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The grandfather clause (repost) — Crooked Timber

13 Aug

I saw a reference to (US Representative) Paul Ryan’s plan to kill Social Security and Medicare, but only for people currently under 55 (he doesn’t say “kill” of course, but if it was going to make things better he wouldn’t need to exempt everyone likely to care directly about the issue) and it reminded me to post this.

A policy like this has what economists like to call a time-inconsistency problem. To get the policy approved, Ryan needs the votes of people currently over 55 (hence the exemption) and in the current US situation, any Republican majority has to rely heavily on older voters. Say the plan passes. Sooner or later, the combination of demographics and the electoral pendulum means that the Repubs will be out, and the new primarily majority will face three choices (a) Repeal the whole thing if they can do so before it comes into force (b) Keep on paying high taxes to fund benefits they will never receive for the benefit of the selfish old so-and-so’s who voted to cut the rope once they had reached the top; or© extend the same cuts to the (as of 2011) over 55’s, and claw back some money for themselves.

If I were an over-55 Republican, I don’t think I would want to count on (b)

Discussion follows at the link below.

via The grandfather clause (repost) — Crooked Timber.

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After Knight Capital, New Code for Trades – NYTimes.com

9 Aug

Software is buggy. Some of my buddies in the industry tell me that it IS possible to write reliable code, but very expensive. So expensive and time-consuming that it is almost never done. Think about that for a minute. We live in a too-big-too-fail world that’s held together by software that’s almost guaranteed to fail. Sometime.

AS a former software engineer, I laughed when I read what the Securities and Exchange Commission might be considering in response to the debacle of Knight Capital’s runaway computerized stock trades: forcing companies to fully test their computer systems before deploying coding changes.

That policy may sound sensible, but if you know anything about computers, it is funny on several accounts.

via After Knight Capital, New Code for Trades – NYTimes.com.

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Universal basic income: how much would it cost? — Crooked Timber

5 Aug

An interesting exercise by a smart economist, though like all such exercises one must pay attention to the details and be judiciously skeptical.

Summing up the exercise, I’d say that a universal basic income of the type I’ve sketched out here is economically feasible, but not, in the current environment, politically sustainable. However, while economic feasibility is largely a matter of arithmetic, and therefore resistant to change, political sustainability is more mutable, and depends critically on the distributional questions I’ve elided so far. A shift of 10 per cent of national income away from working households might seem inconceivable, but of course that’s precisely what’s happened in the US over the last twenty or thirty years, except that the beneficiaries have not been the poor but the top 1 per cent. So, if that money were clawed back by the state, it could fund a UBI at no additional cost to the 99 per cent.

via Universal basic income: how much would it cost? — Crooked Timber.

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Wave of Volatile Trading Unsettles U.S. Markets – NYTimes.com

1 Aug

Whoops! Better not do that again. All this technology, all these mistakes.

The runaway trading suggests that regulators have not been able to keep up with electronic programs that increasingly dominate the supercharged market and have helped undermine investor confidence in stocks.

Traders on Wednesday said that a rogue algorithm repeatedly bought and sold millions of shares of companies like RadioShack, Best Buy, Bank of America and American Airlines, sending trading volume surging. While the trading firm involved blamed a “technology issue,” the company and regulators were still trying to understand what went wrong.

via Wave of Volatile Trading Unsettles U.S. Markets – NYTimes.com.

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This Week in Poverty: TANF, VAWA and Playing Politics with the Lives of Low-Income People | The Nation

30 Jul

In short, let states explore new ways to get better results from their efforts to employ low-income people in good jobs.

Sound familiar? Giving states more flexibility to run their Temporary Assistance to Needy Families (TANF) programs? The notion that local folks might have some of the best ideas on how to help people in their jurisdictions?

It’s straight out of the Republican playbook. Only this time around the proposal is from a Democratic Administration, so suddenly it’s not kosher.

via This Week in Poverty: TANF, VAWA and Playing Politics with the Lives of Low-Income People | The Nation.

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As Social Sites’ Shares Fall, Some Hear Echo of 2000 – NYTimes.com

28 Jul

Is “social media” hitting a wall? Like maybe it’s not very deeply social?

Several companies that were supposed to be the foundation of a new Internet era plummeted this week as analysts and investors downgraded their dreams. There were instant echoes of the crash of 2000, when the money stopped flowing, the dot-coms crumbled and Silicon Valley devolved into recriminations and lawsuits.

Shares of Facebook stumbled to a new low Friday after its first earnings report revealed a murky path to any profit that would justify its lofty valuation. The heavily promoted $100 billion company on the eve of its May debut is now a $65 billion company and persistently headed south.

via As Social Sites’ Shares Fall, Some Hear Echo of 2000 – NYTimes.com.

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Our Overburdened Central Banks – Clive Crook – The Atlantic

26 Jul

Follow the link and look at the chart.

Here’s a chart from the report that’s worth a look. It shows the economic interactions among three sectors: government, households/firms, and finance. Each pairwise interaction is a self-aggravating cycle, and central banks are being asked to intervene at all three points. I remember when monetary policy used to be one target (prices), one instrument (interest rates). Happy days.

That’s three autocatalytic potentially out-of-control loops, each draining the central banks.

via Our Overburdened Central Banks – Clive Crook – The Atlantic.

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Are We Addicted to Gadgets or Indentured to Work? – Alexis Madrigal – The Atlantic

24 Jul

Just why are we so addicted to work? Is that addiction another aspect of the psycho-cultural dynamic that allows us to deny climate change and that keeps us from throwing the Republicrats out?

The upper middle class (i.e. the NYT reader) is WORKING MORE HOURS and having to stay more connected TO WORK than ever before. This is a problem with the way we approach labor, not our devices. Our devices enabled employers to make their employees work 24/7, but it is our strange American political and cultural systems that have allowed them to do so.

And worse, when Richtel blames the gadgets themselves, he channels the anxiety and anger that people feel about 24/7 work into a different and defanged fear over their gadgets. The only possible answer becomes, “Put your gadget down,” not “Organize politically and in civil society to change our collective relationship to work.”

Imagine if 19th-century factory workers blamed the clock for the length of their work days. The answer to the horrible working conditions of the late 19th century was not to smash the clocks or the steam engines! The solution was to organize and fight for your right to a 40-hour week and paid vacations.

via Are We Addicted to Gadgets or Indentured to Work? – Alexis Madrigal – The Atlantic.

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Will Wall Street turn on its own over Libor? – Salon.com

23 Jul

Here’s where, maybe, Goldman Sachs comes into the picture. Because according to a Bloomberg report, Goldman — uninvolved in setting the Libor — is considering taking the law into its own hands and taking care of this Libor business with suits against the firms responsible. Like a fictional comic book metropolis, the financial industry is dreadfully underpoliced, and many of the cops are themselves on the take, so, logically, what Wall Street needs is a morally dubious but incredibly wealthy figure to operate outside the law to achieve order by any means necessary. That’s right: Goldman Sachs is going to become The Green Arrow.

via Will Wall Street turn on its own over Libor? – Salon.com.

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Banks That Are Too Big to Regulate Should Be Nationalized – NYTimes.com

23 Jul

Simons (a hero of the libertarian idol Milton Friedman) was skeptical of enormity. “Few of our gigantic corporations,” he wrote [in 1934!], “can be defended on the ground that their present size is necessary to reasonably full exploitation of production economies.”

The central problem, then as now, was that very large corporations could easily undermine regulatory and antitrust strategies. The Nobel laureate George J. Stigler demonstrated how regulation was commonly “designed and operated primarily for” the benefit of the industries involved. And numerous conservatives, including Simons, concluded that large corporate players could thwart antitrust “break-them-up” efforts — a view Friedman came to share.

Simons did not shrink from the obvious conclusion: “Every industry should be either effectively competitive or socialized.” If other remedies were unworkable, “The state should face the necessity of actually taking over, owning, and managing directly” all “industries in which it is impossible to maintain effectively competitive conditions.”

via Banks That Are Too Big to Regulate Should Be Nationalized – NYTimes.com.

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