Coruscation

The vast majority of the money put on gift cards gets redeemed, but Riley estimates that since 2005 $41 billion in money on gift cards has been lost or is likely never to be cashed in. The lion's share of money lost on gift cards from 2005-2009 came from fees and expiration dates. All that changed with the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009 that was signed into law last year. The Act largely forbids fees on cards sold by retailers (cards given away as promotional items can still charge fees), and it prohibits expiration dates less than 5 years after the card is purchased.

But what happens when the purchases go under the face value and then sit in the junk drawer in perpetuity, or when grandma, who can barely check her AOL email, gets an Amazon.com card that she'll never redeem? Some $3.4 billion of the $41 billion lost on gift cards from 2005-2011 resulted from cards being lost or simply left unused. The Credit CARD Act doesn't do much to address that, and as the market grows that number will grow along with it.

The answer to how retailers deal with those "lost" funds isn't simple, and there are no hard-and-fast rules -- either at the federal level of government or through national regulatory accounting principles. The Securities and Exchange Commission allows companies to take unused gift-card money as income once they can reasonably say the card won't be redeemed, but there's no set time limit. Best Buy, for example, sets that level at about two years. In fiscal 2011, the electronics company recorded $53 million in income from gift-card "breakage," or cards that are unlikely ever to be redeemed, up from $43 million a year earlier.

But some states don't allow companies to keep unused gift-card cash. They demand that companies give the money to the state after a certain period of time to add to unclaimed-funds accounts. States claim this is a way to reunite consumers with their unspent money, but practically it's a way for cash-strapped governments to give themselves more liquid funds. Money the state holds as unclaimed funds can be used for general purposes until someone claims it. For example, in 2008 -- the most recent year for which data could be obtained -- New York state collected $9.6 million in unredeemed gift cards and returned around $2,150 to the rightful owners.

Continue reading "Un redeamed, unspent gift cards: seigniorage ?" »

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Today in 'think like an economist' -- incentives matter:

Hypothesis: these new tests are measuring the right things and that teaching to the test is an improvement over teaching one's own possibly-haphazard curriculum.

Data: every teacher casually encountered just has no notion that this Reach For The Top business could even in theory accomplish anything. It's just more hoops to jump through.

Analysis: given that the thing that is being measured seems to be the wrong thing, it seems like the changes are worse than nothing. Pre-reform: teachers try to do the right thing, but who knows whether they do it or not. Post-reform: teachers are now being judged on the wrong thing, so they have to focus on that instead of what they think is the right thing.

Maybe the average teacher is relying on slanted and inaccurate information from their union leaders here. But the people who are actually making the policy are either making no effort to explain the point of the policy, or are unable to communicate with the people "on the front lines".

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The industry was on the defensive after a series of federal investigations portrayed it as rife with abuse. They found that recruiters would lure students -- often members of minorities, veterans, the homeless and low-income people -- with promises of quick degrees and post-graduation jobs but often leave them poorly prepared and burdened with staggering federal loans.

In response to the rising concerns, 18 months ago the Obama administration proposed its tough restrictions linking tens of billions of dollars in federal student aid to formulas measuring students' debt levels and income after graduation. Colleges whose students were not earning enough money to start paying back their loans would be in danger of losing federal aid altogether.

The proposal was aimed at ensuring that the for-profit schools were providing "gainful employment" in a wide range of vocational fields they taught, like medical testing, massage therapy, business management and cosmetology. The joke in Washington, however, was that the industry effort to defeat the plan mainly ensured "gainful employment" for the capital's Democratic lobbyists and political consultants.

The final standards leave a maximum of 5 percent of schools facing financial sanctions at the start; the original plan would have meant penalties against an estimated 16 percent.

The rules also pushed back the penalties to 2015 from 2012, while requiring schools to disclose more data about loans, defaults and job placement.

Schools also questioned the motives of a key witness at Mr. Harkin's hearings, the noted hedge-fund trader Steve Eisman, who blasted the colleges' sky-high profit margins and likened them to subprime mortgage lenders. After Mr. Eisman acknowledged he held financial positions in the industry, the colleges charged that he stood to make millions by battering their reputations and short-selling their stocks.

Continue reading "For-profit schools -- predatory ?" »

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Last year, the Pocono Raceway installed 40,000 solar panels on 25 acres, enough to power the entire facility. Brandon Igdalsky, the racetrack's president, said the $15 million cost was paid without government subsidies. The track's annual energy bill has been cut by $500,000, so Mr. Igdalsky expects to recover the cost of the panels in eight to 10 years.

Spend $15,000,000. Save $500,000 per year. Payback in under 10 years. !

BUSINESS DAY
Sports Rally Around Green Projects
By KEN BELSON
Published: October 25, 2011
Teams and leagues find that going green can cut costs and attract money-making corporate partnerships for green projects.

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Economics: Economics Nobel 2011

Nobel Committee economics prize

Thomson Reuters

Harvard pool

Mostly economics predictions

Econ job rumors predictions.

Previously: 2010 Economics Nobel Prize

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Take the 1968 decision by New York Mayor John V. Lindsay to hire the RAND Corporation to streamline city management through computer models. It built models for the Fire Department to predict where fires were likely to break out, and to decrease response times when they did. But, as the author Joe Flood details in his book "The Fires," thanks to faulty data and flawed assumptions -- not a lack of processing power -- the models recommended replacing busy fire companies across Brooklyn, Queens and the Bronx with much smaller ones.

What RAND could not predict was that, as a result, roughly 600,000 people in the poorest sections of the city would lose their homes to fire over the next decade. Given the amount of money and faith the city had put into its models, it's no surprise that instead of admitting their flaws, city planners bent reality to fit their models -- ignoring traffic conditions, fire companies' battling multiple blazes and any outliers in their data.

The final straw was politics, the very thing the project was meant to avoid. RAND's analysts recognized that wealthy neighborhoods would never stand for a loss of service, so they were placed off limits, forcing poor ones to compete among themselves for scarce resources. What was sold as a model of efficiency and a mirror to reality was crippled by the biases of its creators, and no supercomputer could correct for that.

Continue reading "Optimal number and locations of fire stations, by RAND" »

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An important reform would be to make sure that before any agency produces a new regulation, the following questions are asked and answered:

1. Is there a large, systemic problem that is unlikely to resolve itself in the near future?

2. Is the federal government in the best position to solve this problem?

3. Does the regulation actually address the identified systemic problem?

4. What other solutions are available?

5. Would the proposed solution give rise to other significant problems?

6. Would the preferred solution solve the problem at a reasonable cost?

7. Will the agencies be able to recognize when the problem is actually solved and eliminate the regulation when it becomes obsolete?

Veronique de Rugy

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Economists often make unrealistic assumptions but so do physicists, and for good reasons. Physicists will describe motion on frictionless plains or gravity in a world without air resistance. Not because anyone believes that the world is frictionless and airless, but because it is too difficult to study everything at once. A simplifying model eliminates confounding factors and focuses on a particular issue of interest. This is as legitimate a method in economics as in physics.

Since there are easy responses to these common criticisms of bad predictions and unrealistic assumptions, attacks on the profession are ignored by professional academic economists, who complain that the critics do not understand what economists really do.
But if the critics did understand what economists really do, public criticism might be more severe yet.

Even if sharp predictions of individual economic outcomes are rarely possible, it should be possible to describe the general character of economic events, the ways in which these events are likely to develop, the broad nature of policy options and their consequences. It should be possible to call on a broad consensus on the interpretation of empirical data to support such analysis. This is very far from being the case.

The two branches of economics most relevant to the recent crisis are macroeconomics and financial economics. Macroeconomics deals with growth and business cycles. Its dominant paradigm is known as "dynamic stochastic general equilibrium" (thankfully abbreviated to DSGE) - a complex model structure that seeks to incorporate, in a single framework, time, risk and the need to take account of the behaviour of many different companies and households.

FT;

Continue reading "Economic rigour" »

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"Identity-protective cognition," a notion borrowed from Dan Kahan. Here's how Kahan and colleagues sum it up:

We propose that variance in risk perceptions -- across persons generally, and across race and gender in particular -- reflects a form of motivated cognition through which people seek to deflect threats to identities they hold, and roles they occupy, by virtue of contested cultural norms.

"Motivated cognition" refers to reasoning done in service of justifying an already held belief or goal. It helps explain why the CWM who know the most about climate science are the most likely to reject it; they learn about it in order to reject it. See Chris Mooney's great piece on that. Point being: when facts (or the implications of those facts) threaten people's social identities, they tend to dismiss the facts rather than the identity.
To all these reasons, I'd add "epistemic closure," the extraordinary way that the modern right has constructed a self-contained, hermetically sealed media environment in which conservatives can be protected from ever encountering a contrary view. It's an accelerant to all the tendencies described above.

Continue reading "Deflect threats to identities they hold, and roles they occupy" »

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Prices at Amazon change, often.

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Tested by Rexford.

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From 1989 to 2009, when college tuition rose by 71 percent, law school tuition shot up 317 percent.

There are many reasons for this ever-climbing sticker price, but the most bizarre comes courtesy of the highly influential US News rankings. Part of the US News algorithm is a figure called expenditures per student, which is essentially the sum that a school spends on teacher salaries, libraries and other education expenses, divided by the number of students.

Though it accounts for just 9.75 percent of the algorithm, it gives law schools a strong incentive to keep prices high. Forget about looking for cost efficiencies. The more that law schools charge their students, and the more they spend to educate them, the better they fare in the US News rankings.

"I once joked with my dean that there is a certain amount of money that we could drag into the middle of the school's quadrangle and burn," said John F. Duffy, a George Washington School of Law professor, "and when the flames died down, we'd be a Top 10 school. As long as the point of the bonfire was to teach our students. Perhaps what we could teach them is the idiocy in the US News rankings."

For years, it made economic sense for smart, ambitious 22-year-olds to pay the escalating price for a legal diploma. Law schools have had a monopolist's hold on the keys to corporate lawyerdom, which pays graduates six-figure salaries.

But borrowing $150,000 or more is now a vastly riskier proposition given the scarcity of Big Law jobs. Of course, that scarcity hasn't been priced into the cost of law school. How come? In part, it's because schools have managed to convey the impression that those jobs aren't very scarce.

For instance, although N.Y.L.S. is ranked No. 135 out of the roughly 200 schools in the US News survey, it asserts in figures provided to the publisher that nine months after graduation, the median private-sector salary of alums who graduated in 2009 -- which is the class featured in the most recent US News annual law school issue -- was $160,000. That is exactly the same figure cited by Yale and Harvard, the top law schools in the country.

Continue reading "Value of law school" »

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The easy explanation, of course, is that there would be no giving -- or not nearly so much -- without the walks. Fund-raisers recognize that the nobility of giving is often stimulated by activities that conjoin the selfless with self-interest. For giving, we often offer value received. Raffles and auctions and naming rights are among the inducements used to win support. But that's not what's going on here.

Those who oversee such fund-raising spectacles argue that there is more to these events than meets the eyes -- mine included. These walks and runs are incubators for future volunteers and donors. They constitute a public proclamation that others matter. They make the invisible visible. More to the point, it is easier to get relatives, friends and colleagues to open their pocketbooks than it is to win over the largess of strangers.

That is the genius of such events. Where abstract appeals on behalf of the faceless needy may fall on deaf ears, appeals from family and neighbors do not. Ultimately, it is not the mass of walkers that moves us to give, but the knowledge that a familiar face -- a nephew or friend -- is among them. It personalizes the issue, quite literally turning the abstract into the concrete, converting perspiration into philanthropy. There is an exquisite -- albeit attenuated -- logic to it all.

Continue reading "I'm running to support the walkathon " »

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Another edition of

Thank you,
but no thank you
I'd rather listen to N Gregory Mankiw.

1 THE VALUE OF COMPETITION Representative Paul D. Ryan, Republican of Wisconsin, has attracted much attention with his plan to reform Medicare. He proposes replacing the current fee-for-service program, in which the government picks up the bill for medical expenses, with a "premium-support" system in which seniors use federal dollars to choose among competing private insurance plans.

Democratic critics of the plan suggest that enacting it would be akin to pushing Grandma over a cliff. But they rarely point out that the premium-support model is in some ways similar to the system set up under President Obama's health care law. If choosing among competing private plans on a government-regulated exchange is a good idea for someone at age 50, why is it so horrific for someone who is 70?

2 THE INSURANCE MANDATE those without insurance will be fined. A mandate is just a financial incentive to have insurance.

What is the Republican alternative for having more people insured? It is unclear what the Republicans would do if they ever succeeded in repealing the health care reform law. However, their last presidential nominee -- Senator John McCain -- proposed a tax credit for buying health insurance. That may seem more palatable than a mandate, because it uses a carrot rather than a stick.

3 TAXING THE RICH Democrats want to increase taxes on the rich to fund the looming fiscal gap, which is driven largely by soaring health costs. Republicans object, saying higher taxes create economic distortions, discourage work and impede growth. Last month, John A. Boehner, the House speaker, said that we should instead consider means-testing Medicare

4 BLINKERED OPTIMISM Democrats and Republicans generally have different approaches to controlling the growth of health care spending. Democrats often favor a top-down approach: a panel of experts set up by the recent health care law will decide which medical procedures are cost-effective and which are wasteful. Republicans tend to prefer a bottom-up approach: empower consumers to make their own choices, they say, and the power of competition among private providers will keep costs down.

One thing that the two parties share, however, is the belief that controlling health care costs is possible.

http://www.nytimes.com/2011/06/19/business/economy/19view.html?hpw

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The summer before her senior year, though, she took an internship at Goldman. If anything, it left her disillusioned. "I started to feel like it was all a bit of a fraud, all these charts and regressions and models." She turned down the subsequent job offer and took a year to travel to Cuba to shoot a documentary with Cahill. "Living in Cuba made me unafraid of whatever could happen to me. Nothing seemed as scary as waking up at 40 and realizing that I had not lived a very courageous life."

¶ So she moved to Hollywood. The three friends wrote some scripts together but decided they worked better in pairs. "Zal actually had a dream that he was bound and blindfolded and walking down to a basement. And I was like: 'Who was there? Maybe a woman who never leaves!' And we ended up with 'Sound of My Voice.' " Their other film, "Another Earth," which hinges on the discovery of a duplicate planet, came in part from a piece of video art Cahill made in which he interviewed himself in a split screen. "We were like, what if you could confront yourself? What if there was a duplicate you?"

¶ She, too, is haunted by the idea of a duplicate -- another Brit Marling, perhaps one who took the job at Goldman. "If I hadn't met Mike or Zal, I really wonder what I would be doing right now. I wonder if I would even be acting. I can't imagine what it would have been like to do it alone." There may be a duplicate Marling looming in the future as well -- one who perhaps succumbs to all this post-Sundance Hollywood attention and finds herself, say, starring in a romantic comedy opposite Ashton Kutcher. (She just finished filming her first big-budget thriller, "Arbitrage," directed by Nicholas Jarecki and starring Richard Gere.)

Continue reading "Hollywood realism over regression models ?" »

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There are basically two ways to cut back on the government health care spending.

(a) From the top, a body of experts can be empowered to make rationing decisions. This is the approach favored by President Obama and in use in many countries around the world.
Alternatively,

(b) at the bottom, costs can be shifted to beneficiaries with premium supports to help them handle the burden. Different versions of this approach are embodied in the Dutch system, the prescription drug benefit and Representative Paul Ryan's budget.

We'll probably need a mixture of these approaches to figure out what works. Instead, Republicans decry the technocratic rationing model as "death panels." Democrats have gone into demagogic overdrive calling premium support ideas "privatization" or "the end of Medicare."

Let's be clear about the effect of this mendacity: We're locking in the nation's wealth into the Medicare program and closing off any possibility that we might do something significant to reinvigorate the missing fifth. Next time you see a politician demagoguing Medicare, ask this: Should we be using our resources in the manner of a nation in decline or one still committed to stoking the energy of its people and continuing its rise?

Continue reading "Two ways to cut back on the government health care spending like it's an objective" »

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David Szwak, a consumer lawyer in Shreveport, La., who has handled dozens of credit cases, said that the V.I.P. designation and preferential treatment did exist at Experian, and he provided sworn testimony from former Experian employees that the category existed.

Estimates of credit reports with serious errors vary widely, anywhere from 3 to 25 percent. A recent study, paid for by the Consumer Data Industry Association, the trade group for the bureaus, found potential errors in 19.2 percent of reports, but said that less than 1 percent of them had disputes that, when settled, resulted in a meaningful increase in scores. Even 1 percent translates into millions of consumers, since there are at least 200 million files at each of the bureaus.

The F.T.C. is expected to deliver a nationwide study on credit report accuracy next year that could provide more clarity. It could also include recommendations for legislative action.

Continue reading "Credit repair vor VIPs ?" »

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In the debate over how to close the budget deficit, President Obama talks often about raising taxes on "millionaires and billionaires," but his policy prescription is a bit different. He says that federal income taxes should be increased on families making more than $250,000. That seems to be the threshold. Under $250,000, you're middle class; over it and you're wealthy.

On a Yahoo message board, a poster named Mason, who lives in Manhattan with two young children, said his household income was $262,000. "I understand the need to raise taxes," he wrote, "but I don't understand why people like us are lumped in with millionaires and billionaires."

On one level, Mason is feeling the effects of inflation; $250,000 isn't what it used to be. If Mr. Obama were really trying to return to Mr. Clinton's 1993 levels, he would have to adjust the bracket for inflation, moving it up to about $386,075. In fact, in Mr. Clinton's last year in office, the top bracket had risen to $288,350 from $250,000.

Continue reading "Middle class ? Nothing special about $250k" »

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The algorithm used by U.S. News puts a heavy emphasis on college grade-point averages and Law School Admission Test scores. Together, those two numbers determine about 22 percent of a school's ranking. The bar passage rate, which correlates strongly with undergraduate G.P.A.'s and LSAT scores, is worth an additional two points in the algorithm. In short, students' academic credentials determine close to a quarter of a school's rank -- the largest factor that schools can directly control.

So the point of most merit scholarship programs, Professor Organ said, isn't merely to tempt prospective students who might otherwise not attend, though that clearly is one result.

"What law schools are buying is higher G.P.A.'s and LSATs," Professor Organ said. In other words, the schools are buying smarter students to enhance their cachet and rise in the rankings.

Each does it a little differently.

The University of Florida's law school requires students to maintain a 3.2 G.P.A. to keep their scholarships; at the Benjamin N. Cardozo School of Law in Manhattan, it's a 2.95. The Chicago-Kent College of Law has a number of grant offerings, one of which sounds like the refueling options for a rental car: students can get a $9,000 annual scholarship guaranteed for all three years, no matter what their G.P.A., or $15,000 a year on the condition that they earn a 3.25 or above. If they get between a 3.0 and 3.25, they keep half the scholarship. Below a 3.0, it's gone.

Some elite schools don't give any merit scholarships, and some give them conditioned only on maintaining good academic standing -- which translates to "don't flunk out." But merit stipulations -- or stips, as they are known by students -- are used by 80 percent of law schools for which information is publicly available, Professor Organ found.

And it's not just institutions in the bottom half of the U.S. News rankings. If your school is ranked 35th, perhaps you're gunning for No. 30 and you can see No. 40 creeping up in the rear-view mirror.

Continue reading "Law school cost benefit disclosure: missing merit scholarship" »

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Larry summers talked about all the research papers that he got sent while he was in Washington. He had a fairly clear categorisation for which ones were likely to be useful: read virtually all the ones that used the words leverage, liquidity, and deflation, he said, and virtually none that used the words optimising, choice-theoretic or neoclassical (presumably in the titles or abstracts). His broader point--reinforced by his mentions of the knowledge contained in the writings of Bagehot, Minsky, Kindleberger, and Eichengreen--was, I think, that while it would be wrong to say economics or economists had nothing useful to say about the crisis, much of what was the most useful was not necessarily the most recent, or even the most mainstream. Economists knew a great deal, he said, but they had also forgotten a great deal and been distracted by a lot.

Even more scathing, perhaps, was his comment that as a policymaker he had found essentially no use for the vast literature devoted to providing sound micro-foundations to macroeconomics. (So that would be most macroeconomics since the original Keynesian revolution?) On the other hand, he pointed out that while there was clearly a need to be prudent while applying research to the real world, it would also be unwise to attack it wholesale. He surmised that it might be possible that some things that seem useless or of limited applicability now would turn out to be useful in years to come (microfoundations for macroeconomics, perhaps?).

He was sceptical, too, of those who put too much faith in regulation, while conceding that it was clear regulation was needed. It was refreshing to hear someone who had been in the thick of policymaking acknowledge a problem others have pointed to: that when it came to stuff like financial regulation, there was "basically no one" who is both knowledgeable enough about what is sought to be regulated and is not, in some way, co-opted. Which made his touching faith in Dodd-Frank, which he defended stoutly, a bit less than convincing.

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F.O.M.C. members traditionally don't discuss their votes or policy before the meeting. If the presidents got together for dinner the night before, they limited their discussion to Reserve Bank business and gossip. Usually they went their separate ways for dinner. Being the introvert that I am, I frequently had take-out Chinese food in my hotel room.

¶Everyone arrives for the meetings after having done tons of homework. The Reserve Banks have excellent research departments, but they are smaller and less specialized than the board's research staff. The presidents are expected to say something about their regions, as well as the national and international economy. It's a lot like cramming for finals. The board staff's material, mostly contained in the "green book," included all recent data in context, forecasts made under alternative assumptions, and special topics of current interest. It was always comprehensive and outstanding in quality.

-- Bob McTeer, former president of the Federal Reserve Bank of Dallas.

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The median income of a NY Times subscriber in 2009 was $115k to $119k.

The aspirational positioning of their well educated readers may explain the appeal of newspaper stories about the guilt felt by benevolent yuppies when they have to lay off their nannies and housekeepers during the current financial crisis. Or how about this one, about the middle class keeping energy costs down on your vacation home.

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Boeing's 787 Dreamliner goal, it seems, was to convert its storied aircraft factory near Seattle to a mere assembly plant, bolting together modules designed and produced elsewhere as though from kits.

The drawbacks of this approach emerged early. Some of the pieces manufactured by far-flung suppliers didn't fit together. Some subcontractors couldn't meet their output quotas...

Rather than follow its old model of providing parts subcontractors with detailed blueprints created at home, Boeing gave suppliers less detailed specifications and required them to create their own blueprints.

Some then farmed out their engineering to their own subcontractors. At least one major supplier didn't even have an engineering department when it won its contract.

Among the least profitable jobs in aircraft manufacturing, he pointed out, is final assembly -- the job Boeing proposed to retain. But its subcontractors would benefit from free technical assistance from Boeing if they ran into problems, and would hang on to the highly profitable business of producing spare parts over the decades-long life of the aircraft. Their work would be almost risk-free, Hart-Smith observed, because if they ran into really insuperable problems they would simply be bought out by Boeing.

What do you know? In 2009, Boeing spent about $1 billion in cash and credit to take over the underperforming fuselage manufacturing plant of Vought Aircraft Industries, which had contributed to the years of delays.

Continue reading "Boeing outsources 787 Dreamliner, thinking" »

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A single worker with two young children needs an annual income of $57,756, or just over $27 an hour, to attain economic stability, and a family with two working parents and two young children needs to earn $67,920 a year, or about $16 an hour per worker.

-- a study by a women's advocacy group that looked at what a somewhat secure middle-class lifestyle costs.

Continue reading "Middle class begins at $68k" »

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Loseit, a nudgey health, diet, exercise tracker.

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In the end, said Robert Daum, chairman of Out2Play's board, "we just decided to declare victory and go home. Money is a scarce resource, and there are lots of other good causes out there, so there is no point in hitting up our friends and contacts for gifts simply to perpetuate the organization."

Out2Play is working to complete roughly 40 more playgrounds before it closes. It plans to leave behind an endowment to cover some of the maintenance costs associated with the playgrounds, Ms. Wenner said.

BUSINESS DAY
Mission Accomplished, Nonprofits Go Out of Business

By STEPHANIE STROM
Published: April 1, 2011
Some nonprofits, like one fighting malaria or another serving victims of the Nazis, are happily closing their doors as they run out of work

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In the definitive document on this issue -- a paper published in December by the Center on Budget and Policy Priorities -- senior fellow Robert Tannenwald notes what he tactfully calls "flaws" in various studies the states have commissioned to justify the subsidy. Even after our recent experience with gullible or mendacious accountants in financial scandals like Enron's, it's actually shocking that reputable accounting firms would pull some of these stunts, such as counting the allowances film crews get paid for expenses as a benefit to the state, then counting the same money again when it is spent. Or assuming without explanation that the average film crew member makes $82,400 a year, when the Bureau of Labor Statistics sets that figure at $35,000. The most outrageous double counting, of course, is telling one state after another that it can bring in billions by enticing the same movies away from other states.

-- Michael Kinsley

Continue reading "Why can't states grasp the absurdity of giving welfare to film and TV producers?" »

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Above $1.75 million, the middle class starts turning wealthy.

According to a Fidelity Investments survey of more than 1,000 millionaires (households with at least $1 million in investible assets, excluding retirement accounts and real estate), 42% of respondents say they don't feel wealthy. Keep in mind that while $1 million is the threshold, this group has an average net worth of $3.5 million.

That 42% is slightly better than the 46% who said they didn't feel wealthy in 2009. So the recovery has, at least, made some miserable millionaires a little less miserable.

Those who don't feel wealthy were asked how much money they would need to feel wealthy. Their answer: $7.5 million. (That's the median asset level).

But here's the interesting twist. The 58% of millionaires who did feel wealthy were also asked how much money they had when the began to feel "wealthy." Their answer: $1.75 million.

So millionaires who don't feel wealthy say they would need $7.5 million to feel wealthy, while those who do feel wealthy need only $1.75 million.

-- Robert Frank

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If you want a person to work harder, you should offer to pay on the basis of individual performance, right? Not usually. A large body of research suggests it's best to motivate groups, not individuals. Organize your people into a group; reward everybody when the group achieves its goals. Susan Helper, Morris Kleiner and Yingchun Wang confirm this insight in a working paper for the National Bureau of Economic Research. They compared compensation schemes in different manufacturing settings and found that group incentive pay and hourly pay motivate workers more effectively than individual incentive pay.

[ Via Books ]

Continue reading "Pay on the basis of individual performance or group's ? Not individuals. Organize your people into a group." »

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MSN Money's Liz Pulliam Weston says a survey of HR managers found the use of credit-checks in hiring had increased from 25 percent in 1998 to 43 percent in 2006. Weston also describes the elegantly nasty conundrum this creates for those who lost their jobs in the global financial crisis:

Many Americans these days are discovering the Catch-22 of unemployment. And that is: You might fall behind on your bills because you've lost your job, and you might not be able to land a new job because you've fallen behind on your bills.

Slacktivist

Continue reading "Slacktivist credit scoring and unemployment" »

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The property tax levied by the village on a typical Bronxville home is now $43,000, up 34 percent in the last five years, although the increase was negligible in the last two years as the mayor, the village trustees and school board members responded to their middle class constituents' concerns.

"I don't think we have seen an antitax uprising, but holding down property taxes is certainly spoken about a lot," said Dr. James D. Hudson, the 54-year-old school board president, a dentist with two children in the high school. He is often buttonholed on the subject, he said, at cocktail and dinner parties or while shopping.

"Their concern is that their taxes will continue to spiral up if we continue to do business as usual," said Dr. Hudson. "If you will, we are looking to develop a lean, mean education machine."

Lean and mean were rarely invoked in the past as a goal for America's wealthiest suburbs -- nearby Scarsdale, for example, Shaker Heights on the outskirts of Cleveland, Brookfield and River Hills near Milwaukee, and Greenwood Village in Colorado. Now that talk is commonplace, and it showed up in interviews with officials and in these communities, where property taxes have often risen by 4 or 5 percent a year.

Continue reading "Property tax levied by the village on a typical Bronxville home is now $43,000 annually. Upper middle class ?" »

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Most education researchers, though, recognize that Rhee's simple vision of heroic teachers saving American education is a fantasy, and that her dramatic, often authoritarian, style is ill-suited for education. If the ability to fire bad teachers and pay great teachers more were the key missing ingredient in education reform, why haven't charter schools, 88% of which are nonunionized and have that flexibility, lit the education world on fire? Why did the nation's most comprehensive study of charter schools, conducted by Stanford University researchers and sponsored by pro-charter foundations, conclude that charters outperformed regular public schools only 17 percent of the time, and actually did significantly worse 37 percent of the time? Why don't Southern states, which have weak teachers' unions, or none at all, outperform other parts of the country? Rhee often noted that poor blacks in New York are two years ahead of poor blacks in Washington, which properly illustrates that demography is not destiny, but New York didn't get ahead by firing bad teachers. Chancellor Joel Klein terminated only three teachers for incompetence between 2008 and 2010.
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The press--including Whitmire, a former USA Today editorial writer--has a fundamental misunderstanding of unions. Whitmire writes that Rhee's proposal to weaken tenure protections and pay great teachers more "represented an existential challenge" to the American Federation of Teachers (AFT). "If the union couldn't protect their members' jobs, what was the point of having a union?" In fact, teachers' unions were created to do lots of things: lobby for more funding for public education, increase teacher salaries, reduce class size, improve the ability of teachers to discipline students, and fight private-school-voucher initiatives.

-- Slate

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The great battles of the future in all likelihood will continue to have their origins in technical economics. That is, after all, where the brains are.

-- David Walsh

From where I sit, it looks as if the ascendant doctrines in our policy/political debate are coming precisely from people who don't know and don't care about technical economics. The revival of goldbuggy sentiment, the fear of hyperinflation in the face of high unemployment, the continuing force of the notion that tax cuts don't increase the deficit, aren't coming from some subtle battle among mathematical modelers; they're coming from the same people who reject evolution, climate science, and more. They don't need no stinking technical analysis. The truth is that the economics profession is proving far less relevant to public debate, even in the face of economic crisis, than was dreamed of in our philosophy.

-- Krugman

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Economists John Ifcher and Homa Zarghamee. In a forthcoming paper called Happiness and Time Preference: The Effect of Positive Affect in a Random-Assignment Experiment, they address the tricky and oft-ignored role of emotion in decision-making. Their study measured whether positive affect impacts time preference - that is, whether people are more patient when they're happy. They found that people are indeed more willing to wait when they're in a good mood. As an individual's rate of time preference affects the actual decision they make, knowing the relationship of short term emotions to time preference points to how to nudge individuals to make long term decisions instead of short-term ones.

-- Freaky

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Patients were using a card distributed by the maker of an expensive antibiotic used to treat acne, sharply reducing their health insurance co-payments. With their out-of-pocket costs much lower, consumers had switched from generic alternatives to the more expensive drug.

With drug prices rising and many people out of work, pharmaceutical companies are increasingly helping patients with their co-payments. The use of such co-payment cards and coupons and other types of discounts has more than tripled since mid-2006, according to IMS Health, an information company that tracks the pharmaceutical industry.

"It seems the best strategy for a pharmaceutical company is to price their drug as high as they possibly can and offer that co-pay assistance broadly" to insulate consumers, said Joshua Schimmer, biotechnology analyst at Leerink Swann, an investment bank.

Jazz Pharmaceuticals has quadrupled the price of its narcolepsy drug Xyrem, to about $30,000 a year, over the last five years, according to a recent report from the securities firm Jefferies & Company. To cushion patients, the company recently increased its co-pay assistance to as much as $1,200 a month.

Continue reading "Sponsored Prescription Rx Co-pays better than Generic " »

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What one might call intellectual capture. While I would strongly argue that the FSA in my day did not favor firms unduly, it is perhaps true that we--and in this we were exactly like our American counterparts--were inclined to believe that markets were generally efficient. If willing buyers and willing sellers were trading claims happily, then, as long as they were "professional" investors, there was no legitimate reason to interfere in their markets. These people were "consenting adults in private," and the state should avert its gaze.
We now know that some of these market emperors had no clothes--and that their activities were far from benign: They could result in severe financial instability and generate serious losses for taxpayers, not to mention precipitate a global recession. That has been a grave lesson for regulators and central banks.

-- Howard Davies, former chairman of Britain's Financial Services Authority and a former deputy governor of the Bank of England, is director of the London School of Economics. His latest book is Banking on the Future: The Fall and Rise of Central Banking.

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the alternative minimum tax started out as a way to ensure that the wealthiest Americans paid their fair share of taxes. But as many families know all too well, it now ensnares people much closer to the middle class, and it hits more upper-middle income taxpayers than those at the very top, according to a recent study by the Urban Institute. No wonder it's often referred to as the "stealth tax."

There may not be much you can do to avoid the A.M.T., especially if you have children and live in a high-income state like New York or California (the A.M.T. rules disallow deductions for dependents and state income taxes as well as several others).

December 22, 2010, 3:57 PM
Minimizing A.M.T. Through Charitable Donations
By TARA SIEGEL BERNARD

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In addition to the growing number of older cars on the road, the percentage of uninsured drivers rose to 18.1 percent in 2009, from 17.4 percent a year earlier, according to CNW Research. The economy is a big reason: a percentage point increase in the unemployment rate leads to a rise of 0.75 percentage point in the number of uninsured drivers, said Michael McShane, a risk management professor at Old Dominion University.

Continue reading "Employment elasticity of demand for auto insurance" »

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Yes, Democrats are fools to tear their hair out over this deal, which gives them most of what they wanted: the middle-class tax rates, unemployment benefit extension, payroll-tax cut, and so on. They compound the idiocy by advertising higher taxes on the rich as their core objective. Forget relieving poverty, widening access to health care, improving opportunities for the disadvantaged. What matters more than any of that is sticking it to "millionaires and billionaires" (two-earner households making more than $250,000). You bet, the Democrats are acting like fools.

-- Clive Crook

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Michelle Pont moved out in the spring of 2009 and filed for divorce. The estranged couple has since spent several hundred thousand dollars on lawyers, accountants and investigators. The judge overseeing the case has warned that the total could exceed $1 million if the two sides cannot reach a compromise.

Ms. Pont said the money from Balance Point would allow her to sustain the case for as long as necessary. Balance Point does not charge interest; instead, clients pay the company a percentage of their winnings.

Lawyers who finance other civil cases generally keep at least a third of the winnings. Ms. Napp said Balance Point required a "substantially smaller" share from clients, though she declined to be more specific.

The company wants to focus on people with marital assets between $2 million and $15 million, a bracket Ms. Napp described as "the lower end of the high end." She said that investing in smaller disputes was not worthwhile. Wealthier people, she said, seemed to resolve divorces more easily -- perhaps because they still felt wealthy in the aftermath. "Anything south of $15 million, when you divide that in half and take out the legal fees, you're not in the same house, you're not taking the same trips -- your life is different," she said. "You can't maintain that same quality of life that you're used to."

Continue reading "(upper) middle class: assets of $2 million to $15 million, a bracket Ms. Napp described as "the lower end of the high end"." »

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House Democrats said they could press ahead as early as Thursday with a vote to allow the tax breaks for income over $250,000 for a family to expire even though such a plan appears unlikely to be able to clear a Senate filibuster, given solid Republican opposition and resistance from several Democrats. Democrats said they could use the votes to make their position for middle class tax cuts clear and also illustrate that they do not have the votes to block extension of the lowered tax rates for the wealthy, clearing the way for concessions.

Continue reading "tax breaks for income over $250,000 for a family to expire ? Middle class could suffer" »

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Officially, Senator Charles E. Schumer of New York will be both vice chairman of the Democratic caucus and chairman of the Democratic Policy Committee. In those roles, he will also share control over the party's messaging apparatus run out of the Senate Democratic Communications Center, better known as the war room.

Mr. Schumer has been outspoken in his belief that Democrats need to concentrate their energies on initiatives aimed at the middle class, a view that the rank and file applaud.

Continue reading "Schumer for the middle class ?" »

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For fast-growing economies like Brazil and Turkey, where currencies are now overvalued against the dollar by an estimated 9 percent and 16 percent, respectively, the paper concludes that they are justified in raising selective barriers.

What gives the study an extra bite is that one of its authors is John Williamson, an international economist who conceived the original notion of the Washington consensus in 1989.

Broadly defined, that long-held view was that developing nations must absorb 10 policies, like balancing their budgets, privatizing state-owned enterprises and opening their markets to foreign investors, to achieve lasting economic success.

Although there is no mention in the original 10 principles of the importance of the free flow of capital, such a view came to be associated with a promarket stance that such flows, along with fiscal discipline and open markets, were crucial for emerging markets to succeed.

"The term took on a life of its own and became associated with free market fundamentalism," said Mr. Rodrik, who added that an apogee was reached in the mid-1990s when the I.M.F. tried to include the free flow of capital as one of its articles of agreement.

After the Asian crisis in 1997 and the Russian market collapse in 1998, the notion that such flows were an unquestioned good began to be challenged. Of course, at the time, many countries were concerned mostly about capital flight and its effect, not inflows.

Despite China's success in maintaining tight control over its currency and the recent actions of Taiwan, Brazil and others, not all emerging markets are erecting barriers.

In India, where a record-breaking stock market has lured billions of dollars, officials have said that they do not intend to impose new restrictions.

Similarly, policy makers in booming Turkey say they will not impose controls, despite calls for action from some of the country's exporters.

Prime Minister Recep Tayyip Erdogan even went so far as to say that a strong currency was a source of pride for Turks.

"I think there has been a bit of exaggeration in this need for capital controls," said William R. Cline, the co-author of the Peterson Institute report.

Continue reading "the original notion of the Washington consensus" »

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First there's the cost: For-profit colleges are often much more expensive than comparable public ones. According to a report by the Government Accountability Office, one for-profit institution charged $14,000 for a certificate in computer-aided drafting that a local community college offered for just $520.

Then there's the issue of how the cost is covered: for-profit colleges take a disproportionate share of federal education loans. Although only 12 percent of post-secondary students go to for-profit colleges, they account for 23 percent of federal loans. And students at for-profit schools default on their loans twice as often as their public school counterparts, leaving taxpayers with the bill.

This is partly due to the open enrollment policies at for-profit colleges. It's disturbingly easy to get accepted, receive thousands of dollars in loans and then flunk out with crippling debt and no degree to show for it. I'm about to fail 4 out of 11 students in one of my classes because they simply stopped showing up. Some students will fail anywhere, but at this rate it's clear that many of them should never have been sold on the program in the first place.

I've also been on the other end of these sales tactics. I once looked into taking a class at a for-profit college. The admissions counselor was quite skillful at avoiding my questions about costs, and pressed me to enroll in a full degree program, despite my repeated refusals.

Problems with the for-profit business model don't end with recruitment; they extend to the classroom. While my nonprofit orientation covered how to create a syllabus and relate to students, the for-profit session addressed the importance of creating paper trails on attendance, should a student need to be flunked, and a video on how to avoid getting sued.

Here's the part that's really going to make me unpopular at my next faculty meeting. Many of my colleagues are excellent teachers, but their qualifications aren't much of a priority for the college. While teachers at a state or private university are typically expected to hold M.F.A.'s or Ph.D.'s, for-profit teachers need only to have taken a few hours of graduate course work.

Teachers at for-profits are paid less, and work more. Full-time instructors teach up to four times as many classes as their state school counterparts. And although nobody teaches only for the money -- I gross just over $30,000 a year, summers on, no benefits -- I earn 50 percent to 65 percent more at nonprofits. I try to treat both jobs with the same seriousness, but I'd be lying if I said this was always the case.

The business model of for-profit schools may pay off for shareholders -- just ask Goldman Sachs, which controls a third of the parent company of my for-profit employer, the Art Institute of Colorado -- but it clearly isn't as effective at educating students.

-- Jeremy Dehn teacher of film and video production at the University of Denver, the Art Institute of Colorado and the University of Colorado at Denver.

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Safe choices for Nobel Economics Prize:

William Nordhaus (Yale) and Martin Weitzman (Harvard) fo their work on Environmental Economics.

Perennial choices:
Eugene F. Fama and Kenneth R. French
Robert J. Barro
Jagdish N. Bhagwati and Avinash K. Dixit
Lars P. Hansen and Thomas J. Sargent, and Christopher A. Sims;
Martin S. Feldstein; Armen A. Alchian and Harold Demsetz
Dale W. Jorgenson; Oliver D. Hart and Bengt R. Holmstrom
Elhanan Helpman and Gene M. Grossman; Jean Tirole; Robert B. Wilson and Paul R. Milgrom

New choices:
Robert Shiller,
Paul Michael Romer
Richard H. Thaler

Kevin M. Murphy (Chicago): pioneering empirical research in social economics, including wage inequality and labor demand, unemployment, addiction, and the economic return of investment in medical research, among other topics .

Ernst Fehr and Matthew J. Rabin;
John B. Taylor and Jordi Gali and Mark L. Gertler

Continue reading "Nobel Prize for Economics 2010" »

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In "Fault Lines: How Hidden Fractures Still Threaten the World Economy" (Princeton University, $26.95), Raghuram G. Rajan concludes that the financial crisis erupted "because in an integrated economy and in an integrated world, what is best for the individual actor or institution is not always best for the system."

Like geological fault lines, the fissures in the world economic system are more hidden and widespread than many realize, he says. And they are potentially more destructive than other, more obvious culprits, like greedy bankers, sleepy regulators and irresponsible borrowers.

Mr. Rajan, a finance professor at the University of Chicago and former chief economist at the International Monetary Fund, argues that the actions of these players (and others) unfolded on a larger worldwide stage, that was (and is) subject to the imperatives of political economies.

He cites three fault lines: domestic political stresses; trade imbalances among countries; and the tensions produced when financial systems with very different structures interact. All three came together to damage the financial sector in 2008, he says, and could meet again to cause another crisis.

Continue reading "Fault Lines: How Hidden Fractures Still Threaten the World Economy" »

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(Known in economics as price discrimination or price differentiation)

"We are spending $8 billion to $15 billion per year on textbooks" in the United States, Mr. McNealy says. "It seems to me we could put that all online for free."

The nonprofit Curriki fits into an ever-expanding list of organizations that seek to bring the blunt force of Internet economics to bear on the education market. Even the traditional textbook publishers agree that the days of tweaking a few pages in a book just to sell a new edition are coming to an end.

"Today, we are engaged in a very different dialogue with our customers," says Wendy Colby, a senior vice president of Houghton Mifflin Harcourt. "Our customers are asking us to look at different ways to experiment and to look at different value-based pricing models."

Continue reading "Value pricing comint to text book market ?" »

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The recession would have been worse if not for the Fed's monetary policy and quantitative easing. Also important were the unmentioned automatic stabilizers--taxes falling more than income, cushioning declines in after-tax incomes and consumption--which were far larger than the spending and tax rebates in the stimulus bill. Arguing that all these policies (including injecting capital into banks, which was necessary but done poorly) may have prevented a depression is perhaps still an exaggeration but at least is within hailing distance of plausibility. On that scale, the effect of the stimulus was puny.

Continue reading "Macroeconomic update on Great Recession" »

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If the Fed were to suddenly announce a big new program of asset purchases, it could cause inflation expectations to jump. That could raise nominal interest rates and lead to a rise in the price of oil as investors use commodities to hedge against inflation. In such a worst-case situation, the recession could become even worse.

Continue reading "Bernanke's macro conundrum" »

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Tax breaks are not the only special advantages that American dynasty trusts provide. Even more troubling, they commonly include a "spendthrift clause," which provides that trust assets cannot be reached by a beneficiary's creditors. If a beneficiary causes a car accident, for example, the victim cannot be compensated with assets from the trust, even if they are the driver's only resources. So beneficiaries are free to behave as recklessly as they like, knowing that their money is forever protected for themselves and their heirs.

Surprisingly, dynasty trusts can also be bad for the beneficiaries themselves. Many wealthy people agree with Andrew Carnegie and Warren Buffett that it is not in their children's best interest for them to be given so much wealth that they don't need to work. Dynasty trusts rob future parents of the ability to decide this for their children, because the ancestor creating the trust is the one who determines how much wealth each generation of his descendants will receive.

What can be done to eliminate these trusts? A state-level solution is unlikely, since all 50 states would need to act in unison. But Congress could fix the problem by limiting the generation-skipping-transfer exemption to trusts that last no longer than two generations. After that, beneficiaries of a trust should be subject to tax, like everyone else. Then America would not have to face the uncontrollable growth of a new aristocracy.

Ray D. Madoff, a professor at Boston College Law School, is the author of "Immortality and the Law: The Rising Power of the American Dead."

Continue reading "Perpetual trusts: The Rising Power of the American Dead" »

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A member of the Chukchansi tribe in California, Andrews is 6-foot-4 and about 250 pounds, with tattoos of his spirit animals ringing his thick biceps. He doesn't joust because he's attracted to romantic notions of honor and chivalry or because he has an affinity for the medieval period. ("I don't know jack about history, nor do I care," he says.) He does it because he considers jousting one of the most extreme sports ever invented, and he likes doing things that most other people can't or won't do.

"I like violent sports," says Andrews, who also participates in mixed martial arts. "I like hitting you. I like getting hit. I like competing man to man to see who the better man is that day."

The problem is that Andrews and Adams joust in a style they call "full contact," which, while popular in North America, is considered by the rest of the world to be unnecessarily dangerous. It's a reputation that isn't helped by the video on YouTube showing the two men describing their many injuries, including the time a lance bruised Andrews's heart and he nearly died from a pulmonary embolism. (He was back jousting five days after his release from the hospital.)

...

Over time, modern jousters have learned the lessons of their medieval predecessors -- plate armor protects better than chain mail, and more armor protects better than less. Even so, there are still plenty of injuries: concussions and dislocated shoulders, broken hands, assorted fractures and gashes. In one much-talked-about incident a few years ago, the Australian jouster Rod Walker suffered a partly severed penis when a lance veered south during a match at a Renaissance fair in Michigan -- a targeting failure that might not have happened if both he and his opponent hadn't been competing with broken hands.

It is these incidents that keep European jousters from coming to the U.S. to compete, and has those who have swearing they won't return. European jousters typically use lances with balsa-wood tips, which produce fewer dangerous splinters and deliver a less powerful hit. "Come do our sport and break your bones -- that's not the ideal recruitment poster," says Petter Ellingsen, a Norwegian jouster who has competed in nine countries and been injured badly only twice -- both times when competing in what he calls "the American style." "I don't think it's cool completing a tournament with four broken bones in my hand," he says. "I think it's bad for the sport."

Continue reading "Why American healthcare costs are high" »

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While our analysis was by no means scientific, our goal was to recreate the type of decision a hypothetical family of four earning $175,000 a year might encounter. We chose an upper-middle-class income because that's generally what our family needs to earn, conservatively, to afford a median-price home in Park Slope, a section of Brooklyn that is family-friendly, has good schools and is generally more affordable than Manhattan.

The two-bedroom, one-bathroom co-operative apartment that we're using as a model in Park Slope is listed at $675,000, close to the median price for the neighborhood, as calculated by Zillow.com.

We stacked that against a four-bedroom, two-and-a-half bathroom home in South Orange, N.J., just a 30-minute train ride from Manhattan, where the two parents work. The house is selling for $595,000.

Continue reading "Middle class includes $175k in Brooklyn or South Orange, NJ" »

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In times like these, deficit spending to pump up the economy doesn't make consumers feel more confident; it makes them feel more insecure because they see a political system out of control. Deficit spending doesn't induce small businesspeople to hire and expand. It scares them because they conclude the growth isn't real and they know big tax increases are on the horizon. It doesn't make political leaders feel better either. Lacking faith that they can wisely cut the debt in some magically virtuous future, they see their nations careening to fiscal ruin.

So we are exiting a period of fiscal stimulus and entering a period of fiscal consolidation. Last year, the finance ministers of the G-20 were all for pumping up economic activity. This year, they called on their members to reduce debt. In this country, deficits are now the top concern.

Some theorists will tell you that if governments shift their emphasis to deficit cutting, they risk sending the world back into recession. There are some reasons to think this is so, but events tell a more complicated story.

Alberto Alesina of Harvard has surveyed the history of debt reduction. He's found that, in many cases, large and decisive deficit reduction policies were followed by increases in growth, not recessions. Countries that reduced debt viewed the future with more confidence. The political leaders who ordered the painful cuts were often returned to office. As Alesina put it in a recent paper, "in several episodes, spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions."

This was true in Europe and the U.S. in the 1990s, and in many other cases before. In a separate study, Italian economists Francesco Giavazzi and Marco Pagano looked at the way Ireland and Denmark sharply cut debt in the 1980s. Once again, lower deficits led to higher growth.

So the challenge for the U.S. in the years ahead is to consolidate intelligently. That means reducing deficits while at the same time making the welfare state more efficient, boosting innovation in areas like energy, and spending more money on growth-enhancing sectors like infrastructure.

That's a tough balancing act.

The biggest task will be to reduce middle-class entitlement spending. Alesina found that spending cuts are a more effective way to stabilize debt than tax increases, though we'll need both.

Continue reading "Stimulus fueled deficits reduce consumer confidence, stall economy -- BrooksDeficits" »

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Worthwhile Canadian Initiative is a humble mostly macro-policy blog, by Stephen Gordon, Mike Moffatt, Nick Rowe and Frances Woolley has left leaning macro economic views from Canada.

Examples: Should recent immigrants be eligible for Old Age Security looks at guaranteed an income above the poverty line by Old Age Security, Guaranteed Income Supplement and the Canada Pension Plan.

My sister, Rachel Goddyn, believes that expanding female job opportunities have led to a decline in the quality of elementary and high school teachers.

he cure can be worse than the disease. At the most recent Canadian Economics Association meetings, University of Toronto PhD student Hugh Macartney presented a paper looking at a US program designed to create incentives for good teaching. Students were tested at the end of each year, and schools were rewarded if test scores showed improvement over time. What's the way to game that system? Teach students poorly in the first year and well in the last year - and Macartney found evidence that this was exactly what was happening.

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For brokers and others who favor a free secondary market for tickets, these concerns cut to the philosophical heart of the issue: Is a ticket a commodity that can be freely exchanged, like a stock, or is it a license granted by a theater, a sports team or an artist that can be used or revoked on their terms?

Continue reading "What do scalpers sell ?" »

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"We deserve a tax break and the kids deserve to keep their programs more than the teachers need a raise," said Fred Gorman, one of the group's founders.

School superintendents and board members say they have been caught in the middle, left with no choice but to reduce teacher payrolls -- either through salary concessions or layoffs -- to offset sharp revenue drops from state aid cuts, declining property values and resistance to higher taxes on the middle class. "At a certain point, there's nowhere else to go" to achieve savings, said Michael V. McGill, the superintendent in Scarsdale, whose 460 teachers are among the best paid in the nation, earning $54,442 to $135,000.

Continue reading "Middle class: Scarsdale, NY teachers up to $135,000" »

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Junior Minister for 4Chan ?

Sunstein had, during his academic career, a penchant for publishing trial balloons -- they were a necessary part of his inquiry, a perpetual what if? Now, with their author a government official, some of these conjectures seem more worrisome. Sunstein has, for example, written often about the corrosive effects of rumors and falsehoods on democratic discourse (it is the subject of one of the two books that were published while he was waiting to be confirmed last year), and in a 2008 paper, he proposed that government agents "cognitively infiltrate" chat rooms and message boards to try to debunk conspiracy theories before they spread. The paper was narrowly concerned with terrorism, but to some, these were dark musings. The liberal essayist Glenn Greenwald, writing in Salon, called the proposal "spine-chilling."

Continue reading "Cass Sunstein, blog leader" »

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During its first decade of membership, the European Union's generous subsidies helped catapult Greece out of its Balkan backwardness. By the time 1997 came around, and Europe's leaders prepared to introduce the single currency, some were hailing Greece, enjoying steady economic growth of more than 3 percent under the then Socialist government of the prime minister, Costas Simitis, as a plucky economic stalwart.

For Athens, Mr. Papantoniou recalled that joining the euro was a matter of pride and necessity, as it would stabilize the country's economy by fending off predatory speculators, while allowing Greece access to credit at low interest rates because it was part of the rich euro club.

"Once we were in line to join the euro, we started to transform from a third world country to one that aspired to look more like Switzerland," he said.

But Greece's path to the euro was far from assured. Public opinion in Germany, scarred by the memory of wartime hyperinflation, was always wary of giving up the Deutsche mark, and the German government insisted on tough conditions for the countries that wanted to join. Budget deficits were supposed to be below 3 percent of gross domestic product; debt was not to exceed 60 percent of G.D.P. and inflation could not top 3 percent.

In December 1996, the currency's rules were toughened in a so-called Stability Pact, intended to punish with costly fines countries that persistently broke the rules once inside the euro zone. The unspoken intention was to raise the barrier for Southern European countries, which were seen as having looser, more inflationary economic policies.

Germany wanted the fines to be automatic, but other countries, led by France, put the onus of enforcement on political leaders in the European Union. (No country, Greece included, has ever been fined even though the rules have been routinely broken by most countries in the euro zone.)

Continue reading "Euro lacks discipline " »

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The relationship between Mr. Rapino and artists is complicated. On the one hand, he must be deferential and accommodating, because without a regular caravan of acts, he has nothing but empty seats and red ink. At the same time, some artists are exasperating, though Mr. Rapino is far too diplomatic to say so.

Instead, he'll simply note that artists -- at least the famous ones -- are in a position these days to define their own destiny. And without question, that destiny includes higher ticket prices. The average price of a ticket to one of the top 100 tours soared to $62.57 last year from $25.81 in 1996, according to Pollstar, far outpacing inflation. The interesting question is why.

Mr. Rapino's theory is that musicians are just benefiting from the same trends that have enriched other superstars, like athletes and actors.

"The ticket was underpriced 40 years ago," he says.

Rival promoters see another culprit in high ticket prices: Live Nation. The company, they say, represents a consolidation of regional promoters that didn't just coincide with rising ticket prices but also helped cause them. Ticket prices, in this telling, have gone up because the largest promoter has been paying whatever-it-takes sums to get bands in the door -- both to drive out competitors and to bring in desperately needed revenue to cover fixed overhead costs and to fill up seats. The company's biggest outlays include "360 deals" with Jay-Z, Madonna, U2 and others, giving the company a stake in tours, recording and merchandise profits in exchange for nine-figure paydays. Jay-Z's deal was reportedly worth more than $150 million.

"Look at what has happened to ticket prices, and the price of everything else at a concert, over the last 10 years, right when consolidation was happening," says John Scher, who books shows in Madison Square Garden, at Radio City Music Hall and elsewhere in New York. "I talk to college kids all the time and they tell me that going to a show at an arena or an amphitheater is just beyond what they can afford. And it's because Live Nation has been paying the acts these outrageous sums, which is just alienating the fan base."

Mr. Rapino denies overpaying for bands, and says that the price of tickets often triples when they're sold by scalpers, which suggests that they were actually underpriced.

Then again, when Mr. Rapino was describing the parlous condition of the concert business in front of Congress last year, he noted that 40 percent of concert tickets go unsold, a statistic that he offered as a symptom of an industry in distress but that might just be evidence that Live Nation and its rivals don't know how to price and sell their products. Today, as high as ticket prices are, Live Nation earns none of its profit from ticket revenue. The artists get nearly all of that. Live Nation's earnings come from stuff sold on site, like beer, parking and advertising.

Continue reading "Pricing concert tickets understates inflation: Ticketmaster, LiveNation" »

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By using pretax dollars, you can reduce your overall cost for these items by about 20 percent, estimates Jennifer Calhoun, a principal with Mercer Health and Benefits, a consulting firm.

Another attraction had been the extremely generous list of eligible health expenses -- including deductibles and co-pays, eyeglasses and dental work, over-the-counter cold medicine, sunscreen and vitamins. But under the new law, starting Jan. 1, flex-spend users will no longer be able to submit claims for over- the-counter medicines unless they have been specifically directed to use them by a doctor.

For many consumers, having to start paying for cough drops or Tylenol with after-tax dollars probably is not a big deal. But the change will probably be felt by people with chronic illnesses who depend on drugs that have gone from prescription-only to over-the-counter status, like Claritin or other allergy medicines, or heartburn pills like Pepcid, Ms. Calhoun said.

And there is another big flex-spend change ahead: starting in 2013 the annual limit that any employee may contribute to these plans will be restricted to $2,500. Many companies had allowed much more.

The policy rationale for that change is simple. As the health law ushers in more comprehensive, affordable coverage, Kelly Traw, a principal at Mercer's Washington Resource Group, said the assumption was that employees would have less need for flexible spending accounts. And the revenue the government may get by limiting this tax break is meant to help finance the nation's health care overhaul.

If you look only at the averages, the new cap actually seems more than adequate. Although about 85 percent of companies with 500 or more workers offer health care flexible spending benefits, only 27 percent of eligible employees use them, according to Mercer. And the average account annual account balance is about $1,400 -- far less than even the new limit.

Continue reading "Flexible medical spending to die in 2011 ?" »

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Until now, it has been perfectly legal in most states for companies selling individual health policies -- for people who do not have group coverage through employers -- to engage in "gender rating," that is, charging women more than men for the same coverage, even for policies that do not include maternity care. The rationale was that women used the health care system more than men. But some companies charged women who did not smoke more than men who did, even though smokers have more risks. The differences in premiums, from 4 percent to 48 percent, according to a 2008 analysis by the law center, can add up to hundreds of dollars a year. The individual market is the one that many people turn to when they lose their jobs and their group coverage.

Insurers have also applied gender-rating to group coverage, but laws against sex discrimination in the workplace prevent employers from passing along the higher costs to their employees based on sex. Gender rating has taken a particular toll on smaller or midsize businesses with many women, like home-health care, child care and nonprofits. As a result, some businesses have been unable to offer health coverage or have been able to afford it only by using plans with very high deductibles.

Advocates for women's health said one of the new law's benefits would be to ban the denial of health coverage to women who have had a prior Caesarean section or been victims of domestic violence. Some companies providing individual policies have refused coverage in those circumstances, regarding Caesareans or beatings as pre-existing conditions that were likely to be predictors of higher expenses in the future.

In a statement issued Thursday, Senator Mikulski said: "One of my hearings revealed that a woman was denied coverage because she had a baby with a medically mandated C-section. When she tried to get insurance coverage with another company, she was told she had to be sterilized in order to get health insurance. That will never, ever happen again because of what we did here with health care reform."

The passage, Sec. 1557 on page 368 of the 2,074-page bill, says: "Except as otherwise provided for in this title (or an amendment made by this title), an individual shall not, on the ground prohibited under Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.), Title IX of the Education Amendments of 1972 (20 U.S.C. 1681 et seq.), the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.), or Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), be excluded from participation in, be denied the benefits of, or be subjected to discrimination under, any health program or activity, any part of which is receiving federal financial assistance, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an executive agency or any entity established under this title (or amendments)."

What it means, Ms. Greenberger said, is that no organization receiving any federal money at all -- as insurers generally do -- can discriminate on the basis of sex. Gender rating, she said, "is a problem whose days are numbered."

Continue reading "Being as woman as a pre-existing condition" »

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This produces a lot of dynamism. As Stephen J. Rose points out in his book "Rebound: Why America Will Emerge Stronger From the Financial Crisis," the number of Americans earning between $35,000 and $70,000 declined by 12 percent between 1980 and 2008. But that's largely because the number earning over $105,000 increased by 14 percent. Over the past 10 years, 60 percent of American adults made more than $100,000 in at least one or two of those years, and 40 percent had incomes that high for at least three.

David Brooks defines a slice of the middle class.

Continue reading "Brooks: 60 percent of American adults made more than $100,000 in at least one or two of those years" »

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At the heart of the existing process is a strategic choice between liquidation under Chapter 7 or rehabilitation under Chapter 13. Under Chapter 7, households give up all of their nonessential assets (as determined by the law of the state where they live), but pay nothing out of any future income to clear their debts; those debts are simply erased. Under Chapter 13, households make payments out of future income, but are more likely to retain their homes and automobiles.

The 2005 reforms, driven by an exaggerated concern that debtors might game the system, instituted a series of paper-intensive procedural safeguards. All debtors must produce documents that estimate potential increases in expenses or income during the year to come, a monthly net income statement and a complex "means test calculation" that certifies expenditures in a large number of specific, carefully defined categories.

the bankruptcy system was doing its job, the mortgage-driven financial crisis should then have led to a sharp increase in filings under Chapter 13. Homeowners unable to keep up with their mortgages should have been able to file for relief under Chapter 13, resolve their problems and move on with their lives. Yet the share of Chapter 13 filings fell in 2009 to only 28 percent of all filings, from 42 percent in 2006.

That's another perverse result of the 2005 reforms: Chapter 13 does not let people avert foreclosure by paying the actual value of their homes, even when their bubble-era mortgages far exceed realistic market prices. In fact, a "special rule" for home mortgages allows lenders to prevent normal bankruptcy relief for borrowers. Thus, the reforms created a system that makes it harder to file for Chapter 7 while doing nothing to make Chapter 13, once the savior of homeowners, useful in this sort of mortgage crisis.

Continue reading "Bankruptcy filing as a prototype mortgage cramdown" »

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Econbrowser take a break from shrill polemics and returns to economics,
with James Hamilton's look at the Federal Reserve as bank regulator.

The Fed employs hundreds of extremely bright and very well-informed economists. On my visits to the Federal Reserve, I've been amazed at how well the staff work together to assimilate information and perspectives. In my experience, you can ask any one of them a question about pretty much anything, and although the person you're talking with may not know the answer, he or she will know the name of the person within the Fed who does know. I've interacted with lots of different institutions over the years, and have never seen another one that functions so effectively as a single, cohesive neural processor. Certainly the objective record of Federal Reserve forecasts is pretty impressive; see for example the assessments by Christina and David Romer and Faust and Wright.

Doubtless others will be skeptical, trotting out the Fed's spectacular underestimation of financial problems during 2005-2007. That criticism is of course well taken, and both the Fed and the economics profession as a whole have much more work to do in terms of recognizing exactly what should have been done differently. But let's be practical. What other institution did a better job? Where in Washington today do you see an agency with the intellectual resources to get this right? Simply squawking that we need a change is not constructive leadership; it's political finger-pointing and CYA.

Indeed, it's striking that many of those who were instrumental in relaxing the oversight on Fannie Mae and Freddie Mac now believe that a regulatory body more directly under their political control could do a better job than the Fed. In the mean time, the FHA continues even today to dig us into a deeper hole.

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A vivid example of how the legislation manipulates revenues is the provision to have corporations deposit $8 billion in higher estimated tax payments in 2014, thereby meeting fiscal targets for the first five years. But since the corporations' actual taxes would be unchanged, the money would need to be refunded the next year. The net effect is simply to shift dollars from 2015 to 2014.

In addition to this accounting sleight of hand, the legislation would blithely rob Peter to pay Paul. For example, it would use $53 billion in anticipated higher Social Security taxes to offset health care spending. Social Security revenues are expected to rise as employers shift from paying for health insurance to paying higher wages. But if workers have higher wages, they will also qualify for increased Social Security benefits when they retire. So the extra money raised from payroll taxes is already spoken for. (Indeed, it is unlikely to be enough to keep Social Security solvent.) It cannot be used for lowering the deficit.

A government takeover of all federally financed student loans -- which obviously has nothing to do with health care -- is rolled into the bill because it is expected to generate $19 billion in deficit reduction.

Continue reading "Phantom cost savings of Obamacare -- Douglas Holtz-Eakin" »

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a bubble is a form of psychological malfunction. And like mental illness there's a tricky gray area between being really sick and just having a few problems, Mr. Shiller said during a panel discussion at the World Economic Forum in Davos, Switzerland.

The solution: a checklist like psychologists use to determine if someone is suffering from, say, depression. So here is Mr. Shiller's checklist.

• Sharp increases in the price of an asset like real estate or dot-com shares
• Great public excitement about said increases
• An accompanying media frenzy
• Stories of people earning a lot of money, causing envy among people who aren't
• Growing interest in the asset class among the general public
• "New era" theories to justify unprecedented price increases
• A decline in lending standards

Continue reading "Bubbles as mania" »

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Calabria, like other southern Italian regions rich in agriculture, has long benefited from hefty European Union agricultural subsidies. To prevent fraud in which small acreage yielded puzzlingly large harvests, in 2007 the European Union changed its rules to base subsidies on the number of hectares planted rather than the tons produced.

The result, some authorities hypothesize, is that it may be more lucrative for some Calabrian landowners to let their harvests rot on the tree and collect the subsidies than to pay pickers. In theory, the migrants may have become less useful and, possibly, less tolerated.

Still, the violence was dramatic. After immigrants struck residents and shops with sticks and burned and smashed cars, residents began responding with violence. By late Saturday night, most immigrants feared for their safety and voluntarily boarded buses and trains that took them to immigrant detention centers elsewhere in southern Italy, Rosarno authorities said.

Continue reading "To prevent fraud EU pays by planted rather than the tons produced. " »

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Labor leaders are fuming that President Obama has endorsed a tax on high-priced, employer-sponsored health insurance policies as a way to help cover the cost of health care reform. And as Senate and House leaders seek to negotiate a final health care bill, unions are pushing mightily to have that tax dropped from the legislation. Or at the very least, they want the price threshold raised so that the tax would affect fewer workers.

Labor leaders say the tax would hit not only wealthy executives with expensive health benefits, but also many rank-and-file union members who have often settled for lower wage increases in exchange for more generous health benefits.

The tax would affect individual insurance policies with annual premiums above $8,500 and family policies above $23,000, which by one union survey would affect one in four union members.

Continue reading "Unions oppose Obamacare tax on good health insurance" »

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Take the "individual mandate" bit: The rule that everybody must buy insurance or get fined. That's something both conservatives and liberals hate, though its inclusion may have been the price to pay to get the insurance industry to agree to any reform.

Now, the individual mandate made excellent sense at the beginning of this re-sewing process, because if people were allowed not to buy insurance at all then the low-risk young people would do exactly that. This would have had two bad consequences: First, they would still need charity care if they got sick or hurt in an accident. Second, the average price of insurance would be higher because the lower-risk people would not be contributing towards it.

Continue reading "Healthcare individual mandate" »

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At least 31 states currently regulate indoor tanning for minors, according to the National Conference of State Legislatures. Just last month, the country's first local ban on indoor tanning for those under the age of 18 was passed in Howard County, Md. And in July, the World Health Organization broadcasted one of its most damning warnings yet about tanning beds, declaring them "carcinogenic," and placed them in the same category as cigarettes and arsenic.

Over the years, such health warnings have gone heard but unheeded by many. But that may have been because, up until quite recently, tan seekers saw no worthy alternative to fake baking. Increasingly, they have another option on the table--or in the booth, that is. Spray-on tanning--when the face and body are misted with nontoxic colored chemicals--is the bright spot for the future of the tanning industry. Even though the service can cost more than three times as much as baking under bulbs, it's considered much safer and, thus, guilt-free. "Growing awareness about the high cancer risk associated with UV tanning beds will invariably diminish market share," George Van Horn, an IBISWorld senior analyst, said in a recent press release. He estimates that sunless tanning accounted for roughly 11 percent of tanning-salon revenues two years ago and may reach as high as 17 percent for 2009. And as technology improves for the spray tan (read: customers exit looking less orange), most industry insiders predict that it will continue to lure customers away from traditional tanning beds.

(See alse Sunscreen SPF.)

Continue reading "Tanning Tax ?" »

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"It's a different kind of recession," said Richard Florida, the author of several best-selling books about the economics of cities. "It's not like in the '30s when people stopped going to concerts. Now people seem to be keeping up with experience consumption and cutting back on other necessities."

Psychologists have been saying for years that shared experiences like vacations lead to more long-term happiness than the latest bauble. And perhaps the change was inevitable -- to be expected when a shopping-spree nation trades a glut of credit for layoffs and furloughs.

There are, of course, potential problems as the United States drops old habits of consumption. On the macro level, economists worry that it could undermine a recovery. And the shift may be temporary: holiday shopping appears to have increased a little in 2009.

But in many homes today, experiences have become a more valued element of life. Scott Hoyt, senior director of consumer economics at Moody's Economy.com, said that the behavioral changes were likely to be less transformative than what followed the Depression but that after three decades when consumer spending outpaced gross domestic product, the end of a spendthrift era may be here.

Continue reading "Keeping experience consumption and cutting back on others" »

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hecession: recession where male incident unemployment overhsaddows female unemployment.

Progressive take and spin on the econonomic scene:

As women's job losses mount, some women--especially unmarried women--are facing an increasingly grim job market. Unmarried women have much higher unemployment than married women. In October, 10.3 percent of unmarried women age 20 and over (3.3 million) and 5.7 percent of married women (2.1 million) were unemployed (see figure below; all data by marital status is not seasonally adjusted). Although unmarried women represent less than half (46.5 percent) of all women workers, they account for 6 in 10 (60.8 percent) of women workers who are unemployed. The situation is worse for unmarried women who head families, most of whom are single mothers, who now have an unemployment rate of 12.6 percent, 2.4 percentage points above the national average.

Question not asked: are married women more likely to drift into and out of the laborforce, given job prospects or lack thereof ?

Continue reading "Progressive polemics take on the 'he'-cession" »

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When Apple and AT&T started offering the iPhone for $199, plus $30 a month for Internet access, sales shot up, even though the previous deal -- $399 for the phone and $20 a month -- cost less over a two-year contract.

"The whole pricing thing is weird," said Barry Nalebuff, an economics professor at the Yale School of Management. "You pay $60 to make your first phone call. Your next 1,000 minutes are free. Then the minute after that costs 35 cents."

To economists, it simply doesn't make sense to make chatterboxes pay that penalty. After all, most businesses tend to give discounts to customers who buy more.

It would be easy to see the cellphone companies simply as avaricious oligopolists trying to gouge consumers for every penny they can. And in some senses they are aiming to maximize revenue, at least as much as the market will let them.

But understanding the psychological nuances of how a price plan affects customers' behavior is at least as important to running a cellphone company today as knowing how radio waves spread over a city. Those high charges for going over your allotted minutes, for example, are designed to cause you enough pain that you will switch to a plan with a higher regular fee.

"You give people a really good bargain on this bucket of minutes," explained Roger Entner, a senior vice president for telecommunications research at Nielsen. "People are risk averse, so you have a relatively high overage charge, which gets people to overbuy. You also get really predictable revenue out of it, which Wall Street loves."

Continue reading "Cel phone pricing is a repeated game" »

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The new chairman of New York's transit system is looking to introduce a pricing policy that would offer passengers discounts to ride late at night and on weekends, an abrupt break from a century-old fare model that could be the city's biggest transportation revolution since the demise of the token.

"We might imagine that we offer discounts at later times, or we offer weekend discounts. Time-of-day pricing might be very attractive."

-- Jay H. Walder, the chairman of the Metropolitan Transportation Authority

It is already too crowded on weekends

Andrew Albert, a nonvoting board member and chairman of the New York City Transit Riders Council, said he was hesitant about the idea. "You really already have some crushed loads at off-peak periods," he said, citing crowded platforms on some weekends.

Many riders already have zero marginal cost

The price of a single bus or subway ride -- $2.25, after a 12.5 percent increase this summer -- is largely symbolic: about half of riders travel with unlimited-ride MetroCards, and the price for each ride varies depending on which type of card is used.

Continue reading "M.T.A. Weighs Lower Fares During Off-Peak Hours " »

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One set are free-enterprise champions who argue that politicizing consumption distorts prices and spurs overproduction while imposing arbitrary conditions on producers -- like insisting that developing-world farmers enroll their children in school -- that might sound good to Westerners but ignore complex local realities.

Insisting on the noblest production methods conflicts, these critics say, with the very function of markets: to bring the most goods to the most people as cheaply as possible.

Another group of critics doesn't deny political consumption's power. Rather, they bemoan that citizenship has come to this.

Citizenship, for them, is about voting, marching, writing -- about being involved. In the modern age, they say, we have begun to turn inward, bowl alone, shirk our public duties. And now comes this cheap (in the moral, if not economic, sense) way to participate just a little, assuage guilt just a little, involve ourselves just a little in AIDS and trade, feel just a little of activism's thrill.

In an article last year in The Lancet, the British medical journal, the scholars Colleen O'Manique and Ronald Labonte strongly condemned RED, the marketing campaign for iPods and other products whose purchase helps to finance the battle against H.I.V./AIDS in Africa.

"Be wary of the 21st century's new noblesse oblige that replaces the efficiency of tax-funded programs and transfers in improving health equity with a consumption-driven 'charitainment' model," they wrote.

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Blumenthal and Morone's most provocative finding is that presidents who have been most successful in moving the country toward universal health coverage have disregarded or overruled their economic advisers. Plans to expand coverage have consistently drawn cautions or condemnations from economic teams in every administration, from Harry Truman's down to George W. Bush's. An exasperated Lyndon Johnson groused to Ted Kennedy that "the fools had to go to projecting" Medicare costs "down the road five or six years." Such long-term projections meant political headaches. "The first thing, Senator Dick Russell comes running in, says, 'My God, you've got a one billion dollar [estimate] for next year on health. Therefore I'm against any of it now." Johnson rejected his advisers' estimates and intentionally lowballed the cost. "I'll spend the goddamn money." An honest economic forecast would most likely have sunk Medicare.

THE HEART OF POWER: Health and Politics in the Oval Office
By David Blumenthal and James A. Morone
Illustrated. 484 pp. University of California Press. $26.95

Books / Sunday Book Review
Critical Care
By ROBERT B. REICH
Published: September 6, 2009
This history of health policy and the Oval Office shows that the presidents who made the biggest steps in the direction of universal care have acted despite their economic advisers.

Continue reading "Health and Politics in the Oval Office, Blumenthal and Morone" »

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After years of complaining about private health insurers denying care, the democrat plan
is now to penalize insurers who do provide full coverage.

Mr. Baucus's plan, expected to cost $850 billion to $900 billion over 10 years, would tax insurance companies on their most expensive health care policies. The hope is that employers would buy cheaper, less generous coverage for employees, thereby reducing the overuse of medical services.

The separate new fee on insurance companies would help raise money to pay for the plan. The fee would raise $6 billion a year starting in 2010, and it would be allocated among insurance companies according to their market shares.

The fees were first proposed by Senators Charles E. Schumer of New York, John D. Rockefeller IV of West Virginia and Debbie Stabenow of Michigan. Until now, Mr. Baucus had not shown interest in the idea.

Mr. Schumer said, "The health insurance industry should pay its fair share of the cost because it stands to gain over 40 million new consumers under health care reform legislation."

Mr. Rockefeller said the fees were justified because insurance companies were "rapaciously, greedily and unstoppably making money by underpaying the patient, by underpaying the provider and by overpaying themselves."

Continue reading "Democrat plan to stop private health insurance companies from providing benefits ?" »

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The popularity of the term "green shoots" shows the kind of social epidemic underlying our changing thinking. The phrase was propelled in Britain by Shriti Vadera, the business minister, in January, and mutated into a more contagious form after Ben Bernanke, the Federal Reserve chairman, used it on "60 Minutes" on March 15.

The news media didn't need to change the term for different cultures around the world. With nothing more than a quick translation -- brotes verdes, pousses vertes, grüne Sprösslinge, etc. -- it is now recognized as a symbol of a revival coming soon.

All of this suggests that a social epidemic is supporting renewed confidence. This confidence can keep growing by contagion, as a kind of self-fulfilling prophecy, and we may see the markets and the economy recover further.

Continue reading "verdes Vadera, green shoots, he scores" »

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Any major shift in the financial status of the rich could have big implications. A drop in their income and wealth would complicate life for elite universities, museums and other institutions that received lavish donations in recent decades. Governments -- federal and state -- could struggle, too, because they rely heavily on the taxes paid by the affluent.

Perhaps the broadest question is what a hit to the wealthy would mean for the middle class and the poor. The best-known data on the rich comes from an analysis of Internal Revenue Service returns by Thomas Piketty and Emmanuel Saez, two economists. Their work shows that in the late 1970s, the cutoff to qualify for the highest-earning one ten-thousandth of households was roughly $2 million, in inflation-adjusted, pretax terms. By 2007, it had jumped to $11.5 million.

The gains for the merely affluent were also big, if not quite huge. The cutoff to be in the top 1 percent doubled since the late 1970s, to roughly $400,000.

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David Adamo, the chief executive of Luxury Mortgage in Stamford, Conn. likened the current mortgage market to a barbell, with pockets of availability for borrowers at both ends of the income spectrum but less for those in between. Those with annual incomes up to about $250,000 have access to mortgages insured by the Federal Housing Administration, while the very affluent can obtain loans from private banking institutions.

For middle class borrowers with household incomes between $250,000 and $500,000, however, mortgages are not as easy to get, Mr. Adamo said. "These people are living in places where starter homes might be $1 million," he said, "and it's really affecting them."

Fannie Mae and Freddie Mac will accept only loans below $729,500 in the highest-cost markets like New York City and northern New Jersey. For mortgages larger than that, mortgage brokers and bankers must find other investors who want to take the loans. (Mortgage brokers process the applications on a lender's behalf, while mortgage bankers will finance the loan and sell it shortly thereafter.)

Continue reading "Between $250,000 and $500,000 is middle income, mortgage-wise" »

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Do new-car buyers even drive clunkers ?

Am I driving a clunker because I cannot afford a 4 year old car ?
Will an extra $1000 trade in afford me a new car (or 14 month olf d car) ?

Update 2009 June 30:

"It has to be worth not very much and it also has to get very poor E.P.A. fuel economy," said Jack R. Nerad, the executive editorial director and market analyst for Kelley Blue Book. "It's a fairly narrow profile. You're talking about people who are probably economically challenged to begin with and they have to be able to qualify for a new car purchase in the midst of a deep recession. Those are some difficult parameters."

The case of the sad SAAB, junked with a work badge.

Continue reading "Trade in clunkers ?" »

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n academic writings, Mr. Sunstein has advocated requiring agencies to demonstrate that new regulations' benefits clearly outweigh their costs, a policy long advocated by conservatives but viewed with suspicion by liberals who have seen it as a way to kill or weaken rules.

Mr. Sunstein said that relative to the Bush administration's heavy reliance on cost-benefit analysis, his approach would be "inclusive and humanized" and give more weight to moral concerns and other "soft variables."

But Mr. Sunstein also said he favors requiring agencies to explain why they are imposing rules that aren't justified by a cost-benefit analysis. And he said he would seek to maintain OIRA's central position in reviewing new regulations.

Continue reading "Costs, benefits of Cass Sunstein " »

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During the campaign, Obama talked about the need to control medical costs and mentioned a few ideas for doing so, but he rarely lingered on the topic. He spent more time talking about expanding health-insurance coverage, which would raise the government's bill. After the election, however, when time came to name a budget director, Obama sent a different message. He appointed Peter Orszag, who over the last two years has become one of the country's leading experts on the looming budget mess that is health care.

Their argument happens to be supported by a rich body of economic literature that didn't even make it into the book. More-educated people are healthier, live longer and, of course, make more money. Countries that educate more of their citizens tend to grow faster than similar countries that do not. The same is true of states and regions within this country. Crucially, the income gains tend to come after the education gains. What distinguishes thriving Boston from the other struggling cities of New England? Part of the answer is the relative share of children who graduate from college. The two most affluent immigrant groups in modern America -- Asian-Americans and Jews -- are also the most educated. In recent decades, as the educational attainment of men has stagnated, so have their wages. The median male worker is roughly as educated as he was 30 years ago and makes roughly the same in hourly pay. The median female worker is far more educated than she was 30 years ago and makes 30 percent more than she did then.

Continue reading "Health Care: Coverage vs Cost" »

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If an abstract model is supposed to be a model of the real world (and not just a mathematical construct), then we should test its assumptions and predictions against the real world. But the real world, in all its boisterous glory, is far from the serene desert landscape of an abstract model. So we must cleverly search out "natural experiments"--real-world circumstances that happen to conform to enough assumptions of a model to provide a relatively direct test of its predictions--and then apply advanced statistical techniques to isolate the effect of the variables we want to study. The result of such tests can lead to tweaks in abstract theories that improve their predictive power and utility.

Overcoming bias.

Continue reading "Overcomingbias: what's wrong with 'cuteonomics'" »

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Sam Kazman on the 'benefits' on mandated change:

Continue reading "Sam Kazman Debates Obama's Car Mileage Regulations" »

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Unexplained is why wages earned in construction are 'stimulus' and wages eared drawing blueprints are not.

The requirement that the money be spent quickly, in order to get it coursing through the parched economy, means that many ambitious projects that require more planning will have to give way to smaller ones considered "shovel ready."

U.S. / POLITICS
House Plan for Infrastructure Disappoints Advocates for Major Projects
By MICHAEL COOPER
Published: January 20, 2009
As the details of Barack Obama's public works plan come into focus, big transformative building projects seem unlikely.

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Barry's scolding Bailout Nation is out. Note the used price is three times greater than the new price.
(We blogrolled Barry Ritholtz' Big Picture years ago).

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From 2004 to 2006, Americans took almost $700 billion per annum of net equity out of their homes through borrowing and spent as much as 50% of it on consumables. The most highly regarded study on mortgage equity withdrawals (MEW) is "Estimates of Home Mortgage Originations, Repayments, and Debt On One-to-Four-Family Residences," by Prof. James Kennedy and none other than Alan Greenspan (Federal Reserve Board FEDS working paper No. 2005-41); Kennedy has been updating his numbers.

Also: The Rise of A New Asset Class

Without MEW, we would have had 2 years, 2001 and 2002, with negative GDP growth. We're not going to go get those levels of mortgage equity withdrawals today - not in this environment. We're still seeing some cash-out borrowing, but it's getting more and more difficult; as home values drop, there are going to be fewer and fewer people pulling less and less money out of the "home ATMs." As Paul McCulley says, your home ATM is starting to spit out negative twenty-dollar bills

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The compulsion to upgrade (and seeking positional goods and services) is most glaring in cities -- particularly New York and Los Angeles -- which are filled with the upwardly mobile who relocate in search of upgraded opportunities surrounded by savvier, richer, trendier people. These transplants are constantly trading up not just their jobs but their group of friends. Everyone in New York and L.A. has had this experience: you make a plan for dinner with a buddy, which he cancels with a lame, last minute excuse ("I'm just exhausted"). What you both know is that he got a late-breaking better offer. He upgraded his dinner.

Continue reading "Positional goods abound in New York" »

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NY State's legislative leaders agreed last week to raise tens of millions of dollars in fees and impose taxes on individuals earning more than $200,000 and couples earning more than $300,000. Is this a middle class tax hike ?

The tax increases and elimination of the property tax rebate program prompted an outcry among local officials in Westchester, which has towns with some of the highest property tax rates in the country.

...

Eliminating the property tax rebate will save the state $1.5 billion, while new income tax brackets for the highest earners will bring in $4 billion. Because Westchester has a high concentration of families with high incomes, its residents will feel the impact of the income tax increases more than most, officials said.

"We expect to see a disproportionate impact on New Yorkers in the region, and in particular Westchester," said Stephen J. Acquario, executive director of the New York State Association of Counties.

Continue reading "Middle class by tax bracket in Westchester County, NY: $300k" »

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Over $100,000 income is the biggest group. Where is the middle class.

"This is a statement that the system is broken, and that inaction will lead to ruin," said Russell Hancock, chief executive and president of Joint Venture. "It's time to start over."

The report also showed that the gap between the wealthiest and the poorest residents continued to grow. The percentage of households earning more than $100,000 a year rose to 42 percent in 2008, from 35 percent in 2002, while the number of households earning $35,000 or less rose to 20 percent, from 19 percent in the same period.

During that period, the number of immigrants to Silicon Valley grew 9 percent.

Continue reading "Middle class more than 100k in Silicon Valley" »

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A hypothetical on the middle class tax cut, or tax hike ?

You favor eliminating the cap on earnings subject to the 12.4 percent Social Security tax, which now covers only the first $102,000. A Chicago police officer married to a Chicago public-school teacher, each with 20 years on the job, have a household income of $147,501, so you would take another $5,642 from them. Are they undertaxed? Are they rich?

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As an example of a 'free service' as it is now (temporarily) being used, please feel free to go to FaceBook, take a

"23 Random Things About My Toes" quiz and forward it to 230 friends, accidentally click on the picture of a hot chick and get taken to a different website, then find your way back and accept a cause invitation to get rid of wobbly shopping carts, an event for people with last names starting with J, a zombie invitation, and a 'click here to find out who has a mad crush on you!'

Continue reading "How to spend an hour on FaceBook" »

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Using consumption (Veblen goods, Giffen goods) to distinguish ones class leaves middle class citizens in the middle.

Individual demands are heavily shaped by the social environment. As the economist Richard Layard has written, for example, "In a poor society a man proves to his wife that he loves her by giving her a rose, but in a rich society he must give a dozen roses." For the last three decades, virtually all income gains in the United States have gone to top earners. Recipients have spent most of their extra income on positional goods, things whose value depends heavily on how they compare with similar things bought by others. Like mutually offsetting weapons in a military arms race, consumption of this sort is largely wasteful. Many of the most spectacular increases in high-end consumption in recent years appear to have been driven almost entirely by positional forces. If people acted in tandem, resources could be diverted from positional consumption at little sacrifice.

Although there is scant evidence that middle-income families in America resent the spending of top earners, they are nonetheless affected by it in tangible ways. Additional spending by the rich shifts the frame of reference that defines what the near rich consider necessary or desirable, so they too spend more. In turn, this shifts the frame of reference for those just below the near rich, and so on, all the way down the income ladder. Such expenditure cascades help explain why the median new house built in the U.S. is now about 50 percent larger than its counterpart from 30 years ago, even though the median real wage has risen little since then.

Higher spending by middle-income families is driven less by a desire to keep up with the Joneses than by the simple fact that the ability to achieve important goals often depends on relative spending. Because of the link between housing prices and neighborhood school quality, for example, the median family would have to send its children to below-average schools if it failed to match the spending of its peers on housing. Instead, middle-income families have opted to save less, borrow more, work longer hours, and commute longer distances than ever before, all in an effort to keep pace with escalating consumption standards.

Robert H. Frank

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Goldman Sachs name new MD (Managing Director Partners) for 2009.

Included was Jan Hatzius, economist known for real estate commentary.

Continue reading "Goldman Sachs Managing Director Partners 2009" »

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Was the Obama stimulus plan built to solve a recession where unemployment peaked at 8.1 percent ? Now that unemployment has hit 8.1 %, should the $787 billion stimulus package be revised and embiggened ?

Continue reading "Stimulus 1.0 too small ?" »

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Faith based economics ?

First, the standard analytical explanation: Roubini said that he studied a chart in economist Robert J. Shiller's book "Irrational Exuberance." It showed that U.S. housing prices, adjusted for inflation, had remained essentially flat for a century, until the mid-1990s, when they began to shoot up. What's more, Roubini saw that the most recent housing correction in the late 1980s had a severe effect on the financial system -- leading ultimately to the collapse of the savings and loan industry.

So Roubini knew two things: Housing prices wouldn't keep going up forever, and when they went down, they would take a big piece of the financial system with them. From then on, it was a matter of watching the data.

But everyone else had those same numbers. Why did Roubini act? The answer is that he decided to trust his gut, which told him there was trouble ahead, rather than Wall Street's "wisdom of the crowd," which -- as reflected in stock prices -- said everything was rosy. He concluded that the markets were not pricing in the degree of risk that was actually present in housing.

"The rational man theory of economics has not worked," Roubini said last month at a session of the World Economic Forum at Davos. That's why he and other prominent economists are paying more attention to behavioral economics, which starts from the premise that economic decisions, like other aspects of human behavior, are influenced by irrational psychological factors.

The most compelling rebuttal of the rational model, paradoxically, was delivered by the ultimate rationalist, Alan Greenspan. "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders," the former Fed chairman told Congress last October.

Continue reading "Without waiting for evidence, Roubini's luck guy feel comes up big" »

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austrianeconomists considers various matters

Example: on failure:

When Dave Prychitko and I were students of Kenneth Boulding, Mr. Boulding told us both once that if economists really wanted to learn we would study the waste baskets of our peers not what gets published in the journals. Like most "bouldingisms", his statement while odd upon first hearing is actually profoundly true once you think abit about what he is getting at. We learn much more from our failures than we learn from our successes if we open ourselves on the lesson to be learned.

Contrast 37 Signals's Signal vs Noise SvN's take:

I don't understand the cultural fascination with failure being the source of great lessons to be learned. What did you learn? You learned what didn't work. Now you won't make the same mistake twice, but you're just as likely to make a different mistake next time. You might know what won't work, but you still don't know what will work. That's not much of a lesson.

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Stimulus scuffle -- it will be really difficult to re-contextualize such discussions by year 2020.

But with public opinion quickly turning against the bill, and the House Republicans claiming the moral high ground as they held formation to oppose him, how could Obama be distanced from responsibility for elements of the bill under GOP attack and remain above the fray? That seemed to be the locus of White House concern, and according to those familiar with what happened, the "polarizing" Nancy Pelosi was designated to take the fall.

Rather than define the bill by its substance and make its opponents attack jobs creation, the strategy was to talk about process -- how everyone's ideas on both sides of the aisle would be welcome and that this bill would represent the best bipartisan thinking about how to face the current economic crisis. That left the door wide open for Republicans to step through and caterwaul that their ideas weren't being respected in this new halcyon world of bipartisanship, and somebody had to take the blame. Nancy Pelosi, come on down!

-- Jane Hamsher @ FDL

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Middle class faded out above $140,000 to $250,000 per year, back in 1993.

Paul Krugman, 1993 on Bill 'Middle Class Tax Cut' Clinton's tax plan:

Bill Clinton's economic program: higher income taxes for wealthy Americans. Families with taxable incomes above $ 140,000 currently pay a tax rate of 31 percent. The Clinton plan will raise that rate to 36 percent, and families with taxable income over $ 250,000 will pay 39.6 percent.

...
Suppose a couple earning $ 200,000 a year has a $ 600,000 mortgage, two children in expensive colleges, large car payments and lavish tastes.

Continue reading "Krugman and Clinton: middle class up to $250,000 in 1993" »

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The stimulus efforts could focus on public goods and durable infrastructure, taking advantage of a lull in private investment to deploy underutilized resources without
crowding out much private investment.

Or, the stimulus could just be a lot of walking around money.

Some street money comes from party fundraisers, like the Philadelphia Democratic Party's biannual Jefferson-Jackson dinner. But most of it comes directly from the candidates. Everyone from the presidential nominee to congressmen and state representatives are expected to chip in. (The top of the ticket usually contributes the most.) In Philadelphia, the candidate sends a check to the chairman of the city's Democratic Party, who then divides the money up among the 69 ward leaders, who in turn divvy up their cash among the 50 or so committee people in each ward. In 2004, John Kerry spent hundreds of thousands of dollars on Philadelphia street money, and ward leaders received checks for as much as $8,000. Individual volunteers can generally expect anywhe

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The companies doing the least hiring right now are very often the companies that offer the safest jobs.

-- Susan Houseman, a senior economist and labor expert at the Upjohn Institute, a research group in Michigan.

With employers shedding half a million jobs a month, some economists, like Nancy Folbre of the University of Massachusetts in Amherst, liken safe jobs to high ground amid the turbulent flood waters of lost employment.

"There is a danger in using the term 'safe jobs' for this perch," Ms. Folbre said. "That makes them sound like sinecures, and they are not."

Continue reading "Stable jobs available ? Dismal science answers." »

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The less money your peer group has, the more bling you buy, explains Virginia Postrel.

About seven years ago, University of Chicago economists Kerwin Kofi Charles and Erik Hurst were researching the "wealth gap" between black and white Americans when they noticed something striking. African Americans not only had less wealth than whites with similar incomes, they also had significantly more of their assets tied up in cars. The statistic fit a stereotype reinforced by countless bling-filled hip-hop videos: that African Americans spend a lot on cars, clothes, and jewelry--highly visible goods that tell the world the owner has money.

But do they really? And, if so, why?

The two economists, along with Nikolai Roussanov of the University of Pennsylvania, have now attacked those questions. What they found not only provides insight into the economic differences between racial groups, it challenges common assumptions about luxury. Conspicuous consumption, this research suggests, is not an unambiguous signal of personal affluence. It's a sign of belonging to a relatively poor group. Visible luxury thus serves less to establish the owner's positive status as affluent than to fend off the negative perception that the owner is poor. The richer a society or peer group, the less important visible spending becomes.

Russ Alan Prince and Lewis Schiff describe a similar pattern in their book, The Middle-Class Millionaire, which analyzes the spending habits of the 8.4million American households whose wealth is self-made and whose net worth, including their home equity, is between $1 million and $10 million. Aside from a penchant for fancy cars, these millionaires devote their luxury dollars mostly to goods and services outsiders can't see: concierge health care, home renovations, all sorts of personal coaches, and expensive family vacations. They focus less on impressing strangers and more on family- and self-improvement. Even when they invest in traditional luxuries like second homes, jets, or yachts, they prefer fractional ownership. "They're looking for ownership to be converted into a relationship rather than an asset they have to take care of," says Schiff. Their primary luxuries are time and attention.

Continue reading "The less money your peer group has, the more bling you buy" »

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The New York Times looks at the impact of gathering at Sundance to watch environmental films.

Still, a stroll here this week down Main Street -- where a dozen idling trucks were unloading supplies and equipment, while an oversize band bus, with trailer in tow, spewed fumes outside a soon-to-be-busy party site -- framed the obvious quandary: how can you cram some 46,000 people, roughly equivalent to a fifth of Hollywood's total work force, into a pretty little mountain town without contributing mightily to the problems your films hope to solve?

...

Utility officials said there was no way to determine how much extra wattage was being poured into the valley for the festival's spotlights and the strings of colored bulbs lining Park City's streets. "Pinpointing use for one city," said Margaret Oler, an information officer with Pacificorp, which provides power to the area, "can be pretty difficult."

Most electrical implements, bulbs included, have power consumption in Watts printed right on them.

MOVIES
The Films Are Green, but Is Sundance?
By MICHAEL CIEPLY
Published: January 17, 2009
This year's Sundance Film Festival has a schedule that's greener than Fifth Avenue on St. Patrick's Day, but what's the environmental impact of the festival itself?

Continue reading "Environmental impact of environmental events" »

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Facebook's targeted advertising throws up three very similar adjacent display placements onto one page. Is this evidence of a price searching algorithm, to ween wages too low to be tempting, or too high to be believed (not to mention too high to be actually available) ?

$92/hr ?

$75/hr ?

$88/hr ?

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Looking at upper-middle-class homes, Lareau describes a parenting style that many of us ridicule but do not renounce. This involves enrolling kids in large numbers of adult-supervised activities and driving them from place to place. Parents are deeply involved in all aspects of their children's lives. They make concerted efforts to provide learning experiences.

Home life involves a lot of talk and verbal jousting. Parents tend to reason with their children, not give them orders. They present "choices" and then subtly influence the decisions their kids make. Kids feel free to pass judgment on adults, express themselves and even tell their siblings they hate them when they're angry.

The pace is exhausting. Fights about homework can be titanic. But children raised in this way know how to navigate the world of organized institutions. They know how to talk casually with adults, how to use words to shape how people view them, how to perform before audiences and look people in the eye to make a good first impression.

Working-class child-rearing is different, Lareau writes. In these homes, there tends to be a much starker boundary between the adult world and the children's world. Parents think that the cares of adulthood will come soon enough and that children should be left alone to organize their own playtime. When a girl asks her mother to help her build a dollhouse out of boxes, the mother says no, "casually and without guilt," because playtime is deemed to be inconsequential -- a child's sphere, not an adult's.

Lareau says working-class children seem more relaxed and vibrant, and have more intimate contact with their extended families. "Whining, which was pervasive in middle-class homes, was rare in working-class and poor ones," she writes.

But these children were not as well prepared for the world of organizations and adulthood. There was much less talk in the working-class homes. Parents were more likely to issue brusque orders, not give explanations. Children, like their parents, were easily intimidated by and pushed around by verbally dexterous teachers and doctors. Middle-class kids felt entitled to individual treatment when entering the wider world, but working-class kids felt constrained and tongue-tied.

David Brooks

Continue reading "Today's rich don't exploit the poor they just outcompete them." »

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For example, four-in-ten Americans with incomes below $20,000 say they are middle class, as do a third of those with incomes above $150,000. And about the same percentages of blacks (50%), Hispanics (54%) and whites (53%) self-identify as middle class, even though members of minority groups who say they are middle class have far less income and wealth than do whites who say they are middle class.

Some 53% of adults in America say they are middle class. On key measures of well-being -- income, wealth, health, optimism about the future -- they tend to fall between those who identify with classes above and below them. But within this self-defined middle class, there are notable economic and demographic differences. For example, four-in-ten Americans with incomes below $20,000 say they are middle class, as do a third of those with incomes above $150,000. And about the same percentages of blacks (50%), Hispanics (54%) and whites (53%) self-identify as middle class, even though members of minority groups who say they are middle class have far less income and wealth than do whites who say they are middle class.

Pew, Inside the Middle Class: Bad Times Hit the Good Life (2009 April)

Reason

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University of Illinois law professor Larry Ribstein has been a pioneer in the study of how private partnerships have been used as alternatives to solving sticky problems of corporate management.

Much of his work has centered on the problem of aligning managers' and owners' interests. He notes that the private partnership model popular in the private equity world might be very useful for Goldman here.

Continue reading "Larry Ribstein, private partnerships have been used as alternatives to solving sticky problems of corporate management" »

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we will create millions of jobs by making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s. We'll invest your precious tax dollars in new and smarter ways, and we'll set a simple rule - use it or lose it. If a state doesn't act quickly to invest in roads and bridges in their communities, they'll lose the money.

-- Obama's Key Parts of the Jobs Plan, 2008 December 6

Would spending on planning, consultants, policy, publicity, media relations, public relations folks create more middle class jobs, before the actual construction began ?

Interestingly, there's nary any talk of building prisons to releive overcrowding.

On airport expansion, Coruscation presents the sorry case of SFO's parallel runway for frequent flyiers.

SFO shelved the runway project in June after $75 million worth of
studies. Airport Director John Martin cited a lack of political will
in pushing the controversial project and the shakiness of the
airport's finances.

64% of County residents support runway expansion, poll reports
Tuesday, December 16, 2003, in the San Mateo County Times

The airport spent money on services that had little to do with
studying the environmental impacts of expanding the airfield, and
items such as public relations and lobbying were sometimes hidden in
contracts for engineering or environmental work, according to the
audit.

Audit criticizes S.F. Airport on runway plan
Lavish spending on consultants cited in report to supervisors
Thursday, May 22, 2003, in the San Jose Mercury News

The consultants have included Attorney Karen Skelton, a former deputy
in the Clinton-Gore administration; Brown's campaign strategist Barry
Wyatt; and Jon Rubin, Brown's appointee to the Metropolitan
Transportation Commission. SFO hired Rubin's firm, Bay Relations.

Supervisors gut SFO runway expansion study
$5 million yanked, put into reserve
Tuesday, June 25, 2002, in the San Francisco Chronicle

Specifically, the airport director suspended environmental studies
looking into the viability of a proposal to extend the airport's
runways into San Francisco Bay -- a review that already has taken
four years, cost $75 million and is 80% complete.
...
Executives also have had to contend with a recent audit of the
airport's books that alleged airport officials mismanaged $75
million spent to study the runway extension plan.

Rose, who relied in part on a random sample of invoices, found that
consultants billed the bureau for unusually high airfare, lodging,
equipment and telephone costs. These included round-trip airfares to
Washington for $4,252, a $799 dinner at the Bacchanal restaurant in
South San Francisco and a $4,686 phone bill for an airport
contractor for one month. Consultants also billed the bureau an
average of $16,646 each for three Dell computer workstations with no
explanation for the high cost, Rose said.

Future Cloudy for San Francisco Airport
Declining passenger traffic and a setback in a project to extend its
runways leave executives with more questions than answers.
Tuesday, June 10, 2003, in the Los Angeles Times

Continue reading "Build it ready or not" »

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The Dojinkai is one of the country's 22 crime syndicates, employing some 85,000 members and recognized by the government.

Traditionally, the yakuza have run protection rackets, as well as gambling, sex and other businesses that the authorities believed were a necessary part of any society. By letting the yakuza operate relatively freely, the authorities were able to keep an extremely close watch on them.

Continue reading "Traditionally, the yakuza have run protection rackets, as well as gambling, sex and other businesses" »

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One report has 'vice' stocks headed down in a recession.

think about "sin industries", the classic countercyclicals. Until now, that is. Vegas is crashing hard, and not just because of its real estate bubble. Can porn and malt liquor be far behind? Is this the moment that amateur porn has been waiting for--just as people have more dinner parties and less dining out during downturns, will people start making their own, er, fun at home?

See also Socially conscious /ethical investing.

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A TED talk, The Shadow Cities Of The Future and Why Squatter Cities Are A Good Thing by Robert Neuwirth, author, Shadow Cities: A Billion Squatters, A New Urban World, gives a different take on development economics, from mud hut cluster to developed city, with or without debt and property rights.

Video after jump.

Continue reading "Why Squatter Cities Are A Good Thing ?" »

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"Kent Hance was a down-home boy, real homey, and George W. wasn't homey like Kent," recalled Johnnye Davis, a Republican leader in Odessa. "He didn't come across to the voters as well as Kent did, with the little jokes that Kent told."

While Mr. Bush now is sometimes mocked for an ignorance of policy details, back then people thought he had the opposite problem: a tendency to drop references in his speeches that baffled audiences, like a discussion of anti-inflationary economic policy.

"He was quick, a bit too quick, so that people didn't always get it," Mrs. Davis said. "He was so darn intelligent that a lot of what he said went over people's heads. He's learned to explain things a little better since then."

Another problem was that while Mr. Bush never really had a clear campaign strategy, Mr. Hance did: he focused his campaign on emphasizing local ties and on casting Mr. Bush as a carpet-bagger from the East. One of Mr. Hance's most effective radio spots was this one, read by an announcer:

"In 1961, when Kent Hance graduated from Dimmitt High School in the 19th congressional district, his opponent George W. Bush was attending Andover Academy in Massachusetts. In 1965, when Kent Hance graduated from Texas Tech, his opponent was at Yale University. And while Kent Hance graduated from University of Texas Law School, his opponent" -- the announcer's voice plunged -- "get this, folks, was attending Harvard. We don't need someone from the Northeast telling us what our problems are."

Continue reading "Bush in 1978: before playing country cowboy" »

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44's Economic transition team to rescue the middle class and offer more stimulus.

Video after break.

Continue reading "Barack's economic rescue" »

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The field of social psychology provides a possible answer. In his classic 1972 book, "Groupthink," Irving L. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes. People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.

Continue reading "Worry about relevance, do not deviate from the consensus" »

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A show of hands at an Obama rally Thursday after the candidate asked who made less than $250,000. Senator Barack Obama says those middle class audience members would benefit from his plan.

Mr. Obama opposes extending President Bush's tax cuts. Instead, he proposes various tax breaks, including a $500 tax credit for each person in a household who works, a larger child care tax credit, a $4,000 tax credit each year for the first two years of college, and eliminating all income taxes for those over 65 with income less than $50,000 a year.

Mr. McCain also proposes giving many households a $5,000 tax credit when they buy family health insurance, which costs $12,000 nationwide on average.

Previously: Charles Gibson of ABC: $200,000 a year was a middle-class income.

Continue reading "Under $250,000 is middle class: Obama" »

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The definition of middle class is in flux. Many try to quantify and specify it in income terms.

Here's Charles Gibson of ABC (Via Paul Krugman): suggested that $200,000 a year was a middle-class income.

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Short list of Laureate top candidates for the Nobel Economics Prize, 2008

Eugene F. Fama (WSJ reports Fama is the front runner, given the efficiency of markets to represent all available information, as demonstrated by betting)
Lars P.Hansen
Thomas J. Sargent
Armen A. Alchian and Harold Demsetz
Martin Feldstein
Jean Tirole

Other top contenders:

Robert J. Barro
Jagdish N. Bhagwati (with Avinash K. Dixit)
Eugene F. Fama (with Kenneth R. French)
Oliver D. Hart:
Dale W. Jorgenson:
Paul R. Milgrom

The nominating processes explained:nobelprize.org

Continue reading "Nobel Economics Prize, 2008" »

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There was a lot of talk about a Greenspan put and whether Bernanke and the FOMC would continue it, or whether they were trying to take it away by holding firm on rates. Whatever the state of that "put" we know now that there is an ECB put for sure, given how quickly the ECB intervened to fend off what it perceived to be a problem. That the ECB flooded the market with liquidity is both interesting, and understandable, given that the ECB doesn't have Lender of Last Resort (LLR) powers.

What should have happened (and this is still a missing piece of information) under the current arrangements within the European system of central banks is that BNP, or any other bank experiencing a liquidity problem, should have had access to its respective central bank's Lombard facility. But the ECB stepped in ahead of the national central banks. The ECB does have the authority to provide liquidity, but doesn't have systemic risk responsibility, except for payments system stability. The event points out how important it is for the ECB to have its LLR powers clearly defined, and there is a need to ensure coordination across the two functions.

-- Robert Eisenbeis, via WSJ.

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Overheard on the internet:

I remember working on an ad campaign for MCI-Sprint at my first agency job out of college. It targeted the poorer areas of Philly, Camden, Newark, etc. The point of the campaign was that you did not have to have good credit or have to go through a credit check in order to receive a phone. When it launched the second question the people were asked was "what credit card would you like to use"'. Not one person at corporate could figure out that people with poor credit generally don't have credit cards.

Posted at Brownstoner by: anon at May 30, 2007 12:06 PM

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Shadow Government Statistics promises 'Analysis Behind and Beyond Government Economic Reporting': shadowstats.

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Creative destruction is only half of Schumpeter's message. Far less in vogue is his projection that entrepreneurs will disappear as innovation becomes mechanized in corporate labs - as it has today in Japan - and that ultimately the very success of capitalism will beget socialism. Will creative destruction give way to central planning? Not necessarily, says Harvard's Clayton Christensen. "What happened in Japan is exactly what Schumpeter envisioned," he argues. "But here, folks just leave - they pick up venture capital on the way out, and they start new disruptive corporations." So as long as Washington encourages an infrastructure that supports entrepreneurship, creative destruction can continue after all.

Continue reading "Creative destruction: another look at Japan's lost decade" »

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Summer music festivals go posh, report from Europe, via WSJ:

Summer rock music festivals, long the preserve of teens and twentysomethings, are increasingly becoming familiar territory for a generation that still remembers the hits of the 1970s and '80s even as it keeps up with current stars. Concert promoters are starting to cater to the needs of this older crowd of festival-goers, many of whom are looking for something more than mosh pits, fast food and porta-potties -- and who can afford multiday tickets costing between €150 and €250.

"They still want to experience the buzz of the festival, they still want to have the excitement of the festival, but they don't want to sleep in a two-person tent anymore," says Melvin Benn, managing director of Festival Republic, which promotes the Leeds, Reading and Glastonbury festivals in the U.K. "They don't want to rough it in quite the same way."

A Grown-Up's Guide To Summer Rock Festivals
By GABRIELE STEINHAUSER, 2008 July 10

An opposing take says concerts are offering cheap tickets as they have difficulty filling venues-- Barry Ritholtz / Big Picture in 2008; and in 2005.

Continue reading "Concert Economy: getting bundled and amenity-riden, or getting cheap and amenity-stripped ?" »

Posted by at 5:09 AM | Permalink | Comments (0) | TrackBacks (0)

urbandigs tracks real estate in NY -- more aimed at investors than at consumers.

Update 2010 Nov.:

blog compares Midtown East with Midtown West.

See also time series charts: Noah Rosenblatt of UrbanDigs has created a unique realtime tool for tracking Manhattan RE.

[ via BigPicture. ]

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Megan vs Brooks on frugalness as an American value; an economic history of debt in America.

Popup video: Megan McArdle on debt in America

[Economist video]

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The best option is probably to tie the size of Medicare benefits
to a person's lifetime income, which is relatively easily measured
and hard to game, rather than to one's income or assets in any
current year. In essence, higher earners would receive lower
benefits instead of facing the prospect of higher taxes, as current
trends predict.

-- Tyler Cowen

Economic View
Means Testing, for Medicare
By TYLER COWEN
Published: July 20, 2008
No matter who sits in the Oval Office next year, there won't be many degrees of freedom in the federal budget. The main problem: Medicare.

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The RC-C section in a FDIC CALL report shows loans secured by
real estate. Manually add up the various detail lines in RC-C,
subheading 1, to get the totals.

Total Assets - $2.118B
(RC-C.1) Loans secured by real estate $1.360B ( 64.2% )

Where does one get the RC-C.1 data?

Each bank submits CALL data to the FDIC on a quarterly basis.
The data usually becomes available 15-30 days after the quarter
ends.

Search for banks and download/view as PDF data at the FDIC
Institution Directory.

[Via CR/Comments]

Posted by at 7:35 AM | Permalink | Comments (0) | TrackBacks (0)

Decreasing marginal utility of stuff is an argument against
large current investments in climate change mitigation.
Basically, future generations will (presumably) be richer
than us. So, our sacrificing now to help them amounts
to a regressive intergenerational redistribution.

-- Overheard.

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Update 2008: Fama and Barro are still contenders.

Who will win the Nobel Prize in economics ?
Coruscation presents the short list:

Eugene Fama
Robert Barro
Jagdish Bhagwati (with Amy Chua)
Oliver Williamson
Sargent and Wallace
Jean Tirole
Lars Hansen
Walter Block and Naomi Klein

See also MR and GM.

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Efrons Dice are like Rock Paper Scissors
for the expected utility theorist.

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Several comments have criticized Krugman for shifting his position,
but I think what has shifted is the second part. He still knows all the
models, and the models he prefers still work as well as ever. But as
for guessing which applies right now in the face of insufficient
information, all he can do is place a wager. It might be better than
most non-economists can do, but it might not be that much better,
and it might be worse than some people can do out of just happening
to have the right kind of intuition for the current situation--or simply
holding doggedly to the same single bullet theory until it finally
happens.

From Krugman Was An Economist

Update 2007 Sept: What's not to like about Paul Krugman.

Posted by at 6:10 AM | Permalink | Comments (0)

Digital Money Forum keeps on top of electronic payments.
Example: ATM anniversary.

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New Papers at National Bureau of Economic Research (NBER).

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Paymentswatch, an early adopter consumer guide to electronic payments.

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digitaltransactions archives on electronic payments.

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Aneace Haddad on interpayments systems, settlements, transactions and
merchant banking.

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banktechnews about payment, transactions and settlements.
Blocking ACH Fraud and debit filters

Continue reading "Bank Tech News" »

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bankersonline resource for banking regulation and practices.
Example: HMDA tour (eg Borrower Isn't
Homeowner, HMDA Reportable ? )

Continue reading "Bankers Online" »

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paymentsnews, example of mobile-phone based transactions.
Excellent design.

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linkdumponpayments, very Dutch: unknowingly satisfied.

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Accrued Interest aka accruedint, smart about finance and economics.
Why Home Depot should borrow more.

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atbozzo, curmudgeonly economist.

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Susan Athey's applied econometrics and heterogeneity of mentorship
wins a Clarke medal, awarded to the most accomplished economist
nearing 40 and is the most distinguished prize short of a Nobel.
Bio.

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In a group health plan, the employer typically pays a large
share of the premium, so most employees sign up as
soon as they are eligible, regardless of their health status.

The health plan covers a mix of sick and healthy workers.
By contrast, individuals and independent contractors are
more likely to defer coverage until they need it, so the pool
of people insured is, over all, less healthy. Sick people
consume more health care. As a result, the cost to insure
them is higher.

Janet S. Trautwein, executive vice president of the National Association
of Health Underwriters, which represents insurance agents and brokers.

Posted by at 5:58 AM | Permalink | Comments (0) | TrackBacks (0)

economist freeexchange economics and public policy.
Adverse selection in healthcare, about inequality.

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Dean Baker: business reporting is not not leftish enough.

Posted by at 2:23 AM | Permalink | Comments (0) | TrackBacks (0)