The Subprime Primer

Business Pundit has an entertaining slide show explaining the origins of the sub-prime mortgage crisis.

Gas Tax Redux

Here's a better explanation of the political machinations going on with Sen. Clinton's gas tax holiday idea, with Clinton's plan being a response to McCain's ridiculous plan. (Posted by commenter CMike on Econospeak -- I'm not referring to the original post.)

If Sexism were Racism

Dr. Violet Socks over at The Reclusive Leftist has an interesting rant about Obama. I can't agree with her conclusion to not ever vote for Obama, because McCain has promised more supreme court justices like Roberts and Alito (would that be Catholic men?). But the bit which rewrites the media's sexist treatment of Clinton in reverse, so that Obama receives the racist media treatment, highlights how sexism is invisible to most men and women. Sexism flies under the radar, so it never gets rooted out.

Page 123 Meme

I always was late handing in assignments, so of course I'm late with this meme. Here's the first five sentences from page 123 of the nearest book with more than 123 pages. (Taken from Red Queen and Chanson.) No tags, cause everybody's already done it, but feel free to leave a comment with yours, especially if you don't have a blog!

"You can actually calculate the average bubble factor for any point in a super-satellite using the following formula:
(Players left -1)/(Eliminations left)
So with 15 players left in a 10-prize satellite, the average bubble factor is (15 - 1)/(5) = 2.8.
Remember that this is the average bubble factor around the table. Big stack clashes have much higher numbers."

Yeah, that would be a poker strategy book belonging to JSM. Looking around for the nearest book that belongs to me, (and cheating slightly because I'm in the study and went looking for the nearest book that belongs to me that wasn't in the bookcases in the study) we find:

"Leland noted, "Consumers are asking others to help themselves develop self-control because so many companies are not showing any restraint."
Bloggging about overspending is important and useful, but as we saw in the last chapter, on emotions, what we truly need is a method to curb our consumption at the moment of temptation, rather than a way to complain about it after the fact.
What could we do? Could we create something that replicated the conditions of Gaurav's class, with some freedom of choice but built-in boundaries as well? I began to imagine a credit card of a different kind--a self-control credit card that would let people restrict their own spending behavior."

That's from Dan Ariely's Predictably Irrational, chapter 6, "The Problem of Procrastination and Self-Control."

That's our interests in a nutshell. Poker and Strategy, and Behavioral Economics. Remarkably precise.

Gas Tax Holiday, or: Keep it in Perspective, People!

It always makes me happy when I make an argument to JSM, and the next morning I pull up the paper and find Paul Krugman has made the same argument. It lets me know my reasoning skills have not entirely deteriorated, when Krugman and I arrive at the same conclusion, particularly when it comes to taxes, health care, or some other economic issue.

Of course sometimes it's just because we have the same political views. In this case, it might be because I'd read his previous comments where he notes, "The Clinton twist is that she proposes paying for the revenue loss with an excess profits tax on oil companies. In one pocket, out the other. So it’s pointless, not evil. But it is pointless, and disappointing."

JSM, by the way, has come perilously close to verbalizing support for Obama. But hey, that's okay, everybody's free to have their own opinion. And I'm cleaning out the guest bedroom this week anyway. Just so we're clear.

No Answer

It's very annoying. Justin Wolfers replied to Freakonomics readers about the "likely economic consequences" of this year's tax rebates, but the papers he cites only discuss whether people spend the money, and if so, on what.

There's a microeconomist for you. I suspect when most people ask about the economic consequences they really mean, "Tell me, really, is this actually going to cut short the recession?"

It reminds me of the only math joke I know. A math professor is working away at his desk when the contents of his wastebasket spontaneously combust. He picks up the flaming trash bin, waves at it rather uselessly, then drops it on his desk and runs for a fire extinguisher. He then proceeds to put the fire out with the fire extinguisher.

The next day, the professor is again working away at his desk when the contents of his trash bin burst into flame again. The professor reaches over, picks up the trash bin, places it on his desk, and returns to work.

[Yeah, I know, not very funny unless you are a mathematician. In case you didn't get it, the joke is that the prof has proved he can put the fire out when the trash can is on his desk, so all he needs to do is place the trash can on the desk and the rest follows. QED.]

In other words, the papers Wolfer cites address the micro question of whether consumers will spend the money on extra consumption or pay off debt, but don't answer the macro question of how extra spending might get the economy moving again, and what might be the size of the effect.

Not that I'm going to tell you. I'm a microeconomist too. ;)

And Then I Took Away His Feminist Card

These links are for JSM, who has been too busy working to pay attention to political matters that matter to only half the population (i.e. the Lily Ledbetter Fair Pay Act), and then made the mistake of trying to act like a on centrist on John McCain, (and I quote!) saying "He's not bad for a Republican. He doesn't toe the party line -- he's a maverick."

Dahlia Lithwick provides an excellent discussion of the Lily Ledbetter case and the Fair Pay Act.

Jezebel has a nice summary, with a lovely quote from Harry Reid at the end. And by the way, I will not abide any more claims that McCain is a maverick, when he won't show up to do the right thing when it means crossing party lines.

Momocrats puts the asinine McCain quote right at the top, where he frets that providing legal recourse against discrimination will lead to...wait for it...lawsuits!

And Bitch Ph.D. provides a link to the senate voting on the Lily Ledbetter Fair Pay Act.

Ensuring the Collective Interests

Shankar Vedantam has an excellent Department of Human Behavior column in the Washington Post today, comparing the Democratic primary to a tragedy of the commons. A quote from political scientist Edella Schlager summarizes: "Rational individuals are trapped. To act rationally, to pursue one's self-interest, leads to collective ruin. To act irrationally, to place the collective interest above one's self-interest, exposes one to exploitation."

The article lists two solutions to the tragedy of the commons. The first is to create structures that reward behavior that favors the long-term welfare of the collective. The second is to have a regulatory body enforce limits. Vedantam suggests that the latter, having the Democratic party step in and call the game, is probably necessary to win the election.

The first solution, however, will keep more Democratic voters happy -- or less unhappy -- and motivated. And the way to do that is to link the two candidates' success. If both candidates commit that the ticket will be Clinton/Obama or Obama/Clinton, then the candidates have an incentive to campaign in a way that builds the Democratic party's likelihood of success come November.

Remember that Clinton offered Obama the VP post before she took the gloves off. Obama brushed her off, but the correct response would have been to offer her the VP post. By refusing to link their outcomes, Obama opened the door for the down-and-dirty contest that the primary has become.

But there is still time. I believe the majority of the country would love to vote for a ticket with both a woman and an African American man, because more than just having the two best candidates the Democratic party has put forth in a long time, it makes us believe our country can recover the moral high ground. I have my favorite and I'm sure you have yours, but the two of us can can be happy and a little happy, or we can be happy and really unhappy. Obama, the ball is in your court.