Saturday, June 30, 2012


Having persuaded their credulous minions that Obama care is the second coming of the Communist Manifesto (rather than the brain child of a right-wing think tank it really is) the Republicans are pretty publicly committed to recall. Romney is still mouthing "repeal and replace" but that doesn't appeal to his Tea Party brethren and he dare not try to give his "replace" any substance. Meanwhile, back on planet Earth, a bunch of Republicans are having second thoughts, since a number of provisions of Obama's law are pretty popular.

David Brooks has a version of replace that turns out to look a heck of a lot like Obamacare. David Frum thinks repeal is a fool's errand, and that Republicans should focus on sensible modifications to the law. He has a version which would hardly cause any liberal heartburn. I've just saved the headlines.

1) Universal coverage has been extended. It won't be retracted, and it shouldn't be retracted. Not only will universal coverage lift a wholly unnecessary misery from the lives of millions, improving the health and welfare of the whole population, but it will also be a spur to economic productivity. Ending the fear of loss of coverage will encourage people to launch new businesses and to change jobs.

2) We should want gradually to sever the connection between employment and coverage for the same reasons as Point 1.

3) We should want to merge the coverage system for under-65s and over-65s. ...

4) We should want to give states the decisive role in defining and shaping healthcare service within their boundaries.

5) We should want to control costs, and indeed to drive them down to levels prevailing in other advanced economies. ...

6) It's important that healthcare be financed in ways that share costs broadly. ...

I think that's a pretty conservative program, actually.

That's good, because I think it's pretty liberal. I endorse 1-3 wholeheartedly. I don't think (4) makes sense for a federally financed program, but that's a small matter. (5) was a key point in Obamacare until wing-nut hysteria over "death-panels" drove it out.

I don't see the TPers buying it, though.

Thursday, June 28, 2012

Tiebreaker Too

After watching Italy vs. Germany.

One of the most exciting games I've seen, mostly because of all the scoring opportunities. These teams can create scoring opportunities when the pressure is on, so take away the safe tie.

In case of tied non-zero scores after 120 minutes - first team that scored wins.

Fly You Fools! Fly!

Outraged conservatives appalled by the Supreme's Obamacare decision promise to fly the coop - to Canada.

A sample:

Casey W@kclovesya Follow I'm moving to Canada. Obviously the United States doesn't know what they are doing anymore. This used to be a great country... Pretty sad.

Van Summers@VanSummers Follow #SCOTUS holds up free healthcare for everyone?! Screw this commie country, I'm moving to #Canada #whoswithme

And plenty more:

Should we say, "Au Revoir?"

Tie Breaker

Soccer games ending in scoreless ties after 120 minutes (in knock-out rounds) should be declared double losses, with both teams eliminated.

Wednesday, June 27, 2012


Fortified by the knowledge that experts are no better at predicting this sort of thing than total idiots, I do my best Spock like Soothsaying:

(1)There is a 48.53 % probability that the Supremes will uphold Obamacare tomorrow.

(2)There is a 96.25 % probability that Merkel has already decided to leave the Euro, but is still trying to find somebody else to blame.

Tuesday, June 26, 2012


Double, double, toil and trouble, Cauldron boil, and housing bubble...........with apologies

Housing bubbles, by now are canonical examples of market failures. If any have still failed to grasp that point, Matt Iglesias points to an oncoming train:

For comparison, some recent history:

What can Norwegians possibly be thinking?

Monday, June 25, 2012

Fiscal Union, German Style

German Finance Minister Wolfgang Schäuble has a proposal for European fiscal union:

Schäuble: In an optimal scenario, there would be a European finance minister, who would have a veto against national budgets and would have to approve levels of new borrowing. It would be up to the individual countries to decide how to spend the approved funds, that is, how to answer the question: "Should we spend more money on families or on road construction?"

That's a clown proposal Wolfie.

Matt Iglesias puts it more concretely. Aside from requiring European countries to paste their sovereignty to the bottom of Germany's boots:

... the really goofy thing here is that Schäuble's plan still doesn't do anything to fix the problem of differential shocks. All it does is codify into law the principle that if something bad happens to push Finland's unemployment up, that the Finnish government will have to respond by implementing fiscal policy that exacerbates the recession.

Germany does not appear to be serious about saving the Euro. My guess is that the price for saving the Euro keeps going up - crunch time might be here already.

Rational Actors??

Wolfgang Münchau has a quote on the starkness of the choices:

Joschka Fischer, the former foreign minister, said recently that by allowing the eurozone to break up, Germany would for the third time in a century have inflicted utter devastation on Europe and on itself.

Those who advocate the strategy of calling Germany’s bluff often assume a degree of rationality that is plainly absent. The Germans have developed a strange narrative of the crisis. Following the debate there, as I do regularly, has a parallel universe feel about it. There is, for example, a denial that the current account surpluses are even remotely a factor. In the German narrative, the economy is like a football game, which Germany is winning. And the chancellor’s job is to support the team against another team – as she did in Gdansk last Friday when Germany beat Greece. Germany, like Ms Merkel, looks unstoppable.

Sunday, June 24, 2012

Deep Water

One of the consequences of the current global warming is rising sea level. Recent evidence suggests that the rise will not be evenly distributed. In North Carolina, though, where some of the fastest rise has been seen, property owners, or at any rate, property developers, are protected by the wise actions of the State legislature, which has voted that global warming doesn't exist. It has the marks of a classic legal showdown: *epithet deleted* politicians vs. thermodynamics.

From Cape Hatteras, N.C., to just north of Boston, sea levels are rising much faster than they are around the globe, putting one of the world's most costly coasts in danger of flooding, government researchers report.

U.S. Geological Survey scientists call the 600-mile swath a "hot spot" for climbing sea levels caused by global warming. Along the region, the Atlantic Ocean is rising at an annual rate three times to four times faster than the global average since 1990, according to the study published Sunday in the journal Nature Climate Change.

It's not just a faster rate, but at a faster pace, like a car on a highway "jamming on the accelerator," said the study's lead author, Asbury Sallenger Jr., an oceanographer at the agency. He looked at sea levels starting in 1950, and noticed a change beginning in 1990.

Since then, sea levels have gone up globally about 2 inches. But in Norfolk, Va., where officials are scrambling to fight more frequent flooding, sea level has jumped a total of 4.8 inches, the research showed. For Philadelphia, levels went up 3.7 inches, and in New York City, it was 2.8 inches.

The observed pattern was predicted by climate models, and is due to dynamic effects on ocean currents plus perhaps some differential warming.

Everybody's Talking

In case you missed it, about old Higgsy.

He does seem to have been made (NEW).

I learned via Physics World that CERN will hold a press conference on Wednesday July 4 to give an “Update on the search for the Higgs Boson”. More information has just appeared (including a press release here), showing that there will be a 2 hour seminar on the results starting at 9am Geneva time, followed by a press conference at 11am.

Reports from the experiments indicate that at least one of them, if not both, will reach the 5 sigma level of significance for the Higgs signal, when they combine 2011 and 2012 data and the most sensitive channels. So, this will definitely be the long-awaited Higgs discovery announcement, and party-time for HEP physicists.

Good on that. Now what? Peter notes that CERN made its last major "discovery" of a new particle 28 years ago - and that turned out badly. Extrapolating, we should expect another in, say, 2210.

Faking It

Meat, that is.

The idea of synthetic meat has been around for a long time. In 1932, Winston Churchill stated, "Fifty years hence, we shall escape the absurdity of growing a whole chicken in order to eat the breast or wing, by growing these parts separately under a suitable medium." But fake meat, aka schmeat or in-vitro meat, is one of those ideas that, like lunar colonies, fusion power and flying cars, has yet to cross the threshold between fantasy and reality.

But this Guardian article suggests that the time is close approaching.

Saturday, June 23, 2012

The Robots Are Coming: Kiss Your Job Goodby

The robot revolution is starting to bite in areas other than death from the skies. Taiwanese mega-corp Foxxcon reputedly plans to replace a million workers with robots. They are a tiny fraction of those to be replaced in the next decade or two.

In principle, increases in productivity should benefit the public, since they mean the potential for more goods for all, but in the short range, the profits usually all accrue to capital. Only a radical reorganization of society is likely to prevent this from happening with a vengeance this time around. There are not many hints as to how or whether this might happen.

The Robots Are Coming: Big Data

Tyler Cowen reads about BBall:

The technology was originally developed to track missiles. Now, SportVU systems hang from the catwalks of 10 NBA arenas, tiny webcams that silently track each player as they shoot, pass, and run across the court, recording each and every move 25 times a second. SportVU can tell you not just Kevin Durant’s shooting average, but his shooting average after dribbling one vs. two times, or his shooting average with a defender three feet away vs. five feet away. SportVU can actually consider both factors at once, plus take into account who passed him the ball, how many minutes he’d been on the court, and how many miles he’d run that game already.

From fastcodesign.

Maybe they could track floppers.

Next up: Walmart? Schools?

Darwin on Group Selection

Another data point:

When two tribes of primeval man, living in the same country, came into competition, if (other things being equal) the one tribe included a great number of courageous, sympathetic and faithful members, who were always ready to warn each other of danger, to aid and defend each other, this tribe would succeed better and conquer the other (Darwin, Descent of Man, 1871, p. 113).

Darwin - no surprise - foresaw the objection:

It is extremely doubtful whether the offspring of the more sympathetic and benevolent parents, or of those who were the most faithful to their comrades, would be reared in greater numbers than the children of selfish and treacherous parents belonging to the same tribe. He who was ready to sacrifice his life, as many a savage has been, rather than betray his comrades, would often leave no offspring to inherit his noble nature (Darwin, p. 114).


It must not be forgotten that although a high standard of morality gives but a slight or no advantage to each individual man and his children over the other men of the same tribe, yet that an increase in the number of well-endowed men and an advancement in the standard of morality will certainly give an immense advantage to one tribe over another. A tribe including many members, who from possessing in a high degree the spirit of patriotism, fidelity, obedience, courage and sympathy, were always ready to aid one another, and to sacrifice themselves for the common good, would be victorious over most other tribes; and this would be natural selection (Darwin, 115-116).

For a very good discussion and commentary, follow the link. The author's basic point, if I understand it, is that it's possible to build models in which group selection, suitably defined, occurs and possible to build models with a slightly different definition in which it doesn't. This point is evaded by Pinker and like minded critics, but then the question becomes how useful are the competing definitions.

Pinker on Group Selection

Steven Pinker’s attack on group selection is getting some blog cred. It caught my attention mainly because one of his targets is the kind of group selection Jonathan Haidt makes a featured player in his Righteous Minds. I should note that Pinker is not just the aging pretty boy front man for evolutionary psychology, but an exceptionally lucid, penetrating, and witty writer on language and thought. His critique should be taken very seriously.

He has divided that critique into three parts, the first of which I have no argument with. The second, which he calls 2. Group selection as an explanation of the traits of individuals is more to the point that interests me. Here Pinker hangs his entire argument on one sentence:

It's only when humans display traits that are disadvantageous to themselves while benefiting their group that group selection might have something to add.

Well you can win any argument if you get to re-define enough of the terms, but I don’t think this is the crux of the group selection argument. The point, not mine, but Darwin’s, is that traits which would in isolation appear detrimental, may not be in the context of other traits. Once again, as Darwin noted, the key associated trait is ability to punish defectors, that is, those who fail to appropriately reciprocate altruistic acts. That is a very non-trivial ability, since it requires being able to remember who did what and also to understand something of the intentions of others.

Arguments about definitions are infamously fruitless, but let that not deter me. Pinker has picked a fight with Jonathan Haidt and E O Wilson, so it might make sense if he used the same definition that they (and Charles Darwin) used. My understanding is that that group selection exists if some or all of the selection takes place at the level of the group – that is, the members of the group survive or perish based on what group they are members of.

To continue, Pinker thinks the following is an argument for his cause:

In tribal warfare among non-state societies, men do not regularly take on high lethal risks for the good of the group. Their pitched battles are noisy spectacles with few casualties, while the real combat is done in sneaky raids and ambushes in which the attackers assume the minimum risks to themselves.[14] When attacks do involve lethal risks, men are apt to desert, stay in the rear, and find excuses to avoid fighting, unless they are mercilessly shamed or physically punished for such cowardice (see, for example, the recent meticulous study of Turkana warfare by Sarah Mathew and Robert Boyd).[15]

Actually, though, this precisely fits the Darwin and Haidt version of enforced group loyalty via punishment and shaming.

Pinker has a lot more to say on similar themes, but the core of his argument remains a simple redefinition of “group selection.” Such arguments are rarely profitable, but there remains one issue: does the notion of multi-level selection add to our understanding of what’s going on?

Pinker’s conclusion:

None of this prevents us from seeking to understand the evolution of social and moral intuitions, nor the dynamics of populations and networks which turn individual psychology into large-scale societal and historical phenomena. It's just that the notion of "group selection" is far more likely to confuse than to enlighten—especially as we try to understand the ideas and institutions that human cognition has devised to make up for the shortcomings of our evolved adaptations to group living.

I would accuse Pinker of being the chief agent of confusion here, by conflating a bunch of unrelated notions with the Darwin and Haidt notions of “group selection.” More on that later.

Friday, June 22, 2012

Hard Higgs News

From Andrew Sullivan:

PM Correction Of The Day "A previous version of this story incorrectly referred to the large hadron collider as a large "hardon" collider. Unfortunately, that's not what it is," - Huffington Post.

I'm not sure the press understands how physicists feel about their apparatus.

Thursday, June 21, 2012

Cash Money

A 500 Euro banknote has dimensions of 160 mm x 82 mm x .16 mm, and hence occupies a volume of 2100 mm^3 or 2.1 X 10^-6 m^3. There are roughly 590 million 500 Euro notes in circulation, so their total volume comes to something like 1240 m^3, which means that with optimum packing you might get them all in eleven semi-trailers - or 60,000 carry on luggage cases.

There are a lot more 100 dollar bills - roughly ten billion, or slightly less than one and one half for every living person.

I know somebody else has got mine.

UPDATE: It's widely understood that these vast numbers of large bills are used almost exclusively by criminal enterprises, so why should governments enable them in this way? I think I know, but I'd like to hear alternative views.

Wednesday, June 20, 2012


It was 107 F when I pulled into the old homestead today - hot, but not record challenging. So far our dose of global warming consists of drought and more drought.

Tuesday, June 19, 2012

Tales of Calamity Foretold: Euro XXIV

It appears Merkel is ready to make the same mistake one more time.

Reading what Krugman wrote in 1998, and Milton Friedman a couple of years later, it's pretty amazing how accurately they (and many other economists) predicted what would go down - even if the timelines were unclear. It's also pretty stunning how thick-headed Brussels and Berlin have been.

Just in case anyone is paying attention, it's been clear for a long time that the periphery is unlikely to be able to repay their loans as long as Berlin keeps them in severe recession, and if they don't repay, that will cost Germany and others plenty. Nonetheless, Merkel and company insist on playing fantasy economics, loaning more and more to those bad credit risks and pretending that they will get their money back.

Monday, June 18, 2012


Can anyone football savvy explain to me why Navas was not "Gaining an advantage by being in an offside position" when the ball was played to Iniesta resulting in Navas's open goal score?

Sunday, June 17, 2012


Lesson for the day: low mechanical aptitude + poor near vision + unsteady hands = !good

It never rains in New Mexico. OK it very rarely rains in New Mexico. The Sun shines a lot. So when those rare rains come, those wiper blades are likely to be badly deteriorated. This happened to me, so I decided to change them. Because I rarely change wiper blades, I'm not good at it. Correction: i used to be not very good at it. Now I'm awful.

A trip to my WalMart and 20 bucks or so bought me spiffy new wipers.

Step one: remove old wipers. I remember there was some sort of tab thingy to be pushed, but couldn't find where to push.

Step zero: look up this junk in manual. Now if I could only figure out how to interpret this tiny but obscure drawing.

Step zero.5 Curse in frustration.

Step one': This appeared to help, since tab finally snapped, and wiper detached. Total elapsed time: 20 minutes.

Step two: Read direction for installation of new wiper. Directions consisted of tiny diagrams which appeared to show two human hands holding something like a wiper blade assembly. There was also helpful commentary in several languages, with stuff like "remove old wiper blade assembly," "detach connector," and "insert new wiper blade assembly."

Step two.5: Curse in frustration. Didn't work this time.

Step three. Get drink.

Step four: Figure out that I really should have just bought the blade part of the assembly, since new assemblies don't match car decor.

Step five. Replace old wiper blade assembly so I can drive back to Walmart.

Step five.4: Curse.

Step six: Break old wiper blade assembly connector.

Step six.5: You know the drill.

Step seven: It appears connector snaps back together. Fix.

Step .... Break connector in two more places. Those snap back together too.

Step ten. Apply first rule of mechanical technique. If it sticks, force it. Defective wiper is back on car. Better go get wiper blade, since it might rain next month.

UPDATE: Step Final: Watched expert do it. Secret: apply step ten.

Saturday, June 16, 2012

Fruit Flies

Time flies like an arrow, but fruit flies like a banana.

Those pesky rascals turn out to be tiny marvels of aerodynamic engineering. The flight regime they operate in is a somewhat difficult one, at a Reynolds number of around 200, which means, more or less, that inertial forces are 200 times larger than viscous forces. That sounds like a lot, but it isn’t. The kinds of aircraft that carry people typically operate with Reynolds numbers in the millions, and somewhere around Re = 40,000 there is a dramatic decrease in the lift to drag ratio for a smooth wing. That’s a likely reason why Drosophila’s wings, like those of other insects and small birds, are patterned rather than smooth.

Drosophila is elaborately instrumented for flight, with pride of place going to his remote optical sensors. These brick red eyes are large, with diameters of roughly 15% of his body length, or, in actual size, rather less than that of the period at the end of this sentence. A good aircraft also needs some air speed sensors, and the fruit fly antenna serves that purpose. Inertial navigation systems are required if you want to be up-to-date, and flies have been so equipped since the Middle Triassic, two hundred thirty million years or so ago, courtesy of modified wings called halteres.

With his flight equipment the fruit fly is phenomenally maneuverable. A 90 degree turn in flight is executed in 50 ms – a tribute to his flight control system and to his tiny moment of inertia. This sort of performance tends to make designers of unmanned aerial vehicles – often called drones – green with envy. The desire to design tiny UAV has in fact propelled a lot of research on bird and insect flight. Designing and building a robotic flyer with insect or bird like performance is still far beyond human technology, but plenty are trying. Some of the more impressive results come from Robert Wood’s lab at Harvard. Follow the link to see some of his amazing results and cunning methods of fabrication.

Nature’s fabrication methods are hard to match, though. The fruit fly, like the rest of us higher multicellular animalia, is a product of modular design. The master module maker, the homeobox, was first discovered in Drosophila melanogaster, and one of its central jobs is segment our embryonic forms into smaller pieces for further development. For some worms, most of those segments might look pretty similar except maybe for the head and tail, but for insects and people, the segmentation is more elaborately differentiated. For vertebrates like us, the individual vertebrae and their associated bony and neural structures are probably the most obvious traces of the original plan. For insects like the fruit fly, the remnants become mouth parts and body segments.

Our large aircraft achieve some performance metrics that outmatch anything in the animal kingdom. Those metrics are based mostly on the fact that heat engines, especially the jet turbine, can produce far higher power to weight ratios than anything in biology – mostly because they can operate at very high temperatures. Internal combustion engines don’t scale well to tiny sizes, because of the increasing problem of friction at smaller sizes and especially because tiny internal combustion engines lose heat too fast to be efficient. Electric motors do scale pretty well, but suffer from the problem that we have not yet figured out how to store electrical energy at high energy/weight ratios.

Mind Reading: On The Eve of Destruction

David Brooks explains the Republican mind, and I suspect he is more or less correct, though I think he's leaving out a lot of crucial details.

Democrats frequently ask me why the Republicans have become so extreme. As they describe the situation, they usually fall back on some sort of illness metaphor. Republicans have a mania. President Obama has said that Republicans have a “fever” that he hopes will break if he is re-elected.

I guess I’d say Republicans don’t have an illness; they have a viewpoint. Let me describe it this way: In the 1950s, Dwight Eisenhower reconciled Republicans to the 20th-century welfare state. Between Ike and George W. Bush, Republican leaders basically accepted that model. Sure, they wanted to cut taxes and devolve power, but, in practice, they sustained the system, often funding it more lavishly than the Democrats.

But many Republicans have now come to the conclusion that the welfare-state model is in its death throes.

It's just, says Dave, that the viewpoint they happen to have is an apocalyptic one. If the apocalypse is coming, almost any kind of extremism is justified. I have little doubt that this is indeed what some Republican elites - call it the John Galt wing of the Republican party - believe. Galt, for those who don't know or won't follow the link, is the Voldemort like figure at the heart of Ayn Rand's Atlas Shrugged, a super powerful wizard who manages to invent all sorts of miracles while spending most of his time stalking the heroine and giving book length speeches that would bore Fidel Castro's dog to death. Galt doesn't just anticipate the demise of the welfare state, he plots its destruction with a program of sabotage, piracy, and other crimes. So it is too with the Republican policy elites who plotted to sabotage the government with the enormous deficit spending begun by Reagan, and continued by the Bushes, and now by the way the Republican Congress is undermining any attempts to restore our economy to growth.

Most Republican voters, though, see a different kind of apocalypse. They are elderly and mostly ensconced in the very welfare state their leaders would abolish. What they see is a world where blacks and Mexicans won't keep their place, and homosexuals refuse to stay in the closet. Even more pointedly, they see the destruction that three decades of rapid economic change have wrought on their lives.

Never mind that the evidence the Galtian's see - Brooks eagerly awaits vindication by Euro collapse - hardly fits their narrative, as Krugman and others point out. On the other hand, the Democrats really have led in the social changes that much of the Republican party abhors.

Barry McGuire

Friday, June 15, 2012

Smart People and Dumb Answers

I considered writing about David Brooks latest NYT column, but I thought the following subject might be a useful prelude: smart people can be really dumb. This is true even when the stakes are purely intellectual. Daniel Kahneman got a Nobel Prize for studying this stuff. The fundamental conclusion is that we love to make mental shortcuts, and that often gets us in trouble. A frequently cited example goes like this:

Here’s a simple arithmetic question: A bat and ball cost a dollar and ten cents. The bat costs a dollar more than the ball. How much does the ball cost?

Of course this really is a simple arithmetic problem, or perhaps algebra problem, but lots of people get it wrong. If you weren't a bit suspicious to start, even you, my cunning readers, might have felt the wrong answer jump into your head for a second or so. From Jonah Lehrer's New Yorker Article:

The vast majority of people respond quickly and confidently, insisting the ball costs ten cents. This answer is both obvious and wrong. (The correct answer is five cents for the ball and a dollar and five cents for the bat.)

The oddity is that most would not have made the error if the question had said instead that the bat cost, say 70 cents more than the ball. They thought they saw a shortcut and took it. That sort of short cut is in our nature - thinking is expensive, math is hard, and most of us avoid it when we think we can get away with it.

A surprising follow up - smart people, or at any rate those with higher IQs - are even bigger suckers for this sort of thing than their more humbly endowed fellows.

And here’s the upsetting punch line: intelligence seems to make things worse. The scientists gave the students four measures of “cognitive sophistication.” As they report in the paper, all four of the measures showed positive correlations, “indicating that more cognitively sophisticated participants showed larger bias blind spots.” This trend held for many of the specific biases, indicating that smarter people (at least as measured by S.A.T. scores) and those more likely to engage in deliberation were slightly more vulnerable to common mental mistakes. Education also isn’t a savior; as Kahneman and Shane Frederick first noted many years ago, more than fifty per cent of students at Harvard, Princeton, and M.I.T. gave the incorrect answer to the bat-and-ball question.

My theory, not evidently the author's, is that smart people know more shortcuts, and hence are more likely to think they know one that works.

Wednesday, June 13, 2012

Taxes II: Consumption

Consumption taxes are beloved of the rich, mainly because they don't need to consume much of their income. There is a plausible rational: what they don't consume, they will invest, supposedly benefiting all. There is perhaps an underpants gnome or two in the logical chain from invest -> benefit all, but let's not worry about that. A real problem in the world right now is that the non-rich can't afford much, so there is little incentive to invest in production. Instead, the moneyed class wind up investing in lending money to finance consumption by those (persons and nations) that can't really afford it. In a purely competitive world, this would result in a sort of redistribution to their creditors, but in practice, today, in Europe and the US, it results in taxpayers getting stuck with the bad loans - so the redistribution takes place from taxpayers to the rich, and less directly, to the poor, while the whole economic system spins into recession and depression.

I think that consumption taxes need to be supplemented with wealth taxes of some sort, mostly to prevent the kind of accumulation of political power in the hands of a few super rich that currently dominates American politics. One modest step would be a large tax - say 400% - on political donations of any sort beyond a few thousand dollars. This would not prevent Sheldon Adelson and the Koch brothers from buying presidential candidates, but it would make it more expensive. Americans might even wake up and wonder what these guys are getting for their half a billion bucks (2.5 billion with my proposed tax).

Taxes I

The principal point of taxes is raising enough revenue to support the government. That obvious point is forgotten by some tax theorists, especially members of Congress who insist on spending more money than they are willing to collect in taxes. It's also very popular to use taxes for a variety of other purposes, allegedly to punish behaviors thought to be bad or reward those thought to be helpful, but in practice, mainly to reward those willing and able to reward the politicians. It's hard for me to believe that these are often a good idea. The reward part looks pretty dubious to me - I think if you want to subsidize, say, private jets for rich people, you ought to make the subsidy explicit. I'm less sure about "sin" taxes.

Let me put my cards on the table: the other legitimate purpose I see for taxes is redistribution. This, of course, is anathema to libertarians, conservatives, rich people, and anybody else who thinks they might lose money on the deal. It is, however, fundamental to the nature of human society. Most of the time, as in the US at present (or China), most of the redistribution involves taking money from the poor and middle class and giving it to the rich. So it is also with the Euro bailouts, TARPS and so on. In each case, money is being taken out of taxpayer pockets and given to rich people who invested badly.

I much prefer the opposite direction of redistribution. For example, taking money from the healthy and productive to educate the next generation, or to care for the old.

There is a very good argument to be made that human society started with food sharing. Humans are one of relatively few vertebrate species that share food, and we share it far more elaborately than any other species. Most foraging societies share food widely. Food sharing helps limit the catastrophic effects of bad luck in the hunt and builds societal solidarity. One essential criterion for a sharing scheme to work is for there to be a mechanism for punishing cheaters - those who collect a share without contributing or those who take more than their share.

Those principles of organizing a primitive society have an echo in the way I think taxes ought to work.

To be continued.

Tuesday, June 12, 2012

Do the Right Thing?

Churchill famously said "America can be counted on to do the right thing - after they've tried everything else." The question now is whether Europe, er, Germany, can be expected to perform to that standard. Auguries are not promising. So far they seem fixated on trying the same thing, over and over.

Monday, June 11, 2012

CIP vs Krugman

Krugman's latest target is China's banking policies. Here he repeats John Hempton's claims that they amount to a kleptocratic theft of savings.

Hempton basically argues that China has turned financial repression — controlled interest rates on deposits, which ensure a negative real rate of return — into a giant engine of kleptocracy. The banks extract rent from depositors, transfer those rents on to state-owned enterprises in the form of cheap loans, and then the Party elite essentially embezzles the money. Underlying the whole system is a high savings rate that Hempton attributes to the one-child policy.

Actually, if he’s right about the demographic underpinnings, there’s a time bomb lurking in the system quite aside from his concerns about inflation running too hot or too cold: eventually, and as I understand it fairly soon, those older Chinese who have been frantically saving because they don’t expect enough grandchildren to support them will become net dissavers, pulling money out of the banks to live on. And then, if his basic story is right, the whole system implodes.

Not really arguing with his points, but there is an important counterpoint: However the system has worked, China's real GDP per capita has increased tenfold (1000%) since 1980. This enormous difference means that, at least in principle, China is likely to be vastly more able to support it's old people than it was in the youth of those now approaching retirement age. For Germany and the US, the comparable increases are more like 50%.

More Euro Reaction

It looks like the latest attempt to kick the Euro can down the road is not getting much respect from the markets. Or from market watchers. Bloomberg says Europe keeps trying the same thing and expecting a different result.

To make Spain’s recovery possible, Europe must break the link between the banks and the government. Instead of lending the money for recapitalization to the sovereign, Europe’s bailout funds should agree to inject it directly into the banks -- as Bloomberg View has advocated. In return, European regulators should have a say in how management would be punished, and whether dividends and bonuses would be paid, at institutions that accepted the money.

That alone won’t be enough. The recapitalization should be part of a larger process that would forge a common euro-area approach to dealing with troubled banks, require private bank creditors to share in losses, consolidate the debt of euro-area governments and create a mechanism to stimulate growth in hard- hit economies such as Spain. A euro-area unemployment fund, for example, could accelerate much-needed labor-market reforms and boost Spain’s GDP growth by as much as 2.5 percentage points at a cost of about 25 billion euros a year -- an expense that would shrink as the added growth put people back to work.

Any of these actions would require the euro area to do something its most powerful member, Germany, has so far resisted: accept collective responsibility for the currency union’s survival. Spain’s predicament makes such a shift in strategy imperative. If Europe’s leaders can’t commit, this most recent gesture will only delay the inevitable, and the global economy will suffer the consequences.

It's possible that the only politically acceptable solution in Germany would be for Germany to leave. The price might be high - suddenly high priced exports and perhaps a trillion in noncollectable debt.

More Bailout Bonanzas

Krugman remains more or less unrelievedly gloomy about the Euro and the latest bank bailout. Though he does finish with an ironic upside:

Still, are we much better? America’s near-term outlook isn’t quite as dire as Europe’s, but the Federal Reserve’s own forecasts predict low inflation and very high unemployment for years to come — precisely the conditions under which the Fed should be leaping into action to boost the economy. But the Fed won’t move.

What explains this trans-Atlantic paralysis in the face of an ongoing human and economic disaster? Politics is surely part of it — whatever they may say, Fed officials are clearly intimidated by warnings that any expansionary policy will be seen as coming to the rescue of President Obama. So, too, is a mentality that sees economic pain as somehow redeeming, a mentality that a British journalist once dubbed “sado-monetarism.”

Whatever the deep roots of this paralysis, it’s becoming increasingly clear that it will take utter catastrophe to get any real policy action that goes beyond bank bailouts. But don’t despair: at the rate things are going, especially in Europe, utter catastrophe may be just around the corner.

Sunday, June 10, 2012


Is TARPentry a new kind of capitalism? It happens that in a highly unequal society those who have money may lack things they really want to spend it on, and those without money lack means to buy what they want. Consequently, such a society lacks demand. This puts both rich and poor into a bind. The poor because they cannot afford to buy, and the rich, because there is no good way to invest. Lacking good ways to invest, they stash their money in banks, and the banks lend it out - not to good credit risks, because there aren't enough of them - but to people or governments who are in fact crappy credit risks.

This would seem extremely hazardous to the bankers and relatively rich who stashed their money in the banks. The actual bankers, protected by incorporation and the fact that they have already taken their payout, are fine. Stockholders and depositors are seemingly screwed, except for the fact that in a modern economy, massive bank failures are more catastrophic than a bucketful of tsunamis, so governments bail out depositors and often stockholders as well. We will refer to the bailout as TARPentry.

The effect is a massive transfer of wealth from taxpayers, who foot the bill and suffer the side effects, to those who are already relatively wealthy. Beats the heck out of actually producing anything.

In its way, it's just as good as various private equity scams.

TARPing for Time

Paul Krugman doesn't seem too optimistic about the Spanish bailout: The Eurotarp Cometh.

The Spanish banks will get some money, and the Spanish government will owe more money to somebody, but says Krugman, the underlying problems of Spanish competitiveness and austerity are not addressed. What has been bought, he says, is time.

The question you should ask is, what problem does this solve? It may — may — put a temporary end to the “doom loop” of funds fleeing Spanish banks, forcing the banks to sell assets, driving asset prices down and creating further doubts about solvency. (It won’t help even here to the extent that fears involve euro breakup rather than default). But it does nothing to restore Spanish competitiveness or lessen the suffering from austerity.

So the whole thing at best buys time — just like the ECB’s lending program from last fall. What will Europe do with that time? If past behavior is any indication, the answer is, nothing.

Friday, June 08, 2012

Phytoplankton Feedback

The discovery of massive phytoplankton blooms in the Arctic hints at a possible unsuspected negative CO2 climate feedback. It appears that thinning Arctic ice may create ideal conditions for algal growth under the ice. It's at least conceivable that the algal growth is sufficient to suck up a significant amount of our CO2 emissions.

NASA has revealed its discovery of a massive algae bloom under the slowly diminishing Arctic ice -- a finding that made scientists' eyes pop. But does this never-before-seen phenomenon change the fate of this microscopic algae?

Not long ago, this crucial plant life -- which produces much of the world's oxygen -- was reported in a century-long tailspin.

Here's the back story.

The same year that NASA researchers launched the Icescape expedition to the Arctic -- the project that resulted in NASA's astounding new discovery -- there was a dire report on the world's phytoplankton.

A Canadian team said in the journal Nature, as The Times reported in July 2010, that the world's phytoplankton had been disappearing at a rate of about 1% a year for the previous 100 years...


Phytoplankton -- the basis of the marine food chain -- "are key to the whole ecosystem," he said. "In terms of climate changes, the effect on fisheries, we don't know exactly what these effects will be."

Could his latest discovery of a mass of phytoplankton in the Arctic signal a turnaround for this crucial organism?

The jury's out. But it's a question scientists will be pursuing, according to Paula Bontempi, NASA's ocean biology and biogeochemistry program manager in Washington.


Scientists also are looking at what this discovery could mean for global warming.

Phytoplankton are carbon dioxide munchers -- "plants need carbon dioxide," Bontempi said, "the major greenhouse gas." So this would be good news in terms of global warming, yes? ...

No doubt this will be hailed by the usual crowd as something they were sure was there all along.


More Estonian Economic History

In 1990 Estonia had a per capita GDP a few per cent larger than that of South Korea. The collapse of the Soviet Union and the Ruble zone sent it tumbling by about 30%. After 1995, and the adoption of radical free market ideas, the economy grew very rapidly, surpassing its old high in 2001 and nearly doubling that value by 2007, at which point it first stalled and then (2008)underwent another stunning collapse. It hit bottom in 2009 and has again begun to grow, regaining roughly half the loss by Q1 2012.

I would say that the story of Estonia is dominated by two spectacular implosions, interrupted by one period of very good growth. Calling that growth miraculous or Estonia a "Baltic Tiger" seems a stretch. South Korea - remember them - wasn't immune to those busts, but it suffered a lot less, and its per capita economy is now about twice that of Estonia.

Thursday, June 07, 2012


I seem to recall Matt Yglesias describing Greece's threat to leave the Euro as being something like a guy in your living room with a pistol threatening to blow his own brains out. Not too scary, but you really don't want to deal with the mess.

If so, the case of Spain is more like a guy in your living room with ten sticks of dynamite strapped to his chest. If he blows himself up, the house is coming down.

That's the threat Germany and the rest of the North face.

Ten More Reasons the Euro is Dead

Alex Barker has a list, but doesn't think the obstacles are insuperable. Call me skeptical.

Some issues to bear in mind when considering whether a European banking union is a realistic possibility. The difficulties highlighted are not impossible to overcome. But it would be a wrench.

1. Germans don’t like strong EU supervision of their banks. Berlin is fond of federal EU solutions. But it is even more keen on running its own banks. The political links — especially between the state and regional savings banks — are particularly strong in Germany. To date Berlin has proved one of the biggest opponents of giving serious clout to existing pan-EU regulators.

Read the link if you want the rest. Via Tyler Cowen.

Estonia vs. Krugman

Join the club.

The President of Estonia twits Krugman on Twitter, calling him:

"smug, overbearing & patronizing,"

He throws in a few more insults and vulgarisms. Like most of Krugman's other critics, the one thing they can't call him is "wrong." Or when they do, they have a heck-of-a time bringing convincing evidence.

In case somebody is inspired to comb the history books for evidence of times when PK has been wrong, let's stick to either Estonia or the Euro for examples. It would really be convincing only if one could show that PK was wrong in the matter which provoked the Estonian President's doofus critique. I don't literally believe PK is infallible like the Pope.

Wednesday, June 06, 2012

The Fix: Ch 324

There is new talk of a Euro fix, but I don't understand it much. My impression is that the idea is a bad bank which will suck up all the other bad banks and stick the general taxpayer with the bill - Chapter 324 of hapless taxpayers bailing out reckless bankers. The worst part about this idea is that it's just another version of let's kick the can down the road and hope everything works out - or at least that some other poor bastard is responsible by then.

The key problem, if I understand it, is the balance of payments between the rich center and the poor periphery. If that's not fixed, we might as well just fast forward to "Hunger Games: Frankfurt."

Tooth Fairy Economics

Say what? Tyler Cowen makes the case for the tooth fairy.

I believe people should take more seriously the notion that the ECB will remain hopeless, and that the crisis can only be addressed by some kind of joint US-German-UK-toss-in-the-other-sound-countries radical multilateral move. Which is not to say I am predicting that. But at least in principle, those three countries can get something done and they also have stronger common interests than those across the eurozone, sorry to say.

Just to make the comparison biting, what if we postponed the costly benefits part of ACA for a year (it may be struck down anyway) and send $200 billion directly to Spain and its banks? Is more money needed? Use this as an excuse to get rid of farm subsidies and cut defense spending. Surely the Germans would then chip in too, and perhaps even the Chinese, if we made the donors club sound exclusive and toney enough. Drop hints about various silly islands (not Taiwan).

Given that Congress and the general population can't even be persuaded to save the American economy, he thinks they might be persuaded to borrow money to save Spain?

Tuesday, June 05, 2012

Economic Theories

Keynes (who else) had the ultimate riposte to those who dismiss economic ideas, theories and models:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggereated compared with the gradual encroachment of ideas…. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil…

Monday, June 04, 2012

Soros Speaks

George Soros has given a widely praised speech on the state of economics and on Europe and its Euro. For some reason it's no longer available on his website, but it is here. Anyone really interested in the Euro crisis should read it, especially for his diagnosis of what went wrong, which differs drastically from what Germany would like to think. It would be impossible to do justice to his ideas in an excerpt, but let me give a couple:

Ever since the Crash of 2008 there has been a widespread recognition, both among economists and the general public, that economic theory has failed. But there is no consensus on the causes and the extent of that failure.

I believe that the failure is more profound than generally recognized. It goes back to the foundations of economic theory. Economics tried to model itself on Newtonian physics. ... ...

Economics, which became the most influential of the social sciences, sought to remove this handicap by taking an axiomatic approach similar to Euclid’s geometry. But Euclid’s axioms closely resembled reality while the theory of rational expectations and the efficient market hypothesis became far removed from it. Up to a point the axiomatic approach worked. For instance, the theory of perfect competition postulated perfect knowledge. But the postulate worked only as long as it was applied to the exchange of physical goods. When it came to production, as distinct from exchange, or to the use of money and credit, the postulate became untenable because the participants’ decisions involved the future and the future cannot be known until it has actually occurred.

I am not well qualified to criticize the theory of rational expectations and the efficient market hypothesis because as a market participant I considered them so unrealistic that I never bothered to study them. That is an indictment in itself but I shall leave a detailed critique of these theories to others.

Also excerptible is his tentative prediction for Europe:

...Germany is likely to do what is necessary to preserve the euro – but nothing more. That would result in a eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments. That would turn the European Union into something very different from what it was when it was a “fantastic object” that fired peoples imagination. It would be a German empire with the periphery as the hinterland.

I believe most of us would find that objectionable but I have a great deal of sympathy with Germany in its present predicament...


One might think that an emergency is not the right time to contemplate massive changes in governmental structure, but history tends to show that it's the only time for such changes. Thus, the depredations of the Barbary pirates triggered the formation of the United States and today's Euro crisis is provoking very serious contemplation of a major step toward fiscal union in the Euro zone.

It won't be easy - or painless.


Saturday, June 02, 2012

Science and Morality

I have previously opined that disputes in economics are often more about morality than evidence. Those attracted to purely free market economics usually seem to be motivated more by fear of government than by evidence of efficiency. Conversely, those who argue for more government intervention, like Krugman, are motivated to a significant extent by belief in the immorality of certain government actions or in-actions.

It wasn't previously obvious to me, but a recent fit of hysteria by one of my anti-government acquaintances made it clear to me that the same is true for many seemingly value-free scientific disputes. A bishop feared to look through Galileo's telescope, because he feared that what he saw might shake his faith, and Galileo was imprisoned for the content of his physics. Bruno and many others suffered far worse fates.

Even today, social conservatives continue to wage a fierce battle against evolution not because they know (or care) anything about the evidence, but because they fear, quite correctly, that evolution undermines faith. Communists had a similar beef with Darwin, for a very similar reason, his ideas undermined their official Marxist dogma. Leftists in the seventies, and perhaps still, wage a similar battle against evolutionary psychology and studies of links between IQ and other traits (especially race). In every case, the core motive is the same - scientific discoveries have the potential to undermine dogma.

So it is with global warming. Environmentalists have been quick to associate the movement against global warming science with special interests like Exxon Mobile and the coal industry, and that association is perfectly valid, but that's not the fire that burns in the hearts of the true (dis)believers. Their religion is fear of the governmental and super-governmental authorities needed to implement realistic action to prevent human caused climate change. Once again science is up against fundamental moral instincts.

One of the most obvious evidences is the puny quality of the arguments advanced against anthropogenic global warming. One day it's some obscure statistical critique of one minor data point, the next it's a fanciful theory of cosmic rays or an obviously nonsensical argument based on the height of the troposphere. For a scientist, internal coherence of your ideas is crucial. The moralist on the defensive picks up any stick, club or fluffy throw pillow that comes to mind.

Friday, June 01, 2012


Today's miserable jobs numbers auger very badly for Obama's re-election chances. Future historians may conclude that he booted his second term when he decided to go small with the stimulus package in 2009.