Category: Current Affairs

I have learned a great deal following the avian flu story, as a result of my hand in the new Avian Flu blog.  Recently we seem to have been in a period of calm, as the flu has been mutating into less lethal forms.  This, however, can be bad news, as less lethal forms have greater potential to spread.

One source — Recombinomics– argues that the next pandemic has started already in Vietnam.  I find their material prone to overstatement but nonetheless their arguments make for chilling reading and I would not dismiss this outright.  Here is another alarmist report.

Here are some puzzles about avian flu.

But will the airlines ban cell phone jammers?

Captain Capitalism is a "frustrated economist" living in Minneapolis.  He thinks he’s found the perfect woman:

…it seemed the prophecy of the Holy and Sacred Elder Economists of Yore were to come true. For in that brief minute of conversation it was established that;

1. She reads The Economist
2. She was a financial manager at a money management firm
3. She had her undergraduate in finance
4. She was getting her masters in economics

The
next hour of conversation was tantilizing and insanely intelligent. We
talked about econometric modeling. We talked about efficient frontier
theory. We talked about Miller-Modigliani. And then she talked about
her specialty, behavioral economics.

I love it when chicks talk dirty to me.

But he makes one crucial mistake in the dating game and, inevitably, is frustrated.

Jacqueline Mackie Paisley Passey is not (yet?) a professional economist but she understands this market far better than CC in Minneapolis.  Kindly, she lays it all out for him in the comments section.  But will he learn the error of his ways?  Are his expectations rational?  Can the Captain find a first-mate? Tune in next week as the frustrated economist finds that doing it with models ain’t as easy as it looks.

In Changing the Guard I wrote:

After the Sept. 11 attacks, many people immediately assumed that more government was necessary and thus the Aviation Security Act, passed just two months after the attacks, federalized airport security.   But on 9/11 airport security did not fail at its assigned task, which was to keep bombs and illegal weapons off the plane.  It’s difficult to see, therefore, how federal workers would have performed better.

No country has more experience with terrorism than Israel, yet Tel Aviv’s Ben Gurion Airport uses private security firms to do major portions of its security work.  In Europe, entire airports are increasingly run by private corporations.  The main airports at Athens, Copenhagen, Frankfurt, London, Rome, Vienna and Zurich, for example, are run by private for-profit firms.  Government is not absent in these airports but, as with private prisons, it remains content with defining acceptable levels of ouput and creating procedures to measure and test the performance of the private companies.

What has Federalization bought us?  Despite spending billions of dollars security at airports has not improved since 9/11 and waste appears rampant.

As a test, 5 airports were allowed to keep private screeners.  The results?

The Government Accountability Office found statistically significant
evidence that passenger screeners, who work under a pilot program at
five airports, including San Francisco International Airport, perform
better than their federal counterparts at some 450 airports, Rep. John
Mica, R-Fla. and chairman of the House aviation subcommittee, said
Tuesday.

A group of students at Harvard has printed up T-shirts in support of President Summers with pictures of Summers ala Che.   True, the T-shirts are not as elegant as an Adam Smith tie but given current events they still show good taste.

The power behind the throne…now unveiled, and coming soon to a theater near you…

Jonathan Landay of Knight-Ridder describes the administration’s new method of fighting terrorism.

The State Department decided to stop publishing an annual report on
international terrorism after the government’s top terrorism center concluded
that there were more terrorist attacks in 2004 than in any year since 1985, the
first year the publication covered.

Several U.S. officials defended the decision, saying the
methodology used by the National Counterterrorism Center to generate
statistics had flaws, such as the inclusion of incidents that may not
have been terrorism.

But other current and former officials charged that Secretary of State
Condoleezza Rice’s office ordered "Patterns of Global Terrorism" eliminated
several weeks ago because the 2004 statistics raised disturbing questions about
the Bush’s administration’s frequent claims of progress in the war against
terrorism.

In other news, President Bush announced that the OMB would no longer be issuing an annual budget.  Several US officials defended the decision saying the methodology the OMB used to calculate deficits was flawed. 

In February I wrote,  "My prediction is that it will be easier to add $540 billion in Medicare spending than it will be to cut $5 billion in farm subsidies."

Today, the Washington Post reports:

Farm Subsidies May Not Face Limits…The Bush administration has signaled that it will not pressure Congress to enact limits on government payments to big farmers this year…The subsidy cuts and other proposed changes in the farm program were hailed by budget cutters, environmentalists and foreign governments when they were included in the administration’s budget proposals in February. They have run into heavy resistance in some parts of the Farm Belt. Southern cotton and rice growers in the GOP’s political base would be hit particularly hard.

And how is this for a laugh?

Reducing agricultural spending by $5.4 billion is [was? AT] a key part of the administration’s plan to cut the federal defict in half.  So far, however, the the Senate Budget Committee has agree to cuts amounting to just $2.8 billion.

The Federal deficit is currently over 400 billion.

Big brother is watching.  So are we.

Try here, here, and here, with the latter offering discussion as well.  Thanks to the ever-keen Naunihal Singh for the pointer.

Addendum: Here are Tradesports.com odds by country, thanks to Paul N for the pointer.

The Army and National Guard are having trouble meeting their recruitment goals.  The basic reasons are obvious but I suspect that an overlooked reason is the use in recent years of stop-gap and stop-loss policies – pulling people back into military service (from the Individual Ready Reserve) possibly years after their active duty has been completed and preventing people from leaving the field after their contractual obligations have ended, respectively.

It’s one thing to volunteer for a known tour of duty – it’s something more to subject your life-plans to an unknown schedule dictated by someone else.  The stop-loss measures may have stopped losses temporarily but part of the price is understandably reluctant recruits.

Two weeks ago, the government announced that 58,000 people had been punished for misappropriating money or making unauthorized loans at just two of the big four state-owned banks. In 2003 alone, officials said that the equivalent of nearly $8 billion was pilfered from state-owned enterprises.

Here is the full story.  OK, they have more than a billion people, but that is from only two banks.  And let us not forget:

In the last four years, at least 25 government officials have been sentenced to death for accepting bribes and kickbacks. Hundreds more are serving lengthy prison terms.

Brad DeLong and Paul Krugman are taking Joe Lieberman and others to task for asserting that the cost of fixing the social security problem increases at $600 billion a year.  I agree that Lieberman is confusing an increase in the nominal present value of the debt with an increase in the cost of fixing social security but in correcting Lieberman both DeLong and Krugman meander towards the opposite error – that the costs of fixing social security is not increasing.

But almost inevitably a fix to social security will involve tax increases and the longer we wait the larger the costs of those increases will be.  The technical explanation is that deadweight loss increases more than proportionately with an increase in taxes.  The common sense explanation is that you don’t want to take all your hits at once – instead, if you must take a hit, it’s best to spread it out over time.  Thus, the sooner we deal with the problem the lower the total costs will be.  Lieberman’s message is correct, even if the details are wrong.

Also this week, Robert Shiller’s simulation study of returns to personal accounts is getting some attention.  There is really nothing new in Shiller’s study, what he concludes is that based on historical data private accounts invested in stocks are great but if returns are lower in the future well then returns will be lower in the future.

Although Shiller’s paper is filled with all kinds of scenarios about stock market risk he has hardly a word to say about the risk of social security (even referrring at one point to the "guaranteed Social Security benefit," yeah right).   But social security payments are going to be cut and they are going to be cut more the lower are stock market returns.

A realistic comparison of social security and private accounts would make consistent assumptions about stock markets returns, taxes, and benefits and the full government budget constraint.  I have yet to see such a study.

Cuban President Fidel Castro has
criticized Forbes magazine for the "infamy" of listing him among the
world’s richest people, with a net worth of $550 million.

"Once
again, they have committed the infamy of speaking about Castro’s
fortune, placing me almost above the queen of England," Castro said in
a speech to top officials of Cuba’s ruling Communist Party, military
and police.

"Do they think I am (former Zairian President) Mobutu
(Sese Seko) or one of the many millionaires, those thieves and
plunderers, that the empire has suckled and protected?" he said in
reference to his capitalist archenemy, the United States…

The magazine said Castro derived his fortune from a web of state-owned
companies that include retail conglomerate CIMEX, pharmaceutical
company Medicuba and a convention center near Havana.

Here is the full story.