Category: Data Source

This is a long "Control C" for a blog post, but it's worth it.  Via Simon Johnson:

New evidence in favor of the second interpretation [knaves] has just become available, thanks to the efforts of Sanjai Bhagat and Brian Bolton, who went carefully through the compensation structure of executives at the top 14 financial institutions in the United States from 2000 to 2008.

The key finding is that chief executives were “30 times more likely to be involved in a sell trade compared with an open-market buy trade” of their own bank’s stock and “the dollar value of sales of stock by bank C.E.O.’s of their own bank’s stock is about 100 times the dollar value of open market buys.” (See page 4 of the report.)

If the chief executives had really believed in what their banks were doing, they would have wanted to hold this stock – or even buy more.

And:

Professors Bhagat and Bolton argue that if this incentive problem is important, we should see chief executives make a great deal of money while long-term buy-and-hold shareholders lose money.

Table 4 in their paper (Pages 45-48) shows the amounts of money involved, and they are simply staggering. Collectively, the people who headed these 14 institutions pocketed – in hard cash terms – more than $2.6 billion during 2000-8. It’s true that the paper value of their wealth dropped in 2008, although this was an unrealized paper loss. Even including that notional loss, the chief executives made an impressive $650 million profit [emphasis from TC].

In contrast, long-term shareholders in these 14 banks did very badly, particularly in 2008 (see Figure 1 on Page 61 of the paper). Professors Bhagat and Bolton show that shareholders in the biggest banks – where chief executives got their hands on more cash – did significantly worse than investors in smaller banks.

Interestingly, chief executives in the smallest banks in their sample did not sell much stock relative to their purchases of their own bank’s stock. The big bank-small bank contrast is quite striking.

British Prime Minister Harold Macmillan used to call them "banksters."

Here, courtesy of Catherine Rampell of Economix, is a remarkable chart from Branko Milanovic's book The Haves and Have Nots. Along the horizontal axis are within-country income percentiles running from the bottom 5% (1st ventile) to the top 5% (20th ventile). Along the vertical axis are world income percentiles.

The graph shows that the bottom 5% of Brazilians are among the poorest people in the world but the top 5% are among the richest. Thus the vertical range of the curve tells us about within-country inequality.

Comparing between countries we see that the poorest 5% of Americans are among the richest people in the world (richer than nearly 70% of other people in the world). The poorest 5% of Americans, for example, are richer than the richest 5% of Indians.

This NYTimes piece on China and solar power is a must read as it touches upon environmentalism, protectionism, nationalism, the stimulus, the financial crisis and more! Here are a few grafs and comments.

Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China…[and] plunging prices for solar panels. World prices have fallen as much as two-thirds in the last three years…

Good news, right? Plunging prices for solar is just what we want and shouldn't we applaud subsidies for green energy? Not so fast according to the article:

…solar power experts see broader implications. They say that after many years of relying on unstable governments in the Middle East for oil, the United States now looks likely to rely on China to tap energy from the sun…

China monopolizes the sun!

Ian A. Bowles, the former energy and environment chief for Gov. Deval L. Patrick…said the federal government had not helped the American industry enough or done enough to challenge Chinese government subsidies… “The federal government has brought a knife to a gun fight,” Mr. Bowles said.

I guess Bowles didn't get the memo about the new civility, or perhaps that only applies domestically. The reporters also seem to signal their views.

Evergreen’s joint-venture factory in Wuhan occupies a long, warehouselike concrete building in an industrial park located in an inauspicious neighborhood. A local employee said the municipal police had used the site for mass executions into the 1980s.

Woah, a little gratuitous no?

See here for more of interest including a discussion of how the financial crisis and the Lehman bankruptcy are involved.

Hat tip: Daniel Akst.

One quality of life measure put Tunisia first in the Arab world.  If you look at water policy, the Tunisian government has long had a strong reputation.  Here is Wikipedia:

Tunisia has achieved the highest access rates to water supply and sanitation services among the MENA countries through sound infrastructure policy. 96% of urban dwellers and 52% of the rural population already have access to improved sanitation. By the end of 2006, the access to safe drinking water became close to universal (approaching 100% in urban areas and 90% in rural areas). Tunisia provides good quality drinking water throughout the year.

I've never been to Tunisia, but from readings I've found the country especially difficult to understand.  They've had a corrupt autocracy for a long time, but some areas of policy they get (inexplicably?) right.  And usually they are by far the least corrupt country in the Maghreb.  Dani Rodrik called the place an unsung development miracle.  Maybe that was exaggerating but for their neighborhood they still beat a lot of the averages and they've had a lot of upward gradients.  They've also made good progress on education.

And now this.  Perhaps it is no accident this is "the first time that protests have overthrown an Arab leader."  The lesson perhaps is that the path toward a much better world involves…small steps.  Civil society there is relatively strong and has been so for a while.  Democracy is probably not around the corner, but if you're studying social change it's worth spending a lot of time on why Tunisia and Jordan are often so much better run than the other Arab states.

I am correcting the mistake in the previous post, here is a range of estimates from $5k up through $12k.  The point remains that a country, especially a European country with free and wealthy nearby neighbors, should not be content with the lot of Belarus.  My apologies for the slip-up.

Addendum: As Blackadder notes, in terms of the Satisfaction with Life Index, they are near the very bottom.

Ok Trends has another great post combining statistics, sex and even a little "game theory" (read that in whichever sense you prefer). The statisticians at OK Trends discovered that the number of messages a women receives varies widely even after conditioning on the women's attractiveness rating. Why do some 7's receive far more messages than other 7's? It turns out that it's much better to receive some 10's and some 1's than all 7's. Or as OK Trends beautifully expresses it:

A lot of this can be explained by a non-linear function of messages to attractiveness; that is if 2 men rate three women, A,B,C, as A:{0,10}, B:{5,5} and C:{10, 0} it's not that surprising that A and C each receive one message and B receives none.

But OK Trends argue that more is going on. In a regression of messages on number of rankings in each category (1 being lowest, 5 being highest) they find, not surprisingly, that more high rankings increase messages but also that more low rankings increase messages. That is they find that a ranking of {0,10} can be better than a ranking of {6,10}.  Ok Trends hypothesize the following explanation:

Suppose you're a man who's really into someone. If you suspect other men are uninterested, it means less competition. You therefore have an added incentive to send a message.

I have my doubts. Rather I think there are certain types of beauty that greatly attract some men but repel others. Analagously, some people will pay hundreds of dollars for an ounce of caviar that other people won't eat for free. The reason some people love caviar, however, is not that other people dislike it. Instead, it just so happens, that the thing that some people love is the very thing that repels others. We see the same phenomena in art, some people love John Cage, other people would rather listen to nothing at all. 😉

Now if we mix in this kind of beauty–beauty over which there are violent disagreements–with the kind that most people do agree upon (think Haagan-Dazs vanilla ice cream) then I suspect that it will appear that lower rankings increase messages. But what is really going on is that high rankings–conditional on their also being many low rankings–actually signal an extra strong attraction. Someone who tells you that John Cage is their favorite composer is telling you more than someone who says Aaron Copland is their favorite composer.

Note that even if rankings were not public this theory would predict that the same women would receive more messages than their (non-public) rankings would suggest. 

Which ever explanation holds, some advice follows: In the marriage market what you want is not so much to increase your attractiveness to the average person but rather to the one person who will  cherish your unique features. Thus–conditional on attracting a decent number of suitors from a reasonable pool etc.–what you want to do is accentuate your unique features even if doing so reduces your average ranking. In short, heteroscedasticity makes you hot.

FYI, OK Trends will analyze women's reactions to men in a future post.