Re: financial leverage

2003-10-31 Thread alypius skinner
 Short-term I would lose about 1-2% percent on the
 borrowed fund but in the long-term I would gain 1-2%
 when I lock in a long-term bond that has a coupon rate
 that is above the borrowed rate.  I don't see how bond
 would be a loser if interest rates goes higher since I
 will locking in a bond that yield a higher coupon rate
 then the borrowed rate.

If you plan to resell your bonds before maturity, the rising rates will
cause the resell value to go down accordingly.  If you plan to hold the
bonds to maturity, the interest you receive will probably be a net loss in
constant (inflation-adjusted) dollars, because interest rates do not rise
for no reason.  If rates on long term bonds rise, it will probably be in
large part because of rising inflation.  With our government increasing the
money supply to stimulate the economy and the value of the dollar vis a vis
other currencies in a sustained downward trend, both higher inflation and
higher interest rates are likely in the future.


Re: MVT and policy portfolios

2003-10-18 Thread alypius skinner
- Original Message -
From: fabio guillermo rojas [EMAIL PROTECTED]
To: alypius skinner [EMAIL PROTECTED]
Sent: Saturday, October 18, 2003 11:47 AM
Subject: MVT and policy portfolios

   - people spend an inordinate time satisfying extreme voters, even
   winning a party nomination
   They're trying to put together a winning coalition by targeting a
  of market segments.  You don't see General Motors or Altria/Philip
  targeting just the median car buyer or median cigarette smoker.

 Well, this is not a prediction of the median voter theorem. If you have N
 policies, the MVT would predict that the candidate would gravitate to the
 center of each policy. What you are suggesting is that the candidate would
 go to the extreme position for each policy, as defined by some
 subpopulation who cares about the issue.


Yes, special interests--sometimes including  the opinions of the rulers' own
social class--are often more influential than the median voter preference.
Furthermore, if a politician can put together a winning coalition--let's say
one that reliably gives him about 55% of his constituents' votes-- he can
usually ignore those market segments who are not part of his winning
coalition.  Sometimes we also see politicians neglecting part of their
coalition--such as Democrats neglecting blacks or Republicans neglecting
religious social conservatives--because, in a non-parliamentary system, they
can be safely taken for granted.  Thus, both President Bushes courted the
homosexual lobby, because they knew that the Democrats would not nominate
anyone  the social conservatives, however unhappy, could vote for.   (And
I'm fairly sure, if David Duke could win the Democratic Party's presidential
nomination, that he would carry the black vote in the general election.)
The Democrats are enthralled to a coalition of special interests which would
never allow someone acceptable to social conservatives to be nominated,
just as the Republican coalition would never allow anyone to be nominated
who was not acceptable to big business interests.  As another example,
notice how both Democrats and Republicans in Presidential elections always
nominate someone whose views on abortion are to the left and the right
respectively of the median voter, who, according to polls, prefers more
restrictions than the Democratic nominee will endorse and fewer restrictions
than the Republican nominee is willing to allow.  So the two parties, rather
than competing for the median voter, will  compete for those market segments
which would not drive away--or be driven away by--the other segments that
make up the core of *either* party's coalitions.  In a close election, this
often means that both sides compete intensely for that segment of likely
voters which is least informed, least consistent in its opinions, and most
politically clueless.  These people are often the kingmakers in

Related to this is the question of whether there really is a median voter.
Let's take 10 issues--abortion, gun control, gay rights, trade policy, tax
rates, immigration, middle east policy, racial preferences, CO2/global
warming policy, and SDI/star wars missile defense.  What percentage of
the electorate is in the middle quintile (if we could quantify these issues)
on all 10?

 There also is the weight that each voter gives to each issue.  For
significant numbers of voters, abortion or support for Israel or support for
Kyoto/the environment or gay rights positions or gun control or
affirmative action policies will outweigh all other considerations.  Much
more often, even  though one is not dealing with a true single issue
voter, taking the right or wrong position on one issue may outweigh
one's position on 2, 3, or more other issues that are a lower priority for a
given voter.  There is also the question of how committed an office seeker
seems to be to a given issue.  For example, among Republicans we often see
the following tightrope being walked:  the office seeker tries to be
sufficiently supportive of traditional values that he endears himself to the
social conservatives in his party--especially in the primaries--but not so
supportive that socially liberal Republicans in the primaries (or
independents in the general election) will think that he really means it.

On a weighted list of issues, there may not be enough median voters to
bother with.   Putting together a winning coalition of market segments is
probably a surer path to victory.


Re: Median Voter Theorem, Part Deux

2003-10-17 Thread alypius skinner
 - people spend an inordinate time satisfying extreme voters, even after
 winning a party nomination

 They're trying to put together a winning coalition by targeting a variety
of market segments.  You don't see General Motors or Altria/Philip Morris
targeting just the median car buyer or median cigarette smoker.


PS--Fabio, this reply may not appear on the list.  I think Bryan has been
diverting my posts to some cyberfile 13.  The last half dozen or so times I
attempted to post, nothing ever appeared on the list, so I've pretty much
given up trying.  But I can still read everyone else's messages, so you can
reply to me on the list if you wish to.

Re: immigration: net gain or net drain?

2003-09-18 Thread alypius skinner

 Of course, if the losses from immigration restrictions are greater than
 you might think, the gains of weaker restrictions are also greater than
 you would think.  When you double the number of immigrants, you will be
 admitting a lot of people with a lot of surplus, not just marginal

I'd like for you or someone to attempt a crude, ball park estimate for me of
the net gains from immigration in a specific case.
Less than 100 years ago, Kosovo was a mostly Serbian region of the Federal
Republic of Yugoslavia.  Then high levels of legal and illegal immigration
from neighboring Albania made it a mostly Albanian region.  How much better
off is Yugoslavia today as a result of past immigration than it would have
been if it had tightly restricted immigration? How much better off are the
few remaining Serbs who have not been driven out of Kosovo or killed than
they would have been if foreign immigration had been tightly restricted for
the last 100 years? (Of course, one can always argue that the immigrants
benefited, but how did the receiving party benefit? How was it in their
best interest to open the doors?)

Another example is Palestine.  Now I know the natives of Palestine had no
control over immigration policies in the late 19th and early 20th centuries;
that was a British decision.  But how much better off is the *average*
Palestinian--most of whom live in the West Bank and Gaza strip--as a result
of Jewish immigration?  And since immigration makes their lives so much
better, why is there so much unrest?

A third example: American immigration to the Mexican state of Texas
certainly benefited the immigrants; but as a result, half of Mexico was, a
generation later, off limits to most Mexican citizens until today.  How much
did the average member of the receiving party benefit from allowing large
scale Anglo immigration to Texas?

If current immigration policies in the United States give the Democrats a
permanent lock on the White House beginning in 2008, and eventually a lock
on Congress as well, how much better off will the receiving party and their
posterity be as a result? In California, would Cruz Bustamante be a
frontrunner in the special election for governor in the absence of large
scale immigration from Mexico?


Re: Economics and E.T.s

2003-09-18 Thread alypius skinner
 Well, we have reaches a level of life exactly equal to our own, and we
 haven't colonized anything beyond our planet.  The tehnology is
 probably there, but the costs are high and the benefits are unclear.
 The same maybe true 200 years from now.

(Gee, I hope this is on topic!) Anyway, a physicist said one time that any
extraterrestrial visitors probably would have to live in our little corner
of the Milky Way.  Since  the speed of light functions as an absolute speed
limit, the length of time necessary for distant interplanetary travel poses
logistic challenges that are probably insurmountable with any possible

 Also, think about this: On our own planet, there are thousands, maybe
 millions of different forms of life, from humans to peat moss to
 bacteria.  The overwhelming majority of species on earth are things
 like insects and bacteria -- not humans.  If there were life elsewhere
 in the universe, isn't there a higher probability that's it's on the
 level of bacteria rather than humans?

Oh, absolutely.  Even if life is common, intelligent life probably isn't.
It took life on earth many hundreds of millions of years to evolve an
intelligent life form, and even then it was unlikely.  If some disaster had
not wiped out the dinosaurs, there might never have evolved a niche for
primates.  And if the Pleistocene ice age had not begun about 3 million
years ago when the isthmus of Panama moved into its present position (which
altered the oceans' thermohaline circulation in important ways) and about
the time that  early hominids evolved in Africa, Homo sapiens, or even
erectus, might never have evolved. Our primate ancestors might have remained
in the rain forest without the drying and cooling effects of the ice age.
And even primates that adapt to savannah do not necessarily become
intelligent--just look at baboons.  And even if early Homo had evolved, in
the absence of our periodic glacial episodes, his IQ probably never would
have risen to a high enough level to create industrial civilization.  IQ,
brain size, cranial size, and the latitude at which a population probably
lived during the last glacial era (circa 120,000 BC to c. 11,000 BC) are all
correlated.  And even now either a return to ice age conditions or, in the
case of continued interglacial conditions, a gradual decline in intelligence
due to unfavorable differential fertility trends, might be sufficient to end

Furthermore, it is not only intelligence that makes technological
civilization possible, but prehensile thumbs and bipedalism.  It all has to
evolve as a package.

When the first humans came to the western hemisphere, why didn't they find
another intelligent species already here, having evolved independently?
Because the chance of intelligent life evolving anywhere, at any time, is

Intelligent species don't even appear to be very successful.  If you look at
every species of ape but man, they are marginal species.  Their sparse
populations eke out an existence in specialized environmental niches and do
not appear to be very adaptable.  Even Homo sapiens was almost extinguished
following the eruption of a super-volcano about 72,000 BC.  It was only with
the invention of agriculture at the beginning of this interglacial that our
numbers multiplied enough to give our species the (misleading?) appearance
of biological security.



2003-09-05 Thread alypius skinner
 Perhaps even more fundamentally, if the Americans who pay the immigrants
 didn't benefit by paying the immigrants the Americans wouldn't pay them.
 Obviously both parties--American and immigrant--benefit from the exchange
of money for

Sure *some* Americans benefit--just like some Americans would benefit from
invading Communist China, as I pointed out before.  But do Americans in the
aggregate or on average benefit? Where does this benefit show up in the
economic stats?  Cuban-American immigrant Borjas says we benefit to the tune
of 10 billion dollars in an economy of 10 thousand billion--that's a .001%
benefit to the average US citizen, and it may well be canceled out or worse
by net negative externalities, which are much easier to enumerate than
positive externalities, perhaps because there are more of them.

~Alypius Skinner

immigration's effect on per capita GDP

2003-09-04 Thread alypius skinner
Robert Book wrote:

Do any of these studies take into account the effect of immigrants on
demand?  It would see these people have to eat.

Judging from the article below (Note carefully what Professor Borjas is
saying here. Sure, those immigrants who work do raise overall GDP. But the
bulk of that increase goes to the immigrants themselves, in the form of
wages. The benefit to native-born Americans, after everything is taken into
account, is infinitesimally small.), the effect of immigrants on demand
does appear to be taken into account.

What I want to know is whether the labor economists' studies take into
account the cost of the immigrants' crime rates (which are above the native
born average), their welfare dependency (again, above the national average),
and the higher transaction costs and ethnic friction and rivalry that comes
from high rates of immigration.  Most immigrants also come from cultures
that are more socialistic than the United States and, upon gaining
citizenship, vote heavily for the more socialistic of the two major parties.
(An exception here may be the relatively small East Asian/Oriental
population, which seems to straddle the fence, although the large Chinese
element seemed to lean toward the Democrats during Clinton's second term,
when he was perceived as China-friendly, even though it may have been at the
expense of US national security.  Miami's Cubans are also an exception,
perhaps because most Cuban refugees were from Cuba's more well-to-do classes
and also tend to be vehemently anti-Communist.  But exceptions are rare and
relatively small.)  It always struck me as odd that contemporary
libertarians (although not von Mises or the objectivist Ayn Rand) are the
strongest supporters of open borders, even though most of the people who
would enter under such an arrangement would be hostile to libertarian
political thought.

~Alypius Skinner

Contra Costa Times
December 4, 1999
Immigration policy stupid, evil and hurting Americans
By Peter Brimelow

IN AMERICA, WE have a two-party system, a Republican congressional staffer
is supposed to have told a visiting group of Russian legislators some years

There is the stupid party. And there is the evil party. I am proud to be a
member of the stupid party.

He added: Periodically, the two parties get together and do something that
is both stupid and evil. This is called -- bipartisanship.

Our current mass immigration policy is a classic example of this fatal
Washington bipartisanship. It is a stupid policy because there is absolutely
no reason for it -- in particular, Americans as a whole are no better off
economically because of mass immigration.

It is an evil policy because it second-guesses the American people, who have
shown through smaller families that they want to stabilize population size.

Unfortunately, our current immigration policy is consuming the environment
with urban sprawl, hurting the poor and minorities with intensified wage
competition, and ultimately threatening the American nation itself -- what
Abraham Lincoln called the last, best hope of earth -- with cultural and
linguistic fragmentation.

And, of course, the current mass immigration policy is bipartisan. Both
major party leaderships have tacitly agreed to keep the subject out of
politics. No single figure is more responsible for this than Sen. Spencer
Abraham, R-Mich., chairman of the Senate's Immigration Subcommittee.

Abraham was a key figure in sabotaging the most recent chance of reform, the
Smith-Simpson immigration bill, in 1996.

Ironically, this was a truly bipartisan measure, proposed by Republicans but
based on the work of the Jordan Commission, headed by the former black
liberal Democratic Congresswoman Barbara Jordan. She recommended almost
halving immigration, in part because of its impact on the poor.

The economic stupidity of current mass immigration policy is illustrated by
a brilliant new book, Heaven's Door: Immigration Policy and the American
Economy (Princeton University Press).

The author, Professor George Borjas of Harvard University's John F. Kennedy
School of Government, is widely regarded as the leading American immigration
economist. And he is an immigrant, arriving here penniless from Castro's
Cuba in 1962, when he was 12 years old.

Borjas has every reason to favor immigration. He writes movingly about his
own early experiences, and compassionately about the immigrant waves that
have followed him.

But, as a scholar, he recognizes what he calls accumulating evidence that
immigration has costs as well as benefits. My thinking on this issue has
changed substantially over the years, he admits.

Professor Borjas' devastating findings:

The current wave of mass immigration is not benefiting Americans overall.
All of the available estimates suggest the annual net gain is astoundingly
small, writes Professor Borjas, ... less than 0.1 percent of the Gross
Domestic Product. Roughly: less than

US housing price trends

2003-08-14 Thread alypius skinner
Around U.S., a House Is a Home but Not a Bonanza

August 6, 2003

FORT WAYNE, Ind. - On a tree-filled boulevard known as
Doctors' Row, the four- and five-bedroom brick Tudor homes
that are the jewels of this city's housing stock were
selling for about $150,000 two decades ago. At the time,
some homes in the nation's most desirable suburbs, like
Brookline, Mass.; Sausalito, Calif.; and Great Neck, N.Y.,
cost the same.

Over the last 20 years, however, the nation's housing
market has been cleaved in two, and the break has helped
create two very different economies in one country.

Homes in the areas that were already the most expensive -
California and the Boston-to-Washington corridor - have
often doubled or tripled in value, even after adjusting for
inflation. The increases have created nest eggs for
longtime owners and allowed them to borrow billions of
dollars against their equity, financing new kitchens and
college educations and keeping the current economic malaise
from being far worse than it might have been.

But while the boom has become the subject of daily
conversations among the middle class and affluent in New
York, San Francisco and Los Angeles, people in much of the
country have little housing bounty to tap for home
improvements, retirement or other needs. From Fort Wayne to
Rochester to Salt Lake City, the prices of typical homes
across most of the country's vast middle have risen just
ahead of inflation - and more slowly than incomes. The cost
of homes in the most expensive cities is now about six
times that in the least expensive, up from a ratio of three
to one two decades ago.

Here in Fort Wayne, the homes with elegant porticoes and
broad lawns on Doctors' Row sell for about $300,000 today,
roughly the same as they did in the early 80's, after being
adjusted for inflation.

Not a single house in Fort Wayne - a small,
manufacturing-heavy city halfway between Chicago and
Detroit, with a jobless rate below the nation's - has sold
this year for more than $800,000, according to real estate
industry data. That is roughly the average price of a
two-bedroom apartment in Manhattan.

The real housing boom is fairly concentrated, said Mark
M. Zandi, the chief economist of Economy .com, a research
firm. And at the moment, it is clearly keeping the economy
afloat in those areas.

There is no such cushion throughout much of the nation's
interior. Some economists argue that the Federal Reserve's
aggressive interest rate cuts might have been more
effective at ending the economic slowdown if the gains in
house prices - and the potential they create for consumer
spending - had been more broadly shared.

Last year, Tom and Judy Auer sold the four-bedroom Fort
Wayne house where they raised their three children for
$107,900, or slightly less than the $34,000 they bought it
for in 1974, after adjusting for inflation. Without a
bonanza from the sale, the couple now live in a smaller
house in Fort Wayne, relying on the pension from Mr. Auer's
job as a hardware salesman at Sears, Roebuck and Social
Security, which they began drawing early.

Marva and Bill Herx, on the other hand, left Fort Wayne in
1998 to move to the Philadelphia suburbs for his job. When
they returned last year, they had made enough profit
selling their Pennsylvania house - for about 40 percent
more than the purchase price - that they were able to move
into a house in Fort Wayne noticeably bigger than the one
they had left.

The home costs in Fort Wayne have stayed pretty much the
same, said Ms. Herx, who is in her 50's. In Philadelphia,
we made a good profit in just four years.

The dynamic is reversed for younger adults, who are
struggling to afford houses on the coasts while their
counterparts elsewhere in the country are taking advantage
of low mortgage rates to buy bigger, better homes than in
the past.

All my friends in Fort Wayne have houses. I think the
biggest thing in the world I own is a cellphone, said
Michael Korte, a 28-year-old Fort Wayne native who works
for the City Council in New York and rents a two-bedroom
apartment along with his sister, brother-in-law and nephew
on the Lower East Side. It blows my mind.

For $102,000, Brady Gerding, a high school classmate of Mr.
Korte, recently bought 27 acres of land outside of the city
where he and his wife will build a house. It will be the
second house owned by Mr. Gerding, who, unlike Mr. Korte,
did not graduate from college.

You can still live like a king in Fort Wayne for
$200,000, said Linda Duesler, who has been selling houses
here since 1977. And you can live pretty well for

Beyond determining many families' wealth and standard of
living, the two-tier housing market has begun to create
difficult questions for government officials trying to
create policies that apply to the entire nation. For
example, when designing pensions, it becomes very difficult
to judge the ability of people to retire because their
finances might be in much better shape 

Re: Absolute vs. relative income level

2003-07-23 Thread alypius skinner

 Dear armchairs,

 i think there is a at least partial contradiction between the hypothesis
of diminishing marginal return of income and the hypothesis that people care
about consuming more than their neighbors or about earning more than their
neighbors (Frank: Luxury Fever). If the latter is true than the first
hypothesis is weak. What do you think about this?


I don't see a contradiction.  Once people have enough money for food,
housing, keeping up with the Jones's, (or perhaps besting the Jones's),
etc., then additional income beyond that level has less perceived value.


Re: broadcast spectrum rent

2003-06-06 Thread alypius skinner

 The spectrum leaseholders should be free of any content restrictions
 than the usual laws about fraud).  That would create a market for the
 highest and best social use of the spectrum.

I was cheering you on  upto here.  Banning content restrictions (which I
think is a decision that should somehow be made within the viewing area, not
Washington) will lead to the most profitable use of the spectrum, but that
is not necessarily the highest and best social use.  In fact, I think an
excellent case could be made for either requiring the spectrum to be used
for anything *but* television (best), or making television a government
monopoly:  in the latter case,  with the higher boredom factor produced by
bureaucratic management with no profit incentive (yes, it should fully
subsidized by us longsuffering taxpayers),  viewership would dwindle, much
to the benefit of both individual ex-viewers and society at large.


stock trade patterns could predict financial earthquakes

2003-06-04 Thread alypius skinner
Public release date: 14-May-2003
Contact: Denise Brehm [EMAIL PROTECTED] 617-253-2700
Massachusetts Institute of Technology

Stock trade patterns could help predict financial earthquakes

CAMBRIDGE, Mass.--The stock market has its share of shakeups, but who would
guess that large movements in this man-made system adhere to a similar
of predictability as earthquake magnitudes?

After analyzing four years of data from the world financial markets, an
interdisciplinary team comprising an economist at the Massachusetts
of Technology and physicists from Boston University discovered that
events in the stock market adhere to distinct patterns. They believe that
market analysts could use these new findings to partially predict the chance
a market crash, although prevention is not possible.

The frequency of crashes such as those in 1987 and 1929 follow these
patterns, said Xavier Gabaix, assistant professor of economics at MIT and
author of the paper describing this research, which is appearing in the May
issue of Nature. But that doesn't mean we'll be able to predict with
when a change will occur or which direction the change will go.

The patterns found by the scientists are power laws--which describe
mathematical relationships between the frequency of large and small events.
such power law is used to forecast the chances that an earthquake of a given
magnitude will occur.

In short, the scientists have shown that stock markets have a mathematical
elegance frequently found in natural systems.

We have found that the artificial world of the financial markets follows a
pattern similar to one found in our natural world, said Gabaix. Trading on
the stock market has a lot of randomness, but at the end of the day you find
that a pattern emerges that matches power-law patterns found empirically in
data from systems as diverse as earthquakes and human language.

The team also found that the actions of large market participants, like
funds, produce this power-law behavior when they trade stock under time

We want to understand financial earthquakes in order to protect people like
you and me, whose retirement is tied up in the markets, said Professor H.
Eugene Stanley, director of the Center for Polymer Studies at BU and a
co-author of the paper. Fortunately in Tokyo they build buildings so that
don't succumb to earthquakes. We need to do the same thing in economics. BU
physicists Dr. Parameswaran Gopikrishnan and Dr. Vasiliki Plerou are also

But our research suggests that the forces that give rise to the power laws
stock market fluctuations are extremely robust, said Gabaix. So
unfortunately, such crashes would be very, very hard to prevent.

If you put an extremely large amount of friction--in the form of
regulations--into the system, you could prevent the crashes. But moderate
amounts of frictions will make no difference, he added. In any case,
we can give advice on policy, we need more research to better understand all
those regularities in the stock market.

When applied to a precise computer model, the power laws might allow market
analysts to predict a crash, but not necessarily prevent it.

We believe that the computer model presently used by most analysts
the number of large, rare events. That is what we're looking at next, said
Gabaix. If we combine physics methods and economic reasoning, we may be on
right track.


In their paper, the scientists show that--for the market as a whole and for
individual stock--the daily volume of stocks traded, number of trades and
fluctuations follow power laws.

For example, the number of days when a particular stock price moves by 1
percent will be eight times the number of days when that stock moves by 2
percent, which will in turn be eight times the number of days when that
moves by 4 percent, which will in turn be eight times the number of days
stock moves by 8 percent, and so on.

The same relationship (called the inverse cubic pattern) characterizes the
number of daily trades. A similar power law (the inverse half-cubic pattern)
describes the number of shares traded each day.

For instance, if 100,000 shares of Apple stock were traded on 512 days
during a
certain period, then you can predict that there would be 64 days when
shares of Apple stock were traded, and eight days when 1,600,000 shares of
Apple stock were traded, and one day when 6,400,000 shares of Apple stock

To understand these patterns, the scientists looked at the size of large
traders, such as mutual funds with more than $100 million in assets. They
that their size also follows a power law. The number of funds that manage $1
billion is twice the number of funds with $2 billion, which in turn is twice
the number of funds with $4 billion, and so on. (This pattern is called
Law, named after 

Fw: economists find evidence for Bronx effect

2003-06-03 Thread alypius skinner

For years lawyers have talked about the Bronx effect, the idea that 
juries from high-poverty areas with large minority populations favor 
injured plaintiffs.  But anecdotes aside, little hard evidence has 
been brought forward one way or the other. The paucity of analysis on 
the role of race and poverty in the American tort system  -- and 
growing interest in tort reform -- makes a new study published in the 
JOURNAL OF LEGAL STUDIES (v. 32 (1), Jan. 2003) all the more 

According to the study's authors, economists Eric Helland and 
Alexander Tabarrok, research director of The Independent Institute, 
tort awards are significantly higher in counties and jury districts 
that have high black and Hispanic populations and poverty rates.

  Among Helland and Tabarrok's findings:

* As white poverty increases, jury awards decrease; but as black 
poverty increases, jury awards increase.

* A one percent increase in the black poverty rate is associated with 
a three to ten percent increase in the average size of a personal 
injury award.

* A one percent increase in the Hispanic poverty rate is associated 
with a seven percent increase in the average size of a personal 
injury award.

* Forum shopping for high-poverty minority counties could raise 
awards by hundreds of thousands of dollars.

See Race, Poverty, and American Tort Awards: Evidence from Three 
Datasets, by Eric Helland and Alexander Tabarrok
(Requires university subscription to the Journal of Legal Studies).
(Scroll down for link to working paper pdf.)

Also see:

Home Cooking a Class Action, by Alexander T. Tabarrok (5/5/02)

The Independent Institute archive on litigation

Fw: Ruppert on ASPO Conference

2003-06-02 Thread alypius skinner


  Bush Advisor Matt Simmons Who Advised 
  Cheney's Energy Task Force Confirms Peak Oil is Major Concern of Bush 
  Peak Oil Symptoms More Apparent 
  Recoverable Reserves May Be Less Than Hoped 
  Natural Gas Shortages May Appear in US This 
  Hydrogen Vastly Overrated and Not Likely to 
  Offer Solution 
Paris Peak Oil Conference Reveals Deepening 
by Michael 
C. Ruppert
© Copyright 2003, From 
The Wilderness Publications, All 
Rights Reserved. This story may NOT be posted on any Internet web site without 
express written permission. Contact [EMAIL PROTECTED]. May be circulated, distributed or 
transmitted for non-profit purposes only.
May 30, 2003, 1800 PDT, (FTW), PARIS  Research presented on May 26th and 
27th at the French Institute for Petroleum (IFP) by a wide variety of 
experts from varying and often competitive perspectives disclosed that, in the 
year since the first conference of the Association for the Study of Peak Oil 
(ASPO) supply, constraints have worsened and the realities of energy depletion 
are becoming more apparent. A year of violent political history centered on oil 
and ever-more unforgiving production results have begun to force reluctant 
political and economic acknowledgement of Peak Oi's threat to civilization. Yet 
ASPO's founder, Professor Colin Campbell, and his colleagues, retired 
TotalFinaElf Exploration Manager, Jean Laherrère, and Physics 
Professor, Kjell Aleklett, have good reason to be pleased with the 
second-ever ASPO conference. Two hundred people from more than twenty countries 
attended this year, doubling attendance for the inaugural event held last May in 
Uppsala, Sweden. In an acknowledgement 
of Peak Oi's penetration of official consciousness, the event was partially 
subsidized by the French Institute for Petroleum, the oil services firm 
Schlumberger, and the French oil giant, Total. The fact that it was held at a 
government institution was, according to Campbell, evidence of the fact that 
Peak Oil can no longer be completely ignored, even by politicians.
Olivier Appert, Chairman of the IFP, bluntly acknowledged that many oil 
experts have concluded that world oil depletion is between five and ten per cent 
per year and that 60 Million barrels per day (Mbpd) of 
new capacity is needed to meet demand. On that basis he concluded in his opening 
remarks, "It is timely to reopen the debate." Appert however told the audience 
that he was an optimist basically because he predicted that new technologies 
would produce new discoveries and better recovery in the future.
But quiet, official support of the conference fell far short of the political 
and economic mobilization the organizers believe necessary to respond to a 
crisis that might start grinding national economies to a halt and causing 
massive dislocations in short order. As one conference organizer told 
FTW, "The fact that several governments have asked to be kept 
fully informed,' or that the French government allows us to use their 
facilities, or that major oil companies and automakers like Daimler-Chrysler 
come to make presentations is a way of listening closely to what we are doing 
without having to publicly accept what we are saying. The political and economic 
ramifications of that are too drastic from their perspectives, but each hour of 
delay only assures that the eventual crisis will be worse once it has been 
IFP Chairman Appert's optimism was belied by experts like 
Laherrère, whose brutally honest graphs and plots not only mirror 
the truth of declining discovery and production but also establish 
scientifically that there are no more major significant reserves to be found. 
Other experts established definitively that wildly exaggerated hopes for polar 
or deep sea discoveries, or tar sands production are both unfounded and 
dangerously deceptive because of the excessive production costs and the 
investment required to develop what will likely prove 
to be disappointing yields.
In the end, the most realistic and integrated analyses were delivered by 
political scientist and author Michael Klare and Professor Kenneth Deffeyes of 
Princeton, a one-time colleague of the late M. King Hubbert, whose Hubbert Curve 
predicted today's events with startling accuracy some six decades ago. These two 
conference presenters gave integrated presentations incorporating real-world 
current events and showed clearly that Peak Oil is here now.
BBC sets the tone
One of the first presentations of the conference was the screening of a new 
BBC documentary which aired on March 26, 2003, titled, "The War For Oil." In stark and irrefutable detail the film verified 
every major aspect of Peak Oil including declining production, vanishing 
discovery rates, smaller field sizes and increasing demand. It pointed out that 
worldwide production capacity was stretched to the limit and that the 
US would be importing seventy 

Re: Cost benefit analysis

2003-02-13 Thread Alypius Skinner

  Does anyone know how often CBA is actually used in making 
  policy? What percent of the federal budget (or state or local) has been 
  determined by CBA?Cyril Morong 
  I'm sure it's used frequently. It's 
  probablyapplied something like this: "what's the minimum amount of 
  taxpayer-funded benefits that I need to dispense to guarantee my 

Re: Median Voter, Welfare State and World Power

2003-02-13 Thread Alypius Skinner

 Bullshit or not?

 Assumption 1: There is a trade off between welfare state spending and
 military spending.

 Assumption 2: The more you spend on military, the more a gov't can project
 power abroad.

 Assumption 3: The Median European voter prefers more welfare state than
 Americans, who prefer more military spending.

 Conclusion 1: Americans per capita get more military than Europeans.
 Conclusion 2: Americans per capita are more able to project their
 millitary across the globe.
 Conclusion 3: Preferences for welfare state drives the power imbalance
 between Europe and America.


Probably not bullshit, but I think it is an oversimplification.  In
addition to the points raised by the other posters, I would also add that
the conclusion seems to assume a conflict between American and European
foreign policy.  Notwithstanding the EU, different European states can have
different national interests in foreign affairs, and probably would not
often be able to project a unified military power in foreign affairs.  Thus,
one cannot often speak of a European foreign policy.  Europe would rarely
be unified enough to match America in the projection of power.

But if Europe were a unitary state, it's geographical proximity to Africa
and much of Asia might give it an edge over America, and probably at lower

Yet more to the point, I really think Europe's preference for a welfare
state over superpower status is a minor element in our disparity of force.
Japan could easily be the world's number 2 superpower if it so desired, and
it's welfare state is smaller than ours in the US.  However, both Japanese
(especially) and also European foreign policies tend to be policies of
national self-interest, and self-interest does not always require the
imperial projection of force.  The Swiss would not necessarily be better off
if they sought to dominate militarily as many other countries as possible,
and we in the US are not necessarily better off either.  But US foreign
policy for the last century  has tended to be a messianic policy motivated
by the visionary ambitions of our foreign policy elites, and with the
necessary sacrifices of the American taxpayers and soldiers and their
families viewed as a form of noblesse oblige.  Much of this messianic
foreign policy ultimately derives from the original Puritan cultural
heritage of the American northeast, which dominates the rest of the country
in semi-imperial fashion (which is why one rarely if ever hears
northeasterners talk of secession, unless of course they are speaking of
preventing some other state's or region's potential secession; nor can one
imagine any other region of America seeking to stop the northeast if it
decided to secede! Many would say, Good riddance.).

Whether the sacrifices US citizens make for the alleged good of the world
are really appreciated or even desired by the rest of humanity is another
question.  I think many of them, especially outside western Europe, tend to
feel toward the United States much the way that American Southerners feel
toward northeasterners.  But most of my fellow Americans seem to have
difficulty understanding why the bulk of the human race does not appreciate
our sacrifices on their behalf.  Why do they hate us? they ask.  After
all, virtually everyone in the world would really like to be an American.
All those millions of thirdworlders aren't lined up to get into the US just
because they want to make money after all.  It's because they want to share
in our superior American values and culture.  But since we don't quite have
room for all of them in America, we can do the next best thing and bring
Americanism to them, like we did in Germany and Japan and are now doing in
Haiti, Yugoslavia, and Afghanistan.  And Iraq is the next nation we aim to
liberate and modernize.  That's what nation-building is all about.  What
we're about to do to them is for their own good, and they should be
grateful, or at least the survivors should.  After all, it is well known
that America is  a benevolent nation which has nothing but the best interest
of all the world at heart.  Where would the world be if we returned to being
like all those other narrow, money-grubbing countries that think of nothing
but their own welfare?

Enough sarcasm.  Debating matters raised in the above paragraph is
pointless, since one's conclusions ultimately depend on one's
values--national greatness or national self-interest? In both American
political parties, the national greatness school has outmaneuvered and
largely banished (especially among Republicans) the national self-interest
school.  But now I wish to raise some questions that can be discussed on a
practical rather than value system basis.   Now that we have decided to
substitute a policy of conquest and direct control for diplomacy and
influence, for how many years, decades, or centuries will we have to occupy
these lands? What will it eventually cost us? What is our ultimate goal? To

book review: in defense of free capital markets

2003-02-05 Thread Alypius Skinner
July 2, 2001


  David F. DeRosaBloomberg Press, $27.95, 230 pp. 
Reviewed by Gene 
Epstein This book is the 
proverbial tall drink of water after a long trek through an intellectual desert. 
The currency and emerging-market meltdowns of the past decade have been shocking 
events that cry out for thoroughgoing analysis and explanation. 

But apart from generating a few fleeting insights 
on these urgent issues, mainstream economists and commentators have served up 
the usual wasteland of airy musings, usually punctuated by the proposal that 
international regulatory bodies get beefed up, possibly with said economists and 
commentators in charge, to curb market excesses. 
A pretentious work by Princeton economist Paul 
Krugman (The Return of Depression Economics, 1999), and the literary 
ravings of billionaire hedge-fund manager George Soros (Open Society: 
Reforming Global Capitalism, 2000) are prominent examples. 
Now comes In Defense of Free Capital Markets: 
The Case Against a New International Financial Architecture, a book that, 
for the sake of its sales, should have had a different title, since its unique 
achievement is to explain to anyone of any ideological stripe the real causes 
and cures of these tragic happenings. 
For sure, Ph.D. economist David F. DeRosa (a Yale 
School of Management Adjunct Professor and head of DeRosa Research  
Trading) lays the responsibility squarely at the feet of government; at local 
governments for instituting ruinous fixed exchange-rate regimes; but most 
especially those two governing institutions, the U.S. Treasury Department and 
the International Monetary Fund. 
His story even includes a villain or two, if (like 
me) you're willing to call former Treasury Secretary Robert Rubin villainous for 
helping to set in motion the forces that punished the innocent and rewarded the 
For DeRosa, the key combustible material present 
in Mexico's unraveling of '94, and in the subsequent crises in Asia through 
1998-99, was the practice of pegging the local currency to the dollar, yen and 
mark, together with the policy of protecting investors from their losses. If 
that thesis sounds odd, then consider how these policies can lead to behavior 
destructive enough to lay these economies low. 
Although no brief sketch can do justice to 
DeRosa's analysis, here's one storyline: Say the Mexican peso is pegged at 3.0 
to the dollar. What invariably occurs is that the returns on a dollar's worth of 
pesos will exceed the cost of borrowing that dollar by a wide margin. 

In January '94, for example, the short-term 
peso-denominated interest rate on Treasury bills issued by the Mexican 
government exceeded comparable U.S. dollar rates by more than 6%. This kind of 
spread not only gives rise to the "carry-trade" speculators going short dollars 
and long the local currency. It also motivates domestic banks and businesses to 
borrow heavily in dollars from foreign investors and then convert those dollars 
to the local currency to transact their business. 
What happens, then, is that pegging motivates 
virtually everyone to be long the local currency and short dollars -- a "bomb in 
the making," as DeRosa writes. For if and when the peg is abandoned, the local 
currency will plunge in value as the carry-trade rushes for the exits, and the 
dollars owed by government and business become ever more expensive to repay. 
Then come the U.S. Treasury and IMF to make matters worse. 
When the peso was devalued in 1995, pushing Mexico 
into default, Treasury Secretary Rubin engineered a financial bailout. The 
result was that foreign investors and institutions were made whole, while Mexico 
slid into recession. And armed with the knowledge that the U.S. Treasury or IMF 
would come to the rescue if trouble arose, foreign investment flowed at an 
accelerating pace into the economies of Southeast Asia, where exactly the same 
preconditions for disaster were present. Among plausible cures, DeRosa rightly 
favors flexible exchange rates, plus the complete abandonment of the lethal 
practice of no-fault capitalism. 
Many nonfiction books are basically padded 
versions of 30-page articles. But the 230 pages of In Defense of Free Capital 
Markets, while readable and clear, should have run 400-500. The book often 
covers far too much territory in too short a space, as when it tries to lay out 
the story of Japan's decline and fall. Its thesis would be more persuasive if 
placed within the context of the Austrian theory of business cycles. 
On the other hand, what a pleasure to read any 
book that one wishes were longer. 
Gene Epstein is Barron's economics 
editorE-mail comments to [EMAIL PROTECTED] 


  UPDATE: Lively (if 
  Not So Light) Reading on the Dismal ScienceBy 
  Gene EpsteinJuly 
  9, 2000 - BarronsFormer Treasury Secretary Robert E. Rubin's 

Re: Bubblemania

2003-01-30 Thread Alypius Skinner
Thanks for the accurate data. Elsewhere,  I have  read that the pre-war baby
bust began in the mid-1920's--before the great depression--and so could not
have been entirely a result of the difficult times of the '30's.  If it
isn't too much trouble, can you either confirm or disconfirm this

 In a message dated 1/26/03 8:02:08 PM, [EMAIL PROTECTED] writes:

 (demographically, the boom began in 1943)

 The fertility rate (measured per 1000 women) in 1943 barely exceeded that
 1942 (2,718 v. 2,628), follwed by declines in 1944 (2,568) and 1945
 only a bit higher than the rates of 1941 (2,301) and 1940 (2,301).

 In 1946, however, the rate rose to 2,943 and thereafter remained above
 through 1964 (3,208) and then again in 1965 (2,928), 1966 (2,736), 1967
 (2,573), 1968 (2,477), and 1969 (2,465).  I've generally heard
 to include the years 1946-1964 in the Baby Boom, although one might
 include 1965 or exclude 1946.

 The Baby Boom stands out even more starkly if one uses live birth rates
 1,000 women: the number doesn't exceed 100 until 1946, and then does so
 year through 1964, after which it again falls below 100.  (Source:
 Statistics of the United States, Colonial Times to 1970, Part I, pp.


Fw: economic projections of the IPCC

2003-01-16 Thread Alypius Skinner


  Issue 4 November/ December 

Concise and comprehensive paper by Dr Chris de Freitas 
pointing out myths and fallacies in the entire IPCC position. Dowloadable pdf 
file just over 1 Mb. 

CSIRO and the greenhouse game: player yes, umpire 
by Bob Foster1 bclim10, 
review by Paul Adam in The ANZAAS Mercury (September 2002, p 5) of Fields of 
Discovery: Australias CSIRO by Brad Collis (Allen  Unwin, 520 p) begins: 
The CSIRO is one of the jewels in Australias crown. It is an 
extraordinarily diverse and productive research organization, and the 
national public face of science. In many countries public statements 
from government scientists tend automatically to be regarded with 
suspicion and scepticism. In Australia CSIRO is a trusted umpire, 
and endorsement by the organization is a high accolade. 
It takes decades to earn a reputation like this. 
AUSTRALIA CSIROs website tells 
us that: By 2070, annual average temperatures are increased by 1.0 to 6.0 
OC over most of Australia ... because of 
human-caused greenhouse gas (GHG) emissions. For the inland, the new 
(8/5/2001) projection is an even-more-remarkable 1.0-6.8 OC  cf only 0.7-3.8 OC 
in CSIROs last (1996) report. 
I promise I am not making this up: now, CSIRO has Darwin going from the 
present one December-February day per year over 35 OC on average, to a whopping 5-79 days by 2070. CSIRO 
could be quite right, of course; but no-one today has any way of knowing. 
Think the unthinkable: is CSIRO snowing us on future Australian warming? 
3.1 Did the Greenhouse Effect cause 20th-Century warming? 
In the 20th Century, 0.6 OC of 
global-average surface warming from all causes occurred in two episodes: from 
the 1920s to the mid-40s, with the balance from 1976 onward - and with a return 
to slightly cooler conditions in the interim. Figure 1 compares world 
consumption of carbon-based fuels (a good surrogate for GHG emissions) with the 
observed increase of globally-averaged surface temperature. Clearly, the 
first warming episode from the 20s largely predates the growth of human-caused 
GHG emissions to the atmosphere. 
The Great Pacific Climate Shift of 1976/77 was the climatic event of the 
century. This Shift coincided with an abrupt reduction in the 
upwelling of cold water in the eastern Pacific, as recorded by the Pacific 
Decadal Oscillation (PDO) Index (Figure 2) - which 
shows reductions during the 1920s-40s and 1977-98. The impact of the 76/77 
Shift extended far beyond PDO and the Pacific; and its global influence on 
atmosphere and oceans is illustrated in Figure 3. 
Selected examples of its physical and biological influence are given in Figure 4,---Figure 5,---Figure 6,---Figure 7,---Figure 8, and Figure 9. 

1. Phone (61.3) 9525 6335, fax 6345, email 
[EMAIL PROTECTED] Bob is a director of the Lavoisier Group which is putting a contrarian view on climate change to 
that of the UNs IPCC. Like-minded Australian sites are and the comprehensive 

But could the renewed warming from the late 70s be the greenhouse 
effect? The human-caused greenhouse effect is a phenomenon of the 
atmosphere. GHG emissions, of which carbon dioxide (CO2) from 
fossil fuels is by far the most influential constituent, are supposed to trap 
extra heat in the lower troposphere  which warms as a consequence. 
Instead of escaping to Space as before, some of this trapped heat should return 
to the earths surface  causing greenhouse effect warming. 
Concurrently, less heat than before escapes to Space. 
We now have 23 years of global coverage from satellite-derived observations 
to supplement the weather balloon record (top graph in Figure 3), which is only 
adequate in the Northern Hemisphere - better over land, best over Europe and 
North America. There are two surprising findings. The lower 
troposphere is only warming a quarter as fast as is the surface, and (in the 
tropics, at least) more  not less  heat is leaving the top of the atmosphere 
for Space. The simplest explanation for these findings is that most of the 
measured surface temperature increase over the past 23 years is something other 
than greenhouse effect warming. 
During this period, the lower troposphere of the Southern Hemisphere appears 
not to have warmed (Figure 10---Figure 11). In 
fact, most warming in the lower troposphere is north of 30ON; and south of 45 OS is 
cooling. Therefore, any human-caused greenhouse warming (i.e. at the 
surface) to date, would be largely confined to the extra-tropical 
Northern Hemisphere. 
And yet, CSIRO is warning us that Australia could warm ten times as much by 
2070 - from the greenhouse effect alone - as the global-average warming from all 
causes over 

Re: FW: History shows paths to market crashes, but lessons seem forgotten

2003-01-07 Thread Alypius Skinner

The average
 investor would be far better off if they did think that enormous returns
 could continue forever because, in a deep though less dramatic way, they
 DO.  I suspect that a lot of people have been turned off to stock
 ownership for decades in spite of the fact that they are the smart
 long-term bet.

People aren't always alive in the long-term! Lots of baby boomers are
approaching retirement when they will begin to draw down their savings.  If
their savings are being decimated by a bear market at the same time, they
may not have enough to last them until they die.  For people who have
already accumulated a nest egg and may not be young enough to start over,
capital preservation is rule number one.  So it may be a wise precaution for
these people to move their wealth into save havens, mainly bonds.  In a few
years, this movement of baby boomer money into safe havens should drive down
both the price of stocks and the yield on bonds.

~Alypius Skinner

FW: History shows paths to market crashes, but lessons seem forgotten

2003-01-05 Thread Alypius Skinner 
 History shows paths to market crashes, but lessons seem 
LONDON In the spring of 1720, when all of London was clamoring 
for shares in the South Sea company, Sir Isaac Newton was asked 
what he thought about the 
market. "I can calculate the motions of 
the heavenly bodies, but not the madness of the market," the 
scientist is said to have replied. 
Newton should have heeded his own wise words. Having sold his 
stock in the company at 7,000 pounds sterling, he later bought 
back more at 20,000 pounds sterling at the top of the boom and 
went down for the count with other speculators when the crash 
came. Little has changed in the 
intervening 280 years. Common to every bubble is the ingrained 
belief that this time things will be different, that the rise in 
the price of an asset is rooted this time in sound common sense 
rather than recklessness, stupidity and 
greed. Take the crash of 1929. In Devil 
Take the Hindmost, Edward Chancellor records how Wall Street's 
elite convinced themselves that the rules of economics had been 
rewritten and that the market could support ever-higher share 
prices. John Moody, founder of the 
credit agency that bears his name, intoned in 1927 that "no one 
can examine the panorama of business and finance in America 
during the past half-dozen years without realizing that we are 
living in a new era." And Yale economist 
Irving Fisher declared a few weeks before the October crash that 
stock prices had reached a "permanently high plateau." Why was 
this? Simple, he said. The creation of the Federal Reserve in 
1913 had abolished the business cycle, and technological 
breakthroughs had created a "new economy" that was much more 
profitable than the old. As share prices 
continued their heady rise, traditional methods of stock market 
valuations were abandoned. It did not matter that many start-up 
companies of the late 1920s were not making any money; what 
counted was that some day they surely would. So share prices 
were justified by discounted future 
earnings. Investors mortgaged themselves 
to the hilt to buy stocks in exotic companies from brokerages 
houses, which proliferated in the 1920s. One analyst warned that 
"factories will shut ... men will be thrown out of work ... the 
vicious circle will get into full swing and the result will be a 
serious business depression" unless sounder minds were brought 
to bear. He was, of course, ridiculed by 
market experts. Sound familiar? It 
should, because the gravity-defying performance of stocks in 
London and New York is eerily redolent of 1929. And again those 
who warn that the stock market edifice is built on sand have so 
far been proved wrong. It is quite possible that they will continue 
to be wrong and that this time the rules really, really have 
been rewritten. It may 
be that Fed Chairman Alan Greenspan has abolished the business 
cycle, that Goldman Sachs' contented equity guru Abby Joseph 
Cohen is wiser than Irving Fisher, that is in a 
different league from RCA (the go-go stock of the 
1920s). However, there are plenty of 
warnings there for those prepared to heed 
them. One is what is happening in the 
markets themselves. More and more money is being concentrated in 
a handful of stocks in the technology sector, while shares in 
"old industry" fall. An analysis by Peter Oppenheimer of HSBC 
showed that the price-earnings gap in London between the new 
economy stocks and the old economy stocks is the largest for any 
market ever. An analysis of the balance 
sheet of by Tim Congdon of London showed that 
liabilities were covered more than four times by holdings of 
cash and securities in early 1999. However, by the end of the 
year, high investment and trading losses meant that liabilities 
were higher than cash and securities. He believes that the rise in 
the Nasdaq index is being underpinned by firms borrowing money 
to buy each other's shares -- the equivalent of taking in each 
other's washing.'s results, 
he says, give "a fascinating and alarming insight into the cost 
of building an Internet brand. Arguably, they also demonstrate 
that the high-tech element in the American stock market is now 
gripped by a speculative madness of a kind never before seen in 
the organized financial markets of a significant industrial 
country." Economist Robert Gordon has 
started to unpick the American productivity data in an attempt 
to put the "new paradigm" into historical perspective. "I 
believe that the inventions of the late 19th century and early 
20th century were more fundamental creators of productivity than 
the electronic-Internet era of today," he 
said. Oppenheimer, at HSBC, estimates 
that share prices in the new economy imply growth rates that are 
unlikely to be achieved and that collectively shares are 

Study disovers Swedes are less well-off than American blacks

2002-12-29 Thread Alypius Skinner

This article can be found at several sites on the 
net. This link is to a left-wing site where the feedback was almost 
uniformly negative, but, as so often in leftist critiques, factually 
empty.Does anyone on the list have any comments about this 
story?Despite the fact that the left-liberal responses I read to this 
article were devoid of substance, I still think theremust be more to the 
story than this article says. Do you all think it is better to be black in 
America or white in Sweden (and why, of course)? Or doesthe 
answerall depend on some other factor? 


Study disovers Swedes are less 
well-off than American blacks 

Study discovers Swedes are less well-off than the poorest AmericansReuters 
via Haaretz | 5/4/2002 | ReutersPosted on 5/4/02 3:41 PM Pacific by 
l33tSTOCKHOLM - Swedes, usually perceived in Europe as a comfortable, 
middle class lot, are poorer than African Americans, the most 
economically-deprived group in the United States, a Swedish study showed 
yesterday.The study by a retail trade lobby, published in the liberal 
Dagens Nyheter newspaper 19 weeks before the next general election, echoed the 
center-right opposition's criticism of the weak state of Sweden's economy, 
following decades of almost uninterrupted Social Democratic rule.The 
Swedish Research Institute of Trade (HUI) said it had compared official U.S. and 
Swedish statistics on household income, as well as gross domestic product, 
private consumption and retail spending per capita between 1980 and 
1999.Using fixed prices and purchasing power parity adjusted data, the 
median household income in Sweden at the end of the 1990s was the equivalent of 
$26,800, compared with a median of $39,400 for U.S. households, HUI's study 
showed."Weak growth means that Sweden has lost greatly in prosperity 
compared with the United States," HUI's president, Fredrik Bergstrom, and chief 
economist, Robert Gidehag, said.International Monetary Fund data from 
2001 show that U.S. GDP per capita in dollar terms was 56 percent higher than in 
Sweden, while in 1980, Swedish GDP per capita was 20 percent 
higher."Black people, who have the lowest income in the United States, 
now have a higher standard of living than an ordinary Swedish household," the 
HUI economists said.If Sweden were a U.S. state, it would be the 
poorest, measured by household gross income before taxes, Bergstrom and Gidehag 
said.They said they had chosen that measure for their comparison to get 
around the differences in taxation and welfare structures. Capital gains such as 
income from securities were not included.The median income of African 
American households was about 70 percent of the median for all U.S. households, 
while Swedish households earned 68 percent of the overall U.S. median 
level.This means that Swedes stood "below groups, which, in the Swedish 
debate, are usually regarded as poor and losers in the American economy," 
Bergstrom and Gidehag said.Between 1980 and 1999, the gross income of 
Sweden's poorest households increased by just over 6 percent, while the poorest 
in the United States enjoyed a three times higher increase, HUI said.If 
the trend persists, "things that are commonplace in the United States will be 
regarded as the utmost luxury in Sweden," the authors said. "We are not quite 
there yet, but the trend is clear."According to HUI figures, during the 
period 1998-1999, U.S. GDP per capita was 40 percent higher than in Sweden, 
while U.S. private consumption and retail sales per capita exceeded Swedish 
levels by more than 80 percent.The HUI economists attributed the much 
bigger difference in consumption and sales mainly to the fact that U.S. 
households pay themselves for education and health care, services that are 
tax-financed and come for free or at low user charges in 
Sweden.According to recent opinion polls Sweden's Social Democrats are 
comfortably ahead of the center-right opposition in the run-up to the September 
15 elections.

Fw: Japan: Divorces and parasites upset the balance

2002-12-28 Thread Alypius Skinner


Japan: Divorces and parasites upset the balance 

Review February 21, 2000Divorces and parasites upset the 
balanceTokyo Observed,By Andrew CornellOne of the enduring 
images of Japan, even in these recessionary days, is ofperfectly good 
consumer goods left out on the street for the 
garbagecollector.Opportunistic foreigners tell tales of equipping 
their digs withtelevisions, stereos, fridges and washing machines dug from 
the dump.In Japan, while combustible, non-combustible and recyclable 
discards arefree, large rubbish must be paid for and put outside with a 
receiptattached.Such large items are called "sodai gomi", 
inconvenient rubbish, which isalso the nickname given to retired salarymen. 
Equally unkind, butcolourful, is "nureochiba" - dead wet leaves that stick 
to the leg - as theretired husband, deprived of work and work functions, 
hangs about stickingto the wife.As Japan struggles to restructure 
its economy, the social cost isincreasingly evident in rising unemployment, 
irrationally high savings dueto fears about the future, and growing numbers 
of homeless.Other, more subtle social changes are also 
occurring.Seiji Kohno is a successful, 50-something businessman who is 
well respectedin his electronics company. But he has also been divorced 
twice and, nowmarried for the third time, he has been anxious that a third 
divorce couldsee him without a job.It is not an idle anxiety in the 
rigidly codified world of corporate Japan.At his third marriage, senior 
company officials made it clear that anotherdivorce would simply be 
unacceptable.But Kohno has a deeper anxiety, "teinnen rikon", divorce 
after retirement.Increasing numbers of women, fed up with the personal cost 
of their"inconvenient large rubbish", are divorcing soon after the husband 
retires.Such things never used to happen in corporate Japan but now 
women arebecoming more independent, more confident and, frankly, fed up 
withfeeding, cleaning and rearing for some of the world's 
mostinstitutionalised chauvinists."It is not easy for a husband to 
try and spend time only with his wifeafter retirement, he usually has not 
worked on their relationships," saysretirement counsellor Hiromi Ikuta. "The 
husband has devoted himself to thecompany, his wife has devoted herself 
to the family, they have had acompletely different life."A recent 
survey by the Japan Association of Travel Agents showed 62 percent of men in 
their 50s wanted to travel with their wives for the newmillennium but only 
47 per cent of women in the same age group wanted thesame thing. For couples 
in their 60s - prime retirement age - 75 per centof men wanted to travel 
with their spouses but only 53 per cent of women.Another survey showed 
divorces among couples who had been together morethan 35 years increased 28 
percentage points in 1998. Commonly, the womensay "it is no use feeling 
suddenly close after having left me alone for solong".Now a growing 
trend is for men to maintain a secret stash of savings incase of divorce as 
traditionally all household finances were controlled bythe wife. Under 
Japanese law, a divorced wife is entitled to 30 to 50 percent of her 
husband's salary as alimony.The weekly magazine Shukan Hoseki recently 
explored the "divorce savingsplans" and found that 20,000 to 30,000 ($285 
to $425) a month is common,and men go to extraordinary lengths to conceal 
the plans, such as forgingpay statements.Another major structural 
shift taking place in Japanese life, thanks inpart to the declining birth 
rate, in part to dissatisfaction with thetraditional life cycle of school, 
marriage and children, is the emergenceof "parasaito shinguru" - parasite 
singles.These, typically, are women who don't fancy the prospect of 
giving upindependence and a career to marry a salaryman and elect to stay 
with theirparents where they pay cheap board, if any, have few household 
chores andget to spend all their money.While such spendthrifts might 
be beneficial for Japan's weak consumption,they have raised the ire of many 
social commentators, and Tokyo GakugeiUniversity professor Masahiro Yamada 
has written a book about them."Parasite singles are a phenomenon 
peculiar to Japan," he says. "In the USpeople think it is shameful to depend 
on their parents and they can'tattract the opposite sex."As more and 
more Japanese are only children, they are becoming more dotedupon and Yamada 
says parents allow them to stay home while the motherprovides care and the 
father money.The parasites themselves are unrepentant. They point out 
that if they marrythey must give up their lifestyle while, with 
discrimination stillentrenched in the Japanese workforce, career prospects 
for a woman are notgood."It rings true to me," says one 26-year-old 
female office worker. "I don'tdo any housekeeping chores and my parents do 
everything. I pay some moneyto my parents every month but I know they save 

Fw: Brains and Capital

2002-12-27 Thread Alypius Skinner

The Clout of CapitalFriday, April 19, 2002Donald 
LuskinThere's an important new book that every investor should 
read.First published as Luskin's Ahead of the Curve column for on April 19, 2002.THE FORCE OF FINANCEReuven 
BrennerTexere: 2002The Force of Finance is an important new book 
that should cause investors to tear themselves away from their usual 
obsession with recession, earnings season and the accounting scandal du 
jour.It's one of those books that come along only once or twice in a 
generation  one with the power to redefine the way we understand the 
rules of the game of global economic growth. The author of this 
remarkable book is Reuven Brenner, a professor of business at Montreal's 
McGill University. Brenner is an economist and an academic, yet he tells me 
he "despises academia and economists." That's because he has no time for the 
usualconception of economics as "the dismal science," defined by 
Britisheconomist Lionel Robbins as "the study of the use of scarce 
resources which have alternative uses." Instead, Brenner's economics is 
ajoyful social science, based on his proposition that "Prosperity is the 
result of matching brains with capital and holding both sides 
accountable."The Force of Finance is a celebration of the ultimate 
un-scarce resource  brains: the unlimited creative power of human 
beingsto build wealth. Brenner believes that the best brains from around 
the world will try to migrate to those countries and those industries 
where they can achieve their highest potential. For Brenner, that means 
they will seek the most highly developed and most open financial markets 
they can find, trying to match their brains with capital. He should know  
born in Rumania in 1947 as the son of concentration camp survivors, Brenner 
moved his own brain first to Israel, and finally to Canada.For 
Brenner, America is at the top of the pyramid of global growth and global 
wealth because "The United States has created asociety in which anyone 
with talent, energy, and the ability to organize has access to financial 
resources. Banks, venture capitalists, underwriters, and asset-management 
firms do not much care who your grandfather was or whether you dropped out 
of college. They only want to know if they can make money by backing you." 
With our capital markets beckoning and our relatively open immigration 
policies, America attracts the crème de la crème of theworld's 
brains. The result is more than just material wealth. Brenner 
believes that as countries move closer to the American model of open capital 
markets they are able to harvest important social and institutional 
advantages, as well. The more developed and more active acountry's 
capital market, the larger the percentage of total resource-allocation 
decisions that are being made not by elitist government planners, but by 
informed market participants who will risk their own fortunes on making the 
right decisions. Brenner says, "Mercantile interests are diverse, not 
dogmatic." Thatmeans that everyone has a stake in stable institutions, 
lots of new ideas get tried out, and bad decisions quickly get diversified 
away or corrected. What prevents every nation from imitating the 
American model of free financial markets? Brenner believes that ruling 
elites  not just monarchs, but too-powerful vested political and commercial 
interest, as well  know that "nothing disperses power more quicklythan 
democratized capital markets  just as nothing threatens acompany 
more than competitors with access to cheaper financing."Brenner 
shows that the elites use a bewildering variety of "mythologies, economic 
ones and financial ones inparticular," to justify keeping capital 
markets unfree. And it is for their complicity in this myth-making that 
Brenner damns his fellow economists. What Brenner calls "the illusion of 
macroeconomics asa science" has given birth to a global industry that 
creates, interprets and debates meaningless statistics about economic 
activity. "Economists transformed a self-serving political idea(a 
benevolent big government) into a neutral-sounding scientific debate 
about numbers and statistical methods. Macroeconomics thus became an 
obscure theory that could be taught in dictatorial regimes as well as 
democratic ones."Even in the United States, perched at the very top of 
the pyramid, the smooth functioning of free financial markets is constantly 
endangered by governmental abuse of groundless economic myths. One of 
many examples offered by Brenner is the theory of Princeton economist Paul 
Krugman that a perpetual rate of inflation to 2% to 4% is beneficial. 
Brenner despairs, "Do not ask why. Even ayearly inflation rate of 2% 
doubles the price level in 35 years. Yet that is not the only bewildering 
idea that Krugman and other economists offer today."But economic 
myths are not the only culprits. Any dogma that disconnects brains from 
capital sets back the cause of prosperity. 

can economists end recessions?

2002-12-19 Thread Alypius Skinner

(REUTERS) UPDATE 3-Argentina 
says to default again on World Bank debtUPDATE 3-Argentina says to default 
again on World Bank debt(Adds World Bank confirmation, 
separate bond, paragraph 6) By Brian 
Winter BUENOS AIRES, Argentina, Dec 13 (Reuters) - 
Argentina'sgovernment said it would default on more than $700 million 
dueto the World Bank on Friday, a second missed payment that cutsthe 
bankrupt country off from any aid from the bank. Argentina 
had already let pass a first deadline a monthago, technically defaulting and 
ending any hope for new loans.But Friday's missed payment, which was 
expected, cuts offaccess to roughly $2 billion in existing financing that 
hadbeen earmarked for AIDS programs, high schools and farm 
aid. With almost all other outside credit choked off by 
achaotic four-year recession, the government said it lacks thecash to 
pay the World Bank unless it breaks a months-longstalemate in aid talks with 
the International Monetary Fund. Since November, Argentina 
has been in a league with Iraqand Zimbabwe as a defaulter on multilateral 
loans. "If we reach a deal with the IMF, Argentina will 
startpaying its debts again," Cabinet Chief Alfredo Atanasof 
toldreporters. "We assume the responsibility as a country ... butwhat we 
are saying is the bureaucracy at the fund has promotedthe policies that put 
us in this situation." A World Bank spokesman confirmed 
Argentina had told thebank they would not be paying. Argentina's government 
said itwould also miss a separate payment of about $250 million due 
onMonday for a World Bank-guaranteed bond. Most 
Argentines have become used to the idea of the countrynot paying its foreign 
debts and financial markets shrugged offthe news. The country has been more 
focused lately on thethreat of food riots many believe are planned for Dec. 
20 tocoincide with the anniversary of bloody protests that overthrewa 
previous government. The government already suspended 
payment in January onabout $95 billion in debt held by private-sector 
creditors,marking the biggest sovereign debt default in 
history. "They pay, they don't pay: at this point things 
can't getany worse so nobody cares," said Carlos Lopez, a retired 
autoexecutive who owns several small cafes in Buenos Aires. "As 
abusinessman, I get the feeling the worst of the uncertainty haspassed 
so this default doesn't hit me at all." RESERVES 
LOW Argentina has scrambled for nearly a year to get the 
IMF tofork out enough money to cover debts owed to multilateralbodies 
through 2003. But the IMF has told Argentina to makedeeper spending cuts and 
rally its divided politicians behindan economic plan, something Argentina 
has been unable to do. "We saw this coming, but what they 
said about the IMF waspretty tough," said Hernan Fardi, an economist for 
localconsultancy Maxinver. "Some say this is some kind of strategyto 
pressure the IMF to reach a deal, but I doubt it. I thinkthey realize it's 
obvious that's not going to work." The World Bank said 
Argentina was due to pay $830.7 millionby the close of business on Friday. 
This amount includes $726million in principal plus additional payments due 
and interest. The government argues that the penalty of 
not paying theWorld Bank is outweighed by the danger of handing over 
$3.6billion -- around a third of its foreign reserves -- owed tothe bank 
in interest and principal until the end of 2003.((Buenos Aires 
newsroom, +5411 4318-0650,[EMAIL PROTECTED]))((Xtra 
clients: Click on http://topnews.session.rservices.comto 
see Top News pages in multimedia Web format. If you cannotaccess the pages, 
ask your IT department to check your Internetfirewall settings. For a 
technical advisory, click on C9991))REUTERS*** end 
of story ***

is japan faking it?

2002-12-15 Thread Alypius Skinner

Eamonn Fingleton, Is Japan Faking It? 
The Australian Financial Review, Friday 22 November 2002, in the Review 
For a decade now, the Western consensus has been that Japan is an economic 
basket case. But this is a dramatic misreading of a perennially secretive 
society. ... 
The truth is that dozens of facts contradict the gloomy consensus. Here are 
just a few: 
* Living standards increased markedly in Japan in the so-called "lost decade" 
of the 199Os, so much so that the Japanese people are now among the world's 
richest consumers. 
* Japan's trade has continued to expand. Its current account surpluses 
totalled $US987 billion in the "disastrous" 1990s. This was nearly 2.4 times the 
total recorded in the 1980s when Japan was already seen as the "unstoppable 
juggernaut" of world trade. 
* Although you would expect the Japanese yen to have declined sharply 
against, for instance, the US dollar in recent years, the reverse is the case: 
the yen's dollar value has increased 17 per cent since the beginning of the 
Tokyo financial crash. 
* At last count, the all-important Japanese savings rate, which has been the 
main driver of the country's success, was 8.7 per cent of GDP. By comparison, 
the rate for the US was 5.7 per cent and for Britain only 4.5 percent. ... 
* Japan has continued to invest heavily in its industries and infrastructure. 
Investment per job in manufacturing, for instance, has consistently run at about 
twice the rate of the US over the past decade. 
* ... Japan's net foreign assets have continued to mushroom. As measured by 
the International Monetary Fund, they nearly quadrupled in the 11 years to 2000. 
... As long as Japan runs the world's largest current account surpluses, 
it will remain the world's largest capital exporter. ... 
* Japan passed the US in the early 1990s to become the world's largest 
foreign aid donor and, as of 1999 ,was paying out 67 per cent more in aid than 
the US. The UN is only the most prominent of many international bodies that 
depend heavily on Japanese money. (Japan accounted for nearly 20 per cent of the 
UN's budget in 2001). Tokyo is reaping a rich reward in terms of rising 
influence in everything from the International Whaling Commission to FIFA. 
* Corporate Japan's worldwide spending on sponsorship - from motor racing to 
universities - has grown by leaps and bounds. In the latter half of the 1990s, 
its sponsorship budget in the US alone increased by about 80 per cent In 
Britain, an interesting instance of recent Japanese sponsorship is the Asahi 
Shimbun newspaper's donation for the British Museum's Great Court. It is hard to 
imagine, say, the Guardian, which is roughly the Asahi's British counterpart, 
doing anything similar in Tokyo. In fact, the Guardian can't afford a staff 
correspondent there. 
By contrast, thanks to big increases in advertising in the past decade, not 
only can Japanese newspapers like the Asahi afford large bureaeus in Britain but 
they can undertake extensive goodwill programs. 
... First, consider the claim that Japan's manufacturing industries are being 
driven to the wall by China. The mistake analysts make here is to assume that 
the Japanese economy is still highly labour-intensive. But Japan is probably the 
world's most capital-intensive economy at present. Capital-intensive Japanese 
companies supply the sophisticated components, materials and machines without 
which labour-intensive Chinese factories would have no exports. Japanese exports 
these days are not television sets and pocket calculators but rather machine 
tools, electricity-generating plants, railway rolling stock, broadcasting 
equipment, telephone switching equipment and internet routers. 
Capital goods industries are invisible to the consumer and thus Japan's 
dominance in many of them is easy to overlook. But capital goods are the 
ultimate fount of the world's wealth and historically the nation that dominates 
their manufacture - Britain in the 19th century, America in the first 75 years 
of the 20th century - has been ipso facto the world's leading economy. ... 
in many of the capital goods industries in which they are strong, Japanese 
companies face no significant competition from anywhere, let alone from Third 
World nations like China. 
Second, what about the claim that the Japanese economy is in the grip of a 
deflationary spiral? Actually, what Japan has been experiencing is similar to 
the persistent deflation the US experienced in the late 19th century. This was 
when the US went from rural backwater to the world's most powerful economy. ... 
Third, it is claimed that Japan has been eclipsed in high technology by a 
resurgent US. ... All the evidence is that Japan has greatly lengthened its lead 
in the past decade. ... . At last count, the title of the world's fastest 
computer was held by a weather-forecasting computer made by Tokyo-based NEC. By 
contrast, the fastest American supercomputer, an IBM-built machine 

Fw: cost of subsidizing a prodigal son

2002-12-10 Thread Alypius Skinner

  In my opinion, here is another fine 
  example of domestic political expedience triumphing over economic 
  rationality. Of course, money isn't everything, but one also has to ask: 
  what will we ultimately have to show for our national "investment?" And why do 
  our politicians persist in throwing good money after bad when it is so 
  obviously counterproductive? Might this be an example of the special interest 
  influence we were discussing a few days ago in the "median voter" 
  ~Alypius 1973, Israel has cost the United States about 
  $1.6 trillion By David R. Francis | 
  Staff writer of The Christian Science Monitor Since 1973, Israel has 
  cost the United States about $1.6 trillion. If divided by today's population, 
  that is more than $5,700 per person. This is an estimate by Thomas 
  Stauffer, a consulting economist in Washington. For decades, his analyses of 
  the Middle East scene have made him a frequent thorn in the side of the Israel 
  lobby.For the first time in many years, Mr. Stauffer has tallied the 
  total cost to the US of its backing of Israel in its drawn-out, violent 
  dispute with the Palestinians. So far, he figures, the bill adds up to more 
  than twice the cost of the Vietnam War.And now Israel wants more. In a 
  meeting at the White House late last month, Israeli officials made a pitch for 
  $4 billion in additional military aid to defray the rising costs of dealing 
  with the intifada and suicide bombings. They also asked for more than $8 
  billion in loan guarantees to help the country's recession-bound 
  economy.Considering Israel's deep economic troubles, Stauffer doubts 
  the Israel bonds covered by the loan guarantees will ever be repaid. The bonds 
  are likely to be structured so they don't pay interest until they reach 
  maturity. If Stauffer is right, the US would end up paying both principal and 
  interest, perhaps 10 years out.Israel's request could be part of a 
  supplemental spending bill that's likely to be passed early next year, perhaps 
  wrapped in with the cost of a war with Iraq.Israel is the largest 
  recipient of US foreign aid. It is already due to get $2.04 billion in 
  military assistance and $720 million in economic aid in fiscal 2003. It has 
  been getting $3 billion a year for years.Adjusting the official aid to 
  2001 dollars in purchasing power, Israel has been given $240 billion since 
  1973, Stauffer reckons. In addition, the US has given Egypt $117 billion and 
  Jordan $22 billion in foreign aid in return for signing peace treaties with 
  Israel."Consequently, politically, if not administratively, those 
  outlays are part of the total package of support for Israel," argues Stauffer 
  in a lecture on the total costs of US Middle East policy, commissioned by the 
  US Army War College, for a recent conference at the University of 
  Maine.These foreign-aid costs are well known. Many Americans would 
  probably say it is money well spent to support a beleagured democracy of some 
  strategic interest. But Stauffer wonders if Americans are aware of the full 
  bill for supporting Israel since some costs, if not hidden, are little 
  known.One huge cost is not secret. It is the higher cost of oil and 
  other economic damage to the US after Israel-Arab wars.In 1973, for 
  instance, Arab nations attacked Israel in an attempt to win back territories 
  Israel had conquered in the 1967 war. President Nixon resupplied Israel with 
  US arms, triggering the Arab oil embargo against the US.That shortfall 
  in oil deliveries kicked off a deep recession. The US lost $420 billion (in 
  2001 dollars) of output as a result, Stauffer calculates. And a boost in oil 
  prices cost another $450 billion.Afraid that Arab nations might use their 
  oil clout again, the US set up a Strategic Petroleum Reserve. That has 
  since cost, conservatively, $134 billion, Stauffer reckons.Other US help 
  includes:• US Jewish charities and organizations have remitted grants 
  or bought Israel bonds worth $50 billion to $60 billion. Though private in 
  origin, the money is "a net drain" on the United States economy, says 
  Stauffer.• The US has already guaranteed $10 billion in commercial 
  loans to Israel, and $600 billion in "housing loans." Stauffer expects the US 
  Treasury to cover these.• The US has given $2.5 billion to support 
  Israel's Lavi fighter and Arrow missile projects.• Israel buys 
  discounted, serviceable "excess" US military equipment. Stauffer says these 
  discounts amount to "several billion dollars" over recent years.• 
  Israel uses roughly 40 percent of its $1.8 billion per year in military aid, 
  ostensibly earmarked for purchase of US weapons, to buy Israeli-made hardware. 
  It also has won the right to require the Defense Department or US defense 
  contractors to buy Israeli-made equipment or subsystems, paying 50 to 60 cents 

Fw: Israel, An Economic Basket Case

2002-12-09 Thread Alypius Skinner

 The social cost of the occupation
 by Nehemia Strasler

 This week the parliamentary commission that investigated social
 in Israel published a 55-page report dealing with the reasons for the
 increase in the socioeconomic gaps in Israel over the past 20 years. Even
 though the commission included all the Knesset members who describe
 themselves as socially oriented - from the chairman, Ran Cohen (Meretz)
 to the militant Amir Peretz (One Nation) - they arrived at the same
 conclusion as the wicked economists did years ago: The Israeli economy has
 exhausted its ability to raise taxes on work and to increase the transfer

 It turns out that even though the social service budgets (education,
 health, housing, immigrant absorption and National Insurance Institute
 allowances) increased dramatically in the past 20 years (from 28 percent
 the state budget 20 years ago to 54 percent today), the social gaps only
 became wider, with the result that Israel now finds itself in an
 bad place in terms of inequality between rich and poor.

 About 30 or 40 years ago, Israeli society was marked by greater equality.
 But the past 20 years saw a very large increase in the gaps in economic
 income - meaning income from work, capital and pensions. In 1979 the index
 that measures the level of inequality stood at 0.43, whereas in 2001, it
 had risen to the dangerous level of 0.53. How did this happen?

 l The territories. Israel invests prodigious sums in the territories, in
 building settlements, constructing bypass roads, maintaining the security
 of the settlers, and giving them benefits of various kinds and tax breaks.
 Obviously, if a preferred group is given surplus resources, there is no
 money left for the other missions. Owing to political limitations
 from the composition of the parliamentary commission headed by MK Cohen,
 did not address this central point.

 l The war. The situation in which the economy has found itself in the past
 two years precludes the renewal of growth. As a result, unemployment will
 increase and with it, inequality. When the state of war continues, and
 gets worse, there is no chance that the economy will be able to escape the
 recession. In other words, the political-security situation is highly
 instrumental in causing the gaps in the society.

 l The infrastructure. Owing to the huge investments in the territories and
 the administration of the war, not enough money remains to invest in the
 physical infrastructure - highways, interchanges, sewerage, water -
 creating a situation in which the periphery (mainly the south of the
 country) lags behind, cut off from the center, adversely affecting quality
 of life and making it very difficult for residents there to find good jobs
 in the center.

 l Education. Not enough money remains to improve the educational level in
 the periphery. The farther one gets from the center, the lower the level
 education. The direct connection between level of education and level of
 income has already been proved.

 l The foreign workers. The entry of large numbers of foreign workers into
 Israel in the mid-1990s, instead of the Palestinians, had the effect of
 lowering the wages of manual workers, as the foreigners were willing to
 work for extremely low pay. The result was that the foreign workers pushed
 the manual workers into the cycle of unemployment, in which they became
 recipients of guaranteed income payments. Instead of the state ensuring
 that hiring a foreign worker would be expensive and not worthwhile, the
 current situation is the exact opposite. Today it is 40 percent cheaper to
 employ a foreign worker than to employ an Israeli, and just a few days
 the Knesset's Labor and Social Affairs Committee blocked a proposal to
 impose a levy on the hiring of a foreign worker, because the interests of
 the manpower companies (some of whose owners have close ties to
 government), the contractors and the farmers are stronger than all the
 about the battle against unemployment.

 l The ultra-Orthodox. Eighty percent of ultra-Orthodox men do not work - a
 dramatic increase from 50 percent in the 1980s. They live in poverty as
 yeshiva students at the expense of the state budget. Indeed, even if they
 want to do productive work they are unable to fulfill their wish, as the
 schools they attended did not teach them the essential subjects for
 a respectable living: neither English nor mathematics, neither history nor
 the sciences.

 When the gaps between the rich and the poor constantly increased during
 past two decades, the state came up with a clever idea to salve its
 conscience: raising taxes on work and diverting the money to increasing
 transfer payments, especially the National Insurance Institute (social
 security) allowances.

 However, it turns out that this far-fetched solution failed. Despite the
 high taxes that are imposed mainly on the two 

James Rossi reviews Globalization and Its Discontents by Joseph Stiglitz

2002-12-08 Thread Alypius Skinner

Book Review
Globalization and Its Discontents By Joseph StiglitzW.W. 
Norton  Co., May 2002. 282pp.
Reviewed by 
James M. 



For most of the world's people, globalization has not worked 
out as advertised. The fall of the Iron Curtain brought great hopes for 
development of the Third 
World, but the reality has been far crueler. Poverty has increased. The 
global distribution of wealth has grown more unequal. War and social upheaval 
have intensified, infectious disease and famine have persisted, and 
environmental destruction threatens human welfare on a global scale.
What happened? What's next? Stiglitz addresses globalization as 
a Nobel Prize-winning economist and Washington insider:

  In 1993 I left academia to serve on the Council of Economic 
  Advisers under President Bill Clinton... From there I moved to the World 
  Bank in 1997... I saw firsthand the devastating effect that globalization can 
  have on developing countries, and especially the poor within those countries. 
  I believe that globalization... can be a force for good and that it has the 
  potential to enrich everyone in the world, especially the poor. But I also 
  believe that if this is to be the case, the way globalization has been 
  managed... needs to be radically rethought.
Globalization and its Discontents is a concise, 
devastating, and relentless indictment of the global economic policies of the International Monetary Fund, World Trade Organization, and World Bank. Stiglitz singles 
out the IMF for most of the blame: flawed economic theories, lack of 
transparency and accountability to the public, and the pursuit of special 
corporate interests. 
What happened
The theories which guide the IMF's policies are empirically 
flawed. Free market, neoclassical, and neoliberal are all essentially euphemisms 
for the disastrous laissez-faire economics of the late 19th century. This 
approach seeks to minimize the role of government -- arguing that lower wages 
solve problems of unemployment, and relying upon trickle-down economics 
to address poverty [the belief that growth and wealth will trickle down to 
all segments of society]. Stiglitz finds no evidence to support this belief, and 
considers the 'Washington Consensus' policy of free markets to be a blend of 
ideology and bad science:

  Behind the free market ideology there is a model, often 
  attributed to Adam Smith, which argues that market forces--the profit 
  motive--drive the economy to efficient outcomes as if by an invisible 
  hand. One of the great achievements of modern economics is to show the 
  sense in which, and the conditions under which, Smith's conclusion is correct. 
  It turns out that these conditions are highly restrictive. Indeed, more recent 
  advances in economic theory --ironically occurring precisely during the period 
  of the most relentless pursuit of the Washington Consensus policies--have 
  shown that whenever information is imperfect and markets incomplete, which 
  is to say always, and especially in developing countries, then the 
  invisible hand works most imperfectly. Significantly, there are 
  desirable government interventions which, in principle, can improve 
  upon the efficiency of the market. These restrictions on the conditions 
  under which markets result in efficiency are important--many of the key 
  activities of government can be understood as responses to the resulting 
  market failures.
Stiglitz should know. His 2001 Nobel 
Prize [shared with two others] was awarded for demonstrating how information 
affects markets. Without equal access to information between employer and 
employee, company and consumer, or [in the IMF's case] lender and debtor, there 
is no chance of "free" markets operating efficiently -- which is to say fairly 
[this explanation also owes much to the earlier Nobel work of Kenneth 
Arrow  Gerard Debreu].
The IMF, WTO, and World Bank lack transparency and 
accountability. Without government oversight, they reach decisions without 
public debate and resolve trade disputes involving "uncompetitive" or "onerous" 
environmental, labor, and capital laws in secret tribunals -- without appeal to 
a nation's courts. Little wonder that thousands of activists -- who agree on 
little else -- brave barricades, tear gas, and slanted media coverage to protest 
the World Bank, IMF, and WTO wherever they meet.
In East Asia's financial crisis, Russia's failed conversion to 
a market economy, failed development in sub-Saharan Africa, and financial 
meltdown in Argentina, Stiglitz argues that IMF policies contributed to a 
disaster. Loans came with extensive conditions that subverted the growth 
of democracy, hampered local economic growth, and enriched multinational 
To evaluate his conclusion, it's instructive to look at those 
cases where Third World development actually succeeded: South Asia and China 

self-funding wars

2002-12-07 Thread Alypius Skinner

Yes, in a worst-case scenario, the impending war 
of aggression against Iraq could be very expensive; but, unlike wars against 
most countries, this war could pay its way: just make the hand-picked 
pro-American replacement regime pay reparations (fully deserved since they have 
the unmitigated gall to defend themselves against foreign attack--who do they 
think they are?), which could be fundedwith revenue earned by oil 
exports. If all wars could be self-funding like this one, we'd have a lot 
more of them. I hear the word going around in Israel and certain US State 
Department circles is that Iran will be our next conquest after Iraq--do they 
have enough oil left to pay for a war, too? If not, maybe Iraq could pay for 
both wars.

~Alypius Skinner

Friday, Dec. 6, 2002 
$2 Trillion to Fight Iraq? 
War with Iraq could cost U.S. taxpayers almost as much as the 
government spent in the last budget year, nearly $2 trillion, according to an 
organization of academics. 
A study by American Academy of Arts and Sciences estimated costs would range 
from $99 billion to more than $1.9 trillion over a decade. 
The lower figure assumes a successful military, diplomatic and 
nation-building campaign. The higher figure accounts for a prolonged war, 
disruption of oil markets and a U.S. recession. 
Both figures assume involvement in Iraq for a decade. 
White House spokesman Gordon Johndroe said it was premature to comment on 
costs, the Associated Press reported today. 
"War is the last resort," he said. "We're hoping for a peaceful solution." 
The 1991 Persian Gulf War cost America an estimated $61 billion, though 
allies reimbursed all but about $7 billion. By some accounting methods, the 
United States might have even made a profit, according to AP. 
The report, titled "War With Iraq: Costs, Consequences and Alternatives," 
cautioned that the estimates should be "regarded as informed conjecture." 
American Academy of Arts and Sciences, founded in 1780 and located in 
Cambridge, Mass., describes itself as an international society of scientists, 
scholars, artists, business people and political leaders. Among its inductees in 
October: National Public Radio leftist Daniel Schorr and Sen. Ted Kennedy, 

Re: U of Cal scientists question efficient market hypothesis

2002-12-06 Thread Alypius Skinner
 or seven years or so, although
his performance has dropped off considerably since the bear market began in
2000 (although still doubling).   Random walk theorists would say this is
either impossible or blind, dumb luck.  I suspect the degree of inefficiency
in the markets is underestimated, although I also agree it takes either
quite a bit of work or quite a bit of sophistication--more than the typical
mutual fund manager possesses--to take advantage of it.

~Alypius Skinner

Fw: Median voter theorem

2002-12-05 Thread Alypius Skinner
But perhaps third parties don't siphon off more votes because they're
undercapitalized.  It's hard for an upstart domestic auto company to
challenge General Motors, or other established automakers.  Remember
DeLorean? He was a third party automaker.  Democratic politics appear to
be (inherently?) oligopolistic.
(Funny, I just remembered that the Soviet political system was often
described by western observers as an oligopoly--although they described
themselves as a democracy.  More support for my pet theory that
differences between Communism and social democracy, while they do exist, are
in many ways less striking than the parallels.)

~Alypius Skinner

 I've never really studied the Median Voter Theorem.
 Recently I read where someone claimed that the U.S.
 political system was designed to keep the two parties
 nearly identical by keeping other parties out.  I
 assumed that the reason they Dems  Reps seem so close
 may be because of the MVT--they want the middle guy's
 vote.  So then I thought, suppose a third party were
 let into the race, does the MVT still hold w/ for 3 or
 more candidates?  Does it weaken as more candidates
 are added, or do they all bunch toward the center for
 for any n2, where n is the number of candidates?
 Does anybody know of a good discussion of it online?

Well look at the 1992 presidential race.  You had Bob Dole, the
 for the welfare state who never met a tax hike he didn't like and the
 architect of affirmative action, Bill second-biggest tax hike in history,
 Ross let's fix what's broke by raising taxes Perot.  You essentially had
 three mushy-moderate statist candidates running for office, and nobody
 advocating either mainstream conservatism or mainstream liberalism (if
 is still such a thing).  We needed Perot's brand of mushy-moderate statism
 like Al-Queda needs a new form of explosive.

 John Anderson in 1980 likewise offered fiscal conservatism and social
 moderation, in other words, warmed over Jimmy Carter, although since
 won, and would have won even had Carter gotten all of Anderson's votes
 (unlikely in the extreme based on exit-polling) it would seem we had two
 candidates rather far from the media voter.

 Still, most third party candidates in America (and perhaps in some of the
 parliamentary democracies) seem to offer platforms that are determinedly
 from the median voter's squishy preferences.  I think of candidates like
 Strom Thurmond, who probably captured the median white voter in the South,
 but fared poorly with most other voters.  Green Party and Libertarian
 candidates, offering platforms well away from the median voter, fare even
 more poorly, at least in all but small local races.  (I recall a bar owner
 Denver, registered as a Libertarian, getting elected to the Denver
 Commission while I lived out there.)

 From the little I know about the MVT--and it's little indeed--it seems to
 assume that the candidates have no ability to influence the median voter,
 as to move it more or less in one direction or the other.  If so I'd have
 say that it makes a more-than-heroic assumption.  I think few people would
 have guessed that during what appeared to be the heyday of unabashed
 statist-liberalism and in the wake of Watergate that a
 Republican candidate would win by a large majority in 1980.  It's
 how quickly attitudes appeared to shift on a wide variety of issues from
 busing to taxes, to welfare programs to abortion to defense.

 While it's undoubtedly true that many people secretly agreed with Ronald
 Reagan's positions throughout the 1970s but feared to admit it to avoid
 social condemnation, it must also be true that Reagan and his supporters
 persuaded others who had not previously agreed, thus shifting the median
 voters toward the right across a spectrum of issues.  By focusing on the
 median voter, the MVT seems to give credence to the mushy moderate's
 creed--pander to me or lose when I vote for your opponent--but
 as we've seen in recent elections with Libertarians pulling votes from
 Republicans and Greens pulling votes from Democrats that not pandering to
 extremes loses elections too.

 Indeed, it's not clear that the median voter theorem actually describes
 process by which candidates typically win in highly-publicized elections.
 Presidents don't typically win by persuading all the mushy moderates, who
 tend to break both ways and can't generally be relied upon by a major
 no matter what it does, but rather by building coalitions of voters
 highly-motivated  by various issues.  Put together a coalition of blacks,
 Jews, Northern WASP elites and labor union members and you can win even if
 you're too liberal (or too statist) for the median voter.  Put together a
 coalition of defense hawks, right-to-bear-arms advocates, tax-cutters,

U of Cal scientists question efficient market hypothesis

2002-12-05 Thread Alypius Skinner


  Statistical physics predicts stock market 

11:5902December02 news service


  A statistical physics model is predicting that the US stock market 
  recovery suggested by recent rises will only last until spring next year, 
  before tumbling yet further. 
  Physicists Didier Sornette and Wei-Xing Zhou at the University of 
  California in Los Angeles claim to have identified an "anti-bubble" in the 
  Standard and Poor's 500 stock market index. Their model also describes a 
  similar anti-bubble in the Japanese Nikkei index in the early 1990s, which 
  preceded a decade of decline.
  However, Neil Shephard, an economist at the University of Oxford, UK, 
  is sceptical. "Firstly, the track record of empirical prediction isn't 
  very good and secondly, economic theory says it shouldn't work," he told 
  New Scientist. This is because traders act on new information about 
  the market by buying or selling shares, making it impossible to make a 
  prediction without it affecting the outcome.
  But the physicists' predictions are in line with those of some others. 
  Haydn Carrington, a dealer at spread betting firm City Index in London, 
  also believes the US market is in a long decline, but that a short term 
  rally is likely: "The Americans are optimistic about recovery, so that 
  will probably happen."
  Herding behaviour 
  Bubbles and anti-bubbles are traits of herding and imitative behaviour, 
  Sornette says. Investors and traders constantly exchange opinions and 
  information, generating a feedback loop that can drive the performance of 
  the market.
  A bubble, or bull market, occurs when optimism spreads, pushing the 
  market value artificially high. The bubble may then burst in a dramatic 
  crash, but if not, a slow period of downwards adjustment will follow - a 
  bear market, which Sornette calls the anti-bubble phase.
  An anti-bubble market has two key characteristics. The value slides 
  inevitably downwards, but oscillates as it does so. The value of the 
  SP 500 has been riding this rollercoaster since August 2000.
  Sornette says that the "up" seen now is just one of the oscillations, 
  and that hopes of a recovery will be dashed by a "down" in mid 2003. And 
  the trough that it sinks into may be deeper than this year's low, he says. 
  Failure mechanisms 





Related Stories 


Pound and euro behave as if they are the same 
currency 5 December 2001 



For more related stories search 
the print edition Archive 







Sornette, UCLA 


City Index 


Quantitative Finance 





  The model used to make this prediction describes "crowd" behaviour of 
  the type Sornette expects from traders and investors. It consists of a set 
  of three equations that describe feedback processes. 
  He developed the equations when studying failure mechanisms in 
  materials - the way that cracks develop and cause damage is similar to the 
  way that information seeps through the market and changes opinion, he 
  The model requires the input of two constants: one quantifies the 
  overall trend (down in an anti-bubble), the other the frequency of 
  oscillation. He chose constants such that the model matched the SP 
  data from the past few years - and then extended the model to 2004.
  Journal reference: Quantitative Finance (vol 2, p 468) 



  Jenny Hogan

  This story is from's news service - for more exclusive 
  news and expert analysis every week subscribe 
  to New Scientist print edition.

Re: U of Cal scientists question efficient market hypothesis

2002-12-05 Thread Alypius Skinner

 --- Alypius Skinner [EMAIL PROTECTED] wrote:
A statistical physics model is predicting that the US stock market
  recovery suggested by recent rises will only last until spring next
  before tumbling yet further.

 Why would this contradict efficient markets?

I originally called this message physicists discover anti-bubble; just in
case that was one the two possible reasons the message did not appear on the
list, I retitled it to be obviously pertinent to economics.  (But I also
cross-posted the first time, so maybe that was the problem.)  Of course,
that is not my complete answer to your question.

 The efficient-market proposition does not imply any absence of
 fluctuations, nor does it imply any limitation on the rise and fall of
 asset prices.  It states that prices take into account public beliefs.  If
 the expectation is that others will buy the assets at higher prices, then
 why would it be inefficient for the price to rise?

It has always seemed to me that the greater fool theory is incompatible
with market efficiency.  If prices really are going up for a period of time
solely on expectation that someone else will always be willing to pay prices
even more unjustified by business fundamentals than the price the previous
buyer paid, then it would be possible to predict that the overbid stocks
will inevitably move downward by a large amount.   That sort of extreme
price distortion  should not be possible in a highly efficient market.
After all, all stock purchases are made in expectation that the price will
go up in the future (which can only be because other buyers will be willing
to pay more for them).  If that is what you mean by an efficient market
then to say that securities markets are efficient becomes a tautology rather
than a theory.

 It seems to me that efficient markets is a micro phenomenon on specific
 assets at some moment ex ante, not a proposition about the whole financial
 market over the long term ex post.

 Fred Foldvary

So are you saying that the market pricing of some stocks are efficient, but
not the pricing of others? If the pricing of all (or nearly all) individual
assets are efficient, then the market as a whole for these assets must be
efficient.  If a large number of securities are irrationally priced (based
on business fundamentals) at any given time, then one can not speak of an
efficient market, because the market average as a whole will become
distorted by the large number of mispriced securities.

Also, if the market (or the vast majority of its individual components, if
one wishes to focus on the individual trees rather than the forest) are
efficiently priced from, say, day to day, then the whole financial market
over the long term must be efficient.  The whole market cannot be
inefficient over the long term if its individual component assets are
efficiently valued at any given moment in time.

Of course, an economist or historian may say, In the long run, markets will
rise (or an astronmer or geologist may say, Over the long run, the markets
will go to zero) for fundamental reasons without contradicting the
efficient market hypothesis--but one should not be able to use a statistical
analysis to correctly predict the ups and downs of market averages if the
efficient market hypothesis is correct.

The markets may or may not be efficient, but the term must be defined in
some way that has enough objective meaning to be analyzed and tested.

~Alypius Skinner


Re: Median voter thm

2002-12-05 Thread Alypius Skinner

 Of course SOME voters--typically the
 uniformed, non-ideological mushy moderate median voter--have no memories,
 many do, and of course there's always the media to lamaste Republicans at
 least for changing positions (especially in a more conservative
 Frankly, almost no candidate seems to court the median voter; you almost
 never hear candidates saying, vote for me, I'm the most centrist


But you do see liberals (when outside the northeast) describe themselves as
moderates, while Republicans like Bush, with political stances hardly
distinguishable from the liberal John Kennedy in the early '60's, describe
themselves as conservatives.  I think both parties tend to portray
themselves as more conservative than their actual policies would indicate.
Why might that be? Does this phenomenon happen in other countries too?

Also, does the necessity for successful politicians to strategically
position themselves on the issues to gain the maximum vote share suggest
that the ability to deceive the voters is more important in democratic
politics than the ability to persuade them?

As political marketing specialists--oops! I mean political
strategists--sometimes say, Issues divide, images unite.

Furthermore, I typically notice that in Presidential debates both candidates
are careful not to distinguish themselves on specific issues too sharply
from their opponent.  I also notice that questions related to ethnic balance
or ethnic political rivalry are always too hot even to ask, much less
answer.  To a surprising degree, both our major parties in the US have
become ethnic parties, but this is never discussed publicly.  Related to
this, economists often focus on the value of open-borders labor markets for
global economic efficiency, but typically ignore the risk of political
destabilization; there is also a tendency to ignore the question of whether
the government of a nation has as its primary duty (of two duties) to
maximize global welfare or to balance the interests of its own voters' upper
and lower classes for a happy medium between growth and security.

~Alypius Skinner

Re: A Short Review of *Hard Heads, Soft Hearts*

2002-12-01 Thread Alypius Skinner

 Jacob W Braestrup wrote:

 Alypius Skinner wrote

 Thus some sort of
  balance must be struck between compassion for our fellow man and
  the incentives for temptation-prone people (who are often the same as
  incompetent or semi-competent people) to resist temptation.

 But where do you suppose such a balance is most accurately struck? in a
 public market for redistribution - or a private one?

 my money is on te latter

 - jacob braestrup

All government programs are a form of redistribution.  For example, public
police and fire protection subsidize the safety of the poor at the expense
of the rich (if I may oversimplify the class structure).  So the real
question is whether the optimal balance would be one of no public
redistribution or some public redistribution.  If there were no public
redistribution, there would be no need for a state, yet if a state did not
exist, one would soon emerge  because the stateless society would be so
obviously suboptimal for an economy beyond the level of the hunter gatherer.
For example, when the bloated west Roman state collapsed in western Europe,
the life of the average peasant probably improved, but trade also collapsed,
which made society in the aggregate poorer.  This is an example of swinging
from one suboptimal extreme of public redistribution to another.   I would
certainly argue that the current level of public redistribution is above the
optimum rather than below it--probably well above.  But I would not argue
that the optimum is zero public redistribution.

Of course, this question of whether we should have an inherently
redistributionist public sector is a different question than whether  the
public sector should micromanage the private sector.

~Alypius Skinner

Re: A Short Review of *Hard Heads, Soft Hearts*

2002-11-28 Thread Alypius Skinner

  If there
  were no efficiency consequences, why not equalize incomes?  The answer,
  I maintain, is that more able and hard-working people deserve more.

 I don't see why,
 efficiency aside, more able and hard-working people deserve more. Being
 more able and hard-working should be reward enough by itself. Lazy and
 incompetent people no doubt did not consciously decide to become lazy and
 incompetent, so why should they be punished for it, again if efficiency is
 not a consideration?

And another response:
 This is an interesting point. Suppose we carry it a little further.

 Cruel and dishonest people didn't choose to be cruel and dishonest.
 Or, if they did at some point choose to be those things, they didn't
 choose to be the sort of people who would make that choice. So why
 should they be punished for it?

Part of the answer is that people do respond to incentives in the
environment.  Giving people an equal share of the annual economic pie
regardless of their conduct will not give them any incentive to curb their
antisocial impulses.

But, on the other hand, there is an argument for some degree of
redistribution.  There is a limit to how much people can raise their
competence level in response to incentives.  No one is born a blank slate.
Some people have a higher potential for achievement than others, and, in the
genetic lottery, some people will always be born with very limited
potential.  Some of these persons are obviously helpless to survive without
assistance even as adults, but then there are the marginal cases--people
with limited educability who will eke out a marginal existence in good times
but often find themselves unable to do so in bad times.  Thus some sort of
balance must be struck between compassion for our fellow man and maintaining
the incentives for temptation-prone people (who are often the same as the
incompetent or semi-competent people) to resist temptation.

The biggest problem with public aid to the poor may be that it is value
neutral.  Very few moral demands are made on the recipients, perhaps because
morality is intimately entwined with religion, and the lawmakers and opinion
shapers are generally determined to keep church and state rigidly
separated, apparently even in countries that have legally established
churches! There is also an exaggerated concern with not imposing moral
values on welfare recipients, which is a policy guaranteed to increase abuse
of taxpayer generosity.

~Alypius Skinner

The Fed's options

2002-11-22 Thread Alypius Skinner

(COMTEX B: Mortgage market commentary--Low rates 
require persistent panicNov 22, 2002 (Inman News Features via 
COMTEX) -- The tone of financial marketsshifted suddenly this week, favoring 
stocks and hurting bonds and mortgages. Byyesterday, 30-year fixed rates 
touched 6.25 percent in the lowest-fee offerings,the high for rates in the 
last three months.There was nothing in new economic data to cause 
such an abrupt change inpsychology. A modest drop in new unemployment claims 
and some life-like twitchesin technology were not enough, though there is a 
growing sense that the Novembereconomy has been no worse than flat, and not 
an extension of theSeptember-October decline. For rates to stay low, panic 
must persist; instead,yields on ultra-safe Treasuries and mortgages rose, 
while rates for corporatebonds stayed the same or fell. Narrowing "credit 
spreads" invariably reflectsfading fear.Federal Reserve Board 
Chairman Allen Greenspan dropped a policy hint in anaccidental way on 
Tuesday, and the big change in market psychology followed.This Fed 
Chairman doesn't drop lint by accident. Fed Chairmen avoid making 
majorpolicy pronouncements in high-tension settings; instead they leak them, 
or slipthem in some otherwise ho-hum remarks. Tuesday's numbing venue: six 
droningpages on international financial risk delivered to the Council on 
ForeignRelations. The text is on the Fed's Web site; read it and you can all 
but hearthe audience struggle for wakefulness, punctuated by the plopping of 
faces intosoup plates.In asides from the published text of the 
speech, the Chairman gave starkdescriptions of the economy: "...a very major 
fallback in businessinvestment Nobody is doing anything, or I should 
say, most everybody isdoing nothing."Then, also aside from 
text, came an astonishing statement of possible Fedaction. The Chairman: "We 
would just move out on the curve, as we have in thepast. We are very far 
from the Fed being restricted."Moving "out on the curve" is a 
phrase beyond the mainstream media, hence aremark unreported and unnoticed 
except among professionals. It refers to the"yield curve," the graphic 
description of interest rates prevailing at 
differentmaturities.The Fed-controlled rate watched by 
everyone in the modern era is the Fed fundsrate, the overnight cost of 
money. Until Tuesday, the markets had assumed thatthe Fed's half-point rate 
cut two weeks ago to 1.25 percent marked the near-endof the Fed's assistance 
to the economy; that the Fed had shot its bolt, we wereon our own and the 
Fed is nearly as helpless as the Bank of Japan.To "move out on the 
curve" means that if the Fed runs out of above-zero Fedfunds room, it would 
begin to buy longer-dated instruments -- bonds -- and drivedown the whole 
rate structure as necessary to revive the economy.Greenspan's "as 
we have in the past" referred to a policy in mothballs for halfa century. 
>From 1942 to 1951, the Fed held the yield on long Treasury bonds to2.5 
percent or less, buying bonds whenever yields threatened to rise higher. 
Inthe modern era, it has been axiomatic that the Fed does not manipulate 
long-terminterest rates. No modern Chairman has suggested that the Fed even 
try to do so.At best, the Fed has worked to keep long-term rates low by 
keeping inflationlow.This policy announcement is a big deal. 
In the near term, it leads to a perverseeffect in the bond market-the Fed as 
a potential buyer of bonds should helprates, but hurts instead. The logic: 
if the Fed has the power to rescue theeconomy and intends to do so, then 
traders and investors shouldn't buy mortgagesand bonds, and maybe should 
sell the ones they have and buy some stock.Will the Fed need to 
move "out on the curve"? Watch U.S. automakers, stockmarkets, holiday sales 
and the visibly sinking economies in Japan and now,Europe.Lou 
Barnes is a mortgage broker and nationally syndicated columnist based 
inBoulder, Colorado. He can be reached at [EMAIL PROTECTED].Send 
a Letter to the Editor for publication. Send a comment or news tip to 
ournewsroom. Please include the headline of the 
story.By Lou BarnesInman News 
FeaturesCopyright 2002 Lou Barnes Distributed by Inman News 
Consumer*** end of story ***

Fw: True costs of oil and gas (3 articles)

2002-11-10 Thread Alypius Skinner
Higher energy prices are needed now to signal the real
 scarcity to come. Without higher prices we will not invest in the
 alternative energy technologies needed for a smooth transition to the
 post-petroleum age. Without higher prices we will not conserve the
 fossil energy needed to manufacture those alternative technologies.
 Without higher prices, argues petroleum analyst Richard Duncan, the
 remaining life expectancy of industrial society may well be less than
 40 years!

 Tuesday November 17, 3:23 pm Eastern Time, 1998

 Real cost of U.S. gasoline is $15.14 per gallon, report says

 By Tom Doggett

 WASHINGTON, Nov 17 (Reuters) - So you think you're getting a good
 deal on a tank of gasoline these days? Not so, if all the oil
 industry tax subsidies received from the federal and state
 governments and other costs that went into producing that gallon of
 gasoline were included in the pump price.

 Such external costs push the price of gasoline as high as $15.14 a
 gallon, according to a new report released Tuesday by the
 International Center for Technology Assessment.

 ``In reality, the external costs of using our cars are much more
 higher than we may realize,'' the Washington-based research group
 said in its report.

 The report examined more than 40 separate cost factors the group said
 it associated with gasoline production but aren't reflected by the
 price of gasoline at the pump.

 These external costs total up to $1.69 trillion per year, according
 to the report.

 The group points out that the federal government provides the oil
 industry with tax breaks to help U.S. companies compete with
 international producers, so gasoline remains cheap for American

 The Department of Energy is forecasting that the national price for
 regular unleaded gasoline will average $1.02 during the current
 quarter, the lowest price on record for any three-month period when
 adjusted for inflation.

 Tax subsidies don't end at the federal level, as the group said most
 state income taxes are based on oil firms' lower federal tax bills,
 which result in companies paying $123 million to $323 million less in
 state taxes.

 In addition to tax breaks, the federal government provides up to
 $114.6 billion in subsidies annually that support the extraction,
 production and use of petroleum, such as research and development and
 export financing.

 The federal government also spends up to $1.6 billion yearly on
 regulatory oversight, pollution cleanup and liability costs connected
 to the oil industry, the group said.

 In addition, U.S. Defense Department spending allocated to safeguard
 the world's petroleum resources totals $55 billion to $96 billion a
 year, according to the group.

 Copyright © 1998 Reuters Limited. All rights reserved. Republication
 or redistribution of Reuters content is expressly prohibited without
 the prior written consent of Reuters. Reuters shall not be liable for
 any errors or delays in the content, or for any actions taken in
 reliance thereon. See our Important Disclaimers and Legal
 Information. Questions or Comments?


 The International Center for Technology Assessment

 The Real Price Of Gas

 Executive Summary

 This report by the International Center for Technology Assessment
 (CTA) identifies and quantifies the many external costs of using
 motor vehicles and the internal combustion engine that are not
 reflected in the retail price Americans pay for gasoline. These
 are costs that consumers pay indirectly by way of increased taxes,
 insurance costs, and retail prices in other sectors.

 The report divides the external costs of gasoline usage into five
 primary areas: (1) Tax Subsidization of the Oil Industry; (2)
 Government Program Subsidies; (3) Protection Costs Involved in Oil
 Shipment and Motor Vehicle Services; (4) Environmental, Health,
 and Social Costs of Gasoline Usage; and (5) Other Important
 Externalities of Motor Vehicle Use. Together, these external costs
 total $558.7 billion to $1.69 trillion per year, which, when added
 to the retail price of gasoline, result in a per gallon price of
 $5.60 to $15.14.


 The federal government provides the oil industry with numerous tax
 breaks designed to ensure that domestic companies can compete with
 international producers and that gasoline remains cheap for
 American consumers. Federal tax breaks that directly benefit oil
 companies include: the Percentage Depletion Allowance (a subsidy
 of $784 million to $1 billion per year), the Nonconventional Fuel
 Production Credit ($769 to $900 million), immediate expensing of
 exploration and development costs ($200 to $255 million), the
 Enhanced Oil Recovery Credit ($26.3 to $100 million), foreign tax
 credits ($1.11 to $3.4 billion), foreign income deferrals ($183 to
 $318 million), and 


2002-11-03 Thread Alypius Skinner
problems with email lately; this is only a test; please ignore

Fw: America's Second Plutocratic Gilded Age Pt. 1

2002-10-28 Thread Alypius Skinner

Krugman tries so hard to make his case that he 
ignores some other factors (perhaps even more controversial) that contribute to 
some of the new social developments that Krugman describes. Unfortunately, 
I don't have time to comment on them, but they would not in any 
eventcancel out the basic direction of socio-economic evolution that 
Krugman describes.~ams--- 
New York Times MagazineOctober 20, 2002For RicherBy PAUL 
KRUGMANI. The Disappearing MiddleWhen I was a teenager growing 
up on Long Island, one of my favorite excursionswas a trip to see the great 
Gilded Age mansions of the North Shore. Thosemansions weren't just pieces of 
architectural history. They were monuments toa bygone social era, one in 
which the rich could afford the armies of servantsneeded to maintain a house 
the size of a European palace. By the time I sawthem, of course, that era 
was long past. Almost none of the Long Islandmansions were still private 
residences. Those that hadn't been turned intomuseums were occupied by 
nursing homes or private schools.For the America I grew up in -- the 
America of the 1950's and 1960's -- was amiddle-class society, both in 
reality and in feel. The vast income and wealthinequalities of the Gilded 
Age had disappeared. Yes, of course, there was thepoverty of the underclass 
-- but the conventional wisdom of the time viewedthat as a social rather 
than an economic problem. Yes, of course, some wealthybusinessmen and heirs 
to large fortunes lived far better than the averageAmerican. But they 
weren't rich the way the robber barons who built themansions had been rich, 
and there weren't that many of them. The days whenplutocrats were a force to 
be reckoned with in American society, economicallyor politically, seemed 
long past.Daily experience confirmed the sense of a fairly equal 
society. The economicdisparities you were conscious of were quite muted. 
Highly educatedprofessionals -- middle managers, college teachers, even 
lawyers -- oftenclaimed that they earned less than unionized blue-collar 
workers. Thoseconsidered very well off lived in split-levels, had a 
housecleaner come inonce a week and took summer vacations in Europe. But 
they sent their kids topublic schools and drove themselves to work, just 
like everyone else.But that was long ago. The middle-class America of my 
youth was anothercountry.We are now living in a new Gilded Age, as 
extravagant as the original.Mansions have made a comeback. Back in 1999 this 
magazine profiled ThierryDespont, the ''eminence of excess,'' an architect 
who specializes in designinghouses for the superrich. His creations 
typically range from 20,000 to 60,000square feet; houses at the upper end of 
his range are not much smaller thanthe White House. Needless to say, the 
armies of servants are back, too. So arethe yachts. Still, even J.P. Morgan 
didn't have a Gulfstream.As the story about Despont suggests, it's not 
fair to say that the fact ofwidening inequality in America has gone 
unreported. Yet glimpses of thelifestyles of the rich and tasteless don't 
necessarily add up in people'sminds to a clear picture of the tectonic 
shifts that have taken place in thedistribution of income and wealth in this 
country. My sense is that few peopleare aware of just how much the gap 
between the very rich and the rest haswidened over a relatively short period 
of time. In fact, even bringing up thesubject exposes you to charges of 
''class warfare,'' the ''politics of envy''and so on. And very few people 
indeed are willing to talk about the profoundeffects -- economic, social and 
political -- of that widening gap.Yet you can't understand what's 
happening in America today withoutunderstanding the extent, causes and 
consequences of the vast increase ininequality that has taken place over the 
last three decades, and in particularthe astonishing concentration of income 
and wealth in just a few hands. Tomake sense of the current wave of 
corporate scandal, you need to understandhow the man in the gray flannel 
suit has been replaced by the imperial C.E.O.The concentration of income at 
the top is a key reason that the United States,for all its economic 
achievements, has more poverty and lower life expectancythan any other major 
advanced nation. Above all, the growing concentration ofwealth has reshaped 
our political system: it is at the root both of a generalshift to the right 
and of an extreme polarization of our politics.But before we get to all 
that, let's take a look at who gets what.II. The New Gilded 
Age[T]he Securities and Exchange Commission hath no fury like a woman 
scorned.The messy divorce proceedings of Jack Welch, the legendary former 
C.E.O. ofGeneral Electric, have had one unintended benefit: they have given 
us a peekat the perks of the corporate elite, which are normally hidden from 
publicview. For it turns out that when Welch retired, he was granted 

Will Britain succumb to Japanese disease?

2002-10-22 Thread Alypius Skinner,1598,776295,00.html

Will Britain succumb to Japanese disease? The spectre of deflation is haunting 
central bankers around the globe Faisal IslamSunday August 18, 
2002The Observer 
In Waco, Texas, at 
President Bush's 'economic forum', the pom-poms were missing but the 
cheerleaders did their job nonetheless. 
The markets may have applauded last Wednesday's mass certification of company 
accounts by chief executives, but central banks around the world were refusing 
to budge, or announcing their reasons for doing nothing. 
The Bank of England, in published minutes, announced that it discussed 
cutting rates, but held back for fear of panicking the markets. The Federal 
Reserve decided to hold fire, but said it stood ready to cut if economic 
conditions deteriorated. But bankers on both sides of the Atlantic are keeping a 
careful eye on Japan - still suffering a deflationary spiral of falling prices 
and a rotten financial system after a decade. 
The much-feared 'double-dip' recession in the United States and Europe would 
actually be one of the more benign outcomes for the world economy compared with 
the really scary scenario: the world's largest economies following Japan into a 
sustained period of stagnation, compounded by deflation - subverting the ability 
of monetary policy to help boost the economy. 
Stephen King, chief economist at HSBC, has no illusions: 'The environment we 
are painting is one in which deflation provides the greatest single risk to 
ongoing economic stability.' 
He points to warning lights that are 'flashing red', such as the persistent 
weakness of equities and rise in corporate bond spreads. 
Money supply growth is still strong despite low price inflation. King puts 
this down to an increase in the demand for money to hold on to rather than to 
spend. A sharp decline in the 'velocity of money' - the extent to which the same 
notes and coins are circulated - supports this view. In deflationary times, 
holding on to cash is a sensible financial strategy. 
Here, the Bank of England's 'symmetrical' mandate gives equal weight to 
avoiding inflation and deflation. The European Central Bank, long accused of 
inheriting a 'deflationary bias' from the German Bundesbank, recently announced 
that its target of positive inflation, less than 2 per cent, should also be 
deemed 'symmetrical'. 
Deflation is essentially the painful march down a hill after an asset price 
bubble. As such, it is more of a worry for the US post-dotcom economy than for 
the UK or Europe. Mervyn King, the Deputy Governor of the Bank of England, calls 
this 'debt deflation', where the burden of nominal debt grows as prices fall 
leaving an even bigger burden of debt this kickstarts a cycle of lower demand 
and even lower prices. 
'The phenomenon of debt deflation is one that all of us are conscious of as a 
conceptual problem, but no one thinks it is an immediate problem for the UK, and 
part of our task is to ensure it remains that way,' said King at the launch of 
this month's Bank Inflation Report. 
Price statistics are not showing overall deflation just yet. In the US the 
GDP deflator, a broad measure of price trends, shows that the price of all the 
goods and services produced in the economy rose at an annualised rate of 1.2 per 
cent in the second quarter of this year. 'This is somewhat below the 3.1 per 
cent average annualised rate since 1930, but it by no means suggests the [US] 
economy is on the verge of deflationary slump,' says Peter Dixon of Commerzbank. 

Last week, the monthly retail price index in the UK showed that inflation had 
gone up from 1.5 to 2 per cent, still well below the Bank of England's target of 
2.5 per cent. Over the last half-decade, British inflation has been the lowest 
it has been at any time since the Fifties. 
But the overall figures mask important divergences within different sectors. 
In the US and in the UK healthy inflation in the service sector coexists with 
deflation in goods prices. On the Federal Reserve's favoured measure, second 
quarter services, prices were up 4.6 per cent while durable goods slumped 2.9 
per cent. In the UK, figures released last week showed goods prices down 1.7 per 
cent and services prices up 4.5 per cent. 
Globalisation helps to explain this. Goods can be traded more readily than 
services, and are therefore more sensitive to international price competition. 
In ultra-competitive markets, companies completely lack pricing power. Only last 
week it was announced that already embattled mobile phone companies, weighed 
down with mountains of debt, were to face even more competition from 'Three', a 
new entrant in the UK. 
But this is not the reason that Japan fell into its deflationary spiral in 
1991. In the Far East the markets marked out a path of over-investment, excess 
capacity and unserviceable debt to speculation and exuberant valuations in 
property markets that slumped. But, hey presto, 

Re: (book review)The Case against Government Science

2002-10-16 Thread Alypius Skinner

- Original Message -
From: Eric Crampton [EMAIL PROTECTED]

The upshot isn't that
 government science is entirely ineffective, it's that it displaces private
 science spending dollar for dollar.  The question then isn't how effective
 government science is, it's how effective the private science foregone
 would have been.

So if we were to look at ratios of government-financed research to
privately-financed research in various countries, after adjusting for total
levels of spending, do countries with proportionately greater private
funding for research achieve proportionately greater practical results,
equal results, or poorer results? Does anyone have any idea?

~Alypius Skinner

How the Greenspan bubble burst

2002-10-16 Thread Alypius Skinner,1598,787908,00.html

How the Greenspan bubble burst William KeeganSunday September 8, 
2002The Observer 
There was a period 
during the chancellorship of Nigel Lawson when some Treasury officials favoured 
the 'spritzer' as a drink. This is neither white wine nor water, but an uneasy 
combination of the two. 
The mystery of why officials should have been opting for this strange potion 
was solved when one learnt that leadership in this matter was coming from none 
other than the Chancellor himself. 
This summer, before going on holiday, I noticed that a number of Treasury 
officials were talking of the crime novels of Raymond Chandler. I don't know 
whether this was at the suggestion of the Chancellor, but it intrigued me; as I 
hadn't read Chandler since I was at school, I thought a return to the scene of 
the crime might make good holiday reading. 
And so it did - ideal for the necessarily brief bursts of reading that child 
duty by the pool allows. But for meatier stuff I took Anthony Beevor's Berlin: 
the Downfall, 1945 and Piers Brendon's account of the Thirties, The Dark Valley. 
Anything to do with the Second World War puts current problems in perspective, 
and reminds one why, for all its irritations, the European Union is a good thing 
and must be built on. 
But the relentless slaughter of 1944-45 described by Beevor made pretty 
depressing holiday reading, although it did not quite drive me to try the drink 
favoured in Chandler's The Long Goodbye: the 'gimlet', 'half gin and half Rose's 
lime juice, and nothing else'. I do not know whether this will catch on at the 
Treasury. Perhaps it could be mixed with a spritzer. 
To explain the Thirties, Brendon naturally spends a good deal of time on the 
Twenties. And, without wishing to push the analogies too far, one is reminded 
how closely the boom of the Nineties and turn of the millennium resembled the 
lead- up to the 1929 Crash and Depression. 
Brendon's section on this is replete with quotations and rationalisations 
that could have come straight from the Nineties. The basic belief was that it 
was a 'new era', and you could forget the old assumptions, rules and 
regulations: the stock market knew better... 
Which brings us to the recent apologia by the economic policymaker who was 
worshipped throughout the Nineties and acquired the status of financial 
witchdoctor, Alan Greenspan, chairman of the US Federal Reserve. Greenspan 
recently claimed 'it was very difficult to definitively [sic] identify a bubble 
until after the fact' and that, in any case, it was impossible to do anything 
about a bubble, even if it could be identified. 
This seemed to me to be a revisionist view, because I recalled friends of 
Greenspan telling me years ago that he was very concerned about the stock market 
bubble, and indeed used that term. But he would then point out that the very 
metaphor itself implied you could do nothing about it. You could not 'deflate' a 
real bubble. Real bubbles could only burst. 
Can it be that the boom got out of hand, and that appropriate cautionary 
policies were not adopted simply because policymakers were obsessed with one 
metaphor that told them they could do nothing? 
Well, not exactly: the American economist Paul Krugman has tracked down a 
passage in the published minutes of the Federal Open Market Committee for 
September 1996, at which the Fed chairman said: 'I recognise that there is a 
stock market bubble problem at this point.' The solution was 'the possibility of 
... increasing margin requirements. I guarantee that if you want to get rid of 
the bubble, whatever it is, that will do it.' 
The timing of this statement was interesting. It was several months before 
Greenspan made his famous comment about 'irrational exuberance', and that 
comment itself was made in December 1996, when the US stock market boom of the 
Nineties was only in its infancy. 
Now anyone who has read JK Galbraith's The Great Crash will recall the 
central role 'margin requirements', or rather the lack of them, played in the 
boom of the Twenties. Bluntly, much of the feverish buying in the Twenties and 
the Nineties was done on easy credit, and tougher regulation of the financing of 
stock market activity could have done a lot to limit the damage. 
This is not of just historical or 'academic' importance. As British economist 
Christopher Dow made clear in his last work, Major Recessions , history teaches 
us that 'the bigger the boom, the bigger the bust'. This is a lesson that, to 
judge from the number of times he has referred to 'the economics of boom and 
bust', Gordon Brown has fully appreciated. 
It is abundantly clear from the gloominess of the economic news in the US 
that the 'bust' phase is far from over. And, given that the rest of the world 
relied for so long on the US role as 'importer of last resort', there is a limit 
to which European schadenfreude can offer consolation. For years 

Global crash fears as German bank sinks

2002-10-15 Thread Alypius Skinner

Fears that some incident or other will trigger a 
global crash have cropped up off and on for many years--such as the Asian 
currency devaluations or Greenspan's emergency bailout of that big hedge fund 
some years back. Are these fears more or less groundless, or is the world 
economy really so highly leveraged that it constantly dances on the precipice of 
disaster? Is the global economy really that fragile, or are the risks of 
catastrophe over-rated? Does anyone wish to venture an opinion?

~Alypius Skinner,1598,805683,00.html

Global crash fears as German bank sinks Faisal Islam, economics correspondent and 
Will HuttonSunday October 6, 2002The Observer Stockbrokers around the world are braced for 
a potentially calamitous week as alarm mounts over a looming, Thirties-style 
global financial crisis. A leaked email about the credit-worthiness of 
Commerzbank, Germany's third largest bank, yesterday increased fears of the 
international stock market malaise exploding into a fully-fledged banking 
Commerzbank lost a quarter of its value last week, raising the spectre of 
Credit-anstalt, the Austrian bank that collapsed in 1931, sparking global 
US stock markets have fallen for six consecutive weeks, to their lowest 
levels in five years. European markets have collapsed even further, wiping out 
nearly half of the value of European corpora tions in this year alone. Japan is 
struggling to put together a plan to save its banking system, riddled with bad 
debt after a decade of recession and falling prices. Now the German economy 
threatens to follow. 
'There are strong parallels to the Thirties after an unsustainable "new era" 
boom,' says Avinash Persaud managing director for economics and research at 
State Street Bank. 'Then, the stock market decline was not just steep, it was 
long, taking three years to reach the bottom.' 
'Commerzbank being affected is a sign of the severity. But in today's crisis 
risks have been offloaded from the banks to the markets and ultimately our 
pensioners, which makes the problem more difficult to deal with,' he says. The 
leaked email about Commerzbank was in response to an inquiry from a US 
investment bank about rumours of huge losses on credit derivatives, which aim to 
spread risk. 
Figures due to be published on Friday will show that a toll of stock market 
falls, rising joblessness and war fears is finally denting the spending habits 
of Americans. Economists fear that the result may be a 'double-dip' US 
recession, taking much of the world with it. 
Europe's finance Ministers, including Chancellor Gordon Brown, will meet in 
Luxembourg on Tuesday amid deepening concern about the stability of the 
financial system. Tomorrow evening, the Eurogroup of finance ministers, 
excluding Brown, will discuss reforming Europe-wide tax and spending rules along 
the lines of the British system, taking stronger account of economic 
In the US, the concern is that Alan Greenspan, chairman of the US Federal 
Reserve, has insufficient room to cut interest rates if the economy falls into 
recession. 'The [Bush] Administration has two lines of action: tax relief for 
the rich [and] reliance on the Federal Reserve. Both are without effect,' says 
US economist JK Galbraith in an interview with The Observer. 

Re: (book review)The Case against Government Science

2002-10-14 Thread Alypius Skinner

- Original Message -
 With the widespread intrusion of the federal government into the lives and
 business of everyone, it might be fruitful to consider a spectrum of
 spanning the gamut from purely private to purely governmental rather than
 considering just the two extremes.

 David Levenstam

On the other hand, if there really is a trend of increasing scientific
value-added as one goes from totally public to totally private research,
then would it not be beneficial to all concerned--science, government,
industry, consumers--to eliminate all government funding of scienfic
research? I am not convinced that this is the case, but, as they say,
stranger things have happened.  We ought to look and see.

~Alypius Skinner

Re: (book review)The Case against Government Science

2002-10-13 Thread Alypius Skinner

- Original Message -
From: john hull [EMAIL PROTECTED]

That the expense of cushy jobs for
 okay scientists was more than offset by the gains from
 getting only the best scientists to go to Bell Labs,
 or MIT, or wherever.

Pardon my ignorance, but is MIT a private or public institution? (I thought
it was public, but that is merely an assumption on my part.) For that
matter, would not even private universities have enough direct or
indirect government subsidy to blur the lines between government science
and private science? Should only corporate science be considered private

~Alypius Skinner

 The review didn't seem to
 indicate that that was addressed.


 --- Alypius Skinner [EMAIL PROTECTED] wrote:
  The Case against Government Science
  The Economic Laws of Scientific Research
  Terence Kealey
  St. Martin's, New York, 1997
  382 pp, paper ISBN 0-312-17306-7
  Reviewed by Frank Forman
  Ayn Rand dramatized the case against government
  funding of science in Atlas Shrugged, but a
  dramatization is not evidence. The problem is that,
  according to standard economic theory, research is
  almost a perfect example of a pure public good, a
  good that once produced can be consumed by all
  without any possibility of exclusion by way of
  property-rights delimitation. Such goods will be
  underproduced in the market, since the producers can
  capture only the benefits of the research that they
  themselves use. Rational citizens, all of them,
  might very well empower the state to provide for the
  provision of research and other public goods. Not
  every citizen would actually benefit from each good
  so provided, but under a well-designed constitution,
  each citizen would presumably be better off as a
  result of constitutionally limited state provision
  of public goods than without it. This would mean
  unanimity of agreement-a social contract-and hence
  no initiation of force.
  But what about government funding of science? Nearly
  every scientific paper, it is true, seems to
  conclude with an appeal for funds for further
  research, but even so the case for public funding
  is accepted by nearly everyone except a few
  ideological extremists. Along comes a bombshell of a
  book by Terence Kealey, The Economic Laws of
  Scientific Research, that argues that government
  funding of science at best displaces private funding
  and in fact diverts research into less productive
  channels. I am surprised that this book has not
  gotten much more attention from the free-market
  The book is essentially a history of science and its
  funding, with the number of pages per century
  increasing up to the present. The author argues that
  technology drives science, even basic science, just
  as much as the reverse, which is awfully reminiscent
  of John Galt and his motor. Kealey describes the
  work of several engineers and other practical men
  turned scientists, such as Carnot, Torricelli,
  Joule, Pasteur, and Mendel. He argues that most new
  technology comes from old technology. The book is
  highly instructive on matters of history and greatly
  entertaining to read. To wit:
Laissez-faire works. The historical (and
  contemporary) evidence is compelling: the freer the
  markets and the lower the taxes, the richer the
  country grows. But laissez-faire fails to satisfy
  certain human needs. It fails the politician, who
  craves for power; it fails the socialist, who craves
  to impose equality on others; it fails the
  businessman, who craves for security; and it fails
  the anally fixated, who craves for order. It also
  fails the idle, the greedy, and the sluttish, who
  crave for a political system that allows them to
  acquire others' wealth under the due process of law.
  This dreadful collection of inadequates, therefore,
  will coalesce on dirigisme, high taxes and a strong
  state (p. 260).
  Here are the three Laws of Funding for Civil RD,
  based upon comparing different countries and across
  1.. The percentage of national GDP spent
  increases with national GDP per capita.
  2.. Public and private funding displace each
  3.. Public and private displacements are not
  equal: public funds displace more than they do
  themselves provide (p. 245).
  But it is not just the funds that are displaced; so
  is their effectiveness, as a rule, from projects
  that have a promise to become useful to those that
  only keep scientists busy. Furthermore, many wealthy
  men generously fund science and are free to choose
  genuine innovators and not those merely expert in
  filling out grant applications. Kealey describes
  many gentleman amateurs, the greatest being Darwin.
  And he compares the quality of private and public
  medical research in England during this century in
  detail, with the advantage going to the former.
  Kealey also

A man for all markets (interview with Galbraith)

2002-10-12 Thread Alypius Skinner,6903,805309,00.html

man for all markets At 93, the scourge of contemporary economics, JK Galbraith, is on the 
attack. The author of The Great Crash tells William Keegan that President Bush's 
moves against recession are no use at all Sunday October 6, 2002The Observer Recent reports had said Galbraith looked 
frail, and he has certainly not been too well. But when this was being explained 
to me in advance, he grabbed 




the telephone and 
boomed: 'Keegan, I'm on the mend.' And certainly, when we spoke, his form of 
93-year-old frailty seemed pretty robust. (He is 94 next week.) 
He began with a paean of praise for Adam Smith, who, he said, had been 'too 
fully captured by the right-wing'. In Galbraith's view 'much of what he said had 
large encouragement for the careful and intelligent Left. He was ruined to an 
extent by his acolytes, many of whom had never read him.' 
Thoughts of Smith's Theory of Moral Sentiments moved Galbraith to the ethics 
of the present. 'I have written a long essay, "The Economics of Innocent Fraud" 
about things that, for self-interest or convenience, we hail as the truth but 
have no particular relevance to reality.' 
With an eye on the Bush administration Galbraith said one minor example of 
this was relevant now: 'You can't stimulate an economy by reducing taxes on the 
rich. That is popular for what it does for those who get the money, and not for 
what it does for the economy.' 
He has always been superb at attacking 'conventional wisdom', a phrase he 
coined, and his current target is worship of the US Federal Reserve. America is 
'having a somewhat painful recession, with no remedial action in sight of any 
consequence. The administration, in summary, has two lines of action: one is tax 
relief for the rich. The other is reliance on the Federal Reserve. It is at 
least consistent. Both are without effect.' 
This celebrated author feels his greatest achievement was not his books but 
his time as head of the body responsible for US price controls during the Second 
World War. He contrasts the success of this with the inflation that took place 
after the First World War, when the Fed was in charge. 'Historians never mention 
inflation as they did after World War One. But if - and I think this is the 
basic rule of all public service - if you succeed your work is forgotten.' 
Then came the rapier thrust: 'One of the most important things we did in 
those years was to set aside all reliance on central bank policy.' There will be 
more about the excessive reliance placed by governments and economists on 
central banks in the new book. 'But it will not be without admira tion for Alan 
Greenspan. We've never seen anything like his theatrical skills.' 
And European central banks? 'I've never been a close student of monetary 
policy in Europe, apart from the inescapable history of the Bank of England.' 
We returned to the present day. 'This is a very disagreeable time, and its 
burden is falling as usual on those least able to carry it. You pick up the 
newspaper any time, and on the financial pages you'll read of the constructive 
action some company or other is taking: in a commendable step it has just laid 
off 10 per cent of its workforce. There is no reflection on the discomfort that 
might follow from being so assigned to leisure, or what it might do if their 
children are going to college.' 
Galbraith has always written beautifully - a source of admiration and 
sometimes acute envy among fellow economists - and still speaks in measured, 
rounded sentences, choosing his words carefully, sometimes going back to 
substitute le mot juste. 
'Being so assigned to leisure' is a classic Galbraithian use of irony, and 
reminded me of his book, The Affluent Society. 'Things are bad enough,' he said, 
'so that I haven't noticed any great revival of interest in that book. Perhaps I 
should have a new edition with a new title. It could be "The Depressed Economy", 
and it would face the fact that only a reduced colony of booklovers could afford 
to buy it.' 
Which brought us to Galbraith's masterpiece The Great Crash, 1929. Surely 
there had been a revival of interest in that? 
'The Great Crash has been in print since the mid-Fifties, and it still 
outsells all of my other books' (he has published 30). 'It has a wonderful, 
built-in salesmanship: any time anyone complains as to what he or she is 
suffering in the stock market there is someone who always says, "If you think 
that is bad, why don't you read Galbraith on 1929"?' 
This reminds him of when he used to peruse bookshops to see how his latest 
was doing. He noticed that one title was never on sale in the old La Guardia 
airport in New York. 'One night the woman in charge asked me what I was looking 
for. I was a little ashamed, but came out with the title, The Great Crash. She 
never hesitated: "That certainly is not a book 

Re: WWII Germany - Olson - American South

2002-10-09 Thread Alypius Skinner

- Original Message -

 If I recall Mancur Olson suggests that one of the reasons that post WWII
 West Germany did so well is that all of Germany's special interest
 groups were destroyed.

 I'm inclined to agree although I know that Germany had tremendous
 manufacturing ability even at the end of the war.  However, why did the
 South fare so poorly after the US Civil War?

Olson's distributional coalitions remained intact in the US, and the South
was part of the US.  Within a country, why do most major industries and
financiers locate in one region of a country and not in another? Why did
industrialists so rarely set up shop in Southern states? Why were
meatpacking, steel, and auto industries, among others, all originally
concentrated in the old Union states?  While most of America's cotton was
grown in the South, why was most textile manufacturing done in the north? If
anyone has the answer to these questions,  we might understand why the
post-War South was for so long impoverished.

~Alypius Skinner

When Economics Shifts From Science to Engineering

2002-10-06 Thread Alypius Skinner

When Economics Shifts From Science to 
EngineeringBy HAL R. VARIAN
CONOMISTS think of 
themselves as scientists; their primary goal is to understand how the economy 
works. But scientific knowledge is not their only goal; as a famous economist 
once remarked, "The point is not to understand the world, but to change it."
Economists are increasingly being called on to give advice about how to 
design new economic institutions. They have been consultants in the design of 
auctions, power exchanges, financial exchanges and a variety of other market and 
market-like mechanisms.
In these applications, economics looks more like engineering than it does 
pure science. Just as a civil engineer applies principles of physics and 
mechanics to design bridges, economists apply principles of economic analysis to 
design exchange mechanisms.
Al Roth, an economist at Harvard, recently described an interesting case 
study of "economist as engineer." In the mid-1990's, Mr. Roth worked with the 
National Resident Matching Program to design a new system for matching residents 
and hospitals. Documents that describe his experience are available at
As with civil engineering, economic engineering at its best involves an 
understanding of the historical and institutional environment, coupled with 
theoretical models, computational models and real-life experiments.
Start with the institutional background. Each year this program matches about 
20,000 medical students to hospitals. Students interview with potential 
employers and then submit a ranking indicating their preferences. Similarly, 
hospitals submit a ranking of residents. The program then uses a computer 
algorithm to match residents with hospitals.
The clearinghouse started in the early 1950's and worked reasonably well for 
a while, but by the 1980's there was considerable dissatisfaction. The chief 
issues had to do with whether the system was fair to students, whether there 
were ways to "game the system" and whether there were better ways to treat 
married students who wanted jobs near their spouses.
As it happens, there is a large theoretical literature on "matching problems" 
of this sort. In this literature, a match is "unstable" if there is some student 
and some hospital that prefer each other to their current matches. If there are 
no such pairs, the matching is "stable."
Stability is obviously a desirable property. It turns out that in the simple 
cases studied in theory there are usually many stable matches. There are 
relatively simple algorithms that can find the "best" stable match for each side 
of the market, but these are typically different.
So far so good  there are easy ways to find good matches, at least in 
theory. What about gaming the system? Here the news is not so good. It turns out 
that there is no algorithm that cannot be manipulated in matching students and 
hospitals: there will always be cases in which applicants or hospitals will want 
to change their stated ranking to improve their prospects.
But the theory only says there are some cases in which participants want to 
misrepresent their preferences; it does not give guidance about how often this 
This observation led Mr. Roth to do some computational experiments to 
determine just how likely such misrepresentation would be. It turned out that it 
was not a common problem for realistic distributions of preferences. Even though 
manipulation was always possible, it was not much of a problem in practice, if 
an appropriate algorithm was used.
What about the couples problem? Here theory was even more pessimistic: there 
might be no stable matching if couples were involved. Still, simulations showed 
that this was also relatively rare.
The next stage was to experiment with real-life data. Experiments are 
important in economics for the same reason they are important in engineering or 
medicine: something may work well in a controlled environment and fail miserably 
in real life.
Some experiments are computational: applying various algorithms to actual 
data, to see how they would fare. This was particularly easy in this case, since 
the data from other years was readily available. One could also use laboratory 
experiments with human subjects, but that did not have a big role to play here. 
(In other work Mr. Roth reports subsequent experiments designed to examine 
various alternative matching models.)
Theoretical and computational models are important in coming up with designs. 
But they should be subject to experiment to really test them out, since effects 
that aren't in the models could be critical in practice. In civil engineering 
these might be things like wind and snow; in economics they might be things like 
psychological bias and social norms.
In some cases, market participants can figure out loopholes the designer 
never thought of. This has been a particular 

Re: Why does tenure exist?

2002-10-05 Thread Alypius Skinner

 Don't federal and state workers effectively have tenure?  Isn't it
 impossible to fire a government worker covered by civil service in


It's hard to fire government employees, especially civil service employees,
partly because we wanted to remove most of these jobs from the political
spoils system.  Another factor is that government's top management does not
worry about their firms going out of business nor do they expect to
maximize their own profits or careers by maximizing production or minimizing
costs.   They know they can better get their customers to shell out their
votes and campaign donations by promising more services than by cutting
costs.  There is a more limited or less enthusiastic market for
cost-cutting.  Also, making government employees' jobs seem less secure will
tend to lose them the votes of government employees, and that is a lot of

For education, because supply of teachers tends to exceed demand, tenure
will naturally have great appeal for prospective employees.  If some
colleges or universities decided to eliminate tenure, by how much would they
have to increase pay or costly fringe benefits to attract and keep the best

Private employers have occasionally tried something like tenure--it has been
widely aspired to in Japan since WW2 (although only the larger employers
have been able to apply it in practice) and IBM was for many years famous
for the degree of employment security it offered--but the cost-pressures of
a highly competitive marketplace have eroded these policies.   Some business
management theorists believe that lifetime employment policies were one of
the secrets to the management success of Japan's better corporations.
Certainly, some firms (as well as some non-profits) must find that, under
the right circumstances, employment guarantees offer substantial benefits to
employer as well as employee.  Otherwise, such policies would be even less
common than they are.  Tenure-type practices seem only to be workable when
the organization has ways to buffer itself from extreme swings in financial
conditions.  Educational institutions, in addition to  government and
private subsidies, may have large numbers of untenured personnel who could
be sacrificed' in a financial pinch.  Big corporations typically have
access to generous lines of credit at favorable rates, and, in Japan,
usually employ large numbers of temps who can be dismissed in hard times.
(To buffer its own employees, the government can either sell bonds or raise
taxes during tight periods.)

When lifetime employment is viable for the hiring institution, it is a
cheaper way to attract and maintain the best talent, it makes it
economically feasible to invest heavily in employee training, trade secrets
or other sensitive information is more secure, skilled personnel are not
lost during cyclical downturns,  and employees will offer less resistance to
innovation, automation, and re-organization.  One downside is that fear
becomes a less effective motivator; but the most serious downsides are that
the cost of retaining employees during cyclical downturns may not be fully
compensated for  during cyclical upswings, that structural adjustments may
make some employees permanently superfluous,  and that the cost of retaining
employees during a downturn may lead to a liquidity crisis before the cycle
turns up again.

One area where tenure is very common is in family businesses.  They can use
flexible wages, minimal debt, and the option of flexibly redeployeeing
personnel (family members) elsewhere during a crunch.  The joint
household, a fairly common institution in India and some other parts of the
world (although rare in European cultures),  might be viewed as an economic
institution with tenure-type employment policies.  Are there any studies
of the economics of joint households (or communes such as those of the
Hutterites)?  If so, they might shed some further light on the conditions
necessary for  tenure systems and lifetime employment policies.

~Alypius Skinner

Stock market shock explained

2002-10-04 Thread Alypius Skinner


  Stock market shock explainedPhysicists 
  model recent trading frenzy. 1 October 





  Some lost hundreds of millions in 
September's twenty minute trading frenzy.

  Two physicists have an explanation for the convulsion of the stock 
  market just ten days ago that left traders reeling and economists 
  scratching their heads. The market was behaving like a muffled guitar 
  string, they suggest, thanks to short-termism and technological 
  The 20-minute trading frenzy on Friday 20 September saw one bank loose 
  £100 million while another dealer racked up £1 million profit in three 
  minutes. More shares changed hands than are often traded in an entire day. 
  It began at around 10.10 am; by 10.15 the FTSE 100 index - a barometer 
  of the market's overall health - had soared from around 3,860 to 4,060. 
  Minutes later it plummeted to 3,755 before eventually levelling off close 
  to its starting point.
  Economists struggle to understand these rare, earthquake-like anomalies 
  that they dub, rather vaguely, turbulence. But to Sorin Solomon and Lev 
  Muchnik of the Hebrew University of Jerusalem, Israel the event of 20 
  September looks more like another physical phenomenon: damped 
  Solomon and Muchnik have built a computer program that simulates 
  trader-trader interactions for a wide range of different trader 
  strategies; the model borrows ideas from the physics of colliding gas 
  particles. They searched for a set of simple 'psychological' rules that 
  would produce the spike seen on the 20 September.
  The model generates damped oscillations if there are three types of 
  traders: random traders, who buy and sell at small random deviations from 
  the current market price, market-maker traders who occasionally induce 
  large price fluctuations, and inertial traders who base their orders on 
  what they did in the previous transaction. 
  All the traders are opportunists. "They are interested in short-term 
  profits and anxious not to miss a trend," says Solomon. If everyone else 
  is buying, they'll tend to buy too, leading to herding behaviour that 
  amplifies small price fluctuations into big ones. 





  Traders anxious not to miss a 
trend can cause these oscillations.

  If prices drift too far from what the traders believe is their 
  fundamental value, they'll slow down and eventually reverse their 
  behaviour. This makes the prices oscillate around their fundamental value. 
  But another process damps out these oscillations: a kind of friction 
  produced by the way traders follow the market rather sluggishly. In the 20 
  September event, it seems that technological limits on how fast a 
  transaction can be made may have slowed the market's response.
  Explanations like this might not be unique, but by being based on the 
  behaviour of the market as a whole they contrast with the way that 
  economists typically seek to pin anomalies on specific causes. Some have 
  blamed the 20 September turmoil on trading errors made by the Swiss-owned 
  Credit Suisse First Boston and by Deutsche Bank. 
  A similar frenzy last year was traced to a deal by a trader for the 
  US-based Lehman Brothers that was 100 times bigger than he'd intended. But 
  single errors can't swing the whole market. That happens when other 
  traders react - the effects of which conventional economic models fail to 

  © Nature News Service / Macmillan Magazines Ltd 

depreciating assets with rising prices

2002-08-19 Thread Alypius Skinner

I have often seen the housing market so strong 
that even stocks of physically depreciating housing (darn that second law of 
thermodynamics!)would appreciate in market value, often quite rapidly. 
Many times the cost of housing presumably increases faster than the cost of the 
inputs (labor and materials). Why doesn't a natural cap exist on housing 
appreciation by virtue of the "threat" that potential buyers may simply build 
their own houses by paying for the labor and materials directly?

On a related note, why does the local press--which 
does all sorts of handwringing over the rising prices of gasoline, food, 
electricity, automobiles and other consumables--rejoice when local housing 
prices are inflating? In fact, the higher the rate of housing inflation, the 
louder the local opinion shapers seem to cheer. Why don't they cheer when 
the price of, say, transportation or food increases at a double digit annual 

~Alypius Skinner

Re: charlatanism

2002-08-18 Thread Alypius Skinner

- Original Message -
From: fabio guillermo rojas [EMAIL PROTECTED]
 Example from my professional life: As is probably obvious, I'm not
 an economist - I'm a sociologist who takes economics very seriously
 and I sometimes use economic tools in my research. So I'm always
 in a position of explaining economic ideas to non-economists and I
 frequently find that people tend to avoid economic issues.

Rodney Stark and some other sociologists have very fruitfully used supply
and demand for public goods to explain the rise and fall of religious
bodies.  They also discuss religious entrepreneurship and the attempt to
impose religious monopolies or religious cartels to fend off competition.
This school has also explained the secularization of western Europe as a
supply side failure.  Within this genre,  I regard Stark and Bainbridge's
_The Future of Religion_ as a latter day classic.  Since many sociologists
seem to have an aversion to both religion and economics, I wonder whether
their studies have adversely affected their professional reputations.
(Also, I regard Stark's textbook _Sociology_ as the only introductory
sociology textbook so interesting it can be read for pleasure, but I don't
think it is in print anymore.)

~Alypius Skinner

Re: Nations as Corporations

2002-08-18 Thread Alypius Skinner
 born poor have some right
(implied by wrong-to-prevent-them-from-moving-here) to move here.

I would also like to point out the moral hazard of receiving enough poor
from sending countries to reduce pressure for political and economic reform
within those countries, while doing nothing for the vast hordes of poor who
must remain there.

One problem with open borders (in addition to differing political cultures
among the immigrants, national security risks, the evolution of Quebec-style
or Yugoslavia/Kosovo-style multicultural schisms, ethno-tribal rivalries,
differential ethnic crime rates, and unlimited population growth) is that
the immigrants will not stop coming until the standard of living or economic
opportunities in the receiving nation are no better than in the poorest,
most mismanaged and tyrannized nation in the rest of the world.

 2. The incentive structure may give unhealthy goals
 too much weight.  I can't think of anything specific,
 but it sounds like we could be setting ourselves up
 for a Ken Lay presidency.  I'm not sure that would be
 a good idea.

Ken Lay, Bill Clinton (Hillary in 2008), what's the difference? Lay might
even be an improvement.  And then there was the notorious Grant
administration, or the democratically elected (twice!) Milosevitch
administration in Yugoslavia.  Lincoln's administration led to a civil war
(any of the other three choices in the 1860 election would have avoided
secession), and the FDR and LBJ administrations were policy disasters from
which we may never recover.  What makes you think a Board of Directors would
necessarily make poorer choices?  One problem with universal suffrage is
that too many voters are actual or wannabe free-riders.  Another problem, of
course, is voter ignorance and even voter stupidity.  And then there is
voter apathy, which is entirely rational.  One vote really doesn't make a
difference.  If it made a difference in one election in 100, it still would
make no difference.

 it would be found efficient to re-allow indentured servitude to pay off
 one's share, right?

Interesting question.  Technically, indentured servitude is not really
involutary servitude.  Under current interpretations of the 13th, 14th, or
whichever amendment it was that confiscated US slaves without compensation,
is indentured servitude permitted by the courts?

Misha Gambarian wrote:
They can just lose their voting rights, but still have right to work and
live in USA. In this case I expect price of share to be very small, probably
less than $10,000 - and in this case Gates can buy 6,000,000 votes and more
or less make USA presidents

It would probably be safer to allow one vote per shareholder, not one vote
per share.

From: john hull--
for example,
 the CEO could pursue int'l policies that would prevent
 India from having a strong high-tech industry as a
 means to get educated Indians to move to the States.
 It seems to me that such a scenario degrading into
 some of the lowest depths of mercantile excesses is
 too likely to be a safe choice.

But all the incentives for that scenario already exist.

Robin Hanson wrote:
One, assuming that
 a CEO maximized share value of a nation, what would they do wrong or

Do you mean what would they do to decrease or increase shareholder value, or
what would they do wrong or right morally, which seems to be a question that
also crops up a lot in this thread?

And two, what institutions could get them to maximize share

For a start, we could tie fluctuations in the pay of government employees
(elected and unelected) to fluctuations in the GDP, perhaps using a five
year moving average.

Does this whole discussion of nation-as-corporation remind anyone besides me
of the USSR? Was the Soviet Union's collapse fundamentally a matter of bad
management rather than any dysfunctionality inherent in the corporate model?
I think even competition would be possible by pitting one division against
another in the same industry, with promotions going to the manager of the
best performing division or profit center.  The biggest shortcoming to  a
fully corporate model seems to be the question of how to spur innovation.
The mechanics of innovation have been tackled by some business gurus, but
I don't know how effective their recommendations are.

Free-riding might be dealt with by worker peer groups and by closely tying
worker pay to the profitability of the profit center.

~Alypius Skinner

China Will Soon Be Second Only To The US

2002-08-18 Thread Alypius Skinner
Title: China Will Soon Be Second Only To The US


  China Will Soon Be Second Only To The 
  USThe Korea Herald8-4-2


  Over the coming decades, China will become a 
  thoroughly new form of political and economic entity. Brutally 
  competitive in both politics and world markets, innovative and 
  resilient, China will be more dominant than any nation save 
  Such a shift in the global balance of power occurs 
  only about once every century and is comparable to the emergence of 
  the U.S. power a century ago. The magnitude of this change is due, in 
  part, to a radical and rapid shift in China's governance. Because of 
  its suddenness, it is tempting to write this shift off as a fluke. But 
  China's restructuring is permanent and will affect every aspect of its 
  national life, as well as its global standing. 
  The People's Republic now embodies two systems: the 
  centralized, autocratic Communist administration, dominated by an 
  outdated ideology and military interests, and the decentralized 
  free-market economic regime. Whether deliberately or not, China is 
  reorganizing itself to balance central authority and common purpose 
  with decentralized freedom, in the same way that nimble companies 
  balance home-office and divisional control. The result is an entirely 
  new geopolitical model - the country as corporation. 
  Call the new China "Chung-hua, Inc." (Chunghua 
  translates as "China" and actually means "the prosperous center of the 
  universe.") Like many corporations, China is moving most 
  decision-making to the "business unit" level - semi-autonomous, 
  self-governing economic region-states that compete fiercely against 
  each other for capital, technology, and human resources (just as 
  America's states do). 
  This new, decentralized free-market regime currently 
  encompasses only a small part of China's vast territory, and many 
  Chinese officials still refuse to acknowledge its existence. Indeed, 
  only seven years ago, the word "federation" was banned from the 
  Chinese language; companies like Federal Transport or Federation 
  Merchants were required to change their names. Today, China has the 
  most federal governance structure of any large nation except the 
  United States. 
  Two broad categories of region-states exist. The 
  first are relatively small, composed of cities and their surrounding 
  areas, generally with a population of 5-7 million people. Some of 
  these - Shenzhen, Shanghai, Dalian, Tianjin, Shenyang, Xiamen, 
  Qingdao, and Suzhou - are now growing economically at a rate of 15-20 
  percent per year - faster than such Asian "tigers" as Malaysia, 
  Taiwan, Thailand and Korea ever did. These smaller region-states, in 
  turn, are propelling the growth of larger mega-regions, with 
  populations approaching 100 million each. 
  The mega-regions, which tend to share common 
  dialects, ethnic identities, and histories, are becoming economic 
  powerhouses in their own right. If they were separate nations, five of 
  them - the Yangtze Delta, the Northeastern Tristates area (formerly 
  known as Manchuria), the Pearl River Delta, the Beijing-Tianjin 
  corridor, and Shandong - would rank among Asia's 10 largest 
  Regional governments have also been toughened up by 
  the Chung-hua, Inc. ethic. Most officials are appointed, not elected. 
  Not only are they held to targets of 7-percent annual economic growth 
  or better (like many corporate executives), they must also improve 
  environmental quality, build better infrastructure, and reduce local 
  crime levels. In October 2001, a half-dozen bureaucrats were expelled 
  from one of China's major cities for not meeting their economic growth 
  and security targets. 
  Local officials are often considered heroes, not 
  oppressors. In January 2001, Bo Xhi Lai, then mayor of Dalian, was 
  promoted to governor of Liaoning province. Thousands of women, many in 
  tears, spontaneously came to a park to bid him farewell. During his 
  nine-year tenure, Dalian evolved from a ramshackle port into one of 
  the cleanest and most prosperous cities in Asia. It now has a street 
  life more vibrant than Singapore, a layout 

Re: In Praise of Pay Toilets

2002-05-29 Thread Alypius Skinner

- Original Message -
From: john hull [EMAIL PROTECTED]
 On reflection it has occured to me that prices may
 affect bathroom maintenance costs: if Mc.D's charges
 less for burgers and obtains more customers, then they
 may have more bathroom use which may require more
 bathroom cleaning, i.e. an increase in bathroom
 maintenance costs.  If such were the case (it seems
 reasonable), then maintenance costs would enter into
 the profit max. problem and would therefore affect the
 price, right?  That's not a rhetorical question; if
 I'm wrong please tell me.

Do you include water usage in maintenance costs? Are pay toilets more common
in areas of water scarcity? Are costs of water higher in Holland or Spain?
Is there any strictly economic rationale that would account for pay toilets
being common in some countries and rare in others? Or is the assumption here
that businessmen in some countries prefer policies which are economically
irrational? How would either a businessman a priori or an economist after
the fact go about estimating or determining which policy was more

~Alypius Skinner

Re: In Praise of Pay Toilets

2002-05-27 Thread Alypius Skinner

- Original Message -
From: fabio guillermo rojas [EMAIL PROTECTED]
 3. They aren't as profitable as you think because people can frequently
 use quasi-public restrooms such as fast food places, hotels, gas stations,
 etc. Ie, there are real competitors.


Yet this is just the point.  The few pay toilets that I have seen in my life
were in the very places you describe as 'competitors.'  Why don't
McDonald's, convenience stores, etc., make their restrooms pay their own
way? Why pay for the maintenance out of their profits?

~Alypius Skinner