Link of the Day

Hospital Compare

Assorted

Odd Crop Prices Defy Economics

Harvard’s $34.9 Billion Endowment Makes Its Choice for New Chief

Be It Ever So Illogical: Homeowners Who Won’t Cut the Price

Treasury Dept. Plan Would Give Fed Wide New Power

Japanese Court Rejects Defamation Lawsuit Against Nobel Laureate

When the Disease Eludes a Diagnosis

Loans and Leadership

Futurist Ray Kurzweil Pulls Out All the Stops (and Pills) to Live to Witness the Singularity

America, Insure Thyself

Scientists try to explain religion

Bureaucrats

Using the Minimum Wage to Beat the Competition

Are You Happy?

Incoming at the Governor’s Office

Guide to Fed’s Alphabet Soup

Recession, Shmecession? Ask Mishkin

Art of Stealing an Election

Related;
Mugabe’s Weakening Grip

Zimbabwe on tenterhooks

Everybody likes being number one- even Economists

An interesting comment by Bhagwati on university politics (it is 10 minutes into the end of the podcast, talking about Japan bashing);

Everybody likes being number one, .. is almost an obsession…in the way our culture is… When we were trying to hire Robert Barro from Harvard to Columbia...We happen to have the largest apartment on campus, we actually gave 4 rooms away when our daughter went to Yale, because we don’t derive our utility from how large over apartment is, or how big our office,…may be we’re just crazy people, I guess

We were told, even with seven rooms left over in our apartment...,not to invite Robert Barro to our apartment, because he would want one more room than we had.

Related;
Fighting Raids;

The University of California at Berkeley announced last week that it has raised a $1.1 billion fund to fight raids on its faculty by wealthier private universities, such as Harvard, Yale, Princeton and Stanford. The money will endow chairs for 100 professors and facilitate raises for Berkeley professors who now often earn as much as 30 percent less than their counterparts at private universities.

Chancellor Robert Birgeneau said Berkeley would revamp the management of its $2.9 billion endowment, too, in hopes of matching the 25+ percent returns achieved in recent years by the most successfully-managed private university portfolios.

It is a hopeful sign for the nation’s highest-ranked public university. Perhaps it will be enough to counter over the next few years the threat reported here last week to one of the nation’s most creative economics departments.

Mineshaft Canary

Expelled: No Intelligence Allowed

Expelled: No Intelligence Allowed

Related;
Larry Summers on the role of universities;

But I think that we will almost certainly make more progress in advancing the values that we all share, if every issue is open for academic debate and if the response to distrastful argument is logical counter argument, rather than statements of revulsion. So I will always wish that I had handled that whole situation differently, but at the same time I think it is very important to uphold the principle of the right to be speculative, the recognition that when you offer hypotheses and judgments in a tentative way, they sometimes turn out to be right and they sometimes turn out to be wrong. People will debate over time the merits of different hypothesis. But I think it is something that is very, very important. Which isn’t to say that with the benefit of hindsight not gone to the NBR that day, but it is to say I think we do need to do a certain amount of soul searching around concepts of freedom of discussion and how we regard controversial hypotheses.

Hamilton vs Jefferson

From the recent Obama speech;

In a city of landmarks, we meet at Cooper Union, just uptown from Federal Hall, where George Washington took the oath of office as the first president of the United States. With all history that's passed through the narrow canyons of Lower Manhattan, it's worth taking a moment to reflect on the role that the market has played in the development of the American story. The great task before our founders was putting into practice the ideal that government could simultaneously serve liberty and advance the common good. For Alexander Hamilton, the young secretary of the treasury, that task was bound to the vigor of the American economy. Hamilton had a strong belief in the power of the market, but he balanced that belief with a conviction that human enterprise, and I quote, "may be beneficially stimulated by prudent aids and encouragements on the part of the government." Government, he believed, had an important role to play in advancing our common prosperity. So he nationalized the state Revolutionary War debts, weaving together the economies of the states and creating an American system of credit and capital markets. And he encouraged manufacturing and infrastructure, so products could be moved to market. Hamilton met fierce opposition from Thomas Jefferson, who worried that this brand of capitalism would favor the interests of the few over the many. Jefferson preferred an agrarian economy, because he believed that it would give individual landowners freedom and that this freedom would nurture our democratic institutions. But despite their differences, there was one thing that Jefferson and Hamilton agreed on: that economic growth depended upon the talent and ingenuity of the American people; that in order to harness that talent, opportunity had to remain open to all; and that through education in particular, every American could climb the ladder of social and economic mobility and achieve the American dream. In the more than two centuries since then, we've struggled to balance the same forces that confronted Hamilton and Jefferson.: self-interest and community, markets and democracy, the concentration of wealth and power and the necessity of transparency and opportunity for each and every citizen. Throughout this saga, Americans have pursued their dreams within a free market that has been the engine of America's progress. It's a market that's created a prosperity that is the envy of the world, and opportunity for generations of Americans; a market that has provided great rewards to innovators and risk-takers who've made America a beacon for science and technology and discovery.

But the American experiment has worked in large part because we guided the market's invisible hand with a higher principle. A free market was never meant to be a free license to take whatever you can get, however you can get it. That's why we've put in place rules of the road: to make competition fair and open, and honest. We've done this not to stifle but rather to advance prosperity and liberty. As I said at Nasdaq last September, the core of our economic success is the fundamental truth that each American does better when all Americans do better; that the well-being of American business (OOTC:ARBU) , its capital markets and its American people are aligned. I think that all of us here today would acknowledge that we've lost some of that sense of shared prosperity. Now, this loss has not happened by accident. It's because of decisions made in board rooms, on trading floors and in Washington. Under Republican and Democratic administrations, we've failed to guard against practices that all too often rewarded financial manipulation instead of productivity and sound business practice. We let the special interests put their thumbs on the economic scales. The result has been a distorted market that creates bubbles instead of steady, sustainable growth; a market that favors Wall Street over Main Street, but ends up hurting both. Nor is this trend new. The concentrations of economic power and the failures of our political system to protect the American economy and American consumers from its worst excesses have been a staple of our past: most famously in the 1920s, when such excesses ultimately plunged the country into the Great Depression. That is when government stepped in to create a series of regulatory structures, from FDIC to the Glass-Steagall Act, to serve as a corrective, to protect the American people and American business.

Interesting observation by Justin Wolfers

Interestingly, some of the best analysis is coming from economic journalists, who are unencumbered by either the fight for tenure or post-tenure lethargy.

-Where Have All the Macroeconomists Gone?

Marriage Counseling from Prostitutes

Your Sex Industry Questions Answered;

What’s the best way to keep the john around for a long time?

A: Dorothy says that “the best” sex workers will try to persuade their clients to discuss their marriages openly:

See, if you can start providing that kind of help, then the man thinks you’re not trying to hurt him, and he’ll come back for more. He’ll start being one of your regulars, and there’s nothing better than a man who keeps on paying!

How not to give economic policy advice to governments

Per Kurowski, a former World Bank executive director writes in a comment on Rodrik's blog;

What should a World Bank economist know about governance and growth?

Easy answer!

The importance of being very clear about: the governance by whom, and the growth for whom.

The biggest confusions that I have seen in this respect is when World Bank economists have teamed up on the government side, which is anyhow quite logical given that they are their direct bosses, but ending up working against the interests of the people.

Example:
“Dear government privatize this electrical distribution company and offer some future high rate adjustments (defended on the based of this questionable model) and that way you can obtain a very good price for it; and thereby get your hands on plenty of resources to spend on your favorite projects… and not having to worry about repaying loans or such nonsense… as the electrical consumers will take care of that for you by paying the higher than needed tariffs. Of course, please make sure though that the tariff increases occur somewhat down the line, since we do not want to be so transparent that the consumer, following the dots, makes the connection.”

GMU and Chicago- the believers, the rest atheists

David Friedman has an interesting comment about the role and belief of economists;

I think it's still an important difference among economists and economics departments, and one that young academics ought to care about. I remember a long time ago commenting to a graduate student at Chicago that it seemed to me that there were a lot of economists who didn't really believe in economics. It was what they did in working hours, not how they thought about the world. His response was that some of his fellow graduate students had noticed that–when visiting other schools.

I was reminded of that incident when visiting one of the colleges my daughter is considering for next year. Wandering around the economics department to get a feel for the place, I spoke with three faculty members–none of whom struck me as an economist in my sense of the term. My daughter, having audited an econ class, commented to me on the fact that a student had made a comment which any economist should have responded to with some version of "that sounds plausible but is wrong because"–a point that would seem obviously right to a non-economist, obviously wrong to an economist. The professor simply let the comment go.

I don't know enough about economics department to say which ones currently are in what category, with two exceptions. Chicago, so far as I can tell, is still a place where economists believe in economics. So, less obviously, is George Mason. One simple test, I suspect, would be to have lunch with members of the department, perhaps also with graduate students, and see what they talk about.

I should add that my point is not that economics is true, although I think it largely is. I am not inclined to take theology very seriously. But if I did take a course in it, I would expect to learn more, and have a more interesting time, if the professor was a believer than if he were an atheist.

Optimal Disaster Insurance

On the Optimal Design of Disaster Insurance in a Federation
by Timothy J. Goodspeed and Andrew F. Haughwout

Abstract: Recent experience with disasters and terrorist attacks in the US indicates that state and local governments rely on the federal sector for support after disasters occur. But these same governments are responsible for investing in infrastructure designed to reduce vulnerability to natural and man-made hazards. This division of responsibilities – regional governments providing protection from disasters and federal government providing insurance against their occurrence – leads to the tension that is at the heart of our analysis. We explore these tensions building on the model of Persson and Tabellini (1996). We show that when the federal government is committed to full insurance against disasters, regions will have incentives to underinvest in costly protective measures. We derive the structure of the optimal second-best insurance system when regional governments choose investment levels non-cooperatively and the central government cannot verify regional investment choices. Surprisingly, second-best transfer levels (and the corresponding regional investment levels) can be greater or less than their first-best counterparts, depending on the relative probability of a disaster. If the probability of a disaster is low, secondbest transfers will be designed to reward regions that succeed in avoiding disasters and punish those that do not, thereby giving regions an incentive to increase investment in protective infrastructure. However, this raises the further question of whether the central government can credibly commit to such a scheme, and we find that ex-post an optimizing central government will decrease transfers if a region provides protective infrastructure that increases its expected future income, generating a soft-budget constraint for regions. This provides an additional incentive for regions to underinvest in protective infrastructure. We discuss these results in light of recent disaster policy outcomes in the US.

Did the Iraq War cause the sub-prime crisis

Try the following thought experiment;

As a matter of arithmatic, Stiglitz may be right. But does he really think that, absent the war, we would have suddenly found a political consensus to fix Social Security? Do the MoveOn-niks really believe we would have used the money to reform health care?

Here is a little thought experiment. Had there been no occupation, we would have had a balanced budget by fiscal 2007. The deficit was $162 billion, almost exactly equal to the direct cost of the war that year. Factor in other foregone costs, such as the expense of caring for wounded vets and the like, and we probably would have had a modest surplus.

And what would we have done with it? This is just speculation, of course, but if Stiglitz can do it so can I. The White House would have said, "We have balanced the budget, so let's extend the 2001 and 2003 tax cuts." Congressional Democrats would have said, "We have a balanced budget, let's extend the SCHIP child health program." And, in the end, they may very well have done a little of both. But long-term entitlement fixes? I don't think so.

If I were MoveOn, I'd probably do all I could to blame the poor economy and the lack of progress on health reform on the war too. It is probably a political winner. But it doesn't happen to be true.

Related;
Six Degrees of Joseph Stiglitz

Obamanomics- 'Pain trickled down'

If we can extend a hand to banks on Wall Street when they get into trouble, we can extend a hand to Americans who are struggling, often through no fault of their own.

Obama’s Speech on the Economy

Obama Pushes Tougher Oversight

Who's behind the Speech;

Two of Mr. Obama’s chief advisers for his speech served under President Clinton: Joseph E. Stiglitz was chairman of the president’s Council of Economic Advisers, and Robert B. Reich was secretary of labor.

Text of the Speech



The Dark Art;

Almost all that any politician says on any topic other than political strategy should be treated with even less respect than would be accorded a professional circus-clown's speculations about string theory.

Technology trap in Africa- World Bank

Technology trap and poverty trap in Sub-Saharan Africa;

Summary: Since the industrial revolution, advances in science and technology have continuously accounted for most of the growth and wealth accumulation in leading industrialized economies. In recent years, the contribution of technological progress to growth and welfare improvement has increased even further, especially with the globalization process which has been characterized by exponential growth in exports of manufactured goods. This paper establishes the existence of a technology trap in Sub-Saharan Africa. It shows that the widening income and welfare gap between Sub-Saharan Africa and the rest of world is largely accounted for by the technology trap responsible for the poverty trap. This result is supported by empirical evidence which suggests that if countries in Sub-Saharan Africa were using the same level of technology enjoyed by industrialized countries income levels in Sub-Saharan Africa would be significantly higher. The result is robust, even after controlling for institutional, macroeconomic instability and volatility factors. Consistent with standard one-sector neoclassical growth models, this suggests that uniform convergence to a worldwide technology frontier may lead to income convergence in the spherical space. Overcoming the technology trap in Sub-Saharan Africa may therefore be essential to achieving the Millennium Development Goals and evolving toward global convergence in the process of economic development.

Related;
New Limits to Growth Revive Malthusian Fears


State of Planet '08

Jeff Sachs on water policy

Quote of the Day

If the government underwrites all the risks, call it socialism. If it underwrites only the failures, call it foolishness.

- Allan Meltzer

A Consitution for the Environment by the People?

What do you think of the following Article from Bhutan's constitution? Should the people and jobs come first?;

The Government shall ensure that, in order to conserve the country's natural resources and to prevent degradation of the fragile mountain ecosystem, a minimum of sixty percent of Bhutan's total land shall be maintained under forest cover for all time.

- Article 5, Bhutan Constitution

A New 'Guided Democracy' made by the King

It will be interesting to hear Bryan Caplan's views on this new experiment in a tiny country.

For Discussion: Who's a genuine Bhutanese Citizen?

Related;
Voting on the king's orders;

Yet the king's decrees—formulated into an overarching policy of “Gross National Happiness”, as opposed to economic growth at any cost—have not always helped alleviate poverty. Stringent checks on the exploitation of Bhutan's timber, for example, have helped ensure that rapid economic growth has created relatively few jobs. Though furnished with free medicine and education, some 20% of Bhutanese live below the poverty line.

A big minority—Nepali-speakers from the country's south—have deeper grievances. Under pressure in the late 1980s to adopt the culture of the majority, some arose violently. In response, the government drove around 60,000 (including, it says, many illegal immigrants) into Nepal. More than 100,000 still languish there in UN-run camps; America has offered sanctuary to 60,000.

This will not end the worries of the 100,000-odd Nepali-speakers who remain in Bhutan. Thousands have allegedly been denied citizenship because of their association with those in exile. For the southerners, at least, democracy promises something better. Nine of the DPT's winning candidates were Nepali-speakers. Officials in both parties said that resolving the southerners' grievances was a priority.

In general, candidates promised voters more of the benefits the king gave, including roads and electricity. Some villagers quietly complained about the former regime. By tradition, the king gives land to the landless and timber for house-building. Yet in the remote village of Miseytang, a poor landless trader said that after a month spent presenting her petition in Thimpu, a nine-hour drive away, she had received half an acre of protected forestry land. “It's useless to me,” she lamented, standing outside her fine house, facing a school where her three children were educated free, next to a health clinic, also free.

Most Bhutanese applaud the king's rule. But his decision to impose democracy on them looks canny. There is enough social change evident in Bhutan to suggest a political change was in store. In Thimpu, a city of 100,000, unemployment, and disgruntlement, is rising among educated youths. “Bad Boyz!” exclaims graffiti on a Thimpu building-site. The former regime's success in education, and failure to boost Bhutan's tiny private sector, is partly to blame for their frustrations. So is a fresh limit on civil-service hiring; last year around a third of the country's new 1,200 university graduates found no state job.

The new government will have to find jobs for the boyz. In the short term, tourism is the best hope. A plan to double the number of tourists (20,000 last year) aims to create a total of 100,000 jobs in the sector. This will require a new international airport; the current one, at Paro, is shunned by every national carrier except Bhutan's because of its terrifying hilly approach.

More important, to improve the lot of poor peasants, the government will have to lead them out of subsistence farming. To bring their goods to market, alas, many more roads must no doubt be bulldozed through pristine forests. And the last of the hidden kingdom will come into view.

Let's Kill Seal

Canada's 'controversial' seal hunt?

Memo to the Next President on Education Reform

Lawrence Summers on education reform;

Q: ...As I told you I’m writing an essay for the next president of the United States with recommendations for federal higher education policy. Would you give me three major recommendations you would like to have in the book to be presented to her?

LS: I’ll make you a deal. You tell me for sure who is going to read it and I’ll give you three very good recommendations. First, there needs to be a substantial increase in reform in the availability of financial aid. It’s great that Harvard is able to do the kinds of thing that it is able to do with its $38 billion endowment, but it is really a tragedy that if you look in the United States today, as somebody put it very directly, rich dumb kids are much more likely to go to good universities than poor smart kids. You can just see it in the statistics and it’s wrong and it’s about financial aid and effort. That is the first thing I would say. The second I would say is that, much as my colleagues in higher education don’t like these ideas, it wouldn’t hurt to start thinking about ways of, at least on an informal basis, evaluating what happens in universities and trying to come to judgments about the effectiveness in education and research of different universities. I’m going to give you four. Third, to take one that will be sort of universally popular but difficult, it is nuts that at the beginning of the century, the beginning of the life science century, we are cutting the NIH for the first time in history, and people under 40 basically can’t get grants. It is just crazy, with all the progress that is possible. Last and not unimportant, there are few things that are crazier than the combination of tenure and mandatory retirement. It is sort of beyond belief that you have science departments in great universities where the decisions as to who the next generation is going to be made are being made by people in their 70s. Not only are they occupying larger amounts of laboratory space, filling slots that could be given to other people, they are also the decision makers with veto power as to who the scholars of the next generation are going to be, and it is just crazy. It would make a very substantial contribution to at least the leading institutions of higher education if an exemption were crafted for mandatory retirement. It should say something about how weird this is in a way that the professors who are least likely to retire are in the sciences. Something should be done.

Timur Kuran on Islam and Economic Progress

Interesting panel discussion from CFR;

Muslim societies have always welcomed change. If you look at the last two centuries, you can see this. Two centuries ago nowhere in the Islamic world were there corporations, did banks exist, did stock markets exist, was there standardized accounting. These institutions, these practices have been accepted -- widely accepted all across the Islamic world. And in fact, even Islamists who -- radical Islamists who oppose various elements of modernity accept these. They don't make an issue out of them.

In earlier times, tax systems repeatedly changed. Military technologies were -- new military technologies were generated. Military technologies were borrowed from abroad again and again.

The same token, certain elements of -- certain elements of the infrastructure of the private economy remained stagnant for almost a millennium across the Islamic world. If someone -- if a merchant who had lived in the 10th century came alive in 1800, he would find the types of contracts in use quite familiar. Credit markets would be quite familiar. Economic relations would seem quite similar to those that he had experienced eight centuries earlier.

So the economic infrastructure of the economy had undergone a stagnation. And it turns out that this -- even though changes had occurred in other areas, in this particular area the stagnation mattered dramatically to economic development....

I deliberately used the same examples in the last 200 years -- the dramatic change in commercial life in the Middle East and the rest of the Islamic world came about through transplants. And the transplants occurred, institutions were borrowed from the West at a time of crisis when it appeared that unless major borrowings took place, unless merchants and investors were given ways to pool resources on a large scale to take advantage of modern technologies, that they would all be dominated -- that these societies would be dominated by outsiders.

Now, the big question is: Why did these institutions, these modern institutions -- say, joint stock companies, the corporations, banks, large-scale organizations, stock markets, standardized accounting -- why did these develop organically in Europe and why didn't they develop organically within the Islamic civilization so they have to be borrowed in a period of crisis from abroad with all of the distortions that accompany it? This is the question.

Now, here is where Islam and specific aspects of Islam come into play and that helps us explain why there was a long period of stagnation. Certain institutions that are elements of Islamic law failed to create the incentives for organizational modernization. And parallel institutions in Europe did create those incentives so you have cascading phases of the modernization.

Let me give you an example of an institution that made a difference: Islam's inheritance system. By medieval standards, Islam's inheritance system is highly egalitarian. It mandates a share for all children, male and female -- and surviving parents, sometimes also members of the extended family. It was much more egalitarian than the inheritance systems elsewhere in the world in the medieval period.

One problem that this creates -- that this inheritance system created is it made it very difficult to carry successful enterprises from one generation to the next. And the problem was particularly acute with successful businessmen who left large estates. Why? Because they had -- they typically, as a sign of their success, as a result of their success, they had multiple wives and many children. More surviving children than in the West. They had huge numbers of heirs. So the successful business -- all the assets got fragmented very quickly.

Europe was able to solve this problem, because unlike Islam, in Christianity the inheritance -- there is no inheritance system grounded in the Bible. There's a great deal of flexibility. In some places, and particularly the places that eventually gave us the industrial revolution, primogenitor -- leaving the assets, all the assets to the oldest son -- was adopted as a solution. This enabled successful businesses to be passed to the son.

Now, why is this so important to economic development? Because if you can pass on an enterprise to others, it can grow over -- as an industry grow over time. That growth generates communication and coordination problems that then require the development of new organizational forms. It developed --

for example, a need for standardized accounting develops, a need for stock market develops when people instead of forming short-lived enterprises, they form enterprises that are going to last more than a generation.

So this is a dynamic that was not -- did not take off in the Middle East. And this is not because Islam was designed as an inflexible religion, that there was a certain, you know, rule in Islam that says enterprises have to be small and short-lived. This was an unanticipated, unintended consequence of an inheritance system that served certain needs quite well.

Financial Development and Growth in India

Financial Development and Growth in India: A Growing Tiger in a Cage?;

Summary: This paper examines the efficiency of the different segments of India's financial system using firm-level data on corporate financing patterns. Firms are increasingly relying on external funds to finance their investment in most recent years. Empirical analyses indicate that (1) the financial system in India is not channeling funds into industries with higher external finance dependence; (2) the debt financing system does not allocate funds according to firms' external finance dependence, while equity financing system does; and (3) firms in an industry that are more dependent on external finance grow more slowly.

Believe it or Not

Chinese want their government to control the Internet

Climate Change- a human rights or a foreign aid problem?

The island nation of the Maldives said it made a big step forward Friday toward protecting its very existence, which it fears is threatened by global warming.

The Indian Ocean archipelago, which says it risks loosing its entire territory to rising sea levels, leaving its 360,000 inhabitants with no place to go, drummed up enough support in a key U.N. body to request a study on the impact of climate change on human rights.

"We feel it is very important that the Human Rights Council start addressing the issue of climate change," said the Maldives Foreign Minister Abdulla Shahid.

"If we look at the consequences of climate change, it is the individual human rights of every person on the planet which is going to be violated, including the right to life," he told The Associated Press by telephone from the Maldives.

Some countries were unhappy to link climate change to human rights. Russia said the United Nations already has enough agencies tackling the problem.

But Shahid said the Maldives wants the council's work to be complementary to other U.N. organizations dealing with climate change, such as the Nobel Prize-winning U.N. Intergovernmental Panel on Climate Change.

The 47-nation council said in the document adopted by consensus that it is "concerned that climate change poses an immediate and far-reaching threat to people and communities around the world and has implications for the full enjoyment of human rights."

The Maldives, which consist of 1,200 islands, were joined by other small island countries such as the Fiji Islands and Tuvalu in offering the resolution. They have said they risk disappearing altogether if global warming continues unabated and that the world would see hundreds of thousands of stateless people who have nowhere to go, no government to protect them or to deliver basic services.

The 3,000 inhabitants of Papua New Guinea's Carteret Islands, in the far western Pacific, are already preparing to be among the world's first "climate refugees."

As seas expand from warming and from the runoff of melting land ice, higher and higher tides are eating away at tiny places like the Carterets, a sandy atoll of a half-dozen islands. Its people are getting ready to abandon the islands over the next several years, resettling on designated land on nearby Bougainville island.

Shahid said the inhabitants of the Maldives "don't intend to go anywhere."

If significant measures are taken now, the tiny island nation can be saved, he said. "It's not too late, but time is ticking."

-Maldives gets UN top human rights body to study climate change

Related;
What Development Economists Need to Know About Climate Change ;

Schelling started his presentation by characterizing the climate change issue as a bargaining between developed countries, leaving the developing countries with a limited role. Yet it is the developing countries that are truly vulnerable to the effects of climate change, he said. This is largely because in developing countries so many people live on agriculture. Additionally, Schelling explained, this is where the bulk of the population resides, and will increasingly reside in the next few decades. Other reasons for developing countries’ vulnerability that Schelling cited included weaker health care systems and less access to crucial nutrients, clean water, and sewage systems. Additionally, he pointed out that as climates become warmer, vectors that carry pathogens (mosquitoes, flies) become more numerous and also more virulent. These will all be key factors in offsetting the effects of climate change, Schelling said, and as such the best defense of developing countries against climate change will be their own development. This will allow them to become less dependent on agriculture and become sufficiently wealthy to afford a decent public health infra-structure.

Another moronic move by the U.N. Human Rights Council

The Downside of Freakonomics

Glenn Loury and Heather MacDonald at Blogging Heads

Related;
Toward a Unified Theory of Black America

The Burden of Bad Ideas: How Modern Intellectuals Misshape Our Society

10 Questions for Heather Mac Donald

First Voiceless Phone Call

Texas Instruments: World's first, live voiceless phone call

Related;
Tech Market of the Future: The Brain
In January, Miguel A. L. Nicolelis, M.D., Ph.D., announced that his team completed the first steps toward a brain machine interface that might make it possible for paralyzed people to walk by directing devices with their thoughts. The team's monkey, in North Carolina, demonstrated the power of the technology when she used her brain signals to make a robot in Japan walk.

Political Economy during the Mexican Financial Crisis

President Clinton at his best- from the talk given by Summers at CFR;

I’m someone who admires President Clinton very much. Like all of us, he is not a perfect man. But I guess I was struck again and again with the 1993 budget deal, with what happened in Mexico with the way he worked to contain the Asian financial crisis. But on all sorts of things, he did the politically convenient thing. But when it was really important, I never saw him hesitate to do what he thought was the right thing. Probably the single moment I will remember with the greatest clarity was the night Secretary Rubin was sworn in as Secretary of the Treasury by Chance. We walked in and we told him that after Bob’s swearing in, we walked in and we told him that Mexico was going to default within 48 hours if the United States did not make an appropriate commitment. He asked how large a commitment. Bob turned to me. I said $25 billion. One of his aides said you mean, $25 million. Bob said, no. He means $25 billion. There was a certain silence in the room. Another very senior person on the White House staff remarked – remember, this is January 1995, so it’s two months after the President had lost badly the 1994 election. One of his most senior people remarked that if we send this $25 billion to Mexico and it doesn’t come back, there is no way you are going to be reelected. The president didn’t hesitate. He said – I’m going to clean up slightly what he said but the essence of it was – this is serious, this is why we’re here. We are going to do our best to make the right decisions. If we make the wrong decisions and we lose an election, that is how the process ought to work. So I just want to know two things. First, is there a substantial chance that something very serious will happen if we don’t do this? We said yes. Then he said, I realize there are no guarantees, there are no certainties, but is there a reasonable chance that is we are prepared to make a commitment that we will contain the situation. We said yes. He said, well, it’s pretty obvious what we should do. That launched us on something that had a fair number of ups and downs. If I look back at the calendar of those events and look at graphs of the market, it was basically pretty clear that the thing was going to work within about two-and-a-half months. But if I take my subjective experience of those two-and-a-half months, and I think about it, it feels more like two years. That was probably the single most dramatic of the episodes that I was involved in.

Sri Lanka- and the war goes on

Any body remember Somalia

“We haven’t been paid in eight months,” said one government soldier named Hassan. “We rob people so we can eat.”

Nur Hassan Hussein, the prime minister, did not deny government troops were robbing civilians. “This is the biggest problem we have,” he said in an interview in late March.

But, he said, he does not have the money to pay them. Each month, more than half of government’s revenue, mostly from port taxes, disappears — stolen by “our people,” the prime minister said.

-In Somalia, a Government on Life Support

Obama is also Irish?

Obama speech in Scranton, St. Patrick's Day

'Barack is a Celtic name'

Poverty Photo of the Day

An young girl scavenges for recyclable parts at a car yard on the outskirts of Jammu in Indian-administered Kashmir.

Good Capitalism, Bad Capitalism

Good Capitalism, Bad Capitalism, and the Economics of Growth and Prosperity

Larry Summers time at the World Bank

Larry Summers from the same CFR event;

I did two things during that period of which I am rather proud, one thing that two thirds of people in this room are probably vaguely aware of. It wasn’t one of the two things I was proud of. I wrote a report that I think subsequently influenced the bank a fair amount on investing in girls’ education, and making the case that it had an enormously high rate of return. I guess I had an urge even then for generating a little bit of controversy. I chose to present this paper initially in Pakistan to the Pakistani Economic Roundtable. It was quite a remarkable event. There were people, sociologists sitting there saying, finally somebody from the World Bank saying something relevant, useful, not the old usual stuff about financial liberalization. But there was also, and I will never forget this, somebody standing up and saying: you know, sir, arguments like yours are the reason why America has 30 million latchkey children and is a sick society. But ultimately the thing had a fair effect. The other thing I did, more of less by serendipity, was I decided that the bank would write its annual report on health and on quantitative techniques for measuring which kind of health interventions were most effective. I could have been more thrilled to read three or four years later that Bill Gates, who at the time I had never met, said that it was reading that report that had led him to decide that global health was going to be the focus of his philanthropy. So one should remember that these kinds of reports can have an impact. I also signed my name to a memo where I tried to make the case that there is a complicated set of balances involved with free trade and economic growth and the comparative advantage that comes from it. A young man who is a good friend now who drafted the memo for me chose to express the thought that not every country should have the same environmental standards by saying, wouldn’t it really be better if more toxic waste was dumped in Africa . This was a rather unfortunate event. The guy from the bank’s press office would call me every two hours. Larry, they just denounced you in Aukland. They’re having an environmental conference in Cape Town and they’re going to pass a resolution about your memo.

Related;
‘Fearful Pig’ is resigning as the President

Paul Krugman once noted the late economist Dornbusch classified economists, depending on their research style; "Goldsmiths" were careful, meticulous workers - which Rudi admired. "Pigs" just sort of jumped into an issue and wallowed around. But that was OK too, if it was done with sufficient vigor and originality. Rudi described Larry Summers as a "fearful pig" - and it was a compliment.

Another Stiglitz Moment

From an event at CFR- Q& A with Larry Summers;

Q:Lucy Komisar, I’m a journalist. I interviewed Joe Stiglitz not too many years ago. He was chief of the Council of Economic Advisors under Clinton . He told me that when Robert Rubin was Treasury Secretary, he didn’t want to do anything to stop the free flow of money into the US . That meant not doing anything about money laundering because some of the freely flowing money was drug money, corruption money, money looted from developing countries. But when you came in, you really took some initiative to do something about the whole money laundering issue. I’m interested about what made you want to do that and how did you decide what you ought to do. Did you have problems with interests that didn’t want you to do this because maybe they wanted the money to come in freely without any blocking? This is an issue which of course is important today. Obama signed on to stop tax havens.

Larry Summers: I got it, I got it. I’ll take my compliments where I can get them, even from Joe Stiglitz who hasn’t usually been complimentary. Let me just say that I’m aware of no difference in opinion on this question between Bob Rubin and myself, and some how the suggestion that he was representing Wall Street interests seems to me to be entirely unfair and unwarranted and devoid of merit. For a variety of reasons at the time when I became Secretary of the Treasury, given concerns that existed in a number of parts of the US government, given some of what we have been discovering at the IRS , we did launch a series of initiatives directed at what I like to call the dark side of capital mobility. But for the most part open capital markets, foreign investment, bring tremendous benefits. But we identified three highly programmatic things: tax havens that were costing the tax payer large amounts of money, principally because of bank secrecy, not just in the United States , but in the rest of the world. Pressuring the ability to maintain progressive taxation around the world. Money laundering and failure to adequately regulate levered financial institutions who could plant their leverage abroad. We launched a series of initiatives designed to multi-laturalize an effort, to diplomatically pressure jurisdictions with respect to all three of those issues. I would say that during the time that we did it, with the help of my colleagues – my colleagues Will Wexler, Neal Woollen and Todd Sturn – we made what by government standards was quite a bit of progress over a period of a couple of years. The new administration regarded this all as some kind of dangerous left-wing plot against the fundamental right of capital to hide itself and not pay taxes and basically eviscerated all the initiatives. They basically said they are not our policy anymore, we’re done, finished. Yes, we have been working in the OECD through all this time but it’s done. After 9/11 there was a bit of a change of heart, particularly around the money laundering parts of it. But I think we did the right thing, and by the way, if we are to maintain support for an open trading system, we had better be prepared in those places where open markets are coming with very substantial costs, to act aggressively and forcefully. I thought this was important in two respects. I thought the problems were large and important, and I also thought there was a broader symbolic purpose in making clear that our judgments and commitment to open trade were not some kind of ideological principle, but were based on a pragmatic judgment of what would best promote prosperity.

I find it hard to believe that well-known economists go about making outrageous accusations against other economists.

Related;
An Open Letter- Rogoff;

Joe, you may not remember this, but in the late 1980s, I once enjoyed the privilege of being in the office next to yours for a semester. We young economists all looked up to you in awe. One of my favorite stories from that era is a lunch with you and our former colleague, Carl Shapiro, at which the two of you started discussing whether Paul Volcker merited your vote for a tenured appointment at Princeton. At one point, you turned to me and said, "Ken, you used to work for Volcker at the Fed. Tell me, is he really smart?" I responded something to the effect of "Well, he was arguably the greatest Federal Reserve Chairman of the twentieth century" To which you replied, "But is he smart like us?" I wasn't sure how to take it, since you were looking across at Carl, not me, when you said it...

On page 208, you slander former IMF number two, Stan Fischer, implying that Citibank may have dangled a job offer in front of him in return for his cooperation in debt renegotiations. Joe, Stan Fischer is well known to be a person of unimpeachable integrity. Of all the false inferences and innuendos in this book, this is the most outrageous. I'd suggest you should pull this book off the shelves until this slander is corrected.

Common Sense and Nonsense on Global Imbalances

This forum, featuring Dr. Joseph Stiglitz, Dr. Jose Antonio Ocampo, and Dr. Mark Weisbrot, was organized by the Center for Economic and Policy Research and hosted by the Carnegie Endowment for International Peace. Multilateral economic institutions are facing a period of unprecedented challenges — among these are large macroeconomic imbalances (including the US current account deficit), stalled negotiations at the WTO, and a much-reduced IMF. Three economists discussed some of these current challenges and their implications for economic growth and development. The panel discussion was followed by a brief question and answer period.

Assorted Podcasts

HBO History Makers Series with Lawrence H. Summers


Australia's new baby boom

Narcissism
Most of us are familiar with the Greek myth of Narcissus; a young man who saw himself as more beautiful and superior than those around him. Not only does his love of himself keep him from falling in love with anybody else, but in the end, he falls in love with his own reflection in a pool of water and dies.

Can Democracy Afford to Neglect the Poor?
Alejandro Toledo, Ph.D., is the former president of Peru (2001-06) and the founder and current president of the Global Center for Development and Democracy which focuses on the interrelationship between poverty and inequality and the future of democracy. He is a Payne Distinguished Visiting Lecturer at the Freeman Spogli Institute for International Studies and a Distinguished Fellow at the Center for Advanced Studies in the Behavioral Sciences, both at Stanford.

Bhagwati Says Democrats Need to Change Trade Policy

Cannadine, Author, Examines Legacy of Andrew Mellon

David Nasaw Says Andrew Carnegie Had `Eternal Optimism'

Deutsche Bank's Sieminski Doubts Oil Will Fall Below $90

Here Comes Everybody: the power of organising without organisations
Clay Shirky

Second Bounce of the Ball: Turning Risk into Opportunity

Speaking of Race: John Edgar Wideman’s Fanon

Islam in Saudi Arabia's Politics

Ethan Zuckerman & Solana Larsen

India: The Emerging Giant

Beauty and the Beast - Numbers and Public Policy
Michael Blastland, a writer and broadcaster and the originator of the More or Less programme on BBC Radio 4, and Andrew Dilnot, principal of St Hugh's College, Oxford, and former director of the Institute for Fiscal Studies.

Five Years, 4000 Dead Troops, but $3 Trillion?, featuring Christopher A. Preble

Sunshine Week and Government Data, featuring Jerry Brito

Organ Sales in Iran, featuring Benjamin Hippen

The Thomas C. Schelling Symposium

The Thomas C. Schelling Symposium

Featuring amongst others Kenneth Arrow, George Akerlof and Daniel McFadden

Is Chinese action in Tibet terrorism?

Jerrold M. Post and Louise Richardson talks with Riz Khan on what motivates terrorists.

Their books;
The Mind of the Terrorist: The Psychology of Terrorism from the IRA to al-Qaeda
by Jerrold M. Post

What Terrorists Want: Understanding the Enemy, Containing the Threat
by Louise Richardson

More interesting

Single Man Theory of History

A contrast of Simon Boliva and George Washington;

Both men were members of the colonial aristocracy. Simon Bolivar inherited his wealth, while George Washington married into it. Both men were the military leaders of their revolutionary movements. However, Bolivar was a much more successful general. Despite his great reputation, George Washington never won a major battle. His defense of New York was routed, and the revolutionary army was forced to flee across the Delaware River. Hoping to cut the insurgency in half, the British, under the command of General John Burgoyne, launched an invasion from Canada—marching south with an army of more than 7,000 men. After an arduous trek through the thick swamplands north of the Hudson Valley, the British army was defeated at Saratoga by Generals Horatio Gates and Benjamin Arnold. The unexpected victory allowed the colonists to convince France to enter the fray. Two years later, armed with an army of 5,000 soldiers and the assistance of the French fleet, the Comte de Rochambeau took on General Charles Cornwallis, cornering him in the Virginia peninsula of Yorktown. After a savage siege, the French general overran the British defenses, allowing General Washington and the American colonists to make the final charge as a symbolic act of victory. Bolivar, however, was a different story.

Simon Bolivar was an astute military general, able to overcome enormous odds and adversity. It is true that Bolivar confronted a more debilitated adversary. Spain was reeling from years of French occupation and guerrilla warfare. The Spanish garrisons in Latin America were relatively small and not very well supported by the creoles. Just as France played the role of spoiler during the North American war for independence, Britain played a pivotal role in providing arms and ammunition to the Latin American forces. The ranks of the Latin American army were also peppered with British mercenaries who had served in the peninsular campaigns. However, the military leadership still remained in Bolivar’s hands, and his engagements at Carabobo and Boyacá were textbook examples of flanking maneuvers and the skillful use of mounted cavalry. Despite the strong contrasts on the battlefield, the two leaders were even more different politically.

Koch Associate Program

Applications Now Open

Food and People

Italy’s Trash Crisis Taints Reputation of a Prized Cheese;

In the last few months, sales of buffalo mozzarella have dropped 40 percent, the product’s trade association says. The problem makes for a near-perfect morality play about Italy: For years, the nation’s paralyzed political class has done little to halt huge-scale illegal dumping of trash, some of it toxic, around Naples. That area happens to produce some of the best mozzarella....
“It really is a problem of criminals making a counterfeit product from God-knows-what,” said Mr. Ursini, who expects to open a branch in New York soon. “Mozzarella-wise, we’re in good shape. I just hope the whole thing doesn’t become a panic.”

Much is at stake: In a business that stretches back nearly to antiquity — invading barbarians are believed to have brought the first buffalo from Asia as early as the sixth century — some 30,000 tons of the high-quality protected cheese are produced each year, representing nearly half a billion dollars in sales.

Virus Kills Chile’s Salmon;

But the latest outbreak has occurred after a rash of nonviral illnesses in recent years that the companies acknowledge have led them to use high levels of antibiotics. Researchers say the practice is widespread in the Chilean industry, which is a mix of international and Chilean producers. Some of those antibiotics, they say, are prohibited for use on animals in the United States.

Many of those salmon still end up in American grocery stores, where about 29 percent of Chilean exports are destined. While fish from China have come under special scrutiny in recent months, here in Chile regulators have yet to form a registry that even tracks the use of the drugs, researchers said.

Lil' Hillary

Is it such a big deal?

In October 2006, Dr. Claudia Henschke of Weill Cornell Medical College jolted the cancer world with a study saying that 80 percent of lung cancer deaths could be prevented through widespread use of CT scans.

Small print at the end of the study, published in The New England Journal of Medicine, noted that it had been financed in part by a little-known charity called the Foundation for Lung Cancer: Early Detection, Prevention & Treatment. A review of tax records by The New York Times shows that the foundation was underwritten almost entirely by $3.6 million in grants from the parent company of the Liggett Group, maker of Liggett Select, Eve, Grand Prix, Quest and Pyramid cigarette brands.

-Cigarette Company Paid for Lung Cancer Study

Related;

A conversation about the film "Thank You For Smoking". Charlie talks to the author of the novel on which it's based, Christopher Buckley as well as the director Jason Reitman, actor Aaron Eckhart, and producer David Sacks- starts at 38th minute

The Fed’s New Alphabet Soup- Vincent Reinhart

First, the mnemonics. On March 14, the Federal Reserve extended access to its discount window to a non-depository, Bear Stearns, for the first time since the 1930s. (The discount window is the Fed’s lending facility, where loans are made at a rate above the federal funds rates and can be secured with a wide variety of collateral.) According to the Federal Reserve Act, lending to such an individual, partnership, or corporation (an IPC) requires the affirmative vote of five of the governors of the Federal Reserve Board. Moreover, the Federal Reserve must attest that there are “unusual and exigent” circumstances and that failure to lend would impair the economy. On March 16, the Fed granted other investment banks access to its lending facility.

On the prior Tuesday, the Fed had introduced a new program called the Term Securities Lending Facility (TSLF), under which it will loan some of the Treasury securities currently on its balance sheet to key financial market participants in return for other securities as collateral. The term of these transactions is 28 days, and the fee paid for the loan of Treasury securities will be set in an auction.

For the past few months, the Fed has been holding regular auctions for depositories of its discount window credit, also for a term of 28 days. This is referred to as the Term Auction Facility (TAF), in which depositories bid for credit. Earlier this month, these auctions were bumped up to total $100 billion per month. To put that sum in perspective, the amount of discount window loans outstanding this month will likely be nine times the previous monthly record from 1919 to the inception of the TAF (see the nearby chart). And if the TAF continues at its recent pace through June of this year, the Federal Reserve will have extended a greater volume of loans over the first eight months of the program than it had cumulatively lent over the prior 90 years.

Last but not least, the Fed also announced that it will loan another $100 billion in the form of 28-day term repurchase (RP) agreements. RPs are the bread-and-butter of a central bank’s open market operations. In the typical RP, the Fed lends money to its dealer counterparties for a fixed term, taking collateral in the form of Treasury securities or the debt and mortgage-backed securities of the government-sponsored lenders, Freddie Mac and Fannie Mae.

If we tally up all these new programs, the Federal Reserve appears willing to commit almost one-half of its balance sheet, around $400 billion, to promote the renewed health of financial markets. Given its open-ended invitation for investment banks to follow the Bear Stearns route and tap the Fed’s discount window, it may wind up committing even more.

-The Fed’s New Alphabet Soup

Parenting and Economists

Watch Simpsons with your Kids- Bryan Caplan's

Teach your 7 year old how to think Mathematically - Mankiw's

Related;
The Birth of Parentonomics: A Guest Post

Three Questions to Bernanke from Carmen Reinhart

From Reinhart's congressional testimony last month;

First, Federal Reserve policy easing in the last five months of last year seemed to be constrained by concerns about inflation. Judging from the longer-term projections included in the minutes of the October 2007 and January 2008 meetings, Federal Reserve policy makers seem to have an informal goal for PCE inflation (excluding food and energy) or something less than 2 percent. Was that goal reining in their response to the weakening of spending in 2007, and will it constrain their actions their actions over the remainder of this year?

Second, policy actions this year suggest that the Federal Reserve has abandoned the practice of gradually responding to economic events that marked the experience of the prior two decades. Will this phase of post-gradualism apply symmetrically later this year if evidence accumulates that inflation expectations are on the rise?

Third, Chairman Bernanke and his predecessors have previously argued that Federal Reserve involvement in the supervision of financial institutions is important in making both the conduct of supervision and monetary policy better. But the past few years apparently witnessed multiple regulatory lapses. Supervisors failed to caution depositories offering potential borrowers unsuitable mortgages. They also acquiesced as complicated structures were booked off the balance sheet, even though, in the event, they were not treated as such by corporate headquarters at the first sign of stress. At the same time, it is hard to read the hesitant easing of late 2007 as evidence that monetary policy makers were receiving useful insights from their supervisory colleagues. Does Chairman Bernanke still view supervision and regulation as an appropriate responsibility of the Federal Reserve?

Related;
Read Rogoff and Reinhart

Challenges for the world’s divided economy

5 Historical Economic Crises and the U.S.
Learning from experience

Third world America

Only the Hawks go to Central Bank Heaven

"Central Bankers- they live and die for price stability"

Laurence Meyer gives an inside look at the workings of FOMC (it starts about 10 minutes into the program, after Greenspan's comments)- it's a bit old lecture, but very informative and useful.

Best book for the layperson on the inner workings of the Fed- yes, better than Greenspan's.
A Term at the Fed: An Insider's View
by Laurence H. Meyer

Economics Department wants Accountants

The Economics Department at the University of California, Santa Cruz is recruiting for lecturers who can teach at both the lower- and upper-division level. Our most urgent need (currently) is for applicants who can teach accounting courses.

An Ode to Hypothesis Testing

I call upon Stata
To help with the data.
Now what do I type
To get this thing right?

I punch in the numbers
And check the commands;
The computer screen freezes
And ignores my demands.

The room grows dark,
My head starts to spin;
The nightmare continues
As I start all over again!

See the entire poem by Donna Windish

Mr. Armstrong vs Mr. Gore

Scott Armstrong of the Wharton School challenges Al Gore $20,000 that he will be able to make more accurate forecasts of annual mean temperatures than those that can be produced by climate models. Scott Armstrong’s forecasts will be based on the naive (no-change) model; that is, the forecasts would be the same as the most recent year prior to the forecasts.

Related;
Environmental Forecasting and the Policy Process

There are many weaknesses in current climate models. Current models do not provide forecasts; they provide the modeler's own speculations or scenarios. Given the complexity and uncertainty involved, it is unlikely that these models will prove to be a useful guide. Scientific forecasts are derived from evidence-based models. To create a scientific forecast, several principles apply: it is important to avoid complex models and unaided expert judgment and to be conservative when uncertainty is high. In order to have an accurate forecast for global warming, there are several contingencies. First of all, there must be accurate forecasts in long-term temperature change, the effects of that change, and the effects of feasible policy changes. Climate modelers claim that their models are scenarios, not forecasts, but continue to refer to them as forecasts or predictions. Climate "experts" use models to present their own opinions and make adjustments to suit their assumptions. When making forecasts for complex and uncertain future events, experts have no advantage over nonexperts. Processing facts is most important.

After auditing the current climate change models, most of the forecasting principles were contravened, and there is not a single scientific forecast to support global warming. Forecasts by climate experts are of little value. Climate may change in the future, but because of the uncertainties that exist, the most sensible forecast right now is no change. To produce accurate results, modelers need to use scientific approaches to climate forecasts, avoid alternative sources of bias, consider alternative explanations, examine empirical evidence, use valid empirically based methods, provide full disclosure, present findings clearly, and obtain peer review.

Al Gore refuses to gamble on the environment

Ben Bernanke- the Man to Solve Problems

If This Meltdown Were a Movie