Philip Greenspun’s Weblog

Thought for this morning: Is Greece the equivalent of GM? Here are some parallels:

• GM promised to pay out more in pensions than what it could earn in profits (2009 post); Greece promised to pay out more in pensions than what it could collect in tax revenue
• GM received about $100 billion in taxpayer dollars while its competitors received nothing; Greece has received about $400 billion mostly from its partners (also competitors in many industries, such as agriculture and tourism) within the EU

I was always shocked that Ford could survive as a company when its major competitor had just been handed $100 billion for free. Now I’m wondering why Greece isn’t doing better than some of its competitors. With $400 billion in free money, shouldn’t Greece have an edge over other countries in the region? Maybe the answer is that the people who provided the $400 billion want it back, but Greece is sovereign and, assuming it is willing to live within its means going forward, can simply say “we’re not giving any of it back.” That would leave Greece as having had a massive injection of free cash, especially on a per-capita basis, that neighboring countries haven’t enjoyed. Greece could even keep the euro in the same way that Ecuador uses U.S. dollars as its official currency without having any special ties to the U.S. Treasury.

Clearly there is something wrong with the above analysis because (1) Ford is still more profitable than GM, and (2) Greece is the subject of a constant stream of doom-and-gloom journalism. But I can’t figure out why this back-of-the-envelope calculation is wrong. In short: assuming that they’re not going to pay it back, shouldn’t Greece be better off than a country that had never borrowed $400 billion?

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“Revenge Killing: Race and the death penalty in a Louisiana parish” is a New Yorker story about a man in Louisiana sentenced to death after either a tragic murder or a tragic accident, depending on which medical expert you believe. As with similar stories from the magazine, the description of the legal process is thorough.

[Note: the New Yorker editors implied with their headline that this was a racially-motivated prosecution and verdict. The text of the article does not support that headline, however. The prosecutor admits to a prejudice against children of divorced and unwed parents:

[Prosecutor] Cox told me that in the past forty years he had never prosecuted a man between the ages of seventeen and twenty-six who grew up in a nuclear family. “Not one,” he said. He believes that the “destruction of the nuclear family and a tremendously high illegitimate birth rate” have brought about an “epidemic of child-killings” in the parish.

But there is no evidence that the prosecutor is prejudiced against anyone on any other basis, including the “race” characteristic of the headline. There were three black members of the jury and all apparently voted “guilty” for this defendant, who happens to be black.]

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I asked a couple of divorce litigators what they thought of the movie Boyhood. The quote “Women are never satisfied. They’re always looking to trade up.” was cited with approval.

They liked the mother’s practice of multiple marriages and divorces, but couldn’t understand how she could have been so badly informed as to be doing it in Texas (virtually no alimony). Had she been married in Connecticut, for example, she could have been collecting alimony off at least one husband at all times.

They thought that it was unrealistic that the mother was not engaged in post-divorce litigation with the father of her children, at least to get court orders for more lucrative child support payments as his income grew.

What do readers think of the film? Personally I thought the least credible part was the carefree musician becoming an actuary without ever once having a math book in his hands. Also, if he was an actuary working in tax-free Texas (BLS says $94,000/year median pay in 2012), why wasn’t he rich enough to keep his classic muscle car?

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The Wall Street Journal has a story about how Down the Rabbit Hole: Curious Adventures and Cautionary Tales of a Former Playboy Bunny is America’s #1 bestselling book. The author is Holly Madison, a 35-year-old who was at one time Hugh Hefner’s girlfriend and lived in the Playboy Mansion (Hefner is 89).

The reader comments are interesting. One reader disputes that there is any “correlation, positive or negative, between beauty and intelligence. Some beautiful women are intelligent and some are not.” This is at variance with “Intelligence and physical attractiveness” (Kanazawa 2011, Intelligence), which found a positive correlation.

Here’s a response to a commenter attacking Madison for being a bimbo:

Actually she is quite an intelligent person. I heard her do an interview with a business news site two years or so ago. I was very impressed with her performance. She’s articulate, can think on her feet (or her back, depending, I guess on the needs of the moment) and is not afraid of any questions. Unlike interviews that the news media does with Hillary Clinton, the interview was not rehearsed, the questions were not presented to her in advance so her staff could prepare canned answers, and the interviewer did not fawn all over her George Stephanopolus-style.

Yes, she used her assets. Why not? Do we really think that the offspring of rich, powerful politicians and mega rich media moguls really shot right to the top of daddy’s empire because of their brains and business ability?

Andrew Cuomo would be parking cars for a living if not for daddy.

What about the general idea of Americans being more interested in the memoir of a rich geezer’s young girlfriend than in The Rise and Fall of Classical Greece (a recent download to my Kindle, though I haven’t read it yet)? Kenneth Tarr noted

In some ways, entertainment today is like the Roman amphitheaters in days of old, when entertainment had to become more extreme to keep the citizens engaged.

Has anyone who reads this blog also read this book? What is there to say about Ms. Madison’s bestseller?

Related:

• child support cashflow from a brief encounter at the Playboy Mansion (see the California chapter of Real World Divorce for the formula)
• comment on NBC News article on Bill Cosby at the Playboy Mansion:

If you are a success out West, get ready for women to pretend to be your soul mate, until you don’t fall for their lies and trickery. Then, since their Plan A failed at you getting them pregnant so they can live off child support for the rest of their lives, Plan B kicks in: the rape and abuse allegations. The goal is to get the same amount of money but by different means. I had five women attempt to scam me after moving out West. Of the five, two were psychopaths — with children from many different fathers! All living off over $10,000 a month in child support.

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On a recent flight I watched (but did not listen to) the live action version of Cinderella. Historians tell us that princes and kings back in the old days were not typically set far apart from ordinary nobility and they tended to affect a “first among equals” manner even when they were. In the movie, however, when the prince and Cinderalla dance everyone else at the ball (presumably all noble) stands in a circle to watch. Children learn from watching this that some people are vastly more important than others, the exact opposite of what their K-12 teachers are supposedly telling them.

So here’s a question for readers: Why is this message popular with children? We know why the chain of being was popular with rulers, but I don’t think anyone is explicitly telling those who make children’s movies to emphasize this concept.

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In February I posted a note about TransAsia 235, the turboprop that crashed in Taiwan. I suggested that, in the event of an engine failure, the pilots didn’t have to do much of anything other than fly the airplane. The official factual report is now available.

The engine failed about one minute after take-off (see page 12). Automated systems then shut off bleed air from the good engine, so as to maximize its available power (bleed air from the compressor is used to run pressurization and de-icing), temporarily relaxed a power limit to the good engine (“uptrim”), and, more important, feathered the prop on the failed engine so as to reduce drag. At this point all the pilots had to do was leave the throttles pushed full forward and fly. The pilot flying (PF), however, pulled back the throttle on the good engine about five seconds after the bad engine failed, ignoring the PM’s (pilot monitoring) suggestion to “wait a second cross check.” (A third pilot, an “observer” (OBS), sat behind the PF/PM in the front seats.) With no power on one side and limited power on the other side the airplane crashed about two minutes later.

Not a great day for John Henry…

[Illustrating the human bias towards action, the press coverage of this latest discovery has failed to mention “doing nothing” as a superior alternative to what the pilots actually did. A non-pilot reader would be left with the impression that the crew should have moved at least some levers but unfortunately moved the wrong one when in reality a far better course of action would have been to touch nothing. (Corollary to the First Principle of Flying Jets: “If a switch has dust on it, don’t touch it.”)]

Related:

• my syllabus for multi-engine training in a crummy piston-powered twin
• part of my email report on flying a Beriev Be-103: “pulling an engine back to zero thrust is an experience you won’t soon forget. The yaw isn’t that dramatic because the engines are inboard. What is dramatic is the sink rate at blue line. We were at 3000′ on a cold day and couldn’t hold altitude. It turned out that we’d [we = TWA captain demo pilot plus newbie (me)] left the cowl flaps [air inlets to cool the engines at high power settings] open and that was enough to rob us of the advertised 3000′ service ceiling. A piston twin is a pretty bad aircraft and an underpowered piston twin is scary bad. The ship has 210 HP per side. It probably should have at least 250 or, better yet, a single 450 HP turbine.”

 

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What percentage of U.S. GDP is simply moral hazard? The U.S. is one of the world’s most heavily insured countries and Americans are not notable for considering the welfare of their insurers.

Let’s consider health insurance, the purchase of which is now required by law. Would people be discouraged from risky behavior if they thought that they’d have to pay medical costs likely to occur as a result? Can any non-emergency trip to a U.S. hospital be considered moral hazard? If an American didn’t have insurance, presumably he or she would fly to Europe, Mexico, Israel, or India to have a procedure rather than pay 5X the world market rate.

Taxpayer-subsidized flood insurance is another obvious example. A lot of Americans have built and rebuilt fancy houses near the beach or rivers because they don’t have to pay the true cost of cleaning up after floods.

I thought about this other day because of a condo that I own in Cambridge. The trustees are the owners of the four units and also manage the building (rather than contracting with a property management firm to do it professionally). The top of the building is a 125-year-old slate roof that I wrote about in 2013. The trustees with units on lower floors voted against redoing the roof (cost of $25,000 to $30,000) on the grounds that it wasn’t leaking into their units, but only into the top floor unit, and also because the insurance company had always been there to write checks for repeated damage (minus a deductible each time). The winter of 2014-2015 resulted in ice dams on the roof, however, which sent water down the side walls into units on lower floors. The insurance company estimated that it will cost $100,000 to repair and they are getting ready to write a $76,000 check (the full cost minus some depreciation for damage to areas that hadn’t been painted for a while). In a world without insurance the roof probably would have been fixed a long time ago. In a world with an insurance company cheerfully paying out, a large percentage of GDP will be repairing damage caused by moral hazard.

What do readers think? Is this now a significant percentage of U.S. GDP. Given that health care is 18 percent of GDP it seems as though it could be.

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“A World Without Work” is an Atlantic story about what the U.S. might look like after robots and smarter software take over a lot of jobs within the U.S. The author says that the declining labor force participation rate in the U.S. (from 66 percent to 63 percent since 2009) hasn’t been the boon to American happiness that we might have expected: “By and large, the jobless don’t spend their downtime socializing with friends or taking up new hobbies. Instead, they watch TV or sleep. … The unemployed theoretically have the most time to socialize, and yet studies have shown that they feel the most social isolation; it is surprisingly hard to replace the camaraderie of the water cooler.”

This Wall Street Journal article shows that Puerto Rico is about 20 years ahead of the rest of the U.S. The federal minimum wage of $7.25 per hour is 77% of the median wage (comparable to a $13 per hour minimum wage in May 2014 (BLS data showing median hourly wage of $17.09 nationwide)). In other words, it is illegal for companies to hire a large percentage of Puerto Ricans at what would be a market-clearing wage for their particular skills. The result is that labor force participation in Puerto Rico is 43 percent, which means a much higher percentage of the population needs to find something to do every day other than work.

There seems to be a political consensus in the U.S. around raising minimum wage to $12-15/hour. If we assume that Americans as a whole will respond to economic incentives in the same way as those who live in Puerto Rico, presumably the 50 states in 10 years will look like Puerto Rico today (or sooner if the technological revolution forecast by the futurists turns into reality). This makes Puerto Rico a potentially useful laboratory for figuring out how to build a society that is satisfying for citizens when the majority of able-bodied working-age citizens do not have jobs. On some measures, Puerto Rico has already solved the problem of how to build a good society without work. This Orlando Sentinel article notes that Puerto Rico topped a worldwide happiness survey back in 2005. A lot of the boost seems to come from extended family living nearby. The mainland U.S. could be naturally trending in the Puerto Rican direction. As traditional colleges become unaffordable fewer young people will move away from home in order to go to college. As a smaller percentage of Americans work, a smaller percentage will move away from their birthplace in order to work. We could spend more of our tax dollars on festivals and social gatherings (every town every three days) and less on health care (if we cut the percentage of GDP spent on health care to something more like what other developed nations spend we could easily fund all-day, every-day parties; see my health care reform piece for other alternatives). We have 50 million people getting food stamps. What if, for at least one meal per day, those 50 million people were invited to come to a social meal? The same deal with SSDI. We could offer enhanced SSDI benefits for those who move to an “SSDI party village” where at least half of the neighbors are also on SSDI. Then there would be more opportunity for socializing during the middle of the day when 43-63 percent of working-age Americans were at work.

What ideas do readers have? How should society be organized if only a minority of working-age Americans are working? What can we test out in Puerto Rico?

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Whatever Greece has been doing economically hasn’t worked out that well, apparently. It seems irrational to say that “What we organized in the past few decades led to insolvency, but we’re much smarter and wiser and would never do that again.”

Maybe Ecuador is the model for Greece. They noted their failures in managing their own currency (the sucre) and voluntarily gave up this government function in 2000, adopting the U.S. dollar as the official currency.

Analogously, the Greeks could recognize that they aren’t capable of drafting and passing laws that lead to a sustainable economy and import another country’s laws and regulations in a big package that nobody can open or tweak. Which country’s laws should they pick?

The CIA Factbook shows that the world’s most successful country, aside from oil-rich Qatar or a few tiny financial services havens, is Singapore. Singapore has a per-capita GDP that is 50 percent higher than the U.S.

Singapore is similarly situated to Greece in many ways. The population is within a factor of 2. Both countries are small relative to neighbors and trading partners. Both countries have military challenges in dealing with much larger potential foes (Turkey for Greece; Malaysia and Indonesia for Singapore; Singapore currently spends a larger percentage of GDP on military than does Greece (World Bank)).

Greeks could strip their politicians of law-making power and say that their courts and police were responsible for applying the laws and regulations of Singapore, however those laws and regulations evolve.

Related:

• Heritage foundation on Singapore (#2 in the world for “economic freedom,” after Hong Kong)
• Heritage foundation on Greece (#130 in the world, in between Suriname and Bangladesh) — this raises the question “Why does the world have to stop and pay attention to the economic challenges faced by the Greeks? Are there not similar challenges faced by people in their economic environment neighborhood? Why do we care about Greeks this week but not people in Suriname or Bangladesh?)

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An awesome idea from Spain: hybrid airplane powerplant. Airplanes need about 65 percent power for a reasonable cruise. Airplanes can certainly fly on 35 percent power. Thus having an electric motor that can be used for a boost on take-off and as a backup in case the reciprocating contraption comes apart comes with potential weight savings as well as some potential safety improvements (though not too many accidents are caused by power failure).

With typical regulatory certification challenges this might be ready in 10 years!

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