Coyote Blog

Sorry for the lack of serious blogging, but I am not in the mood.  Local 81-year-old woman accused of hoarding and eating cats by Maricopa County Sheriff's Department.  Sheriff Joe and this woman are perfect for each other.

Via my daughter.  It's a suckers game to try to analyze what is popular on YouTube, but the view count for this video is just staggering.  It apparently also has about a thousand imitators.  If I am going to watch a cover video, why wouldn't I rather one with LA cheerleaders?  But I have to credit Harvard as a trendsetter.  Who knew there could be a whole new genre of videos about lip syncing pop tunes in a moving passenger van?

Yes, yet another group of school kids and their parents are battling it out over whose little darling should be valedictorian.   I like the approach taken by my son's high school.  All the seniors, on dates scattered through the year, must make a 10-15 speech to the school.  On anything.  This year there were speeches on topics ranging from the Holocaust to the banking crisis to "why I love my dog" to "why the rumors of my crying at that formal dance Freshman year when my date abandoned me are greatly exaggerated."

The speeches are a fun event.  The speaker's friends leave an offering of food and balloons on the stage.  When they are done, much of the school comes up on stage and congratulates them.  It is great experience, and (within the context of public speaking, which is stressful for many) the school works to lower the pressure on the kids -- in fact, there are no grades for the speeches that hit any transcript.

The only grading is simple -- whoever is judged to have given the best speech, both in subject matter and in presentation, gives the speech at graduation.

Of course, this could only work at a private school, where the school and teachers can actually exercise judgement without having to defend their decision in court.

PS-  My son's speech included, among other topics, one of the four subjects listed above.  If you really must know which, see the 23-minute mark here.

Apparently the news of the week is that the letter grade "A" is now the most common.  Mark Perry has more on college grade inflation.

I am actually a fan of the grading system at Harvard Business School when I was there.   15% of the students in each course get the top grade (category I) -- no more, no less.  10% get the bottom grade (category III) -- again by rule, no more and no less.  All the rest are in the middle.  It effectively acknowledges that for most folks, the point is to demonstrate you have satisfactorily learned the course material, while still allowing folks to distinguish themselves on both ends.  Budding young executives who complain that it is unfair to automatically "fail" the bottom 10% of each course are reminded that this is exactly how many Fortune 500 companies run their HR systems, seeking to constantly weed out the bottom 10%.

Update:  The argument usually is that students need high grades to compete with other kids from grade-inflated schools in the marketplace.  I just don't think this is true.  Colleges themselves deal with this all the time in admissions.  When they get a high school transcript, attached to that transcript is a fact sheet about the high school that gives its distribution of grades.  That way the recipient can discount the GPA as appropriate.  Every company doing hiring should demand the same of colleges.

Here is a personal anecdote.  My son Nic's school grades hard.  Something like 2 kids over the last 2 decades have graduated with a 4.0.  One could argue my son's grades could have been higher at another school, but knowledgeable consumers of high school GPA's know how our school works and we have never felt he somehow was at a loss due to the school's grading policies (but Oh God can type A parents fret about this incessantly among themselves).   [edit:  took out brag about my son.  Nothing more boring than other people bragging on their kids.]

It is bad enough that great series like Game of Thrones and Downton Abbey whiz by in just 10 episodes or so, making us wait another year for more.  But Sherlock has to be the ultimate tease, giving us just three (admittedly epic) episodes each season.  I mean, every three episodes there is a season-ending cliffhanger.

Somehow the picture of my son posing with one of Joe Arpaio's new recruits got messed up in an earlier post.  I know you all were desperate to see it, so here is the repaired image.

No, not the Affordable Care Act, though we need to get rid of that, too.  In this case I am talking about the Arizona Commerce Authority.  This is one of those ubiquitous local / state "development" efforts that mainly consists of handing out corporate welfare to a few well-connected companies who threaten to leave or build their new plant somewhere else.

Dru Stevenson at the Privatization blog has been nice enough to invite me to blog from time to time over at his place, despite the fact that we do not always agree.  But we are in total agreement on this effort:

Even from a conservative, free-market perspective, government subsidies for businesses distort markets, foster monopolies, undermine competition, and reduce efficiency.  The same complaints that business advocates make about the welfare system apply to government programs to help businesses - the vicious cycle of dependence, the lack of incentive to work hard or face difficult choices, the inevitable favoritism (some businesses get taxpayer subsidies, others miss out, and those that do have an unfair advantage over competitors who might otherwise win in a free marketplace).  It has a chilling effect on market-driven innovation, improvements in efficiency, or "creative destruction." The subsidies can cause inflation as the local market prices correct for the infusion of unearned money. The inherent risks in entrepreneurship get externalized onto taxpayers rather than internalized by those who hope to reap the profits if they get lucky.  The conflict-of-interest problem is not just that the businessmen will engage in whitewashed embezzlement, diverting funds to their own businesses or friend's businesses (or to their suppliers, in hopes of getting discounted inputs).

The problem is also that other firms - firms that might be more efficient, providing better goods and services at lower cost - face higher entry barriers when the existing holders of market share are bolstered by government handouts.  In other words, I see little difference in the morality of handouts for poor individuals/families and handouts for businesses.  There is a spiritual virtue in helping the poor, of course, but also a virtue in helping those who are hard-working and who have made sacrifices to become successful.  The problem for me is the unintended consequences of government subsidies for entities that are supposed to compete and succeed in a free market.

I encourage you to check it all out.

The reason this made his privatization blog is that Arizona has actually privatized this function to an independent business group.  Though an advocate of privatization in many realms, this makes me queasy for a couple of reasons:

• I can't get excited about privatizing an activity that should not be occurring, or is, as Stevenson so ably explains, actually detrimental
• I am comfortable privatizing operational things -- landscaping, running buildings, cleaning bathrooms, etc -- but privatizing the handing out of political patronage is an odd one for me and I don't really know how to think about it.  On the one hand, this is essentially what the PPACA (Obamacare, the other ACA) is doing with difficult decisions like determining which procedures should be on the must-cover list for insurers by putting them in the hands of independent groups.  But I have criticized those provisions of the PPACA for lack of accountability, and I believe the same arguments apply here

The only quibble I have with the criticism of the Arizona group is that, like many criticisms of privatization, it does not actually make a comparison to government-run efforts.  Sometimes even mistake-riddled private efforts can be better than disasterous public management.  For example this criticism:

According to Arizona PIRG's report, only two of the 13 incentive programs even track how many jobs or other benefits they generate -- and none disclose that information publicly. For all its business-savvy rhetoric, the ACA can't demonstrate performance if it doesn't track results. Only one program publicly discloses what companies promise to deliver for their subsidies. Worse still, only 4 of the 13 programs even disclose which companies received subsidies or how much. And when companies that receive subsidies fail to deliver on promised economic development benefits, the ACA can reclaim taxpayer subsidies for only one program, and there is no way for the public to see if this ever happens.

None of this is good, but note that for most similar state-run development programs, the number of programs that track their results is usually less than 2 in 13, the number is usually none.  And the fact that there is some sort of clawback provision on funds is better than exists in most state relocation and other subsidy programs.  In fact, most third-party reviews of state-run corporate relocation and plant location subsidy awards show that they universally fall well short of their pr0mised benefits, though this analysis is really hard to do because there is so little transparency in state activities of this sort.

My quibble, then, is that I am not sure the bad results here are a function of privatization or just the activity itself, as state-run efforts seem to do no better.

Update:  I have written before about government corporate subsidies and attempts at venture capital investment in the context of the "big shot" effect.  Many times I have come to suspect the biggest beneficiary of these programs is to the administrators themselves, who have no money of their own and wouldn't ever be trusted to manage a private portfolio but get to act as "big shots" with other peoples' money.  They get the psychic benefit of being little junior Donald Trumps.  This seems especially evident to me with Glendale, AZ, but seems to be an element of all these schemes.

There is an argument going around, mainly on the Left, that the Supreme Court cannot overturn the PPACA (aka Obamacare) because it is just too major and significant.  It's sort of OK to overturn minor legislation at the margins, but if Congress does something really big, it deserved the Court's respect and acquiescence.

But it strikes me that the larger and more comprehensive a piece of legislation is, the more likely it is to run afoul of Constitutional restrictions.  And this is the case no matter what theory one holds about the Constitution.

I am not a Constitutional scholar nor a lawyer, but I would describe two schools of thought on the Constitution.  The first is that the Constitution gives the Federal government certain enumerated, defined powers beyond which it may not stray.  The second is that the Constitution gives citizens a number of enumerated, defined rights (e.g.  First Amendment freedom of speech) such that the Federal government can do most anything it wants as long as it does not trample on these defined rights.   (I would argue that the first interpretation was the clear meaning of its authors, and the second interpretation is probably the majority view today of average Americans today).

But under either interpretation, larger, more sweeping legislation is more rather than less likely to cross a boundary that circumscribes Federal power.  Whether such a boundary has been crossed by this legislation is another matter, but the argument that large legislation per se should be exempt from the possibility of being overturned on Constitutional grounds does not hold water.

This article from the Chicago Tribune on fire retardants has everything, from regulations that benefit a small industry group to tort lawyers effectively forcing the propagation of a bad standard to playing the race card and the "for the children" card in policy debates.   Here is a bit of history I did not know:

These chemicals are ubiquitous not because federal rules demand it. In fact, scientists at the U.S. Consumer Product Safety Commission have determined that the flame retardants in household furniture aren't effective, and some pose unnecessary health risks.

The chemicals are widely used because of an obscure rule adopted by California regulators in 1975. Back then, a state chemist devised an easy-to-replicate burn test that didn't require manufacturers to set furniture on fire, an expensive proposition.

The test calls for exposing raw foam to a candle-like flame for 12 seconds. The cheapest way to pass the test is to add flame retardants to the foam inside cushions.

But couches aren't made of foam alone. In a real fire, the upholstery fabric, typically not treated with flame retardants, burns first, and the flames grow big enough that they overwhelm even fire-retardant foam, scientists at two federal agencies have found.

Nevertheless, in the decades since that rule went into effect, lawyers have regularly argued that their burn-victim clients would have been spared if only their sofas had been made with California foam. Faced with the specter of these lawsuits — and the logistical challenge of producing separate products just for California — many manufacturers began using flame retardant foam across their product lines.

The "if only the manufacturer had used technology X, little Sarah would not be dead" argument should be very familiar to readers of Walter Olson's blog.  Part II of the story argues that the Tobacco industry helped reinforce this story to shift the blame for fires started by cigarettes to the furniture (can't any of this be, you know, the person's fault who dropped burning items onto flammable items?)

It also, by the way, has plenty of elements of environmental panic in it.  For example:

"When we're eating organic, we're avoiding very small amounts of pesticides," said Arlene Blum, a California chemist who has fought to limit flame retardants in household products. "Then we sit on our couch that can contain a pound of chemicals that's from the same family as banned pesticides like DDT."

I am open to believing that flame retardant chemicals pose some harm to humans, though one must posit some way for them to get out of the foam and into people for it to be harmful (just existing nearby is not enough).  Further, being from the "same family" as another chemical is meaningless, particularly as compared to DDT which was banned for suspected thinning of bird eggs and not for demonstrated harm to humans.

I finally read through all four parts  of the story, and its interesting to compare the approaches to science.  The authors make a really good case that the science of flame retardants effectiveness is deeply flawed and that lobbying pressure and actions in tort cases have led to their expanded use rather than any particular benefit.

But the authors' scientific standards change wildly when it comes to their own side's science (I write it this way because the authors clearly have  a horse in the race here, they want these chemicals banned). I kept waiting for their bombshell study that these chemicals posed a danger, but we never get it.  All we get is the typical journalistic scare quotes about trace quantities of these chemicals being found in house dust and in certain animals.

OK, but with improving detection technology, we are constantly finding traces of chemicals at tiny levels we did not know were there before.   How much risk do they pose?  We never find out.  It would be nice to know.  I'm convinced I would rather not have this crap in my couch, but there has to be a better standard for legislation than this.  Ironically, the whole point of their story is to highlight regulation pushed by small groups based on bad science, and their response is to ... mobilize a group to push different legislation based on bad science.    There is a heck of a lot of "OK for me but not for thee" here.

Here is what is really going to happen:  After years of being stampeded by tort lawyers into putting these chemicals into furniture as a defense against "you should have..." lawsuits based on bad science, these same furniture makers are now going to be sued by people claiming the chemicals make them sick based on bad science.   And yet another industry will find itself in a sued-if-you-do-sued-if-you-don't trap.

The one group never interviewed in all four parts were furniture makers.  It would have been fascinating to get an honest interview out of them.  I am sure they would say something like "legislatures just need to tell us what they freaking want, chemicals in or out, and then shield us in the courtroom when we follow the law."

Update:  The updates to the story are classic.  After describing how the race card was abused in what should have been a straight up fight over chemical effectiveness and safety, the authors then pen a story called "Higher Levels of Flame Retardants in Minority Children."  It's OK, I guess, to play the race card in a scientific debate if it is for your own side.

People who genuinely care about African-Americans in this country should be supporting

• Decriminalization of drugs
• School choice

I spend my business life taking over operations from bloated public agencies, so I suppose I should not be surprised at this picture (via Carpe Diem)

The PPACA has a provision that private insurance companies cannot spend less than 80% of premium on care (vs. administration) or money has to be rebated.  I am not a big fan of this provision, believing a free market is a better mechanism for enforcing price and cost discipline than some arbitrary metric like this.

But, since Congress and this Administration thinks this is such a good idea, here is my modest proposal:  Public universities may not spend less than 80% of tuition directly on teaching of students, or else they must rebate excess tuition back to their students.

 Joe Arpaio Thinks Tennessean Who Said Satan Told Him to Kill "Birthers" Might Be After Him (source)

Wow, two loonies duke it out.  Except unfortunately, while Tennessee actually convicted their guy, we Arizonans elected ours to a high office.  To be fair to Arpaio, Eugene Cox did list him as second to die (behind Alan Keyes), though its unclear if anyone other than Arpaio's press agent really considers this a credible threat.  This is not the first time our fair city has spent hundreds of thousands of dollars defending Arpaio from various mythical threats.

One of the worst outcomes of the war on drugs has been civil forfeiture laws, which basically allow police to take your property and keep the proceeds, forcing the burden of proof onto you to prove that the property is not a result of or facilitator to criminal activity.  It is beyond me how such laws continue to be considered Constitutional, but the unfortunately the same justices that tend to protect property rights are the same one that seem to have an even stronger law and order streak.

Anyway, its good to be reminded just how awful these laws are, and Hit and Run has several recent examples here.

Update: Walter Olson has several more.

A guest blogger on Megan McArdle's blog writes:

Here's my first such idea:

Abolish Mortgage-Backed Securities (and Offspring)

CDOs and credit default swaps don't kill financial systems, mortgages kill financial systems. There has been altogether too much opproprium directed at CDOs, credit default swaps and other structuring techniques that spread financial contagion, and not enough directed at the underlying collateral. The record seems to be, however, that Dick Pratt was correct when he called the mortgage "the neutron bomb of financial products."

This makes no sense.  I don't have time for a comprehensive argument, so here are a few bullet points:

• His argument rests on the fact that mortgages have inherently hard-to-quantify risks.  I don't believe that, given how long the financial system worked just fine writing mortgages, but if this is really the case, shouldn't he be proposing to ban mortgages, not just mortgage-backed securities?
• Holding the higher-quality tranches of an MBS simply cannot, by any mechanism I can fathom, be more risky than holding a lot of individual mortgages.  In fact, for a given bank, it should spread the risk geographically and to a larger number of mortgages.
• The first actual problem with MBS's is that the default risks were under-estimated by those packaging the securities.  Basically, the top AAA tranches were too large (or too wide, I think the term is).  This is correctable, and likely already has been corrected (In fact it had more to do with the actions of the government-enforced credit rating oligopoly than with actions of bankers).
• The second actual problem with MBS's is that the default risks were under-estimated by government regulators world-wide when in Basil II and the equivalent US law changes c. 1991, MBS's were given very preferential capital requirement treatment.  Basically, MBS were treated, for capital requirements, as if they were nearly as risk-free as US treasuries, providing incentives for banks to over-weight in them.
• The largest problem was the reduction in credit requirements for mortgages.  Increasing LTV from 80% to 97% or 100% or even 100%+ hugely increased the risk of default, and no one really took that into account in MBS packaging or bank capital requirements.  Bank capital requirements for mortgages and MBS were set as if they were European style recourse loans with 80% LTV.  But the same regulations and requirements applied to MBS built on US-style non-recourse loans with 97% LTV, which is crazy.

Here is a better plan:

1. Narrow the AAA tranches of MBS
2. Fix bank capital requirements vis a vis mortgages and MBS
3. Stop encouraging high loan to values on mortgages

Veronique de Rugy is doing an awesome job debunking the myth that European countries have cut spending in any meaningful way, and that the "austerity" that Krugman et. al. keeping going on about mostly consists of raising taxes.  Perhaps because they so desperately want to raise taxes in the US, Krugman and company seem willfully blind in recognizing the tax increases in Europe and their negative consequences.

George Lucas is tired of fighting Marin County over developing his land there for business use.  This may be unfair, because I don't really know much about George Lucas's politics, but my bet is that he is a typical wealthy liberal who supported all these sorts of restrictions on everyone else, until they applied to him.  Anyway, he is pushing a new plan, one sure to highlight the absolute hypocrisy of more-liberal-than-thou Marin County residents  (NYT via Reason)

Mr. Lucas said he would sell the land to a developer to bring "low income housing" here.

"It's inciting class warfare," said Carolyn Lenert, head of the North San Rafael Coalition of Residents.

Mr. Lucas said in an e-mail that he only wanted "to do something good for Marin," waving away accusations of ulterior motives.

"I've been surprised to see some people characterize this as vindictive," he said, adding that there was a "real need" for affordable housing here. "I wouldn't waste my time or money just to try and upset the neighbors."

Whatever Mr. Lucas's intentions, his announcement has unsettled a county whose famously liberal politics often sits uncomfortably with the issue of low-cost housing and where battles have been fought over such construction before.

My son had a brush with Lucas-inspired state authority last week:

This will only really be compelling to Princeton grads out there, but I loved this video (HT Maggies Farm).

Almost certainly the only rap video ever that uses video from the P-rade.

This is my favorite chart I have seen in a while:

I don't know how one would even think to graph these two variables, but it is an interesting picture of the life cycle of development, where infrastructure improvements are initially an important part of the development equation, and then fall off, percentage wise, as wealth is enhanced with softer goods.

Anyone off the chart on the high side are going to be what I would call the triumphalists, who do what Thomas Friedman seems to want and pour a disproportionate share of money into high-visibility monuments (e.g. tall buildings, dams, bridges, high speed rail, etc).  I don't see Dubai on here but if they were they might be off the top of the chart.

Zero Hedge links this chart to make a point they have made for a while about a massive bubble bursting coming soon to China, a position with which I agree (though the timing is always a question in such things -- the state has the ability to delay the reckoning at the cost of a worse crash when it eventually comes).

Disclosure:  I am short Chinese real estate and stock funds.

The Department of Labor called this morning, asking me to reconsider my refusal to participate in their monthly survey of employers.  One issue I had with the survey, of course, was that it was a time-consuming mess.  They called today to ask if I would respond monthly with just my employee counts.  I said no.  I gave them some variation of my answer that if I were a deer, I would not voluntarily provide my location and movement data to hunters.  So I suppose I can expect an audit sometime soon.

This is a long-time debate on this site, as I have argued against more intrusive government economic data gathering while the technocratic response has been to argue that if government is going to do certain functions, wouldn't it be better if its data were good.

I am happy to see that others feel the same way as me about government data gathering, as apparently there is a push back among Republicans in Congress on the Census Bureau gathering data beyond the Constitutional minimum.  I know on my Census response I filled in only my name, address, and number of family members at that residence and left everything else blank.

Most of you are familiar with the razor and blades strategy:  Give away or sell the razor below cost to ensure years of profitable razor blade sales.  We had a great example of this at AlliedSignal (later Honeywell) Aerospace where we pretty much gave Boeing the brake assemblies for the aircraft plus a free spare plus I think we put some cash in the box as well, all to get decades of guaranteed high price brake replacement business (courtesy in part to government regulation which made is extraordinarily difficult to the point of being impossible for anyone else to produce aftermarket parts).

So what I don't understand is, why is this company proposing to sell only the razors while inevitably leaving the blade sales to someone else:

The UK's biggest bookstore chain has announced that it will start selling Kindles alongside other digital services from Amazon. Waterstones stores will let Kindle owners digitally browse books in-store and link up with special offers, tying into the chain's plans for substantial renovations that would also include dedicated digital book areas and free WiFi.

One buys the books right from the Kindle interface.  I understand the issue that browsing books online is less satisfying than in a book store (but much more convenient), but I am not sure how they are going to make money.  Are Waterstone Kindle's coded to give Waterstones a share of each purchase?  I can't find anything like that in the media reports, but I would certainly demand that at Waterstones.  If not, this is like selling gift certificates for your competitor.

I will confess to being a book store free rider.  I shop airport book stores but if I see something I like, pull out my iPad at the gate and buy it.  Yes, I understand the appeal of physical books and it frankly pulled at me for years.  But having just gone on a trip with 100 pages to read in the third Game of Thrones book, the relief I felt in having both the third and fourth books on my iPad rather than carrying both physically  (think 800 pages or so each) was great.

I am currently sitting in Disney's best attraction, and it is almost empty: The lobby of the Grand Floridian Hotel, with their orchestra playing. Even if you don't stay here, find an excuse to stop here on the monorail one evening. great way to decompress from the running-with-the-bulls experience in the parks, and a better time machine than any of their rides.

Mike Rizzo writes:

A typical sovereign government can secure funds from three “legitimate” places.*What are these sources?

1. Taxes today.
2. Taxes tomorrow. In other words we can borrow money today in order to build our bridge and then use future tax revenues to pay for the debt tomorrow. By the way, if the government is in the business of actually producing valuable “public goods” then you can easily think of this as value enhancing.
3. Printing money. It’s not generally done this way, but in effect the monetary authorities can monetize the borrowing of a sovereign entity (how they do it is beyond the scope of this post). For simplicity, imagine instead that a central bank prints new bank notes from scratch, hands them to the Treasury, and then the Treasury spends them on goods and services. This is just another form of a tax, again beyond the scope of this post.

So, this is what the government budget identity looks like for “normal” countries:

G = T + the change in debt + the change in base money

I think this is a useful simplification, but I wanted to add a couple other refinements  (refinements by the way he did not neglect in his text, just did not put in the formula).  One other source of funds we have seen in Greece is what I would call Aid, which used to be humanitarian aid (think India in the 1970s) but today tends to be bailout money and debt forgiveness.  So we will write the equation

G = Taxes + ΔDebt  + Money Printing + Aid

But due to the Keynesian orientation of many commenters on the Greek and European situation, it becomes useful to expand the "taxes" term into some sort of base income, which I will just call GDP for simplicity, and some sort of tax rate t.  So then we get:

G = GDP x t + ΔDebt  + Money Printing + Aid

The Greeks can't print money (unless the EU does it for them) and at the moment no one in their right mind will lend to them without guarantees from stronger European countries (e.g. Germany).  If we call EU money printing for Greece or EU loan guarantee programs Aid, we get

G = GDP x t + Aid

As Rizzo noted, aid is drying up and Greek tax revenues are going down rather than up, so basically they are screwed.  The only out seems to be for Greece to exit the Euro and then, once on the drachma again, print money like crazy and inflate their way out of the debt.

But expanding the tax term reveals one more policy alternative that is being suggested.   Keynesians seem to believe there is a path out of this situation in Greece (or if Greece is too far gone, certainly in Italy and Spain) where money from some source  (aid, borrowing, whatever) is spent in the economy by the government in some way that is stimulative, thus increasing GDP and therefore taxes and allowing Greece to increase the money available to the government.  Since Aid is currently only be granted tied to "austerity" programs rather than stimulative spending, they feel Germany et al are following exactly the wrong course.

I am incredibly skeptical of this for two reasons, beyond just my general skepticism of Keynesian stimulus.  First, I have heard something akin to this in my personal experience.  For a short time in my life, during the Internet crazy period, I was brought in by some investors to look at their portfolio of languishing Internet plays (e.g. discountshoelaces.com)* and decide if they should keep pouring money in or shut down.  The plan I got from management was always - always - this stimulus approach.  They suggested that rather than cut back, the investors should give them a bunch of new money to really blow out the marketing effort, which would kick start their growth, etc. etc.

The problem was that they never, ever had a lick of evidence beyond just hope that the next $1 million would suddenly do what the last $10 million failed to do.  So we shut most of these efforts down.  Your first loss is your best loss, as they say.

Similarly, I don't think Keynesians can point to any example in history where this actually worked.   A country is drowning in debt, but suddenly a Hail Mary play of adding a huge chunk more to the debt and spending it on civil service worker salaries suddenly turned the tide.  Seriously, do people honestly think this will work?  Or are they just frustrated because they grew up with an assumption that there is always a public policy answer for everything and there just does not seem to be one here.

I have an emerging hypothesis, not backed by any evidence at this point, that the value of the Keynesian multiplier shifts as debt to total GDP increases.  I am not sure in actual practice it is ever above one, but if it were to be above 1 at 20% debt to GDP, it certainly is not going to be the same at, say, 150%.

There is nothing surprising or unpredictable about the current oil boom, except perhaps how far it has gotten in the face of an Administration that has done virtually everything it can to stop it  (thank god there is oil and gas under private land).  Your humble scribe, neither an economist nor an expert in oil markets, wrote way back in 2005:

Everything old is new again.  Back in the late 70′s, all the talk was about the world running out of oil.  Everywhere you looked, "experts" were predicting that we would run out of oil.  Many had us running out of oil in 1985, while the most optimistic didn’t have us running out of oil until the turn of the century.  Prices at the time had spiked to about $65 a barrel (in 2004 dollars), about where they are today.  Of course, it turned out that the laws of supply and demand had not been repealed, and after Reagan removed oil price controls and goofy laws like the windfall profits tax, demand and supply came back in balance, and prices actually returned to their historical norms....

 Supply and demand work to close resource gaps.  In fact, it has never not worked.  The Cassandras of the world have predicted over the centuries that we would run out of thousands of different things.  Everything from farmland to wood to tungsten have at one time or another been close to exhaustion.  And you know what, these soothsayers of doom are 0-for-4153 in their predictions. ...

The vagaries of reserve accounting are very difficult for outsiders to understand.  I am not an expert, but one thing I have come to understand is that reserve numbers are not like measuring the water level in a tank.  There is a lot more oil in the ground than can ever be recovered, and just what percentage can be recovered depends on how much you are willing to do (and spend) to get it out.  Some oil will come out under its own pressure.  The next bit has to be pumped out.  The next bit has to be forced out with water injection.  The next bit may come out with steam or CO2 flooding.  In other words, how much oil you think will be recoverable from a field, ie the reserves, depends on how much you are willing to invest, which in turn depends on prices.  Over time, you will find that certain fields will have very different reserves numbers at $70 barrel oil than at $25....

All the oil doomsayers tend to define the problem as follows:  Oil production from current fields using current methods and technologies will peak soon.  Well, OK, but that sure defines the problem kind of narrowly.  The last time oil prices were at this level ($65 in 2004 dollars), most of the oil companies and any number of startups were gearing up to start production in a variety of new technologies.  I know that when I was working for Exxon in the early 80′s, they had a huge project in the works for recovering oil from oil shales and sands.  Once prices when back in the tank, these projects were mothballed, but there is no reason why they won’t get restarted if oil prices stay high.

Postscript:  I really need to find new topics to blog about.  The adjacent article in 2005 included this, a frequent topic on this site.  I had not idea I was writing about this so long ago:

When health care is paid for by public funds, politicians only need to argue that some behavior affects health, and therefore increases the state’s health care costs, to justify regulating the crap out of that behavior.  Already, states have essentially nationalized the cigarette industry based on this argument.

I can't confirm this by Randal O'Toole is usually pretty much on top of Portland transit issues:

Portland’s TriMet agreed to allow transit workers to retire at age 55 after as little as ten years on the job and gave them and their families free medical care (with a $5 co-pay, no deductible) for life (plus 16 years after the retiree’s death for their families). As a result, health-care costs have grown from $18 million in 2000 to $68 million next year and projected to rise to $153 million–40 percent of the agency’s 2010 operating budget–by 2020.

There is only one reason to be concerned that fundraiser attendees might record the session -- because one knows the candidate is giving tailored and mutually contradictory messages to different groups.   Obama has a different speech, I suppose, for the 1% than he does for the 99%.   Which is no big surprise, since it is a practice as old as modern campaigning* and one I am sure both parties engage in.  But it is probably a larger issue for Obama -- when so much of a politician's campaign style rests on demonizing certain groups, groups that are also large campaign contributors, it must be a tricky business tailoring his message.

* footnote:  I leave this in a footnote because I don't want to be seen as breaking Godwin's law by bringing up the Nazis, but its almost impossible to talk about modern campaigning techniques in the age of mass media without mentioning them.  They pioneered many of the techniques used by about everyone nowadays.  One thing they did was to create focused messages for different groups -- tailors or farmers or city people or industrial workers or Catholics or whoever.  They were incredibly cynical in how they did this, even by modern standards, and didn't really care what the message was, and so ended up with wildly contradictory promises, e.g. promising farmers higher prices for their produce and promising urban laborers lower food prices.