Coruscation

A leader of this movement is Dr. Kevin Volpp, a physician at the University of Pennsylvania and founding director of the Center for Health Incentives and Behavioral Economics. He designs randomized trials around some of health care's most important challenges: nudging doctors to provide evidence-based care; ensuring patients take their medications; and helping consumers choose better health plans.

"There's starting to be a broad recognition that decision-making environments in health care could better reflect how doctors and patients actually make decisions," he said.

Dr. Volpp, whose work is used by both the public and private sector, recently collaborated with CVS Caremark to test which financial incentives are most effective for getting employees to quit smoking. Employees were randomly assigned to one of three groups. The first was "usual care," in which they received educational materials and free smoking cessation aids. The second was a reward program: Employees could receive up to $800 over six months if they quit. The third was a deposit program, in which smokers initially forked over $150 of their money, but if they quit, they got their deposit back along with a $650 bonus.

Compared with the usual care group, employees in both incentive groups were substantially more likely to be smoke-free at six months. But the nature of the incentives mattered. Those offered the reward program were far more likely to accept the challenge than those offered the deposit program. But the deposit program was twice as effective at getting people to quit -- and five times as effective as just pamphlets and Nicorette gum.

Continue reading "Behavioural health economics" »

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Bike Angels forCitiBike NYC bike share.

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The for-profit Art Institutes programs that failed the federal test trained students in fields including commercial photography, video production, radio broadcasting, culinary arts, interior decorating and video game design. Other programs that crop up frequently on the failing list include cosmetology and barbering, acupuncture and massage therapy, criminal justice studies and low-level jobs in health care fields.

What these programs have in common is a combination of marketing appeal to young people -- design video games for a living! -- and little or no outside pressure to ensure that the education is both of high quality and leads to jobs that pay enough to finance the cost of student loans. Sure, there are good programs in all of these fields, including some offered by for-profit schools. But it can be very hard for the average consumer to know the difference beforehand.

https://www.nytimes.com/2017/01/13/upshot/harvard-too-obamas-final-push-to-catch-predatory-colleges-is-revealing.html

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Economics profession: gloomy
Markets: Up
Small business owner survey: Up stratospherically

these groups are describing different things. Businesses and markets care about profits. Economists focus on workers as well as the businesses they work for, on buyers as well as sellers, and on new firms as much as existing firms. Mr. Trump's anti-regulatory zeal may help businesses but hurt workers; his anti-trade agenda could help sellers but hurt buyers; and his instincts to protect existing jobs may advantage existing businesses at the expense of the next generation of entrepreneurs.

Continue reading "Trumponomics" »

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You can argue that the problems caused by, say, Romanians using the National Health Service are exaggerated, and that the benefits of immigration greatly outweigh these costs. But that's a hard argument to make to a public frustrated by cuts in public services -- especially when the credibility of pro-E.U. experts is so low.

For that is the most frustrating thing about the E.U.: Nobody ever seems to acknowledge or learn from mistakes. If there's any soul-searching in Brussels or Berlin about Europe's terrible economic performance since 2008, it's very hard to find. And I feel some sympathy with Britons who just don't want to be tied to a system that offers so little accountability, even if leaving is economically costly.

An adviser (Dan Davies) for Frontline Analysts, a global research outsourcing firm, supports Remain.

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Kruger Dunning: Unskilled and Unaware is an all time classic.

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The court's decision upheld the F.C.C. on the declaration of broadband as a utility, which was the most significant aspect of the rules. That has broad-reaching implications for web and telecommunications companies that have battled for nearly a decade over the need for regulation to ensure web users get full and equal access to all content online.

"After a decade of debate and legal battles, today's ruling affirms the commission's ability to enforce the strongest possible internet protections -- both on fixed and mobile networks -- that will ensure the internet remains open, now and in the future," Tom Wheeler, chairman of the F.C.C., said in a statement.

The two judges who ruled in favor of the F.C.C. emphasized the importance of the internet as an essential communications and information platform for consumers.

Continue reading "Net neutrality is real" »

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Back in the 19th century, steam power and machinery took away many traditional jobs, though they also created new ones. This time around, computers, smart software and robots are seen as the culprits. They seem to be replacing many of the remaining manufacturing jobs and encroaching on service-sector jobs, too.

Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in "The Second Machine Age," a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, "Average Is Over." The upshot is that machines are often filling in for our smarts, not just for our brawn -- and this trend is likely to grow.

Continue reading "Automation creates and eliminates human jobs" »

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Before the 1980s, Texas followed a long, populist tradition that tried to protect family farmers and other small-scale businesses and consumers. Under its 1876 constitution, for example, Texas enacted consumer protections against predatory mortgage lending, with provisions that ironically helped to hold down foreclosures in Texas during the Great Recession.

In 1889, Texas became the second state in the country to enact an antitrust law. Two years later, it further pioneered government regulation of big business by establishing the Texas Railroad Commission, which went on to protect wildcatters and other small-scale oil producers by regulating the oil industry in ways that kept outside Goliaths like Standard Oil at bay. But since the 1980s, "pro business" in Texas has more and more come to mean just pro Big Business.

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Second Measure by Mike Babineau and Lillian Chou tracks business' sales for investors.

Second Measure takes billions of anonymized credit card transactions and analyzes them so investors can see where consumers are voting with their dollars before a company's quarterly earnings come out.

More in data.

Continue reading "Track business' sales to aid investors " »

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When the aerospace company Sierra Nevada Corporation moved into the Colorado Technology Center about eight years ago, employees on their lunch break could stroll by the alpaca farm next door.

Olivia Sandoval, left, and Kayla Galet take a break from exercising at the top of the stairs at Red Rocks Amphitheater in Morrison, Colo. Cultural amenities like Red Rocks are drawing highly educated workers to the Denver area.

Now the animals are gone, and the land is cleared and ready for the new development surging along the Denver-to-Boulder corridor.

Here in the Mountain West -- but also in places as varied as Seattle and Portland, Ore., in the Northwest, and Atlanta and Orlando, Fla., in the Southeast -- employers are hiring at a steady clip, housing prices are up and consumers are spending more freely.

Continue reading "Denver-to-Boulder corridor booming (Red Rocks Edition)" »

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Marc Andreessen, the Silicon Valley entrepreneur and venture capitalist, says information technology is providing significant benefits that just don't show up in the standard measurements of wages and productivity. Consider that consumers have access to services like Facebook, Google and Wikipedia free of charge, and those benefits aren't fully accounted for in the official numbers. This notion -- that life is getting better, often in ways we are barely measuring -- is fairly common in tech circles.

Until recently, this debate was inconclusive. It consisted mainly of anecdotes, with individuals describing how important advances like the Internet were -- or were not -- to them personally. But now Chad Syverson, a professor of economics at the University of Chicago Booth School of Business, has looked more scientifically at the evidence and concluded that the productivity slowdown is all too real. These results are outlined in his recent National Bureau of Economic Research working paper "Challenges to Mismeasurement Explanations for the U.S. Productivity Slowdown."

Professor Syverson notes that a slowdown has come to dozens of advanced economies, more or less at the same time, which indicates it is a general phenomenon. Furthermore, the countries with smaller tech sectors still have comparably sized productivity slowdowns, and that is not what we would expect if a lot of unmeasured productivity were hiding in the tech industry.

Continue reading "Silicon Valley has not prevented a slowdown in national productivity growth." »

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Satellite photos provide a level of geographic specificity that national accounts do not. Another set of researchers used visual algorithms (related to those that recognize your face on Facebook or help navigate cars) to analyze these images pixel by pixel. Through this process, they could quantify poverty in each square kilometer of Uganda.

Satellite photos provide other useful information. In rural areas, we can see crops in the ground, allowing us to estimate harvest size -- even before the actual harvest. This data gives us a direct window into an essential part of the economic lives of many of the world's rural poor. The information can be used to build early warning systems for crop failure, to create crop insurance or target other forms of assistance.

There are many other important, unconventional sources of data. Consider cellphones. For most of the world's poor, each call and text has a very noticeable and real monetary cost.

-- SENDHIL MULLAINATHAN

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High school is supposed to prepare adolescents for their careers and for college. It is not meant to destroy students' self-esteem in fierce academic environments, or to obliterate their love of learning through overly intense schedules. I don't want to look back as an adult and regret wasting four years solely on busy work and sleepless nights, but I also don't want to look back on four years spent dawdling idly with my friends.

-- Ethan Brown is a 16-year-old high school junior in northern Virginia.

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When events unfold that confirm our thoughts or deeds, we attribute that happy outcome to our skills, knowledge or intuition. But when life proves our actions or beliefs to have been wrong, we blame outside causes over which we had no control -- and thus maintain our faith in ourselves. The Harvard psychologist Ellen Langer describes the phenomenon as, "Heads I win, tails it's chance."

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"It's this notion of this growing equality between husbands and wives having this paradoxical effect of growing inequality across households," said Christine Schwartz, a sociologist who studies the topic at the University of Wisconsin-Madison.

Assortative mating is the idea that people marry people like themselves, with similar education and earnings potential and the values and lifestyle that come with them. It was common in the early 20th century, dipped in the middle of the century and has sharply risen in recent years -- a pattern that roughly mirrors income inequality in the United States, according to research by Robert Mare, a sociologist at the University of California, Los Angeles. People are now more likely to marry people with similar educational attainment -- even after controlling for differences between men and women, like the fact that women were once less likely to attend college.

Even though the typical husband still makes more than his wife, the marital pay gap among opposite-sex couples has shrunk significantly in the decades since women started entering the work force en masse. Today, wives over all make 78 percent of what their husbands make, according to an Upshot analysis of annual survey data from the Census Bureau. That's up from 52 percent in 1970.

In opposite-sex marriages in which both spouses work some amount of time, 29 percent of wives earn more than their husbands do, up from 23 percent in the 1990s and 18 percent in the 1980s, according to the Bureau of Labor Statistics.

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Robert J. Gordon, a distinguished macro­economist and economic historian at Northwestern, has been arguing for a long time against the techno-optimism that saturates our culture, with its constant assertion that we're in the midst of revolutionary change. Starting at the height of the dot-com frenzy, he has repeatedly called for perspective: Developments in information and communication technology, he has insisted, just don't measure up to past achievements.

Specifically, he has argued that the I.T. revolution is less important than any one of the five Great Inventions that powered economic growth from 1870 to 1970: electricity, urban sanitation, chemicals and pharmaceuticals, the internal combustion engine and modern communication.

In "The Rise and Fall of American Growth," Gordon doubles down on that theme, declaring that the kind of rapid economic growth we still consider our due, and expect to continue forever, was in fact a one-time-only event.

First, genuinely major innovations normally bring about big changes in business practices, in what workplaces look like and how they function. And there were some changes along those lines between the mid-1990s and the mid-2000s -- but not much since, which is evidence for Gordon's claim that the main impact of the I.T. revolution has already happened.

Second, one of the major arguments of techno-optimists is that official measures of economic growth understate the real extent of progress, because they don't fully account for the benefits of truly new goods.

Continue reading "Rise and Fall of American Growth, Robert J. Gordon" »

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Aging well and gracefully in retirement may be the goal, but getting there is often a challenge. After all, it can be traumatic to leave the working world -- particularly if your self-concept is wrapped up in your job. You might feel a loss of importance and a loss of vitality; you may grieve the loss of friendships. "A lot of people get their identity from work and they get their social interaction from work, so the idea of stopping means they're going to lose both," says Peter Cappelli, professor of management at Wharton and the director of the school's Center for Human Resources. "[You need to] respect that it's going to be a huge loss.

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Bloom believes inequality is being magnified by technological change and what's known as skills bias, where workers with a particular expertise reap the biggest reward. Neither is amenable to quick fixes.

In Professor Bloom's new paper, which he wrote with David J. Price, a Stanford graduate student, and three other economists -- Jae Song, Fatih Guvenen and Till von Wachter -- the top quarter of 1 percent of Americans appears to be pulling away from the rest.

For workers at this threshold, who earn at least $640,000 annually, their salaries rose 96 percent from 1981 to 2013, after taking account of inflation.

The trend was especially pronounced among the most successful enterprises in the American economy, creating a divergence between the highest-paid people at companies that employ more than 10,000 people and the rest of the work force. In this rarefied circle, overall pay jumped 140 percent versus a 5 percent drop for the typical employee at these corporate behemoths.

The split in compensation between executives and everyone else was much less pronounced at smaller companies, according to the research by Mr. Bloom and his colleagues. At these firms, between 1981 and 2013, top salaries rose 49 percent, while median pay rose 30 percent.

In addition, Mr. Bloom and his team also found a sharp divergence between pay at the most successful companies and also-rans in the same field -- think Apple versus BlackBerry. The highest-paid workers cluster at the winners, heightening income disparities in the overall work force.

Mr. Bloom traces the outsize gains to large grants of stock and options to top workers at big companies, with their fortunes rising in line with the performance of the stock market.

"There used to be a premium for working at a big company, even in a lower-level job," he said. "That's not true anymore. The people who have really suffered are lower-level employees at big companies."

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The more difficult challenge is to redefine the language and perceptions that trap large segments of reliable workers in poverty. All work can be executed with skill, but denying that fact is useful to those who justify the poor treatment of, and unfair compensation for, millions of workers.

Convincing those workers that their treatment is temporary, that if they just keep working harder, learn to do their tasks more quickly, more efficiently, more fluidly, they will eventually surpass it -- this is a myth we can't keep telling.

Continue reading "High spark of low skilled work" »

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One model that N.H.T.S.A. has studied is the one now used by the Federal Aviation Administration, which regulates commercial aircraft. The F.A.A. dispatches representatives to plane manufacturers to directly oversee the software design process for the critical systems that control flying.

If it were to carry out those inspections, N.H.T.S.A. would need skilled people. The agency estimates that it has 0.3 staff members for every 100 fatalities in automobile crashes; the F.A.A. has at its disposal over 10,000 staff members for every 100 fatalities on commercial aircraft, according to N.H.T.S.A.

-- Philip Koopman, an associate professor at the department of electrical and computer engineering at Carnegie Mellon University.

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It's becoming more and more difficult to run a successful business in the United States without doing lobbying, campaign contributions and other deals with politicians. This I think is the most dangerous, I would even say nefarious, trend for the creativity of American business in general, and young and new businesses which we badly need in particular.

-- Daron Acemoglu, an economist at M.I.T

The U.S. economy experienced large, broad-based declines in labor market fluidity in recent decades. Long-term declines in job and worker reallocation rates hold across states, industries, and demographic groups defined by gender, education and age. Fluidity declines are large for most groups, and they are enormous for younger and less educated workers.

"Labor Market Fluidity and Economic Performance", September 2014, Steven J. Davis and John Haltiwanger, professors of economics at the University of Chicago and the University of Maryland, respectively

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Brad Hershbein, Melissa Kearney and Lawrence Summers offer a simple little simulation that shows the limits of education as an inequality-fighter. In short, more education would be great news for middle and lower-income Americans, increasing their pay and economic security. It just isn't up to the task of meaningfully reducing inequality, which is being driven by the sharp upward movement of the very top of the income distribution.

Assumes 10 percent of working-age men without advanced education receive a college degree, and begin earning wages typical of college graduates. Then nationwide Gini would fall from 57 % to 55%.

Continue reading "Educating middle Americans improves economic security, doesn't meaningfully reduce inequality" »

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An airport lounge once felt rich with possibilities for spontaneous encounters. Even if we did not converse, our attention was free to alight upon one another and linger, or not. We encountered another person, even if in silence. Such encounters are always ambiguous, and their need for interpretation gives rise to a train of imaginings, often erotic. This is what makes cities exciting.

The benefits of silence are off the books. They are not measured in the gross domestic product, yet the availability of silence surely contributes to creativity and innovation. They do not show up explicitly in social statistics such as level of educational achievement, yet one consumes a great deal of silence in the course of becoming educated.

-- The cost of paying attention by Matthew Crawford.

Continue reading "Benefits of silence are off the books" »

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to live in the world while being given the benefit of the doubt. Have you ever been able to return a sweater without a receipt? Has an employee ever let you into a store after closing time? Did a car dealership take a little extra off the sticker price when you asked? When's the last time you received service with a smile?

Privilege doesn't (usually) operate as brazenly and audaciously as in the Eddie Murphy joke, but it continues in the form of discretionary benefits, many of them unconscious ones. These privileges are hard to eradicate, but essential to understand.

Ian Ayers.

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Obviously, these arguments are often correct. Experimental studies really are better than quasi-experimental studies which really are better than regression analyses which are certainly better than nothing. Big, broadly representative samples really are better than narrow ones and it is important to have multiple studies back up a conclusion. But given that people tend to read what they want to read in research, these points tend to be used more as bludgeons than as good faith critiques.

Economists do it with models, via Dylan Matthews at the Washington Post:
: just for fun: a handy guide for discussing research you don't agree with.

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LAANE's Jon Zerolnick spoke with Tom Slee, an Ontario-based writer whose work on the intersection of technology, politics, and economics has appeared in The Literary Review of Canada, The New Inquiry, The Guardian, and Jacobin.

One other thing that bothers me is a rhetoric the companies all use around the idea of "extra money." As in, "it's not a job, it's just a bit of extra money." Once you say "extra money," it's like, "Oh, we don't need rules and regulations, because it's just extra money." This is the same rhetoric that was used back in the 60s around women's jobs. There wasn't equal pay for equal work, because "it's not a real job, it's just extra money." Using the phrase "extra money" is a slippery way to undermine employment standards, and to undermine things that unions and progressive politicians have fought for for a long time. Any low-paying job is a way to earn "extra money." There's no such thing as "extra money."

Continue reading "Tom Slee: sharing is OK if not profitable." »

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A Changing Business Model

Cellphone carriers like Sprint have become strong opponents of distracted driving. That was not always so. When cellphones first became mass-market products, drivers were the target market. Carriers sold talk-time by the minute, so the more people talked, the more money carriers made. And people spend a lot of time in cars.

But business models have changed. Carriers now sell unlimited use, making it much less important to their bottom line that people talk or text behind the wheel.

"It did become less of a business interest for carriers to push the freedom of use wherever an individual might be," said Ray Rothermel, internal counsel for Sprint, who works on government affairs.

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Take your smartphone on a date, and it might vibrate in your pocket to indicate "Kiss her now." If you hesitate for fear of being seen as pushy, it may write: "Who cares if you look bad? You are sampling optimally in the quest for a lifetime companion."Those who won't listen, or who rebel out of spite, will be missing out on glittering prizes. Those of us who listen, while often envied, may feel more like puppets with deflated pride.

-- Tyler, being Tyler.

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Bock: "Humans are by nature creative beings, but not by nature logical, structured-thinking beings. Those are skills you have to learn. One of the things that makes people more effective is if you can do both. ... If you're great on both attributes, you'll have a lot more options. If you have just one, that's fine, too." But a lot fewer people have this kind of structured thought process and creativity.

Continue reading "Sell yourself the google $GOOG way" »

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Online ratings are one of the most trusted sources of consumer confidence in e-commerce decisions. But recent research suggests that they are systematically biased and easily manipulated.

-- Sinan Aral, the David Austin Professor of Management and an associate professor of information technology and marketing at the MIT Sloan School of Management.

Continue reading "Online ratings: biased or manipulated ?" »

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The Android mobile operating system was always intended as a gateway drug to Google products and ads. ("We don't monetize the things we create," Android creator Andy Rubin once told me. "We monetize users.") And Moto X is a tool to free-base Google.

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Market efficiency is not always the same thing as consumer benefit -- a lesson worth learning in the digital age, for Uber riders as well as everyone else. There are far more sly forms of technology-enabled price discrimination out there, from airlines charging more if you are using a savvy web browser to online retailers charging you more if you are from a posh ZIP code. But on the Internet, the deck is still stacked on the consumer's side, given the web's powerful ability to facilitate comparison shopping. Shocked by Uber's surge prices, after all, there's nothing from holding an Uber user back from hoofing it home free or trying her luck waving her arms at the passing, fixed-price cabs on the street.

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Steven M. Teles' essay in National Affairs called "Kludgeocracy in America." While we've been having a huge debate about the size of government, the real problem, he writes, is that the growing complexity of government has made it incoherent. The Social Security system was simple. But now we have a maze of saving mechanisms -- 401(k)'s, I.R.A.'s, 529 plans and on and on. Health insurance is now so complicated that only 14 percent of beneficiaries could answer basic questions about deductibles and co-pays.

Continue reading "While we've been having a huge debate about the size of government, the real problem, he writes, is that the growing complexity of government has made it incoherent. " »

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Suneet Tuli, CEO of Datawind, maker of the Aakash 2 tablet uses the slide below to explain how cheap tablets will disrupt the market for more expensive tablets, and potentially other types of personal computing devices, like laptops. "I think [Intel's move] is the classical example of bridging the performance gap between low- and high-end products, where the increasing performance at the low-end of the market starts putting pressure on the higher end of the market," says Tuli, referring to Clayton Christensen's Innovator's Dilemma.

http://qz.com/124393/intel-100-tablet-by-christmas/

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Take the centerpiece of my early career, the work on increasing returns and trade. The models I and others used were, in a way, typical of economics: clearly untrue assumptions (symmetric constant elasticity of substitution preferences; symmetric costs across products!), and involved a fair bit of work to arrive at what sounds in retrospect like a fairly obvious point: even similar countries will end up specializing in different products, and because there are increasing returns in many sectors, this will produce gains from specialization and trade. But this point was only obvious in retrospect. People in trade were not saying anything like this until the New Trade Theory models came along and clarified our thinking and language. Trust me, I was there, and went through a number of seminar experiences in which I had to bring an uncomprehending audience through until they saw the light.

The same is true for the liquidity trap. The basics of what happens at the zero lower bound aren't complicated, but people who haven't worked through small mathematical models -- of both the IS-LM and New Keynesian type -- generally get all tied up in verbal and conceptual knots.

-- Paul Krugman

Continue reading "Math is good, math is right. Almost as good as greed" »

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Davidson admits that eliminating rent controls would likely drive everyone who makes less than $90,000 out of Manhattan, which he says would not be healthy for the city, but then he claims that it would be "great" for the middle class. This makes sense if he's defining "middle class" as an income in the low-mid six figures, visualizing all the fantastically located apartments in Manhattan and brownstone Brooklyn occupied by rent-regulated peasants, and imagining that a mass eviction would open up many more choices on the market and might even enable him to snag a place for $3,300 instead of $3,750.)
Curiously, the real-estate lobby has yet to advocate for the tax increases necessary to adequately fund the federal Section 8 rent-subsidy program, which has been closed to new applicants here since 2009 and generally won't help pay for a two-bedroom apartment that costs more than $1,474.

Continue reading "Middle class is $140k for NY renters" »

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Households in the top fifth of the income distribution reap 70 percent of the tax subsidies. Money in retirement accounts (unlike pension benefits) can be bequeathed to heirs, perpetuating wealth inequality.

Employers have little incentive to expand benefits. Some 401(k) fans contend that automatic enrollment (requiring employees to opt out of a regular contribution, rather than opting in) could increase participation. But evidence suggests that employers who use automatic enrollment offer a lower match to employee contributions in order to control their costs.

Many families who manage to accumulate retirement savings are forced to dip into them when they experience unemployment or other unexpected economic stress. The 10 percent withdrawal penalty makes this a particularly costly way of paying bills.

An increasing percentage of workers are being forced to stay on the job longer than they had planned. The percentage of workers expecting to retire after age 65 increased to 33 percent in 2010 from 11 percent in 1991 and 19 percent in 2000. That's a hardship not just for the older generation but for the younger generation waiting for jobs to open up.

-- Nancy Folbre

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Like many Rust Belt cities, it is a captive of its rich manufacturing past, when well-paying jobs were plentiful and landing one without a college degree was easy.

Educational attainment lagged as a result, even as it became more critical to success in the national economy. "We were so wealthy for so long that we got complacent," said Jane L. Dockery, associate director of the Center for Urban and Public Affairs at Wright State University here. "We saw the writing on the wall, but we didn't act."

Dayton sits on one side of a growing divide among American cities, in which a small number of metro areas vacuum up a large number of college graduates, and the rest struggle to keep those they have.

The winners are metro areas like Raleigh, N.C., San Francisco and Stamford, Conn., where more than 40 percent of the adult residents have college degrees. The Raleigh area has a booming technology sector and several major research universities; San Francisco has been a magnet for college graduates for decades; and metropolitan Stamford draws highly educated workers from white-collar professions in New York like finance.

Metro areas like Bakersfield, Calif., Lakeland, Fla., and Youngstown, Ohio, where less than a fifth of the adult residents have college degrees, are being left behind. The divide shows signs of widening as college graduates gravitate to places with many other college graduates and the atmosphere that creates.

Continue reading "Triumph of the Educated City" »

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The central role of metaphor and narrative in human thought. Professor Cowen HERE, is only the latest to build on this theme although importantly, he concentrates on the negative, blinding aspects of the tendency. Nowhere is this more clear than in the "stories" that surround investments.

Choosing a metaphor presupposes a conclusion. For instance, there's no way to hear "the Chinese economy is a bubble" without unconsciously associating the country's outlook with fragility and inevitable disappearance of a soap bubble. If we describe China's GDP as similar to a hot air balloon on the other hand, our subconscious will immediately become more suceptible to the argument that upcoming government stimulus will right the economic ship. (You see what I did there - the use of the word "ship" is insidious.)

Good metaphors are a double-edged sword and their ubiquity in stock pitches suggests investors remain on their guard, never accepting one outright no matter how successfully it seems to communicates the situation.

Via Interloping.

Continue reading "Metaphors and stories: threat or menace to explanations ?" »

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How should we aggregate the data into an informative bottom line? To Reinhart and Rogoff's critics, the natural approach is to take the average for each debt level across all years in all countries. This would, for example, give a country with 10 years of very high debt 10 times the weight of a country with only one year. Instead, Reinhart and Rogoff took an average growth rate for each country experiencing very high debt, then calculated the average across countries. In their approach, all countries with any experience of very high debt get the same weight.

Which approach makes more sense? That depends on the question you want to answer. Reinhart and Rogoff are trying to find the average country's growth rate during episodes of very high debt. Their critics are seeking the average growth rate of GDP when debt is very high. These are subtly different.

From a statistical perspective, your preference might depend on your judgment about what drives differences in economic growth at a given level of debt. If you think broad country characteristics such as geography or quality of governance are the most important, you might choose Reinhart and Rogoff's approach of averaging out the national idiosyncrasies to determine the experience of the "typical country." If you believe that country and time-specific factors such as domestic- policy decisions matter most, then you might want to weight all years equally to average out these one-time influences.

Betsey Stevenson and Justin Wolfers

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Economic-comicon: New York Fed Publications: result = comics.

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It's hard to imagine now, but for more than three decades after World War II financial crises of the kind we've lately become so familiar with hardly ever happened. Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.

What's the common theme in these episodes? Conventional economics wisdom blames fiscal profligacy -- but in this whole list, that story fits only one country, Greece. Runaway bankers are a better story; they played a role in a number of these crises, from Chile to Sweden to Cyprus. But the best predictor of crisis is large inflows of foreign money: in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out.

I am, of course, not the first person to notice the correlation between the freeing up of global capital and the proliferation of financial crises; Harvard's Dani Rodrik began banging this drum back in the 1990s. Until recently, however, it was possible to argue that the crisis problem was restricted to poorer nations, that wealthy economies were somehow immune to being whipsawed by love-'em-and-leave-'em global investors. That was a comforting thought -- but Europe's travails demonstrate that it was wishful thinking.

And it's not just Europe. In the last decade America, too, experienced a huge housing bubble fed by foreign money, followed by a nasty hangover after the bubble burst. The damage was mitigated by the fact that we borrowed in our own currency, but it's still our worst crisis since the 1930s.

-- Paul Krugman.

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Finally, it's important to understand how the minimum wage interacts with other policies aimed at helping lower-paid workers, in particular the earned-income tax credit, which helps low-income families who help themselves. The tax credit -- which has traditionally had bipartisan support, although that may be ending -- is also good policy. But it has a well-known defect: Some of its benefits end up flowing not to workers but to employers, in the form of lower wages. And guess what? An increase in the minimum wage helps correct this defect. It turns out that the tax credit and the minimum wage aren't competing policies, they're complementary policies that work best in tandem.

Continue reading "Earned-income tax credit and Minimum Wage: double or nothing ?" »

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"You just get sad," Mr. Agati said. "I see people getting up in the morning, going out to their careers and going home. I just wish I was doing that. Some people don't like their jobs, or they have problems with their jobs, but at least they're working. I just wish I was in their shoes."

He said he cannot afford to go back to school, as many younger people without jobs have done. Even if he could afford it, economists say it is unclear whether older workers like him benefit much from more education.

"It just doesn't make sense to offer retraining for people 55 and older," said Daniel Hamermesh, an economics professor at the University of Texas in Austin. "Discrimination by age, long-term unemployment, the fact that they're now at the end of the hiring queue, the lack of time horizon just does not make it sensible to invest in them."

Many displaced older workers are taking this message to heart and leaving the labor force entirely.

The share of older people applying for Social Security early spiked during the recession as people sought whatever income they could find. The penalty they will pay is permanent, as retirees who take benefits at age 62 -- as Ms. Zimmerman did, to help make her mortgage payments -- will receive 30 percent less in each month's check for the rest of their lives than they would if they had waited until full retirement age (66 for those born after 1942).

Those not yet eligible for Social Security are increasingly applying for another, comparable kind of income support that often goes to people who expect never to work again: disability benefits. More than one in eight people in their late 50s is now on some form of federal disability insurance program, according to Mark Duggan, chairman of the department of business economics and public policy at the University of Pennsylvania's Wharton School.

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There is growing recognition that the true cost of disruptions, in terms of gasoline lines, lost workdays and business sales, and shivering homeowners, is far higher than the simple dollars and cents spent to protect the power system. A recent report from the National Academy of Sciences about the vast 2003 blackout in the Eastern United States determined that the economic cost of that disruption was about 50 times higher than the price of the actual electricity lost, and that didn't take into account deaths or other human consequences.

"We need to think now of not just restoring the grid, but how to make it more survivable," said Philip B. Jones, president of the National Association of Regulatory Utility Commissioners, a trade association of state officials. "I think most commissioners are coming around to that."

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But a part of Ms. Lorri Unumb's job these days is to assist parents with appeals where employers have said no or appear likely to. She has accompanied parents to meetings with their human resources departments all over the country to request that the employer expand coverage for everyone. She has a 115-page presentation that she draws on, pointing out that at its core, autism is a medical condition diagnosed by a doctor, the very thing health insurance is supposed to cover.

At $60,000 or more annually for children with particularly acute treatment needs, the coverage does not come cheaply. But Autism Speaks estimates that that expense, spread over thousands of employees, raises premium costs 31 cents a month.

Ms. Unumb notes that for many autistic children, intensive early intervention can allow them to function in mainstream classrooms and prevent a host of problems there and once they finish school. "You pay for it now or you pay for it later," she said. "And you pay for it a lot more if you choose later, in more ways than just financial."

Autistic children can benefit from an intensive treatment called applied behavior analysis, but many insurance companies haven't wanted to cover what can be a $60,000 or $70,000 annual cost. They claim that the treatment, which can include intensive one-on-one interaction and assistance with both basic and more complex skills, is either too experimental or an educational service that schools should provide. This can be a tricky area for parents to navigate, because it isn't always clear which part of an overall health insurance policy ought to cover various possible treatments.

A law school professor named Lorri Unumb faced a bill that big several years ago when her son Ryan was found to be autistic and she discovered that her insurance would not pay for treatment. After moving to South Carolina and meeting families there who had not been able to afford the therapy, she spent two years persuading state legislators to pass a law that forced insurance companies to pay for the treatment. "I did not really know how to write a bill," she said. "I had watched 'Schoolhouse Rock' before, and that was kind of my inspiration and guidance."

Autism Speaks, a national advocacy organization, saw what she accomplished and hired her to barnstorm the country in an effort to get similar laws passed. There are now 32 states that have them, though there's a crucial catch: they don't apply to the many large employers who pool their own resources in so-called self-funded insurance plans.

If you work in such a company, it may be up to you to lobby your human resources department to cover applied behavioral analysis or whatever mental health therapy you or your child may need. Sometimes a personal appeal will succeed; Mr. Kaplan, the benefits consultant, noted that when a parent called about a child, an employer might be particularly sensitive.

Continue reading "Autism: more treatable than billable ?" »

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The first thing Truffo told me when I reached her in her Orange County office was that I shouldn't feel bad about my empty hours; nowadays, she said, even established veterans were struggling. Yes, the economy was bad, but the real issue was that psychotherapy had an image problem.

The one thing I enjoyed most was the wide array of cases I saw, I explained to Roth, and if I specialized, I'd be doing too much of the same thing all day. She suggested that if I wasn't ready to commit to a niche, I could add life-coaching services to appeal to "today's consumer looking for quick solutions rather than long-term insight." When I balked -- I couldn't picture "Lori Gottlieb, life coach" -- she assured me that many therapists who prefer deeper, broader work also offer coaching as an adjunct to their practices.

She told me about a therapist named Sandra Bryson. In 2009, Bryson called for help after her successful Oakland-based practice of 25 years lost patients when she stopped taking insurance. According to Truffo, Bryson shared a problem common to therapists: "a blah-sounding message and no angle." Bryson had always done well as a generalist -- treating anything from depression to grief to marital issues -- but Truffo urged her to find a specialty, one that "captured the zeitgeist but didn't feel played out." Bryson mentioned that she liked helping parents and had an affinity for technology, and voilà -- suddenly she had a brand. Not as a clinician addressing typical parenting issues like boundary-setting, which Truffo called "generic and old-school," but as an expert who helps modern families navigate digital media. She also became a sought-after speaker on so-called hot issues like screen time, cyberbullying and sexting, and Bryson told me her practice, which is based on "mostly deep work," had become "more advice-driven." Now her schedule is full, and her income has increased about 15 percent a year.

"Nobody wants to buy therapy anymore," Truffo told me. "They want to buy a solution to a problem." This is something Truffo discovered in her own former private practice of 18 years, during which she saw a shift from people who were unhappy and wanted to understand themselves better to people who would come in "because they wanted someone else or something else to change," she said. "I'd see fewer and fewer people coming in and saying, 'I want to change.' "

From a branding perspective, the fix was simple. At professional-networking events or in newsletters, her pitch went from "I treat people with depression and anxiety" to "Are you having trouble with the difficult people in your life?" Of course, therapy isn't about changing someone else, but that wasn't the point. If she could get people in treatment and help them feel better, she explained, why did it matter how she spun her pitch? Her goals seemed valid, but the idea of pitches and branding still made me uncomfortable.

Continue reading "A support group for failed therapists? " »

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The consultant has since been moved to another company, where he has done well at his professional tasks but still misses social cues. In Denmark, there is a tradition of bringing cake to the office on Fridays, and Oblom recently learned from the on-site supervisor that the consultant happily eats cake but has never volunteered to bring one himself. Then there was the time he tasted a co-worker's cake and pronounced it terrible. Oblom told me that he plans to tell the consultant that he has to bring in cake now and then -- and he will do it, Oblom predicts, without understanding the reason -- but he's not going to encourage the consultant to be more polite. The concept of socially mandated dishonesty would mystify him, Oblom said, so the other employees will just have to deal with it.

Continue reading "Autistic consultants" »

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Mr. Ryan, as you may recall, has positioned himself as an icon of truth-telling and fiscal responsibility, while offering policy proposals that are neither honest nor responsible. He calls for huge tax cuts, while proposing specific spending cuts that, while inflicting immense hardship on our most vulnerable citizens, would fall far short of making up for the revenue loss. His claims to reduce the deficit therefore rely on assertions that he would make up for the lost revenue by closing loopholes that he refuses to specify, and achieve further huge spending cuts in ways that he also refuses to specify.

But didn't the Congressional Budget Office evaluate Mr. Ryan's plan and conclude that it would indeed reduce the deficit? I'm glad you asked that. You see, the budget office didn't actually evaluate his plan, because there weren't enough details. Instead, it let Mr. Ryan specify paths for future spending and revenue, while noting -- in what sounds to me like a hint of snark -- that "No proposals were specified that would generate that path."

So Mr. Ryan basically told the budget office to assume that his plan would slash the deficit, then claimed the resulting report as vindication of his deficit-slashing claims. Sorry, but that's the policy equivalent of sneaking into a marathon near the finish line, then claiming victory.

-- Krugman

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Now it's clear that Mr. Romney is not about to cede fairness to his rival.

In a new argument that he first offered in a primary victory speech on Tuesday, Mr. Romney is laying claim to his own version of the fairness issue. He argues that the policies pursued by Mr. Obama and his Democratic allies are fundamentally unfair to Americans.

"I see an America with a growing middle class, with rising standards of living," he said, speaking in New Hampshire. "This America is fundamentally fair."

"And as I look around at the millions of Americans without work, the graduates who can't get a job, the soldiers who return home to an unemployment line, it breaks my heart," Mr. Romney added. "This does not have to be. It's the result of failed leadership and a faulty vision."

Call it the clash of the fairness doctrines.

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Nowadays, the veil of ignorance is challenged by a powerful but ancient contender: the veil of opulence. While no serious political philosopher actually defends such a device -- the term is my own -- the veil of opulence runs thick in our political discourse. Where the veil of ignorance offers a test for fairness from an impersonal, universal point of view -- "What system would I want if I had no idea who I was going to be, or what talents and resources I was going to have?" -- the veil of opulence offers a test for fairness from the first-person, partial point of view: "What system would I want if I were so-and-so?" These two doctrines of fairness -- the universal view and the first-person view -- are both compelling in their own way, but only one of them offers moral clarity impartial enough to guide our policy decisions.

Those who don the veil of opulence may imagine themselves to be fantastically wealthy movie stars or extremely successful business entrepreneurs. They vote and set policies according to this fantasy. "If I were such and such a wealthy person," they ask, "how would I feel about giving X percentage of my income, or Y real dollars per year, to pay for services that I will never see nor use?" We see this repeatedly in our tax policy discussions, and we have just seen the latest instance of it in the Tax Policy Center's comparison of President Obama's tax plan versus Mitt Romney's tax plan.

Benjamin Hale, assistant professor of philosophy and environmental studies at the University of Colorado, Boulder, and a co-editor of the journal Ethics, Policy & Environment

Continue reading "Finish line equality: veil of opulence; Starting line equality: veil of ignorance" »

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there are millions of gullible Americans who believe the storyline and are easily convinced that driving a $30,000 new car, financed over seven years, makes them a success. The decades of Bernaysian marketing propaganda has worked its magic on the government educated, math challenged citizenry.

There are only two things that matter to the non-thinking auto buyer (renter) - the monthly payment and what the next door neighbor and his coworkers will think. Buying a fuel efficient car they can afford, paying it off in three or four years, and driving it for ten years, while saving the monthly car payment, is what a practical, rational thinking person would do. The fact that only 20% of the 9.7 million vehicles sold this year have been small cars and the average sales price of new cars sold is now $31,000 proves Americans are still living in a delusional fantasyland of cheap gas and monthly payments for eternity.

Continue reading "Debt stimulus and auto buyers" »

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One of the themes of Dan Ariely's new book "The (Honest) Truth About Dishonesty." Nearly everybody cheats, but usually only a little. Ariely and his colleagues gave thousands of people 20 number problems. When they tackled the problems and handed in the answer sheet, people got an average of four correct responses. When they tackled the problems, shredded their answers sheets and self-reported the scores, they told the researches they got six correct responses. They cheated a little, but not a lot.

That's because most of us think we are pretty wonderful. We can cheat a little and still keep that "good person" identity. Most people won't cheat so much that it makes it harder to feel good about themselves.

Ariely, who is one of the most creative social scientists on the planet, invented other tests to illustrate this phenomenon. He put cans of Coke and plates with dollar bills in the kitchens of college dorms. People walked away with the Cokes, but not the dollar bills, which would have felt more like stealing.

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My family has lived this reality for many years. We have a severely autistic son who has attended private schools which offer intensive behavioral therapy ("Applied Behavior Analysis" or "ABA," which is the only therapeutic methodology for which much evidence of effectiveness exists) with a student-teacher ratio of 1:1, and has also been receiving extensive ABA and other related services after school. Those schools and related services have enabled our son to make what progress he has been able to achieve. They are also necessarily and extremely expensive.

But every single year, we have to "sue" NYC (technically it's not a lawsuit in a court but an impartial hearing as provided under IDEA, but it functions in very similar fashion) to cover the costs of such a school and services when they invariably recommend services far below what is necessary for our son to achieve any educational benefit. We have never lost one of our "suits" yet against NYC, but in the meantime we are required to front the cost of our son's school and services every year and seek eventual reimbursement from NYC. Very, very few families have the financial resources to do so. (And while we have enough resources to front the costs pending reimbursement, we are not nearly rich enough to bear the full costs of our son's school and services - those can exceed $170K per year.) Those that do not either have to move or make do with whatever the system offers, which is often far, far below what is necessary.

It should also be noted that the very malfunctions of large school systems such as NYC make it easier for families such as mine, who have enough resources to go through the battles every year, to obtain eventual public reimbursement for special education services. First, the IEP process described above presupposes intensive consideration of the student's individual educational needs. Large educational bureaucracies, such as NYC's, are not well equipped for that type of individual consideration. This leads to a tendency for the bureaucracies to offer services based on what's convenient and typical rather than what's appropriate for the student. Second, large school bureaucracies are not, to put it mildly, well renowned for their general administrative competence, and the IDEA imposes various elaborate procedural requirements on school districts that are regularly violated. A family can often demonstrate these two facts when necessary to enforce the IDEA against the school district, if they have the time and resources to spare.

Continue reading "the Atlantic: Special ed system favors the rich and Romney has a plan to fix it. " »

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The cab commission of the District of Columbia is less thrilled: it is in the midst of a legal tussle with Uber. Ron M. Linton, chairman of the commission, said Uber had begun operating in the city without its approval.

He said that under the commission's rules, there are limousines, which set a price with passengers in advance, and there are cabs, which have meters that charge by time or distance. He said Uber was breaking the rules by trying to be both. Uber calculates fares by time and distance, and then bills the customers' credit card.

The commission's inspectors have been citing Uber's car-service partners for infractions, Mr. Linton said. The commission is proposing to change the district's taxi laws to strengthen regulation of sedans like the ones that Uber's partners use. Mr. Linton said this would allow it to protect consumers from issues like extra fees that they don't understand.

"There's room for limos, for taxis and this new concept for sedans," he said. "We're trying to make it work for everybody, but we need cooperation. We can't deal with an organization that sticks its thumb up our nose."

Mr. Kalanick of Uber said its operations in Washington were completely legal, and that the commission was citing rules that don't exist. He said the commission wanted to regulate sedans more tightly so that it could control their fares, which would prevent Uber from eventually undercutting cabs.

"They want to keep our prices from going down, which is a very unusual price-fixing scheme," Mr. Kalanick said. "Essentially they're trying to protect taxis from competition, from having any viable alternative."

New York doesn't seem to have a problem with Uber. Allan Fromberg, a spokesman for the city's taxi and limousine commission, said that as long as services like Uber conformed to the city's rules, "we are highly supportive of ways to use technology to enhance service to the riding public."

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While it is reasonable for politicians to shy away from rationing -- especially when voters believe no expense should be spared to save a human life -- if the experience of other countries serves as precedent, they will probably get there sooner or later. In Britain, the National Institute for Health and Clinical Excellence determines what therapies will be covered by the National Health Service. It generally recommends against paying for a therapy that costs more than $31,000 to $47,000 for each year of life gained, adjusted for quality.

Putting a value on life, as it were, is controversial. The National Institute in Britain has denied or limited coverage of expensive drugs for ailments like pancreatic cancer, macular degeneration and Alzheimer's. But in a world of limited budgets, such decisions must be made.

Similar systems exist in many countries, including Australia and New Zealand, where the government decided not to pay for a universal vaccine against pneumococcal disease until its price fell to 25,000 New Zealand dollars (about $20,000) per quality-adjusted life year.

Though this concept may sound foreign, Washington has been putting a price on life since the administration of Ronald Reagan -- who determined that regulations should pass through a strict cost-benefit analysis, with values placed on factors like life and health. The Environmental Protection Agency values a life at about $9 million today. In 2009, the Transportation Department used a price tag of about $6 million. If safety improvements on a road were projected to cost more than the value of the lives expected to be saved by the improvement, the project would be deemed too expensive.

This approach has been contentious. And it has had an impact on Americans' health. In 1991 an appeals court reversed the E.P.A.'s decision to ban asbestos on the ground that it was too costly. The E.P.A., it argued, "would have this court believe that Congress, when it enacted its requirement that the E.P.A. consider the economic impacts of its regulations, thought that spending $200 million to $300 million to save approximately seven lives (approximately $30 million to $40 million per life) over 13 years is reasonable."

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Guy Sorman is an oddity--some might say a walking contradiction. The French economist and writer has for decades championed free markets in the birthplace of dirigisme. He is a man of the right who is guardedly upbeat about France's future under the first Socialist president in 20 years. And he's decidedly positive on the euro and the European Union.

The latest of his 25-odd books, "Journal of an Optimist," a series of diary-like essays on Europe and France, was published here this spring. His contrarian streak--a virtual job requirement for French public intellectuals going back to Voltaire--flies straight into the gloomiest headwinds. "The consensus is not always the truth," he says without hesitation.

Doomsday scenarios also overlook differences among EU states. The Berlin Wall was replaced by a sort of sunshine curtain that separates a healthy, growing north from the basket cases of Club Med. Visit Berlin, booming Warsaw or the Estonian capital of Tallinn to escape the depressed mood of Paris. "I think you'll have a European revival coming from Poland, the Baltic States and Finland" says Mr. Sorman. "Just look at what they've achieved."

Mr. Sorman has advised the South Korean president Lee Myung-bak since 2009 ("without much result," he says) and lived for a year recently in China. This up-close look makes him skeptical of the rising East hype and eager to halt Europe's premature burial.

Continue reading "Guy Sorman on European federalism" »

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These days, though, the advantages of being an elite frequent flier are harder to gauge. The private lounges are more crowded, the priority check-in lines longer. And on some flights there are so many elites that it's become almost a joke: "Never go to check-in at the elite line; it's way too long," said Randy Petersen, the founder of frequent flier Web sites like FlyerTalk.com and MilePoint.com.

Continue reading "Flying today: private lounges are more crowded, the priority check-in lines longer. " »

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But despite their relative success, Skinnerian weight-loss programs have not become the default treatment for obesity the way AA has for alcoholism. One reason, of course, is that most would-be weight-losers can't afford these programs (insurance usually won't cover them) or don't have the time, patience, or motivation to commit to one. At up to $3,500, the six-month Miriam outpatient program is a relatively good deal, especially compared with Canyon Ranch, which offers a well-regarded residential program for about $1,200 a day.

"We know how to get people to eat healthier and exercise," says Steven Blair, an exercise and epidemiology researcher at the University of South Carolina. "The question is how to roll out the needed behavioral strategies to 50 million unfit adults in the U.S. Even if there were enough trained counselors to work with that many people, which there aren't, the cost issues would be overwhelming."

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Denied:
¶In Seattle, the Virginia Mason Medical Center, once deemed a high-cost provider, has conducted rigorous internal reviews to eliminate waste and inefficiency. It says that after doctors were required to click through a computerized checklist of the medical circumstances needed to justify a costly imaging test, CT scans for sinus conditions dropped by 27 percent and M.R.I.'s for headaches by 23 percent. It placed nursing teams and supplies closer to patients, freeing nurses to spend 90 percent of their time on direct patient care, far more than the 35 percent at most hospitals. The time needed to process insurance claims was sharply cut by consolidating steps. In a tough environment for hospitals, Virginia Mason has been reporting margins of 4 to 5 percent.

Speedy:
¶Virginia Mason also collaborated with Starbucks and the company's insurance provider, Aetna, to find better ways to treat patients with uncomplicated back pain, a costly burden to the company. At the start, all patients complaining of back pain typically waited many weeks to see a specialist, who would then prescribe a costly, unnecessary M.R.I. before finally sending them on to a physical therapist. By finding ways to separate out the uncomplicated cases, Virginia Mason was able to send them directly to a therapist on the day the patient requested an appointment, and the vast majority were able to quickly return to work.

Continue reading "Denied care, speedy care, by Virginia Mason Medical Center" »

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When everyone agrees, prices get stupid. Studies have shown that crowd estimates can be surprisingly accurate on average -- but only when there is sufficient diversity of opinion. Market valuations are the same way: When you have a diversity of opinion, reasonable estimates prevail as outliers cancel each other out. But when there is a critical mass of one-sided opinion -- when an overwhelming majority shares the same general view -- you get serious mispricings.

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The definition of "employee" under the Fair Labor Standards Act is quite broad, and it covers many unpaid interns. Only unpaid internships that build skill and meet the Department of Labor's six-part test are exempt from minimum-wage laws.

The following six criteria must be applied when making this determination:

The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

The internship experience is for the benefit of the intern;

The intern does not displace regular employees, but works under close supervision of existing staff;

The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

The intern is not necessarily entitled to a job at the conclusion of the internship; and

The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

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It's not like the power people are studying one area while the economic people are studying another. They're all looking at society as a whole, but from different premises. That's why it's incoherent: all 4 will look at the same phenomenon and confidently describe it in mutually incompatible ways.

1 Hard core interactionism/social constructionism: Social reality is defined mainly by how it's enacted in specific situations and these vary quite a bit. Moreover, interactions aren't necessarily reducible to the broader social order. The more radical elements of this tradition run into post-modernism - there is no coherent social reality because it's created differently in different contexts (i.e., no coherent self). You see it also pop up in the strong sociology of knowledge (construction of ideas may have little to do with "reality").

2 Critical social theory: The basis of social reality is power. This can be defined in economic terms (Marx), race (DuBois), or gender (feminists). Or it can be generically defined (Bourdieu). Most of social life boils down to struggle over the stuff that gives your power, or resisting the power.

3 Values, institutions, and relations: This is the broad trend stemming from Weber and Durkheim. The basic elements of VI&R are that human communities have values, which are translated into order via rules, organizations, and institutions. This basic set up motivates everyone from Parsons, to Selznick, to Sumner, to Luhmann, to the world polity crowd. The flavors may be different, but they're all about the push and pull between values and structure.

4 Resources and Action: This strand represents what might be called the "economic view" on things. Psychology and values are strongly de-emphasized and you just work on strategic action. The old version was called "social exchange." Now we call it rational choice. But the R&A tent is big enough to catch some other types of sociology. Organizational ecology - psychology thin and focusing on competition - fits here as well. So might lightly theoretical stratification research.

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A new study from the Brookings Institution quantifies that price gap, and the differences between the cost of living near a high-scoring public school and a low-performing one are striking.

The study, by Jonathan Rothwell, a senior research analyst in the Metropolitan Policy Program at Brookings, found that housing costs in the nation's 100 largest metropolitan areas were an average of 2.4 times as high - a difference of $11,000 a year - for homes near schools whose average test scores put them in the top fifth of schools in the area, compared with schools in the bottom fifth.

That means that a family would have to pay more per year to move into a good public school zone than for their children to attend some private schools. Translated into an average home price, the gap works out to an average of $205,000 more for a home near a high-performing school.

"We think of public education as being free, and we think of the main divide in education between public and private schools," Mr. Rothwell said in an interview. "But it turns out that it's actually very expensive to enroll your children in a high- scoring public school." Mr. Rothwell said that in the New York metropolitan area, for example, annual housing costs are $16,000 higher on average in neighborhoods near high-performing schools than in neighborhoods near low-performing schools,

Continue reading "Housing in better school district costs a $11,000 a year " »

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Cities are really important, as engines of the broad economy via industrial clustering, as enablers of efficiency-enhancing specialization and trade, as sources of customers to whom each of us might sell services. Contrary to many predictions, technological change seems to be making human density more rather than less important to prosperity in the developed world. Commerce intermediated at a distance via material goods has become the province of cheap workers in distant lands, and will very soon be delegated to robots. The value of human work is increasingly in collaborative information production and direct personal services, all of which benefit from the proximity of diverse multitudes.

-- and Avent, Glaeser and Yglesias

Continue reading "Avent, Glaeser and Yggls go urban" »

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Two years ago, President Obama promised to double exports over the next five years. The U.S. might actually meet that target. As Tyler Cowen reports in a fantastic article in The American Interest called "What Export-Oriented America Means," American exports are surging.

Cowen argues that America's economic export strength will only build in the years ahead. He points to three trends that will boost the nation's economic performance. First, smart machines. China and other low-wage countries have a huge advantage when factory floors are crowded with workers. But we are moving to an age of quiet factories, with more robots and better software. That reduces the importance of wage rates. It boosts American companies that make software and smart machines.

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Most cybercrime estimates are based on surveys of consumers and companies. They borrow credibility from election polls, which we have learned to trust. However, when extrapolating from a surveyed group to the overall population, there is an enormous difference between preference questions (which are used in election polls) and numerical questions (as in cybercrime surveys).

For one thing, in numeric surveys, errors are almost always upward: since the amounts of estimated losses must be positive, there's no limit on the upside, but zero is a hard limit on the downside. As a consequence, respondent errors -- or outright lies -- cannot be canceled out. Even worse, errors get amplified when researchers scale between the survey group and the overall population.

Suppose we asked 5,000 people to report their cybercrime losses, which we will then extrapolate over a population of 200 million. Every dollar claimed gets multiplied by 40,000. A single individual who falsely claims $25,000 in losses adds a spurious $1 billion to the estimate. And since no one can claim negative losses, the error can't be canceled.

THE cybercrime surveys we have examined exhibit exactly this pattern of enormous, unverified outliers dominating the data. In some, 90 percent of the estimate appears to come from the answers of one or two individuals. In a 2006 survey of identity theft by the Federal Trade Commission, two respondents gave answers that would have added $37 billion to the estimate, dwarfing that of all other respondents combined.

This is not simply a failure to achieve perfection or a matter of a few percentage points; it is the rule, rather than the exception. Among dozens of surveys, from security vendors, industry analysts and government agencies, we have not found one that appears free of this upward bias. As a result, we have very little idea of the size of cybercrime losses.

-- Dinei Florêncio is a researcher and Cormac Herley, Microsoft Research.

Continue reading "Cybercrime: overcounted, and as tradegy of the commons" »

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A measure of economic confidence -- people don't tend to quit their jobs in tough labor markets because they're worried they won't be able to find a new one. During the downturn, monthly quits plunged to a record low of 1.6 million in September 2009, down from more than three million per month before the recession began. The fact that they're rising again suggests that workers may finally be seeing signs that the job market is improving.

Quits matter for another reason, too: They're a component of "churn," the regular comings and goings that are a critical element of any healthy job market. When people leave jobs in search of higher pay and new opportunities, they open up opportunities for others. When they stop quitting, those opportunities dry up.

"For workers who are unemployed, if there's less churning of jobs, it's harder to get on the merry-go-round," University of Chicago economist Steven Davis said in a Wall Street Journal article in February.

Churn is a big deal. A new paper, Hiring, Churn and the Business Cycle by Edward Lazear of Stanford and James Spletzer of the Bureau of Labor Statistics finds that during the recent recession, 80% of the drop in hiring was due to low levels of churn, rather than reduced job creation. The authors estimate reduced churn shaved two-fifths of a percentage point off GDP for the duration of the recession.

Continue reading "Employment churn and job quitting a sign of macroeconomic strength" »

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Insurers typically encourage patients to use less expensive drugs by classifying products into tiers with successively higher co-payments, like $10, $30 and $50. Generic drugs are usually in the lowest tier, preferred brand-name drugs in the second tier and other brand-name drugs in the third.

But some insurers are now putting specialty drugs into a fourth tier of their own with extra high co-payments, or even co-insurance, in which the patient pays a percentage of the drug cost.

Patient advocates say that for some diseases, like multiple sclerosis, none of the drugs are inexpensive, making it impossible to avoid the high out-of-pocket costs unless people stop taking their medicine and endanger their health.

That discriminates against people with certain diseases, they say, and contravenes the whole idea of insurance, which is to help people pay for costly medical problems.

Mark Merritt, president of the Pharmaceutical Care Management Association, which represents pharmacy benefit managers, said the real problem was the price of the drugs. The legislation, he said, was an effort by the pharmaceutical industry to "turn a pricing problem into a coverage issue."

Sharon Treat, executive director of the National Legislative Association on Prescription Drug Prices, an organization of state lawmakers, said that was a drawback of the bills. Insulating patients from the cost of their drugs, she said, "gives the drug companies a free ride to charge as much as they want."

Continue reading "Fourth tier of medicine pricing links patient advocates, pharmaceutical managers, and health insurers" »

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The health care mandate was defended as a kind of technocratic marvel -- the only policy capable of preventing the complex machinery of reform from leaking smoke and spitting lug nuts.

But the mandate is actually a more political sort of marvel. In the negotiations over health care reform, it protected the Democratic bill on two fronts at once: buying off some of the most influential interest groups even as it hid the true cost of universal coverage.

The mandate offered the interest groups what all entrenched industries desire: a fresh and captive market for their products. For the insurance companies, it promised enough new business to offset the cost of covering Americans with pre-existing conditions. For the health care sector as a whole, it guaranteed that disposable income currently being spent on other goods and services would be spent on its instead.

This explains why the health care bill was ultimately backed by so many industry lobbying groups, from the Pharmaceutical Research and Manufacturers of America to the American Medical Association. It explains why the big insurers, while opposing the final legislation, never attacked it as vigorously as they did Bill Clinton's ill-fated reform effort.

At the same time, by requiring the private purchase of insurance, the mandate kept the true cost of the health care expansion off the government's books, and largely out of the Congressional debate. As the Cato Institute's Michael Cannon has noted, during the Clinton era the Congressional Budget Office scored an individual mandate as a form of government spending, which pushed the official cost of the Clinton bill into the trillions. But the Obama White House was savvier in its mandate design, and the C.B.O. was more compliant in its scoring. As a result, a bill that might require over $2 trillion in new health care spending -- private as well as public -- over its first decade was sold with a $900 billion price tag.

So the mandate was politically brilliant, in a sense.

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"We need the Ex-Im Bank, period."

Like so much else in Congress these days, it is not that simple.

With its charter set to expire in May, the bank is the target of conservative groups. They are making the case to Republicans that the bank, created in 1934 to finance sales to the Soviet Union, has no place in a free-market system. Club for Growth is holding it up as the next Fannie Mae or Freddie Mac, crowding out private lending and offering dangerous loans that ultimately could be left in the laps of the taxpayer.

"Those groups are just wrong, period," said Jay Timmons, president of the National Association of Manufacturers and a generous personal contributor to Republican candidates.

Continue reading "Pro business or pro-economy ?" »

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Why economists feel they are qualified to undertake this kind of analysis. They are a self-confident bunch and may not be inclined to ask such questions of themselves. But answers do exist.

Economics is unusual in requiring statistical sophistication plus the ability to think about man-made institutions and human motivations. And economists are naturally suspicious: rational economic man, after all, is smart and amoral, the kind of person you'd want to keep an eye on.

The forensic economics trend may be good for the economics profession, too. It requires economists not to spend too much time thinking about theory, but to pay close attention to data, and to the messy way in which markets actually work. These cannot be bad habits for economists to acquire.

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Another promising investment: In-room televisions that walk a patient through a doctor's orders - from bed rest to getting prescriptions filled.

"Like while you're in the hospital, they educate you on the TV so that you cannot see your shows until you've gone through the education, and they test you," she says.

It's a bit like not getting dessert until you've had your vegetables. Maybe this all sounds incredibly simplistic, but venture capitalists say one of the trickiest things about this new world of investing is that their returns, in many cases, hinge on humans changing their behavior. And that's a lot harder than building a robot.

-- DualCap investor Anne Degheest

Continue reading "Doctors orders, replayed until understood" »

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"Americans under the age of 40 are thinking about coffee pricing in cups," said Ric Rhinehart, executive director of the Specialty Coffee Association of America. "If you asked my mother how much coffee cost, she would have told you that the red can was $5.25 a pound and the blue can was $4.25. If you ask people in their 20s and 30s, they'll say coffee is $1.75 to $3.75 a cup."

This generational shift helps explain why single-serve coffee is the fastest-growing sector of the home market. According to a study from the National Coffee Association, single-serve coffee is now the second most popular method of preparation after conventional drip brewers, by far the dominant method. In 2011, 7 percent of the cups of coffee consumed in the United States were made with a single-serve brewer, up from 4 percent in 2010.

The premium that single-serve coffee commands makes it especially lucrative. Julian Liew, a spokesman for Nespresso, said single-serve coffee is 8 percent of the global market, but accounts for 25 percent of its value. It's likely that the number will continue to climb.

Continue reading "Coffee: by the cup, or by weight ?" »

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The vast majority of the money put on gift cards gets redeemed, but Riley estimates that since 2005 $41 billion in money on gift cards has been lost or is likely never to be cashed in. The lion's share of money lost on gift cards from 2005-2009 came from fees and expiration dates. All that changed with the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 that was signed into law last year. The Act largely forbids fees on cards sold by retailers (cards given away as promotional items can still charge fees), and it prohibits expiration dates less than 5 years after the card is purchased.

But what happens when the purchases go under the face value and then sit in the junk drawer in perpetuity, or when grandma, who can barely check her AOL email, gets an Amazon.com card that she'll never redeem? Some $3.4 billion of the $41 billion lost on gift cards from 2005-2011 resulted from cards being lost or simply left unused. The Credit CARD Act doesn't do much to address that, and as the market grows that number will grow along with it.

The answer to how retailers deal with those "lost" funds isn't simple, and there are no hard-and-fast rules -- either at the federal level of government or through national regulatory accounting principles. The Securities and Exchange Commission allows companies to take unused gift-card money as income once they can reasonably say the card won't be redeemed, but there's no set time limit. Best Buy, for example, sets that level at about two years. In fiscal 2011, the electronics company recorded $53 million in income from gift-card "breakage," or cards that are unlikely ever to be redeemed, up from $43 million a year earlier.

But some states don't allow companies to keep unused gift-card cash. They demand that companies give the money to the state after a certain period of time to add to unclaimed-funds accounts. States claim this is a way to reunite consumers with their unspent money, but practically it's a way for cash-strapped governments to give themselves more liquid funds. Money the state holds as unclaimed funds can be used for general purposes until someone claims it. For example, in 2008 -- the most recent year for which data could be obtained -- New York state collected $9.6 million in unredeemed gift cards and returned around $2,150 to the rightful owners.

Continue reading "Un redeamed, unspent gift cards: seigniorage ?" »

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Today in 'think like an economist' -- incentives matter:

Hypothesis: these new tests are measuring the right things and that teaching to the test is an improvement over teaching one's own possibly-haphazard curriculum.

Data: every teacher casually encountered just has no notion that this Reach For The Top business could even in theory accomplish anything. It's just more hoops to jump through.

Analysis: given that the thing that is being measured seems to be the wrong thing, it seems like the changes are worse than nothing. Pre-reform: teachers try to do the right thing, but who knows whether they do it or not. Post-reform: teachers are now being judged on the wrong thing, so they have to focus on that instead of what they think is the right thing.

Maybe the average teacher is relying on slanted and inaccurate information from their union leaders here. But the people who are actually making the policy are either making no effort to explain the point of the policy, or are unable to communicate with the people "on the front lines".

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The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students -- often members of minorities, veterans, the homeless and low-income people -- with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans.

In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students' debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether.

The proposal was aimed at ensuring that the for-profit schools were providing "gainful employment" in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured "gainful employment" for the capital's Democratic lobbyists and political consultants.

The final standards leave a maximum of 5 percent of schools facing financial sanctions at the start; the original plan would have meant penalties against an estimated 16 percent.

The rules also pushed back the penalties to 2015 from 2012, while requiring schools to disclose more data about loans, defaults and job placement.

Schools also questioned the motives of a key witness at Mr. Harkin's hearings, the noted hedge-fund trader Steve Eisman, who blasted the colleges' sky-high profit margins and likened them to subprime mortgage lenders. After Mr. Eisman acknowledged he held financial positions in the industry, the colleges charged that he stood to make millions by battering their reputations and short-selling their stocks.

Continue reading "For-profit schools -- predatory ?" »

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Last year, the Pocono Raceway installed 40,000 solar panels on 25 acres, enough to power the entire facility. Brandon Igdalsky, the racetrack's president, said the $15 million cost was paid without government subsidies. The track's annual energy bill has been cut by $500,000, so Mr. Igdalsky expects to recover the cost of the panels in eight to 10 years.

Spend $15,000,000. Save $500,000 per year. Payback in under 10 years. !

BUSINESS DAY
Sports Rally Around Green Projects
By KEN BELSON
Published: October 25, 2011
Teams and leagues find that going green can cut costs and attract money-making corporate partnerships for green projects.

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Economics: Economics Nobel 2011

Nobel Committee economics prize

Thomson Reuters

Harvard pool

Mostly economics predictions

Econ job rumors predictions.

Previously: 2010 Economics Nobel Prize

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Take the 1968 decision by New York Mayor John V. Lindsay to hire the RAND Corporation to streamline city management through computer models. It built models for the Fire Department to predict where fires were likely to break out, and to decrease response times when they did. But, as the author Joe Flood details in his book "The Fires," thanks to faulty data and flawed assumptions -- not a lack of processing power -- the models recommended replacing busy fire companies across Brooklyn, Queens and the Bronx with much smaller ones.

What RAND could not predict was that, as a result, roughly 600,000 people in the poorest sections of the city would lose their homes to fire over the next decade. Given the amount of money and faith the city had put into its models, it's no surprise that instead of admitting their flaws, city planners bent reality to fit their models -- ignoring traffic conditions, fire companies' battling multiple blazes and any outliers in their data.

The final straw was politics, the very thing the project was meant to avoid. RAND's analysts recognized that wealthy neighborhoods would never stand for a loss of service, so they were placed off limits, forcing poor ones to compete among themselves for scarce resources. What was sold as a model of efficiency and a mirror to reality was crippled by the biases of its creators, and no supercomputer could correct for that.

Continue reading "Optimal number and locations of fire stations, by RAND" »

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An important reform would be to make sure that before any agency produces a new regulation, the following questions are asked and answered:

1. Is there a large, systemic problem that is unlikely to resolve itself in the near future?

2. Is the federal government in the best position to solve this problem?

3. Does the regulation actually address the identified systemic problem?

4. What other solutions are available?

5. Would the proposed solution give rise to other significant problems?

6. Would the preferred solution solve the problem at a reasonable cost?

7. Will the agencies be able to recognize when the problem is actually solved and eliminate the regulation when it becomes obsolete?

Veronique de Rugy

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Economists often make unrealistic assumptions but so do physicists, and for good reasons. Physicists will describe motion on frictionless plains or gravity in a world without air resistance. Not because anyone believes that the world is frictionless and airless, but because it is too difficult to study everything at once. A simplifying model eliminates confounding factors and focuses on a particular issue of interest. This is as legitimate a method in economics as in physics.

Since there are easy responses to these common criticisms of bad predictions and unrealistic assumptions, attacks on the profession are ignored by professional academic economists, who complain that the critics do not understand what economists really do.
But if the critics did understand what economists really do, public criticism might be more severe yet.

Even if sharp predictions of individual economic outcomes are rarely possible, it should be possible to describe the general character of economic events, the ways in which these events are likely to develop, the broad nature of policy options and their consequences. It should be possible to call on a broad consensus on the interpretation of empirical data to support such analysis. This is very far from being the case.

The two branches of economics most relevant to the recent crisis are macroeconomics and financial economics. Macroeconomics deals with growth and business cycles. Its dominant paradigm is known as "dynamic stochastic general equilibrium" (thankfully abbreviated to DSGE) - a complex model structure that seeks to incorporate, in a single framework, time, risk and the need to take account of the behaviour of many different companies and households.

FT;

Continue reading "Economic rigour" »

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"Identity-protective cognition," a notion borrowed from Dan Kahan. Here's how Kahan and colleagues sum it up:

We propose that variance in risk perceptions -- across persons generally, and across race and gender in particular -- reflects a form of motivated cognition through which people seek to deflect threats to identities they hold, and roles they occupy, by virtue of contested cultural norms.

"Motivated cognition" refers to reasoning done in service of justifying an already held belief or goal. It helps explain why the CWM who know the most about climate science are the most likely to reject it; they learn about it in order to reject it. See Chris Mooney's great piece on that. Point being: when facts (or the implications of those facts) threaten people's social identities, they tend to dismiss the facts rather than the identity.
To all these reasons, I'd add "epistemic closure," the extraordinary way that the modern right has constructed a self-contained, hermetically sealed media environment in which conservatives can be protected from ever encountering a contrary view. It's an accelerant to all the tendencies described above.

Continue reading "Deflect threats to identities they hold, and roles they occupy" »

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Prices at Amazon change, often.

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Tested by Rexford.

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From 1989 to 2009, when college tuition rose by 71 percent, law school tuition shot up 317 percent.

There are many reasons for this ever-climbing sticker price, but the most bizarre comes courtesy of the highly influential US News rankings. Part of the US News algorithm is a figure called expenditures per student, which is essentially the sum that a school spends on teacher salaries, libraries and other education expenses, divided by the number of students.

Though it accounts for just 9.75 percent of the algorithm, it gives law schools a strong incentive to keep prices high. Forget about looking for cost efficiencies. The more that law schools charge their students, and the more they spend to educate them, the better they fare in the US News rankings.

"I once joked with my dean that there is a certain amount of money that we could drag into the middle of the school's quadrangle and burn," said John F. Duffy, a George Washington School of Law professor, "and when the flames died down, we'd be a Top 10 school. As long as the point of the bonfire was to teach our students. Perhaps what we could teach them is the idiocy in the US News rankings."

For years, it made economic sense for smart, ambitious 22-year-olds to pay the escalating price for a legal diploma. Law schools have had a monopolist's hold on the keys to corporate lawyerdom, which pays graduates six-figure salaries.

But borrowing $150,000 or more is now a vastly riskier proposition given the scarcity of Big Law jobs. Of course, that scarcity hasn't been priced into the cost of law school. How come? In part, it's because schools have managed to convey the impression that those jobs aren't very scarce.

For instance, although N.Y.L.S. is ranked No. 135 out of the roughly 200 schools in the US News survey, it asserts in figures provided to the publisher that nine months after graduation, the median private-sector salary of alums who graduated in 2009 -- which is the class featured in the most recent US News annual law school issue -- was $160,000. That is exactly the same figure cited by Yale and Harvard, the top law schools in the country.

Continue reading "Value of law school" »

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The easy explanation, of course, is that there would be no giving -- or not nearly so much -- without the walks. Fund-raisers recognize that the nobility of giving is often stimulated by activities that conjoin the selfless with self-interest. For giving, we often offer value received. Raffles and auctions and naming rights are among the inducements used to win support. But that's not what's going on here.

Those who oversee such fund-raising spectacles argue that there is more to these events than meets the eyes -- mine included. These walks and runs are incubators for future volunteers and donors. They constitute a public proclamation that others matter. They make the invisible visible. More to the point, it is easier to get relatives, friends and colleagues to open their pocketbooks than it is to win over the largess of strangers.

That is the genius of such events. Where abstract appeals on behalf of the faceless needy may fall on deaf ears, appeals from family and neighbors do not. Ultimately, it is not the mass of walkers that moves us to give, but the knowledge that a familiar face -- a nephew or friend -- is among them. It personalizes the issue, quite literally turning the abstract into the concrete, converting perspiration into philanthropy. There is an exquisite -- albeit attenuated -- logic to it all.

Continue reading "I'm running to support the walkathon " »

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Another edition of

Thank you,
but no thank you
I'd rather listen to N Gregory Mankiw.

1 THE VALUE OF COMPETITION Representative Paul D. Ryan, Republican of Wisconsin, has attracted much attention with his plan to reform Medicare. He proposes replacing the current fee-for-service program, in which the government picks up the bill for medical expenses, with a "premium-support" system in which seniors use federal dollars to choose among competing private insurance plans.

Democratic critics of the plan suggest that enacting it would be akin to pushing Grandma over a cliff. But they rarely point out that the premium-support model is in some ways similar to the system set up under President Obama's health care law. If choosing among competing private plans on a government-regulated exchange is a good idea for someone at age 50, why is it so horrific for someone who is 70?

2 THE INSURANCE MANDATE those without insurance will be fined. A mandate is just a financial incentive to have insurance.

What is the Republican alternative for having more people insured? It is unclear what the Republicans would do if they ever succeeded in repealing the health care reform law. However, their last presidential nominee -- Senator John McCain -- proposed a tax credit for buying health insurance. That may seem more palatable than a mandate, because it uses a carrot rather than a stick.

3 TAXING THE RICH Democrats want to increase taxes on the rich to fund the looming fiscal gap, which is driven largely by soaring health costs. Republicans object, saying higher taxes create economic distortions, discourage work and impede growth. Last month, John A. Boehner, the House speaker, said that we should instead consider means-testing Medicare

4 BLINKERED OPTIMISM Democrats and Republicans generally have different approaches to controlling the growth of health care spending. Democrats often favor a top-down approach: a panel of experts set up by the recent health care law will decide which medical procedures are cost-effective and which are wasteful. Republicans tend to prefer a bottom-up approach: empower consumers to make their own choices, they say, and the power of competition among private providers will keep costs down.

One thing that the two parties share, however, is the belief that controlling health care costs is possible.

http://www.nytimes.com/2011/06/19/business/economy/19view.html?hpw

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The summer before her senior year, though, she took an internship at Goldman. If anything, it left her disillusioned. "I started to feel like it was all a bit of a fraud, all these charts and regressions and models." She turned down the subsequent job offer and took a year to travel to Cuba to shoot a documentary with Cahill. "Living in Cuba made me unafraid of whatever could happen to me. Nothing seemed as scary as waking up at 40 and realizing that I had not lived a very courageous life."

¶ So she moved to Hollywood. The three friends wrote some scripts together but decided they worked better in pairs. "Zal actually had a dream that he was bound and blindfolded and walking down to a basement. And I was like: 'Who was there? Maybe a woman who never leaves!' And we ended up with 'Sound of My Voice.' " Their other film, "Another Earth," which hinges on the discovery of a duplicate planet, came in part from a piece of video art Cahill made in which he interviewed himself in a split screen. "We were like, what if you could confront yourself? What if there was a duplicate you?"

¶ She, too, is haunted by the idea of a duplicate -- another Brit Marling, perhaps one who took the job at Goldman. "If I hadn't met Mike or Zal, I really wonder what I would be doing right now. I wonder if I would even be acting. I can't imagine what it would have been like to do it alone." There may be a duplicate Marling looming in the future as well -- one who perhaps succumbs to all this post-Sundance Hollywood attention and finds herself, say, starring in a romantic comedy opposite Ashton Kutcher. (She just finished filming her first big-budget thriller, "Arbitrage," directed by Nicholas Jarecki and starring Richard Gere.)

Continue reading "Hollywood realism over regression models ?" »

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There are basically two ways to cut back on the government health care spending.

(a) From the top, a body of experts can be empowered to make rationing decisions. This is the approach favored by President Obama and in use in many countries around the world.
Alternatively,

(b) at the bottom, costs can be shifted to beneficiaries with premium supports to help them handle the burden. Different versions of this approach are embodied in the Dutch system, the prescription drug benefit and Representative Paul Ryan's budget.

We'll probably need a mixture of these approaches to figure out what works. Instead, Republicans decry the technocratic rationing model as "death panels." Democrats have gone into demagogic overdrive calling premium support ideas "privatization" or "the end of Medicare."

Let's be clear about the effect of this mendacity: We're locking in the nation's wealth into the Medicare program and closing off any possibility that we might do something significant to reinvigorate the missing fifth. Next time you see a politician demagoguing Medicare, ask this: Should we be using our resources in the manner of a nation in decline or one still committed to stoking the energy of its people and continuing its rise?

Continue reading "Two ways to cut back on the government health care spending like it's an objective" »

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David Szwak, a consumer lawyer in Shreveport, La., who has handled dozens of credit cases, said that the V.I.P. designation and preferential treatment did exist at Experian, and he provided sworn testimony from former Experian employees that the category existed.

Estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. A recent study, paid for by the Consumer Data Industry Association, the trade group for the bureaus, found potential errors in 19.2 percent of reports, but said that less than 1 percent of them had disputes that, when settled, resulted in a meaningful increase in scores. Even 1 percent translates into millions of consumers, since there are at least 200 million files at each of the bureaus.

The F.T.C. is expected to deliver a nationwide study on credit report accuracy next year that could provide more clarity. It could also include recommendations for legislative action.

Continue reading "Credit repair vor VIPs ?" »

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In the debate over how to close the budget deficit, President Obama talks often about raising taxes on "millionaires and billionaires," but his policy prescription is a bit different. He says that federal income taxes should be increased on families making more than $250,000. That seems to be the threshold. Under $250,000, you're middle class; over it and you're wealthy.

On a Yahoo message board, a poster named Mason, who lives in Manhattan with two young children, said his household income was $262,000. "I understand the need to raise taxes," he wrote, "but I don't understand why people like us are lumped in with millionaires and billionaires."

On one level, Mason is feeling the effects of inflation; $250,000 isn't what it used to be. If Mr. Obama were really trying to return to Mr. Clinton's 1993 levels, he would have to adjust the bracket for inflation, moving it up to about $386,075. In fact, in Mr. Clinton's last year in office, the top bracket had risen to $288,350 from $250,000.

Continue reading "Middle class ? Nothing special about $250k" »

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The algorithm used by U.S. News puts a heavy emphasis on college grade-point averages and Law School Admission Test scores. Together, those two numbers determine about 22 percent of a school's ranking. The bar passage rate, which correlates strongly with undergraduate G.P.A.'s and LSAT scores, is worth an additional two points in the algorithm. In short, students' academic credentials determine close to a quarter of a school's rank -- the largest factor that schools can directly control.

So the point of most merit scholarship programs, Professor Organ said, isn't merely to tempt prospective students who might otherwise not attend, though that clearly is one result.

"What law schools are buying is higher G.P.A.'s and LSATs," Professor Organ said. In other words, the schools are buying smarter students to enhance their cachet and rise in the rankings.

Each does it a little differently.

The University of Florida's law school requires students to maintain a 3.2 G.P.A. to keep their scholarships; at the Benjamin N. Cardozo School of Law in Manhattan, it's a 2.95. The Chicago-Kent College of Law has a number of grant offerings, one of which sounds like the refueling options for a rental car: students can get a $9,000 annual scholarship guaranteed for all three years, no matter what their G.P.A., or $15,000 a year on the condition that they earn a 3.25 or above. If they get between a 3.0 and 3.25, they keep half the scholarship. Below a 3.0, it's gone.

Some elite schools don't give any merit scholarships, and some give them conditioned only on maintaining good academic standing -- which translates to "don't flunk out." But merit stipulations -- or stips, as they are known by students -- are used by 80 percent of law schools for which information is publicly available, Professor Organ found.

And it's not just institutions in the bottom half of the U.S. News rankings. If your school is ranked 35th, perhaps you're gunning for No. 30 and you can see No. 40 creeping up in the rear-view mirror.

Continue reading "Law school cost benefit disclosure: missing merit scholarship" »

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Larry summers talked about all the research papers that he got sent while he was in Washington. He had a fairly clear categorisation for which ones were likely to be useful: read virtually all the ones that used the words leverage, liquidity, and deflation, he said, and virtually none that used the words optimising, choice-theoretic or neoclassical (presumably in the titles or abstracts). His broader point--reinforced by his mentions of the knowledge contained in the writings of Bagehot, Minsky, Kindleberger, and Eichengreen--was, I think, that while it would be wrong to say economics or economists had nothing useful to say about the crisis, much of what was the most useful was not necessarily the most recent, or even the most mainstream. Economists knew a great deal, he said, but they had also forgotten a great deal and been distracted by a lot.

Even more scathing, perhaps, was his comment that as a policymaker he had found essentially no use for the vast literature devoted to providing sound micro-foundations to macroeconomics. (So that would be most macroeconomics since the original Keynesian revolution?) On the other hand, he pointed out that while there was clearly a need to be prudent while applying research to the real world, it would also be unwise to attack it wholesale. He surmised that it might be possible that some things that seem useless or of limited applicability now would turn out to be useful in years to come (microfoundations for macroeconomics, perhaps?).

He was sceptical, too, of those who put too much faith in regulation, while conceding that it was clear regulation was needed. It was refreshing to hear someone who had been in the thick of policymaking acknowledge a problem others have pointed to: that when it came to stuff like financial regulation, there was "basically no one" who is both knowledgeable enough about what is sought to be regulated and is not, in some way, co-opted. Which made his touching faith in Dodd-Frank, which he defended stoutly, a bit less than convincing.

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F.O.M.C. members traditionally don't discuss their votes or policy before the meeting. If the presidents got together for dinner the night before, they limited their discussion to Reserve Bank business and gossip. Usually they went their separate ways for dinner. Being the introvert that I am, I frequently had take-out Chinese food in my hotel room.

¶Everyone arrives for the meetings after having done tons of homework. The Reserve Banks have excellent research departments, but they are smaller and less specialized than the board's research staff. The presidents are expected to say something about their regions, as well as the national and international economy. It's a lot like cramming for finals. The board staff's material, mostly contained in the "green book," included all recent data in context, forecasts made under alternative assumptions, and special topics of current interest. It was always comprehensive and outstanding in quality.

-- Bob McTeer, former president of the Federal Reserve Bank of Dallas.

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The median income of a NY Times subscriber in 2009 was $115k to $119k.

The aspirational positioning of their well educated readers may explain the appeal of newspaper stories about the guilt felt by benevolent yuppies when they have to lay off their nannies and housekeepers during the current financial crisis. Or how about this one, about the middle class keeping energy costs down on your vacation home.

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Boeing's 787 Dreamliner goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits.

The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn't fit together. Some subcontractors couldn't meet their output quotas...

Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints.

Some then farmed out their engineering to their own subcontractors. At least one major supplier didn't even have an engineering department when it won its contract.

Among the least profitable jobs in aircraft manufacturing, he pointed out, is final assembly -- the job Boeing proposed to retain. But its subcontractors would benefit from free technical assistance from Boeing if they ran into problems, and would hang on to the highly profitable business of producing spare parts over the decades-long life of the aircraft. Their work would be almost risk-free, Hart-Smith observed, because if they ran into really insuperable problems they would simply be bought out by Boeing.

What do you know? In 2009, Boeing spent about $1 billion in cash and credit to take over the underperforming fuselage manufacturing plant of Vought Aircraft Industries, which had contributed to the years of delays.

Continue reading "Boeing outsources 787 Dreamliner, thinking" »

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A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.

-- a study by a women's advocacy group that looked at what a somewhat secure middle-class lifestyle costs.

Continue reading "Middle class begins at $68k" »

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Loseit, a nudgey health, diet, exercise tracker.

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In the end, said Robert Daum, chairman of Out2Play's board, "we just decided to declare victory and go home. Money is a scarce resource, and there are lots of other good causes out there, so there is no point in hitting up our friends and contacts for gifts simply to perpetuate the organization."

Out2Play is working to complete roughly 40 more playgrounds before it closes. It plans to leave behind an endowment to cover some of the maintenance costs associated with the playgrounds, Ms. Wenner said.

BUSINESS DAY
Mission Accomplished, Nonprofits Go Out of Business

By STEPHANIE STROM
Published: April 1, 2011
Some nonprofits, like one fighting malaria or another serving victims of the Nazis, are happily closing their doors as they run out of work

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In the definitive document on this issue -- a paper published in December by the Center on Budget and Policy Priorities -- senior fellow Robert Tannenwald notes what he tactfully calls "flaws" in various studies the states have commissioned to justify the subsidy. Even after our recent experience with gullible or mendacious accountants in financial scandals like Enron's, it's actually shocking that reputable accounting firms would pull some of these stunts, such as counting the allowances film crews get paid for expenses as a benefit to the state, then counting the same money again when it is spent. Or assuming without explanation that the average film crew member makes $82,400 a year, when the Bureau of Labor Statistics sets that figure at $35,000. The most outrageous double counting, of course, is telling one state after another that it can bring in billions by enticing the same movies away from other states.

-- Michael Kinsley

Continue reading "Why can't states grasp the absurdity of giving welfare to film and TV producers?" »

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Above $1.75 million, the middle class starts turning wealthy.

According to a Fidelity Investments survey of more than 1,000 millionaires (households with at least $1 million in investible assets, excluding retirement accounts and real estate), 42% of respondents say they don't feel wealthy. Keep in mind that while $1 million is the threshold, this group has an average net worth of $3.5 million.

That 42% is slightly better than the 46% who said they didn't feel wealthy in 2009. So the recovery has, at least, made some miserable millionaires a little less miserable.

Those who don't feel wealthy were asked how much money they would need to feel wealthy. Their answer: $7.5 million. (That's the median asset level).

But here's the interesting twist. The 58% of millionaires who did feel wealthy were also asked how much money they had when the began to feel "wealthy." Their answer: $1.75 million.

So millionaires who don't feel wealthy say they would need $7.5 million to feel wealthy, while those who do feel wealthy need only $1.75 million.

-- Robert Frank

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If you want a person to work harder, you should offer to pay on the basis of individual performance, right? Not usually. A large body of research suggests it's best to motivate groups, not individuals. Organize your people into a group; reward everybody when the group achieves its goals. Susan Helper, Morris Kleiner and Yingchun Wang confirm this insight in a working paper for the National Bureau of Economic Research. They compared compensation schemes in different manufacturing settings and found that group incentive pay and hourly pay motivate workers more effectively than individual incentive pay.

[ Via Books ]

Continue reading "Pay on the basis of individual performance or group's ? Not individuals. Organize your people into a group." »

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MSN Money's Liz Pulliam Weston says a survey of HR managers found the use of credit-checks in hiring had increased from 25 percent in 1998 to 43 percent in 2006. Weston also describes the elegantly nasty conundrum this creates for those who lost their jobs in the global financial crisis:

Many Americans these days are discovering the Catch-22 of unemployment. And that is: You might fall behind on your bills because you've lost your job, and you might not be able to land a new job because you've fallen behind on your bills.

Slacktivist

Continue reading "Slacktivist credit scoring and unemployment" »

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The property tax levied by the village on a typical Bronxville home is now $43,000, up 34 percent in the last five years, although the increase was negligible in the last two years as the mayor, the village trustees and school board members responded to their middle class constituents' concerns.

"I don't think we have seen an antitax uprising, but holding down property taxes is certainly spoken about a lot," said Dr. James D. Hudson, the 54-year-old school board president, a dentist with two children in the high school. He is often buttonholed on the subject, he said, at cocktail and dinner parties or while shopping.

"Their concern is that their taxes will continue to spiral up if we continue to do business as usual," said Dr. Hudson. "If you will, we are looking to develop a lean, mean education machine."

Lean and mean were rarely invoked in the past as a goal for America's wealthiest suburbs -- nearby Scarsdale, for example, Shaker Heights on the outskirts of Cleveland, Brookfield and River Hills near Milwaukee, and Greenwood Village in Colorado. Now that talk is commonplace, and it showed up in interviews with officials and in these communities, where property taxes have often risen by 4 or 5 percent a year.

Continue reading "Property tax levied by the village on a typical Bronxville home is now $43,000 annually. Upper middle class ?" »

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Most education researchers, though, recognize that Rhee's simple vision of heroic teachers saving American education is a fantasy, and that her dramatic, often authoritarian, style is ill-suited for education. If the ability to fire bad teachers and pay great teachers more were the key missing ingredient in education reform, why haven't charter schools, 88% of which are nonunionized and have that flexibility, lit the education world on fire? Why did the nation's most comprehensive study of charter schools, conducted by Stanford University researchers and sponsored by pro-charter foundations, conclude that charters outperformed regular public schools only 17 percent of the time, and actually did significantly worse 37 percent of the time? Why don't Southern states, which have weak teachers' unions, or none at all, outperform other parts of the country? Rhee often noted that poor blacks in New York are two years ahead of poor blacks in Washington, which properly illustrates that demography is not destiny, but New York didn't get ahead by firing bad teachers. Chancellor Joel Klein terminated only three teachers for incompetence between 2008 and 2010.
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The press--including Whitmire, a former USA Today editorial writer--has a fundamental misunderstanding of unions. Whitmire writes that Rhee's proposal to weaken tenure protections and pay great teachers more "represented an existential challenge" to the American Federation of Teachers (AFT). "If the union couldn't protect their members' jobs, what was the point of having a union?" In fact, teachers' unions were created to do lots of things: lobby for more funding for public education, increase teacher salaries, reduce class size, improve the ability of teachers to discipline students, and fight private-school-voucher initiatives.

-- Slate

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The great battles of the future in all likelihood will continue to have their origins in technical economics. That is, after all, where the brains are.

-- David Walsh

From where I sit, it looks as if the ascendant doctrines in our policy/political debate are coming precisely from people who don't know and don't care about technical economics. The revival of goldbuggy sentiment, the fear of hyperinflation in the face of high unemployment, the continuing force of the notion that tax cuts don't increase the deficit, aren't coming from some subtle battle among mathematical modelers; they're coming from the same people who reject evolution, climate science, and more. They don't need no stinking technical analysis. The truth is that the economics profession is proving far less relevant to public debate, even in the face of economic crisis, than was dreamed of in our philosophy.

-- Krugman

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Economists John Ifcher and Homa Zarghamee. In a forthcoming paper called Happiness and Time Preference: The Effect of Positive Affect in a Random-Assignment Experiment, they address the tricky and oft-ignored role of emotion in decision-making. Their study measured whether positive affect impacts time preference - that is, whether people are more patient when they're happy. They found that people are indeed more willing to wait when they're in a good mood. As an individual's rate of time preference affects the actual decision they make, knowing the relationship of short term emotions to time preference points to how to nudge individuals to make long term decisions instead of short-term ones.

-- Freaky

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Patients were using a card distributed by the maker of an expensive antibiotic used to treat acne, sharply reducing their health insurance co-payments. With their out-of-pocket costs much lower, consumers had switched from generic alternatives to the more expensive drug.

With drug prices rising and many people out of work, pharmaceutical companies are increasingly helping patients with their co-payments. The use of such co-payment cards and coupons and other types of discounts has more than tripled since mid-2006, according to IMS Health, an information company that tracks the pharmaceutical industry.

"It seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly" to insulate consumers, said Joshua Schimmer, biotechnology analyst at Leerink Swann, an investment bank.

Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, to about $30,000 a year, over the last five years, according to a recent report from the securities firm Jefferies & Company. To cushion patients, the company recently increased its co-pay assistance to as much as $1,200 a month.

Continue reading "Sponsored Prescription Rx Co-pays better than Generic " »

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What one might call intellectual capture. While I would strongly argue that the FSA in my day did not favor firms unduly, it is perhaps true that we--and in this we were exactly like our American counterparts--were inclined to believe that markets were generally efficient. If willing buyers and willing sellers were trading claims happily, then, as long as they were "professional" investors, there was no legitimate reason to interfere in their markets. These people were "consenting adults in private," and the state should avert its gaze.
We now know that some of these market emperors had no clothes--and that their activities were far from benign: They could result in severe financial instability and generate serious losses for taxpayers, not to mention precipitate a global recession. That has been a grave lesson for regulators and central banks.

-- Howard Davies, former chairman of Britain's Financial Services Authority and a former deputy governor of the Bank of England, is director of the London School of Economics. His latest book is Banking on the Future: The Fall and Rise of Central Banking.

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the alternative minimum tax started out as a way to ensure that the wealthiest Americans paid their fair share of taxes. But as many families know all too well, it now ensnares people much closer to the middle class, and it hits more upper-middle income taxpayers than those at the very top, according to a recent study by the Urban Institute. No wonder it's often referred to as the "stealth tax."

There may not be much you can do to avoid the A.M.T., especially if you have children and live in a high-income state like New York or California (the A.M.T. rules disallow deductions for dependents and state income taxes as well as several others).

December 22, 2010, 3:57 PM
Minimizing A.M.T. Through Charitable Donations
By TARA SIEGEL BERNARD

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In addition to the growing number of older cars on the road, the percentage of uninsured drivers rose to 18.1 percent in 2009, from 17.4 percent a year earlier, according to CNW Research. The economy is a big reason: a percentage point increase in the unemployment rate leads to a rise of 0.75 percentage point in the number of uninsured drivers, said Michael McShane, a risk management professor at Old Dominion University.

Continue reading "Employment elasticity of demand for auto insurance" »

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Yes, Democrats are fools to tear their hair out over this deal, which gives them most of what they wanted: the middle-class tax rates, unemployment benefit extension, payroll-tax cut, and so on. They compound the idiocy by advertising higher taxes on the rich as their core objective. Forget relieving poverty, widening access to health care, improving opportunities for the disadvantaged. What matters more than any of that is sticking it to "millionaires and billionaires" (two-earner households making more than $250,000). You bet, the Democrats are acting like fools.

-- Clive Crook

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Michelle Pont moved out in the spring of 2009 and filed for divorce. The estranged couple has since spent several hundred thousand dollars on lawyers, accountants and investigators. The judge overseeing the case has warned that the total could exceed $1 million if the two sides cannot reach a compromise.

Ms. Pont said the money from Balance Point would allow her to sustain the case for as long as necessary. Balance Point does not charge interest; instead, clients pay the company a percentage of their winnings.

Lawyers who finance other civil cases generally keep at least a third of the winnings. Ms. Napp said Balance Point required a "substantially smaller" share from clients, though she declined to be more specific.

The company wants to focus on people with marital assets between $2 million and $15 million, a bracket Ms. Napp described as "the lower end of the high end." She said that investing in smaller disputes was not worthwhile. Wealthier people, she said, seemed to resolve divorces more easily -- perhaps because they still felt wealthy in the aftermath. "Anything south of $15 million, when you divide that in half and take out the legal fees, you're not in the same house, you're not taking the same trips -- your life is different," she said. "You can't maintain that same quality of life that you're used to."

Continue reading "(upper) middle class: assets of $2 million to $15 million, a bracket Ms. Napp described as "the lower end of the high end"." »

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House Democrats said they could press ahead as early as Thursday with a vote to allow the tax breaks for income over $250,000 for a family to expire even though such a plan appears unlikely to be able to clear a Senate filibuster, given solid Republican opposition and resistance from several Democrats. Democrats said they could use the votes to make their position for middle class tax cuts clear and also illustrate that they do not have the votes to block extension of the lowered tax rates for the wealthy, clearing the way for concessions.

Continue reading "tax breaks for income over $250,000 for a family to expire ? Middle class could suffer" »

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Officially, Senator Charles E. Schumer of New York will be both vice chairman of the Democratic caucus and chairman of the Democratic Policy Committee. In those roles, he will also share control over the party's messaging apparatus run out of the Senate Democratic Communications Center, better known as the war room.

Mr. Schumer has been outspoken in his belief that Democrats need to concentrate their energies on initiatives aimed at the middle class, a view that the rank and file applaud.

Continue reading "Schumer for the middle class ?" »

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For fast-growing economies like Brazil and Turkey, where currencies are now overvalued against the dollar by an estimated 9 percent and 16 percent, respectively, the paper concludes that they are justified in raising selective barriers.

What gives the study an extra bite is that one of its authors is John Williamson, an international economist who conceived the original notion of the Washington consensus in 1989.

Broadly defined, that long-held view was that developing nations must absorb 10 policies, like balancing their budgets, privatizing state-owned enterprises and opening their markets to foreign investors, to achieve lasting economic success.

Although there is no mention in the original 10 principles of the importance of the free flow of capital, such a view came to be associated with a promarket stance that such flows, along with fiscal discipline and open markets, were crucial for emerging markets to succeed.

"The term took on a life of its own and became associated with free market fundamentalism," said Mr. Rodrik, who added that an apogee was reached in the mid-1990s when the I.M.F. tried to include the free flow of capital as one of its articles of agreement.

After the Asian crisis in 1997 and the Russian market collapse in 1998, the notion that such flows were an unquestioned good began to be challenged. Of course, at the time, many countries were concerned mostly about capital flight and its effect, not inflows.

Despite China's success in maintaining tight control over its currency and the recent actions of Taiwan, Brazil and others, not all emerging markets are erecting barriers.

In India, where a record-breaking stock market has lured billions of dollars, officials have said that they do not intend to impose new restrictions.

Similarly, policy makers in booming Turkey say they will not impose controls, despite calls for action from some of the country's exporters.

Prime Minister Recep Tayyip Erdogan even went so far as to say that a strong currency was a source of pride for Turks.

"I think there has been a bit of exaggeration in this need for capital controls," said William R. Cline, the co-author of the Peterson Institute report.

Continue reading "the original notion of the Washington consensus" »

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First there's the cost: For-profit colleges are often much more expensive than comparable public ones. According to a report by the Government Accountability Office, one for-profit institution charged $14,000 for a certificate in computer-aided drafting that a local community college offered for just $520.

Then there's the issue of how the cost is covered: for-profit colleges take a disproportionate share of federal education loans. Although only 12 percent of post-secondary students go to for-profit colleges, they account for 23 percent of federal loans. And students at for-profit schools default on their loans twice as often as their public school counterparts, leaving taxpayers with the bill.

This is partly due to the open enrollment policies at for-profit colleges. It's disturbingly easy to get accepted, receive thousands of dollars in loans and then flunk out with crippling debt and no degree to show for it. I'm about to fail 4 out of 11 students in one of my classes because they simply stopped showing up. Some students will fail anywhere, but at this rate it's clear that many of them should never have been sold on the program in the first place.

I've also been on the other end of these sales tactics. I once looked into taking a class at a for-profit college. The admissions counselor was quite skillful at avoiding my questions about costs, and pressed me to enroll in a full degree program, despite my repeated refusals.

Problems with the for-profit business model don't end with recruitment; they extend to the classroom. While my nonprofit orientation covered how to create a syllabus and relate to students, the for-profit session addressed the importance of creating paper trails on attendance, should a student need to be flunked, and a video on how to avoid getting sued.

Here's the part that's really going to make me unpopular at my next faculty meeting. Many of my colleagues are excellent teachers, but their qualifications aren't much of a priority for the college. While teachers at a state or private university are typically expected to hold M.F.A.'s or Ph.D.'s, for-profit teachers need only to have taken a few hours of graduate course work.

Teachers at for-profits are paid less, and work more. Full-time instructors teach up to four times as many classes as their state school counterparts. And although nobody teaches only for the money -- I gross just over $30,000 a year, summers on, no benefits -- I earn 50 percent to 65 percent more at nonprofits. I try to treat both jobs with the same seriousness, but I'd be lying if I said this was always the case.

The business model of for-profit schools may pay off for shareholders -- just ask Goldman Sachs, which controls a third of the parent company of my for-profit employer, the Art Institute of Colorado -- but it clearly isn't as effective at educating students.

-- Jeremy Dehn teacher of film and video production at the University of Denver, the Art Institute of Colorado and the University of Colorado at Denver.

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Safe choices for Nobel Economics Prize:

William Nordhaus (Yale) and Martin Weitzman (Harvard) fo their work on Environmental Economics.

Perennial choices:
Eugene F. Fama and Kenneth R. French
Robert J. Barro
Jagdish N. Bhagwati and Avinash K. Dixit
Lars P. Hansen and Thomas J. Sargent, and Christopher A. Sims;
Martin S. Feldstein; Armen A. Alchian and Harold Demsetz
Dale W. Jorgenson; Oliver D. Hart and Bengt R. Holmstrom
Elhanan Helpman and Gene M. Grossman; Jean Tirole; Robert B. Wilson and Paul R. Milgrom

New choices:
Robert Shiller,
Paul Michael Romer
Richard H. Thaler

Kevin M. Murphy (Chicago): pioneering empirical research in social economics, including wage inequality and labor demand, unemployment, addiction, and the economic return of investment in medical research, among other topics .

Ernst Fehr and Matthew J. Rabin;
John B. Taylor and Jordi Gali and Mark L. Gertler

Continue reading "Nobel Prize for Economics 2010" »

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In "Fault Lines: How Hidden Fractures Still Threaten the World Economy" (Princeton University, $26.95), Raghuram G. Rajan concludes that the financial crisis erupted "because in an integrated economy and in an integrated world, what is best for the individual actor or institution is not always best for the system."

Like geological fault lines, the fissures in the world economic system are more hidden and widespread than many realize, he says. And they are potentially more destructive than other, more obvious culprits, like greedy bankers, sleepy regulators and irresponsible borrowers.

Mr. Rajan, a finance professor at the University of Chicago and former chief economist at the International Monetary Fund, argues that the actions of these players (and others) unfolded on a larger worldwide stage, that was (and is) subject to the imperatives of political economies.

He cites three fault lines: domestic political stresses; trade imbalances among countries; and the tensions produced when financial systems with very different structures interact. All three came together to damage the financial sector in 2008, he says, and could meet again to cause another crisis.

Continue reading "Fault Lines: How Hidden Fractures Still Threaten the World Economy" »

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(Known in economics as price discrimination or price differentiation)

"We are spending $8 billion to $15 billion per year on textbooks" in the United States, Mr. McNealy says. "It seems to me we could put that all online for free."

The nonprofit Curriki fits into an ever-expanding list of organizations that seek to bring the blunt force of Internet economics to bear on the education market. Even the traditional textbook publishers agree that the days of tweaking a few pages in a book just to sell a new edition are coming to an end.

"Today, we are engaged in a very different dialogue with our customers," says Wendy Colby, a senior vice president of Houghton Mifflin Harcourt. "Our customers are asking us to look at different ways to experiment and to look at different value-based pricing models."

Continue reading "Value pricing comint to text book market ?" »

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The recession would have been worse if not for the Fed's monetary policy and quantitative easing. Also important were the unmentioned automatic stabilizers--taxes falling more than income, cushioning declines in after-tax incomes and consumption--which were far larger than the spending and tax rebates in the stimulus bill. Arguing that all these policies (including injecting capital into banks, which was necessary but done poorly) may have prevented a depression is perhaps still an exaggeration but at least is within hailing distance of plausibility. On that scale, the effect of the stimulus was puny.

Continue reading "Macroeconomic update on Great Recession" »

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If the Fed were to suddenly announce a big new program of asset purchases, it could cause inflation expectations to jump. That could raise nominal interest rates and lead to a rise in the price of oil as investors use commodities to hedge against inflation. In such a worst-case situation, the recession could become even worse.

Continue reading "Bernanke's macro conundrum" »

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Tax breaks are not the only special advantages that American dynasty trusts provide. Even more troubling, they commonly include a "spendthrift clause," which provides that trust assets cannot be reached by a beneficiary's creditors. If a beneficiary causes a car accident, for example, the victim cannot be compensated with assets from the trust, even if they are the driver's only resources. So beneficiaries are free to behave as recklessly as they like, knowing that their money is forever protected for themselves and their heirs.

Surprisingly, dynasty trusts can also be bad for the beneficiaries themselves. Many wealthy people agree with Andrew Carnegie and Warren Buffett that it is not in their children's best interest for them to be given so much wealth that they don't need to work. Dynasty trusts rob future parents of the ability to decide this for their children, because the ancestor creating the trust is the one who determines how much wealth each generation of his descendants will receive.

What can be done to eliminate these trusts? A state-level solution is unlikely, since all 50 states would need to act in unison. But Congress could fix the problem by limiting the generation-skipping-transfer exemption to trusts that last no longer than two generations. After that, beneficiaries of a trust should be subject to tax, like everyone else. Then America would not have to face the uncontrollable growth of a new aristocracy.

Ray D. Madoff, a professor at Boston College Law School, is the author of "Immortality and the Law: The Rising Power of the American Dead."

Continue reading "Perpetual trusts: The Rising Power of the American Dead" »

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A member of the Chukchansi tribe in California, Andrews is 6-foot-4 and about 250 pounds, with tattoos of his spirit animals ringing his thick biceps. He doesn't joust because he's attracted to romantic notions of honor and chivalry or because he has an affinity for the medieval period. ("I don't know jack about history, nor do I care," he says.) He does it because he considers jousting one of the most extreme sports ever invented, and he likes doing things that most other people can't or won't do.

"I like violent sports," says Andrews, who also participates in mixed martial arts. "I like hitting you. I like getting hit. I like competing man to man to see who the better man is that day."

The problem is that Andrews and Adams joust in a style they call "full contact," which, while popular in North America, is considered by the rest of the world to be unnecessarily dangerous. It's a reputation that isn't helped by the video on YouTube showing the two men describing their many injuries, including the time a lance bruised Andrews's heart and he nearly died from a pulmonary embolism. (He was back jousting five days after his release from the hospital.)

...

Over time, modern jousters have learned the lessons of their medieval predecessors -- plate armor protects better than chain mail, and more armor protects better than less. Even so, there are still plenty of injuries: concussions and dislocated shoulders, broken hands, assorted fractures and gashes. In one much-talked-about incident a few years ago, the Australian jouster Rod Walker suffered a partly severed penis when a lance veered south during a match at a Renaissance fair in Michigan -- a targeting failure that might not have happened if both he and his opponent hadn't been competing with broken hands.

It is these incidents that keep European jousters from coming to the U.S. to compete, and has those who have swearing they won't return. European jousters typically use lances with balsa-wood tips, which produce fewer dangerous splinters and deliver a less powerful hit. "Come do our sport and break your bones -- that's not the ideal recruitment poster," says Petter Ellingsen, a Norwegian jouster who has competed in nine countries and been injured badly only twice -- both times when competing in what he calls "the American style." "I don't think it's cool completing a tournament with four broken bones in my hand," he says. "I think it's bad for the sport."

Continue reading "Why American healthcare costs are high" »

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While our analysis was by no means scientific, our goal was to recreate the type of decision a hypothetical family of four earning $175,000 a year might encounter. We chose an upper-middle-class income because that's generally what our family needs to earn, conservatively, to afford a median-price home in Park Slope, a section of Brooklyn that is family-friendly, has good schools and is generally more affordable than Manhattan.

The two-bedroom, one-bathroom co-operative apartment that we're using as a model in Park Slope is listed at $675,000, close to the median price for the neighborhood, as calculated by Zillow.com.

We stacked that against a four-bedroom, two-and-a-half bathroom home in South Orange, N.J., just a 30-minute train ride from Manhattan, where the two parents work. The house is selling for $595,000.

Continue reading "Middle class includes $175k in Brooklyn or South Orange, NJ" »

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In times like these, deficit spending to pump up the economy doesn't make consumers feel more confident; it makes them feel more insecure because they see a political system out of control. Deficit spending doesn't induce small businesspeople to hire and expand. It scares them because they conclude the growth isn't real and they know big tax increases are on the horizon. It doesn't make political leaders feel better either. Lacking faith that they can wisely cut the debt in some magically virtuous future, they see their nations careening to fiscal ruin.

So we are exiting a period of fiscal stimulus and entering a period of fiscal consolidation. Last year, the finance ministers of the G-20 were all for pumping up economic activity. This year, they called on their members to reduce debt. In this country, deficits are now the top concern.

Some theorists will tell you that if governments shift their emphasis to deficit cutting, they risk sending the world back into recession. There are some reasons to think this is so, but events tell a more complicated story.

Alberto Alesina of Harvard has surveyed the history of debt reduction. He's found that, in many cases, large and decisive deficit reduction policies were followed by increases in growth, not recessions. Countries that reduced debt viewed the future with more confidence. The political leaders who ordered the painful cuts were often returned to office. As Alesina put it in a recent paper, "in several episodes, spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions."

This was true in Europe and the U.S. in the 1990s, and in many other cases before. In a separate study, Italian economists Francesco Giavazzi and Marco Pagano looked at the way Ireland and Denmark sharply cut debt in the 1980s. Once again, lower deficits led to higher growth.

So the challenge for the U.S. in the years ahead is to consolidate intelligently. That means reducing deficits while at the same time making the welfare state more efficient, boosting innovation in areas like energy, and spending more money on growth-enhancing sectors like infrastructure.

That's a tough balancing act.

The biggest task will be to reduce middle-class entitlement spending. Alesina found that spending cuts are a more effective way to stabilize debt than tax increases, though we'll need both.

Continue reading "Stimulus fueled deficits reduce consumer confidence, stall economy -- BrooksDeficits" »

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Worthwhile Canadian Initiative is a humble mostly macro-policy blog, by Stephen Gordon, Mike Moffatt, Nick Rowe and Frances Woolley has left leaning macro economic views from Canada.

Examples: Should recent immigrants be eligible for Old Age Security looks at guaranteed an income above the poverty line by Old Age Security, Guaranteed Income Supplement and the Canada Pension Plan.

My sister, Rachel Goddyn, believes that expanding female job opportunities have led to a decline in the quality of elementary and high school teachers.

he cure can be worse than the disease. At the most recent Canadian Economics Association meetings, University of Toronto PhD student Hugh Macartney presented a paper looking at a US program designed to create incentives for good teaching. Students were tested at the end of each year, and schools were rewarded if test scores showed improvement over time. What's the way to game that system? Teach students poorly in the first year and well in the last year - and Macartney found evidence that this was exactly what was happening.

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For brokers and others who favor a free secondary market for tickets, these concerns cut to the philosophical heart of the issue: Is a ticket a commodity that can be freely exchanged, like a stock, or is it a license granted by a theater, a sports team or an artist that can be used or revoked on their terms?

Continue reading "What do scalpers sell ?" »

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"We deserve a tax break and the kids deserve to keep their programs more than the teachers need a raise," said Fred Gorman, one of the group's founders.

School superintendents and board members say they have been caught in the middle, left with no choice but to reduce teacher payrolls -- either through salary concessions or layoffs -- to offset sharp revenue drops from state aid cuts, declining property values and resistance to higher taxes on the middle class. "At a certain point, there's nowhere else to go" to achieve savings, said Michael V. McGill, the superintendent in Scarsdale, whose 460 teachers are among the best paid in the nation, earning $54,442 to $135,000.

Continue reading "Middle class: Scarsdale, NY teachers up to $135,000" »

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Junior Minister for 4Chan ?

Sunstein had, during his academic career, a penchant for publishing trial balloons -- they were a necessary part of his inquiry, a perpetual what if? Now, with their author a government official, some of these conjectures seem more worrisome. Sunstein has, for example, written often about the corrosive effects of rumors and falsehoods on democratic discourse (it is the subject of one of the two books that were published while he was waiting to be confirmed last year), and in a 2008 paper, he proposed that government agents "cognitively infiltrate" chat rooms and message boards to try to debunk conspiracy theories before they spread. The paper was narrowly concerned with terrorism, but to some, these were dark musings. The liberal essayist Glenn Greenwald, writing in Salon, called the proposal "spine-chilling."

Continue reading "Cass Sunstein, blog leader" »

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During its first decade of membership, the European Union's generous subsidies helped catapult Greece out of its Balkan backwardness. By the time 1997 came around, and Europe's leaders prepared to introduce the single currency, some were hailing Greece, enjoying steady economic growth of more than 3 percent under the then Socialist government of the prime minister, Costas Simitis, as a plucky economic stalwart.

For Athens, Mr. Papantoniou recalled that joining the euro was a matter of pride and necessity, as it would stabilize the country's economy by fending off predatory speculators, while allowing Greece access to credit at low interest rates because it was part of the rich euro club.

"Once we were in line to join the euro, we started to transform from a third world country to one that aspired to look more like Switzerland," he said.

But Greece's path to the euro was far from assured. Public opinion in Germany, scarred by the memory of wartime hyperinflation, was always wary of giving up the Deutsche mark, and the German government insisted on tough conditions for the countries that wanted to join. Budget deficits were supposed to be below 3 percent of gross domestic product; debt was not to exceed 60 percent of G.D.P. and inflation could not top 3 percent.

In December 1996, the currency's rules were toughened in a so-called Stability Pact, intended to punish with costly fines countries that persistently broke the rules once inside the euro zone. The unspoken intention was to raise the barrier for Southern European countries, which were seen as having looser, more inflationary economic policies.

Germany wanted the fines to be automatic, but other countries, led by France, put the onus of enforcement on political leaders in the European Union. (No country, Greece included, has ever been fined even though the rules have been routinely broken by most countries in the euro zone.)

Continue reading "Euro lacks discipline " »

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The relationship between Mr. Rapino and artists is complicated. On the one hand, he must be deferential and accommodating, because without a regular caravan of acts, he has nothing but empty seats and red ink. At the same time, some artists are exasperating, though Mr. Rapino is far too diplomatic to say so.

Instead, he'll simply note that artists -- at least the famous ones -- are in a position these days to define their own destiny. And without question, that destiny includes higher ticket prices. The average price of a ticket to one of the top 100 tours soared to $62.57 last year from $25.81 in 1996, according to Pollstar, far outpacing inflation. The interesting question is why.

Mr. Rapino's theory is that musicians are just benefiting from the same trends that have enriched other superstars, like athletes and actors.

"The ticket was underpriced 40 years ago," he says.

Rival promoters see another culprit in high ticket prices: Live Nation. The company, they say, represents a consolidation of regional promoters that didn't just coincide with rising ticket prices but also helped cause them. Ticket prices, in this telling, have gone up because the largest promoter has been paying whatever-it-takes sums to get bands in the door -- both to drive out competitors and to bring in desperately needed revenue to cover fixed overhead costs and to fill up seats. The company's biggest outlays include "360 deals" with Jay-Z, Madonna, U2 and others, giving the company a stake in tours, recording and merchandise profits in exchange for nine-figure paydays. Jay-Z's deal was reportedly worth more than $150 million.

"Look at what has happened to ticket prices, and the price of everything else at a concert, over the last 10 years, right when consolidation was happening," says John Scher, who books shows in Madison Square Garden, at Radio City Music Hall and elsewhere in New York. "I talk to college kids all the time and they tell me that going to a show at an arena or an amphitheater is just beyond what they can afford. And it's because Live Nation has been paying the acts these outrageous sums, which is just alienating the fan base."

Mr. Rapino denies overpaying for bands, and says that the price of tickets often triples when they're sold by scalpers, which suggests that they were actually underpriced.

Then again, when Mr. Rapino was describing the parlous condition of the concert business in front of Congress last year, he noted that 40 percent of concert tickets go unsold, a statistic that he offered as a symptom of an industry in distress but that might just be evidence that Live Nation and its rivals don't know how to price and sell their products. Today, as high as ticket prices are, Live Nation earns none of its profit from ticket revenue. The artists get nearly all of that. Live Nation's earnings come from stuff sold on site, like beer, parking and advertising.

Continue reading "Pricing concert tickets understates inflation: Ticketmaster, LiveNation" »

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By using pretax dollars, you can reduce your overall cost for these items by about 20 percent, estimates Jennifer Calhoun, a principal with Mercer Health and Benefits, a consulting firm.

Another attraction had been the extremely generous list of eligible health expenses -- including deductibles and co-pays, eyeglasses and dental work, over-the-counter cold medicine, sunscreen and vitamins. But under the new law, starting Jan. 1, flex-spend users will no longer be able to submit claims for over- the-counter medicines unless they have been specifically directed to use them by a doctor.

For many consumers, having to start paying for cough drops or Tylenol with after-tax dollars probably is not a big deal. But the change will probably be felt by people with chronic illnesses who depend on drugs that have gone from prescription-only to over-the-counter status, like Claritin or other allergy medicines, or heartburn pills like Pepcid, Ms. Calhoun said.

And there is another big flex-spend change ahead: starting in 2013 the annual limit that any employee may contribute to these plans will be restricted to $2,500. Many companies had allowed much more.

The policy rationale for that change is simple. As the health law ushers in more comprehensive, affordable coverage, Kelly Traw, a principal at Mercer's Washington Resource Group, said the assumption was that employees would have less need for flexible spending accounts. And the revenue the government may get by limiting this tax break is meant to help finance the nation's health care overhaul.

If you look only at the averages, the new cap actually seems more than adequate. Although about 85 percent of companies with 500 or more workers offer health care flexible spending benefits, only 27 percent of eligible employees use them, according to Mercer. And the average account annual account balance is about $1,400 -- far less than even the new limit.

Continue reading "Flexible medical spending to die in 2011 ?" »

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Until now, it has been perfectly legal in most states for companies selling individual health policies -- for people who do not have group coverage through employers -- to engage in "gender rating," that is, charging women more than men for the same coverage, even for policies that do not include maternity care. The rationale was that women used the health care system more than men. But some companies charged women who did not smoke more than men who did, even though smokers have more risks. The differences in premiums, from 4 percent to 48 percent, according to a 2008 analysis by the law center, can add up to hundreds of dollars a year. The individual market is the one that many people turn to when they lose their jobs and their group coverage.

Insurers have also applied gender-rating to group coverage, but laws against sex discrimination in the workplace prevent employers from passing along the higher costs to their employees based on sex. Gender rating has taken a particular toll on smaller or midsize businesses with many women, like home-health care, child care and nonprofits. As a result, some businesses have been unable to offer health coverage or have been able to afford it only by using plans with very high deductibles.

Advocates for women's health said one of the new law's benefits would be to ban the denial of health coverage to women who have had a prior Caesarean section or been victims of domestic violence. Some companies providing individual policies have refused coverage in those circumstances, regarding Caesareans or beatings as pre-existing conditions that were likely to be predictors of higher expenses in the future.

In a statement issued Thursday, Senator Mikulski said: "One of my hearings revealed that a woman was denied coverage because she had a baby with a medically mandated C-section. When she tried to get insurance coverage with another company, she was told she had to be sterilized in order to get health insurance. That will never, ever happen again because of what we did here with health care reform."

The passage, Sec. 1557 on page 368 of the 2,074-page bill, says: "Except as otherwise provided for in this title (or an amendment made by this title), an individual shall not, on the ground prohibited under Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.), Title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), or Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving federal financial assistance, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an executive agency or any entity established under this title (or amendments)."

What it means, Ms. Greenberger said, is that no organization receiving any federal money at all -- as insurers generally do -- can discriminate on the basis of sex. Gender rating, she said, "is a problem whose days are numbered."

Continue reading "Being as woman as a pre-existing condition" »

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This produces a lot of dynamism. As Stephen J. Rose points out in his book "Rebound: Why America Will Emerge Stronger From the Financial Crisis," the number of Americans earning between $35,000 and $70,000 declined by 12 percent between 1980 and 2008. But that's largely because the number earning over $105,000 increased by 14 percent. Over the past 10 years, 60 percent of American adults made more than $100,000 in at least one or two of those years, and 40 percent had incomes that high for at least three.

David Brooks defines a slice of the middle class.

Continue reading "Brooks: 60 percent of American adults made more than $100,000 in at least one or two of those years" »

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At the heart of the existing process is a strategic choice between liquidation under Chapter 7 or rehabilitation under Chapter 13. Under Chapter 7, households give up all of their nonessential assets (as determined by the law of the state where they live), but pay nothing out of any future income to clear their debts; those debts are simply erased. Under Chapter 13, households make payments out of future income, but are more likely to retain their homes and automobiles.

The 2005 reforms, driven by an exaggerated concern that debtors might game the system, instituted a series of paper-intensive procedural safeguards. All debtors must produce documents that estimate potential increases in expenses or income during the year to come, a monthly net income statement and a complex "means test calculation" that certifies expenditures in a large number of specific, carefully defined categories.

the bankruptcy system was doing its job, the mortgage-driven financial crisis should then have led to a sharp increase in filings under Chapter 13. Homeowners unable to keep up with their mortgages should have been able to file for relief under Chapter 13, resolve their problems and move on with their lives. Yet the share of Chapter 13 filings fell in 2009 to only 28 percent of all filings, from 42 percent in 2006.

That's another perverse result of the 2005 reforms: Chapter 13 does not let people avert foreclosure by paying the actual value of their homes, even when their bubble-era mortgages far exceed realistic market prices. In fact, a "special rule" for home mortgages allows lenders to prevent normal bankruptcy relief for borrowers. Thus, the reforms created a system that makes it harder to file for Chapter 7 while doing nothing to make Chapter 13, once the savior of homeowners, useful in this sort of mortgage crisis.

Continue reading "Bankruptcy filing as a prototype mortgage cramdown" »

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Econbrowser take a break from shrill polemics and returns to economics,
with James Hamilton's look at the Federal Reserve as bank regulator.

The Fed employs hundreds of extremely bright and very well-informed economists. On my visits to the Federal Reserve, I've been amazed at how well the staff work together to assimilate information and perspectives. In my experience, you can ask any one of them a question about pretty much anything, and although the person you're talking with may not know the answer, he or she will know the name of the person within the Fed who does know. I've interacted with lots of different institutions over the years, and have never seen another one that functions so effectively as a single, cohesive neural processor. Certainly the objective record of Federal Reserve forecasts is pretty impressive; see for example the assessments by Christina and David Romer and Faust and Wright.

Doubtless others will be skeptical, trotting out the Fed's spectacular underestimation of financial problems during 2005-2007. That criticism is of course well taken, and both the Fed and the economics profession as a whole have much more work to do in terms of recognizing exactly what should have been done differently. But let's be practical. What other institution did a better job? Where in Washington today do you see an agency with the intellectual resources to get this right? Simply squawking that we need a change is not constructive leadership; it's political finger-pointing and CYA.

Indeed, it's striking that many of those who were instrumental in relaxing the oversight on Fannie Mae and Freddie Mac now believe that a regulatory body more directly under their political control could do a better job than the Fed. In the mean time, the FHA continues even today to dig us into a deeper hole.

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A vivid example of how the legislation manipulates revenues is the provision to have corporations deposit $8 billion in higher estimated tax payments in 2014, thereby meeting fiscal targets for the first five years. But since the corporations' actual taxes would be unchanged, the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

In addition to this accounting sleight of hand, the legislation would blithely rob Peter to pay Paul. For example, it would use $53 billion in anticipated higher Social Security taxes to offset health care spending. Social Security revenues are expected to rise as employers shift from paying for health insurance to paying higher wages. But if workers have higher wages, they will also qualify for increased Social Security benefits when they retire. So the extra money raised from payroll taxes is already spoken for. (Indeed, it is unlikely to be enough to keep Social Security solvent.) It cannot be used for lowering the deficit.

A government takeover of all federally financed student loans -- which obviously has nothing to do with health care -- is rolled into the bill because it is expected to generate $19 billion in deficit reduction.

Continue reading "Phantom cost savings of Obamacare -- Douglas Holtz-Eakin" »

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a bubble is a form of psychological malfunction. And like mental illness there's a tricky gray area between being really sick and just having a few problems, Mr. Shiller said during a panel discussion at the World Economic Forum in Davos, Switzerland.

The solution: a checklist like psychologists use to determine if someone is suffering from, say, depression. So here is Mr. Shiller's checklist.

• Sharp increases in the price of an asset like real estate or dot-com shares
• Great public excitement about said increases
• An accompanying media frenzy
• Stories of people earning a lot of money, causing envy among people who aren't
• Growing interest in the asset class among the general public
• "New era" theories to justify unprecedented price increases
• A decline in lending standards

Continue reading "Bubbles as mania" »

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Calabria, like other southern Italian regions rich in agriculture, has long benefited from hefty European Union agricultural subsidies. To prevent fraud in which small acreage yielded puzzlingly large harvests, in 2007 the European Union changed its rules to base subsidies on the number of hectares planted rather than the tons produced.

The result, some authorities hypothesize, is that it may be more lucrative for some Calabrian landowners to let their harvests rot on the tree and collect the subsidies than to pay pickers. In theory, the migrants may have become less useful and, possibly, less tolerated.

Still, the violence was dramatic. After immigrants struck residents and shops with sticks and burned and smashed cars, residents began responding with violence. By late Saturday night, most immigrants feared for their safety and voluntarily boarded buses and trains that took them to immigrant detention centers elsewhere in southern Italy, Rosarno authorities said.

Continue reading "To prevent fraud EU pays by planted rather than the tons produced. " »

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Labor leaders are fuming that President Obama has endorsed a tax on high-priced, employer-sponsored health insurance policies as a way to help cover the cost of health care reform. And as Senate and House leaders seek to negotiate a final health care bill, unions are pushing mightily to have that tax dropped from the legislation. Or at the very least, they want the price threshold raised so that the tax would affect fewer workers.

Labor leaders say the tax would hit not only wealthy executives with expensive health benefits, but also many rank-and-file union members who have often settled for lower wage increases in exchange for more generous health benefits.

The tax would affect individual insurance policies with annual premiums above $8,500 and family policies above $23,000, which by one union survey would affect one in four union members.

Continue reading "Unions oppose Obamacare tax on good health insurance" »

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Take the "individual mandate" bit: The rule that everybody must buy insurance or get fined. That's something both conservatives and liberals hate, though its inclusion may have been the price to pay to get the insurance industry to agree to any reform.

Now, the individual mandate made excellent sense at the beginning of this re-sewing process, because if people were allowed not to buy insurance at all then the low-risk young people would do exactly that. This would have had two bad consequences: First, they would still need charity care if they got sick or hurt in an accident. Second, the average price of insurance would be higher because the lower-risk people would not be contributing towards it.

Continue reading "Healthcare individual mandate" »

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At least 31 states currently regulate indoor tanning for minors, according to the National Conference of State Legislatures. Just last month, the country's first local ban on indoor tanning for those under the age of 18 was passed in Howard County, Md. And in July, the World Health Organization broadcasted one of its most damning warnings yet about tanning beds, declaring them "carcinogenic," and placed them in the same category as cigarettes and arsenic.

Over the years, such health warnings have gone heard but unheeded by many. But that may have been because, up until quite recently, tan seekers saw no worthy alternative to fake baking. Increasingly, they have another option on the table--or in the booth, that is. Spray-on tanning--when the face and body are misted with nontoxic colored chemicals--is the bright spot for the future of the tanning industry. Even though the service can cost more than three times as much as baking under bulbs, it's considered much safer and, thus, guilt-free. "Growing awareness about the high cancer risk associated with UV tanning beds will invariably diminish market share," George Van Horn, an IBISWorld senior analyst, said in a recent press release. He estimates that sunless tanning accounted for roughly 11 percent of tanning-salon revenues two years ago and may reach as high as 17 percent for 2009. And as technology improves for the spray tan (read: customers exit looking less orange), most industry insiders predict that it will continue to lure customers away from traditional tanning beds.

(See alse Sunscreen SPF.)

Continue reading "Tanning Tax ?" »

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"It's a different kind of recession," said Richard Florida, the author of several best-selling books about the economics of cities. "It's not like in the '30s when people stopped going to concerts. Now people seem to be keeping up with experience consumption and cutting back on other necessities."

Psychologists have been saying for years that shared experiences like vacations lead to more long-term happiness than the latest bauble. And perhaps the change was inevitable -- to be expected when a shopping-spree nation trades a glut of credit for layoffs and furloughs.

There are, of course, potential problems as the United States drops old habits of consumption. On the macro level, economists worry that it could undermine a recovery. And the shift may be temporary: holiday shopping appears to have increased a little in 2009.

But in many homes today, experiences have become a more valued element of life. Scott Hoyt, senior director of consumer economics at Moody's Economy.com, said that the behavioral changes were likely to be less transformative than what followed the Depression but that after three decades when consumer spending outpaced gross domestic product, the end of a spendthrift era may be here.

Continue reading "Keeping experience consumption and cutting back on others" »

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hecession: recession where male incident unemployment overhsaddows female unemployment.

Progressive take and spin on the econonomic scene:

As women's job losses mount, some women--especially unmarried women--are facing an increasingly grim job market. Unmarried women have much higher unemployment than married women. In October, 10.3 percent of unmarried women age 20 and over (3.3 million) and 5.7 percent of married women (2.1 million) were unemployed (see figure below; all data by marital status is not seasonally adjusted). Although unmarried women represent less than half (46.5 percent) of all women workers, they account for 6 in 10 (60.8 percent) of women workers who are unemployed. The situation is worse for unmarried women who head families, most of whom are single mothers, who now have an unemployment rate of 12.6 percent, 2.4 percentage points above the national average.

Question not asked: are married women more likely to drift into and out of the laborforce, given job prospects or lack thereof ?

Continue reading "Progressive polemics take on the 'he'-cession" »

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When Apple and AT&T started offering the iPhone for $199, plus $30 a month for Internet access, sales shot up, even though the previous deal -- $399 for the phone and $20 a month -- cost less over a two-year contract.

"The whole pricing thing is weird," said Barry Nalebuff, an economics professor at the Yale School of Management. "You pay $60 to make your first phone call. Your next 1,000 minutes are free. Then the minute after that costs 35 cents."

To economists, it simply doesn't make sense to make chatterboxes pay that penalty. After all, most businesses tend to give discounts to customers who buy more.

It would be easy to see the cellphone companies simply as avaricious oligopolists trying to gouge consumers for every penny they can. And in some senses they are aiming to maximize revenue, at least as much as the market will let them.

But understanding the psychological nuances of how a price plan affects customers' behavior is at least as important to running a cellphone company today as knowing how radio waves spread over a city. Those high charges for going over your allotted minutes, for example, are designed to cause you enough pain that you will switch to a plan with a higher regular fee.

"You give people a really good bargain on this bucket of minutes," explained Roger Entner, a senior vice president for telecommunications research at Nielsen. "People are risk averse, so you have a relatively high overage charge, which gets people to overbuy. You also get really predictable revenue out of it, which Wall Street loves."

Continue reading "Cel phone pricing is a repeated game" »

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The new chairman of New York's transit system is looking to introduce a pricing policy that would offer passengers discounts to ride late at night and on weekends, an abrupt break from a century-old fare model that could be the city's biggest transportation revolution since the demise of the token.

"We might imagine that we offer discounts at later times, or we offer weekend discounts. Time-of-day pricing might be very attractive."

-- Jay H. Walder, the chairman of the Metropolitan Transportation Authority

It is already too crowded on weekends

Andrew Albert, a nonvoting board member and chairman of the New York City Transit Riders Council, said he was hesitant about the idea. "You really already have some crushed loads at off-peak periods," he said, citing crowded platforms on some weekends.

Many riders already have zero marginal cost

The price of a single bus or subway ride -- $2.25, after a 12.5 percent increase this summer -- is largely symbolic: about half of riders travel with unlimited-ride MetroCards, and the price for each ride varies depending on which type of card is used.

Continue reading "M.T.A. Weighs Lower Fares During Off-Peak Hours " »

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One set are free-enterprise champions who argue that politicizing consumption distorts prices and spurs overproduction while imposing arbitrary conditions on producers -- like insisting that developing-world farmers enroll their children in school -- that might sound good to Westerners but ignore complex local realities.

Insisting on the noblest production methods conflicts, these critics say, with the very function of markets: to bring the most goods to the most people as cheaply as possible.

Another group of critics doesn't deny political consumption's power. Rather, they bemoan that citizenship has come to this.

Citizenship, for them, is about voting, marching, writing -- about being involved. In the modern age, they say, we have begun to turn inward, bowl alone, shirk our public duties. And now comes this cheap (in the moral, if not economic, sense) way to participate just a little, assuage guilt just a little, involve ourselves just a little in AIDS and trade, feel just a little of activism's thrill.

In an article last year in The Lancet, the British medical journal, the scholars Colleen O'Manique and Ronald Labonte strongly condemned RED, the marketing campaign for iPods and other products whose purchase helps to finance the battle against H.I.V./AIDS in Africa.

"Be wary of the 21st century's new noblesse oblige that replaces the efficiency of tax-funded programs and transfers in improving health equity with a consumption-driven 'charitainment' model," they wrote.

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Blumenthal and Morone's most provocative finding is that presidents who have been most successful in moving the country toward universal health coverage have disregarded or overruled their economic advisers. Plans to expand coverage have consistently drawn cautions or condemnations from economic teams in every administration, from Harry Truman's down to George W. Bush's. An exasperated Lyndon Johnson groused to Ted Kennedy that "the fools had to go to projecting" Medicare costs "down the road five or six years." Such long-term projections meant political headaches. "The first thing, Senator Dick Russell comes running in, says, 'My God, you've got a one billion dollar [estimate] for next year on health. Therefore I'm against any of it now." Johnson rejected his advisers' estimates and intentionally lowballed the cost. "I'll spend the goddamn money." An honest economic forecast would most likely have sunk Medicare.

THE HEART OF POWER: Health and Politics in the Oval Office
By David Blumenthal and James A. Morone
Illustrated. 484 pp. University of California Press. $26.95

Books / Sunday Book Review
Critical Care
By ROBERT B. REICH
Published: September 6, 2009
This history of health policy and the Oval Office shows that the presidents who made the biggest steps in the direction of universal care have acted despite their economic advisers.

Continue reading "Health and Politics in the Oval Office, Blumenthal and Morone" »

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After years of complaining about private health insurers denying care, the democrat plan
is now to penalize insurers who do provide full coverage.

Mr. Baucus's plan, expected to cost $850 billion to $900 billion over 10 years, would tax insurance companies on their most expensive health care policies. The hope is that employers would buy cheaper, less generous coverage for employees, thereby reducing the overuse of medical services.

The separate new fee on insurance companies would help raise money to pay for the plan. The fee would raise $6 billion a year starting in 2010, and it would be allocated among insurance companies according to their market shares.

The fees were first proposed by Senators Charles E. Schumer of New York, John D. Rockefeller IV of West Virginia and Debbie Stabenow of Michigan. Until now, Mr. Baucus had not shown interest in the idea.

Mr. Schumer said, "The health insurance industry should pay its fair share of the cost because it stands to gain over 40 million new consumers under health care reform legislation."

Mr. Rockefeller said the fees were justified because insurance companies were "rapaciously, greedily and unstoppably making money by underpaying the patient, by underpaying the provider and by overpaying themselves."

Continue reading "Democrat plan to stop private health insurance companies from providing benefits ?" »

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The popularity of the term "green shoots" shows the kind of social epidemic underlying our changing thinking. The phrase was propelled in Britain by Shriti Vadera, the business minister, in January, and mutated into a more contagious form after Ben Bernanke, the Federal Reserve chairman, used it on "60 Minutes" on March 15.

The news media didn't need to change the term for different cultures around the world. With nothing more than a quick translation -- brotes verdes, pousses vertes, grüne Sprösslinge, etc. -- it is now recognized as a symbol of a revival coming soon.

All of this suggests that a social epidemic is supporting renewed confidence. This confidence can keep growing by contagion, as a kind of self-fulfilling prophecy, and we may see the markets and the economy recover further.

Continue reading "verdes Vadera, green shoots, he scores" »

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Any major shift in the financial status of the rich could have big implications. A drop in their income and wealth would complicate life for elite universities, museums and other institutions that received lavish donations in recent decades. Governments -- federal and state -- could struggle, too, because they rely heavily on the taxes paid by the affluent.

Perhaps the broadest question is what a hit to the wealthy would mean for the middle class and the poor. The best-known data on the rich comes from an analysis of Internal Revenue Service returns by Thomas Piketty and Emmanuel Saez, two economists. Their work shows that in the late 1970s, the cutoff to qualify for the highest-earning one ten-thousandth of households was roughly $2 million, in inflation-adjusted, pretax terms. By 2007, it had jumped to $11.5 million.

The gains for the merely affluent were also big, if not quite huge. The cutoff to be in the top 1 percent doubled since the late 1970s, to roughly $400,000.

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David Adamo, the chief executive of Luxury Mortgage in Stamford, Conn. likened the current mortgage market to a barbell, with pockets of availability for borrowers at both ends of the income spectrum but less for those in between. Those with annual incomes up to about $250,000 have access to mortgages insured by the Federal Housing Administration, while the very affluent can obtain loans from private banking institutions.

For middle class borrowers with household incomes between $250,000 and $500,000, however, mortgages are not as easy to get, Mr. Adamo said. "These people are living in places where starter homes might be $1 million," he said, "and it's really affecting them."

Fannie Mae and Freddie Mac will accept only loans below $729,500 in the highest-cost markets like New York City and northern New Jersey. For mortgages larger than that, mortgage brokers and bankers must find other investors who want to take the loans. (Mortgage brokers process the applications on a lender's behalf, while mortgage bankers will finance the loan and sell it shortly thereafter.)

Continue reading "Between $250,000 and $500,000 is middle income, mortgage-wise" »

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Do new-car buyers even drive clunkers ?

Am I driving a clunker because I cannot afford a 4 year old car ?
Will an extra $1000 trade in afford me a new car (or 14 month olf d car) ?

Update 2009 June 30:

"It has to be worth not very much and it also has to get very poor E.P.A. fuel economy," said Jack R. Nerad, the executive editorial director and market analyst for Kelley Blue Book. "It's a fairly narrow profile. You're talking about people who are probably economically challenged to begin with and they have to be able to qualify for a new car purchase in the midst of a deep recession. Those are some difficult parameters."

The case of the sad SAAB, junked with a work badge.

Continue reading "Trade in clunkers ?" »

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n academic writings, Mr. Sunstein has advocated requiring agencies to demonstrate that new regulations' benefits clearly outweigh their costs, a policy long advocated by conservatives but viewed with suspicion by liberals who have seen it as a way to kill or weaken rules.

Mr. Sunstein said that relative to the Bush administration's heavy reliance on cost-benefit analysis, his approach would be "inclusive and humanized" and give more weight to moral concerns and other "soft variables."

But Mr. Sunstein also said he favors requiring agencies to explain why they are imposing rules that aren't justified by a cost-benefit analysis. And he said he would seek to maintain OIRA's central position in reviewing new regulations.

Continue reading "Costs, benefits of Cass Sunstein " »

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During the campaign, Obama talked about the need to control medical costs and mentioned a few ideas for doing so, but he rarely lingered on the topic. He spent more time talking about expanding health-insurance coverage, which would raise the government's bill. After the election, however, when time came to name a budget director, Obama sent a different message. He appointed Peter Orszag, who over the last two years has become one of the country's leading experts on the looming budget mess that is health care.

Their argument happens to be supported by a rich body of economic literature that didn't even make it into the book. More-educated people are healthier, live longer and, of course, make more money. Countries that educate more of their citizens tend to grow faster than similar countries that do not. The same is true of states and regions within this country. Crucially, the income gains tend to come after the education gains. What distinguishes thriving Boston from the other struggling cities of New England? Part of the answer is the relative share of children who graduate from college. The two most affluent immigrant groups in modern America -- Asian-Americans and Jews -- are also the most educated. In recent decades, as the educational attainment of men has stagnated, so have their wages. The median male worker is roughly as educated as he was 30 years ago and makes roughly the same in hourly pay. The median female worker is far more educated than she was 30 years ago and makes 30 percent more than she did then.

Continue reading "Health Care: Coverage vs Cost" »

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If an abstract model is supposed to be a model of the real world (and not just a mathematical construct), then we should test its assumptions and predictions against the real world. But the real world, in all its boisterous glory, is far from the serene desert landscape of an abstract model. So we must cleverly search out "natural experiments"--real-world circumstances that happen to conform to enough assumptions of a model to provide a relatively direct test of its predictions--and then apply advanced statistical techniques to isolate the effect of the variables we want to study. The result of such tests can lead to tweaks in abstract theories that improve their predictive power and utility.

Overcoming bias.

Continue reading "Overcomingbias: what's wrong with 'cuteonomics'" »

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Sam Kazman on the 'benefits' on mandated change:

Continue reading "Sam Kazman Debates Obama's Car Mileage Regulations" »

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Unexplained is why wages earned in construction are 'stimulus' and wages eared drawing blueprints are not.

The requirement that the money be spent quickly, in order to get it coursing through the parched economy, means that many ambitious projects that require more planning will have to give way to smaller ones considered "shovel ready."

U.S. / POLITICS
House Plan for Infrastructure Disappoints Advocates for Major Projects
By MICHAEL COOPER
Published: January 20, 2009
As the details of Barack Obama's public works plan come into focus, big transformative building projects seem unlikely.

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Barry's scolding Bailout Nation is out. Note the used price is three times greater than the new price.
(We blogrolled Barry Ritholtz' Big Picture years ago).

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From 2004 to 2006, Americans took almost $700 billion per annum of net equity out of their homes through borrowing and spent as much as 50% of it on consumables. The most highly regarded study on mortgage equity withdrawals (MEW) is "Estimates of Home Mortgage Originations, Repayments, and Debt On One-to-Four-Family Residences," by Prof. James Kennedy and none other than Alan Greenspan (Federal Reserve Board FEDS working paper No. 2005-41); Kennedy has been updating his numbers.

Also: The Rise of A New Asset Class

Without MEW, we would have had 2 years, 2001 and 2002, with negative GDP growth. We're not going to go get those levels of mortgage equity withdrawals today - not in this environment. We're still seeing some cash-out borrowing, but it's getting more and more difficult; as home values drop, there are going to be fewer and fewer people pulling less and less money out of the "home ATMs." As Paul McCulley says, your home ATM is starting to spit out negative twenty-dollar bills

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The compulsion to upgrade (and seeking positional goods and services) is most glaring in cities -- particularly New York and Los Angeles -- which are filled with the upwardly mobile who relocate in search of upgraded opportunities surrounded by savvier, richer, trendier people. These transplants are constantly trading up not just their jobs but their group of friends. Everyone in New York and L.A. has had this experience: you make a plan for dinner with a buddy, which he cancels with a lame, last minute excuse ("I'm just exhausted"). What you both know is that he got a late-breaking better offer. He upgraded his dinner.

Continue reading "Positional goods abound in New York" »

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NY State's legislative leaders agreed last week to raise tens of millions of dollars in fees and impose taxes on individuals earning more than $200,000 and couples earning more than $300,000. Is this a middle class tax hike ?

The tax increases and elimination of the property tax rebate program prompted an outcry among local officials in Westchester, which has towns with some of the highest property tax rates in the country.

...

Eliminating the property tax rebate will save the state $1.5 billion, while new income tax brackets for the highest earners will bring in $4 billion. Because Westchester has a high concentration of families with high incomes, its residents will feel the impact of the income tax increases more than most, officials said.

"We expect to see a disproportionate impact on New Yorkers in the region, and in particular Westchester," said Stephen J. Acquario, executive director of the New York State Association of Counties.

Continue reading "Middle class by tax bracket in Westchester County, NY: $300k" »

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Over $100,000 income is the biggest group. Where is the middle class.

"This is a statement that the system is broken, and that inaction will lead to ruin," said Russell Hancock, chief executive and president of Joint Venture. "It's time to start over."

The report also showed that the gap between the wealthiest and the poorest residents continued to grow. The percentage of households earning more than $100,000 a year rose to 42 percent in 2008, from 35 percent in 2002, while the number of households earning $35,000 or less rose to 20 percent, from 19 percent in the same period.

During that period, the number of immigrants to Silicon Valley grew 9 percent.

Continue reading "Middle class more than 100k in Silicon Valley" »

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A hypothetical on the middle class tax cut, or tax hike ?

You favor eliminating the cap on earnings subject to the 12.4 percent Social Security tax, which now covers only the first $102,000. A Chicago police officer married to a Chicago public-school teacher, each with 20 years on the job, have a household income of $147,501, so you would take another $5,642 from them. Are they undertaxed? Are they rich?

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As an example of a 'free service' as it is now (temporarily) being used, please feel free to go to FaceBook, take a

"23 Random Things About My Toes" quiz and forward it to 230 friends, accidentally click on the picture of a hot chick and get taken to a different website, then find your way back and accept a cause invitation to get rid of wobbly shopping carts, an event for people with last names starting with J, a zombie invitation, and a 'click here to find out who has a mad crush on you!'

Continue reading "How to spend an hour on FaceBook" »

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Using consumption (Veblen goods, Giffen goods) to distinguish ones class leaves middle class citizens in the middle.

Individual demands are heavily shaped by the social environment. As the economist Richard Layard has written, for example, "In a poor society a man proves to his wife that he loves her by giving her a rose, but in a rich society he must give a dozen roses." For the last three decades, virtually all income gains in the United States have gone to top earners. Recipients have spent most of their extra income on positional goods, things whose value depends heavily on how they compare with similar things bought by others. Like mutually offsetting weapons in a military arms race, consumption of this sort is largely wasteful. Many of the most spectacular increases in high-end consumption in recent years appear to have been driven almost entirely by positional forces. If people acted in tandem, resources could be diverted from positional consumption at little sacrifice.

Although there is scant evidence that middle-income families in America resent the spending of top earners, they are nonetheless affected by it in tangible ways. Additional spending by the rich shifts the frame of reference that defines what the near rich consider necessary or desirable, so they too spend more. In turn, this shifts the frame of reference for those just below the near rich, and so on, all the way down the income ladder. Such expenditure cascades help explain why the median new house built in the U.S. is now about 50 percent larger than its counterpart from 30 years ago, even though the median real wage has risen little since then.

Higher spending by middle-income families is driven less by a desire to keep up with the Joneses than by the simple fact that the ability to achieve important goals often depends on relative spending. Because of the link between housing prices and neighborhood school quality, for example, the median family would have to send its children to below-average schools if it failed to match the spending of its peers on housing. Instead, middle-income families have opted to save less, borrow more, work longer hours, and commute longer distances than ever before, all in an effort to keep pace with escalating consumption standards.

Robert H. Frank

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Goldman Sachs name new MD (Managing Director Partners) for 2009.

Included was Jan Hatzius, economist known for real estate commentary.

Continue reading "Goldman Sachs Managing Director Partners 2009" »

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Was the Obama stimulus plan built to solve a recession where unemployment peaked at 8.1 percent ? Now that unemployment has hit 8.1 %, should the $787 billion stimulus package be revised and embiggened ?

Continue reading "Stimulus 1.0 too small ?" »

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Faith based economics ?

First, the standard analytical explanation: Roubini said that he studied a chart in economist Robert J. Shiller's book "Irrational Exuberance." It showed that U.S. housing prices, adjusted for inflation, had remained essentially flat for a century, until the mid-1990s, when they began to shoot up. What's more, Roubini saw that the most recent housing correction in the late 1980s had a severe effect on the financial system -- leading ultimately to the collapse of the savings and loan industry.

So Roubini knew two things: Housing prices wouldn't keep going up forever, and when they went down, they would take a big piece of the financial system with them. From then on, it was a matter of watching the data.

But everyone else had those same numbers. Why did Roubini act? The answer is that he decided to trust his gut, which told him there was trouble ahead, rather than Wall Street's "wisdom of the crowd," which -- as reflected in stock prices -- said everything was rosy. He concluded that the markets were not pricing in the degree of risk that was actually present in housing.

"The rational man theory of economics has not worked," Roubini said last month at a session of the World Economic Forum at Davos. That's why he and other prominent economists are paying more attention to behavioral economics, which starts from the premise that economic decisions, like other aspects of human behavior, are influenced by irrational psychological factors.

The most compelling rebuttal of the rational model, paradoxically, was delivered by the ultimate rationalist, Alan Greenspan. "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders," the former Fed chairman told Congress last October.

Continue reading "Without waiting for evidence, Roubini's luck guy feel comes up big" »

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austrianeconomists considers various matters

Example: on failure:

When Dave Prychitko and I were students of Kenneth Boulding, Mr. Boulding told us both once that if economists really wanted to learn we would study the waste baskets of our peers not what gets published in the journals. Like most "bouldingisms", his statement while odd upon first hearing is actually profoundly true once you think abit about what he is getting at. We learn much more from our failures than we learn from our successes if we open ourselves on the lesson to be learned.

Contrast 37 Signals's Signal vs Noise SvN's take:

I don't understand the cultural fascination with failure being the source of great lessons to be learned. What did you learn? You learned what didn't work. Now you won't make the same mistake twice, but you're just as likely to make a different mistake next time. You might know what won't work, but you still don't know what will work. That's not much of a lesson.

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Stimulus scuffle -- it will be really difficult to re-contextualize such discussions by year 2020.

But with public opinion quickly turning against the bill, and the House Republicans claiming the moral high ground as they held formation to oppose him, how could Obama be distanced from responsibility for elements of the bill under GOP attack and remain above the fray? That seemed to be the locus of White House concern, and according to those familiar with what happened, the "polarizing" Nancy Pelosi was designated to take the fall.

Rather than define the bill by its substance and make its opponents attack jobs creation, the strategy was to talk about process -- how everyone's ideas on both sides of the aisle would be welcome and that this bill would represent the best bipartisan thinking about how to face the current economic crisis. That left the door wide open for Republicans to step through and caterwaul that their ideas weren't being respected in this new halcyon world of bipartisanship, and somebody had to take the blame. Nancy Pelosi, come on down!

-- Jane Hamsher @ FDL

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Middle class faded out above $140,000 to $250,000 per year, back in 1993.

Paul Krugman, 1993 on Bill 'Middle Class Tax Cut' Clinton's tax plan:

Bill Clinton's economic program: higher income taxes for wealthy Americans. Families with taxable incomes above $ 140,000 currently pay a tax rate of 31 percent. The Clinton plan will raise that rate to 36 percent, and families with taxable income over $ 250,000 will pay 39.6 percent.

...
Suppose a couple earning $ 200,000 a year has a $ 600,000 mortgage, two children in expensive colleges, large car payments and lavish tastes.

Continue reading "Krugman and Clinton: middle class up to $250,000 in 1993" »

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The stimulus efforts could focus on public goods and durable infrastructure, taking advantage of a lull in private investment to deploy underutilized resources without
crowding out much private investment.

Or, the stimulus could just be a lot of walking around money.

Some street money comes from party fundraisers, like the Philadelphia Democratic Party's biannual Jefferson-Jackson dinner. But most of it comes directly from the candidates. Everyone from the presidential nominee to congressmen and state representatives are expected to chip in. (The top of the ticket usually contributes the most.) In Philadelphia, the candidate sends a check to the chairman of the city's Democratic Party, who then divides the money up among the 69 ward leaders, who in turn divvy up their cash among the 50 or so committee people in each ward. In 2004, John Kerry spent hundreds of thousands of dollars on Philadelphia street money, and ward leaders received checks for as much as $8,000. Individual volunteers can generally expect anywhe

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The companies doing the least hiring right now are very often the companies that offer the safest jobs.

-- Susan Houseman, a senior economist and labor expert at the Upjohn Institute, a research group in Michigan.

With employers shedding half a million jobs a month, some economists, like Nancy Folbre of the University of Massachusetts in Amherst, liken safe jobs to high ground amid the turbulent flood waters of lost employment.

"There is a danger in using the term 'safe jobs' for this perch," Ms. Folbre said. "That makes them sound like sinecures, and they are not."

Continue reading "Stable jobs available ? Dismal science answers." »

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The less money your peer group has, the more bling you buy, explains Virginia Postrel.

About seven years ago, University of Chicago economists Kerwin Kofi Charles and Erik Hurst were researching the "wealth gap" between black and white Americans when they noticed something striking. African Americans not only had less wealth than whites with similar incomes, they also had significantly more of their assets tied up in cars. The statistic fit a stereotype reinforced by countless bling-filled hip-hop videos: that African Americans spend a lot on cars, clothes, and jewelry--highly visible goods that tell the world the owner has money.

But do they really? And, if so, why?

The two economists, along with Nikolai Roussanov of the University of Pennsylvania, have now attacked those questions. What they found not only provides insight into the economic differences between racial groups, it challenges common assumptions about luxury. Conspicuous consumption, this research suggests, is not an unambiguous signal of personal affluence. It's a sign of belonging to a relatively poor group. Visible luxury thus serves less to establish the owner's positive status as affluent than to fend off the negative perception that the owner is poor. The richer a society or peer group, the less important visible spending becomes.

Russ Alan Prince and Lewis Schiff describe a similar pattern in their book, The Middle-Class Millionaire, which analyzes the spending habits of the 8.4million American households whose wealth is self-made and whose net worth, including their home equity, is between $1 million and $10 million. Aside from a penchant for fancy cars, these millionaires devote their luxury dollars mostly to goods and services outsiders can't see: concierge health care, home renovations, all sorts of personal coaches, and expensive family vacations. They focus less on impressing strangers and more on family- and self-improvement. Even when they invest in traditional luxuries like second homes, jets, or yachts, they prefer fractional ownership. "They're looking for ownership to be converted into a relationship rather than an asset they have to take care of," says Schiff. Their primary luxuries are time and attention.

Continue reading "The less money your peer group has, the more bling you buy" »

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The New York Times looks at the impact of gathering at Sundance to watch environmental films.

Still, a stroll here this week down Main Street -- where a dozen idling trucks were unloading supplies and equipment, while an oversize band bus, with trailer in tow, spewed fumes outside a soon-to-be-busy party site -- framed the obvious quandary: how can you cram some 46,000 people, roughly equivalent to a fifth of Hollywood's total work force, into a pretty little mountain town without contributing mightily to the problems your films hope to solve?

...

Utility officials said there was no way to determine how much extra wattage was being poured into the valley for the festival's spotlights and the strings of colored bulbs lining Park City's streets. "Pinpointing use for one city," said Margaret Oler, an information officer with Pacificorp, which provides power to the area, "can be pretty difficult."

Most electrical implements, bulbs included, have power consumption in Watts printed right on them.

MOVIES
The Films Are Green, but Is Sundance?
By MICHAEL CIEPLY
Published: January 17, 2009
This year's Sundance Film Festival has a schedule that's greener than Fifth Avenue on St. Patrick's Day, but what's the environmental impact of the festival itself?

Continue reading "Environmental impact of environmental events" »

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Facebook's targeted advertising throws up three very similar adjacent display placements onto one page. Is this evidence of a price searching algorithm, to ween wages too low to be tempting, or too high to be believed (not to mention too high to be actually available) ?

$92/hr ?

$75/hr ?

$88/hr ?

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Looking at upper-middle-class homes, Lareau describes a parenting style that many of us ridicule but do not renounce. This involves enrolling kids in large numbers of adult-supervised activities and driving them from place to place. Parents are deeply involved in all aspects of their children's lives. They make concerted efforts to provide learning experiences.

Home life involves a lot of talk and verbal jousting. Parents tend to reason with their children, not give them orders. They present "choices" and then subtly influence the decisions their kids make. Kids feel free to pass judgment on adults, express themselves and even tell their siblings they hate them when they're angry.

The pace is exhausting. Fights about homework can be titanic. But children raised in this way know how to navigate the world of organized institutions. They know how to talk casually with adults, how to use words to shape how people view them, how to perform before audiences and look people in the eye to make a good first impression.

Working-class child-rearing is different, Lareau writes. In these homes, there tends to be a much starker boundary between the adult world and the children's world. Parents think that the cares of adulthood will come soon enough and that children should be left alone to organize their own playtime. When a girl asks her mother to help her build a dollhouse out of boxes, the mother says no, "casually and without guilt," because playtime is deemed to be inconsequential -- a child's sphere, not an adult's.

Lareau says working-class children seem more relaxed and vibrant, and have more intimate contact with their extended families. "Whining, which was pervasive in middle-class homes, was rare in working-class and poor ones," she writes.

But these children were not as well prepared for the world of organizations and adulthood. There was much less talk in the working-class homes. Parents were more likely to issue brusque orders, not give explanations. Children, like their parents, were easily intimidated by and pushed around by verbally dexterous teachers and doctors. Middle-class kids felt entitled to individual treatment when entering the wider world, but working-class kids felt constrained and tongue-tied.

David Brooks

Continue reading "Today's rich don't exploit the poor they just outcompete them." »

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For example, four-in-ten Americans with incomes below $20,000 say they are middle class, as do a third of those with incomes above $150,000. And about the same percentages of blacks (50%), Hispanics (54%) and whites (53%) self-identify as middle class, even though members of minority groups who say they are middle class have far less income and wealth than do whites who say they are middle class.

Some 53% of adults in America say they are middle class. On key measures of well-being -- income, wealth, health, optimism about the future -- they tend to fall between those who identify with classes above and below them. But within this self-defined middle class, there are notable economic and demographic differences. For example, four-in-ten Americans with incomes below $20,000 say they are middle class, as do a third of those with incomes above $150,000. And about the same percentages of blacks (50%), Hispanics (54%) and whites (53%) self-identify as middle class, even though members of minority groups who say they are middle class have far less income and wealth than do whites who say they are middle class.

Pew, Inside the Middle Class: Bad Times Hit the Good Life (2009 April)

Reason

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University of Illinois law professor Larry Ribstein has been a pioneer in the study of how private partnerships have been used as alternatives to solving sticky problems of corporate management.

Much of his work has centered on the problem of aligning managers' and owners' interests. He notes that the private partnership model popular in the private equity world might be very useful for Goldman here.

Continue reading "Larry Ribstein, private partnerships have been used as alternatives to solving sticky problems of corporate management" »

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we will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s. We'll invest your precious tax dollars in new and smarter ways, and we'll set a simple rule - use it or lose it. If a state doesn't act quickly to invest in roads and bridges in their communities, they'll lose the money.

-- Obama's Key Parts of the Jobs Plan, 2008 December 6

Would spending on planning, consultants, policy, publicity, media relations, public relations folks create more middle class jobs, before the actual construction began ?

Interestingly, there's nary any talk of building prisons to releive overcrowding.

On airport expansion, Coruscation presents the sorry case of SFO's parallel runway for frequent flyiers.

SFO shelved the runway project in June after $75 million worth of
studies. Airport Director John Martin cited a lack of political will
in pushing the controversial project and the shakiness of the
airport's finances.

64% of County residents support runway expansion, poll reports
Tuesday, December 16, 2003, in the San Mateo County Times

The airport spent money on services that had little to do with
studying the environmental impacts of expanding the airfield, and
items such as public relations and lobbying were sometimes hidden in
contracts for engineering or environmental work, according to the
audit.

Audit criticizes S.F. Airport on runway plan
Lavish spending on consultants cited in report to supervisors
Thursday, May 22, 2003, in the San Jose Mercury News

The consultants have included Attorney Karen Skelton, a former deputy
in the Clinton-Gore administration; Brown's campaign strategist Barry
Wyatt; and Jon Rubin, Brown's appointee to the Metropolitan
Transportation Commission. SFO hired Rubin's firm, Bay Relations.

Supervisors gut SFO runway expansion study
$5 million yanked, put into reserve
Tuesday, June 25, 2002, in the San Francisco Chronicle

Specifically, the airport director suspended environmental studies
looking into the viability of a proposal to extend the airport's
runways into San Francisco Bay -- a review that already has taken
four years, cost $75 million and is 80% complete.
...
Executives also have had to contend with a recent audit of the
airport's books that alleged airport officials mismanaged $75
million spent to study the runway extension plan.

Rose, who relied in part on a random sample of invoices, found that
consultants billed the bureau for unusually high airfare, lodging,
equipment and telephone costs. These included round-trip airfares to
Washington for $4,252, a $799 dinner at the Bacchanal restaurant in
South San Francisco and a $4,686 phone bill for an airport
contractor for one month. Consultants also billed the bureau an
average of $16,646 each for three Dell computer workstations with no
explanation for the high cost, Rose said.

Future Cloudy for San Francisco Airport
Declining passenger traffic and a setback in a project to extend its
runways leave executives with more questions than answers.
Tuesday, June 10, 2003, in the Los Angeles Times

Continue reading "Build it ready or not" »

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The Dojinkai is one of the country's 22 crime syndicates, employing some 85,000 members and recognized by the government.

Traditionally, the yakuza have run protection rackets, as well as gambling, sex and other businesses that the authorities believed were a necessary part of any society. By letting the yakuza operate relatively freely, the authorities were able to keep an extremely close watch on them.

Continue reading "Traditionally, the yakuza have run protection rackets, as well as gambling, sex and other businesses" »

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One report has 'vice' stocks headed down in a recession.

think about "sin industries", the classic countercyclicals. Until now, that is. Vegas is crashing hard, and not just because of its real estate bubble. Can porn and malt liquor be far behind? Is this the moment that amateur porn has been waiting for--just as people have more dinner parties and less dining out during downturns, will people start making their own, er, fun at home?

See also Socially conscious /ethical investing.

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A TED talk, The Shadow Cities Of The Future and Why Squatter Cities Are A Good Thing by Robert Neuwirth, author, Shadow Cities: A Billion Squatters, A New Urban World, gives a different take on development economics, from mud hut cluster to developed city, with or without debt and property rights.

Video after jump.

Continue reading "Why Squatter Cities Are A Good Thing ?" »

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"Kent Hance was a down-home boy, real homey, and George W. wasn't homey like Kent," recalled Johnnye Davis, a Republican leader in Odessa. "He didn't come across to the voters as well as Kent did, with the little jokes that Kent told."

While Mr. Bush now is sometimes mocked for an ignorance of policy details, back then people thought he had the opposite problem: a tendency to drop references in his speeches that baffled audiences, like a discussion of anti-inflationary economic policy.

"He was quick, a bit too quick, so that people didn't always get it," Mrs. Davis said. "He was so darn intelligent that a lot of what he said went over people's heads. He's learned to explain things a little better since then."

Another problem was that while Mr. Bush never really had a clear campaign strategy, Mr. Hance did: he focused his campaign on emphasizing local ties and on casting Mr. Bush as a carpet-bagger from the East. One of Mr. Hance's most effective radio spots was this one, read by an announcer:

"In 1961, when Kent Hance graduated from Dimmitt High School in the 19th congressional district, his opponent George W. Bush was attending Andover Academy in Massachusetts. In 1965, when Kent Hance graduated from Texas Tech, his opponent was at Yale University. And while Kent Hance graduated from University of Texas Law School, his opponent" -- the announcer's voice plunged -- "get this, folks, was attending Harvard. We don't need someone from the Northeast telling us what our problems are."

Continue reading "Bush in 1978: before playing country cowboy" »

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44's Economic transition team to rescue the middle class and offer more stimulus.

Video after break.

Continue reading "Barack's economic rescue" »

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The field of social psychology provides a possible answer. In his classic 1972 book, "Groupthink," Irving L. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes. People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.

Continue reading "Worry about relevance, do not deviate from the consensus" »

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A show of hands at an Obama rally Thursday after the candidate asked who made less than $250,000. Senator Barack Obama says those middle class audience members would benefit from his plan.

Mr. Obama opposes extending President Bush's tax cuts. Instead, he proposes various tax breaks, including a $500 tax credit for each person in a household who works, a larger child care tax credit, a $4,000 tax credit each year for the first two years of college, and eliminating all income taxes for those over 65 with income less than $50,000 a year.

Mr. McCain also proposes giving many households a $5,000 tax credit when they buy family health insurance, which costs $12,000 nationwide on average.

Previously: Charles Gibson of ABC: $200,000 a year was a middle-class income.

Continue reading "Under $250,000 is middle class: Obama" »

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The definition of middle class is in flux. Many try to quantify and specify it in income terms.

Here's Charles Gibson of ABC (Via Paul Krugman): suggested that $200,000 a year was a middle-class income.

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Short list of Laureate top candidates for the Nobel Economics Prize, 2008

Eugene F. Fama (WSJ reports Fama is the front runner, given the efficiency of markets to represent all available information, as demonstrated by betting)
Lars P.Hansen
Thomas J. Sargent
Armen A. Alchian and Harold Demsetz
Martin Feldstein
Jean Tirole

Other top contenders:

Robert J. Barro
Jagdish N. Bhagwati (with Avinash K. Dixit)
Eugene F. Fama (with Kenneth R. French)
Oliver D. Hart:
Dale W. Jorgenson:
Paul R. Milgrom

The nominating processes explained:nobelprize.org

Continue reading "Nobel Economics Prize, 2008" »

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There was a lot of talk about a Greenspan put and whether Bernanke and the FOMC would continue it, or whether they were trying to take it away by holding firm on rates. Whatever the state of that "put" we know now that there is an ECB put for sure, given how quickly the ECB intervened to fend off what it perceived to be a problem. That the ECB flooded the market with liquidity is both interesting, and understandable, given that the ECB doesn't have Lender of Last Resort (LLR) powers.

What should have happened (and this is still a missing piece of information) under the current arrangements within the European system of central banks is that BNP, or any other bank experiencing a liquidity problem, should have had access to its respective central bank's Lombard facility. But the ECB stepped in ahead of the national central banks. The ECB does have the authority to provide liquidity, but doesn't have systemic risk responsibility, except for payments system stability. The event points out how important it is for the ECB to have its LLR powers clearly defined, and there is a need to ensure coordination across the two functions.

-- Robert Eisenbeis, via WSJ.

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Overheard on the internet:

I remember working on an ad campaign for MCI-Sprint at my first agency job out of college. It targeted the poorer areas of Philly, Camden, Newark, etc. The point of the campaign was that you did not have to have good credit or have to go through a credit check in order to receive a phone. When it launched the second question the people were asked was "what credit card would you like to use"'. Not one person at corporate could figure out that people with poor credit generally don't have credit cards.

Posted at Brownstoner by: anon at May 30, 2007 12:06 PM

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Shadow Government Statistics promises 'Analysis Behind and Beyond Government Economic Reporting': shadowstats.

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Creative destruction is only half of Schumpeter's message. Far less in vogue is his projection that entrepreneurs will disappear as innovation becomes mechanized in corporate labs - as it has today in Japan - and that ultimately the very success of capitalism will beget socialism. Will creative destruction give way to central planning? Not necessarily, says Harvard's Clayton Christensen. "What happened in Japan is exactly what Schumpeter envisioned," he argues. "But here, folks just leave - they pick up venture capital on the way out, and they start new disruptive corporations." So as long as Washington encourages an infrastructure that supports entrepreneurship, creative destruction can continue after all.

Continue reading "Creative destruction: another look at Japan's lost decade" »

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Summer music festivals go posh, report from Europe, via WSJ:

Summer rock music festivals, long the preserve of teens and twentysomethings, are increasingly becoming familiar territory for a generation that still remembers the hits of the 1970s and '80s even as it keeps up with current stars. Concert promoters are starting to cater to the needs of this older crowd of festival-goers, many of whom are looking for something more than mosh pits, fast food and porta-potties -- and who can afford multiday tickets costing between €150 and €250.

"They still want to experience the buzz of the festival, they still want to have the excitement of the festival, but they don't want to sleep in a two-person tent anymore," says Melvin Benn, managing director of Festival Republic, which promotes the Leeds, Reading and Glastonbury festivals in the U.K. "They don't want to rough it in quite the same way."

A Grown-Up's Guide To Summer Rock Festivals
By GABRIELE STEINHAUSER, 2008 July 10

An opposing take says concerts are offering cheap tickets as they have difficulty filling venues-- Barry Ritholtz / Big Picture in 2008; and in 2005.

Continue reading "Concert Economy: getting bundled and amenity-riden, or getting cheap and amenity-stripped ?" »

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urbandigs tracks real estate in NY -- more aimed at investors than at consumers.

Update 2010 Nov.:

blog compares Midtown East with Midtown West.

See also time series charts: Noah Rosenblatt of UrbanDigs has created a unique realtime tool for tracking Manhattan RE.

[ via BigPicture. ]

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Megan vs Brooks on frugalness as an American value; an economic history of debt in America.

Popup video: Megan McArdle on debt in America

[Economist video]

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The best option is probably to tie the size of Medicare benefits
to a person's lifetime income, which is relatively easily measured
and hard to game, rather than to one's income or assets in any
current year. In essence, higher earners would receive lower
benefits instead of facing the prospect of higher taxes, as current
trends predict.

-- Tyler Cowen

Economic View
Means Testing, for Medicare
By TYLER COWEN
Published: July 20, 2008
No matter who sits in the Oval Office next year, there won't be many degrees of freedom in the federal budget. The main problem: Medicare.

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The RC-C section in a FDIC CALL report shows loans secured by
real estate. Manually add up the various detail lines in RC-C,
subheading 1, to get the totals.

Total Assets - $2.118B
(RC-C.1) Loans secured by real estate $1.360B ( 64.2% )

Where does one get the RC-C.1 data?

Each bank submits CALL data to the FDIC on a quarterly basis.
The data usually becomes available 15-30 days after the quarter
ends.

Search for banks and download/view as PDF data at the FDIC
Institution Directory.

[Via CR/Comments]

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Decreasing marginal utility of stuff is an argument against
large current investments in climate change mitigation.
Basically, future generations will (presumably) be richer
than us. So, our sacrificing now to help them amounts
to a regressive intergenerational redistribution.

-- Overheard.

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Update 2008: Fama and Barro are still contenders.

Who will win the Nobel Prize in economics ?
Coruscation presents the short list:

Eugene Fama
Robert Barro
Jagdish Bhagwati (with Amy Chua)
Oliver Williamson
Sargent and Wallace
Jean Tirole
Lars Hansen
Walter Block and Naomi Klein

See also MR and GM.

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Efrons Dice are like Rock Paper Scissors
for the expected utility theorist.

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Several comments have criticized Krugman for shifting his position,
but I think what has shifted is the second part. He still knows all the
models, and the models he prefers still work as well as ever. But as
for guessing which applies right now in the face of insufficient
information, all he can do is place a wager. It might be better than
most non-economists can do, but it might not be that much better,
and it might be worse than some people can do out of just happening
to have the right kind of intuition for the current situation--or simply
holding doggedly to the same single bullet theory until it finally
happens.

From Krugman Was An Economist

Update 2007 Sept: What's not to like about Paul Krugman.

Posted by at 6:10 AM | Permalink | Comments (0)

Digital Money Forum keeps on top of electronic payments.
Example: ATM anniversary.

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New Papers at National Bureau of Economic Research (NBER).

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Paymentswatch, an early adopter consumer guide to electronic payments.

Posted by at 9:08 PM | Permalink | Comments (0) | TrackBacks (0)

digitaltransactions archives on electronic payments.

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Aneace Haddad on interpayments systems, settlements, transactions and
merchant banking.

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banktechnews about payment, transactions and settlements.
Blocking ACH Fraud and debit filters

Continue reading "Bank Tech News" »

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bankersonline resource for banking regulation and practices.
Example: HMDA tour (eg Borrower Isn't
Homeowner, HMDA Reportable ? )

Continue reading "Bankers Online" »

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paymentsnews, example of mobile-phone based transactions.
Excellent design.

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linkdumponpayments, very Dutch: unknowingly satisfied.

Posted by at 1:59 AM | Permalink | Comments (0) | TrackBacks (0)

Accrued Interest aka accruedint, smart about finance and economics.
Why Home Depot should borrow more.

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atbozzo, curmudgeonly economist.

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Susan Athey's applied econometrics and heterogeneity of mentorship
wins a Clarke medal, awarded to the most accomplished economist
nearing 40 and is the most distinguished prize short of a Nobel.
Bio.

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In a group health plan, the employer typically pays a large
share of the premium, so most employees sign up as
soon as they are eligible, regardless of their health status.

The health plan covers a mix of sick and healthy workers.
By contrast, individuals and independent contractors are
more likely to defer coverage until they need it, so the pool
of people insured is, over all, less healthy. Sick people
consume more health care. As a result, the cost to insure
them is higher.

Janet S. Trautwein, executive vice president of the National Association
of Health Underwriters, which represents insurance agents and brokers.

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economist freeexchange economics and public policy.
Adverse selection in healthcare, about inequality.

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Dean Baker: business reporting is not not leftish enough.

Posted by at 2:23 AM | Permalink | Comments (0) | TrackBacks (0)

Division of Labour econ blog finds Milton Friedman week,
with market conservative leanings.

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Greg Mankiw on behavioural economics.

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FX: US$ vs Euro, US$ collapsed 2002-2005.
Noted by Bond Dad.

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Y Tu Mama Tambien (2001).
Why did Alfonso Cuaron return to Mexico to make it?

Because he has something to say about Mexico, obviously,
and also because Jack Valenti and the MPAA have made it
impossible for a movie like this to be produced in America.
It is a perfect illustration of the need for a workable adult
rating: too mature, thoughtful and frank for the R, but
not in any sense pornographic.

Why do serious film people not rise up in rage and tear
down the rating system that infantilizes their work?

-- Roger Ebert.

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"What really increases the risk of mortgage
default is if you have this payment shock coupled
with a weak economy, because a weak economy
means unemployment,"

"Family incomes are lower. And then if you layer
on top of that a payment shock, that's a trigger
event that may very well lead to a default."

quote, Frank Nothaft, chief economist at Freddie Mac.

Economic commentary, 2003-2005

Continue reading "Who's Who: mortgage economists: Frank Nothaft, Freddie Mac" »

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Economics Books, Economics texts via Alex and Tyler (MR).

This list lacks empirical, practitioner guidance, such as
Econometric Analysis by William H. Greene.

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We don’t have any house price indexes that get it right
-- Todd Sinai, an associate professor of real estate at the
Wharton School of the University of Pennsylvania. bio, home,

Continue reading "Who's who of Real Estate economics 3: Todd Sinai" »

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Once a sales contract is signed, there's no way of recording
the cancellation or putting the home back in inventory.
Builders keep track of gross and net sales; we don't have a
net sales number from Commerce.

-- Dave Seiders, chief economist at
the National Association of Homebuilders in Washington.

The Census Bureau, which is one of the Commerce Department's
statistical agencies, counts an initial new home sale: Sales go
up and the ``for sale'' inventory is reduced. If the sale is
canceled, it isn't reflected in revisions to previous months.
What happens? When the home is ``resold,'' statisticians
ignore that transaction.

We don't double count.
-- Steven Berman, the survey statistician for the residential branch
of the Census Bureau's manufacturing and construction division.

Continue reading "Who's who of Real Estate economics 2: Dave Seiders, National Association of Homebuilders" »

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CreditSlips covers consumer lending from an
aspiring consumer protectionist regulator perspective.

Generally well informed and level headed:
debt trading,

Consuming is where consumers feel in control
(compare to John Fiske, "Shopping for Pleasure: Malls, Power & Resistance").

Innumerate: one number represents the whole population ?

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Rent to mortgage payment ratio.

Mortgage payments are senitive to interest rates.
Are rents less sensitive to interest rates ?

Then why would we exprect a constant
mortgage payment to rent ratio ?

Posted by at 1:32 AM | Permalink | Comments (0)

Invest in foreign emerging market ETFs.

Debt to foreigners and medicare costs will crush baby boomer
Americans during their retirement age.

-- Ben Stein.

And his criticts: BusMovie, on options backdating.

Continue reading "Ben Stein" »

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The heretic J. Bradford DeLong must confess his sins to St Maynard.
You know perfectly well that you have been fascninated by the
Heyekian model since you were an undergraduate. Your effort
to accuse Paul Krugman of the Hayekian/Arian Heresy based
on the claim that not all capital is Homoosian is pure projection.

Arian refers to Arius a theologian who disagreed with the
Nicean crede and not to any alleged race. Homoosian means
"of the same substance," the Nicean crede holds that God the
son and God the father(and the holy spirit) are homoosian.
However, I now realise that the Solovian doctrine that capital
is schmoo is fundamentally Nicean and that the Hayekian
Heresy is similar to the Arian Heresy.

I am shocked that even Paul Krugman has feet of clay
(I thought he had feet of putty).

-- RJ Waldmann, 2005 May 27.

Posted by at 4:24 AM | Permalink | Comments (0)

Are interns underpaid and exploted ?
Yes: Anya Kamenetz, Cokie Roberts (NYT)

It's something that really makes me nuts. By setting up unpaid
internship programs, it seems to me that without completely
recognizing it, it sets up a system where you are making it ever
more difficult for people who don't have economic advantages
to catch up.
-- Cokie Roberts, an ABC News correspondent at a gathering
of Congressional interns.

No: Will Wilkinson, VoxBaby, TheStalwart, Daniel Gross.

Maybe: The Prospect.

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Mortgage Payment Reset: The Rumor and the Reality.

Our nation is a $10 trillion-per-year economy currently possessing
$19 trillion in household asset value and $11 trillion in homeowner’s
equity. Losses of $110 billion – spread over several years – would
come to only about one percent of the total national homeowners’
equity.

Currently the economy is growing at about 3 percent per year,
adding about $300 billion per year to our national income. Losses
of $30 billion in a year would consume only one-tenth of this
increase, the equivalent of slowing the growth rate from 3% to 2.7%.
According to the Mortgage Bankers Association of America, mortgage
lending totals from $2 trillion to $3 trillion per year. The yearly reset
losses anticipated by this paper would constitute only about one
percent of the total annual lending amount.

Christopher Cagan, director for research and analytics at
First American Real Estate Solutions. PDF
[via NYT]

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Stephen Roach of Morgan Stanley New York revisits value analysis by Graham and Dodd.
Optimistic ?

Refs: Security Analysis by Benjamin Graham and David Dodd.

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Mortgage Valuation and Optimal Refinancing, Pliska (2006)

Landholders, Residential Land Conversion, and
Market Signals, Margulis (2006)

Mortgage Payment Reset: The Rumor and the Reality,
Christopher Cagan (2006)

Option-Theoretic Prepayment Model for Mortgages,
Fabozzi, Kalotay and Yang. (2004)

The Complexities of Mortgage Options,
Prendergast (2003)

Optimal Recursive Refinancing and the Valuation of
Mortgage-Backed Securities, Longstaff (2002)

Best-Practices in Mortgage Default Risk Measurement and
Economic Capital, Kaskowitz, Lundstedt (2002)

Mortgage Banking, Comptroller’s Handbook (1998)

Subprime mortgage rate spread at origination

Residential Mortgage Termination and Severity,
De Franco. (1994)

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Greg Mankiw opines economically, mostly on current events, for
the benefit of his undergraduate Economics class.

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No tax attorney needed if Turbo Tax is as good as advertized.
Turbo Tax 1: 1040 EZ
Turbo Tax 2: all 1040
Turbo Tax 3: all 1040 and Schedule C
Turbo Tax 3: all 1040 and Schedule C and professional review and additional audit defense
-- as good as a tax attorney ?

Posted by at 9:36 PM | Permalink | Comments (0)

Ranked by tax attorney or tax CPA ? No.
State by state federal taxing and spending ranked.

Income of out-of-state workers who work via email and
telephone and often have little or no physical contact
with the state.

“The growing practice of multiple states taxing the income
of telecommuters acts as a direct financial disincentive for
employers and employees to use telecommuting.”
-- Tax Attorney

Posted by at 9:45 PM | Permalink | Comments (0)

Speculative markets in essence offer to pay anyone who sees a bias in
current market prices to come and correct that bias.

Speculative market estimates are not perfect. There seems to be a
long-shot bias when there are high transaction costs, and perhaps
also excess volatility in long term aggregate price movements. But
such markets seem to do very well when compared to other
institutions.

-- Futarchy: Vote Values, But Bet Beliefs by Robin Hanson.

Posted by at 9:57 PM | Permalink | Comments (0) | TrackBacks (0)

Tim Worstall's Obvious or Trivial Except ... examines the
political economy of Paul Krugman.

Posted by at 3:53 AM | Permalink | Comments (0) | TrackBacks (0)

Stumbling and mumbling econoblog looks at a winner's curse
-- how to over bid in an auction.
And opposes Managerialism.

Posted by at 11:51 PM | Permalink | Comments (0) | TrackBacks (0)

d-squared digest; jump into threads late.
Lefty English snark.

Posted by at 4:49 PM | Permalink | Comments (0) | TrackBacks (0)

normblog / Norman Geras profiles Tyler Cowen.

Posted by at 8:10 AM | Permalink | Comments (0) | TrackBacks (0)

New Palgrave Dictionary of Economics and the Law is previewed
(links to chapter PDFs) at the New Economist.

Posted by at 7:42 AM | Permalink | Comments (0) | TrackBacks (0)

Catallarchy -- praxiology for the masses: example.

Posted by at 11:29 AM | Permalink | Comments (0)

Nouriel Roubini's first rate economics blog offers an
essay of macroeconomic commentary about weekly.
Quick off the mark with commentary on new Fed Chairman
nominee on Ben Bernanke.

Previously: Roubini Global Economics.

Posted by at 7:54 PM | Permalink | Comments (0)

Smart Economist short shart briefings.

* Sample paper: What Determines International Migration Flows ?
* Sample topic: FINANCIAL MARKETS & INSTITUTIONS

Posted by at 11:39 PM | Permalink | Comments (0)

The mess that Greenspan made: example: how China's investment in the USA in 2005
is different from Japan's investment in the USA in 1985.

Posted by at 10:29 AM | Permalink | Comments (0)

Voluntary Exchange is a small econ and public policy blog.

Posted by at 5:15 PM | Permalink | Comments (0)

Bill Testa covers the US Mid-West economy for the
Federal Reserve Bank of Chicago.

Where is the Mid-West ?

Posted by at 1:08 PM | Permalink | Comments (0)

macroblog looks at Shiller's claims of a housing bubble is about
about to burst.

Is the increase in housing indexes due to bigger, better houses,
or an genuine increase in the overall housing market ?

Housing price vs housing quality, now with quality control.

Posted by at 8:40 PM | Permalink | Comments (0)

Brad Sester's blog-portal of international and macro-economy.

Posted by at 12:24 AM | Permalink | Comments (0)

Cunning Realist newsy commentary. Examples: risk transfer and social security reform *,
New Orleans flood Reality ** (vs AS's version, Hit and Run's version).

Posted by at 8:51 PM | Permalink | Comments (0)

The Stalwart's interesting business coverage, such as:
What's Really Wrong With Dell ?, on the celebrity industry:
The Case For Paparazzi.
Also a real estate analysis.

Update 2009 May: Occasional co-author Vincent Fernando launches Research Reloaded.

Update 2008 October: now at Clusterstock.

Update 2008 August: Fluffy bits at Josephweisenthal.com.

Update: Less frequent after spring of 2006, but came back in April 2007.
Also, 2007 August, was guesting at TechDirt.

Continue reading "The Stalwart / Joseph Weisenthal" »

Posted by at 12:39 PM | Permalink | Comments (0)

Daniel Gross, economic commentator, is consumer-centric
and a left-leaning fact checker

Posted by at 12:37 AM | Permalink | Comments (0)

Financial Rounds on how to argue gently *.

See also Suzette Haden Elgin ...

FR visits the FMA and finds another golden oldie: NotN.

Continue reading "Financial Rounds: Academics argue gently" »

Posted by at 11:22 PM | Permalink | Comments (0)

How I Learned to Love Economics (New Economist)

NewEconomist, sample:

Going on the job market got rid of my self-esteem problem.
There's nothing like explaining why your work is important to a
new captive audience every 30 minutes to make you believe that your
work really is interesting and important.

At some point it dawned on me, I really did want to be a professor.
I can work hours and hours without stopping, so long as I get to
sleep in the next morning. (If only I felt that way about exercise.)
I like being able to choose my own short-term deadlines. I like doing
research. I have important questions to answer and I enjoy the freedom
to work on them.

The process of completing my dissertation has made it much easier
both to come up with new research topics and to figure out, ahead of
time, which projects might be viable. I know which subfields in my
area are understudied. I know what data sets have or don't have the
information I would need to answer those questions. Literature reviews
for new projects bring up questions that beget future work. I have an
agenda.

Posted by at 10:08 AM | Permalink | Comments (0)

Buy a fund of funds or a hedge fund index ?
Measure risk with more than Sharpe ratio and multi-factor models.

edhec-risk reports research on investment alternatives.
Indexes and benchmarking
Multi-style multi-class risk allocation
Style and Performance analysis.

With very Germanic style:

Unique Access to all Information

Edhec-risk.com offers a unique access to all information appearing in
the different sections and archives. The information is accessed using
a search engine which generates both the key words and the content of
available documents. All the information available on the site is
accessible in relation to the key themes that correspond to the
Centre’s research programmes.

Continue reading "edhec-risk hedge fund research" »

Posted by at 8:50 PM | Permalink | Comments (0)

Effects largely captured by a single variable: spread at origination
(SATO). SATO measures the difference in the mortgage rate between the
specified loan and a constant-quality subprime mortgage rate. Assuming
that lenders price borrower risk efficiently, a higher SATO
implies a poorer-credit borrower.

Search for more .

Posted by at 5:18 PM | Permalink | Comments (0)

Econbrowser, time series economist looks a current economic, investment
and business news.

Posted by at 11:35 AM | Permalink | Comments (0)

Economics Roundtable aggregates interest rates, markets and other
economics topics.

Posted by at 1:01 PM | Permalink | Comments (0)

Hayek's theory of depressions was that they started when, for some
reason, interest rates got too low--below fundamentals. If
interest rates are low, asset prices are high--above their
fundamentals. Because financial markets are sending false signals that
capital--whether in the form of machines, business organizations,
commercial buildings, or housing--is very valuable, the market shift
resources into capital-producing sectors and adds to its capital
stock.

Someday, however, interest rates return to their fundamentals. When
they do, asset prices fall sharply: it becomes clear that there are a
lot of business organizations, machines, commercial structures, and
houses that do not produce value to cover their costs. The last thing
needed is more investment. Workers, entrepreneurial energy, and
capital have to be shifted out of capital-goods production and into
the production of consumer goods and services. And, said Hayek, it is
that painful, lengthy, but necessary process of shifting resources out
of capital-goods production that we call a "depression."

In Hayek's monetary overinvestment theory of the business cycle, the
magnitude of the depression depended on the magnitude of the required
structural shift, which depended on (a) how much interest rates had
been pushed below fundamentals, (b) how long they had been pushed
there, and (c) how much damage--in terms of capital investments that
should not have been made given fundamental values--the false prices
fed to the real economy by the financial sector had done.

See also Interest rate modelling.

Continue reading "Hayek's theory of business cycle" »

Posted by at 12:44 PM | Permalink | Comments (0)

Paul Kedrosky / Infectious Greed
Technology aware musings on money culture, with a keen eye
for interesting or jarring research. Great weekend reading.

y the executive director of the William J. von Liebig Center for Entrepreneurism
and Technology Advancement at the University of California, San Diego.

Continue reading "Infectious Greed" »

Posted by at 8:31 PM | Permalink | Comments (0)

New Yorker, car fan, and economist Barry Ritholtz's Big Picture, a well presented
peresonal economic journal. Sample article, Homeowners Go Deep in Debt to Buy
Real Estate.

Also writes as Amateur Investor columnist at The Street / Real Money.

Update 2008 Noverber: Now at Ritholtz.com: example.

Continue reading "Big Picture / Barry Ritholtz" »

Posted by at 7:29 PM | Permalink | Comments (0)

Capuchinomics: *.

Behavioural finance analysis of market trends, especially housing bubble.

Yet, efficient market theory cannot answer these questions:

-Why do companies with stable cashflows, earnings, sales and profit
margins have such volatile stocks?

-If the financials are stable, why is there so much trading?

-Why do prices change so much from day to day or month to month?

-Is that much value created and destroyed in such small time frames?

-Why do stocks increase or decrease by large amounts when often the
underlying financials only change by incremental amounts?

Continue reading "behavioural finance at capuchinomics" »

Posted by at 3:35 AM | Permalink | Comments (0)

Inmann, mortgage blogger, is barkerishly spammy.

Useful listing of mortgage headlines; links are to pay-per-view versions
of what can was distributed by wire services.

Posted by at 7:59 PM | Permalink | Comments (0)

Glyn Holton's Risk Glossary explains common terms such as capital asset
pricing model (CAPM).

Posted by at 2:48 PM | Permalink | Comments (0)

Robert Shiller speaks about Real Estate and 'Irrational Exuberance' on NPR.

More and more home owners are refinancing, and a full quarter of
homes sold last year went to investors instead of live-in homeowners.
How long can this hot market last, and when it ends, are we looking at
a minor chill, or a full-blown ice age?

Posted by at 6:12 PM | Permalink | Comments (0)

Calculated Risk offers nicely illustrated economics.

There has been a significant increase in mortgage brokers. There
has been a similar increase in residential building trades, appraisers,
home inspectors and other housing related occupations. The
impact of a housing slowdown on employment will be significant.

What will the end of the refinance boom and the housing boom
do to the mortgage industry ?

Continue reading "Calculated Risk" »

Posted by at 4:20 PM | Permalink | Comments (0)

Economistsview offers leftist hardcore partisan commentary, often Oregon-centric, posing as economic analysis. (archives).

Update 2006 May: value added.
Update 2005 October: Offers pointers to academic papers and Fed speeches.

Update 2010 Jan:
at CBS MoneyWatch. They named it named Maximum Utility 1,

Posted by at 2:01 PM | Permalink | Comments (0)

Torto Wheaton Research (TWR) studies commercial real estate.
Their Debt Risk Management has a nice list of features. See also
Portfolio strategy and misc research desk.

Continue reading "Torto Wheaton Research (TWR)" »

Posted by at 7:02 PM | Permalink | Comments (0)

CRE: Centre for Real Estate is mostly about town planning,
environment and architecture, but also publishes on economic
topics such as, Is There a "Bubble" in US Housing Markets ? [PDF, 298k]

Continue reading "Centre for Real Estate" »

Posted by at 7:58 PM | Permalink | Comments (0)

PMI's Economic and Real Estate Trends (ERET): [PDF, cached]

Economic and Real Estate Trends is a narrative publication based on an
internally developed PMI model. Issued quarterly, the report includes
commentary on the national economy and regional housing price trends.
In addition, select metropolitan areas are analyzed. The 50 most
populated metropolitan areas are featured in a tabular presentation
(Metropolitan Area Economic Indicators), based on a statistical model
utilizing economic data, real estate variables and market expertise.
The model provides several risk measures to gauge relative residential
lending risk.

Posted by at 4:20 PM | Permalink | Comments (0)

DataBasics walks you through the essentials of Texas economic data.
The articles present numeric operations that economists use to make
data more meaningful. The data definitions are descriptions of
frequently used Texas economic variables that, taken together, help
paint a picture of statewide economic activity.

Texas economic variables.

Posted by at 3:26 PM | Permalink | Comments (0)

In the Agora is a nice name for an Indianapolis-centric current
events blog by Zach Wendling and Paul Musgrave.

Recent controversies: Daylight Savings time.

Posted by at 12:30 AM | Permalink | Comments (0)

The Mortgages Blog (by weblogsinc) is frequently updated with
mortgage industry news mixes some news items and more outside
links with descriptions.

Bankrate is potpourri of mortgage and consumer finance content,
more written for consumers than lenders, and syndicated onto
many consumer sites.

Posted by at 4:37 PM | Permalink | Comments (0)

The sports economist by Skip Sauer covers stadium economics,
player-league bargaining, and more.

Posted by at 2:02 AM | Permalink | Comments (0)

Economy Professor provides a glossary of some well known terms, theories, and economists.

Posted by at 10:04 PM | Permalink | Comments (0)

Toll Roads News. News about toll roads. World-wide.

Covers toll highways, parkways, bridges, tunnels, and truckways.
Recently, topics include Bston's Big Dig / Big Siv, Chicago Skyway,
and Toronto's 407ETR.

Posted by at 2:18 AM | Permalink | Comments (0)

Tradesports' 2004 US Presidential election hourly data.

Kerry +2.5 % on 2004 Nov 01 !

Posted by at 8:31 PM | Permalink | Comments (0)

Chicago Boyz examine the data on Iraqi war losses.

Posted by at 9:53 PM | Permalink | Comments (0)

Mahalanobis is Michael Stastny's excellent economics blog.

He also has a sharp eye for current events, and bio'ed on Xing.

Posted by at 10:13 PM | Permalink | Comments (0)

Marginal Revolution, good economics blog; tries hard to be mainstream.

Posted by at 8:14 PM | Permalink | Comments (0)