Tuesday, September 30, 2008

What do you eat more of in troubled times?

Campbell Soup Co. was the only stock in the S&P 500 that escaped yesterday's historic sell-off. That’s right: 499 fell, and just one rose.

Could there be a clearer metaphor for Americans refocusing on the basics after a decade of greed and excess?
--Henry Blodget, Yahoo Finance, on who the market thinks is the ultimate producer of inferior (in the microeconomic theory sense) goods

Tuesday, September 23, 2008

A billion here, a billion there

Invading the Netherlands might be advisable—that nation's GDP was $768.7 billion last year. Of course, invasions cost a lot of money.
--Juliet Lapidos, Slate, on paying for the Wall Street bailout

Lastly, in apocalyptic terms, $700 billion really isn't all that much. If nothing is done to change the way we finance Social Security, the trust fund reserves will be exhausted by 2041. This means that, in 75 years, there'll be a shortfall of $4.3 trillion—or about six bailouts. According to the Stern report (issued by U.K. economist Sir Nicholas Stern), global climate change could cost the planet $9 trillion (or 12.86 bailouts) if we don't address the problem within the next decade or so.
--Juliet Lapidos on why it's not so bad after all

Saturday, September 20, 2008

Words of wisdom

Don’t invade Russia in the winter, and don’t conduct a short raid on Goldman Sachs when the former CEO is the Treasury Secretary.
--Eddy Elfenbein, CrossingWallStreet.com, on quests doomed to failure

Thursday, September 18, 2008

No, YOU pay more

Noting that wealthier Americans would indeed pay more [taxes], Biden said: "It's time to be patriotic ... time to jump in, time to be part of the deal, time to help get America out of the rut."
--Douglass K. Daniel, Associated Press, on Biden's public words on contributing to the public good

The most surprising fact I learned yesterday:
Democratic vice presidential nominee Sen. Joe Biden released 10 years of tax returns Friday...The Bidens' joint gross income hovered between $215,000 and $320,000 a year during this period...The amount they gave to charity during this period never exceeded one-half of 1% of their annual income. The Bidens never gave more than $995 to charity in any of the tax years, and usually gave much less.(Source)
Compare Biden's behavior to that of a typical American:
The IRS reports that those who itemize deductions on their income tax returns have claimed, since 1975, that between 1.6 percent and 2.16 percent of their income went to charitable concerns. (Source)
This contrast is an example of a broader phenomenon:
conservatives who practice religion, live in traditional nuclear families and reject the notion that the government should engage in income redistribution are the most generous Americans, by any measure. Conversely, secular liberals who believe fervently in government entitlement programs give far less to charity. They want everyone's tax dollars to support charitable causes and are reluctant to write checks to those causes. (Source)
If Biden's below-average charitable giving is typical of those with his political views, why am I surprised by it? Because this man has run for President more than once. He must have known there was a good chance that his tax returns would at some point be made public and undergo close scrutiny.
--Greg Mankiw on the disconnect between private actions and public policy stances

Monday, September 15, 2008


I would like to thank all my friends on Wall Street for doing so much to spark interest in economic issues. You have gone beyond the call of duty, and your timing could not have been better.
--Greg Mankiw on the interplay between Wall Street and the ivory tower

Sunday, September 14, 2008

Will the real Sarah Palin please stand up?

Can you tell which one is Sarah Palin and which one is Tina Fey? Even CTV's caption writer (linked below) gets it wrong!

Saturday, September 13, 2008

The standards of proof

I took the opportunity to ask respondents what method they would recommend for corporate capital budgeting. Table 7 shows that the CAPM is recommended by 265 out of 360 respondents. The strong theoretical underpinning of the CAPM seems to outweigh the fact that it has almost no empirical evidence supporting it. In contrast, the Fama-French model, which lacks a strong theoretical underpinning but performs well empirically, can garner only 41 supporters.
--Ivo Welch, "The Consensus Estimate for the Equity Premium by Academic Financial Economists in December 2007," documenting another example of scientific belief being driven by something other than empirical "proof." See also my thoughts on the scientific method and religious faith here.

Thursday, September 11, 2008

Two birds with one stone

Now every proposal for balancing the budget includes big cuts for both Medicare and NASA. Now here are two seemingly unrelated facts.

Fact one: 30% of Medicare expenditures are incurred by people in the last year of their lives.

Fact two: NASA spends billions a year on astronaut safety.

Maybe you see where I'm going.

Why not shoot the elderly into space? Stay with me. Because I'm not just thinking about the budget here. I'm talking about science. Just think how many more manned space operations NASA could undertake if they didn't have to worry about getting the astronauts back.
--Al Franken, 1996 White House Correspondents Dinner, on a way out of our budgetary problems

Wednesday, September 3, 2008

Marriage engineers for hire

Kyoko, of course, is not the girl’s real name. She did not meet Mr A by chance and does not work for a design company, as he thinks. She is an agent paid to seduce him... The whole operation is paid for by Mr A’s wife, who gets an amply illustrated report every time an encounter takes place. The aim is to have Mr A fall so completely for Kyoko that he wants to marry her and asks for a divorce. Failing that, his wife will have a sizable dossier with evidence of infidelity to confront him with.

In Japan, if you have the money you can sort out virtually any problem in your love life. If you want to get rid of an unwanted spouse, retrieve a straying one, get back with an ex or even get together with someone you’ve seen but don’t yet know, there are companies that will help you, using all the technology and expertise in human psychology at their disposal. ...

Jobs such as separating Mr A from his wife take an average of two to four months. For this the client pays £2,500 a month, plus expenses. ...

Bringing separated people back together is altogether more complicated – and more expensive. It also takes longer. ACYours charges £7,500 for three months for breaking up, but £12,500 for bringing together. In some ways the procedure is the same, explains Mishima.
--Lesley Downer, Sunday Times, on what money can buy in Japan

Monday, September 1, 2008

Why Democrats should go easy on the Palins

Without families like this our nation would have no chance of affording the social welfare programs proposed by the Democratic Party.
--Tyler Cowen, Marginal Revolution, on the highly fertile Palin family