Assorted Links (10/31/2010)

Here’s a list of articles that I have been reading lately:

Tuesday’s National Economic Referendum

www.realclearmarkets.com

“Over the almost 40 years that I’ve been eligible to vote there have been only two elections in which economic policy has so dominated public debate that social issues disappeared from view. One such election will take place on Tuesday. The other happened 30 years ago when Ronald Reagan challenged incumbent Jimmy Carter for the presidency.”

More Evidence on Why the Stimulus Didn’t Work

Johnbtaylorsblog.blogspot.com

“The most debated issue is the size of government purchases multiplier. Suppose that the government purchases multiplier is 1.5… 1.5 is at the upper range of estimates, and was used in a paper by Christina Romer and Jared Bernstein to estimate the impact of the American Recovery and Reinvestment Act of 2009 (ARRA). However, John Cogan, Volker Wieland, Tobias Cwik, and John Taylor found that the multiplier in the case of ARRA was much smaller, around .7. Robert Barro argues that it is zero. So there is debate.”

How to Reform Education

online.wsj.com

“Michelle Rhee and Adrian Fenty on what they learned while tackling Washington, D.C.’s failing public schools.”

Making the world a better place

cafehayek.com

“Right now, a child is crying. A blind woman is walking the streets of New York asking for help at an intersection. A beggar has his hand out. A classroom full of students awaits the teacher’s entrance. Someone’s heart is breaking. A friend’s wife is in the hospital and he finds himself overwhelmed in so many ways. Someone needs you. Do you help? Do you look the other way? If you help, how do you help? With all your heart and soul? Or are you bitter or bored or distracted? Is your phone ringing? Or are you checking your email while you’re listening to a friend’s troubles? Can you find a reason to do what is easy and what is best for you? Or do you help?”

Charles Lane – Obama’s electric-car cult

www.washingtonpost.com

“Maybe it was karma, but the Volt’s launch coincided with publication of a 72-page report by J.D. Power and Associates that confirmed, in devastating detail, what many other experts have found: Electric cars still cost too much, even with substantial federal subsidies for both manufacturers and consumers, to attract more than a handful of wealthy buyers – and this will be true for at least another decade. What little gasoline savings the vehicles achieve could be had through cheaper alternative means. And electrics don’t reliably reduce greenhouse gas emissions, since, as often as not, the electricity to charge their batteries will come from coal-fired plants.”

The Economic Way of Thinking: Red States with a Bad Case of the Blues

ewot.typepad.com

“The Tax Foundation just released their updated State Business Tax Climate Index (click on the map above for an easier to view version). New Mexico (-10), Alabama (-9), and Connecticut (-9) had the biggest year-over-year declines in rankings; Illinois (+7) enjoyed the biggest improvement primarily because states similar to it raised taxes while Illinois kept taxes fairly constant this past year. South Dakota enjoys the best ranking; New York has the worst ranking. When we look at southern states, they clearly seem to have a case of the blues. That is, they’re way more red in their rhetoric (and when it comes to social issues) than they are in reality. ”

The Cost in Jobs of Doing Business With China

blogs.wsj.com

“Does trade with China really cost the U.S. 2.4 million jobs? Some economists say the oft-cited number doesn’t square with economic reality.”

ObamaCare and Voters

online.wsj.com

“The Wall Street Journal writes that Clinton and Obama told Democrats it would be popular. Whoops.”

Requiem for the Pelosi Democrats

online.wsj.com

“In The Wall Street Journal Weekend Interview, Democratic Rep. Brian Baird says that House Speaker Nancy Pelosi and the Obama administration are unpopular because they failed to spur job creation.”

Key Bloc Of Voters Flocks to The GOP

online.wsj.com

“The Democrats’ final push to woo undecided voters appears to have fizzled, potentially putting dozens of competitive House races beyond reach and undermining the party’s hopes in at least four toss-up Senate seats, according to party strategists and officials.”


Prediction Markets and the Upcoming Midterm Elections

Now that we are on the eve of the midterm election, it is worthwhile considering what the “prediction markets” are indicating. 

In an earlier posting entitled “What are the prediction markets saying about the economy?”, I lay out some of the technical details concerning how the intrade.com market in particular works (there are other similar markets; e.g., the Iowa Electronic Market at the University of Iowa’s Tippie School of Business, but my sense is that intrade.com is the dominant player in this “space”).  The intrade.com contracts are very simple – each contract specifies some sort of state-contingent event, along with a date at which the contract matures.  The payoff is $10 if the contingent event occurs, and $0 otherwise.  Prices are quoted in terms of Intrade “points”, and each $1 payoff is worth 10 Intrade points, so a $10 payoff is worth 100 Intrade points. This way, the market prices resemble probabilities (technically, these are actually “Arrow-Debreu” prices), but for practical purposes, it is reasonable to interpret these prices as probabilities.

Here, I reproduce the Wednesday, 10/28 implied probabilities associated with various political contracts. The GOP House Control contract currently indicates nearly a 90% probability that the GOP will win control of the House of Represenatives. In my opinion, the more interesting contracts are the ones indicating the number of House seats gained by the GOP and Senate Seats held by the GOP.  The current make-up of the U.S. House of Representatives is 256 Democrats, 178 Republicans and one vacancy (256+178+1=435), so if the GOP gains 50 seats (80% probability), it will have a majority of 22 House members.  In the Senate, the markets indicate a nearly 80% probability of 48 GOP seats.  However, given that there are at least two “independents”, this would seem to indicate “gridlock” at the very least!

Control of the House of Representatives

Control of the Senate

Democrats

11.1%

Chart

Trade

Democrats

55.0%

Chart

Trade

Republicans

88.8%

Chart

Trade

Republicans

12.5%

Chart

Trade

Neither

0.1%

Chart

Trade

Neither

32.5%

Chart

Trade

Number of House seats gained by the GOP

Senate Race Spotlight: CONNECTICUT

20 Seats Gained

97.7%

Chart

Trade

R. Blumenthal (D)

93.5%

Chart

Trade

 

30 Seats Gained

96.0%

Chart

Trade

Linda McMahon (R)

6.5%

Chart

Trade

 

40 Seats Gained

87.2%

Chart

Trade

Senate Race Spotlight: WEST VIRGINIA

 

50 Seats Gained

79.9%

Chart

Trade

Joe Manchin (D)

52.8%

Chart

Trade

 

60 Seats Gained

43.9%

Chart

Trade

John Raese (R)

47.2%

Chart

Trade

 

Number of Senate seats held by GOP

 

45 GOP Seats

97.5%

Chart

Trade

 

46 GOP Seats

96.9%

Chart

Trade

 

47 GOP Seats

89.0%

Chart

Trade

 

48 GOP Seats

78.9%

Chart

Trade

 

 

49 GOP Seats

48.5%

Chart

Trade

 

50 GOP Seats

30.0%

Chart

Trade

 

 

51 GOP Seats

15.0%

Chart

Trade

 

Assorted Links (10/29/2010)

Here’s a list of articles that I have been reading lately:

Understanding Regime Uncertainty

cafehayek.com

“Writing in today’s Wall Street Journal, Robert Reich reveals his misunderstanding of regime uncertainty. Unleashing this destructive uncertainty requires more than simply changing in major ways government’s role in the economy. Instead, regime uncertainty is increased by changes that portend into the indefinite future a greater degree of arbitrary government economic intervention.”


N.T. Wright Refuses to Choose


www.robmoll.com


“Former bishop turned professor says he opposed making a choice between his care for the church and his academic pursuits.”

The Biggest Election Myths of 2010

online.wsj.com

“In The Wall Street Journal, Potomac Watch columnist Kimberley Strassel says that Democrats will lose big in the midterm because of the Obama agenda, not because of secret campaign donations or extremist tea partiers.”


A Little Lady Predicts a Big Win


online.wsj.com


“The Republican tide may even reach the Jersey Shore, Peggy Noonan writes.”

Abortion, Conscience, and Doctors « Public Discourse

www.thepublicdiscourse.com

“If people are not prepared to offer legally permitted, efficient, and beneficial care to a patient because it conflicts with their values, they should not be doctors,” declares Julian Savulescu of Oxford University. Savulescu’s position, known as the “incompatibility thesis,” contradicts important statements about the rights of conscientious refusal articulated by the American Medical Association, U.S. federal law, and international law.”

College for Those Who Can’t Learn

www.americanthinker.com

“It is not easy being a connoisseur of educational foibles — just as one is recovering from the latest foolishness, along comes something new, and it’s back to the anti-depressants. The latest installment of Educators Gone Wild is the push to enroll the “intellectually disabled” in college. We are not talking about at…tracting eccentrics; these recruits are youngsters with Down Syndrome, autism, and other disabilities that seriously impede learning. This is college for those stymied by reading and writing.”


Brother, Can You Spare a Trill?


freakonomics.blogs.nytimes.com


“Economists Mark J. Kamstra and Robert J. Shiller propose a new tool for government financing: “trills” — i.e., shares in U.S. GDP.”

Warning: Retirement Disaster Ahead

online.wsj.com

“Don’t let the rally in the stock and bond markets fool you. Many Americans are still hurtling towards a retirement train wreck, writes Brett Arends.”


Tax Breaks For The Wealthy Do Boost Economy – Forbes.com


forbes.com


“Congress is biting the hand that feeds long-run economic growth by raising tax rates on the rich.”

Stocks and Bonds Are Bullish on the Economy – BusinessWeek

businessweek.com

“Strong earnings for businesses in a wide range of industries, from CSX to GE to Cargill, may indicate faster economic growth in 2011.”


Democrat Estate Tax Will Trip Next Secretariat: Amity Shlaes


www.bloomberg.com


“The estate tax is one topic getting lost in the dust of the midterm races. That’s a pity. This tax, now quiescent, is set to roar back like a stallion in 2011 if lawmakers don’t rein it in with new legislation.”

Time for Bailout Transparency

online.wsj.com

“In the Wall Street Journal, Matthew Winkler, the editor in chief of Bloomberg News, writes that big banks don’t want you to know which of them went to the Fed for emergency help.”


The Rage Against Citizens United


online.wsj.com


“In The Wall Street Journal, Wonder Land columnist Daniel Henninger examines why Barack Obama gave the Supreme Court a public tongue-lashing.”

Shelby Steele: A Referendum on the Redeemer

online.wsj.com

“Shelby Steele writes in The Wall Street Journal that Barack Obama put the Democrats in the position of forever redeeming a fallen nation rather than leading a great one.”


Stock market aversion? Political preferences and stock market participation


www.sciencedirect.com


“We find that left-wing voters and politicians are less likely to invest in stocks, controlling for income, wealth, education, and other relevant factors. This finding from unique data sets in Finland is robust both at the zip code and at the individual level. A moderate left voter is 17–20% less likely to own stocks than a moderate right voter. The results are consistent with the idea that personal values are a factor in important investment decisions, in this case leading to “stock market aversion.” The results are inconsistent with alternative explanations such as wealth effects, risk aversion, reverse causality, return expectations, or social capital.”

Predicting the Midterm Elections: A Freakonomics Quorum

freakonomics.blogs.nytimes.com

“This year’s midterm elections promise to be a bit more eventful than usual, with predictions of seismic change in Congress and in many statehouses, most of it in a blue-to-red direction. But predictions aren’t elections; and even if the predictions hold true, what happens next?”


Assessing the Power of One at the Polls


economix.blogs.nytimes.com


“You’re more likely to be involved in an election-year car crash than to cast a deciding vote, an economist writes.”

Shipping Out Jobs

www.nypost.com

“With campaign season comes predictable charges that Candidate X favors “tax breaks for corporations that ship US jobs overseas.” It’s a bogus claim.”



QEII, Like QEI, Isn’t Monetary Ease


www.realclearmarkets.com


“As is well known now, the Bernanke Fed is set to begin another round of so-called “quantitative easing” in order to stimulate demand. Unfortunately for Bernanke & Co. simply adding liquidity to an economic system does not promote growth. In fact, the relationship is reversed: it is new demand that stimulates the need for new liquidity, not liquidity that sparks demand.”

The Foreclosure Crisis and the Future of American Communities

online.wsj.com

“In The Wall Street Journal, Business World columnist Holman Jenkins, Jr. says that the attempt by journalists and state attorneys general to cast banks as villains will only make the housing crisis harder to surmount.”

Private Social Security Accounts Are Still a Good Idea


online.wsj.com


“In The Wall Street Journal, William G. Shipman of the Cato Project on Social Security Choice and Peter Ferrara of the Institute for Policy Innovation write that a couple who worked from 1965 to 2009 would have beat the government payout by 75%.”

Fouad Ajami: Karzai and the Scent of U.S. Irresolution

online.wsj.com

“In The Wall Street Journal, Fouad Ajami of Johns Hopkins University writes that the brutal facts about Afghanistan are these: It is a broken country, a land of banditry, of war of all against all, and the need to get what can be gotten from the strangers.”

Assorted Links (10/26/2010)

Here’s a list of articles that I have been reading lately:

No Second Thoughts

www.nytimes.com

“In spite of the polls, the Democrats are quite sure somebody else is to blame.”

Study: Homeowners Rates Still Inadequate » Insurance Industry Blog

www.iii.org

“The majority of U.S. homeowners insurance rate filings approved by regulators still do not adequately recognize the cost of capital needed to protect policyholders in the case of a large catastrophic event, according to an annual review by Aon Benfield Analytics.”

What’s Your Econ 101 Professor Worth?

freakonomics.blogs.nytimes.com

“The Texas A&M University system has embarked on a new accountability program. For every department – indeed, for every professor – revenue generated and cost incurred are calculated; and profit – the difference – is reported. Each professor is presumably supposed to have a marginal revenue product above his/her compensation.”

Cash for Clunkers in a Macro Context

johnbtaylorsblog.blogspot.com

“Using the Mian-Sufi results, which are based on a comparison of different regions of the United States, I estimated the amount by which total personal consumption expenditures first increased as people were encouraged to trade in their clunker and purchase new cars, and then declined because many of the trade-ins were simply brought forward.”

Detecting Political Momentum Is Harder Than You Think

freakonomics.blogs.nytimes.com

“Over at FiveThirtyEight.com, Nate Silver has a post attempting to debunk the idea that there is momentum in political campaigns. But I think he’s wrong. And his post provides a fun opportunity for a simple statistics lesson on the difficulty of discovering momentum.”

Tim Geithner’s Global Central Planning

online.wsj.com

“In The Wall Street Journal, University of Chicago Professor John Cochrane criticizes the public letter by U.S. Treasury Secretary Tim Geithner, who called for the IMF to manipulate exchange rates in order to rebalance the world economy.”

Can the U.S. Avoid Europe’s Mess?

www.realclearpolitics.com

“In Britain, where politics is more polite but the problems are perhaps just as dire, the government is proposing budget cuts on a scale not seen for nearly a century.”

The Challenge of Forecasting the 2010 House of Representatives Election

online.wsj.com

“Less than two weeks before the election, there remain major divisions between forecasters about the outcome of the House races, reflecting the challenge of predicting politics.”

Google Uses Loopholes to Cut Taxes by $3.1 Billion – Video

www.bloomberg.com

“Google Inc. cut its taxes by $3.1 billion in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda. Google’s income shifting helped reduce its overseas tax rate to 2.4 percent, the lowest of the top five U.S. technology companies.”

How to Privatize the Mortgage Market – WSJ.com

online.wsj.com

“In The Wall Street Journal, Dwight Jaffee of the University of California, Berkeley, writes that Fannie Mae and Freddie Mac should be phased out and the mortgage industry privatized.”

The Rules Of the Game and Economic Recovery

www.realclearmarkets.com

Amity Shlaes, who is the author of “The Forgotten Man: A New History of the Great Depression” provides a cautionary tale concerning the strong parallels which exist between FDR’s Great Depression era policy initiatives and Obama’s Great Recession policy initiatives…

Putting a Price on Professors

online.wsj.com

“Should public universities care how much their faculty contribute to the bottom line?” I think the answer is probably yes, but not based upon the kind of myopic “analysis” that Texas A&M purports to do. The methodology seems to stack the deck in favor of adjunct faculty who teach required freshman and sophomore courses with large enrollments. If cost per student is used as the primary criterion, then why not do away with academic research entirely and just have a cadre of contract lecturers handling the “burden” of teaching undergraduates?

I doubt whether many graduate degree programs could possibly survive the Aggies’ cost-benefit analysis; what’s needed is some type of cost-benefit analysis which provides an unbiased assessment of the value added by “intangibles” such as the advancement of science and enhancement of the institution’s overall academic reputation…

Commentary: The Inequality Delusion

www.businessweek.com

“Americans think the U.S. has far more income equality than it has. They want it to be even fairer. Yet they hate the policies that would make it so.”

Can Yoga Be Christian?

online.wsj.com

The Chris Christie Clones

online.wsj.com

“In The Wall Street Journal, Potomac Watch columnist Kimberley A. Strassel writes that across the country, candidates are taking up the government-reform mantra embodied by New Jersey’s new governor.”

Tea Party to the Rescue

online.wsj.com

“Peggy Noonan writes in The Wall Street Journal on how the GOP was saved from Bush and the establishment.”

NPR’s Taxpayer-Funded Intolerance

online.wsj.com

“In The Wall Street Journal, Emilio Karim Dabul writes that all Americans, particularly those of Arab or Muslim descent, should protest the firing of Juan Williams.”

Google to Post the Dead Sea Scrolls – Copyright Infringement Claims Unlikely

www.vogelitlawblog.com

“Google will not be accused of copyright infringement by posting the Dead Sea Scrolls unlike the current litigation about Google’s Books Library.”

Charles Krauthammer – Obama Underappreciation Syndrome

www.washingtonpost.com

“Democrats have anxiety-induced Obama Underappreciation Syndrome.”

Intrade.com US Midterm Elections Market Update (Friday, October 22, 2010)

Control of the House of Representatives

Probability

Democrats

10.30%

Republicans

88.90%

Neither

1.00%

   

Number of House seats gained by the GOP

 

20 Seats Gained

97.70%

30 Seats Gained

96.00%

40 Seats Gained

93.90%

50 Seats Gained

73.00%

60 Seats Gained

37.00%

   

Control of the Senate

 

Democrats

58.70%

Republicans

16.10%

Neither

28.80%

   

Number of Senate seats held by GOP

 

45 GOP Seats

95.00%

46 GOP Seats

88.10%

47 GOP Seats

84.00%

48 GOP Seats

70.20%

49 GOP Seats

48.00%

50 GOP Seats

30.30%

51 GOP Seats

20.40%

   

Senate Race Spotlight: COLORADO

 

Michael Bennet (D)

37.60%

Ken Buck (R)

60.00%

   

Senate Race Spotlight: CALIFORNIA

 

Barbara Boxer (D)

70.10%

Carly Fiorina (R)

29.50%