Philip Greenspun’s Weblog

Peter Singer, the philosophe terrible of New Jersey, argues in The Life You Can Save: Acting Now to End World Poverty that it is our responsibility to provide sufficient aid to poor people in foreign countries so that nobody starves or dies.

The obvious objection to this argument is provided by Thomas Malthus (1766-1834), who predicted that human population growth would inevitably exceed growth in food production. Singer does not mention Malthus until page 121 (out of 173). Malthus is dismisssed in a couple of pages by noting that if everyone on Planet Earth became a vegetarian we would then have enough grain to feed everyone. [Not a refutation of Malthus because universal vegetarianism would yield a constant increase in calories available against an exponential increase in population.] Singer does not reference Gregory Clark, author of A Farewell to Alms, the most heavily researched exploration of Malthus and his applicability to the modern world (Clark analyzes data going back to the 12th Century in England). Much of Singer’s support for a cheerful economic outlook is provided by references to Jeffrey Sachs (see this weblog posting from 2006). Sachs is cited uncritically starting in the Preface and continuing throughout the book, as though Sachs had proved his assertion that if we guarantee every impoverished person on the planet free food, free housing, free education, and free health care, all currently poor countries will experience a development process comparable to Germany during the Industrial Revolution.

Neither Sachs nor Singer deals with the example populations that are in fact guaranteed all of these things, e.g., Saudi Arabians. The result of all of these guarantees in Saudi Arabia has been one of the world’s highest birthrates, not a boom in education or industry.

Singer, in asserting that there is enough food for everyone, no matter how many babies we produce, is not taking the long view. It may be that agricultural production is in a temporary boom due to the fact that we have been digging up coal and oil that required millions of years to form. Chemical fertilizer has been the source of much of the increased productivity of agricultural land and (1) it won’t be available forever, (2) it gives a constant, not exponential, increase in output. It might not be a moral act to help increase the long-term population of a country above the level that can be fed on naturally fertilized land. Singer does not mention the use of fertilizer or question how sustainable current levels of agricultural production are (nor does he note that we’ve already more or less proven that the world’s fisheries were not sustainable at prior levels).

Singer argues that part of our obligation to help the poor is that we have made their lives tougher. For example, subsistence fisherman in Africa find that Russian and Chinese factory trawlers have stripped their traditional fishing grounds bare in order to serve European markets. Singer does not mention that people in advanced countries, merely by being advanced, have provided a lot of assistance to poor countries that wish to develop. A poor country does not need to develop calculus, physics, chemistry, and biology. A poor country does not need to invent antibiotics, water purification systems, refrigeration, internal combustion engines, the stored program computer, TCP/IP, or any of the other essentials of the modern world. All of that can be copied for free from rich countries and bought ridiculously cheaply from China.

The most interesting section of the book describes psychology experiments in human nature. Researchers have shown that we’re more likely to help another person if we think that we’re the only person who could help, e.g., an experiment with two students in a room showed that they each was less likely to respond to a cry for help from an adjoining room than if only one student were present. We like “identifiable victims”: people were more willing to give toward a $300,000 medical bill to save one girl’s life than they were to pay $300,000 to save eight children. We don’t like futility: we’re more likely to give money to save 1500 people out of 3000 at risk than we are to save 1500 out of 10,000. Karl Marx noted that the existence of paper money made people less likely to help. He thought participants in a barter economy would be more likely to send a starving neighbor a ham than modern Europeans would be to send some coins. Modern research has confirmed Marx’s suppositions.

Singer tries to figure out how much it actually costs to save lives in Africa. A group handing out mosquito nets can save lives (from malaria) at $200 per life per year. But the person saved from malaria might also die from another infectious disease or from a lack of clean water. Different organizations give different benefit estimates for their various programs. Adding up all of the numbers, it looks as though it will cost thousands of dollars per year to keep each additional child alive. Could Americans afford this? Singer assumes that we can, but he doesn’t consider the facts that (1) the number of poor children in the world may grow exponentially, and (2) Americans are currently insolvent if you consider the likely cost of Medicare, Social Security, and public employee pensions.

Singer cites Rajan and Subramanian, economists who found that incoming foreign aid can wreck a local economy by driving up the value of the local currency and making it unprofitable to continue processing food and making clothing and footwear. Lives might be saved temporarily, but long-term economic growth will be stunted, a recipe for further impoverishment if long-term population growth remains strong.

Singer’s most convincing point is that our agricultural tariffs and subsidies harm poor farmers by preventing them from competing with American and European farmers in world markets. (The 2008 farm bill provided $300 billion subsidies, was vetoed by King Bush II, and then 2/3rds of Congress voted to override the veto (see weblog entry from July 2008).)

Singer says “My students often ask me if I think their parents did wrong to pay the $44,000 per year that it costs to send them to Princeton.” [The cost now is up to $50,000 per year.] Singer’s response is that by going to such an elite university they are going to earn more money and it won’t be immoral as long as they share some of that dough with the poor. Singer is apparently unaware of the economists who researched this and found that people accepted to Ivy League colleges, but who chose not to attend, ended up with the same lifetime earnings as those who attended. I.e., being smart enough to get admitted to Princeton is useful, but attending Princeton has no economic value over attending a state university. Singer does not consider that his own continued participation in a gold-plated playground for rich kids might be immoral by the standards he espouses in this book. If he were to segue over to Rutgers ($9000 per year in-state), that might attract more bright students to Rutgers. Their families would collectively save millions of dollars that could be donated to the poor.

Singer never does address the question of whether by helping to keep alive 1 poor person today, you would simply be creating 100 hungry mouths to feed some years down the road (by which time you might be dead, your survivors wouldn’t be so generous, and now 100 people would starve to death instead of 1). Let me repeat a couple of passages from my review of The End of Poverty:

One reason this 396-page book isn’t more convincing is that Sachs cannot come up with a single example of a country that has been lifted out of poverty by foreign aid. He talks about saving Russia with financial engineering, but Russia’s clever people were making jet fighters, atomic bombs, and helicopters long before they ever met Sachs. He talks about the Marshall Plan for post-WWII Germany, but Germany didn’t suffer from overpopulation and the lack of education that plague modern poor countries; investing in folks that had conquered France in six weeks probably did not seem very risky…

The most serious flaw with the book, in my opinion, is that Sachs fails to devote even one sentence to the modern fact that labor is mobile and global. Transportation and communication costs fall every decade. An ambitious, hard-working, intelligent, and well-educated person has never had an easier time moving from a poor country to a rich country. … If an African achieves the standards of a First World nurse, he or she can easily emigrate to Europe or the U.K. where such skills are in high demand. The emigre enjoys a much more comfortable lifestyle in the rich country, can make free voice calls to friends and family back in Africa, and can fly home in 8 hours on a discount airline. Educated and productive people are the biggest assets of most countries and, more so than ever, they can simply choose to walk away. Sachs talks about building medical schools in Africa so that doctors and nurses will be plentiful, not noting that the U.S. has jobs for perhaps 200,000 more doctors than U.S. medical schools are going to graduate in the next decade or so.

It is difficult to say what Singer’s The Life You Can Save: Acting Now to End World Poverty adds to Sachs’s 2005 book. The lasting benefits of foreign aid are difficult to find, yet rich countries and people continue to put hundreds of billions of dollars every year into foreign aid. Singer says that this makes us immoral cheapskates. However, the kinds of arguments that Singer put forth to prove that people should give more could easily be used to prove that people should give less. The grain and packaged foods that you paid to send to a poor country may result in the bankruptcy of a local farmer or food processor. The very possibility of foreign aid handouts may discourage businesses in poor countries from investing in agriculture, health care, and education. Would you start a private health clinic if you thought that Paul Farmer was going to show up next month and offer health care for free?

As we Americans are painfully discovering, it may not be possible for per-capita income to grow unless people work harder or are better educated than previous generations. Given that there are only so many hours in the day and that we in one of the world’s richest countries have been unable to build a competent system of schools, that makes world poverty a tough challenge. Too tough, perhaps, to be substantially attacked from an office in Princeton, New Jersey.

Full post, including comments

A few tidbits from the April 2009 Harper’s Magazine (sadly not online):

The U.S. government spent $79,000 last year on phone service for Bill Clinton. New York City collected $624 million last year in parking fines. Texas is the state that retains the highest percentage of people born there, 76%.

The article “Infinite Debt” by Thomas Geoghegan claims that it was the high profits available to financial firms that wrecked the U.S. economy, by diverting all of our resources (smart people, capital) from manufacturing into banking. “[Because usury laws were repealed] when banks get 25-30 percent on credit cards, and 500 or more percent on payday loans, capital flees from honest pursuits, like auto manufacturing. … The people who could have saved GM and Ford went to off to work at AIG, Merrill Lynch, or even [?] Goldman Sachs. … In 2002 and 2003, financial firms took more than 40 percent of the profits that accrued to U.S. corporations … more than double the share the financial industry was taking–about 18 percent–when Ronald Reagan left office. … Who helped the financial sector make too much? We did. In a sense, we use our credit cards to help liquidate our own jobs…”

“Usury Country” by Daniel Brook is about payday lending, but also about how tough it is to work private industry in the U.S. “The average income of a full-time working at Walmart, today the nation’s largest private employer, is only slightly more than $17,000 per year. Fully 47 percent of Americans now report living paycheck to paycheck.” What happens when they get hit with an unexpected bill? They borrow at 500 percent interest from a “payday loan” or “check cashing” bank, expecting things to be better when the next paycheck arrives. In fact, 75-90 percent of these borrowers have to roll the loan over the next time and the next time and the next. They end up paying 20 percent of their income in taxes and another 20 percent to payday loan companies.

[Note to young people: The 47 percent of Americans living paycheck to paycheck is more or less the percentage who do not work for the govenment or in government-supported industries, such as health care. A Walmart cashier earns $17,000 and will soon pay $7 to drive through the airport tunnel here in Boston. The toll-taker working for the Massachusetts Turnpike who collects that $7 gets an average income of $70,000 per year and can retire at age 53 with a full pension and benefits. What if our $17,000/year cashier takes the bus? She’ll hand her new higher fare to an MBTA bus driver earning an average of $55,000 (as of 2006) and retiring at age 41 with a full pension (if the driver started work at age 18; source: Boston Globe).]

An article on Cambodia reminds us that American taxpayers supported the Khmer Rouge, who went on to murder uncountable numbers of their fellow Cambodians; the Soviets were opposed to Pol Pot.

Some thought-provoking facts in the magazine, worth a trip to the library, even if you don’t agree with the authors’ conclusions.

Full post, including comments

With our attention diverted to the tragicomedy of GM and Chrysler, one or two major newspapers seems to dying each month. As taxes increase and government expands as a percentage of GDP, this is worrisome. Mancur Olson wrote that the fundamental cause of economic stagnation in a rich country was special interest groups getting the government to do them a favor at the expense of dispersed consumers. Stories about government handouts aren’t visually interesting and don’t work well on TV news. A story about some sort of sweetheart deal for a particular group would usually require a lot of numbers to be understandable and therefore wouldn’t work well on radio. The local newspaper may be the only representative of the average taxpayer or consumer on an issue where a special interest is lobbying state or local government. How much is at stake? State and local governments spend about $3 trillion per year, not too different from federal spending ($4 trillion; source).

If need be, we could get cars from China and India. Without local newspapers, though, how will consumers and taxpayers find out how seriously they are being bled? A guy in Shenzen or Bangalore cannot be an effective reporter here. A typical example of good local reporting is this New York Times story on the Long Island Railroad, It required four reporters and ran to 7 pages. The story includes facts about how some train drivers earned $215-277,000 per year due to hard-to-understand work rules, how more than 90 percent of L.I.R.R. retirees, most in their 50s, were classified as disabled and received additional pensions (totaling up to $170,000 per year). Despite the billions of dollars in extra costs to taxpayers, the cost of this disability pension festival to most individual taxpayers is never going to be more than a few thousand dollars per year, not enough for them to spend a year digging around in public records. Even if an individual taxpayer did discover the same facts and published them on a personal Web site, would he or she attract the attention of public officials? (so far Mancur Olson has proved to be correct; various elected officials promised to investigate while the scandal was in the public eye, but there don’t seem to have been any conclusions or changes in policy)

When the dust settles on our downsized economy, we may we may find that the loss of hundreds of local newspapers hurts long-term growth more than the loss of a few automotive brands.

Question for readers: What could replace the local newspaper as a check to special interest power in state and local government? The replacement needs to generate enough money for a comparable number of full-time reporters. I don’t think that the answer is as simple as “an online newspaper” because ad revenues right now aren’t strong enough to pay for a full staff of reporters.

Full post, including comments

I attended a seminar this evening presented by one of our largest banks (name not mentioned to protect some friendships). A middle manager introduced Eugene White, an economist from Rutgers. “I earned nothing last year,” said the hard-working bank employee. “Zero for 2008. No bonus. No options. No stock.”

Over dessert and coffee I asked one of the guy’s subordinates if the boss wouldn’t also have gotten some sort of base salary. “Sure,” he replied, “but maybe as low as $500,000 per year.” How did that round to zero? “Well, he might have made $12 million the year before.”

And you thought Peano arithmetic was challenging….

[What did we learn at the seminar? Professor White showed a comparison of events 1920-1936 with events 1990-2009. The similarities that lead many to say that we’re going into a Greater Depression were acknowledged. White claimed that the main divergence is in monetary policy. This time we lowered interest rates and expanded the money supply much earlier into the downturn. White said that he was confident in an eventual recovery because we still had some productivity growth. An attendee asked about risks from changes in government policy and taxation, noting that there was very limited productivity growth during the 1970s due to high taxes and limits on the ability of businesses to deduct (depreciate) capital expenses. White did not have a convincing answer to any question involving Congress, taxes, and the expansion of government.]

Full post, including comments

This month’s Atlantic has an interesting article about China by James Fallows. The last portion writes a bit about a recently founded battery company that is now the world’s largest supplier of rechargeable batteries, employing 130,000 people.

[BYD unveiled] the world’s first mass-produced battery-powered hybrid car that could be recharged on normal household current. … much of the U.S. press tittered about mistranslations in the BYD promotional material and the stodginess of the car’s design. “Oh, we can always make the car look better!” Stella Li told me when I asked her about that. “Designing the car, building the car, that is the easy part.” She was being deliberately breezy: she went on to explain the company’s faith that its demonstrated edge in battery technology, plus its engineering skills and “vertically integrated” manufacturing system—it builds almost all of the car’s components itself—will give it a long-term advantage. And against the snickering of the U.S. auto press was Warren Buffett’s purchase of 10 percent of the company, for $230 million, late last year.

[Coincidentally, the New York Times has an article today on the Chinese electric car industry.]

Full post, including comments

In a rare example of clear understandable prose from an economist, Joseph Stiglitz wrote an editorial yesterday for the New York Times explaining how the next $500+ billion of taxpayer funds are to be handed over to Wall Street. The folks who are going to pay for this are in high school right now and there is nothing that they can do about it, but it is worth seeing that the supposed hypercomplexity of Wall Street is not always beyond the comprehension of a layperson.

The article made me wonder why, if government action is required (and there are those who say that the Audacity of Doing Nothing would be better), we need to accept cronyism. For example, if the government thinks that mortgage-backed securities aren’t worth as much as they should be (“when people get an answer that they don’t like from a market, they cry ‘market failure!'”), the government could go into the market with $50 billion every day and offer to buy mortgage-backed securities from any willing seller, taking home the securities offered at what seemed like the best price. With that kind of buying, eventually the prices would come up and banks would have unloaded a lot of mortgage-backed securities.

Full post, including comments

Every time GM and Chrysler are in the news, the stock market crashes (S&P down 3.5% yesterday). The companies contribute little to U.S. GDP, nothing to U.S. GDP growth, and nothing to U.S. corporate profits, the basis of value in the S&P 500. If G.M. and Chrysler were to disappear and dynamite their factories, the remaining domestic auto plants (Ford, Toyota, Honda, Nissan, Mercedes, BMW, et al) could produce sufficient quantities of vehicles to satisfy current and expected demand. GM and Chrysler had only about a 30 percent combined domestic market share and demand for vehicles is down by more than 30 percent.

Had GM and Chrysler reorganized under Chapter 11 last fall (see my November 8, 2008 posting) investors wouldn’t be constantly reminded of these American failure stories, emblematic of our nation’s decline into special-interest squabbling (see Mancur Olson). The companies would be out of Chapter 11 by now with greatly reduced liabilities, lower costs, and similar levels of production. We could have news stories about growing software, energy, and biotech companies.

Here’s how an investor reads a story about GM and Chrysler:

• U.S. executives, despite being paid 5-10 times as much as counterparts in Japan and Europe, do not produce better products, profits, or investment returns (when Mercedes took over Chrysler, it turned out that the CEO at Mercedes, a much larger and more successful company, earned less than dozens of Chrysler managers)
• U.S. labor laws and unions will eventually strangle a manufacturing company, resulting in a 100 percent loss to shareholders
• the U.S. health care system, with its critical shortage of doctors per capita and Kafka-esque administrative procedures, can become enough of a burden on an employer to render its products uncompetitive
• taxes in the U.S. will eventually become the highest in the world as the country continues to prop up its least competitive industries
• a lot more mortgage-backed securities will become worthless as these companies close factories and workers abandon houses

Is that investor in a mood to buy an American stock? Build a new factory here in the U.S.? Make a venture capital investment?

We would be better off shooting these companies in the head simply so that we could get on with economic life here in the U.S.

[Let me repeat what I said five months ago: “The government has already done everything that it needs to in order to help G.M. The government established bankruptcy courts so that a company like G.M. can go through a Chapter 11 reorganization. During the Chapter 11 process, a judge has the power to adjust the company’s obligations so that they can be paid from the company’s likely future revenue. Chapter 11 was designed specifically so that employees can keep their jobs, albeit possibly at lower salaries, while shareholders and creditors suffer and/or are wiped out.” G.M. and Chrysler are poster children for Chapter 11. They have some good assets and some crushing liabilities. Chapter 11 was explicitly designed to preserve jobs while wiping out shareholders and punishing bondholders.]

Full post, including comments

Just finished Alan Greenspan’s The Age of Turbulence, published in the fall of 2007.

Greenspan says that interest rates were not within the Fed’s control. Formerly poor countries, in which citizens are accustomed to saving heavily, have become rich. That has created a huge surplus of capital in search of investment, which has depressed interest rates. Had the Fed set interest rates high, banks and others could have gone over to China and oil-rich countries and borrowed dollars at lower rates. According to Greenspan, for as long as anyone can remember, there has been more capital than good ideas in which to invest, and the fantastic growth of China made investors more desperate in their quest for a place to sock away funds.

Of the Presidents with whom he worked, Greenspan liked Gerald Ford, Ronald Reagan, and Bill Clinton. What about the fact that we’re still trying to pay back money borrowed during the Reagan years? Not Ronbo’s fault, according to Greenspan. Reagan proposed big tax cuts and big spending cuts across all U.S. government agencies. Congress passed the tax cuts, but not the spending cuts, which resulted in budget deficits.

My favorite parts of the book were chronicles of day-to-day life at the Fed describing how various challenges presented themselves and how they were addressed.

One interesting story sheds light on the limitations of government economic forecasts. A booming economy and stock market swelled federal tax collections so much that there were unheard-of federal budget surpluses during the final years of the Clinton Administration. The non-partisan Office of Management and Budget, in the first half of 2001, predicted that federal budget surpluses would grow year after year. Everyone was trying to figure out what the Feds would do once they’d paid off 100 percent of U.S. long-term debt. Would there be massive tax cuts? Would the U.S. government start buying hard assets in other countries, the way that sovereign wealth funds from China and the Arab countries do now? Everyone in the government, including Greenspan, was shocked when the surpluses evaporated almost overnight. The forecasters hadn’t figured out that a sagging stock market would mean an end to collecting capital gains tax.

Greenspan devotes the last half of the book to rambling discourses on topics of which he knows little. He talks about development in poor countries and says that what they need are property rights. His analysis is painfully shallow compared to Gregory Clark’s A Farewell to Alms, which points out that England circa 1300 had all of the things that modern economists claim are sufficient for economic growth, yet the country stagnated for 400 years.

A long chapter is devoted to the history of oil. You’d learn more reading the book jacket for Yergin’s The Prize.

Greenspan sprinkles the book with discussions about income inequality. Greenspan says that as an economy becomes more productive, the returns to having good skills and being smart will increase (Gregory Clark has some statistics in Farewell to Alms showing the opposite; the returns to skilled labor in England fell and unskilled laborers were the biggest beneficiaries of economic growth). He thinks that the minimum skill level necessary to be productive in the U.S. is now far above what the graduates of our pathetic public school systems are capable of. He thinks it would be politically infeasible to turn our schools from unionized employee paradises into centers of educational excellence. With only dumb young Americans as a labor source, the U.S. economy will stagnate. His solution to continued economic growth is therefore a massive expansion of immigration of smart, well-educated, highly skilled workers from other countries. (Note that Chinese schools on average don’t have to be better than U.S. skills; we just need to attract immigrants from among the millions of Chinese who are better educated than the U.S. average.) Greenspan opposes our current immigration system, which does not give much weight to an immigrant’s potential as a worker.

One insight from the weak second half of the book… The period prior to World War I was one of unbridled optimism. After 100 years of technological advance, increasing wealth, and very few wars in the civilized world (the U.S. Civil War was a painful exception), people thought that the future could only be brighter. WWI changed their thinking dramatically. Greenspan looks at the enthusiasm of the 1990s and September 11, 2001 as comparable. With productivity, wealth, and trade on the rise in most of the world, what could possibly go wrong? The West forget that it had 1.3 billion potential enemies among Muslims.

Various portions of the book are sprinkled with Greenspan’s enthusiasm about technology and what it can do for productivity growth. He is basically optimistic about the future because humans will figure out how to do more with less. Like any good economist, he hedges his predictions of a prosperous 2030 here in the U.S. The main risks that he sees are Islamic terrorism and a resurgence of protectionism that would undo the benefits of globalization (you won’t find Greenspan showing up to protest a WTO meeting!). The main challenge that he sees is funding Medicare and Social Security, which are currently pay-as-we-go (i.e., Ponzi schemes). Despite increased immigration, taxes will rise to crushing levels and benefits will fall. The Europeans will be in even worse shape because they don’t have as much immigration. Greenspan does not address the issue of why a group of citizens would wish to pack their country with double the number of people in order to pay for their retirements. He puts no value on living in an uncrowded place with reasonable real estate prices and traffic.

Any practical investing tips? Greenspan is an old guy (like me!) so he spouts old guy wisdom: given a long horizon, buy and hold common stocks, which have a historically higher return than bonds. Greenspan does not address the problem of what happens to those returns when everyone follows the same advice. [Ed: people noticed how great stocks were starting around 1970, which is why they bid up the prices of stocks to the point that actually stocks are no longer the great investment that they would have been back in 1950 (even before the recent crash, a money manager friend like to point out that someone who bought corporate bonds in 1969 would have earned a higher return than someone who bought stocks; nowadays a passbook savings account held over 10 years would have done better than stocks).]

How about the Collapse of 2008? Did Greenspan foresee it? He thought that Fannie Mae and similar quasi-governmental lenders were disasters in the making, existing mostly to enrich their management and impoverish taxpayers. On the other hand, he thought that the paltry reforms that King Bush II managed to push through a very reluctant Congress (showered with cash by Fannie Mae’s lobbyists) were significant. Greenspan noted that the risk premium on junk bonds compared to U.S. Treasuries was very small and wrote that such periods of small risk premium are usually followed by a big crash. Most of what Greenspan wrote that might relate to the Collapse is that the business cycle is impossible for government to stamp out. People will get exuberant and bid prices up too high and then they’ll get depressed and the sell-off will be deep.

What to do now? Should we have more regulation for the financial sector? Greenspan wrote that it would be a bad idea. Government is too slow and the information is too thin for effective regulation of hedge funds and other exotic entities. He hasn’t said too much since the world fell apart, but in this March 11, 2009 Wall Street Journal editorial he argues against additional regulations beyond increased capital requirements.

It is too bad that Greenspan has been so quiet about the collapse of the world he presided over for two decades. It would be interesting to know what he thinks about the trillions of dollars that we are spending to bail out entrenched firms. From his self-described “libertarian-Republican” perspective, you’d think that ours would be the worst of all possible worlds. We had little regulation so that in theory financial firms were responsible for the consequences of their actions. Then government paid for the dumbest and richest Americans’ (and foreigners’) mistakes, and now we’re going to get a molasses vat full of regulation in which to swim. Greenspan’s philosophy would seem to argue against any bailouts. If every U.S. bank were to disappear, there would still be a surplus of capital in this world. The Chinese, Saudis, and Kuwaitis would come to the U.S. happy to lend money to anyone with a sensible project. [This is indeed what happened to Cirrus Aircraft; they had a nice airplane design and couldn’t get anyone in the U.S. to fund production expansion, so they sold the company to Gulf Arabs in 2001 and have produced thousands of airplanes since then.] Greenspan is a big advocate for capital being allocated to the newest and most productive industries. It certainly seems as though he wouldn’t want to see GM and Chrysler propped up, partly due to their inefficient use of money and partly due to the likely retaliation from our trading partners when they see us subsidizing domestic industry.

The book might be good reading for young people, especially if they don’t waste too much time on the second half. Greenspan’s career shows the effects of choosing a field that society cares about and that isn’t overcrowded with smart people. The guy’s analytical skills could have earned him a job as an associate professor of physics in a state college somewhere in the Midwest. Instead of looking at numbers that came out of a particle accelerator, he chose to look at numbers with dollar signs in front of them. That gave him entree into the world of the rich, famous, and powerful in New York and Washington. Every third page contains a phrase of the form “my good friend [some rich or famous person]”. If Warren Buffett is quoted on some impersonal financial subject, he always gets a Homeric epithet as “my friend Warren Buffett”.

More: read The Age of Turbulence.

Full post, including comments

Yesterday’s New York Times story on subway construction in China has an interesting detail:

“Mr. Chan said that it cost about $100 million a mile to build a subway line in Guangzhou, including land acquisition costs for ventilation shafts and station entrances.

“By contrast, New York City officials hope to build 1.7 miles of the long-delayed Second Avenue line in eight years at a cost of $3.9 billion, or $2.4 billion a mile.

The Chinese are spending about one third as much as the U.S. on stimulus, but apparently they are getting 24 times more for their money. (A much larger fraction of China’s money is being spent on durable infrastructure.)

Full post, including comments

Barack Obama’s Aunt Zeituni is back in her taxpayer-funded apartment in Boston (Globe story). Massachusetts taxpayers have been paying her rent for nearly 10 years and must now also pay their share of a federal immigration judge’s salary for a hearing on April 1. Judges ordered Aunt Zeituni to leave the U.S. back in 2003 and then again in 2004. The conjecture is that Aunt Zeituni will claim that she is entitled to asylum because she would be imprisoned, tortured, or otherwise mistreated if she returned to Kenya to live legally. It seems like a tough claim to make when one’s nephew is the most powerful man in the world. Would the Kenyan government antagonize a guy with nuclear weapons at his command in order to oppress a “frail-looking woman in her late 50s who walks with a cane”?

Aunt Zeituni’s case raises the question of what we’re getting for our tax dollars in terms of immigration enforcement. For five years following her final order of deportation, Aunt Zeituni has lived under her own name in a government-owned apartment. If the Department of Homeland Security couldn’t escort her to Logan Airport and wish her bon voyage, why are we paying their thugs?

Full post, including comments