Category: Current Affairs
Guess who is lobbying against marijuana legalization?
Yup, beer distributors and the police. Ryan Grim of The Huffington Post does a very nice job on the politics:
The California Beer & Beverage Distributors is spending money in the
state to oppose a marijuana legalization proposition on the ballot in November,
according to records filed with the California Secretary of State. The beer sellers are the first
competitors of marijuana to officially enter the debate; backers of the
initiative are closely watching liquor and wine dealers and the pharmaceutical
industry to see if they enter the debate in the remaining weeks…
Public Safety First is largely funded by a different industry whose interests are threatened by the legalization of marijuana: law enforcement. Police forces are entitled to keep property seized as part of drug raids and the revenue stream that comes from waging the drug war has become a significant source of support for local law enforcement. Federal and state funding of the drug war is also a significant supplement to local forces' budgets.
Amusingly, the Teamsters and the teachers (!) are supporting legalization:
The Service Employees International Union, a major presence in California, has endorsed the proposition. The Teamsters in September made its first successful foray into organizing pot growers. The United Food and Commercial Workers is backing the initiative and organizing cannabis club employees in the Bay Area. The teachers union, citing the revenue that could be raised for the state, is also backing the initiative.
The Irish haven’t in fact tried “austerity”
The escalating cost of bailing out Anglo Irish Bank is set to balloon the deficit to at least 25 per cent of GDP this year, cancelling out the benefits of previous austerity budgets.
The culture that is France
In the latest in a series of unusual efforts to make Paris green, the city is now offering residents free sparkling water to try to wean Parisians not from red wine, but from overconsumption of plastic bottles.
It comes from a water fountain and the idea already has been tested in Italy:
“We chill the water between 6 and 8 degrees Celsius,” said Philippe Burguière, the spokesman for Eau de Paris, “and then we inject carbon dioxide into regular tap water to make the bubbles thin and tasty.”
There is more here and for the pointer I thank Yana.
A new theory of monopsony, or how to bargain with trapped miners
In an effort to dominate the miners, the team of psychologists led by Mr Iturra has instituted a series of prizes and punishments. When the miners behave well, they are given TV and mood music. Other treats – like images of the outside world are being held in reserve, as either a carrot or a stick should the miners become unduly feisty.
In a show of strength, the miners have at times refused to listen to the psychologists, insisting that they are well. ''When that happens, we have to say, 'OK, you don't want to speak with psychologists? Perfect. That day you get no TV, there is no music – because we administer these things,''' said Dr Diaz. ''And if they want magazines? Well, then they have to speak to us. This is a daily arm wrestle.''
Here is more. Here is one upshot:
''NASA told us we have to receive the arrows, so that they don't start shooting the arrows at each other,'' said Dr Diaz.
''So we are putting our chests forward – now they can target the doctors and psychologists.''
In other words, don't be too nice to the miners. For the pointer I thank The Browser.
Why aren’t we using monetary policy to stimulate aggregate demand?
My NYT column today is about why we can't move to a three percent inflation target (which I favor, at least for some number of years) and how we might make the leap. Excerpt:
…if the Fed announces a commitment to a higher inflation target but fails to establish its credibility, it will have shown impotence. It would be a long time before the Fed was trusted again, and the Fed might even lose its (partial) political independence. All of a sudden, the Fed would end up “owning” the recession.
Part of the credibility problem stems from the political environment, especially in Congress. Imagine the day after the announcement of a plan for 3 percent inflation. Older people, creditors and workers on fixed incomes – all connected to powerful lobbies – would start to complain. Republicans would wonder whether they had found a new issue on which to campaign, namely, opposition to inflation. And Democrats would worry about what position to take. Presidents of some regional Fed banks would probably oppose the policy publicly.
…The Fed lost some of its political independence during the financial crisis. It undertook major rescue operations in conjunction with the Treasury, and these bailouts proved extremely unpopular. Congress has taken a closer look at Fed operating procedures and will engage in a one-time audit of the Fed’s emergency lending. When it comes to inflation, the Fed cannot easily turn to Congress and simply ask to be trusted.
This is the sad side story of our financial crisis: especially when it comes to financial matters, a great deal of trust has been lost. There is the prospect of a free lunch right before us, yet it is unclear that we will be able to grab it.
…In failing to push harder for monetary expansion, is Mr. Bernanke a wise and prudent guardian of the limited discretionary powers of the Fed? Or is he acting like a too-hesitant bureaucrat, afraid to fail and take the blame when he should be gunning for success?
A few points:
1. For reasons of space, I could not note that the so-called "robust Reagan recovery" had price inflation of over four percent a year. Many conservatives shy away from recognizing this.
2. Three percent inflation also would help the currently impossible state of the real estate market, by lowering the real value of debts.
3. I do not mean to discriminate against Scott Sumner's nominal gdp idea, but it is easier to explain an inflation rate target to a public audience. Here is my earlier column on Scott.
4. Maybe we are in a new political economy equilibrium where each government agency is given "one shot" at a problem. Treasury had its one shot with the stimulus plan. The Fed had its exotic monetary policy operations and deal-making during the crisis. Maybe in bad times voters aren't happy no matter what, and no one is allowed to try twice. We have not yet thought through the political economy of this scenario.
5. If the Fed can't make the commitment today, when did it go wrong? Perhaps at the peak of the crisis, when it was operating with a high degree of discretion, and various radical actions were viewed as justified, it should have announced that, to complete recovery, the three percent price inflation commitment would commence after the dust had settled. That would have required Magnus Carlsen-like levels of foresight, however. If nothing else, Bernanke may not have realized that some version of #4 was operating.
6. Contra Mark Thoma, I am not so worried about time consistency problems, provided that Congress supports the Fed. As long as the economy is weak, it's in the Fed's interest to keep up the three percent inflation. If people know that in better times we will eventually settle back to two percent inflation, I don't think this undercuts the whole idea.
7. It remains instructive to read Bernanke's 1999 Japan piece, for instance:
BOJ officials have strongly resisted the suggestion of installing an explicit inflation target. Their often-stated concern is that announcing a target that they are not sure they know how to achieve will endanger the Bank’s credibility; and they have expressed skepticism that simple announcements can have any effects on expectations. On the issue of announcement effects, theory and practice suggest that “cheap talk” can in fact sometimes affect expectations, particularly when there is no conflict between what a “player” announces and that player’s incentives. The effect of the announcement of a sustained zero-interest-rate policy on the term structure in Japan is itself a perfect example of the potential power of announcement effects.
With respect to the issue of inflation targets and BOJ credibility, I do not see how credibility can be harmed by straightforward and honest dialogue of policymakers with the public.
Maybe I'm too Straussian or too Freudian here, but I read him as trying to promote the commitment, without being totally sure it is possible; note the "distancing" language at the critical points of the argument. I believe Bernanke wrote this next part before he completely understood the incentives of bureaucracies to conserve information:
But if BOJ officials feel that, for technical reasons, when and whether they will attain the announced target is uncertain, they could explain those points to the public as well. Better that the public knows that the BOJ is doing all it can to reflate the economy, and that it understands why the Bank is taking the actions it does. The alternative is that the private sector be left to its doubts about the willingness or competence of the BOJ to help the macroeconomic situation.
Markets in Everything: Afghan Votes
The NYTimes has an excellent piece today on vote-buying in Afghanistan:
How much does it cost to buy an Afghan vote?
Saturday’s parliamentary elections offer a unique opportunity to ascertain that price – and it is in theory a market with many buyers, as 2,500 candidates scramble for only 249 seats….
Nonetheless, prices are low. In northern Kunduz Province, Afghan votes cost $15 each; in eastern Ghazni Province, a vote can be bought for $18. In Kandahar, they sell their rights for as little as $1 a ballot. More commonly, the price seems to hover in the $5 to $6 range, as quoted to New York Times reporters in places like Helmand and Khost Provinces.
You may be surprised to learn that in Afghanistan a woman's vote is regarded as especially valuable:
He wanted to know how many of the cards were for female voters; those are more valuable because, out of respect for cultural sensitivities, women’s registration cards do not bear photographs, so they are easy for anyone to use.
Here is my favorite bit. Vote buying is much more common in this election than in the last. So things have gotten worse, right? Maybe not:
The feeling, experts say, was that last year’s election was stolen wholesale by supporters of President Hamid Karzai, so there was little need for vote buying.
A puzzle in game theory
The markets speak
I read so much blogospheric debate on the future of the Republican Party. As for the 2012 Republican nominee, at Intrade.com, Romney is still leading the pack in the 31 range, and Palin remains in the 17-18 range. John Thune is very much underdiscussed, given that his chance of winning the nomination seems to be about as large as Palin's.
As Robin Hanson would say, politics isn't about policy. Of course if you think these numbers are wrong, go and improve them.
Regulating the shadow banking system
There is a new paper by Gary Gorton and Andrew Metrick, and (part of) the abstract reads as follows:
We first document the rise of shadow banking over the last three decades, helped by regulatory and legal changes that gave advantages to the main institutions of shadow banking: money-market mutual funds to capture retail deposits from traditional banks, securitization to move assets of traditional banks off their balance sheets, and repurchase agreements (“repo”) that facilitated the use of securitized bonds in financial transactions as a form of money. All of these features rely on an evolution of the bankruptcy code that allows securitized bonds to be used as a form of privately created money in large financial transactions, a usage that can have significant efficiency gains and would be costly to eliminate. History has demonstrated two successful methods for the regulation of privately created money: strict guidelines on collateral (used to stabilize national bank notes in the 19th century), and government-guaranteed insurance (used to stabilize demand deposits in the 20th century). We propose the use of strict rules on collateral for both securitization and repo as the best approach for shadow banking, with compliance required in order to enjoy the safe-harbor from bankruptcy.
I liked this paper very much. It has excellent detail on how the shadow banking system works, excellent conceptual analysis comparing shadow banking to America's earlier "free banking era," and the central point that we don't have enough safe collateral for repo (should the Fed issue a special form of such collateral?). It uses the word "rehypothecation" and ends with an excellent (and to me somewhat scary) few sentences:
It seems that U.S. Treasuries are extensively rehypothecated and should be viewed as money…This means that open market operations are exchanging one kind of money for another, rather than exchanging money for "bonds." "Quantitative easing" may well be the monetary policy of the future.
Addendum: Arnold Kling comments.
Scary sentences
It seems the Obama administration is looking for any possible argument to justify its policy of assassinating U.S. citizens without legal restraint. But that's not always easy to manage:
“The more forcefully the administration urges a court to stay out because this is warfare, the more it puts itself in the uncomfortable position of arguing we’re at war even in Yemen,”
The administration doesn't want any possibility of judicial review:
…they are seeking to have the lawsuit dismissed without discussing its merits. For example, officials say, the brief is virtually certain to argue that Mr. Awlaki’s father has no legal standing to file a lawsuit on behalf of his son.
Is the administration trying to figure out the law, and then follow it, or to simply push through whatever it wants to do?
Gorillas and Girls
Ireland's science minister has pulled out of the launch of a book branding evolution a hoax after the event became mired in controversy.
Yes, that's right Ireland's science minister questions evolution. But, he says Mr May the author of the book he was to promote, "Just because you are anti-evolution doesn’t mean you are anti-science." I suppose this is true if one doesn't count as science biology, molecular biology, botany, paleontology, zoology and a host of other fields that rely on evolution as a key concept.
So the controversy is obvious, right? Not quite. What would a controversy about science be without sex? It turns out that the author of the book, non-ironically titled "The Origin of Specious Nonsense," is,
Mr May, a self-proclaimed marriage counsellor, writer, poet and philosopher, [who] has presented on various radio stations and once owned a public relations company.
But the ex-Christian evangelist teacher was also the one-time editor of Ireland’s first magazine devoted to sex.
All of this makes the name of the launch party that science minister Conor Lenihan was to attend even more interesting, 'Gorillas and Girls'. Hard to make this kind of thing up.
Hat tip to Dan Cole at Law, Economics, and Cycling.
What is the most likely source of doomsday in 2012?
Alek has a request:
1) While I'm far from a doomsayer, I'm wondering what is the best way to bet in favor of the world ending in 2012? Betting against is pretty obvious.
I am taking this to ask what is the most likely cause of the destruction of all civilization, circa 2012, and not how to collect on the bet, in which case he should read Pascal. (If the 2012 end of the world won't be a total surprise, any leveraged short position should do, but spend the money quickly!)
Here are some hypotheses, but my answer is: destruction of the earth by space aliens.
Here are previous MR posts on The Fermi Paradox. Rampaging space aliens would explain why we don't see more civilizations out there, plus predatory ways imply that contact is short-lived, thereby making our current lack of contact more likely in the Bayesian sense.
We could be living in some kind of "branching/splitting" theory where the highest number of branches come right before everything ends and for Bayesian reasons we expect to be right up against that final point. Still, why should we think that maximum branching/splitting is coming in 2012? After a Lakers threepeat, are there no more possible worlds to create?
The overwhelming probability from a nuclear exchange, at least circa 2012, is that it would remain limited, albeit highly destructive. A pandemic is unlikely to kill more than a billion people. A very large asteroid or a super-volcano explosion can be considered other leading contenders for world-enders.
A few nights ago Natasha and I saw The Day the Earth Stood Still, 1951 version. It's more a tract on foreign policy than science fiction and Klaatu of course is a stand in for the United States. I hadn't seen it in over twenty years and I'm astonished how well the movie captures and presages today's current mix of paranoia and utter unpreparedness, vis-a-vis "aliens." It works poorly when Klaatu dons the rhetoric and tactics of the United States in galactic affairs, combined with equally clumsy implied threats, backed by no moral authority but superior hardware. It's one of the scariest, and best, movies to watch in 2010, with a superb Bernard Herrmann soundtrack and it also has good shots of WDC in 1951. I won't give away the ending but a careful listen shows it's as pessimistic about the aliens as anything. Supposedly the movie deeply influenced Ronald Reagan and brought him to the arms control table.
“Cash for Clunkers” failed
Here is a new paper by Atif Mian and Amir Sufi:
A key rationale for fiscal stimulus is to boost consumption when aggregate demand is perceived to be inefficiently low. We examine the ability of the government to increase consumption by evaluating the impact of the 2009 "Cash for Clunkers" program on short and medium run auto purchases. Our empirical strategy exploits variation across U.S. cities in ex-ante exposure to the program as measured by the number of "clunkers" in the city as of the summer of 2008. We find that the program induced the purchase of an additional 360,000 cars in July and August of 2009. However, almost all of the additional purchases under the program were pulled forward from the very near future; the effect of the program on auto purchases is almost completely reversed by as early as March 2010 – only seven months after the program ended. The effect of the program on auto purchases was significantly more short-lived than previously suggested. We also find no evidence of an effect on employment, house prices, or household default rates in cities with higher exposure to the program.
Ungated versions of the paper are here.
Haiti fact of the day
By some estimates, the quake left about 33 million cubic yards of debris in Port-au-Prince – more than seven times the amount of concrete used to build the Hoover Dam. So far, only about 2 percent has been cleared, which means the city looks pretty much as it did a month after the Jan. 12 quake.
The story is here and for the pointer I thank the eagle-eyed Daniel Lippman.
Which public figures have integrity?
UWC pleads:
I'm having a hard time coming up with many independently and oddly Google is failing to find a list.
Nelson Mandela
Garry Kasparov
Oprah Winfrey
Ellen DeGeneres
David Letterman
Simon CowellHelp!
How did David Letterman get on that list? Does Simon Cowell make the cut? Is it about who has integrity or who is perceived as having integrity?
It also depends who you count as a public figure and whether they still must be living or only recently deceased. For a few, how about Margaret Thatcher, Hans Blix, Anna Politkovskaya, Ben Goldacre, Lech Walesa, Christopher Reeve, Neil Armstrong, the passengers who downed the flight hijacked by al-Qaeda, leading members of the Iranian opposition, and any number of political dissidents, starting with Burma and Aung San Suu Kyi. Lee Kuan Yew is a more controversial option; he has been a non-corrupt leader who led his country to a very good place, and more or less eliminated corruption, but he has not always respected civil liberties. Nonetheless integrity is not the only value and I don't wish to use the word as a stand-in for all other values of import.
Who am I forgetting? What would Robin Hanson say about this list?