Monday, July 26, 2010
Background Info
I'm finally reading parts of the Stern Review, a report on the economics of climate change.
Bloom Energy
I saw this in a magazine. It's a new technology for tiny power plants turning oxygen into electricity and water. Do we really have enough oxygen? I suppose it depends if the demand would grow exponentially or not.
Sunday, July 25, 2010
Climate Legislation Abandoned
Tom Friedman says we're going to regret it.
I appreciate that he blames the public.
I could blame Republicans for the fact that not one G.O.P. senator indicated a willingness to vote for a bill that would put the slightest price on carbon. I could blame the Democratic senators who were also waffling. I could blame President Obama for his disappearing act on energy and spending more time reading the polls than changing the polls. I could blame the Chamber of Commerce and the fossil-fuel lobby for spending bags of money to subvert this bill. But the truth is, the public, confused and stressed by the last two years, never got mobilized to press for this legislation. We will regret it.
I appreciate that he blames the public.
Expire Those Tax Cuts!
See, Tim Geithner agrees
The top 2% of households make more than $250k. I wonder what top 2% of individual incomes make.
When top earners pay less taxes, everyone else has to pay way more in order to balance the budget. Plus, when income accumulates when the top earners don't reinvest or donate a substantial proportion of their wealth, then there is less to go around for everyone else, and they are not stimulating the economy. Paying taxes is forcing (or "automating") reinvestment of income. Lower earners do not need to feel sorry for higher earners who may have to pay more taxes. Higher earners are looking out for themselves. Lower earners should learn from them.
The top 2% of households make more than $250k. I wonder what top 2% of individual incomes make.
When top earners pay less taxes, everyone else has to pay way more in order to balance the budget. Plus, when income accumulates when the top earners don't reinvest or donate a substantial proportion of their wealth, then there is less to go around for everyone else, and they are not stimulating the economy. Paying taxes is forcing (or "automating") reinvestment of income. Lower earners do not need to feel sorry for higher earners who may have to pay more taxes. Higher earners are looking out for themselves. Lower earners should learn from them.
Saturday, July 24, 2010
Economics Opportunities
It looks like the NEBR (National Bureau of Economic Research) does a lot of interesting work, and it seems to have a strong MIT affiliation. I applied for a job as an economic research assistant for MIT professor David Autor, who is a labor economist and will be the Associate Department Head of the MIT Economics Department in the fall. He studies the income distributions and skills of workers, amongst other things, and he gave me some career advice.
He advised me to apply to more interdisciplinary public policy graduate programs rather than straight economics programs if I were to apply this year. He strongly recommended working in a developing country on an experimental program through the Poverty Action Lab for a year before applying to economics PhD programs. Now I have a lot of leads to follow, and it's really exciting.
He advised me to apply to more interdisciplinary public policy graduate programs rather than straight economics programs if I were to apply this year. He strongly recommended working in a developing country on an experimental program through the Poverty Action Lab for a year before applying to economics PhD programs. Now I have a lot of leads to follow, and it's really exciting.
Misplaced Blame
The Gulf Oil Spill threatens the way of life of Gulf residents and marine life. Besides clean-up and capping the flow, investigating the cause of the spill in order to prevent future spills is an important task. A government panel is having hearings to investigate, and this past week they found that an alarm was "inhibited".
The Obama Administration has issued a drilling moratorium so that risks are minimized until investigations are completed that would either be able to confirm the safety of drilling operations or come up with new safety standards. The administration has also issued commercial fishing and shrimping bans. Governor of Louisiana Bobby Jindal has already lifted the recreational fishing ban and has been urging the federal government to lift the commercial fishing ban.
Some of the Gulf residents have been understanding of the bans, but many have become angry at the government for the bans and even for the spill itself. This is frustrating to me because as voters and taxpayers, people should take some responsibility of these problems rather simply directing their anger at the government. If they really wanted the government to determine the safety of the seafood faster, then they'd have to support giving more resources and funding to the FDA. Plus, at this stage, it may well be that the seafood is not safe, in which case there is not much the federal government can do.
Gulf residents insist that their livelihoods depend on oil and seafood and tourism, but if they knew they were so dependent on the well-being of the Gulf and the cleanliness of the beaches, then they should have paid more attention to the oil industry and the drilling operations. The local government and thus the local people need to be the first line of defense from local disasters. Instead, they want the economic benefits of the drilling while leaving the burden of regulating and cleaning up to the federal government. In fact, in order to attract businesses and economic benefits, local government tend to lobby the federal government to reduce regulations so that the cost of business is cheaper. Meanwhile, the tax revenues from people from other states pay for cleanup and what little regulation there is left.
People are upset that the regulators at the MMS "didn't do their jobs," but then they should have been more supportive of their jobs prior to the spill. Even now, many conservatives say there is too much government regulation. Everyone thinks someone else should take the blame and absorb the cost for the spill, but perhaps everyone has forgotten that this is a participatory democracy, and that you not only get the government that you deserve, but also the corporations and resulting disasters.
At hearings this week here, crew members have described repeated failures in the weeks before the disaster, including power losses, computer crashes and leaking emergency equipment...
Mr. Williams, who filed a lawsuit against Transocean in federal court in New Orleans on April 29, added several new details about the equipment on the rig, testifying that another Transocean official had turned a critical system for removing dangerous gas from the drilling shack to “bypass mode.”
When Mr. Williams questioned that decision, he said he was reprimanded...
Mr. Williams recalled that Mr. Hay added, “The entire fleet runs them in ‘bypass.’ ”
The Obama Administration has issued a drilling moratorium so that risks are minimized until investigations are completed that would either be able to confirm the safety of drilling operations or come up with new safety standards. The administration has also issued commercial fishing and shrimping bans. Governor of Louisiana Bobby Jindal has already lifted the recreational fishing ban and has been urging the federal government to lift the commercial fishing ban.
Some of the Gulf residents have been understanding of the bans, but many have become angry at the government for the bans and even for the spill itself. This is frustrating to me because as voters and taxpayers, people should take some responsibility of these problems rather simply directing their anger at the government. If they really wanted the government to determine the safety of the seafood faster, then they'd have to support giving more resources and funding to the FDA. Plus, at this stage, it may well be that the seafood is not safe, in which case there is not much the federal government can do.
Gulf residents insist that their livelihoods depend on oil and seafood and tourism, but if they knew they were so dependent on the well-being of the Gulf and the cleanliness of the beaches, then they should have paid more attention to the oil industry and the drilling operations. The local government and thus the local people need to be the first line of defense from local disasters. Instead, they want the economic benefits of the drilling while leaving the burden of regulating and cleaning up to the federal government. In fact, in order to attract businesses and economic benefits, local government tend to lobby the federal government to reduce regulations so that the cost of business is cheaper. Meanwhile, the tax revenues from people from other states pay for cleanup and what little regulation there is left.
People are upset that the regulators at the MMS "didn't do their jobs," but then they should have been more supportive of their jobs prior to the spill. Even now, many conservatives say there is too much government regulation. Everyone thinks someone else should take the blame and absorb the cost for the spill, but perhaps everyone has forgotten that this is a participatory democracy, and that you not only get the government that you deserve, but also the corporations and resulting disasters.
Inception
Last week we watched Inception, the new Christopher Nolan movie, and it was very good. In some ways it's similar to Avatar and other Matrix-like movies in that there is an alternate "virtual" world. In this case it is the dream world. It may start a new trend for movies just as the Matrix did when it first came out. Since Joseph Gordon-Levitt was in it, I've been watching 3rd Rock From the Sun this past week. I forgot about that show, and I realized that I didn't even understand the full premise of the show, particularly the fact that Sally was supposed to be the military officer of the bunch. The people who made it also made Wayne's World. Wow!
Friday, July 16, 2010
Thursday, July 15, 2010
Income Distribution
I was curious about the individual income distribution in the US for people over 15 in 2008, and so I looked up some data from the US census bureau for individual income. It doesn't give additional breakdowns for people making over $100k so I did some extrapolations. This is mainly a thought exercise for what you think the income distribution is compared to what you expected it to be compared to what you might think is fair.
In these graphs, I extrapolated the distribution for people making over $100k. In this first graph, the distribution is if the total amounts of money made by the number of people making a certain income in $2500 increments were all equal. That is, 100k*ppl_making_100k = 102.5k*ppl_making_102.5k, and the shape of the distribution is 1/x. As you can see, the maximum amount of income people are making is around $460k.
That is not realistic because I know for a fact that there are many people making millions, but I don't know what is the maximum million of dollars people make in a year. This is the graph that is the same as above but with a few people added at $1 million and $11 million.
In contrast, this is usually the kind of graphic that is used when portraying income distribution. It is for the bottom 98% of households from www.visualizingeconomics.com.
In these graphs, I extrapolated the distribution for people making over $100k. In this first graph, the distribution is if the total amounts of money made by the number of people making a certain income in $2500 increments were all equal. That is, 100k*ppl_making_100k = 102.5k*ppl_making_102.5k, and the shape of the distribution is 1/x. As you can see, the maximum amount of income people are making is around $460k.
That is not realistic because I know for a fact that there are many people making millions, but I don't know what is the maximum million of dollars people make in a year. This is the graph that is the same as above but with a few people added at $1 million and $11 million.
In contrast, this is usually the kind of graphic that is used when portraying income distribution. It is for the bottom 98% of households from www.visualizingeconomics.com.
Finance Reform Passes
Today Congress passed the Finance Reform Bill. Honestly, though, I don't know too much of the details in the bill, but I am generally supportive.
The Dodd-Frank bill -- named after Dodd and Rep. Barney Frank (D-Mass.), who ushered it through the House -- passed by a vote of 60 to 39. Three Republican senators -- Scott Brown of Massachusetts and Olympia J. Snowe and Susan Collins of Maine -- joined 57 members of the Democratic caucus in support. Sen. Russell Feingold of Wisconsin was the lone Democratic opponent, saying the measure didn't go far enough.
Wednesday, July 14, 2010
Volker Admendment in the Financial Reform Bill
Article on Volker and his Rule. Volker was the Fed Chairman under Carter and Reagan before Greenspan. He was ousted by Reagan partly because he wouldn't go along with the deregulation agenda. He now regrets not speaking out more against the deregulation but notes that it's very difficult to be against deregulation while things seem to be going so well, although now we know it was a bubble. Such is the positive feedback nature of bubbles.
Tuesday, July 13, 2010
Words of Wisdom
I just finished Stiglitz's book Freefall today. It excites me because he mentions many things I have been thinking about like contradictions and questions. In the concluding chapter he talks about how the economic system reflects and maybe even defines our moral values, and how we should think about what kind of moral values we want and to take a more active role in designing the system so that it reflects those values.
I really like this line.
If people are serious about wanting less regulation then they need to take more personal responsibility rather than taking refuge in the fact that their actions are technically legal and thus must be "good".
I really like this line.
There was individualism but no individual responsibility.
Society cannot function well if people do not take responsibility for the consequences of their actions. "I was just doing my job" cannot be a defense."
If people are serious about wanting less regulation then they need to take more personal responsibility rather than taking refuge in the fact that their actions are technically legal and thus must be "good".
Monday, July 12, 2010
One Labtop Per Child Left Behind
There have been some studies done showing that having a computer (at least temporarily) widens the achievement gap for low-income middle school students.
I have some solutions, though. My theory is that the reason why the nerds got so much out of having computers up until now is because computers used to be way harder to use (Linux and MS-DOS) and Windows had all these bugs and would crash all the time (blue screen of death!). Maybe the kids should be given Linux boxes or just a computer with no GUI. Alternatively, they could just give them broken computers so they'd have to fix them in order to use them. But then that would just a one-time lesson, after which they would just slack off. Another option is to write and infect the computers with an education virus, which makes you solve problems or answer questions in order to gain access to things like the internet, games, or checking email.
I have some solutions, though. My theory is that the reason why the nerds got so much out of having computers up until now is because computers used to be way harder to use (Linux and MS-DOS) and Windows had all these bugs and would crash all the time (blue screen of death!). Maybe the kids should be given Linux boxes or just a computer with no GUI. Alternatively, they could just give them broken computers so they'd have to fix them in order to use them. But then that would just a one-time lesson, after which they would just slack off. Another option is to write and infect the computers with an education virus, which makes you solve problems or answer questions in order to gain access to things like the internet, games, or checking email.
Sunday, July 11, 2010
Stiglitz and Deming on Perverse Incentives
In Freefall, Stiglitz argues that the crash of the financial system was caused by a "systemic" problem, which means something more specific than a likely or common problem. It means the structure of the system has a tendency to do things (like fail) other than its original function such as providing banking services. Stiglitz elaborates that the business models of the banks and other financial institutions had incentives that caused actors in the system to increase the likelihood that it would fail in this way.
One major problem was that many executives had an incentive to maximize the stock prices because they get paid in stock options. Also, bonus pay depends on the income generated, and in the financial sector, income is generated most easily with fees. However, when the company has losses, executives get paid "retention bonuses," which should actually mitigate the incentive to ruthlessly maximize the share prices. Stiglitz wants to discredit the argument that bonuses give incentives to executives to work harder, but also argues that, to the extent that they work harder, the executives work harder only to maximize the stock price and the profits. Deming claims that any measure of performance will always have this problem since people will always find ways to fudge the numbers in their favor. He strongly cautions against using quantitative metrics to measure performance because maximizing one number (short-term profit) may end up minimizing another number (long-term profit) somewhere else in the system. Another way it comes up that I have experienced at my company is that saving time for one group may end up taking up more of another group's time so there is a need to think of the whole system when setting the agenda for everybody.
Stiglitz then goes on to describe the problems with corporate governance, where management typically appoints most of the board, and the board sets the executive pay.
One major problem was that many executives had an incentive to maximize the stock prices because they get paid in stock options. Also, bonus pay depends on the income generated, and in the financial sector, income is generated most easily with fees. However, when the company has losses, executives get paid "retention bonuses," which should actually mitigate the incentive to ruthlessly maximize the share prices. Stiglitz wants to discredit the argument that bonuses give incentives to executives to work harder, but also argues that, to the extent that they work harder, the executives work harder only to maximize the stock price and the profits. Deming claims that any measure of performance will always have this problem since people will always find ways to fudge the numbers in their favor. He strongly cautions against using quantitative metrics to measure performance because maximizing one number (short-term profit) may end up minimizing another number (long-term profit) somewhere else in the system. Another way it comes up that I have experienced at my company is that saving time for one group may end up taking up more of another group's time so there is a need to think of the whole system when setting the agenda for everybody.
Stiglitz then goes on to describe the problems with corporate governance, where management typically appoints most of the board, and the board sets the executive pay.
Tuesday, July 6, 2010
Green Food
Lynn wrote an article on Food Security and the Green Revolution in response to Attention Whole Foods Shoppers by Robert Paarlberg
Organizational Economy
In Freefall, Stiglitz mentions the research of Herbert Simon arguing that there is no reason for profit enterprises should be any more efficient than non-profit or government organizations given neo-classical assumptions. This is because most people are employees no matter what the organization is, and so there is no difference in motivation. Furthermore, in public companies, the owners are the shareholders, who are very removed from management.
Quarter Century
Now I am 25, and it seems like some kind of milestone, but I can't think of any good reason why 25 years is a milestone. There's nothing really symbolic that happens every 25 years. Maybe there's a 25 year flower or something. At any rate, it's definitely moving on from being in my early 20's.
Saturday, July 3, 2010
Wet Wipe Foresight
the other day i went to dinner at an ethiopian place, and everyone was like, oh no my hands are all messy now, and i'm like 'oh but i have a wet wipe that i saved from some other place a long as time ago,' but then it was completely dry. the end.
No Good Workers
NYT article about how manufacturing companies seeking to expand in the US are having a a hard time finding qualified workers. It really highlights the problem with the public education system and also how difficult it is to "create jobs." The fact is that there are jobs but not enough people with basic skills as well as specialized skills. My company is also having trouble hiring manufacturing people, especially people with soldering skills. Besides soldering, workers need to have enough aptitude to learn how to use the computer program. That kind of aptitude is not something that can be remedied with a training program, but instead needs to be addressed in grade school. The article said that the labor shortage is because many manufacturers have replaced assembly lines with more automated systems so they need more skilled workers to operate computerized machinery. Similarly, the promise of "green jobs" has not materialized. When I interviewed at Synapse, I mentioned my concern about the logistics of transitioning the labor force to green jobs. It seems to me that it's hard to build public support for green projects at the expense of other businesses like coal unless the green jobs made available are explicitly for the people who will be put out of work.
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