Links

• Bob Murphy on Ezra Klein’s highly informed prescription for what mortgage rates should be all across this great country of ours; almost too easy (video)
• Julian Sanchez on philosophy of arguing, or something gets to an example re: the question Is Social Security a Ponzi scheme?
  

  A more productive frame might have been: In what respects can Social Security be meaningfully analogized to the classic Ponzi scheme, in what respects does that analogy break down, and on which dimensions would these similarities render the two susceptible to the same concerns or objections?

  Although the philosophy stuff went mostly over my head, I think my discussion of the issue actually conforms to these rules pretty well.

• The New York Fed’s False Assertion of AIG Bailout Profits looked promising but in the end I don’t think it gets at the real issue as much as my discussion. In fact this part is downright problematic:
  

  The $6.6 billion profit calculation was based on the discounted price that Maiden Lane III paid for the securities in late 2008. [...] The Maiden Lane III transaction and any profits it generated cannot be looked at in isolation; it was part of the larger AIG rescue, which is still ongoing with more than $30 billion in TARP funds still unpaid.

  Okay, but bailout-cheerleaders could just say that the Treasury is also up, at current market prices, in its equity position vs. its original break-even cost, and that even if the TARP loan is discounted appropriately, the government is probably still ahead, net-net. Like I said in the previous post, the real problem is not whether the government is ‘up’ – the U.S. federal government is not supposed to be a profit center, an investor, or a prop desk, I thought we had all agreed! – but whether the round-trip was worth it, all things considered. Viewing the AIG transaction in isolation, this means among other things that you have to look at risk-adjusted returns, not just the absolute nominal sign of returns. But there are also larger issues such as opportunity cost (what else – what better – could the government have done with this money?), moral-hazard (what precedent/example was set by the AIG bailout?), rule of law (was it even legal? were prior-established procedures followed?), democratic accountability and decisionmaking (what arguments were used to justify it, were those arguments valid, and is there reason to be concerned about cronyism and/or this decision being shoved down the throats of ignorant/cowed/frightened government employees and congressmen?), etc. Opponents of the AIG bailout who let the discussion become solely about whether the transaction ‘made money’ are setting themselves up for a loss.

• Ezra Klein says the Obama administration has cut taxes. This brings up a pet peeve of mine which is that financial commentators should probably be required to learn a modicum of accounting and/or how to ‘book’ things appropriately, including at least some attempt to account for future cashflows/liabilities. By my reading of Klein’s article his conclusion that Obama ‘cut taxes’ rests entirely on changes to the tax code and tax receipts up to and including [now]. But what about taxes in that part of space-time we call [the future]? He ignores and treats it as unimportant (“but those changes don’t really take effect for a few years yet” – oh well nevermind those, then!). It’s more useful to think of taxes as a trajectory – a sequence of numbers that the government collects/intends to collect over time – not just a single data-point. And discussions over taxes being raised/lowered should either speak of the whole trajectory/term-structure (which will inevitably require some embedded assumptions over the future state of the world in which those taxes are collected, and thus will be inherently subjective and not subject to – or part of – ‘fact-checking’), or be specific about which year is being addressed. Otherwise you can reach absurd conclusions. For example suppose I pass a law saying “no taxes this coming year, but TRIPLE taxes every year after that!” Will Ezra Klein look at my law and say (1) well the tax increases ‘haven’t kicked in yet’, (2) meanwhile I cut taxes to 0 this year, and indeed (3) 0 taxes were collected, therefore (4) my law cut taxes? I don’t know but from his article I’d have to say yes. The source article he links is better in this regard, because it does address future tax-trajectory changes from e.g. Obamacare, but that article is also more subtle and detailed, reaching no easy yes/no conclusion re: whether Obama ‘cut taxes’ that I can see.
• Why UC Berkeley isn’t as liberal [leftist] as its image suggests: “The impression I think arises from Cal’s close association with the City of Berkeley which actually is full of politically far left citizens.” True. One problem is, some of those citizens are often hanging/hangers-on around the campus, so the distinction gets blurred. The other justification for the stereotype comes from looking at leftist dominance among faculty, but I doubt that’s really much different than at most of the other top colleges.
• William Black responds to an anti-financial-regulation op-ed by NY-(R) Senate nominee Wendy Long, and I find myself largely agreeing with…William Black.
• Borepatch makes his prediction for the election outcome, in cold hard electoral numbers. His prediction is nearly the opposite of mine. For what it’s worth I do hope it is I and not him who is proven to be the stupid one.
• The story of the preschool deaf kid not to sign his name because it looks like he’s making a gun with his hand is nearly as fascinating as it is (obviously) infuriating. The first thought running through my head when I saw this story, of course, was: What sort of special moron at this preschool gave this command? How stupid does that person have to be? And how on earth can a person actually be that stupid, and yet have ended up holding a job working at a preschool? But of course truly stupid people don’t go into running preschools. A different kind of flawed person does. Whatever flaw that is, seems to intersect quite well with a penchant for Mindlessly Applying Overly-Programmatic Rules In The Dumbest Possible Ways. Is it about the power-trip? Are preschool administrators bitter former-overachievers who stew that they didn’t rise to their self-perceived talent level, so they resent their lot in life, and now feel the need to take out those resentments – Walter White-style, James Holmes-style – on society, and society’s children? I wish I knew. The thought that the institutions we set up whose employees will be working with children are selecting at least in part for absolutely horrible, terrible people who have emotional problems making them idiots who should not be allowed anywhere near children is, of course, slightly terrifying. I really don’t have a better hypothesis than that though. Do you?

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