Category: Current Affairs

Canadian shoppers taking advantage of the parity between the U.S. and
Canadian dollars are leaving behind more than cash when the head home.

They’re leaving behind their old clothes.

Some Canadian shoppers wear their new clothes home to avoid paying a duty when they cross back into Canada [TC: do we reallly need the link behind that word?].
The old clothes get left behind in parking lots, dressing rooms and
restrooms at malls and shopping plazas in the Buffalo-Niagara Falls
region.

At the Fashion Outlets mall just outside the city of
Niagara Falls, managers have placed collection bins near the exits
where Canadians customers can deposit their unwanted items.

Here is the story.  Thanks to Bill Griffiths for the pointer.

…public finances have rarely been in better shape. Thanks to policies
put in place by Ernesto Zedillo, who presided over the country during
and after the tequila crisis at the end of 1994, the budget is balanced.

In
2000, it was still running a budget deficit equivalent to 1.1 per cent
of gross domestic product. Net public debt, meanwhile, has fallen
consistently and is now just 23 per cent of GDP. Moreover, much of the
external debt was swapped for peso-denominated debt during Mr Fox’s
administration.

This year, net external debt accounts for roughly
7 per cent of GDP compared with 24 per cent in 1995. “It has all become
boring,” says Damian Fraser of UBS in Mexico City. “But that is fine.
We love boring.”

Even inflation, which has started to creep up
again after it dipped below that of the US for the first time in 2005,
still appears to be under control.

Consensus forecasts from the private sector suggest it will finish the year at about 3.85 per cent.

Here is much more.  But no, one correction is needed, Mexico is never a boring place:

Mexico’s country music stars are being killed at an alarming rate – 13
in the past year and a half, three already in December – in a trend
that has gone hand in hand with the surge in violence between drug
gangs here.  None of the cases have been solved. All have borne the signs of Mexican underworld executions…

Using the latest data available, the United Nations Department of
Economic and Social Affairs puts Singapore’s foreign-born population in
2006 at 42.6 percent.

That’s by Kerry Howley of Reason, here is the full article, which argues that Singapore’s guest worker program is working.  But such high levels of immigration work through:

Singapore’s willingness to accommodate conservatives through policies
of segregation that Americans would probably find odious…[Singapore has] a
system that invites immigration while emphasizing legality and
distance.  A comfort with hierarchy expresses itself as a comfort with
inequality, and countries that can tolerate inequality can allow huge
influxes of poor people.

The same could be said for many of the Gulf States; few members of the Dubai ruling class are saying to themselves: "We wanted workers but we got human beings in return."  Loyal MR readers will know that I am generally pro-immigration, but this article is a good place to start for thinking through possible conflicts between immigration and liberalism. 

As far as I can tell, there has been a partial secession in Bolivia.  (This story makes it sound more like "autonomy" than secession, but that line is a fine one, try this story too.)  The wealthier, more business-oriented, lighter-skinned, and natural gas-rich provinces near Santa Cruz wish to control their own fate.  But as of 8 a.m., there is nada on the front page of The New York Times.  So far it doesn’t make the front page of news.google.com either.  Nor The Washington Post.  Here is a Spanish-language account from Bolivia, it does make the front page there.  Here’s a blog report as well.

It is not an accident that Bolivia has lost territory to Paraguay and also to Chile.  When it comes to Schellingesque focal point purposes, those events aren’t as long ago as clock time might make them seem.  I might add that both conflicts were over resource wealth, just as today’s conflict is in part over natural gas.  I would not be surprised if Bolivia lost territory again.  If there is any trend over the last five hundred and fifteen years, it is that indigenous peoples in the Americas are losing control over natural resources.  Every squib in Kosovo gets reported, why not this too?

Dubai is on a spending spree, and financial analysts are starting to wonder about the amount of debt the city-state is racking up.  Its oil production is dwindling, and its debt load is four times the average among other Persian Gulf states.  Credit-rating companies are asking for more information to determine how sound the government really is…"The transparency isn’t good."

Here is the article and related links.  If I had to "sell short" one country or city-state in the world today, it would be Dubai.

But it makes for a good game theory example nonetheless.  It starts with:

The Bush administration has become rather expert at deploying the relentless anti-Bush Left for its own purposes. The Left has made itself completely predictable, and a predictable poker player can be beaten.

A deliberately deceptive NIE [report on Iran’s nuclear program] could have two purposes.

1. It could pressure Israel and the Arabs.

2. It could mislead Ahmadi-Nejad.

The core claim is that the release of the report precommits the United States to not attacking Iran, at least for a while.  This puts more pressure on other parties (including the Europeans) to help solve the problem.  Furthermore the U.S. will have more influence over both Israel and the Arab nations, who will need U.S. support against Iran for the foreseeable future and cannot reckon on the chance that the Iranian regime will be taken out.  Can you graph this into a game tree?

The problem with this sort of explanation, of course, is simply that one government finds it hard to predict how other governments will interpret its actions, and thus complicated game-theoretic strategies are more likely to confuse than anything else.   

Who’s next? Paddy Power, the Irish gambling site, has decided to tap
the wisdom of crowds and set odds on who the next C.E.O. casualty will
be.

At the top of the site’s list, odds-wise, is Bear Stearns‘
James E. Cayne. Paddy Power is quoting 13-8 odds on a bet that he will
be ousted by June 30, 2008. The odds, better than 2-1, represent a
relatively high expectation that he will soon be out of a job. That
probably reflects some serious setbacks at Bear Stearns under his
watch, including the collapse of two internal hedge funds this summer.

Here is the story, thanks to John de Palma for the pointer.  And here is Robin Hanson on CEO Futures, the idea originates from Robin.

CalculatedRisk writes:

A lot of people are very worked up over the idea that the New Hope Plan
is, in essence, the government mandating a kind of reneging on private
contracts (the PSAs or Pooling and Servicing Agreements that govern how
securitized loans are handled). I personally think you can all stand
down on that one. From what I have seen about the plan to date, it is
clear to me that it is in fact structured with the overarching goal of
making sure that it stays on the allowable side of the existing
contracts. I proceed from the assumption that nobody could write such a
convoluted and counter-intuitive plan if that wasn’t the goal. So
everyone who is thinking, “Gee, we’re violating contracts and we still
don’t get much out of it!” is thinking the wrong thing, in my view.
It’s more like “Gee, we don’t get much out of it when we don’t violate
contracts.”

The full post has more explanation than any sane person can follow, also see the NYT coverage.  I don’t understand many of the details of the plan, but it seems like a push in the right direction, namely encouraging settlement within the previous contractual framework.  That said, I don’t expect it to have a major positive impact.

Many critics would like to see more of a debt jubilee, but I keep thinking of two quotations reproduced over at Megan McArdle’s blog:

There are many nuances related to mortgages. For instance, if you
default, what are your rights in foreclosure? How can you redeem, and
when? But it wasn’t any nuances that tripped people up. "The monthly
payment is more than I can afford" is not a "nuance."

. . the lesson here appears to be that if you see everyone else
borrowing well beyond their means, you should too, since the government
cannot credibly allow large numbers of homeowners to go into
foreclosure.

There are two main arguments for breaking the loan contracts.  The first
is that we could limit human suffering.  The second is that we could
forestall macroeconomic catastrophe.  Put together, these arguments have captured many hearts and minds, but neither is very strong on
its own.

On the first, there are many better ways for our government to help
poor people.  Maybe you respond: "The perfect should not be the enemy of the good," but I am sorry: keeping lower income people in homes and out of apartments is too far down the list of efficient transfers for that rhetoric to succeed.  Can we now allow the perfect to be the enemy of the not-good?  Contract-breaking is not an especially fair way to
help the poor, given that the very poorest probably never borrowed any
mortgage money in the first place, and the most responsible of the poor won’t get anything either.  Should we also reimburse the non-wealthy for their unlucky investments in dot.com stocks?  Go back to square one.

On the macroeconomic issues, there is a real chance of a cascading
credit crunch in the next few months.  Having the federal government arbitrarily rewrite legally binding loan contracts will, if anything, make that problem worse rather than better.  It will hurt bank capitalization, plus it will weaken confidence that future loan agreements will be left intact.  Uncertainty is the enemy of lending.  Further side effects include the savaging of the subprime loan market (currently most subprime loans are being repaid without incident, thus putting deserving borrowers into homes) and seriously curbing floating rate lending in the future.

If you think that the macroeconomic skies will fall from future
mortgage interest rate resets, I am willing to listen.  But your case
had better be really really good, given the macro problems of the debt jubilee.  Aid as you will, but don’t make it a tax on the lenders.

The foreclosures story combines a few popular memes: lower income people suffering, possible macroeconomic
catastrophe, and a fair amount of misleading salesmanship (can I get my money back for having bought a computer with Vista?).  But if we adopt widespread contract abrogation as the intended solution, I truly fear for the future of this republic.

Addendum: Here is testimony by Randall Kroszner, via Greg Mankiw.  And Arnold Kling has a very good and lengthy analysis.

Zimbabwe’s chief statistician says he cannot work out the rate of inflation because of the lack of goods in shops.

Here is the sad story.  Thanks to Shanley and also Wolfram for the pointer.

From Charles Calomiris, via Mark Thoma.  Here is my edited version of the list, without the (very good) explanations:

1. Housing prices may not be falling by as much as some economists say they are.
2. Although the inventory of homes for sale has risen, housing construction
activity has fallen substantially [which will support future prices].
3. The shock to the availability of credit has been concentrated primarily in
securitisations rather than in credit markets defined more broadly.
4. Aggregate financial market indicators improved substantially in September and
subsequently.
5. …nonfinancial firms are highly liquid and not overleveraged.
6. …households’ wealth is at an all-time high and continues to grow.
7. Of central importance is the healthy condition of banks.
8. Banks hold much more diversified portfolios today than they used to.

I find 3-8 more convincing than 1-2, noting of course that #7 is a relative judgment.  Here is a longer version of the Calomiris paper.

An indigenous language in southern Mexico is in danger of disappearing because its last two speakers have stopped talking to one another.

The two elderly men in the village of Ayapan, Tabasco, have drifted apart, said Fernando Nava, head of the Mexican Institute for Indigenous Languages.

Are they really the last two speakers left?  The odd part of the story is this:

Dr Nava played down reports of an argument between the two Ayapan residents, both in their 70s.  "We know they are not to say enemies, but we know they are apart.  We know they are two people with little in common," he told the BBC News website.

They nonetheless have been nominated to play the role of linguistic saviors:

The indigenous languages institute is trying to encourage more local people to speak Ayapan Zoque, and hopes the two men will pass the language on to their families.

Suitability as gifts means the book is a short one, the items will signal elevated taste, they are at least reasonably entertaining, visually appealing, and they are unlikely to be given by others as gifts unless of course your social circle reads MR.

1. Fiction: Stephane Audeguy, Theory of Clouds.  The conceptual foreign novel which got lost in the shuffle of the American fiction market.

2. Popular Music: The View, Hats off to the Buskers, from Scotland, this is musically superior pop and they still have room to get even better.

3. Classical music: Either William Byrd, Laudibus in Sanctus, beautifully recorded, or John Adams, The Dharma at Big Sur/My Father Knew Charles Ives, and yes I spent twenty years as a Johns Adams skeptic.  In the last few years he’s raised his music to an entirely new level.

4. Gadget: I still use my iPhone almost every day and I can no longer imagine not having one.  Mostly I surf web sites and blogs while waiting in lines, or read email.  I’ve yet to make a phone call with it. 

5. DVD: I watched through Planet Earth as quickly as I could.  Yana then took the box up to college, if you need another testimony.  If your loved one doesn’t merit an entire DVD box, I thought Away From Her was the best movie of the year; sadly the first-rate No Country for Old Men won’t be ready on disc in time. 

6. Single song on iTunes: Anthony and the Johnsons, Knockin’ on Heaven’s Door.  The key here is to pick a song on an album you won’t otherwise buy or you won’t otherwise think of.

7. Crazed economist idea: Buy someone a book of stamps.  It has the efficiency properties of a cash transfer (who doesn’t need stamps?), yet if you choose an attractive issue it will show (a little) more thought than money alone.  And hey — you had to stand in line to get it, or endure their ugly web site, and at a monopolistic institution at that.

Finally, it is often better to give experiences rather than possessions, and if you don’t know what your wife wants email her sister or best friend and ask.

Cambodia…basically has one industry, the garment
trade, which employs about 300,000 people (almost all of them young
women), and probably supports about 10% of the population directly and
indirectly.  Almost everyone else makes their living in agriculture,
with a small government elite, a smaller tourism community, and a tiny
small business sector…Cambodia’s garment trade is incredibly dependent on
special treatment from America, where it sells almost all its wares.

In other words, true free trade from China, for the United States, would devastate the Cambodian economy.  If you wish to consider the strongest arguments for protectionism, they usually involve weighing the interests of one poor country against another, and not the interests of a poor country against a rich country.  Here is the full discussion.  Related lessons are that comparative advantage won’t necessarily yield pleasant price and wage ratios and that producing anything of value is truly, truly difficult.  Given Cambodia’s previous problems, one also has to wonder whether mass migration to Vietnam is the best option available, provided of course that is possible.
 

It was Jeffrey Sachs and Betsey Stevenson against myself and Will Wilkinson on the topic of whether America is failing in the pursuit of happiness.  The Economist magazine was the sponsor and it was held in Gotham Hall in New York, which yes could have been out of a Batman movie.

As I had expected, Will proved to be the world’s best debating partner, or at least in the top two (my previous debate partner was Randall Kroszner, for a year in high school).

The initial tally of sentiment was about 67-33 in favor of the Sachs-Stevenson position that America is indeed failing at the pursuit of happiness.  By the end of the debate there was a slight margin in favor of the Cowen-Wilkinson position.  The crowd turned, I believe, in part because Sachs pursued attacks on the current administration rather than focusing on the defined topic at hand.  He was rendered shrill by the unholy madness of something or other, as Brad DeLong would put it.  Will and I don’t like current policy either, but we looked happy.  We were happy.  We are happy.  We also had a long array of facts and citations from the happiness literature and some pointed rebuttals to the so-called Easterlin paradox.

Many loyal MR readers were there, so of course your impressions are invited, even if you don’t usually leave comments.  Who else is to tell this story if not you?  Expect to see reports on Will’s blog and by Felix Salmon as well.

Addendum: Here is Will, Tyrone may weigh in soon.

Building on the thriving carbon offset industry, an innovative British firm, Cheat Neutral, now offers cheat offsetting:

At Cheatneutral, we believe that we should all try to reduce the
amount we cheat on our partners, but we also realise that
fidelity isn’t always possible.

That’s why we help you neutralise your cheating. Your actions
are offset by a global network of fidelity, developed by us.
By paying Cheatneutral, you’re funding monogamy-boosting offset
projects – we simply invest the money you give us  in monogamous,
faithful or just plain single people, to encourage them to stay that way.

Many people have already successfully used Cheat Neutral:

David cheated on his partner of ten years, Sebastian, with a
younger man. He described for us what happened:

"Seb was so angry with me, I felt really bad about what I’d done.
I came to Cheatneutral to offset the side effects of my cheating,
and later on, Seb said the  only reason he could forgive me was
because I’d offset my cheating with Cheatneutral. Thanks to Cheatneutral,
we’re still together, I can feel good about my cheating, and
I’ve helped to reduce global cheating as well! If I do cheat on
Seb again, I’ll definitely be calling Cheatneutral."

Hat tip to David Zetland’s new blog Sex, Drugs & Water Utilities.