The starving brain- talk of the day

'The pressure to be thin is more intense than ever - and with around 80% of teenage girls going on diets - some slide down the slippery slope into anorexia nervosa. Our knowledge of this puzzling disorder remains limited, but some inroads of understanding are being made into what occurs in the starving brain. Lynne Malcolm reports on the latest scientific research, and meets a young woman on the path to recovery who gives a moving insight into her experience'.

Listen to the podcast- from Radio National

Akerlof’s Fatwa- incorporate norms into economics

Akerlof gave a speech at the World Bank last year on the topic of norms in macroeconomics;

Akerlof spoke on how inclusion of certain norms changes our view of macroeconomics, by negating the concept that decision makers are utility maximizers. He put forth a view of motivation that involves individual dignity and behavioral expectations, the use of which broadens the application of the utility function for each individual. The implication of these motivations is that it is not only outcomes that lead to certain behavior, but also expectations about what should occur. These missing motivations give us a better understanding of why people make economic decisions, and may recommend a more naturalistic and observational approach for understanding decision-making processes.

He talked about the same topic at the annual meeting of the American Economic Association this year;

“Mr. Akerlof’s style, in contrast, is more diffident and modest. But he has already contributed significantly to a revamping of the economic theory that Mr. Friedman championed. Now, at 66, he is hoping to spread that debate by taking on some of the profession’s most sacred cows...

“I am trying to effect a return to sensible economics,” Mr. Akerlof said in an interview. “And what is sensible economics? It is very pragmatic. You think about problems in the world and you ask: can government do something about that? At the same time, you maintain your skepticism that government is often inefficient.”

This challenge is not from some outsider in economics. Mr. Akerlof — educated at Yale and the Massachusetts Institute of Technology, and currently a professor at the University of California, Berkeley — is at the heart of the academic establishment. His wife, Janet Yellen, a top economist in the Clinton administration, is president of the Federal Reserve Bank of San Francisco. Their son, Robert, is a Ph.D. candidate in economics at Harvard…

What Mr. Akerlof is trying to do, with Ms. Kranton’s help, is to reflect the variety of motivations that come from the sense people have of “what they are and how they should behave,” as Ms. Kranton put it.

Among the examples they cite:
A teacher in good standing among the parents of her students puts the preservation of that reputation ahead of attempts to maximize her pay.

A change in income will permanently alter a worker’s spending, a view that challenges the more common belief that spending matches a worker’s lifetime income and savings, evening out over time.

Workers resist wage cuts even when unemployment is rising, despite standard theory that they will accept less pay to save their jobs.
The variations in norms and behavior are numerous and Mr. Akerlof, in his speech, calls on economists to incorporate this diversity into standard economic theory.

“If there is a difference between real behavior and behavior derived from abstract preferences, New Classical economics has no way to pick up those preferences,” Mr. Akerlof asserts. “A macroeconomics that incorporates observations regarding how people think they should behave combines the best of the two approaches.”

Related:
George Akerlof: The Missing Motivation in Macroeconomics
In Condemnation of One-Equation Economics
AEA Meeting Papers
George Akerlof, Milton Friedman and Moroccan Lemons
The Year in Economics
‘Norms’ at Rasmusen’s blog
Getting it Wrong
Buy low, sell high / Silly signals

The Economics of Hurricanes- the Inconvenient Truth

A new working paper by Nordhaus- The Economics of Hurricanes in the United States;

"The year 2005 brought record numbers of hurricanes and storm damages to the United States. Was this a foretaste of increasingly destructive hurricanes in an era of global warming? This study examines the economic impacts of U.S. hurricanes. The major conclusions are the following: First, there appears to be an increase in the frequency and intensity of tropical cyclones in the North Atlantic. Second, there are substantial vulnerabilities to intense hurricanes in the Atlantic coastal United States. Damages appear to rise with the eighth power of maximum wind speed. Third, greenhouse warming is likely to lead to stronger hurricanes, but the evidence on hurricane frequency is unclear. We estimate that the average annual U.S. hurricane damages will increase by $8 billion at 2005 incomes (0.06 percent of GDP) due to global warming. However, this number may be underestimated by current storm models. Fourth, 2005 appears to have been a quadruple outlier, involving a record number of North Atlantic tropical cyclones, a large fraction of intense storms, a large fraction of the intense storms making landfall in the United States, and an intense storm hitting the most vulnerable high-value region in the country."

In the conclusion, Nordhaus writes;

"Finally, we should emphasize that the present economic analysis cannot capture the full social and cultural impacts of devastating hurricanes. We might note that America’s first bellicose Republican President, Thomas Jefferson, threatened to go to war with France and Spain over New Orleans. He thought it the key strategic location in America, writing, “There is on the globe one single spot, the possessor of which is our natural and habitual enemy. It is New Orleans.” While the city’s strategic importance has doubtlessly declined over the last two centuries, Jefferson’s view is a reminder that an economic reckoning cannot capture New Orleans’s position as a unique quarter of American culture and history."

Does private health insurance have a role in development?

An important study from the World Bank-Private voluntary health insurance in development : friend or foe?;

This volume presents findings of a World Bank review of the existing and potential role of private voluntary health insurance in low- and middle-income countries and is the third volume in a series of reviews of health care financing. Also, this volume is about managing risk. Not the risk of national or man-made disasters but the risk of illness. The developing world is plagued by many of the historical scourges of poverty: infectious disease, disability, and premature death. As countries pass through demographic and epidemiological transition, they face a new wave of health challenges from chronic diseases and accidents. In this respect, illness has both a predictable and an unpredictable dimension. Contributors to this volume emphasize that the public sector has an important role to play in the health sector, but they demonstrate that the private sector also plays a role in a context in which private spending and delivery of health services often composes 80 percent of total health expenditure. Managing risks in the private sector begins at the household level. Private voluntary health insurance is merely an extension of such nongovernmental ways to deal with the risk of illness and its impoverishing effects in low- and middle-income countries. The authors examine frameworks for analyzing health financing and health insurance. They conclude that most studies are hampered by lack of data on the impact of private voluntary health insurance on broad social goals, such as financial protection. They find no overall consensus on the impact of voluntary health insurance on public health activities or on the quality, innovation, and efficiency of personal health services

Volatility and Growth in Latin America

“Crises, or extreme macroeconomic events, have been ubiquitous in Latin America. There were over 300 crisis-year observations during 1970–2004, covering currency, debt default, and banking crises. Argentina had the maximum number of crises—an average of one per year—while Colombia had only 6 in the entire 35-year period.”

A new working paper from the Fund- Volatility and Growth in Latin America: An Episodic Approach

Summary: This paper compares the pattern of macroeconomic volatility in 17 Latin American countries during episodes of high and low growth since 1970, examining in particular the role of policy volatility. Macroeconomic outcomes are distinguished from macroeconomic policies, structural reforms and reversals, shocks, and institutional constraints. Based on previous work, a composite measure of structural reforms is constructed for the 1970-2004 period. We find that outcomes and policies are more volatile in low growth episodes, while shocks (except U.S. interest rates) are similar across episodes. Fiscal policy volatility is associated with lower growth, but fiscal policy procyclicality is not. Low levels of market-oriented reforms and structural reform reversals are also associated with lower growth

Related;
Brazil's Long-Term Growth Performance -Trying to Explain the Puzzle
Can Fiscal Rules Help Reduce Macroeconomic Volatility in the Latin America and Caribbean Region?
Fiscal Adjustment for Stability and Growth

War is what gives us Meaning?

A must read article from Foreign Policy by Daniel Kahneman and Jonathan Renshon;

“Social and cognitive psychologists have identified a number of predictable errors (psychologists call them biases) in the ways that humans judge situations and evaluate risks. Biases have been documented both in the laboratory and in the real world, mostly in situations that have no connection to international politics. For example, people are prone to exaggerating their strengths: About 80 percent of us believe that our driving skills are better than average. In situations of potential conflict, the same optimistic bias makes politicians and generals receptive to advisors who offer highly favorable estimates of the outcomes of war. Such a predisposition, often shared by leaders on both sides of a conflict, is likely to produce a disaster. And this is not an isolated example...

It is apparent that hawks often have the upper hand as decision makers wrestle with questions of war and peace. And those advantages do not disappear as soon as the first bullets have flown. As the strategic calculus shifts to territory won or lost and casualties suffered, a new idiosyncrasy in human decision making appears: our deep-seated aversion to cutting our losses. Imagine, for example, the choice between:

Option A: A sure loss of $890

Option B: A 90 percent chance to lose $1,000 and a 10 percent chance to lose nothing.

In this situation, a large majority of decision makers will prefer the gamble in Option B, even though the other choice is statistically superior. People prefer to avoid a certain loss in favor of a potential loss, even if they risk losing significantly more. When things are going badly in a conflict, the aversion to cutting one’s losses, often compounded by wishful thinking, is likely to dominate the calculus of the losing side. This brew of psychological factors tends to cause conflicts to endure long beyond the point where a reasonable observer would see the outcome as a near certainty. Many other factors pull in the same direction, notably the fact that for the leaders who have led their nation to the brink of defeat, the consequences of giving up will usually not be worse if the conflict is prolonged, even if they are worse for the citizens they lead.

U.S. policymakers faced this dilemma at many points in Vietnam and today in Iraq. To withdraw now is to accept a sure loss, and that option is deeply unattractive. The option of hanging on will therefore be relatively attractive, even if the chances of success are small and the cost of delaying failure is high.

Hawks, of course, can cite many moments in recent history when adversaries actually were unremittingly hostile and when force produced the desired result or should have been applied much earlier. The clear evidence of a psychological bias in favor of aggressive outcomes cannot decide the perennial debates between the hawks and the doves. It won’t point the international community in a clear direction on Iran or North Korea. But understanding the biases that most of us harbor can at least help ensure that the hawks don’t win more arguments than they should.”

Related;
Cognitive biases and the start of war
The FP Debate: Should Hawks Win?
Do Biases Favor Hawks?
Are we predisposed to be excessively hawkish?
Do Hawks Have A Psychological Edge?
Debating Defense

The evolving demand for smut

NYT's The Lede points out;

"A porn industry opponent is quoted as saying that the industry is “still growing, but just not at the growth rates they experienced in the past.”

Whatever the reality (David points out that because most of the industry is privately owned, accurate numbers are hard to come by), it’s worth noting that porn-peddlers seem particularly excited about two things: 1) the rise of cell-phone smut delivery, and 2) pornography featuring “women in their 30’s into their 70’s” — which an industry analyst described as “the one area of huge growth.”

“The flashpoint for this in our culture was the teen movie ‘American Pie,’” he said, “where there is a famous sequence involving one of the kids and his friend’s mother.”

Podcast of the Day- Skeptical Environmentalist

"Economist Bjorn Lomborg makes a persuasive case for prioritizing the world's biggest problems. His recommendations controversially place global warming at the bottom of the list (and AIDS prevention at the top"- From TED Talks. Listen to the podcast or watch it.

Related;
A skeptical look at The Skeptical Environmentalist
The truth about the environment
On Bjorn Lomborg's use of statistics
Against Lomborg; Anti-Lomborg,Lomborg's Errors

Scientists imagine there’s no religion

Going over the answers to Edge 2007 question to world’s leading scientists, ‘What are you optimistic about and why?’, a lot of them felt that religion and violence will die out. I tend to agree with Russell Roberts that this is highly unlikely. Some of their optimism below;

DANIEL C. DENNETT Philosopher; University Professor, Co-Director, Center for Cognitive Studies, Tufts University; Author, Breaking the Spell: Religion as a Natural Phenomenon- The Evaporation of the Powerful Mystique of Religion

CHRIS ANDERSON, Curator, TED Conference- Systemic Flaws In the Reported World View

“So for example, the publication last year of a carefully researched Human Security Report received little attention. Despite the fact that it had concluded that the numbers of armed conflicts in the world had fallen 40% in little over a decade. And that the number of fatalities per conflict had also fallen. Think about that. The entire news agenda for a decade, received as endless tales of wars, massacres and bombings, actually missed the key point. Things are getting better. If you believe Robert Wright and his NonZero hypothesis, this is part of a very long-term and admittedly volatile trend in which cooperation eventually trumps conflict. Percentage of males estimated to have died in violence in hunter gatherer societies? Approximately 30%. Percentage of males who died in violence in the 20th century complete with two world wars and a couple of nukes? Approximately 1%. Trends for violent deaths so far in the 21st century? Falling. Sharply.”

GEOFFREY CARR, Science Editor, The Economist- Malthus was wrong

JUDITH RICH HARRIS , Independent Investigator and Theoretician; Author, No Two Alike: Human Nature and Human Individuality - The Survival of Friendship

STEVEN PINKER, - The Decline of Violence

“Most people, sickened by the headlines and the bloody history of the twentieth century, find this claim incredible. Yet as far as I know, every systematic attempt to document the prevalence of violence over centuries and millennia (and, for that matter, the past fifty years), particularly in the West, has shown that the overall trend is downward (though of course with many zigzags). The most thorough is James Payne’s The History of Force; other studies include Lawrence Keeley’s War Before Civilization, Martin Daly & Margo Wilson’s Homicide, Donald Horowitz’s The Deadly Ethnic Riot, Robert Wright’s Nonzero, Peter Singer’s The Expanding Circle, Stephen Leblanc’s Constant Battles, and surveys of the ethnographic and archeological record by Bruce Knauft and Philip Walker.”

HELEN FISHER, Research Professor, Department of Anthropology, Rutgers University; Author, Why We Love- "Free Love"

“And along with the rise of romantic love within marriage has come what sociologists hail as the 21st century marital form, known as peer marriages, symmetrical marriages or companionate marriages: weddings between equals. "Marriage," Voltaire wrote, "is the only adventure open to the cowardly." Today more and more men and women have the opportunity to enjoy this adventure—life with someone they passionately love. In this way humanity is regaining a tradition that is highly compatible with our ancient human spirit.”

RANDOLPH M. NESSE , Psychiatrist, University of Michigan; Coauthor, Why We Get Sick- We Will Find New Ways To Block Pessimism

CHRIS ANDERSON, Editor in Chief, Wired Magazine; Author, The Long Tail
- Metcalfe's Law of Minds

NANCY ETCOFF, Psychologist, Harvard Medical School & Harvard University’s Mind/Brain/Behavior Initiative; Author, Survival of the Prettiest: The Science of Beauty- The Hedonic Set Point Can Be Raised

JARED DIAMOND, Biologist; Geographer, UCLA; Author, Collapse
- Good Choices Sometimes Prevail

NASSIM NICHOLAS TALEB, Epistemologist of Randomness and Applied Statistician; Author, Fooled By Randomness- The Birth of Stochastic Science

“All the while institutional science is largely driven by causal certainties, or the illusion of the ability to grasp these certainties; stochastic tinkering does not have easy acceptance. Yet we are increasingly learning to practice it without knowing — thanks to overconfident entrepreneurs, naive investors, greedy investment bankers, and aggressive venture capitalists brought together by the free-market system. I am also optimistic that the academy is losing its power and ability to put knowledge in straightjackets and more out-of-the-box knowledge will be generated Wiki-style. But what I am saying is not totally new. Accepting that technological improvement is an undirected (and unpredictable) stochastic process was the agenda of an almost unknown branch of Hellenic medicine in the second century Mediterranean Near East called the "empirics". Its best known practitioners were Menodotus of Nicomedia and my hero of heroes Sextus Empiricus. They advocated theory-free opinion-free trial-and-error, literally stochastic medicine. Their voices were drowned by the theoretically driven Galenic, and later Arab-Aristotelian medicine that prevailed until recently.”

Related;
Across the blogs; On the edge/ The dangerous question/ What are you optimistic about?/ Ain't gonna study war no more

The World in 2007- podasts from The Economist

2007 Big Thinkers: Yahoo! Distinguished Speaker Series

Can Questions Change the World?

The drop

Ability to delay gratification and health

An interesting article from NYT- A Surprising Secret to a Long Life: Stay in School;

"Victor Fuchs, a health economist at Stanford, points out that it is not clear how or why education would lead to a longer life.

And, he said, there are other mysteries. For example, women increased their years of schooling more than men have in recent decades. But men are catching up with women in their life spans.

And it might be expected that after a certain point, more years of school would not add to a person’s life span. That, however, is not what the data shows. The education effect never wanes. But most researchers say they are swayed by Dr. Lleras-Muney’s work and the studies in other countries. That, though, leaves the question of why the education effect occurs.

Dr. Lleras-Muney and others point to one plausible explanation — as a group, less educated people are less able to plan for the future and to delay gratification. If true, that may, for example, explain the differences in smoking rates between more educated people and less educated ones.

Smokers are at least twice as likely to die at any age as people who never smoked, says Samuel Preston, a demographer at the University of Pennsylvania. And not only are poorly educated people more likely to smoke but, he says, “everybody knows that smoking can be deadly,” and that includes the poorly educated.

But education, Dr. Smith at RAND finds, may somehow teach people to delay gratification. For example, he reported that in one large federal study of middle-aged people, those with less education were less able to think ahead.
“Most of adherence is unpleasant,” Dr. Smith says. “You have to be willing to do something that is not pleasant now and you have to stay with it and think about the future.”

He deplores the dictums to live in the moment or to live for today. That advice, Dr. Smith says, is “the worst thing for your health.”

Researchers cited in the article; James Smith / Richard Hodes / Michael Grossman /Adriana Lleras-Muney /Victor Fuchs / Samuel Preston / Lisa Berkman / Stephanie Raymond / Kristen Bronner / Jonathan Skinner / Richard Suzman

Related
The Dartmouth Atlas Project

"The Relationship Between Education and Adult Mortality in the U.S.," Review of Economic Studies, Vol.72(1), January 2005

'Education and Health: Evaluating theories and evidence, joint with David Cutler, February 2006, NBER WP 12352, July 2006

The New England Centenarian Study

The Okinawa Centenarian Study

Study Links Medical Spending to Life Expectancy Gains

From the Blogs; Arnold Kling, Mankiw, Tyler Cowen, econometrics posts from Healthcare Economist

Causal inference, moral hazard, and the challenges of social science

End of year effect?

Emergency Sex and other podcasts

Jorge Luis Borges
So how has Borges' work informed ideas about our experience of the world through language? How much was his writing shaped by his travel abroad and an unrequited love? And how has his legacy inspired the next generation of great Latin American authors such as Gabriel Garcia Marquez and Mario Vargas Llosa

Samuel Beckett's 100th birthday

Raphael Rubinstein
Ladino is the language used by the Sephardi Jews of the Ottoman Empire. It evolved out of a combination of Old Spanish, Hebrew, Greek and other tongues... it is the Sephardi equivalent of the Ashkenazi Jews' Yiddish—the language that came out of Middle German, Hebrew and Slavic languages

Chinese Brother of Christ
Hong Xiuquan believed he was the younger brother of Christ and by 1850 had 20,000 Chinese followers gearing up for a rebellion.

Then They Started Shooting
Child psychiatrist Lynne Jones spent a considerable amount of time with kids in Bosnia after the war and since set up mental health programs in post-diaster and post-conflict areas like Aceh, Iraq, Pakistan, Mississippi and Sierra Leone

Mafia and the garbage trade in the USA

The greatest gift
Donating your body, or the body of a child, to medical research is a great gift to mankind. Most of you can be recycled: your eyes, your skin, your bone or even a little piece of your heart. Now they want to grind your bones for surgical putty. Then, your dead bits will be helping a biotech company's bottomline too. Can altruism and commerce live side-by-side when it comes to giving "the greatest gift of all"?

Envisioning the Survey Interview of the Future
Michael Schober, Dean, The New School for Social Research, Professor of Psychology

'Cracking the century' - Healthy ageing

Mikhail Gorbachev

Carly Fiorina on Tough Choices

Podcast with Dierdre McCloskey

Health Insurance in Development

HIV and Corruption

Shibli and Early Years of Muslim League from symposium on One Hundred Years of the All-India Muslim League

Emergency Sex - and other desperate measures
Emergency Sex is not a new release. It was first published in 2004 and the events it talks about took place in the 90s. But it's still flying out the door of bookshops around the country and is still being cited as one of the most 'stunningly candid memoirs of peacekeeping operations' ever written

Assorted This and That

A Country Less Dependent on Oil Is Free to Make Other New Year’s Resolutions

A Surprising Secret to a Long Life: Stay in School

World Asset Prices

Was Victory in Iraq Possible?

Child Abuse and Crime

Globalization in Retreat

Technology, not globalisation, drives wages down

How Big An Internet Star Was the 'Star Wars' Kid?

Health, Wealth and Happiness

SYNERGY WITH THE DEVIL

A Buffett Bonanza

Four great Google applications you might not know about

Comparing the cost of living is not what it used to be

Middle-class woes? A letter to Lou Dobbs.

Can Mr. Wolfowitz fix the World Bank?

From a recent editorial in the NYT;

“Mr. Wolfowitz and his aides did an especially poor job explaining their decisions to suspend or delay hundreds of millions of dollars in loans because of alleged corruption, feeding fears that they were settling scores. When Hilary Benn, Britain’s top aid official, publicly questioned bank policies, an unidentified senior bank official dismissed Mr. Benn to The Financial Times as “an ambitious political climber.” That’s no way to win friends or donors. Mr. Wolfowitz wrote to the paper to say that was not his view and has since visited London to patch things up, but relations remain cool.

Mr. Wolfowitz has yet to outline a broader vision for the bank, which might inspire his staff and rally international support. There are certainly a host of issues that need his leadership. The bank needs to give more of a voice to less wealthy and poor countries. It needs to find new ways to mobilize private sector financing. And it needs to get more deeply — and more systematically — involved in addressing global challenges like epidemics, sustainable energy and post-conflict reconstruction.

Mr. Wolfowitz deserves praise for championing debt relief for the world’s poorest countries. And he is right that the bank needs to do a lot more to fight corruption, which can cripple any development effort. To be heard on these subjects, Mr. Wolfowitz will have to work harder to earn the trust of his staff, his shareholders and everyone who cares about development. He needs a more inclusive management style and a more diplomatic inner circle, and to articulate broader goals beyond stopping corruption. That way he would have the credibility to fight the good fight.”

Related;
DFID's response to World Bank progress report on conditionality
Two More Challenges for Mr. Wolfowitz
Why Does Poverty Persist?
Can the World Bank be Fixed? David Ellerman
Helping People Help Themselves- From the World Bank to an Alternative Philosophy of Development Assistance by David Ellerman

State Building Toolkit

A working paper worth a serious read, especially for World Bankers-A Conceptual Framework for Interpreting Recorded Human History by Douglass C North, John Joseph Wallis, Barry R. Weingast;

“Neither economics nor political science can explain the process of modern social development. The fact that developed societies always have developed economies and developed polities suggests that the connection between economics and politics must be a fundamental part of the development process. This paper develops an integrated theory of economics and politics. We show how, beginning 10,000 years ago, limited access social orders developed that were able to control violence, provide order, and allow greater production through specialization and exchange. Limited access orders provide order by using the political system to limit economic entry to create rents, and then using the rents to stabilize the political system and limit violence. We call this type of political economy arrangement a natural state. It appears to be the natural way that human societies are organized, even in most of the contemporary world. In contrast, a handful of developed societies have developed open access social orders. In these societies, open access and entry into economic and political organizations sustains economic and political competition. Social order is sustained by competition rather than rent-creation. The key to understanding modern social development is understanding the transition from limited to open access social orders, which only a handful of countries have managed since WWII.”

More excerpts from the conclusion;

“The process of economic development is instead the movement from a limited access order to an open access order. This process is very difficult to engineer. Despite the massive attention to economic development by international donor agencies, only eight countries have made this transformation since WWII. Our approach implies that development requires a transformation in society from a limited access to an open access basis. This transformation takes place through what we have called creating the doorstep conditions, which represent a radical change in both the state and society: rule of law for elites; perpetual life for organizations, including the state; and political control of the military. Each of these changes increases the gains from specialization and exchange; they also create mechanisms that underpin impersonal exchange. For this reason, natural state on the doorstep are wealthier. Moreover, the doorstep conditions create incentives to make incremental increases in open access that can transform a natural state on the doorstep into an open access state.

We are only beginning to understand how politics and economics interact in either limited or open access social orders. Moreover, we know even less about the transition from one social order to the other: the process of economic and political development. Until we understand the fundamental nature of social orders, we have no chance of explaining how states transition from one to the other.

Social science is the study of how human beings interact to produce the complicated social structures we all live in. It follows that our primary focus must be on organizations, how groups of people organize their relationships in durable, and eventually, perpetual forms of interaction. Organizations are the key to understanding how societies perform, and institutions are the key to understanding how organizations form and behave. Competitive economic and political societies are impossible without open access to organizational forms. Understanding how societies have managed to sustain open access to organizational forms is the heart of understanding modern development.”

Via Arnold Kling. I thought I should highlight comment made by Hasan Jafri on their blog;

“The UAE and Qatar both are stable, affluent states. They are ruled like corporations by authoritarian business-educated sheiks with the help of trained managers. As for China and Vietnam, they already are viewed by developing nations as economic success models to replicate.”

Yes, I wonder why when a lot of small states could be run successfully like corporations, they often fail to do so.

Related;
An initiative on Fragile States headed by a ex World Bankers at CGD.
Did the West Aid Niyazov's Destruction of Turkmenistan?
A New Beginning For Turkmenistan

“The United States is spending billions of dollars trying to turn Afghanistan and Iraq -- both deep in the throes of civil war -- into democratic nations while all but abandoning their peaceful post-Soviet neighbors to the north. Turkmenistan is ready for a new beginning, and the West must finally step up to the plate. To do otherwise would waste a historic opportunity and allow yet another case of popular discontent with an illegitimate government to become an anti-Western lost cause”

The President vs Comptroller General

“It is also a fact that our tax cuts have fueled robust economic growth and record revenues. Because revenues have grown and we've done a better job of holding the line on domestic spending, we met our goal of cutting the deficit in half three years ahead of schedule. By continuing these policies, we can balance the federal budget by 2012 while funding our priorities and making the tax cuts permanent. In early February, I will submit a budget that does exactly that. The bottom line is tax relief and spending restraint are good for the American worker, good for the American taxpayer, and good for the federal budget. Now is not the time to raise taxes on the American people.”

- President Bush

“The largest employer in the world announced on Dec. 15 that it lost about $450 billion in fiscal 2006. Its auditor found that its financial statements were unreliable and that its controls were inadequate for the 10th straight year. On top of that, the entity's total liabilities and unfunded commitments rose to about $50 trillion, up from $20 trillion in just six years.

If this announcement related to a private company, the news would have been on the front page of major newspapers. Unfortunately, such was not the case -- even though the entity is the U.S. government.

To put the figures in perspective, $50 trillion is $440,000 per American household and is more than nine times as much as the median household income.

The only way elected officials will be able to make the tough choices necessary to put our nation on a more prudent and sustainable long-term fiscal path is if opinion leaders state the facts and speak the truth to the American people.

The Government Accountability Office is working with the Concord Coalition, the Brookings Institution, the Heritage Foundation and others to help educate the public about the facts in a professional, nonpartisan way. We hope the media and other opinion leaders do their part to save the future for our children and grandchildren.”

- DAVID M. WALKER, Comptroller General of the United States, Government Accountability Office

So who should we believe?

Related;
A New Year's Plea
Bush's Fiscal Irresponsibility
Fiscal Wakeup Tour
The New Congress and the Budget: Perspectives From Three Former CBO Directors (podcast)

Free will for Parents!

Should this mentally disabled child be prevented from growing to an adult?

“The parents of a nine-year-old girl with the mental ability of a three-month-old baby are using hormone treatment to prevent their child from growing to adult size
The girl has a rare brain condition which leaves her unable to walk or talk and her parents believe she will have a better quality of life if she remains small.”

Via Marginal Revolution.
More links from Google News.

Related
‘Designer’ babies with made-to-order defects?

Creating made-to-order babies with genetic defects would seem to be an ethical minefield, but to some parents with disabilities — say, deafness or dwarfism — it just means making babies like them...
Three percent, or four clinics surveyed, said they have provided the costly, complicated procedure to help families create children with a disability.

Whose life is it anyway?

Podcasts (updated);
Being Different;Geoff Adams-Spink travels to three continents to meet a number of disabled people- Ghana, Denmark, Jordan

The Budget for Deification

Christian Science Monitor reports that in a time of famine and poverty, nearly 40 percent of the country's budget is spent on Kim-family deification;

"In fact, in a time of famine and poverty, government spending on Kim-family deification - now nearly 40 percent of the visible budget - is the only category in the North's budget to increase, according to a new white paper by the Korea Institute for International Economic Policy in Seoul. It is rising even as defense, welfare, and bureaucracy spending have decreased. The increase pays for ideology schools, some 30,000 Kim monuments, gymnastic festivals, films and books, billboards and murals, 40,000 "research institutes," historical sites, rock carvings, circus theaters, training programs, and other worship events.

In 1990, ideology was 19 percent of North Korea's budget; by 2004 it doubled to at least 38.5 percent of state spending, according to the white paper. This extra financing may come from recent budget offsets caused by the shutting down of older state funding categories, says Alexander Mansourov of the Asia Pacific Center for Security Studies in Honolulu."

Should we go back to gold?

An article by Niall Ferguson, ‘Going Back to Gold? Historical Perspectives’;

“However, before we come over all nostalgic about gold, we should recognise the
disadvantages of the gold standard. First, in the simple economic model known as the policy ‘trilemma’, if you make an exchange rate or gold price commitment in your monetary policy and do not have capital controls, there are real limits to how far your domestic national monetary policy can be regarded as independent. Monetary policy makers in such a case cannot really pay any significant attention to growth or unemployment because all their efforts must be focused on meeting the gold target – either the price of gold or, more commonly, the gold reserve.

A second important point about how the gold standard worked was that, although it implied long-run price stability, it also implied quite high volatility in short-term rates, inflation and economic activity.That seems to be one of the corollaries of all systems whereby a single monetary target takes precedence over others. In trying to meet that target, the Bank of England before 1914 constantly had to adjust its minimum lending rate, the so-called Bank rate.

Thirdly, the gold standard pegged the international monetary system to a very scarce metal, and that implied a real constraint on the growth of credit. It turned out to be perfectly possible for the gold standard to generate deflation, if growth outstripped the availability of gold for monetary uses.

Fourthly, and perhaps the most important argument in the literature in recent years, a system as rigid as the pure gold standard has the capacity to transmit crises very rapidly around the world. In a relatively minor way in 1907 and an absolutely spectacular way in the Great Depression, the gold standard turned out to be a system that could generate tremendous international monetary and financial crises.

The volatility story is interesting.We are living through a period of amazingly low volatility. By almost any financial measure, in terms of growth, inflation or asset prices, our fiat-money era evinces much lower volatility than even the time of the classical gold standard.World gold production suffered a significant stagnation from around the 1900s to the 1930s, and it is no coincidence that this was a time when deflationary pressures became a serious problem for the international economy.

Finally, there was the potential for asymmetries in the gold standard. If central banks did not play by the rules, gold could be hoarded in the reserves of a particular bank. The United States became a systematic hoarder of gold in the 1920s –with disastrous repercussions for the rest of the international system.

Related;
Can Government Gold Be Put To Better Use?: Qualitative And Quantitative Effects Of Alternative Government PoliciesChina's gold rush- Cracking the vault

“Gold prices continue to soar and China is the world's fourth-largest producer, with output rising 5.9% last year…
Chinese consumption grew 13% last year to 234 tonnes, well above the 212 tonnes produced domestically. But China's annual per person consumption is only 0.16 grams, less than a quarter of the world average.”

India and gold- Foreseeing the future

“There may be around 10,000 tonnes of gold in India, mostly in jewellery form, according to some estimates. That would constitute the biggest gold hoard in the world.”

Kitco and Blanchard Square Off Over Gold Market Manipulation
Gold Market Lending
An inside look at one of the most opaque Central Bank activities, its impact on the gold market and how IMF policy can change the market to benefit all participants
The Macroeconomic Statistical Treatment of Securities Repurchase Agreements, Securities Lending, Gold Swaps and Gold Loans
Exchange Rates in the Periphery and International Adjustment Under the Gold Standard
The Structure and Operation of the World Gold Market
IMF Response to the World Gold Council (1999)
Central Bank Gold Reserves: An historical perspective since 1845
Gold in the IMF
GOLD ANTI-TRUST ACTION COMMITTEE

The Economics of the Sex Entertainment Industry

"The sex-related entertainment business grew in 2006 by just 2.4 percent, roughly the rate of inflation, to just under $13 billion, according to Paul Fishbein, president of the AVN Media Network, which publishes five trade magazines and runs industry conferences...

Mr. Fishbein’s estimates indicate that for every dollar Americans spent buying tickets to Hollywood movies last year, they spent about 90 cents viewing sex movies in various formats...

JupiterKagan Inc., a media and technology market research company, said it expected that sex movies sold either as pay-per-view or on-demand would grow over the next decade at only half the pace of overall paid-for programming on cable.

George Niesen, managing editor of Kagan Research in Monterey, Calif., said that $1.6 billion was spent on cable pay-per-view, video-on-demand and similar services in 2006, with $515 million, or roughly a third of that, going to sex-related entertainment.

Over the next 10 years, Kagan Research projects, overall paid-for programming on cable will grow at 12.9 percent a year, while the sex-related segment’s growth will be half that, at 6.4 percen...

The idea that revenue growth has slowed for the sex-related entertainment industry was disputed by Steven Hirsch, one of three owners of the Vivid Entertainment Group, a major producer of both soft- and hard-core movies. He and other industry executives said the ways that Americans get pornography are changing, with sales of videos and magazines in decline, while sex-related entertainment over cable television and Internet streaming is growing quickly...

The Census Bureau estimates that the average age of Americans last year was 36, up from 30 in 1980, when the industry was growing rapidly in the wake of favorable Supreme Court decisions, fewer police raids and easy access to movies through the technology of videocassettes, which were new then.

Mr. Fishbein and others said “the one area of huge growth” was hard-core movies featuring women in their 30s into their 70s, a trend that has brought new work for some of the industry’s stars.

“The flashpoint for this in our culture was the teen movie ‘American Pie,’ where there is a famous sequence involving one of the kids and his friend’s mother,” Mr. Fishbein said.

Mr. Fishbein and others also said that there was big growth in sales of sex toys to women.

- ‘Indications of a Slowdown in Sex Entertainment Trade’

Related;
Premarital Sex Is Nearly Universal Among Americans, And Has Been For Decades

The vast majority of Americans have sex before marriage, including those who abstained from sex during their teenage years, according to “Trends in Premarital Sex in the United States, 1954–2003,” by Lawrence B. Finer, published in the January/February 2007 issue of Public Health Reports. Further, contrary to the public perception that premarital sex is much more common now than in the past, the study shows that even among women who were born in the 1940s, nearly nine in 10 had sex before marriage.

The new study uses data from several rounds of the federal National Survey of Family Growth to examine sexual behavior before marriage, and how it has changed over time. According to the analysis, by age 44, 99% of respondents had had sex, and 95% had done so before marriage. Even among those who abstained from sex until age 20 or older, 81% had had premarital sex by age 44.

Oslo gay animal show draws crowds
German Firm Penetrates Sex Market

Inside Free Will

“This knowledge of the non-freedom of the will protects me from losing my good humor and taking much too seriously myself and my fellow humans as acting and judging individuals” – Albert Einstein

"In the 1970s, Benjamin Libet, a physiologist at the University of California, San Francisco, wired up the brains of volunteers to an electroencephalogram and told the volunteers to make random motions, like pressing a button or flicking a finger, while he noted the time on a clock.

Dr. Libet found that brain signals associated with these actions occurred half a second before the subject was conscious of deciding to make them.
The order of brain activities seemed to be perception of motion, and then decision, rather than the other way around.

In short, the conscious brain was only playing catch-up to what the unconscious brain was already doing. The decision to act was an illusion, the monkey making up a story about what the tiger had already done.

Dr. Libet’s results have been reproduced again and again over the years, along with other experiments that suggest that people can be easily fooled when it comes to assuming ownership of their actions. Patients with tics or certain diseases, like chorea, cannot say whether their movements are voluntary or involuntary, Dr. Hallett said.

In some experiments, subjects have been tricked into believing they are responding to stimuli they couldn’t have seen in time to respond to, or into taking credit or blame for things they couldn’t have done. Take, for example, the “voodoo experiment” by Dan Wegner, a psychologist at Harvard University and Emily Pronin of Princeton. In the experiment, two people are invited to play witch doctor.

One person, the subject, puts a curse on the other by sticking pins into a doll. The second person, however, is in on the experiment, and by prior arrangement with the doctors, acts either obnoxious, so that the pin-sticker dislikes him, or nice.
After a while, the ostensible victim complains of a headache. In cases in which he or she was unlikable, the subject tended to claim responsibility for causing the headache, an example of the “magical thinking” that makes baseball fans put on their rally caps.

“We made it happen in a lab,” Dr. Wegner said.

Is a similar sort of magical thinking responsible for the experience of free will?
“We see two tips of the iceberg, the thought and the action,” Dr. Wegner said, “and we draw a connection.”

But most of the action is going on beneath the surface. Indeed, the conscious mind is often a drag on many activities. Too much thinking can give a golfer the yips. Drivers perform better on automatic pilot. Fiction writers report writing in a kind of trance in which they simply take dictation from the voices and characters in their head, a grace that is, alas, rarely if ever granted nonfiction writers.

Naturally, almost everyone has a slant on such experiments and whether or not the word “illusion” should be used in describing free will. Dr. Libet said his results left room for a limited version of free will in the form of a veto power over what we sense ourselves doing. In effect, the unconscious brain proposes and the mind disposes.

In a 1999 essay, he wrote that although this might not seem like much, it was enough to satisfy ethical standards. “Most of the Ten Commandments are ‘do not’ orders,” he wrote.

- Free Will: Now You Have It, Now You Don’t

Related
Making the Right Choices
Liberalism and neurology-Free to choose?

IN THE late 1990s a previously blameless American began collecting child pornography and propositioning children. On the day before he was due to be sentenced to prison for his crimes, he had his brain scanned. He had a tumour. When it had been removed, his paedophilic tendencies went away. When it started growing back, they returned. When the regrowth was removed, they vanished again. Who then was the child abuser?

Neuroscience - the New Philosophy
How 'Manic' Thinking Makes Us Happy, Energized And Self-confident

Podcasts;
A discussion with Geoffrey Carr, Science Editor of The Economist, on the Brain
Gene dreams or gene schemes
The Chimeric Brain
Epilepsy: taming seizures and dispelling myths
Journeys to Recovery: Accepting the Reality of Unreality
Philosophy 101
Seasonal Scepticism
The Mind/Body Problem
The Soul

What’s the Optimal Size of a Central Bank Board?

A new working paper from the Fund- Central Bank Boards Around the World: Why Does Membership Size Differ? The conclusion excerpted below;

“Recent research emphasizes the importance of central bank design for the success of monetary policy. One of the features that have received particular interest is the membership size of the central bank’s decision-making body—that is, how many people should decide whether to take measures to achieve a specified monetary policy target?

From a theoretical point of view, the optimal size of an MPC depends on the costs and benefits. On the benefit side, larger MPCs promise improvements in information processing along the lines of Condorcet’s jury theorem. At the same time, decision making typically becomes more difficult and time consuming as the number of MPC members increases. Also, members may have a stronger incentive to “freeride” on the information-processing efforts of others in larger MPCs. Other factors influencing the optimal size of MPCs include political forces: both the fact that large MPC size may increase its ability to resist political pressures as well as the fact that the size will reflect the political balance of power. Finally, if central bank designers take a holistic view of central bank organization, other parameters of central bank design, such as the term length of MPC members, may be systematically related to MPC size as well. Since factors affecting optimal board size are likely to differ across countries (e.g., the information-processing requirement might vary with the size and diversity of the economy), it seems reasonable to assume also that “the efficient size of a policy committee might vary across countries” (Goodfriend 2005, p. 85).

Around the world, central bank boards do, indeed come, in different sizes. Although New Zealand, for instance, the governor alone is responsible for policymaking, the European Central Bank (ECB) Governing Council currently comprises 18 members. Moreover, the pending increase in euro area membership has triggered a preemptive ECB reform that generally limits the overall number of voting members to 21. This, however, still seems to be a relatively large number compared with the membership size of other central bank decisionmaking bodies such as the U.S. Federal Reserve’s Federal Open Market Committee. The average MPC in our sample of central banks has 7–9 members.

In this paper, we characterize differences in the structure of central bank governance based on a dataset that covers the (de jure) membership size of 84 central bank boards around the world at the end of 2003 that make decisions on whether to increase or decrease interest rates to achieve a specified target. We find that board size is indeed significantly and plausibly correlated to various country and central bank characteristics. For instance, MPC size tends to increase with country size and population heterogeneity, thereby providing empirical support for the notion that central bank board size is affected by information-processing requirements. There is also evidence that MPC size is correlated to political institutions, with more democratic countries, where citizens participate more strongly in the selection of their governments, having, on average, larger boards. For some variables, we find a hump-shaped effect on MPC size.

Finally, although the size of the central bank’s policy committee has been the focus of much debate recently, there are indications that it should not be viewed as independent of other features of central bank design. MPC size is often associated with other central bank characteristics. For instance, central banks tend to have larger MPCs if they have more staff or higher operational expenditure. More importantly, countries with floating exchange rate regimes, which typically have more complicated monetary policy frameworks, also seem to have larger boards. Along similar lines, we find that more independent central banks often have larger MPCs. Furthermore, there is a negative relation between MPC size and the length of terms served by MPC members (at least at shorter term lengths). Viewed in conjunction with the results discussed previously, this suggests that the institutional setup of central banks may indeed be tailored to reflect country-specific factors.”

Related;
Central Bank Governance: A Survey of Boards and Management
Central Bank Autonomy, and Inflation and Output Performance in the Baltic States, Russia, and Other Countries of the Former Soviet Union, 1995-97
Independent Review of the Operation of Monetary Policy- Reserve Bank of New Zealand
Monetary policy in Asia: approaches and implementation

Does democracy and globalization go hand in hand?

An interesting paper by Barry Eichengreen and David Leblang on Democracy and globalization- via New Economist;

“I conclude with a few historical notes. Thinking of specific historical examples, it is hard to see an obvious link between globalisation and democracy. Take 19th century liberalization for instance. Its expansion is conventionally associated with the signing of the 1860 Anglo- French treaty between England - hardly a “democratic” country - and France - then an autocratic regime. Similarly, the reflux of trade liberalisation occurred in France at the end of the 19th century when democracy was at a high point, with this country being one of the few countries on earth with full enfranchisement of male citizens. Similarly, in the mid 19th century, one of the leading countries in terms of empowerment of the people - the United States of America - had a strikingly low trade openness ratio. It compared to that of the world’s leading autocracy - Russia (Accominotti and Flandreau 2006). Autocracy in Russia did not stand in the way of globalisation. In fact, Russia started opening in the late 19th century at a time when its secret police was remote from even thinking of changing its abominable methods. Closer to us, the US has remained until a quarter century ago a largely closed economy with imports and exports representing a tiny fraction of its GDP. Few will dispute that it remained a vibrant democracy all along. Arguably, the current backlash against civil liberties that followed September 11 is the product of some of the challenges that globalisation has created.

The previous list of anecdotal evidence is not meant to stand in the face of Eichengreen and Leblang’s more encouraging results. I, just as they do, want to believe. But these are caveats that suggest that, as long as we do not have a fully fledged theory of why and when globalisation should cause democracy to expand and vice versa, any empirical pattern we think to discern between democracy and globalisation is little more than history.”

- Marc Flandreau, on comments to the paper

Related;
Pillars of Globalization: A history of monetary policy targets, 1797-1997, Marc Flandreau.
The Free Trade Myth
Democracy and Protectionism by Kevin H. O'Rourke, Alan M. Taylor;

"Does democracy encourage free trade? It depends. Broadening the franchise involves transferring power from non-elected elites to the wider population, most of whom will be workers. The Hecksher-Ohlin-Stolper-Samuelson logic says that democratization should lead to more liberal trade policies in countries where workers stand to gain from free trade; and to more protectionist policies in countries where workers will benefit from the imposition of tariffs and quotas. We test and confirm these political economy implications of trade theory hypothesis using data on democracy, factor endowments, and protection in the late nineteenth century."

Malcolm Gladwell on Enron

“In the spring of 1998, Macey notes, a group of six students at Cornell University’s business school decided to do their term project on Enron. “It was for an advanced financial-statement-analysis class taught by a guy at Cornell called Charles Lee, who is pretty famous in financial circles,” one member of the group, Jay Krueger, recalls. In the first part of the semester, Lee had led his students through a series of intensive case studies, teaching them techniques and sophisticated tools to make sense of the vast amounts of information that companies disclose in their annual reports and S.E.C. filings. Then the students picked a company and went off on their own. “One of the second-years had a summer-internship interview with Enron, and he was very interested in the energy sector,” Krueger went on. “So he said, ‘Let’s do them.’ It was about a six-week project, half a semester. Lots of group meetings. It was a ratio analysis, which is pretty standard business-school fare. You know, take fifty different financial ratios, then lay that on top of every piece of information you could find out about the company, the businesses, how their performance compared to other competitors.”

The people in the group reviewed Enron’s accounting practices as best they could. They analyzed each of Enron’s businesses, in succession. They used statistical tools, designed to find telltale patterns in the company’s financial performance—the Beneish model, the Lev and Thiagarajan indicators, the Edwards-Bell-Ohlsen analysis—and made their way through pages and pages of footnotes. “We really had a lot of questions about what was going on with their business model,” Krueger said. The students’ conclusions were straightforward. Enron was pursuing a far riskier strategy than its competitors. There were clear signs that “Enron may be manipulating its earnings.” The stock was then at forty-eight dollars—at its peak, two years later, it was almost double that—but the students found it over-valued. The report was posted on the Web site of the Cornell University business school, where it has been, ever since, for anyone who cared to read twenty-three pages of analysis. The students’ recommendation was on the first page, in boldfaced type: “Sell”.

-OPEN SECRETS; Enron, intelligence, and the perils of too much information
Via Mahalanobis

Related;
Here’s the Enron report mentioned above (browse down the page);

"As shown in Table 2, the 8-variable Beneish model shows that that Enron may be manipulating its earnings. We get a M-score of -1.89 for Enron, which is greater than the standard M-score of -2.22 used to gauge the likelihood of manipulation. The most significant factor contributing to the M-score manipulation statistic is the SGI. After close examination we were not concerned by the fact they were growing too fast because the sales increase comes from the recent acquisition of PGE. Additionally, the GMI shows deteriorating margins, the AQI shows increasing amounts of ‘soft’ assets, DEPI shows depreciation expense slowing down, and LVGI indicate rapidly increasing leverage. However, further examination of these indicators showed no cause for concern.”

The Detection of Earnings Manipulation
Experts and Overconfidence
Solving Mysteries
How to Bring Our Schools Out of the 20th Century

Ed Yardeni on the reserve diversification

DA: Recently we saw the United Arab Emirates decide to diversify its foreign currency reserves away from dollars, something other Asian central banks have been doing for a while now. Do you expect this trend to continue, and how will it affect the global economy?

EY: It’s natural that as people and businesses become wealthier and more prosperous, they will want to diversify their portfolios. None of this should really lead to any dire consequences – quite the opposite, I think it should make for a more sustainable, balanced global boom. The dollar, relative to some currencies, particularly the euro and some of the Asian currencies, may continue to weaken. It might also do so on a trade-weighted basis if the Chinese let their currency appreciate more rapidly. The Thai baht crisis last year was reminiscent of what happened in 1997. Back then, the Thai currency was under downward pressure. This time, the baht and other Asian currencies have been strengthening. This should encourage Asian economic policymakers to increase domestic demand. I don’t see anything wrong with any of this.

Via Managing Globalization

Related;
Is the Dollar Dead?
Call me Ahab (q3 IMF COFER data)
The Chart above from NABE; US Dollar Exchange Rate: Trade-weighted broad currency index

Econ Talks from Fed

Some talks from Federal Reserve Bank of Dallas and Richmond- I wish all of the Federal Reserve Banks would start such podcasts;

A Primer on Inflation
Racing to the Top: How Global Competition Disciplines Public Policy
Interest Rate Policy After Greenspan
Transition and Continuity at the Federal Reserve in 2006

Related;
Excerpts from Richard W. Fisher's interview with Milton Friedman
Understanding the Federal Reserve
Through a Glass, Darkly: How Data Revisions Complicate Monetary Policy

James Buchanan’s Question

James Buchanan asked his students the following question: "If a fly grew 9 times its current size, could it still fly?" The engineering of this question turns out to provide a negative answer. The fly could not get off the ground. But that was not the point. The point was to think of the analogy. If a state's fiscal system was currently working and we allowed it to double in size, tripple in size, etc., could the state still function? This is the question of the fiscal dimension. Can a state function at 9 times its current size? Buchanan's question seemed to imply an answer similar to the one about the fly. Do the social welfare states challenge that answer? I don't think so.

- Peter Boettke, commenting on the replicability of the small social welfare state models like Denmark to larger countries like US

I think the 3rd point made by Tyler that “concentration of power in a major city may account for some of the special properties of small countries” makes a lot of sense- geography is an important aspect we tend to ignore.

Long Term Care Costs in US

“In 2005, the average cost of a year in a nursing home was more than $70,000, and in 1999, according to the most recent data available, the average length of stay was between 2 and 3 years. Long-term care insurance helps individuals pay for costs associated with long-term care services. Yet relatively few individuals have obtained coverage. As of 2002, about 9 million people nationwide had obtained long-term care insurance. To help federal employees, retirees, and others obtain coverage, the federal government began offering long-term care insurance in 2002.”

-Long-Term Care Insurance: Federal Program Has a Unique Profit Structure and Faced a Significant Marketing Challenge (GAO Report)

Incentives Matter

The state of State Finances in India;

“The Reserve Bank of India (RBI) today released ‘State Finances: A Study of Budgets of 2006-07’ – a publication that provides data, analysis and assessment of finances of State Governments. The publication provides data at both, consolidated and disaggregated levels based on the State budgets for 2006-07. Statistical tables appended to the publication provide information on several fiscal parameters as well as State-wise budgetary data covering both revenue and capital accounts.

The data analysed in the publication highlight that there has been a marked improvement in the fiscal position of the State Governments in recent years in terms of key deficit indicators. In 2005-06, gross fiscal deficit (GFD) and revenue deficit (RD), as ratios to gross domestic product (GDP), have declined to 3.2 per cent and 0.5 per cent, respectively. Such a correction has been primarily through revenue enhancement with revenue receipts, as ratio to GDP, rising by 1.0 per cent over the previous year and States’ own tax receipts rising by 0.3 per cent. Further, the revised estimates (RE) of 2005-06 point out that the fiscal performance of the State Governments has improved compared to the budget estimates, particularly in the revenue account, reversing the usual trend of decline in fiscal performance in the revised estimates.”

Indian case is interesting in that following a recommendation by a government commission, it encouraged state governments to enact Fiscal Responsibility Laws in order to get debt relief from central government;

“Twelfth Finance Commission (TFC) recommended that each State should enact FRL. This has been stipulated as a pre-condition for availing the debt relief recommended by the TFC. According to TFC, this legislation should, at a minimum, provide for:
(a) eliminating revenue deficit by 2008-09;
(b) reducing fiscal deficit to 3 per cent of GSDP or its equivalent defined as ratio of interest payment to revenue receipts;
(c) bringing out annual reduction targets of revenue and fiscal deficits;
(d) bringing out annual statement giving prospects for the State economy and related fiscal strategy;
(e) bringing out special statements along with the budget giving in detail number of employees in government, public sector, and aided institutions and related salaries.”

Related;
State of solvency
Will India measure up?
Indian Productivity Miracle
Conference on 'Fiscal Responsibility and Intergovernmental Finance'- jointly with WBI and ASCI

Assorted Talks

Talks with Alvin Toffler, Francis Fukuyama, Bill Easterly.

Benjamin Franklin – 300th anniversary.

Philosophy 101

Epilepsy: taming seizures and dispelling myths

Drug regulation and drug safety

A fortepiano passion: Geoffrey Lancaster

What's in a nickname?

Skin + Bones

Happiness in Australia

Gene dreams or gene schemes

Has the romance of exploration gone forever?

Outsourcing legal services
Outsourcing legal services. Where to? Where else but India – a country with literally 1 million lawyers and 70,000 law graduates each year. The Americans are right into it. By 2015 it's estimated that 80,000 jobs in the American legal sector will have moved offshore.

Note; These talks are from Australian Radio National and available for limited time.

Multi-armed bandit models in Economics

Working paper of the day- Bandit Problems by Dirk Bergemann and Juuso Välimäki;

“We survey the literature on multi-armed bandit models and their applications in economics. The multi-armed bandit problem is a statistical decision model of an agent trying to optimize his decisions while improving his information at the same time. This classic problem has received much attention in economics as it concisely models the trade-off between exploration (trying out each arm to find the best one) and exploitation (playing the arm believed to give the best payoff).”

Related:
Reinforcement Learning: An Introduction

Art for the Brain

“This image perfectly represents what a layered thought looks like to me. When I see a word, or a symbol, or an icon, or a number, I see an additional version or layer of meaning behind it, and I mean that quite literally. I see a second or third version of the visible, though I "know" what I am looking at isn't "see-able" to other people. (At least, I know that as an adult.) In this image, the dark shape in front represents the visible while the white shape behind is equivalent to the version I view automatically on the otherside of consciousness. Even as I look at the additional layer, I understand that it is generated from the object in front of it. That's the reason the edges are indistinct and the shape is amorphous, much like the nature of meaning itself.”
- Marcia Smilack; a photographer and video artist with synesthesia

Here’s a profile of the artist from Seed magazine.