Assorted Links (1/20/2012)

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

What the Top 1% of Earners Majored In

economix.blogs.nytimes.com

“The majors providing the best entree into the top income rank are pre-med, economics, biochemistry, zoology and biology.”

The GOP’s suicide march

www.washingtonpost.com

Quoting from this article by Charles Krauthammer, “Now, economic inequality is an important issue, but the idea that it is the cause of America’s current economic troubles is absurd. Yet, in a stroke, the Republicans have succeeded in turning a Democratic talking point — a last-ditch attempt to salvage reelection by distracting from their record — into a central focus of the nation’s political discourse.”

How Much the Rich Pay

online.wsj.com

Good article concerning the difference between the incidence of a tax and its actual economic burden. Since equity-related income (i.e., dividends and capital gains) gets taxed twice – at the corporate (35%) and personal (15%) levels, marginal tax rates faced by the Mitt Romneys and Warren Buffetts of the world (i.e., people whose income is derived primarily from investments rather than wages or salaries) is 44.75%, not 15%! Too bad Romney and Buffett don’t understand this – it is simple arithmetic…

The Greece Next Door

online.wsj.com

Sad story about my home state, Illinois, which in fiscal terms is the closest thing we have in the USA to our own “Greece”. Quoting from this article, “Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.”

Private Equity: Hero or Villain?

www.businessweek.com

Quoting from this article, “Two major academic studies published in 2011 allow us to examine the record of a broad swath of private equity (PE) firms on the two key questions: returns to investors and job creation.” The first study (cf. http://ssrn.com/abstract=1932316) documents that the record for returns to investors is stellar – 1.27 times the return on the SP500 during 1984-2008. The second study (cf. http://ssrn.com/abstract=1931170) concludes that “…private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment.”

Bain Capital Saved America

online.wsj.com

“In The Wall Street Journal, Wonder Land columnist Daniel Henninger writes that in the 1980s, the resilient U.S. economy saved itself from becoming Europe—and Bain was part of the rescue.”

A Short (Sometimes Profitable) History of Private Equity

online.wsj.com

“In The Wall Street Journal, historian John Steele Gordon writes that the industry may only date back a half-century, but purchases of distressed assets and leveraged buyouts are as old as capitalism.”

A Brief Note on SOPA and PIPA

afinetheorem.wordpress.com

This blog posting written by a PhD student from the Managerial Economics and Decision Sciences department at Northwestern University’s Kellogg School of Management does an excellent job of laying out the law, economics, and political economy underlying the Stop Online Piracy Act (SOPA, in the House of Representatives) and the Protect IP Act (PIPA, in the Senate).

Global Markets Play Key Role In Costa Concordia Loss

www.iii.org

Quoting from this article, “A Reuters report cites one industry analyst estimating the insured loss from the Costa Concordia at between $500 million and $1 billion. Meanwhile, Bloomberg News cites another analyst saying the insured loss could total as much as $800 million.”

Greek Disability Groups Angered by New Categories

www.nytimes.com

The government has expanded a list of recognized disabilities, angering groups who say many people face cuts because of austerity measures. Quoting from this article, “The new list gives pyromaniacs and pedophiles disability pay up to 35 percent, compared to 80 percent for heart transplant recipients.” Apparently the Greek government formally recognizes pyromania and pedolphilia, along with behaviors such as compulsive gambling and “isms” including fetishism and sadomasochism, to be disabilities which qualify people for disability insurance claim payments… I’ll have to see what The Onion has to say about this!

Santorum’s Tax Plan Doesn’t Add Up

www.nationalreview.com

Quoting from this article by economist Kevin Hassett: “Santorum has some good ideas — lowering the corporate tax rate, reducing the number of income-tax brackets, and expensing capital investment, to name a few. But the massive distortions introduced to favor manufacturing and the social engineering from radically higher exemptions are horrible tax policy.”

MLK’s Philosophical and Theological Legacy

www.thepublicdiscourse.com

Great article by my friend Kevin Stuart, who knows what he’s talking about whenever he writes about Aquinas! (since he spent the better part of a year in England studying Aquinas’ Summa Theologica…

The Grumpy Economist: News flash: Bernanke not clairvoyant

johnhcochrane.blogspot.com

Great insights from the Grumpy Economist (AKA U of C’s John Cochrane) who notes, among other things, “The real lesson is this: The smartest people in the room didn’t — couldn’t — see it (the housing crash and banking crisis) coming. The smartest people in the room won’t see the next one coming either.” Professor Cochrane’s conclusion: “…safety comes from better rules of the game, not finding just the right soothsayer to run the show.” Amen!

Does Money Really Buy Elections?

www.freakonomics.com

Fascinating podcast – by the way, the answer to the question, “Does money really buy elections?” is “not really all that much”. Actually, the ineffectiveness of the “dollars spent” variable is quite stunning; quoting from this article, “When a candidate doubled their spending, holding everything else constant, they only got an extra one percent of the popular vote. It’s the same if you cut your spending in half, you only lose one percent of the popular vote. So we’re talking about really large swings in campaign spending with almost trivial changes in the vote.”

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