The May 2007 Quarterly Journal of Economics offers up a fun piece on the marginal product of capital, earlier version here.  The bottom line is startling, though it requires only a simple model:

Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows.  Attempts to provide an empirical answer to this question have so far been mostly indirect and based on heroic assumptions.  The first contribution of this paper is to present new estimates of the cross-country dispersion of marginal products.  We find that the MPK is much higher on average in poor countries.  However, the financial rate of return from investing in physical capital is not much higher in poor countries, so heterogeneity in MPKs is not principally due to financial market frictions.  Instead, the main culprit is the relatively high cost of investment goods in developing countries.  One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries’ incomes.

The rough equality of MPKs [correction: financial rates of return] means that capital can flow to where it is most productive.  That means if a country receives some aid, and converts that aid into useful capital goods, less capital flows into your country.  A version of neutrality holds.  Of course there is no reason to focus on aid in this argument.  Most one-off improvements (or destructions) wash out in the longer run, due to subsequent adjustments in the capital stock.  The one-off improvements matter only if liquidity and credit imperfections hinder the international mobility of capital; such imperfections would mean that transfers could bring about a permanently higher level of capital.

No, I’m not ready to "press the yes button" on this model (should I be?), but it is a good example of how open economy considerations can overturn our expectations, or how easily economics can generate a counterintuitive conclusion.  You also may have noticed Borjas and Rodrik using a version of this model lately, attempting a Brad DeLong Smackdown.  I am suspicious.  It’s not a model they believe in, or if they do I am waiting for Borjas to stop warning us about capital destruction costs more generally… 

It’s just as important to give US consumers access to cheap foreign goods as it is to make real GDP bigger.

That’s Bob Hall, here is the explanation, try this too.

I usually forget to sign the back of my credit cards.  Or, with one of my cards — the one I use most frequently — the signature rubs off quickly.  Every now and then the card will be rejected because it doesn’t have my signature on it.  Or they will require ID.

I then offer to sign the card, but they never accept this possibility.  Hrrmph.

Could not a thief have signed a previously unsigned card before using it?  In fact I would expect precisely that behavior from a thief.  Wouldn’t a thief take more care to sign than would a lazy, careless card holder?  Upon seeing the unsigned credit card, their estimate of my honesty should go up not down (well, that’s not quite a stable equilibrium…).

I have wondered why it ever makes sense for cards to be signed.  If you sign a card and it is stolen, can they not forge your signature more rather than less easily?  (Imagine signing into one of those signature-reading machines.)  And if merchants were more rational, maybe the signature would carry no positive value in the first place.

Here’s today’s Op-Ed by Pat Toomey, praising private equity.  I am tracking down sources on this topic and will pass along what I learn.

I do now trust at least one result: public firms will buy up targets without much discretion, but private equity has been making acquisition decisions in a more rational fashion:

We find that the announcement gain to target shareholders from acquisitions is significantly lower if a private firm instead of a public firm makes the acquisition.  Non-operating firms like private equity funds make the majority of private bidder acquisitions.  On average, target shareholders receive 55% more if a public firm instead of a private equity fund makes the acquisition.  There is no evidence that the difference in premiums is driven by observable differences in targets.  We find that target shareholder gains depend critically on the managerial ownership of the bidder.  In particular, there is no difference in target shareholder gains between acquisitions made by public bidders with high managerial ownership and by private bidders.  Such evidence suggests that the differences in managerial incentives between private and public firms have an important impact on target shareholder gains from acquisitions and managers of firms with diffuse ownership may pay too much for acquisitions.

Here is the paper.