EclectEcon

Could Noah Build the Ark Today?

Maybe not. [from JDH and JT]. See this.

Ten Reasons to Bail Out Bloggers

Tom Hanna proposes an interesting bail-out package: bail out bloggers:

Everyone is out hat in hand looking for a bailout, so let me throw in my two cents. Bail out bloggers. Pick the million most serious bloggers in the US and give loan them $500,000 each. This would be the last big bailout the economy needed. It would fix everything.

Sounds like the type of innovative, creative macroeconomic planning the world is looking for in these times of economic uncertainty! Tom defends the proposal here. Read the whole thing.

Reducing the Threat of Memory Loss in Advancing Years:Toke Up

It has been decades since I even considered using marijuana. But I'm reconsidering now [from the Globe&Mail]:

[A] daily toke in later-middle and old age can help slow memory loss, or the onset of diseases such as Alzheimer's, Parkinson's and multiple sclerosis, a new study suggests.

It's a pre-emptive strike, one not effective at reversing previous memory loss.

So I guess I'd better start now, eh, before things digress (any further)? And if a toke helps that much, what would a few do for me?

Electronic Stability Control

It looks as if insurance companies think electronic stability control [ESC] is a valuable feature on automobiles:

The insurance industry named dozens of new cars and trucks, led by Ford Motor Co. and its Volvo subsidiary, to its annual list of the safest vehicles Tuesday, helped by the increased use of anti-rollover technology. ...

The selected vehicles are the best in protecting people in front, side and rear crash tests based on institute evaluations during the year. The vehicles are required to have electronic stability control, or ESC, to qualify for the award. ...

Electronic stability control senses when a driver may lose control and automatically applies brakes to individual wheels to keep the vehicle stable and avoid a rollover. It helps motorists avoid skidding across icy or slick roads or keep control when swerving to avoid an unexpected object in the road.

I have never been in a roll-over accident, but I have experienced skidding across icy roads several times in my 73 years of driving, and ESC sounds to me like something worth paying for. For more on which cars were rated highly by insurers, see this.

Maybe Canada Can Import a Few Doctors from Iceland

It has long been known and argued by people like Brian Ferguson that Canada's population faces a severe shortage (at the current price of zero) of physicians, and that this shortage will surely grow as the population ages.

An article in the most recent Fraser Forum details the seriousness of this problem. Here is a table from that article, showing (roughly) the number of physicians per 1000 population, adjusting for the age distribution of the population.

Given that Canada is near the bottom (thanks to policies implemented more than two decades ago, limiting medskool enrolments), and given that Iceland is at the top, perhaps the recent financial meltdown in Iceland will induce some of their physicians to move to Canada.

Table 1: Age-adjusted comparison of physicians per 1,000 population for select OECD countries, 2006

1 Iceland 4.5
2 Greece (2005) 4.4
3 Netherlands 4.0
4 Czech Republic 3.8
4 Norway 3.8
6 Belgium 3.7
6 Ireland 3.7
6 Slovak Republic (2004) 3.7
6 Switzerland 3.7
10 Denmark (2004) 3.6
11 Austria 3.4
11 Spain 3.4
13 France 3.2
13 Sweden (2005) 3.2
15 Australia (2005) 3.1
15 Italy 3.1
15 Germany 3.1
18 Portugal (2005) 3.0
19 Hungary 2.9
19 Luxembourg 2.9
21 New Zealand 2.7
22 Finland 2.6
23 Korea 2.4
23 Poland 2.4
23 United Kingdom 2.4
26 Canada 2.3
27 Japan 1.7
28 Turkey 1.6

Mumbai: Not Much Organizational (or any other) Skill Required for this Terrorism

Alan Adamson launches a scathing attack on the main-stream media (MSM) who seemed impressed with the organization of the Mumbai attacks by Islamists:

This is not organization of any serious quality. Nor does it require much in the way of character, except for a Jeffrey Dahmer sort of character. (And Dahmer at least fought against his tendencies.) No courage involved. Not much in the way of brains. And what nobility! - to attack the maternity ward of a hospital, a Jewish centre, a cafe, the railway station, and some hotels which were clearly a favorite spot for Mumbai families to stage family events. ...

What did this take? Find a bunch of disaffected layabouts, young males looking for murderous excitement and glory. That seems pretty easy these days in the Muslim world. Get some money to support destructive attacks on any modernizing part of the world. Also pretty easy. Get lots of weapons. Really easy! (And largely the fault of that modernizing world.) Choose a bunch of low-security targets to attack. And then, knowing in advance that you are entering a world built on mutual trust and co-operation, exploit all that to inflict violence on an unexpecting and innocent population.

More Canadian University Political Correctness Run Amok?

Recently, the student govt of Carleton University (not to be confused with Carleton College in Northfield, Minnesota) voted to no longer support the Shine-a-rama fund-raising activity to support research into treatment of cystic fibrosis. Their reason? It's a disease that affects primarily white males.
Here is a copy of their resolution, as reproduced by Jonathon Kay in The National Post:

Motion to Drop Shinerama Fundraising Campaign from Orientation Week Whereas Orientation week strives to be [as] inclusive as possible; Whereas all orientees and volunteers should feel like their fundraising efforts will serve the their diverse communities; And Whereas Cystic fibrosis has been recently revealed to only affect white people, and primarily men Be it resolved that: CUSA discontinue its support of this campaign Be it Further Resolved that the CUSA representatives on the incoming Orientation Supervisory Board work to select a new broad reaching charity for orientation week. Moved: Donnie Northrup Seconded: Meera Chander

This position is truly obnoxious. It factually incorrect, and it is amazingly discriminatory. As Kay points out,

Even by the loopy standards of students governments, this has got to be a new low. Had the author of this resolution... bothered so much as to look at Wikipedia, here is what he or she would have found: “Approximately 1 in 25 people of European descent … is a carrier of a cystic fibrosis mutation. Although CF is less common in these groups, approximately 1 in 46 Hispanics, 1 in 65 Africans and 1 in 90 Asians carry at least one abnormal CFTR gene. Cystic fibrosis is diagnosed in males and females equally.”

That same author would also have found a photo of a young, pitiful-looking black girl staring back at him from behind a mask nebuliser. (Good thing for her the disease “only affect[s] white people,” huh?)

But even if it were true that only white males got CF, what of it? We raise money for breast cancer even though it is primarily a female disease. We raise money for Tay-Sachs, even thought it strikes almost exclusively Jews. We raise money for AIDS, even though it disproportionately affects gays and blacks. That’s because we raise money to save people — not tribes.

As Susan said when she saw this,

This is surely the most repulsive manifestation of political correctness I have run across. We’re going to have to declare white males an endangered species, now that is it unacceptable even to fund research into fatal diseases that might afflict them. Take apartheid and the colour bar in the Old South, roll them all up together and it would be hard to find anything as reprehensible as this. The only possible ramping up of a position like this is to declare open season on white men.

Queen's University Ridiculed for Thought Police

Political correctness has run amok at Queen's University in Kingston, Ontario.

Queen's University in Kingston, Ont., continues to contort itself hilariously over a pilot program to hire and train a half-dozen "facilitators" to eavesdrop on conversations in public areas of student residences and provide instant, on-the-spot political reeducation where necessary. ....

Perhaps Mr. Deane [Academic Vice-President] needs a "facilitator" of his own to help him understand why his words immediately strike so many as creepy and totalitarian. Indeed, one sentence -- "Freedom of speech and thought is impossible without respect, consideration and a commitment to mutual understanding" -- is exactly the sort of pro-forma boilerplate that inevitably gets sputtered out by human rights commissioners before they bring the boom down on some poor conservative-minded fellow who had the temerity to speak his views.

I find this development at Queen's distasteful and scary. I hope it doesn't spread. For more, see this.

Regifting Revisited

Several years ago, I posted several items about the art of re-gifting [giving gifts you have received but don't want to someone else who actually might like and appreciate them]. See here and here, for example. Recently, Ironman at Political Calculations linked to this item which summarizes the art of re-gifting.

The funniest and most enjoyable example of re-gifting I have come across was a geo-caching event held on New Year's Day last year for which people who attended the event were invited to bring items for regifting to each other. Because of the weather, I was unable to attend it, but I gather it was loads of fun and I'm hoping something similar will materialize this year.

The Elders? Have They Issued Any Statement Concerning Protocols?

Given Jimmy Carter's and Kofi Anan's rather clear anti-Israel statements, their being members of a group called The Elders seems worse than ironic.

And for those of you who don't see the irony, check out this Wikipedia listing.

Update: In response to this item, Sue wrote,

I happened to be in Zimbabwe just after the first election that brought Mugabe to power. At that time there was such a lot of hope for a country with tremendous resources. Rhodesia was able to sustain production of food and consumer goods such that the sanctions had minimal impact. The message then to the white Zimbabweans was: Stay. We’ll build a new country together. Many were already selling anything they could to get American money. Some were determined to stay. Now it has come to this. ... In the end Mugababe has created a nightmare as horrible as any of the other dictators in Africa. To watch Carter swanning around with the other ineffectual leaders adds a note of stand up comedy to an appalling tragedy.

Liquidity Trap or Re-Capitalization Trap?

The standard Keynesian argument has it that fiscal policy (govt spending and tax cuts) will be the only effective way to get out of a recession if we are in a liquidity trap. And we are in a liquidity trap if the demand for money is infinitely interest elastic, which in non-eco-speak means that no matter how much more money the central banks create, people just hold it -- no more lending takes place and the economy gets no stimulus from monetary policy.

While the concept of a liquidity trap is possible in textbooks, I'm skeptical about whether the US is in a liquidity trap now or even close to one.

I wondered recently what is happening to all the liquidity that is being produced by central banks. BQ gave me one possible answer: it is going into the banks to help them re-capitalize to meet their capital requirements. The banks lost tonnes of capital in the subprime meltdown and must re-capitalize. As the central banks create more money, the banks are using this opportunity to restore their capital positions. If the central banks keep inflating the money supply, there is little reason to doubt that banks will start lending more and people will start borrowing more.

Any theory that relies on the assumption of zero or infinite demand elasticities is likely to be wrong.

Arnold Kling on the Suitability of Cecilia Rouse to Head the CEA

I see no reason to doubt her qualifications for CEA chair. Her work has not focused on macro, but when it comes to dealing with the current crisis, do we really care that she does not have a track record of producing Euler equations or calibrating general equilibrium models?

From this posting by Arnold Kling.

How Long Ago Did People See This Coming?

As I have written so often lately, many people saw the housing bubble as a potential problem more than three years ago. Here is one piece, for example, that I wrote in August, 2005, quoting Andy Xie of Morgan Stanley.

Asset inflation has fueled the consumer boom as people borrow against (and/or count on) the rising asset values to finance growing consumption. And Morgan-Stanley's Andy Xie thinks it is all about to come crashing down or maybe slowly slithering down...

But just because many of us saw the crash coming early, that doesn't mean much:

1. Way back then, Ed Leamer predicted the bubble would burst, followed by a recession (see this). But then just last March (2008), he forecast that the US would narrowly avoid a recession. Hmmmm.
2. In July, I sent my friend, MA, the following forecast:

My best guess is that the only way this [a serious depression] will happen is if the monetary authorities REALLY foul up (or if there’s some other major political upheaval). I’d say there’s perhaps a 1/4 chance of 1980s type deep recession, but even that is unlikely.

I'm not so sure I would be that optimistic now. But over the past two months, my pessimism about the future has grown, stemming more from all the attempts by govts to intervene in the economy. I'm quite confident those "fixes" will increase the size of govt bureaucracies and reduce incentives that are important for long-term growth.

I Am a Doer, but I Used to be a Thinker,and before that, a Duty-Fulfiller

From Phil (who is a Guardian), the Typealyzer site purports to analyze the content of a blog and then describe the personality of the person who wrote it.

The analysis indicates that the author of http://www.EclectEcon.net is of the type:

ESTP - The Doers

The Doers are happiest with action-filled work which craves their full attention and focus. They might be very impulsive and more keen on starting something new than following it through. They might have a problem with sitting still or remaining inactive for any period of time.

The active and playful type. They are especially attuned to people and things around them and often full of energy, talking, joking and engaging in physical outdoor activities.

If that is what my writing reveals about me, I clearly do not reveal all of my personality on this blog.
Further evidence of the evolution of my interests, if nothing else, comes when I ask the programme to analyze the previous site of this blog:

The analysis indicates that the author of http://www.eclectecon.com is of the type:

INTP - The Thinkers

The logical and analytical type. They are especialy attuned to difficult creative and intellectual challenges and always look for something more complex to dig into. They are great at finding subtle connections between things and imagine far-reaching implications.

They enjoy working with complex things using a lot of concepts and imaginative models of reality. Since they are not very good at seeing and understanding the needs of other people, they might come across as arrogant, impatient and insensitive to people that need some time to understand what they are talking about

"Arrogant, impatient, and insensitive..."? I think I am glad to have moved away from that writing style.

And when I first started the blog on Blogspot, this is what my writing revealed about me:

         The analysis indicates that the author of http://the-econoclast.blogspot.com is of the type:

ISTJ - The Duty Fulfillers

The responsible and hardworking type. They are especially attuned to the details of life and are careful about getting the facts right.

Conservative by nature they are often reluctant to take any risks whatsoever. The Duty Fulfillers are happy to be let alone and to be able to work in their own pace. They know what they have to do and how to do it.

If these descriptions are even remotely close to correct, I'm happy with the evolution. Interestingly, all three analyses show this image (or one very similar) of the type of brain activity involved in the writing:

The 50 Worst Cars of All Time

BenS sent me this link to a Time article listing one person's view of what have been the 50 worst cars of all time. While the put-downs of the various vehicles are amusingly and artfully written, for the life of me I could not discern what the criteria were for deciding which of all the bad cars should make the top-50 list.

• No matter what the author says, I would not include the Ford Model "T" in a list of worst cars. In fact, given its popularity and longevity, I'd be tempted to include it in a list of the fifty best cars.
• Other candidates from that era which surely deserved more consideration were the Stanley Steamer, which despite its speed and its adherents, simply was never as good as an internal-combustion-engine car, and the Baker Electric -- you think modern cars have battery-life problems?
• I also thought that the Chrysler-DeSoto airstreams were pretty nice dream cars of their era.
• But the 1950s really did usher in a lot of bad autos that I can remember, for example, the Henry J:
  • To save body stamping costs, early Henry Js did not have rear trunk lids; owners had to access the trunk by folding down the rear seat. Another cost saving measure was to offer the car only as a two-door sedan with fixed rear windows. Also lacking in the basic version were glovebox, armrests, passenger side inside sun visor and flow-through ventilation.
• I remember that in our town, Henry Js also had a reputation for being made with thin metal that rusted and dented easily and quickly.
• Another candidate might be the Isetta, a weak-powered, chain-driven car that might be able to reach 50mph downhill. It had a single bench seat, and that was it. I remember riding with two other big guys on a 90-mile round trip in one of those. That experience helped me understand why the car might have been okay in some European settings but was a loser in North America.
• And one of the most serious omissions from the list is the early Hyundais. They had so many problems (Lada-like), it was a miracle the company survived.

The West Bank

As much as I favour a two-state solution in Israel and Palestine, and as much as I wish that (a) the Arabs had not constantly threatened Israel with annihilation and (b) Israelis had not launched settlements in the West Bank, I certainly understand why, given the threats to and attacks on Israel, then defensive occupation seems a reasonable response. But Melanie Phillips says it much better:

... Israel is ‘occupying’ the West Bank (which on a day-to-day basis is not ‘occupied’ but ruled by the Palestinians) entirely within its rights under international law, which recognises the right of a country that has been attacked to occupy and retain land that continues to be used for belligerent purposes against it.  Which is why the UN’s famous Resolution 242 was deliberately drafted to refer to Israel withdrawing from ‘territories’ rather than all the territories – and then only when the Arabs end their war against Israel.

Her entire posting is much longer and much more detailed. It was written in response to feeble explanations by the British Foreign Office for this:

With his remarks about the Israeli settlements, Foreign Secretary David Miliband ... has signalled a sharp deterioration in relations between Britain and Israel. Miliband has urged enforcement of an EU boycott of produce from Israeli settlements in the West Bank, settlements he has called ‘illegal’.

Increasingly it looks as if govts around the world are not recognizing the constant threat to Israel's existence from some of its neighbours, and instead too many of them resent Israel's political, economic, and military successes. This resentment of success is, in part, a syndrome of cheering against a victor and for an underdog; but it is also, more likely, a manifestation of anti-Semitism, a resentiment of Jewish successes.

Phillips concludes,

The Foreign Office’s apparent ignorance of international law derives from its own innate political hostility to Israel and its wholesale endorsement -- along with virtually the entire British intelligentsia -- of the mendacious propaganda of the enemies of Israel and the west. Miliband’s remarks have nothing to do with international law, history or the truth, which he has misrepresented and repudiated, but with dirty and shameful politics. It appears that the British government has now decided openly to side with the enemies of Israel – those enemies who really have been thwarting international law for six decades in their war of extermination.

Declining Migration to the US from Mexico?

From The Conservative Minority Coalition,

MEXICO CITY - Mexican emigration has dropped 42 percent over the last two years, a government study released Thursday showed, confirming that America has become less appealing amid an economic downturn and stepped-up raids against illegal migrants.

How to Stimulate the Economy, Save Detroit, and Boost Aggregate Demand

In a pithy comment, buried among the many at Marginal Revolution, John Chilton (who blogs as The Emirates Economist) suggests that if President-Elect Obama were to announce that he is planning to ban the purchase of automobiles, that would do wonders for the US auto industry:

Spread the word that Obama wants to end the sale of cars ... . It's working with guns.

Avoid Monmouth College

Rebekah urges people not to attend or donate to Monmouth College. I understand, especially given the apparent anti-Western biases (not just there but at many small liberal arts institutions).

Some of the Problems with Rating Agencies

In response to my posting a week or so ago about the financial crisis, Craig Newmark commented that I should take a look at this piece about how the problems with the rating agencies originated with an SEC decision back in 1975.  I did, and here is an intriguing excerpt:

The rating agencies were originally research firms. They were paid by those looking to buy bonds or make loans to a company. If a rating company did poorly it lost business. If it did poorly too often it went out of business.

Low and behold the SEC came along in 1975 and ruined a perfectly viable business construct by mandating that debt be rated by a Nationally Recognized Statistical Rating Organization (NRSRO). It originally named seven such rating companies but the number fluctuated between 5 and 7 over the years.

Establishment of the NRSRO did three things (all bad):

1) It made it extremely difficult to become "nationally recognized" as a rating agency when all debt had to be rated by someone who was already nationally recognized.
2) In effect it created a nice monopoly for those in the designated group.
3) It turned upside down the model of who had to pay. Previously debt buyers would go to the ratings companies to know what they were buying. The new model was issuers of debt had to pay to get it rated or they couldn't sell it. Of course this led to shopping around to see who would give the debt the highest rating.

As plausible as this sounds, I wonder if another reason for the change in the business model was that it became too costly to maintain proprietary interests in the ratings that were produced by the rating agencies. Once an agency's ratings became available, many people were able to take a free ride on their work without paying for it, and selling the research results at higher prices to a shrinking market just could not cover the costs of producing it.

Which explanation is stronger? I don't know. I like them both. And interestingly, either one can work on its own.

P.J. O'Rourke on the Free Market Economy

I have enjoyed the writings of P.J. O'Rourke ever since his early days with the National Lampoon. He has long written pieces promoting freedom and libertarian-type ideals. This item from the Weekly Standard is one of his best. Here's an excerpt [h/t to jdh]:

What will destroy our country and us is not the financial crisis but the fact that liberals think the free market is some kind of sect or cult, which conservatives have asked Americans to take on faith. That's not what the free market is. The free market is just a measurement, a device to tell us what people are willing to pay for any given thing at any given moment. The free market is a bathroom scale. You may hate what you see when you step on the scale. "Jeeze, 230 pounds!" But you can't pass a law making yourself weigh 185. Liberals think you can. And voters--all the voters, right up to the tippy-top corner office of Goldman Sachs--think so too.

Such a sad, yet pithy comment.

In Defence of Mark-To-Market Accounting Rules

My understanding of mark-to-market [M2M] accounting rules is that they require a firm to value its assets at the current market price. See this for more on the topic.

That rule seems eminently sensible to me: if a firm's asset valuations are expected to give its investors and others an up-to-date picture of the firm's position, then current market price seems like a pretty good place to start. I.e., M2M accounting rules require that asset valuations reflect opportunity costs. Who could argue with that?

Of course there are problems with M2M accounting rules ...

Libertarians Gain in New Zealand

The ACT party of New Zealand won five seats (up from only two) in the November 8th election. Congratulations to them and to Rodney Hide, the ACT party leader.

Auto Industry Rescue?Redistribution from the poor to the rich?

From Will Wilkinson,

As Casey Mulligan writes,

A rapid and decisive GM collapse would allow us to continue to hope that President-elect Obama represents genuine change: leading politicians of the Democratic party will no longer tax the average American to bail out the rich, regardless of whether those rich do business in Detroit or in New York City. [EE: or on the farms or in California real estate or ....]

The Best Policy for Dealing with a Recession?Reduce Marginal or Payroll Tax Rates

Forget short-term bail-outs and short-term stimulus packages; there is little, if any, evidence that they have much effect. Instead, says an unattributed column in the European WSJ, it is better to concentrate on policies that at the very least will not inhibit future growth [h/t to Eva]:

The contraction is expected to continue at least until the middle of next year. No doubt, pressure will mount on governments "to do something" and the G-20 already vowed to use "fiscal measures" to shore up the global economy. The danger is that the euro zone may repeat the mistakes of so many others past and present: Fiscal pump-priming that may "spread the wealth" but won't create any wealth. Instead, taxpayers would be saddled with higher government debt.

Over the past few weeks, Japan and China have taken the lead, unveiling massive fiscal packages. President-elect Barack Obama has also called for another stimulus (on the heels of a failed one) as the current U.S. Administration, as well as Berlin, consider bailing out the auto industry. In Britain, Prime Minister Gordon Brown appears within days of announcing his own package of fiscal measures. Details are still sketchy.

If Europeans, or anyone, really want to stimulate their economies, they will be wasting time and money with tax rebates or public works programs. The stimulus with the proven track record at jump-starting economies is the one least often contemplated: a simple, visible marginal tax or payroll cut that would boost long-term incentives to work and invest. Lower payroll taxes, for example, would reduce labor costs, thus helping to preserve some jobs now while ensuring that any future recovery will be stronger.

Just Think of the Incentive Effects!Gain Weight, Get Early Parole

My older son, David Ricardo Palmer, sent me this link last week:

Canadian prisoner, too fat for cell,

released early

OTTAWA (Reuters) – Canadian prison authorities were forced to release a 450-pound (205 kg) drug gang member this week because he was too large for his cell, the Journal de Montreal newspaper reported on Wednesday.                         

Michel Lapointe -- known as Big Mike -- was arrested in September 2006 and received a five-year sentence in May this year. The paper said he could not fit on the chair in his Montreal prison cell and when he went to bed, his body protruded six inches on either side.

A letter from the authorities to Lapointe said: "You have been detained for more than 25 months and your prison conditions are difficult because of your health".

The authorities also cited the refusal of two other facilities to accept the 37-year-old. He was freed late on Tuesday.

I was delighted with the questions that my son raised about the article:

1. How can a man be in jail for over two years and STILL weigh over 450 pounds?
2. How many other inmates will now seek to gain enough weight that they, too, will be set free?

As we keep emphasizing, people respond to incentives, and policy changes alter people's behaviour by altering the incentives they face.

More Evidence that Govt Planners Are Idiots?

Remember how upset so many of us were over the US Supreme Court decision in the Kelo expropriation case? Phil Miller has an update that should be emblazened everywhere.

No, I do not believe that Susette Kelo's spell was effective; nor do I really believe that govt planners are complete idiots. This is just another instance of govt folks risking someone else's assets and not losing much (if anything) of their own money as a result of their bad decisions.

What To Do about Financial Crises?

Nick Rowe, writing at Worthwhile Canadian Initiative (gotta love that blog name!), says,

Trying to prevent crises by trying to prevent default hasn’t worked in the past, and I think it could never work. The overarching reason is this: if the financial system seems safe, people will take bigger risks, which makes the financial system unsafe. If the government is protecting us, we don’t need to look at the risks, and will leverage up to the hilt in illiquid assets at bubble prices. ...

Instead of trying to prevent default, we should focus on trying to prevent default from having real costs. Reducing real costs should also reduce contagion. .... Default means that someone has broken a contract, so the government decides what happens next. ... The legal consequences of default should be instant and automatic. Default should mean a change in ownership of the bank, not the breakup of the bank ... The new owners should be the people who suffered the default – their bonds instantly and automatically become new voting shares. ... Any promise will always be broken under some circumstances, and so debt becomes equity. Contract law needs to recognize the inevitability of debt-to-equity conversions, and make it instant and automatic.

I think he is right. Mostly what he is saying, it seems, is that the present line-up of claimants under the absolute priority rule in bankruptcy is correct, but it just takes too bloody long for it to take effect. Unfortunately, I don't see an easy way to speed it up, either; however, I was very impressed with how quickly most of the Lehman Brothers' affairs were settled, which suggests that much of the delay in other instances is due less to problems with bankruptcy law and more to problems with uncertainties about whether and how much the govt might intervene to stave off defaults, thus creating more uncertainty in the minds of potential investors.

The Credit Crisis: Who Is to Blame

Mark Gilbert, of Bloomberg, has a fun column in which everyone blames everyone else. All the likely suspects are gathered for a business dinner. At the end of the meal,

The waiter coughed, proffering a slim leather folder containing the reckoning for the evening's entertainment.

``You are a taxpayer, I take it?'' asked the investment banker. The waiter nodded. ``In which case, we were rather hoping you would foot the bill.''    

[h/t to BQ]

Horn-Blowing! EclectEcon in the Top Ten

Once again I am indebted to Craig Newmark for his continued support of this blog from its incipiency right up to this:

http://www.blogs.com/topten/the-really-10-best-economics-blogs/