Shocking, yes. Bureaucrats are people too.

And yes, they respond to incentives too.  From WSJ (via Greg Mankiw):

Managers in the Social Security Administration, struggling to handle a skyrocketing number of disability cases, had an unusual request for their workers this week: slow down.  

Social Security judges and employees in Florida, Alabama, Colorado, Georgia, Tennessee, Ohio and Arizona were among those instructed to set aside disability cases this week, with the slowdown allowing managers to boost their performance numbers for the coming fiscal year, which starts Monday.  

Top officials, in a bid to meet goals to win promotions or thousands of dollars in bonuses, directed many employees to refrain from issuing decisions on cases until next week, according to judges and union officials. This likely would delay benefits paid to thousands of Americans with pending applications, many of whom are financially needy and have waited for a government decision for more than a year. 

The directive stemmed from a wrinkle in the federal calendar, in which this week fell between the federal government's 2011 and 2012 fiscal years. This happens every five or six years, as officials are allowed to count just 52 weeks in their calendar. Counting this week would make the current fiscal year 53 weeks long. That meant any applications for disability benefits completed between Monday and Friday wouldn't count toward the annual numerical targets set for Social Security judges or field offices.

Food Aid is worth just 11% of its Cash Cost to the Poor?

That's what a study by Jesse M. Cunha, Giacomo De Giorgi, Seema Jayachandran suggests (Chris Blattman via Beata):

Both types of transfers increase the demand for normal goods, but only in-kind transfers also increase supply. Hence, in-kind transfers should lead to lower prices than cash transfers, which helps consumers at the expense of local producers.

We test and confirm this prediction using a program in Mexico that randomly assigned villages to receive boxes of food (trucked into the village), equivalently-valued cash transfers, or no transfers. The pecuniary benefit to consumers of in-kind transfers, relative to cash transfers, equals 11% of the direct transfer.

TED: Matt Ridley - When ideas have sex

A look at "how we are the only species that becomes more prosperous when we become more populous" - worth the watch (via Adamsmith.org):

American Tax Dollars at Work

And here I was I thought the Obama Administration was proud that they intervened.  TheTruthAboutCars on the White House pressure on Ford to pull ads: 

This situation highlights perfectly why bailouts are so un-American. I don’t care who you are or how you felt about the bailout in the first place: at the point that the President is pressuring competitors to government-owned companies to yank truth-telling ads, you’ve got to wonder what happened to this country.

Related here.

Why Some Civilizations Fall

Victor Davis Hanson (via Instapundit) - as Reynolds notes, read the whole thing:

Redistribution of wealth rather than emphasis on its creation is surely a symptom of aging societies. Whether at Byzantium during the Nika Riots or in bread and circuses Rome, when the public expects government to provide security rather than the individual to become autonomous through a growing economy, then there grows a collective lethargy. I think that is the message of Juvenal’s savage satires about both mobs and the idle rich. Fourth-century Athenian literature is characterized by forensic law suits, as citizens sought to sue each other, or to sue the state for sustenance, or to fight over inheritances. 

The subtext of Petronius’s Satyricon is an affluent, childless, often underemployed citizenry seeking inheritances and lampooning the productive classes that produce enough excess for the wily to get by just fine without working. Somewhere around 1985 in California I noticed that my students were hoping for a state job first, a federal job second, a municipal job third — and a private one last. Around 1990, suddenly two sorts of commercials were aired everywhere: how to join a law suit by calling a law firm’s 1-800 number or how to get a free power chair, scooter, or some other device by calling the 1-800 number of a health care company that would do the paper work for Social Security on your behalf. 

Why is it more moral for a federal bureaucrat in a state-supplied SUV to shut down an offshore oil rig on grounds that it is too dangerous for the environment than for a private individual to risk his own capital to find some sort of new fuel to power his government’s SUV fleet? All affluent societies believe that they are just too rich not to be able to afford another regulation, just one more moralizing indulgence, yet again an added entitlement. But as we see now in postmodern America, idle 250,000 acres of farmland for a tiny fish, shut down an entire oilfield, put off a new natural gas find in worry over possible environmental alteration, add a cent to the sales tax, mandate yet another prescription drug entitlement not funded, or offer yet another in-state tuition discount to an illegal alien — and the costs finally equate to an implosion as we see in Greece or California.

The End of Violence?

From Steven Pinker (WSJ): "We believe our world is riddled with terror and war, but we may be living in the most peaceable era in human existence. Why brutality is declining and empathy is on the rise":

Top Oktoberfests Outside Germany... #1 Kitchener

Who knew? The irony is that despite having grown up living in Waterloo, I can't say I've ever done anything Oktoberfest-ish save doing the chicken dance under threat of force in phys-ed oh so many years ago.  Ranked according to Cheapflights (Reuters):

1. Kitchener-Waterloo, Ontario, Canada Canadians pull out all the stops for nine days each autumn to create the largest Oktoberfest celebration outside of Munich. Based in Ontario's twin cities, Kitchener-Waterloo Oktoberfest is a celebration the entire family can enjoy; the German extravaganza offers more than 40 family and cultural events, including the "World's Most Dangerous Bocce Ball Tournament." The celebration culminates at the Thanksgiving Day Parade, a televised spectacle of floats, entertainers and marching bands broadcast across the country. Dates: October 7-16

On Persistence and Passion...

A pretty incredible chronicling of one artist who learned to paint and practiced daily for 9 years (Conceptart.org h/t HN).  Inspiring.

Declining Economic Freedom in the US

As Jeffrey Ellis points out (The Thinker):

Economic freedom clearly improves the human condition — including lowering poverty — whereas government growth, no matter how well-intentioned, results in reduced prosperity.

In response to Ian Vasquez's notes (Cato @ Liberty):

[T]he United States has had one of the largest declines in the past decade. It now ranks in 10th place compared to 3rd in 2000, largely due to higher government spending and lower ratings on “rule of law” measures. The report documents the strong, positive relationship between economic freedom and a range of indicators of standard of living including wealth, economic growth, longer life spans, better health care, lower poverty, civil and political liberties, and so on. Economic freedom is central to human progress. As the response of activist governments to financial and ongoing debt crises fails to address underlying issues responsible for low growth and high unemployment, this report is an important empirical reminder about the wide-ranging consequences of politics or markets in determining the use of resources.

Do locavores and organic food buyers hate poor people?

According to Charles Kenny at ForeignPolicy, that's a "yes": "Why ditching your fancy, organic, locavore lifestyle is good for the world's poor."

Oh those Neo-colonialist Americans...

Some things can't be parodied (WSJ):

“Once we clearly understand the way this world is structured, we won’t be seduced by Gary Locke’s façade,” the Communist Party newspaper Guangming Daily said in an editorial last Friday titled “A Warning on the American Neo-Colonialism Gary Locke Brings” about the first Chinese-American to be named the U.S. envoy to China (in Chinese). “His Chinese-American identity means that he’s capable of attracting the attention and public support of Chinese people around the world, capable of developing an affinity with regular people in China. Who’s to say that isn’t the intention of the U.S., to use a Chinese to control the Chinese and incite political chaos in China?”

The response so far among Chinese Internet users: Bring it on. 

“To be honest, I’m looking forward to being colonized,” a user of China’s popular Sina Weibo microblogging service writing under the name Yan Lu’antong commented Tuesday. “We welcome this kind of ‘neo-colonialism’ with open arms!!!” added another user, Liu Xiaodong.

Mr. Locke has enjoyed popularity among Chinese Internet users ever since photos of him buying his own coffee at a Seattle Starbucks and carrying his own bags in the Beijing airport were posted online in mid-August. Almost immediately, the ambassador found himself being held up as a measuring stick against which Chinese officials, routinely pilloried for being imperious and prodigal, come up short. 

Mark Cuban: "The Most Patriotic Thing You Can Do"?

Typically bombastic Mark Cuban, on the most patriotic thing you can do - though patriotism is generally one of understated reasons to build a business (h/t HN):

Bust your ass and get rich. 

Make a boatload of money. Pay your taxes. Lots of taxes. Hire people. Train people. Pay people. Spend money on rent, equipment, services. Pay more taxes. 

When you make a shitload of money. Do something positive with it. If you are smart enough to make it, you will be smart enough to know where to put it to work.

I don’t care what anyone says. Being rich is a good thing. Not just in the obvious sense of benefiting you and your family, but in the broader sense.  Profits are not a zero sum game. The more you make the more of a financial impact you can have.

I’m not against government involvement in times of need. I am for recognizing that  big public companies will  continue to cut jobs in an effort to prop up stock prices, which in turn stimulates the need for more government involvement.  Every cut job by the big companies extracts a cost on the American people in one way or another.

Entrepreneurs are needed to create and grow companies to absorb those people in new jobs. If entrepreneurs don’t create those jobs, the government ends up having to spend more money to help them one way or another.

So be Patriotic. Go out there and get rich. Get so obnoxiously rich that when that tax bill comes , your first thought will be to choke on how big a check you have to write. Your 2nd thought will be “what a great problem to have”, and your 3rd should be a recognition that in paying your taxes you are helping to support millions of Americans that are not as fortunate as you.

Do countries choose between Democracy and Growth?

That's the question economist Yasheng Huang asks when comparing China and India with a number of unconventional conclusions - a must watch for those interested in development:

 

More on the demographic differences between India and China (Freakonomics).

On Math Education

A good look at why math education is broken as it's currently taught from the brother of the founder of Wolfram Alpha (TED.com):

 

Quote of the Day

Perhaps a bit surprisingly from the veto pen of the Democratic Governor of California, Jerry Brown (via adamsmith.org, with more on Brown at Reason.com):

Not every human problem deserves a law

As said by Abraham Maslow: If you only have a hammer, you tend to see every problem as a nail. And that's why I think law makers should fully read and understand the laws they pass and they should sit briefly, when they sit at all to pass legislation.

Is inequality the problem?

Argues Jeff Stibel at HBR:

We also need to face the stark reality of income inequality as an exasperating factor in the economy's decline. These disparities are growing at an alarming rate and have been accelerating throughout the recession. An economy that derives 70% of its GDP from consumer spending cannot sustain stable growth when average consumers don't have money to spend. 

Unbalanced growth — growth derived primarily from one segment of the population — inevitably collapses upon itself. From 2000 – 2009, overall GDP grew by 17.8% while average household net worth dropped by 4% when adjusted for inflation. At the same time, the richest individuals and corporations grew net worth by record amounts. This incongruity between rising economic growth and decreased household income is even more remarkable considering there was record low inflation. 

Long-term, stable growth cannot be truly sustainable if it is also massively unequal.

Absent from this conversation is whether or not productivity has shifted commensurate to any increases in wealth.  The policy implications are sweeping.  If in fact productivity of the wealthy or the aggregate number of high income earners is driving economic growth, economic policy should not be to punish the rich (Greg Mankiw) for doing what we want them to do - which is what President Obama has proposed with his new stimulus bill announced yesterday.

In private conversations, there are some who even believe that inequality will lead the poor to revolution, to which Chris Blattman recently noted his skepticism that the poor are any more prone to revolution than at least the middle class.  So is this a question of (re)distribution?  Or a question of access to opportunity?  (Or both?).  The conversation is woefully incomplete.

Specifically in Stibel's case, I note that he cherry picks a few numbers.  He notes that despite GDP growth of 17.8%, average net worth - not net income (which would be the apples to apples comparison given that is what GDP is), fell 4 - adjusted for inflation (which he may or not have adjusted the 17.8% for).  He implies that this suggests that all the subsequent net worth accrued to the rich.  This might be plausible if we didn't know that the rich also saw net worths fall in the last recession and the numbers of high income earners have also fallen in absolute numbers - from the WSJ:

While I don't doubt this is a serious issue, I'm not sure the issue is inequality so much as asking what is dragging down income growth for low and middle income earners.  Whatever the question, Stibel's exaggerations/leaps in logic (for which he is not alone) are unhelpful.

A lesson on conditional risk

I had to laugh at this one.  Courtesy of xkcd via Freakonomics:

Greater sexual freedom leads to ... more discipline?

Free markets and free people.  When you let people choose for themselves, "shockingly" they tend to do the right thing. From Slate.com (via Justin Wolfers):

Monogamy rates are probably rising, hard as it may seem to believe, because of sexual liberation. People are cheating less because people are less desperate and unsatisfied. Nowadays you're expected and even encouraged to delay marriage and childbirth and spend your youth experimenting both sexually and in relationships, and so now people who make commitments have both gotten some of the curiosity out of their systems, and they have a better idea of what will make them happy when they do settle down. 

There were simply more bad marriages in the past, created because of the pressure to marry young, and people in bad marriages are more likely to cheat. I also think it's because people are more open about sex. If you have a need that's going unfulfilled, there's more cultural space to deal with it first by opening your mouth and speaking to your partner instead of leaving the house, casting around for someone who can fulfill it. I'd also add that there's less stigma attached to divorce now, so people are far more likely to end a bad marriage in the early stages of it going sour. No need now to go through the process of laying waste to your marriage through cheating and fighting in order to justify the divorce, not when you can simply say, "I'm not happy anymore," and divorce amicably.

Steve Jobs: America's Greatest Failure?

One of America's greatest strengths is its willingness to overlook if not even celebrate failure.  The struggle for greatness invariably also means epic failures (NationalReview):

Jobs failed better than anyone else in Silicon Valley, maybe better than anyone in corporate America. By that I mean Jobs did what only the greatest entrepreneurs can do: learn from their failures. I don’t mean learn from their mistakes. I mean learn from their abject, humiliating, bonehead, epic fails. 

Everyone today thinks of Jobs as the genius who gave us the iPod, MacBooks, the iTunes store, the iPhone, the iPad, and so on. Yes, he transformed personal computing and multimedia. But let’s not forget what else Jobs did.

More on the aid industry...

Let there be no doubt that it is in fact an industry. According to the President of Doctors without Borders (MSF), aid groups are misleading the public on Somalia (Guardian):

Charities needed to start treating the public "like adults". He went on: "There is a con, there is an unrealistic expectation being peddled that you give your £50 and suddenly those people are going to have food to eat. Well, no. We need that £50, yes; we will spend it with integrity. But people need to understand the reality of the challenges in delivering that aid. We don't have the right to hide it from people; we have a responsibility to engage the public with the truth."

Predictable response from other agencies: "Ian Bray, a spokesman for Oxfam, said it was unhelpful for aid agencies to be seen to be arguing with each other."

One path to better jobs: More density?

That's a solution proposed in the NYT - but as Paul Kedrosky quotes, the authors have a strong sense of the limitations - and population density isn't what comes first in "job creation" (NYT via Paul Kedrosky):

DENSITY isn’t a magic elixir. One can’t create wealth just by crowding people together; otherwise the super-dense metropolitan areas in emerging Asian countries would be richer than American cities. Density simply facilitates interaction. Interactions translate into wealth when a population is educated and local institutions support private enterprise and entrepreneurship.

That said, I'm not sure that density isn't an effect of "a population educated [to] and local institutions [that]  support private enterprise and entrepreneurship."

The story of Akamai and the loss of its founder

An inspired but heart wrenching story of one entrepreneur's vision after he was killed in the first plane that crashed into the World Trade Center (Boston.com):

On Sept. 11, 2001, in Akamai’s control room, engineers and technicians worked furiously to direct the crush of Web traffic to every spare server. There was no time to grieve. But then and in the decade since, the thoughts of Akamai employees rarely strayed from Lewin and his technology, and what both had made possible.

“The end result is that you and I, without knowing Akamai is involved, get to see our content, and we get it fast, and it comes through clear,’’ said Brian Partridge, vice president of research at the research firm Yankee Group in Boston. “Akamai has had a behind-the-scenes role in the incredible development of the Internet.’’

In 1996, when Daniel Lewin, a former Israeli commando with a bachelor’s degree from Technion, Israel’s famed scientific university, began his studies at the Massachusetts Institute of Technology, computer scientists already knew the Internet would do a lousy job of managing big spikes in traffic. Companies could prepare only by buying vast numbers of extra servers that would be idle most of the time, a big waste of money.

Lewin was already hungry for a challenge like that. “Danny had the kind of mind that comes and says, ‘Well, this is a big problem. Why shouldn’t there be a solution?’ ’’ recalled his MIT professor and Akamai cofounder, Tom Leighton. “And sure enough, he figured out a solution.’’

The Internet needed a better way to instantly locate vast amounts of quickly changing data stored on computers all over the world, and send it to anybody, anywhere. What Lewin and Leighton invented was a mathematical scheme called “consistent hashing’’ that radically sped up the process. Just as important, the system could “scale’’- meaning it would work even as many more people used it. It made possible the advanced Internet services we use today.

Lewin’s innovation allows millions of users to watch streaming video simultaneously, for example, and keeps news websites online during global crises as viewers rush for the latest information.

I highly recommend reading the whole thing.

Gary Becker asks a Good Question

Gary Becker via Don Boudreaux:

Warren Buffett has persuaded 68 other billionaires to follow his example and promise to give at least half their wealth to charities. But why hasn’t Buffett proposed also that the very rich make large gifts to the federal government to offset what he considers ridiculously low taxes on their incomes and wealth? 

My guess is that he and the others who pledged to give away their wealth to charity would have little confidence in how the government would spend such gifts. Buffett, for example, is giving most of his wealth to the Gates Foundation, not to the federal government, and is relying on how this foundation will spend his vast gift. Given this reluctance to make large gifts to the federal government, why should anyone have confidence that the federal government will spend additional tax revenue in a sensible way?

Heh.

From xkcd (via Beata):

"The Ten Limerick Principles of Economics"

A fun and racy look at the principles of economics through limericks - here are numbers 2 and 8 (limericksecon.com via Greg Mankiw):

 #2. The Cost of Something is What You Give Up to Get It."Never free are the amorous fruits,"
Said a girl who astutely computes,
"For there's much I'd have earned
If these calories burned
Had involved more productive pursuits."

Decision-makers have to consider both the obvious and implicit costs of their actions. 

#8. A Country's Standard of Living Depends on Its Ability to Produce Goods and Services.
"My sweet," said a lovable lout,
"Of this there can be little doubt:
The continuing health
Of our national wealth
Is dependent on how you put out."

Countries whose workers produce a large quantity of goods and services per unit of time enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average income.

Spurring growth through Keynesian Economics?

From Robert J Barro (WSJ) - "Food stamps and other transfers aren't necessarily bad ideas, but there's no evidence they spur growth.":

Theorizing aside, Keynesian policy conclusions, such as the wisdom of additional stimulus geared to money transfers, should come down to empirical evidence. And there is zero evidence that deficit-financed transfers raise GDP and employment—not to mention evidence for a multiplier of two.

Gathering evidence is challenging. In the data, transfers are higher than normal during recessions but mainly because of the automatic increases in welfare programs, such as food stamps and unemployment benefits. To figure out the economic effects of transfers one needs "experiments" in which the government changes transfers in an unusual way—while other factors stay the same—but these events are rare.

Ironically, the administration created one informative data point by dramatically raising unemployment insurance eligibility to 99 weeks in 2009—a much bigger expansion than in previous recessions. Interestingly, the fraction of the unemployed who are long term (more than 26 weeks) has jumped since 2009—to over 44% today, whereas the previous peak had been only 26% during the 1982-83 recession. This pattern suggests that the dramatically longer unemployment-insurance eligibility period adversely affected the labor market. All we need now to get reliable estimates are a hundred more of these experiments.

If only we lived in a world without tradeoffs...

With environmentalists protesting an oil pipeline from Canada to the US (townhall.com), it's as if they believe that the alternatives are risk free. They aren't. The alternative to ethical oil is Saudi oil:

Meanwhile as the same townhall.com article points out, thousands of protected birds are killed each day from wind farms.  My guess though is that there are a lot of environmentalists against those as well.  There are many days when I wonder if what it is they really object to is electricity and industrial progress.