Government – Page 111 – artdiamondblog.com

Obama Advised by Market-Oriented Chicago Economist Goolsbee

(p. C1) The Democrats, besides talking about a broader range of subjects, also have the freshest face among the top campaign advisers — Barack Obama’s lead economist, Austan Goolsbee, a 37-year-old star professor at the University of Chicago (who writes a monthly column for The New York Times). The two men met when Mr. Obama was teaching at the law school there, and they both seem to favor achieving Democratic goals through market-oriented policies. As Mr. Goolsbee has written: “Moral (p. C9) exhortation doesn’t change people’s behavior. Prices do.” Given their respective professions, the two are also more irreverent than you may expect: Mr. Goolsbee was once a member of an improvisational comedy group.

. . .

Both the Clinton and Obama campaigns are now playing catch-up on policy ideas. John Edwards, who’s running third in fund-raising and the early polls, has tried to grab attention by releasing a series of specific proposals. Rather than bringing economists into his campaign, he is relying on a network of former aides from Capitol Hill to help him sort through ideas. (One Edwards proposal — on tax simplification — was originally Mr. Goolsbee’s, in fact.)

For the full commentary, see:

DAVID LEONHARDT. "ECONOMIX; The Advisers Are Writing Our Future." The New York Times (Weds., April 18, 2007): C1 & C9.

(Note: ellipsis added.)

I have never met Goolsbee, or heard him speak, but I have read a couple of his articles on the economics of the internet, and other subjects, and regularly read his economics articles in the New York Times. He often writes interesting, creative stuff that is fun to read.

I had assumed that Obama was a standard big-government Democrat, although I liked what I read about what he was reported to be saying in Africa. Maybe his economic policies would be more promising than I assumed.

On the other hand, I am convinced that the fight against terrorism is the crucial issue of our time, and I haven’t heard much from Senator Obama on that, besides hopping on the bandwagon of Bush-bashers. What would he constructively do to protect us from the bad guys?

“Roosevelt Warned us of Fearing Fear Itself; Now We Fear Life Itself”

Source of book image: http://ec1.images-amazon.com/images/P/159523005X.01._SCLZZZZZZZ_V46468787_SS500_.jpg

I saw Todd Buchholz on C-Span and on CNBC, and I enjoyed hearing his views, so I decided to buy his Bringing the Jobs Home. I don’t like the title, because it sort of implies that the job market is a zero-sum-game, in which one country’s gain implies another country’s loss. Us true-blue free marketers believe that the market is a non-zero-sum game in which everyone everywhere can have jobs, and have better ones over time.

But Buchholz’s little book is fun to read, and says much that is plausible about how the government hurts the worker and reduces the efficiency of the labor market.

Read the following excerpt for part of his rousing conclusion to the book.

(And, Aaron, I agree with you that Buchholz is wrong to say the American spirit is "innate.")

(p. 177) . . . : Since the 1960s, each year we’ve lost a little nerve, gained another bureaucrat, another lawyer, another layer of protection against life’s uncertainties. We have gotten used to a government that aims to coddle us but ends up both preventing us from growing and dampening the innate American spirit. The spirit still stirs but gets buried under the weight of the nanny state.

. . .

(p. 178) American government officials today cannot put our standard of living in a lockbox to preserve, protect and defend us. Franklin D. Roosevelt warned us of fearing fear itself; now we fear life itself.

. . .

(p. 179) To paraphrase Churchill, Americans did not sail the perilous Atlantic, scale the Appalachians and struggle past the Rockies because we were made of cotton candy.

Source:

Buchholz, Todd G. Bringing the Jobs Home: How the Left Created the Outsourcing Crisis–and How We Can Fix It. New York: Sentinel, 2004.

“Unlikely Collection of French Socialists” Liberated Global Capital Flows?

Source of book graphic: http://www.hup.harvard.edu/catalog/ADBCAP.html

Rawi Abdelal, a Harvard Business School professor, has advanced a novel theory in "Capital Rules: The Construction of Global Finance." Drawing on extensive documentary evidence, as well as dozens of interviews with high-level finance officials and midlevel bureaucrats, he tells a fascinating (and largely unknown) tale: how a clutch of French socialists helped to upend economic orthodoxy and lead the charge for lifting restrictions on capital flows within Europe and throughout the world.

. . .

Mr. Abdelal’s story heats up with the election of Francois Mitterrand in 1981. The new president, together with his majority Socialist Party, set out to storm the Bastille of the economy. He announced plans to nationalize the banks and restrict cross-border capital flows to such a degree that French citizens could take the equivalent of only $427 with them for leisure travel outside France (and were prohibited from using credit cards during such travel). Rather than create a socialist Shangri-La, the moves led to economic chaos. The French had to devalue the franc three times in two short years. Mitterrand then made what the French would elegantly refer to as a tournant but we may bluntly call a U-turn.

This painful episode provided a powerful lesson to a number of senior French officials. Said one: "We recognized, at last, that in an age of interdependence capital would find a way to free itself, and we were obliged to liberate the rest." And so in a Nixon-goes-to-China move, an unlikely collection of French socialists set out to liberalize the country’s controls on cross-border capital flows with a determination that gave new meaning to laissez-faire.

. . .

Mr. Abdelal is unequivocal about the value of Europe’s action: "Global financial markets are global primarily because the process of European financial integration became open and uniformly liberal." He also highlights how free capital flows got a boost from the two primary credit-rating agencies, Standard & Poor’s and Moody’s. In the 1990s, both began to give higher ratings to government-backed debt when the country in question had an open capital account.

For the full review, see:

MATTHEW REES. "Business Bookshelf: Why Money Can Now Make Its Way Around the World." The Wall Street Journal (Weds., February 14, 2007): D12.

(Note: ellipses added.)

Boof reference:

Rawi Abdelal. CAPITAL RULES. Harvard University Press, 304 pages, $49.95.

Even France Recognizes English as the Language of Business

The story below provides further evidence that those who are working hard to make English the mandatory language of the United States, should find themselves a real problem to worry about.

PARIS, April 7 — When economics students returned this winter to the elite École Normale Supérieure here, copies of a simple one-page petition were posted in the corridors demanding an unlikely privilege: French as a teaching language.

“We understand that economics is a discipline, like most scientific fields, where the research is published in English,” the petition read, in apologetic tones. But it declared that it was unacceptable for a native French professor to teach standard courses to French-speaking students in the adopted tongue of English.

In the shifting universe of global academia, English is becoming as commonplace as creeping ivy and mortarboards. In the last five years, the world’s top business schools and universities have been pushing to make English the teaching tongue in a calculated strategy to raise revenues by attracting more international students and as a way to respond to globalization.

Business universities are driving the trend, partly because changes in international accreditation standards in the late 1990s required them to include English-language components. But English is also spreading to the undergraduate level, with some South Korean universities offering up to 30 percent of their courses in the language. The former president of Korea University in Seoul sought to raise that share to 60 percent, but ultimately was not re-elected to his post in December.

In Madrid, business students can take their admissions test in English for the elite Instituto de Empresa and enroll in core courses for a master’s degree in business administration in the same language. The Lille School of Management in France stopped considering English a foreign language in 1999, and now half the postgraduate programs are taught in English to accommodate a rising number of international students.

Over the last three years, the number of master’s programs offered in English at universities with another host language has more than doubled, to 3,300 programs at 1,700 universities, according to David A. Wilson, chief executive of the Graduate Management Admission Council, an international organization of leading business schools that is based in McLean, Va.

“We are shifting to English. Why?” said Laurent Bibard, the dean of M.B.A. programs at Essec, a top French business school in a suburb of Paris that is a fertile breeding ground for chief executives.

“It’s the language for international teaching,” he said. “English allows students to be able to come from anyplace in the world and for our students — the French ones — to go everywhere.”

For the full story, see:

DOREEN CARVAJAL. "English as Language of Global Education." The New York Times (Weds., April 11, 2007): A21.

Chichen Itza May Have Lasted Longer than Other Mayan City-States Because of Its Free Trade

The guide told us that this area of pillars at Chichen Itza, in the Yucatan of Mexico, is thought to have been a market area. (Photo taken by me on April 8, 2007, at the excursion to Chichen Itza arranged for the Association of Private Enterprise Education.)

Usually we think of the Catholic Church’s great damage to knowledge being its persecution of Galileo and attempted suppression of heliocentricism. But the suppression quickly failed and nothing permanent was lost.

A greater harm to knowledge may have been done when, in the name of the inquisition, countless Mayan manuscripts were burned by the Spanish conquistadors.

Evidence was destroyed that likely would have helped us understand how the Mayan society worked.

For example, we were told on our visit to Chichen Itza that one hypothesis has it that Chichen Itza lasted 300 years longer than all other Mayan city-states because it was the only city-state dominated by cosmopolitan merchant and entrepreneur culture–an hypothesis that I find highly congenial.

Unfortunately, much of the evidence that might have confirmed, elaborated, or refuted this hypothesis, was destroyed forever.

Mexican Federal Taxi “Charters” Increase Taxi Prices

A non-federally-chartered taxi leaves the Cancun Hilton, headed for the Cancun airport, charging $23. An identical, but federally-chartered cab, making the reverse trip, charges $40. (Photo by Art Diamond.)

When we arrived at the Cancun airport we faced a chaotic environment where many Mexicans were yelling at us to buy taxi tickets. After buying a ticket for $40, someone escorted us to a crowded, chaotic place to wait for a cab. We waited and waited in the noise and the heat. At some point, my daughter Jenny commented, "These people need to get organized."

Yes, Jenny they sure do! And you might think that what they need in order to get organized, is for the government to come in to organize them.

But it turns out that the government has already come in. Only federally charged taxis are allowed to take passengers from the airport to the hotel zone. The price is fixed at $40. On the other hand, any taxi may take passengers back to the airport, from the hotel zone. The base price for a return trip was $23 . (I added a $2 tip out of sympathy for the cabbie not driving a federally anointed cab.)

So, yes, these people need to get organized, and the best way to do that is to get their government out of their way, so that they can organize themselves through the free market.

Note: relevant guide book passage: "[Returning to the airport] the rate will be much less for the trip from the airport. (Only federally chartered taxis may take fared from the airport, but any taxi may bring passengers to the airport.)" (p. 78)

Note: italics in original; bracketed phrase added.

Source:

Baird, David, and Lynne Bairstow. Frommer’s Cancun, Cozumel & the Yucatan 2007. Hoboken, NJ: Wiley Publishing, Inc., 2006.

Most Subprime Mortgages are Paid, and Allow the Poor to Own Homes

A study conducted by Kristopher Gerardi and Paul S. Willen from the Federal Reserve Bank of Boston and Harvey S. Rosen of Princeton, Do Households Benefit from Financial Deregulation and Innovation? The Case of the Mortgage Market (National Bureau of Economic Research Working Paper 12967), shows that the three decades from 1970 to 2000 witnessed an incredible flowering of new types of home loans. These innovations mainly served to give people power to make their own decisions about housing, and they ended up being quite sensible with their newfound access to capital.

These economists followed thousands of people over their lives and examined the evidence for whether mortgage markets have become more efficient over time. Lost in the current discussion about borrowers’ income levels in the subprime market is the fact that someone with a low income now but who stands to earn much more in the future would, in a perfect market, be able to borrow from a bank to buy a house. That is how economists view the efficiency of a capital market: people’s decisions unrestricted by the amount of money they have right now.

And this study shows that measured this way, the mortgage market has become more perfect, not more irresponsible. People tend to make good decisions about their own economic prospects. As Professor Rosen said in an interview, ”Our findings suggest that people make sensible housing decisions in that the size of house they buy today relates to their future income, not just their current income and that the innovations in mortgages over 30 years gave many people the opportunity to own a home that they would not have otherwise had, just because they didn’t have enough assets in the bank at the moment they needed the house.”

Of course, basing loans on future earnings expectations is riskier than lending money to prime borrowers at 30-year fixed interest rates. That is why interest rates are higher for subprime borrowers and for big mortgages that require little money down. Sometimes the risks flop. Sometimes people even have to sell their properties because they cannot make the numbers work.

. . .

And do not forget that the vast majority of even subprime borrowers have been making their payments. Indeed, fewer than 15 percent of borrowers in this most risky group have even been delinquent on a payment, much less defaulted.

When contemplating ways to prevent excessive mortgages for the 13 percent of subprime borrowers whose loans go sour, regulators must be careful that they do not wreck the ability of the other 87 percent to obtain mortgages.

For the full commentary, see:

AUSTAN GOOLSBEE. "ECONOMIC SCENE; ‘Irresponsible’ Mortgages Have Opened Doors to Many of the Excluded." The New York Times (Thurs., March 29, 2007): C3.

(Note: ellipses added.)

The Peril of Being a Bald Economist

Source of graphic: online version of the WSJ article cited below.

‘The term ‘income inequality’ is a bit misleading because it suggests in a somewhat pejorative way that the rich are getting richer at the expense of the poor," Edward Lazear, a Stanford University labor economist who is now chairman of Mr. Bush’s Council of Economic Advisers, said last May. While it’s a concern that some people are being left behind, he said, "There is some good news…most of the inequality reflects an increase in returns to ‘investing in skills.’"

Mr. Lazear has nurtured his relationship with Mr. Bush. His office is decorated with photos of the two mountain biking. When he gave Mr. Bush a copy of the Economic Report of the President this year, Mr. Bush gave him a bear hug and kissed the top of his bald head, according to people who were present.

For the full story, see:

GREG IP and JOHN D. MCKINNON. "THE OUTLOOK; Bush Reorients Rhetoric, Acknowledges Income Gap." The Wall Street Journal (Mon., March 26, 2007): A2.

Source of graphic: online version of the WSJ article cited above.

Chinese Restaurant Entrepreneur: “A Citizen’s Legal Property Is Not to Be Encroached Upon”

CHONGQING, China, March 23 — For weeks the confrontation drew attention from people all across China, as a simple homeowner stared down the forces of large-scale redevelopment that are sweeping this country, blocking the preparation of a gigantic construction site by an act of sheer will.

Chinese bloggers were the first to spread the news, of a house perched atop a tall, thimble-shaped piece of land like Mont-Saint-Michel in northern France, in the middle of a vast excavation.

Newspapers dived in next, followed by national television. Then, in a way that is common in China whenever an event begins to take on hints of political overtones, the story virtually disappeared from the news media after the government, bloggers here said, decreed that the subject was suddenly out of bounds.

. . .

What drove interest in the Chongqing case was the uncanny ability of the homeowner to hold out for so long. Stories are legion in Chinese cities of the arrest or even beating of people who protest too vigorously against their eviction and relocation. In one often-heard twist, holdouts are summoned to the local police station and return home only to find their house already demolished. How did this owner, a woman no less, manage? Millions wondered.

Part of the answer, which on meeting her takes only a moment to discover, is that Wu Ping is anything but an ordinary woman. With her dramatic lock of hair precisely combed and pinned in the back, a form-flattering bright red coat, high cheekbones and wide, excited eyes, the tall, 49-year-old restaurant entrepreneur knows how to attract attention — a potent weapon in China’s new media age, in which people try to use public opinion and appeals to the national image to influence the authorities.

. . .

“I have more faith than others,” she began. “I believe that this is my legal property, and if I cannot protect my own rights, it makes a mockery of the property law just passed. In a democratic and lawful society a person has the legal right to manage one’s own property.”

Tian Yihang, a local college student, spoke glowingly of her in an interview at the monorail station. “This is a peculiar situation,” he said, with a bit of understatement. “I admire the owner for being so persistent in her principles. In China such things shock the common mind.”

. . .

With the street so choked with onlookers that traffic began to back up, Ms. Wu’s brother, Wu Jian, began waving a newspaper above the crowd, pointing to pictures of Ms. Wu’s husband, a local martial arts champion, who was scheduled to appear in a highly publicized tournament that evening. “He’s going into our building and will plant a flag there,” Mr. Wu announced.

Moments later, as the crowd began to thin, a Chinese flag appeared on the roof with a hand-painted banner that read: “A citizen’s legal property is not to be encroached on.”

Asked how his brother-in-law had managed to get inside the locked site and climb the escarpment on which the house is perched, he said with a wink, “Magic.”

For the full story, see:

HOWARD W. FRENCH. "CHONGQING JOURNAL; Homeowner Stares Down Wreckers, at Least for a While." The New York Times (Tues., March 27, 2007): A4.

(Note: ellipses added.)

On left, Wu Ping, with her tall brother in the background. On right, a map showing the location of Chongqing in China. Source of photo and map: online version of the NYT article cited above.

Passport Fiasco Would Bankrupt a Private Company, But Government Lumbers On

Here is an email that I sent to Congressman Lee Terry’s office on Sat., March 24, 2007:

I applied for a passport renewal on January 20, 2007. The web form said that it would take about six weeks. Later, on the web site they increased that to eight weeks. Then 10 weeks. The trip was scheduled for April 3rd, and as the weeks passed, my stress increased enormously. I would have been willing (not happy, but willing) to pay the extra $60 for "expedited" service, if I had known they were going to lengthen the time for routine handling by a month. But they only passed out that information after it was too late to do anything about it. Insult was added to injury when the State Department passport office was unwilling to answer their phone after many tries at times ranging from early in the morning until a few minutes before midnight (eastern time). Each time, a recorded voice would say: visit the web site, or try to call later. (But the web site did not have the answers to my questions, and calling "later" never worked.)

There is no excuse for the State Department not anticipating that there would be a huge increase in demand for passports when they put into effect the new mandate that passports be used to re-enter the U.S. from Mexico. If a private business operated with the inefficiency of the passport office, they would justly go bankrupt.

The only ray of sunlight in this dark vista was "Susie" of Lee Terry’s office. When I called the Omaha office they put her on the line, and she asked me relevant questions, and proceeded to get back to me the same day with what I needed to know. She got through to an actual human being at the State Department, and learned that I would receive my passport in a few days. (I received it yesterday.) "Thank you" to Susie, and thank you to Lee Terry, for having an office staffed with competent people, who care.

Sincerely,

Art Diamond