pattycake, pattycake, I’m the baker’s man

Answer the questions in this post and I will reward you with spices from Araby, silks from Cathay.

* * *

I did more than just witness a wedding this past Saturday, of course.

I hit up the Union Square Farmer’s Market for old time’s sake, buying fresh basil and haggling over a ciabatta loaf. I hadn’t intended to buy anything else, but when the butcher pointed out that only grass-fed beef went into her hot dogs I instantly bought a pack. At home, I grilled up some chicken and sandwiched it between the toasted ciabatta, along with the basil, some mozzarella and some tomato slices. I think the chicken pushed it over the edge, as the entire concoction kept threatening to disintegrate in my hands. But I still enjoyed it.

The next morning, per Mia’s recommendation, I toasted some ciabatta slices in the oven with mozzarella, basil and diced tomatoes for a homemade pizza. Just as delicious and much less messy.

So I have ciabatta, basil, tomatoes and grass-fed beef hot dogs in my fridge (mozzarella’s gone). And some grapes. What can I do with these ingredients?

* * *

Non-Bostonians, pay attention: the Red Line, one of the main branches of Boston’s subway (the “T”), starts at Park Street near the Boston Common. It goes north into Cambridge, passing through MIT, Harvard and Tufts before ending at the Alewife T stop.

You see a lot of homeless people at the Park Street, Central Square and Harvard T stops, but significantly fewer at Porter or Kendall/MIT and almost none in Davis. Then you see a bunch of panhandlers at Alewife again, which always strikes me odd because you can’t really walk around Alewife. It’s one of those well-paved strip malls, designed to funnel cars into Dunkin Donuts and CVSs. When James Howard Kunstler talks about places not worth caring about, he means Alewife^*.

Non-Bostonians: I have brought you up to speed.

Everyone: why do homeless people congregate at those T stops and not others? It costs the same amount of money to reach any of those stops. Harvard and Central get a lot of foot traffic, but Alewife gets almost none - the panhandlers there walk from car to car at the Route 2 interchange. Harvard has lots of students, but so does the Kendall/MIT stop. And if you want to rationalize about soft-hearted liberals at Harvard and their generosity to the homeless, let me stop you now: I have never once seen even the flakiest Cambridge Spartacist drop a dime in a beggar’s cup. Boston may slant left, but it’s the coldest left I’ve ever seen.

I want to know why homeless and transients favor certain neighborhoods over others. This would make an excellent project for a grad student, unless the student discovers that panhandling pays better than grad school and is less demeaning.

* * *

Finally, I’ve seen a couple different car washes offering the following promotion in the last month: Ask How You Can Wash Your Car for $1 A Day. I presume this sign advertises some unlimited wash program - $30 a month, let’s say. I’ve seen this offer at several different chains all across Cambridge, Somerville and Watertown, so more than one franchise pushes it.

However, every time I stop and check the prices a little further, I see that you can get a quality car wash - wax, undercarriage rinse, the works - for about $15. So this $30/month plan only pays off if you wash your car more frequently than once every two weeks - in other words, for neurotics only.

Granted, you should not come to me for car wash advice - the rust stains on my hood promoted my car from Sturdy Traveler to out-and-out Beater about a year ago. But does this make sense to anyone else? Should you wash your car more than once every two weeks - more often than you fill its gas tank? If not, what gives?

* * *

Spices and silks, people. Tick tock.

_______________________
^* You can reach Government Center, which Kunstler calls out in the linked video, on the Green Line.

I can has utility

At the request of Alex and Meghan, re: last week’s post on Social Security, I have decided to lay out some important economic principles in a format you may recognize and understand.

Join me for today’s lecture in lolcatnomics.

SUPPLY AND DEMAND

Nothing in life comes for free. Everything worth having costs money or the sweat of your brow. And even if Stephen Hawking discovered instant psychic cold fusion tomorrow, enabling every human being to turn anything into anything else with a thought, time would still limit our desires.

The theory of supply and demand models the intersection of wants, resources and what we can willingly pay. You learn supply and demand in Econ 101; it’s fairly simple. There are years worth of theories and details that complicate the basics of supply and demand further (demand elasticity, menu costs, etc). But nothing you learn later on invalidates this basic principle.

If we both want the same dish of food, we must come to some accord.

Your two takeaways from this:

(1) Nothing Comes Free. When someone talks about “universal health care,” read that as “subsidized health care.” When a retailer promises “free shipping,” that means they pay for the shipping instead of you - and they’ve probably jacked up the sale price as a result. Everything costs something.

(2) You Pay One Way Or You Pay Another. When President Nixon put caps on the price of oil in the 70s, gas lines formed as a result. When drivers could no longer outbid each other using money, they started to outbid each other using time - time spent waiting in line. You see similar results today with concert tickets or the iPhone.

MARGINAL UTILITY

Unlimited wants, limited resources, like I said. So, when we get something, we use it to fulfill our most important want first. Every additional unit of that good fulfills a less important want. If you only had 1 gallon of water per day, you would probably use it to fulfill thirst (or you’d die). The next gallon of water can be used for hygiene; the next for cooking nutritious food, and so on. This means that each additional unit of a good has diminishing marginal utility.

This idea stumped economists for a while. In Adam Smith’s time, theorists called it the “diamond / water paradox“: why does water, which we need for life, cost so much less than diamonds, which we use for jewelry? For a time, Smith and other economists used the labor theory of value to answer this question: the idea that the value of a good was a function of the labor required to create it. However, this fails once different people start valuing the same thing differently. I don’t care if you made that Subaru Brat by hand or on an assembly line; I don’t want to buy it.

(And the answer isn’t “scarcity,” either - not everything scarce is valuable)

Rather, the marginal utility of a good - its “next best use” - determines what I willingly give up for it. If I am a hungry kitteh who values nothing but Food and Sleep, I will continue eating Food until the next mouthful will no longer satisfy me. Then, I will fall Asleep. Humans have somewhat more complex value systems, but the idea stands.

Your two takeaways from this:

(1) The Labor Theory of Value Is Dumb. I still find people who subscribe to this notion, and not just in colleges. Only a few months ago I passed a car parked on the streets of Cambridge with a bumper sticker reading “LABOR IS THE SOURCE OF ALL VALUE.” Crazies, I know.

(2) Extra Isn’t Always Better. At least 80% of Massachusetts’ high school students graduate within 4 years, per the most recent data I could find. Getting the graduation rate from 70 to 80% must have yielded some impressive benefits. Would getting it from 80 to 90% yield the same? And what would that cost, vs. the cost the Commonwealth paid to get from 70 to 80%?

ALL COSTS ARE OPPORTUNITY COSTS

We tend to think of cost, price and value in terms of dollars - paper currency, bank statements, the financial bottom line. But dollars, as I’ve mentioned before, act as a symbol for other goods. When I spend $20 on something, I’m not giving up that $20 - I’m giving up everything else that I could have spent that $20 on. Economists call this an opportunity cost - I give up the opportunity to use the good I trade for something else.

A hungry mutt can use his freedom for a lot of things - chasing trucks, harassing kittens, exploring the upstairs, going to his food dish. He should only get stuck in a cat door if he thinks something really tasty lies on the other side. He exchanges his freedom - meaning, his ability to chase trucks, harass kittens, explore the upstairs, etc - for something more awesome than all of those things.

To talk about this in human terms, say we’re bartering between my sack of oranges and your stock of handmade shoes. I will only give up an orange if the next best use (see: marginal utility, above) to which I could put a pair of shoes beats the next best use to which I could put an orange. However, I have a lot of oranges - a whole sack of them. I have already eaten oranges and made orange juice and planted orange seeds for the future. I will be giving up relatively few orange opportunities if I trade you a couple, and I’ll be opening up an exciting new future of shoe opportunities if I get a pair of shoes.

Your two takeaways from this one:

(1) It’s Not Just About The Dollars. A real cost is what you give up in order to get something. If you have an opportunity in your life that you can’t measure in dollars - a free concert ticket, a potential new roommate, the birth of a new child - think about what you would be giving up in order to get that thing.

(2) Time Limits All Options. As I said above, even if the human race discovered instant psychic cold fusion tomorrow, we would still lack for the time to do everything we might want to do. Time always conspires to shrink our opportunities, even if money remains plentiful. Even if what we choose to do today costs us nothing - someone offers me Red Sox tickets and a ride to the park and buys me beer - I still pay an opportunity cost of time I might have spent doing other things.

COMPARATIVE ADVANTAGE

Despite being an early proponent of the labor theory of value that I talked about earlier, David Ricardo produced one work of unquestionable genius as an economist: the theory of comparative advantage. Comparative advantage explains why trade grows wealth more than any other activity.

If I’m better at catching mice and you’re better at guarding against intruders, we’ll have a happier household if I do most of the mouse-catching and you do most of the sleeping in front of the door. That’s common sense. But let’s say you’re better than me at both mouse-catching and guard duty. We’ll still be better off if you focus on guarding while I scamper along the baseboards.

Why? Because every minute you spend hunting is a minute you could spend making the house safer (opportunity costs; see above). You could try to take on both, and do neither of them well, or you could specialize in one and let me take the other.

That’s a big enough deal that I want to restate it: you can be better than me at everything that matters and trading with me will still improve your lot.

Your two takeaways from this one:

(1) Trade Enriches Both Parties. What makes freer markets wealthier than stricter ones is the exchange of goods and services. It’s not the act of producing or stockpiling goods that make a person or a state rich - it’s the act of trading them. Trade makes sure that goods get into the hands of the person who values them most.

(2) Lou Dobbs Is The Stupidest Man On Television. Joe Morgan may be dumber, but it’s close. Every time the U.S. trades with another country - whether it’s labor, in the form of outsourcing; goods, in the form of imports; or capital, in the form of Chinese people buying American companies - Lou Dobbs flips out. Keep this as a steady rule: anything that Lou Dobbs gets mad at will put wealth in American pockets.

CAPITAL MAKES THE DIFFERENCE

Finally, what makes poor countries poor and rich countries rich has little to do with natural resources or the sheer numbers of the labor pool. Bangladesh has plenty of arable land, and China’s population dwarfs that of neighboring Hong Kong. Rather, capital makes the difference - a mental investment in either machinery or technique that allows work to be done more efficiently.

A few examples of world-changing capital off the top of my head: the telegraph, the railroad, crop rotation, the scientific method, the computer, the automobile, assembly line processes, washing your hands with soap, the printing press, sewers, domesticated fire, latitude and longitude … and I could keep going. Think of capital not just as factories and machines, but any discovery that reduces wasted time.

Capital requires savings - either mine or someone else’s. If I want to build a roof over my head, I have to take time out from hunting boar or eating the boar that I’ve hunted. That time represents a cost (see opportunity costs, above), in that I could be spending that time at leisure or in getting the food I need. In civilized society, I don’t need to save up all the money necessary to buy a house - I can borrow someone else’s savings. But somebody has to have saved up resources at some point in order for capital to grow.

Savings requires security. If I think I have a low chance of surviving the week, I’m not putting money toward retirement. Countries wracked with violence, corruption and sickness, like sub-Saharan Africa, never have much in the way of savings. As a result, they never have much in the way of capital, and thus will never grow far past a subsistence level. Sure, a dictator can seize other peoples’ meager savings (as Mugabe did in Zimbabwe, or Chavez did in Venezuela), but that sort of trick only works once. Getting these countries out of the cycle of destruction will probably require the creation of institutions that keep people secure: honest police, reliable banks, clean and well-lit roads, etc.

Leave a kitteh to its own devices and it can only wreck your house. Give a kitteh the Internet and the world trembles.

Your two takeaways from this last one:

(1) Capital Makes The Difference. Economists rarely succeed at picking stock market winners, because economics and business are two different disciplines. You wouldn’t ask a physicist to build a bridge. But if you want a general idea of how a company, a region or a state will grow, take a look at the actions and policies that affect the growth of savings and, therefore, capital. How does borrowing compare against saving? Are plants, factories or processes being designed that will create future output? How long will it take to start turning a profit, and what costs will they have to pay - in other words, what opportunities will they have to forgo - before getting there?

(2) Every Investment May Fail. Consider time the universal currency. Investing it in satisfying your immediate needs pays off. Investing it in leisure time also works, too. But investing it in capital - whether a hut on your desert island, a stake in the East India Trading Company, or the mortgage of your house - always has risks. You’re forgoing present consumption and immediate labor for a future pay-off. The future’s weird and uncertain, though. Even if you calculated everything correctly, something may change very soon - a tsunami, a new Rajah, a change in new housing builds - that you could not have anticipated. You can trace most legislation since the Code of Hammurabi to someone losing returns on capital.

# # #

You could learn all of the above in a good Introduction to Economics class. But not everyone takes Econ 101, not everyone who takes it remembers it, and not everyone who remembers it understands the practical implications. If kittens falling out of ceiling vents or staring bug-eyed at you helps cement these basic principles in your head, then I see nothing wrong with them.

what’s mine is mine; what’s yours is mine

I have very little to add to Will Wilkinson’s excellent post from Tuesday on how Barack Obama might fix Social Security:

Anyway, I have a dream that President Barack Obama will decide to privatize Social Security, because it’s the sensible and moral thing to do. Democrats will be extremely confused for a couple months, but then will decide that this is in fact the greatest idea ever. Roles will reverse and Republicans will enlist the AARP and Jonathan Chait to kill it in a repeat of 2005, but their hearts aren’t in it, and they lose. Obama’s successful Jason Furman-lead transformation of the Social Security system is incredibly popular with the younger voters who put him into office and and sets him in such a strong centrist position that he completely crushes Romney in 2012. Are you listening Barack?

Before I leap in and comment, a couple caveats:

(1) Though I trust Will to be well-informed on any subject he writes about, I have my doubts that Bush’s early attempts to privatize Social Security would have been the pure market hand-off of which libertarians dream. Privatizing the power grid in California didn’t end that way^*. Privatizing the nation’s military efforts in Iraq did not lead to efficiency and accountability. I have little reason to think that Social Security general practices would have been reduced to one sentence - “let the market handle it” - and left untouched forever.

(2) I think Will’s having a little fun at all the progressives who have tripped over themselves to rationalize Obama’s backing of the new FISA / telco immunity bill. And I can’t argue with that at all. The Opposition Party stands against the expansion of domestic surveillance until such time as they stand for it, just like the Ruling Party opposed unilateral interventions in Islamic countries until the time came to support them. Similarly, if Obama came out in favor of privatizing Social Security, you might see a few months of confused mumbling, followed by begrudging acquiescence, and capped off with the usual stirring defense. La partie continu.

That being said, whenever the topic of privatizing Social Security comes up, someone mentions the current poor state of the stock market (funny how the market’s always doing poorly enough to comment on, no matter when you’re speaking, but that’s for another day). “If Bush’s plan had passed,” this person says, “think of how poorly everyone’s ‘individual retirement accounts’ would be! Thank God our Social Security pension isn’t invested privately!”

And I wonder at this, because:

(1) As far back as we have data, the stock market usually outperforms every other mode of investment - Treasury bonds, commodities, real estate - over any given 10-year span. And it absolutely outperforms every other mode of investment over any given 40-year span. Consider that most of us “invest” in Social Security for at least 40 years (start working at 23, retire at 63) and you’ll see my point. Today’s poor performance does not suggest that the market fails as a retirement fund.

(2) But let’s say the unthinkable happens, as it inevitably must, and the stock market becomes a losing investment. Let’s suppose that the $1,000,000,000,000 write-off spells the beginning of the end for American investments. Will the Social Security Trust Fund really be a safer place to keep your money? Social Security’s ability to write checks hinges on young people contributing - meaning, it hinges on the current strength of the economy. A world where the stock market is no longer a safe investment over a 40-year time frame is a world where Social Security is already doomed.

How is the national pension going to be a better investment than the nation it pensions off?

________________________
^* The doctrinal libertarian response whenever someone points out how badly California’s deregulated power grid fared: “well, it wasn’t a true privatization.” That is exactly my point. What incentive does a government agency have to let a bureaucracy that employs thousands, earns millions of votes and billions in campaign donations, fall entirely out of their control? Why would anyone willingly and fairly sell off their favorite horse?

chain chain chain

This week’s links have some games in them:

Budget Hero: a colorful online game that challenges you to balance the budget. First, you assign yourself various badges to reflect your priorities, like Health and Fitness or National Defense or Fiscal Responsibility. Then, you choose which programs you want to expand or cut, in the form of cards to be played. Then you pull the trigger and see how long you can last before the debt becomes unsustainable. Challenging and deep, despite its simple appearance. I submit that the libertarian fantasy of wantonly slashing federal programs might not even be possible, much less realistic. The infrastructure has become tangled with kudzu and it may be tough to clear it.

I’ve been talking about Bayes a lot lately, and not always as clearly as I’d like. Here’s Cory Doctorow, writing on Bayesian probability and terrorist screening, in the Guardian:

Our innumeracy means that our fight against these super-rarities is likewise ineffective. Statisticians speak of something called the Paradox of the False Positive. Here’s how that works: imagine that you’ve got a disease that strikes one in a million people, and a test for the disease that’s 99% accurate. You administer the test to a million people, and it will be positive for around 10,000 of them – because for every hundred people, it will be wrong once (that’s what 99% accurate means). Yet, statistically, we know that there’s only one infected person in the entire sample. That means that your “99% accurate” test is wrong 9,999 times out of 10,000!

Terrorism is a lot less common than one in a million and automated “tests” for terrorism – data-mined conclusions drawn from transactions, Oyster cards, bank transfers, travel schedules, etc – are a lot less accurate than 99%. That means practically every person who is branded a terrorist by our data-mining efforts is innocent.

In other words, in the effort to find the terrorist needles in our haystacks, we’re just making much bigger haystacks.

You don’t get to understand the statistics of rare events by intuition. It’s something that has to be learned, through formal and informal instruction. If there’s one thing the government and our educational institutions could do to keep us safer, it’s this: teach us how statistics works.

Let’s break up all this depressing political talk with a little alternate universe cosmology:

Among the unnatural aspects of the universe, one stands out: time asymmetry. The microscopic laws of physics that underlie the behavior of the universe do not distinguish between past and future, yet the early universe—hot, dense, homogeneous—is completely different from today’s—cool, dilute, lumpy. The universe started off orderly and has been getting increasingly disorderly ever since. The asymmetry of time, the arrow that points from past to future, plays an unmistakable role in our everyday lives: it accounts for why we cannot turn an omelet into an egg, why ice cubes never spontaneously unmelt in a glass of water, and why we remember the past but not the future. And the origin of the asymmetry we experience can be traced all the way back to the orderliness of the universe near the big bang. Every time you break an egg, you are doing observational cosmology.

The arrow of time is arguably the most blatant feature of the universe that cosmologists are currently at an utter loss to explain. Increasingly, however, this puzzle about the universe we observe hints at the existence of a much larger spacetime we do not observe. It adds support to the notion that we are part of a multiverse whose dynamics help to explain the seemingly unnatural features of our local vicinity.

I hate how the modern news cycle discards stories just as they get interesting: a Texas Appeals court has thrown out the state’s seizure of children from a polygamist compound:

In a ruling that could torpedo the case against the West Texas polygamist sect, a state appeals court Thursday said authorities had no right to seize more than 440 children in a raid on the splinter group’s compound last month.

The Third Court of Appeals in Austin said the state failed to show the youngsters were in any immediate danger, the only grounds in Texas law for taking children from their parents without court action.

It was not clear when the children - now scattered in foster homes across the state - might be returned to their parents. The ruling gave a lower-court judge 10 days to release the youngsters from custody, but the state could appeal to the Texas Supreme Court and block that.

The decision in one of the biggest child-custody cases in U.S. history was a humiliating defeat for the state Child Protective Services agency. It was hailed as vindication by members of the Fundamentalist Church of Jesus Christ of Latter Day Saints, who claimed they were being persecuted for their religious beliefs.

Child Protective Services vs. the Fundamentalist Church of Jesus Christ of Latter Day Saints. I’m honestly not sure who to cheer against here.

I wonder how much worse England would have grown, as a surveillance state, if Orwell hadn’t given us his last name as an adjective. Very few people understand the true dangers of the state described in 1984 - namely, historical revisionism and control of language - but the general thrust, “cameras = bad,” is better than nothing.

I mention this as a prelude to the Home Office’s plan to monitor every single phone call and e-mail sent in the UK:

A Home Office spokesman said: “The Communications Data Bill will help ensure that crucial capabilities in the use of communications data for counter-terrorism and investigation of crime continue to be available.

“These powers will continue to be subject to strict safeguards to ensure the right balance between privacy and protecting the public.”

The spokesman said changes need to be made to the Regulation of Investigatory Powers Act 2000 “to ensure that public authorities can continue to obtain and have access to communications data essential for counter-terrorism and investigation of crime purposes”.

But the Information Commission, an independent authority set up to protect personal information, said the database “may well be a step too far” and highlighted the risk of data being lost, traded or stolen.

Assistant information commissioner Jonathan Bamford said: “We are not aware of any justification for the state to hold every UK citizen’s phone and internet records. We have real doubts that such a measure can be justified, or is proportionate or desirable.

“Defeating crime and terrorism is of the utmost importance, but we are not aware of any pressing need to justify the government itself holding this sort of data.”

Let’s break up the depressing news with some photographs.

Here’s some wedding photography, taken during last week’s 7.9 quake in China:

Finally, the Economist does some math:

Data centres consumed 0.6% of the world’s electricity in 2000, and 1% in 2005. Globally, they are already responsible for more carbon-dioxide emissions per year than Argentina or the Netherlands, according to a recent study by McKinsey, a consultancy, and the Uptime Institute, a think-tank. If today’s trends hold, these emissions will have grown four-fold by 2020, reaching 670m tonnes. By some estimates, the carbon footprint of cloud computing will then be larger than that of aviation.

I’m innately leery of any figure that arises from predicting 12 years worth of trends. But a “peak server” crash could be just as bad as a peak oil crash. Having a 1980 volume of oil in 2020 would be terrible; having a 1980 level of computing power in 2020 would fuck us. Hard.

professor? what’s another word for pirate treasure?

Before taking the current job, I had one interview and a follow-up with Extensive Enterprises (they took over the old Bear Stearns offices downtown). I had almost reached the elevator after the second interview when the COO caught up with me in a hurry.

“I actually wanted to talk with you a bit more before you left,” he said.

“Sure thing, Mr … Xamot?”

“No, I’m Tomax, actually. Xamot heads up Marketing and Relations.”

“Right, Tomax. Is that Greek?”

“Corsican.” He steered me toward a private elevator off a back hallway - a glass-walled cage that looked out over the entire city. We began our slow descent.

“So, what are you spending your stimulus check on?” he asked with a conversational chuckle.

“Hadn’t planned that far ahead yet, actually. I figured I might just invest it.”

“You don’t want to do your part to help stimulate the economy?” He put the weirdest emphases on certain words.

“I’d rather preserve the check’s value against inflation.”

“Inflation!” He hissed like he’d suffered a paper cut. “Why is inflation such a big deal?”

“Okay,” I began, “a lot of times, when people want to see how wealthy a country is, they look to see how many dollars it has. This can be dollars of goods produced per citizen, also known as GDP per capita, or the average value of the companies based in that country which sell public stock, also known as a stock index. Or any method of your choice.”

“I like exports over imports myself.”

“Yeah, you and Lou Dobbs. But dollars aren’t just a method of measuring wealth, like the pressure gauge on a barometer. Dollars are also an actual trade good. People exchange dollars for other goods all the time.

“You look at a supply and demand graph in any Intro. Econ textbook and you see price, in dollars, on one axis and quantity, in units, on another. But nobody ever thinks about the supply and demand for dollars.”

“Hmm,” Tomax said. “Could you elaborate?”

“You have a given amount of liquid money on hand,” I explained. “Cash in your wallet, plus whatever you can draw from an ATM or write a check against. Let’s say $100,000. You also have a house full of stuff: a flat screen TV, an Italian leather couch, some imported rugs, a boxster in the garage, etc. At any point, you can trade that stuff for dollars, or those dollars for stuff. The fact that you have $100,000 and a set amount of stuff currently - as opposed to, say, $80,000 and …”

“And a hovercraft with a giant snake’s head on it,” he suggested.

“… is a function of your current desires,” I concluded. “Think of it as the intersection of Money and Stuff on the supply and demand graph in your head.”

“I see. So how does this tie in to inflation?”

“It works the same way on a national level. The total amount of dollars available as liquid cash - hard currency, checking accounts, savings accounts, traveler’s checks - is about seven trillion, seven hundred billion dollars - what the Federal Reserve calls M2. The total amount of stuff available is … well, everything on the planet, really. At every second of the day, people exchange dollars for stuff or stuff for dollars.

“Dollars,” I continued, pulling one out of my wallet to illustrate, “are banknotes issued by the central bank of the United States: the Federal Reserve. The Fed has at its disposal a variety of tools to put more dollars into the market:

1. They can buy or sell Treasury bonds - which would put dollars into or take dollars out of circulation, respectively.
   
2. They can raise or lower the discount rate - the interest rate that U.S. banks can charge each other for interbank loans. Raising it tightens the dollar supply; lowering it expands the dollar supply.
   
3. Or, they can change the reserve requirement - the percentage of dollars that a bank has to keep on hand to honor outstanding accounts.

The Fed typically only uses the first of these three.

“The problem: the Federal Reserve can, and does, increase the supply of dollars without actually creating any more stuff. So now you have more dollars chasing fewer real world goods. The purchasing power of the dollar declines overall.”

The elevator dinged as it hit the 30th floor. A man dressed identically to Tomax stepped on board. “Ah, Professor,” said Tomax, “you’ve met my brother Xamot, haven’t you?”

“Last time I was here,” I said, shaking his hand. “I was just telling Tomax about how inflation reduces the purchasing power of the dollar.”

“I’d heard that,” Xamot said. “But doesn’t it level out over time? The economy adjusts to the new equilibrium between dollars and goods, and we all trundle on.”

“It levels out,” I replied, “but not all at once.

“Let’s say the U.S. orders up one hundred billion dollars worth of bomber jets. The DoD cuts Boeing a check for $100,000,000,000.00, which Boeing can cash out and use to pay its employees, suppliers, distributors and the like. But the DoD doesn’t have one hundred billion dollars - they spent what they got in taxes long ago. The DoD has now added to the U.S. national debt by one hundred billion dollars. Fortunately, every bank in the world cashes their checks, so no one starves this month.

“Now, the supply of dollars has increased by one hundred billion dollars. But this rising tide doesn’t lift every boat. Even though the dollar has just lost a bit of purchasing power, not everyone knows it yet. The employees and customers of Boeing got their hands on that hundred billion first. They get to spend it on food, gas, clothes, cars, industrial materials, investments, whatever. The people they buy from then get to spend it on food, gas, clothes, etc. So that hundred billion trickles out to the economy slowly. Some people profit from it; some people get screwed by it.”

“What does the Federal Reserve …” Tomax began.

“… have to do with all this?” Xamot concluded.

“The U.S. government finances its debt through Treasury securities - which, as I said before, the Fed sells. You exchange cash for the T-bill, which is a promise to pay back that cash plus interest on a future date.”

“I’m still not sure what the big problem with inflation is,” Tomax said. “Sure, direct beneficiaries of government spending get the new cash before anyone else does. But so many people benefit from government spending that the effect has to be pretty broad.”

“It’s like a perpetual motion machine,” Xamot said. “So long as people keep exchanging cash for T-bills, the U.S. debt remains guaranteed, and money keeps pumping along.”

“You’re forgetting one thing,” I corrected. “Overseas investors.”

“Oh,” Tomax and Xamot groaned.

“Overseas investors buy a lot of Treasury securities. They also buy a lot of dollars. Sometimes they pay for these dollars with goods produced in their countries, like clothes from Singapore or cars from Japan. But people in other countries have a demand for dollars and a supply of stuff, same as Americans do. If foreign investors simply refuse to buy Treasury securities, this means they no longer have as high a demand for dollars. When the demand for dollars drops, compared to the demand for euros or yen or rupees, economists call this a weakening dollar.”

The elevator let us off on the ground floor. Tomax and Xamot exchanged a meaningful look. Then Xamot drew a gun, backed up ten feet and pointed it at me.

“Is that a laser pistol?” I asked.

“You’ve found out our plan,” Xamot snarled. “Our master plan to bankrupt the U.S. and destroy the world economy! Whether you’re a spy sent by G.I. Joe or you just figured it out on your own, we can’t let you spoil our scheme. Terribly sorry, Professor.”

Xamot had me dead in his sights. At ten feet away, I couldn’t hope to close the distance and knock the gun out of his hand in time.

So I kicked Tomax in the crotch.

“Guh!” Xamot and Tomax moaned simultaneously, doubling over in pain. I picked the laser pistol out of Xamot’s limp fingers.

“Seriously, guys,” I said, exiting the lobby. “You really ought to do something about that.”

# # #

The Federal Reserve creates easy credit, by targeting a lower Fed funds rate and expanding the money supply. A certain industry - whether it’s housing or domestic manufacturing or savings and loan houses or Internet companies or housing - borrows this easy credit and expands quickly. Once investors start losing confidence, though, this industry stops expanding. Then it contracts, and drags down every company tied into it.

How the Fed gets championed as the solution to this problem, instead of part of the problem, I’ll never understand.

The moral of this story: you can’t create wealth out of thin air. An expansion of credit is not the same thing as a growing industry. Government spending is not the same thing as investing. Money on paper is not the same thing as food in the fridge. At the closing bell, if it doesn’t point to liquid cash or something you can touch, think twice about it.

I’m not suggesting a return to a barter economy or a withdrawal from the modern economy. But remember the rosy figures Enron posted simply by switching some numbers around in their accounting. Or just consider how many years it would take to pay down the U.S. national debt if the federal government did nothing else. If it’s not real wealth - the clothes on your back, the house you sleep in, free time with the ones you love - it’s bookkeeping. And the world’s short on honest bookkeepers.

it’s like that, and that’s the way it is

First and most important, c/o Phanatic (who swiped it from a friend of his) here’s some fresh breakin’ to start your day.

Next: I remember reading a copy of the Journal at the kitchen table in the family homestead over Christmas and seeing a full-page ad for Lifelock - an identity theft protection service. In this ad, which I’m sure you’ve seen since, Todd Davis, CEO of Lifelock, stood in front of block text declaring his Social Security Number to the world. So confident was he, apparently, in his company’s product.

Well, according to a class action lawsuit filed last week, the inevitable happened:

“The lawsuits allege that LifeLock and its multi-million-dollar advertising campaign provided false and misleading information about the limited level of identity protection the company provides, and failed to warn them about the potential adverse impact the company’s services could have on their credit profiles,” according to the press release.

Additionally, the release alleges that Lifelock CEO, Todd Davis has been a victim of identity theft multiple times since using his SSN as a marketing tool to sell the service.

Oops.

Next up: could the “obesity epidemic” plaguing America have anything to do with … the shifting definition of obesity?

“Overweight:”Definition changed from BMI ≥ 27 to BMI ≥ 25 by the U.S. National Heart Lung and Blood Institute in 1998, instantly increasing by 43% the numbers of Americans, an additional 30.5 million, deemed ‘overweight.’

“High cholesterol:”Definition changed from a total cholesterol ≥ 240 to ≥ 200 in 1998 increasing by 86% the numbers of Americans labeled has having high cholesterol, an additional 42.6 million adults.

“Hypertension:”Definition changed in 1997 from 160/100 to 140/90, instantly adding 35% more Americans, 13.5 million, to the rosters of hypertensive. A new definition for ‘prehypertension’ in 2003 increased to 58% the Americans believing they have hypertension.

“Diabetes:” Definition changed from a fasting glucose of ≥ 140 to ≥ 126 in 1997 by the American Diabetes Association and WHO Expert Committee on the Diagnosis and Classification of Diabetes Mellitus, increasing by 14% and 1.7 million the people diagnosed with diabetes. With the proposal of a new term, ‘prediabetes’ by the First International Congress on Prediabetes, and promoted by the International Diabetes Federation (sponsored by 12 pharmaceutical companies), 40% of the adult population was added to the rosters believing they have diabetes and are in need of treatment.

I’ve still seen plenty of fat Americans, but this explains a lot.

In news abroad, Jesus tapdancing Christ, don’t fucking invade Burma in the name of humanitarian aid, you fucking stupid fucks:

One of the illusions that convinced some otherwise well-meaning people to go along with the conquest of Iraq in 2003 was, “Iraq is so bad, how could we make it worse?” But we could. So with Burma. I know almost nothing about the junta that rules Burma. But I know that it’s the junta that rules Burma - that is, that they’ve extended their writ over a preponderance of the territory we think of as Burma, more or less. That is to say, they successfully maintain power.

The junta apparently numbers 19 guys, but 19 guys don’t run a place like Burma by themselves. They’ve got people for that. Cops, soldiers, secret policemen, bureaucrats. And those people have families and friends and hangers-on. Stakeholders. And apparently “regional commanders enjoy a great deal of autonomy in their respective areas.” So they and their retainers and whoever else profits from existing arrangements have a stake in the existing system. And the habits and attitudes of the bulk of the population are the habits and attitudes that enable one to survive under tyranny. It’s not about knocking off that one bad guy and his eighteen friends. There’s a whole set of structures and class interests and cultural patterns, local peculiarities and regional fault lines to cope with. I don’t know much about Burma, but I know that much about any place. It’s hubris to be sure you can start rearranging such a society without a good chance of making it even worse.

And, because I haven’t ragged on President Dog in a while:

“I believe that it’s not an accident that our hostages came home from Iran when President Reagan was president of the United States. He didn’t sit down in a negotiation with the religious extremists in Iran, he made it very clear that those hostages were coming home.’’

[...]

Asked if he thought Mr. Obama was an appeaser — the Democratic candidate has said he would be willing to meet with Mahmoud Ahmadinejad, the president of Iran — Mr. McCain sidestepped and said, “I think that Barack Obama needs to explain why he wants to sit down and talk with a man who is the head of a government that is a state sponsor of terrorism, that is responsible for the killing of brave young Americans, that wants to wipe Israel off the map, who denies the Holocaust. That’s what I think Senator Obama ought to explain to the American people.’’

I should barely need to open my mouth to refute something this illiterate, but:

(1) Reagan had no problem sitting down with Iranian religious extremists when he needed some loose cash to fund Nicaraguan guerillas.

(2) Not that I want to defend Obama’s foreign policy acumen, but: Senator Obama would probably want to sit down with the head of Iran for the same reason Reagan sat down with Gorbachev, or the same reason Nixon shook hands with Mao Zedong. I know these aren’t strictly analogous cases, as Russia and China were threats to the U.S. and Iran is not, but I hope everyone can still follow along.

From the Washington Post, an op/ed that examines the social cost of terrorism:

Fear, in other words, is a tax, and al-Qaeda and its ilk have done better at extracting it from Americans than the Internal Revenue Service. Think about the extra half-hour millions of airline passengers waste standing in security lines; the annual cost in lost work hours runs into the billions. Add to that the freight delays at borders, ports and airports, the cost of checking money transfers as well as goods in transit, the wages for beefed-up security forces around the world. And that doesn’t even attempt to put a price tag on the compression of civil liberties or the loss of human dignity from being groped in full public view by Transportation Security Administration personnel at the airport or from having to walk barefoot through the metal detector, holding up your beltless pants. This global transaction tax represents the most significant victory of Terror International to date.

The new fear tax falls most heavily on the United States. Last November, the Commerce Department reported a 17 percent decline in overseas travel to the United States between Sept. 11, 2001, and 2006. (There are no firm figures for 2007 yet, but there seems to have been an uptick.) That slump has cost the country $94 billion in lost tourist spending, nearly 200,000 jobs and $16 billion in forgone tax revenue — and all while the dollar has kept dropping.

[...]

What is happening to the American character? True, the country has gone through crises of confidence before, some of them cresting in sheer hysteria — from the Alien and Sedition Acts to Sen. Joseph McCarthy’s search for a commie under every State Department desk. But the worst acts from 1798 were repealed or allowed to lapse within three years, and the senator from Wisconsin was censured a few years into his red-baiting career. Alas, the USA Patriot Act and DHS have already endured longer than either earlier excess, and neither is fading.

I vaguely recall someone mentioning how important it was that American citizens live out their lives as normal - without fear, in other words - in the days immediately following the September 11th attacks. My mistake.

Next, you might have seen this on a CNN scrolling banner last week: Marijuana may up heart attack, stroke risks. Of course, the beauty of modern cable news comes from not having to tell you the interesting parts of the story:

The marijuana users in the study averaged smoking 78 to 350 marijuana cigarettes per week, based on self-reported drug history, the researchers said.

78 joints per week makes 11 per day, or one every hour and a half while awake. 350 joints per week makes 50 a day. Drinking 50 glasses of distilled water per day would cause kidney problems, but you don’t see that making the news.

Was there some mythical era of American journalism when obviously bogus news stories like this one would have been caught at the editor’s desk? Or is that wishful thinking?

Finally, I worry about the rising price of oil as much as anyone, but I hope that my worries sound more literate than those of the dumbest man with a Times byline, Paul fucking Krugman:

Now, speculators do sometimes push commodity prices far above the level justified by fundamentals. But when that happens, there are telltale signs that just aren’t there in today’s oil market.

[...]

The only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding — an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.

But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels. This tells us that the rise in oil prices isn’t the result of runaway speculation; it’s the result of fundamental factors, mainly the growing difficulty of finding oil and the rapid growth of emerging economies like China. The rise in oil prices these past few years had to happen to keep demand growth from exceeding supply growth. [emphasis mine]

Speculators? Hoarders? Heaven forfend, Dr. Krugman! Are the Freemasons poisoning the wells? Should I let some blood to dispel the bad humo(u)rs? Quick, without peeking at a calendar: what century are we living in right now?

The bizarre distinction between “speculators / hoarders” and the “fundamental” business of the market belies an odd, illiterate bias on Krugman’s part. To demonstrate why, substitute the word investor for every instance of the word speculator or hoarder. They’re the same thing: people who buy a commodity in the expectation that its price will rise. But one can be found in every basic Econ textbook in print today - none of which, apparently, Krugman has ever read - while the other evokes images of a miser in a mud hovel on the outskirts of a Prussian village. Speculators! Hoarders! Assemble a posse! Notify the burgomeister!

Maybe I wouldn’t be so mad all the time if I lived in Iceland:

Iceland, lodged in the middle of the North Atlantic with Greenland as its nearest neighbour, was too far from the remit of any but the more zealously obstinate of the medieval Christian missionaries. It is a largely pagan country, as the natives like to see it, unburdened by the taboos that generate so much distress elsewhere. That means they are practical people. Which, in turn, means lots of divorces.

‘That is not something to be proud of,’ said [city councilor and single mom] Oddny [Sturludottir], with a brisk smile, ‘but the fact is that Icelanders don’t stay in lousy relationships. They just leave.’ And the reason they can do so is that society, starting with the parents and grandparents, does not stigmatise them for making that choice. Icelanders are the least hung-up people in the world. Thus the incentive, for example, ‘to stay together for the sake of the kids’ does not exist. The kids will be just fine, because the family will rally round them and, likely as not, the parents will continue to have a civilised relationship, based on the usually automatic understanding that custody for the children will be shared.

Fewer Puritans, a high GDP, greatest number of books per citizen and hot springs? I now have a designated escape country.

there’s one more kid that’ll never go to school

Allergies have returned with a vengeance. A heavy medical cocktail - two snoots of Nasonex, 10 mg of Zyrtec and some prescription eye drops - have staved off the worst of it so far. This morning, I merely felt severely congested and only one eye looked red enough to merit suspicions of a drug test. Which I would have passed, thank you. Winners don’t use, because users don’t win.

The weather gizmo on my desktop says yesterday’s high was 78. Today’s: 58. New England - the cradle of our nation, folks!

Several people have asked what I think of the economy in the past week or so. I don’t have any insight that you couldn’t draw from reading any major paper. Things grow worse. Once I get some money to move around I intend to invest in a mix of ETFs from Vanguard. But you shouldn’t necessarily take my advice on where to put money. How the economy’s doing and how I’m doing don’t always go hand in hand - and that’s presuming I even get the first part right.

Plus, my ideas change constantly. I used to want to save up enough to buy my own place. But then someone (either Julian Sanchez or Will Wilkinson) made the point that young, single people rarely improve their lot by buying a house. Once you get tied to a significant investment of real estate, you can’t pack up and move on a month’s notice. Now’s the time I should be chasing job opportunities, crazy projects or hot blondes with a passion for Chandler novels, 70s movies and straight whiskey. Call the difference between my rent and a mortgage (less interest deductions) a flexibility premium. I’m happy to pay.

My point: listen to me if you like, but don’t follow me out onto the lake.

A rare end-week media blow: The Handmaid’s Tale, by Margaret Atwood. I don’t suppose I need to lend my voice to the volumes of critical praise for this novel, other then: yeah, that. Flynngrrl had a post once about a Supreme Court decision on abortion. In it, she made the point that the question of abortion rights comes down to one fundamental fork in the road: either you believe a woman owns her body or you don’t. Either a woman has an inherent value outside of her social role as Childbearer, or she doesn’t. The Handmaid’s Tale gives us a world where this question has been decided.

I don’t think it presents a realistic view of how religious fundamentalists would seize control of the United States (I hardly think they’d need to gun down Congress). But it doesn’t have to. Good science-fiction doesn’t look for the most likely future outcome starting from today’s events. Rather, it starts from a What If (no matter how outlandish), grounds it in verisimilitude, then rolls from there. And Atwood pulls that off beautifully.

And not only does Handmaid move and inform and signify (yeah, yeah, trivial accomplishments, those), but Atwood’s style amazed me, too. She uses a remarkable economy of language to describe the protagonist’s conflicted emotions - her loathing of her captors, her fearful desire to obey, her absolute and paranoid despair, her nostalgia for an admittedly troubled past, and so forth. Finding a novel this powerful leaves an impression on you; finding a novel this well-written delights you.

I think his name was Chips Ahoy

Links for breakfast:

Jesus Made Me Puke: Matt Taibbi of Rolling Stone goes undercover at a Texas megachurch’s “Encounter Weekend.” The text speaks for itself:

“Let me ask you a question,” he said. “Why do alcoholics give birth to alcoholics? Why do the fatherless give birth to the fatherless?” He paused. “There are some people out there who will tell you it’s genetics. It’s in our genes, they say. Well, I tell you, it’s not genetics. It’s a generational curse!”

Fortenberry then started in on a rant against science and against scientific explanations for cycles of sin. “Take homosexuals,” he said. “Every single homosexual is a sexual-abuse victim. They are not born. They are created — by pedophiles.”

The crowd swallowed that one whole. One thing about this world: Once a preacher says it, it’s true. No one is going to look up anything the preacher says, cross-check his facts, raise an eyebrow at something that might sound a little off. Some weeks later, I would be at a Sunday service in which Pastor John Hagee himself would assert that the Bible predicts that Jesus Christ is going to return to Earth bearing a “rod of iron” to discipline the ACLU. It goes without saying that the ACLU was not mentioned in the passage in Ezekiel he was citing — but the audience ate it up anyway. When they’re away from the cameras, the preachers feel even less obligated to shackle themselves to facts of any kind. That’s because they know that their audience doesn’t give a shit. So long as you’re telling them what they want to hear, there’s no danger; your crowd will angrily dismiss any alternative explanations anyway as demonic subversion.

A team of twenty of the world’s leading scientists wouldn’t be able to convince so much as one person in this crowd that homosexuals are not created by pedophiles.

Hillary Clinton Rejects Science, Reasoning:

STEPHANOPOULOS: Can you name one economist, a credible economist who supports the [gas tax] suspension?

CLINTON: Well, you know, George, I think we’ve been for the last seven years seeing a tremendous amount of government power and elite opinion basically behind policies that haven’t worked well for the middle class and hard-working Americans. From the moment I started this campaign, I’ve said that I am absolutely determined that we’re going to reverse the trends that have been going on in our government and in our political system, because what I have seen is that the rich have gotten richer. A vast majority — I think something like 90 percent — of the wealth gains over the last seven years have gone to the top 10 percent of wage earners in America.

STEPHANOPOULOS: But can you name an economist who thinks this makes sense?

CLINTON: Well, I’ll tell you what, I’m not going to put my lot in with economists.

Couple this with her support for the autism/vaccination link and we finally have the pure Anti-Science candidate that this country has been aching for since its inception.

(I kid, of course - none of them are that great)

Bridging the gap between mathematics and civil liberties, Radley Balko talks about the problem of DNA databases. Knowing that a test has a 99.9996% (or whatever) accuracy rate does not tell you all you need to know - you also need to know the actual incidence of what’s being tested for within the population. Few people know that. Hell, I still need to remind myself from time to time. Bayes’ Theorem in action.

Let’s say the U.S. adopts a Great Britain policy on collecting DNA–basically a move toward, at some point in the future, having DNA on file for everyone in the country. Well now the 1 in 1.1 million odds against the suspect in the L.A. Times case are being run against a database of 380 million people. The numbers say that you’re going to pull up about 345 matches in the U.S. alone. In the California case, the database is obviously much smaller than the entire U.S. population, and only one of those 345 people showed up from the 330,000-person FBI DNA database–the (admittedly unsympathetic) subject of the article. But any of the other 344 potential matches in the U.S. (or the 2,200 matches worldwide) could have committed the crime. They just weren’t in the database.

To put it another way: if I run an anabolic steroids test with 99% accuracy in a nursing home with 400 residents, I’m going to get at least 4 positive results. Does this mean that 4 octogenarians shoot themselves in the butt with parabolan every morning? Probably not.

Finally, for all my cheerleading about globalization, it helps to have a saner mind like IOZ put me right once in a while:

So, you know, on one hand “there were once nation-states,” but now there are “dynamos like India and China,” which are, what, anarchoprimitive agricollectives? The idea that some sort of stateless transnational borderless economic singularity is swiftly ripping away borders like stagehands rip up gaff tape on load-out is plain kooky. I am of course for the free movement of labor and capital. Call me the next time you hit Charles de Gaulle, or Beijing Capital International Airport for that fucking matter, without a passport. I’m just saying.

for a moment this good time would never end; you and me, you and me

“Free Tibet” flags made in China (BBC)

Police in southern China have discovered a factory manufacturing Free Tibet flags, media reports say.

The factory in Guangdong had been completing overseas orders for the flag of the Tibetan government-in-exile.

Workers said they thought they were just making colourful flags and did not realise their meaning.

But then some of them saw TV images of protesters holding the emblem and they alerted the authorities, according to Hong Kong’s Ming Pao newspaper.

I never limit myself to one meaning when I can encompass two or more, so take away the following from this story:

1. Globalization commands a lot of power;
   
2. You can find irony anywhere if you know where to look, and;
   
3. Propaganda permeates the civilized mind in ways outsiders can’t comprehend. The police didn’t uproot this factory in an undercover sting - workers voluntarily turned themselves and their employer in. Tibet never did anything to harm these guys, but they so thoroughly believe the Chinese government’s gospel of Tibet As Guerilla Radical that they went out of their way to make the State’s job easier. Fortunately, in the free and enlightened West we don’t have that problem.

Speaking of, how goes the campaign to nuke Iran, Senator Clinton?

Got it - thanks!

Meanwhile, black males took a bump down to Junior-Level Citizenship in New York on Monday, when three NYPD detectives were acquitted of killing an unarmed black man whom they “feared” might be threatening them. Fifty shots it took, which places the 18- to 35-year-old Black Male somewhere between a charging African Rhino and Wolverine of the X-Men in the Scared White Guy Hierarchy of Indestructability. Remember, black people: you don’t have an inherent right to life as such while in the city of New York. You exist on the sufferance of every paranoid cop.

Kai Wright talks a little more about the Sean Bell shooting here, and also sheds some light on the mystery of New York’s falling crime rate over the last decade. If you believe that Giuliani’s “broken windows” theory of Better Living through Petty Harassment reeks of bullshit - as I always have - then the drop in crime looks like a mystery. But Wright points out the following:

[B]lacks accounted for 66 percent of those killed by New York City police between 2000 and 2007 (New York is a perennial leader in police fatalities, averaging 12 a year over those years). And while the violent crime rate plunged to historically low levels in that time period, the number of people killed by police has not budged—indeed, the number of cop bullets fired has skyrocketed. And it’s happened with impunity. Out of 88 fatal shootings, including at least 12 in which victims were unarmed, in only one instance was an officer convicted of criminal wrongdoing.

So Giuliani didn’t reduce violence so much as outsource it to the NYPD. Juking the numbers, if you will.

In other news, rice continues to get more expensive - and more scarce, which really means the same thing - all around the world. Tyler Cowen of Marginal Revolution offers his take on why in the New York Times:

The damage that trade restrictions cause is probably most evident in the case of rice. Although rice is the major foodstuff for about half of the world, it is highly protected and regulated. Only about 5 to 7 percent of the world’s rice production is traded across borders; that’s unusually low for an agricultural commodity.

So when the price goes up — indeed, many varieties of rice have roughly doubled in price since 2007 — this highly segmented market means that the trade in rice doesn’t flow to the places of highest demand.

Poor rice yields are not the major problem. The United Nations Food and Agriculture Organization estimates that global rice production increased by 1 percent last year and says that it is expected to increase 1.8 percent this year. That’s not impressive, but it shouldn’t cause starvation.

The more telling figure is that over the next year, international trade in rice is expected to decline more than 3 percent, when it should be expanding. The decline is attributable mainly to recent restrictions on rice exports in rice-producing countries like India, Indonesia, Vietnam, China, Cambodia and Egypt.

Tariffs and export restrictions choke off valuable goods and services. You can’t call arguments for free trade a trivial academic debate anymore, like whether a country profits more from cheaper cars or more domestic jobs. Open trade across borders will save the Third World from starvation. Fortunately, in the free and enlightened West we don’t have that problem.

Speaking of, how goes the effort to dismantle NAFTA, Senator Obama?

Got it - thanks!

As continuing proof of the ancient assertion that no one has ever drafted a law so noble that it can’t be misused, local British councils have started using surveillance cameras to nab litterers and dogs shitting in public. And a student who photographed some cops ticketing other civilians earned himself a $628 ticket for “sitting on a park ledge.”

Finally, on a somewhat upbeat note, Clay Shirky (author of Here Comes Everybody) talks about the growing wealth of a globalizing economy, the surplus of free time that results, and how we spend that time:

I started telling her about the Wikipedia article on Pluto. You may remember that Pluto got kicked out of the planet club a couple of years ago, so all of a sudden there was all of this activity on Wikipedia. The talk pages light up, people are editing the article like mad, and the whole community is in an ruckus–”How should we characterize this change in Pluto’s status?” And a little bit at a time they move the article–fighting offstage all the while–from, “Pluto is the ninth planet,” to “Pluto is an odd-shaped rock with an odd-shaped orbit at the edge of the solar system.”

So I tell her all this stuff, and I think, “Okay, we’re going to have a conversation about authority or social construction or whatever.” That wasn’t her question. She heard this story and she shook her head and said, “Where do people find the time?” That was her question. And I just kind of snapped. And I said, “No one who works in TV gets to ask that question. You know where the time comes from. It comes from the cognitive surplus you’ve been masking for 50 years.”

So how big is that surplus? So if you take Wikipedia as a kind of unit, all of Wikipedia, the whole project–every page, every edit, every talk page, every line of code, in every language that Wikipedia exists in–that represents something like the cumulation of 100 million hours of human thought. I worked this out with Martin Wattenberg at IBM; it’s a back-of-the-envelope calculation, but it’s the right order of magnitude, about 100 million hours of thought.

And television watching? Two hundred billion hours, in the U.S. alone, every year. Put another way, now that we have a unit, that’s 2,000 Wikipedia projects a year spent watching television. Or put still another way, in the U.S., we spend 100 million hours every weekend, just watching the ads. This is a pretty big surplus. People asking, “Where do they find the time?” when they’re looking at things like Wikipedia don’t understand how tiny that entire project is, as a carve-out of this asset that’s finally being dragged into what Tim calls an architecture of participation.

Now, the interesting thing about a surplus like that is that society doesn’t know what to do with it at first–hence the gin, hence the sitcoms. Because if people knew what to do with a surplus with reference to the existing social institutions, then it wouldn’t be a surplus, would it? It’s precisely when no one has any idea how to deploy something that people have to start experimenting with it, in order for the surplus to get integrated, and the course of that integration can transform society.

I have always measured wealth in units of Time I Can Spend Doing What Makes Me Happy. It pleases me to see that that calculation works on a social level as well.

I am not afraid to keep on living

An observation:

I intend to “boycott” the Beijing Summer Olympics, in the same way I “boycotted” the 2006 Turin Winter Olympics, the 2004 Athens Olympics, the 2002 Salt Lake City Olympics, and the 2000 Sydney Olympics, and the 1998 Nagano Olympics, and NASCAR racing, and most professional basketball, and all hockey on the professional level, and Pirates/Brewers games, and strongman competitions unless it’s Saturday afternoon and I’ve got nothing to do for at least four hours and really there’s nothing else good on, not Shawshank, not Trading Places, nothing.

To be serious for a moment (but just one): were the Olympics that much of a ratings draw that we can call any form of boycott meaningful? Beijing sits twelve hours ahead of the East Coast of the U.S. - their early games will start just as you’re finishing dinner, the late games will end just as the clubs let out. Would anyone in the U.S. really have had the fortitude to watch the Olympics live in the absence of a boycott? Or were you just going to get your Olympiad coverage from CNN and ESPN recaps, which you’re going to do anyway - thus making any form of boycott silly?

Then again, China remains perhaps one of the most despicable tyrannies in the modern world, except (to paraphrase Churchill) for all the others. So I suppose a mild objection to a nation’s censorship trumps none at all.

A quandary:

Free exchange is pretty objectively good, if you know the theory behind it. If you have something I want and I have something you want, a trade profits both of us even if no one creates anything new. In fact, no one can come up with a better way to make as many people as wealthy as possible than by allowing them to trade freely with each other. Just as pointing out gaps in the fossil record does not discredit evolution, pointing out the side effects of profitable behavior - pollution, monopoly, etc - does not discredit free trade.

Corporate behavior is pretty objectively bad, if you know the history behind it. Even the best corporations engage in rent-seeking and bureaucratic makework, with communication stifled through so many layers that success becomes an accident and incompetence becomes assured. And the worst among them bungle, cheat and get away with it. That’s not counting the ones that used to hire Pinkertons to shoot strikers, either.

The quandary: explain the (apparent) contradiction between the obvious benefits of free trade and the obvious failings of the modern corporation. Serious responses will be answered seriously; frivolous responses, frivolously. Show your work.