Irish Austerity: "Crimes and Mistakes"

(Modern) History Quiz

"You have to wonder what it will take for serious people to realize that punishing the populace for the bankers' sins is worse than a crime; it's a mistake."

Who said the above, about what?

A. President Obama, about TARP, zero percent interest rates, and other Wall Street bailouts.
B. FDR about investment bankers, circa 1933.
C. Paul Krugman, about the so-called IMF bailout of Ireland.
D. William Jennings Bryan, about the Gilded Age bankers.

Answer: C. (See, 'Eating the Irish" in today's NYT).

"A." is just wishful thinking; "B." and "D." never happened -- but could have.

Friedman Endorses "Ranked Choice" Voting

Taking Away the "Spoiler Factor"

"Ranked Choice" voting, which I strongly support ("Ranked Choice Voice: Cure for What Ails Us?"), picked up a big endorsement today: from NYT columnist Thomas Friedman.

Here's Friedman's case for what he calls "alternative voting" (also referred to as "instant run-off voting"):

One reason independent, third-party, centrist candidates can’t get elected is because if, in a three-person race, a Democrat votes for an independent, and the independent loses, the Democrat fears his vote will have actually helped the Republican win, or vice versa. Alternative voting allows you to rank the independent candidate your No. 1 choice, and the Democrat or Republican No. 2. Therefore, if the independent does not win, your vote is immediately transferred to your second choice.

--Thomas Friedman, "A Tea Party Without Nuts"; The New York Times (3/24/10)

In other words, ranked choice voting takes away the "spoiler factor" that has always dogged third-party candidates.

As such, it has tremendous potential to open up our sclerotic, dysfunctional two-party political system.

Why is that important?

Friedman again, quoting Stanford University's Larry Diamond: 'If you don’t get governance right, it is very hard to get anything else right that government needs to deal with.'

Lots of things have changed in the several (?) centuries since the paper ballot was introduced.

Maybe it's time that we use modern technology to start to fix our broken political system.

Intel Science Winners & Real Estate

Good Schools = Buyer Demand (What's New?)

Local San Jose Realtors are running ads in newspapers in China and India telling potential immigrants to “buy a home” in [San Jose's] Lynbrook school district because it produced “two Intel science winners."

--Thomas Friedman, "America's Real Dream Team"; The New York Times (3/21/2010)

Nice piece by Tom Friedman in today's Times, with a real estate angle to boot: immigrant home buyers so value education that San Jose Realtors are promoting a local school district as home to not one but two Intel Science Talent Search finalists.

So, can any Minnesota school districts make that boast?

Not any time recently.

None of the 40 Intel finalists were from Minnesota this year. In 2009, one finalist was from Edina; another finalist last year was from Chaska, and attended Breck, a private school.

Is Shiller Right About Trills, GDP?

The Search for New Currencies

Although G.D.P. numbers still aren’t perfect — they are subject to periodic revisions, for example — the basic problem has been largely solved.

--Robert Shiller, "A Way to Share in a Nation's Growth"; The New York Times (12/26/2009)

In a piece in today's New York Times, Robert Shiller -- that Robert Shiller, of "the Case-Shiller index," "Irrational Exuberance," etc. -- calls for a new security, "the trill," that's pegged to U.S. Gross Domestic Product ("GDP").

He argues that a such a derivative instrument would satisfy demand for stable, new currencies -- and be a good deal for investors, to boot.

(Mis)measuring GDP

What jumps out at me is Shiller's comment about GDP measurement being a problem that has "largely been solved."

Oh, really?

The same way that Ptolemy "solved" the problem of the earth seeming to rotate around the sun, perhaps? (He came up with increasingly tortured models that placed the earth at the center of the solar system).

Just consider how GDP now accounts for a horrific environmental tragedy like the Exxon Valdez spill in Alaska's Prince William Sound.

The untold billions in environmental damage aren't counted, because "natural capital" is assigned no value in today's economic world.

Meanwhile, the $1 billion that Exxon spent on remediation efforts shows up as a spike in the "value" of services that go into calculating GDP.

Bottom line?

Society's putative wealth actually increased as a result of the spill.

Right.

"Tattoo GDP"

Or consider how GDP currently accounts for tattoo's -- both creating and removing them.

At one end of a shopping center I know, a tattoo parlor puts them on for $100 apiece.

At the other end, a tattoo "removal specialist" gets rid of them for $100.

"Tattoo GDP" thus comes to $200.

But how is society $200 richer as a result?

Accountants have a saying that people "count what matters, and what matters is counted."

Indeed, Mr. Shiller.

New York Times' "Great Homes and Destinations"

"What You Get For . . . [A Whole Lot Less]"

If you want a window on the national housing market the last 3 years or so, all you have to do is look at The New York Times' weekly real estate feature, "Great Homes and Destinations."

The feature's signature headline, "What You Get For . . . " is followed by a price; next comes profiles of three homes nationally selling for that price, complete with flattering interior and exterior shots.

Since the market peak in 2006, the "showcase" price has come down dramatically: the Houston home pictured above is currently on the market for $399,000(!). Likewise, the amount of house that the "price of the week" can buy has gone up dramatically.

Even allowing that Houston housing prices are famously modest (true), this house is loaded: four BR's up, hardwood floors, high-end finishes, pool, landscaping, etc.

Hard to imagine what $1M would buy in Houston today!

Krugman: 'Only One Parachute'

Fixing the Financial System

If . . taxpayer funds end up providing windfalls to financial operators instead of fixing what needs to be fixed, we might not have the money to go back and do it right. And the lesson of Ireland is that you really, really don’t want to put yourself in a position where you have to punish your economy in order to save your banks.

--Paul Krugman, "Erin Go Broke," The New York Times; 4/20/09

Too often, op-ed pieces discussing the financial system are impenetrable. Written by economists for economists, they leave the general public in a fog.

Krugman is one of the few economists whose pieces are (in my opinion) both consistently on target, and readily accessible -- none more than today's. (I'm not automatically a fan of every economist who has a Nobel prize on his mantle, but in Krugman's case, it's well deserved.)

If you don't understand what's been happening, Krugman boils it down to as succinct a two-sentence summary as I've seen (the rest of the piece discusses Ireland's terrible predicament, whose ultimate financial sin was "being just like us, only more so").