Category: Current Affairs

Keep Momma on the Train!

Today, Paul Krugman writes, under the headline "Stop, you’re killing me" the following:

Eight and a half years ago, when I dubbed the first Bush tax cut the Throw Momma from the Train Act of 2001,
I didn’t really think that we’d get to the point where there would be
strong financial incentives for wealthy heirs to bump off their parents
before the legislation expired, and the estate tax was reinstated….[but] it’s really happening.

As Paul might say, uh no. Or at least not yet. The estate tax goes away in January of 2010 so the story today is that the rich have an extra incentive to keep momma on the train or, as the WSJ correctly puts it, Rich Cling to Life to Beat Tax Man.  (What happens in 2011, however, is another story although the law will almost certainly be changed by then.)  Paul, it seems, just can't stop blaming Republicans for killing people or maybe he just had to make the story fit his Monty Python clip.

How does Delhi gridlock get cleared up?

Sometimes it's so bad that the cars can't even more, at least not without external assistance:

…heads begin to appear between the hoods and trunks.

Motivated by a meeting they wish to keep, men wade into the fray,
examining the crystalline structure of the traffic, looking for gaps,
irregularities, wiggle room. Because there’s always wiggle room. Six
inches here, a foot there, and this makes all the difference. It’s
reverse Tetris: move one this way, move another that way, and suddenly
some cars are free.

The amazing thing is this: these men don’t coordinate their actions.
They don’t formulate strategies. In fact, they probably think they’re
working against each other–as passengers in trapped cars, they care
about helping the other cars move only insofar as it helps get their
own car on its way.

The article is here and I thank Dave Prager for the pointer.  Here is one photo of a Delhi traffic jam.

Markets in everything China fact of the day

Wanted: One live-in protester, $146 a month, no days off.

When the managers of a Beijing restaurant marked for demolition were too busy to fight it, they posted an Internet ad and hired a stranger to stay there around the clock. The job seems to be a first for China, where frenzied urban construction has led to violent evictions, protests and even suicide.

Huddled on a makeshift bed in the trash-strewn, freezing restaurant, Lu Daren said he once worked for a demolition crew and understands their tactics.

"I'm tired," the 46-year-old said Thursday, after a long night of fending off the latest visit from what he suspects were hired thugs by the landlord. "Tired, tired, tired." He stays – wrapped in blankets, reading the newspaper or writing idle poetry, occasionally taking short walks_ because he thinks the restaurateurs have been treated unfairly.

The full story is here and I thank Daniel Lippman for the pointer.

“Late believers”: more rational than you think

It's from The Washington Post, but for a moment I thought I was reading Robin Hanson:

Santa's spell hasn't been broken for Fiona Penn, either. A 12-year-old student at Carl Sandburg Middle School in the Alexandria part of Fairfax, Fiona is aware of the ubiquitous shopping mall Santas and the fact that some presents arrive via a UPS truck, not from the sky. But she chooses to believe that her Santa is different.

"The mall Santas, they change. They get hired and fired. But he's the real one," she said.

The full story is here.

Addendum: Fiona responds to critics in the comments section.

Christopher Hayes on China

The article is interesting throughout, here is one good bit:

The foremost difficulty is immigration. In English we'd call it "migration," but our translators unfailingly used the word "immigration," and I began to see that it was the more accurate description of what was happening. Just as developed countries like the United States and members of the European Union face an influx of workers from the developing world, so does China: it's just that China contains both the developed and developing worlds within its borders.

The way China regulates this flow is not that different from the way nation states do. There is a residence permit called a hukou that anchors people to their home region by tying social services (healthcare, pension and, most important, schooling) to that area. But just as walls and laws have a hard time restricting human traffic from Mexico to the United States when the economic incentives are so extreme, so do the internal regulations of the Chinese state.

And this:

Pick any major city in America and start adding 500,000 people a year. It wouldn't be long before it broke under the strain.

Yet more evidence for Austro-Chinese business cycle theory

Zhao says Wang charges up to $30,000 per breeding session with Obama.

The full story is here.  Get this bit:

Last month, a Nanjing breeder paid $234,000 for his purebred pooch, reported the Yangtze Evening Times. In September, a young woman in Xian paid $600,000 for her pet, according to the Xian Evening News. Both led airport welcomes with long convoys of pricey automobiles.

For the pointer I thank Daniel Lippman.

Markets in everything the culture that is Japan

Buy your own android double:

They will be built by Japanese robotics firm Kokoro, which is best known for its line of attractive Actroid receptionist humanoids.

The company will create the sitting robot out of silicone with the same face, body shape, hair and eyes of the recipient. Their speech will be based on recordings of the owner's voice.

The android's facial expressions and upper body will be modeled on the movements of the buyer.

Do check out the photos of the female models and the video is a must.  They're not cheap:

The mechanical doppelgangers will be on offer at Sogo, Seibu, and Robinson retailers for the princely sum of 20.1million yen or £139,000.

But they are pretty good, here is one (male) example:

Android

For the pointer I thank Bob Cottrell at The Browser.

What’s the IQ of the enemy planner?

I know that not everything reported in the newspaper about terrorist sting operations is reliable information, but still this passage struck me as noteworthy:

Pakistani authorities on Saturday zeroed in on the alleged mastermind of a plot to send five Northern Virginia men to Afghanistan to kill U.S. troops,

Is that how you would allocate the five men?  Yet even that was not allowed:

Saifullah was unsuccessful in convincing al-Qaeda commanders that the men were not part of a CIA plot to infiltrate the terrorist network. As a result, they were marooned for days in the eastern city of Sargodha, far from the forbidding mountains of the northwest that have become a terrorist haven.

I'm not pretending to know the real story, but "remove them from proximity to packed U.S. shopping malls, send them to Sargodha" is a strategy I can live with.  Alternatively, you can take this as evidence that they really were CIA plants.  In which case you can ease up about all the media stories today on homegrown U.S. terrorists, etc. 

One of them was an accounting student at GMU; I wonder which one of us he had for Principles?

Are the naughties the best decade ever?

Some people are saying they're the worst decade ever, but that's more true for the global relations of the United States than for the level of human well-being in the world as a whole.  Even in the U.S., a lot of social indicators improved.  Elsewhere Chinese growth continued, Indian growth moved into the big time (in the gross reckoning we're already at well over two billion people), a lot of Eastern Europe was successfully absorbed into the EU,  Indonesia made slow but steady progress.  Brazil may have turned a corner, and Africa had a better-than-lately decade in terms of economic growth.  Communism didn't really come back.  Admittedly the Middle East is a tougher call.  Canada did strikingly well, as did Australia.  There was lots of progress on public health, including in the war against AIDS.  The internet truly blossomed and human creativity continued.

For a lot of you it feels bad, but it's not obvious that the naughties have been such a terrible decade overall.  By the way, that home prices fell was overall a good thing; the roofs on those homes still keep out the rain.

I thank Bryan Caplan for a discussion related to this post.

Pirate credit, pirate collateral, and pirate price discrimination, in Somalia

Pirates don't even have to pay upfront. Those holding ships hostage that haven't yet received ransom can buy goods on credit — at elevated prices — and settle up their debts when the ransom money comes in, villagers say.

Here is evidence of price discrimination:

When villagers think the price of a cosmetic is too high, their reply is "we are not pirates," said Abdullahi.

The closer to the pirate dens one gets, the higher the prices go. In the nearby town of Eyl, a cup of tea costs three times as much as in Bossaso. In Eyl, pirates pay $5 for a shoeshine, compared with 50 cents in Bossaso, said Hashim Salad, a store owner.

The article is interesting through and I thank Cyril Morong for the pointer.

Will you bail out Dubai?

Would you like to buy an indoor ski resort in Dubai? Maybe you already have.

Andrew Sorkin makes a good point in today's column. The problem of moral hazard is often written off as a problem for "the future," less important than dealing with a present crisis. Not so.  The bailouts may have encouraged more lending to other places that were perceived as good bailout prospects.

That had to be what Citigroup, with its firsthand expertise with bailouts, must have been thinking when it lent $8 billion to Dubai last year. Oh, and here’s an interesting fact: Citigroup made the loan to Dubai on Dec. 14, 2008. Take a look at the calendar – that’s after it received tens of billions in TARP funds. Citigroup’s chairman, Win Bischoff, said at the time, “This is in line with our commitment to the U.A.E. market in general, and reflects our positive outlook on Dubai in particular.” Good call.

Irving Fisher: Underappreciated economist

Tyler points to Malthus as a much underappreciated economist. John Cassidy points to Pigou.  For my money, Irving Fisher dominates.  Other people (e.g. London Banker and Yves Smith)
have also extolled Irving Fisher, but I would still rank
Fisher as highly underappreciated relative to insight and clarity of thought.

Here from his classic, The Debt-Deflation Theory of Great Depressions, are some choice insights. 

Then we may deduce the following chain of consequences in nine links: (1) Debt liquidation leads to distress selling and to (2) Contraction of deposit currency, as bank loans are paid off, and to a slowing down of velocity of circulation. This contraction of deposits and of their velocity, precipitated by distress selling, causes (3) A fall in the level of prices, in other words, a swelling of the dollar. Assuming, as above stated, that this fall of prices is not interfered with by reflation or otherwise, there must be (4) A still greater fall in the net worths of business, precipitating bankruptcies and (5) A like fall in profits, which in a "capitalistic," that is, a private-profit society, leads the concerns which are running at a loss to make (6) A reduction in output, in trade and in employment of labor. These losses, bankruptcies and unemployment, lead to (7) Hoarding and slowing down still more the velocity of circulation.

The above eight changes cause (9) Complicated disturbances in the rates of interest, in particular, a fall in the nominal, or money, rates and a rise in the real, or commodity, rates of interest.

Evidently debt and deflation go far toward explaining a great mass of phenomena in a very simple logical way.

With perhaps the qualification that even real rates of interest may fall is this not a brilliant summary of current events?  And on the solution to the crisis:

On the other hand, if the foregoing analysis is correct, it is always economically possible to stop or prevent such a depression simply by reflating the price level up to the average level at which outstanding debts were contracted by existing debtors and assumed by existing creditors, and then maintaining that level unchanged.

With a few changes to growth rates rather than levels is this not fully modern?  And the following, with its hint of the importance of expectations, strikes a very Sumnerian tone (or rather, of course, Sumner's analysis strikes a very Fisherian tone).

…The fact that immediate reversal of deflation is easily achieved by the use, or even the prospect of use, of appropriate instrumentalities has just been demonstrated by President Roosevelt. Note Charts VII and VIII.

And behavioral economics was nothing new to Irving Fisher:

The public psychology of going into debt for gain passes through several more or less distinct phases: (a) the lure of big prospective dividends or gains in income in the remote future; (b) the hope of selling at a profit, and realising a capital gain in the immediate future; (c) the vogue of reckless promotions, taking advantage of the habituation of the public to great expectations; (d) the development of downright fraud, imposing on a public which had grown credulous and gullible.

When it is too late the dupes discover scandals like the Hatry, Krueger, and Insull scandals. At least one book has been written to prove that crises are due to frauds of clever promoters. But probably these frauds could never have become so great without the original starters of real opportunities to invest lucratively. There is probably always a very real basis for the "new era" psychology before it runs away with its victims.