→ October 27, 2008
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The true cost of panic.

A must-read op ed today from economist Arthur Laffer, probably best known for the Laffer curve. Laffer argues that the economy would bounce back nicely if the government would just stay the hell out of the way:

Whenever the government bails someone out of trouble, they always put someone into trouble, plus of course a toll for the troll. Every $100 billion in bailout requires at least $130 billion in taxes, where the $30 billion extra is the cost of getting government involved.

If you don’t believe me, just watch how Congress and Barney Frank run the banks. If you thought they did a bad job running the post office, Amtrak, Fannie Mae, Freddie Mac and the military, just wait till you see what they’ll do with Wall Street.

He has harsh words for just about everyone involved, crossing party lines, and points out that the stock market doesn’t seem to believe either Obama or McCain is capable of providing a solution. It’s sobering, but unlike 99% of the gloom-and-doom you’ll read, it’s grounded in sound theory rather than a desire for attention. In fact, perhaps if Laffer got more attention, we’d have better solutions.

Filed Under: Economics Tagged With: , , ,
→ October 15, 2008
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Some links on the economy.

Been collecting a few of these links over the last week with some intent to write a short column about the topic, but that’s not happening, at least not in a timely fashion, so here are the links for those of you looking for further reading.

A Thumbs Up From the Ivory Tower: In general, econ professors approve of the idea of injecting capital into the banks rather than a government purchase of bad assets, although the new plan is far from perfect.

Gordon Does Good: Grumpy Paul Krugman gives credit to UK Prime Minister (and former Chancellor of the Exchequer) Gordon Brown for pushing the recapitalization idea when the U.S. was pushing the bad-asset purchase plan. I generally don’t agree with Krugman, but he presents a very strong argument here until he goes off the rails by saying that “All across the executive branch, knowledgeable professionals have been driven out; there may not have been anyone left at Treasury with the stature and background to tell Mr. Paulson that he wasn’t making sense.”

How did it all happen?: A sort of pop-psychology take on the fallacies and (bad) thought processes that played into the real-estate bubble and subsequent credit-market meltdown. It’s thought-provoking, but it’s all argument and no evidence.

Denmark Offers a Model Mortgage Market: George Soros is certainly not among my favorites – his attempts to buy the 2004 election for Kerry and his gleeful puncturing of Asian market bubbles in the 1990s come to mind – but he’s positively tame here in describing a safe, strong way to continue the securitization of home loans.

Filed Under: Economics, Media Tagged With: , , ,
→ October 10, 2008
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Smithtown on NPR.

A classmate of mine from high school (and junior high, and elementary school, dating back to 2nd grade) appeared on NPR’s All Things Considered today, in a segment about Dolly Parton’s song “Jolene.” Mindy Smith – who also shares my birthday – recorded a version of the song for a Dolly Parton tribute album in 2004, and Parton herself said it was her favorite of the 30-odd covers of the song. (You can buy the mp3 on amazon.com.)

And while I’m pimping NPR, the first segment of today’s Diane Rehm Show, “The International Response to the Financial Credit Freeze”, was an outstanding listen, with a ratio of reason to rhetoric that approached infinity. Nobody screaming about the Dow dropping to 5000 or an imminent depression – just serious analysis of what’s happened, what might happen, and what should happen.

Oh, and Casey Weathers left tonight’s game holding his elbow.

Filed Under: Economics, Media Tagged With: , , ,
→ September 28, 2008
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Reusable bags.

I’m in Milwaukee, eating and writing up a storm. To tide you over, here’s a great WSJ article on the rise of the reusable bag, replacing the so-called “T-shirt” disposable plastic bags that have become the environmentalist’s new bête noire. It’s a well-written, balanced piece and brought a few things to light for me (like how the “I used to be a plastic bag” slogan has two interpretations).

Chez Law, we have more of those reusable bags than we really need, but many are the products of trips to the store without our bags and our subsequent refusals to take disposable ones. I think we have five from Whole Foods and at least four from Trader Joes, although I will take any bag to any store. I always tell myself I’m going to leave one in my car, and sometimes I do, except that then I take it into the store, fill it, bring it inside to empty it, and never restore it to the back seat.

Filed Under: Economics Tagged With: , , ,
→ September 12, 2008
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Taking on the Trust.

There is no one left: none but all of us … The public is the people. We forget that we all are the people; that while each of us in his group can shove off on the rest of the bill of today, the debt is only postponed. The rest of us are passing it on back to us. We have to pay in the end, every one of us. And in the end the sum total of the debt will be our liberty. – Ida Tarbell, The History of the Standard Oil Company

Taking on the Trust: The Epic Battle of Ida Tarbell and John D. Rockefeller is Steve Weinberg’s short biography of Tarbell, perhaps the first true investigative journalist in American history and one of the original muckrakers, set off against snippets of the biography of Rockefeller. It’s a good read, but it’s not the story of the battle between these two individuals, who in fact, only met once and had no direct contact even as Tarbell was laying bare the unethical practices of Standard Oil.

Tarbell’s magnum opus was the book quoted up top, an 800-page tome first published in installments in McClure’s magazine, which at the time was an intellectual rag that combined serious (if muckraking) journalism with pieces of short fiction. Tarbell’s father had been involved in the western Pennsylvania oil boom, but also saw his fortunes derailed by the monopolistic practices of Rockefeller’s firm. Weinberg presents the thesis that Tarbell’s drive to expose Rockefeller’s dirty pool, although her earlier work indicates a passion for reformist journalism, with Standard Oil as a likely target of any dogged reporter of the time. What set Tarbell apart was her willingness to work to unearth new sources, including first-person accounts that had not previously come to light, but also documents and letters that other journalists had not bothered to find. She made great use of court documents and filings from the small towns where Standard Oil set up shop, often via shell companies, and identified people who’d had contact with Rockefeller or his minions during Standard Oil’s rise to domination.

Unfortunately, we don’t get much on the direct impact of Tarbell’s book, which only merits a chapter and a half towards the end of Taking on the Trust. Standard Oil was broken up via court ruling a few years afterward, but how direct is the link between Tarbell’s work and that legal decision? And how did Tarbell’s groundbreaking efforts affect the world of journalism afterwards? I imagine that later investigative reporters would have given her at least some credit either for directly inspiring them or for opening doors through which they could walk, but Taking comes to a fairly abrupt end once the narrative reaches the breakup.

I may post something over the weekend, but I’ll be on vacation from Sunday to Saturday and probably won’t post anything next week. I’ll keep an eye on the comments, as always.

Filed Under: Nonfiction Tagged With: , , , ,
→ July 20, 2008
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On naming rights.

Richard Sandomir wrote a slightly polemical piece on Citi’s $20 million purchase of naming rights to the Mets’ new ballpark, arguing largely that it’s unfair to the Citi employees who’ve been laid off during the bank’s recent financial troubles. It’s the type of side-by-side comparison that offends our sensibilities: Big, bad, insensitive Corporation and its Greedy Executives light cigars with $100 bills, cackling as they sign pink slips for the proletariat.

The problem is that Sandomir doesn’t address the one question that underlies the comparison: Does Citi get a higher return from spending the $20 million on naming rights and cutting the employees, or would they get a higher return from foregoing the naming rights and keeping the employees?

I don’t know the answer. Neither does Sandomir, but he’s arguing that Citi’s executives have made a mistake without knowing whether or not they did. If the return on the naming rights option is higher than the return on the employee-retention option, then Citi’s executives made the right call for their stockholders, for the remaining employees, and for their own pockets as well. If the return on keeping the employees is higher, then the executives just screwed up. All Sandomir offers, however, is this:

Even in the flush times during which it was signed, the deal seemed questionable. With high name recognition and a place among the world’s banking leaders, Citigroup hardly needed the Citi name plastered on a ballpark to enhance itself. Will fans move their C.D.’s to a Citibank branch because of the Mets relationship, any more than air travelers will consider flying American Airlines because its name is on two professional arenas?

Will the corporate suite-holders at the Mets’ new home want to do more or new business with Citigroup because they share deluxe accommodations at Chez Wilpon?

I don’t know the answers to those questions, Richard. Do you? And if you don’t, why are you asking these questions as if the answers are all going to support your underlying argument that the naming-rights deal is a dud? The closest we get to this is a generic quote from an academic who raises the same questions I do without providing answers, although he misses one of the fundamental (presumed) benefits of stadium naming rights – the frequent repetition of the stadium name during game broadcasts, on news and highlight shows, and in print coverage of games.

Sandomir calls the deal “an investment that seems to thumb its nose at laid-off workers.” In reality, Citi is responsible to more than just the workers they laid off; they’re responsible to their stockholders, remaining employees, and maybe even their customers. If the naming-rights deal is a bad one, then the executives are putting more than their noses at risk.

Related: BBTF discussion of the article.

Filed Under: Economics, Media, Sports Tagged With: , , ,