Why we don't save more...

Kids and delayed gratification.



[via rgs]

The horror...

All of us who write opinion often wake up sweating and trembling after a nightmare like this.  Don Luskin, a CNBC talking head, not only got it wrong a year ago, he got it all wrong and way wrong.

As the financial industry "celebrates" the anniversary of the the meltdown - which is usually marked with the failure of Lehman Brothers, they spotlighted Luskin's astonishingly bad grasp of the situation.

Just one painful excerpt from 9/14/2008:

A housing "slump," a housing "crisis"? A "severe" price decline? According to the latest report from the National Association of Realtors, the median price of an existing home is up 8.5 percent from the low of last February. And according to the U.S. Census Bureau, the median price of a new home is up 1.3 percent from the low of last December. Home prices may not be at all-time highs -- and there are pockets of continuing decline in some urban areas -- but overall they've clearly stopped going down and have started to recover. So why keep proclaiming a "crisis" after it's over?
"Turmoil" in the debt markets? Sure, but we've seen plenty worse. According to the FDIC, there have been a total of 13 bank failures in 2007 and so far into 2008. There were 15 in 1999-2000, the climax of the Obama-celebrated era of Clintonian prosperity. And in recession-free 1988-89, there were 1,004 failures -- almost an order of magnitude more than today. Since the Great Depression, the average number of bank failures each year has been 94.

 
Despite highly publicized losses in subprime mortgage lending, bank equity capital -- the best measure of core financial strength -- is now $1.35 trillion, more than the $1.28 trillion level of mid-2007, before the "turmoil" even began.
Financial market "crisis" and "meltdown"? Yes, from all-time highs last October, the S&P 500 has fallen 20 percent. But that's nothing by historical standards. Stocks have often fallen more than that over comparable spans of time. They fell more than twice that much in 1974 -- which was truly the worst drop since the Great Depression. Even the present 20-percent loss isn't what it seems. The damage has been heavily concentrated in the financial sector -- banks, investment firms and mortgage companies. If you exclude that sector, stocks are off 14.8 percent.
Some economic indicators -- export growth and non-defense capital goods orders such as industrial machinery, for example -- are running at levels associated with brisk expansion. Others are running at middling levels, such as the closely followed Institute for Supply Management manufacturing index. But it's actually difficult to find many that are running at truly recessionary levels. [More]

At the time we were already 9 months into recession, remember.

Nonetheless, the solution for such goof-ups is to predict some more stuff.  That's what we do.If fact, my next TP column will could place me in his company as well one year hence.

But this is a Wikipedia entry that would argue he should not be allowed near a microphone/camera:

Luskin's predictions were controversial again in 2008 when, in a September Washington Post^[20] he cited evidence of what he claimed were factual errors made by Barack Obama and members of his presidential campaign concerning the state of the economy. Luskin claimed that the market was healthy, and Obama was simply using the state of the economy to discredit John McCain. However, two days later, on September 16th, the stock market had a record plummet, thus discrediting every prediction he made in his editorial.^[21] Additionally, in the same editorial, he cited evidence that the economy was weak, but not in recession. He wrote, "…anyone who says we’re in a recession, or heading into one—especially the worst one since the Great Depression—is making up his own private definition of recession." Shortly afterward, following the sudden collapse of several large financial firms, the economy sharply worsened, and was subsequently declared to have been in recession all year by the National Bureau of Economic Research.^[22] editorial,Foreign Policy included Luskin's prediction in its list of "The 10 Worst Predictions for 2008" on its website and noted that it gave additional opportunities for liberal bloggers to criticize Luskin.^[23] The editors of The Yale Book of Quotations^[24] He has been singled out for "some of the worst, money losing commentary of the past few years."^[25] also made note of the inopportune timing of Luskin's editorial and included his prediction in their list of "Top ten quotes of 2008".

He has been frequently referred to by Brad DeLong as "the Stupidest Man Alive" for, amongst other things, his continued support for literal  interpretations of the Laffer Curve.^[26]

[More]

This perhaps illustrates how not to use talking head predictions.  They may be useful for defining the range of possible outcomes, but all are fraught with emotional, irrational judgments, despite the author's best efforts.

Here's where I've been...

The promised video of our bin going up.  Sorry - no cool soundtrack.  (The crane was for the roof auger.) 

The bin is 42' diameter, 42,000 bu., approximately 56' at the peak.



The camera I used is here.

Photos were taken every minute and the camera shuts off at night.  I edited out the weekend.  There is no viewfinder, so I had to check the video after it was shot.

I was really impressed with iMovie for editing.  Very easy to learn. I got it made in about 30 minutes from the avi files. Maybe later I'll add comments or music.

My thanks to my old friends at Yardstor in Ridge Farm, IL.   And the folks at Cargill.

Special thanks to Erich and Aaron.

Yeah, but think of all the surprises...

More than you can imagine, we are blind to changes around us.



I think this  is one reason why we wonder "why didn't we see X coming".  Answer: we don't notice much.  In a world of massive change and information about it flowing to us (or inundating us), it may be we need tools like Google to overcome this particular inattention.  We only have so much awareness, and it seems modern lifestyles don't enhance that meager talent either.  Outsourcing our change-awareness to computers looks like an idea worth investigating, anyway.

On the plus side, I suspect people who can find such ways to counteract their change blindness will reap significant benefits that will seem like luck to those beside them.

PS.  We also experience change deafness.

PPS.  This also why eyewitnesses are the worst kind of evidence.

The math of death...

Oddly the statistics of dying are pretty straightforward, even if the messiness of actually living is not.

What do you think are the odds that you will die during the next year?  Try to put a number to it — 1 in 100?  1 in 10,000?  Whatever it is, it will be twice as large 8 years from now.
This startling fact was first noticed by the British actuary Benjamin Gompertz in 1825 and is now called the “Gompertz Law of human mortality.”  Your probability of dying during a given year doubles every 8 years.  For me, a 25-year-old American, the probability of dying during the next year is a fairly miniscule 0.03% — about 1 in 3,000.  When I’m 33 it will be about 1 in 1,500, when I’m 42 it will be about 1 in 750, and so on.  By the time I reach age 100 (and I do plan on it) the probability of living to 101 will only be about 50%.  This is seriously fast growth — my mortality rate is increasing exponentially with age.

But even though the numbers fit neatly to expectations, we don't really know why.

Like I said before, no one knows why our lifespans follow the Gompertz law.  But it isn’t impossible to come up with a theoretical world that follows the same law.  The following argument comes from this short paper, produced by the Theoretical Physics Institute at the University of Minnesota.

Imagine that within your body is an ongoing battle between cops and criminals.  And, in general, the cops are winning.  They patrol randomly through your body, and when they happen to come across a criminal he is promptly removed.  The cops can always defeat a criminal they come across, unless the criminal has been allowed to sit in the same spot for a long time.  A criminal that remains in one place for long enough (say, one day) can build a “fortress” which is too strong to be assailed by the police.  If this happens, you die.

Lucky for you, the cops are plentiful, and on average they pass by every spot 14 times a day.  The likelihood of them missing a particular spot for an entire day is given (as you’ve learned by now) by the Poisson distribution: it is a mere .

But what happens if your internal police force starts to dwindle?  Suppose that as you age the police force suffers a slight reduction, so that they can only cover every spot 12 times a day.  Then the probability of them missing a criminal for an entire day decreases to .  The difference between 14 and 12 doesn’t seem like a big deal, but the result was that your chance of dying during a given day jumped by more than 10 times.  And if the strength of your police force drops linearly in time, your mortality rate will rise exponentially.

This is the Gompertz law, in cartoon form: your body is deteriorating over time at a particular rate.  When its “internal policemen” are good enough to patrol every spot that might contain a criminal 14 times a day, then you have the body of a 25-year-old and a 0.03% chance of dying this year.  But by the time your police force can only patrol every spot 7 times per day, you have the body of a 95-year-old with only a 2-in-3 chance of making it through the year.

More questions than answers

The example above is tantalizing.  The language of “cops and criminals” lends itself very easily to a discussion of the immune system fighting infection and random mutation.  Particularly heartening is the fact that rates of cancer incidence also follow the Gompertz law, doubling every 8 years or so.  Maybe something in the immune system is degrading over time, becoming worse at finding and destroying mutated and potentially dangerous cells.

Unfortunately, the full complexity of human biology does not lend itself readily to cartoons about cops and criminals.  There are a lot of difficult questions for anyone who tries to put together a serious theory of human aging.  Who are the criminals and who are the cops that kill them?  What is the “incubation time” for a criminal, and why does it give “him” enough strength to fight off the immune response?  Why is the police force dwindling over time?  For that matter, what kind of “clock” does your body have that measures time at all?

There have been attempts to describe DNA degradation (through the shortening of your telomeres or through methylation) as an increase in “criminals” that slowly overwhelm the body’s DNA-repair mechanisms, but nothing has come of it so far.  I can only hope that someday some brilliant biologist will be charmed by the simplistic physicist’s language of cops and criminals and provide us with real insight into why we age the way we do. [More]

I wonder if all of us have mental metaphors for what is going on inside our bodies, like those graphics on House. The idea of cops and criminals slugging it out is remarkably attractive, and easy to grasp pictures like this tend to stick in our minds.

No product, no byproduct...

Ag lime could be in short supply soon since so much limestone quarry capacity is idle.  Ag lime is essentially the fines from crushing to get rock for roads or concrete.  Guess how many foundations we've been pouring lately.

Second quarter earnings for aggregates declined as the impact of sharply lower shipments more than offset the earnings benefit from improved prices, lower unit costs for diesel fuel and cost control measures.  Aggregates shipments declined 31 percent from the prior year due to weak demand and wet weather.  The decrease in aggregates volumes reduced second quarter EBITDA by approximately $112million versus the prior year.  The increase in the average selling price for aggregates reflects wide variations across Vulcan-served markets.  Many major markets realized price improvement from the prior year well above the 3percent average, while certain markets in the far West and Florida reported year-over-year declines in average selling price.
By rationalizing production, reducing operating hours, streamlining the workforce and effectively managing spending, the Company offset some of the cost impact related to lower volumes.  Aggregates cash fixed costs were reduced17percent from the prior year’s second quarter.  The unit cost for diesel fuel decreased 54percent from the prior year’s second quarter, increasing earnings $0.12per diluted share.  [More from one of the largest aggregate producers]

You might want to check your supplier.

I don't think so...

First the claim: a consumer submarine that can dive to 37,000 feet.  Or a pressure of over 16,000 psi.

Yeah, right.

The "Deep Flight" winged submersibles are experimental prototypes designed to dive to depths of up to 37,000 ft -- almost four times as deep as a giant squid dives -- descending at 400 ft/minute.

They are the brainchild of submarine designer Graham Hawkes who is in the process of building commercial models that can reach those depths.

Hawkes has been designing submarines since the 1960s, working initially with the British Special Forces and then for the oil industry.

He now sells his designs to wealthy sailboat owners as the ultimate yacht accessory.

"If you have the money for a mega-yacht and you're just limited to the surface, then what a waste. That's my perspective," Hawkes told CNN in a telephone interview.

The late billionaire balloonist and adventurer, Steve Fossett, commissioned one of Hawkes' experimental prototypes, "Deep Flight Challenger," which can dive to 37,000 ft. The craft was four weeks away from delivery when he died.

Venture capitalist Tom Perkins has ordered one of Hawkes' first commercially-available models, "Deep Flight Superfalcon" for his yacht "Maltese Falcon." The $1.5 million sub is capable of diving to 1,000 ft and comes complete with air conditioning. [More]

It's really hard to build stuff to hold back 7 miles of water.  The idea some plastic bubble would work is idiotic hard to believe.

You go first.

The-Flu-That-Must-Not-Be-Named...

While pork producers and, belatedly, our USDA Secretary are busy waging a media war on "swine" flu, they may be a distraction to the troubling medical aspects of this infection.  To begin with, it doesn't attack the normal victims.

Seasonal flu kills predominantly the frail elderly. Researchers are trying to determine why the H1N1 swine flu virus, much like the Spanish Flu of 1918, is lethal to a portion of young people in good health. The reason may involve a person’s genetics, or simply taking a deep breath just as a nearby infected person sneezes.

“That’s a question we have to find the answer to,” said Nikki Shindo, a Geneva-based doctor leading the World Health Organization’s investigation of swine flu patients.

Underlying conditions that can intensify the effects of flu include respiratory illnesses, especially asthma, cardiovascular disease, diabetes, a suppressed immune system, and even pregnancy. About 25 percent to 50 percent of severe cases worldwide involve healthy young and middle-aged people like Robb, according to WHO Director-General Margaret Chan.

 ...

While the pandemic virus tightly latches onto cells in the upper respiratory tract like seasonal virus, it also attacks cells in the lungs, researchers at London’s Imperial College wrote in a study reported Sept. 10 in the journal Nature Biotechnology.

In severe cases, influenza can damage the capillaries surrounding the tiny grape-like sacs, known as alveoli, where gas is exchanged through the blood. Damaged alveoli can bleed, causing pulmonary hemorrhage and blood clots.

“What makes it go from the bronchus to the alveoli is the $64,000 question,” said John Nicholls, associate professor of pathology at the University of Hong Kong, who has studied how cells interact with viruses like the H5N1 bird flu strain and SARS. Previous bouts of flu, particularly caused by strains similar to the H1N1 virus, may give some protection, he said.

The U.S. Centers for Disease Control and Prevention is investigating the mechanisms for severe disease, Nancy Cox, director of the Atlanta-based agency’s flu division, told the meeting in San Francisco today.

“When the virus gets into the lower respiratory, it appears to replicate extremely well,” Cox said. “It’s really puzzling.”

Inflammatory chemicals are produced by the immune system to fight the infection and repair the damage. An over-exuberant response can worsen the effect by filling the lungs with fluid and cause permanent scarring that restricts the lungs.

[More]

The other problem is the relatively innocuous symptoms right up until crisis.

Can humans catch swine flu?

Swine flu viruses do not normally infect humans. However, sporadic human infections with swine flu have occurred. Most commonly, these cases occur in persons with direct exposure to pigs (e.g. children near pigs at a fair or workers in the swine industry). In addition, there have been documented cases of one person spreading swine flu to others. For example, an outbreak of apparent swine flu infection in pigs in Wisconsin in 1988 resulted in multiple human infections, and, although no community outbreak resulted, there was antibody evidence of virus transmission from the patient to health care workers who had close contact with the patient.

How common is swine flu infection in humans?

In the past, CDC received reports of approximately one human swine influenza virus infection every one to two years in the U.S., but from December 2005 through February 2009, 12 cases of human infection with swine influenza have been reported.

What are the symptoms of swine flu in humans?

The symptoms of swine flu in people are expected to be similar to the symptoms of regular human seasonal influenza and include fever, lethargy, lack of appetite and coughing. Some people with swine flu also have reported runny nose, sore throat, nausea, vomiting and diarrhea.

Can people catch swine flu from eating pork?

No. Swine influenza viruses are not transmitted by food. You can not get swine influenza from eating pork or pork products. Eating properly handled and cooked pork and pork products is safe. Cooking pork to an internal temperature of 160°F kills the swine flu virus as it does other bacteria and viruses.

How does swine flu spread?

Influenza viruses can be directly transmitted from pigs to people and from people to pigs. Human infection with flu viruses from pigs are most likely to occur when people are in close proximity to infected pigs, such as in pig barns and livestock exhibits housing pigs at fairs. Human-to-human transmission of swine flu can also occur. This is thought to occur in the same way as seasonal flu occurs in people, which is mainly person-to-person transmission through coughing or sneezing of people infected with the influenza virus. People may become infected by touching something with flu viruses on it and then touching their mouth or nose.

What do we know about human-to-human spread of swine flu?

In September 1988, a previously healthy 32-year-old pregnant woman was hospitalized for pneumonia and died 8 days later. A swine H1N1 flu virus was detected. Four days before getting sick, the patient visited a county fair swine exhibition where there was widespread influenza-like illness among the swine.

In follow-up studies, 76% of swine exhibitors tested had antibody evidence of swine flu infection but no serious illnesses were detected among this group. Additional studies suggest that one to three health care personnel who had contact with the patient developed mild influenza-like illnesses with antibody evidence of swine flu infection.

How can human infections with swine influenza be diagnosed?

To diagnose swine influenza A infection, a respiratory specimen would generally need to be collected within the first 4 to 5 days of illness (when an infected person is most likely to be shedding virus). However, some persons, especially children, may shed virus for 10 days or longer. Identification as a swine flu influenza A virus requires sending the specimen to CDC for laboratory testing. [More]

Meanwhile, pork producers are rightfully concerned about the name.   Unfortunately, that hog has escaped the barn I think.  (Notice the above came from government experts - the CDC - who are notably careful with nomenclature)

 Meanwhile, pork producers must worry about a fresh outbreak of the H1N1 flu virus. Though widely called swine flu, there is no evidence it is spread by pork. Nevertheless, the last outbreak hurt global pork demand and inspired China and other big importers to ban U.S. and Mexican pork. China already is raising more of its own pigs. [More]

As I have written before, this campaign is very late in forming. The swine flu label has been used epidemiologists for decades.  And this strain is not unrelated.

The new H1N1 strain is based primarily on an unusual virus that has been circulating widely in U.S. pigs since the 1990s. That "triple reassortant" flu is actually a combination of classic swine flu, a North American avian flu and a strain of human flu.

Somehow, a single pig became simultaneously infected with that virus and a pure swine flu strain found in pigs in Europe and Asia. The two strains swapped genetic material to produce the new H1N1 strain, which then began to infect humans.

HOW DID STRAINS MIX?

That remains a mystery, and scientists will probably never know. Relatively few pigs engage in intercontinental travel, and those that do are strictly quarantined.

But there are theories. One is that a person in Asia became infected with the Eurasian swine flu, then traveled to North America and passed it along to a pig here that already had the triple reassortant virus. That would explain why the outbreak began in Mexico and the United States.

H1N1s BEFORE?

Yes. The extremely deadly 1918 Spanish flu was an H1N1 strain, and one of the strains of the seasonal flu is also an H1N1. But not all H1s and N1s are the same.

The H1 and N1 in the seasonal flu are both from humans. But new H1N1 is more virulent because most people never encountered it before, so they have no pre-existing immunity.

DEADLIER?

It doesn't seem to be deadlier than the seasonal flu, but it's hard to say for sure. Public health officials keep track of how many people have died from H1N1, but without reliable figures on total infections they don't know for sure what proportion of cases result in death.

Even if H1N1 is no deadlier than the seasonal flu, it will cause more deaths because it likely will infect more people.

LIKE THE 1918 FLU?

Both viruses arose in late spring -- the tail end of the traditional flu season. And both appear to be most dangerous for healthy people in the prime of their lives instead of the very young and very old.

The 1918 flu is thought to have begun with a springtime wave that was followed by a more lethal wave in the fall. It ultimately killed about 50 million worldwide. [More]

The campaign to make H1N1 "the" term for this virus is making a difference, but I am becoming persuaded the greater danger is not to the pork industry.  The danger is to people.  I also suspect, but cannot find hard numbers to demonstrate, that a not-impossible pandemic could slow the global economy enough to stunt recovery in all meat demand.  Meat tends to be a discretionary purchase.


 The larger issue for me is the persistent conviction we can solve our problems by making others do stuff.  This is the guiding axiom behind "awareness" and "education" campaigns, and the fallback action plan for organizations seeking to buttress their reason for being.  Perhaps these efforts have proved fruitful in the past, but the sheer overuse of this technique has diluted its effectiveness, I fear.  (More on this in a later post)

Finally, the clinching argument...

I have withstood the arrows of climate change skeptics with saintly stoicism, I think, but now I find within my grasp the facts that will convert all to enviro-nuts like myself: climate change could ruin our beer!

You heard me right.

IF THE sinking Maldives aren't enough to galvanise action on climate change, could losing a classic beer do it? Climatologist Martin Mozny of the Czech Hydrometeorological Institute and colleagues say that the quality of Saaz hops - the delicate variety used to make pilsner lager - has been decreasing in recent years. They say the culprit is climate change in the form of increased air temperature.

Mozny's team used a high-resolution dataset of weather patterns, crop yield and hop quality to estimate the impact of climate change on Saaz hops in the Czech Republic between 1954 and 2006. Best-quality Saaz hops contain about 5 per cent alpha acid, the compound that produces the delicate, bitter taste of pilsners.

The study found that the concentration of alpha acids in Saaz hops has fallen by 0.06 per cent a year since 1954, and models of hop yields and quality under future global warming scenarios predict bigger decreases (Agricultural and Forest Meteorology, DOI: 10.1016/j.agrformet.2009.02.006).

It's not just Czech hops that are at stake here, says Francesco Tubiello, a crop specialist at the European Commission and a lead author of the agriculture chapter of the IPCC Fourth Assessment Report. "The famous hop-growing regions of eastern Germany and central Slovakia are facing the same situation," he says. [More]

So if you look forward to a world where "lite beer*" is considered a legitimate excuse for lager, scoff at will. But I stand firm in my commitment to beer with actual flavor.

*IMHO, "lite beer" is neither one.

I wonder if this they is are us we*...

Did the ag recession of the eighties condition us to who we are now?  There are reasons to believe those of us who lived through the bust have been permanently altered, just as other citizens are being imprinted now by the recession.

But, of course, the effects here aren’t solely on stock-market participation. Another study (abstract / PDF) looks at how recessions affect our beliefs about the world, using data from the General Social Survey from 1972 to 2006. Using time and regional variations in macroeconomic conditions to identify the effect of recessions on beliefs, the study finds that:

[I]ndividuals growing up during recessions tend to believe that success in life depends more on luck than on effort, support more government redistribution, but are less confident in public institutions.

What’s more, it finds that these effects, like the stock-market effects, are long-lasting.
The good news for conservatives here (or the bad news for liberals, depending on how you want to look at it) is that a recession in one’s formative years does not seem to lead one to self-identify as more left-leaning — possibly because the desire for more government redistribution and the lack of faith in public institutions cancel each other out.

Still, on the whole, it seems like pretty cruddy news to me: a generation that feels it has less control over its destiny, that wants more from its government, and that’s less willing to take risks. [More]

I think this would help account for the endless appetite and sense of entitlement we have for government subsidies. It would also partially explain our proclivity to embrace "insurance" schemes of all sorts.  We are truly risk averse.

The timing is not good, as risk seems to be increasing for farmers of all types. Global influences, climate change, technology upheavals, and financial intensification all call for more from us as managers that we expected before.  Few farmers look forward to times of relatively hassle free existence.  Especially since the desire to farm has propelled competition to very exciting levels.

More importantly, the generation returning now may have their own "80's" to live through, leaving them with similar inclinations.

*Ahoy, English majors - am I close?

I'm not sure...

But I think this may become a new approach to musical notation.



At any rate, I found it wonderful to watch, and intuitive to see the parts.

Here's a Bach fugue.

[via sullivan]

Shoot - killing the lawyers won't help...

Since malpractice reform is now back in the debate, how much could it do to solve our health cost problem?

Ummm...not much.

• What Does Malpractice Cost? This is the big one. What does it add up to? The answer, which you wouldn't guess from Bush's policy papers or Clinton's speeches, is not very much. Legal costs are $27,000 per claim, settlements and judgments are $4.4 billion, and insurance is $700 million. The total cost of malpractice is thus 6.5 billion --.46% of health care costs, or less than one half of one percent. They're just not a significant factor in rising health prices, and those who say different are lying.

• Defensive Medicine? We're not sure it exists, and in any case it's not measurable. The Congressional Budget Office did a study and concluded that the savings from less defensive medicine post-tort reform, if there were any, would be very small. [More]

This not to say malpractice reform should not be pursued - just it's really small potatoes economically. 

In fact, the way the system is structured almost insures excessive costs.

If liability concerns aren’t a major driver of overtreatment, then what is? Experts believe that the current reimbursement structure does more to shape practice patterns than fear of liability. “The current health system reimburses doctors, hospitals, and other health care providers based on the number of visits and procedures that are done. As a result, health care providers’ revenues and profits increase when they deliver more services and the cost of health care goes up,” Ellen-Marie Whelan, a Senior Policy Analyst at the Center for American Progress, wrote in a recent report.

Indeed, as Dr. George Lundberg — the former editor of the Journal of the American Medical Association — concludes, “at least 30% of the $2.5 trillion expended annually for American health care is unnecessary. Eliminating that waste could save $750 billion annually with no harm to patient outcomes.” [More]

The solutions for this problem are actually straightforward, I think: introduce free market supply and demand via greatly reduced insurance coverages, so consumers have to pay dearly for nearly every visit or procedure.  Fees would drop and we'd all be better health care consumers.

And I'd like a pony too.


Even if all the current initiatives were to stall, we'd still be looking at runaway deficits that Congress refuses to address.  Quick - name three 2011 budget cuts greater than $100B being pushed by Republicans to reduce the deficit (and the "reducing waste and fraud" smokescreen can only be used once).  Perversely, we have discovered that the only thing worse than "tax and spend" is "cut taxes and spend".  In fact, even just "spend" is a better choice than the latter.

Meanwhile, the range of The Possible has been reduced to alternatives that postpone costs and bring forward benefits, but because so many feel the system unfair, and postponing costs is now standard federal legislative procedure, the choices are could be seen as "Do you want any upside with that or just pain alone?"

Small wonder we're supersizing it.

Yeah - I'd buy the book...

Great astronomical illustrations.  Put one of these on the cover of some pulp s-f, and I'm pulling out my wallet.

[More - worth the click]

[via presurfer]

A leader emerges...

One of the strongest criticisms against climate change legislation is the fear of not moving in lock step with competitors, especially China.  If we stop emitting, it won't matter because we can't save the world alone.

Laying aside for the moment the problem of how our self-directed nation, which goes it alone all the time if we see an advantage, suddenly would begin to create working alliances, there is another development.

What if the mantle of world leadership is as we watch slipping toward Asia?

Japan Steel Works Ltd., a maker of atomic reactor parts for Areva SA and Toshiba Corp., more than doubled its forecast for China’s nuclear plant construction because of stimulus spending and environmental pressures.
The country may build about 22 reactors in the five years ending 2010 and 132 units thereafter, compared with a company estimate last year for a total 60 reactors, President Ikuo Sato said in an interview. Japan Steel Works has the only plant that makes the central part of a large-size nuclear reactor’s containment vessel in a single piece, reducing radiation risk.

China, the world’s largest energy consumer after the U.S., is increasing spending on atomic energy as part of a 4 trillion yuan ($586 billion) economic stimulus and as it curbs greenhouse gas emissions. Japan Steel Works is counting on the rising reactor demand as the global recession curbs sales to customers such as carmakers and electronics companies. [More]

China is already the most dynamic economy, growing with only slightly diminished vigor. They now are the world's largest car market, and dominate sales of everything from cement to fertilizer.  They have the largest army, they are on the verge of being the largest exporter, and will soon likely pass the US as the largest manufacturer.

Anyone who walks the aisles of a U.S. retailer might think China already is the world's largest manufacturer. But, in fact, the U.S. retains that distinction by a wide margin. In 2007, the latest year for which data are available, the U.S. accounted for 20% of global manufacturing; China was 12%.

The gap, though, is closing rapidly. According to IHS/Global Insight, an economic-forecasting firm in Lexington, Mass., China will produce more in terms of real value-added by 2015. Using value-added as a measure avoids the problem of double-counting by tallying the value created at each step of an extended production process.

As recently as two years ago, Global Insight's estimate was that China would surpass the U.S. as the world's top manufacturer by 2020. Last year, it pulled the date forward to 2016 or 2017.

"The recent deep recession in U.S. manufacturing does mean that China's catch-up is occurring a few years earlier than would have been the case if there had been no recession," says Nariman Behravesh, the group's chief economist.

U.S. manufacturing is shrinking, shedding jobs and, in the wake of this deep recession, producing and exporting far fewer goods, while China's factories keep expanding. If manufacturers on both sides of the Pacific were thriving, there would be little reason to butt heads. But given the massive trade gap between the two nations and uncertainty in the U.S. over when and to what degree manufacturing will recover, China's ascent has become a point of growing friction. [More]

I no longer discount as sharply the possibility of China becoming a world power as large as the US in my lifetime.  I have always subscribed to the view that people are power, not a burden.

While the rise of China does not require the demise of the US, at some point in the future we may ask, when did we decide to relinquish world leadership or at least hold the burden to be too great?  Perhaps we will say it was the point when we told China to go first on emissions controls.  And there is some evidence that Chinese leadership may be moving more vigorously than ours to wrestle with such long term issues, such as renewable energy.

Moral leadership is part of the pattern, I think, of global competition.  When the US is no longer the place to look for the right answer, we lose some of the prestige which makes our foreign policy more effective and enables commerce to flow more freely.

We need to spend less time shouting we are Number One and more time proving it by our actions.

Hadn't thought of this...

Re: Sen. Lincoln and the Ag Committee chair.

But is it good for America? Brad Johnson notes that Lincoln is a very strident opponent of climate change legislation, calling even the post-Collin Peterson version of the legislation a “total non-starter.” And the left will have basically no leverage over her; she’s at real risk of losing her seat to a Republican, and Barack Obama is very unpopular in Arkansas. That said, the alternative to this scenario was Tim Johnson heading up Banking, so this is arguably a superior outcome. In terms of core agriculture policy issues, switching from Harkin at the top to Lincoln at the top will probably mostly make things bad in a different way. Policy less oriented toward the interests of people who grow corn, and more oriented toward the interests of Tyson Foods—purveyors of fine fast food chicken products. [More]

It pops into mind that Big Ethanol may be less than enthused as well.

Rice and cotton interests (or what remains of them) are happy.

A rice farmer’s daughter, she is the first woman to ever chair the panel. And together with ranking Republican Sen. Saxby Chambliss of Georgia, she will head the first all-South Agriculture leadership team since Sens. Herman Talmadge (D-Ga.) and Jesse Helms (R-N.C.) ruled the roost in the 96th Congress 30 years ago.

Lincoln denied any lasting imbalance, saying that the committee has always worked across party lines to resolve these differences. But the Lincoln-Chambliss team will pose a real challenge for the White House if the Obama administration persists in trying to reopen last year’s farm bill to achieve greater savings. [More]

Even with payment-limit opponents in these key positions, I wonder how agriculture will escape cuts if Republicans continue to make deficits their key battle cry.

Beats balancing pencils on your nose...

Like him or not, this is still a cool party (heh) trick.



[via drum]

This can't be right...

Men act stupider around women?  Naaaah.

The present research tested the prediction that mixed-sex interactions may temporarily impair cognitive functioning. Two studies, in which participants interacted either with a same-sex or opposite-sex other, demonstrated that men’s (but not women’s) cognitive performance declined following a mixed-sex encounter. In line with our theoretical reasoning, this effect occurred more strongly to the extent that the opposite-sex other was perceived as more attractive (Study 1), and to the extent that participants reported higher levels of impression management motivation (Study 2). Implications for the general role of interpersonal processes in cognitive functioning, and some practical implications, are discussed. [More]

And it gets worse, guys.

Don't tell me mathematicians are wimps...

Nobel laureate Paul Krugman wrote an interesting article about why economists were spectacularly ineffective during the financial meltdown.

By 1970 or so, however, the study of financial markets seemed to have been taken over by Voltaire’s Dr. Pangloss, who insisted that we live in the best of all possible worlds. Discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse. The field was dominated by the “efficient-market hypothesis,” promulgated by Eugene Fama of the University of Chicago, which claims that financial markets price assets precisely at their intrinsic worth given all publicly available information. (The price of a company’s stock, for example, always accurately reflects the company’s value given the information available on the company’s earnings, its business prospects and so on.) And by the 1980s, finance economists, notably Michael Jensen of the Harvard Business School, were arguing that because financial markets always get prices right, the best thing corporate chieftains can do, not just for themselves but for the sake of the economy, is to maximize their stock prices. In other words, finance economists believed that we should put the capital development of the nation in the hands of what Keynes had called a “casino.”
...
These events, however, which Keynes would have considered evidence of the unreliability of markets, did little to blunt the force of a beautiful idea. The theoretical model that finance economists developed by assuming that every investor rationally balances risk against reward — the so-called Capital Asset Pricing Model, or CAPM (pronounced cap-em) — is wonderfully elegant. And if you accept its premises it’s also extremely useful. CAPM not only tells you how to choose your portfolio — even more important from the financial industry’s point of view, it tells you how to put a price on financial derivatives, claims on claims. The elegance and apparent usefulness of the new theory led to a string of Nobel prizes for its creators, and many of the theory’s adepts also received more mundane rewards: Armed with their new models and formidable math skills — the more arcane uses of CAPM require physicist-level computations — mild-mannered business-school professors could and did become Wall Street rocket scientists, earning Wall Street paychecks.

To be fair, finance theorists didn’t accept the efficient-market hypothesis merely because it was elegant, convenient and lucrative. They also produced a great deal of statistical evidence, which at first seemed strongly supportive. But this evidence was of an oddly limited form. Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices. Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient. [More]

Well, the nation's mathematicians reacted swiftly and pretty darn belligerently (speaking relatively, of course).  They weren't taking that kind of dissing sitting down.

One can argue tell one is blue that "humans are different" and that "economics is about Homo sapiens and therefore intractable" but if there is any hope for economics, it seems to me, it is not to retreat away from mathematical sophistication. Sure, I agree, fancy math can hide bad economics (same thing holds in physics.) But fancy/deep/beautiful math can also help you go where others have not been able to tread. Math arising from physics has an especially surprising way of being relevant beyond the laws of physics. So retreat not, economists, from the shouting hordes of anti-math naysayers at the gates, but head over to your physics, computer science, and math departments, sit in on a class with a subject you don't know, and maybe, just maybe, it will give you tools to understand why the hell my 401K got hammered last year. [More]

So, as I read it, it wasn't the math at fault, it was the ham-handed deployment by under-qualified economists. 

At the heart of the issue however, is the efficient market hypothesis (EMH).  True, it is a wonderful concept. If only it worked in real life.  Lately we've been finding that disconnect has been hiding in plain sight.

Kraft Foods has made a $16 billion bid to acquire Cadbury PLC, maker of fine British chocolates.  Naturally, Cadbury turned them down:

Prior to Kraft going public with its offer on Monday, Cadbury had already rebuffed the advance in private. In publicly rejecting it, Cadbury said the offer, a 31% premium to its closing share price on Friday, "fundamentally undervalues" the company.

This is precisely what every company always says whenever someone offers to buy them: even though the offer price is 20% or 30% or 40% higher than the current stock price, it always "fundamentally undervalues" the firm.

In other words, corporate CEOs universally reject the efficient market hypothesis, and since Wall Street as a whole seems to agree, that means that essentially the entire finance industry rejects the EMH.  So if that's the case, why should anyone else believe it? [More]

My thinking is the use of computers models will go through a period of highly skeptical consideration before we all fall back into line with portentous announcements from quants - who are now roaming in wild packs on Wall Street.

But if you think the misplaced faith in computer models is a investment banking problem, consider how often our complicated policy and economic issues are driven by arguably more questionable modeling and data.  From FAPRI to CARD, I think it is safe to say the quality of the computer models being used to analyze agriculture economics is not demonstrably better than those used by people who could pay essentially any amount for brains and data.

To be sure, modeling results are best used to compare competing ideas, but the same issues that underlie the growing disaffection with elaborate computer models based essentially on rational expectations from investors are at work in our sector as well.

This would explain how wildly farm program cost projections miss, for one thing. It also helps explain how competing factions can easily come up with model outputs pointing in opposite directions.  Until we incorporate some aspects of behavioral economics into our industry models, I think we will be at the same risk as the supremely confident investment houses.

But can he hold his beer?...



My strategy would be to offer to keep score.

[via abroath]

So the competition begins...

Before I can even get my bin finished, the cries of "First!" are starting.




And of course it's 6X bigger, too.

BTW, I checked and the camera is working, but today was a lot of messing with the roof and roof auger - not impressive.

[Update:  I realize it was not clear that the above is NOT our bin - it's Keith's.  He kindly forwarded his video.  Our bin in about half done as I write - I'll post the pics next week probably]

Further pondering: When did I get so inflexible?...


[Thanks, Keith]