Archive for January, 2009
| Peter Klein |
From the great Bob Higgs:
Billions come bursting
From huge hydrants of money
I am stimulated
Credit freeze thaws now
Fed heats pipes until they steam
Winter is lovely
Consumers feel fine
Ready to mortgage their souls
John Maynard Keynes smiles
Saving’s so passe
Capital stock may be assumed
Let K be capital
Giant debt you bet
Chinese will serve fine dinner
Children cannot vote
Like rose in springtime
Welfare state blossoms anew
Laughter heard in hell
Feel free to try your hand in the comments section below. See also Bob’s reflections on the Inauguration.
Update: See also Morgan Reynolds’s bailout version of “I Fought the Law.”
| Peter Klein |
My colleague, coauthor on several forthcoming projects, and former PhD student John Chapman was on Hugh Hewitt’s show last night, talking about the US economy. Like me John blames the Fed, not hedge funds and derivatives markets, for the housing bubble and crash. John’s investment advice: “Short the dollar and prepare for the 1970s.” Listen here (John comes on around 25:10).
| David Gerard |
Those of you that think that a football is round might not be aware that the Super Bowl is taking place this Sunday, where my hometown Pittsburgh Steelers will face the Arizona Cardinals. Every year brings its own story lines, and among the many questions surrounding this year’s game is: what is your favorite public-choice explanation for why Pittsburgh schools are opening late on Monday?
The Pittsburgh Public Schools will operate on a two-hour delay Monday because of the Super Bowl, Superintendent Mark Roosevelt said today. Noting that Sunday’s big game means a “late night,” Mr. Roosevelt said the delay should cut down on student and staff absenteeism.
Of course, not all work places are observing the delay, so this will create a few headaches for working parents who don’t happen to be teachers or staff in the Pittsburgh public school system. Perhaps Superintendent Roosevelt thinks parents will already have headaches Monday morning, so the incremental costs will be low.
| David Gerard |
As noted here, a “small” chunk of the House stimulus package is earmarked for carbon capture and sequestration (CCS) demonstration projects. For a coal-fired electric power plant, CCS entails the separation of the carbon dioxide during the combustion stage, compression into a fluid, and injection into a deep (> 1 km) geological formation where it will remain indefinitely.
Regardless of one’s views on global climate change or the government’s role in addressing it, it seems pretty clear that policy makers are moving us toward a carbon-constrained world. The rationale for CCS in such a world is straightforward. Unlike conventional pollutants, today’s carbon emissions will remain in the atmosphere for close to 100 years. Stabilizing atmospheric CO2 concentrations at current levels will require extraordinary (perhaps 80%+) reductions from current emissions levels. However, carbon or no carbon, it is highly improbable that we can meet our projected energy needs (at least in the near term) without continued reliance on fossil energy sources.
I am involved with the CCSReg project that is developing recommendations for the development of a regulatory framework for CCS if the US legislates reductions in carbon emissions. Earlier this month, we issued an interim report with several preliminary recommendations, including putting money toward demonstration projects (summary).
The potential regulatory issues range from identifying and mitigating environmental and safety risks to addressing public acceptance issues associated with the NUMBY (not under my back yard) syndrome. The property rights issue might interest many in this audience, as it is not clear who owns the underground pore space (if anyone), or how much these owners should be compensated for having CO2 filling it up (if anything). This could be resolved on a state-by-state basis, though many potential sequestration sites are located in multiple states. (more…)
| Peter Klein |
Watching UNC beat Clemson in basketball last week — Clemson has lost all 54 games it has played in Chapel Hill, the longest such streak in the nation — I was reminded of the behavioral economics literature on the “hot hand” (Gilovich, Vallone and Tversky, 1985; Camerer, 1989; Brown and Sauer, 1993), a version of the gambler’s fallacy in which people put too much weight on past results in predicting future performance. There is debate about hot-hand effects in sports, where the behavior of players and teams (unlike that of dice or roulette wheels) can certainly be affected by knowledge about past contests. If you’re on a team that has lost every game to a particular opponent, how can you not get nervous down the stretch? But such effects are hard to distinguish, empirically, from random error.
I haven’t seen much on hot-hand effects at the level of the firm, though there is a healthy literature on autocorrelation of stock returns (see Boudoukh, Richardson, and Whitelaw, 1994, for one survey). The business press often describes a firm being on a “hot streak” following a string of successful products or performance results (think Apple, Pixar, Google, etc.). If above-normal performance is anomalous, then investing in such firms is a mistake. If a firm’s hot hand reflects superior resources, strategies, market positioning, etc., and these advantages persist, then its hot hand may be real.
PS: When I taught at Georgia I used to know a great Clemson joke. Originally Clemson’s name was simply “Clem,” but it was decided that “Clem University” didn’t sound very distinguished, so they added “s” for chivalry, “o” for honor, and “n” for knowledge.
Update (2 February): Brian McCann notes that, including last night’s game, the NFC has won twelve consecutive Super Bowl coin tosses.
| Peter Klein |
I enjoyed this rant on “beta culture” — the trend toward earlier and earlier releases of hardware and software, before many bugs are worked out — but wish the author understood the concepts of opportunity cost and marginal analysis. I used to assign Gene Callahan’s classic “Those Damned Bugs!” in my introductory classes to explain these concepts. Would it be nice if new products worked perfectly right out of the box? Sure. Is perfection worth the wait? Probably not. That isn’t to say that all new products are launched on the right side of the temporal benefit-cost margin — the BlackBerry Storm might qualify as alpha, not beta — but using the problems of some new products to crusade against early release more generally misses the mark.
| Mike Sykuta |
A couple weeks ago, Brad DeLong included me in a list of ethics-free Republican hacks because I was among a number of economists who posted comments on Rep. John Boehner’s website critical of the proposed Democratic “stimulus plan.” To wit, I posted:
History has shown that the Obama team’s proposed ‘stimulus’ is not only going to have little to no effect in the short run, but will create a larger bureaucratic structure, lead to tremendous investments in unproductive political lobbying among ‘stimulus project’ wannabes, and dissuade/delay private investment, recovery and growth.
So imagine my surprise (or lack thereof) to see the headline article of today’s Wall Street Journal. The ink is not even dry on the legislative draft that Congress is expected to vote on sometime today, and lobbyists from stimulus project wannabes such as the concrete and asphalt industries are battling over how we should rebuild and repair roads and bridges; dairy and beef cattle producers are battling over talk of a government program to slaughter dairy cattle and increase milk prices. States are clamoring for bailouts. And the labor unions are singing on their way to the bank with plans for massive infrastructure spending.
In the spirit of Art Carden’s recent post, “Everything is proceeding precisely as I have foreseen.” Ethics-free hack or no.