Discourse.net

Europe Beckons

Weak US Dollar Means Nintendo Favors Europe For Now — to the point, apparently, that supplies are now short in the US.

With U.S. in slump, dual citizenship in EU countries attracts Americans

(I’m not saying the first one is causing the second.)

Perhaps my dual-national children are just part of a generational trend.

The Girl Effect

A big chunk of the development agenda summarized in a video:

Great stuff from The Girl Effect.

The Job Market of the Future

It seems at least one filmmaker with a wicked sense of humor is pretty bearish about the job market. See Job Market In 2009.

April 15 Approaches

I’ve been doing my taxes today. And undoubtedly tomorrow.

I believe that taxes are the price of civilization, but did they have to make TurboTax even less fun to use than it was last year?

I suppose I could offload the hassle to an accountant, but given that I’m fairly careful about claiming what I can claim — but don’t believe in pushing the envelope — I can’t believe one would save me enough money to justify the expense unless they went too far.

Economics Made Easy

Chris Bertram posts this marvelous video which explains Mankiw’s 10 principles of economics in terms everyone can understand. Especially funny if you have studied economics.

I think law conferences need a humor session.

Globalization Has Some Work Left to Do

Tom’s Hardware finds that computer hardware prices vary enormously around the world. Globalization — and even the European single market — still has a long way to go:

Meanwhile, the price differences between different PC products are remarkable. Basic consumer electronics accessories such as a 2-GB SD memory card vary in price around the world by up to 100%, while prices for premium PC components vary by 10-30%. Cost for a Core 2 Duo E6850 processor or a GeForce 8800 GTS graphics card was very much balanced, while the Coolermaster power supply or the Zalman CPU cooler showed large pricing differences. We selected products that are available almost everywhere, and we took the average price of the four cheapest etailers to get a solid number.

We found that France is rather expensive, especially if compared to Germany, which is next door. The United States is at the other end of the pricing spectrum, as most products are less expensive there.

One reason may be that consumer-level arbitrage isn’t easy:

It does not make sense to order hardware in a foreign country, or to buy large amounts of hardware when you travel. One the one hand, shipping cost will eat up all cost advantages. On the other hand, you’ll have to pay custom duties or an import turnover tax for many products. The only exception is the purchase of inexpensive products, as consumers in different countries can often buy goods abroad that remain below a certain price level without having to pay duty charges.

'Murder by Spreadsheet'

They’re calling it ‘murder by spreadsheet’ — CIGNA refused for 20 days to OK a liver transplant for Natalee Sarkisian, a teenager who died today, ironically only shortly after demonstrators and a tidal wave of bad publicity forced CIGNA to reverse its negative decision.

The 20-day delay, during which the family had to decline at least one suitable transplant opportunity due to lack of funds, is said by the family to be the proximate cause of death — although this was a very complex medical case.

We need national health insurance. (Not insurance companies for everyone.)

This is Not My Beautiful House (Anymore)

David Byrne, yes that David Byrne, one of my favorite contemporary musicians, explains the mortgage credit crisis and how the housing bubble might explain why working people voted against their interests in 2004 and helped elect GW Bush,

Meanwhile the recipients — the workingmen and women who are barely eking by — suddenly have loan offers thrown at them by the truckload. They feel richer, more flush; things are going well it seems, and their situations improving. It’s not so hard to pay the bills. They worry less and sleep more. A sense of blissfully ignorant well-being pervades the land. The working class and the under- and unemployed assume that the Republicans are somewhat responsible for this new (virtual) wealth — and maybe they were. It would follow that Mr. Joe Average might vote for the administration seemingly responsible for his new sense of well-being. Now, the bills are coming due — the housing market stalled, as I understand it, triggering the collapse of the whole house of cards.

Although Byrne’s analysis of the sources of the bubble isn’t half bad, the really good stuff is at Calculated Risk if you have a taste for true insider mortgage industry wonkishness in all its glory. But having seen Bryne’s blog entry, I couldn’t, just couldn’t, resist the chance to use that headline.

Don't Use PayPal if You Can Use a Credit Card

I’d like to dissent from the view expressed at Concurring Opinions’s A PayPal Christmas. Prof. Waldeck suggests that we’d all be better off if we used PayPal because “PayPal and other payment providers are intermediaries that can make both consumers and merchants better off” — primarily because “PayPal and similar services charge merchants lower processing fees and offer other advantages, such as not requiring retailers to reimburse them for fraudulent purchases.”

But in fact most consumers won’t see the advantages — quite the contrary.

First, consider how Paypal gets its money from you. Unless you are a seller who puts money into Paypal from other consumers, odds are that you fund your Paypal account the way I do: with a linked credit card. It may be that Paypal gets charged a lower fee than a merchant account, but it can’t be that much lower because it is still a “card not present” transaction, and those tend to be on the high end.

No, the real ‘savings’ to merchants is that by inserting Paypal into the payment chain, consumers waive their rights to cancel transactions if the good is not delivered or the service is performed improperly. That’s because the credit card payment agreement is with Paypal, and it’s not Paypal that has failed to perform. It’s done exactly like you asked it, by sending money on to the merchant. And now the merchant is just a third party from the point of view of the credit card.

So, my advice is that if you are buying anything at all expensive, use your credit card. (Unless you are carrying a balance - in which case you want to pay that off first before you buy anything, even with Paypal!) Don’t use your debit card, and certainly not a payment intermediary unless you trust that intermediary to have as generous chargeback terms as the credit cards.

It’s certainly true that credit cards take a big bite out of merchants and that ultimately these charges are passed on to consumers. But unlike debit cards, credit cards give you a small float, even if you pay your bill in full every month (which you absolutely should). More importantly, they are in effect insuring the transaction. That’s valuable now and especially valuable if you are buying something online, sight unseen, and trusting in delivery.

It may be that pressure from the paypals of the world will in time — lots of time — get credit card companies to cut their fees. But at best this is an N-person prisoner dilemma game; at worst it’s a category mis-match because the service you are switching to is one that is significantly inferior to the one you are switching from. Paypal does have a “buyer protection policy” but this isn’t mandated by law, and it is very significantly more limited than what your credit card will give you.

But don’t take my word for it. Visit some of the Paypal fan sites, like PayPalsucks.com.

(Note: There are also “warning” sites aimed at merchants, e.g. About Paypal.org and Paypalwarning.com, but it’s hard to tell if these are for real or just astroturf for a would-be competitor.)

Where Are the Customers' Yachts?

One of my all-time favorite books about Wall Street is Fred Schwed, Where Are the Customers’ Yachts? or A Good Hard Look at Wall Street (1940).

It begins with the wonderful old tale of the visitor to New York who admired the yachts that the bankers and brokers had in the harbor. Naively, he then asked where the customers’ yachts were. Naturally, there were no customers’ yachts.

I’m reminded of this story by today’s bit of front-page boosterism in the New York Times. Goldman Sachs Rakes in Profit in Credit Crisis is all about how the boffins at Goldman were smart about the mortgate crisis, and got out of the dangerous securities a year ago, or if they didn’t then insured them like crazy. So they’re coining it this year, while competitors are hemorrhaging.

But in a classic case of totally missing the real story, we find the following down in paragraph nine:

Even Goldman, which saw the problems coming, continued to package risky mortgages to sell to investors. Some of those investors took losses on those securities, while Goldman’s hedges were profitable.

Goldman hedged, but its customers didn’t. Were the investors so sophisticated that they have only themselves to blame? Were they properly advised, and ignored the advice? Or has nothing changed since the Roaring 20s?

Well, one thing has changed: We re-wrote the securities laws. And if I were a Goldman customer who had been sold radioactive sludge as a security in the past few months without a very stern warning about the unusual risk, risk so great the G-S itself wouldn’t hold the securities without insurance, I’d be calling my lawyer about now to find out what my options were.

Why the Writers Are On Strike

Here’s a simple explanation of why Hollwood’s writers are on strike.

It’s effective. Who is going to write the studios’ reply?

Financial Markets Explained

This is one of the finest explanations I’ve ever seen of the sub-prime crisis, and of market volatility in general:

This really is excellent. Very highly recommended even if you are not an investor.

(spotted via Calculated Risk)

Back to Basics

Someone doing good writes about the basics.

Another Great Capitalist Moment

At the conclusion of a scary, at times rebarbative, summary of the ‘Values Voter’ (what are the rest of us? valueless? devalued?) summit entitled I go to the ‘Values Voter Summit’ so you don’t have to, we find this gem:

I’d like to give a shout-out to Lambda Rising, an iconic gay bookstore not far from the Hilton Washington, where the Values Voter Summit took place. Walking by the store during a break Saturday afternoon, I was amused to see a sign in the window reading, “Attention, Values Voters! Show your badge and get 20 percent off.” I’s good to know that the entrepreneurial spirit lives, and my guess is that most of the guys from the ‘ex-gay’ ministry booth were down there the minute the conference ended.

What the Market Will Bear

Strange item by one Shankar Vedantam in the Washington Post today, which apparently ran on page A03: When Immigration Goes Up, Prices Go Down.

Seeing that headline, I expected to read about the labor market. All other things being equal, more immigration means more workers, means more competition for jobs, means lower wages, which in turn may mean lower prices too.

But no. Not at all. Here’s how it starts:

Last week, a gallon of gas at an Exxon station in the tony suburb of Bethesda cost $2.99.

At an Exxon station in the less affluent suburb of Wheaton, a gallon cost $2.63 — 36 cents less.

Both Exxon stations are located near a subway line that goes to downtown Washington. Both are in the same county: Montgomery.

Why would the same company charge you 14 percent more for an identical product in one location?

Because it can.

The article goes on to suggest that concentrations of immigrants lower prices. Yes, it’s presented as cause and effect:

Immigration, economist Saul Lach recently found, plays a powerful role in holding down prices. For every 1 percent increase in the ratio of immigrants to natives, prices go down by about 0.5 percent, according to Lach’s new study about the effects of 200,000 Jews immigrating to Israel from the former Soviet Union in 1990.

It may be that recent immigrants are poorer, and thus are cannier shoppers, and that this causes a downward pressure on prices. But note that the article itself gives as its major example the willingness of immigrants to drive out of their way for cheaper gas (which would suggest the effect might not in fact be localized).

Whatever the circumstances were in Israel, it seems passing strange to assume that direction of causality in Maryland when there’s so much reason to suspect it works the other way: low prices attract immigrants more than immigrants cause low prices.

I would have thought that poor people tend to live in neighborhoods where property prices are lower because they can’t afford the homes in expensive neighborhoods. And I would have thought that commodity prices like gasoline are lower in poor neighborhoods in part because fixed costs, like rent or property taxes, are lower.

A correlation, even a strong one, is not causation.

(And let’s not even start on all the evidence that food prices are higher in very poor neighborhoods because low-cost chain stores won’t open there.)

Straussian Economics?

Walter J. “John” Williams is an economist with a website called Shadow Government Statistics..

It leads off with an arresting graph claiming to show a big gap between the true rate of inflation and the official Consumer Price Index (CPI):

I don’t know if I am qualified to opine as to how accurate this chart is, and to be honest I haven’t delved deep enough into the supporting materials to form a view.

But the bones of the argument are simple: the revised official Consumer Price Index (CPI) is a lie, since it leaves out food and energy, and these goods are a major part of household purchases. As the prices of these goods are rising much faster than the items in the basket tracked by the CPI, the series fails to capture the real measure of inflation.

A corollary of this conclusion is that most workers’ wages, which were barely keeping up with the CPI if that, have in fact been eroding in real terms (while the richest get much richer).

Why might a government design a misleading CPI in this fashion? The answer is overdetermined. There may be some technical advantages to ignoring cyclical commodities (those pesky ‘seasonal adjustments’) and manipulated foreign / exogenous commodities, but surely these must pale in the face of the importance of food and fuel?

One cynical reason is that the rate of increase of lots of federal transfer payments are based on the CPI. Keep the CPI down and the feds don’t have to pay beneficiaries as much. Should payments to social security beneficiaries be much higher?

Another reason that I can imagine (and this is just my idea, not one I found at Shadow Government Statistics) is sort of Straussian. Inflation has a psychological element: people raise prices (or wage demands) in an effort to at least keep pace with inflation, thus spurring more of it. If inflation gets out of control, especially if coupled with lousy monetary and fiscal policy, this competition to stay ahead/stay even can even lead to hyperinflation. One way to keep inflation lower than it might otherwise be is to persuasively mislead people as to extent. If people believe the CPI is a good measure of inflation, and they are therefore deluded into believing that inflation is 2-3% lower than it actually is, that must surely have a significant anti-inflationary effect.

At least until it is found out. Note that Williams also argues that if inflation is measured right, the GDP deflater grows too, shrinking the true measure of GDP…. Do we have national money illusion too?

Two Questions About the GM Strike Settlement

The news of the proposed GM Strike settlement leaves me with two questions, one political, one legal, both about the part of the deal in which GM sheds its long-term obligation to provide health care for retired workers.

The political question is whether GM getting off the hook for long-term care will reduce its political will for national health insurance. Only the intervention of the big corporations will provide the sort of political coalition that makes a worthwhile reform possible — and until now it looked as if we were on track to get it due to the ever-increasing costs being shouldered by big firms. Will their remaining obligations for their existing workers suffice to motivate the GMs of the world? I hope so.

The legal question stems from ignorance due to the fact that I never took labor law. Ordinary labor contracts are between worker and employer. Collective bargaining agreements introduce the the union as bargaining agent for the workers. When there are ‘givebacks’ as in the current deal, workers get a new contract in consideration for whatever the union gives away. But existing (as opposed to future) retirees are in a different position. The firm’s obligation to them to provide retirement benefits has matured, has vested, and they are not getting much in exchange — unless one has reason to believe that the new entity being created has a better chance of long-term solvency than GM (could that possibly be true? I’m pretty dubious.). So my no doubt very basic legal question is, why are the retired GM workers bound by this agreement? Are they in the bargaining unit forever? And, secondarily, what happens in so-called “right-to-work” states: If there are nonunion workers, are they in or out of this deal? Wouldn’t it be ironic if the very right-to-work laws that firms championed for so long as a union-busting device were to turn out to be a shield against corporate attempts to shed liabilities to former workers that those firms had voluntarily undertaken but now wish to abandon.

Penny Dreadful

I know we don’t expect much from spammers, even the pump & dump crowd, but surely this email I got today is a new low?

09/11/2007 - Traded over 4 million shares with a 100% INCREASE
09/12/2007 - Traded over 6 million shares with another HUGE INCREASE

TOMORROW THIS STOCK IS EXPECTED TO DOUBLE WHAT IT HAS DONE IN THE PAST 2 DAYS! GET IN ON IT NOW WHILE THE PRICE IS LOW! FRESHLY RELEASED PRESS RELEASE!

Current: $.02
Expected: $.57

Kinda self-defeating, isn’t it? Or can you really have listed prices above zero but under one cent?

Banks Engage in Economically Irrational Behavior in Order to Remove Irrational Prejudices Held by Irrational Bankers

I found this story buried deep, deep, inside the New York Times’s business section to be Really Odd.

4 Major Banks Tap Fed for Financing: The country’s four biggest banks announced yesterday that they had each borrowed $500 million from the Federal Reserve, taking an unusual step to ease the credit squeeze that has been rattling the financial system for weeks.

The banks — Citigroup, Bank of America, JPMorgan and Wachovia — said that they had tapped the so-called discount window of the Federal Reserve Bank of New York, five days after the central bank lowered the rate and loosened its collateral standards in an effort to inject more money into the credit markets.

The coordinated moves were seen as largely symbolic, aimed at removing the stigma of borrowing from the discount window, which is regarded as a last resort for financial institutions. All four banks can borrow money more cheaply elsewhere, and all said they had “substantial liquidity.”

For starters, where is this cheaper money that’s available on demand? I’m assuming it’s the LIBOR rates, which are in fact showing a declining yield curve, running from from 5.5% for one month to 5.07% for one year.

More to the point, will anyone be impressed by this behavior?

I had the same cynical reaction as Charles R. Geisst, a financial historian at Manhattan College whom the Times quotes as saying, “The banks are circling the wagons. Somebody’s got a problem.”

Should that headline above have been, “Banks Engage in Economically Irrational Behavior in Order to Remove Rational Prejudices Held by Rational Bankers?”

Redfin Takes a Bite Out of Realtor's Commissions

Redfin is another example of the Internet’s destructive effect on low-value intermediation. It’s an online brokerage service that kicks back 2/3 of the agent’s 3% commission to the seller. (I suppose the buyer’s agent still gets the usual 3%? Why?)

[[Update: There’s a much different and no doubt better explanation of how this works in the first comment below.]]

So far Redfin is only available in Baltimore, Boston, Los Angeles, Orange County, San Diego, San Francisco, Seattle, and Washington DC, but unless some states have Realtor-protective legislation banning kickbacks like this I think things like this should be everywhere soon.

Of course, it wouldn’t shock me to learn we had a Realtor-protective law here in Florida, given the power of the Realtors. An example of their power is that the newspapers capitalize the “R”. They don’t do that for “lawyers” or “attorneys”.

Funny. But.

This is very funny. And it isn’t.

The Laboratorium: Today’s Telemarketing Fun

Can I speak to Mr. and Mrs. Grimmelmann?

Speaking …

I’m calling from the [name omitted] Sweepstakes, and you’ve been entered in a drawing to win $25,000 or a trip to Hawaii. The sweepstakes is also available to cardholders with a Visa, Mastercard, or American Express. Do you have one of those?

Yes. When did you say the trip to Hawaii is?

The winners will be announced August 31.

Oh, I’m sorry. August 31 isn’t good for us. Is there another time we could take the trip?

No, you’ll find out on August 31 whether you’ve won.

Okay, then. We’ll take the money instead. Now, you’ll put that directly on the credit card, right?

I tell you what. We’ll get in touch with you if you win, okay?

James ends by commenting, “I’m getting better at this.”.

Now I certainly emitted a number of evil chuckles at this one. And a chunk of me wishes I had the reflexes to do something like this in real time.

But the problem is, that horrible person on the other end of the phone is a wage slave. They are only a tiny bit responsible for the call; the whole thing is orchestrated by someone better paid. Maybe they could find something else to do, but maybe they can’t.And I remember the time that phone sales was the only summer job I could find with my newly minted high school diploma. That would be shortly before I discovered people would pay you money to do programming even if you had no formal training. I found something else to do. I am lucky.

So I laughed. Then I felt guilty.

Critique of NASA Stalls on Launch Pad

Speaker Pelosi’s blog carries a bit of news designed to shock us about the terrible management over at NASA. It seems they’ve lost $94,000,000 in stuff.

But read on to the end please before you get all worked up about this one.

First, here’s what the Speaker’s office, echoing the GAO, had to say:

This week, the General Accountability Office (GAO) released a report requested by Science Committee Chairman Bart Gordon on the National Aeronautics and Space Administration’s (NASA) lack of monitoring and control over their $35 billion of property, plant, and equipment. NASA has reported a loss of over $94 million in equipment in the last ten years. The GAO noted that they have reported on NASA’s lack of property control “for years” and that NASA themselves undertook an internal study but “instead of tightening controls, as recommended by the agency’s 2002 equipment loss study, when faced with equipment losses, NASA raised its threshold for tracking and controlling nonsensitive equipment items from $1,000 to $5,000. This essentially eliminated control over all nonsensitive equipment costing less than $5,000.”

And here are the two worst examples they found, both involving lost laptops:

• “My wife needed a computer at home to perform her work as a real estate broker so I checked one out from the surplus stock available. I turned the computer back in when she was done using it but never received a receipt.”
• “This computer, although assigned to me, was being used on board the International Space Station. I was informed that it was tossed overboard to be burned up in the atmosphere when it failed.”

Now, I’ll grant you that the first is a bit suspicious, and the second not real credible (but who knows?).

Even so, I just can’t get real worked up about this particular example of governmental waste, fraud and abuse for the following reasons:

1) It confuses stock and flow. NASA has a stock of $35 bn in equipment; it loses $94m over ten years (flow).

2) So in a single year, on average, out of $35,000,000,000 of stuff, NASA loses/misplaces $9,400,000 worth.

3) Let’s do the math: 9,400,000 / 35,000,000,000 = 0.000268571429 or if you prefer 0.0268571429 %

Yes that’s right: less than .03 % (three one-hundredths of 1 percent) of lost stuff per year.

Is that so terrible? I bet few corporations do so well. Sure, there’s some petty theft, and there shouldn’t be, but even so…

I am sure there is a great deal to pick on at NASA, but this doesn’t cut it for me.

Decisions With Big Consequences

Stuff like this can have profound (and unhealthy!) effects on the shape of a market.

Joho the Blog: Laminated lock in and lock out. Verizon (according to the AP) has been removing the copper lines from the houses to which it is attaching fiber lines. This means you will have difficulty going back from FIOS, the Verizon fiber product. Also, Verizon is not required to provide other phone companies with access to its fiber lines, the way they are for copper lines. Verizon thus at once accomplishes a laminated lock in and lock out.

Sicko Frightens the Health Insurance Industry

Crooks and Liars reports SiCKO has Blue Cross Scrambling… and prints the text of a secret internal memo from Blue Cross in which they try to hone a counter-message.

Why is Spam of Such Low Quality?

W. David Stephenson blogs on homeland security et al. — and under “et al.” asks why is there no attention to detail by spammers?

This is something I wonder about every day while I hold down the delete key to kill off several hundred spams. I can see the argument that some foreign spammers can’t do better as their English is too poor (but can’t they find something to copy?). I can see the argument that even cheap spam makes a buck, so that there’s a quality/effort sweet spot. What I can’t understand is why that’s the only point or why it so dominates the (mythical) quality-spam solution point.

I Wish Robert Waldmann Had Been My Freshman Economics Teacher

What do you think the world would look like if freshman micro-economics students were routinely taught by Robert Waldmann? Instead of carrying around an Austrian model in their heads in which we assume total selfishness, zero transactions costs, and conclude that transfer payments are suspect, they’d be hearing about Possible efficiency gains due to taxes and transfers,

A little bit of altruism changes everything. If people care about their own physical well being (pleasure minus pain) plus that of those they love plus 0.00001 times the well being of strangers redistribution can be Pareto improving. Non poor agent A doesn’t need taxes and transfers to give his money to the poor. However, after he has chosen my level of private giving, he doesn’t want to give any more via taxes. However he wants to give rich agent B’s money to the poor. He cares a tiny bit about the small cost (in pleasure minus pain) to B and the same tiny bit about the large benefit to the poor. Increasing taxes and transfers from zero will make everyone happier if the population is large enough so that taxing one me is more than balanced by taxing lots of you

I’m pretty sure I had to wait until sophomore year to hear this stuff, and even then it was said with much less enthusiasm, as an embarrassing exception to an otherwise tidy result.

(Or course, Robert couldn’t have been my freshman economics teacher, we graduated the same year from different universities, but you know what I mean.)

Call Me a Churl If You Like

I remember getting really excited about the idea of Heifer International, giving donations that would buy need people around the world cows and goats. Until, that is, I read the (very) fine print and discovered that my gift would not in fact buy someone an actual cow or goat, but would go into the charity's general fund.

The prices in this catalog represent the complete livestock gift of a quality animal, technical assistance and training. Each purchase is symbolic and represents a contribution to the entire mission of Heifer International. Donations will be used where needed most to help struggling people.

How many actual cows or goats emerged at the other end was uncertain.

How unfortunate therefore to see a great group like Oxfam stoop to the same tactic. If you read their online pitch for Oxfam America Unwrapped you could easily come to believe that your gift of $75 would actually buy someone an actual cow.

But that's not how it works:

In technical terms (what the lawyers tell us we need to explain):
Oxfam America works in 26 countries around the world. This catalog contains gift items that symbolically represent our work. The items selected represent project goals from grants disbursed by our seven offices around the world. The purchase of each gift item is a contribution toward Oxfam America's many programs, not a donation to a specific project or goal. Your donation will be used where it is needed the most--to help people living in poverty throughout the world.

Or, as the FAQ says:

Am I really buying a camel?
First off, let's be clear: Neither you nor your gift recipient will receive a camel (other than the handsome photo on the gift card). When you buy a camel from Oxfam America Unwrapped, you are actually giving much more. The impact of your donation will have far-reaching effects. In each case, your donation will be used where it is most needed. For more information, click on the "How it Works" tab (at the top of the page).

...

Does a camel really cost $175?
Since our gifts are symbolic, these prices represent a suggested donation. We have drawn from a range of gifts so that you can make a donation that is meaningful—and fits your budget!

Good causes, especially Oxfam, but I don't like the tricksy marketing.

I'm not sure what the going rate is for a camel, but I suspect that when you "give a camel" you are not giving a camel, not to mention "so much more" -- the going rate for a camel seems to be £300 to £2,000. If so, that $175 will thus buy at most half of one of the mangiest variety.

[If all went according to plan, I'm just back from Italy now, but very jet lagged. And I am leaving for my next trip ... tonight. So I've queued up some more posts to cover for me. This is one of them.]

Today's Economics Puzzle

TMI a little place to whine: How come…?:

At the corner of 107 and Quail Roost Rd. when 107 become Marlin Dr. There is a U-gas station, where I purchased unleaded regular gas for $3.05 a gallon today.

In South Miami, just before the main shopping dictrict, there is Chevron gas station that has unleaded regular gas for $3.64 a gallon.

Most gas stations are averaging $3.16 a gallon.

Locational utility, imperfect information, or Walrasian tatonnement in slow motion?

Bad For Butlers

Robert Waldmann — who’s been on a roll lately — writes about Democratic proposals to shift the AMT burden to the richest 1% of taxpayers. A winning argument both politically and economically. And one opposed by the plutocrat party, who call it “class warfare.” Waldmann quotes Wisconsin Rep. Paul D. Ryan, the senior Republican on the House Budget Committee, as saying that raising taxes for the wealthiest Americans is a “job killer.”

To which Waldmann replies,

I wonder if Ryan has an actual argument behind his claim that shifting taxes to the rich kills jobs.

I don’t know what Ryan would say, but I imagine that at some point raising AMT for the very rich reduces the demand for butlers. So, yes, it is a “job killer” — of a very special sort.

(Yes, yes, I am aware that when taxes become confiscatory there are undesirable economic effects — but we’re nowhere near there and no one is proposing we go there.)

The Economy

At The Agonist Bonddad asks, “So, are you better off now than you were 7 years ago?”

Incidentally, the Bonddad Blog is worth a look too.

Time for Some Enterprise Journalism on Campus

UM undergrads have, it is said, the highest indebtedness of any students in the USA. (It must be more than the high tuition — something about the lifestyle….)

Which makes it all more important for some local student journalist to find out if there is a local angle to this national story about student lenders and their sweetheart deals with college loan officers. The idea was to seduce or bribe the loan officers into steering student borrowers to certain companies, rather than those with the best deals. The New York Times has had a series of stories about these dubious deals (here’s the latest), concentrating on NY area universities.

What I want to know is whether anything like that happened here at UM. Not that I have the least fact to suggest that it did. But given the size of the student body and its propensity for debt, we do seem like a natural market for that sort of thing. Were university loan officers contacted? If so, did they give in to blandishment or take the high road?

New Frontiers of Data Display: US Housing Prices via Rollercoaster Tycoon

This has to be the most imaginative and evocative (but admittedly not info-rich) way to present data I’ve seen since the famous chart of the French casualties during Napoleon’s invasion of Russia: this video of US housing prices 1890-2007 (inflation adjusted) via Rollercoaster Tycoon.

Hang on for the ride. It ends with you facing off a cliff….

(via boingboing)

Sign of the Times

This piece of direct mail adverting fell through the mail slot yesterday:

Pop Quiz

Pop Quiz: What do these people have in common today?

• Alexander (R-TN)
• Allard (R-CO)
• Bennett (R-UT)
• Bond (R-MO)
• Brownback (R-KS)
• Bunning (R-KY)
• Burr (R-NC)
• Chambliss (R-GA)
• Coburn (R-OK)
• Cochran (R-MS)
• Cornyn (R-TX)
• Craig (R-ID)
• Crapo (R-ID)
• DeMint (R-SC)
• Ensign (R-NV)
• Enzi (R-WY)
• Graham (R-SC)
• Gregg (R-NH)
• Hagel (R-NE)
• Hatch (R-UT)
• Inhofe (R-OK)
• Isakson (R-GA)
• Kyl (R-AZ)
• Lott (R-MS)
• McCain (R-AZ)
• McConnell (R-KY)
• Sununu (R-NH)
• Thomas (R-WY)

Answer below.

Hint: They’re not all running for President — only the ones in bold are doing that.

A: They all voted to eliminate the federal minimum wage today. Yes, really.

source: BobGeiger.com: Who Wanted To Eliminate The Federal Minimum Wage?

More details at: Senate GOP Leadership Tries To Eliminate Federal Minimum Wage.

Snow Flurry in Hell

Maybe Hell hasn't frozen over quite yet -- that will happen when the administration embraces budget transparency, but this story surely counts as at least a snow flurry,

Byrd to give up W.Va. projects: WASHINGTON -- Sen. Robert Byrd has built a reputation in Congress and in West Virginia using special interest funding to bring federal jobs and money home, but the king of pork said he's willing to give up his projects for 2007 to find a way out of the " fiscal chaos" left by the outgoing Republican-led Congress.

Amazing. Hopeful. Even statesman-like...

The Market Believes in Climate Change

The Bush administration may claim that climate change is a myth, but the market believes in it. And insurance carriers are adjusting their rates, and even their willingness to write policies accordingly.

Today, it's mostly hurricanes and coastal flooding. Tomorrow it will be higher sea levels (more flooding) and changes in crop patterns.

Not that one expects this administration to pay any more attention to market signals than any others.

Vote Democratic

GM Responds to Complaints About its Pitchman

GM's Response to the furore about it choosing Sean Hannity as its new pitchman can be found at Think Progress.

A Company With a Death Wish

In its unceasing campaign to lose market share to Japanese companies that understand the American consumer, GM has rolled out new promotion, the “You’re a Great American” car giveaway. And they’ve hired Sean Hannity as their spokesmodel.

You have to wonder how small the ratio gets between the IQs over there and the MPG ratings of their cars: what sort of genius does it take to identify your (struggling) company with a guy who routinely insults more than half the country? As Think Progress reminds us, this is the guy who,

• said a Democratic victory in the midterm elections could be a “victory for the terrorists”
• said that “making sure Nancy Pelosi doesn’t become the [House] speaker” is “worth … dying for.”
• compared voting for Sen. Hillary Rodham Clinton (D-NY) to voting for terrorist groups Hamas or Hezbollah.

And GM thinks this will help them sell cars? Short the stock now.

Connect the Tax Cheat Dots (Since the New York Times Won't)

Gee. Think there just might be a connection between this story in today's paper,

Tax Cheats Called Out of Control: So many superrich Americans evade taxes using offshore accounts that law enforcement cannot control the growing misconduct, according to a Senate report that provides the most detailed look ever at high-level tax schemes.

and last week's story,

I.R.S. to Cut Tax AuditorsThe federal government is moving to eliminate the jobs of nearly half of the lawyers at the Internal Revenue Service who audit tax returns of some of the wealthiest Americans, specifically those who are subject to gift and estate taxes when they transfer parts of their fortunes to their children and others.

Both stories are by David Cay Johnston, but he's too coy to remind us of the first when writing the second...

A Great American

America's second-richest man, Warren Buffett is giving away $30+ billion, the large majority of his fortune, to the Gates foundation to fight disease.

Every Democrat running for office should be quoting what Buffett had to say about the idea of passing it all on to his kids:

Mr. Buffett was scathing yesterday in describing his feelings about estate taxes, which the Bush administration is trying to kill. The ability of rich men to pass on "dynastic wealth" to their grandchildren is offensive to the American tradition of meritocracy, he said.

He gets particularly upset at his country club, he said, hearing members complain about welfare mothers getting food stamps "while they are trying to leave their children a more-than-lifetime-supply of food stamps and are substituting a trust officer for a welfare officer."

(The kids are still getting billions for foundations they run, plus a tidy pile of their own, so don't cry for them.)

Friday Grumble

I spent waaay too much of the past 48 hours doing these:

• Calling around town to find out if anyone has any Altusa Fumé roof tiles that I need to fix the damage from hurricane Wilma. They just laughed. So much for efficient markets. I need about 60 ridge tiles and about a dozen of the S-tiles (aka “field” tiles). Only guy who says he has any says he’ll sell me ridge tiles, but I have to buy 10 field tiles for each ridge, because that’s how they come. Not that desperate yet. Yet. I may just buy some that are a clashing color instead.

• Trying to figure out why I got billed $37.04 in late fees on a discount store credit card. (We use the store credit card in that store rather than a bank credit card because they give you a discount when you use it. But this just ate a lot of it.) I pay the bills via my Very Large Bank’s online bill payment system, and I always send in payments a few days early. I call the store to find out what gives. Hold. Punch wildly at buttons to get a human. Eventually the human says the store got the payment ten days late even though my records say I ordered it sent seven days early. I call Very Large Bank. The first guy says I have to talk to a different guy. We hold. We hold. I am switched to the call center somewhere several continents away, and in due course, “Armando” (yah, right) says they mailed it on time, seven days early like I asked them to, to the address in Illinois.
  
  Whoops. According to the bill I’m looking at the store’s payment address is now in Tampa. Since the store presumes you will pay by check, and the address printed on the bill will show through the little hole in their envelope, they never did anything to call the change to my attention and of course I had no reason to notice: I typed the old address into Very Large Bank’s bill payment service several years ago, and I don’t even see it when I say how much to send the store. It seems that even though store’s credit operation is run by GE Finance, they don’t have electronic systems that talk with Very Large Bank. So my internet e-payment causes Very Large Bank to mail a physical check to GE Payments. Which went to Illinois before being forwarded to Tampa, a seventeen day trip.

• Putting together the paperwork needed to convince my university-provided health insurance company that the on-campus medical center that billed them for a visit last December is an actual medical office staffed by real doctors entitled to payment under health insurance rather than by me.

Oh, and did I mention that my campus email account hosted at osaka.law.miami.edu has been down since 10pm last night? Fortunately, my other mail is working fine if you want to reach me.

Prospective Usury

My credit card bill came today with one of those little notices advising me of a change in terms. This time the change is the APR. It's going to be 29.9%.

Twenty-nine point nine percent annual interest. On someone who has enough house equity to be no serious risk.

Presumably this is punishment for my paying my bill on time every month?

How the Iraqi Dinar is Managed

Via Juan Cole, some interesting information about the management of the Iraqi dinar. Used to be you could get information like this in the Economist and sometimes even the New York Times.

If it has been in either, I sure missed it. But then again, I don't read them as carefully as I used to -- so much of the information was on blogs like Prof. Cole's long before it made it into print...

A Market-Based Approach to Capturing Osama Bin Laden

Back in September '03, in a more innocent time, I suggested only somewhat tongue in cheek that there might be a market-based solution to the Iraq quagmire: Rather than spend the billions in Iraq that the administration was then requesting, we just give the Iraqis $3,230 each and go home. It was more than their pre-war GDP per person, and they'd probably make better use of the money than we would.

Of course, by now we've spent a great deal more in Iraq than the administration ever budgeted, let on, or (I suspect) imagined. The current estimate of the US cost of the war is around $283,000,000,000 and counting and of course that ignores the personal cost to Iraq, Iraqis, and the families (here and abroad) of all the fatalities and casualties. Had we taken that $283 billion and handed it out to the 25 million or so Iraqis, that would be $11,300 or so for every man, woman and child -- or 4.7 times the pre-war GDP/person.

But that's all money down the rat hole (well, mostly -- a few billion here or there was simply stolen).

Today I want to suggest a different market-based solution to an aspect of the current crisis. It's been years that the US has supposedly been searching for "most wanted terrorist" Osama bin Laden with all its might, yet without success. (Some cynics have suggested that in fact US interests are served by not finding bin Laden since his continued freedom justifies the Long War and that the failure to find him is not entirely unwelcome or accidental; that's too cynical even for my blood.)

The bin Laden hunt has been handled by the military and the intelligence services. Neither seems to have been up to the job. My proposal is simple: unleash capitalism.

Currently the US offers a paltry reward for the capture of bin Laden -- a mere $25 million dollars (There is a separate, private offer of $2 million on the table as well.) While this amounts to a great deal of money, especially in the impoverished regions in which bin Laden is thought to have his secret undisclosed location, it clearly hasn't been enough.

And if capitalism teaches us anything it is that if you want the goods and the other side won't sell, then you have to raise your price.

Considering that we've spent some $283 billion invading a country that was no threat to us and had not recently done us any particular harm, surely we could find under a thousandth of that for the bin Laden buyout? Suppose the reward were not $25 million but $250 million -- a quarter of a billion? People get very excited about powerball lotteries in that range, and a payoff that size might encourage someone to snitch.

Heck, offer a cool billion. Pay it out like lottery winnings and the present value is half that. Tax it and it's down back in the neighborhood of that quarter billion. But still real money.

The only downside I can see to this plan is that there's a danger that al-Qaeda will turn in bin Laden themselves, in order to get money to fund their next attack. I suppose the reward offer would have to be conditioned in some way to make this more difficult without descending into the catch-22 that anyone who knows bin Laden's location is presumptively a terrorist or a fellow traveler and thus the sort of person we don't want to give the money to...

Renting Out the Commanding Heights

I know the state of Florida has no shame, and I suppose that anyway this probably is no different from ads appearing on the sides of public buses but even so I was very surprised to have ads for satellite TV and satellite radio fall out of the envelope when I got my annual car registration renewal notice.

When the state sells off public functions we call it privatization. (When it sells or leases land we have unfortunately gotten used to calling it a 'rip off'.) When the state takes on formerly private functions we call it a vast number of things, depending on the circumstances and how we feel about it.

But when the state lends its good offices to put an advertisement into every home (or, who knows, just demographically selected homes?), do we just call it "advertising"? Surely there's a better word for this?

Time to Short AT&T, Verizon and BellSouth?

According to Think Progress | Telcos Could Be Liable For Tens of Billions of Dollars For Illegally Turning Over Phone Records, AT&T, Verizon and BellSouth face huge liabilities for turning over millions of American's call records to the NSA in violation of law. That potentially $1000 for each person whose call records were turned over. Millions and millions of people. Each.

This is Amazing

Sometimes there really is a conspiracy:

The multimillion-dollar lobbying effort to repeal the federal estate tax has been aggressively led by 18 super-wealthy families, according to a report released today by Public Citizen and United for a Fair Economy at a press conference in Washington, D.C. The report details for the first time the vast money, influence and deceptive marketing techniques behind the rhetoric in the campaign to repeal the tax.

It reveals how 18 families worth a total of $185.5 billion have financed and coordinated a 10-year effort to repeal the estate tax, a move that would collectively net them a windfall of $71.6 billion.

The report, available at www.citizen.org, profiles the families and their businesses, which include the families behind Wal-Mart, Gallo wine, Campbell's soup, and Mars Inc., maker of M&Ms. Collectively, the list includes the first- and third-largest privately held companies in the United States, the richest family in Alabama and the world's largest retailer.

These families have sought to keep their activities anonymous by using associations to represent them and by forming a massive coalition of business and trade associations dedicated to pushing for estate tax repeal. The report details the groups they have hidden behind - the trade associations they have used, the lobbyists they have hired, and the anti-estate tax political action committees, 527s and organizations to which they have donated heavily.

Please note: this is NOT posted to the politics:tin-foil category.

Declining Returns Seen in Academic Sector

In the course of justly reaming Thomas Friedman's The World is Flat for the Journal of Economic Literature, Edward Leamer delivers himself of a throwaway remark on the declining returns from the academy and what that might teach about the open source movement,

We [academics] are part of a "Self-Organizing Collaborative Community" called the research universities of the United States and increasingly the rest of the world. Unlike contributors to Wikipedia and Linux, we get paid for our work, not by those who consume the fruits of our labor, but by taxpayers and by donors and by our students, all of whom we have convinced are better off by virtue of the research that we do. When it got started fifty years ago, this system worked great, but it isn't working as well anymore. While we are doing plenty of worthwhile research we are also doing plenty that isn't worthwhile, and the competition for research talent defined by the fads of the moment is driving up the cost of education to unaffordable levels. Adam Smith would have understood what's wrong here. It takes sales for the invisible hand to do its magic. Begging in your work clothes when you aren't working isn't enough, even though the pastime may be lucrative. On the contrary, the more lucrative is the begging, the more likely is the conclusion that the work is worthwhile. But it takes accurate market prices to tell us what's valuable and what's not. Of course, good will and good intentions can carry a collaborative community productively for a while, but financial rewards relentlessly bend the system to their will, slowly perhaps, but inevitably. That's the invisible hand at work. Thus, open-sourcing has the same problems and the same probable longevity as the communes of the 1960s -- they worked great for a while, but the participants chose other ways to live once they got to know the people in the community.

Uncomfortable, but with a ring of truth.

Indeed, I think I heard one of the death-knells for the modern high-priced university this week. Increasingly, even reasonably well-off parents without pensions, people planning to retire off 401(k) plans, just don't think they can afford it any more.

Incidentally, the entire Leamer review is great stuff and I recommend it.

Dean Baker Wants Numerate Reporting

Economist and one-man economic truth squad Dean Baker has a new blog, Beat the Press, dedicated to "commentary on economic reporting."

The inaugural posting asks, reasonably enough, why most economic journalism fails to put raw numbers in context, choosing to report the big exciting number of "$285 billion over the next six years" for the new transportation bill, rather then the more informative, contextualized number of "approximately 1.7 percent of projected federal spending over this period."

In this case, though, it seems to me that this question actually answers itself: $285 billion sounds like a front-page headline; "approximately 1.7% of federal spending over the next six years" sounds like what William Safire used to call a "nine-point MEGO" where the MEGO stood for "my eyes glaze over" and the scale was logarithmic like the Richter scale.

And while I'm carping at my betters, let me point out that telling people that the new transportation bill will be 1.7% of federal spending or even "approximately 4.6 percent of projected discretionary spending" won't tell most readers all that much either...unless you tell them how it compares to transportation spending last decade, whether it covers deferred maintenance, current expenditures or new capital projects, and what it does to the deficit... And your economic journalist has, what, fourteen column inches on a good day?

Households Are Selling Stocks and Deeper in Debt

Angry Bear has some facts for us about what is going on in the US household portfolio:

The following table displays the annual changes in the assets and liabilities of US households over the last several years.


Sources: FOF tables F.100 and B.100. Note that this data is actually for households and nonprofit organizations. Nonprofit assets are estimated to comprise about 6% of the total combined category.

A couple of aspects of this data strike me as interesting. First of all, for the seventh year in a row, US households acquired more financial liabilities than they did financial assets. Naturally, this is due to the fact that much of the debt taken on by households was taken on to buy real estate. The escalating price of real estate meant that in 2005 the gap between the financial assets that households acquired and the financial liabilities they incurred was by far the largest ever.

It's also interesting to note that households (and their pension funds) were net sellers of equities during 2005.

OK. So households as a sector as selling stocks and deeper in debt in both mortgages and other other debt (credit cards!). Does this mean they are house rich and cash poor, or just poorer over all?

Not to mention that I read this to mean that households will be in bigger trouble when the housing bubble pops. And that there's less cushion nationally if the dollar overhang tries to come home...

Where We Live Now

Brad DeLong summarizes the ongoing restructuring of American society:

1. The rise of a very powerful, successful, exploitative upper class.
2. Further increases in inequality as the tax and transfer system becomes less progressive.
3. Increases in risk that threaten to move middle-class families sharply downward in the wealth distribution.
4. Skill-biased technical change that sharply raises the benefits to education.
5. Holes in the safety net--the fall in the value of the minimum wage, time-limited welfare, and so forth.

Corporate Social Responsibility (Redefined)

A hitherto unknown business group the Center for Union Facts ran a startling, rather nasty, anti-union ad in yesterday's New York Times, Washington Post and Wall Street Journal. The ad basically blames unions for job losses overseas. Now, as an economic matter, it stands to reason that anything which raises wages makes it harder to compete with ultra-low-wage foreign producers, but life is much more complex, since human capital is more than just simple hours of labor. And unions are shrinking anyway.

But I'll leave all that to the economists. What interests me is who paid for it. According to the New York Times, all that the group's spokesman would say is: "various companies and a foundation had contributed to his nonprofit group, but he refused to identify them." And their web site is even more opaque about who is behind it.

Do you suppose that the corporations paying for this stuff are booking the contributions under their 'corporate social responsibility' expenditures?

Sex and Money

To make up for today's light posting, here--again courtesy of my wife and of the UK's Financial Services Authority--is a link to a website using the 'stripped down' modern approach to investor education: The world of money laid bare, from the FSA.

I guess it says something about the British that you need pictures of unclothed people to get them to pay attention to their finances.

I also bet this post gets lots of traffic...

If Money Be the Measure of Man

A reader writes:

"America believes in education: the average professor earns more money in a year than a professional athlete earns in a whole week."

      - Evan Esar (1899 - 1995)

But we do tend to have longer careers.

Anyway, it depends on the sport. And whether by "average" person you mean the median person, or if you really want to average the salaries.

And for the ones with bigger teams, do you look just at the stars, or the median player? After all the average (not median) baseball player 'only' made $2,476,589 in 2005, and I bet the median player made less than that. That's under $47,626 per week on a 52-week basis. There definitely are professors in the humanities who make more than that, and the professional schools are loaded with them. (The 52-week comparison isn't as unfair as it seems since many professors have 9-month contracts, which is only a little longer than the baseball season, if you count spring training.)

Update: I think as regards baseball at least, this isn't quite accurate, although it's close: Median baseball salaries on a team range from $ 322,500 on the Colorado Rockies to $ 5,833,334 on the NY Yankees. The median salary on the median team is either the Seattle Mariners' $ 800,000 or the Minnesota Twins' $ 750,000 depending if you round down or up. Which puts it just under 12 times the average professor's salary!

Of course, if you throw in other professional sports, who knows, it might be true...

A Sign of the Times

Today I received an email request from a person who described herself as "the human resources manager for a mid-sized law firm in downtown Miami." She named the firm, but I'm not going to. She wondered if I might have information on "finding quality legal staff candidates from universities in India (i.e., paralegals, legal assistants, word processors, etc.)". Or maybe I know "the best universities in India producing good candidates for these types of position"

In short, she'd like me to help her figure out how to outsource local jobs to India.

I Don't Think So, thank you.

However, in what is undoubtedly a sign of advancing age and who knows maybe even incipient maturity, I have deleted each of the replies which have come to mind, and thus have yet to email a reply. (Yes, I know this contradicts my previous post on giving offense.)

Berkely J Students Are So Lucky

Berkeley J-School students are in for a treat: Brad DeLong is going to explain to them how not to get snowed by politicians spouting economic statistics See Covering the Economy for a taste of what he's up to.

Just a few basic rules -- understanding trends, comparing like with like, doing everything in real dollars would be a good start.

And, Brad, I know you are mainly intersted in public data from federal sources, but may I mention one of my pet peeves? I hatehatehate the way the business section reports corporate profits. Neither I nor anyone else cares if profits were up or down twelve million percent over last year. That depends so much on what last year was like. We want to know how much it grew in real dollars, or maybe the ROI compared to last year, to other players in the industry, or the industry as a whole. Or anything else standardized and meaningful. BUT NOT % CHANGE OVER LAST YEAR. (Please?)

Today's Tax Fact

The cost this year alone of the Bush tax cuts enacted in 2001 and 2003 comes to $225 billion. In other words, the revenue lost because of tax cuts going through this year without any congressional action would more than pay the costs of Katrina recovery.

Source: E. J. Dionne Jr.

How to Pay for Rebuilding New Orleans

It's not too early to think about how to pay for the rebuilding of New Orleans and the other area communities that have been devastated. Indeed, a firm long-run plan will give the people who live(d) there more hope, and help discourage flight of the most mobile professionals that a city depends on for its economic health.

The government has already appropriated $10.5 billion for immediate relief, but that's a drop in the bucket. And that, plus every other cent going forward, is just added to the deficit. So it's time for Democrats to step up to the plate and propose an emergency surtax -- like we used to do in wartime -- to rebuild all the damaged areas. And to do it right, with coastal, wetland and barrier island reconstruction, so the next storm surge will not be so dangerous. It's an expensive undertaking, but it's the least we owe the people of the area after the hideous treatment they are now experiencing.

I don't know exactly how big the tax would need to be, but I'm certain we could design one that's suitably progressive. Ideally it would be focused on the people who've benefitted the most from the last five year's growth, i.e. top 1% of the wealthy would pay the most, the next 20% would pay a share, and the rest (who have seen no benefit as a class, or even lost ground) would make NO more token payments. It's especially important for Democrats to get out in front on this issue given the GOP leadership's trial balloon, via House Speaker Dennis Hastert, if the idea that this national cultural landmark (and Democratic stronghold) should be left to rot.

Corrected: I had left out a key "NO" above.

Update: and how about a windfall profits tax for the oil refining business, now looking forward to much higher margins.

Hot Stock Tip

One of my favorite UM staff people has a new blog, and she offers a hot stock tip:

pssst...hey you...wanna hear a great stock tip?

Peanut butter.

Yeah, that's what I said. Peanut butter.

Why?

Well it's not insider information, that's for sure. It's common sense.

I paid $10 this morning to put 3.76 gallons of regular unleaded into my car so I could get to work. $10 used to be just below the full line. Now it's barely to 1/2 a tank. So I used to have more money to spend on eating out at lunchtime. No big fancy restaurant or anything, just away from work and the work crowd. I would do that once a pay period, sometimes twice. So, that was $20 or $30 a month I spent to keep the economy rolling.

Now I put that $20 or $30 into my gas tank to keep OPEC and George W. Bush's oil pals well fed while I eat in the building.

As I said, peanut butter is the coming thing. The stock in peanut butter should be going through the roof soon because I am not the only one who is cutting back on lunch expences. Right now I am still able to afford lunchmeat, but as transportation costs and energy costs rise I will be looking for alternate foods that don't cost an arm and a leg to refrigerate and transport. Lunch meat is perishible. Peanut butter is not.

So, if I wanted to make a killing in the stock market equal to the killing the oil barons are making I have to do it soon. Investing in peanut better may be the wave of the future. Get in now on the ground floor before the prices of it go up too and you're priced right out of the market

Investors (and politicians), take note.

The Price of Water

Bottle of Dasani (glorified tap water) in Orlando Marriott hotel room: $3.

Slightly smaller bottle of Dasani in hotel vending machine down the hall: $1.

Glass of water from tap, or ice water from hotel bar: $0

Edgy Thinking

This query at Nicholas Weaver’s Random Thoughts is the sort of thing you see first at the edges, on smaller blogs, and then, sometimes, a few days later you see it everywhere.

Except that I just spent a chunk of Monday morning in the car repair waiting room, which was playing one of the local TV stations, I think the NBC affiliate.

In the hour and a half I was there, the news covered the following topics (that I can recall):

• The weather (the sun rose this morning — illustrated with lovely pictures of Miami)
• Anchorman Peter Jennings dies
• Yoga for dogs (actually, they didn’t cover this — they produced a lengthy promo for the upcoming story on the nightly news).
• Space shuttle landing delayed due to weather
• The weather (the sun is in the sky, illustrated with lovely pictures of Key West)
• Extensive interview with a mother who had to take her kids to the first day of school today.
• What to do about the “problem” of curly hair
• The world’s smallest ice cream
• Interview with Barbara Walters about Peter Jennings [note that he anchored for a different network; this wasn’t an internal ABC promotional thing]

There were probably other stories, but I can’t remember them. I can, however, assure you that the following topics were never mentioned at any time:

• The war in Iraq¹
• The economy
• Any foreign countries
• Any other states (except in the weather report) (update: and possible landing sites for the shuttle)

Which is why some of this edgy thinking stays at the edge….

---

¹ Update: I forgot one: the war did get mentioned during a segment on four singing grannies who were interviewed wearing their silly costumes. The grannies write and sing anti-Bush protest songs, and they called the war illegal and immoral. The segment didn’t actually make fun of them, although one had the sense the interviewer was struggling between a desire to mock and a desire to respect the aged.

Risk and the Compensation Culture

Tony Blair spoke about better regulation, risk and the compensation culture this week. He gave a speech on Living with Risk at an event organised by the Institute for Public Policy Research and the Association of British Insurers. There’s a lot in this speech, including a theme that worry about liability has got out of hand:

something is seriously awry when teachers feel unable to take children on school trips, for fear of being sued; when the Financial Services Authority that was established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent, is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone; when pensions protection inflates dramatically the cost of selling pensions to middle-income people; where health and safety rules across a range of areas is taken to extremes. Europe has done itself more damage through what is perceived as unnecessary interference than all the pamphlets by Eurosceptics could ever do

Blair recognises that much of the talk about the “compensation culture” may be just that, and that the risks of liability may be much less than people think, but he also acknowledges that public authorities sometimes respond in weird ways to the thought of the risk of liability.

Then there is a theme about risk. Blair doesn’t want regulation to eliminate risk (if it were possible):

A natural but wrong response is to retreat in the face of this change. To regulate to eliminate risk. To restrict rather than enable. But we pay a price if we react like this. We lose out in business to India and China, who are prepared to accept the risks. We are unable to exploit our scientific discoveries. We seek protection from risks that are exaggerated or even imagined. We allow the conspiracy theorists to dictate the argument without a basis in fact.

So Blair wants the British people to be subject to the same levels of risk as if they were living in India or China?

There are to be a number of new initiatives including the Arculus suggestion of a “one in-one out” approach to regulation - every time a new rule is introduced an old one is eliminated and a new Compensation Bill to regulate claims farmers and (re)define negligence. And the media will be nobbled:

The media have a responsibility. MMR is one example. The present debate on mobile phones is another. We only narrowly avoided massive expenditure on SARS. We need to involve the media in a better dialogue about risk. To that end, I have asked John Hutton to invite newspaper and broadcast editors to discuss with the Chief Medical Officer and the Government’s Chief Scientist the best and most appropriate forum for ensuring that risk is communicated effectively so that the maximum information can be put into the public domain with the minimum of unnecessary alarm.

What the Government wants is as follows:

We should understand the nature of the decisions we take together, have a mature, reasoned debate between government, experts and people; a conversation between adults taking responsibility for the risks they face.

Sort of like the position with the decision to invade Iraq?

"Better Regulation"

The subject of regulation is on the table in the UK these days. Gordon Brown has been talking about a Better Regulation Action Plan. This all makes me feel very old - I can’t help but feel that I have heard all of this before - in the 1970s and 1980s and 1990s and in particular in 1997 when the Blair Government changed the terminology from deregulation to better regulation and set up the Better Regulation Task Force. The Blair Government inherited a 1994 statute, the Deregulation and Contracting Out Act which was supposed to facilitate the destruction of uunnecessary regulation. Then there was the Regulatory Reform Act 2001. But after the Arculus Report and the Hampton report (Dec. 2004 version) Gordon Brown now proposes a bill for “removing outmoded and unnecessary regulations” He says:

We will begin a widespread consultation with businesses to identify regulations that should be removed or simplified.

Some of Brown’s other language reeks of Thatcherism:

A risk based approach helps move us a million miles away from the old assumption - the assumption since the first legislation of Victorian times - that business, unregulated, will invariably act irresponsibly. The better view is that businesses want to act responsibly. Reputation with customers and investors is more important to behaviour than regulation, and transparency - backed up by the light touch - can be more effective than the heavy hand. So a new trust between business and government is possible, founded on the responsible company, the engaged employee, the educated consumer - and government concentrating its energies on dealing not with every trader but with the rogue trader, the bad trader who should not be allowed to undercut the good. And the risk based approach has wide application from environmental health, to financial services and even taxation.

No wonder the conservatives lost the election!

The Absent Consumer - again

IOSCO isn’t the only supranational financial standards setter which doesn’t get input from consumers. In its first few years of existence, the EU’s CESR (Committee of European Securities Regulators) didn’t bother much about consumer views either. In March 2005 CESR held a “Consumer Day” to discuss the MiFID (Markets in Financial Instruments Directive). In a subsequent summary of the meeting CESR stated:

The importance CESR attaches to receiving comments on its advice from representatives of retail clients and consumers was stressed and CESR expressed its concern that the responses received to previous consultations carried out on MiFID, had not reflected sufficiently this set of stakeholders. CESR made it known that it intended to organise similar meetings in the future to continue and develop this dialogue further

The Consumer representatives who attended the meeting made some useful observations. They pointed out that they did not necessarily have the resources in terms of knowledge and staff to be able to prepare “considered responses” to consultations. They also suggested that it would be helpful if consultation papers were more “reader-friendly” and if they were translated from English into the different national languages in the EU.

This translation point is important and particularly critical in the EU which has been committed since the very early days to communicating with citizens in their own languages. Enlargement puts stresses on the EU’s translation resources, and leads the EU to limit the number of documents that are translated into all of the official languages and to produce shorter pre-legislative documents. Publishing consultation papers only in English tends to favour people in the UK, and members of the elite who either read English or can afford to pay for translators.

The Strange Case of the Disappearing Consumer

In November 2004 IOSCO (the International Organisation of Securities Commissions), which promulgates international standards for securities regulation, published a consultation document about its consultation procedures. The document contained a set of general objectives. The second of these stated that IOSCO would conduct public consultations:

To benefit from the expertise of market intermediaries, exchanges and other market operators, securities clearing and settlement system service providers, endusers and consumers, auditors and auditing companies, and other public authorities, international standard setters, international financial institutions, and regional development banks, when assessing and analyzing regulatory issues

IOSCO received a very limited number of public comments on this document. It is unclear how many private comments it received. The April 2005 Executive Committee Report on IOSCO Consultation Policy and Procedure does not mention consumers at all. Where the inclusive stakeholder paragraph appeared in the draft there now appears the following language:

To benefit from the expertise of the international financial community when assessing and analyzing regulatory issues.

What happened to the consumers? Is IOSCO just responding to the lack of comments by consumer groups or does the change in language reflect a change in policy? It’s worth noting here that the International Bar Association’s comments on the November draft emphasised that transparency in rule-making at the supranational level is important because:

It seems increasingly clear that the essential discussion of standards will take place at the IOSCO level rather than later at the home country level and that home country regulators will increasingly take the position that the standards adopted by IOSCO foreclose further discussion in the home country of the topics covered by these standards. This process is legitimate in democratic rulemaking when, and only when, those same principles have been fully vetted in a public manner at an international level.

In the same way, if IOSCO decides not to seek consumer input, then the consumer voice may be lost at the domestic level as well.

Corporate Manslaughter

I have been interested for a while in the ways that financial trade associations seek to influence the law, particularly in the context of international financial markets and transactions. This week I am working on my draft of a paper called Private International Law-Making for the Financial Markets which I am going to talk about at the Law & Society Conference in Las Vegas. I have been noticing the ways in which financial trade associations (such as the Bond Market Association and the Securities Industry Association) work together and separately in commenting on proposed regulations.

Last week I saw that CMS Cameron McKenna is inviting people to respond to a survey about the UK Government’s proposed Corporate Manslaughter Bill (this proposal is from before the recent election but the new Government proposes to introduce a Bill). The English rules on corporate liability for manslaughter are currently very restrictive. A company is only criminally liable for manslaughter where a “directing mind” of the company was liable for manslaughter. It is difficult to succeed in prosecuting a large company for manslaughter because even if there is one person who is the directing mind that person is likely to be far removed from the people who may be responsible for causing others’ deaths.

CMS Cameron McKenna is a law firm, not a financial trade association, and the topic it is inviting comments on is not really directly an international finance topic (although the statute would, if enacted in the form proposed in March, affect the criminal liability of foreign corporations). But CMS Cameron McKenna’s invitation to comment on the Government’s proposals is an invitation to comment to the firm (which states on its web site that it is preparing a response to the government’s consultation) rather than to the Home Office (which published the draft Bill in March). The survey document does not seem to invite responses from those who approve of the idea of increasing the risks of corporate criminal liability. For example, one question asks:

Do you believe the proposed new offence could encourage risk averse behaviour and bureaucratic systems?

Another question asks:

Will those industries which are traditionally exposed to health and safety issues struggle to attract top-level managerial talent in the face of corporate manslaughter prosecutions?

The email on CMS Cameron McKenna’s list (although not the web page) suggested that the firm was preparing a response to the consultation on behalf of the CBI (Confederation of British Industry) which expressed reservations about an earlier proposal to expand corporate criminal liability, and in its response to the Queen’s Speech said

If the government is going to press ahead on corporate manslaughter, it must ensure that the legislation is fair. The grossly negligent must be separated from genuinely responsible employers who do everything possible to ensure safety.

If the eventual response is published in the CBI’s name I’d have no problem with this, but if it is to be published in the law firm’s name I would have some problems because of the skewed nature of the survey questions and because I w