I have a new motto (thanks to Brad DeLong)

Nervos lecturae, caffeinam infinitam

The sinews of lecturing are unlimited caffeine…

From  http://delong.typepad.com/sdj/2012/01/nervos-lecturae-caffeinam-infinitam.html

Finance and insurance are 8.4% of our GDP

Why financial crises are correlated with an increasingly clueless plutocracy...

"There are two sustainable ways to make money in finance: find people with risks that need to be carried and match them with people with unused risk-bearing capacity, or find people with such risks and match them with people who are clueless but who have money." - J. Bradford DeLong

http://www.project-syndicate.org/commentary/delong121/English

Have you listened to Ford, lately?

"There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." - Henry Ford.

Ford knew the best defense against socialism and government interference in the free market is good-paying jobs.  Supporting a growing middle class and an expanding the economy makes the capitalist richer in the long run.

Industrial serfdom can only lead to the decline of capitalism.

We could use a few more long-sighted capitalists and fewer short-sighted plutocrats if we want to keep a (relatively) free market economy.

learning something new

An important rehashing "If I were a poor black kid"  from a real poor black kid who is now an economist...

http://modeledbehavior.com/2011/12/14/if-i-were-a-poor-black-kid/

Echo of the day

Next time, let's take the cheap route and just buy the bank.  At the beginning of the crash we could have bought Morgan Stanley for about $25 billion.  Instead we lent them about $75 billion.  At the peak of the bailout, we lent the 775% of the value of their assets.

Who is choosing the winners and losers?

The GOP is fond of saying the government shouldn't be choosing winners and losers in the economy.

I agree with the theory - but not the actual practice.

A dollar of income should be a dollar of income - whether you spend 8 hours on a roof nailing shingles under the hot sun, or walking around the golf course as your daddy's money works for you. 

But that's not the way it works.  If you're walking around the golf course earning capital gains on your investments, you get taxed at a lower rate than someone behind a desk, on a tractor, or building a business.

The GOP has chosen the winners.

Those that have inherited money are the big winners in the GOP scheme.  Those that manage to build their own fortune come in a close second.  For example, Bill Gates had to pay a lot of income tax to get to the point where he doesn't pay much, whereas the Koch brothers are riding on daddy Koch's coat tails.

So if you weren't born into the right family or you with the right smarts and entrepreneurial skills - then you are the loser and get to pay higher tax rates.

So let's get government out of choosing the winners and losers...
 

Tax capital gains and dividends as ordinary income.

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Watch for hype

A new global warming study is out in Science.  I haven't had a chance to read anything but the abstract; however, already I can make a prediction: there will much hype over this article as "proof" that global warming has been a scam, despite the fact that the abstract clearly supports 77% of the previous median estimate of global warming temperature change.  

Here's my interpretation of the abstract:  Global warming has been previously predicted in a range of 2 - 4.5C with a median estimate of 3C.  The new study comes up with a range of 1.7 - 2.6C and a median estimate of 2.3C.

That is, the new median temperature change estimate is 0.7C less than the previous estimate, and the uncertainty range has been reduced from 2.5C to 0.9C.  This is the way that science progresses - new models (if others can validate by replicating) provide reduced uncertainty and (hopefully) better estimates.  Note that nothing in the abstract says that global warming is not occurring or is not caused by CO2 rise.  Indeed, I expect to find the article is based entirely on the mechanisms by which CO2 perturbs the climate.

The article, once again, supports the science showing that rising CO2 levels lead to global climate change and an increase in the average global temperature.

Here's what I expect to see widely quoted:

"...these results imply lower probability of imminent extreme climatic change than previously thought." 

What will be eliminated from the quote is the initial modifying phrase...

"Assuming paleoclimatic constraints apply to the future as predicted by our model,..."

When scientists begin a sentence with "Assuming...", well, you should assume they are outlining a thought problem for future study rather than discussing something proven[1].  This common approach to scientific writing has caused much angst and misunderstanding in the global warming debate[2]. 

I'm interested if the authors have a good argument as to why paleoclimate constraints are still reliable under conditions where an external CO2 source (fossil fuel burning) is steadily forcing the system rather than part of a climate feedback cycle.  I expect that what I'll find is a paper that supports the direction and general magnitude of existing global warming models, but application to the future remains speculative until the difference climates with and without human fossil-fuel burning are further analyzed.

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[1] You shouldn't assume that what follows "assuming" is either true or necessarily discussed in the paper.  In many cases, the scientists are merely presenting a thought problem illustrating the possible importance of their paper.   If they actually had a good argument, they wouldn't begin the sentence with "assuming." In this case, if they were able to show evidence that paleoclimate constraints developed without human intervention should apply to a climate affected by humans, they would have written something like "It is shown that arthropogeneic paleoclimate constraints apply to the anthropogenically-affected future, so predictions of our model imply a lower probablility..." 

[2] As an example, the entire "hockey stick" controversy revolved around an analysis methodology that written up using an "assuming" form of discussion, which was then taken out of context by people with an agenda.  The authors were quite careful in their discussion - the readers not so much.  However, debunking the readers out-of-context hype is not the same as proving the science to be ill-founded.