Wednesday, September 28, 2011

Over at MR, Alex Tabarrok highlights a very interesting memo written to President Obama by Larry Summers in 2010 about the green energy loan guarantee program. While Prof Tabarrok highlights the economic aspects of the memo, this program was intended to improve the environment, so it is more interesting to hear it evaluated in those terms:
Carbon reduction benefits: If this wind power displaced power generated from sources with the average California carbon intensity, it would result in about 18 million fewer tons of CO2 emissions through 2033. Carbon reductions would have to be valued at nearly $130 per ton CO2 for the climate benefits to equal the subsidies (more than 6 times the primary estimate used by the government in evaluating rules).

In other words, the memo is pointing out that subsidizing this wind farm involves spending $1.2 trillion in order to prevent emissions that will do $200 million in damage.

Tuesday, September 27, 2011

The decline in deaths from extreme weather in an era of global warming:

Monday, September 26, 2011

Physician support for Obamacare is startlingly low:
The survey — conducted by physician recruitment firm Jackson & Coker — is a brutal indictment of both the AMA and ObamaCare. Just 13% of doctors agree with their trade association’s support of the health reform law.

Some doctors are even dissociating themselves from the AMA. Of those who have terminated their membership, 47% cited the organization’s continued backing of the health care law as the primary reason. Increasingly doctors are turning to associations like Docs4PatientCare and the Association of American Physicians and Surgeons that actually do represent their interests.

The Jackson & Coker survey joins a large stack of research with similar findings. In February, the National Physicians Survey discovered that more than three times as many doctors believed that the quality of American health care would “deteriorate” rather than “improve” under ObamaCare. Nine of ten physicians think ObamaCare will have a negative impact on their profession.

Sunday, September 25, 2011

Tyler Cowen summarizes my thoughts on Pigovean carbon taxes perfectly:
1. Other countries won’t follow suit and then we are doing something with almost zero effectiveness.

2. It may push dirty industries to less well regulated countries and make the overall problem somewhat worse...

4. Especially for large segments of the transportation sector, there simply aren’t plausible substitutes for carbon on the horizon.

5. A tax on energy is a sectoral tax on the relatively productive sector of the economy — making stuff — and it will shift more talent into finance and other less productive sectors.

6. Oil in particular will become so expensive in any case that a politically plausible tax won’t add much value

The bottom line is that there are massive coordination and enforcement problems that may increase emissions globally.

Saturday, September 24, 2011

Alex Tabarrok tells us to be safe and break the law:
The 55 mph speed limit was a vain attempt by the Federal government to reduce gasoline consumption; initially passed in the 1974 Emergency Highway Energy Conservation Act the law was relaxed in 1987 and finally repealed in 1995 allowing states to choose their speed limits. Highways and cars are safer today than in the 1970s and on many highways speed limits were increased to 65 mph. Higher speed limits are often safer because what is worse than speed is variable speed, some people driving fast and some driving slow. When the speed limit is set too low you get lots of people who safely break the law and a few law-abiders who make the roads more dangerous.

He links to a paper in the American Economic Review by Charles Lave from 1985 which says:
Based on analysis of 1981 and 1982 state cross-section data, I find that there is no statistically discernable relationship between the fatality rate and average speed, though there is a strong relationship to speed variance. When most cares are traveling at about the same speed, whether is is a high speed or a low one, the fatality rate will be low-- presumably because the probability of collision will be low. Variance kills, not speed.

Friday, September 23, 2011

Conservative and libertarian opponents of the death penalty enjoy a logical consistency liberal opponents do not, at least on one point. The Right is skeptical about government's competence. So when they say that they don't trust the government to implement the death penalty unerringly, it makes sense.

But when liberals make this case it's a huge contradiction. The history of liberal technocrats' screwing things up is long, rich, and deep. This Solyndra mess is just a tiny footnote to that epic tale. And yet, despite all evidence, progressive technocrats and "empiricists" insist that they have the brains and the know-how not only to manage wildly complex phenomena involving literally billions of variable and millions of individual actors but to predict behavior and events years from now. But when it comes to the infinitely more discrete task of determining the guilt of a murderer, they suddenly say, "It's impossible to be sure! We can never be certain!"
-Jonah Goldberg, G-File, 23 Sept 2011
Virginia Postrel on the egos behind Renaissance art:
Know what to look for and Florentine artworks reveal secret messages that, while not as sexy as Dan Brown’s Mona Lisa fantasies, have the advantage of actually existing.

Take the boys shown walking up the stairs behind their tutor in Domenico Ghirlandaio’s fresco in the Santa Trinita church. What could these kids have to do with the “Confirmation of the Rule of Saint Francis,” the official subject of the fresco? They aren’t friars or church officials.

In fact, their portraits are just good public relations. The patron, a banker named Francesco Sassetti, included them to butter up their father, Lorenzo de’ Medici, and to let the churchgoing public know that he and Lorenzo were tight.

But the painting doesn’t tell the whole story. It “conveniently omits a crucial fact about the patron’s relationship with the Medici,” write art historian Jonathan K. Nelson and economist Richard Zeckhauser in their book, “The Patron’s Payoff,” which uses economic signaling theory to analyze Renaissance patrons’ motivations and techniques. That fact: “By the time he commissioned the fresco, Sassetti had nearly run the Geneva branch of the Medici bank into bankruptcy.” Oops. Maybe the portraits were meant as a distraction or damage control. How could you fire (or worse) a man who had sponsored such fine pictures of your kids?

Nelson and Zeckhauser’s work demonstrates that Renaissance art is full of status signals and calculated image-building -- once-obvious messages that today’s tourists never notice.
Warren Buffett and Crony Capitalism:
Did you know that the life insurance lobby is actively lobbying to restore the estate tax?

Why would the life insurance industry care about that? It turns out that ten percent of life insurance industry revenue is related to the estate tax. Wealthy people take out life insurance in order to reduce estate taxes because when you die, your life insurance payout doesn't count as part of your estate.

Did you know that Warren Buffett owns six life insurance companies? Did you know he supports the estate tax? You do now.

Warren Buffett isn't just noted as an owner of life insurance companies and a supporter of the estate tax. He's also noted as a buyer of family businesses. As Dick Patten shows, these two business strategies support each other.

A family business owner or farmer takes out a large life insurance policy which he sinks tens or hundreds of thousands of dollars into each year. When he finally passes away, the life insurance pays out his policy to his family--tax free...

Even as Mr. Buffett's insurance companies are "protecting" family businesses from the IRS, he is buying companies that are forced to sell themselves to pay the death tax. Mr. Buffett's ability to buy family businesses at bargain basement prices depends on families being desperate to sell-and nothing produces family businesses desperate to sell quickly like a 55% bill from the IRS on all of the businesses' assets.

Thursday, September 22, 2011

The effectiveness of bans on short selling:
British financial stocks dropped 41 percent in the four months after regulators imposed a ban on short selling following the collapse of Lehman Brothers Holdings Inc. in September 2008. The benchmark FTSE 100 index fell 15 percent in the period. When the Securities and Exchange Commission prohibited short-sales for three weeks in September 2008 a Bloomberg Index tracking the 880 U.S. stocks affected fell 26 percent, outpacing the Standard & Poor’s 500 Index’s 22 percent decline.

European regulators are divided over how to respond after a rout that sent the region’s bank stocks to their lowest in almost 2 1/2 years this week. Germany and the Netherlands have said they don’t plan further restrictions on short sales, while British regulators said they don’t plan to limit the practice.

“In contrast to the regulators’ hopes, the overall evidence indicates that short-selling bans at best left stock prices unaffected and at worst may have contributed to their decline,” said Alessandro Beber, a professor at Cass Business School in London who’s studied short-sales bans in 30 countries.

Via Daniel J Mitchell, who comments:
Beber’s research (cited in the excerpt above) has been confirmed by other scholars. Simply stated, if investors realize that something is over-valued, it is going to fall in price. Governments can hinder and delay that process, thus increasing volatility and uncertainty, but they can’t stop it.

But here’s a very big reason why these laws are stupid (at least from my amateur perspective*). Most rational people presumably would agree that the housing and financial bubbles of the last decade were a bad thing. But most of us know it was a bad thing because we have 20-20 hindsight.

But what if there were lots of people back in 2005, 2006, and 2007 who recognized a bad thing as it was happening? And what if they had the ability to deflate the bubble (or at least slow its increase) by making investments that assumed housing and finance were heading for a fall?

We could have saved ourselves a lot of economic misery if that was the case. Heck, short sellers probably did save us from a lot of additional economic agony by stopping the bubbles from getting even bigger.

In other words, short sellers are the good guys.
AP Fact Check: Are rich taxed less than secretaries?
President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are.

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said as he announced his deficit-reduction plan this week. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."

On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office...

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay an average of 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

Wednesday, September 21, 2011

Steven Hayward on the effectiveness of Stimulus:
“Shovel ready jobs” do exist, but “what we don’t have is shovel ready government.” Among other stories told about this misadventure is the greenie “weatherization” projects that were held up for months while the Department of Labor cogitated the proper union-friendly prevailing wage rates for different labor markets.

Tuesday, September 20, 2011

Walter Russel Mead on Turkey's turn East:
More, Turkey’s role as the de facto head of western Sunnism looked promising. The state of the Sunni Arab world is deeply depressing. The fall of Saddam Hussein, the ever-tightening relationship of Syria and Iran, the growing Shi’a power in Lebanon and more recently Iran’s success (with Syrian help) at building its influence in Gaza, paint a disturbing picture of Sunni fecklessness and decline. Dominated by corrupt dinosaurs like former Egyptian president Mubarak or ruled by immensely wealthy and not particularly courageous or attractive royal families, the western Sunni world hungered for leadership that Turkey might be ready to provide.

The great idea of a return to the east was looking good.

But Atatürk’s instinct that Turkey needed to turn west was based on more than a sense that the west was where the power and the money could be found. It was also based on a sense that the east was a trap: full of danger and complications that could endanger Turkey’s stability if Turks were sucked into its quarrels.

Syria, Lebanon, Iran, Armenia, Georgia, Azerbaijan and Iraq (to say nothing of Israel and the Palestinian territories) are still on the ethnic and sectarian boil. None of these countries have borders that match up with their ethnic composition; religious divisions still have the power to kill; tribal loyalties are oblivious to artificial boundary lines. There is probably a lot of killing still to be done and a lot of ethnic and religious refugees to be made before these countries settle down into something like a final form.

Involvement with the east might start with expanding Turkish trade and enhancing Turkey’s diplomatic and Islamic profiles; it will be very difficult to ensure that it does not entangle Turkey into intractable conflicts across the region. Indeed, Turkish foreign policy has already been destabilized by the Armenian-Azerbaijani and Israel-Palestinian rivalries, and the Kurdish question in Iraq, Syria and Iran brings Turkey new and vexing headaches every day.

Asserting itself as an Islamic and Middle Eastern power plunges Turkey more deeply into this morass; it also triggers religious and ethnic tensions within Turkey itself. The AK is predominantly a Sunni party but up to a fifth of Turks belong to the Alevi faith, a form of Islam that is rooted in Twelver Shi’ism but has a more tolerant and universalist view than, say, the bigoted orthodoxies of Tehran. Many Alevi oppose the AK Party and what some see as its Sunni sectarianism; a secular government sounds very attractive when you belong to a religious minority.

And of course there are the Kurds... Any eastern expansion of Turkish influence immediately deepens Turkey’s engagement with the Kurdish question.

Professor Mead also points out that a reviving of Ottoman ambitions is not just a turn to engage the traditional Mid East, "The regional dynamics are even more complex. In a rivalry between Turkey and Iran, Russia would not look on indifferently". Russia was the Ottoman Empire's traditional enemy, and any move of Turkey away from the West and isolated from the East can only rekindle that fire.
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