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Posts Tagged ‘Government

More Environmental Tradeoffs

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The Corporate Average Fuel Economy (CAFE) standards will rise from 27.5 mpg to 35 mpg from now until 2020. That should decrease any pollutant associated with burning fossils fuels.  All good, right?  Wrong.

There is a trade off in safety.  You are much more likely to die in a small car. The WSJ Online reports on a recent Insurance Insititute for Highway Safety (IIHS) study that shows  small cars like the Honda Fit and Toyota Yaris fair very poorly in two-car frontal offset crash tests against the Honda Accord and Toyota Camry. This is against mid-sized cars from the same manufacturer, so a reasonable comparison.

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Written by Kevin

April 18, 2009 at 3:08 pm

Explaining the Credit Crisis in 10 Minutes

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Via my buddy Matt Watson, here is a really well done infographic explaining the credit crisis.  Merely entertaining for regular readers who’ve been following the crisis.  But quite informative for any of your friends who haven’t felt the need to wade through all the commentary.

Written by Kevin

March 31, 2009 at 11:27 am

Two Sociology Books You Should Read

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As you’ve probably figured out by now, I prefer to base decisions on statistically significant evidence.  However, in order to gather such evidence, you must have hypotheses in the form of testable models.  If the models you try to test are divorced from reality on the ground, your results will be useless no matter how statistically significant.

Therefore, if you’re interested in issues of poverty and race in the US, here are two ethnographies you should read.  Gang Leader for a Day by Sudhir Venkatesh and Cop in the Hood by Peter Moskos.  As sociology PhD candidates, both went out and actually became actors in poor black neighborhoods.  Venkatesh hung out with a crack gang in a Chicago housing project and Moskos became a police officer in Baltimore’s roughest neighborhood.

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Written by Kevin

March 10, 2009 at 12:58 pm

Posted in Government, Society

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Brilliant or Crazy? I Really Don't Know.

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Apropos of Rafe’s last post on Complexity Economics, I ran across an economic stability proposal that is either brilliant or crazy. I both haven’t thought it over enough and am probably not qualified to determine which.

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Written by Kevin

March 1, 2009 at 4:32 pm

I May Have Been Wrong About Macroeconomics

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When I was an undergraduate studying macroeconomics, I came to the conclusion that it was pretty much total bullshit.  Because I was in a co-terminal masters program, I was also studying graduate level decision theory, game theory, microeconomics, behavioral economics, and dynamic systems. In comparison, it seemed clear to me that macroeconomics was not a coherent study of a complex system.

Lately, Arnold Kling’s blog posts have been reinforcing this belief. However, we may both be wrong.  Arnold studied and practiced macroeconomics in the late 1970s.   Given the delay in propagating knowledge to the undergraduate level, that’s probably also what was taught in my late 1980s undergraduate textbook. However, Will Ambrosini observes that Arnold’s views are outdated and this is a problem with non-macro economists in general. He points to this essay and I find myself convinced that modern macroeconomics is a coherent study of a complex system.

I thought this might provide you some measure of comfort.  If anyone wants me to summarize the particulars of why I changed my mind, let me know.

Written by Kevin

January 29, 2009 at 11:06 am

Posted in Government, Society

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I May Be a Credit Crunch "Denier" Too

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As most of you already know, I am an anthropogenic global warming skeptic, aka “denier”.  Well, a new paper by the Federal Reserve Bank of Minneapolis has turned me into a credit crunch skeptic too.

The maintstream narrative on why we need a bailout is that credit is “frozen”. We can’t just let the financial sector sort itself out because it provides the credit “grease” that lubricates the rest of the economy.  The graphs in this paper make it pretty clear that the wheels of Main Street have plenty of grease. So it looks to me like the bailout is corporate welfare plain and simple.  It also means that Paulson and Bernanke talking about how bad things are to justify the bailout may have actually exacerbated any real recession by magnifying the psychological salience of the crisis.

Written by Kevin

October 23, 2008 at 5:38 pm

Financial Crisis Act III: The Flailing Response

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As we saw in Act I and Act II, the current financial crisis was enabled by government interference in the housing and mortgage markets, then initiated by Wall Street’s willful blindness to systematic risk in the MBS market. Now we are observing the government’s flailing response.

First they bail out Bear Stearns.  Then they let Lehman go bankrupt.  But AIG gets a lifeline. On to a $700B bailout intended to purchase toxic MBSs. And most recently forcing several probably healthy banks to absorb $250B in government investment. Along the way, there were a bunch of changes to FDIC regulations and a see-sawing stock market.

You might be asking yourself, what the heck is going on here? The reason for all the flailing is that the government is attempting to implement a command and control solution to an extremely distributed problem.

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Written by Kevin

October 15, 2008 at 11:19 pm

Financial Crisis Act II: Wall Street Sharks

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When the bailout passed, I first thought this post was moot.  But then I reconsidered.  There’s still plenty of time to affect the implementation and several lessons to be learned.  Also, when I’m pissed off, it’s nice to know that I have a good reason.

In Act I, we saw how government meddling overheated the housing and mortgage markets. Now we’ll see how Wall Street took advantage of this opportunity and also apportion some blame to ourselves.

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Written by Kevin

October 3, 2008 at 10:15 pm

Financial Crisis Act I: Government Meddling

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Let me start by saying that the financial crisis is a very complex situation.  I read several economics blogs every day and quite a few academic papers every month.  My semi-professional opinion is that no economist even comes close to fully understanding the financial system, let alone the complete macroeconomy.  Luckily, I haven’t seen any of them delusional enough to assert that they do in a professional forum. So when you hear a talking head spouting off about the crisis, take what he says with a grain of salt (this includes me, of course). At best, he only sort of knows what he’s talking about.

Because of the complexity, I think we should be very careful to take baby steps.  Going off half-cocked is much more likely to make things worse than better.  I think we need to do three things.  First, we need to understand the underlying causes of the mortgage meltdown that kicked off the cascade (not because I think fixing the cause will solve the problem, but because it will help us avoid making things worse).  Second, we need to examine how the cascade was magnified so we can hopefully install some breaks going forward. Third, we need to agree on the outcomes we most want to prevent as a society (as individuals, I’m sure we all want to keep our houses, jobs, and savings).

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Written by Kevin

October 1, 2008 at 5:23 pm

Who's Curious About the Financial Crisis?

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So as not to waste my expensive schooling, I still keep up with economics as a hobby.  I don’t expect other people to generally share this interest, but it occurred to me that the current financial crisis is an excellent example of what happens when a complex adaptive system experiences a shock.  Is anybody curious to have us discuss this topic?  If so, what is specifically interesting to you?  My short answer is to read everything by Arnold Kling at EconLog.  Of course, I have a lot more thoughts if anyone wants to hear them.

Written by Kevin

September 29, 2008 at 9:15 pm