The countercyclical meal plan, Arrow-Hahn-Debreu edition

Will Wilson blogs:

Seattle’s 5 Spot has a new “Blue Plate Special” promotion, with the daily meal priced like this:

…we’re pricing these items daily according to the most
recent close of the Dow Jones Industrial Average. If the Dow closes at
8650, then your “square meal” will only cost you $8.65; if it closes at
7875, then you win your meal for a mere $7.87.

There’s a built-in stop-loss, too. They make a limited number of blue plates each night, and when they’re gone, they’re gone.

Kicking the Stimulus

Smokers are three times more likely to kick the habit for at least six months when they are paid up to $750 (£520), a new study has found.

Nearly 900 General Electric workers took part in the test across 85 US sites. The results were published in the New England Journal of Medicine.

GE will launch a similar scheme in 2010 for all US employees, believing it will be cost-effective in the long term.

A certain blogger once expressed great skepticism that such plans could work. In related news, Ted owes Ray $12,400 as of Jan. 29.

Buy a House, Get a Visa

Add Thomas Friedman to Tyler, myself, Lee Ohanian and others suggesting immigration as a way to alleviate the recession:

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

“All you need to do is grant visas to two million Indians, Chinese and
Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper.
“We will buy up all the subprime homes. We will work 18 hours a day to
pay for them. We will immediately improve your savings rate – no Indian
bank today has more than 2 percent nonperforming loans because not
paying your mortgage is considered shameful here. And we will start new
companies to create our own jobs and jobs for more Americans.”

Note that the multiplier on the “buy a house, get a visa” strategy would be much larger than any possible domestic multiplier since the money would come from outside the economy (and efficiency would improve as well.)
I think there would be considerable support among economists that immigration (buy a house, get a visa), a payroll tax cut and maintaining state and local funding would be reasonably good policies in this recession (albeit not necessarily sufficient) yet these policies seem to be the ones that the political system rejects out of hand.  (See also Matt Yglesias here and here).  Now, I can understand rejecting these policies as compared to doing nothing, ala a precautionary principle, but why these policies are rejected compared to taking a trillion dollar gamble is puzzling even to someone like myself schooled in public choice.

Good sentences

Giving up being liked is the ultimate public sacrifice.

Here is more, interesting throughout.  Shakespeare, in his Henriad, understood that citizens do not allow their leaders to be nice, reasonable, likable guys who admit when they are wrong.  I am still glad — for eggheady, "merit good," and self-aggrandizing of my own relative status reasons — that Obama is trying to be reasonable, but I am not naive as to what lies at the end of the process.

There is no good reason for this

Thomas Friedman reports:

…the U.S. Senate unfortunately voted on Feb. 6 to restrict banks and
other financial institutions that receive taxpayer bailout money from
hiring high-skilled immigrants on temporary work permits known as H-1B
visas.

It is, however, another unintended consequence of bail-outs and we can expect riders like this to increase as the amount of money spent is increased.

The job market for economists turns…dismal

Here is a good article by Justin Lahart:

The dismal economy has claimed yet another victim: jobs for the economists who study it.

Columbia University's economics department, for example, isn't
making any new hires this year. That's in stark contrast to last year,
when Columbia poached eight economics professors from other schools,
and hired one economist out of graduate school. The University of North
Carolina at Chapel Hill, Amherst College and the University of
Minnesota all have suspended their searches for economics professors.
And Harvard University has gotten permission to hire just one person —
only after "many rounds of negotiation," according to Harvard economist
Lawrence Katz, who is handling recruiting this year. Typically, Harvard
hires two or three economics professors out of graduate school.

Barack Obama on Sweden

Read this post; here is Obama speaking:

Sweden, on the other hand, had a problem like this. They took over the
banks, nationalized them, got rid of the bad assets, resold the banks
and, a couple years later, they were going again. So you'd think
looking at it, Sweden looks like a good model. Here's the problem;
Sweden had like five banks. [LAUGHS] We've got thousands of banks. You
know, the scale of the U.S. economy and the capital markets are so vast
and the problems in terms of managing and overseeing anything of that
scale, I think, would — our assessment was that it wouldn't make
sense. And we also have different traditions in this country.

Here is a short movie by Ingmar Bergman.  Here is a Carl Milles sculpture.  Here is some cabbage with your pizza.

Interview with The Daily Beast

From The Daily Beast, with me.  This was done before the new Geithner plan was announced.  Here is one part:

It's a sort of finger in the dike approach with no clear vision, but
maybe no one has a clear vision. And a finger in the dike is better
than nothing. But it's not a great place to be.

Here is the closing bit:

The fact they're talking about an itty-bitty plan suggests to me they
think things are manageable so it makes me more optimistic. I hope
that’s not just them trying to trick me. So you can take their response
actually as somewhat of a sign that things aren't as bad as the worst
doomsayers are claiming.

Today I am less optimistic about that.

Theories of TARP evolution

Via J. Wallace, here is a tableaux of how U.S. banking/bailout proposals have evolved.  And of course the Geithner plan has hardly proven itself overwhelming.  I offer up the following hypotheses, none of which settles the issue for me:

1. U.S. banks have been known to be insolvent for some time and everyone is simply afraid to come out and admit it.

2. The economists offer up coherent plans, but they are then bogged down by the input of competing advisers and Karl Rove-like politicos.

3. The goal of the various plans has been to confuse Congress.

4. The Republicans were just stupid and irresponsible and now the Democrats are smart but they lack experience at the rudder and they need another try to get it right.

5. The Republicans were just stupid and irresponsible and now the Democrats are just stupid and irresponsible.

6. The Obama team is brilliant and we are the silly ones who insist on imposing simple narratives on all policy actions.  Good policy should be difficult to understand.

7. The Democrats made the mistake of setting an artificial deadline and by the time it came around they realized they had nothing so they put up what they had, which wasn't much.

8. We need to re-benchmark our expectations because the world doesn't work as well as we used to think.  What we used to consider "bad policy" is, in reality, compared to the relevant alternatives, "reasonably good policy."

9. U.S. banks are insolvent but we can muddle through if we ignore that fact and let them evolve back into solvency.  What we need is a plan which lacks transparency and Geithner delivered.

10. All of the above.

The Geithner plan

Megan McArdle writes:

Tim Geithner reveals that the Treasury has a plan to fix the problems in our broken capital markets by . . . er . . . fixing them.

Paul Krugman writes:

An old joke from my younger days: What do you get when you cross a
Godfather with a deconstructionist? Someone who makes you an offer you
can’t understand.

I found myself remembering that joke when trying to make sense of the Geithner financial rescue plan.
It’s really not clear what the plan means; there’s an interpretation
that makes it not too bad, but it’s not clear if that’s the right
interpretation.

Here is Brad DeLong on same.  Get the picture?

In a nutshell

Here's Brad Setser:

Implicitly, Geithner and his colleagues seem to have concluded that the
“great unwind” has limited the private sector’s ability to absorb the
banks troubled assets. Key players no longer can borrow the funds
needed to make large bets on troubled mortgage-backed securities. By
providing credit to those willing to buy bad assets, the US government
hopes to push up their market price up, and in the process induce the
banks now holding these assets to sell. The US government in effect is
providing the financial system with leverage to facilitate – one hopes
– a transition to a less leveraged financial system. The amount that
private investors have to put down – relative to the amount they are
spending – is a key detail.

The post is interesting throughout.