A large share of the special green issue of the NYTimes Magazine was closely tied to economics.  I find this encouraging.  Here is one interesting bit:

…demand response has become one of the most powerful
green techniques for protecting the nation’s overtaxed power grids. When
a blackout looms, utilities call a small coterie of demand-response firms. These
firms prearrange for major users of electricity – factories, shopping
malls, skyscrapers – to shut down all nonessential electricity in exchange
for payments, often totaling tens of thousands of dollars each year. It’s
expensive, but far less so than a blackout that cascades across the country….ConsumerPowerline controls 300 huge buildings in
New York alone, where hastily brokered turnoffs by Macy’s
and major hotels prevented the spread of a 2006 blackout in Queens
– a blackout that lasted for more than a week – into Manhattan.

The Mobi is Germany’s mobility bonus, funding that covers moving, relocation and retraining costs for unemployed Germans seeking work anywhere in the world.

Plagued by high unemployment due to the turmoil of
re-unification and rigid labour laws, Germany has been helping
its skilled and less-skilled jobless workers match up with
foreign employers searching for manpower.

The country has also been offering financial support to
cover moving and transportation costs for the hordes of
unemployed Germans in search of jobs across the European Union,
and even as far away as Australia and Canada.

The mobility bonus strikes me as a move of desperation. The Germans have created a bloated welfare state and now they are paying people to get off the welfare rolls and get out.  I wonder what Rawls would have said?

Even now, I see an opportunity for America:

Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!

Only one country in the world has eliminated the shortage of transplant kidneys.  Only one country in the world has legalized financial payments to kidney donors.  That country is Iran.

In an important report, transplant surgeon nephrologist Benjamin Hippen argues that the Iranian system has saved thousands of lives and it should be used if not as model then to inform America’s efforts to eliminate its deadly shortage.

In the Iranian system organs are not bought and sold at the bazaar.  Instead a non-profit, volunteer-run Dialysis and Transplant Patients Association (DATPA) mediates between recipients and donors.  Recipients who cannot be assigned a kidney from a deceased donor and who cannot find a related living donor may apply to the DATPA.  The DATPA identifies a possible donor from a pool of people who have applied to the DATPA to be donors.  Donors are medically evaluated by transplant physicians, who have no connection to the DATPA, in just the same way as are non-financially compensated donors.

The government pays donors $1,200 plus limited health insurance coverage.  In addition, charitable organizations also provide renumeration to impoverished donors.  Thus demonstrating that Iran has something to teach the world about charity as well as about markets.  Will wonders never cease?  Recipients may also contribute to donor remuneration.

Hippen reports that the system works well, although better follow-up of donors would be an improvement.  He concludes with a call to legalize financial compensation in the United States.

The introduction of automated cameras that ticket people who run a red light has given some cities a "clever" idea – let’s reduce the yellow-light period and increase ticket revenue.  Here’s one example from Dallas. 

An investigation by KDFW-TV, a local TV station, found that of the ten
cameras that issued the greatest number of tickets in the city, seven
were located at intersections where the yellow duration is shorter than
the bare minimum recommended by the Texas Department of Transportation
(TxDOT).

The city’s second highest revenue producing camera, for example, was
located at the intersection of Greenville Avenue and Mockingbird Lane.
It issued 9407 tickets worth $705,525 between January 1 and August 31,
2007. At the intersections on Greenville Avenue leading up to the
camera intersection, however, yellows are at least 3.5 or 4.0 seconds
in duration, but the ticket-producing intersection’s yellow stands at
just 3.15 seconds. That is 0.35 seconds shorter than TxDOT’s
recommended bare minimum.

More examples here and a hat tip to J-Walk Blog.

• Keith Chen (of monkey sex fame) says cognitive dissonance may be an artifact of an unappreciated Monty Hall problem.

• Brad DeLong is an "optimist" on housing.  Even if wrong this puts him in good company.

• The economics of Barack Obama Senior is upsetting some people.

I’m a little surprised that the Bartels result is receiving so much attention because the result, in slightly different form, has long been known to political economists under the rubric of partisan business cycle theory.  In a nutshell, the theory of partisan business cycles says that Democrats care more about reducing unemployment, Republicans care more about reducing inflation.  Wage growth is set according to expected inflation in advance of an election.  Since which party will win the election is unknown wages growth is set according to a mean of the Democrat (high) and Republican (low) expected inflation rates.  If Democrats are elected they inflate and real wages fall creating a boom.  If Republicans are elected they reduce inflation and real wages rise creating a bust.  Notice that in PBC theory neither party creates a boom or bust it’s uncertainty which drives the result – if the winning party were known there would be neither boom nor bust.

Ok, there’s plenty to question about the theory but let’s look at the data.

Notice that in the second year of just about every Democratic Presidency there is a boom.  Interestingly, the boom is biggest for Truman whose reelection was highly uncertain (remember Dewey wins!) thus expected inflation would have been low and the boom big.  Similarly the boom is smallest (relative to the surrounding years) for Clinton II a relatively certain reelection.

Now look at Republicans in just about every second year of a Republican Presidency there is a bust.  The one major exception being Reagan II where uncertainty about the outcome was low.

It’s pretty clear that this result can explain Bartels’s result which is exactly Tyler’s point in his post.   It’s equally clear that when we consider Presidents there aren’t many data points.  (PBC does appear to hold somewhat in other countries).

Notice that the reason for the result, according to PBC, is sticky wages and the business cycle and not some nefarious story about taxes, oligarchies and political conspiracies.

From the frozen lands of Norway’s Arctic Circle to the hot sands of the Middle East and the booming metropolis of Shanghai the losses from America’s subprime crisis are popping up around the world like angry whac-a-moles.  The losses are large and appear larger by being found in the most unexpected of places.  Today the focus is on these world-wide losses but I think future historians will focus on how the crisis demonstrated to everyone the power of integrated capital markets to diversify risk. 

The losses, of course, are regrettable and the desire to find and apportion blame for the crisis among investors, home buyers, mortgage brokers, credit analysts and regulators is understandable.  We should and will learn lessons.  And yet, despite problems with transparency one of those lessons ought to be that the crisis would have been worse if the losses had been more concentrated.

From this perspective, world-wide losses are perhaps the best losses of all.

I am puzzled by the resurgence of Austrian Business Cycle theory among Sachs, Krugman, Baker and many others who you would not ordinarily associate with the theory.  Sachs, for example, writes:

…the US crisis was actually made by the Fed… the Fed turned on the monetary spigots to try to combat an economic
slowdown. The Fed pumped money into the US economy and slashed its main
interest rate…the Fed held this rate too low for too long.

Monetary expansion generally makes it easier to borrow, and lowers
the costs of doing so, throughout the economy. It also tends to weaken
the currency and increase inflation. All of this began to happen in the
US.

What was distinctive this time was that the new borrowing was concentrated in housing….the Fed, under Greenspan’s leadership, stood by as the credit boom gathered steam, barreling toward a subsequent crash.

What is puzzling about this is two-fold.  First, there is no standard model that I know of (say of the kind normally taught in graduate school) with these kinds of results.  Second and even more puzzling is that the foul-weather Austrians don’t seem to draw the natural conclusion from their own analysis.

If the Federal Reserve is responsible for what may be a trillion dollar crash surely we should think about getting rid of the Fed?  (n.b. I do not take this position.)  The true Austrians, like my colleague Alvaro Vargas Llosa, have long taken exactly this position.  So why aren’t Sachs, Krugman et al. calling for the gold standard, a strict monetary rule, 100% reserve banking, free banking or some other monetary arrangement?  Each of these institutions, of course, has its problems but surely after a trillion dollar loss they are worthy of serious consideration.

Nevertheless, I haven’t heard any ideas, from those blaming the crash on the Fed and Alan Greenspan, about fundamental monetary reform.  (Can Sachs, Krugman et al. really believe that it was Greenspan the man and not the institution that is to blame?  That seems naive.)

Instead, the foul weather Austrians seem at most to call for regulatory reform.  But that too is peculiar.  Put aside the fact that banking is already heavily regulated, have these economists not absorbed the Lucas critique?  In short, suppose that whatever regulation these economist want had been put in place in earlier years.  Would the crash have been avoided or would the Fed have simply pushed harder to lower interest rates?  After all, the Fed lowered rates for a reason and if the regulation reduced the effectiveness of monetary policy in creating a boom well then that just calls for more money.