economics
emjohnson | August 12, 2009Goldman Sachs CEO Lloyd Blankfein urges his employees not to engage in "conspicuous consumption" for image concerns after their "record second-quarter profit of $2.3 billion" thanks to a government bailout:
Goldman Sachs CEO Lloyd Blankfein has warned his employess to avoid making big-ticket, high-profile purchases as the gold-plated Wall Street firm hunkers down amid a firestorm of public and political anger over outsize bonus payments. . . "This is a sensitive time for us, and [Blankfein] wants to make sure that we're not being seen living high on the hog," said one Goldman exec.
Meanwhile…
mikethemadbiologist | August 4, 2009So Arthur Laffer, the creator of the Laffer Curve, which was used to justify lower taxes on the grounds that the increase in economic activity would actually increase the amount of tax revenue despite the lower rates, just crapped out on national television this pearl of wisdom:
If you like the Post Office and the Department of Motor Vehicles and you think they're run well, just wait till you see Medicare, Medicaid and health care done by the government.
If I were a Very Serious Blogger, I'm sure I would have something trenchant to say, but, damn, what a fucking moron. Laffer is the…
razib | July 20, 2009Felix Salmon has been at the center of a discussion on the merits and value-add of financial innovation. He notes:
Then there's the more purely financial innovation. There are good things here too -- fractional reserve banking, factoring, common-stock limited-liability companies, tradable fungible bonds, stock-market index funds, that sort of thing. But on this front I think the low-hanging fruit was plucked decades if not centuries ago, and that we've long since entered a world of diminishing returns when it comes to the positive developments. Meanwhile, the negative developments, from…
emjohnson | July 16, 2009With huge profits reported this week from two bailed-out institutions, Sacramento-based real estate investor Reggie Lal is euphoric:
JPMorgan Chase & Co. posted a 36 percent jump in second-quarter profit Thursday, easily surpassing analysts' expectations, as strength in investment banking offset higher credit losses. JPMorgan, the second big bank to report stronger earnings this week after Goldman Sachs Group Inc., earned $2.72 billion, up from $2 billion a year earlier. Revenues soared 39 percent to $25.62 billion.
Results were driven by record investment banking fees and revenue in its…
stoat | July 15, 2009
Our share price, over the last 5 days. Exciting, isn't it? No, I have no idea why it is doing this, and (of course) if I did I wouldn't be able to tell you :-).
mikethemadbiologist | July 8, 2009I've written before (here) about the problems I have with the new trend in economics to misuse irrationality and to wrongly credit it for phenomena. So, a long-time reader sent along a Conor Clarke interview with Paul Samuelson, in which he discusses irrationality (boldface questions; italics mine):
Okay, what's the distinction there? I'm curious what you think about some recent developments in economics, some of the movements that are hot right now -- like behavioral economics, part of which wants to challenge the notion of humans as utility maximizing rational agents.
In my view behavioral…
emjohnson | July 4, 2009Danny Schecter asks, how independent are we?
"This isn't just about Madoff. This is about the system in which Madoff's scam took place. This is about systemic fraud and malpractice, the cultural trade of due diligence for easy profit. It's about conflicts of interest where companies paid ratings agencies for their ratings. It's about ideological blinders that let regulators and the Federal Reserve look the other way while banks turned into betting parlors."
Amy Goodman looks into the overthrow of independence in Honduras.
The first coup d'etat in Central America in more than a quarter-century…
ddobbs | July 2, 2009An article from the Standard ponders why, despite widespread recognition that the country needs health care reform, we may not get it.
The relatively new field of behavioral economics--a blending of psychology and economics--helps makes sense of these clashing views. One major tenets of this sub-discipline is that people value a "loss" about twice as much as they value a "gain." And as a result, people are more risk averse than might be suggested by traditional, rational economic theory. In other words, instead of "rationally" weighing risks and rewards equally and then forming a judgment,…
emjohnson | June 30, 2009Peter and Billy Getty over at City Brights write:
There are slews of people richer than we are, just in this neighborhood. We're more famous for being rich than we really are rich. But we have enough to belong to the leisure class, meaning we get to spend very little of our time doing anything we don't feel like, and we have means to sample, if not to gorge on, pleasures that most people, sad to say, won't likely ever share in -- things like yacht trips and safaris, ludicrously expensive wine, and private jet travel. You can be richer than we are, but you can't live a whole lot better without…
mikethemadbiologist | June 29, 2009Over the weekend, I had started writing a post titled "When Will [economist Paul] Krugman Have His Creationist Epiphany?" It was inspired by a comment left on a Krugman post about "the Great Ignorance which seems to have overtaken much of the economics profession -- the "rediscovery" of old fallacies about deficit spending and interest rates, presented as if they were deep insights, the bizarre arguments presented by economists with sterling reputations."
While Krugman argues this is due to flat-out ignorance, a commenter made a great point (italics mine):
This is a point I've kept making to…
mikethemadbiologist | June 25, 2009Before I dive in, I really do want good news. But misinterpreting bad economic news as good news doesn't help. You might have heard that, last week, jobless claims dropped (i.e., the number of workers filing for unemployment benefits decreased). This is a good thing, right?
Not so fast. Barry Ritholtz:
Those of you (who can still afford the luxury of) a trusty Bloomberg will note the 'exhaustion rate' for jobless benefits - EXHTRATE - reveals that people are not leaving the pool of continuing unemployment claims because they are getting new jobs; Rather, they are leaving because they have…
ddobbs | June 24, 2009Nate Silver makes George Will clear:
Will's argument is apparently this: The government does not need to make a profit and will have greater leverage with providers; therefore it will deliver the same service for less money. That's unfair!
Is this really the best argument that one of the most prominent intellectual conservatives can mount against the public option?
Post is a bit longish for tweetish attention spans -- but a great exposure of the real objection to public plans (Congressional conflicts of interest notwithstanding), and of why no real competition exists in the insurance…
mikethemadbiologist | June 19, 2009Recently, I described how absurd it is to get excited over the second derivative when it comes to unemployment. A decrease in the rate at which unemployment is increasing is hardly good news (it beats the alternative, but "green shoots", this is not). Now, we're hearing similar noises about housing starts (building of new houses): they're increasing, we must be doing better! Admittedly, this is a gain--the first derivative. But Paul Krugman, using a really nifty St. Louis Federal Reserve site, puts this in context:
Let me help, just in case you missed it:
A seventeen percent increase…
illconsidered | June 17, 2009Via MT, I came across a most excellent and interesting essay by Herman Daly on the Oil Drum (one of those great and meaty blogs that I only wich I had the time to read everything on!)
The subject is how to establish a steady state economy versus the current paradigm based on the fantasy of eternal growth. The reason you should read it is because it is not your usual Utopian hand wave about what a perfect world would be like, it is a specific set of policy prescriptions.
Worth your time!
ddobbs | June 16, 2009
What we know, Bill speaks:
I already knew, from my own modest experience installing and paying for installation of insulation and other energy-saving upgrades in my house, that such work is highly labor-intensive -- and so employs a lot of people per dollar spent. When we had our basement insulated, the material cost was perhaps $400; the total bill over $3000. Some of the difference was in equipment, but that was probably fairly modest. The big cost was clearly in paying two or three guys to make racket spraying goop in our basement for 3 or 4 days.
So it stands to figure that a good way…
mikethemadbiologist | June 16, 2009...and the Mad Biologist told you so. A while back, I looked at median incomes and median housing prices and concluded that housing prices had to drop twenty to forty percent from their highs. I also thought that, given the ARM recasts due in 2010 and that too many in the U.S. are already over their heads in debt, it would be much closer to forty percent than twenty. Well, by way of Calculated Risk, we find that Fitch Ratings concurs:
The projected losses also reflect an assumption that from the first quarter of 2009, home prices will fall an additional 12.5% nationally and 36% in…
ejohnson | June 15, 2009
The two major policy approaches to cutting carbon emissions, cap-and-trade and carbon taxes, both work by putting a price on pollution. Carbon tax—simply, a tax on fossil fuels—is intended to motivate businesses to conserve energy and switch to cleaner energy sources in order to save money. Cap-and-trade schemes put a limit on how much pollution a company is allowed. Companies that exceed their limit must then buy "carbon credits" from greener companies to compensate. Though these efforts have met with some success, our bloggers ask: is pricing carbon enough to stimulate investment in clean…
mikethemadbiologist | June 9, 2009Economist Brad DeLong is thinking about writing President Obama a letter suggesting the following:
â¢That it is past time for you to seek from the Congress for authority to guarantee the debt of states that, in response to the current recession, (a) seek to conduct their own state-level fiscal expansions, and (b) devise plans and strategies for the long-term repayment of the debt the federal government guarantees that the Secretary of the Treasury certifies as prudent and sustainable.
â¢That it is time for you to seek from the Congress an amended Budget Resolution: to include in this year's…
mikethemadbiologist | June 7, 2009Unnamed "economists" appear to claiming a light at the end of the economic tunnel because the U.S. economy 'only' lost 345,000 jobs last month, and the increase in unemployment is slowing.
We have been reduced to cheering on the second derivative.
For those of you whose math is rusty, the first derivative is the change in unemployment. A negative number is actually a good thing, since it means unemployment has dropped. The second derivative measures how large the change in unemployment is.
These "green shoots" still mean that unemployment is rising, but it's not rising as quickly. I've…
mikethemadbiologist | May 31, 2009Joseph Marr Cronin and Howard E. Horton describe the extent to which college tuitions appear to have become the next economic bubble:
According to the National Center for Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440 percent -- more than four times the rate of inflation and almost twice the rate of medical care.
...the middle class, which has paid for higher education in the past mainly by taking out loans, may now be precluded from doing so as the private student-loan market has all but dried up. In addition, endowment cushions…