Results for “department why not”
169 found

Advertising markets in everything

Goldman Sachs Group Inc., winning its first job managing a share sale by an Indian state-owned company, may earn next to nothing for the privilege.

The most profitable securities firm in Wall Street history tied for the lowest bid among 17 banks vying to manage the $1.8 billion offer by Power Grid Corporation of India Ltd., three people with knowledge of the matter said. Goldman Sachs and SBI Capital Markets Ltd. said they’d do the work for a fee equal to 0.00000001 percent of the sale proceeds. That means the firms stand to reap about 2 rupees (4 cents) each on the deal.

The full story is here and I thank Mehul Kamdar for the pointer.  There were other low bidders, including JP Morgan.  Why bid four cents I wonder, why not bid one cent?

Here is a related page, from what is propitiously called the Department of Disinvestment.

What are markets demanding?

Paul Krugman, like many other bloggers, asks a good question:

Why, then, are Very Serious People demanding immediate fiscal

The answer is, to reassure the markets – because the markets
supposedly won’t believe in the willingness of governments to engage in
long-run fiscal reform unless they inflict pointless pain right now. To
repeat: the whole argument rests on the presumption that markets will
turn on us unless we demonstrate a willingness to suffer, even though
that suffering serves no purpose.

And the basis for this belief that this is what markets demand is …
well, actually there’s no sign that markets are demanding any such
thing. There’s Greece – but the Greek situation is very different from
that of the US or the UK. And at the moment everyone except the
overvalued euro-periphery nations is able to borrow at very low interest

Here is a short bit from today's morning news:

The euro slid 2.5 percent last week versus the greenback as
credit-default swaps on France, Austria, Belgium and Germany rose,
sending the Markit iTraxx SovX Western Europe Index of contracts on 15
governments to a record.

The French in particular are having serious and formerly unexpected problems and that is one of the two major EU countries, not Greece or Iceland. The French also don't have one of those impossible debt-gdp ratios.

In the blogosphere, discussions of market constraints are too heavily influenced by interest rates, which also "measure" an ongoing flight to safety.  (U.S. rates have fallen of late, but does that mean our fiscal position has improved?  Hardly.)  All of these austerity-promoting leaders are in constant communication with their finance ministers and departments and many of them are hearing glum, on the ground reports from relatively competent bureaucracies.  Furthermore many of these politicians seem to have the discipline to engage in a bit of worst-case thinking, rather than just looking at modal outcomes.

Call me naive, but I believe that most of these politicians would in fact prefer to spend the money and hand out goodies to favored constituencies.

What may be destroying economic recovery is not fiscal contraction, but rather lack of trust,  "Trust" is an underused word in macroeconomics.

Also, do not forget Cowen's Third Law, namely that: "All propositions about real interest rates are wrong." 

The real interest is only one indicator of where fiscal policy is at.  The point that interest rates serve multiple functions, and don't always communicate direct market information very well, comes from…John Maynard Keynes.  Let's at least keep that possibility in mind.

What makes an economist?

When you read about a shortage of women's restrooms, your first thought is whether there is some way of charging for usage.

As it stands, Congress is preparing a bill to regulate the ratio of men's to women's rooms in federal facilities.  I would think the theatre and symphony orchestra is where reform is needed, not at the Treasury Department.  Men might benefit too ("husband leaving" and "wife leaving" are often complements) and I wonder why Tiebout competition has not enforced better outcomes.

The origins of mutton barbecue

Here is one account:

The one truth about barbecue seems to be that people use what they've got. In Texas it's beef, in the Carolinas it's pork, and in Western Kentucky it's mutton. Thanks to the tariff of 1816, wool production in the then Western United States became profitable and suddenly people found themselves with a lot of sheep on their hands.

Any story of the origin of barbecue starts with a meat that is too tough and undesirable to be sold for a profit. Mutton barbecue is no different. Aging sheep who no longer produced good wool became a virtually unlimited resource, but the meat was too tough and too strong tasting to be worth anything so people turned to the tried and true methods of low and slow cooking. In the early days a whole sheep would be cooked for long hours over a low fire. A mixture of salt water would be mopped over it and it would be served up with a dipping sauce of vinegar and hot peppers and stuck between a couple slices of bread. In Kentucky this "sauce" is called a dip, specifically Mutton Dip or Vinegar Dip.

Call it the Protectionist Theory of Barbecue, plus or minus a bit of hysteresis.  I've seen or heard of mutton barbecue only in Kentucky and then only parts of Kentucky, the southwest and a bit in Lexington.  I wonder if they have mutton barbecue in North Africa or the Middle East.  In general it is an open question why barbecue traditions have for so long been so geographically concentrated.

From The New Yorker, here is another account:

How come this is the only area where mutton is barbecued?" I asked an Owensboro merchant who had been kind enough to give me change for a nickel parking meter.

"I expect because there are so many Catholics here," he said.

I didn't want to appear ignorant. "Yeah," I said. "I suppose that'd do it."

As I was searching my mind for some connection between the Roman rite and mutton consumption, the merchant told me that the large Catholic churches in town have always staged huge picnics that feature barbecue and burgoo–burgoo, another staple of Owensboro barbecue restaurants, being a soupy stew that I, for some reason, had always associated with southern Illinois. In the early days, the church picnics apparently served barbecued goat. In fact, Owensboro might have arrived at barbecued mutton by a process of elimination, since people in the area seem willing to barbecue just about any extant mammal. In western Kentucky, barbecue restaurants normally do "custom cooking" for patrons who have the meat but not the pit, and among the animals that Posh & Pat's offers to barbecue is raccoon. The Shady Rest, one of the most distinguished barbecue joints in Owensboro, has a sign that says "If It Will Fit on the Pit, We Will Barbecue It. It is probably fortunate that the people of the area settled on barbecued mutton as the local delicacy before they had a go at beaver or polecat

In other words, they don't know either.  What would Robin Hanson say?: Something like: "Food isn't about eating!"

I thank Brandon Sheridan for the pointers.

The economic theories of the MLA

A resolution calling for full- and part-time faculty members to “be eligible for tenure” and expressing the view that “[a]ll higher education employees should have appropriate forms of job security, due process, a living wage and access to health care benefits” passed in a 81-15 vote, but not without concerns from delegates that the wording went too far – or not far enough.

Ian Barnard, an associate professor of English at California State University-Northridge, said he wanted to see the resolution extended to include a call for all faculty to be eligible not only for tenure but also for full-time employment. Simply voicing support for a lecturer to continue to be guaranteed one course per semester was, he said, “really weak … a way for us to cop out,” for departments to avoid paying for health benefits and for adjunct faculty to continue bouncing around among many jobs just to make ends meet.

The full story is here.  Why don't journalists demand something similar?  You can pinch yourself, but it really is 2010.

By the way, here are some facts:

In 1960, 75 percent of college instructors were full-time tenured or tenure-track professors; today only 27 percent are.

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.

China committee of the day

Today's Financial Times writes about the Central Organization Department of China:

To glean a sense of the dimensions of the organization department's job, conjure up a parallel body in Washington.  The imaginary department would oversee the appointments of US state governors and their deputies; the mayors of big cities; heads of federal regulatory agencies; the chief executives of General Electric, Exxon-Mobil, Walmart and 50-odd of the remaining largest companies; justices on the Supreme Court; the editors of The New York Times, The Wall Street Journal and The Washington Post; the bosses of the television networks and cable stations; the presidents of Yale and Harvard and other big universities and the heads of think-tanks such as the Brookings Institution and the Heritage Foundation.

All equivalent positions in China are filled by people appointed by the party through the organization department.

I would not want to be on the bad side of the Central Organization Department.  The full article, which is interesting throughout, is here.  It's also related to why I don't see China just evolving into a normal democracy.

“Too big to take a pay cut”

Here is my latest column.  It's about how politicization is behind the financial crisis (in part), why we haven't learned very much from the financial crisis, why we are treating the health care sector just as we have been treating the banks, and why Atlas Shrugged is selling so many more copies.


We should stop using political favors as a means of managing an
economic sector. Unfortunately, though, recent experience with health care reform
shows we are moving in the opposite direction and not heeding the basic
lessons of the financial crisis. Finance and health care are two
separate issues, of course, but in both cases we’re making the common
mistake of digging in durable political protections for special
interest groups.

came over the summer when it was reported that the Obama administration
had promised deals to doctors and to pharmaceutical companies under the
condition that they publicly support health care reform. That’s another
example of creating favored beneficiaries through politics.

If these initial deals are falling apart, it is only because reform
met with unexpected resistance. Even after Mr. Obama’s speech Wednesday
night, we’re still at the point where the medical sector is enshrined
as “too big to take a pay cut,” which is not so far removed from the
banking motto of “too big to fail.” In finance and health care, a
common political dynamic has created similar trends, namely,
out-of-control costs, weak accountability, and the use of immediate
revenue patches to postpone dealing with fundamental problems.

worse, these political deals threaten open discourse. The dealmaking
may be inhibiting some people in health care from speaking out in
opposition to the administration’s proposals. Robert Reich, who served
as secretary of labor in the Clinton administration, deserves credit
for complaining about this arrangement, but not enough people are asking where such dealmaking might stop.

The banking sector has been facing similar constraints; if bankers criticize the Treasury
or the Fed, they risk losing their gilded cages and could get a bad
deal when the next bailout comes. When major economic sectors can be
influenced in this way, are we really very far from the nightmare
depicted by Ayn Rand in “Atlas Shrugged”?

The conclusion is this:

In short, we should return both the financial and medical sectors and,
indeed, our entire economy to greater market discipline. We should move
away from the general attitude of “too big to take a pay cut,”
especially when the taxpayer is on the hook for the bill. If such
changes sound daunting, it is a sign of how deep we have dug ourselves
in. We haven’t yet learned from the banking crisis, and we’re still
moving in the wrong direction pretty much across the board.

A Swedish tragedy, in one short act

Wife: Let's send her the bag

Husband: That will take forever.


Husband: Swedish postal delivery has been privatized.  [TC: More accurately, it is open to private competition.]

Wife: Where do we find a post office?

Aide: In the main train station


Wife: Why isn't there a post office in the train station?

Different aide: It is gone.

Wife: Why are there no post offices around?

Wife (again): What do you do if you wish to mail something?

Yet another aide, in halting English, with a Middle Eastern accent: I do *not* wish…to do that.  I do not do it.

(Much later, in the basement of a department store, surround by lottery promotions and cigarette racks, husband and wife are mailing the aforementioned computer bag)

A fourth and different aide: This is the only post office in central Stockholm (TC: how can that be true?)

Husband: In the United States the postal service absorbs too many workers; Sweden represents efficiency.

Wife: If I cannot mail the bag, this is inefficiency.

Editor's note: The dialog with several other aides has been omitted due to publication constraints.

Pharmaceutical R&D

In an over-the-top post Megan McArdle goes all Xena warrior princess on Ezra Klein and Jerry Avorn.  I especially liked this bit: Here's Avorn on why we need not worry that regulating drug prices will reduce innovation:

There are a couple reasons that this is a specious argument. One is that according to their filings with the SEC, the drug companies only spend about 15 cents of every dollar on research and development. That's compared to more than 30 cents in administration and marketing and more than 20 cents on shareholder equity. As an investment in R&D, I think any venture capitalist would say a company spending 15 percent on research is not a robust innovation engine.

and here is McArdle swinging the sword of truth:

This makes about as much sense as saying that Dr. Jerry Avorn cannot be that smart because his brain only weighs about three pounds. Presumably, you can't be really smart–really innovative–unless your brain is at least 30 percent of your body weight!

This is obviously ludicrous–so why would Dr. Avorn say it about an R&D department? Like your brain, the R&D department is part of a complex system that does a lot of important stuff. You can argue that the R&D department is the most important part of a company, not least because it couldn't survive long without it. I think the same thing about my brain–but I'd still be just as dead without my liver. You certainly can't prove anything about my effectiveness as a journalist by pointing out that [my brain] weighs less than my bones. So how big should a "brain" be? Hard to say. But let's look at some companies that are generally recognized as pretty innovative, and their R&D as a percentage of revenue:

Apple:  three cents out of every dollar

Google:  ten cents out of every dollar

Intel:  fifteen cents out of every dollar

Genzyme (innovative biotech startup!):  sixteen cents of every dollar

US Government:  three cents out of every dollar

I can assure Dr. Avorn that any venture capitalist would be happy to invest in these hidebound laggards who haven't had a new idea in centuries. The first few, anyway.

By the way, I liked Jerry Avorn's book Powerful Medicines (see also here) but I thought it was weak on economics, a fact which really shows in this interview (he does make a few good points about comparative effectiveness research). 

Apportioning Blame for the Deficit

David Leonhardt's column breaking down the "causes" of the budget deficit has been widely reported and the bottom line repeated many times

President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying.

I have two problems with the analysis.  First, the NYTimes' excellent graphics department this time goes overboard with a big and difficult to read chart.  Matt Yglesias does much better summarizing the point with that old standby, the pie chart:
Second, although not "wrong" the Leonhardt's analysis doesn't reveal the arbitrariness of this way of apportioning deficit blame.  

The reason why the hundreds of billions of dollars of spending in Obama's agenda is said to be responsible for only a "sliver" of the deficit is that the agenda also includes taxes, thus the net effect is low.

Now Obama deserves kudos for a more honest budget process.  Indeed, if the only choices are the tax and spend party and the no-tax and spend party then I prefer the former for both economic and political reasons.  Thus as political accounting Leonhardt's conclusion is reasonable.

I suspect, however, that many people will not see that the economic accounting is arbitrary and potentially misleading.  To see why, imagine that President Bush increased taxes in the last days of his administration and Obama increased spending in the first days of his administration.  We would then be in exactly the same economic position as we are now but everyone would be writing about how "Obama's ambitious agenda is responsible for a large portion of the deficit."  In other words, if it were not for Obama's spending, the deficit would be hundreds of billions of dollars lower. 

Washington is all about political accounting but we should not be misled into thinking that because Obama's agenda accounts for only a "sliver" of the deficit that this makes it a modest or cheap agenda.  The agenda is big and expensive and every dollar of spending is a dollar that adds to the deficit.  

Tyler hitting hard

That's how Dan Klein described this piece to me.  The end of the piece runs as follows:

One has to wonder if anyone who has read [Henry] George
could lend a hand to the production of the screed of mistruths and
error that is The End of Poverty. I prefer to be subtler, but this movie does not allow it.

I guess I did not signal magnanimity with that one.  I believe the movie is coming out soon.

Addendum: David Henderson adds comment.

How easy is it to fill those Treasury jobs?

In a search for "non-compromised" candidates, Matt writes:

And yet, look, we’re only looking to fill a relatively small number of
positions. Timothy Geithner needs a Deputy Secretary. And then there’s
a need for an Under Secretary of the Treasury for Domestic Finance, an
Assistant Secretary for Financial Institutions, and an Assistant
Secretary for Financial Markets. There are other positions in the
department, but those are the four where you might think that
experience with high finance specifically was vitally necessary. It’s
only three jobs. And you can’t tell me that there aren’t four people
alive in the United States who have experience with finance but lack
compromising relationship[s]. Why not Simon Johnson, for example? Give him
one of the jobs, and a quarter of your problem would be solved. Indeed,
if you even got three non-bankers to fill four of the
positions, I think that would create a lot of piece of mind. Nouriel
Roubini, to give another name well-known to the blogosphere, seems
perfectly well-qualified for a job at Treasury–he’s even worked in the
past as a “senior adviser” to Tim Geithner.

One point is that both Johnson and Roubini were born outside of this country and perhaps neither is an American citizen.  More fundamentally, the job requires close to a 24/7 time commitment, a huge cut in pay (might Roubini earn 50K per talk?, along with enjoying complete personal freedom), an ability to "stick to message" and give up the right to speak one's mind in public, managerial and person-handling skills, a smooth enough temperament, the ability to tolerate a gross imbalance between responsibility and resources, the possible end of an academic career (for some people it's hard to keep on caring), and a very real chance to fail and fall flat on one's face.  Toss in near-perfect tax records and regular payment of Social Security contributions for one's Green Card-holding housekeeper.

That's all without even being in charge.  Is Geithner an easy guy to work with?  You won't know until you say "yes."

I once, by sheer accident, ran into Johnson in the lobby of an NPR studio and he was smiling.

How many brilliant academics even manage to make good deans?

Infrastructure: Roads and The Smart Grid

The first thing people think about when someone says "infrastructure" is roads and bridges.  That’s unfortunate because we already spend over $100 billion a year on transportation infrastructure and the truth is we don’t need that much more.  Peter Orzag, President-Elect Obama’s choice for OMB estimated – when Director of the CBO – that an additional $20 billion in spending, mostly to maintain current transportation infrastructure, would achieve 83% of the net benefits to be had from more transportation infrastructure spending.  Moreover, in many cases, congestion pricing would be both greener and more efficient than greater spending.  A better program would be to follow Germany and several innovative state programs to get congestion pricing using GPS technology up and running, especially for trucks.

Even more valuable than transportation infrastructure would be greater investment in  electricity infrastructure, a smart grid.  Consider that in 2003 a massive, widespread, power outage threw 50 million people in the Northeastern states and Ontario, Canada out of power – disrupting lives and the economy.  Why did this happen?  Because of a failure to "trim trees" in Eastlake, Ohio – now that’s a dumb grid.  And remember that only a few years earlier, the most innovative, high-tech industries in the world were shut down by blackouts caused by our primitive electricity grid.  Overall, blackouts cost the U.S. on the order of $100 billion a year.

The smart gird is a not one idea but many technologies such as real-time pricing (smart meters), superconductive smart cable, and plug-n-play architecture that combine to produce a grid that is decentralized, self-healing, robust, and smart for both producers and consumers.  Decentralized power, for example, makes it easier to isolate problems, "route" power to different areas, and maintain robustness in the face of falling trees and other problems.  Plug and play architecture means that new technologies such as electric cars can be automatically used as both consumers and producers (via storage) of electricity, as needed, on the fly.  Plug-n-play, the open-source of electricity infrastructure, will also open the field of electricity generation and storage to far greater innovation than is possible now.

Useful references include the Department of Energy’s somewhat breathless introduction for the layperson, The Smart Grid, The National Energy Technology Laboratory’s The Modern Grid Strategy, the Smart Grid newsletter and papers by Kiesling and also Dismukes in Electric Choices (a book I had a hand in).

The smart grid did not receive prominent attention in Obama’s infrastructure speech but the campaign called for matching grants to investment in smart grid technology and support for smart meters and real-time pricing.  An investment tax credit for smart grid technologies and more foresighted regulation (price regulation has limited investment in needed infrastructure) could encourage the construction of much-needed electricity infrastructure while maintaining private investment incentives and promoting innovation.

Where have the graduate students gone?

Applications to take the GRE are down and that means the number of graduate students is unlikely to rise, in contrast to the traditional pattern of greater graduate school attendance during recessions.  Here are a few hypotheses:

Stewart has several theories about why declines may be taking place
this year, despite historic trends. She said it was possible, as ETS
officials suggested, that the credit crunch was making it more
difficult for students to borrow – or that hearing about the crunch
discouraged some from trying. In that same vein, she said that with
many colleges and universities announcing budget cuts, many departments
may not have the same levels of funds to offer in fellowship support.

In addition, she said that while economic uncertainty in the past
has prompted some people to decide to improve their skills so they can
seek better jobs, the turmoil is so great this year that “no one will
leave a job if they have a job – they think the risk is too much to

Stewart also stressed that just because the surge in interest in
graduate school has not happened this year doesn’t mean it won’t start.
Many people these days are experiencing “freezing behavior” where they
are so uncertain about their next move and the state of the economy
that they aren’t making any changes, she noted. “It could be that this
has created a temporary pause where we would have normally seen a flow
to graduate school. That the flow hasn’t started doesn’t mean it won’t.”

I opt for paragraph #2.  How about all of you?  Are you in this position yourselves?