Tuesday, January 31, 2012

Predicting the Nevada Republican caucus

I could run a victory lap tonight, but I won't. Instead, I'll just issue my prediction for the Nevada caucus this Saturday:

1. Mitt Romney

2. Newt Gingrich

3. Ron Paul

4. Rick Santorum

And off to Nevada we go...

Food stamps, there's a problem

One brisk Saturday evening you find yourself at your local gas station/convenience store combo. Nothing seems out of place. Yup there are your teenagers working the register. The tweens scoping out the candy isle. The old woman stealing sugar packets from the coffee island. Everything checks out. You grab your warm coffee, after all you have a long night of partying ahead of you. Eventually you mosey on up to the checkout line, only to find everyone in the county came to the store at the same time. Great, just great. Looking for something to do, you start to snoop on that person ahead of you in line - well the 10 cans of Red Bull surely caught your eye, quickly interrupted by the small child screaming that the top of their lungs that they want candy and lots of it.

Yup, nothing out of the ordinary...well until that person in front of you plops the 10 cans of Red Bull and various candy bars on the table. But that's not what caught your eye. It's the swipe of an EBT (food stamps) card and the transaction reading APPROVED across the cheap LED screen. That can't be right, can it? Are you telling me that person just bought $30 worth of junk using food stamps? I know that about only 1 cent of that probably came from my contribution to society but the concept still boggles the mind.

You're still trying to wrap you head around this idea when you notice the newspaper headline "Food stamps to be accepted at McDonalds." You're freaking kidding me right? This has to be the twilight zone where a $7 Big Mac meal with their large soda is being financed by the greater public. You pass out from the frustration, hitting your head on the 'Slippery when wet sign' (well no shit Sherlock) only to awake in a hospital bed hours later. What do you mean you only take Medicaid? Concussion from the fall? Kick me out on the street because my company has a good insurance company? Maybe this is the twilight zone...oh right, this is America.

What's that you say? You just bought a 70'' HDTV? Jeez, you must make a lot of money - I can see the 20" rims on your ever-so-fuel-efficient SUV. Thank the government? What, why? Food stamps? What the hell. Oh right, your $500 a month in food stamps let's you spend the $500 you would have normally spent on food on sneakers instead - don't think the government thought of that one.

So much for only being used for necessities. Food stamps, the next American dream.


I'm gonna have to get on welfare so I can hit up the local strip club: http://money.cnn.com/2012/02/06/news/economy/strip_club_welfare/index.htm?hpt=hp_t3

Monday, January 30, 2012

Issue #1: Unemployment in America, Pt. II

Suppose that you expect to have a certain amount of funds at your disposal (you're expecting your next paycheck, for example). What may you plan to do with those funds? One option is to spend them today, consuming goods and services produced by the economy. Another option is to save them today, so that you may consume goods and services down the line. If you decide upon the latter, you have two more options to choose from. The first is to free up your savings so that someone else may make use of them, in exchange for a promise of repayment (with interest) when you're ready to spend. The second is to keep your savings to yourself--that is, to hoard money--until you're ready to spend.

Whether you decide to consume (spend your funds yourself) or to invest (let someone else spend your funds), you're contributing to the aggregate demand for goods and services produced by the economy. It's only if you engage in hoarding that you deprive the economy of aggregate demand. The job of financial markets is to match savers with borrowers. If interest rates are just right, savers want to save as much as borrowers want to borrow. Consequently, there is little hoarding, and aggregate demand is plentiful. If interest rates are too high, savers want to save more than borrowers want to borrow, causing hoarding, thereby reducing aggregate demand.

In my previous post, I contended that greater aggregate demand would reduce the unemployment rate, putting willing workers back to work. If the preceding discussion is correct, then, the recipe for stimulating aggregate demand is lower interest rates. What, then, my fellow Americans, is my diagnosis of our jobs crisis? The interest rate is too damn high!

In my final post on this subject, I'll explain why lower interest rates may not be so easy for the government to engineer, under the unusual circumstances of the present.

[Earlier posts in this series:

Announcing my bid for the US presidency

Issue #1: Unemployment in America


Issue #1: Unemployment in America

Suppose that you own and operate a single firm. For whatever reason, it seems that the demand for what your firm produces has declined. Recognizing this, what should you do? Well, if consumers do not want to buy as much of your output as they did before, you should not produce as much output as you did before. There's no profit to be made in producing stuff nobody wants to buy.

Now that you have decided to scale back your output, it occurs to you that you no longer require as many inputs as you once did. Among your many inputs is labor. If you do not require as much labor as you did before, some of your workers must be laid off.

Responding to a fall in demand, therefore, you have in a very small way raised the unemployment rate. Your ex-workers do not have jobs, but continue to actively seek employment. But why has the demand for your firm's output pulled back? Presumably, other firms in the economy have either begun producing the same goods and services more cheaply (due to technological progress, say), or begun producing different goods and services which consumers want more than the goods and services you produce (due to a shift in consumer preferences, say). Whichever is the case, just as the demand for what you produce is falling, the demand for what others produce is rising. Needing to produce more output to meet growing demand, these other firms must draw upon more inputs--in particular, more labor. This raises the demand for labor, offsetting the fall caused by your firm, thereby restoring full employment in relatively short order. The unemployment rate is elevated only slightly, and only briefly.

Suppose instead that the aggregate demand for goods and services produced by the US economy declines. Much like your firm, the economy "recognizes" that the demand for its output has fallen, causing it to scale back production. Just as your firm would do in the course of scaling back production, the economy disemploys many of its inputs--most visibly, labor. The unemployment rate rises as in the previous case.

In contrast to our earlier example, however, a fall in aggregate demand is not offset elsewhere in the economy. Remember that, in this instance, we're talking about the economy as a whole--there is no elsewhere. Does this mean that the unemployment rate will be permanently elevated?

Ideally, no. The reason is that, usually, prices adjust to clear markets. In our first example, the way that the economy signals to the newly unemployed workers to shift out of your declining firm into other expanding firms is by pushing down the wages you offer, while pushing up the wages they offer. Similarly, if the aggregate demand for goods and services produced by the economy declines, this ought to lower wages in general, encouraging firms to hire more workers. And if wages fall far enough, quickly enough, the number of people looking for work but unable to find it will be as low as always. That is, the unemployment rate will quickly return to normal levels.

In reality, however, this does not happen. The reason, in the view of many macroeconomists, is that wages are 'sticky', or 'rigid'. When there is a drop in aggregate demand, instead of wages falling instantaneously, many wages fall rather sluggishly, or in lots of cases not at all. No single theory as to why this is the case commands a consensus, but the evidence in favor of wage stickiness is quite solid. If wages do not fall immediately when aggregate demand falls, then laid off workers will continue to apply for increasingly scarce job opportunities, keeping the unemployment rate elevated in the short run. In the long run, wages will fall far enough to restore the economy to full employment, but as J. M. Keynes famously remarked, "in the long run, we are all dead." A lot of unnecessary suffering is evitable if policymakers properly deploy the instruments at their disposal to stimulate aggregate demand, encouraging the economy to scale up production, which in turn encourages the re-employment of unemployed workers. In my next post, I will explain how best to do just that.

[Earlier posts in this series:

Announcing my bid for the US presidency


Sunday, January 29, 2012

Announcing my bid for the US presidency

I hereby declare my entry into the 2024 US presidential contest. It is time for a change, America. Promise me your vote, and I will promise you a more perfect union. In posts to come, I will spell out my plan for cultivating a freer, fairer, and filthy rich U. S. of A., issue by issue, so that by 2024, you will know exactly where I stand. If you don't like what I have to offer, vote for the other guy. Just be warned that he touches many a kid, has illegitimate, dark-skinned children, and often feasts upon the broken dreams of discarded fetuses. Also, take note that God and me are like this (*crosses fingers tightly*). Seriously, love that guy.

First up: jobs, jobs, and more jobs...

Two Americas

There are two kinds of Americans. The first are autistic. The second are drunk, drugged up, and manically depressed. Why? Don't ask me. But, here's a theory: the economy hates the second group, just like you hate your drunk, drugged up, and manically depressed cousin (and yes, the Oxford comma is absolutely essential) who just eats all your food and complains about life being unfair.

Now, Mr. Scientist (you might say), what use is this theory? Just seems like you're hating on people who already hate themselves. Well, I am doing just that. But, I'm also doing science. If my theory is right, here's a prediction it makes: the second group has shitty economic fortunes compared with the first. Ta da...
From personality to neuropsychiatric disorders, individual differences in brain function are known to have a strong heritable component. Here we report that between close relatives, a variety of neuropsychiatric disorders covary strongly with intellectual interests. We surveyed an entire class of high-functioning young adults at an elite university for prospective major, familial incidence of neuropsychiatric disorders, and demographic and attitudinal questions. Students aspiring to technical majors (science/mathematics/engineering) were more likely than other students to report a sibling with an autism spectrum disorder (p = 0.037). Conversely, students interested in the humanities were more likely to report a family member with major depressive disorder (p = 8.8×10−4), bipolar disorder (p = 0.027), or substance abuse problems (p = 1.9×10−6). A combined PREdisposition for Subject MattEr (PRESUME) score based on these disorders was strongly predictive of subject matter interests (p = 9.6×10−8). Our results suggest that shared genetic (and perhaps environmental) factors may both predispose for heritable neuropsychiatric disorders and influence the development of intellectual interests.

You know whose economic fortunes are better than humanities majors? Science majors. Just look at those p-values. Hot damn. I didn't pay much attention in AP statistics (I just remember gems like "power is desirable", and "we want small Ps"), but this looks pretty sciency to me. And the authors are from Princeton!

OK, so, my theory sucks. Granted. But how about them p-values? And for the record, I belong to the first group, have shitty economic fortunes, and I spend my days eating other people's food and complaining about the unfairness of life. I am the two Americas.

2012 Winter X Games

The 2012 Winter X Games came to a close today, and, as predicted, no one even knew it was on. If you can believe it, the 'X' in X Games means the sports in which the athletes compete are extreme. To that end, both the Summer and Winter X Games feature a multitude of adrenaline pumping, motor revving, energy drink drinking activities that challenge competitors and viewers alike to stick it out. This year Shaun White (USA), Torah Bright (AUS) and Halldor Helgason (ISL) are among the many names that no one has ever heard of. With the Women's Figure Skating National Championships and Novak Djokovic's striptease to focus on, it's no surprise that the interest in the X Games has been X-hausted. That's right, folks, we're doing extreme puns now.

On a serious note, this year a good deal more attention has been paid to this year's Winter X Games due to the death of Canadian skier and X Games multi-gold medal winner, Sarah Burke. While training in Utah, Burke fell and hit her head and went into cardiac arrest on the slopes. She was airlifted to a hospital where, on January 19th, she was overcome by her injuries and passed away. Unfortunately, her life insurance policy did not cover this particular event. In order to cover the massive hospital bills accrued during her 9 day stay at the University of Utah Hospital, Burke's family opened a website to accept donations from her fans and concerned onlookers. Burke was instrumental in the addition of the superpipe skiing event to the 2014 Winter Olympics roster. At the very least, her legacy will live on.

Predicting the Florida Republican primary

1. Mitt Romney

2. Newt Gingrich

3. Rick Santorum

4. Ron Paul

If I'm right, you owe me a cookie. Make it oatmeal raisin, please.

Saturday, January 28, 2012

That's no moon...

Earlier this week, Newt Gingrich haughtily announced his plans to establish an American colony on the moon by the end of his second term as president. He laid out preliminary plans to fund the moon base by taking a portion of NASA's budget to use as prize money for private companies to do the leg work. The plans included the possibility of the moon colony petitioning for statehood once the population reached 13,000. It's no surprise that Gingrich's announcement came days before the Republican debate in Cocoa, Florida, the so-called "Space Coast".

Other than the good people of Cocoa, whose livelihoods depend so deeply on the space industry, many have scoffed at Gingrich's fantastical plan, as if it came out of a work of science fiction. During the CNN debate this week, Mitt Romney took a crack at Gingrich's proposal saying, "If I had a business executive come to me and say they wanted to spend a few hundred billion dollars to put a colony on the moon, I’d say, ‘You’re fired.’” Rick Santorum added his viewpoint of the economic irresponsibility of the plan, while Ron Paul also weighed in, making some comment about how he wants to go to the moon or something.

It's easy to be negative on such visionary plans. Especially with a plan as insanely flawed as one for a moon colony in eight years. But once you wade through the swamp of insignificant problems like funding and managing this program, there is beaucoup merit to be found. With tourism being such a large industry here on Earth, why wouldn't the same hold true for the moon? I know I'd like to see what it feels like to smash a golf ball into low orbit and do some sweet tricks in a low gravity moon buggy. The tourism would bolster the slipping air transport and cruise industries. It's been found that some people can't handle the relative isolation of visiting a small island for too long, this is referred to as island fever. If people are being babies and crying to come home from a vacation on a sun bathed tropical island for a few months, think how quickly and frequently people will get moon fever. The airline industry could make a killing with their standard 3000% charge for one-way tickets, alone. As for cruises to the moon, there aren't nearly as many icebergs lurking out in space, ready to sneak up on unsuspecting cruise ships and there's a very low risk of running aground. Also, no space pirates. Yet. Furthermore, the moon's supply of some pricey minerals is many times that of Earth's. The moon is pretty much a giant cash cow and we need to get in there while the getting is good. And who can forget the Helium 3. Helium 3, people!

The only beef I have with Gingrich's plan is that he claims he wants to accomplish this before the Chinese. Well, way to blow the element of surprise there, big guy. If the Chinese weren't already thinking about this, they definitely are now, probably.

Did you know they think the Man in the Moon is actually a woman...

Friday, January 27, 2012

Utopian tax policy

Every month, the government would provide each citizen with a check for, say, $250. Businesses would report their revenue from sales, from which they would deduct the cost of their inputs (including labor costs), paying a flat rate of, say, 25% on the difference. Individual workers would report their wages and benefits, paying in line with a graduated rate schedule beginning at 0% for very low-wage workers, and ending at 25% (the rate on businesses) for very high-wage workers. There would be no further deductions, exclusions, credits, etc.

There would also be selective taxes on negative externalities (e.g., pollution), subsidies for positive externalities (e.g., basic scientific research), and if necessary, paternalistic carrots and sticks (e.g., encouraging retirement savings, discouraging addictive drugs).

That's it. It would take a worker about 5 minutes, and a business about 15 minutes, to complete their respective tax returns each year. No Turbotax, no tax attorneys, just your basic calculator and a postcard.

I'm a gradualist, so I wouldn't shift to this regime overnight. To move in the right direction, however, we should begin to broaden the tax base (eliminate wasteful deductions, exclusions, credits, etc.), lower tax rates on saving and investment (cut personal income, corporate income, capital gains, dividend, and inheritance tax rates, among others), up the progressivity of consumption taxes (e.g., payroll taxes), implement Pigouvian (externality-correcting) taxes/subsidies, and reform entitlements--substituting a lump-sum subsidy for Medicare, Medicaid, Social Security, etc. Doing a bit on each of these fronts would be a very good start, and would also be a good way to go about reigning in the long-run budget deficit (a la Bowles-Simpson).

My proposal (which is little different from the Bradford "X Tax") is rather uncontroversial in public finance circles. Note also that under the ideal system, Mitt Romney would (as far as I can tell) have an effective (statutory) tax rate near 0%. So, there's that.

Mitt Romney wins the debate

According to Intrade, Romney's nomination prospects were significantly up by the end of yesterday's debate, compared with where they were at the start of the debate. By contrast, Gingrich's prospects were significantly down, while Paul and Santorum more or less flat lined. Given how much of a lock Romney already was for the nomination, his performance (as measured by Intrade) was impressive indeed. At this point, unless we find out Romney is a Kenyan anti-colonialist Muslim socialist, I think this thing is over with.

A lot of Democrats seem to want Gingrich to be the nominee, for he will supposedly be easier for Obama to beat. What they forget, however, is that in every presidential election, no matter how extreme or incompetent the candidates, the Republican and the Democrat each have a sizeable chance of winning. Do they really want to risk a Gingrich presidency just to boost Obama's chances by a percentage point or two? Or would they rather have both parties serve up the best they have to offer, so that the worst case scenario is not so bad?

Whatever else you may say about Romney, if you were an employer hiring someone to perform the duties of the president, Romney's resume would make him a rather attractive candidate. Gingrich's simply would not. If you're a Democrat, his being a Republican may be enough to get you to support Obama (fair enough). But I'd sleep easier knowing that whichever party wins, the president isn't going to be an doughboyish, crazy, unpredictable buffoon with no demonstrated experience managing a large bureaucracy like the US government.

But that's just me. And for the record, Senator Assyfuck McNutdick continues to enjoy my support.

Wednesday, January 25, 2012

The Fed sets a nominal target

Well, it looks as if the FOMC read my post about the importance of setting a nominal target, as they have decided to adopt an inflation target of 2%. This is not my preferred policy, but it constitutes progress in my view. How so? Now that the Fed has a nominal target, curious minds will begin to wonder, "why 2%? why not 3%?", or "why inflation? why not nominal GDP growth?", or "why a growth target? why not a level/path target?", etc. Stick those in a blender, and suddenly the financial press will be wondering, "why not a 5% nominal GDP level/path target?". Once that question comes on the radar, the Fed will have some 'splainin to do.

Facebook this, Facebook that. Update Your Status

Facebook has transformed the internet. A novel idea, allowing first students then the rest of the world, keep in touch with classmates and friends that they have accumulated over the years. No more waiting until class reunions to find out that the b---- you hated in high school got pregnant and is already divorced. No more "playing the field" with 3 or 4 girlfriends since they'd all want the ├╝ber status of 'In a Relationship with...' Or the best yet, those friends that decide to share their lives in 30 second increments including any gastrointestinal issues that may be facing that day. Let's not down play either the creep factor 10 skill of stalking every attractive girl in your class. Well that was a weird progression wasn't it?

Here we have a perfectly good social service that continually 'innovates' information presentation that I could care less about. That's really it, right? Facebook's concept has been the same since it was founded: a presentation layer that is cleaner than MySpace with a little exclusivity (originally just college students). Well, Facebook has lost that exclusivity by opening the flood gates to the rest of the world - hey it was in their best interest to do so. I really question the innovation that things like Timeline bring to the Facebook community as a whole - each phase of these so called innovation has been met by mass protests in the community - then again, no one likes change - and only lessened the privacy that people actually experience.

I'm a bit of a privacy nut and from that perspective Timeline removes a lot of that from me. I liked it when stalkers actually had to work at piecing together information rather than having it all presented in a single place. Oh I can adjust my own privacy settings you say? Go on your account and look at your friends - how many of them are really just people you met once at some party? I'm going to bet your real friends can be counted on your hands and toes - yes even if you have a thousand friends. If you're really into sharing things like pictures of your drunk ass at a party with complete strangers you probably have some form of social disorder, nay a serious problem.

Tinfoil hat time. Let's take a step back from Facebook for a moment and look at the malicious potential which can be achieved. Let's say you meet CJ through a friend of a friend and immediately add each other on Facebook. Time passes and you forget who the guy was or really where you even met him (2 years down the road say) and in that time CJ has become a crack head and needs his next fix.Where does he turn? Facebook. In those two years you've been checking into places, sharing photos, commenting on peoples walls - all things that CJ can use to figure out when you're not around and break into your house while you're checked into the Sonic down the street, stealing everything valuable. "Oh no, that couldn't happen to me". Hate to burst your bubble but it happens already - people using Facebook to build a social profile on someone and then later using it for malicious intent. "OMG I'm going to Cancun for 3 weeks" is a pure gold mine for someone that knows where you live. "Be home in five minutes from the club" here come the serial killers and rapists.

The amount of information that you put on the web about yourself is scary. You know those security questions you have on your bank or email accounts? Think about how many of those questions could be answered by a friend or better yet someone with a lot of time on their hands. Great examples of those types of thefts are Paris Hilton and Sarah Palin - information which was freely available on social media sites (and some books on them) were used to gain access to their emails and phones.

Look, Facebook has had enough scary 'innovations' in the past (facial recognition), the last thing anyone needs is some crazy person just needing to go to one spot to get all your information (cough Timeline). If you're really that addicted to Facebook, post after you get back from somewhere - or better yet don't post at all: no one actually cares about you and if they do they are probably sitting next to you when you post it. Oh and if you're one of those people that post pictures of shoes or rap lyrics all the time go to hell.

(As a side note, I deleted my Facebook when Timeline was announced and highly encourage you to do the same).

Tuesday, January 24, 2012

One Submachine Gun Per Child

Not too long ago, the good people at One Laptop Per Child announced they would be developing tablet computers specifically for children in developing nations. These tablets are supposed to be inexpensive and very durable. They have been designed with the unstable life of a third world child in mind. They don't need wall chargers because the battery is capable of being charged via hand cranking or a solar panel. They are equipped with a camera to allow the kids to take pictures and express themselves creatively through that medium. Most importantly, though, each tablet is capable of connecting directly to one another for peer-to-peer collaboration on group projects. All in all, a wonderful step forward for the massively underprivileged children of third world nations.

Hold up. Tablet computers? Is that really the most pressing issue Afican kids are facing, lack of fancy electronic devices? Now, I'm no Luddite. I don't even brush my teeth unless each tooth is being gently caressed by the automatically rotating heads of my electric toothbrush. Much to my chagrin, similar technologies are not available when it comes to hand washing; my right hand is still belabored with the task of washing my left, how bourgeois. Get it together, Science. These kids, though, they haven't slipped the surly bonds of earth and touched the face of God. They don't know what it is to not be poor. Maybe they'd like to finally enjoy the experience of having a nice sit on a sturdy chair, instead of a mound of hard packed dirt. I mean, with all the turmoil they've endured during their brief tenure on this earth, perhaps camping out in front of their neighborhood Target for the debut of the latest gizmo isn't the greatest of their concerns. Oh, wait, camping out is pretty much their standard of living, isn't it?

There's a reason that I'm sitting here on my plush suede couch, sipping the very finest V8 vegetable juice (for the fiber) and those kids are out there nibbling on wet garbage, trying to suck out any notion of nourishment to help satisfy their distended stomachs. That reason, friends, is that all men are not created equal. Let's get our priorities straight, first world first. None of those kids should even know what a tablet computer is before I get bored of mine. Once we all get ours, then let's consider how we should deal with sending our scraps out to those third worlders. They won't know the difference, anyway.

Instead of giving these underprivileged youths a shiny new toy, let's give them something they'll actually need. They don't need to learn how to make a gripping PowerPoint presentation about changing ecosystems in various climates. Nor do they need to be tweeting about how exhilarating it is to eat their first gummie bear. These kids are living in the middle of continuous tribal infighting; they need to learn how to shoot a gun. Let's face it, at $100 a piece, these tablets are going to be some real junkers. Instead, let's check out the black market for some lightly used, adult owned AK-47s from smoke-free homes. Hell, down there, you give me enough time and a can of used motor oil, I could probably barter for one. The best part is that the AK is a multipurpose tool. You can hunt with it and then later you can use it to paint a still life. Multipurpose. How many things can you do with a junker tablet? Words with Friends is really only so effective at teaching kids how to cheat.

Mitt Romney's tax burden, dead babies, etc.

Suppose Jack and Jill each have a job this year that pays $50,000. Suppose further that the only activity that makes Jack happy is eating dead baby sandwiches, while the only activity that makes Jill happy is drinking dead baby smoothies. Let the price of a dead baby sandwich be $100, and the price of a dead baby smoothie be $200. This year, therefore, Jack will eat 500 dead baby sandwiches, and Jill will drink 250 dead baby smoothies. Is there any economic inequality between Jack and Jill? Of course not. Though Jack eats more than Jill drinks, they both have $50,000 to begin with. Jack only eats more than Jill drinks because Jack has simpler tastes than Jill.

Suppose instead that the only activity that makes either of them happy is snorting dead baby powder. Let the price of one gram of dead baby powder be $50. Now suppose that Jill buys a bond from Babyfart McGeezax at a price of $25,000, with a 10% yield to maturity, that matures in a year. In year 1, therefore, Jack snorts 1000 grams of dead baby powder, while Jill snorts only 500 grams. In year 2, however, Jack snorts 0 grams of dead baby powder, while Jill snorts 550 grams. In total, Jack snorts 1000 grams, while Jill snorts 1050 grams, of the very same stuff. Is there any economic inequality between Jack and Jill? Of course not. Though Jill snorts more than Jack, they both have $50,000 to begin with. Jill only snorts more than Jack because Jack has simpler tastes than Jill.

What is the difference between the first and second cases? Apparently, it is that in the first case, they consume different quantities of different stuff, while in the second case, they consume different quantities of the same stuff. But this appearance is deceiving, for a gram of dead baby powder this year is not at all the same thing as a gram of dead baby powder next year. Comparing Jill's 1050 grams over two years to Jack's 1000 grams over one year makes no more sense than comparing Jill's 250 smoothies to Jack's 500 sandwiches. In both cases, Jack and Jill have the same power over society's resources--they just choose to exercise their powers differently.

Taxing Jill on her $2,500 of investment income makes no more sense, from the perspective of economic equality, than taxing Jill for preferring dead baby smoothies to dead baby sandwiches. What's more, taxing Jill on her investment income encourages her to be more like Jack, since Jack pays no tax besides what he pays on his earned income. Unless you think society saves too much (if anything, we save too little), this is a bad idea. On grounds of both efficiency and equality, therefore, we ought to tax Jack and Jill only on their earned income (or alternatively, on their consumption), and not tax Jill at all on her investment income.

In short, if anything Mitt Romney pays too much, rather than too little, in taxes.

America's Down Fall - Universities and Contentfiltering

I've been around computers for what seems to be forever. Countless hours clicking away on my 28.8 modem and checking out all the hot AOL keywords that you'd see in commercials. Punting, ASCII art, and progs (gold stars if you know what any of these are) passed the time while I waited the 30 minutes for Napster to download that ultimate creative commons (they didn't have a real name for any of that back then) mix to serve as background noise later that night. You know the good old days, when people thought that having an MP3 was illegal if you had it on your computer for more than 24 hours. I got my start in second grade - we had a computer for all of 3 days before our first internet connection and I never looked back. Countless hours after baseball and basketball practice were dedicated to surfing the web without parental controls or content filters (just flat out did not exist), hitting the deep bowels of the Internet underground and coming back unscathed each time, all the more educated, all the more aware of the power of the Internet.

When I started all of this, it was out of curiosity and the quest for knowledge. Hacking and phreaking text files went down like butter. Thousand page technical books on wide ranges of topics consumed my free time, sending my parents for broke at $50 a pop. Source code from open source security projects littered my hard drive. By the time my family had their second computer, I already had re-purposed it with a hardened version of Linux and I wasn't even in 6th grade yet - that didn't last too long when my sister complained about the black screen and lack of a user interface. Computers were a passion, an obsession for me - something that I always knew I wanted to do 'when I grew up'. Can you guess which direction I went? Computer Science baby, the major of champions, or so I thought.

Shortly after starting my formal computer science education I began to question my choice. I found myself reinventing the wheel, redeveloping the STL, rewriting quick sort, random naming conventions, or my favorite: game development (hangman anyone - maybe a round of text based chess?). The closest I came to anything that was actually applied was the development of RSA encryption in scheme - what never heard of the programming language called scheme? I don't think that will ever show up as a required skill for a job interview. It quickly became apparent that the education that I was receiving had nothing to do with the real world and none of these teachers had stepped foot outside of academia, stuck in the academic matrix and never the wiser. I get it, in order to justify your existence you have to keep a steady stream of non-informed students entering academic computer science who don't know that source code management system, naming conventions, or that standard libraries exist to do a lot of what you need - no need to write and compile your own data structures for each new project you work on.

Needless to say, I complained to the head of the department about the lack or actual skills being imbued onto students through the course structure. I heard rhetorical rues on building a foundation and ensuring that all students were at the same level before progression, that the courses have been the same for the past 10 years. I guess he missed the point when I said that the foundation both his underlings and himself were laying went against every logical principal there was in my book: don't reinvent the wheel, use widely accepted naming conventions, and learn how to integrate code that others have developed. Hmm, a 10 year old course structure sounds like something I want to put on my resume, don't you? Quickly, I transferred to a hot business school but continued to take electives in computer science something which, only much later, opened my eyes to the problems rampant in the software industry.

I found myself in settings where the teacher could not explain the difference between a token ring network and the star topology. Fourth year students having compile time errors in their graphical chess game and not knowing what was wrong with their code. People saying they were doing computer science because they heard about people making large sums of money but lacked any inkling of knowledge. Maybe, I have had a tainted experience at two totally unrelated schools but a pattern was coming into being that I had never thought about before...

Why does every one tell you to go to college? In the current job market it's the only way to get a job. You hear less and less people talking about getting jobs outside their college major and more and more job listings having masters or greater requirements. Well, that's a sort of weird trend right there - requiring higher and higher educational standards for the same mundane positions. Parents that didn't go to college use money as a good motivator to go to college (although they will probably freak when they realize their kid makes just as much as they do but is sitting in $100k of student loans). What does that leave you with in academic institutions? It leaves you with a sea of individuals who on average have no passion, no real direction with where they want to go,5 skirting by through the good graces of diluted course content and the understanding that failing a student soils the professors reputation in the department. Uh oh, the problem is starting to come into focus with not only computer science but academia as a whole.

Sometime right after the dot com bubble burst, there was a shift in technology companies towards that of heavy accents, broken English, and backward grammar. Whoa there, did I just break out stereotypes? Go with the flow and keep reading. Stereotypes didn't get started out of the blue - there must be some truth behind it, something that could explain the H1B sweatshops, rampant offshore development, and blatant abuse of certifications and titles. White collar Americans were cut out of their cushy $200k a year jobs and replaced by $15 an hour counterparts. But where did this flux come from and why was the world of the 90's so different than the wasteland of the 00's?

Get rich quick technology IPO's flooded academic institutions with computer science graduates. Even the modern veil is apparent just by searching for top jobs in your favorite search engine - computer science means you will make good money. Universities go further to promote this with slides showing that people with college degrees will make a million dollars in their life time - I hope that spending $160k (assuming private 4 year university excluding interest) on an education would net you a million dollars in your life time (65-22 = 43 years. $1,000,000/43 = $23k and change - "Man, I wish I made just above minimum wage!" is just what college student think) - and yes this was on a real publication by a real university.

Maybe the problem with the software industry wasn't actually caused by the software industry? Maybe universities and academia are the ones to blame? Maybe the notion of non-profit academic institutions fighting for student dollars in the free market crossed some wires and have lead to the current state of technical fields?

Let's face it people - there are more universities than ever before spitting out more graduates in every field than ever before. The problem isn't the government but academic institutions and their proliferation of mediocrity. Getting back to software, India dominates. Period. But why? Opportunities to leave the caste, their country, or poverty is only available to them if their skills are at least at the same level of their American counter parts - and are willing to work at a discount.

When student apply for college, they are not given a full picture. They don't get to see the trends in the work place or know that they are heading for a life of mediocrity. The only ones that succeed in the work force are the ones dedicated and passionate for what they do and study. Joe Blow that goes to school thinking that a degree in XYZ will get him somewhere is on crack. The same goes for Jane Doe sucking up to the teacher to get that 4.0. Academia doesn't matter. It's a milestone in the progression of life, but the assumption that reaching that milestone will get you somewhere is something only perpetuated by academics. If you get bored one day, look at the bios for corporate leaders or read about any successful person - most of them made themselves, not the school or degree they attended. One thing I haven't gotten around to is looking at the GPAs for these very people and seeing just how many of them "applied" themselves in school versus the ones that worked two jobs and busted their butts to get through. I have a feeling you'll find alot of 2.5-3.0's rather than the 4.0 but I'll leave that one for another day.

Education isn't really about wrapping things in a neat bow and flaunting it around as the end all. In fact, the idea of a canned education system can only spit out deficient students to the workplace - all thinking the same and making the same mistakes time after time. Maybe this downfall was cause by the introduction of content filters and limiting of information. I know I certainly learned more trolling the internet underbelly than I ever did in the class room.

Remove the canned nature of education and lift the social filters which have become common place and maybe, just maybe, the United States will come out of its slump.

What happens when the EU stops buying Iranian oil?

Demand for Iranian oil declines, holding supply fixed, which lowers the price of Iranian oil on world markets. Demand for non-Iranian oil rises, holding supply fixed, which raises the price of non-Iranian oil on world markets. Everyone outside the EU sees Iranian oil going for less than non-Iranian oil, and so buys more. Demand for Iranian oil rises, holding supply fixed, which raises the price of Iranian oil on world markets. Demand for non-Iranian oil declines, holding supply fixed, which lowers the price of non-Iranian oil on world markets. From the perspective of world markets, it's a wash. From Iran's perspective, all that changes is who is buying their oil; neither the price nor the quantity sold changes (after an adjustment period). Inside the EU, the supply of oil is effectively restricted, raising its effective price. Outside the EU, the supply of oil is effectively expanded, lowering its effective price.

In short, the equilibrium impact of this move is to make EU citizens poorer and non-EU citizens richer. There are ways to make Iran suffer. This is not one of them.

Addendum: Goldman seems to agree, though they think Iran would suffer somewhat from lower prices. They probably know more about the relevant elasticities than I do, but my basic point stands.

Monday, January 23, 2012

This is science

Scientific research has received a lot of much deserved approbation over the past few decades. As with all things, however, there is a draw back. Ceaselessly, it seems like sweet things from back in the day are being undone by recent scientific advancements. I thought science was supposed to bring us all good things, like new ways to high five and low carb granola. Apparently, though, the guys that invented anthrax and Joel David Moore's fedora were more on the money. Science isn't about progress anymore, it's about copy editing the past. And not the historical whammies, either, but the long revered gems that highlighted our childhoods.

Ever heard of a little planet called Pluto? Of course not. That's because it's not a planet anymore, it's a planetoid or some crazy nonsense like that. Pluto was a great little planet. It kept things fresh; you never really knew what was going on out there with that guy. You're telling me that a freakshow like Uranus is a better planet than Pluto? Unlikely. Pluto was the Roman god of death or something. Did you even know that Uranus didn't mean your poop hole? Yeah, that was a real shocker.

Science has also emasculated the once terrifying Tyrannosaurus Rex. Gone are the days when the mighty T-Rex roamed the prehistoric landscape chompin' on lesser beings (Joel David Moore, for instance) on a whim with his massive dinosaur dong swaying in the breeze. What are we left with now? Scientists tell us that the T-Rex was a lowly scavenger, just feeding on the discarded leftovers of superior dinos. What the hell is that? That's not any more terrifying than a pregnant alley cat listlessly picking through a Dumpster behind that Panera Bread. Also, apparently the T-Rex couldn't run, it could just barely manage a saunter. You remember that scene from Jurassic Park? Well, according to the latest research, a T-Rex would be hard pressed to catch you if you were riding in a hansom cab at a brisk pace.

And then it seems like the more research that goes into fighting cancer, the more things that end up causing cancer. Coincidence? Probably. It's like they don't want me to drink a can of good ol' fashioned Monster energy drink or eat food from the microwave or touch my phone to my penis. Back in the days when men were men and no one worried about double checking facts or researching things, I could just kick back with a bowl of deep fried lead paint chips and sit really close to the tv.

Now the scientists and researchers are developing all these new ways to help prevent this, or eliminate the negative effects of that. Listen, if I wanted someone to follow me around and tell me not to eat Yellow 5, or drink melted down, bpa-laden plastic water bottles, I would still be living with my mom.

She's a scientist.

Beat me with a stick, please? Iran is Straight, I Swear

The war mongering capitalist pigs are just looking to get at our oil like they did with Iraq! Spammed everywhere on the internet are references to how the current situation in the Straight of Hormuz is identical to the situation which led to the Iraq invasion and the 'war' launched in Afghanistan. Could the United States really looking to invade another country for its oil, some sinister plot to prop up a puppet regime and suck the region for every cent that it has? Oh wait, does it really matter?

Just pretend for a moment that the United States was a single person, bent on ruling the world and hording all the wealth and prosperity for itself. That this person was pure evil and did not care about the lively hood of any country it invaded. Wait a second, right... America has a hard enough time gaining enough consensus to elect a single official let alone concoct some multifaceted, complicated scheme to have absolute power over the world. Oh, what's that you say...American tax dollars have been spent attempting to help rebuild Iraq and Afghanistan rather than exiting the country and letting them rebuild on their own? Weird!

Since this is the internet, let's take a deeper dive into the world of internet geopolitical commentary on the subject and see if we can really get to the root of their perspectives on Iran. The best that I can tell is that there are three major camps , voicing their concerns for all the world to hear:

  1. Sweep-and-clear American - "Where is the Straight of Hormuz? Doesn't matter, just blow all of Iran up and figure it out later.  They took our jobs......"

  2. David-versus-Goliath Iranian - "We don't care how much the Americans spend on their military, our advanced 30ft speed boats and extensive history of armed combat will dominate the battle field and bring honor to our country. Just because I'm a sociopath doesn't mean that you're right"

  3. Random internet banter aka Hippie - "I read/saw this [insert random form of media here] that said America does what ever it wants when it wants. Those dirty Americans even went to war and weren't able to find any WMD so therefore they are the responsible for all diplomatic failures in the past 10 years"

If you've made it this far in reading, you probably get as much joy from reading uninformed articles(much like this one) that take some totally unrelated element and apply it to current situation hoping to go undetected to the ignorant masses that wander the internet - call it a passion, but disproving people on the internet is right up there with free beer in my book. Let's take a crack at it!

Each of these factions in some way, shape or form rationalizes that their view on the matter is the correct one - they have to be right, right? I think, therefore ev'r body else is wrong. Didn't we go through that fiasco a few times in the course of history? Not even going to go there.

I'm not even going to bother trying to analyze the first faction list above other than there is a certain belief that a pipsqueak of a country (cough Iran) is making a big stink over nothing (well it's something but I'll get into that in a moment) but that doesn't matter and America should just flex the arm of the most expensive military in the world to prove a quick point. Step one, wipe Iran off the face of the world. Step two, profit.

Iran has always been looking to steal the show on the world stage saying "HEY EVERYONE, LOOK HOW GREAT IRAN IS!" with shenanigans like claiming to have hacked data feeds controlling surveillance drones, sentencing a supposed CIA operative to death with no evidence or the best yet, the iconic war games (and associated statements of "American acts of aggression" essentially being acts of war) with toy boats. Because the rest of the world wants me to stop enriching uranium I'm going to keep enriching past the 1% mark (all that is required for supposed medicinal purposes) to see how high I can go. More on the uranium later.

Internet hippies are just the mindless masses that wander from page to page, taking the skewed views on often a single source of media, labeling it as their own view, without actually thinking for themselves in most cases. Don't fret if you fall into this category - it's not really all that bad unless you're voting for elected officials...hey, wait a second. Most of you won't fit into any of the these categories, but then again you probably don't troll around the internet posting on random new articles either.

Now that I've probably offended most of you, let's get to what this discussion was actually about - Iran's quest for weapons grade uranium and the slaps on the hands received to date. The new stiffer sanctions, although spearheaded by the US, are meant to tighten the vice on the political figures within Iran and prevent war rather than make it. Playing devil's advocate, you're probably sitting there thinking "but it's hurting the people of Iran at the same time, America doesn't care about them, just about the oil exiting Iran." - now you're thinking like a hippie. There is more at stake in the game of cat and mouse currently being played than just dollars or barrels of oil - the entire region would be in shambles should Iran achieve in its ability to gain weapons grade uranium.

To date, no nuclear nation has ever gone toe-to-toe in war with another nuclear nation so the outcome of that Iranian achievement is up for debate. What is known, is that Iran has the utmost hatred for Israel (US is in there too) and a government that isn't known for it's stability in terms of foreign policy or freedom of the people. There is a certain expectation that should Iran get to the point of fully enriched uranium that they would do bad things with it, but who could blame them? It's the ultimate insurance policy if you're looking to retain power in a failing country or twist the arm of the nation that has goods and services other than oil exports to hear you on the global level.

Please use some common sense when posting on larger scale issues in a public form. Most of you out there sound like idiots to the educated groups that rarely make their way around the internet. If you can express all sides of an argument without being jaded, you're probably well enough versed on the subject to voice an opinion - everyone else should be beaten with sticks...

Federal funds rate forecasts

Participants on the FOMC will begin publishing their expectations regarding the future path of the federal funds rate this week. This is not dissimilar from the driver of a car informing the car's passengers of his plans for adjusting the steering wheel during the course of the ride. Quite frankly, the passengers couldn't care less. What they want to know is the car's destination. Similarly, the markets couldn't care less what the Fed plans to do with its policy interest rate. What they want to know is the Fed's objective. If the markets know that we're going to see 2% inflation, or 5% NGDP growth, or whatever, then it doesn't help one bit for them to know the forward path of interest rates that the FOMC thinks will get us there.

Repeat after me: the instrument is not the target; the steering wheel is not the destination; the federal funds rate is not the economy's nominal anchor.


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