Social Media: Waste of Time or Next Revolution?

Sep 30, 2009 12:54 PM, By Steve Fretzin

Almost every day there is a buzz in the media regarding social media and its effect on our pop culture. Weird names like Twitter, LinkedIn and Facebook continue to be shuffled in front of us and it’s sometimes hard to make heads or tails of it all.

As a non-techy type of guy, I can relate to the confusion. However, I have been an avid user of social media for the past year and it has dramatically altered my life and business for the better. For many newcomers, it’s important to take the first step and learn the basics in order to understand its relevance to you.

In order to effectively utilize social media, it is important to recognize what you want social media to do. Are you looking to increase sales, develop a cult following, or brand your product or service? If you can answer that question first, it will be much easier to begin and not waste valuable time using an ineffective social media forum.

There are literally hundreds of choices out there and it can be very confusing to know which way to go. Let’s start with the two best: LinkedIn and Twitter.

Go to Article

Walmart, Love and Universal Ethics

Pope Benedict of the Week

David Nirenberg a Jewish professor of (Jewish) history and social thought at the University of Chicago offers a review in the TNR of Benedict’s recent encyclical “Caritas in Veritate: On Integral Human Development in Charity and Truth.” He likes the message of love over market values, but asks: Why does it have to be framed as Catholic and not universal?

Benedict’s teaching differs from that of his predecessors in at least two important ways. The first is evident in the key term in his analysis: “love,” rather than “justice,” “natural law,” or “human reason,” the terms that were favored by some of his predecessors

As Wal-Mart shoppers, for example, we must divide our attention between 1) a self-interest in the lowest possible price for whatever object we desire; and 2) the needs of that object’s producers, of the environment in and from which it was made, and of the moral and fiscal balance of global trade (hence “consumers should be continually educated regarding their daily role, which can be exercised with respect for moral principles without diminishing the intrinsic economic rationality of the act of purchasing”); and 3) an openness to the loving “spirit of the gift.” Benedict is not simply suggesting a moral yardstick for the marketplace. He is claiming that every commercial exchange needs to become a loving act modeled on the gratuitous gift of Jesus Christ.

And only Catholicism, Benedict tells us, can achieve the universal fraternity necessary for authentic community: “Reason, by itself, is capable of grasping the equality between men and of giving stability to their civic coexistence, but it cannot establish fraternity.

The problem is that Benedict is claiming to offer general answers to global questions that affect people of every faith (and sometimes of no faith), while at the same time insisting that the only possible answer to those questions is Catholicism. Such a suggestion might be a plausible prescription for global peace and development in a Catholic world, but the world is not Catholic.

In a de-secularizing age, and with our faith in self-interest shaken by economic crisis, we should want to draw on the wisdom in that ocean of thought. But if those teachings are to contribute to global “unity and peace,” they will have to be taught in a way that seeks to transcend the boundaries of the traditions that produced them. This does not mean, as Benedict fears, that Christianity (or any other religion) must become “more or less interchangeable with a pool of good sentiments, helpful for social cohesion, but of little relevance,” or that “there would no longer be any real place for God in the world.” Values are not a zero-sum game. God’s place in the world is not lost when one religion tries to translate some of its truths into helpful good sentiments for those of other or no faith

Full review

To which Michael Sean Winters replies at NCR and at his blog at America that he likes the perspective of the historian but disagrees with the need for universalism

his article is so refreshing and so frustrating. On the one hand, he understands that the advent of capitalism and its values represented a “reversal of a millennial moral consensus”

If Nirenberg truly believes that Benedict’s vision is narrowed by his insistence on truth to the point of preventing dialogue, why write a review of the encyclical? Nirenberg’s effort disproves his own claim.

Who is correct?

I think A Jewish Call For Social Justice by Shmuly Yanklowitz is closer to David Nirenberg in that he discusses social justice without any claims of truth or higher values. But is Jewish pragmatism enough? Is Winters correct that David Nirenberg, and most Jews, are more utilitarian than principled?

The Movie of the Year: Overtures

OVERTURES

Three opening sequences have embedded themselves in my mind this year:

Youssou N’Dour’s anthemic call, at the beginning of Elizabeth Chai Versalihis’ ‘I Bring What I Love’ to the young people of Africa, tears streaming down his face, asking his people to be guided by their own vision to unshackle themselves from the dependency fostered by sentimentalized Western views of the continent.

The first section of ‘Up’, which I saw a few weeks before my own wedding in May, the most glorious animation and design fused with a powerfully resonant story: the arc of a love affair, beginning in childhood, and reaching a crisis with the death of one party; whole films have dedicated to this arc, of course; ‘Up’ manages to make you believe it in five minutes; the whole rest of the movie is about what happens next, and how love always outlasts its object.

And the first half hour of ‘Inglourious Basterds’, which manages to invoke the memory of Lee van Cleef, the ‘Hills are Alive’ sequence in ‘The Sound of Music’; and even the face of Stanley Kubrick.  Beyond that, it provides the most credible reason in cinema history for a French and German character to speak English to each other; announces the arrival of a fantastic actor – Christoph Waltz – on international screens; and declares Tarantino’s intention to make Nazi violence look even worse than it has ever done by the very absurdity of its portrayal in his film.

More suggestions?

Market Ideas at Work Around the World

(Guest Post by Jonathan Butcher)

It is a beautiful thing when improvements in how we live can be explained by economic theories rooted in free market principles.  When someone halfway around the world sees their way of life improve and this is featured in the media, dust off your favorite book by a free market thinker and look for the theory that explains it. 

This week’s Economist provides an opportunity to do just that.  In a feature section on the telecom industry and emerging markets, this excerpt on cell phones in an article entitled “Eureka Moments” caught my attention:

“How did a device that just a few years ago was regarded as a yuppie plaything become, in the words of Jeffrey Sachs, a development guru at Columbia University’s Earth Institute, ‘the single most transformative tool for development’?  A number of things came together to make mobile phones more accessible to poorer people and trigger the rapid growth of the past few years.  The spread of mobile phones in the developed world, together with the emergence of two main technology standards, led to economies of scale…” (emphasis mine).

The casual reader may miss the significant principle at work here: the poor, even on the other side of the planet, benefit from developments in wealthier nations.  This idea is at least as old as 1960, as Friedrich A. Hayek, beautifully elaborates in The Constitution of Liberty:

“There can be little doubt that the prospect of the poorer, ‘underdeveloped’ countries reaching the present level of the West is very much better than it would have been, had the West not pulled so far ahead.  Furthermore, it is better than it would have been, had some world authority, in the course of the rise of modern civilization, seen to it that no part pulled so far ahead of the rest and made sure at each step that the material benefits were distributed evenly throughout the world…

“The over-all speed of advance will be increased by those who move fastest.  Even if many fall behind at first, the cumulative effect of the preparation of the path will, before long, sufficiently facilitate their advance that they will be able to keep their place in the march.”

So, if we want to help the poor at home or abroad, powerbrokers should do everything they can to foster the success of the successful.  Instead of redistributing wealth through higher taxes on the rich, policymakers should make policy that helps entrepreneurs succeed.  For it is the knowledge they create, use, and pass on with their enterprises that quickens the pace of progress, pulling everyone along at a faster rate as the new technology spreads.

It is not just tax policy or legislation pertaining to businesses to which this idea applies; other social programs can be improved in the same way, and education is no exception.  Charter schools are an excellent example of a public policy that promotes individual liberty and entrepreneurship—resulting in the creation of new ideas that can then be used widely. 

Everywhere charters have spread, the new ideas on leadership and teaching, for example, that they carry with them have been copied.  Even those opposed to charter schools have decided to combat them using the charter concept.  For example, Pilot Schools were created in Boston by existing school leaders in response to charter schools, using concepts central to the charter movement (more freedom over administrative decision making, specialized mission statements, etc.).  The result is that parents have even more options than before—more schools to chose from and more freedom.

Likewise, President Obama’s recent call for a longer school day and yearis nothing new; the much-heralded KIPP Academies, also charter schools, have been operating with this policy for many years.  Again, new ideas that survive once implemented, created in the realm of entrepreneurship, are difficult to ignore even at the highest level. 

The Economist’s piece goes on to explain how cell phones help the poor in rural areas around the globe, by “generally mak[ing] it easier to do business.”  In fact, a recent study found that “adding an extra ten mobile phones per 100 people in a typical developing country boosts growth in GDP per person by 0.8 percentage points.”  Would that we could see such an improvement in student achievement from policies promoting educational entrepreneurship.  Here’s hoping policymakers let the successful succeed, in education and elsewhere.

Are We Too Dumb to Govern Ourselves?

Are We Too Dumb to Govern Ourselves?
NewSpin
By Christian Piatt

(Originally Printed in PULP)

As the time draws closer for Pueblo’s mayoral question to achieve ballot-worthy status, tensions have been a little high around these parts. Lines have been clearly drawn on both sides of the issue, and there’s been no shortage of drama, particularly regarding the Committee to Assess Local Mayorship’s (CALM’s) petitions to make way for a charter amendment that would require the city to have a “strong” mayor at the helm.

In case you’ve been napping for the last few months, he’s a basic rundown:

CALM was created several months ago to press for the charter amendment to be included on the upcoming November ballot. It is clear from the wording of their proposed amendment (visit www.pueblocalm.blogspot.com to read for yourself) that the type of leader they seek is historically described as a strong mayor.

In response to CALM’s actions, the City Council assembled its own “Blue Ribbon” panel of advisors, who then proposed their own model of leadership, which included a “weak” mayor.

Though there are many details differentiating a strong mayor from a weak one, the main distinction is that, with a weak mayor, we would maintain the existing city manager position to do most of the real work of governance. The weak mayor, which would be a member of city council, would effectively be a step up from the current council president, charged mainly with diplomatic and other symbolic duties.

Council took some time to decide whether to put their own weak mayor option on the upcoming ballot, as their action seemed to be a response to CALM’s proposal. In the last couple of weeks, a question arose about whether CALM’s amendment would make it after more than a thousand of their petition signatures were disallowed by Pueblo City Clerk, Gina Dutcher.

Says Roger Gomez, CALM’s Executive Director and current Owner/Operator of Steel City Dogs, “We ended up handing in 4,575 signatures. The expected signature disqualification rate for an average petition drive is about 20%. The City Clerk’s Office ended up invalidating over 35% of our signatures…”

Asked if they could provide the extra signatures in a week, CALM quickly mobilized and collected 644 more names in two days. The signatures were verified as of Tuesday, August 18th. Now the voters will have three choices in November: a strong mayor, a weak mayor, or keeping things as-is.

Though it might seem potentially frustrating to have Council openly working against CALM’s efforts, the benefit has been a more informed public. “We are delighted,” says Gomez, “that so many voters we have talked to have been able to distinguish between our strong mayor platform and the new weak mayor platform adopted by the City Council. The voters are very aware and they asked a lot of specific questions about structure and cost.”

Regarding cost, one argument for the strong mayor option is that it should cost less. Whereas in the weak mayor system, one council member serving as mayor will be paid more for added duties, while also employing a full-time city manager, the strong mayor would replace the city manager role, leaving Council as-is. The proposal is for the strong mayor to be paid $50,000 a year less that the city manager position too, and though some fear that additional positions under the mayor will be created, many current duties and positions currently under the manager simply would be shifted over to the mayor’s office.

Asked why Council would pick now to jump into the ring on this issue, Gomez was clear.

“I believe the weak mayor alternative is an attempt to dilute and possibly confuse the voter on election day,” he says. “The Pueblo voters have been watching this debate and they know the difference. That does not mean that over the next two and half months our opponents won’t try to blur that fine line with a weak [mayor] ad campaign.”

So why the objections to a strong mayor in the first place? The answers vary, even within Council, though the majority of council members oppose CALM’s proposal. One common argument is that an elected official is accountable first to the voters rather than to Council, which theoretically makes them more susceptible to corruption.

Another, more concerning, reason has come out in commentary from City Council members themselves. In a City Council Work Session held on the evening of June 22nd, Councilman Mike Occhiato referred to the median family income and education levels as cause for questioning whether or not a capable candidate could be fielded from Pueblo. He also states:

“There’s always the ability to hire someone within a relatively short period of time, or to bring someone up from the ranks within the professional pool of professionals who actually managed a department head versus the gene pool that a strong mayor might have. And I say ‘gene pool’ because strong mayors in larger communities [pause] a lot of the department heads that have those positions are not filled by people with competent ability.”

Occhiato continues, “We just don’t have the ability to pick someone out in the community, unless he’s unemployed, to run the community. And that’s exactly what’s happened. I know there’s a joke going around the community. If the strong mayor would pass, we’d wanna be at Gina [Dutcher]’s office the next day to see who lines [up] for [pause] trying to, uh, become the mayor. Those that would be unemployed.”

Get it?

Where did this mentality in our city come from that suggests we’re not capable of sustaining a reasonable democratic system of governance? Following this line of thought, we’re just smart enough to elect those currently in power, but beyond that, we cannot be trusted to choose or participate wisely.

Council’s decision to impose their own opposing option on the ballot is yet another example of this. Kudos, however, to Councilmen Thurston and Atencio for standing up against the way this matter was handled, regardless of their personal feelings. In an August 25th Chieftain story, the two “said council had no business bringing such a question to the public.” They went on to say that, had Council done the same as CALM and gone to the public, gathering signatures for their proposal of a weak mayor ballot option, they would then have been happy to support it.

The ballot options are sure to be a hot topic of conversation in the coming months, and I’d expect that, one way or another, we’ve yet to see the most dramatic developments in this political soap opera.

Stay tuned, stay informed, and most of all, mind your gene pool, Pueblo.

The Defining Moment, an interview with author Len Renier

Yesterday Bruce Weide and I had the privilege to speak to author Len Renier, author of the best-selling book “The Defining Moment: The Battle for Your Future” on Straight Talk Wealth Radio.

It was a good show and Renier offered some great insight into our collective financial future. Here are a couple of his ideas, which are undeniably true:

Defining Moment #1: Your money will never be worth more than it is today.

Defining Moment #2: You are in the lowest tax bracket of your life moving forward (taxes will go up).

To hear the show and watch a brief video promo, visit Bruce Weide’s blog. It will well worth your time.

To learn more about how to protect yourself and your finances into the future, call me at 714-738-7811. I’ll give you a free copy of Len Renier’s book “The Defining Moment,” and I’ll help you to develop a personalized, no obligation rescue plan to provide for your financial future while preserving your lifestyle. Save yourself – and your money – today!

To your success,

Scott K. Warner
Life Design Financial

Follow me on Twitter

I hope the Blue Dogs read the CongressDaily section of the National Journal over the weekend.

If they did, they would find that the preferred Public Option plan has been shown by The Congressional Budget Office (which, as we know, is impartial) to save $85 Billion more than the plan they favor (and Blue Dogs are ONLY Blue Dogs because they want to save money!). Here’s a cut from the article:

In a bid to wrangle concessions from the Blue Dog Coalition on healthcare reform, House leaders Thursday released CBO estimates for liberals’ preferred version of the public option that show $85 billion more in savings than for the version the Blue Dogs prefer.

Rep. Stephanie Herseth Sandlin, D-S.D., a Blue Dog co-chair, said any possible new momentum toward a public option tethered to Medicare rates is, in part, “because of the cost issue” and the updated CBO score.

The original House bill required the public plan to pay providers 5 percent more than Medicare reimbursement rates. But as part of a package of concessions to Blue Dogs, the House Energy and Commerce Committee accepted an amendment that requires the HHS Secretary to negotiate rates with providers. That version of the plan will save only $25 billion.

In total, a public plan based on Medicare rates would save $110 billion over 10 years. That is $20 billion more than earlier estimates, a spokesman for House Speaker Pelosi said.

So if your Representative is a Blue Dog, give ‘em a call. Today. Now. They’ll be working again tomorrow (after Atoning for their kissing of lobbyists asses for Yom Kippur) and they need to hear from you.

Thoughts on Education, Religion and Our Culture

There is an article in Salon this morning about Home Schooling which I though was quite good, as it was written from the point of view of a Brooklyn Liberal father whose twins are being schooled at home for, what seem to be, non-religious reasons. I think that’s great, but it doesn’t jibe with what most of us think about when we consider Home Schooling.

A couple of years ago, home schooling was pushed by the religious right in order to avoid the teachings in public schools which were closer to Darwinism and scientific method. This was the major thrust of “Creation Science” as an educational discipline.

If you don’t know what Creation Science means, here is a number by Roy Zimmerman:

OK, this is America and people can believe anything they want. And they can make sure their children learn the things they believe as well. But it is worth considering why a majority of Europeans (the last figure I saw was 83%) are non-believers as opposed to 9 to 12% of Americans, and they are amazed at the fundamentalist beliefs that affect our country’s education and politics. One of the sources of these European opinions are expressly brought out by a pair of TV comics called The Chasers. A sample (called “Do you believe he Bible is true?):

I think what made much of Europe believe (or not believe) the way they do was the effect of World War II in bringing folks to the real truth: there was no God there to protect them as their cities were devastated and their civilization was destroyed. We, on the other hand, with the exception of Pearl Harbor, were left intact and wealthy by the war, which supported the God-is-on-our-side concept (as well as the time between capitalism and religion as a money making prospect).

Anyhow, to sum up, education, religion and home schooling have developed quite a few links in our culture which often works against us… and has a lot to do with whether or not we can put up a real fight against all the political stuff affecting us now.

test prep

I have my first exam of grad school tomorrow.

I just spent the last forty-five minutes making brownies.

I have to wake up in… eight hours? Ish. I was hoping that baking + doing dishes would relax me and get me ready to fall asleep, but I am just as hyper as before, possibly more. On the plus side, my apartment smells really good.

It has been a long time since I’ve taken a test like this (involving math, and formulas, and possibly a calculator). I am nervous not because I don’t think I am prepared – I understand the concepts, as far as we have gone over them multiple times in class and in the book – I am nervous because every time I try to do problems stemming from the concepts I trip up on some silly step along the way, usually involving algebra. I am not detail oriented. We have been assured that partial credit will be given if it’s clear we knew how to do it, but as the whole “exam” concept is a recipe for big, scary stress, this doesn’t help very much.

What a boring post. Time to stuff my mouth with brownies; that has to be better than whinging.

EDIT: Used this recipe as I did not have any baking chocolate in the house. Quite good!

Thorstein Veblen

But most of all, the man gave so much to economics- a new pair of eyes with which to see the world. After Veblen’s savage description of the mores of daily life, the classical picture of society as a well-mannered tea party became increasingly difficult to maintain. His scorn of the old school was bitingly expressed when he once wrote: “A gang of Aleutian Islanders, slushing about in the wrack and surf with rakes and magical incantations for the capture of shellfish, are held… to be engaged on a feat of hedonistic equilibration in rent, wages, and interest,” and just as he ridiculed the classical attempt to resolve the primitive human struggle by fitting it into a fleshless and bloodless framework, so he highlighted the emptiness of trying to understand the actions of modern man in terms which derived from an incomplete and outmoded set of preconceptions. Man, said Veblen, is not to be comprehended in terms of sophisticated “economic laws” in which his innate ferocity and creativity are both smothered under a cloak of rationalization. He is better dealt with in the less flattering but more fundamental vocabulary of the anthropologist or the psychologist: a creature of strong and irrational drives, credulous, untutored, ritualistic. Leave aside the preconceptions of another age, he asked of the economists, and find out why man actually behaves as he does.

From Heilbroner’s, The Worldy Philosophers

I do experience strong and irrational drives. This man fascinates me : )

Why Mr Volcker Is Right

    This past thrusday, former Federal Reserve Chairman Paul Volcker testified before the house’s committee on Banking and Financial Services. The testimony called for several changes to existing regulation and amongst the most “radical” is his affirmation that commercial banking should be separated from investment firms. Basically, chaiman Volcker advocates a return to Glass Steagall, the act repealed in 1999 that broke down the barriers between banks, insurers and trading firms.     Among the other recommendations, chaiman Volcker advises that Americans should not return to “business as usual” and encourages more regulation of financial derivatives, stricter reporting requirement for hedge funds and the moral hazards of the “too big to fail” ongoing policy.      In my opinion, Paul Volcker is absolutely on target and his comments raised many eyebrows in the investment community. His testimony was not carried live on CNBC, (surprise anyone?).     The issue of excessive risk taking by banks and insurance companies is at the heart of this crisis (AIG and CITI?). his assertion that commercial banks should not take on such elevated risks is my opinion a crucial aspect of the regulatory reform we desperately need. Good to hear that there is at least 1 individual close to the President who has not lost his common sense…

Economics through politics

There has been a lot said and written about Manmohan Singh’s exchanges with President Obama at the G-20 Summit and his constructive suggestions to the world community as regards the world economic downturn and the restructuring that is being proposed. It was indeed heartening to see the economist in Manmohan Singh giving direction to the thought process being followed by the leading nations of the world. There was this little exchange between our prime minister and South African president Jacob Zuma that the prime minister mentioned in the passing. Their exchange was about the general economic condition but there was also a mention of the long drawn Bharati-MTN deal that came up. One of the news channels reported this as follows:

‘The proposed $23-billion Bharti-MTN deal, which had run into trouble over the issue of dual listing and the revised Sebi takeover norms, received a shot in the arm with the South African President Jacob Zuma assuring Prime Minister Manmohan Singh that the deal would not be subject to any discriminatory treatment in his country.

The Prime Minister said, “I did mention this (the Bharti-MTN issue) to President Zuma, and told him I sincerely hope this deal will go through.” He said the two agreed the matter could be discussed further with the South African government. “As far as MTN issue is concerned, I mentioned it to Jacob Zuma. I sincerely hope that this deal would go through and there will be no discrimination against it,” he told reporters in reply to a question at a press conference here.’

This is something new to India. Not that this is the first time an Indian company is on the verge of buying a foreign company. That has happened in the past. It is the upfront promotion of Indian company by the political leadership, without any apologies or an effort at camouflaging it as something else that has struck many an observers. This is very un-Indian, if I might use the term. Generally the political class in India tends to keep a distance in matters of corporate affairs. Things have changed though. Manmohan Singh’s pitch for the Bharati-MTN deal is a coming of age of sorts. This is a very western way of doing things. But then the world is changing and the political and economic lines are blurring very fast.

The one thing that is in favor of Manmohan Singh is that his clean image and his upfront way of politics is such a refreshing change that no one questions his motives. The nation knows that Manmohan Singh will not do anything for his own personal gains. That gives him the moral authority to pitch for a company with the head of another state. This is a very good sign. Most nations do this and there is no reason why the Indian political leadership should shy away from something that promotes the national interest.

I am sure that this was not the first time that Indian political leadership has pitched for an Indian company but what is surely a first is the way it has been done – out in the open without any pretense or long drawn explanation. The matter of fact way in which this has been received by the public and the media also shows that Indian polity and economic interests are converging to the benefit of the nation. I am not celebrating this as a victory of sorts for India, nor am I suggesting that the deal is done. For all one may know this deal may not happen at all. I am also not going into the details of the pros and cons of the deal for the country. What this endorsement by the political leadership has done is to show that there is a connect between the economic leadership and the political leadership of the country and that the country does not work in splits and parts. That is a strong message for the world.

The other thing that this has done is to reinforce the stand that Indian economic strength is intrinsic to the diplomacy that the nation undertakes across the globe. This acknowledgement of the importance given to economic issues boiling down to specific deals is something that is a departure from the stand taken by previous governments. This micro-management is critical and that phony moral high ground of the government addressing on issues of policy – a broad framework, as was the stand in the past does not impress anyone. This will make the South African leadership think twice before rejecting any proposals by the Indian company – Bharati Airtel in this case. By taking this up, the prime minister has given a clear indication that if the deal is given thumbs down by the South Africans that would have wider bi-lateral implications. India and South Africa have had very good bilateral and economic relations over the years and it would be in no one’s interest to unnecessarily put hurdles to a deal that is being seen by many as a win-win situation for both the telecom giants. I guess such upfront endorsement of economic interests shows the strength of the political leadership. This might also help both these important nations to develop closer economic and political ties. I will not go into the details of the bilateral relations between the two nations. Suffice to say that Manmohan Singh has done something that is new to Indian political landscape. But then it takes a Manmohan Singh to be able to do something like this. I hope the Indian leadership in future also does not shy away from promoting the cause of our corporate sector aggressively with other nations. There has to be greater exchange of views and cooperation between corporate India and political leadership. This is a good beginning. Those who will criticize this as the the big Indian corporates taking over the Indian politics should understand that the political leadership in a democracy such as Indian cannot afford to sidestep people’s issues. But to refrain from taking any constructive action to bolster the interests of  Indian companies is a very unimaginative way of doing politics and is a regressive step for the economy of the nation. This forthrightness is good for the politics and economics of the country. Besides it brings the two nations closer.

Another Dot, For Good Measure

Lest you think my previous post was just an attempt to make hay out of a crisis currently under the popular spotlight, let me toss out another example where efforts to artificially decrease the scarcity of a “good” thing can backfire: Higher Education.

The pattern fits: “Having a college education is good.”  Agreed.  “College educations are expensive.”  Agreed.  “There are well-meaning and hard-working people who would like a college education but can’t afford it.”  Agreed.  “Let’s distort the market by making a college education artificially inexpensive.”

Now, let’s do a quick mental exercise: what can we expect to happen when we try to artificially deflate the cost of a college education?  There are a few ways to do so, each with its own particular side-effects.

If we make a lot of free money available to pay for tuition (grants and scholarships), we have reduced the scarcity of tuition dollars, and thus can expect an inflationary rise in tuition.  (People can still afford the same out-of-pocket cost as they could without the grants, why should the college not extract just as many dollars from them PLUS the newly-minted grant dollars?)

If we create alternative subsidized institutions (city/county/state universities), we can expect for them to be perpetual cost centers in government budgets and for them to need to limit enrollment (demand) by capping class sizes (rationing).  In terms of the price curve, the “state option” doesn’t actually compete with private options because it’s understood that it can hemorrhage money and that the shortfall will be covered by the good faith and credit of the state, so the low tuition at these universities does not actually cause other universities to compete with them on price; nobody is “kept honest” because everybody knows that public tuition is a shell game in which everyone’s contribution via taxation is hidden under the table.

But let’s flip the economics around the other way: is it necessarily a good thing to get everyone into and through college?  The road to a bachelor’s degree in many ways is a poor fit for someone who wants to go into the trades (traditional or modern).  Mass enrollment combined with the incentives of a school’s reputation for achievement naturally drive grade inflation, which in turn drives an overall devaluation of the bachelor’s degree, driving the employers everyone went to college to qualify to work for to demand masters degrees for those positions instead.  And so begins a treadmill: higher education is turned into a commodity; a secularist value-free market then reduces it to the lowest common fungible denominator in order to drive efficient low-cost delivery; higher education’s original value proposition (a competitive advantage) is replaced with factory-floor, cookie-cutter information transfer (once the realm of technical/trade schools) devoid of relationship, character formation, critical thought, and innovation; the resulting certification thus devalued, our beneficient leaders drive to do the same thing to graduate education, and while they’re at it, to impress the same dehumanizing regularity upon earlier stages of education as well to “prepare” students for the mill.

Is it good to have universities?  Yes.  Is it good that many people attend them?  Yes.  Does this necessarily mean that coercive tax policies and tax-underwritten market intrusions are going to be good for the university as an institution or the people whom it intends to serve?  No.

The World's Biggest Companies (top 100)

Rank Company Country Industry Sales ($bil) Profits ($bil) Assets ($bil) Market Value ($bil) 1 General Electric United States Conglomerates 182.52 17.41 797.77 89.87 2 Royal Dutch Shell Netherlands Oil & Gas Operations 458.36 26.28 278.44 135.10 3 Toyota Motor Japan Consumer Durables 263.42 17.21 324.98 102.35 4 ExxonMobil United States Oil & Gas Operations 425.70 45.22 228.05 335.54 5 BP United Kingdom Oil & Gas Operations 361.14 21.16 228.24 119.70 6 HSBC Holdings United Kingdom Banking 142.05 5.73 2,520.45 85.04 7 AT&T United States Telecommunications Services 124.03 12.87 265.25 140.08 8 Wal-Mart Stores United States Retailing 405.61 13.40 163.43 193.15 9 Banco Santander Spain Banking 96.23 13.25 1,318.86 49.75 9 Chevron United States Oil & Gas Operations 255.11 23.93 161.17 121.70 11 Total France Oil & Gas Operations 223.15 14.74 164.66 112.90 12 ICBC China Banking 53.60 11.16 1,188.08 170.83 13 Gazprom Russia Oil & Gas Operations 97.29 26.78 276.81 74.55 14 PetroChina China Oil & Gas Operations 114.32 19.94 145.14 270.56 15 Volkswagen Group Germany Consumer Durables 158.40 6.52 244.05 75.18 16 JPMorgan Chase United States Banking 101.49 3.70 2,175.05 85.87 17 GDF Suez France Utilities 115.59 9.05 232.71 70.46 18 ENI Italy Oil & Gas Operations 158.32 12.91 139.80 80.68 19 Berkshire Hathaway United States Diversified Financials 107.79 4.99 267.40 122.11 20 Vodafone United Kingdom Telecommunications Services 70.39 13.30 252.08 93.66 21 Mitsubishi UFJ Financial Japan Banking 61.43 6.38 1,931.17 53.63 22 Procter & Gamble United States Household & Personal Products 83.68 14.08 138.26 141.18 23 CCB-China Construction Bank China Banking 42.98 9.45 903.35 119.03 24 Verizon Communications United States Telecommunications Services 97.35 6.43 202.35 81.04 25 Petrobras-Petróleo Brasil Brazil Oil & Gas Operations 92.08 14.12 120.68 110.97 26 Nippon Telegraph & Tel Japan Telecommunications Services 107.02 6.36 179.95 59.07 27 EDF Group France Utilities 89.46 4.73 278.76 71.53 28 IBM United States Software & Services 103.63 12.34 109.53 123.47 29 BNP Paribas France Banking 107.96 4.20 2,888.73 29.98 30 Bank of China China Banking 40.10 7.70 817.84 105.04 31 Telefónica Spain Telecommunications Services 80.70 10.57 129.16 85.56 32 Nestlé Switzerland Food, Drink & Tobacco 103.01 16.91 97.12 118.99 33 Sinopec-China Petroleum China Oil & Gas Operations 154.28 7.43 100.41 93.50 34 Crédit Agricole France Banking 107.75 5.90 2,064.17 21.91 35 Siemens Germany Conglomerates 108.76 8.05 128.46 44.18 36 Hewlett-Packard United States Technology Hardware & Equip 118.70 8.05 109.63 69.57 37 Intesa Sanpaolo Italy Banking 50.56 10.58 835.15 31.43 38 Bank of America United States Banking 113.11 4.01 1,817.94 25.29 39 Honda Motor Japan Consumer Durables 120.27 6.01 124.98 44.32 40 BBVA-Banco Bilbao Vizcaya Spain Banking 56.51 6.99 747.99 27.56 41 ArcelorMittal Luxembourg Materials 124.94 9.40 133.09 26.80 42 Johnson & Johnson United States Drugs & Biotechnology 63.75 12.95 84.91 138.29 43 ENEL Italy Utilities 82.92 7.37 177.21 31.00 44 UniCredit Group Italy Banking 83.72 8.70 1,482.98 18.37 45 Generali Group Italy Insurance 118.39 4.26 546.50 21.35 46 France Telecom France Telecommunications Services 74.50 5.67 125.32 58.92 47 Samsung Electronics South Korea Semiconductors 104.42 7.87 99.47 45.82 48 Deutsche Bank Germany Diversified Financials 124.78 9.47 2,946.88 14.40 49 Microsoft United States Software & Services 61.98 17.23 65.79 143.58 50 Pfizer United States Drugs & Biotechnology 48.30 8.10 111.15 83.03 51 Wells Fargo United States Banking 51.65 2.66 1,309.64 51.28 52 BHP Billiton Australia/United Kingdom Materials 59.47 15.39 72.40 96.65 53 StatoilHydro Norway Oil & Gas Operations 93.38 6.20 82.42 53.30 54 Sumitomo Mitsui Financial Japan Banking 46.06 4.62 1,114.89 25.56 55 China Mobile Hong Kong/China Telecommunications Services 47.09 11.49 76.42 175.85 56 Goldman Sachs Group United States Diversified Financials 53.58 2.32 884.55 42.06 57 RWE Group Germany Utilities 66.16 3.56 127.64 33.68 58 Roche Holding Switzerland Drugs & Biotechnology 42.75 8.41 69.77 98.47 59 Commonwealth Bank Australia Banking 34.98 4.58 467.83 28.01 60 Société Générale Group France Banking 99.25 2.80 1,572.73 17.77 61 Novartis Switzerland Drugs & Biotechnology 42.01 8.30 73.22 82.97 62 E.ON Germany Utilities 120.74 1.76 215.15 47.44 63 Deutsche Telekom Germany Telecommunications Services 85.89 2.07 162.51 52.96 64 Rosneft Russia Oil & Gas Operations 46.99 11.12 77.40 34.07 65 Mizuho Financial Japan Banking 42.29 3.12 1,545.23 21.46 65 Sanofi-aventis France Drugs & Biotechnology 38.40 5.36 96.01 67.84 67 National Australia Bank Australia Banking 41.87 3.58 515.83 21.90 68 Royal Bank of Canada Canada Banking 30.01 3.52 575.21 34.29 69 Cisco Systems United States Technology Hardware & Equip 39.58 7.49 61.36 85.05 69 Rio Tinto United Kingdom/Australia Materials 54.26 3.68 88.25 39.42 71 Tesco United Kingdom Food Markets 93.85 4.21 59.80 37.50 72 China Life Insurance China Insurance 26.20 5.32 127.83 83.26 73 Mitsubishi Corp Japan Trading Companies 60.43 4.64 117.84 20.89 74 Vale Brazil Materials 30.75 9.28 79.26 66.14 75 Munich Re Germany Insurance 64.20 2.09 291.87 24.29 76 Lukoil Russia Oil & Gas Operations 66.86 9.51 59.14 26.62 77 Barclays United Kingdom Banking 59.82 6.40 2,947.84 11.15 78 Banco Bradesco Brazil Banking 39.97 3.26 194.51 26.75 79 Unilever Netherlands/United Kingdom Food, Drink & Tobacco 56.44 7.00 48.75 58.24 80 BASF Germany Chemicals 86.77 4.06 69.41 25.62 81 Nokia Finland Technology Hardware & Equip 70.63 5.55 52.29 35.32 82 Sony Japan Technology Hardware & Equip 88.89 3.70 124.12 17.12 83 CVS Caremark United States Retailing 87.47 3.21 60.96 37.46 83 Daimler Germany Consumer Durables 133.43 1.88 180.08 21.21 85 United Technologies United States Conglomerates 58.68 4.69 56.47 38.53 86 Saudi Basic Industries Saudi Arabia Chemicals 40.62 5.87 72.39 31.44 87 Iberdrola Spain Utilities 35.09 3.98 114.81 32.42 88 Nissan Motor Japan Consumer Durables 108.46 4.83 119.00 14.14 89 Panasonic Japan Technology Hardware & Equip 90.87 2.82 71.85 28.93 90 MetLife United States Insurance 50.99 3.21 501.68 15.10 91 Westpac Banking Group Australia Banking 25.90 3.05 346.22 31.40 92 GlaxoSmithKline United Kingdom Drugs & Biotechnology 35.55 6.72 52.67 79.06 93 Morgan Stanley United States Diversified Financials 62.26 1.71 658.81 21.00 94 Telecom Italia Italy Telecommunications Services 41.97 3.08 117.81 23.82 95 Intel United States Semiconductors 37.59 5.29 50.72 70.86 96 Zurich Financial Services Switzerland Insurance 32.35 3.04 325.04 19.60 97 Mitsui & Co Japan Trading Companies 57.50 4.11 97.15 17.12 98 Comcast United States Media 34.26 2.55 113.02 37.62 99 AXA Group France Insurance 156.95 1.28 936.92 19.47 100 Bayer Group Germany Chemicals 45.85 2.55 71.39 36.97

All figures are in U.S. dollars and are latest available. Market value is as of Feb. 27. Combined market value for BHP Billiton Ltd and BHP Billiton Plc (a dual listed company in Australia and the U.K.). Combined market value for Carnival Corp and Carnival Plc (a dual listed company in Panama and the U.K.). Combined market value for Investec Plc and Investec Ltd (a dual listed company with headquarters in South Africa and the U.K.). Combined market value for Mondi Ltd and Mondi Plc (a dual listed company in South Africa and the U.K.). Combined market value for Reed Elsevier Plc and Reed Elsevier NV (a dual listed company in the Netherlands and the U.K.). Combined market value for Rio Tinto Plc and Rio Tinto Ltd (a dual listed company in Australia and the U.K.). Combined market value for Thomson Reuters Corp and Thomson Reuters Plc (dual listed company in Canda and the UK.) Combined market value for Unilever NV and Unilever Plc (a dual listed company the Netherlands and the U.K.). E: Estimate. NA: Not available.

Sources: FT Interactive Data, LionShares, Thomson Reuters and Worldscope via FactSet Research Systems; Bloomberg ; Forbes.

Leaving Michigan, Part 2

Moving to a new town is always exciting because it gives you the chance to have a “clean slate”.  I certainly did not run from a horrible past or anything like that when I left my beloved home state (Michigan), but I am enjoying the benefits of a new group of friends, a new program of study, new and exciting things to do, and a new perspective!

A bit back, a good friend of mine sent me this video:

Before moving a month ago, I had never lived anywhere outside of a 15-mile radius from Lansing, Michigan, and I have to say that it will always have a place in my heart. However, as I have said before and will surely say again, you cannot have a well-rounded set of experiences if you only see the world from one tiny part of it. 

There are two big problems that I have always had with Michigan: the attitude and the infrastructure.  As many people in the video pointed out,  it is hard to convince yourself to stay in a town where the business climate is terrible, where growth is almost discouraged, where failing businesses are forced back into the market again and again, and where basic shared properties like parks and recreational opportunities are lacking. What 20-something wants to live in a town that has no concert venues, only a few decent restaurants, an unemployment rate of around 13% (in a town that had a smaller variety of interesting and accessible opportunities than most metropolitan areas even in good economic times), schools with a poor reputation, grungy housing, no non-education-based sports team other than a minor league baseball team, a government that simply shuts down every time the state Democrats and Republicans cannot agree how to spend money, and an aging population that refuses to let go of a dying industry??

I did want to, and for a long time I did live in Lansing. Maybe I will go back one day. Something about Michigan stays with you for a very long time, I hear, and I believe it.  It is not that I want to be permanently separated from my first love, with its shining lakes, beautiful hills, fascinating scenery, vibrant culture, and brilliant minds. We just need a bit of a …break.

To me, you need to go elsewhere before you can truly gain perspective on where you came from. That is what brings me to Boston — perspective, among other things. Until it disappears, I will continue to be annoyed by the silly Michigan idea that in order to succeed as a state again, Michiganders need to keep the great minds in. (See my last Michigan post for more on that…) Until my mind is sufficiently enriched by outside experiences and until Michigan has something to offer me that is better than what is out here, I think I might be stuck on the outside for a while (and I am in no way sad about that).

I really do love Boston, and I see it as a tremendous opportunity. This town is so alive and so exciting, and it makes me feel those ways as well. I would be very happy to end up here, but that does not in any way mean that I did not gain something great from (and hopefully give something great back to) Michigan. I owe a good portion of my life so far to the place, after all!

So far, I am having a wonderful time in my new home. I am also looking forward to visiting Michigan in a few months. I go to football game-watching parties with the Boston Spartans crew, and I read wlns.com and lsj.com just to catch up. I read Facebook statuses from MSU students and even catch up on the State News sometimes. Heck, all of my roommates are (quite coincidentally) Michiganders who relocated for educational purposes.

Michigan is my birthplace, but I’ll be singing “Oh, Boston, you’re my town” with the rest of them for a while now, I suspect. Here is hoping that the future brings new and great things to the fantastic state of Michigan, even if I never find myself back for good. (I always feel a burst of pride when I see things like Ignite Lansing! being put on by those few, proud Lansing entrepreneurs that I miss so much! Hopefully that went very well. Spotlight Michigan appears to be back in the swing of things t00!)

(By the way, it’s funny to me that the video showed some shots of Old Town while playing “Under the Hedge” by Ted Leo. One of my favorite memories of Old Town was seeing Ted Leo + Pharmacists play at the Temple Club just before it went under…)

Basic Maintenance

While traveling recently in the Southwest, I made a startling realization, more like a reminder than a discovery. When traveling, one’s usual feeding and grooming routines are interrupted, and if one lacks access to kitchens and showers, one is forced to improvise and/or forgo some of the basic maintenance we perform daily, almost automatically and without much circumspection. The reminder is often expressed after a nice, warm shower and a decent meal, whereupon one begins to “feel human” again. Of course, the natural world is indifferent to whether humans are fed, clothed, housed, and after that, cleaned up, powdered and pampered, and entertained in the myriad ways that we now take for granted as being civilized. The utter indifference of the natural world to the considerable energies spent on such basic maintenance is often interpreted as hostility, especially in a difficult clime like the Southwest, where plants and animals have evolved some fairly elaborate and effective means of survival where the heat of the sun and the lack of water make men blanche. Some of those means survive beyond death, as I discovered when I was occupied clearing away a dead cactus and ended up covered in burrs, bloodied pinpricks, and scratches. Once upon a time, humans had also adapted to that environment, but those cultures are now gone.

Our civilized ways have moved beyond most conscious thought as technologies have arisen to make civilized prerogatives largely invisible. For instance, we live and sleep in warmth (or in hot summers and southerly locations, relative cool), drink from the tap, take hot showers, and power our many devices via wall plugs. We telephone the utility companies to activate services. Automatic timers and thermostats regulate such devices for us, removing them further from our day-to-day awareness except for bill paying. Very few of us have experience with hauling water or applying our labor to turning a grindstone or digging a pit for an outhouse. But if predictions of many awaiting the imminent collapse of industrial civilization come true — which predictions range from as close in as 20 years to as far off as 150 years — we are assured that those still here on the other side of the collapse (a far smaller population than now exists) will be less familiar with the relative ease we now experience in the First World as “civilized people” and will become far more familiar with a bleak austerity where practical skills confer more power than pushing electrons around a computer screen or network. Whether society declines gradually to such a state or hits a figurative wall where everything falls apart at once is still the subject of considerable debate in some circles, but the eventuality is scarcely worth questioning anymore. The short-sightedness of human nature and the ineffectiveness of our leadership and institutions have already carried us beyond the tipping point, whether or not we have the courage to accept it, so no hope for a technological fix or a last-minute turnaround are reasonable to a rational observer of the direction history is taking us.

The newly emerging primal fear is that those in the halls of power when the crunch comes, who may be among the most “civilized” among us, will mount a last-ditch though futile effort to preserve those structures that have performed the basic maintenance to which we’ve all become accustomed. The power elite have most invested in industrial civilization. The masses will cling to an unsustainable past, too, until it becomes clear that, like the disproportionate amount of wealth (nearly half) controlled by the top ten percent of earners, provision of basic services is no longer their right or preserve. Severe dislocations and deprivations like those experienced post-Katrina will be the norm, except for those who retreat to well-prepared and -armed enclaves, abandoning the masses to their lot even more fully and abjectly than today.

Greetings from Liechtenstein

I am in Vaduz, Liechtenstein, where I will be giving a speech shortly on tax competition issues, at a conference entitled, “Can Capitalism Survive.”

Regular readers already know my views on tax competition, so allow me to make a few observations instead about Liechtenstein.

It has a progressive income tax, which sounds bad, but the top tax rate is only 18 percent. The low rates, combined with a very simple system that generally does not penalize saving and investment, means that there is very little disincentive for people who want to make the economy more productive.

Government spending in Liechtenstein is far too high, consuming about 21 percent of GDP. But compared to the United States, where government outlays are approaching 40 percent of GDP (and Western Europe, where they someteimes exceed 50 percent of economic output), Liechtenstein is a small-government jurisdiction.

There are 36,000 people living in Liechtenstein and 32,000 jobs. Is this a sign of rampant child labor? No, there are 32,000 jobs because more than 15,000 foreigners come to Liechtenstein every day to work. Having low tax rates and small government is a good recipe for economic prosperity, and this is good news for workers in neighboring nations.

It goes without saying, of course, that the people and leaders of Liechtenstein correctly understand that financial privacy is a fundamental human right, one that respects the sanctity of the individual and recognizes the threat of government.

Last but not least, the seven villages that comprise Liechtenstein have an explicit right of secession. So if the Royal Family and/or Parliament ever get too greedy, all it takes to escape is a two-thirds vote.

The Future of Facebook

The most important development in the way we interact on the web will come when a system of micropayments is in place.  The big difficulties are coordination problems and security.  The strongest incentive to build and control a massive social network is that it will enable Facebook to host a micropayments economy within its closed environment, solving both the coordination problem and a big part of the security problem.

Here’s the future of Facebook.  You will subscribe to your friends.  A subscription costs you a flow of micropayments.  Your friends will include the likes of Tyler Cowen, The Wall Street Journal, gmail, Jay-Z, Harry Potter and the Deathly Hallows, etc.

Remember that the next time you hear somebody say that there is no way to monetize Facebook or Twitter.

Rise Of New Chinese Collector Continues As Chinese Antiquities Remain "Recession Proof"

Astronomical Prices Paid For Historical And Quality Pieces In Recent Asian Auctions Defies Global Economic Woes As More Chinese Collectors Get In The Game

Since good works by historical artists like Yue Minjun are becoming more scarce, Chinese collectors are expected to continue to flex their muscles in upcoming auctions of Chinese contemporary art

Hardly any industry has escaped the global economic slowdown unscathed, and art is no exception, but recent auction results indicate that the art market — or at least pockets of the art market — are coming back to life. As the Wall Street Journal reports today, in some recent auctions some pieces have sold for exponentially more than their estimates, surprising collectors and market analysts alike. The common bond shared by most of these pieces? They were Chinese — or, if not Chinese, Asian:

Last week, the longest string of Asian art sales since the Zodiac clock dispute was held in the U.S.—and amid the most entrenched art-market recession in nearly two decades, the auction prices of many more than a handful of pieces went through the roof. At the Sotheby’s sale of works from the collection of Arthur M. Sackler, for example, the auctioneer sang out fast-rising numbers, first in English, then Chinese, as if he were rising in the elevator of some fantastically tall Hong Kong skyscraper.

The emergence of the New Chinese Collector is a subject we’ve followed pretty much since our inception, and is a subject that is endlessly fascinating simply because it’s such a new phenomenon. While, technically, Chinese people have collected art for a few thousand years — with the exception of a few Mao-era decades where the practice was virtually nonexistent but for a few elite art lovers here and there — the New Chinese Collector has only existed for around 20 years, and arguably even less than that. This collector base was out in full force in recent auctions of Chinese and other Asian art — in New York, London and Hong Kong — and the motivation, desire and intensity of the Chinese collector is becoming somewhat legendary right before our eyes.

In the Sotheby’s sale of Chinese antiquities mentioned in the Wall Street Journal article, agreements set in the last few years factor into the decisions by collectors of Chinese art to purchase now and purchase even at high prices, since it has become much harder to procure artifacts that will not become embroiled in potential disputes. For the New Chinese Collector, however, the relative ease of purchase is less important than the value of the investment and cultural resonance of the pieces of Chinese art they are buying around the world:

China’s economy remains strong relative to other nations, and there are impassioned movements in several Asian countries to reclaim national treasures and collect local art. So, at the auctions, rare works, those owned by prominent collectors, or those with comfortingly thorough and undisputed histories of export went for three, five, even 10 times their expected prices.

This fits with some of our previous posts, in which we posited that the continued rise of the New Chinese Collector as a global art collecting force would mirror China’s economic growth and global presence. As this group becomes more influential, we can expect to see them trotting the globe even more, spending what they need to to “reclaim” (although that word has unfortunate political associations) works of Chinese art from antiquity to the present day. In the recent Sotheby’s auction of works from the Sackler collection, this group didn’t mess around, and was significantly more visible compared to a year ago:

While standard art auctions of all kinds have struggled in the past six months, virtually everything offered at the Sackler sales sold. Consider a 12th-century B.C. bronze vessel of the Western Zhou Dynasty. Estimated at about $25,000, it sold for $362,500 at Christie’s. Tina Zonars, director of the firm’s Chinese artworks division, said that the market was “surprisingly strong,” with 70% of the buying done by Asian bidders, versus 50% a year ago. “We haven’t seen a noticeable impact of the recession.”

The article concludes by noting that there has been a major shift towards the East among auction houses like Sotheby’s, where they can more easily reach emerging buyers in mainland China and East Asia, and points out that the New Chinese Collector base is developing varied, sophisticated tastes in everything from the “Recession Proof” antiquities and cultural relics to the newer generation of contemporary Chinese artists:

Chinese photography continues to climb in the wake of purchases by both the Museum of Modern Art and the J. Paul Getty Museum; they added works to their collections by such artists as Ai Weiwei and Hai Bo.

…

The star sector of so-called Asia Week…was classic Chinese art. “You have two things going on,” says Larry Warsh, head of New York’s AW Asia and a collector and trader in Chinese, Indian and U.S. contemporary art. “The Chinese, as a people, stopped collecting during the Cultural Revolution and have begun again; meanwhile, wealth and luxury spending there has grown to a degree we’ve never seen before.”

Is it only the beginning in the nation’s splurge? Consider this: Sotheby’s raised more at a single sale of rare wine in Hong Kong this summer than at all of its London wine auctions combined all year.

Up for auction on Oct. 6: Liu Ye, one of China's top historical contemporary artists

I think these last few paragraphs really summarize the world of the New Chinese Collector — many of them are flush with cash for the first time, and, having already put some of their money into traditional “hedges” like gold (a perennial favorite in China) and maybe real estate or luxury cars, they want to get into the cultural realm with things that resonate with them on a personal, patriotic and historical level. How best to do that? Buying the personal (fine wine, historical watches), the patriotic (Chinese contemporary art) and the historical (Chinese antiquities). As we’ve seen in recent auctions, the New Chinese Collector is equally motivated to get involved with all three and take as many of each group home as possible. It’s good for the collector, it’s good for the art market, and it adds a new and exciting dynamic to the art world, which remains plagued by the global economic doldrums.

Now we’ll have to see what Chinese collectors do at big Asian auctions coming up in the next few months – the first of which, Sotheby’s Autumn Auction of Chinese and other Asian art, takes place on October 6 (during Golden Week – when millions of cash-rich and shopping-mad mainlanders hit the city to celebrate and leave billions of yuan in the hands of HK merchants). Will the New Chinese Collector’s march continue unhindered? Or will we be surprised by the old standby — the seasoned Western collector? We’ll have to wait and see.

Sen. Murkowski Proposes Disastrous EPA Amendment on Behalf of Dity Energy

A Senator from Alaska is moving to sabotage US efforts to create meaningful climate legislation before Copenhagen.

Online petitions are springing up

Senator Lisa Murkowski of Alaska has proposed an amendment to EPA’s fiscal 2010 spending bill that would strip EPA of the ability to regulate greenhouse gas emissions from coal plants and polluting industries.  Such an amendment could seriously undermine the US’ leverage in negotiating a sufficient climate treaty in Copenhagen.

On Monday, 32 environmental groups sent a letter urging the Senate to reject Murkowski’s draft amendment. Among the letters’ contentions:

“The Murkowski amendment seeks to exempt from the Clean Air Act the biggest global
warming polluters. The amendment would let Big Oil, dirty coal, and other big polluters off the
hook for their carbon dioxide emissions, undermining the Clean Air Act’s protections for public
health and the environment. These sources are responsible for the lion’s share of U.S. carbon
dioxide emissions.

The Murkowski amendment delays the transition to clean energy. Exempting the biggest
sources of carbon dioxide from the Clean Air Act will delay our nation’s transition to efficiency,
solar, wind, and other sources of clean energy – sources that won’t run out, will only grow
cheaper over time, don’t harm our environment or public health, and will create millions of
clean energy jobs.”

Lisa Jackson, Administrator of the EPA, and some Senators have indicated that they must fight this amendment in any way they can. “I don’t know that we can stop [Murkowski] from offering her amendment,” said Sen. Tom Carper (D-Del.) “We may want to table it. We may want to try and defeat it. We may want to offer a second degree. All of the above. Or one of the above.”  However, conservative Democrats are not as decided in their opposition to the amendment.  The vote could be close.  Online petitions are circulating right now, including:

CREDO: Tell the Senate: Hands off the EPA

1Sky: URGENT: Call your Senators and tell them to vote NO on the Murkowsky amendment

For a plain-English explanation of the role of the EPA in regulating carbon emissions, please read David Robert’s article in Grist, “Everything you always wanted to know about EPA greenhouse gas regulations, but were afraid to ask.”

Mo' money, mo' money, mo' money!

Mo’ money, mo’ problems.  You know what I’m talkin’ about, Stanley, right?  - Michael Scott, “The Office”

Earlier, I wrote a note about the misconception that the measure of economic activity is somehow a corresponding measure of wealth.  But I think we also have a misconception of what money itself is.
The classic definitions of money are a medium of exchange and a store of wealth.  This means that if I have money, I don’t have to barter.  If I have money, I don’t have to worry about wolves carrying off my livestock.  I can still do the things I needed to do before, only now it has become a little easier, as I don’t have to carry around sheep with me in order to get wheat to make bread.

One of the caveats to this whole thing is that the value aspect of money is based solely on trust.  That is, if I trust that what you are giving me is something I can give to someone else, then I will accept it.  The widespread use and general trustworthyness of the Federal Reserve Note is what has made it the de facto currency of the day.  Back a few decades ago, each green sheet was backed by a certain amount of gold in some vault somewhere.  If you were so inclined, you could go in to that vault and get yourself some gold.  Then, instead of buying your next car or groceries with greenbacks, you could plunk down cold, hard, gold.

Once people agreed that there would be something of value to back the green paper, they trusted it.  As that trust spread, there became less and less demand for proof that there was something back there, and eventually we even eliminated the gold standard for money.  This means that the Federal Reserve just makes more money by, well, just making it.  They print it – and we accept it, just like that.

Now, plenty of people have written about the perils of eliminating the gold standard.  Dozens of books on Amazon are available, probably just as many more in your local library.  I’m too lazy to make another link, so you’ll have to do your own research.  But what the Dollar, or the gold coin, does for us is it allows us to do something else.

But what?  What else would we need to do that would maintain our lives?

• Buy a car?  Nope.  Cars are not necessary for keeping us alive.
• Save for a rainy day?  Nope.  Savings is not necessary for keeping us alive.
• Buy new clothes?  Nope.  Buying new clothes blah, blah, blah.
• Loan money to a friend?
• Loan money to an enemy?
• Donate to charity?

Nope, none of those.  The only thing that will keep us alive – as individuals and as a society – is if you purchase food for yourself with your money.  Think about it.

If you don’t have clothes, you can still survive.  You’ll be a little cold, maybe a little wet at times, but you will still survive.

If you don’t have a house, you can still survive.  Again, you may have to walk a way to get to a more mild climate in which you can survive without a house, but you can do it.

If you don’t have a new stereo, or a new TV, or a savings account, you can still survive.  It might not be the most entertaining, or the most secure, but it’s there.

But if you don’t have food, no matter what else you have, you die.  Period.  End of story.  Kaput. Therefore, the only real value money has for us is a way for the individuals in society to get food.

(I am also including water in the category of food.  But for the future, instead of writing “food and water” each time, I’ll just write “food”.)

And that’s what I think we have been missing all this time.  Our economics has been focused on “wealth”, measured in terms of currency.  Dollars, yen, share prices, 401(k) balances.  But our real wealth, our only true wealth, is actually measured in terms of our Calories.  We create wealth not by fancy watermarked- and embedded-thread printed pages, but by growing more corn, more beets, more cabbage.  We create wealth by spending our time not on writing fancy blogs, but by catching fish or spearing deer.  We create wealth by creating food, and we destroy it simply by existing.  By breathing in and breathing out.

Unfortunately for this post, it’s late and time to go to bed.  So much more I’ve been thinking about, and needing to get down on the computer.  Keep in touch, folks.  It’s going to get interesting from here.

Why Thomas Byrne is wrong on Fairtrade

Thomas Byrne has been slurred by his friends as an ‘evil capitalist swine’, [who would] ‘rather see people suffer’, than be brought out of poverty through these wonderful Fairtrade schemes.

And rightly so.

His arguments against Fairtrade show a fundamental misunderstanding about how a poor country develops into a rich one.

ByrneTofferings‘ main argument against Fairtrade is that it is not free trade. I’ve reproduced some below with my emphasis to illustrate where he’s gone wrong.

[Fairtrade] distorts the markets, and while it may be good for the coffee grower in the short term, it’s bad for them in the long term, it’s bad for other coffee growers who aren’t part of the schemes (because they have to sell at the same price as everyone else), and it’s bad for the consumer because it costs us more than it should. Obviously we have the choice to go elsewhere, but that necessitates that there are some producers not part of the Fairtrade group which again, hurts them.

Where ByrneTofferings goes wrong is that he assumes distorting markets is a Bad Thing. For a developing country nothing could be further from the truth.

Exporting primary materials like coffee or rubber is a precarious situation for any country to find itself in. For example, the economies of Peru and Chile nearly collapsed after their export of nitrate fertilisers was obliterated by the creation of the Haber Process in the early 20th Century, which provided a cheaper, closer and more reliable source of fertiliser.

This is why distorting markets is so important, it allows countries to move from low value-added to high value-added activities more swiftly. For example, moving from low value added coffee growing, to coffee roasting, to coffee packing and finally to high value added coffee marketing will increase people’s well being and domestic stability as the economy diversifies.

Relying on a natural resource is dangerous and waiting for your domestic economy to upgrade naturally is risky.

There are plenty of ways which Governments can distort markets to make development and domestic upgrading occur more quickly.

• For the capitalist out there, a government could grant tax exemptions or holidays to businesses engaged in capital investment. For example, tax breaks for firms that invest in new facilities rather than pay higher dividends.
• For the centrists, firms engaged in similar endevours could be encouraged to congregate in selected “special economic zones” via various subsidies. By bringing these together the government would encourage positive spillovers which would not occur without some guiding visible hand. For example, car manufactures sharing widget producers.
• For my comrades, a state firm could use tax revenues to promote full employment pushing up agregate demand and subsidise domestic demand.

Fairtrade goods are an excellent way to get money into these developing countries to allow them to undertake these sorts of endeavours. ByrneTofferings argues that it would be better to give money to a charity, but charities are accountable to their donors, not the recipients of the aid. Fairtrade puts money in pockets and channels it through productive businesses, this is the advantage it has over charity.

Fairtrade on its own will not change many lives, but coupled with an activist Industrial, Trade and Technology policy it can provide a vital step to improving the condition of those in the third world.

Basic transportation with a momentary PS3 effect

The Tata Nano is not a good car, but it is a car, and a serviceable one at that. Most importantly, it is basic and extremely cheap; $2,500 when it first went on sale, a quarter of the price of the typical economy car for sale in the states. It was built to provide the millions and millions of lower and lower middle class in India the opportunity to cross the threshold from dangerous family motorbike to much safer family car.

This is a great idea, but it hasn’t gone perfectly smoothly. Due to production delays, Nano supply falls well short of demand, so a “PS3″ effect is kicking in for many who won the lottery to purchase the initial batch of Nanos. When the PS3 was launched, many waited in line to buy it so they could quickly flip it on eBay and make a tidy profit. This is going on with the Nano now, and people are paying far more than $2,500 for the car, a price the company slaved for years to achieve. Instead of families upgrading from bike to car, richer elites are buying up the car as a Prius-like status symbol; a novelty, not a necessity.

But this should pass once Nano production hits its second or third winds, and when you add the possibility of taking out a microloan from Grameen to purchase a Nano, poorer Indians will be moving up, possibly in the millions, in good time. The cheap no-frills transportation for the masses is hardly a new idea, but it is an nonexistent one in the Western world in this century. The cheapest new cars cost $10,000, and there’s no getting around it. Which is a shame, because a lot of Americans who need cars and have a little bit of money to buy one don’t have that much to spend. So they buy used cars or no car. In our economy, and with our safety standards, a Nano exactly like the one in India would be impossible in America or Europe, so they’re making a safer, more robust version that will likely cost more.

But if they can still get it here for well under $8,000, they may have a winner, and do something Volkswagen hasn’t done since the original Beetle ceased production: build a real volkswagen.

Say YES to Patent Law

With all of the posters and emails going around, it seems that every Harvard student is saying yes to drugs. To generic drugs for those in the developing world who cannot afford name brand pharmaceuticals. Of course, with this basic premise and a cute slogan going around, pretty much all Harvard students (even the Crimson) have seemingly gotten behind this new campaign.

Although initially, promoting generic drugs seems like a good policy, in the long term, it may turn out to be extremely detrimental. The point of patent law is to protect the right to research and provide incentive for pharmaceutical companies to develop of new drugs by allowing them to make greater profits due to their temporary monopoly over its production. Eliminating the patent law will strip away the high potential for profit, deterring companies from producing the life-saving drugs in the first place. Profit motive provided by the United States market is the main reason that we’ve had many miraculous breakthroughs for pharmaceuticals.

To me, it seems wiser to temporarily delay the production of generic drugs in developing companies than to deter their production altogether. Promoting patent law may seem like a policy in the pockets of corporate pharmaceutical companies, but it’s actually a plan to provide lifesaving generic drugs in the long-term.

Unlike my peers, I must repeat the refrain of the great conservative role model, Nancy Reagan. Just say no!

[Jordan Monge is a Sophomore in Currier and the Membership and Publicity Director of the Harvard Republican Club.]

Why standardized testing in our schools SUCKS

Why CSAP Sucks
By Christian Piatt

(Originally published in PULP)

If the ridiculous school supply and uniform bills weren’t enough to signal the beginning of school, there are plenty of other signs that the academic season is upon us: nervous-looking kids; slightly euphoric parents; bulging backpacks and the telltale crossing guards posted at strategic locations around town.

We also know it’s back-to-school time since we’re finally getting a glimpse of the CSAP test results from last year. The CSAPs – which stands for “Colorado Student Assessment Program” – is given to most students on most grades throughout the state, supposedly to track student progress. A love child of George Bush and his No Child Left Behind legislation, the CSAPs and similar testing batteries across the nation have drawn mixed reviews.

In general, the sentiment toward the tests is negative, but the problem is most folks agree we should have some sort of accountability for student achievement; the problem is that no one seems to have a clue about how to make the tests better.

For starters, the tests historically have compared apples to oranges, holding one third-grade class’ scores up against the third-graders that follow them the next year and so on from grade to grade. But aside from any kids who failed and had to repeat a grade, these are entirely different students, so it’s impossible to get much useful data this way.

Recently, the bureaucrats and administrators have wised up at least a little, and they’re now tracking cohorts. This means we get to see data from one group of students as they progress throughout their academic career. But this still has huge flaws, particularly in a highly mobile community like Pueblo. In some schools, where the mobility rate exceeds 100 percent, most of theses aren’t the same kids from beginning of year to end, let alone from one year to the next.

A more reasonable solution is to implement a longitudinal system that follows each individual students from kindergarten to graduation. This would require more consistency from state to state, but it’s really the only way to use the tests to tell if a particular student is where they need to be or not.

Another issue is the test’s sensitivity, on two levels. First, though some strides have been made to try and make the tests culturally sensitive, there are still issues surrounding the assumption of prior knowledge, much of which comes from a middle class, primarily Anglo background. Simply put, middle class kids have seen and done more than poorer kids, which gives them an advantage over kids who may have never left their home town.

A second sensitivity problem is more technical, primarily regarding the higher and lower extremes of the scale. In general, all we hear about is whether or not a kid performs at or above the “proficient” level, which constitutes two of the four possible quartiles within which scores can fall. Each school can see scores in a bit more detail, but for a child who began as a non-English speaker, or as functionally illiterate, a gain of a year or more may not even create a blip on the score chart. Some concessions are made for “special needs” students, but this hardly addresses the fundamental flaw, which is a test that is akin to taking a chainsaw into surgery.

Finally, there’s the problem of what the tests actually measure. The testing protocols, which are timed, try to tell if a child has mastered a set of skills necessary to solve a problem, whether it is a math proof or answers at the end of a reading passage. For the kids who get the right answers, all is well, but for the rest, the tests really tell us nothing.

For example, say a child misses all five questions at the end of a story passage. Though we can see they got all the wrong answers, did they fail because they didn’t understand the story? Maybe they misunderstood the questions? Or perhaps the directions for what to do in the first place? Did they read too slowly to even get to the questions? Did they have so many words they could not decode in the story that they lost the story’s point? Did they lack the vocabulary to comprehend three dozen words in the first few paragraphs?

We have no idea.

That’s because these are achievement tests, which do just that: measure overall achievement. If, however, we really wanted to mind some valuable data from this effort, we should be conducting diagnostic assessments. This not only tells you where a child does well, but where, across the board, they are weak. This helps teachers target the low points so that the entire end-result can come up, and so that some problems for which kids may compensate early in their school careers don’t suddenly blow up in their faces come junior high or high school.

Some are calling for the whole testing concept to be trashed, which would be a mistake. The problem isn’t that we’re testing our kids; it’s that we don’t know how or why. For now, though, the CSAPs and their counterparts in others states score well below proficient.

Economics: Ch. 1 and Ch. 2 Test 9-22-09

What We Did Today:

* We started the class by collecting all homework, no late work will be accepted after the date of the test.

* We took the Ch. 1 and Ch. 2 Test.  This was mostly Multiple Choice and True False.  There was also a short answer portion and one essay question that went along with the test.

* Then we finished the class by playing a news game.

Homework:

* There is no homework tonight!

Boston's Hyatt Hotels: Not Much Hospitality Toward Their Workers

An ongoing labor story here in Boston involves three Hyatt hotels, whose management abruptly terminated some 100 housekeeping workers after having them train replacement workers from a Georgia-based contracting company.  The workers claim they were deceived into thinking they were training vacation fill-ins.

As reported in the Boston Globe:

When the housekeepers at the three Hyatt hotels in the Boston area were asked to train some new workers, they said they were told the trainees would be filling in during vacations.

On Aug. 31, staffers learned the full story: None of them would be making the beds and cleaning the showers any longer. All of them were losing their jobs. The trainees, it turns out, were employees of a Georgia company, Hospitality Staffing Solutions, who were replacing them that day.

Labor advocates and elected officials have responded with dismay and outrage, and with good reason.  Hyatt employees with 20 years service were making a modest wage of a little over $13/hour plus benefits, which based on a full-time work week adds up to annual earnings of around $26,000.  Their replacements will earn about $8/hour, which leads to annual earnings of around $17,000.

In response to the growing firestorm, the Hyatt Corporation said that it is setting up a task force to help the terminated workers find employment and extending their health benefits to the end of the year.  This strikes me as being too little, too late, and a shallow attempt to look better in the public eye.

Contracting has become a common form of replacing full-time employees, and at times, economic necessity may require changes in staffing arrangements.  But one has to wonder about the social responsibility and ethics of a major corporation that deems loyal 20-year employees earning $26,000 “too expensive.”  And if the allegations about deceiving their workers into training their replacements are true, then we can only wonder if they have any decency.

Links to Boston Globe articles:

http://www.boston.com/business/articles/2009/09/17/housekeepers_lose_hyatt_jobs_to_outsourcing/

http://www.boston.com/business/articles/2009/09/18/hundreds_attend_rally_for_fired_hyatt_housekeepers/

http://www.boston.com/business/ticker/2009/09/hyatt_to_help_l.html

The Desert Island Test

 “No one should die because they cannot afford health care, and no one should go broke because they get sick.  If you agree, please post this as your status for the rest of the day.” 

Facebook users will no doubt recognize the above quote, which was recently posted as a “wave” by some supporters of socialized medicine.  Evidently they just wanted everyone to know how deeply they care about the plight of the less fortunate who, for whatever reason, cannot afford health insurance.  I have no doubt that all those who posted the aforementioned status update to their Facebook page also contacted their favorite health-related charity that very same day to make a sizable donation.  Otherwise the more cynical among us might have thought that their public display of concern for the downtrodden was really nothing but a shallow demand for the government to spend everyone else’s money.  

Granted, scanning my friends’ Facebook pages is not exactly a scientific survey, but it does at least offer an opportunity to see what some of the people in my network are thinking.  As health care seems to be the one and only issue being discussed in the media these days, it is naturally a hot topic on social networking sites as well.  In addition to the pro-government medicine wave, there are also various Facebook polls concerning health insurance, such as the one that asks, “Should health care be considered a basic human right?”  At the time of this writing, the results were 72% Yes, 28% No. 

As sad a commentary as those results are, the poll question itself reveals how poorly most people understand fundamental concepts.  Rights, in the classical liberal tradition upon which the US government was founded, derive from our nature as human beings.  The Facebook poll question, however, asks whether health care should be a right or not – the implication being that what is or is not a right is subject to change at any given time, like the menu down at the corner deli.  

As libertarians and a few others understand, however, something is either a right or it is not.  “Should” doesn’t enter into the equation.  In a recent episode of his online show “Freedom Watch,” Judge Andrew Napolitano stated (correctly) that “health care is not a right, it is a good.”  Many people (at least 72% of Facebook respondents, anyway) would obviously take issue with Judge Napolitano’s position, but I suspect the disagreement is primarily a semantic one.  Perhaps we should define our terms – especially fundamental terms like “rights” – before getting bogged down in the details of any particular proposal.  Only then will we be able to make some progress in the national health care debate.  

In the modern vernacular, the term “right” seems to mean “anything I might like to have.”  Health care is (or for those of you on Facebook, should be) a right because everyone wants it, or needs it, or thinks it’s really nifty.  The same goes for education, a minimum wage, a three-bedroom house with a view, or whatever else people want to throw on the government wish list at any given time. 

The fallacy underlying this popular definition of rights shouldn’t be too hard to disprove.  And when it comes to the issue of universal health care, it would behoove the liberty-minded individual to do so as quickly as possible.  If the popular definition goes unchallenged, the proponents of socialized medicine will inevitably claim that health care is a basic human right, and will consider that to be the end of the argument – their “get out of the debate free card,” if you will.  As the concept of rights in the traditional American sense is now so poorly understood, you may have to work a bit to educate those who haven’t been exposed to the foundational principles of our fair republic.  Nevertheless, it’s an important task that should help clarify the issues at stake.  What follows are a couple of strategies that may help illustrate the difference between the legitimate rights of the Lockean tradition and the illegitimate positive rights that seem to dominate the discussion these days.  No doubt the reader knows of other approaches that are equally effective. 

When confronted with the claim that X, Y, or Z is a “right,” the first question we should ask is, “Does everyone have the same rights, or do different people have different rights?”  If we can agree that all people have the same rights, then we can probably move forward with the discussion.  If our opponents claim that some people have more rights than others, then we should probably just back away slowly and not make any sudden moves until we have reached a minimum safe distance.  Life’s too short to argue with pinheads. 

Assuming we do agree that all people have the same rights, then it follows that rights must be universal.  That is, they must apply equally to all people, at all places, at all times.  This is merely a restatement of the already agreed-upon proposition.  One way to determine whether something meets the universality constraint is to use the “desert island” test. 

Let’s imagine that I’ve been shipwrecked on a desert island.  After I wash up on shore, do I have a right to my life?  Yes.  Do I have a right to whatever property I have with me, or am able to create using the resources available to me on the island?  Yes.  Would I have these rights no matter when I got stranded on the desert island, be it the year 1609, 2009, or 3709?  Yes.  Would I have these rights without regard to my race, color, national origin, religion or creed, gender, sexual orientation, age, or disability?  Yes.  So it seems that these rights – life and property – satisfy the universality constraint.  They apply equally to everyone, at all places, at all times. 

Now let’s continue the test.  If I’m stranded on a desert island, do I have a right to health care?  If no one is around to provide health care to me, then how can I have a right to it?  Would I have the right, as some claim, to health care regardless of when I wash up on shore?  Would I have the right, for example, to a CAT scan if I were shipwrecked in the year 1609?  Clearly, health care fails the universality criteria for basic human rights.  It cannot apply equally to all people, at all places, at all times. 

Another way to conceptualize the distinction is to describe a right as something for which one would be morally justified in using force to obtain.  I have the right to use force against someone who is trying to kill me because I have a right to my own life.  I do not have a right to anyone else’s life, and therefore I would not be morally justified in using force against those who do not attempt to harm me first.  Hopefully most people would agree to that proposition without the aid of any long, drawn-out logical proofs.  

Let’s imagine that Joe is trying to kill Frank for no other reason than the voices in his head told him to.  In this example, Frank would be justified in shooting Joe if need be because Frank has the right to his own life.  

Now let’s say that Joe is not trying to kill Frank.  Instead, Joe is sitting at home, minding his own business.  If Frank falls ill, would he be morally justified in shooting Joe if Joe doesn’t pay for Frank’s medical treatment?  Most sane people would say no.  Nevertheless, if the proponents of socialized medicine who claim that health care is a basic human right wish to be logically consistent, they would have to say that Frank would be within his rights to use force against Joe in this case.  To my knowledge, few proponents of Obamacare have been quite so forthright. 

There are many things in this life that are necessary for mankind to survive and flourish, and health care is certainly one of them – along with food and water, clothing, shelter, and countless other goods and services.  People have the right to desire whatever they want (an Aston Martin, cable TV, sunshine and puppy dogs), but this does grant them a right to the thing itself, no matter how much they may want or even need it.  To suggest that we have a right to the goods and services that others must provide us is to claim that we can legitimately impose contractual obligations on those other people with or without their consent.  There’s a term for that kind of forced labor, and as far as I know, slavery is still considered très déclassé. 

As important as this semantic discussion of rights may be, I don’t imagine for a second that it will halt the drive toward universal health care in this country, even if we are successful in restoring the true meaning of the term.  Most people just want what they want, and they’re not going to let some egg-headed notions of rights and ethics stand in the way.  But at least it would help to strip away the false virtue that proponents of socialized health care have used to cloud the debate.  Perhaps then more people would see Obamacare for what it really is – gun-run medicine.  

If you agree, please post this as your status for the rest of the day… 

 

(Desert island photograph from here).

Key events for FX markets this week

Key events this week include the Fed FOMC and G20 meetings .  The G20 meeting is likely to be a non-event as far as markets are concerned.  There will be plenty of discussion about co-ordinating exit strategies but officials are set to repeat the commitment to maintain stimulus policies until recovery proves sustainable.  

There is likely to be little emphasis on currencies despite the fact that the dollar is trading around its lowest level in a year, except perhaps at the fringes of the meeting, with focus in particular on Japan’s new government’s pro yen policy.  

Regulation will also figure high amongst the topics debated but this will have little impact on markets over the short term.  Another topic that could be debated is protectionism, especially in light of the US decision to impose tariffs on Chinese tyres.

Ahead of the G20 meeting the Fed FOMC meeting is unlikely to result in any change in interest rates but the statement is likely to be cautiously upbeat in line with Fed Chairman Bernanke’s recent comments that the recession is “very likely over”.  The statement will be scrutinised for clues to the timing of policy reversal, especially given recent speculation that a couple of FOMC members were advocating an early exit.  Given that the dollar has suffered due to its funding currency appeal, any hint that some Fed officials are turning more hawkish could give the currency some much needed relief but we doubt this will last long. 

In contrast to speculation of a hawkish shift in thinking by some Fed members the Bank of England appears to be moving in the opposite direction.  The MPC minutes on Wednesday will be viewed to determine just how close the BoE was to extending quantitative easing and reducing interest rates on bank reserves at its last meeting. 

Sterling (GBP) has been a clear underperformer over recent weeks and a dovish tint to the minutes will act as another factor weighing on the currency as speculation over further action intensifies ahead of the next meeting.  

Sterling is also struggling against the euro having hit a five month low.  A combination of factors have hit the currency including concerns about quantitative easing expansion, the health of the banking system, and the latest blow coming from a the Bank of England in its Quarterly Bulletin where it states that GBP’s long run sustainable exchange rate may have fallen due to the financial crisis.   

Against this background it is not surprising that sterling was the only major currency against in which speculative positioning actually deteriorated versus the dollar last week (according to the latest CFTC Commitment of Traders report).   It is difficult to see any sterling recovery over the short term against this background, with a re-test of the 9 July low just under GBP/USD 1.60 in focus.

NGOs and Microfinance in Africa: the Awakening Experience of ‘Rwanda Works’

Interesting interview that Josh Ruxin–founder of the new NGO Rwanda Works, Professor at Columbia University, and Director of the Millennium Global Village Project in Rwanda, just had with BigThink.

In the interview, Ruxin describes his current work in Rwanda helping to promote access to healthcare and sustainability, as well as his profound insights into the policies that actually work to advance international development. Among the many current practices that Ruxin explains are simply not working, include the widely-praised spread of microfinance loans, which Ruxin believes are not nearly the “panacea” many believe them to be, and are not actually creating any significant progress in much of the developing world–particularly not sub-Saharan Africa: http://bigthink.com/joshruxin/the-case-against-microfinance-loans

Ruxin also discusses the urgency of developing sustainable agriculture in the developing world as a way to solve an array of problems, and describes some of the creative new approaches to affordably promoting sustainability in Rwanda and surrounding countries that currently being refined to meet these challenges: http://bigthink.com/joshruxin/the-key-to-developing-rwanda

Ruxin also examines how an increase in women’s reproductive rights is one of the key issues in international development and why government officials investing in foreign aid should provide far more funding for family planning: http://bigthink.com/joshruxin/the-link-between-womens-rights-and-economic-success

.

.

Spanish version here below:

ONGs y microfinanzas en Africa: la experiencia reveladora de ‘Rwanda Works’

Interesante entrevista (en inglés) que Josh Ruxin ha concedido a BigThink.  Josh Ruxin es el fundador de la nueva ONG Rwanda Works, Profesor de la Universidad de Columbia, y director del Proyecto de la Aldea Global del Milenio, en Rwanda.

En la entrevista, Ruxin describe su trabajo actual en Rwanda para ayudar a promover el acceso a la asistencia sanitaria y la sostenibilidad, así como sus reflexiones lúcidas sobre las políticas que funcionan realmente para promover el desarrollo internacional. Entre las muchas prácticas actuales que Ruxin considera simplemente inoperantes, incluye la propagación del muy encumbrado sistema de microcréditos. Ruxin los juzga de tal forma que cree que no son ni la “panacea” que muchos quisieran, y no son, puesto que no representan en realidad un avance significativo en la mayor parte de el mundo en desarrollo – en particular, para África subsahariana: http://bigthink.com/joshruxin/the-case-against-microfinance-loans

Ruxin también razona sobre la urgencia en desarrollar la agricultura sostenible en el mundo en desarrollo como una manera de resolver una serie de problemas, y describe algunos de los enfoques nuevos y creativos para promover la sostenibilidad asequible en Rwanda y países vecinos que actualmente se está perfeccionando para enfrentar estos desafíos: http://bigthink.com/joshruxin/the-key-to-developing-rwanda

Asimismo Ruxin examina cómo un aumento en los derechos reproductivos de las mujeres es una de las cuestiones clave en el desarrollo internacional y por qué los funcionarios de la administración que desean invertir en ayuda al desarrollo han de proporcionar muchos más fondos para la planificación familiar: http://bigthink.com/joshruxin/the-link-between-womens-rights-and-economic-success

Behavioral economics, taxes, and health care

In my previous post (Keynes vs. the Chicago school of economics), I posted a link to an article written by Paul Krugman regarding the current state of macroeconomics and its salient failures. One thing I pointed out is Krugman’s advocacy for a higher reliance on behavioral economics, which is a branch of economics that “applies scientific research on human and social, cognitive and emotional factors” to economic decisions.

One thing behavioral economics helps us do is find differences in assumed, theoretical economic behavior and actual economic behavior. For example, in a recent paper by Congdon, Kling, and Mullainathan, the authors write, “Behavioral economists have now accumulated several decades of findings indicating that the standard economic assumptions about individual behavior are not accurate, that people do not act rationally, that they are not perfectly self-interested, and that they hold inconsistent preferences. Moreover, and especially in recent years, policy economists have increasingly come to see that these deviations from the standard assumptions about behavior matter for economic policy.” The authors point out that while such faulty assumptions about human behavior are used in modern economic theory, some justify it on the basis that they are simple and useful for modeling purposes and crafting new theories. However, write the authors, “behavioral economics argues that the standard assumptions are so consistently violated as to be neither literally true nor useful as modeling assumptions.” (Emphasis mine.)

This paper specifically deals with behavioral economics as it relates to taxes. On this, the authors declare, “Behavioral economics stresses that individuals are not, in practice, perfectly self-interested.” In fact, “They care about the welfare of others and they care about the fairness of the process that generates outcomes.” And this, I think, relates to some comments I made in a SCSU Scholars post regarding health care reform. The point I try to make is that I think there are some goods and services that we can call essential, that we can reasonably say no person should have to go without (at least in a highly developed, industrialized, and wealthy country such as the United States). For example, I think most people would agree policing, firefighting, and defense under law are all reasonably essential and that people should be entitled to such things even if they cannot afford them. My argument is that health care is something we can reasonably say people deserve to have even if they can’t afford it.

Now, I concede that this might just require taxes in the same way taxes are used to fund police protection, firefighting, and public defenders. Some people may say taxes are a “road that leads to slavery.” I don’t like taxes either, but I won’t go that far; the question isn’t whether there are taxes, per se. What we should ask ourselves instead is, To what end does this taxation go and does it represent what most Americans want? As the authors of the paper point out, people do actually care about the welfare of others and how welfare is achieved. So I think in answering the two questions I asked, and as someone who believes strongly in democratic principles, I think a tax in this case can be justified. For example, poll after poll show the American public favor a public health care system (and by wide margins). And it’s been like that for decades. Of course, if this were a functioning democracy, I think that would be the case by now.