A new career for me, perhaps?

Some economists have recently turned into detectives, pioneering the field of forensic economics.

Forensic economists don’t investigate specific crimes or individual wrongdoing; they analyze the incentives underlying criminal activity and then use conventional tools to look for the footprints that wrongdoers’ actions have left in the data. Which companies were shipping arms to Angola in violation of a UN embargo? Economists looked at stock market reactions to news of a ceasefire in Angola to see which stocks suffered the most: Presumably the embargo violators had the most to lose from an end to the fighting. What goods were smuggled into China from Hong Kong in the late 1990s? When I compared records of Hong Kong’s exports with those of China’s imports, I found that high-tariff goods were most likely to “disappear” in transit. Other forensic economists have uncovered evidence of options back - dating, payola in the UN oil-for-food program, and vote trading among figure-skating judges at the Winter Olympics. [HBR]

Would I get a badge like the one FBI has?

Quote of the Day

The only thing we haven’t done is have sex—and if you would’ve just put down the glue gun that might’ve happened, too.

Matt Lauer to Martha Stewart during Magazine Lifetime Achievement Awards in New York

Free Falling

Talk about grinding to a halt:

The economy shrank at a 3.8 percent pace at the end of 2008, the worst showing in a quarter-century, as the deepening recession forced consumers and businesses to throttle back spending.

For all of 2008, the economy grew by just 1.3 percent. That was down from a 2 percent gain in 2007 and marked the slowest growth since the last recession in 2001. [BW]

Quote of the Day

We have mistaken consuming for living.

Andrew Sullivan, commenting on an article by Brad DeLong

I've been saying this all along

Marty Feldstein on the stimulus bill:

The plan is to give a tax cut of $500 a year for two years to each employed person. That's not a good way to increase consumer spending. Experience shows that the money from such temporary, lump-sum tax cuts is largely saved or used to pay down debt. Only about 15 percent of last year's tax rebates led to additional spending.

He also goes on about other items he thought are not stimulative. So what does he think is the most stimulative?

If rapid spending on things that need to be done is a criterion of choice, the plan should include higher defense outlays, including replacing and repairing supplies and equipment, needed after five years of fighting. The military can increase its level of procurement very rapidly. Yet the proposed spending plan includes less than $5 billion for defense, only about one-half of 1 percent of the total package.

History has shown that war torn countries grow the fastest because so much spending get allocated toward rebuilding. Industries prosper due to high demand. Japan, for example, grew very fast after losing WWII.

I don't know if I completely buy it. Military spending right now would benefit mostly foreign recipients and may not translate back to our economy as much since it's not directly at rebuilding our infrastructure. There are other features in the stimulus bill that we immediately need, like food stamps and unemployment benefits. Other than that it's like throwing darts. Economists don't really know, unfortunately. We can only go by historical facts, which indicate that tax cuts don't stimulate the economy much.

[Update:]


(via Econbrowser)

Colgate-Palmolive Makes Profits in 4Q

Erin Burnett of CNBC said this morning, "hygiene hasn't succumbed to recession; people still brushing their teeth" as she commented on the story that CL had reported 4Q net rose 20%. But it's not like people have alternatives to brushing their teeth, do they? If you don't brush your teeth, which can lead to stinky breath, you might find yourself without friends. You may also get turn down for job potentials. Worse yet, you might have bad teeth in the long run. Yuck!

Prof. Krugman is perplexed?

No bipartisan support.

Like a Good Neighbor?

More like not in Florida's neighborhood:

The nation's largest insurer of cars and homes said it is pulling out of the Florida homeowners-insurance market because it wasn't able to charge high enough rates. Florida regulators rejected State Farm's request last year for a 47% rate rise. [WSJ]

Can you blame them? Obviously, their risk model has indicated that Florida is not profitable. The insurance companies, after all, are in it for profits. So, what if other insurance companies all pull out? I think either a) people will eventually be forced to pay more for their property insurance, or b) the government steps in. We just have to wait and see.

(Florida hurricanes, Oct 1914-2006)

Stealth Wealth - Don't Flaunt It

From NBR (emphasis mine):

SUSIE GHARIB: And finally tonight, it's the latest recession trend: stealth wealth. The concept is simple: if you've got it, don't flaunt it. That doesn't mean an end to shopping sprees, but cutting back on pricey purchases. It's also known as luxury shame. That's when shoppers ask cashiers at high end stores to put purchases in plain white paper bags or to remove designer tags. And Paul, some shoppers are even paying extra to ship their packages so they can avoid glances and sneers when they leave stores.

KANGAS: Talk about your sign of recession.

GHARIB: Yes, the new sign.

I'm Speechless

They shared their sad stories the other night at an informal gathering of Dating a Banker Anonymous, a support group founded in November to help women cope with the inevitable relationship fallout from, say, the collapse of Lehman Brothers or the Dow’s shedding 777 points in a single day, as it did on Sept. 29.

In addition to meeting once or twice weekly for brunch or drinks at a bar or restaurant, the group has a blog, billed as “free from the scrutiny of feminists,” that invites women to join “if your monthly Bergdorf’s allowance has been halved and bottle service has all but disappeared from your life.” [NYT]

You're kidding me, right?

Jobs Massacre

In January alone, companies have announced more 211,500 job cuts. [CNN]

It's ugly.

Name Those Cows!

"If cows are slightly fearful of humans, they could produce [the hormone] cortisol, which suppresses milk production," Douglas says. Farmers who have named their cows, she adds, "probably have a better relationship with them. They're less fearful, more relaxed and less stressed, so that could have an effect on milk yield."

But Marcia Endres, an associate professor of dairy science at the University of Minnesota, wasn't impressed. "Individual care is important and could make a difference in health and productivity," Endres says. "But I would not necessarily say that just giving cows a name would be a foolproof indicator of better care." [SciAm]

I say money well spent on this research.

What If We All Spend Less?

To ponder:

And let’s also ask ourselves this: What if we actually do spend 10 percent less this year — and then decide to stay at that level? Is that healthy? Will China implode? What will be the next Iceland? The next Waterford Wedgwood?

Right now, it seems almost impossible to imagine ever spending more on things except, maybe, gasoline. And yet the prospect of less consumption fills us with dread. It’s not the having less part that is frightening — people are generally happy as long as everybody’s in the same boat. What’s frightening is the fear that our system can’t handle less, and it’s not as if there’s some other system out there shouting: “Try me! Try me!”

We’ve finally spiked over the edge of the chart — we’re at the place we couldn’t see in social studies classes, when late 20th-century trends like population and raw material consumption and pension indexes were extrapolated along the x- and y- axes into infinity.

In my mind we were never really in the future until we hit that edge — and now we have — and because of this, everything we sense in 2009 is going to be new, but that’s what the future was always supposed to be about. [NYT]

Fast and Furious: Recession Style

Not very encouraging:

Projections by the International Labour Organization, a UN agency, on global employment trends predict that on a worst-case scenario, recorded unemployment could rise by more than 50m from baseline 2007 levels to 230m or 7.1 per cent of the world’s labour force by the end of 2009.

In the same scenario the number of people in “working poverty”, earning less than $2 a day, could rise to 1.4bn or 45 per cent of all workers, from 1.2bn in 2007.

This would leave as many people below the poverty line as there were in 1997, wiping out all the gains over the past decade and marking “a return to a situation in which more than half of the global labour force would be unemployed or counted as working poor.” [FT]

I don't think that the US will be spared from this situation. It might not be as bad as some other parts of the world, but it still won't be pretty.

I know - we're all sick of hearing about Blago's media blitz

But this headline is still funny:

Blagojevich Claims Behavior Was Just Elaborate Plan To Surprise Patrick Fitzgerald With Senate Nomination On His Birthday

Quote of the Day

Well, it's actually from last night's the Daily Show, between the host Jon Stewart and Bishop Gene Robinson:

STEWART: Washington DC was so crowded today, there was so many people. You as a Bishop are sort of doubly handicapped in that situation, only being able to move diagonally. How was that, negotiating the crowds.

ROBINSON: John, you have to remember, there's a queen on the board, as well.

It was pretty funny and such an awesome comeback. Watch:

The Daily Show With Jon StewartM - Th 11p / 10c

Bishop Gene Robinson

Barack Obama Interview
John McCain Interview

Sarah Palin Video
Funny Election Video

Must Speak English

Voters in Nashville will decide Thursday whether their city government should only conduct business in English. [NPR]

Interesting proposition. I wonder what has prompted this. Do you know?

Star Wars: Retold (by someone who hasn't seen it)

See more funny videos and funny pictures at CollegeHumor.

Making Room on the Shelves

[via Andrew Sullivan]

Trade Deficits Shrink

At least one deficit is getting smaller:

The US trade gap shrunk by 29 per cent to $40.4bn in November, the commerce department said on Tuesday, as plunging oil prices led the sharpest deficit contraction in 12 years.

The November trade deficit hit a five-year low as the economic recession has curbed US consumption. Imports in November plummeted by 12 per cent after falling by just 1.6 per cent the month before. [FT]

No wonder China is worried.

ComEd's Greenfleet

ComEd has added 50 new Toyota Prius hybrids and plug-in electric hybrids to a fleet that now numbers more than 2,100 green vehicles.

ComEd meter readers in Chicago and the company's Maywood office will drive the 50 new Priuses, including 10 Priuses that have been specially converted into electric plug-in hybrids. The plug-in conversion is expected to significantly increase fuel-efficiency by providing greater electric-drive capability.

ComEd's green fleet is one of many environmental initiatives that support Exelon 2020, a comprehensive strategy announced earlier this year by Exelon, ComEd's parent company. The goal of Exelon 2020 is to reduce, offset or displace more than 15 million metric tons of greenhouse gas emitted by its family of companies and customers. This includes ComEd's efforts to reduce its energy consumption by 25 percent by 2012. [Energy Central]

Exxon CEO Backs Tax on Greenhouse Emissions

The chief executive of Exxon Mobil Corp. for the first time called on Congress to enact a tax on greenhouse-gas emissions in order to fight global warming. [WSJ]

A move in the right direction.

Scrap TARP Now!

"The panel's initial concerns about the [Troubled Asset Relief Program] have only grown, exacerbated by the shifting explanations of its purposes and the tools used by Treasury," said the draft report, which found that the department has "not yet explained its strategy" for stabilizing the financial markets.

The report faults Treasury on a variety of fronts: having no ability to ensure banks lend the money they have received from the government; having no standards for measuring the success of the program; and for ignoring or offering incomplete answers to panel questions. [WSJ]

I say move on to the stimulus package. At least a couple of billion dollars can still be saved from TARP to use toward the stimulus package.

Resurrection of Polaroid

That's right: Polaroid was set to announce Thursday at the International Consumer Electronics Show that it is introducing a digital camera that produces prints right on the spot. You can even call them "instant" prints, but they take nearly a minute to appear, so they're only as "instant" as the old film prints.

Essentially, the $200 PoGo is a camera that contains a built-in color printer. It produces 2-by-3 inch photos by selectively heating spots on specially treated paper. It has nothing to do with the old chemical Polaroid process, but the prints convey some of the same Pop Art charm: They're grainy and the colors are slightly off, with faces tending toward a deathly blue-green. [Wired]

I don't think I'll be rushing out to buy this when it releases in April or May, but it's still sentimental. Nearly everyone in my generation has grown up with Polaroid. As the article points out, it's not meant to be technology-savvy, but it's iconic. But can legacy sell?

What to do if you have no money? Print your own!

Homemade currencies, sometimes known as community or complementary currencies, have a habit of popping up during economic crises. Some towns in the U.S., Canada and Germany introduced their own scrip during the Great Depression. Similar schemes have emerged more recently in Japan, Argentina and Britain.

One of the more successful programs has been in Berkshire County, Mass. Residents there pay $10 to get 11 "BerkShares," which are widely accepted in local stores, encouraging people to shop at home instead of using dollars to buy goods online or at large retail chains. Launched in 2006, BerkShares are still being used.

The idea is that by using local currencies, residents don't spend so many dollars, Thai baht or euros, thus helping to keep more resources within their communities. And because local currencies can't be banked away to earn interest, users keep spending it, providing a boost to their area's economy. [WSJ]

May be Mr. Mayor should consider this option as a solution to fix his $31 million deficits. But knowing the City, we'd probably trade $10 for 1 "Chicagolar" : )

Recession? What Recession?

No. 9 on the list is a sewing kit. That seems pretty practical. “Missing button?” reads the text. “Torn pocket? Take matters into your own hands (and keep tailoring bills in line) with Smythson’s ostrich-print calf-leather sewing kit.”

The price? Just $975. [NYT]

I couldn't help but laughed at the absurdity when I read this. The guess the economy hasn't tanked enough for some people to be able to afford a sewing kit at $1,000. Must be nice. As for me, I get them free from hotels. I've got quite a few over the years. Yes, I'm proud to be a cheapskate in this case.

A "Normal Bad Recession"

The TED spread is at 1.34, sharply lower. (improved)

Here is more on the progress of other economic indicators. None of it is sign of recovery, rather it represents progress toward having a "normal bad recession" rather than a major financial crisis.

[via Tyler Cowen]

Your spending habit mirrors your mom's

The Skipton Building Society, a financial services company in the U.K., surveyed 1,000 adults online, and one in four of them said that the way they spend money — profligately, reluctantly — was the way their mother spent. Fifteen percent said their patterns resembled their fathers, while only 2 percent gave blame (or credit) to either their grandparents or their circle of friends. [NYT]

This is an interesting research. I makes sense that you'd try to mimic adults in your life, and I would think who you choose to mimic has a lot to do with your personality as well. I don't think I spend money like my mom; it's more so like my aunt who I grew up with during my adolescent years. My mom spends money like my grandmother. However, my mom encourages my grandmother to spend money. Hmm.

I don't think that learning how to spend is limited to just from your parents. As a society we often compare ourselves to our peers. How well you feel you do is relative to how well others do. If the norm says it's ok to spend, chances are kids will go ahead and spend. Spending money is more fun than saving money.

Today's Fresh Air - China's Global Prominence

I'm listening to Terry Gross interviewing James Fallows, a journalist for the Atlantic, on Fresh Air. Today's topic is about China and its rise in power and wealth. It's very interesting and worth checking out if you get time. Fallows points out at one point that the Chinese government manages everything, including any profits from businesses. The Chinese Central Bank would then determine what to do with the surplus that China has. Essentially everyone works to put extra dough in a central pile.

I find this to be very interesting, that the government manages everything and it hasn't failed (well, at least in terms of economics). The US can't even manage our social security or health care program. So, what does that say about democracy vs. communism? Please don't get me wrong, as I'm not advocating anything. But what does it say about efficiency when you don't have parties with different interests trying to influence domestic policy? There are pros to pluralistic society, I know, but there is something to be said about Chinese society. The punishment for failure in China seems to be harsh. Lately, most executives who have made bad decisions are executed. Yikes. Talk about taking responsibility for your actions.

It's interesting to me when you analyze different policies. Is there a one "true" model? China is a very interesting hybrid: communism with free market. It seems to be working so far.

Björk to the rescue!

Björk has turned venture capitalist, with a new fund that aims to revive Iceland's economy.

Björk is working with Audur Capital, a Reykjavik-based investment company founded and managed by women. Audur Capital will oversee the fund's day-to-day dealings, directing an initial investment of 100m Icelandic krona (£575,000) toward sustainable, environmentally-friendly businesses.

"The fund will invest in sustainable businesses that create value through the country's unique resources, spectacular nature, vibrant culture and green energy," the Audur Capital website explains.

The company seeks to raise as much as 1.5bn krona before new investors begin to contribute to the fund at the end of March. "We are attracting a lot of interest from Iceland and abroad as increasingly more people are looking for investments whose returns aren't only financial," Halla Tomasdottir, Audur Capital's executive chair, told Bloomberg. [Guardian]

Did you know?

TV efficiency:

Televisions consume about 4 percent of household electricity nationally, and the modern flat-panels are especially energy-intensive. Liquid Crystal Display (LCD) models require 43 percent more power than conventional tube TVs, according to the Los Angeles Times.

This is the precise reason why we haven't joined in the flat-screen TV bandwagon. (Ok, I lied. It's more like because we're too cheap to upgrade... )

If I were a Palestinian

About 10 years ago they were uttered by our defense minister, Ehud Barak. Haaretz journalist Gideon Levy had asked him then, as a candidate for prime minister, what he would do had he been born Palestinian and Barak replied frankly: "I would join a terror organization."

This is not my own answer; terrorism by individuals or organizations or states is always aimed at exacting casualties in a civilian population that has not drawn any blood. Not only is terror blind - consuming both the saint and the sinner - it also expands the circle of the hot-headed, whose blood rises to their brains: Our blood is on their heads, their blood is on our heads. And when an account of the blood of the innocent is opened, who can pay it in full, and when? [Yossi Sarid, haaretz.com]

An essay about the on-going situation between the Israeli and the Palestinian in Gaza. Can compassion or put-yourself-in-other's-shoes be a solution? Care to share your thoughts?

[Update:] Here's another article, but with angrier tone, on the same subject.

Quote of the Day

"Governments are making mistakes," he said. "They're saying to all the banks, you don't have to tell us your situation. You can continue to use your balance sheet that is phony... All these guys are bankrupt, they're still worrying about their bonuses, they're still trying to pay their dividends, and the whole system is weakened."

Jim Rogers, a prominent investor, on the economy

Monday Mental Break

Odds for Black Senators

This is a very interesting analysis done by Nate Silver:

The chart below estimates the percentage chance that the Representative in a given Congressional District is black given the African-American population in that district, as based on a logistic regression. The chances of having a black Representative are virtually nil until the African-American share of the population hits 25 percent, at which time it begins to accelerate rapidly until the black population hits 60 percent, after which point having a black congressman is virtually certain.

His analysis points to racism (duh), but there's no strong evidence that it plays a crucial role. His suspicion:

I suspect that a lot of the problem, however, is that as Congressional Districts have become more and more gerrymandered, leading to the creation of more and more majority-minority districts following the 1980 and 1990 censuses, the black political apparatus has become more and more 'ghettoized'. Black candidates have not had to develop a message that appeals to white voters, because most of them don't have very many white voters in their districts (about half the nation's African-American population is limited to the 60 blackest Congressional Districts). Nor do they have very many conservative voters in their districts, and so they have not had to develop a message that appeals to conservatives, even though the black population itself is far more diverse in its political views than is generally acknowledged.

The conclusion is not that all-earth-shattering or counterintuitive. But using regressions for anything is cool!

More on the effect of internet

In continuation to my previous blogpost - Bargain Hunting for Books, and Feeling Sheepish About It:

They get their books from friends, yard sales, recycling centers, their own shelves castoffs (I just bought a book from a guy whose online handle was Clif Is Emptying His Closet). Some list them for as little as a penny, although most aim for at least a buck. This growing market is achieving an aggregate mass that is starting to prove problematic for publishers, new bookstores and secondhand bookstores.

One consequence has been to change the calculations involved in buying a book. Given the price, do I really want to read this? Now it’s become both an economic and a moral issue? How much do I want to pay, and where do I want that money to go? To my local community via a bookstore? To the publisher? To the author?

I guess I've never thought of it as strongly as a moral issue... like saving the economy. But do we have obligations as consumers to help peddling the economy by consuming more and more, or do we have obligations to ourselves to not consume more than more but instead reduce, reuse and recycle? What do you think?

Substitution Effect and Williams-Sonoma

A few months back, we… talked publicly about our prices getting too high, we did reduce our pricing... However, now that the consumer has cut back more we have to do an even better job of being more competitive and what we’ve been very successful in doing, is to drive operational improvement and to cut our costs and we are able to give that back in savings to the consumer and particularly next year as we cut inventory… We are in a better position to offer the customer great value that we have ever been because we have really improved our quality and we’ve stabilized where we are with our design aesthetics… We are excited about… next year, even though the customer is much more picky and much more thoughtful about what they are buying. [Seeking Alpha from WS 3Q08 conf call]

It also plans to close some stores.

I think that this is also a side-effect of technology and globalization. In the past, Williams-Sonoma had offered unique kitchen goods. That's no longer true as people can get the same (or comparable) brand cheaper elsewhere as quick as a click of a mouse. True that its target consumer is not the lower-middle class, but I know that the riches are starting to feel the pinch in this economy, considering the market has tanked by almost half its value. Competition is fierce out there for most goods, not just for kitchenettes. Free market works!

Questions remain: Can "boutique" stores compete with low-price stores? Can Williams-Sonoma compete with stores like Target or Wal-Mart? Just today Waterford announces that it has filed for bankruptcy. Can legacy brands save themselves?

Staring into the Abyss

New World, New Rules

A really good article by Fareed Zakaria in the Times on how the world has changed which also changes all the rules from politics to economics:

It has become conventional wisdom, even a sport of sorts, to blame the United States for a lack of leadership on these issues. There is some truth to this, and I certainly hope that President Obama will be far more engaged than his predecessor in tackling this agenda. But the problem is not limited to Washington. The problem also lies with Paris and Moscow and Beijing and New Delhi. European governments have been reluctant to cede power to the IMF and other forums. The United Nations is becoming increasingly irrelevant and antiquated, unable to adapt its structure to accommodate rising powers. Many emerging-market countries guard their sovereignty as jealously as does the United States, often even more so. Yet what alternative is there?

Another genius idea by Ford

I spoke too soon in my previous blogpost. Ford is not just coming out with one bad idea. Now there's another one: Ford is planning to release 2010 Shelby Mustang Muscle Car by this Spring.

While other car companies are moving forward and putting their best foot forward in R&D for more efficient cars, Ford retreat backward. Oy!

Leave it to the Japanese

There are rumors out there that Toyota is developing cars that run on solar. These rumors are so secretive that there is no evidence to support it yet (at least from what I've read so far). Real or not, it's still a good concept to be floating around out there. It's a move forward in a right direction, unlike the move announced by Ford a few days ago.

From what I understand (and have read from somewhere), the whole vehicle is not going to be powered by solar, but may be certain components, like air conditioner or stereo. If you run into traffic jam, AC can burn a lot of fuel. This extra gas guzzling can be mitigated by using solar panel. But, of course, the goal is most likely to develop cars that will run on solar entirely, with gasoline backup like in hybrids now.

I'm excited to see the concept moving forward, especially in incorporating solar power into our every routines.