EclectEcon

US Liquidity and China's Accumulation of Dollars

As the Fed creates more money, the Chinese gubmnt seems to be soaking up the extra liquidity by holding more US dollars. This phenomenon is a far cry from the liquidity trap that Keynes, Hicks, Hanson, Ackley, et al used to describe. As John Lott points out, the US is trying to cause a bit of inflation to stimulate their economy, but China has been thwarting these attempts by simultaneously increasing its demand for US dollars (to hold).

It may seem like a pretty good deal for Americans. We give the Chinese pieces of paper (or their equivalent) and they give us goods. But no one, not even the Chinese, are [sic] going to be willing to do this forever. It would be great for us if they would let this go on, but at some point just piling up dollars and giving us products is going to be too costly for them. And when they dump all those dollars, the real problem starts. All that pent up inflation is going to be released. 

 Indeed, the process may be starting. Just this last Wednesday, the Chinese and Russians announced that they would quit using the dollar for trade between their two countries.

 The U.S. is playing a high stakes game of chicken. Will the Chinese want to hoard more dollars as the U.S. government prints up nearly a trillion more dollars? Money that will just sit around and not even earn interest? The irony is that despite the Federal Reserve and the Obama administration attacking the Chinese propping up the value of the dollar, we must hope that they continue doing just that. If the Chinese start dumping dollars, not only will the $880 billion come back, but so might all the other money that the Chinese have been absorbing over the years.

Short the US dollar. And I certainly would not want to hold any long-term bonds denominated in US dollars. What astounds me is that more people don't have similar expectations. If they did, US interest rates would be creeping upward. 

 

University Admissions and Discrimination

Fortunately, Canada pretty much has merit-based admissions for university. Sure, they are flawed in many ways, but there is less reliance on family or other connections, ethnic background, etc. when admission decisions are made. As a result, there is a tendency for the brightest students to be the ones who attend university, especially the upper-tier universities. 

It turns out that a "disproportionate" number of the university students are Asian. This fact, reported earlier by Maclean's magazine, means little-to-nothing to me. But I guess lots of people in Canada took Maclean's to task for pointing out this fact, arguing that Maclean's was being racist. I don't see it that way.

Neither does Tony Keller: 

A 2005 Statistics Canada study found that 54% of visible minority Canadians aged 24 to 26 reported having attended university, versus just 38% of the non-visible minority population.

Two weeks ago, Maclean’s magazine published an article headlined, “Too Asian?” about the racial makeup of Canada’s university campuses. U of T was singled out as a campus that has become very Asian. The article was universally panned, the favored reaction being accusing Maclean’s of racism.

Ah, racism: once you pull out that card, the discussion is over. And that’s too bad because the Maclean’s article, for all its faults, actually contained some new information, on a topic that anyone who spends five minutes on a Canadian university campus notices: the rapidly changing racial makeup of the student body. Everybody notices but nobody notices, because if you do, you risk being called a racist. Maclean’s, to it’s credit, took notice.

Unfortunately, it drew exactly the wrong conclusions. It discovered a success story — a uniquely Canadian success story — and described it as a problem.

A large proportion of immigrants are motivated and smart and industrious enough that they attend university (more than w.a.s.p. Canadians). As Keller says, this sounds like a success story for the immigrants, not a problem. The only question is why fewer non-immigrants attend university.

Disclosure: one of my relatives is an immigrant from Asia.

Marching in the Grey Cup Parade on Saturday, November 27th

I gather that I'll be playing drums in the Grey Cup parade (Global national tv, noon Edmonton time). From what I can tell, the parade route isn't all that long, but the drum carriages are fairly heavy and who knows how my toe will be tomorrow:

I must say, I did this at 7am on Friday. We'd awakened at 4:45am for an appearance on Canada AM at 6am. Then we did another gig at the same venue. And then I stubbed my toe on the way up the stairs.

This will be fun .... or at least interesting.

Update: I'm glad the parade route wasn't any longer than it was (maybe 2 miles or so), but it was satisfying, as someone who is clearly an over-the-hill senior citizen, to be one of the drummers who lasted the entire parade route and played most of the time. I was pretty crappy on the drum cadence used by the Roughrider pep band, but I made up for that by being loud.

After just two blocks, my arms were already sore. I'd forgotten about those muscles, and I'd forgotten what it's like to play drums really loud with fat sticks. And by the time we reached the end of the route, my back was killing me.  And THEN we had to walk another 6-7 blocks to get to our bus. Whew! 

I was exhausted, and I slept on the bus between gigs the rest of the afternoon. And now, 24 hours later, my arms are still sore. 

Public Service Announcement: Ice Scrapers for Cars

The very best ice scraper I have ever used is a broad plastic trowel/spatula for smoothing plaster when doing dry wall work. You can usually buy a pack of three different-sized plastic scrapers for less than the price of one window scraper at any major discount store. 

They scrape well, they're flexible so they bend a bit to scrape on curved windows, they're thin, so you can store them in the car easily, and they are cheap. 

Revealing a Trade Secret in Amateur Music

Why do French horn players keep their right hands in the bells of their horns?

Historically it was because horn players used their hands to alter the tuning of each note. Better players with a good sense of tuning still do this to some extent, depending on the make and model of the horn they are playing and how they have tuned the horn. 

But for the rest of us, there is a much more important reason: Keeping the right hand in the bell hides the fact that we use the fingers on that hand to count out the long rests to which we are frequently subjected.

10 Awesome Turkey Recipes

Well, I am filled with awe that anyone would consider trying to make any of these. [h/t Ted Frank].... especially the first one:

The TurDunkin'

• 

  “Turkey brined in Dunkin Donuts coolattas, stuffed with munchkins and served with coffee gravy and mashed hash browns.” (From Unwholesome Foods)

 

Tentative Rider Pep Band Schedule at the Grey Cup

All times are Mountain Standard Time (6am in Edmonton is 8am in Trono). I'll likely be playing trumpet most of the time, but will be on drums now and then, especially for the parade. I'm not sure if we'll actually take our instruments into the game, but there's enough playing scheduled for the weekend to shred my lips:

Thursday, November 25^th

6:45 am                           Meet in the Northgate Mall parking lot 

7:00 am                           Depart for Edmonton

4:00 pm                           Arrive in Edmonton     Coast Edmonton House   

Confirmed performances times listed below – subject to change with many additions expected.

~~4:30pm         CKRM Sports Cage (this is before we even check in at the hotel!)

7:00 pm            Riderville

7:45 pm            Spirit of Edmonton

 

Friday, November 26^th

  6:15 am            Canada AM

  7:30 am            Spirit of Edmonton Breakfast

  8:30 am            CKRM – Flea Market

11:30 am            Riderville Luncheon

  1:10 pm            Touchdown Manitoba

  3:15 pm            Spirit of Edmonton

  3:45 pm            CKRM Sports Cage

  5:45 pm            Lions Den

  6:30 pm            CKRM Hospitality Suite

  7:45 pm            Spirit of Edmonton

  9:00 pm            Stamps House

  9:30 pm            Riderville

10:30 pm            Tiger Town

Saturday, November 27^th

7:30 am                           Spirit of Edmonton Breakfast

Noon                  Grey Cup Parade – Global Edmonton  

2:30 pm                           Riderville

3:15 pm                           Spirit of Edmonton

4:15 pm                           Lions Den

5:00 pm                           Supper at Buffet Royale

6:00 pm                           CKRM Hospitality Suite

7:30 pm                           Riderville

8:15 pm                           Spirit of Edmonton

????                   Double Blue Bash

10:30 pm            Tiger Town

Sunday, November 28^th

  ????                 CKRM broadcast

  ????                 Riderville – pregame party

  ????                 Depart for the game

 

4:30 pm             Grey Cup Game

                           Section “M”, Rows 25, 26, 27

                           Details regarding the game will be decided in Edmonton 

Monday, November 29^th

5:45 am    Load the Bus

6:00 am    Depart for Regina

4:00 pm    Tentative arrival back in Regina at Northgate Mall

Public Request to All Hotels

After I have checked in, please be assured that I will let you know if there is anything I think you can do to make my stay nicer. Please, Please do not call my room to welcome me to your hotel and to ask if there is anything you can do. I resent having my reading, tv watching, showering, net surfing, whatevering interrupted by your call.

Do those calls really impress regular travelers? Do those calls really generate an increase in repeat business? Or do they just irritate everyone else the way they irritate me?

Is a Non-Reader the Same as a Philistine?

There is a survey going around on Facebook, purportedly from the BBC. 

Have you read more than 6 of these books? The BBC believes most people will have read only 6 of the 100 books listed here.

As I scanned through the list, I thought, "Well, I probably brought the average down." It turns out I've read ten, maybe eleven, of them, more than I expected (some were such non-standouts, I can't even remember for sure whether I've read them). I had to read two of the books in high school for book reports, but the rest were all recreational (or "personal growth") reading.

Most of my Facebook friends have read LOTS more books from the list than I have. I find that when I start many of these books, my mind drifts and I'd rather be watching television. For others, I've seen the movies or made-for-tv movies and have no interest in reading the books. In fact, I've seen performance versions of fifteen of the books.

One anomaly: am I the only person among my Facebook friends to have read the Wind in the Willows? I read that just for the heck of it one summer when I was in grad school. 

Israel a Rogue State? .... maybe it is....

The debaters at Oxbridge are superb wordsmiths. I stand in awe of their use of words and the developments of their arguments. But this one really stands out. Excerpts:

When you compare Israel to its regional neighbours, it becomes clear just how roguish Israel is. And here is the fourth argument [EE: read the entire piece for the other arguments]: Israel has a better human rights record than any of its neighbours. At no point in history, has there ever been a liberal democratic state in the Middle East -- except for Israel. Of all the countries in the Middle East, Israel is the only one where the LGBT community enjoys even a small measure of equality.

In Kuwait, Lebanon, Oman, Qatar, and Syria, homosexual conduct is punishable by flogging, imprisonment, or both. But homosexuals there get off pretty lightly compared to their counterparts in Iran, Saudi Arabia, and Yemen, who are put to death. Israeli homosexuals can adopt, openly serve in the army, enter civil unions, and are protected by exceptionally strongly worded ant-discrimination legislation. Beats a death sentence. In fact, it beats America.

Israel’s protection of its citizens’ civil liberties has earned international recognition. Freedom House is an NGO that releases an annual report on democracy and civil liberties in each of the 195 countries in the world. It ranks each country as “Free,” “Partly Free,” or “Not Free.”  In the Middle East, Israel is the only country that has earned designation as a “free” country. Not surprising given the level of freedom afforded to citizens in, say, Lebanon -- a country designated “partly free,” where there are laws against reporters criticizing not only the Lebanese government, but the Syrian regime as well. I’m hoping Ms. Booth will speak about this, given her experience working as a “journalist” for Iran.

Iran is a country given the rating of “not free,” putting it alongside China, Zimbabwe, North Korea, and Myanmar. In Iran, as Ms. Booth I hoped would have said in her speech, there is a special “Press Court” which prosecutes journalists for such heinous offences as criticizing the Ayatollah, reporting on stories damaging the “foundations of the Islamic republic,” using “suspicious (i.e., Western) sources,” or insulting Islam. Iran is the world leader in terms of jailed journalists, with 39 reporters (that we know of) in prison as of 2009. They also kicked out almost every Western journalist during the 2009 election. (I don't know if Ms Booth was affected by that.)

I guess we can’t really expect more from a theocracy. Which is what most countries in the Middle East are. Theocracies and autocracies. But Israel is the sole, the only, the rogue, democracy. Out of every country in the Middle East, only in Israel do anti-government protests and reporting go unquashed and uncensored.

Ban the Penny: The Momentum Continues

20 years ago, EclectEcon advocated getting rid of the penny. Several years ago, Greg Mankiw joined the club. And now Russ Roberts has joined, too. 

As several people have pointed out, and as my previous posting on the topic showed, businesses have long been on board with "penny cups" next to the cash registers, and some are beginning to post signs that theirs is a "penny-free environment". 

My expectation is that soon pennies will disappear. But it would likely be efficient for gubmnts to hasten their demise. 

For more from my testimony before a Senate committee on eliminating the penny, see this.

The Chevy Bastiat

A very telling suggestion for renaming the Chevy Volt. The Coyote Blog points out that not only will the Volt Bastiat be expensive, it won't save much on fuel costs and it won't reduce the carbon footprint much [h/t Kip].

I am thinking about renaming the Chevy Volt the Chevy Bastiat.  Because the entire vehicle concept is based on the hope that people will ignore the unseen.  Specifically, those pushing the vehicle are hoping that buyers will just assume the electricity for the vehicle is free (after all it is not separately metered) and that the CO2 footprint is zero (despite the fact that in states like Michigan, an electric car is essentially powered by coal combustion.

For more on Frederic Bastiat, see this.

Update: a colleague writes, "I guess its more symbolism - almost like wearing a religious symbol.. The Chevy Hairshirt?" 

The US State Department and Israel: getting it right

I am on a very interesting e-mail list called "Daily Alert" which provides news about Israel and the Middle East. This item appeared today, and I was delighted to see the US's continued strong support for Israel along with its growing concern about the increasing virulent forms of antisemitism that are emerging.

• U.S. Denounces "Obsession with Condemning Israel"
  Hannah Rosenthal, U.S. Special Envoy to Monitor and Combat Anti-Semitism, told a conference on "Combating Anti-Semitism" in Ottawa, Canada, on Nov. 8: "Opposition to a policy by the State of Israel morphs into anti-Semitism easily and often. We record huge increases in anti-Semitism whenever there is activity in the Middle East. This form of anti-Semitism is more difficult for many to identify - but if all Jews are held responsible for the decisions of the sovereign State of Israel, when governments call upon and intimidate their Jewish communities to condemn Israeli actions, when academics from Israel are boycotted - this is not objecting to a policy - this is anti-Semitism."
      "Our State Department uses Natan Sharansky's framework for identifying when someone or a government crosses the line - when Israel is demonized, when Israel is held to different standards than the rest of the countries, and when Israel is delegitimized. These cases are not disagreements with a policy of Israel, this is anti-Semitism. The U.S. is often the only "no" vote in international bodies who seem to have an obsession with condemning Israel."  (U.S. State Department) 

 

Drinking and Driving? Use a Straw!

Recent studies indicate that drinking even non-alcoholic beverages and driving is an important  cause of auto accidents [h/t Jack]. I'm not surprised. You tip a coffee cup and you can no longer see where you are going very well. 

... a nice cup of coffee is more dangerous than an iPhone or BlackBerry while driving. 

The article and column in the link suggest that spills are the cause of the accidents; they do not mention visibility. But I suspect the loss of visibility as one tips a coffee cup or a pop can up in front of one's eyes plays a role, too.

Drinking with a straw would likely reduce both the spilling and the visibility problems. As I have posted before, 

I drink coffee with a straw. I realize that most take-out coffee comes with a lid that has a tear-up section or pre-punched hole to drink through, and that these lids help prevent spills. But I'm still perfectly capable of spilling coffee when I drink it from the cup. So I stick a straw through the hole.

Some years ago, Ms. Eclectic and I discovered that if we drink coffee through a straw, it is much less likely to spill, especially when we are in the car, driving down the road. 

And a real bonus of drinking anything through a straw while driving is that your vision of the road is never obstructed. You don't tip the cup or can or bottle up in front of your face when you drink through a straw — you can always keep your eyes on the road and the traffic when you drink coffee (or anything else, for that matter) through a straw in the car (and to head off the likely questions, no I do not and I do not advocate drinking beer [or other alcoholic beverages] while driving, nor have I tried drinking beer through a straw).

And, no, at home I do not drink Lagavulin or Caol Ila (or any other scotch) with a straw.

Eliminate the Penny: It's Going to Happen with or without Legislation

A few weeks ago, several of my friends drew this announcement to my attention. A donut shop will no longer give pennies in change. 

.

.

As I wrote several decades ago, the transaction costs alone are enough to deter continued use of one-cent coins in North America. But with commodity inflation, the gubmnts are losing money in the manufacturing and distribution of the coins, and these losses provide added impetus for legislators to eliminate the penny.

For some of my earlier and more detailed writing on this topic, see this.

 

Green Is the Colour

Being in the Roughrider Pep Band is fun!

 

 

PM Harper on Anti-Semitism and Israel

An excellent summary of Canada's position. Here are some excerpts:

In Canada, we have taken a number of steps to assess and combat anti-Semitism in our own country. But of course we must also combat anti-Semitism beyond our borders, - an evolving, global phenomenon. And we must recognize, that while its substance is as crude as ever, its method is now more sophisticated.

Harnessing disparate anti-Semitic, anti-American and anti-Western ideologies, it targets the Jewish people by targeting the Jewish homeland, Israel, as the source of injustice and conflict in the world, and uses, perversely, the language of human rights to do so.

We must be relentless in exposing this new anti-Semitism for what it is. Of course, like any country, Israel may be subjected to fair criticism. And like any free country, Israel subjects itself to such criticism – healthy, necessary, democratic debate. But when Israel, the only country in the world whose very existence is under attack – Is consistently and conspicuously singled out for condemnation, I believe we are morally obligated to take a stand. Demonization, double standards, delegitimization, the 3 D’s, it is a responsibility, to stand up to them.

Pay-Day Loans

I have never taken out a pay-day loan. I have some savings and a steady income (a bit steadier, I might add, now that there is a tentative agreement between the faculty union and UWO), and I am able to budget fairly carefully, so I don't feel the need for pay-day loans. But I can readily understand that for some people, given their particular situations and credit ratings, a pay-day loan might come in handy and might be preferable to any other realistic options (see below). 

I have only a limited idea about what all the options are that might be available in the marketplace. I do know, though, that several sites (see here and here) offering a payday loan  or cash advances help sponsor this site, for which I thank them.

I have always been skeptical of claims that pay-day loan companies exploit the poor. I'm sure there are information imperfections and transaction costs, but entry into this industry is relatively easy. Consequently, one would expect that over time, firms will compete on the basis of both service and price, especially now that internet options are available, too. Thus it should be the case that profits for these firms are driven down by competition to reflect only normal rates of return (given the expected risks involved) on average. This expectation, based on textbook economic theory, seems relatively realistic. From Wikipaedia,

A study by the FDIC Center for Financial Research^[49] found that “operating costs are not that out of line with the size of advance fees” collected and that, after subtracting fixed operating costs and “unusually high rate of default losses,” payday loans “may not necessarily yield extraordinary profits.” Based on the annual reports of publicly traded payday loan companies, loan losses can average 15% or more of loan revenue. Underwriters of payday loans must also deal with people presenting fraudulent checks as security or making stop payments.

Indeed the growth of the industry suggests that firms in the industry are both providing a valuable service to their clients and facing increasing competition.

A staff report released by the Federal Reserve Bank of New York concluded that payday loans should not be categorized as "predatory" since they may improve household welfare.^[52] "Defining and Detecting Predatory Lending" reports "if payday lenders raise household welfare by relaxing credit constraints, anti-predatory legislation may lower it." The author of the report,Donald P. Morgan, defined predatory lending as "a welfare reducing provision of credit." However, he also noted that loans are very expensive, and that they are likely to be made to under-educated households or households of uncertain income.

Other studies have questioned this claim. Petru Stelian Stoianovici, a researcher from The Brattle Group, and Michael T. Maloney, an economics professor from Clemson University, found "no empirical evidence that payday lending leads to more bankruptcy filings, which casts doubt on the debt trap argument against payday lending."^[53]

And here are some interesting comparisons. Whether they are relevant might be open to question, but for people seeking payday loans they might be VERY relevant:

Other options are available to most payday loan customers.^[54] These include pawnbrokers, credit union loans with lower interest and more stringent terms,^[55] credit payment plans, paycheck cash advances from employers, bank overdraft protection, cash advances from credit cards, emergency community assistance plans, small consumer loans and direct loans from family or friends.

Payday lenders do not compare their interest rates to those of mainstream lenders. Instead, they compare their fees to theoverdraft, late payment, and penalty fees that will be incurred if the customer is unable to secure any credit whatsoever.

The lenders therefore list a different set of alternatives (costs expressed here as APRs for two-week terms):

• $100 payday advance with $15 fee = 391% APR;
• $100 bounced check with $48 NSF/merchant fees = 1,251% APR;
• $100 credit card balance with $26 late fee = 678% APR;
• $100 utility bill with $50 late/reconnect fees = 1,304% APR.

As I said, whether you like payday loans or not, and regardless of whether you would ever use one yourself, I am glad to have the sponsorship from these two members (here and here) of the industry.

I'm More of a Philistine than a Plebe

Rondi Adamson sent me a link, recently, to a questionnaire, "Are you a Plebe?" My answers are in bold below.

1. Can you talk about "Mad Men?" Who are they?.
2. Can you talk about the "The Sopranos?" Only in a couple of choirs.
3. Do you know who replaced Bob Barker on "The Price Is Right?" Yes.
4. Have you watched an Oprah show from beginning to end?         Yes (Donald D'Haene, Nov 5).
5. Can you hold forth animatedly about yoga? No.
6. How about pilates? No.
7. How about skiing? No.
8. Mountain biking? No.
9. Do you know who Jimmie Johnson is? Yes, Helmet Head.
10. Does the acronym MMA mean anything to you? No.
11. Can you talk about books endlessly? Probably not; not many, anyway.
12. Have you ever read a "Left Behind" novel? Yes.
13. How about a Harlequin romance? No.
14. Do you take interesting vacations? As much as possible.
15. Do you know a great backpacking spot in the Sierra Nevada? No.
16. What about an exquisite B&B overlooking Boothbay Harbor? Where's that???.
17. Would you be caught dead in an RV? Maybe not; I've never been in one.
18. Would you be caught dead on a cruise ship? I have, and I wouldn't mind going on one again, depending on the destination(s) and amenities.
19. Have you ever heard of of Branson, Mo? Yes.
20. Have you ever attended a meeting of a Kiwanis Club? Yes.
21. How about the Rotary Club? No.
22. Have you lived for at least a year in a small town? Yes; I think Clinton, ON qualifies.
23. Have you lived for a year in an urban neighborhood in which most of your neighbors did not have college degrees? How urban? Maybe... Probably.
24. Have you spent at least a year with a family income less than twice the poverty line? No, unless we qualified for that status while I was growing up, but I doubt it.
25. Do you have a close friend who is an evangelical Christian? Yes.
26. Have you ever visited a factory floor? Yes.
27. Have you worked on one? Yes, in a cannery for 2 and 1/2 summers.

I think I scored 15/27. I'm not much of a Plebe, I guess. But being a Plebe is not the same thing as being a Philistine. If you would like to learn more about the Philistine Liberation Organization, click here. For the full statement of the PLO, along with links to reviews and it's first annual conference, click here.

Where Are Arab-Islamic Leaders on This? the church bombing in Baghdad

Salim Mansur asks pointed questions about leaders in the Arab-Islamic world in his most recent column:

... [I]f such an atrocity was not just another criminal event in a "normal" day across the Arab-Muslim world, then we should have heard of a special meeting being called at the UN, or in one of the capitals of member states of the Organization of the Islamic Conference, to express outrage against those who killed innocent worshippers inside Our Lady of Deliverance Syriac Catholic Church in Baghdad.

We then should have heard of Muslim political and religious leaders expressing their grief over the dead and wounded — there were some 120 Iraqi Christians in attendance at the Sunday evening mass when Muslim terrorists attacked the church and left 58 dead with only a dozen escaping unhurt.

Instead, we have deathly silence of the Muslim leadership as non-Muslim minorities inside the Arab-Muslim world are routinely abused, their homes and places of worship under daily duress, and their hearts filled with fear of violent death in the hands of Muslim jihadis.

The silence signifies the abdication of any responsibility by governments of the Arab-Muslim world to protect non-Muslims in their countries, and severely punish those who target them.

... The simple truth is Muslims are among the worst perpetrators of crimes against non-Muslims, and penalties based on obsolete jurisprudence of Shariah implemented in Muslim states violate the UN Charter and the Declaration of Human Rights, to which they are signatories.

Query: when will the fatwa be issued against Salim Mansur? Or has one already been issued?

Electric Car Sinkholes

Despite pronouncements by politicians in both Canada and the US to the contrary, J.D.Powers has recently announced that even with the various gubmnt subsidies, electric cars are going to be priced waaayyyy out of line with the prices of other cars for the next decade or so. See this and see Mark Collins' Canadian take on it, too. It sounds as if the electric car is yet another example of gubmnt failure overwhelming any hint of market failure. 

Maybe it was karma, but the Volt’s launch coincided with publication of a 72-page report by J.D. Power and Associates that confirmed, in devastating detail, what many other experts have found: Electric cars still cost too much, even with substantial federal subsidies for both manufacturers and consumers, to attract more than a handful of wealthy buyers – and this will be true for at least another decade.

What little gasoline savings the vehicles achieve could be had through cheaper alternative means. And electrics don’t reliably reduce greenhouse gas emissions, since, as often as not, the electricity to charge their batteries will come from coal-fired plants.

The Obama Energy Department has suggested that, with the help of federal money, manufacturers can ramp up mass production and bring the price of electric-car battery packs down 70 percent by 2014 – thus rendering the cars more affordable.

If it will eventually be profitable for firms to increase production, and if there is a reasonable chance that the prices of battery packs will drop by 70%, they why on earth is the gubmnt involved? Why isn't private capital being invested in the production of electric cars? If you think the answer is that doing so is too risky for the private sector, then it is also too risky for taxpayer investment, too. Gubmnt intervention in this market will distort capital markets even more, attracting scarce capital away from other, more efficient uses.

What is worse, the intervention of the gubmnt in a portion of the market means that others will be very reluctant to enter this sector the auto industry. Who knows how much subsidy will be available for different producers, and who knows whether or how much favouritism will be shown toward GM with gubmnt programmes? 

 

Set Your DVRs to Record Oprah on November 5th and 12th.

Donald D'Haene meets with 199 other men and talks with Oprah about the sexual abuse and molestation he experienced as a child. He has written about it in a book called Father's Touch.

I met Donald about ten years ago. He was the very effective producer of "Opera Comique," a play in which I appeared in London (Ontario). It was only after I came to know him a bit that I began to learn about his background and life. He is an amazing person: genuine, intelligent, and extremely hard working.

Donald continues to write about the theatre and arts scene in London, where is active in zillions of various different endeavours.

 

Automobile Reliability

I'm very impressed with the reliability of all the cars we have owned over the past 15 or so years. Granted, I probably take better care of them now, but I think they are much better made, too. 

Here is a brief summary of a recent article about automobile reliability from the Globe, summarizing the opinions/findings of Consumer Reports:

Most reliable car: Porsche Boxster

Least reliable cars: Audi A6 3.0T and Jaguar XF

Most reliable brand: Scion

Least reliable brand: Chrysler

... 

Top 10 brands for reliability:

1.Scion

2.Porsche

3.Acura

4.Honda

5.Infiniti

6.Toyota

7.Subaru

8.Volvo

9.Lexus

10.Ford

Interestingly, the article talks more about the increased reliability of GM and Ford cars and only briefly mentions the domination of non-North-American brands at the top of this list.

Yea, Sparky!!

It looks as if my friend, King Banaian (aka "Sparky") has won a very narrow victory to become a member of the state legislature in Minnesota. King has strong libertarian tendencies (small gubmnt). He is the former chair of the economics department at Minnesota State University, St. Cloud. This was the right year for an advocate of small gubmnt to be running, but it is still a hard battle when trying to convince the electorate that, no, the gubmnt is not there to provide goodies for voters. But King has both the intelligence and the charm to pull it off. The state of Minnesota is very fortunate.

King and I share a number of other interests, including baseball (we were both active in rec.sport.baseball back in the old days of newsgroups on the internet). And several years ago, we had a great several days together in Chicago, exploring several different pizzerias. Wrap-up and links here. 

Update: Oops. The link above provides my wrap-up but the individual reviews all were posted Jan 5-8, 2007.

The Most Important Ballot Initiative Facing Washington Voters Today

via Ted Frank (please click on the image to enlarge it):



The full text is here.

Cobweb Theorems, (Ir)rational Expectations, and the market for lawyers

Cobweb theorems in economics assume that people form their expectations about the future based on what they experienced most recently. For example, if the price of soybeans is high this year, then lots of farmers will plant soybeans next year, driving the price down. And then when the price is down next year, few people will plant beans the following year, and the price will be driven back up. 

As odd as it may seem, empirical support for such myopic expectations is readily available.

• When I was a graduate student at Iowa State University, the department head was Karl Fox. He had gained some notoriety in his younger, pre-computer days for having inverted a 9x9 matrix using a mechanical calculator. He was also a dynamic administrator.
  
  The role of expectations in explaining people's decisions was just beginning to be formalized in the economics profession. When we ask Professor Fox about expectations and agriculture, he smiled and told us that no matter what model people used, they still found that the simple, myopic cobweb model explained supply and demand in agriculture better than any of the others.
  
  
• We saw a similar phenomenon with MBA graduates in finance a few years ago. Students flocked to bizskools and studied Black-Scholes et al 'til the cows came home, all in the expectation that they would each receive multiple job offers paying hundreds of thousands of dollars to start. When the demand for finance specialists fell off, these folks were scrambling for jobs and the demand to study finance diminished somewhat.
  
  
• And now we learn that the market for lawyers is also following the cobweb cycle. This article  presents considerable evidence that  students made decisions to enter lawskool back in the days when lawyers were doing very well. But now, just as they are finishing their degrees and articling, the US economy remains mired in a considerable slump. Many are not finding jobs at all, and many more are taking jobs that are considerably less lucrative than they expected. So what happens? Potential lawskool applicants are concerned and as a result, lawskools are scrambling to recruit new students.

The cobweb models fly in the face of rational expectations. Why did farmers consistently take the current year's price as their expectation for what the price would be in the future (actually, I doubt if they do so much nowadays)? Why didn't at least some of them anticipate that others in the market would respond to the current year's price and alter their planning decisions? Most models of rational expectations would predict that farmers adjust their expectations, knowing the underlying supply and demand conditions, and on average will correctly predict the next season's price. 

But we don't see that type of equilibrium all the time. Instead, we see that people form their expectations for many of their decisions, adaptively: we expect the future to be most like what we have experienced in the recent past. We try to keep in mind other information, but we do, indeed, tend to have somewhat myopic expectations.

With the myriad examples of adaptive expectations, can we stop touting rational expectations models so highly?