Asymmetrical Information

From the desk of Jane Galt:

GM goes down

Brad DeLong looks at GM's problems:

As I see it, GM has three big problems:

It paid its workers in the 1980s and 1990s in backloaded pension and health care benefits so that now workers have cash-flow rights but no control rights over the corporation, and this is an unstable and dangerous corporate control situations.

Oligopoly profits have been built into GM's wages for a long time, and these oligopoly profit components are very "sticky"--they remain even though the
oligopoly profits are long gone.

GM management has bet very heavily on a low price of oil and a high price of SUVs.

Samuelson thinks that these are less important than (4): a culture of management that focuses on maintaining stability rather than taking advantage of change. He may be right.

As I see it, all four of these things are a problem. Either legacy labour costs or lacklustre design and engineering could be enough to swamp the company alone. Only absolutely brilliant management could get GM out of its hole. And GM's management has not been absolutely brilliant.

From the desk of Jane Galt:

Worried about social security?

Believe it or not, our public pension system is actually in relatively good shape. countries everywhere are desperately seeking a solution to the impending demographic crisis.

From the desk of Jane Galt:

Winterspeak points out in the comments to this post that I misread his original piece on returns to education, muddying up his insightful question--whether education has become more profitable because the opportunity cost has decreased--with the (to an economist) relatively uncontroversial point that education does not necessarily improve your skills, only your credentials.

Well, that's the difference between businesspeople and journalists: he looks at microeconomic effects, while my mind immediately jumps to the question of how this should shape policy.

Why does it matter whether education is functionally useful, or merely a signalling mechanism that tells employers you're a good risk? Because if education actually increases people's skills, then society can increase economic productivity by sending more people to college--at least if we assume that there are people not currently attending college who have the cognitive gifts to benefit from higher education.

If, on the other hand, college is merely a filtering mechanism that helps employers sort out potential employees, then the extra returns to sending more people to college are zero: it will only increase the supply of white collar workers, while doing nothing to increase the number of jobs for them to fill. Given that the marginal candidates likely to enter higher education under a programme to promote college attendance are probably those with the lowest level of complementary assets, such as cognitive ability, family ties, and self discipline, to help them find a job after graduation, it seems likely that such a policy would simply deprive marginal college candidates of potential earnings for four years, while doing nothing to improve their income potential--a negative result for both society and the individual.

So which is it? Some forms of education "teach you to think", but to be honest, what an undergraduate English major did was "teach me to regurgitate the political opinions of my professors in essays ostensibly about literature". This is not a skill that I have been called upon to use since in either my personal or professional lives. I learned to think critically in business school, five years later, and only after I'd already acquired substantial logical problem-solving ability through troubleshooting computer networks for years.

From the desk of Jane Galt:

Bubble ethics?

Mark Kleiman says that you won't see stories on the housing bubble in your paper's real-estate section for the same reason you didn't see stories on the stock market bubble in financial papers: the sections need advertising dollars to support themselves.

Now maybe I'm biased--my employer predicted the stock market bubble, and has been loudly harassing readers about the housing bubble throughout the rich world for quite some time. And we sell plenty of advertising. But beyond that, I don't think this is quite true.

The problem with real estate and financial sections is not that they cater to the whims of advertisers; it's that they are extraordinarily vulnerable to survivor bias.

Bubbles generally become apparent to experts years before they pop. Contrary to popular opinion, many people on Wall Street knew that stock prices were irrational long before the bubble collapsed.

So why didn't they say so? Well, some of them wanted to sell fat IPOs to gullible suckers. But many of them did say so, only no one paid attention. The problem with newspapers isn't that they need advertisers; it's that they have incredibly short attention spans. Journalists tend to cover a beat for a few years, and then move onto the next thing; that's how you move up in a media organization. Thus, they tend to check expert's predictions against months, rather than years, of data. And in the short run, bearish experts were wrong.

It is a maxim of traders that "the market can stay irrational longer than you can stay solvent"; that is why few people on Wall Street tried to act on their knowlege that the stock market was overvalued by selling short. They knew it was going to bust, but they didn't know when, meaning that they couldn't be sure they'd be able to cover their short trades long enough to make a profit.

This problem afflicted bearish experts on the publicity side too. Inexperienced business journalists saw some guy claiming that the stock market was going to crash, and then watched the Nasdaq climbing to ever more dizzying heights. Who are you going to believe, him or your own eyes? Moreover, because the crash wasn't actually happening, it was very hard to cover: there's only so many times you can say "the bubble is going to crash and everyone is going to lose a bunch of moola" before your editor demands something fresh. ANd there were a lot of fresh stories about dotcom companies with record first-day pops.

Similarly, experts have been predicting the housing market's demise for quite some time. Journalists, who generally need a hard news "peg" to sell a story to their editor, have understandably overlooked this in pursuit of something that was actually happening right now.

From the desk of Jane Galt:

Public service announcement

The Overstock.com Christmas ad has now replaced the eHarmony commercials as the most annoying thing on television. Pardon me while I repair to the toolshed and hit myself in the head with a small hammer to knock that stupid tune out.

From the desk of Jane Galt:

Why pundits are like businessmen

Louis Menand has an article in the New Yorker which ought to make me, a professional news analyst, despair:

Tetlock also found that specialists are not significantly more reliable than non-specialists in guessing what is going to happen in the region they study. Knowing a little might make someone a more reliable forecaster, but Tetlock found that knowing a lot can actually make a person less reliable. "We reach the point of diminishing marginal predictive returns for knowledge disconcertingly quickly," he reports. In this age of academic hyperspecialization, there is no reason for supposing that contributors to top journals--distinguished political scientists, area study specialists, economists, and so on--are any better than journalists or attentive readers of the New York Times in reading emerging situations. And the more famous the forecaster the more overblown the forecasts. "Experts in demand," Tetlock says, "were more overconfident than their colleagues who eked out existences far from the limelight."...

The experts' trouble in Tetlock's study is exactly the trouble that all human beings have: we fall in love with our hunches, and we really, really hate to be wrong....

The expert-prediction game is not much different. When television pundits make predictions, the more ingenious their forecasts the greater their cachet. An arresting new prediction means that the expert has discovered a set of interlocking causes that no one else has spotted, and that could lead to an outcome that the conventional wisdom is ignoring. On shows like The McLaughlin Group, these experts never lose their reputations, or their jobs, because long shots are their business. More serious commentators differ from the pundits only in the degree of showmanship. These serious experts, the think tankers and area-studies professors, are not entirely out to entertain, but they are a little out to entertain, and both their status as experts and their appeal as performers require them to predict futures that are not obvious to the viewer. The producer of the show does not want you and me to sit there listening to an expert and thinking, I could have said that. The expert also suffers from knowing too much: the more facts an expert has, the more information is available to be enlisted in support of his or her pet theories, and the more chains of causation he or she can find beguiling. This helps explain why specialists fail to outguess non-specialists. The odds tend to be with the obvious.

The problem as I see it is that the market for punditry has skewed incentives. There is no reward for being boring and right, nor any punishment for being novel and wrong. But there are big rewards, in the form of book contracts and lecture fees, for being novel and right. Pundits are thus tempted to act like executives with fat option packages. Executives with stock options get paid only if the stock appreciates considerably, putting their options "in the money"; but unlike investors, there is no downside for them. They are just as badly off if the stock stays at its current level, keeping their options "out of the money", as they are if the company implodes and the price of the stock drops to 50 cents a share. They are thus tempted to take risky steps which have high upside potential. Similarly, the expected value of an obviously right prediction is exactly the same to the pundit as that of a spectacularly wrong one. They are thus tempted to make risky predictions, hoping that one hits and they strike it rich.

I have myself observed the tendency of journalists to believe that their spectacularly wrong predictions (i.e. my near certainty that Argentina would never default on hte IMF) were merely bad luck, while their correct predictions are evidence of unusual intellectual acumen. Thus, in addition to their likeness to executives with options packages, pundits also closely resemble mutual fund managers, and the people who invest with them.

Statistically, mutual fund returns show little evidence that their managers are particularly sharp; a manager who lead the league last year is no more likely than any other manager to repeat the phenomenon this year. But managers rarely attribute their good years to being in a lucky spot on the bell curve; they see them as the natural result of the wise decisions they made throughout the year. And because there are so many mutual funds out there, some managers by pure chance manage to put together strings of good years, just as others, by almost equally random chance* will have a run of bad years. If you flip a coin a thousand times you will, purely by chance, get some strings of heads and tails that seem non-random to the casual observer, who may be tempted to attribute the strings to the coin-flipper's unusual skill. This is why investors, stupidly, pile into mutual funds that have had a couple good years behind them. They tend to get the same results that you could expect if you decided to put money down on your "hotshot" coin flipper continuing his winning streak.

In other words, a bet on the predictions of famous pundits is a sucker bet. As Daniel Drezner suggests, political bloggers everywhere are undoubtedly congratulating themselves on having been right all along.

*while there's no evidence that good mutual fund managers can beat the market, there are bad managers who consistently underperform it. Luckily for us, they are quickly fired and their funds closed.

From the desk of Jane Galt:

TiVo talk

Here's what I wrote about TiVo last year:

. . . it's been five years, and TiVo still isn't turning a profit. This is surprisingly common with new technologies; innovators often (even usually) aren't the people who end up making money off the market. They invent their bright idea, and then some established player, one with the complementary assets like distribution channels and marketing departments, comes over and horns in just as it's getting profitable. As the old saying goes, smart ain't the same as rich.

Now comes some exciting news from the Dow Jones newswire:

TiVo Inc. reported a narrower loss for the third quarter and revenue rose nearly 30% as the company reached four million subscriptions helped by its partnership with DirecTV.

For the three months ended Oct. 31, TiVo lost $14.2 million, or 17 cents per share, compared with a loss of $26.4 million, or 33 cents a share, in the year-ago period. Revenue was $49.6 million, up from $38.3 million last year.

For the third quarter, TiVo added 434,000 new subscribers, compared with 419,000 in the year-ago period. A large portion of those new accounts, 379,000, were from DirecTV Group satellite TV subscribers, instead of consumers who purchased TiVo's standalone DVRs.

TiVo, which pioneered DVRs that lets users easily record television shows to a hard drive and pause live TV, is facing tough competition from cable companies as it strives to reach sustainable profitability.

In the second quarter, the company reported its first ever profit -- albeit a small one of $240,000 -- but the company has forecast future quarterly losses as it plans to increase sales and marketing efforts to boost subscriber numbers. On Tuesday, it cautioned that its fourth-quarter loss will be between $17 million and $22 million.

Remember, excitement is relative. A couple years ago, I thought Amazon was doomed too.

From the desk of Jane Galt:

How does education increase earnings?

I'm less sanguine than Winterspeak that education actually increases skills in a productive way. Of course, I was an English major, and if there's any course of study less designed to make you employable, it isn't given in the Ivy League*. But in general, I'd say that very few of my classmates taking a liberal arts course learned anything useful that couldn't be gotten out of a six week course on business writing. Eingineering and science majors, yes, but not the liberal arts majors--who are the majority of our nation's college graduates.

So why do we both sending people to college?

In my opinion, it's very much a signalling mechanism: employers do not value what you learned in school, but they do value knowing that you have the middle class background, the willingness to delay gratification, and the intelligence necessary to complete a degree. For many people, college also provides a social network that helps them later in life. And it may allow them to mature enough to make them worth more than minimum wage.

If what we learned in college were really important, we would expect to see income correlated with the quality of the school. And indeed it is--but if you look at people who were admitted to a highly selective school, but chose to attend a less prestigious one (presumably for money reasons) they earn no less than the students who matriculated at the more highly regarded school. Thus, I think in general, the educational benefits of college are probably pretty trivial compared to the social and signalling benefits.

This is not necessarily inefficient for our society. Education may have non-economic benefits. And the signalling mechanism could well be more efficient than employing legions of unproductive high school graduates. Plus, college students get a lot of utility out of being irresponsible morons for four years. Or was that just me?

Funnily enough, I am now employed in the only job which has ever required the skills I learned in school--and I'm in a job that almost no business school graduates go into. On the other hand, my classmates on average seem to use very few of the skills they learned. Go figure.

*The joke when I was graduating college ran something like this:

Q: What did the English major say to the Engineering major after they graduated?

A: You want fries with that?

Sadly true.

From the desk of Winterspeak:

Returns to Education

Kash over at Angry Bear had the nerve to say that education increases earnings. The data on this is pretty clear -- he includes an excellent chart showing that those with just a high school degree earned a median income of $26K in 2003 compared to those with some professional degree, who earned $82K. He also notes that:

This reward to education has grown over time. For example, a Census Bureau summary of major economic trends in the US over the past half century reported that the median income of workers with at least a Bachelor’s degree was only 35% higher than those with only a HS diploma in 1963. By 1997 that premium had risen to 88%. And in 2003 the earnings gain from having at least 4 years of college was over 100% of a HS graduate’s earnings, according to the data cited above.

His commentators get really mad, arguing that higher education is mere credentialism and that these higher wages are not due to any additional skill that higher education signals or produces, but that society rewards people based solely on which bits of paper they have, not what they can actually do.

Although there is certainly some credentialism in higher education, I don't buy the argument that it runs rampant in an economy as competitive as the US's. A country that is comfortable outsourcing work to poorer parts of the world clearly cares, at least a little, about what people can do, and not just where they graduated from.

I would also add that the falling expected wages of a high school diploma have also greatly reduced the cost of a college education. While college tuition has outpaced inflation for several decades, the gap between what a HS diploma holder and college degree holder can hope to earn has widened dramatically. The opportunity cost of going to college is now much lower than it used to be, both in foregone wages while in school and in the wages you would have earned had you not gone to school at all.

The question is whether or not the reduced opportunity cost of getting a college degree makes up for the increase in the cost of the degree itself, making college more of a bargain today than it was in the past. I'm too lazy to calculate it all out, but if anyone wants to take a swing at things in the comments, they are welcome.

From the desk of Jane Galt:

A vote for terrorists is a vote for freedom

Mark Kleiman says "What to do when terrorists win elections is a genuinely hard problem." But is that true? After all, much of the support for terrorist networks comes from disenchantment with the existing political regime--whether that regime is Israel's government, the PLO, or the Iraqi interim coalition. The best way to undercut that support is to let people see that, despite their promises, the terrorists do not in fact improve the lives of those who vote for them. To the extent that they do improve the lives of those who vote for them, thus undercutting my argument, I submit that this will be because they are spending less time blowing things up and more time worrying about sewers and schools.

Not that I think that the Muslim Brotherhood would necessarily do a better job running Egypt than Mubarrak. But having to please voters with tangible results, rather than rhetoric and explosions, can only exert a moderating influence on them.

I'm far more concerned with what happens to the process. Theocracy (or any other ideological group that gets elected to power) worries me most to the extent that it changes the rules so that the group can't get unelected: excluding women or minorities from the franchise, rigging the electoral system, or doing away with elections altogether. As long as the process remains Democratic, I'm of the opinion that the rest will eventually (albeit possibly very slowly) work itself out. And in the case of Egypt, the Muslim brotherhood could hardly make things less democratic. An actual free election that brought the Muslim Brotherhood to power would, in my opinion, be far superior to the current system, notwithstanding its effect on our foriegn policy in the short term.

From the desk of Jane Galt:

Oh Canada!

So Canada has given its government the boot, just scant months after the election that put this government in power. This is hardly surprising, since Canada's minority governments have an average lifespan of 14 months.

This morning on Fox News I heard an anchor trying to make this "relevant" to Americans by pointing out that Bush would not be endorsing Prime Minister Martin for reelection, since he has been a thorn in the side of Mr Bush's administration for quite some time. My goodness, who cares? I mean, have y'all been to Canada lately? The Canadians are not exactly anxiously waiting to know which way George Bush thinks they could vote. In fact, if Mr Bush really wants to scuttle Mr Martin's chances, the best way to do so would be to saturate television networks near the Canadian border with advertisements enthusiastically encouraging Canadians to vote Liberal in teh strongest possible terms.

This will probably not happen. But I doubt that Mr Martin will manage to secure a majority for his government; he's managed to pretty conclusively alienate both the Quebecois and the western provinces, plus anyone in Ontario and the Maritimes who cares about the rather sordid corruption scandal that got the Liberals into this political mess.

Not that that means, as American conservatives seem to be hoping, that the Conservatives will finally get back into power. Canada's conservative party is a messy alliance of two opinionated wings that barely managed to mount a serious challenge to the Liberals in the face of the worst political scandal to hit Canada in decades. Best bet is that there will be another minority government, and another vote of no confidence that brings that government down, until the Canadian people get over their disgust will all of their politicians.

From the desk of Jane Galt:

Donation function

Alex Tabarrok proves scientifically, using economics, that you should donate a lot of money to your favourite bloggers:

Why are we asking for donations? MR is never going to be a paying venture but donations help us to cover our costs. More importantly, donations help to solve a serious economic problem. Efficiency says that goods with zero marginal cost should have a zero price but without prices not only is the incentive to produce diminished but so is information about what to produce. (See Coase's 1946 classic, The Marginal Cost Controversy, JSTOR). Donations allow prices to be set at MC while at the same time providing a (noisy) signal about where true economic value lies. In particular, Tyler and I know that we can appropriate more of our marginal product from professional work than we can from blogging yet it is conceivable that our marginal product is higher in blogging. Thus, to decide how much to invest in this venture we markup donations to get an estimate of our social value and we put positive weight on social welfare in our utility function.

Needless to say, we at Asymmetrical Information would love to spend some time analyzing the social welfare in our utility function.

From the desk of Jane Galt:

Special note

Would whoever bought the six-quart Kitchenaid mixer email me and tell me if it's as beautiful to use as it is to look at?

From the desk of Jane Galt:

Shameless begging: Home electronics edition

My kitchen gear recommendations are here

As you may know, now is the time of year when I engage in an absolutely shameless attempt to encourage you to earn me money from my Amazon.com associates account, under the thin pretense of suggesting things you can buy your loved ones for Christmas. I am poor, and my student loan officer is hungry, and the people at the workhouse will only give me one serving of gruel a day. . . this brazen commercialization of The Birth of Our Lord is the only way that I can afford to buy myself the books with which I enrich my mind so that I can offer you keen insight and witty commentary on a quasi-daily basis.

If you're going to do your Christmas shopping on Amazon this year, just click the handy links provided by me or another of your favourite bloggers (mine's over there at the right, if you scroll down a little!), and at absolutely not cost to yourself, you can send a little commission our way. We get the commission even if you buy something other than the product we linked, though the commission is higher for direct links.

However, even if you don't order through Amazon, all the stuff I'll suggest here is stuff that I genuinely love, so do consider purchasing for yourself or your loved ones offline. And if you do buy something I recommend, please, please, please email me to let me know how it went over.

And if you don't like anything you see here, please feel free to peruse last year's selections, though there is some overlap.

1) Tivo. Yes, it really is better than the other DVRs, and not just because it has the cute little TV character bouncing all over the place. The interface is better and more intuitive, the suggestions work better, and you can now set it up to play music or pictures, something I'm planning to take advantage of at the brunch I'm giving this year on New Year's Day.

I love my Tivo with such a passion that when my last Tivo died, I composed a poem in honor of its demise. It is not a good poem, to be sure. But it comes from the heart.

Tivo has changed my television watching life. When I'm over at my parents, I have trouble wrapping my mind around the fact that I can't rewind to recover a missed sentence, pause to answer the phone, or call up a treasure trove of stored movies and documentaries when the current offerings do not appeal--as they so often don't. I do not have premium cable, and yet I am never at a loss for something to watch. Ironically, I spend less time watching television, because I don't spend aimless hours cruising the channels and waiting for something to entertain me.

The link I posted is to the one I have, the eighty hour, which I've found more than adequate for my needs, even at "best" recording quality. There's also an introductory forty hour model, which is what I had before; I found it a little skimpy, but it's still pretty good, and with all the discounts they're offering you can often get your hands on one for as little as $50. On the other end, there's a Toshiba combination DVR and DVD recorder, which I've heard fantastic things about, but which is just a little bit beyond the budget at Stately Galt Manor.

2) Averatec 3360-EG1 laptop computer Never heard of them? Neither had I until my father bought one. Three months later he bought me one, ostensibly as an early Christmas/Birthday present, but really as a way of persuading me to give him his damn laptop back.

It's thin, light, and so far, it works swimmingly. The caveat is that I have a big honking Dell desktop; I use this guy only for writing and cruising the web. Computer games or big statistical sets are pretty slow on this guy, so I wouldn't get it as a desktop replacement if you need serious processing power.

But if you don't need serious processing power, take a look at these guys. You get a ton for your money--built in wireless, a nice screen, good battery life, and so forth. It's neatest feature is a little button that turns the wireless card off and on, so that it doesn't suck power when you're not using it.

Now, of course, my technical support requirements are pretty slim; I just need someone to send me the correct part in a reasonable time frame. For this reason, I am unbothered by their scanty 1 year warranty. But if you're reasonably technically adept (i.e. you trust yourself to open a laptop case and poke around inside it with a screwdriver), and on a tight budget, I highly recommend it. You could buy a third-party warranty and still come out ahead at this price.

3. Home microdermabrasion kit. This one, obviously, is for the ladies. Not that you guys don't need microdermabrasion to give your skin a more even and youthful appearance, but no matter what I say, you're not going to try it, so I'll leave you to your scaly dermis.

My mother ordered this for fun, and I spent my vacation at my Grandmother's house giving her and my aunt facials. Not to sound like an infomercial or anything, but it actually did make them look younger, and it really made their skin beautifully soft and smooth. (I did not try it on my skin, which tends to erupt in a hideous rash when anything harsher than Evian is applied to it.) It takes 4-8 minutes a day, and you're supposed to use it five days in a row the first time you use it, followed by a week off, and then regular maintenance uses 2-3 times a week. My mother says it's well worth the small effort.

4) Linksys Wireless Router Give the gift of wireless this Christmas season. To yourself, if no one else. Honestly, I know, you don't think you want to take your laptop to the couch so that you can cruise the web while lying flat on your back and watching Grosse Pointe Blank, but trust me, you do. And while you may not be aware of it, you also want to be able to take your computer into the kitchen, where you can call up a recipe from Epicurious while browsing through the refrigerator to see what ingredients you have. You want to lie in bed on a Saturday morning, Instant messaging your sister about your crazy mother, and when a brilliant idea occurs to you just as you are drifting off to sleep, you want to be able to grab your laptop and jot it down in a word document before you collapse into slumber. You have all off these deep needs lurking inside you, waiting to be unleashed by a wireless router. Give into them. No good can come from repressing your innermost feelings.

Plus, if you have a Tivo, you can get this wireless USB adapter and hook your Tivo up to the network without messy cables or taking up the phone line.

5) Rio Karma MP3 player If you have to have aniPod . . . well, my Dad splurged on the 60 GB, and he raves about it. I've used iTunes, and it's great, although I don't purchase music because it won't transfer it to my MP3 player. But the Rio Karma is a lot cheaper, and it has some features the iPod doesn't.

For starters, it fits snugly in a cupped hand, and is set up so that it can be operated without looking at it--volume on one side, scroll on the other, and the play button conveniently located for your thumb to move it. It's so ingeniously designed that a left-handed friend picked it up and said "Why did you buy an MP3 player made for lefties?"; even though it's not symmetrical, it has the same snug fit and easy operation no matter which hand you put it in.

The software and docking station are easy to use, and the transfer rate is fast. Best of all, it can play an entire album without pausing, meaning that if you listen to opera or classical, you can get the entire act or movement. The iPod chops them up into tracks, which is deeply annoying to serious buffs.

It doesn't have the sleek white design of the iPod, but hey, are you playing music, or looking at it?

6) Sennheiser noise canceling headphones It was with deep trepidation that I purchased these to go with my Rio. But the first plane trip I took them on erased all doubts. The headphones emit a sound that cancels out airplane noise. I created a special playlist for sleeping to (no Public Enemy or Nine Inch Nails) and was borne blissfully away on the wings of Morpheus, happily oblivious to both engine noise, and my fellow passengers. They're bulkier than earbuds, but oh! the sweet peace. They're also fantastic for the subway. And they're surprisingly lightweight and compact; they fold for storage. The only downside is that they require AAA batteries to produce the noise cancellation, but it's a tiny price to pay.

7) Minolta DiMage G600 My previously high-end digital camera is this year's mid-list offering. But I still adore mine. It takes really beautiful pictures, even if you're a complete photographic moron, as I am. But it also has enough shutter speed, light monitoring, and Fstop adjustment to content my camera-mad coworker, who has an SLR but keeps this one for snapshots. Other than more zoom, I can't imagine a feature I'd want that it doesn't have. The only downside is that you tend to spend precious vacation hours posing and re-posing for snapshots, until the picture in the display window matches the vision in your mind.

8) Panasonic cordless phone I won't bore you with the saga of me and my cordless phones. Suffice it to say that when my old Panasonic, which took me to Chicago and back with years of faithful, perfect service, died, I entered the world of cordless phone hell. If the battery didn't die, the reception fizzled, even when standing three feet from the receiver (and you can't get much farther than that in my apartment). Or the voicemail light didn't work. Or . . . but I said I wasn't going to bore you, didn't I? Anyway. Love this phone. Love it. Love, love, love it. No answering machine--voicemail is cheaper and easier. Couldn't be happier.

9) Vonage I just couldn't be happier with their service. For $25 a month, I get unlimited local and long distance, voicemail, caller ID, three-way calling, my voicemails emailed right to my desk when I'm at work, and about a zillion other features I can't even remember. They also have great rates to Europe, which I call fairly often for work. And it's insanely easy to use. Only two potential downsides are 9/11 calling--they can't automatically pinpoint where you are--and that if your cable internet goes out, so does your phone. But if you have a cell phone, switching to Vonage is a slam dunk. It's incredibly easy to set up, and their tech support has been great. Best of all, you can travel with it; I took my Vonage phone to London, plugged it into my cable modem, and presto! it worked just as if I were back in the US. I gabbed for hours with friends across the Atlantic at absolutely no cost to myself. It also works in hotels with broadband, enabling you to buypass the outrageous fees they charge you for phone service.

10) Civilization IV Yes, it's as good as everyone says it is. Yes, I have wasted countless hours conquering the Aztec empire and building the Great Library. Do it anyway. You know you want to. [/evil grin].

From the desk of Jane Galt:

Public Service Announcement

I'm giving a New Year's Day brunch this year. If you're going to be in New York, and you know me, please drop me a line to let me know. I make some of the finest pancakes in this Republic of ours, and I'd love to see you.

From the desk of Jane Galt:

The sky is falling!

Well, no, but the yield curve may be inverting, which is almost as bad.

What does an inverted yield curve mean? It means that the yield on short term debt is higher than the yield on longer term debt. Historically, this has been a harbinger of recession, and for good reason, since the markets are telling you that they have very dim expectations indeed for the future.

From the desk of Jane Galt:

Stephen Moore is slamming John McCain

He writes:

Yet Mr. McCain holds the most eclectic set of economic policy positions of any politician I've ever met. He seems to defy political typecasting, reveling in the role of maverick. He voted against the Bush tax cuts ("Way too tilted to the rich"), while supporting antigrowth initiatives to combat global warming ("Climate change is just a huge problem that really needs to be confronted"), and is the lead sponsor--with Sen. Ted Kennedy--of a guest worker program to allow immigrants to enter the country legally. Any one of these landmines could blow up in Mr. McCain's face in conservative red state primaries in 2008. His 2000 presidential bid was capsized by Christian conservative primary voters in South Carolina. He readily concedes that "sometimes I have run-ins with the right-wingers in the party."

On the other hand, he's a fierce defender of free trade and a champion of school choice. "The day that members of Congress will send their kids to the public schools in Washington, D.C., is the day I'll know we've fixed education in America." Then he asks: "How can my colleagues say they are against vouchers or charter schools when they won't send their own kids to the schools in the town where we work?"

. . .

On a broader range of economic issues, though, Mr. McCain readily departs from Reaganomics. His philosophy is best described as a work in progress. He is refreshingly blunt when he tell me: "I'm going to be honest: I know a lot less about economics than I do about military and foreign policy issues. I still need to be educated." OK, so who does he turn to for advice? His answer is reassuring. His foremost economic guru is former Texas Sen. Phil Gramm (who would almost certainly be Treasury secretary in a McCain administration). He's also friendly with the godfather of supply-side economics, Arthur Laffer.

But Mr. McCain is no antitax supply-sider himself. He grandstanded against the Bush capital-gains and dividend tax cuts and even co-sponsored an amendment with Tom Daschle to scuttle the reduction in the highest income-tax rates. Why? "I just thought it was too tilted to the wealthy and I still do. I want to cut the taxes on the middle class." Even when I confront him with emphatic evidence that those tax cuts have been an economic triumph and have increased revenues, he is unrepentant and defends his "no" vote by falling back on class-warfare type thinking: "We have a wealth gap in this country, and that worries me."

I see nothing in this litany to worry me. While I endorsed "starving the beast"--cutting taxes in the hopes that this would restrain spending--it doesn't seem to have worked. Taxes can go up now, or they can go up later, but given that the government is apparently incapable of cutting spending, they're going up sometime. It seems to me uncontroversial to say that the wealthy, who have experienced most of the income gains of the last 20 years, should be the ones who get the higher taxes--though I would like to see the capital gains and dividend taxes kept low, while marginal income rates are increased. Moreover, if Stephen Moore tried to persuade me that the Bush tax cuts had caused revenues to increase, I would have done a lot more than genially ignored him.

Likewise, climate change seems to be a real problem, and it is to the deep shame of conservatives that they cling to increasingly tenuous science to pretend that it ain't so, rather than addressing what sort of tradeoffs we should make between growth and the environment. The more hysterical claims of the environmentalist movement may be, even probably are, risible. But the fundamental fact is that we're tampering with a complex system that we don't understand very well, and which could kill all or most of us if it goes wrong. Conservatives are supposed to be against that sort of thing.

And while I have ambivalent feelings about guest worker programmes, they're not facially absurd.

What frightens me about McCain is not the specifics of his policy ideas; it's that he's a meddler. On this, Stephen Moore and I agree:

He views himself, I believe, as a kind of modern-day Robin Hood, a defender of the downtrodden and tormentor of the bullying special interests, which is endearing and unquestionably a big part of his broad political appeal, but often leads to populist and parasitic economic policy conclusions like higher taxes on the rich and attacks on "huge oil profits." He wants to be the caped crusader against corruption. The buzzword for the McCain Straight Talk Express in 2008 will be reform: "I want to reform education, reform Medicare and Social Security, reform lobbying and campaigns. Reform immigration. Reform. Reform. Reform."

I'm uncomfortable with a president who looks for a villain to pillory every time people are unhappy. Moreover, the senator's evident belief that any and all ills can be fixed with a sufficiently complex law make me wonder why one would vote for him instead of the democrat saying the same thing.

Professor Bainbridge cites Russell Kirk:

Change and reform, conservatives are convinced, are not identical: moral and political innovation can be destructive as well as beneficial; and if innovation is undertaken in a spirit of presumption and enthusiasm, probably it will be disastrous.

Senator McCain gets high marks on those conservative voting scorecards, but in a deeper sense he seems to me to be not very conservative at all.

From the desk of Jane Galt:

What if they gave a summit and nobody came

Soft power has limits:

When President George W. Bush launched his "greater Middle East initiative" for Arab democracy a couple of years ago, many Europeans complained he was ignoring what the European Union had achieved over the past 10 years with its neighbours around the southern and eastern rim of the Mediterranean. But, as the EU takes stock at a 35-nation summit today of this decade-long partnership, one has to ask, what achievement?

For the so-called Barcelona process has shown the limits of the soft (political) power that Europe likes to vaunt and contrast with US hard (military) power. The EU gives �1bn a year in aid, and more in loans, to its Mediterranean partners, but has stimulated little political reform in return.

One reason is that EU influence over its neighbours depends largely on whether the latter stand any chance of joining the EU. Of the 12 original Barcelona partners, Cyprus and Malta are inside the EU and Turkey is in the waiting room, but the rest have zero chance of joining. Another reason is that events have changed the political agenda. The EU and its Mediterranean partners have let human rights take second place to measures to counter terrorism and illegal immigration, as shown by the recent ugly scenes of sub-Saharan African migrants being thrown first out of Spanish enclaves in Morocco and then out of Morocco itself.

The New York Times adds:

Many of the North African and Middle Eastern leaders who had agreed to come to the meeting announced last week that they could not attend. Their absence weakens European claims that their approach to the Muslim world - based on economic development, dialogue, strengthening the rule of law, and other forms of soft power - has greater credibility with the region's leaders than what they see as the Bush administration's more aggressive approach.

The problem, as I see it, is that Europe has very limited "soft" tools in its box. It cannot offer significant military assistance, and while it does dispense aid around the region, the US's aid to Israel and Egypt dwarf the EU's efforts. Moreover, trade, one of its most potent tools, is being taken away from its diplomats by a population frightened of competing. And any goodwill it might have generated with its donations is, one presumes, being rapidly eroded on the famed Arab street by the European population's obvious hostility to muslim immigrants.

So the US, where anti-muslim bias seems to be much less prevalent (due in part, no doubt, to the fact that we have a lot fewer muslim immigrants--but I don't see Mexicans rotting for generations in ghettoes without jobs or hope), probably has some weapons in the soft toolkit that we could be deploying and aren't. But there are real limits to how far one can get with soft power.

From the desk of Jane Galt:

Communism really does suck

Alex Tabarrok reminds us just how much:

The total for the communist democide before and after Mao took over the mainland is thus 3,446,000 + 35,226,000 + 38,000,000 = 76,692,000, or to round off, 77,000,000 murdered. This is now in line with the 65 million toll estimated for China in the Black Book of Communism, and Chang and Halliday's estimate of "well over 70 million."

This exceeds the 61,911,000 murdered by the Soviet Union 1917-1987, with Hitler far behind at 20,946,000 wiped out 1933-1945.

For perspective on Mao's most bloody rule, all wars 1900-1987 cost in combat dead 34,021,000 -- including WWI and II, Vietnam, Korea, and the Mexican and Russian Revolutions. Mao alone murdered over twice as many as were killed in combat in all these wars.

Now, my overall totals for world democide 1900-1999 must also be changed. I have estimated it to be 174,000,000 murdered, of which communist regimes murdered about 148,000,000. Also, compare this to combat dead. Communists overall have murdered four times those killed in combat, while globally the democide toll was over six times that number.

From the desk of Jane Galt:

They got Al Capone for tax evasion . . .

And now Augusto Pinochet has been arrested in Chile on charges of tax evasion.

From the desk of Jane Galt:

Getting ready for Thanksgiving

If you're still looking for something to serve, I have some suggestions for excellent recipes: side dishes, cranberry bread, and homemade pumpkin pie.

From the desk of Jane Galt:

Measuring prosperity

Sorry I haven't posted for a while, but there have been a lot of demands on my time. You probably didn't realise this, but occasionally I see people in the offline world, and it seems that the last few weeks of November are when everyone wants to see ol' Janie. As a result, my morning blogging time has been used up by the need to catch up on sleep.

Anyway, I've been meaning to post for a while on Kevin Drum's argument that instead of looking at GDP growth, we should keep our eyes on the growth in median wages. I don't think that that's a bad idea, or really a good idea . . . I think that excessive emphasis on any one metric leads to distorted economic thinking, and don't agree with Mr Drum's assertion that you can't have a society getting worse off as long as median wages are growing; people at both tails could be getting dramatically poorer without altering the trajectory of median wages. WHile I realize that for some people, the wealthy getting poorer is a feature rather than a bug, this would still decrease net utility in our society. Unless our society gets a lot of net utility from watching rich people suffer, and while this may be true, judging from our tabloids, I'd prefer not to believe that we as a nation are that petty.

But more deeply, I don't see either of these metrics as a very good guide to policy, because I don't believe that there is very much the government can do to influence them, for good or ill.

Oh, we have a good idea, on a gross level, of what governments should not do to really screw up the economy. Governments should not create massive hyperinflation, they should not nationalise industries, they should not implement regulations that allow industries to function as cosy little cartels, they should not block trade with other nations, they should not enact currency or price controls, they should not indulge in confiscatory taxation. (Note to conservatives: 35% marginal tax rates do not count as confiscatory for these purposes. Nor, for that matter, do 45% or even higher rates.)

But other than not screwing things up, there's very little the government can do to increase growth. And there's nothing that the government can do to increase median wages that isn't on our list of bad things you shouldn't do to the economy.

Just as conservatives prefer to believe that the Reagan tax cuts resulted in the economic growth and increased tax revenue of the eighties, despite the fact that the tax cuts coincided with recovery from the worst recession of the postwar period, liberals like to believe that leftish economic policies resulted in the extraordinary wage growth of the 25-year period following the end of World War II. Unfortunately, the numbers don't back this up. The growth in wages largely tracks the growth in productivity, which was not due to government policy, but to changes in technology and the labour force. While union bargaining power can increase the wages going to union workers, as I understand it there's little indication that this increase is taken from capital's share of national income, which means that whatever unions generated in the way of surplus wages for their workers seems to have come out of the pockets of other workers, or consumers.

So why have median wages been stagnating even though productivity began increasing in the 1990s? Two reasons: increasing labour supply, and increasing costs for benefits. While median wages have stagnated, total compensation hasn't. In essence, workers have been consuming all of their income increases as health care.

At the same time, new entrants have flooded into the labour market, not just here, but abroad. The world labour force is currently undergoing a massive expansion as the result of the entry of India and China's citizens, who number approximately 1/3 of the entire population of the earth. At home, women have entered the labour force in dramatic numbers (an increase which has now stopped). And technology is "entering" the labour force by displacing workers. Just think how many fewer secretaries there are now that the typing pool has disappeared.

Those technology improvements raise productivity. But they don't do so evenly; they have raised wages mostly at the top, unlike the mechanical revolution, which increased the productivity of low-skilled assembly-line workers. Difference in skills account for most of the divergence between the top and the bottom of the income distribution. (Yes, CEO salaries are largely related to how cozy they are with the board, not how skilled they are. But there are only about 1,000 people in the country running companies large, and cozy enough, to get truly outrageous pay packets. This is a minor annoyance, not a national disaster.)

The government could shoot illegal immigrants on sight, force women out of the labour market, curtail trade, and slow the pace of technology growth so as to reduce the return on skilled labour. But these are not good things for the government to be doing. Making the country as a whole poorer in order to reduce income inequality doesn't sound to me like a good idea. I realise that many liberal commentators claim that they can do this without sacrificing growth. But I don't see how.

From the desk of Winterspeak:

Elasticity of Bankruptcy

The US government recently passed a new, tougher, personal bankruptcy law that makes it harder to escape repaying your debt. Those for the change argued that current bankruptcy provisions were being abused, resulting in more filings and higher interest rates for the rest of us. Those against the change argued that nobody chooses to become bankrupt -- it just happens through bad luck -- and increasing the penalty is needlessly punitive.

Just before the law passed, the number of bankruptcy filings rose sharply. Now that the law is in place, the number of bankrupcies filed has fallen by 90%.

The spike in bankrupcies was clearly people rushing to file before the tougher regulations took hold, and the lull after is due to 1) fewer people filing (not worth it) and 2) fewer people to file (they all filed last month). Both of these support the idea that bankruptcy is a calculated and timed decision, and that changes to the benefits around filing for bankruptcy would impact whether or not people did so.

If bankruptcy was primarily driven by unforseeable bad luck that left people with no choice, individuals would not be able to be as strategic about filing as they have been.

From the desk of Jane Galt:

Risk vs. return

James Hamilton has a post that illustrates why it's as important to look at risk as return:

Of course, if you play that game long enough, eventually the market will make a big enough move against you that your capital used to meet margin requirements gets completely wiped out, giving you a long-run guaranteed return on your investment of -100%. But over the 1992-99 period, Lo's hypothetical fund dodged that bullet and ended up turning in a whopping performance.

Lo gives a variety of other examples of funds that could go for a long period with very high returns and yet entail enormous risks. They all have this feature of pursuing investments that have a high probability of a modest return and a very small probability of a huge loss. By leveraging such investments, one can achieve a very impressive record as long as that low probability disastrous event does not occur. It is certainly possible that some strategies along these lines would, unlike Capital Decimation Partners, earn a higher return than the market on average if you stuck with them forever. However, you should view that higher return as coming at the expense of much higher risk.

My discussion of Lo's hypothetical hedge fund should not be construed as a specific critique of any currently operating actual hedge fund. But suppose that all you know about a fund is that it has earned exceptional returns every year for the last decade, and you don't have access to information about the specific trading or asset holding strategy that netted those returns. Is it a good investment for your money? My advice would be no.

This is pretty much exactly what happened to Long Term Capital Management, which, as you may recall, nearly took the US financial system down with it when its bets on the bond market blew up. Caveat emptor.

From the desk of Winterspeak:

Psychology and Markets

Standard classical economics is modeled on forward looking, rational utility maximizers. By definition then, classical economics struggles to explain bubbles and funks, periods of irrationally high or irrationally low asset prices that correct themselves with a *pop*.

Part of the problem is that it is very difficult to know whether a price is right or not. For example, I thought Google was totally overpriced when it IPOd at $100, and its quadrupled in the 14 months since then. It is currently trading at a P/E of 90, which is really really high. It seems even more overpriced to me now but had I shorted it back in '04 I would have lost my shirt.

At least with Google people can fantasize about them launching brilliant new highly profitable products, but what captures the imagination to justify the crazy run-up we've seen in real estate prices? What magical thing is going to happen in the future that justifies a doubling of price in five years?

Seperating out real, informed predictions about the future, from short-term speculative greed and risk taking, from genuine sentimental fantasy is very difficult, and maybe a fools errand. But the individual that does some math and declared an asset overvalued is not ignoring psychology, he is considering it directly.

I've written extensively about housing (here, here, here) and the fact that I think it is currently in a bubble, so I very much enjoyed this post by Prof. Piggington:

I suppose that one could note my emphasis on data and assume I am some sort of impassive misanthrope whose only glimmer of pleasure comes from long nights spent manipulating my beloved database tables as my long-suffering wife looks resignedly on in aching loneliness. Our hypothetical reader believes that such a person—perhaps our reader now pauses to wonder whether such a joyless automaton can even be considered a person at all—could never understand the role that psychology and emotion play in buying a home.

There is but one purpose served by all those fun-filled charts and graphs in the Bubble Primer (the series of articles in which I lay out my case that San Diego housing is both way overpriced and at risk for a steep correction). That purpose is to use the process of elimination to zero in on the causes of the home price runup. One by one, we look at the actual numbers and see that none of the usual suspects—population, housing stock, income, rates, nice weather—can explain the magnitude of San Diego's recent home price growth. And when you rule out all those potential demographic and economic causes, only one thing remains: psychology.

The psychology, to be specific, of a speculative financial mania.

Standard economic theory says that systematic mispricing (which is what a bubble is) presents a free profit opportunity and so can be arbitraged away. But the illiquidity of housing, plus the difficulty of shorting, or hedging, strongly limits the ability to arbitrage mispricings. What can one do in a housing bubble except wait it out if one does not own, and sell and rent if one does?

Robert Shiller, whom I met at Chicago, has some very interesting ideas our financial instruments that are actually useful to individuals, and one of them is indices and futures on residential housing. Not only are these more liquid instruments amenable to short positions (bets that prices will decline) but they will also let people who do not yet own a house, and want to be longer on real estate but don't actually want an entire house, to buy some fractional ownership.

Since everyone needs to live somewhere, I argue that we are born into this world short housing and buying a house merely moves us to neutral. You need to buy "extra" house (more house than you need) or a second house to actually be long real estate and profit from price appreciation. I would recommend that all young people put their savings into residential futures upon graduation -- people should have a diversified portfolio and we enter this world naked, screaming, and very short housing.

From the desk of Jane Galt:

Copper crisis

If you haven't been following the brouhaha in London's copper market, you really should; it reads like a tabloid tale:

THE story sounded more appropriate for a spy novel than a sober financial broadsheet: rogue copper trader goes missing, as the Chinese government denies he ever worked for it. Yet in this case, truth has turned out to be at least as strange as fiction. Liu Qibing, a trader for China's State Reserve Bureau (SRB), which accumulates stockpiles of commodities for the nation's needs, has disappeared, leaving his employers on the hook for massive short positions in copper on the London Metal Exchange (LME).

Because the orders are likely to have been parcelled out among various brokers, it is difficult to assess the scope of China's problem. But most seem to think that Mr Liu's short-selling (sales of copper he did not own in the hope of buying it back later at a lower price) has left China short of the metal by some 100,000-200,000 tonnes--which is unfortunate, as it is due for delivery in December. Nor is it clear how Mr Liu was able to make such a big bet that prices would fall, since the SRB is saying little. Indeed, as rumours of Mr Liu's folly began to spook the markets, the organisation seemed to be denying any such person worked for it, even though he is well known to other LME traders; this fuelled speculation that the SRB would refuse to cover the trades. Others say that it has forced Mr Liu to go on leave. No one has heard from him for weeks.
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On Tuesday November 15th, copper hit a record $4,174 per tonne on anticipation of massive buying by China's government to cover the short positions (see chart). The contracts are thought to have been undertaken in April, when copper traded between $3,100 and $3,200 a tonne; that would translate into a loss of roughly $100m-200m if prices are at current levels when the copper must be delivered. China has been trying hard to cool prices to more manageable levels. Over the past few days, it has taken the unusual step of announcing sizeable sales of the metal on the domestic market, and late last week it announced that it had 1.3m tonnes of copper on hand, a figure roughly 1m tonnes higher than most independent estimates, according to the Financial Times.

Though these early efforts to take the heat out of the market were unsuccessful, on Wednesday the copper price dropped by more than 2% on news that the SRB was seeking permission to export up to 200,000 tonnes of the metal. But by Friday it had hit another new high, topping $4,200 per tonne, as traders once again began to doubt whether China can, or will, deliver.

Estimates of how much copper the SRB actually holds run from as little as 100,000 tonnes up to 500,000. Most observers think it probably has enough to cover the trades. But that doesn't mean it will; the SRB has said that Mr Liu acted without its authority, which may be a sign that it is preparing to disown the trades, lumbering the brokers with whom he traded with huge losses. But even if the SRB decides to honour the transactions, it will be hard to move such a huge volume of copper to LME warehouses by next month, as required by the contracts. Buying the necessary copper could prove equally difficult, since analysts estimate global exchange stocks amount to only 140,000 tonnes, of which the LME holds 65,000.

From the desk of Jane Galt:

Abortion and viability

Radley Balko's Fox News Column about abortion echoes some of the thoughts that I've expressed here about the messy muddle that contains most people's beliefs about abortion.

This bit struck a mental spark:

Abortion policy, then, is a game of line-drawing. We're looking for the moment at which a fetus reaches the stage of viability, when its right to live becomes more compelling than its mother's right to terminate her pregnancy. Enmeshed in this line-drawing game are deep convictions about morality, and personal and community values, not to mention medical technology, which continually pushes back the point at which a fetus can survive outside the womb.

What happens if viability goes back to at or near the point where a woman is likely to detect the pregnancy? I know that this may not happen, since right now we can't save a baby whose lungs have not sufficiently formed, but I think it's possible that in the future we'll develop some sort of artificial womb-like thing for even earlier preemies than those we now save.

This poses a real problem for women, doesn't it? Because I don't think that many of us would endorse widespread abortion for viable fetuses, which is what common first trimester abortions would then amount to. And yet, whatever the rhetoric the pro-choice side uses about women controlling their bodies, the main reason that most women seek abortions is not that they don't want to be pregnant; it's that they don't want a baby. If nine months of abdominal swelling, acid reflux, and hemorrhoids were an occasional side effect of sex, most of the people I know would probably just endure it rather than have a doctor vacuum out their abdomen with a painful and bloody surgery.

What happens to women once babies can be gestated, in however inferior a fashion, outside the womb? They end up stuck in the position that men are currently in: if you conceive, you're on the hook to support the little darling for the next eighteen years.

As I was writing this, I questioned whether it was really true that women are more worried about the baby than the pregnancy, since after all, if this were true, women could just give the baby up for adoption. I think that this would be valid if we lived in a vacuum, but for most women over the age of eighteen, there's a pretty stiff social stigma attached to giving up your baby. I can much more easily imagine myself telling my colleagues that I was going to be an unwed mother than telling them that I was going to be pregnant, but had no intention of raising the little monster. And for women who are worried about what a baby will do to their lives, abortion is a way to get rid of the baby before you see it, feel it kicking, or hold it in your arms . . . like sending the puppy the kids bring home back to the pound before it can lick your hand. I would certainly fear that once I'd delivered a baby, I'd change my mind.

But I think the real test of what we worry most about is simply that I'd bet most pro-choice women would rather live in a world with an abortion ban, and stigma-free adoption, than in a world with an abortion ban, and artificial wombs. This will raise some interesting questions as medical science improves.

From the desk of Jane Galt:

Absolutely shameless begging: kitchen edition

As you know, now is the time of year when I engage in an absolutely shameless attempt to encourage you to earn me money from my Amazon.com associates account, under the thin pretense of suggesting things you can buy your loved ones for Christmas. I am poor, and my student loan officer is hungry, and the people at the workhouse will only give me one serving of gruel a day. . . this brazen commercialization of The Birth of Our Lord is the only way that I can afford to buy myself the books with which I enrich my mind so that I can offer you keen insight and witty commentary on a quasi-daily basis.

If you're going to do your Christmas shopping on Amazon this year, just click the handy links provided by me or another of your favourite bloggers (mine's over there at the right, if you scroll down a little!), and at absolutely not cost to yourself, you can send a little commission our way. We get the commission even if you buy something other than the product we linked, though the commission is higher for direct links.

However, even if you don't order through Amazon, all the stuff I'll suggest here is stuff that I genuinely love, so do consider purchasing for yourself or your loved ones offline. And if you do buy something I recommend, please, please, please email me to let me know how it went over.

And if you don't like anything you see here, please feel free to peruse last year's selections, though there is some overlap.

Kitchen Equipment

1. Kitchenaid Stand Mixer I suggested this last year. I'll suggest it again next year, and every year until they drag me screaming into my grave. I really cannot tell you how strongly I believe that anyone with even a moderate interest in cooking or baking should purchase one of these. Don't tell me you have no counter space; I have (I'm not exaggerating) one counter approximately 18 x 36 inches for all of my cooking needs. My Kitchenaid lives in a closet and comes out every time I need it. Which is all the time. Every time I go to someone's house, I'm reminded of how bleak a cook's life is without a Kitchenaid: no effortlessly whipped egg whites, no popping unsoftened butter into the bowl and letting the Kitchenaid beat it into a creamy froth, no bread dough expertly kneaded for you while you lounge on the sofa watching television. Other mixers take forever, break down, and force you to stand there with a rubber spatula, scraping down the damn sides so that it all gets mixed in. That's no way to live.

"But Jane!" I hear you whine. "Do you know how much that thing costs? That's ridiculous. Well, the link I gave you is to the top-of-the-line model, the six quart. That's the model I covet (mine is the same, but five quarts instead of six), but sadly will never, ever get because Kitchenaids have approximately the same lifespan as the solar system. You invest a lot of money up front in a Kitchenaid, but you never, ever have to buy another mixer again. And you'll get the use out of it, believe me. The smaller models are no less reliable, though you can't make as much cookie dough or bread in them, and they work a little more slowly--but still orders of magnitude better than any other mixer you'll see. Non-cooks, I know your eyes are goggling at the price tag, but trust me, if there's a cook in your life, they will treasure this gift forever.

2. Kitchenaid hand mixer It's not as useful as the stand mixer, because you have to hold it in your hand and move it around, which is fine for cakes, but makes your arm tired awfully fast if you're dealing with a stiff dough. Mine came with dough hooks, but I'd rather knead the bread by hand than get carpal tunnel trying to drive my hand mixer through a thick wad of bread dough.

That said, if your loved one already has a Kitchenaid stand mixer, or you can't afford something quite that generous, the Kitchenaid professional hand mixer is a very nice gift. I find it invaluable for things like angel food cakes and pancakes, so I can whip the egg whites in one mixer, while making the rest of the batter in the other. With my two Kitchenaids, I can get an Angel Food Cake into the oven in fifteen minutes or less. This model will do most cakes quite as well as a stand mixer, and will considerably ease the task of whipped cream or making cookie dough.

3. Kitchenaid ice cream making attachment This is my new find for this year. It's a bowl you stick in the freezer for twenty-four hours, then slot onto your Kitchenaid with a special dasher attachment.

Why get this instead of a real ice cream maker? Three reasons: money, quality and space. If you already have a Kitchenaid (like all Kitchenaid attachments, this works with all models). The attachments isn't quite as easy to use as a professional "pour-and-go" model, but it won't set you back $500 either. Because a Kitchenaid mixer has such a powerful motor, this produces wonderful, smooth ice cream, much better than the cheap ice-cream makers you'll see in Target. It also has a larger capacity; you can make two quarts in this bowl, where most bargain ice cream makers will only let you make 1 or 1.5 quarts. And because you already have the mixer, you don't have to use up valuable counter or cabinet space to store the machine part with the motor in it.

4. Select-a-spice spice carousel I got this for my sister last year, and it's been a big hit. Basically, it comes with 12 spice containers that slot into the carousel. Each has a dial on it that you can twist to measure exactly the amount of spice you want, in 1/4 tsp increments. A full turn of the dial gives you two teaspoons worth of spice. Once you've got the amount you want, you open a little door in the bottom, and exactly the right amount of spice drops into your recipe, with no spilling or mess. The top also has a door for you to stick your measuring spoons into, if you want or need to, and a separate shaker spout--no more prying that little disc with the holes in it off the cinnamon every time you need a teaspoon of the stuff. You can also stack these, or mount them underneath your cabinets so they don't take up counter space. If I had any place at all to put one, this is where I'd be keeping my spices.

5. Yogurt maker This is a specialty item; probably most people don't eat as much yogurt as I do. But if you do eat yogurt, it's actually really worth it to make your own. Not only is the yogurt much more delicious (it has a mild, creamy, slightly tangy flavour that appeals even to some people I know who don't like yogurt), but it costs about a tenth as much to make your own as it does to buy it in the store. If you're trying to eat fewer simple carbohydrates, as I am, having discovered that they tend to put me to sleep, there's no better breakfast than fresh yogurt and a simple compote made by boiling frozen berries, a quarter cup of water, and a few teaspoons of Splenda into a nice thick consistency. It's like having dessert for breakfast every morning. And making your own yogurt is unbelievably easy: you just combine a quart of milk with 1/3 cup of nonfat dry milk (it's a thickener--you can't taste it) and a container of plain yogurt, whisk it all together, and pour it into the little cups. Then all you have to do is plug it in and leave it for twelve hours, and voila! Fresh yogurt. No preservatives, and if you want flavored yogurt, just toss in some fruit or flavoring. I use mine all the time. (Though I should point out that I ate a lot of yogurt before I bought this machine).

6. Pineapple corer This seems like kind of a silly thing, but if you're like me, and you love pineapple, but you're on a budget, this little gadget is a fantastic thing to have. You can buy a pineapple and make your own fresh sliced pineapple for less than half what it costs to buy the pre-sliced pinapple in the store, without the teeth-gritting agony of trying to slice the damn thing with a knife. You just cut off the top and screw the gadget into the pineapple flesh until you hit bottom, then pull out the corer with a lovely yellow cylinder of pineapple meat wrapped around it. If someone you know--or you--likes fresh fruit, it's a cute little gift for very little money.

7. Calphalon semi-nonstick aluminum frying pan We just bought four of these at a kitchen outlet near my grandmother's, one for me, Mom, sis, and grandma. The problem with nonstick is that if you use metal on it, the nonstick coating scratches off, and the pan becomes basically worthless, because food catches in the little scratches and burns, and you'll never get it clean again. The problem with anodized aluminum is, well, that it's not nonstick, although at least you can take some brillo to it when food does stick. Now Calphalon is making these pans with the nonstick fibers infused into the aluminum, so you can use scratchy things to your heart's content without losing the nonstick properties.

Now, it's not quite as stick-free as traditional non-stick, but when you're paying this much for a pan, you don't want to worry constantly about ruining it. (We didn't pay this much; it's worth scouting around the local outlet mall to see whether you can snag this on sale). But it's a terrific pan--nice and heavy, very even heating, and it keeps heat very well. And it's much less sticky than regular anodized aluminum; we fried hamburgers in it all week with no fat, and the burned bits rubbed right off with a sponge. I'm actually throwing away one of my beloved old pans to make room for this lovely. If you're shopping for someone starting a household, they also have a very nice looking eight piece set. Again, these pans are very pricey compared to what you find at Target, but unlike what you find at Target, they should last for decades.

8. Electric kettle Brits have known about these for years--almost every home in the UK has one--but they're just making their way over to this side of the pond. These don't boil quite as fast as the British models do, because the UK uses 220 rather than 110 volt power, but it will nonetheless boil much faster than anything will on your stove, even if you have a Viking range (as my mother does).

I got one of these for my grandmother last year, because she is blind and forgetful and had burned the bottom out of two teakettles. My gift has been the talk of the town ever since. In the intervening year, I have been asked to procure more kettles for aunts, friends, and my grandmother's paid helper; I'm thinking about going into the business full time. All you have to do to boil the water is press a button on the handle, and it brings the water to a boil in a few minutes, and then automatically shuts off to keep the pressure from building to dangerous levels. It's cordless, so you can then pick it up and bring it right to the table, if you like. If there are tea-drinkers in your family, I think you'll find they really get a lot of use out of this--it's easy enough to operate that even my 91-year old technophobic grandmother can do it easily. I've recommended the one that I got Grandma, because she's liked it so much, but you can find them all over now, and I'm sure there are lots of good models at your local store. If you want something that looks like a traditional teakettle, Cuisinart makes one, though it's twice the price of the TFal model.

9. Decrimping can opener In general, I think electric can openers aren't worth the bother, but I've made an exception for this one. It's a smooth edge can opener; it decrimps the can, rather than cutting through the top. The result is that there are no sharp edges a child or elderly person can cut themselves on (this was another gift for my grandmother), and the top makes a neat little resealing lid you can pop on and put the can in the fridge, if you only use part of the contents. Beats the hell out of wrapping it up in Saran Wrap. And it actually works, unlike most electric can openers; all you have to do is hold it and push a button. If you're strong enough, or poor enough, to want a manual version, Oxo makes one for a little less money than the electric version.

10. Microplane zester Again, non cooks are goggling their eyes, dumbstruck by the thought that someone could actually buy an entire gadget just for removing lemon and orange zest. But once you've used a zester, you'll never go back to the grater. Not only does it avoid the nastiness of scraped knuckles; it removes a perfect layer of zest, with none of the bitter white underpeel to contaminate your cooking. And it's about eight times easier and faster than using a grater. I just can't communicate how you, or that special cook in your life, will rave once they've tried this.

Update A reader suggests adding the Lodge cast iron skillet and talking a bit about knives. I second the recommendation of a cast iron skillet--they're better than anything else for searing, and unlike most frying pans, they go from stovetop to oven beautifully, though they do take more maintenance than most pans.

Good knives also make an enormous difference; you don't realise how enormous until you're standing in the kitchen of a rented London flat on a Sunday afternoon, crying with frustration because the flimsy knives they've furnished the flat with take about six weeks to slice through a chicken breast. I use the high-end Henckels line, and for my money the crucial pieces are a solid chef's knife, one or two good paring knives (four inch and 2 3/4 inch), a serrated utility knife (invaluable for things like tomatoes), a good bread knife and a good six inch utility knife. But you should be sure that whoever you give these to understands that giving them knives to celebrate the coming of The Prince of Peace is meant to be a loving, rather than ironic, gesture.

From the desk of Jane Galt:

Pop quiz

From James Hamilton, oil economist extraordinaire:

EXAM ESSAY QUESTION (answer on separate paper)

Senator Frank Lautenberg (D-NJ) today issued the following press release:

In the four years since the secret Cheney task force met, we have seen gas prices double and oil company profits skyrocket. What went on at these secret White House meetings that may be motivating oil company executives to deny their participation? Now it appears that some Big Oil CEOs might have lied to Congress to cover up their involvement with the White House task force. What are they trying to hide from the American people?

Your assignment is to describe in detail the possible economic mechanisms whereby the actions of this task force might have contributed to a doubling in the world price of oil. Be sure to address in your essay the following issues.

1.) The Cheney task force resulted in the Bush energy plan released in May 2001. Discuss in detail three elements of this plan that led to an increase in oil prices. Be sure to explain how this happened despite the fact that the legislation proposed in that plan was not passed by the Senate and, if passed, would have increased energy supplies.

2.) Even if one ignores the Bush energy plan itself, explain how secret consultations by the task force could have resulted in higher oil prices. Recall that the five executives who were called before the Senate last week represented BP, Exxon-Mobil, Shell, Chevron, and ConocoPhillips. Including all their global operations, these five companies between them produced 10.1 million barrels of oil per day in 2004 (data from Petroleum Review with a tip of the hat to The Oil Drum), which would represent 12% of global production of 83 mbd. Describe the precise actions these companies could have taken that could have led to a doubling of oil prices. If possible, bolster your argument with a numerical example using plausible elasticities and actual production figures.

3.) Develop further Lautenberg's theme that the statements made by those called before the Senate were knowingly false. In particular, refute the claim by ConocoPhillips CEO James Mulva that in 2001 he had been the chief executive of Phillips and that Cheney met with someone from Conoco, which at that time had been a separate company.

4.) Perhaps the most important accusation made by Senator Lautenberg is that the statements by the oil company executives before the Senate committee were misleading. Describe some of the economic harm that can result when someone in a position of power makes statements that could result in a misunderstanding of the facts by the American public.

From the desk of Jane Galt:

Superhero physics

I'm reading a fantastic book right now called The Physics of Superheroes, which I highly recommend for that special geek in your life . . . or for anyone you know like me, who managed to duck high school physics entirely.* It teaches real physics, using various superheroes to illustrate principles like acceleration, thermodynamics, and electromagnetism. The prose is clear enough that a math dunce like me can grasp it, and the superhero examples are enough, I think, to interest even someone who already knows physics. Plus, the gentle fun he drily pokes at the comics he collects makes me laugh out loud.

Max Dillon was a highly skilled but self-centered electrical utility worker. When a coworker was trapped atop a high-tension line, Max was cavalier about his fate until his foreman offered Dillon a $100 reward (in 1963 dollars, worth about $600 today) for rescuing him. Freeing the unconscious colleague and lowering him to the ground with a cable, Dillon then receives an unanticipated bonus when he is struck by lightening while grasping the high-tension lines. Just as in the case of Barry Allen (the Flash), not only did Dillon not die or suffer any burns or neurological damage from this traumatic event, but he in fact gained the ability to store electrical energy that he could discharge at will in the form of lightning bolts. (Young readers during [the 1950's and 1960's] could be forgiven if they reached the conclusion that being struck by lightening, preferably in conjunction with some other hazardous activity, was one of the best things that could happen to them, second only to being exposed to massive doses of radiation.) Dillon's accident, presented in Amazing Spider Man #9 may have changed his body but it left his antisocial attitudes intact. Realizing that he now possessed fearsome electrical powers, he designed a garish green-and-yellow disguise, with a bright yellow lightning-bolt-themed mask and embarked on a life of crime as Electro . . . Personally, if I gained mastery over such a powerful force of nature, I don't think this would necessarily be the costume that I'd choose to wear in public. Perhaps if Max Dillon had not been such a rat, his friends might have gently provided some better fashion advice. But it is exactly such a pattern of bad choices that frequently leads these superpowered miscreants to a life of crime.

*Yes, that's right, I have never taken physics. "How did you manage that?" My aghast critics demand. "You went to an excellent school?" The answer is that I was in honors science, which instead of teaching "physical science" in 9th grade, then moving onto biology and chemistry, taught biology first, and then chemistry, with the expectation that you would then move onto advanced physics in 11th grade, while you were getting the math to grasp it. But advanced physics was an elective, and I didn't elect. I took Japanese literature instead.

From the desk of Jane Galt:

Questions for doctors:

1) If I can't have birth control pills over the counter, why would the FDA let me have "Plan B" OTC, which as I understand it, amounts to simply taking several birth control pills at once?

2) Could a medical professional tell the difference between an abortion induced by RU486 and a spontaneous miscarriage? In other words, assuming that NARAL's worst fears are realised and conservatives succeed in passing a constitutional amendment against abortion, could doctors identify women who had given themselves an abortion using smuggled meds?

3) Why do I get dizzy during asthma attacks when I am still getting adequate air?

From the desk of Jane Galt:

A monopoly not even a monopolist could love

Daniel Gross notes:

You would think it would be pretty difficult to lose money selling cans of Coke, frozen sandwiches, and bags of chips to train passengers. After all, you've got a captive audience, since passengers don't hop off at stations to buy snacks. You've got a monopoly, since outside vendors don't troll the aisles. You buy standardized, non-spoiling packaged goods in bulk, so you should be able to keep costs down.

And yet somehow Amtrak managed to lose a trainload of cash on its food--excuse me, dining--service

Let me suggest a possible explanation: Amtrak's food is terrible. I mean, worse than airplane food. And not that microwaved dog-food enchilada with the rubber cheese that they used to serve you in the good old days when airlines took an interest in keeping their passangers alive and in possession of all their limbs as they shuttled them from Point A to Point B. I mean worse than the repulsive bag of "southwestern-flavour" pretzels that I was served on a recent flight to Colorado (I believe that anyone who had tried to serve such an item in the Southwest would have been--rightfully--gunned down by the liberty-loving citizens of the region). Worse than the cardboard-and-rubber concoction misleadingly labeled as a "ham and cheese sandwich" I was given during my return flight from London. Worse, even, than the port-wine flavoured processed cheese substance that formed the main content of the "snack" that American Airlines sold me for $3.50 on my last trip to Mexico. Amtrak food can only be adequately compared to the execrable fare that used to await unwary travellers at the highway service stations of my youth.

Given that the average journey on Amtrak is, like, four hours, you have to be pretty desperate to ever buy a sandwich off them. And if you want to buy anything else, you have to wait on a line that is sort of a Platonic ideal of all lines, stretching from the slow-witted bureaucrat behind the cash register off into infinity through some sort of special space-time vortex located around the gent's lavatory. One miserable Christmas, when I was having an asthma attack on the train to Syracuse, I nearly blacked out three times before reaching the head of the line. In the true Christmas spirit, the staff and fellow passengers acted as if I wasn't there.

When you see service this incompetent, you know the government has to be behind it somewhere. Only in a government agency could such practices continue without fear of competition or bankruptcy.

From the desk of Jane Galt:

Disturbing thoughts

As the days go by, I find myself less and less worried about terrorism, and more and more worried about things like Lindsay Graham's proposed bill to strip habeas corpus rights from non-citizens.

By the strict standards of my libertarian-ish beliefs, this is a good thing. But I'm not so sure.

The reason for this mental shift is not because I have carefully studied the issues, and concluded that terrorism is not as great a threat as I once thought. The reason is simply that time is putting ever more distance between me and 9/11.

But this is not a good reason to believe that terrorism is less of a risk than it once was. Terrorism was a HUGE threat on September 10th, 2001, even though it had been 8 years since Al Qaeda attempted anything on American soil.

I can feel myself committing the basic decision error of believing that something that hasn't happened in a while is therefore less likely to happen tomorrow, even though for many events, such as earthquakes, the fact that it has been a while since the last one makes it more likely, not less, that a big event will occur in the near future.

On the veldt, this sort of heuristic works most of the time, which is how it got hard-wired into our brains. But it can be deadly in the modern world.

Is a terrorist attack that sort of event? I have no idea. But that's the problem; my assessment is not changing because I have gotten new information about terrorist attacks; it is changing merely because 9/11 is fading from my mind.

I don't mean to suggest that my current assessment is necessarily wrong; indeed, I'm sure that my analysis of the relative risks of civil liberties curtailment and terrorism was wildly skewed in the days after the World Trade Centre was destroyed. But changing my priorities should be the result of rational analysis, not the simple passage of time.

From the desk of Jane Galt:

The price of torture

I've long endorsed Glenn Reynolds' take on the torture question: if there really is a ticking nuclear bomb in New York City, and the CIA gets hold of a guy who can tell them what they want to know, they're going to torture it out of him whether torture is legal or not. There's no need to legalise routine depravity in order to ensure the correct outcome in rare doomsday scenarios.

Now Alex Tabarrok makes that argument in economic terms:

The problem with making torture legal is that the government will abuse its powers. I do not trust the government, any government, to use this power responsibly. Leviathan must be heavily restrained, especially when it comes to torture.

Here is where economics can make a contribution. By making torture illegal we are raising the price of torture but we are not raising the price to infinity. If the President or the head of the CIA thinks that torture is required to stop the ticking time bomb then they ought to approve it knowing full well that they face possible prosecution. Only if the price of torture is very high can we expect that it will be used only in the most absolutely urgent of circumstances.

The torture victim faces incredible pain and perhaps death at the hands of his torturer. If these costs are to be born by the victim then we had better make damn sure that the benefits are also high and the only way we can do that is to make the torturer also bear some of the costs. Torture must not be cheap.

Amen.

Update Winterspeak, posting at his own blog, disagrees:

I don't think it's so clear. It may be better for the politicians involved to go to some remote town unlikely to be nuked, say anywhere but NYC and DC, and let the nuke go off. In this situation they have zero chance of dying from terrorism and run zero risk of being sent to prison by a journey. Arguing that "torture is illegal and we did not know for sure if we had the right guy" is a bulletproof defense against the charge of not torturing someone when you ought to (not that mandatory torture is any kind of law).

To date, I have not seen people being very understand towards making tough decisions under incomplete information. I have also seen public support for the government grow after a terrorist attack, and shrink when the terrorist attacks stop happening and fade into memory. Given these incentives, a smart government would hide and wait in a ticking bomb scenario, not break the law.

In general, I'd say that given a potential event of sufficient magnitude, the agents will resort to torture whether or not it is legal. But my, or the agent's, definition of "sufficient" may not comport with what Winterspeak thinks is sufficient, and so events such as a hypothetical small town with a nuke may not pass the threshold.

I'm pretty comfortable assuming that anything I think is sufficiently catastrophic to merit torture will also strike the FBI/CIA/etc. that way. But given that I don't actually know any policemen or agents, this assessment is possibly wildly mistaken.

I certainly agree with Winterspeak that the aftermath of 9/11 has revealed that the government, the media, and the public do not seem to have grasped the difficulty of the decisions that people like Bush and Clinton had to make, demanding, with the benefit of perfect hindsight, that our leaders pluck the Al Qaeda needle out of the haystack of shadowy leads with which our intelligence and defense agencies are daily bombarded. I can see how that might raise the price of the marginal case higher than we would want.

From the desk of Mindles H. Dreck:

J.K. Rowling's bleak vision of government

Well, I didn't put it in a law review paper, but I have noted the libertarian interpretation of the Harry Potter books before. I compared it to Atlas Shrugged.

By the way, don't miss Paul Zrimsek's comment in the house-elf part of the comments. Typically pithy and hilarious. Then there's the last commenter who isn't quite ready to offer an 'analyzation' of Rand's 'rhumative' writing.....

UPDATE: Mark Kleiman suggests that the context of the work's creation argues against such an interpretation as Rowling received substantial government support and shows no sympathy for business. The first argument can be used in favor of our interpretation as easily as against. After all, it is hardly inevitable that a recipient of government support will stroke (or bite) the hand that feeds her. But we have gone too far down this contextualist blind alley, it isn't particularly relevant.

As for the second, admiration of business is hardly a necessary condition for a libertarian outlook (although comparing it to Atlas Shrugged, as I do above, might indeed require such a view). Alas, Mr. Kleiman should have revisited the text as opposed to ruminating on Ms. Rowling's economic status. I recall a variety of businesses that come off rather well in Rowling's books, including the Weasley twins' burgeoning joke business, now located and thriving in Diagon Alley along with Gringott's and an assortment of other interesting commercial ventures. They needn't be the size of Microsoft to be commercial. However, to return to the point, Rowling would have to show an anti-commercial streak for this argument to carry any weight.

As others have suggested, the prevailing feel of the Rowling books is anti-bureaucratic. An admiration for individual effort, personal responsibility and individuality shows throughout the text. As I said before, these interpretations are like the Mirror of Erised. Mark's mirror says Rowling doesn't like business, but when I look in it I see many Libertarian reflections.

From the desk of Winterspeak:

Real deficits

Alan Greenspan recently spoke about the US current account deficit where he says:
1) The US can run larger CA deficits than before because foreign countries are more willing to lend to the US than they used to be.
2) This is more about what foreign lenders want to do than anything the US can or cannot do. US (fiscal) deficit reduction would not change things much either.
3) Even thought the US CA deficit can be larger, it cannot expand infinitely. Eventually it will stop and rates will rise.
4) This adjustment will be smooth.

Angry Bear makes the bogus point:

These are familiar themes from earlier comments by Greenspan about the CA deficit. I was most disappointed about this line in his speech, however: "a discretionary reduction in our federal budget deficit would work toward narrowing the current account deficit but, if history is any judge, to an uncertain and possibly small extent."

This downplaying of the importance of reducing the budget deficit strikes me as almost irresponsible from a central banker. The speech was a perfect chance for Greenspan to talk about the dangers inherent in the large and sustained structural budget deficit in the US.

Firstly, the current US budget deficit is not structural. The structural aspect of the US deficit comes from entitlement programs and these aren't going to start blowing up for a few years now. Since the US government uses cash accounting, this imbalance does not show up now. Bush has done more to address these imbalances than any other president by 1) trying to shrink Social Security and 2) greatly increasing Medicare via the prescription drug benefit. The current US budget deficit comes from that fact that the government is spending more than it is collecting in taxes, but this spending is not being driven by entitlement programs.

Secondly, the link between the current account deficit is quite distinct from the budget deficit. One has to do with imports vs exports. The other has to do with taxation and spending. Their only link is the interest rate and in the US this remains extremely low. When (if) interest rates start to rise, the current account deficit will naturally correct as imports become less attractive. I don't see how this will impact US spending on entitlement programs -- which is what drives the structural budget deficit.

Update
Good comments all around. I want to point to this link by Dreck, detailing the domestic savings rate and the impact this has had on US growth. Essentially, domestic net savings has been falling since 92 and is deep in negative territory -- in other words, US spending is being fueled by debt.

Dreck notes that "foreigners as a group must continue to hold as many dollars as is necessary to balance the books, but the price (exchange rate) may change freely." To date, for their own reasons, foreigners have been willing to hold the neccessary number of US$ for cut price rates, which means that borrowing has been really cheap.

From the desk of Jane Galt:

The perils of privatisation?

For a while now, left-wing pundits have been trying to fight social-security privatisation schemes by pointing out that the much-touted model for such schemes, the Chilean system, is having issues. Close to half the people in the country will not have adequate retirement income from the system.

That sounds bad for privatisation. But on closer examination, we find that the main reason that so many people will not get adequate retirement income from the systeme is that they are not putting any money into the system. Given that America is mostly a nation of employees, not a nation of small farmers and street vendors working for cash, this seems unlikely to be a big problem, particularly since--unlike in Chile--the self-employed here are required to contribute to Social Security, as I recall to my immense displeasure every April 15th, when I declare my freelance income.

And to the extent that this would be a problem for the American system, it already is a problem for the American system. There is a not-insignificant number of people who work for cash and don't save for retirement, and end up as wards of the community. Those people would not be made better off by a privatisation scheme, but they wouldn't be made worse off either.

From the desk of Winterspeak:

Personal interactions with Schwartz

Barry Schwartz has become something of an anti-choice posterchild after his book, "Paradox of Choice", hit the circuit. I've actually met and spoke with him a couple of times and remain unimpressed -- as does Mindles H Dreck.

Schwartz's position is out and out socialist/communitarian/technocratic/elitist or whatever you choose to call the notion that people cannot be trusted to make good decisions for themselves. He honestly believes that it is the correct role of an authority to make the decision for them, both for their own good and for the good of society. He pays lip service to the idea that choice and competition have produced some good, but argues that things are so out of hand now that that has to end.

Nevertheless, I am sympathetic to the idea that figuring out this stuff is complicated and I acknowledge the empirical reality that multiple choices turn people off and impose a real search cost on them.

Schwartz's response to this is to eliminate choices entirely, but Thaler/Sunstein's "LIbertarian Paternalism" is about better defaults and better editting. Instead of getting rid of an option, make the default options better. This is a critical distinction since "one-size-fits-all" is a poor approach to public policy but people also make bad decisions when left to their own devices. Since you cannot get away from having some default option, why not try to make it a good one instead of a random one? In areas like healthcare and retirement, bad individual decisions have negative externalities since soceity at large will be taxed to make up the difference. Since good defaults result in better decisions (which they do), this is a good way to improve 401(k) participation rates and the quality of that participation without reducing individual choice.

(I don't know of any good way to handle healthcare.)

From the desk of Jane Galt:

Announcement

Mindles and I are very pleased to announce that a new blogger, Winterspeak, a top-notch finance and economics blogger (no surprise, as he graduated from the University of Chicago's Graduate School of Business two years after me), will be blogging here. As you may have noticed, our day jobs have been interfering with posting as often as we (and presumably you), would like. The new addition means more frequent, and extremely high-quality, content for you guys to savour. Hope you'll join us in welcoming him aboard.

From the desk of Jane Galt:

Thrift

Alex Tabarrok's post on Bill Cosby led me to this column in the Washington Post, arguing that Cosby's tirade against underclass blacks is wrong.

It smacks of elitism that poor blacks are held to standards that most Americans aren't, Dyson said in an interview. He reminds readers of what President Bush asked Americans to do after Sept. 11, 2001.

He asked us all to go shopping. And many did and are still shopping till they are now dropping from financial exhaustion.

"It is interesting that Cosby expects poor parents, and youth, to be more fiscally responsible than those with far greater resources prove to be," Dyson writes.

But what about the oft-repeated assertion that poor blacks can't afford to be spendthrifts?

"There is a cruelty to such an observation," according to Dyson. "Not only is the poor parent, or child, at a great disadvantage economically, but they are expected to be more judicious and responsible than their well-to-do counterparts, with far fewer resources."

Dyson's book is a stinging indictment of upper-middle-income blacks who have benefited from the civil rights movement but now feel justified to criticize poor black folks who haven't ascended to the same financial success.

By no means does Dyson absolve impoverished blacks of personal responsibility. Instead, he documents why we all "must never lose sight of the big social forces that make it difficult for poor parents to do their best jobs and for poor children to prosper."

You've heard me argue before that the middle-class moralistic tone taken towards the poor often vastly overestimates how easy it is to transcend one's peer group. But that argument can't be applied to Cosby, who grew up in the Philadelphia ghetto. And if those pushing middle-class values on the poor can seem insufferably smug, their prescriptions are, by and large, correct. To me, this columnist sounds not compassionate, but lunatic. Do people with fewer resources have to be more judicious than those with more? D'uh! Speaking as someone who chose a career in which she makes only a fraction of what her graduate school classmates rake in . . . well, if I wasn't a hell of a lot more judicious and responsible than my classmates, I'd be bankrupt and homeless. It seems rather crueller to let someone continue to dig themselves into a pit, than to point out that the only way they are headed is further down.

From the desk of Mindles H. Dreck:

Let the Schwartz decide for you

The war against choice continues as the New York Times blames falling 401k participation on 'confusing choices' and highlights complexity as the signature feature of the prescription drug bill.

Whether you buy Schwartz' dressed-up socialism, or Cass and Thaler's "Libertarian Paternalism", this remains a lame angle of attack. The idea that we can solve all the problems of social programs and entitlements by offering one-size-fits-all solutions is ridiculous because that one size will tend to offer no compromises, no pain and no prioritization. See problem 1 - the entitlement spending explosion.* Yet intelligent people keep grabbing it like some kind of lifeline.
I recommend Virginia Postrel's article on Schwartz, and Coyote Blog for a libertarian version of Nanny 911. Here is the abominable Schwartz article that started all this.

*The fact that the prescription drug benefit is both hideously expensive and complex is probably a good indicator of the available "compromise" position here.

From the desk of Mindles H. Dreck:

Up in a Whiffenpoof of smoke

Quoth a dejected Tigerhawk :

I've heard "Bulldog! Bulldog! Bow wow wow! Eli Yale" quite enough in recent years.

Funny, I never tire of it. Shall we sing Bright College Years instead?

Funny thing is, "The Game" for us was always Harvard. How can you have a rivalry when only one side cares?

"We are poor little lambs who have lost our way bah, bah..."

From the desk of Mindles H. Dreck:

Michiko Kakutani simultaneously apes and overlooks Mary Mapes...

Is this a book review, or an editorial? Jeez.

This is rich:

Meanwhile, the press has often unwittingly aided politicians by flagellating itself. As Mr. Crawford astutely notes, journalists "seldom defend" themselves. In addition, they allow themselves, on occasion, to be distracted from covering the news made by politicians and government officials to engage in cannibalistic navel-gazing - a phenomenon fueled by Internet bloggers, cable news pundits and talk radio partisans like Rush Limbaugh, who are intent on promoting themselves at the expense of the mainstream media.

Awww. I'll happily accompany this nonsense on the world's tiniest violin.

I suppose one man's cannibalistic navel-gazing is another man's constructive reflection..at least when it's in response to mainstream media scrutiny.

I must say, I never knew 'astutely' was a synonym for 'disingenuously'. The press 'seldom defends' itself much like Kakutani 'seldom' reviews books. In addition to the subject volume and her own article, Kakutani herself provides examples of these self-effacing navel gazers:

"Attack the Messenger" isn't nearly as comprehensive or incisive as the reader might want: Eric Boehlert of Salon, Frank Rich of The New York Times, Michael Massing in The New York Review of Books, Eric Alterman of The Nation and Ken Auletta in The New Yorker have all written about aspects of the Bush administration's relationship with the press, and done so with far greater acuity and depth than this volume demonstrates.

Reluctant warriors all, like Clint Eastwood in Unforgiven.

From the desk of Jane Galt:

More on reproductive asymmetry

I'm a big fan of feminist blog Alas, A Blog, though our politics are pretty far apart. This morning I came across this post from Nick Kiddle, on the patriarchy-reinforcing effects of telling women not to do things that put them at risk of rape.

In my ideal world, men would not be tempted to commit rape. Sexual encounters would be handled with negotiation, not with one partner's insistence on getting what he wants at the expense of another. Men would respect the desires of women to control what happens to their bodies, whether they've known each other for ten minutes or ten years.

And in my ideal world, the fear of rape could not be used as a justification for slut-shaming.

Let's rephrase that bolded part a little bit: "In my ideal world, people would not be tempted to take things from other people that those other people do not freely choose to give them." I endorse that statement wholeheartedly. But that doesn't mean I leave the door unlocked.

There is a strain of feminism that encourages women to behave as if we have arrived in some feminist utopia where rape is impossible. This stems from a very admirable desire to put the responsibility for rape on the men, not the women, and is an understandable backlash to rape trials that used to investigate whether the woman was "asking for it".

Nonetheless, it's stupid. Not only are we not in this utopia, we are never, ever going to be in that utopia. Even if we achieved a marvelously gender-blind society, there would still be some people who want to have sex with people who do not want to have sex with them. Indeed, the variety of human sexual fantasy being what it is, there will be some people who are almost exclusively interested in that sort of activity.

Some of those people will be women. But biology being what it is, the only ones who will be able to act on these desires will be men. Rape is, of course, tied up with our social ideas about sex and gender, just as theft is tied up with our social ideas about property rights and economic justice. But it is not simply a weapon of the patriarchy; it's part of the natural human urge to force other people to give us what we want. (And let's hope that we don't develop compensating political philosophies to "redistribute" sex to the less privileged). That means women are going to have to take action to protect themselves. If you don't want to stop engaging in risky behaviour, then vote libertarian and buy yourself a gun. But don't just stick your head in the sand and claim that it's all society's fault, so you're not going to do anything until society takes care of the problem.

From the desk of Jane Galt:

Abortion follow-up number seven: funny post from somebody else

This post from the John Roberts confirmation hearings is hilarious:

Make no mistake, then - the Supreme Court is no longer the Supreme Court of past fame. It is now the National Abortion Tribunal, and its members are no longer jurists, they are the Keepers of the Abortion Toggle Switch.

-----0-->0-----

Fig. 1A. Abortion Toggle Switch, closed.
Suction motors will engage.

As we can see from the schematic diagram above, the Abortion Toggle Switch is currently in the closed (ON) position. The entire purpose of the so-called Supreme Court, as current wisdom understands that purpose, is to stare at this switch all day wondering whether they should play with it or not.

Now this is a sad state for this once-great court to have fallen to, and makes me wonder if we don't need another court to assume the neglected responsibilities of the current one. Then the Abortion Toggle Switch could be moved to some remote corner of the public's attention, and the various abortion partisans could play their endless game of Keep Away without buggering up the entire constitutional process.

From the desk of Jane Galt:

Political prosecution

The liberal blogosphere is up in arms about this church, which it believes is the victim of a politically motivated IRS investigation over a pre-election speech.

Churches and other non-profits, as you know, are not supposed to engage in political activity. If they do, they lose their tax-exempt status.

The sermon, while claiming not to tell the congregation how to vote . . . well . . . how shall I put this . . . tells its congregation how to vote. The good reverend uses every mechanism except actually saying "Vote for John Kerry or you're an amoral, venal, war-mongering, woman-hating, poor-oppressing bastard." Exactly that message is, however, crystal clear.

This is a big no-no. Now, as non-profit sins go, this speech strikes me as a venial one, several steps down the ladder from allowing employees to purchase office supplies with the Church's sales tax exemption. For starters, it's extraordinarily unlikely that anyone in the decidedly left-wing congregation was planning to vote for George Bush in the first place, and even if there was a reactionary imperialist running dog or two in the audience, I find it hard to imagine that they had their vote swayed by the good pastor's speech, which is neither original nor particularly compelling.

Nonetheless, the IRS has to investigate these things when it gets a complaint, and investigate it has, and aren't we all glad that we have a big tax-collecting apparatus to protect us from left-wing ministers? But I digress.

The liberal blogosphere seems to be entertaining the notion that George Bush has personally spearheaded this inquisition against those noble people of conscience in order to intimidate the left wing. Cough. Might I suggest that George Bush probably gains a lot more votes than he loses if pastors are allowed to tell their flock how to vote, considering that most churchgoers on any given Sunday are rather conservative in outlook and denomination?

But at a more fundamental level, what's more likely: that the Bush administration has launched a personal crusade against a left wing church that might have cost Mr Bush a handful of votes, in a state that was predestined to go Democratic anyway? Or that some sourpuss who's pissed off at the minister because he wouldn't use his cousin's cleaning company to tidy up the vestry after services decided to get even by putting the IRS on his tail?

If the people getting all excited about this went to church more often, they'd know the answer to that question.

From the desk of Jane Galt:

Abortion follow up #6: It's all about privacy!

It's between a woman and her doctor! Anti-abortion types just want to control women! They're poking their nose where it doesn't belong! If you think abortion is wrong, don't have one!

Whoa, Nelly. First of all, if you think that abortion is murder, or kinda murder, then you can hardly be fobbed off with a claim that it is none of your business. Even the most avid pro-choicer who caught the neighbours preparing to disassemble their children with a chainsaw would presumably try to stop it, not wander back to their own yard mumbling about the right to privacy.

Acting as if concern for the potential life in that womb is the same thing as peeking under the window shades to see whether you're renting porn or leaving dirty dishes in the sink is insulting. Try this one on for size: "If you think lynching is wrong, don't string up your neighbours."

Even more ridiculous is the pretense that we're somehow on a slippery slope back to the 19th century if we restrict abortion; that we should support Roe not because it is correct, but because overturning it would somehow endanger the precedents that underpinned it (to the extent that they did) such as Griswold v. Connecticut, which found a constitutional right to birth control.

I mean, c'mon. Griswold v. Connecticut is safe, and better than safe, it's irrelevant. The draconian anti-birth control laws it overturned were outdated decades before the case came before the Supreme Court, kept on the books only by Connecticut's politically powerful Catholic lobby. They were so laxly enforced, even in Connecticut (which was in no way typical of most states) that initial court cases aimed at the laws were dismissed because the plaintiffs had suffered no harm from them. The plaintiffs in Griswold had to gin up a case in order to appeal it to the Supremes--set up a birth control clinic, call the DA themselves to complain, and then appeal the drastic repressive treatment they received at the hands of the legal system, which consisted of a $100 fine.

Even if Griswold were rolled back, the result would be . . . nothing. There is no significant political movement trying to ban birth control in the United States, and there hasn't been since, oh, 1925. As well to worry that the court will bring back the gold standard. No one is coming for our birth control, our girly magazines, or our dirty dishes if Roe is overturned. And no one, except the activists getting pleasurably hysterical over margaritas and mango salsa, gives any credence to claims to the contrary.

From the desk of Jane Galt:

Abortion follow up #5: Why am I writing so much about abortion?

Short answer: it's been a while since everyone yelled at me. Long answer: I hate the way the abortion debate is handled in this country. It's shamefully simplistic. And it's also ridiculously overblown. I mean, this is the only thing we care about in a Supreme Court justice? I can kind of understand why pro-lifers feel that way; they think that they think there are 1.2 million babies being murdered each years, which certainly dwarfs affirmative action and the constitutionality of telecoms regulation in my book. But on the pro-choice side, I am amazed that half the chattering classes really purport to believe that the single most important issue facing the courts is whether or not ten or so low-population states will, or will not, be allowed to outlaw abortion. More important than civil liberties? More important than towns condemning any old house they feel like it to build a strip mall? The highest cause in the land, the only one that really matters, is making sure that nothing interferes one iota with the free and unfettered scraping out of uteruses from sea to shining sea?

From the desk of Jane Galt:

Abortion follow up #4: But it's not fair!

But it's not fair that women are the ones whose careers get all screwed up by an untimely pregnancy, wail feminists. We need abortion to make things right!

But it's not fair that women get to decide whether to abort, but men get stuck with the results of that decision, scream father's rights activists. We need the right to terminate our parental obligations!

Okay, kiddies, gather round, for Aunty Jane is going to let you in on a little secret: reproduction is not fair. It is not going to be fair. Once we made the decision to gestate the little suckers in our stomachs for nine months, instead of just putting out a few thousand eggs and hoping that a few of them hatched, things were bound to get a little asymmetrical. I know, none of us made that decision. But we didn't decide to walk upright or have opposable thumbs, either, and yet we reap the fruits of the wise planning of our ancestors. You have to take the bad with the good.

As a woman, of course I am extremely sensitive to the unfairness of it all. But there is no power on earth that is going to rectify that unfairness. Nature gave us a big job, and the tools to do it. Unfortunately, many of those tools, like hormones and breastfeeding, actively conflict with the establishment of an androgenous society.

And the same message to the guys. Most of you at some time are going to want to have kids, even if not right now. And when that time comes, you are not going to endure the stretch marks, morning sickness, hemorrhoids, labor pains, the searing agony of pushing a live human being out of an opening smaller than said human being's head, the late night breastfeeding, the postpartum depression, and so on. Life. Not fair. In so many ways, not fair, as you'll notice when you drive past the schizophrenic guy talking to his shopping-cart full of cans beside the highway.

Instead of trying to surgically correct reality in a fruitless quest to torture an organic thing into some impossibly symmetrical idealized shape you have in your brain, how about talking about tradeoffs, and making uncomfortable compromises? How about we stop pretending that we can find a perfect solution (or even worse, pretending that we have found it, and angrily denouncing any evidence to the contrary), and settling for finding the best one in a decidely imperfect world?

From the desk of Jane Galt:

Abortion follow up #3: What's the difference between abortion and birth control?

Very little, according to the Catholic Church. For the vast majority of us who are not practicing catholics, however, there are three big differences.

Difference number one: Most second- and third- trimester fetuses feel pain. And I'm not referring to any existential anguish that my unfertilised eggs may feel at going unfulfilled. Abortion at that stage involves hacking what I hope pro-choicers will at least recognize as the moral equivalent of a small, defenseless animal to death without anaethesia.

Difference number two: Human intuition recognizes a big difference between affirmative and passive response.

The classic thought experiment that behavioral scientists offer of this is that of a train hurtling out of control down a track. Shortly up ahead, the track splits into two. On one track, there is a single man standing. On the other, there are five people hanging out. (Presumably they are all blind and deaf). With no time to warn them, your only option is to pull a lever to divert the train from its current path, towards the five people, onto the track where there is only one man. Do you pull it?

Most people say yes.

Now say there is only one track, with our five Helen Kellers standing thereupon. You have no way to divert the train, but you are standing next to a man who is fat enough that if you push him in front of the train, he will derail it, killing him, but saving the five others. Do you push him?

Almost everyone says no.

And yet the result--one man dead in order to save five others--is exactly the same. By a logical, utilitarian calculus, the one action is no better than the other.

Or say you refuse to donate a kidney to your cousin, knowing that there is no time to find him a donor? Wrong? Folks might argue. But is it as wrong as donating a kidney to some stranger in order to induce him to kill your (perfectly healthy) cousin? Logically, they are the same thing. Morally, they're not.

The human brain just doesn't work that way. Preventing a pregnancy just isn't the same thing to us as ending it once it has occurred, and you can ask any woman who's had an abortion if you need confirmation that it does not feel just the same as, say, having an IUD inserted.

Difference number three: birth control is low-probability, and non-specific. An abortion prevents the highly-likely birth of a single, specific child; birth control prevents the possible birth of millions of potential combinations of sperm and egg, all of which have an extremely low probability of being born.

Let's say that you are asked to donate $10 to Pakistani earthquake relief efforts. Say you know to a virtual certainty that that money will save the life of at least one person who will otherwise die. Is this morally the same thing as accepting $10 to kill your boss's wife?

You can argue until you are blue in the face that we should abandon such intuitive distinctions for some hyperrational utilitarian values of your devise, but the fact is that we are not going to turn into a race of Spocks, and it wouldn't be a good thing if we did. And anyone who believes that their position on abortion is the only possible logical derivation from the facts is simply ignoring the colossal value judgements that must be postulated before one can even begin applying logic: judgements about the relative value of a woman's right to control her own body, and a baby's right to get born; judgements about when life begins; judgements about how much responsibility people should have for the predictible, if unintended, results of their actions. I'm not saying those judgements are wrong, mind you. But they are not logical.

From the desk of Jane Galt:

Abortion follow up #2: what do we really believe about abortion?

The hard-core pro-choice side of the debate could be summed up as saying that right up until Mom shows up at the maternity ward to say "Hey, I'm ready to have this baby", what's in her tummy is a mere bundle of cells, and what happens to it is of no more interest to anyone (except her and her doctor) than what happens to her appendix.

The hard-core pro-life side of the debate could be summed up as saying that the instant sperm meets egg, a baby is created, and that abortion is as much murder as it would be if you met the fruit of that union on the street twenty years hence and shot him.

Most of what passes for "debate" on the issue is simply heated restatement of these core theorems: "Abortion is murder" and "A fetus is not a baby". And yet, almost no one on either side actually believes this.

If your typical strongly pro-choice woman is five months pregnant, and has a miscarriage, she does not call her mother to say "I lost the fetus"; she sobs "I lost the baby". Nor would she vote to allow a woman to slit the throat of her premature baby, even though this is functionally equivalent to a procedure that she thinks should be legal, the "intact dilation and extraction" aka the "partial-birth abortion".

And your typical strongly pro-life man does not, in fact, want to see women sent to jail for having abortions, even though he would almost certainly endorse a stiff stretch in the pokey for any woman who hired a doctor to hack her infant to pieces and throw the pieces of the body in a medical waste bin.

There are some true radicals on both sides who really do believe these things, and endorse the logical conclusions of these beliefs. (I am reminded of an acquaintance in college who was going to become a vegan before he realised that he'd be implicitly endorsing the pro-life position). But the 99% of us who are not zealots believe that abortion is morally worse than an appendectomy, though not as bad as infanticide.

That's why we start dragging other questions into it. How responsible were the prospective parents for the pregnancy? How badly will they suffer if she carries it to term? What is the cost to society of the unwanted pregnancy? How can we build a society in which women are equal if they spend much of their adult lives at risk that an untimely pregnancy will disrupt their careers?

If abortion were either murder, or irrelevant, than we wouldn't need to ask those questions. And indeed, most people with strongly held positions like to maintain that it is at one of these two poles, because it shuts down debate, obviates the need for compromise, and forestalls confrontation of the ugly consequences of whichever side you ultimately come down upon. We prefer to live in a neat moral universe, and so we simplify, even to ourselves.

But deep down, we know that these are simplifications; that every scared teenage girl is not Susan Smith, and that that tiny hacked-off arm lying in the medical waste bin is no mere lump of cells. And so it is appropriate for us to grapple with the grey areas, the mushy questions of when, and how much, to intervene in the relationship between host and parasite, mother and child.

From the desk of Jane Galt:

Follow up on abortion: how many people getting abortions are really victims of accidents?

Well, in the sense that obviously, they weren't trying to get pregnant, all of them.

But in the sense that what happened to them could not have been avoided by exercising more care and self restraint, very few of them, as I understand it.

To start with, I'm told that more than half of the people getting abortions are repeat customers. That would seem to be more than random chance at work.

Secondly, the difference between birth control failure rates with "perfect use" and "normal use" is roughly fourfold. Only one in two hundred women will get pregnant while on the pill if she takes it at the same time every day, doesn't vomit, and does not weigh significantly more than normal, or take certain medications that can neutralize the pill's effects. The most common problem is not that women don't realize their antibiotics will knock out the pill; it's that she didn't take one or two or three, then forgot that she forgot--or said "damn the torpedos, full speed ahead".

Condom failure rates are 3% with perfect use, 12% with normal use. "Normal" use includes running out of Trojans and deciding it's worth the risk just this once.

Similar rates apply to diaphragms and so forth. About the only birth control that doesn't fall prey to these sorts of problems are Norplant and IUDs, and these have their own issues that have made them understandably unpopular.

If I don't use my birth control correctly--if I forget a pill, don't notice my patch has fallen off, use a petroleum-based lubricant that dissolves latex, or decide to go without a condom or my diaphragm "just this once"--am I responsible for the pregnancy that results? Damn straight.

If paying attention to really rather simple instructions, which are included right in the box, is truly beyond your abilities, then you need to be in a state home where you can be taken care of like the mental infant you are. This is not to say that everyone who has an accident is a mental infant--it seems like every third morning I forget either my asthma pills, or my inhaler, and yet I have my own apartment and student loans and everything. But if I have an asthma attack because of this, it's my own damn fault. I can't blame anyone else, or the universe, for something that I could easily have prevented with a little more care.

Given those rates, it seems safe to say that at least 80% of couples who got pregnant while "using" birth control are responsible for what happened to them.

Then, of course, there are the people who unintentionally got pregnant while not using birth control--although I don't see how you can call this "unintentional". It's rather like "unintentionally" getting fat while eating supersize McDonalds meals three times a day.

But what about rape and incest? I hear you cry. Well, sexual abuse is really uncommon--people VASTLY overestimate its incidence, because we tend to assume that something we hear about frequently happens frequently. But all those people on Dr. Phil and Oprah and the nightly news are there precisely because what happened to them is rare. Most families have yelling contests where the children claim that the parents are, like, the worst people on the planet, and the parents tell their children that they are ungrateful, snot nosed brats with a potty mouth and a piss-poor attitude who have no idea how much has been given to them--and yet those families do not make it on television, because if we wanted to watch stuff like that, we'd be hanging out with our family instead of relaxing in front of the television.

Rape is more common. But not that common; there were 94,635 rapes reported in the United States in 2004. Assuming that every single one of those women was fertile and not on the pill, and that women are likely to get pregnant roughly 1/5 of the time (four out of twenty-one days), and that none of those women were offered emergency contraception. That would still add only 21,000 abortions to the nation's rate, which was in the 1.2 million range last year. Neither rape nor incest are significant contributions to the national abortion rate, and making public policy around them is silly.

To sum up, the overwhelming majority of women having abortions are doing so because of their own failure to use birth control correctly, or to ensure that their partners are doing so.

The deeper question is "should it matter whether the couple is responsible?" After all, if abortion is the taking of a human life, then it is really irrelevant whether that life is the product of rape or incest, unless you and your relative are carrying some horrible recessive that dooms the child to a short and horrifyingly painful life. And if it's just a bundle of cells, then who cares whether they're responsible for it or not?

First of all, I think that almost no one believes that a fetus is a) morally equivalent to a baby or b) just a bundle of cells -- even people who say they believe this, and even believe that they believe this. More on that later.

But second of all, I think that responsibility does matter. If you knowingly take a risk, and something happens, society rightfully does less to help you avoid those consequences than if you were just touched by the fickle finger of fate. And intuitively, people are, and I believe will remain, far more horrified by the woman who is on her fourth abortion because she just can't be bothered to use birth control consistently, than by that 1-in-200 woman who found out, the hard way, that she's one of those lucky few who just don't respond well to the pill.

Update The number I had on women getting repeat abortions was 53%. It looks like I reversed the numbers: 47% are on their second, third, or more abortion, according to the CDC. I got yelled at in the comments for this.

To my mind, the difference is immaterial; whether almost half, or more than half, of all women getting abortions have done this before, to me the figures imply that gross irresponsibility is behind at least half of abortions, even before we dig into data about birth control use.

From the desk of Jane Galt:

Alito's dissent

Predictably, most pro-choice bloggers have taken Alito's dissent in Casey as proof that he's Satan's minion.

Is George Bush trying to pack the court with anti-Roe judges? I'd guess so. Nor do I think that, tactically, this is illegitimate. Roe left the sizable minority in this country that vehemently opposes abortion with no recourse except to pack the court with judges. And if as a result we get a court so composed as to uphold a pretty clearly unconstitutional federal ban on abortions, why then we'll have no one to thank but the folks who decided that the path to freedom lies in ramming their opinions down the nation's throat with a one-vote majority.

But whether Alito is likely to overturn Roe is, in my mind, a separate question from whether his dissent in Casey is correct. That question, as I understand it, hinges on whether spousal notification is, or is not, an undue burden on women seeking an abortion.

And this is where I part company with my pro-choice compatriots: while I think that we need keep abortion available, I see no reason to make it easy.

Objections to spousal notification are not that she'll be abused (there are overrides for just that sort of thing in the law). The objection is that, well, she doesn't want to tell him, because he'll get mad. And that's mostly the objection to parental notification laws too, although in the case of those laws I sense an underlying assumption that of course all children conceived by women under the age of 21 should be aborted, and therefore anything that makes it more likely a teenager will carry her pregnancy to term is a bad idea.

What are we, three? If you're old enough to have sex, you're old enough to tell Mom, Pop, or Hubby that you got pregnant. I have no doubt that if I'd gotten pregnant in high school, I'd have had an abortion immediately in order to avoid telling my parents. And I have no doubt that if I'd gotten arrested for Driving While Intoxicated, I'd have done my darndest to keep them from finding out about that. But now that I am no longer fifteen, I can see that it is not a good idea for teenagers to have secret lives with serious repercussions, which is why the government tells your parents if you get arrested for doing drugs, whether you want them to or not.

There's a belief among more radical pro-choicers which I truly do not emotionally understand: that anything that makes women feel bad about having an abortion, from telling an unwilling spouse to having protesters shout that she should reconsider, should be discouraged By Any Means Necessary. Intertwined with this is an assumption that we shouldn't try in any way to discourage women from having an abortion once they've gotten pregnant.

That's pretty repellant to me. I think that abortion should be legal, but I also think that it should be a last resort, and I'm all for the government using any non-coercive methods it can to encourage women to carry their pregnancy to term, including things that will make them feel bad about aborting. I think, for example, that sonograms should be mandatory before termination, I'm in favor of waiting periods and parental notification laws, and I'm agnostic on spousal notification.

I get the sense that there's an underlying belief among a lot of people that it's somehow better if those babies aren't born. All too often, in my more radically pro-choice days, I heard people actually arguing that the babies themselves would be better off not being born, since their mother didn't want them. Say what? Even if my mother hadn't wanted me, I'd damn well rather be alive than dead, and so would pretty much everyone still walking the earth. Abortion is something done for the benefit of the mother, for which the child who will not be born pays the ultimate price. Trying to elide, sugarcoat, or invert this is morally bankrupt. It seems to me not only reasonable, but fundamentally right that society should force women to confront the tragic cost they are asking someone else (even if only a legally hypothetical someone) to pay for their freedom, and evaluate whether the benefit they are gaining is really worth that cost.

If you really want abortion to be "safe, legal and rare", then there are two approaches, both of which have merit. First, you educate children about birth control, so that they know exactly how not to get pregnant when the time comes. I'd say that at least in my neck of the woods, we're doing about as well at this as we can reasonably expect the government to achieve. Condoms are cheap, and reliable oral contraceptives can be had from Planned Parenthood for the price of dinner for four at McDonalds (not even that if you can prove you're poor).

On the other side, the way you keep abortion "rare" is to discourage it as much as possible. That not only reduces the number of abortions; it reduces the number of pregnancies (and, as a nice side benefit, things like STD's), because as much as teenagers (and others) say that they were just swept away by passion, it's a lot easier to be swept away when you know that if you catch, there's a surgical out. Raise the "cost" of abortion, and a lot more girls will insist that he run down to the drugstore for a pack of Trojans.

From the desk of Jane Galt:

Quote of the day

From Peter Campos' excellent book, Jurismania:

The President of the United States is about to step onto the tarmac of Denver's brand-new airport, where he will deliver a campaign speech, framed artfully for the cameras against a backdrop of purpole mountain majesty. After crossing cities and plains, deserts and mighty rivers, he has descended out of the clouds to bring us a message of hope, and to show us how to build a bridge that will reach the ever-receding future. Now he emerges from his ceremonial airship, to be greeted by kowtowing dignitaries, high school cheerleaders, crowds of the curious and the committed, and of course that swarm of equipment-laden journalists forever trailing in his charsmatic wake. He speaks the words he has come all this way to deliver, words designed to be the first sound bite on this evening's national news: "Today I have signed legislation to crack down on illegal drugs."

A wave of cheers engulfs the podium, above which--barely visible behind a medusa-like amalgamation of microphones--we get a glimpse of perfectly coifed hair, and of an eminently presidential expression, stern yet empathic, noble yet sincere.

This exercise represents what in contemporary America gets called "politics". Still, despite our jaded ennui--despite all the seemingly bottomless reservoirs of cynicism so characteristic of these times--no one appears to notice the most remarkable feature of the President's statement. Reporters will duly note that he is signing this legislation in response to his opponent's claims that he is soft on drugs. Law and order types will dismiss the action as "playing politics", refusing to believe that this President, redolent as he is of easy virtue, can really be serious about doing what it takes to fight the war on drugs. By contrast, those of a libertarian inclination will deplore yet another incursion on our constitutionally-guaranteed freedoms, and see in the President's remarks another example of that brazen opportunism for which he is famed. Still, the most salient feature of the President's carefully scripted utterance goes unremarked--it's sheer absurdity.

Nearly two decades ago the federal government began to pass a torrent of anti-drug legislation, featuring stiffer penalties, mandatory sentences, the elimination of parole, and other draconian elements intended to combat a perceived social crisis brought on by the use of illegal mind-altering substances. Indeed, several of the new laws Congress enacted declared that the goal of these statutes was no less than to make America "a drug-freee nation" by the end of the 1990s. (If we dismiss such statements as mere rhetoric, we are ignore that such rhetoric has real consequences.) Today, primarily as a result of these laws, the prison population of the United States has more than doubled since the mid-1980s, and nearly quadrupled since 1975. More than half of all federal prisoners now incarcerated are serving drug-related sentences; the average leength of these sentences is by far the longest in the developed world. Meanwhile, the wholesale price of cocaine and heroin is actually lower than it was fifteen years ago; drug use among teenagers has skyrocketed; and drugs are as widely available as ever. For example, in California, despite more than a billion dollars spent on attempts to eradicate the farming of marijuana plants, maijuana growers continue to harvest their crops with impunity, and law enforcement officials now openly admit that there is not much they can do about it.

Faced with these sorts of facts, disinterest observers of the situtation admit the so-called "war on drugs" has been an almost complete failure. Indeed, given the characteristics of the enemy, it is fairly remakrable anyone ever believed it could be won. Among those characteristics are: the employment of mind-altering substances in all known human cultures; the huge profits always generated by underground economies in highly desirable contraband, and the enormous incentives to participation in those economies such profits produce; the total impossibility of stopping or even impeding significantly the importation of banned substances into a country with thousands of miles of unguarded borders; and, not least, that cautionary tale of spectacular failure, the federal government's attempt to ban the sale of alchohol during what in retrospect are remembered as "the roaring Twenties".

Given all this, it would in truth make more sense for the President to announce he has undertaken to perform a ritualistic dance, designed to drive away the evil drug spirits, than for him to inform us that he has yet again "signed legislation to crack down on illegal drugs." After all, it is just conceivable, empirically speaking, that the Evil Drug Spirit Dance might work; and at the very least it would represent a low-cost expriment in social policy. We know the legislation isn't going to work' and we also know it will merely continue to add to the expense of a set of destructive policy initiatives that are not only utter failures, but are costing us a fortune to implement.

None of these points are even particularly controversial. Why then is the President's proposal not met with hoots of derisive laughter, or perhaps with a grave suggestion that he be examined, so as to determine the cause of this delusional pattern of thought? Why is the reaction of his opponent instead to claim the legislation doesn't go far enough, and to promise that he, if elected, will do even more along these same lines? Why, in shore, is the answer to an important social problem almost always more law, even or rather especially in those social contexts where the evidence more or less shouts at us that more law isn't going to work? Doing a rain dance in the tropics: this I can understand. But in the desert? Why do we trust so blindly in the weak magic of law?

Now go out there to the polls and remembere: your vote counts. For what, I have no idea.

From the desk of Jane Galt:

George Bush and the terrible, horrible, no good, very bad week for trade

Daniel Drezner has a good post up on the dreadful week trade is having: the FTAA is a no go, and Doha seems to be perilously close to stalling out. I was going to write about this, but why bother when Mr Drezner has done such an excellent job?

[So this is Europe's fault, right?--ed. Well, at this point the answer is yes and no. Certainly EU intransigence on agricultural matters doesn't help. On the other hand, the developing countries are now in a position where they need to make concessions as well. Consider the Indian Commerce Minister's remarks in this story by the Independent's Philip Thornton In a wide-ranging interview with The Independent, Kamal Nath lashes out at the attitude taken by rich nations in the WTO talks � especially that of Europe's trade commissioner Peter Mandelson. He appears baffled that Europe has offered to eliminate domestic subsidies and reduce tariffs � but in exchange for concessions in other areas, notably service industries and market access for industrial goods.

"I welcome Peter Mandelson's proposal to say he will reduce by so much but then he says 'I want my pound of flesh'," Mr Nath said. He compared Mr Mandelson to a politician seeking a knighthood simply for obeying a traffic light. "He is looking to be rewarded and rewarded for behaving as one should.

"It is a step in the right direction but it is a question of giving an inch and asking for a mile � not just asking for a foot but a mile."

On the one hand, Nath is correct in saying that the EU should liberalize its agricultural sector no matter what. On the other hand, the GATT/WTO process was designed for states to get concessions from other countries in order to gain the concessions they want. From an economic standpoint, this kind of reciprocity makes no sense (it's better for countries to unilaterally lower all their tariffs, quotas, and barriers). From a political standpoint, however, the Indians are going to have to reciprocate for the Doha round to have any meaning.

Not to pass up an opportunity to bash the French, who have been working their Gallic little hearts out to make Doha as messy as possible. But the developing world, having successfully scuttled talks at Cancun by banding together to demand real movement on agriculture, seem to have decided that intransigence will get them everything they want. It won't. Western politicians cannot afford to make concessions on agriculture without developing-world concessions on other issues to take back to their voters.

From the desk of Jane Galt:

Why are French muslims rioting?

Is it because Arabs/Muslims are a roiling repository of violent, seething hatred, ever threatening to bubble over onto unsuspecting victims in their path? Because the French are so damn mean?

Let me suggest another possibility: Muslim youth are rioting in France because breaking windows and setting cars on fire is fun.

Everyone who has ever taken their .22 out to the back forty and shot up a line of old bug spray cans knows this. Seeing things break, disintegrate, or explode, at absolutely no personal risk to yourself, lights up some primitive reptilian part of our brain with searing glee. I've often thought there would be big money for the firm that figured out how to build an adult recreation center where frustrated Americans could go to have a beer, take a sledgehammer to a used computer, and throw some glassware at the walls.

Of course, normally we don't go around torching automobiles, because the owners of those automobiles would be angry, and we would be arrested, and our friends would look at us funny. But take a group of people who have relatively little to lose from an arrest, since they're never going to get jobs anyway, and who are, not without reason, permanently angry at the people who own those cars, and thus have very little of the social control that comes from feeling you are in a mutual social contract that protects you as well as the car owners, and add a minor provocation . . . voila! With a peer group giving us permission to bust stuff up, I bet a substantial number of us would go on a rampage too. The riot is only the mirror image of the lynch mob.

Groups offer another benefit: it makes it less likely you'll be arrested. It's like being in a herd of zebra; if there's only one zebra on the veldt, the stripes make it easy picking. But when there's three hundred of them, it's hard to single one out to take it down. Similarly, one guy attacking cars with a sledgehammer is easy pickings. Three hundred of them reduce hte probability that any one rioter will get caught.

Indeed, it is horrifying to consider how little most people wouldn't do, as long as the group around them ratified it, as this George Will piece attests. That's why I get a creepy feeling when I'm in a group of people all agreeing with each other, even if they're also agreeing with me.

But that doesn't really answer the question that everyone is asking: is the peer group ratifying it because they're Muslim/North African, or because they're a member of a segregated underclass? I vote number two. Poor, uneducated, ghettoized people everywhere display a tendency to riot, because they have little to lose, and because they feel little part of the reciprocating bonds that hold us together in a web of mutual exchange, rather than violence. There's no special magic to culture that I can see, which is why Irish Americans rioted in 1863 and not 1963.

Update The Moderate Voice

Actually, it was quite enjoyable to be internet-free. It has prevented me from having to have an opinion on Democratic senatorial antics, Scalito, or the burning question of whether Scooter Libby should get sent up the river for committing perjury about a crime that they apparently can't prove he committed, or isn't a crime, or something like that. If a politician lies in the forest, and nobody hears it, is he still a waste of a good law degree?

(Okay, if you have to know: duh! Perjury is a real, live crime, and if the legislators had wanted to write the law to read ". . . except for if the thing they're lying about is later determined not to have actually been a crime, or something", they were perfectly capable of doing so. If we let witnesses to decide what they have to tell the truth about, this whole justice system thingy is going to get pretty messed up. Do I really have to explain this to the Party of Law and Order?

And yes, Democrats, that means exactly what you think it means, and furthermore, y'all did so think that sexual harassment was a real live crime right up to the minute Bill Clinton was accused of it. And while I may agree that people shouldn't have to testify about their private lives thusly, it is my impression that Bill Clinton is the guy who signed the bill into law that said you have to testify about stuff like that in sexual harassment cases, which means that in my opinion he is the one guy in the world who downright deserved to have prosecutors cross-examining him on what he liked to do in the Presidential Coat Closet during his spare moments. 'Kay?)

I walked in the woods with my dog, chatted with my grandmother, and baked my little heart out. Here's one of my particular favourite family recipes, on which I munched throughout the car ride home:

Crisp Oatmeal Cookies

1/2 cup butter
1/2 cup white sugar
1/2 cup brown sugar
1 egg
3/4 cup flour
1/2 tsp salt
1/2 tsp baking soda
1/2 cup chopped nuts
1 cup coconut
1 1/2 cups oatmeal (old fashioned; not quick or instant)

Preheat oven to 375 degrees fahrenheit. Cream the butter and sugars together. Beat in egg. Sift together flour, salt, and baking soda, and add to mixture. Stir in nuts and coconut. Stir in oats. Drop by rounded spoonfuls onto a greased cookie sheet and bake 12-14 minutes, until golden brown.

These are the rare cookies that improve with age; they just get crispier and more delicious every day. Hope y'all enjoy.

From the desk of Mindles H. Dreck:

They just don't make 'em like they used to.

Don't you love a NJ gubernatorial campaign? Forrester and Corzine have been running negative ads for weeks, and the recent lot from Forrester have gone pretty personal, raising a morality charge dressed up as a conflict of interest (well-OK it is a conflict of interest, but that's not why it's airing).

It reminds me of the good old days when the Florio campaign ran an ad saying Jim Courter had 'toxic waste in his backyard'.

It helps to be the kind of person who ignores all sense of decency when running for office.

From the desk of Mindles H. Dreck:

Morning Masochism

Just went back and re-read what I wrote prior to the Iraq invasion. It strikes me that critics and supporters of the administration and/or my support thereof would extract different quotes.

Critics:

The government has additional information available. We must assume that our intelligence community has a view on all these issues, and their view is informed by substantially more data than our own. It seems to be human nature for us to discount this and try to make up our own minds about each of the unknowable questions above, rather than say we do or do not trust government to use its superior information as we would want. Some are inclined to believe the administration has additional information to support a case for war, others seem predisposed to think they don't or implicitly do not trust them to know what to do with it if they did. In fact, I think concerns about any administration's evaluation of the facts are one of the best arguments for a Congressional Declaration of War.

Supporters:

I think the behavior of all of the actors in the Middle East is unpredictable if the U.S. pursues a unilateral invasion. Up until now Middle Eastern powers have been used to the the U.S. being restrained by international convention. A willingness by the U.S. to use its raw power will completely and irrevocably change the marginal utility of hostility to the U.S. for all non-allied countries. Dictators are generally practical, so I expect the U.S. would have a lot of insincere new friends brutally repressing anti-American sentiment in their countries. Not necessarily a good development, that, but not a hindrance to the regime change in Iraq. Unfortunately, until there is democracy in these countries, the effect would likely be to increase small terrorist attacks and possibly suicide bombings, but reduce the risk of a WMD attack. Any identifiable terrorist-supporting infrastructure would extract too much of a price.

However attitudes develop, there is likely to be a rapid sea-change in attitudes in response to an unprecedented move by the United States. Those who worry about instability in the region are certainly on target. But, as Steven says, that may be a "feature, not a bug", of the war effort...

...I wish reality were prettier, but those of us who do not rule out war under any circumstances will support or criticize this effort on what amounts to an incomplete fact set and a hunch. We operate under limited information, unable to achieve perfect justice or even perfect rational self-interest. Life is still nasty and brutish, and thugocrats and terrorists bear a disproportionate share of the blame. That may be the best ex ante justification you can find for deposing one.