Entries from March 2009 ↓

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Bespin Presentation

The canvas tag is supported by all major web-browsers, with the exception of Internet Explorer. Bespin Presentation

Alternative future, best case scenario

1. The recession bottoms out soon. In fact, by May, the economy is growing. GM’s Volt is a success.
2. 2010 and 2011 are years of solid growth, so that the deficit naturally falls as the government acts counter-cyclically. The Obama predictions turn out not to be rosy scenarios at all. The budget is actually balanced by 2012.
3. The deleveraging of the financial system means that the massive Fed increases of money are not inflationary, so prices don’t rise and the dollar doesn’t fall. The bond markets never get angry.
4. Obama rides on the tails of this economic growth and is re-elected by a land-slide.

Alternative future, best case scenario 1. The recession bottoms out soon. In fact, by May, the economy is growing. GM's Volt is a success. 2. 2010 and 2011 are years of solid growth, so that the deficit naturally falls as the government acts counter-cyclically. The Obama predictions turn out not to be rosy scenarios at all. ...

Here’s one possible future for the next couple of years. This is worst-case-scenary for an Obama presidency (I’ll post a best-case scenary pretty soon):

1. The recession bottoms out soon. By the end of the year, the economy is growing. The tax rebate part of the stimulus helps in this, but the rest of the stimulus hasn’t even been spent yes.
2. As the spending part of the stimulus comes online (i.e., is spent) it acts pro-cyclically fueling a boom. In 2010, growth is above-trend.
3. Obama’s ratings soar. Critics are silenced. A new era for liberalism is upon us. Health care reform and maybe cap&trade get passed into law. Democrats win by a landslide the mid-terms.
4. The bills start coming in mid-2011. Pressure starts mounting on the budget. Bond yields go up. Fiscal conservatives get a bit more air-play. A couple of scandals (some fake, some real) on stimulus money being misspent make the news. A sex scandal. Cracks in the castle.
5a. Obama is forced into crisis mode just as an election looms. The bond markets are un-forgiving and he must cut spending and/or raise taxes in 2012. It all comes crashing down very fast and Bobby Jindal wins the election by, what even a couple of weeks before the election, would be a very surprising margin.
5b. There are is a loss of confidence, but no general crash (like recessions, bubbles always last longer than you’d expect). Obama is still getting credit for the boom and wins the election handily (although by a margin that is less than he got in 2008). However, he must, belatedly, raise taxes and cut some spending. He finishes as a not-failed-but-definitely-humbler President. He takes confort in having higher ratings than W at the end of his two terms.

Here's one possible future for the next couple of years. This is worst-case-scenary for an Obama presidency (I'll post a best-case scenary pretty soon): 1. The recession bottoms out soon. By the end of the year, the economy is growing. The tax rebate part of the stimulus helps in this, but the rest of the ...

Fortunately, the appetite for U.S. government debt can be taken for granted Tyler Cowen (sarcastically).

This is the weak link in Obama’s plans. What will he do when the bond markets return to normal after a decade of being too nice?

In a way, Bush’s easy-spending ways are explained by the abnormally nice bond markets in the last decade. A return to normal credit (what the credit markets will look like when “fixed”) will probably imply a return to the times when the bond markets “could scare anybody” rather than the times when they would lend anybody anything.

Fortunately, the appetite for U.S. government debt can be taken for granted Tyler Cowen (sarcastically). This is the weak link in Obama's plans. What will he do when the bond markets return to normal after a decade of being too nice? In a way, Bush's easy-spending ways are explained by the abnormally nice bond markets in ...

Burke’s post about the difficulties of measuring small savings is interesting throughout (ht: Megan McArdle).

It talks about how hard it is to know whether a certain action that saves money saves enough money to be worth it. However, it becomes even more relevant if you re-read it mentally replacing “saves money” with “saves energy”. Many of the myriad of energy-saving measures we hear advocated fall into the save the world by turning off the light when you are taking a dump category: feel-good meaningless in the big scheme of things (here’s a simple heuristic: if you can’t tell the difference on your electrical bill, then it doesn’t make a difference environmentally either).

Some people would counter-argue that small environmental measures such as unplugging the laptop charger when not in use should be promoted because they raise awareness even if they are mostly meaningless. I think, however, that we have a mental environmental-caring budget and if we promote the meaningless measures we crowd-out the possibly meaningful measures (like eating less fish).

Burke's post about the difficulties of measuring small savings is interesting throughout (ht: Megan McArdle). It talks about how hard it is to know whether a certain action that saves money saves enough money to be worth it. However, it becomes even more relevant if you re-read it mentally replacing "saves money" with "saves energy". ...

Failure counts as done.

Cult of Done Manifesto

The rest of it is dumb, but this is pretty good.

Failure counts as done. Cult of Done Manifesto The rest of it is dumb, but this is pretty good.

Matthew Yglesias points to a study that finds the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. [On the contrary,] we estimate a cost of increased electricity bills to Indiana households of $9 million per year. We also estimate social costs of increased pollution emissions that range from $1.7 to $5.5 million per year. Finally, we argue that the effect is likely to be even stronger in other regions of the United States. I have seen other studies that point the same way.

(via Andrew Sullivan)

This doesn’t even count the cost of inconveniencing and confusing everyone twice a year.

It’s a good example of how government programs always linger on despite no longer being relevant (DST might have made some sense when the primary energy cost was light) or even ever having made sense. They linger on because they exist even if no interest group is interested in them.

Matthew Yglesias points to a study that finds the primary rationale for DST has always been to promote energy conservation. Nevertheless, there is surprisingly little evidence that DST actually saves energy. we estimate a cost of increased electricity bills to Indiana households of $9 million per year. We also estimate social ...

Yesterday, on NPR, a Republican congressman complained that Obama’s health care plan might endanger an innovative health care system. In fact, it is taken as an article of faith, that the US health care system is the most innovative in the world.

On some level, this is true. There are many new treatments and drugs every year. However, most of this is non-disruptive innovation—it feeds the current system, but never challenges it.

It is mostly illegal to actually touch the fundamental mechanisms through which health care is delivered.

Have people which don’t have a traditional MD provide medical services? Replace doctors with computer programs? Franchise hospitals built around the McDonald’s model? Insurance with an explicit dollar amount on your life (something like the NICE model used in Britain [and praised by many single-payer advocates]: if it costs more than X to save your life, it’s not covered)? All of these are simply illegal.

Nurse practitioners could be the thin end of the wedge, but they are always controversial. Doctors, more than teachers or trial-lawyers, are the most sacrosant interest group in the country. Libertarian blogs are full of posts bemoaning the way in which teacher unions stand in the way of disruption in education. Rarely do we see the same being said of the medical association (which is even worse than the teachers union because its licensing has force-of-law).

Yesterday, on NPR, a Republican congressman complained that Obama's health care plan might endanger an innovative health care system. In fact, it is taken as an article of faith, that the US health care system is the most innovative in the world. On some level, this is true. There are many new treatments and drugs ...

Two trillion dollars sounds like a lot of money, but in a pinch we could pay it all back in just one year if we were willing to reduce household and government spending by about 15 percent. It would require temporary sacrifice on everyone’s part but would hardly be the death of the American dream.

—Steven Pearlstein (hat-tip: Arnold King

It’s interesting how the above quote is in the context of trying to avoid a loss in output that the pessimists claim could be as high as 10%! So either, a 15% drop isn’t a big thing, in which case, the world economy is doing just fine, thank you very much; or we are all suffering, in which case, a 15% drop would be terrible. So, what is it?

Two trillion dollars sounds like a lot of money, but in a pinch we could pay it all back in just one year if we were willing to reduce household and government spending by about 15 percent. It would require temporary sacrifice on everyone's part but would hardly be the death of the American ...

Are economic bubbles like putting a cat in the microwave or like getting drunk? The cat in the microwave is an apocryphal story about how microwave manufactures are now required to warn you not to put pets in the microwave. It’s pretty obvious that if the old lady had known it would kill her cat, she would not have put it in the microwave.

Getting drunk is a bit different. We might have an idea that it has some bad effects afterwards, but, hey, it’s fun while it lasts (just ici, tout va bien…)

There are a lot of commentators that say If only people had been warned of the fact that real estate could explode nobody would have invested in real estate. This sound too much like morning-after I will never drink again.

Bubbles happen because we, humans, like bubbles. Every bubble has its Cassandras, but people never listen to them because we like bubbles. The people who want to make money like bubbles, the regulators like bubbles, the government likes bubbles, people who buy houses like bubbles,… (in fact, by the time you count everyone who likes bubbles, it’s probably 90% of the population). We all start telling ourselves that this time is different, this is not a bubble, it’s solid growth because the internet changes everything or credit ratings change everything and real estate can only go up or deficits don’t matter.

Now, we’re in the anti-bubble (a term I owe to Megan), the I will never drink again, this time for real phase. In a couple of years, we’ll see the bubble mentality come back, ’cause that time it really will be different. ‘Round-a-round it goes.

Are economic bubbles like putting a cat in the microwave or like getting drunk? The cat in the microwave is an apocryphal story about how microwave manufactures are now required to warn you not to put pets in the microwave. It's pretty obvious that if the old lady had known it would kill her ...