Going Galt
The Obama administration orders huge pay cuts:
Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year. For many of the executives, the cash they would have received will be replaced by stock that they will be restricted from selling immediately.
And for the 25 best-paid executives, the total compensation, which includes bonuses, will drop, on average, by about 50 percent.
The companies are Citigroup, Bank of America, the American International Group, General Motors, Chrysler and the financing arms of the two automakers.
There is no way this will work as advertised. If the administration actually follows through, most of these executives will quit and get higher paying jobs elsewhere. Executives not directly affected by the pay cuts will also quit when they see their prospects for future salary gains have been cut. Chaos will be created at these firms as top people leave in droves. Will the administration then order people back to work?
Addendum: Larry Ribstein has an excellent post on this issue and see Max Fisher for an interesting explanation of the timing and a good roundup.
Russia markets in everything
AndrewG points us to the following:
A Russian armoured-car builder is boasting that its latest vehicle has seats covered with “whale-penis leather”.
That is not all:
The bulletproof windows are gold-plated, the exhaust is made of
tungsten, the gauges are encrusted with diamonds and rubies and the
exterior has a Kevlar coating.The car also comes
with three bottles of the world’s most expensive Vodka, RussoBaltique,
although the website does warn prospective buyers not to drink and
drive.
It is supposed to be the world's most expensive…whatever it deserves to be called. Here is more information.
Assorted links
1. Lots of opinions about lots of people, including assessments of their relative status.
2. How will Twitter make money? (a request), and more here.
3. Garett Jones: "How much have
cell phones pushed down the cash wages of tedious jobs? Labor supply
increase: parking attendant, janitor, better jobs now."
5. Rules for writing non-fiction.
6. Pay as you wish, for the Goo Game: the results.
I, Coffee
Modified from original. Hat tip to ChartPorn.
*Too Big To Fail*
That's the new book by Andrew Ross Sorkin and the subtitle is The Inside Story of how Wall Street and Washington fought to Save the Financial System — and Themselves. Last night I read through to p.132. So far it seems to be the single best narrative of the crash and its aftermath. I haven't seen anything theoretical or on root causes, etc. I chuckled at reading this sentence, which starts with Dick Fuld of Lehman Brothers picking up the phone:
"I know this call may be a little unusual," [Treasury Secretary] Paulson began. "You and I have been trying to kill each other for years."
I'll let you know if my judgment changes, but so far this falls into the "recommended" category, noting again that it is narrative not theory.
Addendum: Here is Yves Smith on the book, very good post. See also Felix Salmon.
Successful government bureaucracies
Jason asks:
What are some examples of successful government bureaucracies?
Wars aside, here is a short and very incomplete list: the NIH, the Manhattan Project, U.C. Berkeley, the University of Michigan, Fairfax County, the World Trade Organization, the urban planners of postwar Germany, some of the Victorian public works and public health commissions, most of what goes on in Singapore, anywhere that J.S. Bach worked.
The European Union has been very good for eastern Europe. I'll leave aside the health care issue because we've debated that plenty already. The real question is what all these examples have in common.
The day everything changed?
Even since I wrote Create Your Own Economy, which was not so long ago, I've come around closer to Alex's position on on-line instruction. Today I read:
After several years of experimenting
with “hybrid” Spanish courses that mix online and classroom
instruction, the University of North Carolina at Chapel Hill has
decided to begin conducting its introductory Spanish course exclusively
on the Web.Spanish 101, which had featured online lessons
combined with one classroom session per week, will drop its
face-to-face component in an effort to save on teaching costs and
campus space in light of rising demand for Spanish instruction and a
shrinking departmental budget.
Adios a mis amigos!
Addendum: Elsewhere on the "everything changed" front, no one wants to buy The Boston Globe and Barnes and Noble's new e-Reader — Nook — will allow e-readers to "lend" copies to their friends, albeit in sequential fashion.
Unfounded game-theoretic speculation
David Rohde opines:
Our guards believed the drones were targeting me. United States
officials wanted to kill me, they said, because my death would
eliminate the enormous leverage and credibility they believed a single
American prisoner gave the Haqqanis, the Taliban faction that was
holding us.
Here is the full story and I thank Greg for the pointer.
Assorted links
1. Blog on Chinese financial markets.
2. Webcast site for my NIH talk, coming on Wednesday noon, on lotteries and randomized control trials in medical research.
3. Very good comments on geo-engineering, with some excellent sentences, and more here.
4. Why the Euro is not the next global currency.
Clay Shirky on knock-offs
Nokia products say "Made in China" on the back. Chinese-made Nokia-knockoffs say "Made in Finland.
Hat tip goes to Eric Barker on Twitter. Here is Eric on the worst man in history, namely you.
Preface to the Students
Here is the preface to the students from Modern Principles:Microeconomics, just now out.
We love economics. We talk economics, argue economics, and think about economics every day. We use economics in our lives, not just when we choose whether or not to refinance our mortgage but also when we choose strategies for dating, keeping a good marriage, and parenting. Yeah, we are weird. But now a warning. If you are afraid of being a little weird, Do Not Read This Book. Once you have been exposed to the economic way of thinking there is no going back — you will see the world differently and that will make you different.
Will what you learn be worth the price? That is for you to decide. But we think economics is important. We need economics to make better investments and better life choices. Citizens in a democracy must evaluate issues of taxes, deficits, trade, health care policy and inflation. These issues and many more cannot be understood without an understanding of economics. Do you want to vote ignorantly or intelligently? The economic way of thinking will help you to understand the issues of the day and to explain them with confidence to others.
We won’t lie: economics can be difficult. Few things worth knowing come easily and to understand economics well you will need to master new tools and new ideas like supply and demand curves, marginal thinking, and equilibrium. We have worked hard, however, to strip away as much jargon and unnecessary verbiage as possible. We are going to give you what is important and not much else. We are also going to have fun.
Welcome to the world of economics.
Tyler and Alex
Under- and over-explored areas in economics
Hamilton, a loyal MR reader, requests:
Of those questions in economics whose answers interest you, which
question do you think is most under-explored, given its importance? And
why do you think that is?Or, going the other way, to what question or questions has economics
been over-applied? Where have economists put too much effort?
Under-explored; Empirical studies of signaling behavior, peer effects, the kind of "questionnaire macro" pioneered by Alan Blinder on price stickiness. Economic anthropology. Neuroeconomics other than brain scans. The economics of the emotions, an area started by Robert Frank. Status and fame motivations. Economic history. The economics of the non-profit sector. The economics of science. How IQ and other cognitive measures interact with economic decision-making and economic rationality. Behavioral economics of politics and public choice. Anything Alex does.
Over-explored: VAR, most structural macro, "another open economy model," auction theory, auctions in experimental economics. There's more, but today I'm not so interested in complaining.
That's my list, what's yours?
My favorite guitarists
"Ar" wants to know who they are. When I was young I studied guitar for seven years (multiple styles), so it's an area I've long had an interest in. I was never very good but I learned a lot about it. Here goes:
Classical: Segovia, Eduardo Fernandez. I enjoy the transcriptions of Yamashita and Larry Coryell's covers of Stravinsky, though he isn't usually considered a classical guitarist.
Jazz: Django Reinhardt, Joe Pass's Virtuoso album, Wes Montgomery live (no strings), and George van Eps. Charlie Christian deserves a mention. Today, Kurt Rosenwinkel, and the guy who plays for Trio Saudade. There are plenty of others, including Jim Hall and John McLaughlin.
John Fahey-Leo Kottke: They deserve their own category and indeed they dominate it. For Kottke try 6 and 12-String Guitar Music, and then his 1981 Guitar Music. For Fahey try the 1959-1977 Greatest Hits collection. This is some of my favorite music.
Electric blues: Muddy Waters, Robert Cray (live), Johnny Winter (live only). Amadou of Amadou and Miriam. The player from Orchestra Baobab. Does Lonnie Mack count here?
Acoustic blues: Reverand Gary Davis, Son House and many others. Jorma Kaukonen also. Bob Dylan is much underrated in this area. Can Richard Thompson go here? d'Gary, from Madagascar, is one of the greatest and most original guitarists that few people have heard of. Bola Sete too, from Brazil.
Bluegrass: Clarence White and also Doc Watson.
Rock: Jimmy Page, Brian May, Chuck Berry, Bo Diddley, of course Jimi Hendrix as #1. van Halen and his ilk never much impressed me.
Les Paul deserves mention but he straddles a few of these categories, as does Chet Atkins. Hawaiian guitar deserves its own post. Dick Dale. The Carnatic slide guitar players, including Bhattacharya. Roger McGuinn. The Zairean tradition, including Franco. Neil Young has his moments, as does Thurston Moore.
Eric Clapton was impressive for a while but overall I wish to be contrarian and leave him off. Who am I forgetting? Duane Allman?
In general guitar is an instrument which works relatively well on YouTube. Most of the names above can be found there.
Pedigree bias in economics
Coastal Elite, a loyal MR requester, requests:
Why is there more "pedigree bias" for hiring of Economics faculty than
in other disciplines? For example, at any top 30 school, 95% of the
faculty will have their PhD from a top 10 school. In other fields, this
will not be the case. Some other disciplines have a much stronger
tendency to co-author than Economics, which should decrease the signal
to noise ratio on a CV. This should imply that pedigree bias should be
even stronger in disciplines with more co-authoring, but anecdotally
this does not seem to be true.
And very often it is the top six rather than the top ten. I don't myself see the factor of co-authoring as the path to an answer here. The default answer is to invoke a relatively high importance for IQ, in economics, combined with the relative absence of prodigies, compared to say math. When prodigies and autodidacts are possible, top performers can come from anywhere. But smarts and training and networking are all required. The combination of those barriers give a big advantage, justified or not, to the very top schools. It is usually believed that a candidate from a lesser school is lacking in at least one of these yet all are required for a big career success. So maybe a "multiplicative model" of achievement in economics plays a big role in pedigree bias.
On top of that, economics is a relatively unified field with relatively homogeneous metrics of quality. A school ranked #23 can "play it safe" by hiring a lesser MIT grad, rather than the best student coming out of Emory, and more or less know what they are getting and agree on that. This tendency in the market is probably inefficient, relative to a first-best with a higher degree of intellectual innovation and less concentration of rewards across the top graduate programs.
Also, the top programs are good at doing admissions — surprisingly good in my view — and pre-selecting the kind of talent the rest of the profession is looking for.
Which other fields have a comparable "pedigree bias"?
Request for requests
It can't hurt to try.