EclectEcon

The U.S. Open (Tennis)

Query:



How much would it be worth to the U.S. Open and its television partners to have Agassi progress to at least the quarter finals?



Enough to make large enough "side payments" to other players to let him win?



(note: I am making no allegations. I am just wondering about the possibilities.)

Podcasts on Science Topics

If you like to listen to podcasts (I do, during my twice weekly commute to the university), you might want to check out Science and the City, sponsored by the New York Academy of Sciences:

Science & the City delivers a podcast featuring interviews, conversations, and lectures by noted scientists and authors. You can subscribe to our podcast feed so that our latest audio presentations are brought to your desktop, or you can preview individual presentations.

Why Buy Bottled Water?

I have long been perplexed by the growth in sales of bottled water. And yet I have bought it, in the rare instance, most notably when I wanted to buy a cold, caffeine-free, calorie-free drink.



Mostly, though, I just use a water bottle and refill it from the tap at home or from a water fountain at work. I confess to having a filter on our drinking-water tap, in part to reduce the amount of chlorine in our water, upped considerably since the Walkerton tragedy, an hour's drive north of here.



According to Lester Brown, [h/t to Jack]

"There are places in the world where safe bottled water is important," Brown notes. "The United States is not one of them." [EE note: neither are Canada or England]



"It's an example of conspicuous consumption," Brown says. "Reasonably well-educated people have been convinced that water in plastic bottles is better for them than water that's in their tap." In fact, most U.S. states regulate tap water much more stringently than they do bottled water, he adds.

Conspicuous consumption? Gee, when I refill a water bottle from the tap, I don't really feel the same way I would if I'm put cheap scotch in an empty bottle that once held expensive scotch; it sure isn't conspicuous consumption on my part, and it probably isn't some overbearing concern about the environmental impact of using too many plastic bottles.



Maybe it's just because I'm cheap.

"Canada Is Not an Optimal Currency Union"

At the David Laidler Festschrift, John Crow, former Governor of the Bank of Canada, pointed out how the rising price of oil has put upward pressure on the Canadian dollar. He further pointed out that while the oil patch is primarily in the western provinces, the rising international price of the Canuck buck has reduced world demand for other Canadian goods and services, which has particularly inflicted some economic pain on firms in the eastern provinces.



What if there were two different currencies, one for eastern Canada and a different currency for western Canada? The western currency would certainly appreciate relative to the eastern currency, and this led Clark Leith (who was presenting a paper about currency unions) to reply to John Crow's comment,

Canada is not an optimal currency union.

At that point David Laidler interjected that labour mobility is important. Within a given country, differential shifts in demand induce considerable labour mobility, which tends to attenuate the shifts that would otherwise occur; if there were two different countries with two different currencies and with barriers to labour mobility, a currency union would have much more difficulty.



In that sense, it is easy to understand how crucial it was/is that barriers to labour mobility be reduced within the Euro community in order for the Euro to survive as a common currency across different countries.



Related: David Laidler also pointed out that the US treatment of Canadian softwood lumber producers indicated that when a small country signs an agreement with a very large neighbour, it has little recourse if the very large neighbour abrogates the agreement. He used this example to argue against forming a currency union between Canada and the United States.

Are Conditions Getting Worse for the Poor in the U.S.?

There has been quite a bit of discussion in the media and around the blogosphere during the past couple of days about labour income and about conditions for the U.S. poor. Here's more from The Economist, "Richer for Poorer" ($):

[E]ven though poverty is in retreat more slowly than anyone would like, there is still some encouragement for advocates of welfare reform. The poverty rate is over a percentage point lower than it was when Mr Clinton signed the infamous bill. Child poverty has fallen even more dramatically.



... Some critics of the government’s poverty figures argue that the impression they give is too gloomy. Nicholas Eberstadt of the American Enterprise Institute, a free-market think-tank, points out that official poverty calculations exclude taxes paid and government benefits received as well as non-cash income such as fringe benefits or the rent saved through homeownership. ...



Mr Eberstadt points out that while nutrition, adequate shelter and health care were big problems for the poor when America’s poverty measure was devised, the picture is different today. Obesity is now the chief nutritional woe facing America’s poor. And those under the poverty line now have nearly as much house space and amenities as the average family in 1980. This does not mean that the poor are leading lives of plenty but it does indicate that their lot is getting steadily better, an improvement not reflected in official figures.

As Dave Altig says about the Census Bureau study,

Conclusion? If you are poor and not working — which is the most common circumstance for those under the poverty line — the reasons are not obviously related to the state of the labor market.

Update:As expected, Krugman piles on, paying no attention to the details.

Ferguson:Levitt::France:Disabled

Brian Ferguson and Steve Levitt have similar postings on related topics. Brian Ferguson points out how restrictions on firing workers has led to higher unemployment among young people in France; Steve Levitt points out how restrictions on firing workers has led to less employment of persons with disabilities.



The crux of the two postings is this: making it difficult to fire workers or lay them off in essence raises the average, expected costs of hiring those workers. Hence employers choose not to hire them if given a choice.



People respond to incentives. Or as Brian Ferguson concludes,

[T]here is considerable entrepreneurial dynamism in France. It just happens to be devoted to rent-seeking: to demanding that the government give you whatever you want as a matter of right. And it's hardly surprising that there would be heavy reliance on such an approach, given the way the government folds in the face of opposition. One might, if one were being unkind, say that France doesn't really need a Council for the Diffusion of Economic Culture. One might say that what France really needs is a Margaret Thatcher.

The Media vs. Israel

Melanie Phillips has a powerful summary and demolition of the media attacks on Israel. It is lengthy but worth reading (h/t to MA). Here is a very brief excerpt:

In short, much of the most incendiary media coverage of this war seems to have been either staged or fabricated. The big question is why the western media would perpetrate such institutionalised mendacity. Many ancillary reasons come to mind.



... But the big answer is that the western media transmit the lies of Hezbollah because they want to believe them. ... The plain fact is that western journalists were sent to cover the war being waged against Israel from Lebanon as a war being waged by Israel against Lebanon.

Update: BenS comments:

Melanie Phillips’s essay is the best commentary I have read on the way in which reality has been falsified to achieve a story line or to harm the Jewish state and to distort the world view of Western Society in a way that will disarm it and contribute to its defeat.



A must-read….

Is Capitalism Boring?

Scrawled on a wall at one of the colleges in Oxford:

I love the ambiguity of this graffiti, and I hope the ambiguity was intended.



On the one hand, calling capitalism "boring" is one of the best things that can be said about it — we all know (or should know) how the system works, and it is (or should be) pretty straight-forward.



On the other hand, surely the statement is incorrect in that it overlooks the challenges of entrepreneurship and rent-seeking.

Life is Stranger Than Fiction

Rebekah tells a story of her parents' stolen luggage. A must read.

Walt, Mearsheimer, CAIR, and the National Press Club;the combo speaks volumes

You might remember the names, Walt and Mearsheimer. They're the academics from Harvard and Chicago who wrote the infamous "Protocols of the Elders of Harvard," otherwise known as the "Israel Lobby and U.S. Foreign Policy".



It comes as no surprise that they were invited by CAIR to give an address about the Israeli lobby, reported by Dana Milbank. Both Milbank and Captain's Quarters have no trouble pointing to the holes in the Walt and Mearsheimer performance. Milbanks nailed Mearsheimer here:

As evidence that the American public does not agree with the Israel lobby, the political scientist cited a USA Today-Gallup poll showing that 38 percent of Americans disapproved of Israel's military campaign. He neglected to mention that 50 percent approved, and that Americans blamed Hezbollah, Iran, Syria and Lebanon far more than Israel for the conflict.

As the Captain said,

This shows the preparation and scholarship that comes into play when one writes anti-Semitic diatribes. Not that CAIR had any problem with the presentation, of course; they wasted no time giving the pair "Fight The Israel Lobby" buttons and cheered their denunciations of Israel and the Jews — which was the entire point of the event.



... Milbank clearly has fun dissecting the two anti-Semitic paranoid conspiracy theorists, but Chicago and Harvard should be embarrassed by this display of hatred and defective thinking.

I guess I should not find it surprising that the event was hosted at the National Press Club. But that fact symbolizes to me an anti-Israel, pro-appeasement leaning of much of the western media.



My own response to Walt, Mearsheimer, CAIR, and the National Press Club (if necessary) is somewhat different. What's wrong with providing what Walt and Mearsheimer decried as "fervent support for Israel"? What's wrong with supporting the only serious democracy in the middle east? What's wrong with supporting a strong ally in the fight against terrorism (that seems mostly to come from fanatical Muslims)? People should be proud and pleased to support Israel against those who would wipe it off the map.

What Did You Do in the War, Unifil?besides broadcast Israeli Troop Movements?

From the Weekly Standard, courtesy of JB:

UNIFIL--the United Nations Interim Force in Lebanon, a nearly 2,000-man blue-helmet contingent that has been present on the Lebanon-Israel border since 1978--is officially neutral. Yet, throughout the recent war, it posted on its website for all to see precise information about the movements of Israeli Defense Forces soldiers and the nature of their weaponry and materiel, even specifying the placement of IDF safety structures within hours of their construction. New information was sometimes only 30 minutes old when it was posted, and never more than 24 hours old.



Meanwhile, UNIFIL posted not a single item of specific intelligence regarding Hezbollah forces. Statements on the order of Hezbollah "fired rockets in large numbers from various locations" and Hezbollah's rockets "were fired in significantly larger numbers from various locations" are as precise as its coverage of the other side ever got.

For more details, read the whole thing.

Real Wages Have Increased, Not Decreased,When Total Compensation Is Considered.

When I saw the NYTimes story yesterday, saying that real wages have fallen, I figured it had to be wrong. Russell Roberts explains why.

Let me repeat the key sentence:



The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation.



That's a very strange sentence for many reasons:



1. Why would you use a measure of compensation that ignores benefits, an increasingly important form of compensation?



2. Why would you use 2003 as your starting point when the recession ended in November of 2001?



3. There are no government series that I know of on median earnings. Where did those data come from?



There's a chart accompanying the article. It tells the reader that the median hourly pay data are from the Economic Policy Institute. The Economic Policy Institute has a policy agenda. Their main issue is the stagnant or falling standard of living of American workers. They support a higher minimum wage and the strengthening of labor unions.

Roberts goes on to report BLS data on real hourly compensation, showing it has increased in every year since 1996 (the beginning date of his data series). He concludes,

What keeps my wages high (and yours) is our alternatives. Is there any evidence that workers have fewer alternatives than they once had? If anything, workers are more mobile today than ever. What sets workers wages are the wages of those alternatives. That depends, generally, on our skills, our knowledge and our drive and discipline—human capital and how well we are able to apply it. Workers are better educated than ever. That is why I believe that compensation, properly measured, is higher than it was five or ten or twenty or thirty years ago.



By the way, the New York Times quotes one economist in this entire article. That would be Jared Bernstein of the Economic Policy Institute.

I'm surprised they didn't get a quote from Paul Krugman, but he is probably saving his "piling on" comments for his next column.



Too bad they didn't check with a few other economists they way they would if the results had come out differently — you know, get some quotes from other people who might have a different take on the situation.... It is difficult to understand how so many people still cannot see through the biases at the NYTimes.

Katrinitis

From JH:

Katrinitis, definition: Severe inflammation; cause is ceaseless media coverage and brainless analysis of people who have chosen to live below sea level in a hurricane zone and believe they are entitled to lay off the risk thereof onto all taxpayers and become enraged when the tax dollars don't flow fast enough.



What is the cure?



Update: Rondi Adamson says Katrinitis is related to JonBenetitis, another disease afflicting the media.

Does Anybody Understand Exchange Rates?

At the David Laidler Festschrift, Charles Goodhart (former independent member of the British Monetary Policy Committee) said,

We don't know what is happening to exchange rates, and we cannot explain why they are what they are.

If that guy says that, I guess it helps explain my own discomfort (and feelings of ignorance) with the area.

fatness: calories, genes, or microbes?(or is it all just economics?)

BenS says,

Hurrah! Fatfolk such as I have a new excuse for our fatness: it ain’t fatuity! It’s bugs!

Here is the link to the full, very long story. Here is the crux:

Researchers and public-health officials have long understood that to maintain a given weight, energy in (calories consumed) must equal energy out (calories expended). But then they learned that genes were important, too, and that for some people ... this formula was tilted in a direction that led to weight gain. Since the discovery of the first obesity gene in 1994, scientists have found about 50 genes involved in obesity. ...



But even as our understanding of genes and behavior has become more refined, some cases still boggle the mind.... Now a third wave of obesity researchers are looking for explanations that don’t fall into the relatively easy ones of genetics, overeating or lack of exercise. They are investigating what might seem to be the unlikeliest of culprits: the microorganisms we encounter every day.

These microbe explanations for obesity must be addressing some of the unexplained variances mentioned in this lengthy WSJ debate between Carol Graham, of the Brookings Institution, and Darius Lakdawalla, of the Rand Corp.

Does Abortion REALLY Lead to Reductions in Violent Crime?

Most of us by now are familiar with the hypothesis put forward in Freakonomics by Steve Levitt and Stephen Dubner (summarizing earlier research by Levitt et al.) that following the decision in Roe v. Wade, violent crime rates declined.



Fewer of us know that there was a coding error in the original work that cast some doubt on the original results. Levitt redid the study and found even stronger results, but those are now being questioned. One among those who have questioned Levitt's most recent results is, guess who, John Lott. Here are excerpts from a recent news story about his results.

Freakonomics, co-authored by Stephen Dubner and published last year, says legalized abortion led to a large drop in murder and other violent crime in the late 1980s and early '90s, and continues to reduce crime.



The book suggests that if the aborted fetuses had instead been born, they would have become adults more likely to commit crimes because they were unwanted by their mothers.



... But Lott says the Levitt study did not fully consider the increase of children born out of wedlock. His theory is that with the option of abortion, women became more likely to have premarital sex, but then had their babies and raised them as single parents.



Children born out of wedlock have had smaller investments in "human capital" by their parents and are more likely to get into trouble when they grow older, Lott says.



... Before legalized abortion, more than 70 percent of children born out of wedlock ended up in families with a father, but the fraction fell to 44 percent in 1984, according to the paper.



In an interview, Lott acknowledged that legalization of abortion in the '70s did have a "slight impact" on reducing crime — but not when the effect of unwed mothers is included in the analysis. Levitt, on the other hand, estimated abortion will account for declines of 1 percent a year in crime over the next two decades.

My own priors have been revised — they're pretty flat now.



Update: John Lott tells me that his paper with Whitley is forthcoming in Economic Inquiry this fall, but it was written back in 2000. Let me add that was long before Freakonomics was written, but after Levitt, et al., published their initial studies. Here is the abstract to the paper:

Legalizing abortion can either increase or decrease investments in children’s human capital. This article finds that abortion increases the number of out-of-wedlock births.



Using data that more directly links the criminal with age when the crime was committed, not age when arrested, and fixing the assumption in previous research that no abortions took place prior to the Roe v. Wade decision in the 45 states affected by that decision, we find consistent significant evidence that legalizing abortions increased murders by over 7%. Linear estimates indicate that legalization increased total annual victimization costs by at least $3.2 billion.

They conclude:

This is not to suggest that the hypothesis provided by Bouza-Morgentaler-Donohue-Levitt is not plausible, but at least that it is not the most important part of the story. Abortion can eliminate unwanted children and can benefit many women, but it can also make other women who are unable to bring themselves to have an abortion worse off and more likely to have out-of-wedlock births. Like many laws there appear to be both winners and losers, but here the net effect appears to be a net reduction in human capital and an increase in crime.

Max, Charlie, and the Carnival of Cats

The Carnival of Cats, #127, is up here, with a link to this earlier posting about Maxwell and Charlie.

Does the Cato Institute Need a Geography Lesson?

Here's a quote from Andrew Coulson at Cato's Blog:

Hat tip to James Taronto — who, interestingly enough, shares the name of the Canadian capital.

Note to non-Canadian readers: The problem is not that he misspelled "Toronto".

Anti-Virus Software Review

Jack uses the subscription version Kaspersky anti-virus programme, but there is also a free version available; Jack warns that getting downloaded updates for the free version is difficult, and he highly recommends the subscription version, which automagically downloads as many as four database updates each day. I use the free version of AVG, and so does my son, David Ricardo Palmer. Click here for a review of the leading programmes.

Today’s best anti-virus software come with multiple virus scans, allowing you to schedule scans in advanced, giving you access to a variety of location-specific scans and even real-time scanning, which scan your computer every few minutes for viruses—stopping them before they can do their damage



And, since new viruses are being created everyday, the most effective anti-virus programs offer convenient virus updates. Some software even offer automatic updates, which regularly and automatically check back with the manufacturer for information on new viruses, providing you the highest-level of protection at all times.



However, undeniably, the most valuable thing that today’s anti-virus software brings to its consumers is plain, good-old-fashion peace of mind.

This graphic is just fyi; it does not contain a link:

So Just What Is the UN Planning To Do in Lebanon?

Besides provide protection for Hezbollah while it re-arms itself? From the Debka Headlines

[h/t to Jack]:

UNIFIL-2, which will deploy in two stages starting early September, “will not be used along Lebanon’s long and porous border with Syria to stop any shipments of arms reaching Hizballah,” the UN secretary admitted Friday night from Brussels.



This confirms DEBKAfile’s report Friday that Israel has failed to obtain a pledge to enforce the UN embargo on arms for Hizballah’s rearmament from Iran and Syria.



Annan also stated: “Troops are not going in there to disarm – let’s be clear.” Disarming Hizballah, he said, is a subject for “political agreement among the Lebanese -” (a direct contradiction of UN Security Council resolution 1552)



Annan also spoke of “international guarantees” to secure Israel against further attacks. In other words, that is not UNIFIL’s job.



The UN Secretary General will go ahead with raising more international soldiers from Indonesia, Malaysia and Bangladesh, despite their refusal to maintain diplomatic relations with Jerusalem. He said he would take the best peacekeepers “wherever he can find them “– even if Israel does not accept this.



The Muslim contingents will supplement the 6,900 soldiers 12 European governments have pledged. Italy which succeeds France as leader of the force next February deploys the largest unit of 3,000 men, followed by France’s 2000 troops, Spain’s 1,000, Poland’s 500 and 250 from Finland.

But is that entirely consistent with this next bit, or are the next two paragraphs just double-talk?

French defense minister Alliot-Marie ... told the Wall Street Journal that Paris had obtained a very important clarification permitting its troops to use rubber bullets against “anyone standing in their way.”



Foreign minister Philippe Douste-Blazy said the force would mark out “exclusion zones,” in which armed militias would be disarmed, as “the best way to remove Hizballah’s weapons.”

But read on to see what they apparently mean:

Neither French minister referred to the non-exclusion zones, from which it may be inferred that there, Hizballah fighters would be allowed to bear arms.



The Italian foreign minister, Massimo D’Alema, who can’t wait to plant a European military presence in the Middle East, is even more relaxed about holding Hizballah to UN resolution 1701. After all, he says, Europe does not regard Hizballah as a terrorist organization. He repeated Annan’s statement and declared Italy would not engage in disarming Hizballah fighters.



Hizballah spokesmen say that the “exclusion zones” issue is under study. DEBKAfile’s Beirut sources have learned that Iran’s Shiite proxy is considering opposing exclusion zones in Lebanon unless they are extended to northern Israel. This condition would hold up the UNIFIL-2 deployment in Lebanon until such time as Israel withdraws its troops - not only from Lebanon, but also from defensive positions on the Israeli side of the border including Galilee, two weeks after its civilian population endured a 4,000-rocket Hizballah blitz.

Addendum: From Michael Portillo, writing in the Times:

At the heart of this mess is France’s reluctance to tackle Hezbollah. Back in 2004 the security council adopted resolution 1559 demanding that the terrorist organisation be disarmed. Like many resolutions it is a declaration without serious intent. ... During recent days, as France has procrastinated, arms have been pouring in from Syria and Iran to re-equip the terror group. ...



There is now no suggestion that UN troops will attempt to disarm Hezbollah in accordance with UN policy. The question must be rather, to what extent will the French-led mission turn a blind eye to the group’s re-armament? If Hezbollah moves its Katyusha rockets back to the Israeli border, will the blue-helmeted Frenchmen stand in their way?



... Last week a former junior member of the Bush administration, Jeff Babbin, likened undertaking a military operation without the French to going on a deer shoot without an accordion — you just leave behind the noisy useless baggage.



... Chirac has been caught out. In the case of Lebanon, grandstanding was not enough. He has now stepped forward to do his duty with all the relish of a man slipping into a quicksand. French forces may be ineffective, or suffer casualties, or both. Washington cannot wait to see what happens next.

A Shining Star

Five years ago, I was fortunate to teach an honours microeconomic theory class with at least ten really bright students. One of the best of the group was Anne Swift, who has continued her studies, focusing on applications of economics, especially in the areas of innovation and entrepreneurship.



Here is her website. Here is her blog.

Morning Glories

Amazing Choreography

Alan Adamson links to some brilliant work on the treadmills. Go watch this video. It is stupendous.

New Zealand Super Car

One evening back in July, as a result of random serendipitous events, I ended up on Hayling Island, near Portsmouth. While there, I soon found myself in deep conversation with Jock and Arthur, from New Zealand, who had brought their supercar to England for a major auto show in Chichester. We had a great time, and they are very enthusiastic about their project.

For more information on the car, see here. For more photos, see here.I think of it is a very high-end competitor for Lotus, et al.

Geezer World:Life in a Seniors' Community

Emily Yoffe has a piece in Slate about life at Leisure World, near Washington, D.C. Given that I am often mistaken for someone who is considerably older than I really am, the piece held considerable interest for me. Her summary:

Bingo. 3 p.m. dinner. Leisure World. What happens when I try to live like a senior citizen.

She also mentions amateur theatre, bus trips to casinos, coupon clipping, and the social life.



One big thing is missing. She doesn't mention the frequency of funerals.

Sir Martin Gilbert, Official Biographer of Churchill

Tomorrow I will have an opportunity to meet with Sir Martin Gilbert. He is the author of 77 books [whew!]. His primary subjects have been the life and decisions made by Winston Churchill, but he has also written extensively on the holocaust and on the dangers of appeasement on the international scene.

. . . . . . .

Moneyball Followup

Tyler Cowen of Marginal Revolution mentions two articles that examine the success of Billy Beane's (General Manager of the Oakland A's) theories about assessing talent in baseball. Of the two, this one is much better.

How Much Is a Baby Squirrel Worth?

A priori, I would answer, "not much." But read on.



Yesterday morning, as Ms. Eclectic and I were off for a morning walk to Tim Horton's for a bagel and coffee, a neighbour told us he was nursing three baby squirrels who had been abandoned by their mother. Two of the squirrels are black, and one is white.



No, this photo on the left is not a rat; it is a white squirrel (look at the beginnings of a fluffy tail).



We have several white squirrels in Clinton, Ontario, and Exeter, Ontario (15 miles south of Clinton) bills itself as "Home of the White Squirrel".



Shortly after we arrived home from our walk, Maxwell (one of our cats) pranced in through the pet door, proudly bearing a baby squirrel. At that point he hadn't killed it; he hadn't even seemed to harm it much*, and so Ms. Eclectic opposed my using brute force to euthanize Maxwell's prey. So we mixed up some soya milk and corn syrup to try to feed it (photo on the right).







Ms. Eclectic then did some research on the internet and learned that we should keep the baby squirrel warm and feed it something called "Pedialyte", which seems a bit like Gatorade for infants.



We soon became the proud owners of a large bottle of pedialyte, a syringe-like plunger, and a brand new hot water bottle. We named him Charlie, and in the space of several hours became quite attached to him.



Then last evening we located a "licensed wildlife rehabilitationist". She has more photos on her website, and she was pleased to take Charlie off our hands.



So how much is a baby squirrel worth? A whole lot more after you've nursed it back to health and become attached to it.

.



*Maxwell is a lover, sometimes a stalker, but not a fighter. He catches dragonflies or moths sometimes, but he's never been fast enough to catch a mouse. We're quite sure he couldn't have caught Charlie if Charlie hadn't been stunned or injured.

Chateau d'Cardboard -- For People Who Like Plonk (i.e. are not wine snobs)

My idea of a good wine is one that is inexpensive and has a screw cap. The possibility of aging a bottle of wine seems very foreign to me. It turns out I'm not alone:

Despite the conventional wisdom that older wine is better, only a very few wines improve with age.



Most bottles of wine are consumed the same day they're purchased, and wine producers support this trend by making barrel after barrel of wine that will never taste any better than the day you buy it.



But the most-asked question in wine storage has nothing to with aging.



Now that you've opened a bottle of wine — old or new — how long will it keep and how should you store it? As Robinson puts it, "You buy a bag of chips, you don't feel like you have to eat the whole thing in one sitting. Most people don't feel so confident buying and opening and not finishing wine."



For the ultimate in wine preservation, buy a box. More and more quality wines are available in three-liter "casks," which don't let air anywhere near the wine, and they'll stay fresh in the refrigerator for months after opening. As long as your guests don't see what you're doing behind the fridge door, you're golden.

It wouldn't bother me. I'm fine with Chateau d'Cardboard.

Housing Bubble to Deflate;Recession to Follow

(I posted this a year ago this coming weekend):



That [headline is] the prognostication of economist Ed Leamer:

In Leamer’s view, the housing market appears to have peaked “in California and elsewhere. It will take more than a year for this weakness to turn into job losses and to affect the economy in general.” [emphasis added]



And, yes, he’s using the “R” word. As in “recession.”



Leamer lays the blame squarely on the Federal Reserve for leaving interest rates too low for too long. Now, he says, we’re not only heading for trouble in the housing sector, but in the auto industry — another market that got drunk on historically low rates.



Low borrowing costs accelerated future sales by enticing consumers to trade up to bigger homes and new vehicles sooner than they might have done otherwise. Instead of waiting to buy a new family car in a couple of years, folks said, “Oh, what the heck. Financing is so cheap we might as well get it today.” As a result, car dealers lose the sale they would have gotten two years from now.



As rates creep higher, consumers happily driving their new cars or living in their larger homes have no motivation to purchase additional ones. Since consumer spending drives two-thirds of our economy, when consumers close their wallets, the impact is far-reaching.

---

Update in 2006: With growing doubts and concerns about what will happen in the US economy over the next year or so, it looks as if Leamer may have called it pretty well.



For more on the housing slowdown and possible recession, see the postings at Calculated Risk and Econbrowser.



And for a really bleak outlook, see the charts reproduced at The Big Picture, where Barry Ritholtz contrasts what most people think of as a "housing bubble" with what he and Lon Witter call a lending bubble. Interestingly, these concerns were being raised a year and a half ago (and brought to my attention by MA and Sean), but only now are the predictions being realized. Ed Leamer seemed to have the timing right, too.