Memes of Ben Ho

Obama's Economic Miracle

2008-12-04T12:29:00.000-08:00

I made this call on my facebook page on election day, but figured I'd elaborate on it here. Obama will get credit for both the inevitable economic recovery and the end of the Iraq war (both of which would have happened regardless of who is President), which should likely guarantee a second term.

It is annoying that president's get credit for just standard movements along a business cycle that are out of their control. Reagan won re-election because of it, Carter lost for largely the same reason.

More broadly, Obama like Clinton will benefit from a large peace dividend. Clinton likes to claim credit for balancing the federal budget, but more credit should go to an intransigent Newt Gingrich led Congress, balanced budget laws passed under his predecessor, and military spending (as % or GDP) that had halved in the past 10 years.

Greg Mankiw's Blog: The Sociology of Economics

2008-12-02T14:04:00.000-08:00

Greg Mankiw's Blog: The Sociology of Economics

This is an awesome post. Basically, it was a letter by a medical resident at Harvard noting that at interdisciplinary conferences economists are

0) Always has something to say regardless of discipline of talk, present better papers, and are less likely to be caught off guard by questions.

1) The most aggressive. (Probably responsible for part 0)

2) The most willing to engage with statisticians.

3) Will readily attack other disciplines on questions of causality and selection bias.

4) Economists are smarter

5) Economists have more rigorous training

6) Economist believe more in science than advocacy. They are less likely to base opinion on preconceived priors.

7) The economics job market is more efficient.

I think this is stuff that every economist secretly believes but has enough humility not to say it aloud. At least I've certainly noticed it, but maybe that's because I hang out in other disciplines too much.

I think people outside economics don't appreciate that basically half of an econ phd is essentially Stats, whereas in other disciplines, from Sociology to Medicine, you tend to take one maybe two classes on stats and that's it. And usually the stats they take is helpful for experimental designs, but useless and in fact misleading for cases where you don't have experiments.

Though I wouldn't say economists are "smarter," but better at math, certainly. But as Mankiw admits, perhaps worse at social skills and other dimensions.

As my advisor liked to say, economists are better at answering questions, but that's cause they massively limit the scope of the questions they ask. (i.e. they only look for their keys by the lamp post)

And I agree very much of the fact that economists are not advocates. It is much easier for one economist to convince another to agree with you, or to conclude that "it remains an empirical question" whereas in other disciplines, people spend their careers making ad hominem attacks on opponents to make their point. Within the White House, the CEA was known as the most conservative group, because all the economists advocated essentially consensus economic opinion, even though nearly everyone at CEA was a Democrat.

One Degree of Kevin Bacon (and Gossip Girl folk)

2008-11-29T18:16:00.000-08:00

I wandered into a Verizon store to check out the touch screen Blackberry, intrigued by the fact that the screen clicks, but the interface was totally befuddling, even to a former computer guy/blackberry devotee like myself, agreeing with Pogue that this was an epic fail in interface design on RIM's part. The upside of this jaunt was that as I was fiddling, the girl next to me who was equally befuddled by the phone, whispered "hey, do you know who Kevin Bacon is?" Having no idea where this going, I just said yes. "he's right over here. Sure enough there he was in baseball cap and sunglasses, huddled with phone, trying to look inconspicuous. I surreptitiously snapped a photo, feeling somewhat guilty, but I openly admit to the standard weakness that celebriy inspires.

See also, my Bobby Flay run in, as well as the random sighting of Penn Badgley and Blake Lively of Gossip Girl fame, getting photographed in Central Park.

Another transcendent iPhone moment: a new musical instrument

2008-11-25T20:53:00.000-08:00

The iPhone still annoys me, it crashes all the time, and the long litany of annoyances goes on, but it still more than makes up for it with transcendent experiences. One recent one was the latest app, Smule's Ocarina, the top selling app for $0.99.

I remember the summer I spent in Paris, six weeks of glorious travel, but there was a dull emptiness, that I came to appreciate when I walked into a music store, on one of my random excursions perambulating about (flanning) Paris (or perhaps it was Reims), where I picked up a tin whistle, and realized I missed music. I had still been playing clarinet/saxophone regularly back then (something I managed to continue up until mid grad school) but had left it behind on my trip, and realized I missed it. Thereafter, I would pick up flutes (tranverse and otherwise)/recorders and other instruments whenever I traveled. That has something I've mostly left behind but now with my iPhone, I will never be without one.

The Ocarina is an ancient primitive medieval flute, that they have recreated faithfully on the iPhone a real musical instrument, not a game like guitar hero, but an instrument that replicates a classic medieval arcane fingering scheme that you play by blowing into the microphone. Like a real instrument, it responds to subtle shifts in breath and tonguing, and changes timber based on how phone is positioned.

The really magical part of it though is the interactive part of it. It uses the gps to get your location and then broadcasts whatever you are playing around the world. You can switch to a 3-d model of the world, and from points on the globe, you can see streams of music flying into into space which you can zoom into and hear, real people around the world playing their ocarina, magically broadcasting. Some are fumbling like myself, but some are playing recognizable tunes, and I'm sure with time, you will find virtuosic performances, broadcast into the ether, like Link's ocarina of time.

Clinton Foreign Policy = Bush Foreign Policy = Obama Foreign Policy

2008-11-23T16:24:00.001-08:00

I have long argued here (and here) that Bush Foreign Policy is not that different from Clinton Foreign Policy. Here is someone else who agrees. I hate Ithaca's NPR station, mostly because they play the most left show (on an already liberal station) I've ever heard on NPR, Democracy Now, which I often wake up to many mornings as my clock radio goes off. It is useful for the different point of view.

In a recent episode, the author is arguing that Bush merely continued the policies of the Clinton administration (extraordinary rendition, unilateral nation building) and it appears that esp with a Clinton under Obama, those policies are likely to continue. Argument again that it is the situation and environment that matters more than president him/herself.

Connoisseurship: Wine, Cheese, Fish, but not Coffee and Beer

2008-11-21T22:54:00.000-08:00

Just randomly noted recently that after many years, I have gotten to the point where I can actually start telling different wines apart. What they don't tell you when you start getting into wine is that really, without practice, most wine tastes pretty much the same. A random dinner table factoid I was told was that in a taste test, people couldn't tell the difference between red wine and room temperature white wine. After many years of diligent experimentation, with the help of the habit of earnestly trying to describe each wine, as encouraged by R-, I feel I'm starting to get there. Where, can replicate the tasting notes, a non-random amount of the time, can guess the grape, a statistically significant amount of the time, and can even have a guess as to what country the wine is from, or at least what continent. Of course, not really enough to justify the vast variety on the market, but getting there.

Thinking about it, I've come along way with Cheese and Fish too. Cheese, used to be cheese. It was either flat squares of processed American, or it was random unidentified cubes, or goat or blue. So now, starting to learn obvious ones, cheddar, and gouda, and monterray jack. Still lots to learn, but making progress.

Fish, even more so. Not too long ago, fish used to be either Salmon or not-Salmon. Now actually, I have a pretty good sense of most of the fish in the fish counter. I guess it comes from enough experimentation and experience.

Though I must say that on at least two fronts, Beer and Coffee, I haven't made much progress at all. Working on both, but still by and large, they all taste the same to me.

The Economics of Ethanol

2008-11-19T23:07:00.000-08:00

A friend of mine asked me to write a guest post for his blog. Here is it reproduced here.

Ethanol is an immensely complicated issue that requires a detailed institutional background to fully appreciate, and those with a little bit of knowledge often jump to wildly wrong conclusions.

On the Benefits of Ethanol

The environmental benefit of ethanol has been hotly disputed over the years. Various studies have found various things over the years as is typical in science (a recent study finds that 1/3 of the most cited publications in a top medical journal are refuted in just a few years). A meta-analysis of all of these papers shows a clear time trend. Newer studies show greater benefits. The reason for this is simple. While the environmental benefits from corn-based ethanol are arguably small today, they will only grow in the future. Corn yields have been increasing steadily for decades, and there is every reason to expect that to continue. Thus we should get more ethanol per environmental cost each year. Furthermore, new enzymes are being developed again to get more ethanol from the same amount of corn, thereby further increasing the amount of ethanol per given input.

All of this also does not account for the possibility of more dramatic technological shifts that subsides make possible. Current car engines are tuned for gasoline from oil. However, engine tuned for gasoline from ethanol could lead to 25-30% increases in engine efficiency. Furthermore, the infrastructure being developed is helping to pave the way for new biofuels, like biodiesel and cellulosic ethanol that have substantial and already demonstrated environmental benefits.

Finally, environmental analyses ignore the other benefit of ethanol, which is a diversification away from oil consumption. Much of the problem s in the oil markets comes from the monopoly power of the oil industry given the lack of substitutes for oil. By helping develop a viable substitute, there are immense gains beyond just the environment, for example, dampening the geopolitical power of OPEC, and alleviating the resource curse in the Middle East.

On the Ethanol Subsidy.

Many people wrongly assume that the government specifically subsidizes only corn based ethanol. In fact, regular ethanol gets a 51 cent per gallon subsidy, biodiesel gets around 80 cents, cellulosic ethanol gets over $1. Other fuels get subsidized in their own way. And in fact a system of mandates and other tax credits makes total subsides substantially higher and substantially more complicated.

This is not an ideal system. A carbon tax would be much simpler that would replace this myriad of complicated and overlapping policies. But we do not live in an ideal world. So on the simple question of whether we should repeal the ethanol subsidy, we go back to the tools of cost benefit analysis (something I used to teach back at Stanford).

What are the costs of a subsidy? The subsidy is effectively just a transfer from one American to another, so the cost is only the cost associated form the distortions to the economy from raising that 51 cents. A large literature estimates the cost of raising 51 cents to be around one quarter of that, or around 12.5 cents. Is that worth it?

It is first worth noting that mathematically, a subsidy on a good works exactly the same way as a tax on a bad. So if you believe we should increase gasoline taxes by 51 cents, then you should support a 51 subsidy for ethanol.

The benefits of an extra gallon of ethanol are hard to quantify, but if you add it up (the small environmental benefit, the impact of geopolitics, the fostering of technological innovation, the support of an agricultural lifestyle) it is actually fairly easy to find benefits far outweighing 12.5 cents.

Again, subsides for ethanol is messy ugly kludgy policy. But absent a comprehensive gasoline/carbon tax, repealing the subsidy could be even worse.

On the Ethanol Tariff

Many people (including free-market economists) decry the 54 cent tariff on imported ethanol, without really understanding the institutional background for the tariff. First of all, most imported ethanol falls under various free trade agreements that makes them exempt from the tariff. Second of all, while it is true that we place a tariff on Brazilian ethanol, Brazilian ethanol also enjoys the 51 cent subsidy, hence leaving Brazilian ethanol producers no better or worse off than in a free market environment. The main purpose of the tariff is just to make sure only American ethanol producers get the subsidy.

Whether this is fair from a global justice perspective is debatable but from a standard economic cost-benefit analysis, it is eminently reasonable. Recall that a transfer between two Americans is not considered an economic cost from the point of view of America since it has no net effect on American social welfare (only the dead weight loss of raising the taxes is considered a cost). However, a transfer from American tax payers to a Brazilian producer is considered a cost.

On Ethanol and Food Prices:

It is incredibly difficult to estimate the impact of biofuels on food prices. This is why most respectable economists decline to give exact numbers. I was asked to do such an analysis for the White House in 2007, and found that drought and crop failure combined with rising energy costs (a major input in production) and increased meat consumption in places like China, account for a far larger share of the price increase. This may have changed in 2008 (though I doubt it), though either way, the argument seems strange to me.

I find it incredibly odd that the same economists (like those at even Oxfam) who have for years been decrying farm subsides for depressing food prices and therefore hurting developing world farmers are today decrying biofuel subsides for increasing food prices. It is hard to say whether the developing world would prefer lower or higher food prices, though one would think that since developing countries tend to have a comparative advantage (note I said comparative, not absolute advantage) in agriculture (seen by the fact that they devote most of their labor force to agriculture), then increasing food prices leads to a favorable shift in their terms of trade, which means it should be good for developing countries overall (yes it hurts the non-farmers in these countries, but it helps all of the farmers who tend to out-number the non-farmers, leading to a net gain).

Time magazine and Abe Lincoln on Attribution Bias

2008-11-09T17:49:00.000-08:00

Time magazine had a good article last week.

They only look as if they inhabit our galaxy. In truth, the men who would be President have been running for months in a parallel universe, a place where a Chief Executive changes laws by waving a hand and reorders society at the stroke of a pen. "When I am President," the candidates declare — and off they go into dreamspeak, describing tax codes down to the last decimal point and sketching health-care reforms far beyond the power of any single person to enact. In their imaginary, reassuring cosmos, America is always a mere 10 years — and one new President — away from energy independence. And the ills of the federal budget can be cured simply by having an eagle-eyed leader go through it line by line.

Then one of them wins the election.

In an instant, the winner is sucked through a wormhole back into the real world. A world in which Congress, not the President, writes all the laws and gets the last word on the budget. Where consumers decide which cars to drive and how many lights to burn. And where the clash of powerful interest groups makes it easier to do nothing about big problems than to tackle them.

It's good to see this message get out, because though I've been complaining about attribution bias on this blog (e.g. here and here), it's something the media rarely considers.

The article also had this nice quote by Lincoln: "I claim not to have controlled events, but confess plainly that events have controlled me."

Later in that issue, they quoted a seemingly non-partisan pundit (he attacked both sides) who gives another reason to worry about Obama's campaign promises. Obama promised to abide by campaign financing limits, but reneged on that promise as soon as it was expedient. In fact, Obama has had no history of sticking up against his party for his own principles. Doesn't give much confidence that he will follow through with any of his promises now.

Worries for a new administration

2008-11-08T15:46:00.000-08:00

A friend of mine used Krehbiel's Pivotal Politics model to analyze the implications of a Democratic Congress and Presidency. He finds the scene is set for substantial policy change.

That was a good time to reflect on the perils of an Obama administration.

Higher trade barriers (which will mostly hurt the poor in developing countries and the poor Walmart customers in the US), more frivolous lawsuits (something the current administration has been fighting behind the scenes), more wasted bureaucracy, less school choice and school reform, slower growth (see QJE paper by a former classmate of mine), regulation that leads to less home ownership, higher minimum wage (which hurts the poor through more unemployment and increases the prices at places they shop most like walmart). Could be good as well, but I worry. could be quite bad for the people who need help the most.

Confronting Prejudice: A message to Obama supporters

2008-11-05T10:51:00.000-08:00

The two McCain voters I talked to yesterday both expressed concern that they were uncomfortable revealing their vote to their friends, and probably wouldn’t do so. I know the feeling. I wrote about it in the Stanford Daily in 2004. Back then, I declared that one of my main reasons for voting for Bush was to use it to confront people with their own anti-Republican prejudices.

Voting is 99.9999% symbolic anyway (there is a tiny percent chance you influence the election, but essentially zero). So it is the symbolism that matters most.

This time, I voted for Obama, because ever since I outed myself as a Republican sympathizer (partly by my CEA job, though that really shouldn’t count since most of my colleagues were Democrat), no one could believe that it is possible to be both a Republican sympathizer and an Obama supporter. I’d really like to advocate the position that both sides deserve sympathy and respect. And that it’s awful that people should feel uncomfortable discussing how they feel.

Of course, I’m not saying this is the only form of prejudice out there, or even amongst the more important ones, but it is one that people rarely talk about.

Why I like Bush. Why I like Palin.

In response to comments from elsewhere as to why anyone could like Bush, my answer reposted here: “long 7 year economic expansion (which the president really has minimal control over, but just to counter Clinton's claims to his economic record). no terrorist attacks on American soil for the past 7 years (unlike under Clinton). fundamental reform of US education. expansion of free trade. continued unprecedented growth in productivity. converting two autocratic regimes into democracies. (unlike Clinton's attempts at nation building by unilateral invasion which are largely forgotten), tremendous funding for addressing AIDS and malaria, more spending on alternative energy than the manhattan project, higher emissions standards for cars and trucks (the fruits of both will pay off in the next 8 years, and hence Obama will get the credit). Europe has pretty much elected all pro-US heads of state, so arguably stronger ties to Europe.”

In response to comments on how anyone could like Palin: “she has more executive experience than Obama, is less prone to mistakes than Biden, and has social policy preferences which I don't necessarily agree with but matches the majority of Americans.”

Bush's staffers and the kool-aid

2008-11-02T12:34:00.000-08:00

The New York Times ran a mostly touching (and rare) piece about the positive parts of Bush's legacy. One quote rang true:

Then she looked directly at me and said, “But it’s all worth it, because I so believe in the president.”

It would have been easy for me to dismiss Ms. Perino as a bright and likable but ultimately Kool-Aid-stricken peddler of talking points, were it not for two things. First, my interviews with current and former Bush staffers constantly veered off into similar testimonials. Their belief in Mr. Bush transcended ideology: as much as anything else, they just loved the guy.

I also often use the kool-aid line myself, when people ask what I thought about the President (a friend of mine remarked that it was odd that I call him "the President" as opposed to Bush, or Dub-ya, habit I picked up while there I guess).

But I generally say that I didn't know him really well personally, but I respected the opinions of the people who interacted with him every day, and they all respected the guy. Of course, maybe they had "drank the Kool-Aid" but that must count.

And it wasn't just staffers, it "transcended ideology." I remember talking to a Washington Post White House correspondant (and Democrat) after a talk she gave when I was in grad school who also said she respected the President's abilities quite a bit.

Anyway, just my two cents.

Our insignificance in the Cosmos

2008-11-01T18:53:00.001-07:00

The New York Times reported a student at Dartmouth asking: How do you keep from despairing at the immensity of space and the smallness of us?

I remember having the exact same question back in high school, learning about cosmology, the age and shape and size of the universe, thinking about space-time (roughly 15 billion light years wide in at least 4 dimensions) and how insignificant any one life is (whose theoretical limit of one light-lifespan). And indeed I did despair for a time.

My answer at the time was that while one human is mortal, humanity is potentially immortal, and information and knowledge, would outlive even the life of the last man. As was the theme of the Shakespearean sonnets I had to memorize back freshman year. "So long as men can breathe, and eyes can see, so long lives this, and this gives life to thee."

So my answer to the vastness of space back in high school, was to become part of the cloud of knowledge achieved by humanity.

Haven't thought about that in a while. I used to think about it more. Even used it on my first date with R-. Not sure if that helped or hurt.

Ha, I'm not the only one who doesn't believe in voting

2008-10-31T21:57:00.000-07:00

From the current issue of The Economist's Voice

As the election approaches, please
remember to be kind to any economist
you know. Economists feel
on election day a little like Jews
feel on Christmas. Participating
makes them feel like a traitor to their kind but
boycotting the extravaganza makes them feel
estranged from the rest of society.
Like everyone, economists have a choice on
election day, but to an economist neither option
seems good. We don’t mean the choice of voting
for a Republican or a Democrat. We mean
the choice of whether to vote.
An economist who votes commits an irrational
act, and to an economist irrationality is
a sin. Why bother spending half an hour or
more going to the polls and waiting in line
when the chance is infinitesimal that your vote
will affect the outcome?
Yet, what is the other choice? Not voting.
But, an economist who doesn’t vote must
squirm when others ask that day: “Have you
voted yet?” Any explanation about the irrationality
of voting will be scorned.
There is no winning for an economist on
election day (unless he or she is running for office,
and probably even then).

More evidence that Gore = Bush

2008-10-30T12:13:00.000-07:00

I have long noted here that people commit the fundamental attribution error when evaluating the Bush administration. Over attribute outcomes to disposition, and not accounting for situation. Most say that had Gore won, he would not have reacted the same way to 9/11 (though his VP, the wife of the president he served under, and that president's British doppleganger were all strong supporters of the war in Iraq).

In a recent economist book review, they find the following Al Gore quote:

IN 1993, Bill Clinton was pondering whether to authorise what is now called an “extraordinary rendition”, when American agents snatch a suspected terrorist abroad and deliver him to interrogators in a third country. The White House counsel warned that this would be illegal. President Clinton was in two minds until Al Gore walked in, laughed and said: “That’s a no-brainer. Of course it’s a violation of international law, that’s why it’s a covert action. The guy is a terrorist. Go grab his ass.”

Obama is one of "us" and indeed "we" are not "real" and "we" are not "pro-American"

2008-10-28T11:41:00.000-07:00

A problem I’ve had with this election is that I actually identify with Obama quite a bit. But as I’ve elaborated on at length in this blog that doesn’t mean I’d vote for him (e.g. because I dislike many of his supporters, because I dislike the policy of the median Congressional Democrat).

The media has recently taken a lot of umbrage at the suggestion by the McCain campaign that Obama is not “pro-American” and that he is out of touch with “real” America (e.g. Time magazine). But I think those accusations are fair.

First of all, by “us” I am talking about well-off highly educated coastal elites. Although Obama often evokes the language of unity, when talking about tax policy Obama talks about people like “us“ meaning Obama and McCain and other well off elites, which implicitly creates the “other” of people not like “us."

Pundits are happily making the point that the real “Joe the Plumber” makes well less than $250,000 a year, but the point of the McCain campaign is that that doesn’t matter. Because in his world view Joe and McCain are part of the same “us.”

But Obama’s “us” is different. Saying that we are anti-American is too far, but that’s not what the McCain campaign’s been saying. The most extreme way to see this is the number of my friends who (jokingly, but still) threaten to move to Canada. Or, I bet if you poll my friends and ask them if they had to choose between wearing a Canadian flag or an American flag on their bag while traveling, I bet nearly all would choose Canadian. I bet most people in the pro-American states that Palin is talking about would never do that (admittedly, I’m not sure what I’d pick, but probably I’d still put an American flag). It’s not a bad thing to not be “pro American.” It represents a different cosmopolitan ecumenical humanist world view that I like. But it is different.

This is an old notion of course, the different ways of defining identity. Democrats try to create identity along economic divisions, whereas Republicans do so along social divisions.

I might support Obama but will never be an “Obama supporter”

2008-10-26T21:50:00.000-07:00

There are various reasons to describe how people vote given in the political economy literature. A few are:

You vote for who you think will be best for you.
You vote for who you think will be best for the country.
You vote for symbolic or expressive purposes.
You vote for who you think is going to win.
You vote for the candidate you identify with.
You vote to be affiliated with others who vote for that person.

I’ve already said in this blog that I am largely indifferent between Obama and McCain on the first two points. Points 3 and 4 and 5 are pushing me toward Obama. It would be cool to vote for the first black president (as a fellow political economic thinking friend of mine who is similarly indifferent to voting pointed out), and I have long identified with Obama’s post-partisan rhetoric (though he basically abandons bipartisanship whenever it is expedient, which is basically always).

My problem, is point 6, which is actually the point I focus on in my current research. And on this point, I really really don’t want be associated with Obama supporters. And that is making me not want to vote for Obama. A recent New York Times column is a case in point which has the audacity to blame Republicans alone for being condescending and derisive. They probably are, but I’m rarely exposed to Republicans, or Republican media, so that doesn’t bother me as much. But I’m constantly exposed to the condescension and derision of “Obama supporters” and liberal newspapers (as measured by Groseclose and Milyo) who think that McCain supporters “cling to their guns and religion” or that Palin supporters are “frightening” and “delusional” and don’t give voters in Alaska any credit for overwhelmingly voting her into office, and assume that mistakes she gives during interviews are signs of incompetence, whereas the numerous mistakes and fabrications that Joe Biden makes are merely signs of eccentricity.

I agree that Palin is really bad at handling herself on the national stage. Unlike Obama, she hasn’t had 4 years doing nothing else but campaigning for president. But that doesn’t make her incompetent, and doesn’t make her unfit. Bloomberg gave probably the worst speech I ever heard for his inaugural but has proven to be a very well respected mayor. It’s fine to disagree with Palin’s policies, and it’s fine to disagree with her view on the world, but please, as Obama would advocate, do so with respect.

Another reason to ignore the Issues when picking president

2008-10-26T00:55:00.000-07:00

Pretty much exactly 4 years ago, days before the election, I argued in my Stanford Daily column that Americans (myself included) are too stupid/ignorant to pick the President. That really understanding the correct policies a president should take, requires years of study, that people don't really take the time for, but shouldn't, given that in an economy where people specialize, it doesn't make sense for everybody to be a policy wonk.

That is why I advocated basing decisions on character rather than the "issues" journalists and pundits are always blathering on about.

Another reason issues don't matter, is that whatever issues Presidents promise is rarely what they deliver (usually because circumstances change). Bush ran on a campaign for a humble foreign policy and against nation-building, though 9/11 forced him to change all that.

Kinsley, in Time magazine this week made the point "Even more miraculous (though troublesome for democracy), both Lincoln and F.D.R. were elected by promising more or less the opposite of what they did in office. Lincoln said he'd preserve the institution of slavery. F.D.R. said he'd balance the federal budget."

Thus when the fact checkers all bristled and got all indignant at McCain's accusation that Obama would raise taxes, even though Obama's "plan" said he wouldn't. I think pish posh. Since when do campaign promises have any bite. McCain's point that Congress will likely push for higher taxes, and Obama will be more likely to accede is perfectly valid.

A Kristof column I agree with?!

2008-10-23T14:53:00.000-07:00

I had this discussion with myself some time last year, even before Obama won the primaries. Obama would have a huge effect on world perception of the US. As a semi old-school Marx style materialist/realist, I am not convinced that perception matters, but it is still nice when it shifts to what I think is a more accurate image of America.

A friend of mine said recently, it'd be nice to tell your grand kids, that you voted for the first Black US President. But otherwise, he like me is still mostly unmotivated to vote.

I also decided, when I had this thought some time last year, the same sentiment Kristof ends with: "Look, Mr. Obama’s skin color is a bad reason to vote for him or against him."

That logic takes away the main reason I have for voting for Obama. So I am still largely indifferent.

(Amusingly, in Kristof's list of countries led by minority presidents, he left out Peru's Fujimori, perhaps because Fujimori fled in ignominy.)

Even a Stopped Clock is Nouriel Roubini

2008-10-22T16:58:00.000-07:00

I’m a little bugged by all the attention and credit Nouriel Roubini has been getting for predicting the crash. I normally like contrarians, but I’m also generally an optimist, and pessimistic Bears bug me. I was always annoyed by the credit the Morgan Stanley economist, Stephen Roach, got for predicting the end of the dot-com boom in 2001.

The problem is that the fact of business cycles means that every expansion will end in recession. And people like Roach and Roubini started predicting the crash many years before the crash actually happened.

If I start predicting that there will be another crash, I will be right eventually. It doesn’t mean it’s useful.

There’s an expression, even a stopped clock is right twice a day. Just because a clock that happened to have stopped at 7:56 is accurate when it is 7:56 doesn’t mean it is useful.

I have the same problem with people who complain that there was someone at the FBI who predicted 9/11 before it happened. In an organization with 30,000 people, you probably have 30,000 predictions being made every single day. Anything that could possibly happen is probably predicted by one of them. It doesn’t mean there was anything useful about that prediction, any more than a stopped clock.

Reviewlet: Man of the Year

2008-10-20T15:10:00.000-07:00

Sometimes movies surprise you.
Movies that you hate as insipid drivel somehow pull it together in the closing scenes of the last act.

I can't think of a complete list off the top of my head.

Skeleton key was definitely one. (pap. airplane fodder. drivel.) But the last 10 minutes made it all worthwhile. the first 90 were all there to lower expectations.

Deterrence is another. Which is also all the pap and drivel except for the end of the last act, which not only excuses the rest of the movie but at least partially justifies the earlier crappiness. (domino and contender and matchstick men and euro trip have this quality to a lesser extent)

Man of the year is certainly another.

I spent the first hour not just thinking it was bad (despite its impressive cast), but actively hating it, at how it glorifies the mockery of the political system, taking cheap and dumb shots. The premise--amusing given Al Franken's true story--is that a comedian in the style of Bill Mahr or Jon Steawrt, but played by Robin Williams, decides to run for president. And while commercials had led me to expect something that glorified the everyman as president (like Bullworth or Dave) and while i'm fine with that concept, this movie made the premise of Robin Williams as president both disgraceful and disgusting.

And so i was actively hating it, handling e-mails, playing with my phone, until I realized, that the disgust was intentional. That everything I hated about it was intentional. That explained how they managed to attract such a stellar cast (laura linney, christopher walken, and tons of cameos from news anchors and comedians from chris mathews to tina fey).

So at the end, still not a great movie, but I respect it.

Final Grade:
B-

Krugman and Asimov and Me

2008-10-13T16:54:00.000-07:00

So Paul Krugman received a well deserved Nobel Prize today. Despite my political differences with his Ny Times column that I have commented on many times here, I still respect his models of international trade (I went to grad school wanting to expand on his models to understand development) and his popular books before the New York Times.

Watching him on News-Hour today, interesting that he said it was Asimov's sci-fi Foundation novels and psycho history that made him want to be an economist. I, somewhat embarrassingly, said exactly the same thing in my grad school essays. The idea that you could use mathematics to not only understand but also to shape society. In some ways, its amazing how far we've come toward achieving Asimov's vision, on the other hand, it's also notable how very far away we are as well.

The intro to my essay:

Issac Asimov, the science fiction writer, once envisioned a world where a mathematician invented a science called psychohistory that allowed him to foretell and therefore improve the course of human events. When I was younger, this fascinated me. However, it was not until I took freshman economics in college that I realized this was not all fantasy. By studying economics, I could apply my training in abstract math and theoretical computer science to something beyond the world of academia. The field of economics provides a window where my interests and abilities could be applied to research that has direct impact on the lives of so many people.

Heh, also gratuitously mentioned "such as those from Paul Krugman’s graduate International Economics class which I audited." Interesting to read these old essays, made readily available by Vista search.

Neel Kashkari: the $700 billion man, and bailout czar

2008-10-13T16:16:00.001-07:00

Interesting. This is the guy i used to wrestle with at the white house over the details of the white house energy policy of 2007. I think we were probably the only ones who really saw all the details. and we often clashed on them. He's a smart competent smooth talking guy, though there were times he played things a bit fast and loose.

The stock photo all the news articles are using is kinda funny.

nytimes article

usa today article

Digging Vista

2008-10-10T13:30:00.000-07:00

The New York Times has an article on living with vista. Having used vista as a clean install on two new machines, I've had no problems. Yeah, upgrading an old machine sonds problematic, but I've been happy. For the most part, no substantive differences except one: integrated search.

Now, the file explorer has fast integrated search (something you could do with google desktop, but integrated), and that's nice. Let's me adopt the google philosophy "search don't sort." After decades of experience in carefully organizing my files into directories, I don't have to so much anymore. And that is a good thing.

what happened to tackling the root causes of terrorism?

2008-10-08T12:47:00.000-07:00

Watching the debate last night, to Obama especially, it sounds like people believe that the way to handle terrorism is to find this Osama Bin Laden guy and the Taliban, and then the problem will be solved.

That was the attitude that was roundly derided by the media once upon a time. Terrorism is like a cancer of different cells, and killing any one is hopeless. Focusing on Afghanistan is pointless, most of the 9/11 terrorists came from Saudi Arabia. Many are now coming from Europe.

There was a time when liberals advocated somehow reforming the root causes, by spurring economic development. Though now the middle east is awash in petrodollars, you don't hear that any more.

Plus, decades of foreign aid spending and quiet diplomacy hasn't worked.

What isn't easy to say, is that the war in Iraq was an attempt to get at the root causes of terrorism. There was a time in 2005 when it looked like the crazy experiment might work. Democratic movements spreading across the middle east and arabic world, in Libya, Egypt, Jordan, Syria, Lebanon, Iran, Iraq, Afghanistan. I used to have the cover of the Economist magazine from this time. It didn't work, but that doesn't mean it wasn't worth a try.

Capping CEO Pay - why Golden Parachutes save firms money.

2008-10-06T13:20:00.000-07:00

There's been a lot of talk about capping CEO pay--which is included in the last bailout bill--and pretty much all of it has been ideological; no one has asked an economist what it all means.

So yes, from an "optics" view as they say in Washington, paying CEO's huge bonuses when they are forced to leave a failing company looks awful.

But from an economic point of view, the point of Golden Parachutes is to transfer risk from the risk averse potential CEO to the risk neutral firm. It is not something you give to reward a CEO for leaving, it is something to promise at the beginning to get him to join. What basic contract theory says is that by reducing the risk to the CEO for taking the job, you actually have to pay him/her less overall. Thus a ban on Golden Parachutes should lead to increased overall CEO compensation.

Of course a more likely and better outcome is that if a ban is in place, companies will come up with contracts to replicate golden parachutes, but don't look like golden parachutes. Perhaps a loan that is paid out of future wages. (Which I guess is already done and still looks bad, but less bad.)