Category: A Rationale
Posted by: Admin
The most general and the most pervasive way I make sense of the world is through economics. Concepts inspired by the great economic thinkers and philosophers applied to business and life. Here are their stories and my stories......
See also my blog Eye2theLongRun
See also my blog Eye2theLongRun
This paper is especially important at present..... a sharp warning to amateur gurus with colossal egos.....
Economics is Hard. Don’t Let Bloggers Tell You Otherwise
Kartik Athreya
Research Department
Federal Reserve Bank of Richmond
June 17, 2010
Abstract
In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contribute any insight to discussion of economics and, as a result, should be ignored by an open minded lay public.
Economics is Hard. Don’t Let Bloggers Tell You Otherwise
Kartik Athreya
Research Department
Federal Reserve Bank of Richmond
June 17, 2010
Abstract
In this essay, I argue that neither non-economist bloggers, nor economists who portray economics —especially macroeconomic policy— as a simple enterprise with clear conclusions, are likely to contribute any insight to discussion of economics and, as a result, should be ignored by an open minded lay public.
HOW could anybody dislike the notion of fairness? Everything is better when it is fair: a share, a fight, a maiden, a game and (for those who think blondes have more fun) hair. Even defeat sounds more attractive when it is fair and square.
A sense of fairness, as any parent knows, develops irritatingly early. A wail of “It’s not fair!” is usually the first normative statement to come out of the mouths of babes and sucklings. People seem to be hard-wired to demand fairness. Studies in which people are offered deals that they regard as fair and unfair show that the former stimulate the reward centres in the brain; the latter stimulate areas associated with disgust.
For the British fair play is especially important: without it, life isn’t cricket (especially when you score a perfectly good goal against the Germans and it is unfairly disallowed—see above, ref). Their country becomes quite pleasant when the weather is fair, though unfortunately it rarely is. And these days fair-trade goods crowd their supermarket shelves.
Fairness is not only good, but also moderate, which is another characteristic that the British approve of. It does not claim too much for itself. Those who, on inquiry, admit that their health and fortunes are fair-to-middling navigate carefully between the twin dangers of boastfulness and curmudgeonliness, while gesturing in a chin-up sort of way towards the possibility of future improvement.
The French have taken to using le fair-play in sport, presumably because (as their coach’s refusal to shake hands with his opposite number after losing to South Africa suggested) their own culture finds the concept rather difficult. When talking politics, however, the French, like the Americans, tend to go for the more formal notion of justice. But fairness appeals to the British political class, for it has a common sense down-to-earthiness which avoids the grandiosity of American and continental European political discourse while aspiring to do its best for all men—and of course for maidens too, fair and otherwise, for one of its virtues is that it does not discriminate on grounds of either gender or skin colour.
Not surprising, then, that Britain’s government should grab hold of the word and cling to it in the buffeting the coalition has had since the budget on June 22nd proposed higher taxes and even sharper spending cuts. “Tough but fair” is what George Osborne, the Conservative chancellor of the exchequer, called the cuts he announced. “It is going to be tough, but it is also very fair,” said Vince Cable, the Liberal Democrat business secretary. At last, something they could agree on.
Fair dos
Yet the fact that everybody believes in fairness is a clue to what’s wrong with the notion. Like that other warm-blanket word, “community”, it signals limp thinking. What exactly is “fair” about restricting trade, for instance? Or “unfair” about letting successful people in business or other fields enjoy the fruits of their enterprise without punitive taxes?
“Fairness” suits Britain’s coalition government so well not just because its meanings are all positive, but also because—like views within the coalition—they are wide-ranging. To one lot of people, fairness means establishing the same rules for everybody, playing by them, and letting the best man win and the winner take all. To another, it means making sure that everybody gets equal shares.
Those two meanings are not just different: they are opposite. They represent a choice that has to be made between freedom and equality. Yet so slippery—and thus convenient to politicians—is the English language that a single word encompasses both, and in doing so loses any claim to meaning.
Fairness is fudge. This newspaper will have none of it. We reject the wide, woolly notion of fairness in favour of sharper, narrower words that mean what they say, like just or cruel. Sadly, British politicians are unlikely to follow our lead. They will continue to paper over their cracks with fairness. Which, given how handy the word is, is probably fair enough.
Economist 3 July
A sense of fairness, as any parent knows, develops irritatingly early. A wail of “It’s not fair!” is usually the first normative statement to come out of the mouths of babes and sucklings. People seem to be hard-wired to demand fairness. Studies in which people are offered deals that they regard as fair and unfair show that the former stimulate the reward centres in the brain; the latter stimulate areas associated with disgust.
For the British fair play is especially important: without it, life isn’t cricket (especially when you score a perfectly good goal against the Germans and it is unfairly disallowed—see above, ref). Their country becomes quite pleasant when the weather is fair, though unfortunately it rarely is. And these days fair-trade goods crowd their supermarket shelves.
Fairness is not only good, but also moderate, which is another characteristic that the British approve of. It does not claim too much for itself. Those who, on inquiry, admit that their health and fortunes are fair-to-middling navigate carefully between the twin dangers of boastfulness and curmudgeonliness, while gesturing in a chin-up sort of way towards the possibility of future improvement.
The French have taken to using le fair-play in sport, presumably because (as their coach’s refusal to shake hands with his opposite number after losing to South Africa suggested) their own culture finds the concept rather difficult. When talking politics, however, the French, like the Americans, tend to go for the more formal notion of justice. But fairness appeals to the British political class, for it has a common sense down-to-earthiness which avoids the grandiosity of American and continental European political discourse while aspiring to do its best for all men—and of course for maidens too, fair and otherwise, for one of its virtues is that it does not discriminate on grounds of either gender or skin colour.
Not surprising, then, that Britain’s government should grab hold of the word and cling to it in the buffeting the coalition has had since the budget on June 22nd proposed higher taxes and even sharper spending cuts. “Tough but fair” is what George Osborne, the Conservative chancellor of the exchequer, called the cuts he announced. “It is going to be tough, but it is also very fair,” said Vince Cable, the Liberal Democrat business secretary. At last, something they could agree on.
Fair dos
Yet the fact that everybody believes in fairness is a clue to what’s wrong with the notion. Like that other warm-blanket word, “community”, it signals limp thinking. What exactly is “fair” about restricting trade, for instance? Or “unfair” about letting successful people in business or other fields enjoy the fruits of their enterprise without punitive taxes?
“Fairness” suits Britain’s coalition government so well not just because its meanings are all positive, but also because—like views within the coalition—they are wide-ranging. To one lot of people, fairness means establishing the same rules for everybody, playing by them, and letting the best man win and the winner take all. To another, it means making sure that everybody gets equal shares.
Those two meanings are not just different: they are opposite. They represent a choice that has to be made between freedom and equality. Yet so slippery—and thus convenient to politicians—is the English language that a single word encompasses both, and in doing so loses any claim to meaning.
Fairness is fudge. This newspaper will have none of it. We reject the wide, woolly notion of fairness in favour of sharper, narrower words that mean what they say, like just or cruel. Sadly, British politicians are unlikely to follow our lead. They will continue to paper over their cracks with fairness. Which, given how handy the word is, is probably fair enough.
Economist 3 July
This paper analyses who pays and who wins from CSR..... (thanks to NZBR)
Who exactly benefits from CSR
Who exactly benefits from CSR
19/06: The "big problem" summarised
Gary Becker.... from a WSJ interview
Bad legislation, maintained by self-seeking interest groups. Back in 1982, I remind Mr. Becker, the economist Mancur Olson published a book, "The Rise and Decline of Nations," predicting just that trend. Over time, Olson argued, interest groups would form to press for policies that would almost invariably prove protectionist, redistributive or antitechnological. Policies, in a word, that would inhibit economic growth. Yet since the benefits of such policies would accrue directly to interest groups while the costs would be spread across the entire population, very little opposition to such self-seeking would ever develop. Interest groups—and bad policies—would proliferate, and the nation would stagnate.
Olson may have sketched his portrait during the 1980s, but doesn't it display a remarkable likeness to the United States today? Mr. Becker thinks for a moment, swiveling toward the window. Then he swivels back. "Not necessarily," he replies.
"The idea that interest groups can derive specific, concentrated benefits from the political system—yes, that's a very important insight," he says. "But you can have competing interest groups. Look at the automobile industry. The domestic manufacturers in Detroit want protectionist policies. But the auto importers want free trade. So they fight it out. Now sometimes in these fights the dark forces prevail, and sometimes the forces of light prevail. But if you have competing interest groups you don't end up with a systematic bias toward bad policy."
Mr. Becker places his hands behind his head. Once again, he reflects, then smiles wryly. "Of course that doesn't mean there isn't any systematic bias toward bad policy," he says. "There's one bias that we're up against all the time: Markets are hard to appreciate."
Capitalism has produced the highest standard of living in history, and yet markets are hard to appreciate? Mr. Becker explains: "People tend to impute good motives to government. And if you assume that government officials are well meaning, then you also tend to assume that government officials always act on behalf of the greater good. People understand that entrepreneurs and investors by contrast just try to make money, not act on behalf of the greater good. And they have trouble seeing how this pursuit of profits can lift the general standard of living. The idea is too counterintuitive. So we're always up against a kind of in-built suspicion of markets. There's always a temptation to believe that markets succeed by looting the unfortunate."
Bad legislation, maintained by self-seeking interest groups. Back in 1982, I remind Mr. Becker, the economist Mancur Olson published a book, "The Rise and Decline of Nations," predicting just that trend. Over time, Olson argued, interest groups would form to press for policies that would almost invariably prove protectionist, redistributive or antitechnological. Policies, in a word, that would inhibit economic growth. Yet since the benefits of such policies would accrue directly to interest groups while the costs would be spread across the entire population, very little opposition to such self-seeking would ever develop. Interest groups—and bad policies—would proliferate, and the nation would stagnate.
Olson may have sketched his portrait during the 1980s, but doesn't it display a remarkable likeness to the United States today? Mr. Becker thinks for a moment, swiveling toward the window. Then he swivels back. "Not necessarily," he replies.
"The idea that interest groups can derive specific, concentrated benefits from the political system—yes, that's a very important insight," he says. "But you can have competing interest groups. Look at the automobile industry. The domestic manufacturers in Detroit want protectionist policies. But the auto importers want free trade. So they fight it out. Now sometimes in these fights the dark forces prevail, and sometimes the forces of light prevail. But if you have competing interest groups you don't end up with a systematic bias toward bad policy."
Mr. Becker places his hands behind his head. Once again, he reflects, then smiles wryly. "Of course that doesn't mean there isn't any systematic bias toward bad policy," he says. "There's one bias that we're up against all the time: Markets are hard to appreciate."
Capitalism has produced the highest standard of living in history, and yet markets are hard to appreciate? Mr. Becker explains: "People tend to impute good motives to government. And if you assume that government officials are well meaning, then you also tend to assume that government officials always act on behalf of the greater good. People understand that entrepreneurs and investors by contrast just try to make money, not act on behalf of the greater good. And they have trouble seeing how this pursuit of profits can lift the general standard of living. The idea is too counterintuitive. So we're always up against a kind of in-built suspicion of markets. There's always a temptation to believe that markets succeed by looting the unfortunate."
The new iPhone 4 is deliberately pitched and to be marketed as the result of combined design principles drawn from the arts as from the geek end of technology. CEO Steve Jobs has often spoken of this concept - and to some extent it is evident in various Apple products. It appears though to have been taken to a new level in a stringly commercial sense in the upcoming release....
From ZNET....
Leading up to the launch of the iPhone 4 (Techmeme, live coverage, gallery, all Apple posts), run by the iOS since it powers the iPhone, iPod touch and iPad, there were whispers everywhere about the Android’s turbo-charged innovation cycle, the end of iPhone envy and how other smartphones from the likes of HTC were closing the gap.
Now it wasn’t like the iPhone was becoming a commodity device, but you could see some parity on the horizon. Even Sam Diaz got over his iPhone envy. Enter Apple CEO Steve Jobs who was having none of that talk. Jobs talked about the mix between technology and liberal arts. The emphasis is on technology as an art form.
From ZNET....
Leading up to the launch of the iPhone 4 (Techmeme, live coverage, gallery, all Apple posts), run by the iOS since it powers the iPhone, iPod touch and iPad, there were whispers everywhere about the Android’s turbo-charged innovation cycle, the end of iPhone envy and how other smartphones from the likes of HTC were closing the gap.
Now it wasn’t like the iPhone was becoming a commodity device, but you could see some parity on the horizon. Even Sam Diaz got over his iPhone envy. Enter Apple CEO Steve Jobs who was having none of that talk. Jobs talked about the mix between technology and liberal arts. The emphasis is on technology as an art form.
06/06: The Beat Goes On....
French Connection: The Eurozone Crisis Worsens Sharply
By Peter Boone and Simon Johnson
The big news is France. With sentiment worsening across Europe, France has lost its relative safe haven status – credit default swap spreads on French government debt were up sharply today.
The trigger – oddly enough – was Hungary’s announcement that its budget is worse than expected (blaming the previous government; this is starting to become the European pattern) and in the current fragile environment discussed yesterday, this relatively small piece of news spooked investors. But these developments only reinforced a trend that was already in place.
It did not help that the Irish Minister of Finance announced Ireland has 74.2bn euros of guaranteed bank loans, bonds, and systemic support falling due between now and Oct 1. This is around 55% of GNP. It sounds like everyone backed by the Irish government had the “clever” idea to roll over their debts to just before the guarantees expire.
The big losers are Portugal-Ireland-Italy-Greece-and-Spain as always, but Belgium is now in the line of fire, and France is clearly under pressure. The spread between French and German credit default swaps (measuring the relative probability of default) is up – yesterday this was 40 basis points, today it stands at 44 (up from just 5 basis points at the end of 2009; most of the increase is since mid-March, with a sharp acceleration recently). French bonds have become illiquid, with wide bid-ask spreads; not what is supposed to happen in a safe haven. This is going to make the French angry – watch for more market slanders from top French politicians over the weekend; you know they would just love to ban trading in something.
Earlier today the French Prime Minister came out with a quote for the ages:
“I only see good news in parity between euro and dollar”.
Be careful what you wish for – such statements will drive the Germans crazy as they see further evidence that inflation lovers are clearly winning influence and might just gain control at the European Central Bank (ECB).
By Peter Boone and Simon Johnson
The big news is France. With sentiment worsening across Europe, France has lost its relative safe haven status – credit default swap spreads on French government debt were up sharply today.
The trigger – oddly enough – was Hungary’s announcement that its budget is worse than expected (blaming the previous government; this is starting to become the European pattern) and in the current fragile environment discussed yesterday, this relatively small piece of news spooked investors. But these developments only reinforced a trend that was already in place.
It did not help that the Irish Minister of Finance announced Ireland has 74.2bn euros of guaranteed bank loans, bonds, and systemic support falling due between now and Oct 1. This is around 55% of GNP. It sounds like everyone backed by the Irish government had the “clever” idea to roll over their debts to just before the guarantees expire.
The big losers are Portugal-Ireland-Italy-Greece-and-Spain as always, but Belgium is now in the line of fire, and France is clearly under pressure. The spread between French and German credit default swaps (measuring the relative probability of default) is up – yesterday this was 40 basis points, today it stands at 44 (up from just 5 basis points at the end of 2009; most of the increase is since mid-March, with a sharp acceleration recently). French bonds have become illiquid, with wide bid-ask spreads; not what is supposed to happen in a safe haven. This is going to make the French angry – watch for more market slanders from top French politicians over the weekend; you know they would just love to ban trading in something.
Earlier today the French Prime Minister came out with a quote for the ages:
“I only see good news in parity between euro and dollar”.
Be careful what you wish for – such statements will drive the Germans crazy as they see further evidence that inflation lovers are clearly winning influence and might just gain control at the European Central Bank (ECB).
Category: Environmental
Posted by: Admin
"Some good news is that, using government-scientists’ maximum estimate of the amount of oil spilled daily (25,000 barrels) into the Gulf of Mexico from BP Deepwater, this spill today ranks as only the ninth largest accidental oil spill in world history. To become the largest accidental oil spill in world history, it would have to continue spilling unabated, at this maximum-estimated rate of spillage, for another 94 days. (Using the mid-range estimate of daily spillage – 18,500 barrels daily – BP Deepwater would have to spill unabated for another six days [as of May 29] even to break into the top ten, and then another 134 days beyond that to become the world’s largest accidental spill.) Yet how frequently is news of this fact, which gives necessary context, spread by the mainstream media?
Even better news is the declining frequency of major oil spills. Some evidence of this healthy trend is the fact that the average time that elapsed between each of history’s top ten accidental oil spills prior to BP Deepwater was 26 months. But the amount of time between the most recent of these top-ten spills (which occurred in September 1994) and the BP Deepwater spill is 187 months. How many Americans today hear of this happy trend?"
From Don Boudreaux.... Cafe Hayek.
Even better news is the declining frequency of major oil spills. Some evidence of this healthy trend is the fact that the average time that elapsed between each of history’s top ten accidental oil spills prior to BP Deepwater was 26 months. But the amount of time between the most recent of these top-ten spills (which occurred in September 1994) and the BP Deepwater spill is 187 months. How many Americans today hear of this happy trend?"
From Don Boudreaux.... Cafe Hayek.
This morning President Obama stated, flatly "This BP's fault and BP will pay the costs (of clean up compensation etc)".
This statement says a great deal about:
- one of the most common mistakes made by non economists
- just how attractive rhetoric rather than analysis is for politicians
And it's so simple.....
This statement says a great deal about:
- one of the most common mistakes made by non economists
- just how attractive rhetoric rather than analysis is for politicians
And it's so simple.....
Category: Regulation
Posted by: Admin
Example of "bold" regulation of new financial products.....
"For example, before 1996, certain initial public offerings of stocks were subject to merit review in certain states, where the state decided if a security is a "bad" investment and thus not appropriate to be offered to its citizens. In fact, this is exactly what happened to Apple Computer when it first went public in 1980. Massachusetts prohibited the offering of Apple shares because they were "too risky," and Apple did not even bother to offer its shares in Illinois due to strict state laws on new issues. What if federal bureaucrats had had the power to impose their judgment on a "risky" financial product (such as an IPO) on a nationwide scale, or every state followed Massachusetts' lead?"
From Marginal Revolution
"For example, before 1996, certain initial public offerings of stocks were subject to merit review in certain states, where the state decided if a security is a "bad" investment and thus not appropriate to be offered to its citizens. In fact, this is exactly what happened to Apple Computer when it first went public in 1980. Massachusetts prohibited the offering of Apple shares because they were "too risky," and Apple did not even bother to offer its shares in Illinois due to strict state laws on new issues. What if federal bureaucrats had had the power to impose their judgment on a "risky" financial product (such as an IPO) on a nationwide scale, or every state followed Massachusetts' lead?"
From Marginal Revolution
