links for 2010-01-25
Financial Aid to the States Is the Long-Hanging Fruit Here...

Ten Economics Pieces Worth Reading: January 25, 2010

1) Michael Linden: How to Spot a Deficit Peacock:

Deficit hawks come in a variety of breeds.... And then there is another species of deficit bird all together: the deficit peacock. Deficit peacocks like to preen and call attention to themselves, but are not sincerely interested in taking the difficult but necessary steps toward a balanced budget. Peacocks prefer scoring political points to solving problems. How can you tell the difference between deficit hawks, those who are serious about the dangers posed by persistent, large deficits and deficit peacocks, those who only use those dangers to preen and score political points? It’s actually fairly simple. Here are four easy ways to tell when someone isn’t taking our budget problems seriously.... 1. They never mention revenues.... 2. They offer easy answers.... 3. They support policies that make the long-term deficit problem worse.... 4. They think our budget woes appeared suddenly in January 2009...

2) Stan Collender: More On Walking Away From A Mortgage:

I've previously posted on my dislike of the notion that it's acceptable for homeowners who can afford to make their monthly payments but refuse to do so to walk away from their homes simply because they feel like it.  They made a bad decision (or decisions if they took out home equity loans based on the assumption that the value of their homes would never fall) and should have to bear a major part of the total costs involved.  Walking away from the obligation will increase the costs that I and others who are not in this situation have to pay the next time we try to buy a home.  I want that externality captured in a significant way to make it less likely that it will happen...

3) Mark Thoma sends us to Richard Thaler: Non-Recourse Mortgage Borrowers Have Already Paid for Their Option to Walk Away:

[M]illions of American homeowners are “underwater.”.... In Nevada, nearly two-thirds of homeowners are in this category. Yet most of them are dutifully continuing to pay their mortgages, despite substantial financial incentives for walking away from them.... Some homeowners may keep paying because they think it’s immoral to default. This view has been reinforced by government officials like former Treasury Secretary Henry M. Paulson Jr., who while in office said that anyone who walked away from a mortgage would be “simply a speculator — and one who is not honoring his obligation.” (The irony of a former investment banker denouncing speculation seems to have been lost on him.)... The morality argument is especially weak in a state like California or Arizona, where mortgages ...[are] secured [only] by the home itself.... [B]orrowers in nonrecourse states pay extra for the right to default without recourse. In a report prepared for the Department of Housing and Urban Development, Susan Woodward, an economist, estimated that home buyers in such states paid an extra $800 in closing costs for each $100,000 they borrowed...

4) Jay Rosen and Scott Rosenberg: Get there by clicking a link and the New York Times paywall disappears:

"Q. What about posting articles to Facebook and other social media? Would friends without a subscription then not be able to view an article that I think is relevant for them?" — Julie, Pinole CA. "A. Yes, they could continue to view articles. If you are coming to from another Web site and it brings you to our site to view an article, you will have access to that article and it will not count toward your allotment of free ones."

Jay Rosen: [T]he answers are from Janet Robinson, president and chief executive of the Times company, and Martin Nisenholtz, senior vice president for digital operations. They ought to know, right?  So according to the people who made the decision, the metered system to which the Times will be moving permits unlimited access to articles at the Times site as long as the user gets there from another web site. Therefore, all linking from blogs would be unaffected.... Google News is surely "another Web site."... That looks a lot less like a pay wall to me. It isn't a metered system if I can access the Times via the link economy without limit.  This scrambles a lot of what's been written on the subject. 

Scott Rosenberg: I think that the phrase "get there from another website" may be executive fuzz-brain of some kind. Maybe they mean "get there from certain other websites we select." Because otherwise what they're saying is "we want people to read our articles. We will charge them to do so if they find those articles by clicking from our own front page, but if they arrive from anywhere else they will be free." Which makes zero sense...

5) Free exchange: The jobless recovery, illustrated:

A NEW Goldman Sachs report... on America's lacklustre labour market.... [E]ven by the pitiful standard of those recent downturns the current recovery is a jobless one. The gist of the report on housing, by the way, is that the sector's performance in 2010 is likely to be disappointing relative to the second half of 2009, thanks to the withdrawal of government supports, continued labour market weakness, and foreclosure troubles.

Already the data appear ready to support the Goldman conclusion. Just today, the National Association of Home Builders released its report on builder confidence for January, and its index declined from December—the second consecutive monthly drop. As Calculated Risk notes, housing starts data tend to follow builder confidence pretty closely, which suggests that the autumn rebound in home construction is likely to stall out. That will mean fewer new jobs in construction, and where back to the point about the jobless recovery. It will be a while until the American economy pulls itself out of this trap.

6) Economist: Published calories counts have intended effect:

Here's a new piece of research from NBER, by Bryan Bollinger, Phillip Leslie, and Alan Sorensen:

We study the impact of mandatory calorie posting on consumers’ purchase decisions, using detailed data from Starbucks. We find that average calories per transaction falls by 6%. The effect is almost entirely related to changes in consumers’ food choices—there is almost no change in purchases of beverage calories. There is no impact on Starbucks profit on average, and for the subset of stores located close to their competitor Dunkin Donuts, the effect of calorie posting is actually to increase Starbucks revenue. Survey evidence and analysis of commuters suggest the mechanism for the effect is a combination of learning and salience.

That is what we'd expect to see; after all, consumers seem to significantly underestimate the calorie content of junk food, occasionally by thousands of calories. What's interesting is that Starbucks actually benefitted financially, relative to nearby competitors, from posting this information. That suggests that firms should be quick to adopt calorie posting in places where it's not yet mandated. And, oddly enough, the government mandate seems to have turned up a few twenty dollar bills, just lying around on the sidewalk.

7) GRAPH OF THE DAY: John Timmer: NASA: 2009 tied for 2nd-warmest year, 00s hottest decade:

NASA: 2009 tied for 2nd-warmest year, 00s hottest decade too

8) BEST NON-ECONOMICS THING I HAVE READ TODAY: Garry Kasparov: The Chess Master and the Computer:

The AI crowd, too, was pleased with the result and the attention, but dismayed by the fact that Deep Blue was hardly what their predecessors had imagined decades earlier when they dreamed of creating a machine to defeat the world chess champion. Instead of a computer that thought and played chess like a human, with human creativity and intuition, they got one that played like a machine, systematically evaluating 200 million possible moves on the chess board per second and winning with brute number-crunching force. As Igor Aleksander, a British AI and neural networks pioneer, explained in his 2000 book, How to Build a Mind:

By the mid-1990s the number of people with some experience of using computers was many orders of magnitude greater than in the 1960s. In the Kasparov defeat they recognized that here was a great triumph for programmers, but not one that may compete with the human intelligence that helps us to lead our lives.

It was an impressive achievement, of course, and a human achievement by the members of the IBM team, but Deep Blue was only intelligent the way your programmable alarm clock is intelligent. Not that losing to a $10 million alarm clock made me feel any better...

9) STUPIDEST THING I HAVE READ TODAY: Bill O'Reilly, via Adam Serwer of TAPPED Bill O'Reilly is very very sad that you can't make "Arab jokes" anymore:

O’REILLY: So 48 years ago — 48 years ago in this country we could make fun of Arabs. … We could make fun of people in a general way, and certainly, Ahab was the Arab was a general parody. But now, we can’t. What has changed in America?

Serwer comments: It's not really that you "can't" make racist jokes anymore; it's that you when you make them, you can't expect everyone to remain silent as you assert your cultural or racial superiority through humor. Still, while we're clearly a country where simply "making fun of Arabs" is seen in most circles as inappropriate, we are a country where it's not as taboo to whine about no longer being able to make fun of Arabs...

10) HOISTED FROM THE ARCHIVES: DeLong (April 2005): Materials Science:

Wood is truly an amazing substance. Relatively light, very strong for its weight, elastic, capable of being shaped to an extraordinary degree.... It seems clear that competition between plants has a bunch to do with it: whatever plants can get their leaves higher and wider spread has a big advantage in photosynthesis and thus in fitness. It seems pretty clear that wind has a bunch to do with it: wind can put great stresses on plants--especially those that reach high and are widely spread. But I really do wish that by now somebody had told me why wood is so... woody.

Tomorrow: I also wish someone would tell me why doping iron with carbon atoms changes its properties so much...