30 March 2010

It's Worth Asking

A recent poll suggests that nearly one-in-four Republicans believe that Obama is the anti-Christ.

Next time you're with four or five of your Republican friends, when there is a lull in the conversation, lean in conspiratorially and ask, "Okay. Which one of you knows that Obama is the anti-Christ? And why?"

What ensues ought to be more interesting than whatever else you were talking about. Like non-standard uniforms, for instance.

29 March 2010

The Future of Baseball?

Team uniforms are ... well, so uniform.

I wonder how long before we'll have a professional team named, say, The Las Vegas Rebels, or the Santa Cruz Non-conformists whose team members are free to dress as they please. The pitcher in retro-uniform, the Left Fielder in his college jersey, the first basemen in shorts and t-shirt because it is hot.

The beauty of it is that whatever you wore to the game, you'd be showing your support for the team.

23 March 2010

Health Care Aftermath

Republicans felt that health care reform ought not to focus on expanding the insured but, rather, on limiting lawsuits.

Within hours of Obama signing the new health care bill, Republicans have sued.

History from the Future: The Burger Craze of 2014

It was hard to know exactly when futures markets had begun to drive commodities prices. Oil, obviously, was one place where speculations on financial markets drove the everyday price at the pump - causing prices to rise and dip like seagulls in a squall. And then the same thing began to happen to wheat, rice, beef, chicken .... And before long, the prices at restaurants and grocery stores began to move in tandem with these commodities prices, like prices at the gas pump. And then somebody got the really bright idea of pricing food like stocks and the real fun began.

The pushing and shoving in line at the fast food joints as the first indication that something profound had changed. Customers were bidding for burgers like traders on the floor of the stock market. Prices were bouncing up and down like the price of Yahoo stock. From the time someone got into line to the time they ordered, the combo meal they wanted might have gone up or down a dollar. But that was just at first. Soon, this market, like so many before it, began to be defined by derivatives and speculation.

In 2014, there was the great quarter pounder craze. As the pace of social change quickened, demand for comfort food surged. Coupled with a bad wheat harvest that year, savvy speculators realized that beef prices would soon be going up. A day trader who'd become rich speculating on gold around the time of the Great Recession, Chaz Mingus, tried to corner the market on quarter pounders and the folks at Goldman Sacs began to bid against him. It was surprising that quarter pound burgers rose to $10. What was more surprising was that this actually created a resurgence of interest in quarter pounders. Worried that this American classic might soon be priced out of reach, Americans lined up to buy it before prices went higher. This, of course, made prices go even higher. Commentators were soon explaining that it only made sense that quarter pounders would cost $120. Hadn't Americans been paying exorbitant prices for fine dining for decades? And what was more classic than the burger? And then prices hit $500 and as had happened decades before at Ford and GM, the new credit and financing divisions of Burger King and McDonald's began to make more profit than the actual restaurants. Stories abounded of people who were paying the equivalent of monthly mortgages for their quarter pounder habit.

The derivatives market began to trade in the concept of the hamburger. How could you price something so iconic, people began to ask. And then the prices got really out of hand.

Curiously, the market bust about a year later when Wendy's introduced the fifth-pounder. Prices plummeted and millions of Americans were left holding the bag on $2,000 hamburgers.

19 March 2010

The Simple Financial Reform Act

My plan for financial reform is simple.

Bankers get two kinds of bonuses: positive and negative.

Let me elaborate.

If a bank makes a billion dollars in profits, some banker in it might get a bonus of a million. This kind of thing actually seems like a pretty good deal for banks and their shareholders. If some guy can find you a billion in profit that you weren't going to have before, it only seems fair that you share the wealth. I honestly have no problem with institutions like banks sharing profits with people who take initiative. In this way, banks (or corporations) do what smart governments have done for business people for centuries: let these individuals keep a portion of the money they make. (And countries usually let entrepreneurs and individuals keep about 50% to 70% of what they make, whereas banks and corporations only let their employees keep about 1% to 20% of what they make. If anything, banks and such may give too little for a bonus.)

So business people within a country have an incentive to take risk. They start a business to make money. To get a return, they have to take a risk. One of the simplest rules of business and investing is this: higher risk yields higher return. But the business person is also careful about taking risk. Because the even simpler rule is that more risk means more risk. The business person could lose his business and his house. He's bold but not reckless.

The problem with bankers is that they, too, have an incentive to take risk. They make up new financial instruments, make investments, and try new things in seek of higher returns. If these risks work out, they get a big return. But if these risks don't work out, they get nothing.

It is easy to say that the bankers are greedy. But really, how would any of us play this game? The more risk you take, the more you can make. Oh, and if you lose the bet, you get nothing. That's right. You don't get a negative amount. You simply don't get a bonus. You would be right to take huge risks. But of course, even if you can't do worse than zero, the bank can lose billions or even trillions.

An easy way to continue to motivate bankers to move banks forward is to continue to give a bonus. An easy way to make sure that the risks they take moving forward are bold but not reckless is to mandate that their bonuses can be negative as well as positive. Sure you can make a million but you can also lose a million. Or, if you are playing options and the like, perhaps lose tens of millions.

This is not something that bankers will adopt themselves, any more than popes willingly gave up religious control over regions of Europe or kings willingly gave up control over portions of their kingdom. Nobody with huge power ever just voluntarily gives it up.

But as long as governments are insuring banks - as they should - they can stipulate how something like a bonus is calculated. And I suspect that no one regulation would do more to ensure a balance between the necessary risk taking to keep the industry innovative and the cautious risk avoidance that would keep the financial industry from regularly imploding.

Once We've Cut Health Care Costs ...

We can adopt this plan for education.

17 March 2010

Less Jefferson, More Schlafly. If that doesn't make America stronger, we'll have to resort to more drastic measures

Texas is changing textbooks, putting more emphasis on the influence of Phyllis Schlafly and less on Thomas Jefferson.

“By getting married, the woman has consented to sex, and I don’t think you can call it rape.”
- Phyllis Schlafly

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness.”
- Thomas Jefferson

The Texas State Board of Education approved some controversial right-leaning alterations to what most students in the state – and by extension, in much of the rest of the country – will be studying as received historical and social-scientific wisdom. Here are some of the other signal shifts that the Texas Board endorsed last Friday.

A greater emphasis on “the conservative resurgence of the 1980s and 1990s.” This means not only increased favorable mentions of Schlafly, the founder of the antifeminist Eagle Forum, but also more discussion of the Moral Majority, the Heritage Foundation, the National Rifle Association, and Newt Gingrich’s Contract with America.

Thomas Jefferson no longer included among writers influencing the nation’s intellectual origins. Jefferson, a deist who helped pioneer the legal theory of the separation of church and state, is not a model founder in the board’s judgment.

Read the whole thing here.

15 March 2010

Of course a half century later, there are fewer surprises

When we got into office, the thing that surprised me the most was that things were as bad as we'd been saying they were.
- John F. Kennedy

09 March 2010

Firing Teachers? That'll Change Everything.

Newsweek's cover article argues for firing bad teachers. I'm sure that will change everything. Just like voting out all the bad politicians will change Washington.

We used to burn witches because we didn't understand disease and bad weather. Today we vote out politicians and fire people because we don't understand systems.

Are there bad teachers who should not teach? Probably. Can some of them be rescued themselves by better education about how to teach? Probably. Will more rigorously firing more teachers help? Probably not.

Keep this in mind. We have no more populous profession. How many teachers do we have in this country? 3.7 million, more even than lawyers (952,000), engineers (1.3 million), waiters (1.8 million), janitors, maids and household cleaners (3.3 million), and secretaries (3.6 million).

I am going to assume that we can't afford to pay enough to compete for the engineers or lawyers (and it is not obvious how many would have the personality and skills to deal with and manage kids anyway.) I am also going to assume that very few of the waiters and maids have the background to educate kids. So, assuming that we fire the bad half of teachers, where are we going to find nearly 2 million "good" teachers? (The Gates Foundation is researching what makes for good teachers and one thing that they can report with confidence is that current certification is no predictor of "good.")

We have an educational system. If we want a different output, we have to change the system, not the people working in the system. If you don't like the way the movie ends, you don't hire new actors: you change the script. (And I will agree that changing the system may change who gets through the system to become teachers. I don't deny that there are bad teachers. I just deny that they constitute a big enough problem to change outcomes much given how much we can now afford to pay teachers and the technology we currently use for teaching.)

And I would say that a measure of how well the system performs should begin with accurate measures. The Newsweek article suggests that the US performs about on par with Lithuania, ranking about 10th in the world. I think it would be more telling to know how first generation immigrants from Mexico or China (or Lithuania even) do on standardized tests compared to kids who are still in Mexico, China, or Lithuania. (And even this would not be apples to apples given that English as Second Language kids aren't given provision for learning a new language in most American school systems.) By that measure, I'd be willing to bet that we do pretty well.

No other country in the world brings in more immigrants from more countries. I feel confident that third and fourth-generation American kids would hold their own against kids from any country.

Does this mean that we ought not to change the educational system? I would never say that. I've argued for changing the system numerous times in this blog. (40 posts not counting this one.)

But succeeding at improving the current system would be the booby prize (and I don't mean booby in a good way). It would be like making a better turn table or horse carriage in a world of CD players and cars. If we could find a market for standardized tests, emphasizing them would make sense. We have not and they do not.

If we begin to pay some teachers $130,000 and fire others, we'll just raise the cost of an already costly educational system by increasing turnover, teacher training costs, and raise wages. Paying some teachers far more while firing others sort of reminds me of giving some kids A's and flunking others. If that kind of system gave us results that made people happy, we wouldn't be talking about firing teachers.

Those Anti-Market Forces Are Ruining Everything

From yahoo:
One year ago, the economic crisis dragged stocks to their lowest in more than 12 years. The S&P 500 is up 68.5 percent since then --the strongest one-year rally since 1936, according to Standard & Poor's, but still 27.6 percent below its all-time high.

Damn that anti-capitalist, socialist Obama.

03 March 2010

Extended Lives = Extended Childhood

George Will writes about boys who won't become men in this week's Newsweek. George decries the fact that the median age at which boys marry or leave home is going up. He makes some good points but misses the context of extended boyhood: we're living longer.

Life expectancy goes up about 3 months a year. This works out to about 2.5 years per decade or about 5 to 7 years per generation.

So, let's say that we still left home and married at 14, as people did only a century or so ago when life expectancy was about 40-some years. Is that really how much preparation we want them to have for work and parenting? Do we expect 14 year olds to choose who they'll be married to at 85?

If the next generation gets married two years later than their dads and then retires four years later than their dads, they'll still end up married and retired for longer than their dads. That is what happens when life expectancy goes up each generation.

It is not just old age that now lasts longer. So does youth. That life stages - from youth to middle age to old age - would all extend for longer as life itself lasts longer makes every kind of sense to me. But I guess saying that wouldn't make for a very interesting column.

01 March 2010

The Secret About Health Care Costs

Rumors are, health care is about 16% of our total GDP. One of the few things that politicians and their constituents seem to agree on is that costs are too high.

So, let's say that the folks in DC reduce health care costs by half - making health care more affordable.

Little problem. Our GDP would suddenly drop by 8%, leaving about 12 million people suddenly unemployed.

People holler about debt and forget that for every dollar of debt there is a dollar of assets.

People holler about costs and forget that for every dollar of costs there is a dollar of revenue.

There will be no sweeping change in health care. It threatens too many jobs and businesses. What we can hope for is coverage for everyone and then incremental cost containment.

The most important thing we could do to contain health care costs, though, has nothing to do with health care. We need to grow new sectors, new industries, that make health care a relatively smaller and smaller portion of our economy. The way to make health care more affordable is to generate more revenue from outside of the health care industry, revenue that can be used to pay for health care.

We aren't just dealing with a health care system. The health care system is, itself, a part of a larger system. Lose track of that and "solving" the health care problem seems nearly impossible.