James K. Galbraith – A Bailout We Don't Need

Is this bailout still necessary?

The point of the bailout is to buy assets that are illiquid but not worthless. But regular banks hold assets like that all the time. They're called "loans."

With banks, runs occur only when depositors panic, because they fear the loan book is bad. Deposit insurance takes care of that. So why not eliminate the pointless $100,000 cap on federal deposit insurance and go take inventory? If a bank is solvent, money market funds would flow in, eliminating the need to insure those separately. If it isn't, the FDIC has the bridge bank facility to take care of that.

James K. Galbraith – A Bailout We Don’t Need – washingtonpost.com.

Makes a lot more sense to me than “Give me 700b today or I’ll blow up your economy” line fed by the same administration that gave you “give us the unfettered right to wage war or you’ll be eaten alive by mushroom clouds”.

Similar Posts

  • Take that, economists!

    Brownlee’s mistake was to put into practice something that worked only in theory.

    Meet the economists who know why we buy what we buy | Money | The Guardian

    Buried in an excellent article introducing the field of behavioural economics to a wider audience is that one line takedown of economics theory! I happen to believe that economists just aren’t scientific enough to understand how modeling works. A well behaved, rational human being who makes every decision independently of other decisions based solely on maximizing her economic utility is like (warning, quantum theory reference) a physicist reading about the particle in a box model and deciding to predict the behavior of all subatomic particles. Yes, it is a neat theory with some neat math, but it’s only the first step!

    Scientists try to be a little more humble with their modeling. They seem to know that the chaos and probability driven events in even the simplest of real world settings make models/simulation mostly exercises in trend seeking, not deterministic end points.

    To predict the economic behavior of people, you have to include the variables that make them people! Not assume that all people will follow all your assumptions of their behavior strictly, and to not call them names when they don’t act to maximize their short term utility!

    Anyway, apropos nothing, I like to rant about economists! The article also notes that Barack Obama is a follower of behavioral economics, good for him. I wonder if McCain even knows what that phrase means.

  • Hey Young Woman! Canada’s Senate needs you!

    Canada’s Senate, that life-tenured repository of appointed political loyalists, ex-journalists and random washed up celebrities, got in the news recently after Prime Minister Stephen Harper appointed three failed conservative MP candidates, including two who had resigned from their life time senate appointments to run. While all this is unethical and just serves to perpetuate the plutocracy and the welfare state Canadian politicians have set up for themselves, it is clearly the PM’s sole prerogative to do this. He would have done these appointments regardless of majority/minority. The PM knows that the median voter will only turf him in the event of obvious corruption, or a recession, not for riding roughshod over parliamentary procedures, or being divisive, or any such “subtle” issues.

    There are calls to reform the senate to make it more relevant, and Stephen Harper has made noises about introducing legislation that will limit senators’ terms and provide for an elected model. The article is short on detail on exactly what the election process will look like.  But let’s look around for some examples, of course rule out the UK House of Lords, sorry, no point discussing hereditary peers!

    1. The American Model: Good god, no. The US Senate is unrepresentative and broken. It assigns two senators to each state regardless of population, and has procedures like the filibuster, anonymous secret holds, etc that are severely undemocratic. Just read George Packer’s devastating report in the New Yorker and you’ll run screaming from this option. Anyway, they have too much power, that’s the last thing we need. The Australian model is somewhat similar (though it uses the single transferable vote or STV for voting).  and is unrepresentative.
    2. The Indian Model. India’s Rajya Sabha. It is elected by the State’s MLAs through a regionally population weighted formula using a Single Transferable Vote multi-member list. Members are voted to 6 year terms. It has has a small percentage of appointed members meant for prominent scientists, artists, etc. The Rajya Sabha does not have equal powers, it cannot initiate appropriations bills, or reject them (only send them back). Also, in the event that the Rajya Sabha (assembly of “rulers”) disagrees with the Lok Sabha (the assembly of the people), there is a joint session, in which the Rajya Sabha, limited by number to 250, is always outnumbered by the Lok Sabha (not more than 552), and would generally lose. This has only happened three times, so in general, the Rajya Sabha serves as a rubber stamp body, and a place for politicians who aren’t up for an election campaign. However, members of the Rajya Sabha can be part of the cabinet, or even be PM. Most famously, India’s current PM Manmohan Singh is from the Rajya Sabha and has been there since 1991. The only time he ran for the Lok Sabha in 1999, he lost.  The Indian model is better than the US model, but I am not too keen on having PMs that have never been directly elected, there’s something wrong about that.

    It appears that the original intent of Canada’s senate was to be an unelected body of people which provided sober, non-partisan review of House of Commons legislation. Given that the Canadian senate recently rejected climate change legislation Bill C-311 (with much rancour and little debate) after it had been passed by the House of Commons, this premise is dead. The voting was entirely on party lines, rejected democratically passed legislation, and debate was anything but sober. The current political system will only serve to make any Canadian Senate increasingly partisan (not always a bad thing, partisanship is honest). Voting will not change this much, even if the voting is based on proportional representation, which appears to not be too popular with the status quo. Why have a senate that once again prioritizes the voices of the elite, especially if we don’t intend the senate to have equal power? What to do?

    Lottery Democracy, that’s what! Let’s randomly pick, based on provincial weighting, a certain number of people out of the elector pool, to serve in the senate for a fixed term, say 4 years or so. Also, since the current system biases towards age, let’s put an age restriction as well, younger than 35! Obviously, the pay has to be good enough, and the work has to be part time. The current senate sits for anywhere between 50-90 days in a year. Let’s pick a small enough senate, say a total of 50-100 senators, one minimum per province/territory,  then weighted by population. Let’s make most of the senate proceedings online friendly, so most voting, discussion, etc can happen by video conferencing, with 2-3 weeks per year face time in Ottawa. This way, the work is part time, and can be worked around jobs/children, etc. The pay will have to be good enough for the senators to afford good day care, etc.

    What powers would we give this senate? The power of a second voice, nothing more. If the senate does not like a legislation, it sends the bill back for discussion. If the Commons chooses to pass it unchanged, have a joint vote. The number disparity between the Commons and the Senate would ensure that the Commons gets primacy, unless the bill is so egregiously divisive, and voting so close that a joint session produces a different result.

    What are the advantages of having a randomly picked “young” senate?

    1. Age – Provides valuable policy experience and job training to someone just starting their career, not a sinecure and pension to someone finishing theirs off. At the end of 4-5 years, you get someone who has lived public policy. Obviously, a lot of training and civil service help will be needed, just like for MPs currently.
    2. Elitism – Since we will get a randomly selected senate, there are fewer White male middle aged lawyers.
    3. Representativeness – This provides a direct democracy element to our governance.
    4. Orthogonality – The senate is picked using rules completely different from the Commons, so we will get a different set of people.
    5. Ego and power – Being a politician means wanting to be one, and all the compromises that come with it. I am not a politician basher, many of them want to do good. But having a vote for people who did not have to raise money, or are not beholden to any special interest groups (in theory) provides a good complementary view.

    I am under no illusion that this senate will be less “partisan”, whatever that means. We have strong biases whether we acknowledge them or not, and the senators will vote with these biases. That’s okay, politics is about making choices. But we can design senate rules to mitigate party affiliation and conflict of interests.

    Obviously, just like jury duty, people could have an option to refuse for the right reasons, but there should be no other restrictions. If you’re eligible to vote, you’re eligible to be picked regardless of your past history. Will there be a few slackers, yes, but look at the current senate/house of commons, there are some who make you wonder… We also have people in the Senate appointed in 1979, clearly time to leave after 30 years!

    So, hey young woman, you sitting in the corner pondering your next move, would you like to be a senator?

    Image courtesy – Flickr – Andresrueda used under a creative commons license.

  • |

    California’s Prop 65 on Deathbed

    House votes to dump state food safety laws

    See this post for some context.

    The vote Wednesday was a sign of the tremendous power of the food industry in Congress. Corporations and trade groups that joined the National Uniformity for Food Coalition, which backed the bill, have contributed more than $3 million to members in the 2005-06 election cycle and $31 million since 1998, according to data from the Center for Responsive Politics.

    The industry also has many top lobbyists pushing the bill, including White House Chief of Staff Andrew Card’s brother, Brad Card, who represents the Food Products Association.

    Well, will it die in the senate? One wonders.

    Why bother with an elected goverment if all it does is pass bills written by big industry? Maybe it’s time to get the middlemen out and have big business actually run the country, maybe GM can take a shot! Or maybe the top guy on the Forbes list for the year can take over as president for the year, this will give Warren Buffett good incentive to knock off Mr Gates.

  • |

    Fun with maps: BC Smart meters and the 2013 election

    SmartMeterVotingMapI have been MOOC’ing this summer and learning how to do maps. Geography as an adult is much more fun than my 10th grade geography class.

    Chad Skelton over at the Vancouver Sun intrigued me with his data retrieval and mapping of British Columbia’s Smart Meter uptake. if you’re not from BC, here’s a short intro (#BCpoli-aware feel free to skip the next two paragraphs).

    BC Hydro is the government owned (Crown Corporation) utility that produces and distributes electricity for the province of British Colombia in Canada. In 2011, BC Hydro announced its intention to spend $$$ upgrading all its electricity meters to “smart meters”. These meters are capable of being read via wifi by meter readers, and potentially also give BC residents the ability to monitor their electricity usage in near-real time.

    Many concerns were raised about the smart meters. One was about the costs of the program vs. perceived benefits. The others, which gained traction were around an emerging movement in BC connecting wifi, cell signals and wifi-enabled smart meters with a whole variety of health effects. While few, if any of these health concerns have been actually causally linked to smart meters, or even to the amorphous descriptor “wifi radiation”, these health concerns have gained traction even among official bodies such as the Union of BC Municipalities, municipal councils and school boards. The BC provincial election in 2013 was a chance for people to voice their concerns. The opposition parties all brought the issue up during canvassing.

    For my peer assessment mapping project, I wanted to see if areas of relatively high smart meter refusal were correlated or co-located in any way with voting against the ruling BC Liberals.

    This is the map I made, my first ever map not scrawled on paper.


    View Larger Map

    Reading the Map

    The electoral districts are colour-coded by BC Liberal Party percentage, darker means higher vote for the BC Liberals. I chose this rather than “who won” because I was looking more for an anti-BC Liberal effect. I will, at some point in time, try to overlay “who won” as well. The smart meter refusal data is in three different coloured and sized circles. Large and red means higher refusal, and small and green means low refusal. This is a hybrid of a graduated circle symbol scheme and a diverging colour scheme. Clearly, using points to represent areas is a big limitation, but it is sufficient for a quick peek.

    Anything to See?

    • An overwhelming majority of people had smart meters installed, > 90% in most places. So, BC Hydro’s brute force, no options, default installation plan was mostly successful
    • Places of higher than normal refusal tended to vote against the BC Liberals. I believe this had more to do with existing anti-BC-Lib tendencies influencing smart meter refusal rather than the other way around.
    • Urban centres like Victoria and Vancouver had relatively low rates of refusal. Is this because of higher apartment proportions, or because smart meter refusal was restricted to a small number of high information, highly motivated individuals whose number varied by location and whose numbers in places like Victoria were muted by larger populations?. Note that my home area of Victoria had the most (7300) rejected smart meters, even though the percentage is small. The ageing white (l)iberal enclave of Saltspring Island (Ganges), aka hippieville, Canada had by far the highest refusal percentage. So, is this smart meter refusal map mostly a hippie population distribution map?

    The take home message for me was that the anti-smartmeter movement had little influence on the election, which was most likely won on the usual and mundane issues of the economy, trust and corruption.

    Methods

    1. I downloaded data on smart meter refusal from the Chad Skelton’s post and Tableau public
    2. The data from BC Hydro is categorized using their division of BC into distinct geographical billing areas. I used billing area names to geotag the information. The site http://www.findlatitudeandlongitude.com/ has a feature where addresses can be uploaded in bulk via a text interface, and the site returns the place, and latitude longitude. I added province and country to the place names, and edited ambiguous names to make the search more effective.
    3. I uploaded this table to arcgis to form one layer. Arcgis is a big and expensive GIS software, with a limited free online playpen where this map is displayed. I used graduated circles and natural breaks to represent the different levels of smart meter refusal. A big limitation to this approach is that the BC Hydro billing areas are just that, areas, not points on a map. However, the area boundaries are not available as a shape file, and geographical areas vary widely. So, the points correspond to the centre of the nearest big population area mentioned in the BC Hydro billing area description
    4. I downloaded BC electoral district shape files from Paul Ramsey of Open Geo. These shape files are an improved version of those available from Elections BC, again, thanks to Chad Skelton for pointing me in this direction
    5. Elections BC lists 2013 provincial election results information by party by district. However, there is no publicly downloadable mapped source for the election data results. I used the open source GIS desktop software QGIS to open the shape file and add the attribute of BC Liberal percentage to the shape file. I uploaded this shape file to arcgis and layered it with the smart meter refusal rate graduated circles to look for patterns.

    Maps are fun to play with, and I know very very little about them, which is a great combination. Every minute I spent making this map was a learning experience. Comments and feedback, please. I think I will slowly incorporate mapping into my skill set. But I think I will use open source/free solutions in the future.

  • Compare and Contrast…

    “(Our) stance is not limited to those who fight on the government’s side but applies to all Sudanese, including those who still bear arms and fight the government. They are Sudanese, and we will not let them be tried by any court outside Sudan.”
    — Sudan Justice Minister Mohamed Ali al-Mardi
    Sudan rejects ICC jurisdiction, says one suspect held | Reuters

    To wit…

    For a number of reasons, the United States decided that the ICC had unacceptable consequences for our national sovereignty. Specifically, the ICC is an organization whose precepts go against fundamental American notions of sovereignty, checks and balances, and national independence. It is an agreement that is harmful to the national interests of the United States, and harmful to our presence abroad.

    John Bolton, Ex US Envoy to the UN

    Nothing more to say, goose, meet gander, eat sauce!, insert other acceptable truisms, here. When Sudan uses the same language as the leader of the free world to “protect” perpetrators and apologists of genocide, you know that the world is a FUBARed place.

One Comment

  1. Gasp! Are you suggesting that throwing 700billion at the problem isn’t going to help?! Well, whyever not.
    Oy, it makes my head hurt. Can’t wait to see how it all shakes out.

Comments are closed.