As of yesterday, lenders were charging an average of 7.34 percent
for prime, 30-year, fixed-rate jumbo loans, according to financial
publisher HSH Associates.  That was up from an average of 7.09 percent
last week.

It was also 0.75 percentage points more than the 6.59
percent they were charging for conforming loans.  In mid-July, the
difference between the two types of loans was 0.20 percentage points.

If you think this is only a liquidity event, there is of course a profit opportunity.  Note that the 10-year T-Bond rate has been falling.  I am more inclined to think we are returning to a more reasonable spread between mortgages and Treasuries; let’s hope the transition is a relatively smooth one.  If trading volume is low, traders may fear the other trader knows something he doesn’t ("no-trade" theorems are one source of Robin Hanson’s theorems on disagreement between persons), and we’re not yet in a new regime where such concerns are shrugged off or attributed to mere churning.  Since regular trading is part of what brings expectations to such a new regime, the adjustment doesn’t generally occur right away (even when prices are flexible) and the ride can be a rocky one indeed. 

Here is the cited article.

Freakonomics/NYT holds a symposium, including me, Nassim Taleb, Barbara Ehrenreich, Arthur Brooks, and Mark Cuban, with guest comments from Roland Fryer and Stephen Dubner.  My first sentence:

I’m not keen on giving money to the beggar.

Here is another bit of mine:

Oddly, the case for giving to the beggar may be stronger if he is an alcoholic.  Alcoholism increases the chance that he is asking for the money randomly, rather than pursuing some well-calculated strategy of wastefully investing resources into begging.  But in that case, I expect the gift will be squandered on booze, so I still don’t want to give him the money.

…paying the first bill in a stack of overdue bills does little to relieve a guilty conscience.

That is from Charles Karelis’s truly intriguing The Persistence of Poverty: Why the Economics of the Well-Off Can’t Help the Poor.

If your car has lots of scratches and dents, getting rid of just one doesn’t help much either.

More generally, if pains and troubles are high enough, extra pain and trouble just isn’t so bad.  You hardly notice it.  But that overturns standard economic assumptions of diminishing marginal utility, and the rest of Karelis’s model follows directly. 

Poor enough people will accept risk in the downward direction rather than smoothing consumption, so they buy lots of lottery tickets.  They also commit more crime, so they can have at least some joyous times, and they take lots of "stupid" chances.  Yet the poor are not irrational or necessarily dysfunctional in terms of procedural rationality, but rather they are optimizing given constraints.  They are taking the Friedman-Savage model very very seriously.

"Getting tough" with the poor through policy is more likely to backfire than succeed, as it just encourages more mean-reducing, risk-taking behavior.  At some level the marginal utility of consumption for the poor fits the standard model, so income effects will more likely bring normal behavior than will substitution effects.  That’s one reason why the EITC works relatively well.

The more the poor regard themselves as lagging the rich (rather than doing better than, say, their peers back home in Gujarat), the more stupid risks they will take.  That’s why poor immigrants are more value-maximizing than the poor that have lived in America a long time and adapted to American norms and expectations.  The immigrants don’t regard their burdens as insuperable and they are on standard downward-sloping marginal utility curves.

It can make more sense to give money to people on the verge of leaving poverty, rather than people deeply mired in poverty.  The former transfer will get people onto "normal" marginal utility curves, but the deeply poor will just squander their new wealth, as it doesn’t much alleviate their unhappiness.

This short book is a wild ride.  The absence of traditional evidence makes it hard to evaluate these hypotheses, but it is one of the more valuable and stimulating contributions of the year.

…why the extraordinarily outsized pay packets of the high financiers?
Why doesn’t competition–which sorta works elsewhere in the
economy–cause us to see greatly reduced earnings? We understand, we
think, why celebrities get paid so much–a combination of increasing
returns in distribution, being the genuinely best in the world, and
being well-known for your well-known-ness. But why financiers?

What is it that blocks effective entry and competition, exactly?

The post is here.  I see the high returns of hedge fund managers as the result of a "who moves first?" game.  Someone
is the first to buy a big chunk of an underpriced asset, and indeed the
greater liquidity of capital markets makes it possible for the first
mover to buy a bigger chunk than ever before.

The other buyers might (though might not) come only a second later
with their purchases of the same asset.  In that sense the world is
very competitive.  Entry into purchasing the undervalued asset is not
blocked.  But still someone has bought first and will earn a
huge bundle.  Highly competitive "piling on" simply speeds up the
receipt of the eventual capital gain by the first purchaser, it does
not limit the size of that gain.