Peoria Mayor Jim Ardis, It is Now Past Time to Google "the Streisand Effect"

The Peoria, IL mayor used the city police to raid and shut down the owners of a Twitter account that mocked the mayor.  The original twitter feed probably had about 12 followers when it was shut down.  I suggest that it is now past time for him to Google the "Streisand Effect"


Too bad she didn't have a police force.


Wherein I Almost Agree With Thomas Friedman on a Climate Issue

Thomas Friedman outlines what he would do first to attack climate change

Well, the first thing we would do is actually slash income taxes and corporate taxes and replace them with a carbon tax so we actually encourage people to stop doing what we don't want, which is emitting carbon, and start doing what we do want, which is hiring more workers and getting corporations to invest more in America.

Friedman is a bit disingenuous here, as he proposes this in a way that implies that deniers (and probably evil Republicans and libertarians) oppose this common sense approach.  Some may, but I would observe that no one on the alarmist side or the Left side of the aisle is actually proposing a carbon tax that 1:1 reduces other taxes.  The only person I know who has proposed this is Republican Jeff Flake, who proposed a carbon tax that would 1:1 reduce payroll taxes.

As I said back then, I am not a big fan of taxes and think that the alarm for global warming is overblown, but I could easily get behind such a plan.  Payroll taxes are consumption taxes on labor.  I can't think of anything much more detrimental to employment and economic health.  So Flake's proposed shift from a consumption tax on labor to a consumption tax on carbon-based energy sources is something I could get behind.  I probably would do the same for Friedman's idea of shifting taxes from income to carbon.  But again, no one is proposing that for real in Congress.  The only plan that came close to a vote was a cap and trade system where the incremental payments would go into essentially a crony slush fund, not reduce other taxes.

Of course, since this is Friedman, he can't get away without saying the government should invest more in infrastructure

 the federal government would borrow money at almost 0 percent and invest it in infrastructure to make our cities not only more resilient, but more efficient.

In TARP and the stimulus and various other clean energy bills, the government borrowed almost a trillion dollars at 0% interest.  How much good infrastructure got done?  About zero.  Most of it just went to feed government bureaucrats and planning studies or ended up as crony payments to well-protected entities (Solyndra, anyone?).  The issues with government infrastructure investments, which Friedman has never addressed despite zillions of articles on infrastructure, are not the borrowing rate but

  • The incentive and information problems the government has in making investments of any sort.
  • The vast environmental, licensing, and NIMBY factors that make it virtually impossible to do infrastructure projects any more, at least in any reasonable time frame.

College Tours Summarized in One Sentence

The WSJ has an editorial on college tours, wherein they talk about the sameness (and lameness) of most college tours.

Most colleges offer both an information session and a tour.  We always found the tour, given by students, more useful than information sessions given by the admission department.  I came to hate the information sessions in large part because the Q&A seems to be dominated by type A helicopter parents worried that Johnny won't get into Yale because he forgot to turn in an art project in 3rd grade.

My kids and I developed a joke a couple of years ago about information sessions, in which we summarize them in one sentence.  So here it is:

"We are unique in the exact same ways that every other college you visit says they are unique."

Examples:  We are unique because we have a sustainability program, because we have small class sizes, because our dining plans are flexible, because we don't just look at SAT scores in admissions, because our students participate in research, because our Juniors go abroad, etc. etc.

There you go.  You can now skip the information session and go right to the tour.  Actually, there is a (very) short checklist of real differences.  The ones I can remember off hand are:

  • Does the school have required courses / distribution requirements or not
  • Is admissions need blind or not
  • Is financial aid in the form of grants or loans
  • Do they require standardized tests or not, and which ones
  • If they do, do they superscore or not
  • Do they use the common app, and if so do they require a supplement
  • Do they require an interview or not

My advice for tour givers (and I can speak from some experience having gone on about 20 and having actually conducted them at my college) is to include a lot of anecdotes that give the school some character.   I particularly remember the Wesleyan story about Joss Whedon's old dorm looking out over a small cemetery and the role this may have played in the development of Buffy the Vampire Slayer.

The biggest fail on most tours is many don't show a typical dorm room, the #1 thing the vast majority of prospective admits want to see.

Bundy Ranch the Wrong Hill for Libertarians to be Dying On

Here is something I find deeply ironic:  On the exact same day that Conservatives were flocking to the desert to protest Cliven Bundy's eviction from BLM land, San Francisco progressives were gathering in the streets to protest tenant evictions by a Google executive.   To my eye, both protests were exactly the same, but my guess is that neither group would agree with the other's protest.  I think both protests are misguided.

In the case of Cliven Bundy, I agree with John Hinderaker, right up to his big "But...."

First, it must be admitted that legally, Bundy doesn’t have a leg to stand on. The Bureau of Land Management has been charging him grazing fees since the early 1990s, which he has refused to pay. Further, BLM has issued orders limiting the area on which Bundy’s cows can graze and the number that can graze, and Bundy has ignored those directives. As a result, BLM has sued Bundy twice in federal court, and won both cases. In the second, more recent action, Bundy’s defense is that the federal government doesn’t own the land in question and therefore has no authority to regulate grazing. That simply isn’t right; the land, like most of Nevada, is federally owned. Bundy is representing himself, of necessity: no lawyer could make that argument.

It is the rest of the post after this paragraph with which I disagree.  He goes on to explain why he is sympathetic to Bundy, which if I may summarize is basically because a) the Feds own too much land and b) they manage this land in a haphazard and politically corrupt manner and c) the Feds let him use this land 100 years ago but now have changed their mind about how they want to use the land.

Fine.  But Bundy is still wrong.  He is trying to exercise property rights over land that is not his.   The owner gave him free use for years and then changed its policy and raised his rent, and eventually tried to evict him.  Conservatives and libertarians don't accept the argument that long-time tenancy on private land gives one quasi-ownership rights (though states like California and cities like New York seem to be pushing law in this direction), so they should not accept it in this case.   You can't defend property rights by trashing property rights.   Had this been a case of the government using its fiat power to override a past written contractual obligation, I would have been sympathetic perhaps, but it is not.

I would love to see a concerted effort to push for government to divest itself of much of its western land.  Ten years ago I would have said I would love to see an effort to manage it better, but I feel like that is impossible in this corporate state of ours.  So the best solution is just to divest.  But I cannot see where the Bundy Ranch is a particularly good case.  Seriously, I would love to see more oil and gas exploration permitted on Federal land, but you won't see me out patting Exxon on the back if they suddenly start drilling on Federal land without permission or without paying the proper royalties. At least the protesters in San Francisco likely don't believe in property rights at all.  Conservatives, what is your excuse?

I suppose we can argue about whether the time for civil disobedience has come, but even if this is the case, we have to be able to find a better example than the Bundy Ranch to plant our flag.

Power of Geologic Forces

The footprints are cool.   But what really had an effect on me is how vividly this picture portrays the power of geologic forces (combined with time).  This wall of rock was obviously once horizontal.

click to enlarge


More pictures here.

Wherein I Have Another Great Product Idea Too Late

We increasingly use VRBO to find rental houses when we go on vacation.  The key transfer process seems to be the most awkward.  Either the owner or their representative has to meet you (a hassle for them) or they have an old style mechanical lockbox where a fixed combination opens the box and gives you the key.

All of this strikes me as both a hassle and tremendously insecure.  Most folks do not change their lockbox combinations very often, so I could probably go back to most of them today and get back in the house.  Also, since the owners tend to leave only one key, and my wife and I prefer to have two or three for us and the kids, we tend to go immediately to the local hardware store to make copies.

It would make a lot more sense to have an electronic combination lock whose combination changes automatically, over the Internet, with each rental.  I figured developing such a thing would be pretty easy and the first step I would take would be to try to cut a co-branding deal with VRBO, AirBNB, etc.  You can imagine something like "VRBO Secure" where a home owner would buy the lock via VRBO and would then get a little icon on their listing.

Unfortunately, as is usual with my product brainstorms, someone is already there.  But no one yet seems to have cut a co-branding deal with VRBO or airBNB.  Seems like that would be a win-win for both the lock company and the rental agency.go.

Everything Looks Like a Nail When You Have A Hammer

Kevin Drum quotes Hugo Dixon on the Greek recovery:

Greece is undergoing an astonishing financial rebound. Two years ago, the country looked like it was set for a messy default and exit from the euro. Now it is on the verge of returning to the bond market with the issue of 2 billion euros of five-year paper.

There are still political risks, and the real economy is only now starting to turn. But the financial recovery is impressive. The 10-year bond yield, which hit 30 percent after the debt restructuring of two years ago, is now 6.2 percent....The changed mood in the markets is mainly down to external factors: the European Central Bank’s promise to “do whatever it takes” to save the euro two years ago; and the more recent end of investors’ love affair with emerging markets, meaning the liquidity sloshing around the global economy has been hunting for bargains in other places such as Greece.

That said, the centre-right government of Antonis Samaras has surprised observers at home and abroad by its ability to continue with the fiscal and structural reforms started by his predecessors. The most important successes have been reform of the labour market, which has restored Greece’s competiveness, and the achievement last year of a “primary” budgetary surplus before interest payments.

Color me suspicious.  Both the media and investors fall for this kind of thing all the time -- the dead cat bounce masquerading as a structural improvement.  I hope like hell Greece has gotten its act together, but I would not bet my own money on it.

Anyway, that is a bit beside the point.  I found Drum's conclusion from all this odd:

If this keeps up—and that's still a big if—it also might be a lesson in the virtue of kicking the can down the road. Back in 2012, lots of commenters, including me, believed that the eurozone had deep structural problems that couldn't be solved by running fire drills every six months or so and then hoping against hope that things would get better. But maybe they will! This probably still wasn't the best way of forging a recovery of the eurozone, but so far, it seems to have worked at least a little better than the pessimists imagined. Maybe sometimes kicking the can is a good idea after all.

For those that are not frequent readers of his, I need to tell you that one of the themes he has been pounding on of late is that the US should not be worried about either its debt levels or inflation -- attempting to rebut the most obvious critiques of his strong support for more deficit spending and monetary stimulus.

I would have thought the obvious moral of this story was that austerity and dismantling all sorts of progressive labor market claptrap led to a recovery far faster than expected**.  But since Drum opposes all those steps, his  conclusion seems to be simply a return to his frequent theme that debt is A-OK and we shouldn't be worried about addressing it any time soon.

** I don't believe for a moment that Greece has really changed the worst of its structural labor market, regulatory,  and taxation issues.  This story gets written all the time about countries like, say, Argentina.  Sustained incompetence is not really newsworthy, which is likely one reason we get so few African stories.  They would all be like "Nigeria still a mess."  A false recovery story gives the media two story cycles, one for the false recovery and one for the inevitable sinking back into the pit.

Tracking Changes in Those With Health Insurance

RAND has a study out on changes in people's sources for health insurance.  Once you get the hang of reading it, this is a great table:

click to enlarge


This is how to read it -- of the 40.7 million uninsured in September of 2013, 26.2 million remained uninsured, 7.2 million got new employer health insurance (ESI) , 3.6 million joined medicaid, etc.  But then some new uninsured were added back so the new total uninsured is 31.4 million.

One of the first things to notice is the marketplace number of 3.9 million is well below the Administration's claim of 7.1 million.  The Administration's number is not even within the error bar here, so one needs to be skeptical, if he was not already, of Administration sign-up figures.

We also can notice that the individual marketplace seemed to have shrunk from 9.4 million to 7.8 million.  No huge surprise, with all the cancellations that made the news last year.

The really interesting question, of course, is what happened to the uninsured.  We can use this table to look at net changes (millions of people).

2013 Uninsured 40.7
     To Employer -5.1
     To Medicaid -2.6
     To Individual +0.2
     To Exchange -1.4
     To Other -0.3
2014 Uninsured 31.4

To make sure everyone understands the math, 7.2 million left the ranks of the uninsured to get an employer policy, but 2.1 million previously insured by employers became uninsured.  The net is -5.1 million as shown.  All the other numbers are calculated the same way.

I have always had serious questions about the value of the Medicaid signups during this period.   Medicaid is not a limited enrollment product.  You can sign up bleeding on a gurney being rolled into the operating room, and in fact many do -- Hospitals are very good at enrolling people into Medicare as they walk in.  So it was really a misnomer in the first place that someone eligible for Medicaid is "uninsured" -- they are in fact insured, they just have not done the paperwork.  The Medicaid expansion in the PPACA probably helped, but many states that did not expand Medicaid had a lot of signups as well.

The exchange seems to have done little to affect the uninsured.  Net of the reductions in individual insurance presumably driven also by the PPACA, the exchanges reduced the uninsured by 1.2 million.

The really interesting number everyone is  looking at is the huge number of the insured that gained employer coverage.  Three quarters of the non-Medicare related reduction in uninsured (since I don't consider a lot of the Medicare signups a real reduction) were from people going onto employer plans.

Kevin Drum quotes Andrea Mcintyre as saying

If it’s correct, it was probably motivated multiple factors—I hate the word “synergy” on principle, but it comes to mind. The economy has been improving, so some of the previously unemployed have secured jobs with benefits. But CBO built in expectations about economic recovery, so I don’t think it’s quite right to try pinning all (or even most?) of the 8.2 million on that. The individual mandate, while weak in its first year, might be a stronger stick than we expected, nudging people to take their health benefits where they’d previously been opting out. Employers could be helping this move this trend along; the University of Michigan, for example, eliminated “opt out dollars” in 2014 (cash compensation for employees who declined coverage).

Drum add triumphantly

If this finding is confirmed, it's a genuine shocker. Although CBO projected that ESI would stay steady, there's been a lot of chatter about the likelihood of employers dropping coverage thanks to Obamacare. But that sure doesn't seem to have happened. So in addition to the usual sources of coverage—Medicaid, exchanges, sub-26ers—it looks like Obamacare has yet another big success story to tell, one that was almost completely unexpected.

Uh, maybe.  The employer insurance changes could also be an artifact of normal churn and of the odd study period.   The study period is only about half a year.  If there were annual patterns, ie with people losing employer health care early in the year and then gaining it at the end of the year, then only the gains would show up in the study and not the losses.  In fact, there is some reason to believe this is the case, as most corporations have open enrollment periods at the end of the calendar year.

But there is a more interesting issue here.  Folks arguing for Obamacare in the first place sold it by implying that most all the uninsured were uninsured because they could not afford coverage or did not have access.  Now it turns out a large block of the uninsured actually did have access and could afford it, they just chose not to buy it, for whatever reason.  Was this really what it was all about from the very beginning, forcing people to buy a product that they could afford but did not want?

Even an Influential Chart Can Be A Graphics Fail

Presumably most of you have seen this chart frm a study that says that not only do Americans not know where the Ukraine is, but that desire for US intervention there is correlated with such knowledge or lack thereof (the less people understand where it is, the more they support intervention).

click to enlarge

I find the study results both depressing and unsurprising, so I won't comment on them per se.   Though I suppose if you confuse the Ukraine with the Yukon (as a number of respondents seem to), interventionism might make more sense.  My only question is:  where were such studies of domain knowledge vs. policy recommendations in the health care or minimum wage debate?

However much impact this chart has had, though, it is still a graphics fail in my mind.  Why?  Because the author attempts to portray a second variable by the dot color.  But the variable he or she chooses to portray is the distance of the point from the correct location (red being more correct, blue less).  But that is easy to see without the variation in color.  It is redundant information.

A much better chart would have been to color code each dot with that respondent's Ukraine prescription, from blue = intervention to red = non-intervention.  This way the chart would have supported the full findings of the study (link between geographical knowledge and policy prescription) rather than just one aspect (quality of geographic knowledge).

Update:  If so many people got the Ukraine and the Yukon confused, God help us if the next Russian crisis is in Georgia.

Today's Lesson In Unintended Consequences: Safety Mandates That May Reduce Safety

Via the WSJ (emphasis added)

Nomar may be the most extreme example of a problem plaguing 911 response centers nationwide: false emergency calls made from cellphones that no longer have a contract or prepaid minutes with a wireless carrier and so can avoid being tied to a user. Under federal rules these disabled phones, which can't make ordinary calls, must retain the ability to dial emergency numbers.

Abuse of these phones has become enough of a concern that many 911 officials and some in the telecom industry are urging the Federal Communications Commission to shut off or phase out the emergency feature in the interest of public safety.

In the San Francisco Bay Area alone, anonymous dialers have made tens of thousands of false 911 calls since 2007—with Nomar alone believed responsible for over 30,000. (Call-center operators can detect a disabled phone in part because no phone number shows up on their screen.)

During a 24-hour period on Thanksgiving Day 2012, dispatchers at the city's Department of Emergency Management reported 1,527 false 911 calls—more than one a minute. They believed all the calls came from just five phones, based in part on the cellphone towers from which the calls were connected...

At the root of the problem is a 1997 FCC requirement that all carriers include emergency-dialing capability on cellphones whether they have working service or not. Back then, 911 centers supported the feature as a potential lifeline.

"Cell service was still a new thing," said Trey Forgety, director of government affairs at the National Emergency Number Association, a trade group of 911 centers in Washington. "We wanted people in dire straits to have reliable access to 911."

Expensive Legislation Whose Only Benefit is a Politician's Talking Point During Re-election

I absolutely despise legislation like this.  Some legislator wants to pat him or herself on the back during their re-election that they "did something" about human trafficking so they pass this law:

New Mexico Governor Susana Martinez approved a law requiring employers to post a notice containing information about the National Human Trafficking Resource Center Hotline. The new law, H.B. 181, unanimously passed by both legislative chambers, becomes effective July 1, 2014.

Employers subject to the state Minimum Wage Act must post a sign containing the following notice in English and in Spanish and in any other written language where at least 10 percent of the workers or users of a covered facility speak that language:


Oh yeah, that is going to make a big difference.  Have you seen a labor poster wall lately?  Probably not, because no employees ever look at these things unless they are by the microwave and they have nothing better to do while waiting for their popcorn.  But every time some legislator wants to "do something" about an employment related issue, another poster is added.

Here is the really hilarious part -- do they really think that a person who who is so lawless as to engage in forced labor is going to post this poster?  Seriously?    I have this picture in my head of a southern plantation owner in 1864 tacking the Emancipation Proclamation up in the slave quarters.

I will take a picture of all the posters required in California, because I was just working on it, but here is a list of what has to be posted.

The Progressive View of the First Ammendment

I didn't really pay all that much attention to the Supreme Court's election speech case yesterday.   But as I learn the reasoning that is driving the dissent by the four Justices on the Left, I am left deeply worried about the future of speech rights.

I really haven't put much time in understanding how Progressives justify strong speech protections for non-political activity (e.g. pornography) while eschewing them for political speech (in the form of multiple types of limits on the amount and timing of speech one is allowed prior to an election).  Justice Breyer, in writing for the minority in in McCutcheon, lays out what I suppose is the Progressive position.

First up, here is David Bernstein

But how can liberals, who so expansively interpret other constitutional provisions, narrow the First Amendment so that campaign finance no longer gets protection?

Justice Breyer’s dissent today shows the way, as he revives the old Progressive conception of freedom of speech as serving instrumental purposes (which he calls “First Amendment interests”), rather than protecting individual rights or reining in potential government abuses.  And once we identify those “First Amendment interests,” we must limit freedom of speech to ensure that they are advanced.

Thus, Justice Breyer, writes, “Consider at least one reason why the First Amendment protects political speech. Speech does not exist in a vacuum. Rather, political communication seeks to secure government action. A politically oriented ‘marketplace of ideas’ seeks to form a public opinion that can and will influence elected representatives.”  Just to make sure he’s not being too subtle, Breyer goes back to the source, Justice Brandeis, citing his opinion in Whitney for the proposition that freedom of speech is protected because it’s ”essential to effective democracy.”

Further showing off his affinity for the Progressive statism of a century ago (noted by Josh Blackman and me here), Breyer turns constitutional history on its head, by declaring that the purpose of the First Amendment was not to prevent government abuses, but to ensure ”public opinion could be channeled into effective governmental action.”  ...

Breyer adds that “corruption,” by which he means individuals engaging in too much freedom of speech via campaign donations, ”derails the essential speech-to-government-action tie. Where enough money calls the tune, the general public will not be heard. Insofar as corruption cuts the link between political thought and political action, a free marketplace of political ideas loses its point.”

This strikes me as both tortured and dangerous.  Once one posits that that there is some ill-defined, un-measurable value like "promotion of positive government action" can be balanced against free speech, then the government gets a nearly unlimited ability to limit speech.

James Taranto also highlights parts of the decision

In making the case for the constitutionality of restrictions on campaign contributions, Breyer advances an instrumental view of the First Amendment. He quotes Justice Louis Brandeis, who in 1927 "wrote that the First Amendment's protection of speech was 'essential to effective democracy,' " and Brandeis's contemporary Chief Justice Charles Evans Hughes, who in 1931 argued that " 'a fundamental principle of our constitutional system' is the 'maintenance of the opportunity for free political discussion to the end that government may be responsive to the will of the people" (emphasis Breyer's).

After citing Jean-Jacques Rousseau's (!) views on the shortcomings of representative democracy, Breyer quotes James Wilson, one of the Founding Fathers, who argued in a 1792 commentary that the First Amendment's purpose was to establish a "chain of communication between the people, and those, to whom they have committed the exercise of the powers of government." Again quoting Wilson, Breyer elaborates: "This 'chain' would establish the necessary 'communion of interests and sympathy of sentiments' between the people and their representatives, so that public opinion could be channeled into effective governmental action."

And here's how Breyer sums it all up: "Accordingly, the First Amendment advances not only the individual's right to engage in political speech, but also the public's interest in preserving a democratic order in which collective speech matters."

What is democratic "order"?  What the hell is "collective" speech?  This is the kind of thing I would expect dictators-masquerading-as-elected-officials to spout as an excuse for suppressing dissent.  After all, doesn't dissent interfere with order?  How can we have collective speech when there are these folks out there disagreeing so much?   Again from Taranto:

It's important to note that when Breyer refers to "collective" rights, what he does not have in mind is individuals exercising their rights by voluntarily collecting themselves into organizations. In fact, the prevailing left-liberal view, most notably with respect to Citizens United v. FEC (2010), is that collections of individuals, at least when they take corporate form, have (or should have) no rights.

The only "collective" that matters to Breyer is the one from which you cannot opt out except by the extreme measure of renouncing your citizenship: "the people" or "the public" as a whole. In Breyer's view, the purpose of the First Amendment is to see that (in Chief Justice Hughes's words) "the will of the people" is done. Individual rights are but a means to that end. To the extent they frustrate it, they ought to be curtailed. You will be assimilated.

Citizens United and Turkey

So now that the Turkish incumbents have been re-elected, the government will allow Twitter to be turned back on in the country.

I think that the vast, vast majority of Americans would agree that this turning off of a communications vehicle several weeks before an election was a pretty transparent dodge to protect incumbent politicians, and that most of us would oppose such steps -- even be outraged by them.

So why the hell was McCain-Feingold's ban on 3rd party ad-based communications 60 days prior to an election any different?   These two steps seem absolutely identical to me, but my guess is most everyone agrees the Turkish actions were bad but the Citizens United decision that overturned the McCain-Feingold restrictions was met with much wailing and gnashing of teeth.

OK, Can You Start Tomorrow?

Bill McKibben suggest climate alarmists go on strike until we start listening to them:

So at this point it’s absurd to keep asking the scientific community to churn out more reports. In fact, it might almost be more useful if they went on strike: until you pay attention to what we’ve already told you, we won’t be telling you more. Work with what you’ve got. We’re a quarter-century ahead – when you deal with the trouble we’ve already described then we’ll tell you what’s coming next.

A Slightly Different Take on High Frequency Trading (HFT)

My guess is that HFT will soon become one of those bogeyman words that people automatically associate with "bad stuff" without ever actually understanding what it means.  But it is worth understanding the underlying problem, and that problem is not high speed or frequency per se.

As I understand it, when an order to buy, say, 10,000 shares of Exxon gets placed, the purchase will get pieced together by searching across multiple servers where offers are listed and putting together the 10,000 shares in bits and pieces from these various servers.  What HFT's are doing (and I am sure this is grossly oversimplified) is that once it sees this order pinging  a server, it runs ahead at high speed to other servers and buys up blocks of Exxon at price A and then offers it up to the pokey buying search when it finally arrives at those servers at A+a bit more.  That "a bit more" may be less than a penny, but the pennies add up and if done right, there is almost no trading risk.

This is bad, though generally not for us small investors but for our mutual fund companies.  For my little trade of 100 shares that might be cleared on the first server, HFT's have no opportunity to play.  Moreover, I may not even notice a penny or two difference in the price I get.  This is a much bigger deal for mutual fund companies and large investors clearing larger trades, where a few pennies can add up to a lot of money.

An exchange always has to be really careful to maintain its image of fairness, and systematically allowing such behavior, called front-running, is not good for the health of the market.   Which is why you are hearing a lot about this.

Here is what you are not hearing, and I will admit that it is all a hypothesis of mine.  But it may well be possible that HFT's actually reduce the total cost of front-running to investors.  It may be that HFT's real crime is that what they are doing is more transparent and visible than what market makers were doing in the past -- ie they are not increasing the volume of front-running, they are just making it more obvious.   I would not be at all surprised if such front-running always existed in market-making (certainly Goldman Sachs has been accused of it) and that HFT's are actually the Wal-Mart or Amazon of front-running -- not doing anything new but doing it cheaper on tighter margins.   Kind of ironically, I suppose this is what efficient markets theory would predict for the market in front-running.

If this is the case, while we would rather see front-running eliminated entirely, HFT's may actually be reducing the cost of front-running and making things more rather than less efficient.

Is Their a Guinsess Record for the Longest Correction?

This correction by Michel Taylor of something called the Australian Independent Media Network has got to be the longest correction in history.  You know it is an incredible correction when this is just a tiny part of the errors admitted:

  • Evans does not believe, and has never believed, that 9/11 was an inside job perpetrated by the Rothschild family, that US President Barack Obama is a secret Jew, that the Holocaust never happened or that Jewish bankers and the Rothschild family have assassinated at least two US Presidents.

The author also admits to getting Evans' education, occupation, organization, and sources of funding wrong.

In part I suppose kudos are owed to Mr. Taylor for being so honest, but seriously, how can one be so comprehensively wrong? (I will actually explain why in a minute).  The correction runs on so long in part because he Taylor also has to correct an earlier correction where he blamed one of his original sources for being intentionally misleading.  He also apologizes for that.

I would likely have posted this anyway just because it is sort of funny.  But it just so happens to tie into what I wrote yesterday here.  Because it is clear that Mr. Taylor's core mistake is that he researched the positions of a climate skeptic (Mr. Evans) solely by asking climate alarmists (and climate alarmist web sites) what this skeptic believed.  He felt no need to hear the skeptic case from the skeptic himself.  And what do you know, the descriptions of Mr. Evans' beliefs as portrayed by his ideological enemies were full of errors, exaggerations, straw men, and outright lies.  Who would have thought?

We can laugh at Mr. Taylor, but at least he admitted his mistakes in great depth.  But outlets such as the LA Times and the BBC have recently made it a rule they will never allow skeptic voices into their reporting.  They have institutionalized Mr. Taylor's mistake.

On Firefox and Wedding Photographers

The OK Cupid website is protesting the Mozilla CEO's past donations to anti-gay-marriage campaigns by asking visitors to use something other than Firefox to browse their site.  Readers will know that I have actually led a past Equal Marriage effort in Arizona, so while sympathetic to the cause here, I don't think I would go so far as to block a browser to my website.  Establishing this precedent that I would boycott services and products based on the political views of company employees (which is the issue here, Mozilla does not have any official position on gay marriage that I know of), I could consume my whole life doing research.  And then I would be stuck with questions like "Are the gay marriage opinions of the Firefox CEO better or worse than Google/Chrome's enabling of censorship in China?  As I have told some folks before, if I really wanted to do do business only with those who agree with me politically, I would find myself stuck for life listening to a couple of Rush albums and watching Firefly and Wire reruns all day.

But anyway, OK Cupid is a private company and I presume they do this with their owner's approval so all's fair in conducting commerce or choosing not to conduct commerce.  Except that just a few weeks ago everyone was arguing that photographers should be forced to serve gay weddings even when they do not wish to do so.  Is this any different?  If we are going to establish a public accommodation standard that a business cannot turn away customers based on political or religious preferences, then don't we have to enforce that in a value-neutral way?

Climate Alarmism In One Statement: "Limited Evidence, High Agreement"

From James Delingpole:

The draft version of the report's Summary For Policymakers made the startling admission that the economic damage caused by "climate change" would be between 0.2 and 2 percent of global GDP - significantly less than the doomsday predictions made in the 2006 Stern report (which estimated the damage at between 5 and 20 percent of global GDP).

But this reduced estimate did not suit the alarmist narrative of several of the government delegations at the recent IPCC talks in Yokahama, Japan. Among them was the British one, comprising several members of the deep green Department of Energy and Climate Change (DECC), which insisted on doctoring this section of the Summary For Policymakers in order to exaggerate the potential for more serious economic damage.

"Losses are more likely than not to be greater, rather than smaller, than this range (limited evidence, high agreement)"

There was no evidence whatsoever in the body of the report to justify this statement.

I find it fascinating that there can be "high agreement" to a statement for which there is limited or no evidence.  Fortunately these are all self-proclaimed defenders of science or I might think this was purely a political statement.

Note that the most recent IPCC reports and new published studies on climate sensitivity tend to say that 1) warming in the next century will be 1-2C, not the much higher numbers previously forecast; 2)  That warming will not be particularly expensive to manage and mitigate and 3) we are increasingly less sure that warming is causing all sorts of negative knock-on effects like more hurricanes.  In other words, opinion is shifting to where science-based skeptics have been all along (since 2007 in my case).  No surprise or shame here.  What is shameful though is that as evidence points more and more to the lukewarmer skeptic position, we are still called evil heretical deniers that should be locked in jail.  Like telling Galileo, "you were right about that whole heliocentric thing but we still think you are evil for suggesting it."

Ideological Turing Tests, Climate, and Minimum Wage

Yesterday I was interviewed for a student radio show, I believe from the USC Annenberg school.  I have no quarrel with the staff I worked with, they were all friendly and intelligent.

What depressed me though, as I went through my usual bullet points describing the "lukewarmer" position that is increasingly common among skeptics, was that most of what I said seemed to be new to the interviewer.   It was amazing to see that someone presumably well-exposed to the climate debate would actually not have any real idea what one of the two positions really entailed (see here and here for what I outlined).  This gets me back to the notion I wrote about a while ago about people relying on their allies to tell them everything they need to know about their opponent's position, without ever actually listening to the opponents.

This topic comes up in the blogosphere from time to time, often framed as being able to pass an ideological Touring test.  Can, say, a Republican write a defense of the minimum wage that a reader of the Daily Kos would accept, or will it just come out sounding like a straw man?  I feel like I could do it pretty well, despite being a libertarian opposed to the minimum wage.  For example:

There is a substantial power imbalance between minimum wage workers and employers, such that employers are able to pay such workers far less than their labor is worth, and far less than they would be willing to pay if they had to.  The minimum wage corrects this power imbalance and prevents employers from unfairly exploiting this power imbalance.  It forces employers to pay employees something closer to a living wage, though at $7.25 an hour the minimum wage is still too low to be humane and needs to be raised.  When companies pay below a living wage, they not only exploit workers but taxpayers as well, since they are accepting a form of corporate welfare when taxpayers (through food stamps and Medicare and the like) help sustain their underpaid workers.

Opponents of the minimum wage will sometimes argue that higher minimum wages reduce employment.  However, since in most cases employers of low-skilled workers are paying workers less than they are willing and able to pay, raising the minimum wage has little effect on employment.  Studies of the fast food industry by Card and Walker demonstrated that raising the minimum wage had little effect on employment levels.  And any loss of employment from higher minimum wages would be more than offset by the Keynesian stimulative effect to the economy as a whole of increasing wages among lower income workers, who tend to consume nearly 100% of incremental income.

Despite the fact that I disagree with this position, I feel I understand it pretty well -- far better, I would say, than most global warming alarmists or even media members bother to try to understand the skeptic position.  (I must say that looking back over my argument, it strikes me as more cogent and persuasive than most of the stuff on Daily Kos, so to pass a true Turing test I might have to make it a bit more incoherent).

Back in my consulting days at McKinsey & Company, we had this tradition (in hindsight I would call it almost an affectation) of giving interviewees business cases** to discuss and solve in our job interviews.  If I were running a news outlet, I would require interviewees to take an ideological Touring test - take an issue and give me the argument for each side in the way that each side would present it.

This, by the way, is probably why Paul Krugman is my least favorite person in journalism.  He knows very well that his opponents have a fairly thoughtful and (to them) well intention-ed argument but pretends to his readers that no such position exists.  Which is ironic because in some sense Krugman started the dialog on ideological Turing tests, arguing that liberals can do it easily for conservative positions but conservatives fail at it for liberal positions.


** Want an example?  Many of these cases were just strategic choices in some of our consulting work.  But some were more generic, meant to test how one might break down and attack a problem.  One I used from time to time was, "what is the size of the window glass market in Mexico?"  Most applicants were ready for this kind of BS, but I do treasure the look on a few faces of students who had not been warned about such questions.  The point of course was to think it through out loud, ie "well there are different sectors, like buildings and autos.  Each would have both a new and replacement market. Within buildings there is residential and commercial.  Taking one of these, the new residential market would be driven by new home construction times some factor representing windows per house.  One might need to understand if Mexican houses used pre-manufactured windows or constructed them from components on the building site."  etc. etc.

Yet Another Reason to Live in Arizona

Via the Valley Fever blog:

Good news, Diamondbacks fans: Chase Field is still home to the cheapest beer in baseball.

Fourteen ounces of beer at a Diamondbacks game is still $4, making this at least the fifth season in a row the D-backs have had the cheapest beer in baseball.

Window Dressing

Fed's reverse repo activity in Treasuries with major banks.  When I was on the corporate staff of a large conglomerate, we eventually busted one of our divisions for pushing inventory out the door on the last day of the quarter, only to have most of it returned a few days later, all as a way to boost quarterly revenues.  This appears to be the bankers' equivalent of such channel-stuffing.

Reverse Repo


Are the Feds really fooled by artificial quarter-end liquidity that is provided by the Feds themselves?  The stress-tests remind me of the story about FDR declaring a bank holiday, and claiming to have allowed only the strong banks to reopen the next day.  How did they know which were strong and weak?  They didn't, really.  The whole exercise was a PR ploy to boost consumer confidence in the banking industry.

Update:  Yep, there it all goes back where it came from

Reverse Repo April 1 2014

A Question I Have Been Asking For Years -- Effect of Passthrough Entities on Income Equality Numbers

Greg Mankiw wonders how much the growth of pass-through corporations like sub-chapter S corps are skewing income trends, particularly for the highest earners.   With a C-corp, an owner only recognizes corporate income when it is passed through as dividends or when they sell the company.  With an S-Corp or LLC, there are no corporate taxes and corporate income is declared in that year, in full, on one's individual 1040.  I asked about this as far back as 2006 and 2007.

cbo pass through entities

We Are All Lukewarmers Now

Matt Ridley has another very good editorial in the WSJ that again does a great job of outlining what I think of as the core skeptic position.  Read the whole thing, but a few excerpts:

The United Nations' Intergovernmental Panel on Climate Change will shortly publish the second part of its latest report, on the likely impact of climate change. Government representatives are meeting with scientists in Japan to sex up—sorry, rewrite—a summary of the scientists' accounts of storms, droughts and diseases to come. But the actual report, known as AR5-WGII, is less frightening than its predecessor seven years ago.

The 2007 report was riddled with errors about Himalayan glaciers, the Amazon rain forest, African agriculture, water shortages and other matters, all of which erred in the direction of alarm. This led to a critical appraisal of the report-writing process from a council of national science academies, some of whose recommendations were simply ignored.

Others, however, hit home. According to leaks, this time the full report is much more cautious and vague about worsening cyclones, changes in rainfall, climate-change refugees, and the overall cost of global warming.

It puts the overall cost at less than 2% of GDP for a 2.5 degrees Centigrade (or 4.5 degrees Fahrenheit) temperature increase during this century. This is vastly less than the much heralded prediction of Lord Stern, who said climate change would cost 5%-20% of world GDP in his influential 2006 report for the British government.

It is certainly a strange branch of science where major reports omit a conclusion because that conclusion is not what they wanted to see

The IPCC's September 2013 report abandoned any attempt to estimate the most likely "sensitivity" of the climate to a doubling of atmospheric carbon dioxide. The explanation, buried in a technical summary not published until January, is that "estimates derived from observed climate change tend to best fit the observed surface and ocean warming for [sensitivity] values in the lower part of the likely range." Translation: The data suggest we probably face less warming than the models indicate, but we would rather not say so.

Readers of this site will recognize this statement

None of this contradicts basic physics. Doubling carbon dioxide cannot on its own generate more than about 1.1C (2F) of warming, however long it takes. All the putative warming above that level would come from amplifying factors, chiefly related to water vapor and clouds. The net effect of these factors is the subject of contentious debate.

I have reluctantly accepted the lukewarmer title, though I think it is a bit lame.

In climate science, the real debate has never been between "deniers" and the rest, but between "lukewarmers," who think man-made climate change is real but fairly harmless, and those who think the future is alarming. Scientists like Judith Curry of the Georgia Institute of Technology and Richard Lindzen of MIT have moved steadily toward lukewarm views in recent years.

When I make presentations, I like to start with the following (because it gets everyone's attention):  "Yes, I am a denier.  But to say 'denier', implies that one is denying some specific proposition.  What is that proposition?  It can't be 'global warming' because propositions need verbs, otherwise it is like saying one denies weather.  I don't deny that the world has warmed over the last century.  I don't deny that natural factors play a role in this (though many alarmists seem to).  I don't even deny that man has contributed incrementally to this warming.  What I deny is the catastrophe.  Specifically, I deny that man's CO2 will warm the Earth enough to create a catastrophe.  I define "catastrophe" as an outcome where the costs of immediately reducing CO2 output with the associated loss in economic growth would be substantially less than the cost of future adaption and abatement. "

Apparently, Los Angeles Has Banned Oil Production in the City

Most folks who talk about oil production know very little about it.  One reality of oil production, particularly for older fields like those around Los Angeles, is that oil wells have to be frequently reworked to maintain such production  (fracking, by the way, is one of those rework techniques and has been used for over 50 years).  By  banning well rework and re-injection of water (most fluid flowing from older wells is water), the city council has effectively banned oil production.

The linked article is a good reminder of a technique used by many environmental activists.  Despite portraying themselves as being driven by science, they actually often make progress by taking words and both obscuring their meaning and adding emotional baggage to them.  Such is the case with "fracking"

Because with its pun-friendly name, the term fracking has become an effective nonspecific rallying point for extreme activist groups aiming to scare the public about environmental harms that have yet to be demonstrated. Amid the cheering after the vote, some of the national activists behind the effort acknowledged the true goal behind measure. The term fracking, it seems, is actually intended to be a catch-all phrase to describe all aspects of oil and gas production, conventional and unconventional alike, according to Washington-based Food and Water Watch, one of the activist groups behind the measure. In an interview with online publication Streetsblog Los Angeles after the vote, FWW organizer Brenna Norton boldly stated as much when she acknowledged, “It’s easier to engage and organize people around ‘fracking’ than a complicated list of practices.”

Unionizing NCAA Players: A Simple Question in a Free Society, But A Total Mess In Ours

This week, the NLRB agreed to allow the players on the Northwestern University football team to unionize.   This is one of those issues that is simple and straightforward in a free society and a total mess in our less-than-free society.  Here are a few thoughts:

  1. In a free society, this is a no-brainer.  The Northwestern players are welcome to create an association among themselves and call it anything they like, including "union".  That association is free to try to negotiate with the university for better terms  (they are also free to fail at this and make no progress).
  2. However, it is clear that we are not a free society because the players had to go to the government and ask permission to form this particular type of association.  The reason is that associations called "unions" have been granted special powers and privileges under the law not available to other associations.  There are also a large body of very particular rules for how such associations may conduct business and how other groups (in this case the University) can or cannot interact with it.  It is a very tricky legal and philosophical question whether this package of benefits and privileges should be accorded to a group of college football players
  3. In a free society, the fact that the players don't get paid cash and that their universities make millions off the football program would be irrelevant.  The players freely agreed to the deal (in most cases, playing in exchange for free tuition and perhaps a chance to land an NFL job) so there is nothing inherently unfair about it.
  4. However, in our society, we have all sorts of government interventions.  I consider many of these interventions to be counter-productive, even occasionally insane.  But if one is to navigate such a society (rather than, say, go off and live in Galt's Gulch), I think the principle of equal protection is critical.  Arbitrary government interventions in free exchange are FAR worse when applied unevenly.  From an equal protection standpoint, I think the players may have a good case.
    • The law generally does not allow profit-making businesses (and the NCAA and college footfall are certainly those) to accept unpaid labor.  Many folks who don't deal with the Fair Labor Standards Act every day will say: "players are paid, they get free tuition."  But this is not how the FLSA works.  It counts non-cash wages only in very specific circumstances that are enumerated in the law (e.g. lodging).  Think of it this way -- McDonald's could not legally just pay all its employees in french fries and claim to be compliant with the law.  Also, large numbers of Division 1 football and basketball players never graduate, which shows a fair amount of contempt by players for this supposedly valuable "free tuition" compensation.
    • On the other hand, most college athletics are not profit-making.  My son plays baseball at Amherst College -- it would be laughable to call this a profit center.  I am not sure there are but a handful of women's teams in any sport that generate profits for their school, and even on the men's side money-making is limited to a few score men's football and basketball teams.   But the few that do make money make a LOT.  University of Texas has its own TV network, as do most major conferences.
    • The law generally does not allow any group of enterprises to enter into agreements that restrict employment options.  Google et. al. are getting flamed right now, and likely face criminal anti-trust charges and lawsuits, for agreements to restrict hiring employees from each other's firms.  The NCAA cuts such deals all the time, both severely restricting moves between schools (transfer provisions in Division I are quite onerous) and preventing poaching at least of younger players by professional leagues like the NBA and NFL.   The notion that top players in the NCAA are playing for their education is a joke -- they are playing in college because that is what they have to do in order to eventually be allowed in a league where they can get paid for their skills.
    • Actually trying to pay players would be a real mess.  In a free society, one might just pay the ones who play the most profitable sports and contribute the most value.   But with Title IX, for example, that is impossible.  Paying only the most financially valuable players and teams would lead to 99% of the pay going to men, which would lead to Title IX gender discrimination suits before the first paycheck was even delivered.  And 99% of college athletes probably don't even want to be paid
    • Part of the pay problem is that the NCAA is so moronic in its rules.  Even if the university does not pay players, many outsider would if allowed.  Boosters love to pay football and basketball players under the table in cash and cars and such, and top athletes could easily get endorsement money or paid for autographs by third parties.  But NCAA rules are so strict that athletes can be in violation of the rules for accepting a free plane ticket from a friend to go to his mother's funeral.  When I interview students for Princeton admissions, I never buy them even a coffee in case they are a recruited athlete, because doing so would violate the rules.
    • Much of this is based on an outdated fetish for amateurism, that somehow money taints athletic achievement.  It is hilarious to see good progressive college presidents spout this kind of thing, because in fact this notion of amateurism was actually an aristocratic invention to keep the commoners out of sports (since commoners would not have the means to dedicate much of their life to training without a source of income).  The amateur ideal is actually an exclusionist aristocratic tool that has for some reason now been adopted as a progressive ideal.   Note that nowhere else in college do we require that students not earn money with their skills -- business majors can make money in business over the summer, artists can sell their art, musicians can be paid to perform.  When Brooke Shields was at Princeton, she appeared in the school amateur play despite making millions simultaneously as a professional actress.  Only athletes can't trade their skill for money in their free time.

I am not sure where this is all going, but as a minimum I think the NCAA is going to be forced to allow athletes to earn outside income and accept outside benefits without losing their eligibility.

Back in 2011 I wrote an article in Forbes on this topic