July 7, 2011
Cartoon history of the global warming panic
July 6, 2011
Having it all? Not without sacrifices
Scott Greenfield wastes little sympathy with the plaintifss in this case:
How grand would life be if you could enjoy the perks, the glory, the importance and power of being a big shot executive with a major multinational, but got to stay home and play with the kids rather than work? I know, me too. So too the six women suing Bayer for sex discrimination.
While there are plenty of other causes of action that suggest they have some very real gripes. This [. . .] is not their strongest point:
The few women who have advanced beyond the director level and into the highest echelon of management have achieved this rank by sacrificing their personal lives and abandoning work-life balance. Female Vice President of Global Health Economics and Outcomes Research Kathleen Gondek is unmarried with no children, female Senior Director Susan Herster has no children and female Vice Presidents Shannon Campbell and Leslie North have others who serve as primary care-givers to their children.
Can you imagine the sadness at the loss of work-life balance by these women in the “highest echelon of management?” How sad. How wrong. They shouldn’t be there are all if they haven’t figured out that anyone elevated to that position is required to sacrifice their personal lives to perform the heavy burdens that come with the heavy paycheck.
Not worth it for you? That’s cool. Don’t do it. And don’t get the title, or the car, or the paycheck. But you can’t have it all. No man can. No woman can. No one can. And don’t whine about the choice you made, to go for the career at the price of a family life.
July 5, 2011
When (not if) Greece defaults
John Lanchester explains why default is inevitable, and that the only question remaining is how it will happen:
The economic crisis in Greece is the most important thing to have happened in Europe since the Balkan wars. That isn’t because Greece is economically central to the European order: at barely 3 per cent of Eurozone GDP, the Greek economy could vanish without trace and scarcely be missed by anyone else. The dangers posed by the imminent Greek default are all to do with how it happens.
I speak of the Greek default as a sure thing because it is: the markets are pricing Greek government debt as if it has already defaulted. This in itself is a huge deal, because the euro was built on the assumption that no country in it would ever default, and as a result there is no precedent and, more important still, no mechanism for what is about to happen. The prospective default could come in any one of several different flavours. From everybody’s perspective, the best of them would be what is known as a ‘voluntary rollover’. In that scenario, the institutions that are owed money by the Greek government will swallow heavily and, when their loan is due to be repaid, will permit their borrowings to be rolled over into another long loan. There is a gun-to-the-side-of-the-head aspect to this ‘voluntary’ deal, since the relevant institutions are under enormous governmental pressure to comply and are also faced with the fact that if they say no, they will have triggered a proper default, which means their loans will plummet in value and they’ll end up worse off. The deal on offer is: lend us more money, or lose most of the money you’ve already lent.
This is, at the moment, the best-case scenario and the current plan A. It reflects the failure of the original plan A, which involved lending the government of George Papandreou €110 billion in May last year in return for a promise to cut government spending and increase tax revenue, both by unprecedented amounts. The joint European Central Bank-EU-IMF loan was necessary because, in the aftermath of the financial crisis of 2008, Greece was exposed as having an economy based on phoney data and cheap credit. The cheap credit had now dried up, and Greece was faced by the simplest and worst economic predicament of any government: it couldn’t pay its debts.
June 29, 2011
The real reason for the Greek bailout
Eric S. Raymond explains why all the politicians and apparatchiks of the world’s bureaucracies are lining up to pump for a Greek bailout:
Lost in the eye-glazing babble about maturity extensions, haircuts, and which acronymic organization is going to funnel the money into place is the real magnitude of the stakes here. It’s not just the Greeks’ opera-bouffé parody of the modern redistributionist state that is circling the structural-insolvency drain; what really terrifies our political class is the prospect that, very soon, the investors simply won’t buy government bonds anymore — and massive borrowing through bond issues is the only thing keeping the redistributionist state afloat.
As I have documented many times on this blog, the entitlement-spending commitments of the U.S. Federal government, most U.S. state governments, most European governments, and indeed most national governments everywhere exceed the capacity of their economies to generate wealth. And demographic trends are making the imbalance worse over time, not better.
This is why raising taxes won’t help. The amount of private wealth available to be taxed is insufficient, even if taxation could be raised to 100% without suppressing all economic activity. In practice, raising taxes leads to increases in spending which more than consume the increased revenue (by a ratio of 1.17:1 in the U.S. since the 1940s).
[. . .]
That is the assumption that is now under threat. Greece must be bailed out in order to preserve the illusion that the borrowing can continue indefinitely, that the bill will somehow never come due. When the political class speaks of “contagion”, what they’re really worried about isn’t the solvency of German banks holding Greek paper, it’s a general flight of investors from the sovereign-debt markets.
Auditor skeptical of Ontario government spending cut promises
With their track record on spending, it’d be hard to take the promises seriously, and the Auditor General isn’t optimistic that they will deliver on their promises:
A plan by Ontario’s Liberal government to slash the increase in annual spending by almost 400 per cent is too optimistic and could lead to service cuts, Auditor General Jim McCarter warned Tuesday.
The Liberals increased spending by 7.2 per cent a year since they were elected in 2003, but in the March budget vowed to cut the growth in spending to 1.8 per cent annually to help trim the $16.7-billion deficit.
Ontario voters, who head to the polls Oct. 6, should view the Liberal plan with “a moderately big grain of salt,” said McCarter. “Basically take that into consideration when you look at the pre-election report.”
The Liberals’ revenue projections were fine, he said, but their plan to keep the growth in spending below the rate of inflation for the next three years is “aggressive” rather than prudent.
“You’ve really got to have a pretty hard look at the assumptions underlying those expenses, and you may be forced to make some hard decisions from a service delivery point of view,” said McCarter. “The assumptions underlying those expense projections, rather than being cautious and prudent, were optimistic, they were aggressive, and in a lot of cases really reflected a best-case scenario.”
Political promises are rarely worth the paper they’re printed on, and this particular government’s spending habits make it even less likely that they’ll meet this promise.
June 27, 2011
The Economist calls for Greek debt restructuring
A Greek default. It’s stopped being a possibility, moved into being a probability, and it’s starting to look inevitable:
There is an alternative, for which this newspaper has long argued: an orderly restructuring of Greece’s debts, halving their value to around 80% of GDP. It would hardly be a shock to the markets, which have long expected a default (an important difference from Lehman). The banks that still hold a big chunk of the bonds are in better shape to absorb losses today than they were last year. Even if Greece’s debts were cut in half, the net loss would still represent an absorbable proportion of most European banks’ capital.
An orderly restructuring would be risky. Doing it now would crystallise losses for banks and taxpayers across Europe. Nor would it, by itself, right Greece. The country’s economy is in deep recession and it is running a primary budget deficit (ie, before interest payments). Even if Greece restructures its debt and embraces the reforms demanded by the EU and IMF, it will need outside support for some years. That is bound to bring more fiscal-policy control from Brussels, turning the euro zone into a more politically integrated club. Even if that need not mean a superstate with its own finance ministry, the EU’s leaders have not started to explain the likely ramifications of all this to voters. But at least Greece and the markets would have a plan with a chance of working.
No matter what fictions they concoct this week, the euro zone’s leaders will sooner or later face a choice between three options: massive transfers to Greece that would infuriate other Europeans; a disorderly default that destabilises markets and threatens the European project; or an orderly debt restructuring. This last option would entail a long period of external support for Greece, greater political union and a debate about the institutions Europe would then need. But it is the best way out for Greece and the euro. That option will not be available for much longer. Europe’s leaders must grab it while they can.
Stephen Gordon: The “broken window” fallacy of “green” jobs
It’s always nice to see a reference to Frédéric Bastiat in a modern day setting:
But it is possible to oversell the green jobs theme. Job creation should not be a goal of environmental policy, no more than it should be a policy goal in the fields of health or national security. If, instead of hiring people, we could use magic to stop disease, crime and environmental degradation, we would. Pointing to jobs ‘created’ to fix these problems is an error that Frédéric Bastiat identified in his ‘parable of the broken window’. Broken windows generate work for glaziers, but that doesn’t mean that breaking windows will increase national income.
An often-quoted statistic goes something like this: “wind energy produces 27 per cent more jobs per kilowatt hour than coal plants and 66 per cent more jobs than natural gas plants”. This could well be true, but it is hardly a strong argument in favour of the employment opportunities that would be generated by investing in wind energy: hiring more people to produce less energy is not a strategy for prosperity. Similar gains in employment could be obtained by outlawing mechanical excavators so that all digging must be done by hand. It may make sense to encourage the development of wind power, but increased employment is most emphatically not one of the reasons for doing so.
A review of The Declaration of Independents
Timothy P. Carney talks about the new book by Nick Gillespie and Matt Welch:
Libertarians today are mostly considered a variety of conservative — Ronald Reagan with fewer bombs and more pot. But Welch and Gillespie don’t cast libertarianism as one of many political ideolgies. Instead, they portray it as a truce. It’s unpolitics. The authors see evidence of a “libertarian moment,” not so much in public opinion on policy matters (though outrage about bailouts helps), but in cultural trends that spill over into politics.
Younger Americans don’t like being told what to think. Gone is the voice-of-God Walter Cronkite figure. Younger adults assemble their own news feeds a la carte, following trusted voices on Twitter and RSS feeds. Even walking through a shopping mall, the authors argue, shows how we’re much more individualistic as a culture than we used to be. The authors say there’s a proliferation of cliques and types in high schools and among adults, too. The Internet has helped people find kindred spirits both near and far, making it less necessary to modify your interests to match an existing group. Americans, increasingly, choose their own way.
And there, in a nutshell, is the traditionalist’s core argument against the internet (grounded in their remembered high school experience): it allows geeks and nerds and other unpopular kids to find solace, support and fellow feeling outside their immediate physical surroundings. That undermines the traditional rule of the jocks and the beautiful people.
Welch and Gillespie see our cultural trends as evidence that “decentralization and democratization” are taking territory from “the forces of control and centralization.” The political corollary, naturally, would be a movement that creates more space for individuality. It would be almost an anti-political movement.
But this is where every dream of an independent or libertarian uprising crashes into reality. You don’t win at politics without being good at politics. The people who are best at politics are the people who stand to gain a lot from it — special interests and people who get like to play the political game. Neither group is likely to include many anti-political decentralizers.
What about the libertarians who are already caught up in politics? The think-tankers, the activists, the journalists? Well, they’re another obstacle to a libertarian revolution. For one thing, this is a group famous for infighting. The Libertarian Party has been racked with strife, splits and feuds for its entire existence. Welch and Gillespie want to pitch a big tent, but Beltway libertarians are famous for imposing “purity tests.” (Q: Should vending machines marketing heroin to children be allowed on public sidewalks? A: There shouldn’t be public sidewalks.)
That last quip is quite true: the very first time I walked in to a libertarian gathering, I was besieged with purity testing of that sort. I nearly walked right back out without a backward glance.
June 26, 2011
Skype’s PR problem over their sneaky options plan
Over my career in the software industry, I’ve worked for several companies who provided a stock option plan as part of their employee compensation scheme. Exactly one of those companies’ programs ever provided me with any actual tangible benefit (the company was bought, and the options were bought back at market rate). It netted me a couple of thousand dollars. Options may have been a way to get rich in the early 1990s, but they’re pretty much a longshot lottery ticket now.
Skype has found a sneaky way of making that longshot chance even more unlikely to pay off:
Employees aren’t even able to keep the vested portion of their stock options. The vast majority of stock options granted to startups have a vesting period, typically four years, with chunks of those options becoming vested during that four year (or whatever) period. If options are vested you can exercise them, pay for the stock and own that stock. At least that’s the way things have been done over the decades.
Skype did things differently. With Skype stock options the company has the right to not only terminate unvested options, but also vested ones. And any vested options that you’ve exercised (meaning you paid cash for them) that were turned into actual shares could simply be bought back by the company at the price you paid, regardless of their current value.
Turning your potentially lucrative stock holdings (if the value was higher than your strike price) into a mandatory zero-interest savings account. Nice.
The fact that Skype adopted this plan in the first place isn’t in itself “evil.” But they’ve done two things wrong from what I can tell.
First it appears that employees had no idea what they were signing and they probably expected it would be a normal stock option type deal that everyone in Silicon Valley has done for decades. If Skype wasn’t crystal clear with them, and explained it in normal human language that they understood, then these employees were intentionally misled. Skype had an incentive to make things unclear, because employees would demand far more compensation if they had understood. The fact that employees are so surprised that this is happening suggests that they didn’t understand the agreement. This is what lawyers call fraud.
The second thing Skype did wrong was not to waive this clause with the looming acquisition. The company can deny all day long that they fired these employees for cause, not to save a few dollars on stock options. But the appearance is the exact opposite.
June 25, 2011
Taxes must rise to maintain “the overall size of government programs”
Treasury Secretary Timothy Geithner was being as honest as he knows how in talking to the House Small Business Committee this week. Reducing the size of government is literally unthinkable:
[T]he Obama administration believes taxes on small business must increase so the administration does not have to “shrink the overall size of government programs.”
The administration’s plan to raise the tax rate on small businesses is part of its plan to raise taxes on all Americans who make more than $250,000 per year — including businesses that file taxes the same way individuals and families do.
[. . .]
Geithner, continuing, argued that if the administration did not extract a trillion dollars in new revenue from its plan to increase taxes on people earning more than $250,000, including small businesses, the government would in effect “finance” what he called a “tax benefit” for those people.
“We’re not doing it because we want to do it, we’re doing it because if we don’t do it, then, again, I have to go out and borrow a trillion dollars over the next 10 years to finance those tax benefits for the top 2 percent, and I don’t think I can justify doing that,” said Geithner.
Not only that, he argued, but cutting spending by as much as the “modest change in revenue” (i.e. $1 trillion) the administration expects from raising taxes on small business would likely have more of a “negative economic impact” than the tax increases themselves would.
Tim Harford analyzes the ECB’s real problem
Tim Harford puts the head of the ECB (Essex Community Business association) on the couch:
“With all due respect, doctor, I don’t think it’s me who needs to see a shrink.”
“Don’t worry. A lot of people feel a bit awkward when they first lie on this couch. This is a safe, non-judgmental space.”
“I wish the Essex Community Business association was as relaxed.”
“But you’re the chairman of the ECB association. Tell me why you feel that way.”
“Look, I always felt that the ECB association was supposed to be an informal talking shop, a way for people with shared interests to make new friends and perhaps even launch joint projects. Everyone was really happy when Georgios, the new owner of the Plaka Taverna, wanted to join — the more the merrier.”
[. . .]
“So if I understand the situation, you’re lending money to Georgios that you know he can never pay back, and demanding that his staff make sacrifices they are transparently unwilling to make, in order to protect Mr Saville’s bank, in order to protect José, who in some unspecified way is connected to Georgios’s fate.”
“It does sound a bit strange when you put it like that. I think the theory is that if we don’t throw money and yell impractical and unwelcome management advice at a transparently bankrupt business, then maybe a perfectly viable business will be damaged. Especially since there won’t be any money left, because we’ll have given it all to Georgios, who will have given it all to his waiters. Does that make sense?”
June 24, 2011
Newspapers still trying to adapt to a vastly changed world
In a blog post at the Guardian, Roy Greenslade puts the financial changes into a bit of perspective:
So prepare — if you’re of a certain age — for a warm nostalgic bath. In 1950, with TV sets in only 9% of homes, a British street of 100 houses could be relied on to buy 140 newspapers a day and 220 on Sunday.
In 2010, with each of those houses containing an average of 2.6 TVs, the same street bought just 40 papers a day, Monday to Sunday.
Some advertising revenues fled to TV as it developed in the 1950s, 1960s and 1970s, but not in such great numbers as to ruin newspapers, which could still rely on huge circulation sales income.
In 1966, the Daily Mirror sold 5.1m copies a day, the Daily Express 4m and the Daily Telegraph 1.4m. Last month, those titles had circulations of 1.2m, 631,000 and 635,000 respectively.
It was one of the things that struck me on my first trip back to England in 1979 — although not as badly as the bone-chilling damp — was the profusion of newspapers available. I was used to Toronto, where you could get the Toronto Star, the Globe and Mail, and the horrible little upstart pleb rag, the Toronto Sun. Seeing all the different papers was quite an eye-opener.
No wonder why he chose to title the post “Those were the days, my friends, we’d thought they’d never end…”
June 22, 2011
What is a balance-sheet recession?
Stephen Gordon has some really nasty looking diagrams explaining just what a balance sheet recession looks like:
I had never heard the expression “balance-sheet recession” before this recent episode, and it’s time I got around to a comparison of the household balance sheets of the US and Canada. Of all my “Canada is not the US” posts, this is the one that makes me most grateful.
The quarterly data goes back to 1990, and it’s good to put the last few years in context. I’ve scaled all the series by price (the consumption spending deflator) and population. Here is the net worth series:
There’s been talk of a Japan-like ‘lost decade’ in the US; that seems optimistic. US real per capita net worth is back to what it was back in 1999.
More (and somewhat scarier) diagrams at the original post. It doesn’t even finish on a high note:
The US data go back to 1952, so I was able to check the last time the real, per capita value of US housing equity was at its current level. Even after looking at all of these graphs, the answer astonished me: 1978. Nineteen seventy-freaking-eight.
June 21, 2011
The Athens protests as a theatre for projection
Whatever may really be behind the protests, reporters are having a wonderful time using it as a blank canvas to project their own notions:
Some seriously overblown claims are being made about the anti-government, anti-EU, anti-IMF protests in Athens. ‘Syntagma Square has become the frontline of the battle against European austerity’, said one giddy British reporter, referring to the square where for the past three weeks Greek citizens, calling themselves ‘indignados’, have been protesting against the IMF/EU demand for further austerity measures before Greece can receive more aid. In truth, the most striking thing about the protests is their incoherence, even their childishness. Far from being the frontline of any kind of solid movement, the Syntagma camp-in is a confused, depoliticised, borderline petulant response to the economic crisis.
Some European journalists and activists have become so enamoured by the physicality of the protests that they seem not to have noticed the gaping political hole at the heart of them. BBC reporters, who normally spend most of their time in stuffy, smokeless offices, have written with undisguised glee of their sweaty experiences in Athens, where the ‘teargas hits us without warning’ and ‘we crush together, shoulder to shoulder’. A Guardian reporter describes being ‘jammed up against the railings’ in a ‘raucous’ atmosphere that is like ‘an open-air concert’. Hacks more used to writing about Vince Cable’s latest pronouncement on business law have leapt upon the opportunity to get stuck into a seemingly more thrilling economic story, in the process presenting the Syntagma stand-off as way more profound than it actually is.
Likewise, many amongst the European left are busily projecting their aspirations on to Athens. This is the ‘start of the European workers’ fightback’, they claim, describing the protests as the ‘beginning’ of an uprising against austerity that they knew would come. It is a feeling of profound disarray and disconnection amongst European left groups, their sensitivity to the political stasis that has largely greeted the economic crisis, which leads them to make excitable claims about Greece. Motivated by a determination to avoid having hard debates at home about the crisis, far less try to come up with any strategies for resolving it, they content themselves instead with celebrating the rowdy ‘indignation’ of Greek protesters and imagining that it represents the first stirrings of the return of traditional class politics.
Would you pay $23,698,655.93 for a book about flies?
This link was sent to one of my various mailing lists. It’s an amusing little story about a very expensive book and how the price on eBay got so out of hand:
A few weeks ago a postdoc in my lab logged on to Amazon to buy the lab an extra copy of Peter Lawrence’s The Making of a Fly — a classic work in developmental biology that we — and most other Drosophila developmental biologists — consult regularly. The book, published in 1992, is out of print. But Amazon listed 17 copies for sale: 15 used from $35.54, and 2 new from $1,730,045.91 (+$3.99 shipping).
I sent a screen capture to the author — who was appropriate amused and intrigued. But I doubt even he would argue the book is worth THAT much.
At first I thought it was a joke — a graduate student with too much time on their hands. But there were TWO new copies for sale, each be offered for well over a million dollars. And the two sellers seemed not only legit, but fairly big time (over 8,000 and 125,000 ratings in the last year respectively). The prices looked random — suggesting they were set by a computer. But how did they get so out of whack?
Amazingly, when I reloaded the page the next day, both priced had gone UP! Each was now nearly $2.8 million. And whereas previously the prices were $400,000 apart, they were now within $5,000 of each other. Now I was intrigued, and I started to follow the page incessantly. By the end of the day the higher priced copy had gone up again. This time to $3,536,675.57. And now a pattern was emerging.
