EXCERPTS:
"WASHINGTON—The Obama administration on Tuesday backed a proposal to spend up to $6 billion more on subsidies for electric vehicles, amid renewed interest on Capitol Hill in measures to cut petroleum consumption in response to the Gulf of Mexico oil spill.
The proposals include more spending for research and development of car-battery technology, aid to utilities and homeowners to build recharging outlets, and consumer tax credits to offset the higher costs of battery-electric vehicles.
A bill drafted by Sens. Byron Dorgan (D., N.D.), Lamar Alexander (R., Tenn.) and Jeff Alan Merkley (D., Ore.) calls for the additional spending, and includes a provision that would establish up to 15 "development" communities to receive funds for infrastructure and other programs for plug-ins.
"The rest of the world is moving up quickly on this technology," David Sandalow, the Energy Department's assistant secretary for policy and international affairs, told a Senate hearing Tuesday. "The question before us is whether the United States will lead in this technology."
The proposal has drawn criticism from auto makers, which worry that it focuses on electric vehicles at the expense of other alternative technologies, and from Republicans who cite the need to cut government spending.
QUESTIONS:
Is the important question, "whether the United States will lead in this technology?" Shouldn't we also ask
1. Does the government know for sure that this is the best alternative technology?
2. How will subsidizing this alternative affect the incentive to develop other alternatives that might turn out to be better?
3. If this is the best alternative technology, should we always seek to be the leader? Should we, perhaps, think in terms of not just the benefits of leading but also the costs, and if the costs of leading exceed the benefits, choose to let someone else lead?
Wednesday, June 30, 2010
Oil Companies, Drill Operators Clash Over Idled Rigs - WSJ.com
EXCERPTS:
"Oil companies and drilling-rig operators are entering uncharted waters as they fight over who should pay for rigs idled by the recent U.S. offshore-drilling moratorium, and one case has already landed in court.
While offshore drilling could legally resume after a federal district court judge overturned the moratorium Tuesday, few if any oil companies are likely to go back to work until higher courts rule on appeals, officials at several companies said. Meanwhile, the unused rigs are costing them as much as $600,000 a day.
At least three oil companies are demanding early exits from long-term leases on five rigs in the Gulf of Mexico, alleging the ban on offshore drilling voided their contracts.
The drillers disagree, claiming the rigs could move to international projects or work in shallower waters, where the federal moratorium didn't apply.
***
But government interference is typically written into contracts only for operations in more uncertain political territory such as Venezuela and Nigeria, according to analysts and others familiar with oil-industry contracts.
They said it was unlikely most Gulf rig contracts anticipated an event like the six-month deep-water drilling moratorium instituted by President Barack Obama on May 27. That was five weeks after Transocean Inc.'s Deepwater Horizon rig caught fire and sank in the Gulf of Mexico, triggering the worst offshore oil spill in U.S. history.
"No one ever expected political risk in the Gulf of Mexico, but that's exactly what they've got now," said Michael Lynch, a consultant who has negotiated rig contracts for offshore drillers. He said he couldn't recall another rig-contract dispute involving U.S. political risk going to court, nor could several other longtime industry analysts.
Judge Martin L.C. Feldman of U.S. District Court in New Orleans overturned the drilling moratorium Tuesday, saying that plaintiffs, a group of oilfield-services companies, "established a likelihood of successfully showing that the Administration acted arbitrarily and capriciously" in issuing the moratorium.
***
Norwegian oil company Statoil ASA, which has signaled its plan to exit two rig contracts, owes Transocean nearly $600 million through October 2013 for one rig. Transocean has denied Statoil's right to an early termination, though the companies said they were still negotiating.
About 30 rigs could end up in similar disputes, and who pays will hinge on how the contracts define force majeure, a catchall term for uncontrollable events that halt work. Anadarko's contract with Noble, for example, defines force majeure as including "rules or regulations" that make "continuance of operations impossible," though Noble contends the rig has tasks it can perform other than drilling deep-water wells.
"We don't believe this is a true force majeure situation," said a Noble spokesman.
Neither the oil companies nor the drillers have much incentive to back down. Oil companies hope to avoid being stuck paying for rigs they don't need. Rig operators have come to rely on premium-rate deep-water contracts to boost earnings.
This situation illustrates an extremely important aspect of the real world: it is a very complicated place filled with uncertainty. A stable legal system provides fixed rules concerning how private contracts will be interpreted and enforced. Having such a framework makes it possible for private individuals and businesses to write contracts which specify what each party is obligated to do if various unexpected circumstances do in fact occur. Through these contracts risk is transferred to those parties who are most willing and able to bear it.
It also illustrates that when government acts outside of the legal system, it reduces the effectiveness of the legal system and of private contracts at dealing with risk. The end result is that economic life becomes more uncertain than if the rule of law was fully respected by the government. More uncertainty means less investment, less capital, less output, and lower living standards than would otherwise occur.
"Oil companies and drilling-rig operators are entering uncharted waters as they fight over who should pay for rigs idled by the recent U.S. offshore-drilling moratorium, and one case has already landed in court.
While offshore drilling could legally resume after a federal district court judge overturned the moratorium Tuesday, few if any oil companies are likely to go back to work until higher courts rule on appeals, officials at several companies said. Meanwhile, the unused rigs are costing them as much as $600,000 a day.
At least three oil companies are demanding early exits from long-term leases on five rigs in the Gulf of Mexico, alleging the ban on offshore drilling voided their contracts.
The drillers disagree, claiming the rigs could move to international projects or work in shallower waters, where the federal moratorium didn't apply.
***
But government interference is typically written into contracts only for operations in more uncertain political territory such as Venezuela and Nigeria, according to analysts and others familiar with oil-industry contracts.
They said it was unlikely most Gulf rig contracts anticipated an event like the six-month deep-water drilling moratorium instituted by President Barack Obama on May 27. That was five weeks after Transocean Inc.'s Deepwater Horizon rig caught fire and sank in the Gulf of Mexico, triggering the worst offshore oil spill in U.S. history.
"No one ever expected political risk in the Gulf of Mexico, but that's exactly what they've got now," said Michael Lynch, a consultant who has negotiated rig contracts for offshore drillers. He said he couldn't recall another rig-contract dispute involving U.S. political risk going to court, nor could several other longtime industry analysts.
Judge Martin L.C. Feldman of U.S. District Court in New Orleans overturned the drilling moratorium Tuesday, saying that plaintiffs, a group of oilfield-services companies, "established a likelihood of successfully showing that the Administration acted arbitrarily and capriciously" in issuing the moratorium.
***
Norwegian oil company Statoil ASA, which has signaled its plan to exit two rig contracts, owes Transocean nearly $600 million through October 2013 for one rig. Transocean has denied Statoil's right to an early termination, though the companies said they were still negotiating.
About 30 rigs could end up in similar disputes, and who pays will hinge on how the contracts define force majeure, a catchall term for uncontrollable events that halt work. Anadarko's contract with Noble, for example, defines force majeure as including "rules or regulations" that make "continuance of operations impossible," though Noble contends the rig has tasks it can perform other than drilling deep-water wells.
"We don't believe this is a true force majeure situation," said a Noble spokesman.
Neither the oil companies nor the drillers have much incentive to back down. Oil companies hope to avoid being stuck paying for rigs they don't need. Rig operators have come to rely on premium-rate deep-water contracts to boost earnings.
COMMENTS:
This situation illustrates an extremely important aspect of the real world: it is a very complicated place filled with uncertainty. A stable legal system provides fixed rules concerning how private contracts will be interpreted and enforced. Having such a framework makes it possible for private individuals and businesses to write contracts which specify what each party is obligated to do if various unexpected circumstances do in fact occur. Through these contracts risk is transferred to those parties who are most willing and able to bear it.
It also illustrates that when government acts outside of the legal system, it reduces the effectiveness of the legal system and of private contracts at dealing with risk. The end result is that economic life becomes more uncertain than if the rule of law was fully respected by the government. More uncertainty means less investment, less capital, less output, and lower living standards than would otherwise occur.
Tuesday, June 29, 2010
Saturday, June 26, 2010
State, Federal Rules Rush to Protect Consumers in Advance of New Agency - WSJ.com
EXCERPTS:
"Even before Congress unveils a consumer-protection agency, new state and federal laws are ushering in the most sweeping changes in consumer finance since the 1960s.
On July 1, Arizona will force changes on the state's 595 payday-loan stores—outfits that make high-interest loans against future paychecks—that could effectively put them out of business. Wisconsin banned small loans backed by car titles that led many people to lose their vehicles. Arkansas, Maine and New York joined other states in putting curbs on tax preparers who offer costly loans against expected tax refunds.
The federal government, meanwhile, is for the first time requiring that lenders verify a borrower's income and assets before issuing a home loan. It has also slapped broad new rules on credit-card issuers, limiting their ability to boost interest rates and charge certain fees.
"It's a pace of regulatory output we've never seen before in the consumer area," says Richard Hackett, who teaches consumer-finance law at Boston University's Morin Center for Banking and Financial Law.
The new Consumer Financial Protection Bureau, while housed inside the Federal Reserve, would be fully independent of the central bank, with a leader appointed by the president and confirmed by the Senate.... It will write and enforce rules on the structuring and marketing of loans as well as other financial products sold by banks, credit unions, credit-card issuers and even neighborhood check-cashing outfits.
***
Rep. Jeb Hensarling (R., Texas), a member of the House-Senate conference committee negotiating the final bill, called the new regulator a "consumer credit rationing agency" that would "take choices away from consumers and choke desperately needed credit out of our economy."
Senate Banking Committee Chairman Christopher Dodd (D., Conn.), a leading proponent, said the agency would "watch out for the average citizen in our country when they are abused by a financial market place that takes advantage of them on home mortgages and credit cards."
1. Who do you think is right, Rep. Hensarling, who says this new regulation will take choices away from consumers and ration credit, or Sen. Dodd, who says it will "watch out for the average citizen?" Explain your reasoning.
"Even before Congress unveils a consumer-protection agency, new state and federal laws are ushering in the most sweeping changes in consumer finance since the 1960s.
On July 1, Arizona will force changes on the state's 595 payday-loan stores—outfits that make high-interest loans against future paychecks—that could effectively put them out of business. Wisconsin banned small loans backed by car titles that led many people to lose their vehicles. Arkansas, Maine and New York joined other states in putting curbs on tax preparers who offer costly loans against expected tax refunds.
The federal government, meanwhile, is for the first time requiring that lenders verify a borrower's income and assets before issuing a home loan. It has also slapped broad new rules on credit-card issuers, limiting their ability to boost interest rates and charge certain fees.
"It's a pace of regulatory output we've never seen before in the consumer area," says Richard Hackett, who teaches consumer-finance law at Boston University's Morin Center for Banking and Financial Law.
The new Consumer Financial Protection Bureau, while housed inside the Federal Reserve, would be fully independent of the central bank, with a leader appointed by the president and confirmed by the Senate.... It will write and enforce rules on the structuring and marketing of loans as well as other financial products sold by banks, credit unions, credit-card issuers and even neighborhood check-cashing outfits.
***
Rep. Jeb Hensarling (R., Texas), a member of the House-Senate conference committee negotiating the final bill, called the new regulator a "consumer credit rationing agency" that would "take choices away from consumers and choke desperately needed credit out of our economy."
Senate Banking Committee Chairman Christopher Dodd (D., Conn.), a leading proponent, said the agency would "watch out for the average citizen in our country when they are abused by a financial market place that takes advantage of them on home mortgages and credit cards."
QUESTIONS:
1. Who do you think is right, Rep. Hensarling, who says this new regulation will take choices away from consumers and ration credit, or Sen. Dodd, who says it will "watch out for the average citizen?" Explain your reasoning.
Why less government spending would mean less economic trouble - CSMonitor.com
EXCERPTS:
"History teaches that temporary surges in government spending give people money that, for the most part, they save or use to reduce debt, rather than setting in motion an upward spiral of income, expenditure, real output, and employment, as envisioned by John Maynard Keynes, the British economist whose theory spurred massive government interventions in the economy from the 1930s onward.
History also teaches that government “emergency” spending tends to fatten the coffers of the politically connected. Thus, much of the so-called stimulus spending has served only to increase the pay and benefits of government employees, transferring income from the private sector to the government sector, and reward groups, such as the United Auto Workers and low-income home buyers, for their support of the Obama administration.
One aspect of the current crisis that has come as anything but a surprise to students of history is that the politicians (in the words of President Obama’s chief of staff, Rahm Emanuel) have not allowed this crisis “to go to waste.” The past two years have witnessed one power-grab or institutional takeover after another, including AIG, Fannie Mae, Freddie Mac, General Motors, and Chrysler.
***
"Since the early 20th century, periods of national emergency – real and imagined – have triggered sharp increases in government power, scope, and cost.
The first five episodes were World War I, the Great Depression, World War II, the upheavals associated with the civil-rights revolution and the Vietnam War, and the post-9/11 events associated with the war on terror and US engagements in Afghanistan and Iraq.
We are now in another such critical period, springing from the housing bust, financial debacle, and recession. In their embrace of Keynesianism, many economists have concluded that even though the New Deal’s hodgepodge of policies never brought about full recovery, World War II did, as the economy expanded to produce munitions and enlarge the armed forces. Huge, deficit-financed government spending, they argue, finally wiped out the lingering mass unemployment.
The truth, however, is really quite simple. In 1940, after eight years of New Deal pump priming, the unemployment rate remained about 10 percent even if, unlike the Bureau of Labor Statistics, we count people enrolled in federal emergency work-relief programs as employed. The gigantic buildup of the armed forces, primarily by conscription, then pulled the equivalent of 22 percent of the prewar labor force into the military. Voilà, unemployment disappeared, as it was bound to do regardless of any wartime Keynesian fiscal policies.
"History teaches that temporary surges in government spending give people money that, for the most part, they save or use to reduce debt, rather than setting in motion an upward spiral of income, expenditure, real output, and employment, as envisioned by John Maynard Keynes, the British economist whose theory spurred massive government interventions in the economy from the 1930s onward.
History also teaches that government “emergency” spending tends to fatten the coffers of the politically connected. Thus, much of the so-called stimulus spending has served only to increase the pay and benefits of government employees, transferring income from the private sector to the government sector, and reward groups, such as the United Auto Workers and low-income home buyers, for their support of the Obama administration.
One aspect of the current crisis that has come as anything but a surprise to students of history is that the politicians (in the words of President Obama’s chief of staff, Rahm Emanuel) have not allowed this crisis “to go to waste.” The past two years have witnessed one power-grab or institutional takeover after another, including AIG, Fannie Mae, Freddie Mac, General Motors, and Chrysler.
***
"Since the early 20th century, periods of national emergency – real and imagined – have triggered sharp increases in government power, scope, and cost.
The first five episodes were World War I, the Great Depression, World War II, the upheavals associated with the civil-rights revolution and the Vietnam War, and the post-9/11 events associated with the war on terror and US engagements in Afghanistan and Iraq.
We are now in another such critical period, springing from the housing bust, financial debacle, and recession. In their embrace of Keynesianism, many economists have concluded that even though the New Deal’s hodgepodge of policies never brought about full recovery, World War II did, as the economy expanded to produce munitions and enlarge the armed forces. Huge, deficit-financed government spending, they argue, finally wiped out the lingering mass unemployment.
The truth, however, is really quite simple. In 1940, after eight years of New Deal pump priming, the unemployment rate remained about 10 percent even if, unlike the Bureau of Labor Statistics, we count people enrolled in federal emergency work-relief programs as employed. The gigantic buildup of the armed forces, primarily by conscription, then pulled the equivalent of 22 percent of the prewar labor force into the military. Voilà, unemployment disappeared, as it was bound to do regardless of any wartime Keynesian fiscal policies.
Friday, June 25, 2010
Baby For Sale -- Real Cheap | NBC Bay Area
EXCERPTS:
"Everyone knows you can find just about anything you need for a low price at Walmart -- including baby stuff. But an actual baby? That's not usually part of the deal.
Unless you're desperate for cash and not in the best frame of mind.
That's the case in Salinas, California, where police say a couple tried to sell their 6-month-old baby for $25 outside the doors of a Walmart store. Now they're facing child endangerment charges.
Patrick Fousek, 38, and Samantha Tomasini, 20, were arrested Wednesday, hours after Fousek allegedly approached two women outside Walmart and asked if they'd like to purchase his child -- at the bargain price of $25. The women initially thought Fousek was joking, but when he became persistent, they got suspicious and reported it to police, Salinas police spokesman Officer Lalo Villegas said.
"They did an outstanding job and gave our officers good information." Villegas said. "I don't know if they're mothers but they definitely had that instinct to help."
Fousek and Tomasini were arrested at 1 a.m. Wednesday at their home. Officers said the couple appeared high on methamphetamines....
"Everyone knows you can find just about anything you need for a low price at Walmart -- including baby stuff. But an actual baby? That's not usually part of the deal.
Unless you're desperate for cash and not in the best frame of mind.
That's the case in Salinas, California, where police say a couple tried to sell their 6-month-old baby for $25 outside the doors of a Walmart store. Now they're facing child endangerment charges.
Patrick Fousek, 38, and Samantha Tomasini, 20, were arrested Wednesday, hours after Fousek allegedly approached two women outside Walmart and asked if they'd like to purchase his child -- at the bargain price of $25. The women initially thought Fousek was joking, but when he became persistent, they got suspicious and reported it to police, Salinas police spokesman Officer Lalo Villegas said.
"They did an outstanding job and gave our officers good information." Villegas said. "I don't know if they're mothers but they definitely had that instinct to help."
Fousek and Tomasini were arrested at 1 a.m. Wednesday at their home. Officers said the couple appeared high on methamphetamines....
Bill to Extend Unemployment Benefits Dies, Doctor Payments Not Cut - WSJ.com
EXCERPTS:
"WASHINGTON—Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid costs.
***
"One element that will survive in a different form: a proposal to suspend a 21% cut in Medicare payments to doctors that's set to take effect this month. That was stripped from the bill last week in a cost-cutting step and sent to the House as a stand-alone measure. The House, voting 417 to 1, approved the six-month suspension of the cuts late Thursday.
COMMENT:
This means the government is cutting benefits to long-term unemployed workers but not cutting Medicare payments to doctors.
QUESTIONS:
1. How are long-term unemployed workers likely to feel about their benefits being cut but payments to doctors not being cut?
2. What would be the consequences of continuing to provide benefits to unemployed workers, not matter how long they remain unemployed?
3. What consequences would result if the government cut Medicare payments to doctors based on the idea that "if long-term unemployed workers are going to have to suffer it's only fair that doctors suffer a little too?"
"WASHINGTON—Spooked by concern about deficits, the Senate shelved a spending bill that included an extension of unemployment benefits, suddenly cutting off a federal cash spigot opened by President Barack Obama when he took office 18 months ago.The collapse of the wide-ranging legislation means that a total of 1.3 million unemployed Americans will have lost their assistance by the end of this week. It will also leave a number of states with large budget holes they had expected to fill with federal cash to help with Medicaid costs.
***
"One element that will survive in a different form: a proposal to suspend a 21% cut in Medicare payments to doctors that's set to take effect this month. That was stripped from the bill last week in a cost-cutting step and sent to the House as a stand-alone measure. The House, voting 417 to 1, approved the six-month suspension of the cuts late Thursday.
COMMENT:
This means the government is cutting benefits to long-term unemployed workers but not cutting Medicare payments to doctors.
QUESTIONS:
1. How are long-term unemployed workers likely to feel about their benefits being cut but payments to doctors not being cut?
2. What would be the consequences of continuing to provide benefits to unemployed workers, not matter how long they remain unemployed?
3. What consequences would result if the government cut Medicare payments to doctors based on the idea that "if long-term unemployed workers are going to have to suffer it's only fair that doctors suffer a little too?"
Thursday, June 24, 2010
Who Is We? The benefits of specialization and exchange
EXCERPTS from Donald Boudreaux's letter to Tony Kornheiser, host of the Tony Kornheiser Show on ESPN:
"Your show is great. And while I realize that your chief goal is to be humorous, your monologue yesterday – lamenting that “we Americans don’t make things any more” and filled with genuine worry about America being largely a service economy – demands a response.
***
You make your living by writing and talking about sports. The Kornheiser family truly doesn’t “make things.” You earn an income by specializing in what you do best, and you use that income to purchase from persons outside of your household all the many “things” that you consume. As a result, you’re quite prosperous.
What’s true for the plural pronoun “we” used to describe the Kornheiser household is no less true for the plural pronoun “we” used to describe America. We Americans do indeed buy lots of things from non-Americans – a fact that is no more worrying than is the fact that, as you might say, “we Kornheisers don’t make things any more and, instead, buy all of our things from non-Kornheisers.”
"Your show is great. And while I realize that your chief goal is to be humorous, your monologue yesterday – lamenting that “we Americans don’t make things any more” and filled with genuine worry about America being largely a service economy – demands a response.
***
You make your living by writing and talking about sports. The Kornheiser family truly doesn’t “make things.” You earn an income by specializing in what you do best, and you use that income to purchase from persons outside of your household all the many “things” that you consume. As a result, you’re quite prosperous.
What’s true for the plural pronoun “we” used to describe the Kornheiser household is no less true for the plural pronoun “we” used to describe America. We Americans do indeed buy lots of things from non-Americans – a fact that is no more worrying than is the fact that, as you might say, “we Kornheisers don’t make things any more and, instead, buy all of our things from non-Kornheisers.”
Venezuela to nationalize U.S. firm's oil rigs - Yahoo! News
EXCERPTS:
"CARACAS (Reuters) – Venezuela will nationalize a fleet of oil rigs belonging to U.S. company Helmerich and Payne, the latest takeover in a push to socialism as President Hugo Chavez struggles with lower oil output and a recession.
A former soldier inspired by Cuba's Fidel Castro, Chavez has made energy nationalization the linchpin in his 'revolution'. He has also taken over assets in telecommunications, power, steel and banking.
***
Chavez, who faces legislative elections in September, often pushes ahead with radical plans during election campaigns.
The 55-year-old leader is having a hard time in his 11th year in power. Venezuela's economy is the worst performing in Latin America this year, a problem exacerbated by a drop in oil output since 2008, power outages and soaring inflation.
***
Chavez has kept pressure up on the private sector in recent months, blaming a "parasitic bourgeoisie" for Venezuela's recession and 30 percent annualized inflation,
He has threatened to nationalize Polar, the top brewer and food processor in the country of 30 million. The government has also seized a bank belonging to an owner of the leading opposition TV station and put an arrest warrant out for his partner, who is now on the run.
QUESTIONS:
1. If you had money you wanted to invest somewhere, would you consider investing in Venezuela?
2. If you already owned a company that operated in Venezuela, and you saw what was happening to this oil company, what would you want to do now?
3. Given your answers to the first two questions, what would the consequences in Venezuela be for investment, the country's capital stock, its production possibilities frontier, and the standard of living for an average citizen?
4. What would be the consequences for the value of a share of stock in Venezuelan companies and for the foreign exchange value of the country's currency?
"CARACAS (Reuters) – Venezuela will nationalize a fleet of oil rigs belonging to U.S. company Helmerich and Payne, the latest takeover in a push to socialism as President Hugo Chavez struggles with lower oil output and a recession.
A former soldier inspired by Cuba's Fidel Castro, Chavez has made energy nationalization the linchpin in his 'revolution'. He has also taken over assets in telecommunications, power, steel and banking.
***
Chavez, who faces legislative elections in September, often pushes ahead with radical plans during election campaigns.
The 55-year-old leader is having a hard time in his 11th year in power. Venezuela's economy is the worst performing in Latin America this year, a problem exacerbated by a drop in oil output since 2008, power outages and soaring inflation.
***
Chavez has kept pressure up on the private sector in recent months, blaming a "parasitic bourgeoisie" for Venezuela's recession and 30 percent annualized inflation,
He has threatened to nationalize Polar, the top brewer and food processor in the country of 30 million. The government has also seized a bank belonging to an owner of the leading opposition TV station and put an arrest warrant out for his partner, who is now on the run.
QUESTIONS:
1. If you had money you wanted to invest somewhere, would you consider investing in Venezuela?
2. If you already owned a company that operated in Venezuela, and you saw what was happening to this oil company, what would you want to do now?
3. Given your answers to the first two questions, what would the consequences in Venezuela be for investment, the country's capital stock, its production possibilities frontier, and the standard of living for an average citizen?
4. What would be the consequences for the value of a share of stock in Venezuelan companies and for the foreign exchange value of the country's currency?
Wednesday, June 23, 2010
Obama Warns Insurers on Rates - WSJ.com
EXCERPTS:
"President Barack Obama told health-insurance executives they should keep a lid on big rate increases, but the executives said some rises were unavoidable because the new health law requires them to offer better benefits.
Mr. Obama met with them the same day he touted new regulations released Tuesday, in line with the law's provisions, that lift limits on insurance coverage and prevent insurers from denying care to consumers.
***
In remarks afterward, the president ... said insurers should justify rate increases and shouldn't use the law to drive up rates in an "unreasonable" way, citing a proposed 39% rate increase by WellPoint's California subsidiary.
Insurance company executives, speaking after the meeting, said they couldn't be expected to improve customers' benefit packages as required by the law without charging more.
Ron Williams, chief executive of Aetna, cited the law's rule that insurers allow children to stay on their parents' plan until age 26. That rule "does increase costs, and that cost is going to show up in the premium increases," he said.
***
Starting next year, insurers must use at least 85% of premiums to pay for medical care for patients when they are selling to large employers, and 80% when they are selling to individuals and small employers. The remainder of premiums can go to administrative costs and profit.
Ms. Praeger said she was concerned some insurers will pull out of certain markets because they can't meet the requirement. An administration official said Health and Human Services Secretary Kathleen Sebelius indicated the law allows her to modify the regulations on a case-by-case basis if they would disrupt the market.
The new regulations released Tuesday cover four parts of the bill that take effect starting Sept. 23 or later. They prevent insurers from placing lifetime caps on insurance coverage and restrict the value of annual limits to no lower than $750,000 a year, with a gradual increase to $2 million a year by 2012. The law says insurers must accept children with pre-existing health conditions.
***
Mr. Obama called the rules a "patients' bill of rights," evoking Congress's failed attempt almost a decade ago to pass legislation ensuring basic medical rights and a fairer insurance appeals process. He criticized Republicans who want to repeal the law, citing four stories of Americans who were harmed by insurers.
"Anybody who favors repeal is welcome to come talk to these people and tell them why we should go back to the status quo prior to us signing this bill," he told an audience that included congressional Democrats and the insurance executives.
2. If the insurance company's costs increase but it is not allowed to increase the price charged for its product, what consequences will result?
3. If the services included in an insurance policy, and the price that can be charged for the policy, are decided by someone in government, rather than by competition between insurance companies, do you think this change will benefit or hurt the average person? Defend your answer using economic concepts.
"President Barack Obama told health-insurance executives they should keep a lid on big rate increases, but the executives said some rises were unavoidable because the new health law requires them to offer better benefits.
Mr. Obama met with them the same day he touted new regulations released Tuesday, in line with the law's provisions, that lift limits on insurance coverage and prevent insurers from denying care to consumers.
***
In remarks afterward, the president ... said insurers should justify rate increases and shouldn't use the law to drive up rates in an "unreasonable" way, citing a proposed 39% rate increase by WellPoint's California subsidiary.
Insurance company executives, speaking after the meeting, said they couldn't be expected to improve customers' benefit packages as required by the law without charging more.
Ron Williams, chief executive of Aetna, cited the law's rule that insurers allow children to stay on their parents' plan until age 26. That rule "does increase costs, and that cost is going to show up in the premium increases," he said.
***
Starting next year, insurers must use at least 85% of premiums to pay for medical care for patients when they are selling to large employers, and 80% when they are selling to individuals and small employers. The remainder of premiums can go to administrative costs and profit.
Ms. Praeger said she was concerned some insurers will pull out of certain markets because they can't meet the requirement. An administration official said Health and Human Services Secretary Kathleen Sebelius indicated the law allows her to modify the regulations on a case-by-case basis if they would disrupt the market.
The new regulations released Tuesday cover four parts of the bill that take effect starting Sept. 23 or later. They prevent insurers from placing lifetime caps on insurance coverage and restrict the value of annual limits to no lower than $750,000 a year, with a gradual increase to $2 million a year by 2012. The law says insurers must accept children with pre-existing health conditions.
***
Mr. Obama called the rules a "patients' bill of rights," evoking Congress's failed attempt almost a decade ago to pass legislation ensuring basic medical rights and a fairer insurance appeals process. He criticized Republicans who want to repeal the law, citing four stories of Americans who were harmed by insurers.
"Anybody who favors repeal is welcome to come talk to these people and tell them why we should go back to the status quo prior to us signing this bill," he told an audience that included congressional Democrats and the insurance executives.
QUESTIONS:
1. When the government requires insurance companies to provide additional services how does this affect the company's costs?2. If the insurance company's costs increase but it is not allowed to increase the price charged for its product, what consequences will result?
3. If the services included in an insurance policy, and the price that can be charged for the policy, are decided by someone in government, rather than by competition between insurance companies, do you think this change will benefit or hurt the average person? Defend your answer using economic concepts.
Hayek Has a Hit - Real Time Economics - WSJ
EXCERPTS:
"Mr. Hayek’s book is no beach read. Rather, it’s dense polemic against socialism that argues that centralized planning by the government will inevitably lead to an oppressive state. Mr. Hayek wrote it while living in England in the early 1940s out of concern that a shift toward collectivism there would give rise to something akin to Nazism.
***
A member of the so-called Austrian school of economics, Mr. Hayek believed that the economy was simply too complex for the government to attempt to manage its ups and downs. He argued that economist John Maynard Keynes’s recommendation that government spend money to allay an economic downturn could actually make the downturn worse, as well as lead to an inflation problem later.
... Late last year George Mason University economist Russell Roberts helped put together a rap video that pitted Mr. Keynes against Mr. Hayek that so far has garnered over a million hits on YouTube.... Mr. Roberts, a libertarian who runs the economics blog Café Hayek with colleague Donald Boudreaux, says he’s encourage by the renewed interest in Mr. Hayek.
“There’s been very large growth in government and very large growth in the deficit – it’s alarming,” he says. “I don’t know if we’re on the road to serfdom but we may be on the road to Greece, which is scary enough.”
Among most academic economists, however, Mr. Hayek’s ideas about how economy responds to government intervention have held little sway. His major contribution to the field has been the idea that prices convey crucial information about supply and demand, and that government attempts to manage prices – like the price controls put in place by the Soviet Union and its satellites – lead to the overproduction of some items, while others end up in short supply.
The rush of orders [for Hayek's book] caught Hayek publisher The University of Chicago Press short of copies.... He anticipates that as many as 120,000 copies of the Road to Serfdom will be sold this year, up from about 27,000 last year, and 7000 to 8000 a year before the financial crisis struck in fall 2008.
"Mr. Hayek’s book is no beach read. Rather, it’s dense polemic against socialism that argues that centralized planning by the government will inevitably lead to an oppressive state. Mr. Hayek wrote it while living in England in the early 1940s out of concern that a shift toward collectivism there would give rise to something akin to Nazism.
***
A member of the so-called Austrian school of economics, Mr. Hayek believed that the economy was simply too complex for the government to attempt to manage its ups and downs. He argued that economist John Maynard Keynes’s recommendation that government spend money to allay an economic downturn could actually make the downturn worse, as well as lead to an inflation problem later.
... Late last year George Mason University economist Russell Roberts helped put together a rap video that pitted Mr. Keynes against Mr. Hayek that so far has garnered over a million hits on YouTube.... Mr. Roberts, a libertarian who runs the economics blog Café Hayek with colleague Donald Boudreaux, says he’s encourage by the renewed interest in Mr. Hayek.
“There’s been very large growth in government and very large growth in the deficit – it’s alarming,” he says. “I don’t know if we’re on the road to serfdom but we may be on the road to Greece, which is scary enough.”
Among most academic economists, however, Mr. Hayek’s ideas about how economy responds to government intervention have held little sway. His major contribution to the field has been the idea that prices convey crucial information about supply and demand, and that government attempts to manage prices – like the price controls put in place by the Soviet Union and its satellites – lead to the overproduction of some items, while others end up in short supply.
The rush of orders [for Hayek's book] caught Hayek publisher The University of Chicago Press short of copies.... He anticipates that as many as 120,000 copies of the Road to Serfdom will be sold this year, up from about 27,000 last year, and 7000 to 8000 a year before the financial crisis struck in fall 2008.
Do you live like a king? You might be surprised
EXCERPT:
"Not long ago, I spent an afternoon exploring Dover Castle, historically one of the great homes of English royalty. The castle keep was built by King Henry II in the 1180s. After only a few minutes in the royal castle, I decided that I have it much better today than any of the kings and queens of one of the richest nations in the world, had it when they lived in Dover Castle. King Henry II died when he was 35 years old. Living like a king, in that sense, certainly does not appeal to me.
I was interested to see the royal quarters....
"Not long ago, I spent an afternoon exploring Dover Castle, historically one of the great homes of English royalty. The castle keep was built by King Henry II in the 1180s. After only a few minutes in the royal castle, I decided that I have it much better today than any of the kings and queens of one of the richest nations in the world, had it when they lived in Dover Castle. King Henry II died when he was 35 years old. Living like a king, in that sense, certainly does not appeal to me.
I was interested to see the royal quarters....
Let markets regulate offshore oil industry
EXCERPTS:
"Congress should consider policy changes, such as lifting the current $75 million limited liability ceiling. Offshore operators should expect to be responsible for the full costs of any environmental damage related to their activities.
There is one hitch: smaller offshore companies could accept full liability but then take shelter under bankruptcy laws in the event of a disaster. This means some additional steps must be taken.
In addition to removing any limits on liability, Congress should require that any offshore operator provide an insurance policy guaranteeing full liability coverage.
Full liability insurance not only protects taxpayers from bearing the cost of cleaning up environmental disasters, it also adds another layer of protection against future disasters. You can bet that private insurers like Lloyds of London would inspect very carefully the safety practices of those it insures.
Furthermore, by relying on private markets, taxpayers are saved the expense of monitoring offshore operations. Full liability without the option of invoking bankruptcy laws assures that offshore operators will have no incentives to cut corners.
A great advantage of this proposal is that it leaves the decision of how best to avoid disasters to the most knowledgeable agents involved: the oil operators and their insurers. These are relatively simple changes to make, and in principle the requirements involved are no different from those any homebuyer would expect of her builder.
"Congress should consider policy changes, such as lifting the current $75 million limited liability ceiling. Offshore operators should expect to be responsible for the full costs of any environmental damage related to their activities.
There is one hitch: smaller offshore companies could accept full liability but then take shelter under bankruptcy laws in the event of a disaster. This means some additional steps must be taken.
In addition to removing any limits on liability, Congress should require that any offshore operator provide an insurance policy guaranteeing full liability coverage.
Full liability insurance not only protects taxpayers from bearing the cost of cleaning up environmental disasters, it also adds another layer of protection against future disasters. You can bet that private insurers like Lloyds of London would inspect very carefully the safety practices of those it insures.
Furthermore, by relying on private markets, taxpayers are saved the expense of monitoring offshore operations. Full liability without the option of invoking bankruptcy laws assures that offshore operators will have no incentives to cut corners.
A great advantage of this proposal is that it leaves the decision of how best to avoid disasters to the most knowledgeable agents involved: the oil operators and their insurers. These are relatively simple changes to make, and in principle the requirements involved are no different from those any homebuyer would expect of her builder.
On Regulating Debit Card Charges: Durbin's antitrust fantasies - Washington Times
EXCERPT:
"Serious economists long ago rejected the idea that market structure (the number of competitors in a market) determines whether a market will produce competitive outcomes. Markets with many competitors can nonetheless produce anticompetitive results and markets with few competitors often have vigorous competition (such as Coke and Pepsi). So instead of relying on crude indicators like market structure as a proxy for competition, antitrust economists and regulators require actual evidence of anticompetitive effect.
"Serious economists long ago rejected the idea that market structure (the number of competitors in a market) determines whether a market will produce competitive outcomes. Markets with many competitors can nonetheless produce anticompetitive results and markets with few competitors often have vigorous competition (such as Coke and Pepsi). So instead of relying on crude indicators like market structure as a proxy for competition, antitrust economists and regulators require actual evidence of anticompetitive effect.
Paul Samuelson Misread Hayek - Boudreaux
EXCERPTS:
"[Paul] Samuelson profoundly misread Hayek’s book. Hayek said that “the planning against which all our criticism is directed is solely the planning against competition – the planning which is to be substituted for competition.” So because Scandinavian countries emphatically do not plan in this way, Samuelson was mistaken to say that their socialism is of the sort that Hayek believed paved the road to serfdom. Those countries have reasonably free trade, only light regulation of capital markets and business, and strong private property rights. In short, all Scandinavia retains what for Hayek was the most significant protection against serfdom: competitive economies.
And while Hayek would disapprove of the size of Scandinavian welfare states, he stated explicitly that “Nor is the preservation of competition incompatible with an extensive system of social services.”*
Paul Samuelson’s long history of misrepresenting Hayek’s arguments has done a great disservice not only to one of the 20th century’s wisest minds but also – and more importantly – to the countless people who would have read Hayek but for Mr. Samuelson’s mischaracterization of The Road to Serfdom.
"[Paul] Samuelson profoundly misread Hayek’s book. Hayek said that “the planning against which all our criticism is directed is solely the planning against competition – the planning which is to be substituted for competition.” So because Scandinavian countries emphatically do not plan in this way, Samuelson was mistaken to say that their socialism is of the sort that Hayek believed paved the road to serfdom. Those countries have reasonably free trade, only light regulation of capital markets and business, and strong private property rights. In short, all Scandinavia retains what for Hayek was the most significant protection against serfdom: competitive economies.
And while Hayek would disapprove of the size of Scandinavian welfare states, he stated explicitly that “Nor is the preservation of competition incompatible with an extensive system of social services.”*
Paul Samuelson’s long history of misrepresenting Hayek’s arguments has done a great disservice not only to one of the 20th century’s wisest minds but also – and more importantly – to the countless people who would have read Hayek but for Mr. Samuelson’s mischaracterization of The Road to Serfdom.
Business leaders say Obama's economic policies stifle growth
EXCERPTS:
"The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama's closest ally in the business community, accused the president and Democratic lawmakers Tuesday of creating an "increasingly hostile environment for investment and job creation."
Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and "harm our ability . . . to grow private-sector jobs in the U.S."
"In our judgment, we have reached a point where the negative effects of these policies are simply too significant to ignore," Seidenberg said in a lunchtime speech to the Economic Club of Washington. "By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses."
"The chairman of the Business Roundtable, an association of top corporate executives that has been President Obama's closest ally in the business community, accused the president and Democratic lawmakers Tuesday of creating an "increasingly hostile environment for investment and job creation."
Ivan G. Seidenberg, chief executive of Verizon Communications, said that Democrats in Washington are pursuing tax increases, policy changes and regulatory actions that together threaten to dampen economic growth and "harm our ability . . . to grow private-sector jobs in the U.S."
"In our judgment, we have reached a point where the negative effects of these policies are simply too significant to ignore," Seidenberg said in a lunchtime speech to the Economic Club of Washington. "By reaching into virtually every sector of economic life, government is injecting uncertainty into the marketplace and making it harder to raise capital and create new businesses."
Tuesday, June 22, 2010
Degeneration of Democracy - Thomas Sowell
EXCERPTS:
"Many among the public and in the media may think that the issue is simply whether BP's oil spill has damaged many people, who ought to be compensated. But our government is supposed to be "a government of laws and not of men." If our laws and our institutions determine that BP ought to pay $20 billion-- or $50 billion or $100 billion-- then so be it.
But the Constitution says that private property is not to be confiscated by the government without "due process of law." Technically, it has not been confiscated by Barack Obama, but that is a distinction without a difference.
With vastly expanded powers of government available at the discretion of politicians and bureaucrats, private individuals and organizations can be forced into accepting the imposition of powers that were never granted to the government by the Constitution.
"Many among the public and in the media may think that the issue is simply whether BP's oil spill has damaged many people, who ought to be compensated. But our government is supposed to be "a government of laws and not of men." If our laws and our institutions determine that BP ought to pay $20 billion-- or $50 billion or $100 billion-- then so be it.
But the Constitution says that private property is not to be confiscated by the government without "due process of law." Technically, it has not been confiscated by Barack Obama, but that is a distinction without a difference.
With vastly expanded powers of government available at the discretion of politicians and bureaucrats, private individuals and organizations can be forced into accepting the imposition of powers that were never granted to the government by the Constitution.
Illustration of the effects of mandated paternty leave
EXCERPTS:
"Derrick Jackson wants government to mandate paid maternity and paternity leave for workers (“A gift that pays off for new dads,” June 19). He writes as if the costs of mandated paid leave will be fully absorbed by employers: workers will get an additional valuable fringe benefit at the expense of employers and, hence, employees will suffer no downside.
What a strange notion. To see why, suppose that Mr. Jackson weren’t an opinion writer but, instead, a food critic for your paper. He would observe that some restaurant diners order and very much enjoy vintage Veuve Clicquot Ponsardin champagne with their meals, but that not all diners order this pricey bubbly. He also would (correctly) infer that many diners who never order this champagne would do so if they didn’t have to pay for it.
But would Mr. Jackson then conclude that government should mandate that all restaurants give a bottle of Veuve Clicquot Ponsardin free of charge with every meal? Surely not. He’d understand that such a mandate would bankrupt some restaurants, and cause those that remain in business to raise the prices they charge for food and other menu items. And Mr. Jackson would understand also that these higher prices would be paid even by diners who don’t drink. In short, he would understand that, as desirable as Veuve Clicquot is, mandating its provision would make restaurant diners worse off.
So I scratch my head wondering why Mr. Jackson thinks that government should mandate paid leave. Does he not see that other terms of employment contracts will be adjusted to compensate – for example, that wages would fall, or that employers would contribute less to employees’ pension funds? Does he not recognize that some employers, unable to compensate for this higher cost, will be bankrupted?
"Derrick Jackson wants government to mandate paid maternity and paternity leave for workers (“A gift that pays off for new dads,” June 19). He writes as if the costs of mandated paid leave will be fully absorbed by employers: workers will get an additional valuable fringe benefit at the expense of employers and, hence, employees will suffer no downside.
What a strange notion. To see why, suppose that Mr. Jackson weren’t an opinion writer but, instead, a food critic for your paper. He would observe that some restaurant diners order and very much enjoy vintage Veuve Clicquot Ponsardin champagne with their meals, but that not all diners order this pricey bubbly. He also would (correctly) infer that many diners who never order this champagne would do so if they didn’t have to pay for it.
But would Mr. Jackson then conclude that government should mandate that all restaurants give a bottle of Veuve Clicquot Ponsardin free of charge with every meal? Surely not. He’d understand that such a mandate would bankrupt some restaurants, and cause those that remain in business to raise the prices they charge for food and other menu items. And Mr. Jackson would understand also that these higher prices would be paid even by diners who don’t drink. In short, he would understand that, as desirable as Veuve Clicquot is, mandating its provision would make restaurant diners worse off.
So I scratch my head wondering why Mr. Jackson thinks that government should mandate paid leave. Does he not see that other terms of employment contracts will be adjusted to compensate – for example, that wages would fall, or that employers would contribute less to employees’ pension funds? Does he not recognize that some employers, unable to compensate for this higher cost, will be bankrupted?
Response to Blinder's defense of government's response to the financial crisis
COMMENT:
This article by Russ Roberts (not a Keynesian economist) takes issue with Alan Blinder's defense of the Keynesian policies enacted in 2008 and 2009 to address the financial crisis.
This article by Russ Roberts (not a Keynesian economist) takes issue with Alan Blinder's defense of the Keynesian policies enacted in 2008 and 2009 to address the financial crisis.
Alan S. Blinder: Bernanke and Obama Saved the Economy - WSJ.com
EXCERPT:
"Historians will look back at this time and say the three-pronged strategy of TARP, fiscal stimulus and bank stress testing kept us out of the abyss.
COMMENT:
This is a good statement of the Keynesian view from a highly-respected Keynesian economist.
"Historians will look back at this time and say the three-pronged strategy of TARP, fiscal stimulus and bank stress testing kept us out of the abyss.
COMMENT:
This is a good statement of the Keynesian view from a highly-respected Keynesian economist.
Monday, June 21, 2010
Obama's thuggery is useless in fighting spill | Washington Examiner
EXCERPTS:
"The $20 billion escrow fund that Obama pried out of the BP treasury at the White House when he talked for the first time, 57 days after the rig exploded, with BP Chairman Tony Hayward. It's pleasing to think that those injured by BP will be paid off speedily, but House Republican Joe Barton had a point, though an impolitic one, when he called this a "shakedown."
For there already are laws in place that insure that BP will be held responsible for damages and the company has said it will comply. So what we have is government transferring property from one party, an admittedly unattractive one, to others, not based on pre-existing laws but on decisions by one man, pay czar Kenneth Feinberg.
Feinberg gets good reviews from everyone. But the Constitution does not command "no person . . . shall . . . be deprived of life, liberty or property, without due process of law except by the decision of a person as wise and capable as Kenneth Feinberg." The Framers stopped at "due process of law."
Obama doesn't. "If he sees any impropriety in politicians ordering executives about, upstaging the courts and threatening confiscation, he has not said so," write the editors of the Economist, who then suggest that markets see Obama as "an American version of Vladimir Putin." Except that Putin is an effective thug.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/politics/Obama_s-thuggery-is-useless-in-fighting-spill-96684389.html#ixzz0rV59clR2
"The $20 billion escrow fund that Obama pried out of the BP treasury at the White House when he talked for the first time, 57 days after the rig exploded, with BP Chairman Tony Hayward. It's pleasing to think that those injured by BP will be paid off speedily, but House Republican Joe Barton had a point, though an impolitic one, when he called this a "shakedown."
For there already are laws in place that insure that BP will be held responsible for damages and the company has said it will comply. So what we have is government transferring property from one party, an admittedly unattractive one, to others, not based on pre-existing laws but on decisions by one man, pay czar Kenneth Feinberg.
Feinberg gets good reviews from everyone. But the Constitution does not command "no person . . . shall . . . be deprived of life, liberty or property, without due process of law except by the decision of a person as wise and capable as Kenneth Feinberg." The Framers stopped at "due process of law."
Obama doesn't. "If he sees any impropriety in politicians ordering executives about, upstaging the courts and threatening confiscation, he has not said so," write the editors of the Economist, who then suggest that markets see Obama as "an American version of Vladimir Putin." Except that Putin is an effective thug.
Read more at the Washington Examiner: http://www.washingtonexaminer.com/politics/Obama_s-thuggery-is-useless-in-fighting-spill-96684389.html#ixzz0rV59clR2
Saturday, June 19, 2010
Venezuela: Hugo Chavez Spearheads Raids as Food Prices Spike - CNBC
EXCERPTS:
"Mountains of rotting food found at a government warehouse, soaring prices and soldiers raiding wholesalers accused of hoarding: Food supply is the latest battle in President Hugo Chavez's socialist revolution. Venezuelan army soldiers swept through the working class, pro-Chavez neighborhood of Catia in Caracas last week, seizing 120 tons of rice along with coffee and powdered milk that officials said was to be sold above regulated prices.
"The battle for food is a matter of national security," said a red-shirted official from the Food Ministry, resting his arm on a pallet laden with bags of coffee.
It is also the latest issue to divide the Latin American country where Chavez has nationalized a wide swathe of the economy, he says to reverse years of exploitation of the poor.
Chavez supporters are grateful for a network of cheap state-run supermarkets and they say the raids will slow massive inflation.
"Mountains of rotting food found at a government warehouse, soaring prices and soldiers raiding wholesalers accused of hoarding: Food supply is the latest battle in President Hugo Chavez's socialist revolution. Venezuelan army soldiers swept through the working class, pro-Chavez neighborhood of Catia in Caracas last week, seizing 120 tons of rice along with coffee and powdered milk that officials said was to be sold above regulated prices.
"The battle for food is a matter of national security," said a red-shirted official from the Food Ministry, resting his arm on a pallet laden with bags of coffee.
It is also the latest issue to divide the Latin American country where Chavez has nationalized a wide swathe of the economy, he says to reverse years of exploitation of the poor.
Chavez supporters are grateful for a network of cheap state-run supermarkets and they say the raids will slow massive inflation.
Alan Greenspan: U.S. Debt and the Greece Analogy - WSJ.com
EXCERPTS:
"Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.
The roots of the apparent debt market calm are clear enough. The financial crisis, triggered by the unexpected default of Lehman Brothers in September 2008, created a collapse in global demand that engendered a high degree of deflationary slack in our economy. The very large contraction of private financing demand freed private saving to finance the explosion of federal debt. Although our financial institutions have recovered perceptibly and returned to a degree of solvency, banks, pending a significant increase in capital, remain reluctant to lend.
Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain.
The U.S. government can create dollars at will to meet any obligation, and it will doubtless continue to do so. U.S. Treasurys are thus free of credit risk. But they are not free of interest rate risk. If Treasury net debt issuance were to double overnight, for example, newly issued Treasury securities would continue free of credit risk, but the Treasury would have to pay much higher interest rates to market its newly issued securities.
***
I grant that low long-term interest rates could continue for months, or even well into next year. But just as easily, long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points.
"Despite the surge in federal debt to the public during the past 18 months—to $8.6 trillion from $5.5 trillion—inflation and long-term interest rates, the typical symptoms of fiscal excess, have remained remarkably subdued. This is regrettable, because it is fostering a sense of complacency that can have dire consequences.
The roots of the apparent debt market calm are clear enough. The financial crisis, triggered by the unexpected default of Lehman Brothers in September 2008, created a collapse in global demand that engendered a high degree of deflationary slack in our economy. The very large contraction of private financing demand freed private saving to finance the explosion of federal debt. Although our financial institutions have recovered perceptibly and returned to a degree of solvency, banks, pending a significant increase in capital, remain reluctant to lend.
Beneath the calm, there are market signals that do not bode well for the future. For generations there had been a large buffer between the borrowing capacity of the U.S. government and the level of its debt to the public. But in the aftermath of the Lehman Brothers collapse, that gap began to narrow rapidly. Federal debt to the public rose to 59% of GDP by mid-June 2010 from 38% in September 2008. How much borrowing leeway at current interest rates remains for U.S. Treasury financing is highly uncertain.
The U.S. government can create dollars at will to meet any obligation, and it will doubtless continue to do so. U.S. Treasurys are thus free of credit risk. But they are not free of interest rate risk. If Treasury net debt issuance were to double overnight, for example, newly issued Treasury securities would continue free of credit risk, but the Treasury would have to pay much higher interest rates to market its newly issued securities.
***
I grant that low long-term interest rates could continue for months, or even well into next year. But just as easily, long-term rate increases can emerge with unexpected suddenness. Between early October 1979 and late February 1980, for example, the yield on the 10-year note rose almost four percentage points.
A Mind-Changing Page - Thomas Sowell
EXCERPTS:
"Those who are convinced that the government has to "do something" when the economy has a problem almost never bother to find out what actually happens when the government intervenes.
The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock market crash in 1987 that most people have long since forgotten.
What was the difference between these two stock market crashes? The 1929 stock market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock market crash was followed by two decades of economic growth with low unemployment.
But that was only one difference. The other big difference was that the Reagan administration did not intervene in the economy after the 1987 stock market crash-- despite many outcries in the media that the government should "do something."
"Those who are convinced that the government has to "do something" when the economy has a problem almost never bother to find out what actually happens when the government intervenes.
The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock market crash in 1987 that most people have long since forgotten.
What was the difference between these two stock market crashes? The 1929 stock market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock market crash was followed by two decades of economic growth with low unemployment.
But that was only one difference. The other big difference was that the Reagan administration did not intervene in the economy after the 1987 stock market crash-- despite many outcries in the media that the government should "do something."
Thursday, June 17, 2010
BP Oil Spill: Against Gov. Bobby Jindal's Wishes, Crude-Sucking Barges Stopped by Coast Guard - ABC News
EXCERPT:
"Sixteen barges sat stationary today, although they were sucking up thousands of gallons of BP's oil as recently as Tuesday. Workers in hazmat suits and gas masks pumped the oil out of the Louisiana waters and into steel tanks. It was a homegrown idea that seemed to be effective at collecting the thick gunk.
"These barges work. You've seen them work. You've seen them suck oil out of the water," said Jindal.
So why stop now?
"The Coast Guard came and shut them down," Jindal said. "You got men on the barges in the oil, and they have been told by the Coast Guard, 'Cease and desist. Stop sucking up that oil.'"
A Coast Guard representative told ABC News today that it shares the same goal as the governor. "We are all in this together. The enemy is the oil," said Coast Guard Lt. Cmdr. Dan Lauer.
But the Coast Guard ordered the stoppage because of reasons that Jindal found frustrating. The Coast Guard needed to confirm that there were fire extinguishers and life vests on board, and then it had trouble contacting the people who built the barges.
***
After Jindal strenuously made his case, the barges finally got the go-ahead today to return to the Gulf and get back to work, after more than 24 hours of sitting idle.
QUESTIONS:
1. Do you think the Coast Guard official who ordered the barges to stop sucking up oil was comparing the benefits of his actions with their costs, or was he simply following the rules it was his job to enforce?
2. Did the Coast Guard official have much incentive to allow a rule to be broken simply because the benefits to society of breaking the rule exceeded the likely costs?
3. If the Coast Guard official had been a manager for a corporation that was going to bear the full costs of the spill, would he have been more or less likely to weigh benefits versus costs in making his decision?
What Makes E.S. Kluft's Palais Royale Mattress Worth $33,000? - WSJ.com
EXCERPTS:
"How much would you spend for a good night's sleep? Some people might say $33,000. That's the price of E.S. Kluft & Co.'s hand-tufted, king-size Palais Royale mattress and box spring, currently the most expensive American-made mattress set on the market. The company says it has sold about 100 since introducing it in 2008.
At $69,500—roughly the price of a Porsche Cayenne S hybrid SUV—there's the Vividus king-size mattress set from Hästens Sängar AB, of Sweden. Hästens says it takes 160 hours to assemble this mattress entirely by hand, which has a Swedish-pine frame with thick layers of horsehair, cotton, flax and wool inside. The company says since introducing the mattress in 2006, it has sold 250 of them world-wide.
***
... bad sleep was what drove Scott Kimple, a 44-year-old hedge-fund manager in Dallas, to invest $27,500 in a king-size Hästens 2000T mattress set two years ago. "I've had problems sleeping in the last couple of years, and I thought well, maybe a mattress might help," Mr. Kimple says.
"When I heard there was a $20,000 mattress out there, I thought it was kind of ridiculous." But Mr. Kimple is a convert. "It's light years better than anything I've ever slept on. It's like you're floating on air." An added plus: "They will come to your house and flip the mattress for you," Mr. Kimple says. The Hästens store in Dallas offers the monthly service to local customers for the first year; Mr. Kimple had it done.
***
For some, the eye-popping price is part of the appeal. "For any luxury brand, there has to be a perception of scarcity," says Dean Crutchfield, senior partner at Method Inc., a New York brand consulting firm. "If everyone was running around buying these beds, they wouldn't be as special.
"Let's be honest, not everyone can have this. Not everyone can afford this. That's what this is about," Mr. Crutchfield says.
"How much would you spend for a good night's sleep? Some people might say $33,000. That's the price of E.S. Kluft & Co.'s hand-tufted, king-size Palais Royale mattress and box spring, currently the most expensive American-made mattress set on the market. The company says it has sold about 100 since introducing it in 2008.
At $69,500—roughly the price of a Porsche Cayenne S hybrid SUV—there's the Vividus king-size mattress set from Hästens Sängar AB, of Sweden. Hästens says it takes 160 hours to assemble this mattress entirely by hand, which has a Swedish-pine frame with thick layers of horsehair, cotton, flax and wool inside. The company says since introducing the mattress in 2006, it has sold 250 of them world-wide.
***
... bad sleep was what drove Scott Kimple, a 44-year-old hedge-fund manager in Dallas, to invest $27,500 in a king-size Hästens 2000T mattress set two years ago. "I've had problems sleeping in the last couple of years, and I thought well, maybe a mattress might help," Mr. Kimple says.
"When I heard there was a $20,000 mattress out there, I thought it was kind of ridiculous." But Mr. Kimple is a convert. "It's light years better than anything I've ever slept on. It's like you're floating on air." An added plus: "They will come to your house and flip the mattress for you," Mr. Kimple says. The Hästens store in Dallas offers the monthly service to local customers for the first year; Mr. Kimple had it done.
***
For some, the eye-popping price is part of the appeal. "For any luxury brand, there has to be a perception of scarcity," says Dean Crutchfield, senior partner at Method Inc., a New York brand consulting firm. "If everyone was running around buying these beds, they wouldn't be as special.
"Let's be honest, not everyone can have this. Not everyone can afford this. That's what this is about," Mr. Crutchfield says.
BP Doesn't Deserve a Liability Cap - Richard A. Epstein - WSJ.com
EXCERPTS:
"Our national frustration continues to rise with each new drop of BP oil that leaks into the Gulf of Mexico. Everyone knows we can't legislate away environmental risks without consigning ourselves to the Stone Age. What's needed going forward is a comprehensive legal strategy that addresses the risks though a combination of regulation before the fact and tort liability (and criminal sanctions where appropriate) afterwards.
Tort remedies are essential to protect people (and their property) who do not have contractual relations with defendants from harms such as air and water pollution. The legal system should never allow self-interested parties to keep for themselves all the gains from dangerous activities that unilaterally impose losses on others—which is why the most devout defender of laissez-faire must insist, not just concede, that tough medicine is needed in these cases. The fundamental question here is one of technique: What mix of before and after sanctions will do the job at the lowest cost?
The first element in the mix is a no-nonsense liability system that fastens full responsibility on the parties who run dangerous operations, no excuses allowed. Accordingly, we have to be especially wary of statutory caps on tort damages, including the current law, under which, in the case of the oil industry, the "total of liability . . . with respect to each incident shall not exceed for an offshore facility except a deepwater port, the total of all removal costs plus $75,000,000." That $75 million is chicken feed. Fortunately, the law removes that cap if the incident was caused by "the gross negligence or willful misconduct" of any party, or its failure to comply with any "applicable Federal safety, construction, or operating regulation."
BP has waived the cap by expressing its willingness to pay "any legitimate claim." No surprise here, especially as the evidence to date suggests the cap will be blown off precisely because of the two exceptions. But we'd all be much better off if there were no statutory liability cap and if operators both big and small were required to purchase insurance—amounting to the tens of billions if necessary—when they operate in dangerous waters or terrains.
A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don't get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate. This logic also suggests that the Price Anderson Act's $375 million cap on damages for each responsible party to cover incidents at a nuclear power facilities should be rethought.
Tort liability does not preclude direct government safety inspection and regulation, especially in the Gulf of Mexico, where the government itself leases the drilling rights. So by all means work hard to make these better. Just be skeptical that this or any other presidential administration will reform the Department of Interior's hapless Minerals Management Service.
The rash decision of the Obama administration to shut down for six months all drilling in over 500 feet of water highlights the converse risk of regulatory overreaction. Why impose a ban on competitors with better safety records? Why extend it to relatively shallow waters?
***
"Our national frustration continues to rise with each new drop of BP oil that leaks into the Gulf of Mexico. Everyone knows we can't legislate away environmental risks without consigning ourselves to the Stone Age. What's needed going forward is a comprehensive legal strategy that addresses the risks though a combination of regulation before the fact and tort liability (and criminal sanctions where appropriate) afterwards.
Tort remedies are essential to protect people (and their property) who do not have contractual relations with defendants from harms such as air and water pollution. The legal system should never allow self-interested parties to keep for themselves all the gains from dangerous activities that unilaterally impose losses on others—which is why the most devout defender of laissez-faire must insist, not just concede, that tough medicine is needed in these cases. The fundamental question here is one of technique: What mix of before and after sanctions will do the job at the lowest cost?
The first element in the mix is a no-nonsense liability system that fastens full responsibility on the parties who run dangerous operations, no excuses allowed. Accordingly, we have to be especially wary of statutory caps on tort damages, including the current law, under which, in the case of the oil industry, the "total of liability . . . with respect to each incident shall not exceed for an offshore facility except a deepwater port, the total of all removal costs plus $75,000,000." That $75 million is chicken feed. Fortunately, the law removes that cap if the incident was caused by "the gross negligence or willful misconduct" of any party, or its failure to comply with any "applicable Federal safety, construction, or operating regulation."
BP has waived the cap by expressing its willingness to pay "any legitimate claim." No surprise here, especially as the evidence to date suggests the cap will be blown off precisely because of the two exceptions. But we'd all be much better off if there were no statutory liability cap and if operators both big and small were required to purchase insurance—amounting to the tens of billions if necessary—when they operate in dangerous waters or terrains.
A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don't get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate. This logic also suggests that the Price Anderson Act's $375 million cap on damages for each responsible party to cover incidents at a nuclear power facilities should be rethought.
Tort liability does not preclude direct government safety inspection and regulation, especially in the Gulf of Mexico, where the government itself leases the drilling rights. So by all means work hard to make these better. Just be skeptical that this or any other presidential administration will reform the Department of Interior's hapless Minerals Management Service.
The rash decision of the Obama administration to shut down for six months all drilling in over 500 feet of water highlights the converse risk of regulatory overreaction. Why impose a ban on competitors with better safety records? Why extend it to relatively shallow waters?
***
Obama vs. BP (and You) - WSJ.com
EXCERPT:
"Government is the greatest of blessings, without which many other blessings are not possible, such as freedom from fraud and extortion and violence. The problem, and irony, is that government, in clearing the field of other fraudsters and extortionists, is ever tempted by those roles itself.
A policeman kicks out your taillight and then writes you a ticket for a faulty taillight. A president announces a moratorium on offshore drilling as a sop to a section of his public that always opposes drilling, and to be seen "doing something." Then he turns around and demands that BP compensate those injured by the president's own careless action.
"Government is the greatest of blessings, without which many other blessings are not possible, such as freedom from fraud and extortion and violence. The problem, and irony, is that government, in clearing the field of other fraudsters and extortionists, is ever tempted by those roles itself.
A policeman kicks out your taillight and then writes you a ticket for a faulty taillight. A president announces a moratorium on offshore drilling as a sop to a section of his public that always opposes drilling, and to be seen "doing something." Then he turns around and demands that BP compensate those injured by the president's own careless action.
Wednesday, June 16, 2010
Doctors Chafe As Medicare Cuts Loom - WSJ.com
EXCERPTS:
"For more than two decades, internist Lee Antles has treated Medicare patients at his practice in Olympia, Wash. Last month, he started turning them away.
What pushed him over the edge was Congress's failure to end the looming threat—which no one expects to be carried through—of a 21% payment cut for doctors who participate in the seniors' insurance program. Last year, he and his wife, Margie, who manages the office, took home $55,000 before taxes.
Dr. Antles is considering quitting medicine and moving to Chicago, so his wife can return to a sales job that pays at least twice that much. "It just causes me such angst," he said. "It leaves 1,000 Medicare patients. Where do they go?"
The Senate could vote as soon as Wednesday to end debate on a bill to delay the cuts. But lawmakers are considering postponing them just through the year's end. A House bill that passed last month would delay the cuts through the end of 2011.
Repeated short-term fixes of the problem in recent years have left doctors frustrated and some, like Dr. Antles, are refusing to take new Medicare patients....
"For more than two decades, internist Lee Antles has treated Medicare patients at his practice in Olympia, Wash. Last month, he started turning them away.
What pushed him over the edge was Congress's failure to end the looming threat—which no one expects to be carried through—of a 21% payment cut for doctors who participate in the seniors' insurance program. Last year, he and his wife, Margie, who manages the office, took home $55,000 before taxes.
Dr. Antles is considering quitting medicine and moving to Chicago, so his wife can return to a sales job that pays at least twice that much. "It just causes me such angst," he said. "It leaves 1,000 Medicare patients. Where do they go?"
The Senate could vote as soon as Wednesday to end debate on a bill to delay the cuts. But lawmakers are considering postponing them just through the year's end. A House bill that passed last month would delay the cuts through the end of 2011.
Repeated short-term fixes of the problem in recent years have left doctors frustrated and some, like Dr. Antles, are refusing to take new Medicare patients....
Text of Barack Obama’s Oval Office Address - Washington Wire - WSJ
EXCERPT:
"You know, for generations, men and women who call this region home have made their living from the water. That living is now in jeopardy. I’ve talked to shrimpers and fishermen who don’t know how they’re going to support their families this year. I’ve seen empty docks and restaurants with fewer customers – even in areas where the beaches are not yet affected. I’ve talked to owners of shops and hotels who wonder when the tourists will start to come back. The sadness and anger they feel is not just about the money they’ve lost. It’s about a wrenching anxiety that their way of life may be lost.
I refuse to let that happen. Tomorrow, I will meet with the chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness. And this fund will not be controlled by BP. In order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party."
"You know, for generations, men and women who call this region home have made their living from the water. That living is now in jeopardy. I’ve talked to shrimpers and fishermen who don’t know how they’re going to support their families this year. I’ve seen empty docks and restaurants with fewer customers – even in areas where the beaches are not yet affected. I’ve talked to owners of shops and hotels who wonder when the tourists will start to come back. The sadness and anger they feel is not just about the money they’ve lost. It’s about a wrenching anxiety that their way of life may be lost.
I refuse to let that happen. Tomorrow, I will meet with the chairman of BP and inform him that he is to set aside whatever resources are required to compensate the workers and business owners who have been harmed as a result of his company’s recklessness. And this fund will not be controlled by BP. In order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party."
The Gulf Spill, the Financial Crisis and the Failure of Big Government - WSJ.com
EXCERPTS:
"The Gulf oil spill and the global financial crisis both demonstrate the failings of big government. Partisan politics obscures the linkage, with the consequence that each political party repeats the mistakes of the other as its turn to govern arrives.
First, consider the oil spill. BP and its contractors are surely responsible for the accident. They may also be responsible for a poor response. The nature and scope of legal culpability is yet to be determined. What is the government's role? Offshore drilling is a dangerous activity with potential undesirable consequences now actualized. For this reason, as we have learned, it is heavily regulated. The agency directly responsible for regulating the activity is the Minerals Management Service (MMS) of the Department of the Interior.
... the federal government has assumed the role of solving a collective action problem. Potentially all Americans benefit from the drilling, but those living in coastal areas suffer disproportionate harm from mishaps. The government theoretically negotiates on their behalf and establishes rules to protect them.
Obviously, regulation failed. By all accounts, MMS operated as a rubber stamp for BP. It is a striking example of regulatory capture: Agencies tasked with protecting the public interest come to identify with the regulated industry and protect its interests against that of the public. The result: Government fails to protect the public. That conclusion is precisely the same for the financial services industry.
***
Advocates of heavy regulation promise that risky behavior by banks can be controlled and limited by regulators. There are two major reasons such efforts fail. I have already discussed the first: regulatory capture.
The second source of regulatory failure is the knowledge problem identified by Nobel Laureate Friedrich Hayek. The knowledge required by regulators is dispersed throughout the industry and broader economy. For regulation to work, that dispersed knowledge must be centralized in the regulatory agency. To successfully accomplish this requires central planning of the industry, if not the economy. But the local knowledge of specific circumstances of time and place cannot be aggregated in one mind or agency. We know that is impossible, and that impossibility was the reason for the collapse of the Soviet Empire and the transformation of the Chinese economy.
Regulatory practice represents islands of central planning in otherwise decentralized market economies. If we add back in the problem of regulatory capture, then we get industries coddled and protected by government. When business and politics become intertwined we move from market economies to crony capitalism.
***
A big-government conservative administration failed in crisis, as has a big-government liberal administration. The regulatory state did not prevent excessive risk taking whether in financial services, nor perhaps in offshore oil drilling. Government response to crises once they occur is slow and inept. All this is not because either Republicans or Democrats are in power, but because big government doesn't work. It can't deliver on its promises. Big government overpromises and underdelivers. In reaching to do more, big government accomplishes less. That is not an ideological statement, but an empirical observation.
***
University of Chicago law professor Richard Epstein has observed that we need simple rules for a complex world. The complexity of rules is self-defeating, because that complexity requires more knowledge than can be acquired. Brazil has a simple rule for directors of failed banks: They are personally liable. That concentrates the mind of directors on reining in risk-taking by management more effectively than would creating a systemic-risk regulator.
The Obama administration and Congress propose more of the same failed approach to regulation. Instead they should heed Hayek, who observed that "the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
"The Gulf oil spill and the global financial crisis both demonstrate the failings of big government. Partisan politics obscures the linkage, with the consequence that each political party repeats the mistakes of the other as its turn to govern arrives.
First, consider the oil spill. BP and its contractors are surely responsible for the accident. They may also be responsible for a poor response. The nature and scope of legal culpability is yet to be determined. What is the government's role? Offshore drilling is a dangerous activity with potential undesirable consequences now actualized. For this reason, as we have learned, it is heavily regulated. The agency directly responsible for regulating the activity is the Minerals Management Service (MMS) of the Department of the Interior.
... the federal government has assumed the role of solving a collective action problem. Potentially all Americans benefit from the drilling, but those living in coastal areas suffer disproportionate harm from mishaps. The government theoretically negotiates on their behalf and establishes rules to protect them.
Obviously, regulation failed. By all accounts, MMS operated as a rubber stamp for BP. It is a striking example of regulatory capture: Agencies tasked with protecting the public interest come to identify with the regulated industry and protect its interests against that of the public. The result: Government fails to protect the public. That conclusion is precisely the same for the financial services industry.
***
Advocates of heavy regulation promise that risky behavior by banks can be controlled and limited by regulators. There are two major reasons such efforts fail. I have already discussed the first: regulatory capture.
The second source of regulatory failure is the knowledge problem identified by Nobel Laureate Friedrich Hayek. The knowledge required by regulators is dispersed throughout the industry and broader economy. For regulation to work, that dispersed knowledge must be centralized in the regulatory agency. To successfully accomplish this requires central planning of the industry, if not the economy. But the local knowledge of specific circumstances of time and place cannot be aggregated in one mind or agency. We know that is impossible, and that impossibility was the reason for the collapse of the Soviet Empire and the transformation of the Chinese economy.
Regulatory practice represents islands of central planning in otherwise decentralized market economies. If we add back in the problem of regulatory capture, then we get industries coddled and protected by government. When business and politics become intertwined we move from market economies to crony capitalism.
***
A big-government conservative administration failed in crisis, as has a big-government liberal administration. The regulatory state did not prevent excessive risk taking whether in financial services, nor perhaps in offshore oil drilling. Government response to crises once they occur is slow and inept. All this is not because either Republicans or Democrats are in power, but because big government doesn't work. It can't deliver on its promises. Big government overpromises and underdelivers. In reaching to do more, big government accomplishes less. That is not an ideological statement, but an empirical observation.
***
University of Chicago law professor Richard Epstein has observed that we need simple rules for a complex world. The complexity of rules is self-defeating, because that complexity requires more knowledge than can be acquired. Brazil has a simple rule for directors of failed banks: They are personally liable. That concentrates the mind of directors on reining in risk-taking by management more effectively than would creating a systemic-risk regulator.
The Obama administration and Congress propose more of the same failed approach to regulation. Instead they should heed Hayek, who observed that "the curious task of economics is to demonstrate to men how little they really know about what they imagine they can design."
Tuesday, June 15, 2010
Obama's Political Oil Fund - WSJ.com
EXCERPTS:
"The BP oil spill is already a calamity for the Gulf Coast ecosystem and economy, but now that Washington is looking to deflect all political blame it could also became a disaster for the rule of law. Exhibit C ... is the new White House demand that BP pay into an escrow account controlled by government to pay for the economic costs of the spill....
Then came the President's suggestion that BP suspend its dividend, which is crucial to the retirement of thousands of shareholders. BP may decide it is prudent to suspend its dividend while it gets a better handle on its ultimate liability. But the White House has no legal basis to compel such a decision. Meanwhile, Democrats in Congress are preparing to lift their own $75 million liability cap and apply that retroactively to BP, another move of dubious legality.
No wonder Britain's Prime Minister and other officials are alarmed about the fate of one of their country's foremost corporations. This is the kind of treatment that Americans would protest if it were applied to U.S. companies by Venezuela or Russia.
***
None of this is to absolve BP for any bad judgments or shortcuts that contributed to this disaster....
BP is financially responsible for the Deepwater Horizon gusher, and the White House should want the company to stay healthy enough to honor those obligations. Instead, the Administration's denunciations and legally dubious demands are compounding the damage.
***
Offshore drilling, even in shallow water, is coming to a stop as the entire industry considers the additional political risks of operating amid a political panic in which even the President of United States seems oblivious to the rule of law....
"The BP oil spill is already a calamity for the Gulf Coast ecosystem and economy, but now that Washington is looking to deflect all political blame it could also became a disaster for the rule of law. Exhibit C ... is the new White House demand that BP pay into an escrow account controlled by government to pay for the economic costs of the spill....
Then came the President's suggestion that BP suspend its dividend, which is crucial to the retirement of thousands of shareholders. BP may decide it is prudent to suspend its dividend while it gets a better handle on its ultimate liability. But the White House has no legal basis to compel such a decision. Meanwhile, Democrats in Congress are preparing to lift their own $75 million liability cap and apply that retroactively to BP, another move of dubious legality.
No wonder Britain's Prime Minister and other officials are alarmed about the fate of one of their country's foremost corporations. This is the kind of treatment that Americans would protest if it were applied to U.S. companies by Venezuela or Russia.
***
None of this is to absolve BP for any bad judgments or shortcuts that contributed to this disaster....
BP is financially responsible for the Deepwater Horizon gusher, and the White House should want the company to stay healthy enough to honor those obligations. Instead, the Administration's denunciations and legally dubious demands are compounding the damage.
***
Offshore drilling, even in shallow water, is coming to a stop as the entire industry considers the additional political risks of operating amid a political panic in which even the President of United States seems oblivious to the rule of law....
Saturday, June 12, 2010
Greg Mankiw's Blog: The Value of Student Evaluations
EXCERPTS:
"Results show that there are statistically significant and sizable differences in student achievement across introductory course professors in both contemporaneous and follow‐on course achievement. However, our results indicate that professors who excel at promoting contemporaneous student achievement, on average, harm the subsequent performance of their students in more advanced classes. Academic rank, teaching experience, and terminal degree status of professors are negatively correlated with contemporaneous value‐added but positively correlated with follow on course value‐added. Hence, students of less experienced instructors who do not possess a doctorate perform significantly better in the contemporaneous course but perform worse in the follow‐on related curriculum.
Student evaluations are positively correlated with contemporaneous professor value‐added and negatively correlated with follow‐on student achievement. That is, students appear to reward higher grades in the introductory course but punish professors who increase deep learning (introductory course professor value‐added in follow‐on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice.
"Results show that there are statistically significant and sizable differences in student achievement across introductory course professors in both contemporaneous and follow‐on course achievement. However, our results indicate that professors who excel at promoting contemporaneous student achievement, on average, harm the subsequent performance of their students in more advanced classes. Academic rank, teaching experience, and terminal degree status of professors are negatively correlated with contemporaneous value‐added but positively correlated with follow on course value‐added. Hence, students of less experienced instructors who do not possess a doctorate perform significantly better in the contemporaneous course but perform worse in the follow‐on related curriculum.
Student evaluations are positively correlated with contemporaneous professor value‐added and negatively correlated with follow‐on student achievement. That is, students appear to reward higher grades in the introductory course but punish professors who increase deep learning (introductory course professor value‐added in follow‐on courses). Since many U.S. colleges and universities use student evaluations as a measurement of teaching quality for academic promotion and tenure decisions, this latter finding draws into question the value and accuracy of this practice.
Friday, June 11, 2010
Obama Meets Toto - Dan Henninger: WSJ.com
EXCERPTS:
"Two historic events happened in the Gulf of Mexico this spring: Unimaginable amounts of accidental oil rose from a hole one mile below the water's surface. Bigger than that, the federal government was exposed as the Wizard of Oz, unable to do anything about it.
In the movie, Dorothy and her friends in Oz admit the Wizard's limits. Not here. After a century of faith in the government's omnipotence, the discipleship can't believe this is happening....
[They believed] that with things like health care for the poor or protecting the environment, the private sector would never step up. [They were] willing to pay high taxes to let government do it, no matter how stupid, corrupt and inefficient the government might be, because that was better than the alternative, which was nothing.
Whatever the validity, for most of the postwar period, many people bought into this Faustian bargain. Throw money, accept the inefficiencies, and hope the government does more good than harm.
Arguably, achieving certain public goods this way could have endured for the Democrats—but only if programs like Medicaid remained as modest as their originators promised. Or if government's advocates had made choices. We can do this (Medicare for the elderly), but not that (Medicare for all, now called ObamaCare). But any liberal suggesting judgment or restraint—a Sen. Pat Moynihan— was tossed off the magic bus.
Now government's inefficiency has become indefensible and its fantastic costs, its oceanic spending, a clear and present danger.
Re-read Barack Obama's nomination-acceptance speech in Denver, an amazing compendium of promises ending with: "America, we cannot turn back (applause) not with so much work to be done; not with so many children to educate, and so many veterans to care for; not with an economy to fix, and cities to rebuild, and farms to save; not with so many families to protect and so many lives to mend."
The speaker of those words can't stop the oil, but his language shows how indiscriminate faith in government omnipotence has become, and how incapable the believers are of targeting discrete goals, rather than vapor-filled clouds such as "saving the planet" or "mending lives."
This truly is the land of Oz.
But Toto has pulled the curtain back, and it looks like this year's clear-eyed electorate is ready to go home to Kansas.
"Two historic events happened in the Gulf of Mexico this spring: Unimaginable amounts of accidental oil rose from a hole one mile below the water's surface. Bigger than that, the federal government was exposed as the Wizard of Oz, unable to do anything about it.
In the movie, Dorothy and her friends in Oz admit the Wizard's limits. Not here. After a century of faith in the government's omnipotence, the discipleship can't believe this is happening....
[They believed] that with things like health care for the poor or protecting the environment, the private sector would never step up. [They were] willing to pay high taxes to let government do it, no matter how stupid, corrupt and inefficient the government might be, because that was better than the alternative, which was nothing.
Whatever the validity, for most of the postwar period, many people bought into this Faustian bargain. Throw money, accept the inefficiencies, and hope the government does more good than harm.
Arguably, achieving certain public goods this way could have endured for the Democrats—but only if programs like Medicaid remained as modest as their originators promised. Or if government's advocates had made choices. We can do this (Medicare for the elderly), but not that (Medicare for all, now called ObamaCare). But any liberal suggesting judgment or restraint—a Sen. Pat Moynihan— was tossed off the magic bus.
Now government's inefficiency has become indefensible and its fantastic costs, its oceanic spending, a clear and present danger.
Re-read Barack Obama's nomination-acceptance speech in Denver, an amazing compendium of promises ending with: "America, we cannot turn back (applause) not with so much work to be done; not with so many children to educate, and so many veterans to care for; not with an economy to fix, and cities to rebuild, and farms to save; not with so many families to protect and so many lives to mend."
The speaker of those words can't stop the oil, but his language shows how indiscriminate faith in government omnipotence has become, and how incapable the believers are of targeting discrete goals, rather than vapor-filled clouds such as "saving the planet" or "mending lives."
This truly is the land of Oz.
But Toto has pulled the curtain back, and it looks like this year's clear-eyed electorate is ready to go home to Kansas.
Thursday, June 10, 2010
In Louisiana, Scrambling for Work - WSJ.com
EXCERPT:
"VENICE, La.—The Deepwater Horizon oil spill might have spelled doom for Cajun Unlimited, a charter fishing business here in the southeast corner of the state.
The company lost $100,000 worth of booked trips for the summer—high season in this world-class sport-fishing area—as the worst offshore environmental disaster ever to afflict the U.S. scared off the tourists.
But instead of packing up and leaving, owner Jesse Morris, a fourth-generation fisherman born and raised here, dug in. Mr. Morris turned a food kitchen set up for locals and visiting sport fishermen into a small industry that feeds the hordes hired by BP PLC for the cleanup. His staff nearly doubled to about 15 people, who prepare between 1,200 and 1,500 meal boxes a day, for a profit of about $3 each.
Mr. Morris said he has been billing twice as much from the expanded food business as he would from charter fishing....
COMMENT: This is what entrepreneurs do. They recognize opportunities to use resources more effectively. The owner's motivation is to make profit for himself, but the end result is that BP gets the food its workers need. No one told the owner to switch from charter fishing to food supply. He looked at the resources he had, he evaluated the demand for the various products he could produce with them, and made the switch.
QUESTION: If the charter-fishing company had been owned and operated by the government, and Mr. Morris had been the manager employed by the government with a salary that did not depend on the company's revenues from serving customers, and accountable to a supervisor in Washington, do you think the company would have switched from charter service to food supply more quickly, or less quickly?
"VENICE, La.—The Deepwater Horizon oil spill might have spelled doom for Cajun Unlimited, a charter fishing business here in the southeast corner of the state.
The company lost $100,000 worth of booked trips for the summer—high season in this world-class sport-fishing area—as the worst offshore environmental disaster ever to afflict the U.S. scared off the tourists.
But instead of packing up and leaving, owner Jesse Morris, a fourth-generation fisherman born and raised here, dug in. Mr. Morris turned a food kitchen set up for locals and visiting sport fishermen into a small industry that feeds the hordes hired by BP PLC for the cleanup. His staff nearly doubled to about 15 people, who prepare between 1,200 and 1,500 meal boxes a day, for a profit of about $3 each.
Mr. Morris said he has been billing twice as much from the expanded food business as he would from charter fishing....
COMMENT: This is what entrepreneurs do. They recognize opportunities to use resources more effectively. The owner's motivation is to make profit for himself, but the end result is that BP gets the food its workers need. No one told the owner to switch from charter fishing to food supply. He looked at the resources he had, he evaluated the demand for the various products he could produce with them, and made the switch.
QUESTION: If the charter-fishing company had been owned and operated by the government, and Mr. Morris had been the manager employed by the government with a salary that did not depend on the company's revenues from serving customers, and accountable to a supervisor in Washington, do you think the company would have switched from charter service to food supply more quickly, or less quickly?
BP Shares Plunge 16% as Pressures Mount - WSJ.com
EXCERPTS:
"The Obama Administration ratcheted up its demands on Wednesday that BP PLC cover all costs stemming from the Gulf of Mexico oil spill, including millions of dollars in salaries of oil-industry workers laid off because of the federal moratorium on deepwater drilling.
The sudden increase in BP's potential liabilities—along with growing evidence that even more oil than expected is gushing from BP's crippled well—helped send BP's shares plummeting almost 16% in New York, to $29.20. The stock has lost close to half its value, more than $82 billion, in the seven weeks since the spill started.
"There is no objective justification for this share price movement. BP faces this situation as a strong company," said BP chief executive Tony Hayward in an interview at the company's Houston crisis center. "We have significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims."
BP didn't comment directly on the latest demand from Washington. But it is expected to argue that under the Oil Pollution Act of 1990, BP is liable only for the direct costs of the clean-up and couldn't be held responsible for the lost wages of oil workers. "Somewhere a line has to be drawn," a company official said.
Several legal experts said they couldn't think of any law or precedent that would allow the U.S. to try to recover damages from BP on behalf of rig workers thrown out of work by a government moratorium on deep offshore drilling.
"I'm not aware of anything out there that would allow [President Obama] to latch onto a legal remedy on behalf of the out-of-work workers," said Benjamin A. Escobar Jr., a Houston-based labor and employment attorney for Beirne Maynard & Parsons. "I think he's in for a real court fight on these issues."
The White House has a different view. "The moratorium is a result of the accident that BP caused. It is an economic loss for those workers," Press Secretary Robert Gibbs said. "Those are claims that BP should pay."
QUESTIONS:
1. Do you think BP should be required to bear the cost of the income lost by oil-industry workers as a result of the moratorium?
2. If BP is required to bear these costs, what consequences will likely result?
3. Explain how the concept of the "rule of law" is relevant to this issue.
"The Obama Administration ratcheted up its demands on Wednesday that BP PLC cover all costs stemming from the Gulf of Mexico oil spill, including millions of dollars in salaries of oil-industry workers laid off because of the federal moratorium on deepwater drilling.
The sudden increase in BP's potential liabilities—along with growing evidence that even more oil than expected is gushing from BP's crippled well—helped send BP's shares plummeting almost 16% in New York, to $29.20. The stock has lost close to half its value, more than $82 billion, in the seven weeks since the spill started.
"There is no objective justification for this share price movement. BP faces this situation as a strong company," said BP chief executive Tony Hayward in an interview at the company's Houston crisis center. "We have significant capacity and flexibility in dealing with the cost of responding to the incident, the environmental remediation and the payment of legitimate claims."
BP didn't comment directly on the latest demand from Washington. But it is expected to argue that under the Oil Pollution Act of 1990, BP is liable only for the direct costs of the clean-up and couldn't be held responsible for the lost wages of oil workers. "Somewhere a line has to be drawn," a company official said.
Several legal experts said they couldn't think of any law or precedent that would allow the U.S. to try to recover damages from BP on behalf of rig workers thrown out of work by a government moratorium on deep offshore drilling.
"I'm not aware of anything out there that would allow [President Obama] to latch onto a legal remedy on behalf of the out-of-work workers," said Benjamin A. Escobar Jr., a Houston-based labor and employment attorney for Beirne Maynard & Parsons. "I think he's in for a real court fight on these issues."
The White House has a different view. "The moratorium is a result of the accident that BP caused. It is an economic loss for those workers," Press Secretary Robert Gibbs said. "Those are claims that BP should pay."
QUESTIONS:
1. Do you think BP should be required to bear the cost of the income lost by oil-industry workers as a result of the moratorium?
2. If BP is required to bear these costs, what consequences will likely result?
3. Explain how the concept of the "rule of law" is relevant to this issue.
Wednesday, June 9, 2010
Staying In One of the Country's Most Expensive Hotel Rooms - WSJ.com
EXCERPTS:
"For guests used to staying in the best rooms at luxury hotels, the top suite at the Four Seasons Hotel New York may offer the ultimate in bragging rights: To sleep in it, you have to stomach its $35,000 a night price tag.
The Ty Warner Penthouse, named for the Beanie Baby mogul and the hotel's owner, is the most expensive hotel room in the country outside of Las Vegas, an important distinction in the industry since rooms in the gambling capital are often comped for high rollers. The suite has sweeping views of Manhattan in every direction, bathroom sinks made of solid blocks of rock crystal and a personal butler on-call 24 hours a day. Guests have the use of a Maybach or Rolls-Royce—with driver, of course. Room service from the hotel's restaurants, including one run by celebrity chef Joël Robuchon, is included in the price and nearly unlimited (though one guest was charged for a $1,000 order of caviar).
The suite, which opened in 2007, cost $50 million to build and took seven years to design, the hotel says....
The suite has about 850 light bulbs: Mr. Graziosi keeps about 30 different types on hand for quick replacements. The dark mahogany lacquer bookshelves in the library alone feature about 400 bulbs illuminating a history, art, and biography collection. The $120,000 chandelier over the dinning room table is made of more than 100 tiny fiber optic bulbs.
Only four of the 42-person housekeeping staff are allowed to clean the room. They receive two extra weeks of training, says Margie Garay, director of housekeeping at the hotel, learning how use special chemicals that won't erode the room's delicate surfaces. "We don't use Pledge," she says....
Staff say they try to anticipate penthouse guests' preferences. The hotel keeps files on all return guests detailing their habits and favorite food, drink and even toilet paper. After reviewing one incoming guest's file, staff discovered they needed to track down a particular "tissue," says Ms. Garay. It wasn't easy. Two employees went out separately searching to find the needed "ultraplush" paper product, she says.
Once the penthouse is booked, it's "all hands to the fire," says Anthony Zamora, executive chef at the hotel. The kitchen staff wants to know "do they like tea sandwiches automatically throughout the day or just on request? Should we pre-order caviar from our supplier just in case they request it?" says Mr. Zamora. If a guest is from the Middle East, he may preorder Hildon water, a brand bottled in southern England and popular among guests from the region, he says. Louis Roederer Cristal, the champagne that retails for around $200, is pre-stocked in the room unless the guest prefers something else.
If the guest is coming to the hotel for the first time, intelligence gathering is harder. The three person "special services department" or the general manager's assistant will speak to the guest or his or her assistant about the reason for the visit and the guest's preferences. Employees also scour the Internet for clues and check in with other Four Seasons properties where the guest has stayed. While some guests enjoy the personal service, "others are a little taken aback—'why do you need all these details?'" says Mr. Schmidinger, the general manager.
During a penthouse guest's stay, their personal butler, often Johannes Walz, a soft-spoken 45-year-old from Germany, acts as intermediary between the guest and all hotel staff.
The placement of every object in the room is detailed in a book of more than 50 pages. Then housekeeping staff knows "how many hangers are in the closet, where flowers are placed on tables, how far is a table placed from the piano. How far is the Montblanc blotter from the lamp on the desk," says Ms. Garay. The room is dusted daily and cleaned weekly even when there are no guests in residence.
Changing any aspect of the set up goes through Ms. Aslanian and is ultimately Mr. Warner's decision. It's "like amending the constitution," says Leslie Lefkowitz, director of public relations for the hotel.
"For guests used to staying in the best rooms at luxury hotels, the top suite at the Four Seasons Hotel New York may offer the ultimate in bragging rights: To sleep in it, you have to stomach its $35,000 a night price tag.
The Ty Warner Penthouse, named for the Beanie Baby mogul and the hotel's owner, is the most expensive hotel room in the country outside of Las Vegas, an important distinction in the industry since rooms in the gambling capital are often comped for high rollers. The suite has sweeping views of Manhattan in every direction, bathroom sinks made of solid blocks of rock crystal and a personal butler on-call 24 hours a day. Guests have the use of a Maybach or Rolls-Royce—with driver, of course. Room service from the hotel's restaurants, including one run by celebrity chef Joël Robuchon, is included in the price and nearly unlimited (though one guest was charged for a $1,000 order of caviar).
The suite, which opened in 2007, cost $50 million to build and took seven years to design, the hotel says....
The suite has about 850 light bulbs: Mr. Graziosi keeps about 30 different types on hand for quick replacements. The dark mahogany lacquer bookshelves in the library alone feature about 400 bulbs illuminating a history, art, and biography collection. The $120,000 chandelier over the dinning room table is made of more than 100 tiny fiber optic bulbs.
Only four of the 42-person housekeeping staff are allowed to clean the room. They receive two extra weeks of training, says Margie Garay, director of housekeeping at the hotel, learning how use special chemicals that won't erode the room's delicate surfaces. "We don't use Pledge," she says....
Staff say they try to anticipate penthouse guests' preferences. The hotel keeps files on all return guests detailing their habits and favorite food, drink and even toilet paper. After reviewing one incoming guest's file, staff discovered they needed to track down a particular "tissue," says Ms. Garay. It wasn't easy. Two employees went out separately searching to find the needed "ultraplush" paper product, she says.
Once the penthouse is booked, it's "all hands to the fire," says Anthony Zamora, executive chef at the hotel. The kitchen staff wants to know "do they like tea sandwiches automatically throughout the day or just on request? Should we pre-order caviar from our supplier just in case they request it?" says Mr. Zamora. If a guest is from the Middle East, he may preorder Hildon water, a brand bottled in southern England and popular among guests from the region, he says. Louis Roederer Cristal, the champagne that retails for around $200, is pre-stocked in the room unless the guest prefers something else.
If the guest is coming to the hotel for the first time, intelligence gathering is harder. The three person "special services department" or the general manager's assistant will speak to the guest or his or her assistant about the reason for the visit and the guest's preferences. Employees also scour the Internet for clues and check in with other Four Seasons properties where the guest has stayed. While some guests enjoy the personal service, "others are a little taken aback—'why do you need all these details?'" says Mr. Schmidinger, the general manager.
During a penthouse guest's stay, their personal butler, often Johannes Walz, a soft-spoken 45-year-old from Germany, acts as intermediary between the guest and all hotel staff.
The placement of every object in the room is detailed in a book of more than 50 pages. Then housekeeping staff knows "how many hangers are in the closet, where flowers are placed on tables, how far is a table placed from the piano. How far is the Montblanc blotter from the lamp on the desk," says Ms. Garay. The room is dusted daily and cleaned weekly even when there are no guests in residence.
Changing any aspect of the set up goes through Ms. Aslanian and is ultimately Mr. Warner's decision. It's "like amending the constitution," says Leslie Lefkowitz, director of public relations for the hotel.
Free Markets: Pro-Rich or Pro-Poor - Walter E. Williams
XCERPTS:
"Free markets, or laissez-faire capitalism, refer to an economic system where there is no government interference except to outlaw and prosecute fraud and coercion. It ought to be apparent that our economy cannot be described as free market because there is extensive government interference. We have what might be called a mixed economy, one with both free market and socialistic attributes. If one is poor or of modest means, where does he fare better: in the freer and more open sector of our economy or in the controlled and highly regulated sector? Let's look at it.
Did Carnegie, Mellon, Rockefeller and Guggenheim start out rich? Andrew Carnegie worked as a bobbin boy, changing spools of thread in a cotton mill 12 hours a day, six days a week, earning $1.20 a week. A young John D. Rockefeller worked as a clerk. Meyer Guggenheim started out as a peddler. Andrew Mellon did have a leg up; his father was a lawyer and banker. Sam Walton milked the family's cows, bottled the milk and delivered it and newspapers to customers. Richard Sears was a railroad station agent. Alvah Roebuck began work as a watchmaker. Together, they founded Sears, Roebuck and Company in 1893. John Cash Penney (founder of JCPenney department stores) worked for a local dry goods merchant.
"Free markets, or laissez-faire capitalism, refer to an economic system where there is no government interference except to outlaw and prosecute fraud and coercion. It ought to be apparent that our economy cannot be described as free market because there is extensive government interference. We have what might be called a mixed economy, one with both free market and socialistic attributes. If one is poor or of modest means, where does he fare better: in the freer and more open sector of our economy or in the controlled and highly regulated sector? Let's look at it.
Did Carnegie, Mellon, Rockefeller and Guggenheim start out rich? Andrew Carnegie worked as a bobbin boy, changing spools of thread in a cotton mill 12 hours a day, six days a week, earning $1.20 a week. A young John D. Rockefeller worked as a clerk. Meyer Guggenheim started out as a peddler. Andrew Mellon did have a leg up; his father was a lawyer and banker. Sam Walton milked the family's cows, bottled the milk and delivered it and newspapers to customers. Richard Sears was a railroad station agent. Alvah Roebuck began work as a watchmaker. Together, they founded Sears, Roebuck and Company in 1893. John Cash Penney (founder of JCPenney department stores) worked for a local dry goods merchant.
It's boom times for firms cleaning up oil spill - Gulf Oil Spill - MiamiHerald.com
EXCERPTS:
" ``Right now we are working two 10-hour shifts, 15 men per shift, six days a week,'' O'Brien said. ``And we're producing about a mile of boom a day.''
Before the spill, the company manufactured about 1,500 feet per day, he said.
QUESTIONS:
1. This company has taken dramatic steps to increase its production of boom [a product used to protect the environment from the oil spill]. What do you think is the primary motivation behind this company's response to the oil spill: a desire to protect the environment, to help society, or to make more profit for itself?
2. Companies that specialize in products and services which are used to clean up oil spills will actually profit from the oil spill in the Gulf. In fact, they may receive tremendous profits as a result of the spill. While the environment is being hurt, and many people are suffering, these companies will be benefiting. Do you think it would be a good idea to impose an extra tax on the "excess" profits that these companies receive?
3. In answering question 2, what should your first step have been?
" ``Right now we are working two 10-hour shifts, 15 men per shift, six days a week,'' O'Brien said. ``And we're producing about a mile of boom a day.''
Before the spill, the company manufactured about 1,500 feet per day, he said.
QUESTIONS:
1. This company has taken dramatic steps to increase its production of boom [a product used to protect the environment from the oil spill]. What do you think is the primary motivation behind this company's response to the oil spill: a desire to protect the environment, to help society, or to make more profit for itself?
2. Companies that specialize in products and services which are used to clean up oil spills will actually profit from the oil spill in the Gulf. In fact, they may receive tremendous profits as a result of the spill. While the environment is being hurt, and many people are suffering, these companies will be benefiting. Do you think it would be a good idea to impose an extra tax on the "excess" profits that these companies receive?
3. In answering question 2, what should your first step have been?
Protecting, or hurting, nannies?
EXCERPTS:
"To be a Times contributor, you apparently have to write like Mara Gay, who penned these lines for a front page article last week:
New York may soon become the first state to offer employment protection for nannies. The state Senate passed a bill of rights for domestic workers this week, a measure that would require employers to offer New York’s approximately 200,000 household workers paid holidays, overtime pay and sick days. Supporters say the step will provide needed relief to thousands of women — and some men — who are helping to raise the children of wealthier New Yorkers without any legal workplace rights beyond the federal minimum wage.
Now, you see, if I had been writing this article, it might have opened more like this:
New York state may soon become the first state to restrict employment opportunities for nannies. The state Senate passed a bill this week that would prohibit New York’s approximately 200,000 household workers from accepting any position that does not include paid holidays, overtime pay and sick days. Opponents say the step will bring unnecessary hardship to thousands of women—and some men—who have found employment because of labor markets that operate freely, except for constraints imposed by the federal minimum wage.
A more neutral observer might have noted that this bill, if passed, will be good for some of those nannies who retain their jobs, bad for the many nannies who will be driven out of the business, and extremely good for people like Ai-jen Poo, director of the National Domestic Workers Alliance, who will represent the winners and can conveniently ignore the losers.
"To be a Times contributor, you apparently have to write like Mara Gay, who penned these lines for a front page article last week:
New York may soon become the first state to offer employment protection for nannies. The state Senate passed a bill of rights for domestic workers this week, a measure that would require employers to offer New York’s approximately 200,000 household workers paid holidays, overtime pay and sick days. Supporters say the step will provide needed relief to thousands of women — and some men — who are helping to raise the children of wealthier New Yorkers without any legal workplace rights beyond the federal minimum wage.
Now, you see, if I had been writing this article, it might have opened more like this:
New York state may soon become the first state to restrict employment opportunities for nannies. The state Senate passed a bill this week that would prohibit New York’s approximately 200,000 household workers from accepting any position that does not include paid holidays, overtime pay and sick days. Opponents say the step will bring unnecessary hardship to thousands of women—and some men—who have found employment because of labor markets that operate freely, except for constraints imposed by the federal minimum wage.
A more neutral observer might have noted that this bill, if passed, will be good for some of those nannies who retain their jobs, bad for the many nannies who will be driven out of the business, and extremely good for people like Ai-jen Poo, director of the National Domestic Workers Alliance, who will represent the winners and can conveniently ignore the losers.
Friday, June 4, 2010
The "Mankiw Rule" for monetary policy
EXCERPT:
"There has been a lot of talk lately about whether the Fed will continue raising interest rates or pause for a while. I don't know the answer, but here is one way to think about it.... I estimated the following simple formula for setting the federal funds rate:
Federal funds rate = 8.5 + 1.4 (Core inflation - Unemployment).
"There has been a lot of talk lately about whether the Fed will continue raising interest rates or pause for a while. I don't know the answer, but here is one way to think about it.... I estimated the following simple formula for setting the federal funds rate:
Federal funds rate = 8.5 + 1.4 (Core inflation - Unemployment).
Wednesday, June 2, 2010
Why is the unemployment rate for teenagers so high?
Donald J. Boudreaux's letter to the editor of the New York Times:
Dear Editor:
Suppose Uncle Sam orders you to raise by 41 percent the price you charge for subscriptions to your newspaper. Would you be surprised to find a subsequent fall in the number of subscribers? If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible explanations for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?
Unless you answered “yes” to this last question, I wonder why you published Mickey Meece’s report on today’s record high teenage unemployment rate (“Job Outlook for Teenagers Worsens,” June 1). Between 2007 and 2009, Uncle Sam ordered teenage workers (who are mostly unskilled) to raise the price they charge for their labor services by 41 percent. (That is, the federal minimum-wage rose from $5.15 per hour in 2007 to its current level of $7.25 in 2009 – a 41 percent increase.)
Does it not strike you as more than passing strange for your reporter – assigned to help explain why teenagers today have an increasingly difficult time finding jobs – to ignore the fact that these teenagers are ordered by government to raise significantly the wages that they charge their employers?
Dear Editor:
Suppose Uncle Sam orders you to raise by 41 percent the price you charge for subscriptions to your newspaper. Would you be surprised to find a subsequent fall in the number of subscribers? If you assigned a reporter to investigate the reasons for this decline in subscriptions, would you be impressed if that reporter files a story offering several possible explanations for the fall in subscriptions without, however, once mentioning the mandated 41 percent price hike?
Unless you answered “yes” to this last question, I wonder why you published Mickey Meece’s report on today’s record high teenage unemployment rate (“Job Outlook for Teenagers Worsens,” June 1). Between 2007 and 2009, Uncle Sam ordered teenage workers (who are mostly unskilled) to raise the price they charge for their labor services by 41 percent. (That is, the federal minimum-wage rose from $5.15 per hour in 2007 to its current level of $7.25 in 2009 – a 41 percent increase.)
Does it not strike you as more than passing strange for your reporter – assigned to help explain why teenagers today have an increasingly difficult time finding jobs – to ignore the fact that these teenagers are ordered by government to raise significantly the wages that they charge their employers?
Tuesday, June 1, 2010
The official definition of poverty, and a new revised definition
EXCERPT:
"Despite poverty's messiness, we've tended to measure progress against it by a single statistic, the federal poverty line. It was originally designed in the early 1960s by Mollie Orshansky, an analyst at the Social Security Administration, and became part of Lyndon Johnson's War on Poverty. She took the Agriculture Department's estimated cost for a bare-bones -- but adequate -- diet and multiplied it by three. That figure is adjusted annually for inflation. In 2008, the poverty threshold was $21,834 for a four-member family with two children under 18....
The existing poverty line could be improved by adding some income sources and subtracting some expenses (example: child care). Unfortunately, the administration's proposal for a "supplemental poverty measure" in 2011 ... would compound public confusion....
The "supplemental measure" ties the poverty threshold to what the poorest third of Americans spend on food, housing, clothes and utilities. The actual threshold -- not yet calculated -- will almost certainly be higher than today's poverty line. Moreover, the new definition has strange consequences. Suppose that all Americans doubled their incomes tomorrow, and suppose that their spending on food, clothing, housing and utilities also doubled. That would seem to signify less poverty -- but not by the new poverty measure. It wouldn't decline, because the poverty threshold would go up as spending went up. Many Americans would find this weird: People get richer but "poverty" stays stuck.
What produces this outcome is a different view of poverty. The present concept is an absolute one: The poverty threshold reflects the amount estimated to meet basic needs. By contrast, the supplemental measure embraces a relative notion of poverty: People are automatically poor if they're a given distance from the top, even if their incomes are increasing. The idea is that they suffer psychological deprivation by being far outside the mainstream. The math of this relative definition makes it hard for people at the bottom ever to escape "poverty."
"Despite poverty's messiness, we've tended to measure progress against it by a single statistic, the federal poverty line. It was originally designed in the early 1960s by Mollie Orshansky, an analyst at the Social Security Administration, and became part of Lyndon Johnson's War on Poverty. She took the Agriculture Department's estimated cost for a bare-bones -- but adequate -- diet and multiplied it by three. That figure is adjusted annually for inflation. In 2008, the poverty threshold was $21,834 for a four-member family with two children under 18....
The existing poverty line could be improved by adding some income sources and subtracting some expenses (example: child care). Unfortunately, the administration's proposal for a "supplemental poverty measure" in 2011 ... would compound public confusion....
The "supplemental measure" ties the poverty threshold to what the poorest third of Americans spend on food, housing, clothes and utilities. The actual threshold -- not yet calculated -- will almost certainly be higher than today's poverty line. Moreover, the new definition has strange consequences. Suppose that all Americans doubled their incomes tomorrow, and suppose that their spending on food, clothing, housing and utilities also doubled. That would seem to signify less poverty -- but not by the new poverty measure. It wouldn't decline, because the poverty threshold would go up as spending went up. Many Americans would find this weird: People get richer but "poverty" stays stuck.
What produces this outcome is a different view of poverty. The present concept is an absolute one: The poverty threshold reflects the amount estimated to meet basic needs. By contrast, the supplemental measure embraces a relative notion of poverty: People are automatically poor if they're a given distance from the top, even if their incomes are increasing. The idea is that they suffer psychological deprivation by being far outside the mainstream. The math of this relative definition makes it hard for people at the bottom ever to escape "poverty."
Google sued for "faulty" map directions
EXCERPT:
"A California woman is suing Google after she was hit by a car while following directions provided by Google Maps on her cell phone, according to AOL News.... The directions did not tell her that there were no sidewalks along Deer Valley Drive, which, Rosenberg alleges, led to her being struck by traffic.
"As a direct and proximate cause of Defendant Google's careless, reckless and negligent providing of unsafe directions, Plaintiff Lauren Rosenberg was led onto a dangerous highway, and was thereby stricken by a motor vehicle, causing her to suffer severe permanent physical, emotional and mental injuries," according to the complaint filed in Park County district court.
Rosenberg is asking for Google to pay her medical expenses in addition to punitive damages and loss of earnings.
QUESTIONS:
Do you agree that Google should be required to help this woman? Explain why you agree or disagree.
"A California woman is suing Google after she was hit by a car while following directions provided by Google Maps on her cell phone, according to AOL News.... The directions did not tell her that there were no sidewalks along Deer Valley Drive, which, Rosenberg alleges, led to her being struck by traffic.
"As a direct and proximate cause of Defendant Google's careless, reckless and negligent providing of unsafe directions, Plaintiff Lauren Rosenberg was led onto a dangerous highway, and was thereby stricken by a motor vehicle, causing her to suffer severe permanent physical, emotional and mental injuries," according to the complaint filed in Park County district court.
Rosenberg is asking for Google to pay her medical expenses in addition to punitive damages and loss of earnings.
QUESTIONS:
Do you agree that Google should be required to help this woman? Explain why you agree or disagree.
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