Monday, November 30, 2009
Seeding labs in Africa with old lab equipment from the US. A great cause, and congratulations to Paul and the others for getting some much-deserved recognition.
Friday, November 27, 2009
"Move to chopsticks!" he exclaimed, making bites smaller and harder to take. If the chopsticks are a bit extreme, smaller plates and utensils might work the same way. Study after study shows that people eat more when they have more in front of them. It's one of our predictable irrationalities: We judge portions by how much is left rather than how full we feel. Smaller portions lead us to eat less, even if we can refill the plate.
Speaking of which, Ariely suggests placing the food "far away." In this case, serve from the kitchen rather than the table. If people have to get up to add another scoop of mashed potatoes, they're less likely to take their fifth serving than if they simply have to reach in front of them.
"Start with a soup course," he says. That is what economists refer to as a default: Rather than putting everything on the table for people to choose, you begin by making the choice for your guests. If the first course is relatively filling and relatively low in calories, everyone will eat less during the rest of the meal.
Indeed, it's not a bad idea to limit the total number of courses. Variety stimulates appetite. As evidence, Ariely brings up a study conducted on mice. A male mouse and a female mouse will soon tire of mating with each other. But put new partners into the cage, and it turns out they weren't tired at all. They were just bored. So, too, with food. "Imagine you only had one dish," he says. "How much could you eat?"
What you eat, of course, is also important. Studies show that people aren't very consistent in the amount of calories they eat each day, but they're very consistent in the volume of food they eat each day. Thanksgiving is an exception to that consistency, but probably not to the underlying rule. Satisfaction doesn't depend on caloric intake; low-calorie, high-fiber foods and foods high in water content are filling. Thus, the more broccoli rabe there is at the table, the better.
Some cool wikipedia articles:
Wednesday, November 25, 2009
"What caught the attention of Michele Belot and Jonathan James, though, was the way Oliver's project had been implemented. Belot and James – economists at Nuffield College, Oxford, and at the University of Essex respectively – noted that the campaign had created a near-perfect experiment. The chef had convinced Greenwich's council and schools to change menus to fit his scheme; he mobilised resources, provided equipment and trained dinner ladies. Other London boroughs with similar demographics received none of these advantages – and indeed, because the programme wasn't broadcast until after the project was well under way, probably knew little about it. The result was a credible pilot project. It wasn't quite up to the gold standard of a randomised trial, but it wasn't far off.
Thanks to the UK's exhaustive school testing regime, Belot and James were able to track pupils' performance in some detail. They concentrated on primary schools, figuring that secondary school pupils could (and probably would) avoid eating school lunches that were too worthy. (This is surely correct. My own habitual sixth-form lunch was four bars of chocolate – a pound a day well spent.)
Their answer – a provisional one, since they are still refining the research – is that feeding primary school kids less fat, sugar and salt, and more fruit and vegetables, has a surprisingly large effect. Authorised absences, the best available proxy for illness, fell by 15 per cent in Greenwich, relative to schools in similar London boroughs. And relative to other boroughs, the proportion of children reaching Level Four in English rose by four and a half percentage points (more than six per cent), while the proportion of children achieving Level Five in Science rose by six points, or almost 20 per cent. There is some uncertainty about these numbers: they could be substantially smaller or larger. There is not much that can be said with confidence about scores in other subjects, or other achievement levels – although the academic benefits of the Greenwich lunches appear to be positive, if tentatively so, in almost every case."
Politicians should talk about the cost of things as a % of GDP, not in millions and billions.
A 2,074-page, trillion-dollar health-care bill to redesign 17% of the U.S. economy. A carbon tax—cap and trade—that remains an Obama priority ahead of the Copenhagen climate summit next month. A falling dollar and gyrating commodity prices, with no idea where those prices will go next.
Tuesday, November 24, 2009
Lieberman takes a stand, foreign policy, financial reform and the deficit, homebuyers, criminalization...
Monday, November 23, 2009
Friday, November 20, 2009
The UN is a joke. It's hard to see why anyone takes it seriously anymore.
Krugman writes ANOTHER good article! WOW! This time, it's about the stupidity of buying AIG's commitments at 100% on the dollar. (Of course, buying them at fair value actually means AIG's creditors end up in trouble, because their balance sheets required the 100% of face value in order to stay afloat, but at least then you spend less money and can use what you save to bail out those of AIG's creditors who need it more without paying off the banks who are in good shape anyway- in effect a more targeted approach, and one that doesn't reward banks just for contracting with the weakest link, AIG)
and then Brooks reminds us why Krugman has the growingly poor reputation among other economists that he does. Krugman was pushing for bank nationalization because he didn't like bankers, and the way things have borne out, that would have been an awful, awful idea.
Do it. Build a settlement on the moon. Every other major NASA program has returned ~800% in investment and a countless amount in quality-of-life improvement due to scientific discovery. This one should be no different - we have no idea what, but it will be something. One major question will be of power, because transporting nuclear fuel from earth to the moon is hard. Clean energy actually could end up a focus, unintentionally. So will sustainable agriculture.
Thursday, November 19, 2009
it'll never get interpreted that way, but it's still pretty funny. That's what you get for homophobia - humiliated by the rest of us.
Wednesday, November 18, 2009
The US makes it unnecessarily and stupidly difficult for immigrants to work here, including the high skill immigrants we desperately need.
Tuesday, November 17, 2009
The worst career advice I ever gave was to my brother's college roommate, Robert Buckley. He was one year out of college when he asked me if he should quit healthcare consulting to become an actor.
I said, No, that's the dumbest idea I ever heard.
He told me he thought he had talent, and then (like I wasn't against the idea enough) he told me he was dating some girl he met in Vegas, and she is going to be an actress, and she said that he had talent.
I actually questioned how my brother could be such good friends with someone who was so stupid. I tried to be patient, but mostly I told Rob that everyone in LA has a girlfriend who thinks he has acting talent. I thought maybe his best career move might be to find a girlfriend who was impressed with his healthcare consulting talent.
But really, he did not think he had any future in healthcare consulting. So I became a largely useless advisor to him. And then my brother forwarded me a trailer to Lipstick Jungle and there was Rob: naked, with Kim Raver. And he looked so good. Who knew? And more importantly, who knew I could give such poor career advice?
I think the reason that I gave such poor advice is that I had such strong preconceived notions about the acting career. But I actually don't know anything about making it big as an actor. I only know that when I played professional beach volleyball in LA we were constantly surrounded by casting agents and entertainment industry types. And I learned that the competition to get anywhere in acting is so tough that you should buy lottery tickets instead.
It's ironic, though, because I'm a writer, where the odds are not much better. And both actors and writers generally ply their trade because they love it, not because they think the odds are great. If someone asks me if they should become a writer, I repeat the advice I received in graduate school: No. Try anything else first. Writing is too hard.
And I was thinking the same thing with acting: No. Big no. But I needed to adjust my advice. I needed to be able to see when I was looking at someone who could not feel fulfilled if they did not do this type of work.
So every week I watched Lipstick Jungle (I loved it, by the way—for the writing, of course) and I thought about how I could have given such misguided career advice. And I figured out that the hallmark of a bad advisor is to not understand where she is coming from, what preconceived notions she brings to the table.
I didn't think much more about this until I was in Menlo Park last week for the roundtable organized by Ben Casnocha and Chris Yeh. They posed questions to the group of entrepreneurial types: What makes good advice? What makes bad advice?
The answers were interesting, and each shed more light on why I gave Rob such bad advice. Here are some ideas that came from the group:
1. A good advisor asks good questions. Mostly in order to understand the goals of the advisee. No advice is given in a vacuum. Understand that an advisor can probably give you great tips on how to get to your goals, but really, the hardest part of making any decision in life is understanding your goals in the first place.
So your advisor needs to be very attuned to your goals and where you are in your life. This is why the best advisors ask questions rather than make proclamations. Often a good advisor is more sounding board and less Magic-8 ball.
2. A good advisor is a good listener. Advice is so much about understanding the particular situation that if she is not listening most of the time, then you are probably receiving advice based on incorrect assumptions that actually apply to a different circumstance. But it's hard to listen when you are a subject matter expert.
In general, all situations sound the same when you give advice to the same types of people all the time. The trick for the advisor is to stop focusing on the similarities, which make her job easier, but to focus instead on the differences, which is more challenging—but makes for better advice.
3. Good advice is not fly-by-night. Advisors are best when they really know you, and they really know the arena where the issues live. So cultivate a relationship with someone who is a subject matter expert, and then he can give you ongoing advice that is relevant to your particular circumstances based on both what you are telling him, and on the relationship that provides a context for your questions.
Wondering how you are going to attract this kind of advisor? Be one yourself. Giving good advice is the same thing as giving a good kiss. You attract what you deserve. Not in a Secret sort of way, but in a way where if you are practicing good behavior then you will attract good behavior.
And, while I hesitate to give advice at the end of the piece about how advice should not be in a vacuum: You usually get in life what you expect to get. So expect good advice. And good kisses. And they will come.
I have found that the best way to manage myself is by asking for a lot of help. The question is, how do you know who to take advice from?
The answer is not always intuitive. For example, you'd think that if Bill Gates wants to give you career advice, you should take it, right? I mean, the guy's had a pretty decent career. The problem is that if he doesn't care about your career, he's going to give you generic advice.
Here are five other counter-intuitive principles I have used to figure out who to listen to when it comes to my own career:
Listen to people who hate you. People ask me all the time how I put up with the level of criticism this blog draws. The interesting thing about taking advice from people who don't like me is that sometimes, they'll say things that other people wouldn't say because it would hurt me. I rely on my gut in terms of whose criticism comes from caring and understanding and whose criticism comes from an obsessive need to take me down, but after I figure that out, I still pay attention to my critics.
Stop thinking your issues are especially difficult. The most important piece of self-knowledge is that our problems are not unique. If you had problems no one else has, then no one will understand you enough to help you. But the truth is that it's pretty easy to see what someone else should be doing if you have distance from a problem. So don't be a snob about who to take advice from. You don't need a "career expert." You don't have the world's most sophisticated problems. If you are articulate about framing your problem, most of your friends can give articulate, useful guidance for solving the problem.
Less experience often means better advice. When it comes to finding a mentor, the most effective mentors are 3-5 years ahead of you in the workplace. Those are the people who have the best memory of what it was like to be where you are. In today's workplace this is especially true. The rules are changing so quickly, that many times someone who has a lot more experience than you do will also be out of touch with what the workplace is like today. I find that this is a big problem when people rely on their parents for advice.
Be wary of people whose lives look perfect. Happiness researchers have known for a long time that if you ask people directly if they are happy in their career, most of the time they'll lie. This makes sense becuase if someone has invested tons of time in getting to where they are, it's a really tough thing to say they're unhappy; then they'd have to take action to change. So you're often better off just watching people. Many people hide their lives – they want you to think things are going perfectly, and they're always making great decisions, so they don't tell you the parts that are a mess. But sometimes, you come across people who are willing to show you the messy parts, and you can learn the most from these people. This is why I like reading about celebrities. They can't hide as much as non-celebrities, so I can learn more about what works and what doesn't.
Stick with people who give you bad advice. If you're getting advice from someone who has never steered you wrong, then you're not asking this person enough questions. After a while, someone who has given you a lot of advice will falter. Because no one is perfect, and no one can do as well at running your life as you can. So if you find someone who is giving good advice, push harder, until you get to their limit. Everyone gives bad advice sometimes, even me.
In some respects, bad advice might be better than good advice. Because what you really want is advice that makes you think in new ways about possibilities for yourself. So when it comes to taking advice, you still have to have your inner compass. You can't blame anyone else for where you end up. But, in a way, that's good news. Because if you are responsible for where you are, if you don't like it, you can get yourself to a new spot. This means that you should gather lots of advice, but be aware that sometimes, you need to ignore it. After all, what is the fun of life if we can't make our own mistakes?
The stark truth is that the U.S. has no long-term economic strategy—no coherent set of policies to ensure competitiveness over the long haul. Strategy embodies clear priorities, based on understanding the strengths we need to preserve and the weaknesses that threaten our prosperity the most. Strategy addresses what to do, but also what not to do. In dealing with a crisis, experience teaches us that steps to address the immediate problem must support a long-term strategy. Yet it is far from clear that we are taking the steps most important to America's long-term economic prosperity.
America's political system, especially as it has evolved in recent times, almost guarantees an absence of strategic thinking at the federal level. Government leaders react to current events piecemeal, rather than developing a strategy that unfolds over years. Congress and the Executive Branch are organized around discrete policy areas, not around the overall goal of improving competitiveness. Neither candidate has put forward anything close to a strategy; rather, each has presented a set of disconnected policy proposals with political appeal. Both parties contribute to the problem by approaching the economy with long-held ideologies and policy positions, many of which no longer fit with today's reality.
Now is the moment when the U.S. needs to break this cycle. The American economy has performed remarkably well, but our continued competitiveness has become fragile. Over the last two decades the U.S. has accounted for an incredible one-third of world economic growth. As the financial crisis hit, the rest of the American economy remained quite competitive, with many companies performing strongly in international markets. U.S. productivity growth has continued to be faster than in most other advanced economies, and exports have been the growth driver in the overall economy.
THE AGE OF ANXIETY
Yet our success has come with deep insecurities for many Americans, even before the crisis. The emergence of China and India as global players has sparked deep fears for U.S. jobs and wages, despite unemployment rates that have been low by historical standards. While the U.S. economy has been a stronger net job creator than most advanced countries, the high level of job churn (restructuring destroys about 30 million jobs per year) makes many Americans fear for their future, their pensions, and their health care. While the standard of living has risen over the last several decades for all income groups, especially when properly adjusted for family size, and while the U.S. remains the land where lower-income citizens have the best chance of moving up the economic ladder, inequality has risen. This has caused many Americans to question globalization.
To reconcile these conflicting perspectives, it's necessary to assess where America really stands. The U.S. has prospered because it has enjoyed a set of unique competitive strengths. First, the U.S. has an unparalleled environment for entrepreneurship and starting new companies.
Second, U.S. entrepreneurship has been fed by a science, technology, and innovation machine that remains by far the best in the world. While other countries increase their spending on research and development, the U.S. remains uniquely good at coaxing innovation out of its research and translating those innovations into commercial products. In 2007, American inventors registered about 80,000 patents in the U.S. patent system, where virtually all important technologies developed in any nation are patented. That's more than the rest of the world combined.
Third, the U.S. has the world's best institutions for higher learning, and they are getting stronger. They equip students with highly advanced skills and act as magnets for global talent, while playing a critical role in innovation and spinning off new businesses.
Fourth, America has been the country with the strongest commitment to competition and free markets. This belief has driven the remarkable level of restructuring, renewal, and productivity growth in the U.S.
Fifth, the task of forming economic policy and putting it into practice is highly decentralized across states and regions. There really is not a single U.S. economy, but a collection of specialized regional economies—think of the entertainment complex in Hollywood or life sciences in Boston. Each region has its own industry clusters, with specialized skills and assets. Each state and region takes responsibility for competitiveness and addresses its own problems rather than waiting for the central government. This decentralization is arguably America's greatest hidden competitive strength.
Sixth, the U.S. has benefited historically from the deepest and most efficient capital markets of any nation, especially for risk capital. Only in America can young people raise millions, lose it all, and return to start another company.
Finally, the U.S. continues to enjoy remarkable dynamism and resilience. Our willingness to restructure, take our losses, and move on will allow the U.S. to weather the current crisis better than most countries.
Yet what has driven America's success is starting to erode. A series of policy failures has offset and even nullified its strengths just as other nations are becoming more competitive. The problem is not so much that other nations are threatening the U.S. but that the U.S. lacks a coherent strategy for addressing its own challenges.
An inadequate rate of reinvestment in science and technology is hampering America's feeder system for entrepreneurship. Research and development as a share of GDP has actually declined, while it has risen in many other countries. Federal policymakers recognize this problem but have failed to act.
America's belief in competition is waning. A creeping relaxation of antitrust enforcement has allowed mergers to dominate markets. Ironically, these mergers are often justified by "free market" rhetoric. The U.S. is seeing more intervention in competition, with protectionism and favoritism on the rise. Few Americans know that the U.S. ranks only 20th among countries in openness to capital flows, 21st on low trade barriers, and 35th on absence of distortions from taxes and subsidies, according to the 2008 Global Competitiveness Report. We are fast becoming the kind of distorted economy we have long criticized.
Lack of regulatory oversight and capital requirements, in the name of liberalization and well-meaning efforts to extend credit to lower-income citizens, has undermined our financial markets. America underregulates in some areas while it overregulates in others.
U.S. colleges and universities are precious assets, but we have no serious plan to improve access to them by our citizens. America now ranks 12th in tertiary (college or higher) educational attainment for 25- to 34-year-olds. We have made no progress in this vital area over the past 30 years, unlike almost every other country. This is an ominous trend in an economy that must have the skills to justify its high wages. Instead of mounting a serious program to provide access to higher education, like the G.I. Bill and National Science Foundation programs of earlier years, Congress grandstands over the rate of endowment spending in our best universities.
The federal government has also failed to recognize and support the decentralization and regional specialization that drive our economy. Washington still acts as if the federal level is where the action is. Beltway bureaucrats spend many billions of dollars on top-down, highly fragmented federal economic development programs. Yet these programs are not designed to support regional clusters, nor do they send money where it will have the greatest impact in each region. For example, distressed urban communities, where poverty in America is concentrated, are starved of the infrastructure spending needed for job development. Again, no strategic thinking.
At a time when insecurity and job turnover are higher than ever, the U.S. also has abdicated its responsibility to provide a credible transitional safety net for Americans. It is no wonder Americans are becoming more populist, more protectionist, and more tolerant of harmful intervention in the economy. The job training system is ineffective and receives less and less funding each year. Pension security is eroding, and the most obvious step required to strengthen Social Security—slowly adjusting upward the retirement age—has not been taken. Improving access to affordable health insurance is a major worry for all Americans. Washington could take basic steps such as equalizing the tax deductibility of individually purchased insurance to assist those not covered by their employers. Yet the government has failed to do so.
HIGH COSTS, BIG HASSLES
Federal polices have hobbled America's entrepreneurial strength by needlessly driving up the cost and complexity of doing business, especially for smaller companies. Cumbersome regulation of employment, the environment, and product liability needs to give way to better approaches involving less cost and litigation, yet special interests block reform. The U.S. has become a high-tax country not only in terms of rates but also administrative hassle. Infrastructure bottlenecks, due to neglect and poorly directed spending, are driving up costs in an economy increasingly dependent on logistics. The U.S. is energy-inefficient, but public policies fail to promote energy conservation. Health-care costs are too high, but there is no serious effort to provide more integrated and efficient care.
Collectively, these unnecessary costs of doing business, coupled with skill gaps, are becoming significant enough to drive investments out of the country, including investments by American companies. Instead of addressing the real reasons for offshore investment, the parties spar over closing tax "loopholes," even though U.S. corporate rates are among the highest in the world. Where is the strategic thinking?
Trade and foreign investment are fundamental to the success of the U.S. economy, but America has lost its focus and credibility in shaping the international trading system. Our economy today depends on advanced services and selling intellectual property—our ideas, our software, our media. Yet rampant intellectual property theft and high barriers to competition in services tilt the world trading system against a knowledge-based economy.
With no strategy, the U.S. has failed to work effectively with other advanced countries to address these issues and has failed to assist poorer countries so they feel more confident about opening markets and internal reform. The U.S. has abdicated its strategic role in developing Latin America, our most natural trading partner. We have failed to engage meaningfully in Africa, the Middle East, and Asia to help countries improve the lot of their citizens. Our foreign aid is still tied to the purchase of U.S. goods and services, rather than the actual needs of countries. Congress fails to pass trade agreements with countries highly committed to our economic principles, such as Colombia.
A final strategic failure is in many ways the most disconcerting. All Americans know that the public education system is a serious weakness. Fewer may realize that citizens retiring today are better educated than the young people entering the workforce. In the global economy, just being an American is no longer enough to guarantee a good job at a good wage. Without world-class education and skills, Americans must compete with workers in other countries for jobs that could be moved anywhere. Unless we significantly improve the performance of our public schools, there is no scenario in which many Americans will escape continued pressure on their standard of living. And legal and illegal immigration of low-skilled workers cannot help but make the problem worse for less-skilled Americans.
The problem is not money—America spends a great deal on public education, just as we do on health care. The real problem is the structure of our education system. The states, for example, need to consolidate some of the 14,000 local school districts whose existence almost guarantees inefficiency and inequality of education across communities. Instead, government leaders haggle over incremental changes.
SAME OLD ARGUMENTS
We need a strategy supported by the majority to secure America's economic future. Yet Americans hear the same old divisive arguments. Republicans keep repeating simplistic free-market thinking, even though the absence of all regulation makes no sense. Self-reliance is preached as if no transitional safety net is needed. Some Republicans even argue passionately that the country should have no strategy because that would be "industrial policy." Yet the real issue is not picking industry winners and losers but improving the business environment for all American companies, something we cannot do without identifying our top priorities. Overall, Republicans seem to think business can thrive without healthy social conditions.
Democrats, meanwhile, keep talking as if they want to penalize investment and economic success. They defend unions obstructing change in areas like education, cling to cumbersome regulatory approaches, and resist ways to get litigation costs for business in line with other countries. Democrats equivocate on trade in an irreversibly global economy. They seem to think social progress can be achieved only at the expense of business.
To make America competitive, we have to get beyond this thinking. Political leaders, business leaders, and civil society must begin a respectful, fact-based dialogue about our challenges. We need to focus on competitive reality, not defending past policies.
A strategy would address each of the areas I have discussed. If we are honest with ourselves, we would admit the U.S. is not making real progress on any of them today. Efforts under way by both parties are largely canceling each other out. A strategy would direct our spending to priority investments that also put money into the economy, such as educational assistance and logistical infrastructure, rather than tax rebates. With a strategy, we would stop counterproductive and expensive practices such as farm subsidies and spending earmarks.
Is such strategic thinking possible, given America's political system? It happens in other countries—Denmark and South Korea are just two where I have participated in serious efforts by national leaders, both public and private, to come together and chart a long-term plan. This almost never occurs in the U.S., except around single issues.
We will need some new structures to govern strategically. I served on the last public-private President's Commission on Industrial Competitiveness—in 1983! This time we need one that is less politically motivated. Congress would benefit from a bipartisan joint planning group to coordinate an overall set of priorities. More up or down votes on comprehensive legislative programs are needed to allow a shift to a coherent set of policies and away from lots of separate bills.
The new Administration will have an historic opportunity to adopt a strategic approach to the U.S.'s economic future, something that would bring the parties together. America is at its best when it recognizes problems and accepts collective responsibility for dealing with them. All Americans should hope that the next President and Congress rise to the challenge. "
Monday, November 16, 2009
Sunday, November 15, 2009
one of the most incredible videos i've ever seen. The Chinese government built an entire city, Ordos, designed for 1 million people, in order to make GDP numbers look high. The city is almost entirely empty. This is akin to the "if you throw a brick through somebody's window then you stimulate the economy as they spend money to fix their window" parable the Austrians derided as stupid.
more on why we need big banks, and too big to fail is a dumb idea
Friday, November 13, 2009
Thursday, November 12, 2009
Wednesday, November 11, 2009
—Representative Barney Frank, September 25, 2003
For many of the working poor, the implicit marginal tax rate is greater than 100 percent. The long-run consequence of undermining the positive incentive to work is, of course, the creation of an underclass acclimated to not working; the supplement of cash and noncash benefits with income from crime and the underground economy; and the government resorting to negative incentives such as mandatory work programs."
Tuesday, November 10, 2009
Let's say there are 6 American conglomerate banks remaining after this financial crisis: Citigroup, Bank of America, JP Morgan Chase, Morgan Stanley, Goldman Sachs and Wells Fargo. There are more big, important banks, but for simplicity and name recognition, let's stick with these.
In a world with no restriction on too-big-to-fail:
Let's say Citigroup, because it's dumb, takes on a whole bunch of risks that all go kaput at the same time as the result of a systematic shock. It fails. The FDIC, funded by the US taxpayer, needs to bail out all of Citigroup's depositors. Citigroup's failure casts doubt upon its ability to pay down its derivatives and loan obligations. Holders of these obligations - the other 5 banks - need to write them down, sending them into a liquidity crisis as they struggle to raise more capital to fill the holes in their books. If they can't raise the capital, they fail, sending their own derivatives and loan obligations into question, and further burdening the survivors. Eventually, everyone dies.
In a world where too-big-to-fail is regulated:
Each of these 6 banks is split into 2 smaller banks. Any one of the new banks is not big enough to take down the financial system; none of them are "too big to fail".
However, everyone still has loans outstanding, and generally there's quite a bit of overlap as to the groups they're lending to. If the loans of the original big banks are split among the small companies, then systematic shock happens, and then instead of Citigroup failing, Citigroup A and Citigroup B both fail (or Citigroup A and Bank of America B, or whatever). You're in the same situation, then, because the same number of loans failed, they were just split among two banks who could only handle half the size of failure as the original big bank - the other 10 banks scramble to find liquidity and the process happens.
In other words, if banks need a 2:1 ratio of capital to loans, it doesn't matter if there's one bank with 40 in loans, 20 in capital who loses 6 in capital and needs to find 6 vs two banks with 20 in loans, 10 in capital who each lose 3 in capital and need to find 3 each. Systematically, small banks and big banks pose the same collective risk.
There's an argument that opening the prospect of an individual bank failing will prevent stupid risks to begin with because each individual bank can't be sure of a bailout. This has two problems. Firstly, in the above scenario, every small bank except the very first one or two to fail needs a bailout, also. So you don't really help the system that much.
Secondly, it ignores the fact that firms are not living, breathing entities; they're run by humans who get fired. Maybe everyone knew the government would bail out the banks and let them live. Most of the chief executives, however, have left in disgrace (the exceptions being the ones who did a good job - Blankfein, Dimon, etc). Say what you like about contractual compensation commitments (and ignoring the fact that the government has been abrogating them) - all of them would rather be doing their job than not doing it. Does it soften the blow and make risk more palatable? Probably, but it's not as if they thought it'd be consequence-free. Certainly there's something to be said for toughening the Boards of Directors at public firms to make them act with some teeth towards CEOs - both strategy and compensationwise. Done by a privately elected board of directors, this can actually work in the shareholder's interest. Regulation isn't going to solve that very well, though - it's too "one size fits all".
An alternate "split up" method is to separate the different financial activities that happen within a bank - for example, commercial banks and investment banks and insurers couldn't be under the same roof. Splitting commercial banks and investment banks would exchange frequency of bailouts for severity. You'll still have "too-big-to-fail" institutions within each sphere. What that ends up doing is creating more frequent crises that are less severe. If the investment banking industry has a crisis, then the investment banks need to be bailed out. If they're linked to commercial banks, however, the commercial bank may provide the diversification necessary to make regular equity capital or debt capital work, without a bailout. Thus, large and diversified banks fail less often. Of course, as we've seen, when they do fail, they fail spectacularly because there are so many moving parts that fail all together. Would more frequent but less severe crises be better? Possibly, because they'd derail the economy less often. However, given that the US underinvests so badly, sustained periods of good times actually aren't a bad thing if they prompt actual investment, whereas more frequent crises may undermine investment further. Without actual research, this isn't an easy question to answer.
What's the real solution to "too big to fail"? Create an orderly system of quickly dismantling failed banks so you don't send banks that haven't failed scrambling for liquidity. That'll help, but not solve the problem, by lessening the level of required writedown to the amount by which the failed bank fell short instead of some prospect of more.
A better idea would be to stop politicizing loans; if Fannie and Freddie hadn't started buying up mortgage assets at the order of Congress, the bubble would never have been as big in the first place. The same goes for small-business loans.
However, ultimately, while good practice (by government and individual firms, as well as consumers) can lessen the risk, you can't legislate it away. It's fundamental to fractional reserve banking, and unless you wanna take that away (and send us back to the 1840's, stunting American growth forevermore), it will always be a risk. We're better off creating a method for dealing with it next time than trying to eliminate it altogether.
Where to aim? Tran and Silverberg say you should aim for the back of the rim, leaving close to 5 centimeters – about 2 inches – between the ball and the back of the rim. According to the simulations, aiming for the center of the basket decreases the probabilities of a successful shot by almost 3 percent.
The engineers say that the ball should be launched at 52 degrees to the horizontal. If you don't have a protractor in your jersey, that means that the shot should, at the highest point in its arc to the basket, be less than 2 inches below the top of the backboard.
Free-throw shooters should also release the ball as high above the ground as possible, without adversely affecting the consistency of the shot; release the ball so it follows the imaginary line joining the player and the basket; and release the ball with a smooth body motion to get a consistent release speed.
"Our recommendations might make even the worst free-throw shooters – you know who you are, Shaquille O'Neal and Ben Wallace – break 60 percent from the free-throw line," Silverberg says with tongue firmly in cheek. "A little bit of physics and a lot of practice can make everyone a better shooter from the free-throw line."
The engineers used a men's basketball for the study; it is heavier and a bit larger than basketballs used in women's games. They also assumed that the basketball player doing the shooting was 6 feet 6 inches tall, and that he released the ball 6 inches above his head, so the "release height" was set to 7 feet. The free-throw line is 15 feet from the backboard, a cylinder-shaped opening that is 10 feet off the ground. Though it looks smaller, the diameter of a regulation basketball hoop is 18 inches; the diameter of a men's basketball is a bit more than 9 inches.
Monday, November 9, 2009
"Ordinarily, during an asthma attack, people panic and breathe quickly and as deeply as they can, blowing off more and more carbon dioxide. Breathing rate is controlled not by the amount of oxygen in the blood but by the amount of carbon dioxide, the gas that regulates the acid-base level of the blood.
Dr. Buteyko concluded that hyperventilation — breathing too fast and too deeply — could be the underlying cause of asthma, making it worse by lowering the level of carbon dioxide in the blood so much that the airways constrict to conserve it.
This technique may seem counterintuitive: when short of breath or overly stressed, instead of taking a deep breath, the Buteyko method instructs people to breathe shallowly and slowly through the nose, breaking the vicious cycle of rapid, gasping breaths, airway constriction and increased wheezing.
The shallow breathing aspect intrigued me because I had discovered its benefits during my daily lap swims. I noticed that swimmers who had to stop to catch their breath after a few lengths of the pool were taking deep breaths every other stroke, whereas I take in small puffs of air after several strokes and can go indefinitely without becoming winded. .....
In an interview, Mrs. Yakovlev-Fredricksen said: "People don't realize that too much air can be harmful to health. Almost every asthmatic breathes through his mouth and takes deep, forceful inhalations that trigger a bronchospasm," the hallmark of asthma.
"We teach them to inhale through the nose, even when they speak and when they sleep, so they don't lose too much carbon dioxide," she added. "
Saturday, November 7, 2009
Health bill bans coverage for abortion on both public and private insurance offered on the to-be-created insurance exchange. Abortion coverage can be purchased as a separate supplemental policy, but how many of the people who really need that (teens, etc) are going to feel comfortable buying it?
EDIT: After posting, realized the incredible adverse selection problem with an abortion rider. The people who get an abortion rider are the ones who are very likely to get an abortion. The cost will be prohibitive for most even when they ARE someone who is willing and able to buy an abortion rider because the probability of getting an abortion would be so high for people who take the rider.
Friday, November 6, 2009
How to Dodge a Difficult Question
Econ blogger Steve Waldman, who recently participated in a meeting with Treasury Department officials, takes note of the technique employed by officials to dodge difficult questions:
In response to a several difficult questions, one official enthused that what the interlocutor had brought up was an important concern, something he really cared about, but then quickly went on to assert that, in his judgment, it was unlikely to be the pivotal or most challenging problem. I thought this a very effective trick to sweep an issue aside, a kind of jujitsu by which the official would render very sharp comments harmless by moving with rather than fighting against the questioner. After this move, the only possible disagreement is a judgment call about which of many problems is most pressing, and whose judgment would be better than that of a senior official immersed daily in the practicalities of policy?
Clever. Agree that it's an important question, but not the most important question. Then turn to the more important question. Perhaps even present the "more important" question back to the audience for their oh-so-valued feedback.
He then goes on to note how the Treasury officials employed the oldest trick in the book: flattery.
Twice Treasury officials commented on how uncommon a group we were, how we asked particularly pointed questions or were unusually bright. To borrow a cliché, I'll bet they say that to all the groups. One official made use of an expletive early in his discussion, which had the effect of making us feel like insiders, like this was not the sort of canned, guarded conversation one might see on CNN. The same official was quick to address us by first name when responding to questions. That wasn't hard, since our names were in front of us, written on placards in large letters. But it was still effective. Being addressed so familiarly makes you feel important, like you are someone powerful people deem worth their while to know. Obviously, the reality distortion field wears off when you leave, once you think it over. But these guys are pretty good at what they do.
Flattery, false bonding, etc: Even if you know it's happening, it doesn't mean it's not effective.