.

Thursday, December 29, 2011

Healthcare:  Medicare Spending Growth Slowing

Medicare spending per person is rising more slowly than spending in the private health sector. And, because of the cuts that were part of last year's Affordable Care Act, it is expected to mirror overall growth in the economy for much of the next decade, staying well below targets set by Congress.

Medicare is not out of control, said Robert Berenson, vice chairman of the congressionally appointed Medicare Payment Advisory Commission, which studies the program's finances. This bloated and inefficient program is not bloated and inefficient.

Instead, the immediate and inescapable problem is a demographic one: the enormous wave of baby boomers who started enrolling this year. That concern suggests different solutions, experts say, from those needed to cope with runaway costs.

For more, see Medicare Spending Growth Rising Slower but Enrollment Will Rise by Lori Montgomery, December 22, 2011 at The Washington Post.

Wednesday, December 28, 2011

Economics:  Rehypothecation Heightens Systemic Financial Risk

The swift implosion of MF Global highlights a common practice used by aggressive speculators, one that experts say makes the broader financial system vulnerable to another crisis. It's called rehypothecation, and it allows a firm to essentially pledge the same limited collateral to arrange fresh loans.

MF Global is believed to have used client funds as collateral to borrow money to make bets on the risky sovereign debt of Portugal, Spain and Italy, leading to a daisy chain of securitization, Thomson Reuters Business Law Currents reported. It's akin to using a single home as collateral for several loans and then investing that money to earn dividends before payments are due on the loans.

Over the last decade, the practice has become riskier due to looser regulations. In 1934, U.S. lawmakers limited rehypothecated funds to investments in U.S. Treasury, state and municipal instruments, but those rules were relaxed from 2000 to 2005, allowing brokers to use client funds to make riskier bets on foreign bonds and sovereign debt.
Rehypothecation has been practiced for decades, but the systemic risks grow as the leverage increases. At the height of the financial crisis, the credit multiplier was 4, according to the IMF, and $1 trillion in hedge fund assets had been transformed into $4 trillion of pledgeable collateral at banks. The problem comes when everyone wants the money back.

Many of Wall Street's most prominent players "have been piling into re-hypothecation activity with startling abandon," reported Thomson Reuters Business Law Currents, essentially creating "what may be the world's largest ever credit bubble." Among them are Goldman Sachs ($28.17 billion rehypothecated in 2011), Wells Fargo ($19.6 billion), JPMorgan ($546.2 billion) and Morgan Stanley ($410 billion).

More alarming is the lack of transparency about such rehypothecations, which are off-balance-sheet transactions. Because they don't appear on a firm's ledger of revenues and expenses, a significant amount of liability may be hidden. Thus, it is not clear how much in rehypothecations is tangled up with risky sovereign debt. U.S. banks hold $181 billion in the sovereign debt of Greece, Ireland, Italy, Portugal and Spain, according to the Bank of International Settlements, but that total does not include off-balance-sheet transactions.

For more, see MF Global Collapse Spotlights Practice That Heightens Systemic Financial Risk by Marcus Baram and Catherine New, December 22, 2011 at The Huffington Post.

Monday, December 26, 2011

Law:  Michigan Judge Jails Lawyer for Doing His Job

Wow.

In early December, Attorney Scott G. Millard was held in contempt and jailed by 58th District Court Judge Kenneth Post for insisting that his client not answer questions about any prior drug use for fear of self-incrimination.

Millard's client, who was charged with a minor in possession of alcohol, was asked repeatedly by the judge if he would pass a drug test. Millard politely asserted his client's right to remain silent; however, Judge Post continued to press the issue and instructed Millard to sit down and be quiet. When Millard asserted his client's constitutional rights again in response to further questions, the judge held him in contempt and sent him to jail.

For more, see Michigan Judge Jails Lawyer for Doing His Job by Ed Brayton, December 23, 2011 at Dispatches from the Culture Wars.

Politics:  Modernizing Conservatism

By allowing their well-reasoned and often well-founded critiques of government action to metastasize into a categorical rejection of all prospective government action, while continuing to deny the basic political economy of the welfare state, conservatives increasingly find themselves in an ideological and practical straightjacket. Where conservatives have succeeded in cutting government, they have done so by taking an indiscriminate fire ax to non-defense discretionary spending. Meanwhile, they have had virtually no success at all in cutting middle-class entitlements, which represent the lion's share of federal spending and continue their unrestrained growth. This kind of conservatism would be unrecognizable to, for example, Calvin Coolidge, a current sentimental conservative favorite who favored minimum wage laws and child labor regulations, or even to Reagan, who favored large-scale government science research beyond just missile defense.
Consent does not require surrender. Liberals and conservatives do not agree about the principle of equality in American life and probably never will. Conservatives emphasize equal opportunity while accepting or even celebrating unequal outcomes. Conservatives see nothing inherently unjust about large disparities in the distribution of income or wealth, and also offer practical reasons why unequal rewards make for a more dynamic, creative, and ultimately wealthier society. Liberals strongly prefer more equal results, with many viewing disparities in income or wealth as random (Richard Gephardt once referred to the structure of America's wealth and income distribution as a "lottery"), and, as a result, favor egalitarian policies and entitlement programs.

Even so, most liberals are not pure redistributionists, and generally support policies that broaden opportunity for individual advancement, while few conservatives are entirely indifferent to the importance of income mobility and social opportunity. Liberal policies to advance individual opportunity tend to emphasize education, along with some job training efforts, to mixed effect. Meanwhile conservatives have tended to favor using the tax code to bring about rising incomes indirectly through higher rewards for capital investment in work effort. This much derided "trickle-down" approach has some evidence in its favor (for example, research showing the effect high corporate tax rates have on wage levels and wage growth). But even without settling that argument it can be noted that the supply-side string has been fully played out. Honest observers on the Right acknowledge the stagnation of middle-class incomes (though disagreeing on the causes).

I have written this paper in the hopes that my fellow conservatives will recognize the need for a conservative reformation, and I believe that liberals must follow suit.

For much more, see Modernizing Conservatism by Steven F. Hayward, Fall, 2011 at Breakthrough Journal.

Friday, December 23, 2011

Economics:  The 10 Worst Economic Ideas of 2011

2. Austerity works.

Is it conceivable that we have learned nothing from history -- or from economic theory, for that matter? It is hard to believe that after a year or so of the momentary return of Keynesianism in the wake of the deep recession of 2007-2009, it has been utterly renounced in practice in most rich nations around the world. The U.S. refuses to adopt a new fiscal stimulus as fears of a long-term deficit now determine short-term policy.

The eurozone's decision makers are even more obtuse and dangerous. Germany is leading the pack by imposing harsh limits on deficits as a percent of GDP on member states, which is sure to lead to slow growth and probably growing deficits. In the near term, the refusal to restructure the debt of the southern periphery along with demands for harsh austerity there could lead to a break-up of the eurozone and general catastrophe.

...

IMF economists have recently produced solid research putting the lie to claims that austerity has led to rapid growth in some countries in the past. It almost never has, and in the couple of cases it has, it was because the countries devalued their currencies sharply to promote exports. Of course, there will be no devaluations in the eurozone.

7. The Medicare eligibility age should be raised.

Reports had it that President Obama had momentarily agreed to raise the Medicare eligibility age from 65 to 67. Indeed, a New York Times editorial recently seemed (a little less than wholeheartedly) to endorse the idea. Yes, this might reduce Medicare expenditures, but it would raise the total amount Americans spend on health care. In fact, the Kaiser Family Foundation figures it would increase private health care costs for most of the seniors leaving Medicare by more than $2,000 a year on average. There would be other cost-raising effects, as, for example, healthier seniors left Medicare. Kaiser figures the increase in total health spending by Americans would be twice the amount of savings to Medicare. And of course some seniors would simply give up coverage. Call it triage.

For more, see The 10 Worst Economic Ideas of 2011 by Jeff Madrick, December 22, 2011 at The Huffington Post.

Education:  Law Schools

The debate about legal education has focused on tuition costs in the stratospheric layers of the law-school world. But what of the ground floor? Duncan hopes to draw students from economically distressed parts of the country, including the Appalachian Mountains of Tennessee, and sincere efforts have been made to keep overhead to a minimum.

But tuition here is still $28,664 a year. With living expenses and various fees, the student handbook warns, the total price tag for a year runs $50,000.

The reason, according to Pete DeBusk, a retired businessman and the school's main benefactor, is the A.B.A. standards. Without them, he says, Duncan could have cut its tuition in half, maybe by two-thirds.

... the United States churns out roughly 45,000 lawyers a year, but survey after survey finds enormous unmet need for legal services, particularly in low- and middle-income communities. This year, the World Justice Project put the United States dead last among 11 high-income countries in providing access to civil justice.
Nashville School of Law [is] a night school that started as the Nashville Y.M.C.A. Night Law School in 1911. Nashville's graduates are not recruited by large corporate firms. Most will remain in Tennessee, because only a few states deem a diploma from a school that lacks A.B.A. accreditation as a ticket to practice.

But tuition costs $21,000 — in total, for all four years it takes to complete the degree. The reasons? Nobody has tenure. There are no full-time professors. The library costs $65,000 a year.

Our mission from Day 1, says Virginia M. Townzen, associate dean, was to provide a quality, affordable education to those who might not otherwise be able to attend law school.

The graduates get high marks from local judges, including Lawrence H. Puckett of the 10th Judicial District of Tennessee. Some of our more outstanding practitioners have come through the Nashville School, he said. Many of the teachers are judges that I know, and I'm sure they are excellent instructors. But I think it's also the quality of students. They persevere while also holding down a job. That speaks highly of their character.

For more, see The Price to Play Its Way by David Segal, December 17, 2011 at NYTimes.com.

Wednesday, December 21, 2011

Mind:  I Was Wrong, and So Are You

Back in June 2010, I published a Wall Street Journal op-ed arguing that the American left was unenlightened, by and large, as to economic matters. Responding to a set of survey questions that tested people's real-world understanding of basic economic principles, self-identified progressives and liberals did much worse than conservatives and libertarians, I reported. To sharpen the ax, The Journal titled the piece Are You Smarter Than a Fifth Grader?—the implication being that people on the left were not.
I'm a libertarian, and I found it easy to believe that people on the left had an especially bad grasp of economics.
But one year later, in May 2011, Buturovic and I published a new scholarly article reporting on a new survey. It turned out that I needed to retract the conclusions I'd trumpeted in The Wall Street Journal. The new results invalidated our original result: under the right circumstances, conservatives and libertarians were as likely as anyone on the left to give wrong answers to economic questions. The proper inference from our work is not that one group is more enlightened, or less. It's that myside bias—the tendency to judge a statement according to how conveniently it fits with one's settled position—is pervasive among all of America's political groups. The bias is seen in the data, and in my actions.
Buturovic and I largely refrained from replying to the criticism (much of which focused on myside bias) that followed publication of the article. Instead, we planned a second survey that would balance the first one by including questions that would challenge conservative and/or libertarian positions.
Buturovic began putting all 17 questions to a new group of respondents last December. I eagerly awaited the results, hoping that the conservatives and especially the libertarians (my side!) would exhibit less myside bias. Buturovic was more detached. She e-mailed me the results, and commented that conservatives and libertarians did not do well on the new questions. After a hard look, I realized that they had bombed on the questions that challenged their position. A full tabulation of all 17 questions showed that no group clearly out-stupids the others. They appear about equally stupid when faced with proper challenges to their position.

For more, see I Was Wrong, and So Are You by Daniel B. Klein, December, 2011 at The Atlantic.

Security:  Iran Hijacked Us Drone, Says Iranian Engineer

Iran guided the CIA's "lost" stealth drone to an intact landing inside hostile territory by exploiting a navigational weakness long-known to the US military, according to an Iranian engineer now working on the captured drone's systems inside Iran.

Iranian electronic warfare specialists were able to cut off communications links of the American bat-wing RQ-170 Sentinel, says the engineer, who works for one of many Iranian military and civilian teams currently trying to unravel the drone's stealth and intelligence secrets, and who could not be named for his safety.

Using knowledge gleaned from previous downed American drones and a technique proudly claimed by Iranian commanders in September, the Iranian specialists then reconfigured the drone's GPS coordinates to make it land in Iran at what the drone thought was its actual home base in Afghanistan.

For more, see Exclusive: Iran Hijacked Us Drone, Says Iranian Engineer by Scott Peterson and Payam Faramarzi, December 15, 2011 at CSMonitor.com.

Monday, December 19, 2011

International:  Israel's Culture War

Gideon Levy, a powerful liberal voice, writing in Haaretz, the Israeli daily, this week [said] that anyone who says this is a matter of a few inconsequential laws is leading others astray. ... What we are witnessing is w-a-r. This fall a culture war, no less, broke out in Israel, and it is being waged on many more, and deeper, fronts than are apparent. It is not only the government, as important as that is, that hangs in the balance, but also the very character of the state.

For more, see Newt, Mitt, Bibi and Vladimir by Thomas L. Friedman, December 13, 2011 at NYTimes.com.

Economics:  Analysis: China's $300 Billion Fund a Wake-up Call to U.S.

China's plan for a new $300 billion sovereign wealth fund is as much a warning to Washington as it is a body blow to Brussels.

It's the clearest sign yet of Beijing's waning faith in bonds issued by Europe and the United States. Europe's festering debt debacle, record low yields on U.S. Treasuries and a depreciating dollar all add weight to the view in China that the time is ripe to change investment tack.

"China has decided that real assets are better than broken debt fix promises and low interest rates," says Paul Markowski, president of MES Advisers and a long-time external adviser to China's monetary policymakers on global financial markets.

"They want underlying assets. Equities, corporate bonds, real estate ...."

For more, see Analysis: China's $300 Billion Fund a Wake-up Call to U.S. by Reuters, December 14, 2011 at NYTimes.com.

Monday, December 12, 2011

Taxes:  Taxing Wages Instead of Wealth

Wow!

I compared the taxes of two hypothetical married couples for tax year 2011. Mr. and Mrs. Owner received $90,000 in taxable, qualified dividends, and Mr. and Mrs. Worker received $90,000 in wages. Neither couple had any other income, and both took the standard deduction and had no dependents, adjustments, nor credits, and live in Nevada, which has no state income tax. Each had a taxable income of $71,000 after a $11,600 standard deduction and $7,400 in exemptions.

The Owners owed $300 in federal income tax according to my tax software.

The Workers owed $10,006 in federal income tax + $5,085 in payroll taxes for a total of $15,091.

But if there weren't a temporary Social Security tax cut for 2011, the Workers would have paid $1,800 more, for a total of $16,891 out of their pocket.

And that does not include another $6,885 in payroll taxes their employer would have paid, for a grand total of $23,776 in taxes due to $90,000 in wages.

The calculations for Mr. and Mrs. Worker:

 10,006  federal income tax
+ 1,305  Medicare tax  (1.45% of 90,000)
+ 3,780  Social Security tax  (4.2% of 90,000)
--------
 15,091  tax paid out of their pocket for 2011
+ 1,800  Social Security if wasn't a tax break  (2.0% of 90,000)
--------
 16,891  tax out of their pocket if 2011 were a "normal" year
+ 6,885  employer payroll tax  (1.45% + 4.2% + 2.0% of 90,000)
--------
 23,776  total for the Workers and employer in a normal year

International:  Democracy in Hungary

One of Hungary's major parties, Jobbik, is a nightmare out of the 1930s: it's anti-Roma (Gypsy), it's anti-Semitic, and it even had a paramilitary arm. But the immediate threat comes from Fidesz, the governing center-right party.

Fidesz won an overwhelming Parliamentary majority last year, at least partly for economic reasons; Hungary isn't on the euro, but it suffered severely because of large-scale borrowing in foreign currencies and also, to be frank, thanks to mismanagement and corruption on the part of the then-governing left-liberal parties. Now Fidesz, which rammed through a new Constitution last spring on a party-line vote, seems bent on establishing a permanent hold on power.

The details are complex. Kim Lane Scheppele, who is the director of Princeton's Law and Public Affairs program — and has been following the Hungarian situation closely — tells me that Fidesz is relying on overlapping measures to suppress opposition. A proposed election law creates gerrymandered districts designed to make it almost impossible for other parties to form a government; judicial independence has been compromised, and the courts packed with party loyalists; state-run media have been converted into party organs, and there's a crackdown on independent media; and a proposed constitutional addendum would effectively criminalize the leading leftist party.

Taken together, all this amounts to the re-establishment of authoritarian rule, under a paper-thin veneer of democracy, in the heart of Europe. And it's a sample of what may happen much more widely if this depression continues.

For more, see Depression and Democracy by Paul Krugman, December 11, 2011 at NYTimes.com.

Saturday, December 10, 2011

Politics:  For and Against Newt

From a very good analysis you might want to read ...

Of all the major Republicans, the one who comes closest to my worldview is Newt Gingrich. Despite his erratically shifting views and odd phases, he continually returns to this core political refrain: He talks about using government in energetic but limited ways to increase growth, dynamism and social mobility.
But how you believe something is as important as what you believe. It doesn't matter if a person shares your overall philosophy. If that person doesn't have the right temperament and character, stay away.

From The Gingrich Tragedy by David Brooks, December 8, 2011 at NYTimes.com.

International:  China Sovereign Fund Has About 60% of Assets in U.S.

China Investment Corp., the nation's sovereign wealth fund, has about 60% of its assets in the U.S., which has many investment opportunities and a good legal system, Jin Liqun told CNBC in an interview yesterday.

Jin, chairman of CIC's supervisory board, said that much of the rest of the fund's assets are in Europe, other nations in Asia and Canada, with investments in resources, real estate and open market transactions.

For more, see China Sovereign Fund Has About 60% of Assets in U.S., JIN Says by Joshua Fellman and Sylvia Wier, December 9, 2011 at Washington Post Business Page.

Thursday, December 8, 2011

Great Recession:  Separating Fact from Fiction on the Fed's Loans

It sounds like a great story: The Federal Reserve lent the banks $7.7 trillion during the financial crisis. And Congress wasn't told.

But it isn't true. Even if Jon Stewart says otherwise.

The Fed and the taxpayers did bail out the banks, including some that occasionally pretend otherwise today. The Fed lent enormous sums: $1.6 trillion in emergency loans and individual bailouts at the December 2008 peak. The Fed has been too secretive in the past. The Fed deserves some blame for not preventing the crisis. The Fed executed some aggressive plays during the crisis that demand post-game scrutiny.

But lending against collateral to solvent, but cash-short, banks during a panic isn't among the Fed's more controversial moves. That's what central banks have done since 19th-century England. And the Fed didn't lend anywhere near $7.7 trillion. Nor did it keep the size of its lending secret, though it did unsuccessfully try to keep the borrowers' identities secret.

For more, see Separating Fact from Fiction on the Fed's Loans by David Wessel, December 7, 2011 at WSJ.com.

Tuesday, December 6, 2011

Diversion:  The Beauty of Pollination

A beautiful video of the birds and the bees (and the bats and the butterflies) ...

Contributed by Pat W. from The Beauty of Pollination by mdemirst, at YouTube.

Government:  The Wonky Liberal

Republicans have many strong arguments to make against the Obama administration, but one major criticism doesn't square with the evidence. This is the charge that President Obama is running a virulently antibusiness administration that spews out a steady flow of job- and economy-crushing regulations.
Over all, the Obama administration has significantly increased the regulatory costs imposed on the economy. But this is a difference of degree, not of kind.

During the final year of their administrations, presidents generally issue tons of new rules. Nineteen-eighty-eight, under Ronald Reagan, 1992, under George H.W. Bush and 2008, under George W. Bush, were monster years for new regulations. In his first years, Obama has not increased regulatory costs more than Reagan and the Bushes did in their final years.

Data collected by Bloomberg News suggest that the Obama White House has actually reviewed 5% fewer rules than George W. Bush's did at a similar point in his presidency. What has increased is the cost of those rules.

George W. Bush issued regulations over eight years that cost about $60 billion. During its first two years, the Obama regulations cost between $8 billion and $16.5 billion, according to estimates by the administration itself, and $40 billion, according to data collected, more broadly, by the Heritage Foundation.

That's a significant step up, as you'd expect when comparing Republican to Democratic administrations, but it is not a socialist onslaught.

Nor is it clear that these additional regulations have had a huge effect on the economy. Over the past 40 years, small business leaders have eloquently complained about the regulatory burden. And they are right to. But it's not clear that regulations are a major contributor to the current period of slow growth.

The Bureau of Labor Statistics asks companies why they have laid off workers. Only 13% said regulations were a major factor. That number has not increased in the past few years. According to the bureau, roughly 0.18% of the mass layoffs in the first half of 2011 were attributable to regulations.

For more, see The Wonky Liberal by David Brooks, December 5, 2011 at NYTimes.com.

Saturday, December 3, 2011

Economics:  Why Germans Fear Inflation

By robbing a currency of its value, inflation wipes the slate clean for debtors and savers alike. Germans say they like the slate the way it is because they are on the plus side of the ledger.

Consumer debt, whether credit cards or in many cases even home mortgages, is frowned upon here. According to figures of the Organization for Economic Cooperation and Development, the German savings rate was more than 10% every year between 2003 and 2009, while during the same period it bottomed out at 1.5% in the United States, and never rose above 6.2%. As a result German households had net savings of $4.3 trillion, according to the Bundesbank, in a country of fewer than 82 million people.

Germans own homes at a lower rate, 41.6%, than the 66.3% of Americans who do. And most people do not invest in the stock market here.

For the average American, inflation means the home price is increasing and the value of debt is going down, said Peter Bofinger, a prominent economist on Mrs. Merkel's independent council of economic advisers, whereas the German invested in life insurance and sitting in an apartment he rented is much more vulnerable to inflation.

For more, see German Fears About Inflation Stall Bold Steps in Debt Crisis by Nicholas Kulish, December 1, 2011 at NYTimes.com.

Government:  Gingrich and the Destruction of Congressional Expertise

On Nov. 21, Newt Gingrich, who is leading the race for the Republican presidential nomination in some polls, attacked the Congressional Budget Office. In a speech in New Hampshire, Mr. Gingrich said the C.B.O. is a reactionary socialist institution which does not believe in economic growth, does not believe in innovation and does not believe in data that it has not internally generated.

Mr. Gingrich's charge is complete nonsense. The former C.B.O. director Douglas Holtz-Eakin, now a Republican policy adviser, labeled the description ludicrous. Most policy analysts from both sides of the aisle would say the C.B.O. is one of the very few analytical institutions left in government that one can trust implicitly.

It's precisely its deep reservoir of respect that makes Mr. Gingrich hate the C.B.O., because it has long stood in the way of allowing Republicans to make up numbers to justify whatever they feel like doing.

For example, Republicans frequently assert that tax cuts, especially for the rich, generate so much economic growth that they lose no revenue. This theory has been thoroughly debunked, most recently by the tax cuts of the George W. Bush administration, which, according to C.B.O., reduced revenues by $3 trillion. Nevertheless, conservative groups like the Heritage Foundation (where I worked in the 1980s) still peddle the snake oil that the Bush tax cuts paid for themselves.

Mr. Gingrich's unprovoked attack on the C.B.O. is part of a pattern. He disdains the expertise of anyone other than himself and is willing to undercut any institution that stands in his way. Unfortunately, we are still living with the consequences of his foolish actions as speaker.

For much more, see Gingrich and the Destruction of Congressional Expertise by Bruce Bartlett, November 29, 2011 at Economix.

Thursday, December 1, 2011

Diversion:  Pearls Before Swine

From Pearls Before Swine by Stephan Pastis, November 22, 2011 at GoComics.

Mind:  The Certainty of Memory Has Its Day in Court

For scientists, memory has been on trial for decades, and courts and public opinion are only now catching up with the verdict. It has come as little surprise to researchers that about 75% of DNA-based exonerations have come in cases where witnesses got it wrong.
While most of us tend to think memory works like a video recorder, it is actually more like a grainy slide show. Lost details, including imaginary ones, often are added later. One of the earliest and more famous experiments to demonstrate that memories are malleable was conducted by Elizabeth Loftus, a psychology professor at the University of California, Irvine, and an early pioneer of witness memory research.

In a 1974 study published in The Journal of Verbal Learning and Verbal Behavior, she asked participants to view films of fender-benders in which no car windows or headlights were broken. Later, the subjects who were asked how fast the cars were going when they smashed into each other — as opposed to hit — were more likely to report speeding and describe shattered glass they never actually saw.

In another experiment, conducted in Scotland, participants were four times as likely to report a memory of a nonexistent event — in this case, a nurse removing a skin sample from their little finger — if they had been asked to imagine it just one week before. Others in the experiment read a description, but were not asked to picture it happening.

Even the process of police questioning and prepping for trial can crystallize a person's own faulty reconstruction. In 2000, Dr. Tversky published a series of experiments conducted at Stanford University in the journal Cognitive Psychology. In one, volunteers read profiles of fictitious roommates with both charming and annoying habits; they were then asked to write either a letter of recommendation or letter making a case for a replacement.

When later asked to repeat the original description, the volunteers' recollections were skewed by the type of letter they had written. Their minds had shed qualities that didn't match the first draft of their own recall and had embellished those that did.

When we don't remember, we make inferences, Dr. Tversky said.

Sometimes we miss details because we weren't paying attention, but sometimes we are concentrating too hard on something else. Nothing is as obvious as it seems.

All this makes sense, he said, when you consider the purpose of memory. He and his colleagues believe that memory is designed not just to keep track of what has happened, but to offer a script for something that might.

Evidence for this also comes from brain scans. Just as the recall of a bogus event lights up the brain's memory centers, so does thinking about something that might occur.

Because the brain uses memories for mental dress rehearsal, we are not wired to retain every facet of an event, scientists say. We don't have to. A general framework is all that's necessary to keep from getting lost, or find food, or know what to do when a storm is coming.

For more, see The Certainty of Memory Has Its Day in Court by Laura Beil, November 28, 2011 at NYTimes.com.

Tuesday, November 29, 2011

Tax:  Tax Financial Transactions?

... then there's the idea of taxing financial transactions, which have exploded in recent decades. The economic value of all this trading is dubious at best. In fact, there's considerable evidence suggesting that too much trading is going on. Still, nobody is proposing a punitive tax. On the table, instead, are proposals like the one recently made by Senator Tom Harkin and Representative Peter DeFazio for a tiny fee on financial transactions.
... some countries already have financial transactions taxes — and that among those who do are Hong Kong and Singapore.

For more, see Things to Tax by Paul Krugman, November 27, 2011 at NYTimes.com.

Health:  Over Time, Even a Little Too Much Tylenol Can Kill

When it comes to acetaminophen (aka Tylenol or paracetamol), taking slightly too much for a few days may be more deadly than taking way too much all at once.
A staggered overdose was defined as an average of 4 grams per day (8 extra strength pills). Although such an overdose can even occur after one day, the average staggered overdose patient consumed a total of 24 grams.

The chemical used to treated acetaminophen poisoning, N-acetyl cysteine, is meant to protect the liver from the damage of a single overdose, and is unlikely to help patients with staggered overdoses, the researchers write. By the time these patients reach the hospital, much of the damage may already be done.

For more, see Study: Over Time, Even a Little Too Much Tylenol Can Kill by Douglas Main, November 24, 2011 at 80beats.

California:  Pension Tension

Jerry Brown has rolled out his long-awaited proposal to reform publicly financed pensions for government workers, drawing protests from Republicans and Democrats alike.
As a policy matter, paying for pensions, at least in the short term, is a relatively modest problem given the massive scale of the state's fiscal woes; retirement costs account for just 3% of Sacramento's overall budget, and the average public pension is only about $26,000 a year, despite news stories highlighting a relatively small number of outrageous abuses. As a long-term issue, however, it is far more dire; one study estimates that state and local governments face an unfunded future pension liability of as much as $500 billion in California, and retirement costs for cities, counties, and special districts, which administer thousands of plans linked to the state's, are proportionately of much greater magnitude.
... the governor proposed major reforms to restructure the system, which he said would save taxpayers more than $10 billion over the next 30 years. Key elements include:

• Raising the retirement age for most new employees to 67; public workers between 50 and 62 currently can retire with full benefits, depending on the type of work they do.

• Splitting contributions to the system 50-50 between workers and government employers; employees typically now pay a smaller share, and some pay nothing.

• Adopting a hybrid system that would require taxpayers to fund a smaller portion of pensions for new employees, with more financed by private-sector—style 401(k) investment programs.

For more, see Pension Tension by Jerry Roberts, November 3, 2011 at Santa Barbara Independent.

Friday, November 25, 2011

Taxes:  Would Doubling Taxes on the Rich Create More Jobs?

... the top tax rate has been above 70% before, and the economy averaged better than 4% growth.
There are two ways you can interpret this graph. One is that high marginal tax rates seem to create growth! That's probably wrong. Two is that high marginal tax rates coincided with, and did not constrain, years of high growth in the 1950s and 1960s. That sounds more like it.

For more, see Would Doubling Taxes on the Rich Create More Jobs? by Derek-Thompson, November 23, 2011 at The Atlantic.

International:  World Bank Issues Alert on Afghanistan Economy

Afghanistan will suffer a recession in 2014 and beyond after foreign troops leave and aid dwindles, and if the security situation gets worse, the country could face complete economic collapse, according to an ominous report released in Kabul on Tuesday by the World Bank.
Afghanistan faces a difficult decision over whether to go ahead with plans to expand its security forces to 352,000 soldiers, or to scale back to leave more room in the budget for education, health care and infrastructure. There will not be enough money for both, the World Bank report indicates.

For more, see World Bank Issues Alert on Afghanistan Economy by Alissa J. Rubin, November 22, 2011 at NYTimes.com.

Thursday, November 24, 2011

Society:  Fatalism and the American Dream

Of the five nationalities polled, Americans were least likely to believe that success in life was determined by forces outside our control.
Put another way, Americans are (not surprisingly) more likely to believe in the American dream.
These findings are particularly interesting when juxtaposed with a separate report from the Pew Economic Mobility project. That report, which examined economic and social mobility in 10 Western countries, found that Americans actually appear to have less control over their success in life than their counterparts do.

In particular, the educational attainment of a person's parents — a factor usually determined before that person's birth — seems to matter more for mobility in the United States.

“There is a stronger link between parental education and children's economic, educational and socio-emotional outcomes than in any other country investigated,” the report says.

As Richard Wilkinson suggested in a recent TED Talk, if you want to live the American dream — and have greater control over your own likelihood of success — you should probably move to Denmark, where the poor have a better chance of moving up in the world.

For more, see Fatalism and the American Dream by Catherine Rampell, November 23, 2011 at Economix.

Education:  The Wrong Inequality

in Scranton, Des Moines, Naperville, Macon, Fresno, and almost everywhere else. In these places, the crucial inequality is not between the top 1% and the bottom 99%. It's between those with a college degree and those without. Over the past several decades, the economic benefits of education have steadily risen. In 1979, the average college graduate made 38% more than the average high school graduate, according to the Fed chairman, Ben Bernanke. Now the average college graduate makes more than 75% more.

Moreover, college graduates have become good at passing down advantages to their children. If you are born with parents who are college graduates, your odds of getting through college are excellent. If you are born to high school grads, your odds are terrible.

In fact, the income differentials understate the chasm between college and high school grads. In the 1970s, high school and college grads had very similar family structures. Today, college grads are much more likely to get married, they are much less likely to get divorced and they are much, much less likely to have a child out of wedlock.

Today, college grads are much less likely to smoke than high school grads, they are less likely to be obese, they are more likely to be active in their communities, they have much more social trust, they speak many more words to their children at home.

Some research suggests that college grads have much bigger friendship networks than high school grads. The social divide is even starker than the income divide.

For more, see The Wrong Inequality by David Brooks, October 31, 2011 at NYTimes.com.

Tuesday, November 22, 2011

Diversion:  Mystical India Vacation

We just returned from this very interesting tour of northern India: Mystical India, 2011 at odysseys-unlimited.com -- with an extension to include the Pushkar Camel Fair.

Politics:  How Should I Vote in the Republican Primaries 2012?

To see which Republican candidate best matches your positions on issues, see How Should I Vote in the Republican Primaries 2012?, November 22, 2011 at The Telegraph.

Economics:  The Greek Debt Fallout

The euro zone's ongoing crisis talks have raised the specter of 60% haircuts for the Greek government's creditors. Not surprisingly, the cost of insuring Greek debt against default keeps hitting fresh highs. As of Tuesday [October 25th] afternoon, Greek credit default swap (CDS) protection stood at 5969.36 basis points, meaning that it would cost €5.97 million to insure €10 million of Greek debt for the next five years.

Because so much bank debt is bought together with insurance, many of the counterparties to Europe's Greek debt burden are American institutions. If Greece or any of Europe's other troubled sovereigns were to default on their debt obligations, the American financial sector would take a palpable hit.

According to the Bank for International Settlements, U.S. creditors own just 5% of direct exposure to Greek debt. But they are also indirectly exposed to at least 43% of such debt through CDSs, which total upwards of €25 billion. This equals about half of the European Central Bank's direct Greek exposure of €52 billion.

Meanwhile France's BNP Paribas, Groupe BPCE and Societe Generale, along with Belgium's Dexia, Germany's Commerzbank and Deutsche Bank and Dutch ING Groep, together hold more than more than €130 billion in Greek, Portuguese and Italian debt. The most exposed is France's BNP Paribas, with more than €37 billion in the troubled European countries' debt. The most exposed German institution, Commerzbank, holds more than €15 billion. More worrying still, markets have woken up to the interconnectedness of Europe's banking and sovereign-debt woes just as Europe's 90 largest banks (which this summer completed the EU's so-called stress tests) queue to roll over a total of €5.4 trillion of debt in the next two years alone.

A large write-down of Greek sovereign debt would cripple the country's banks unless they are refinanced instantly by the ECB or the European Financial Stability Facility. Along with their sovereign exposures, French banks hold up to 20% of Greek bank debt, or about €25 billion in a conservative estimate. German banks' exposure to Greek banking debt is just as high, with the state-owned Hypo Real Estate's holdings alone accounting for €8 billion, according to Barclays Capital.

As for the ECB, it would not only suffer heavy losses on its own holdings of Greek bonds in the event of a default. Having received those bonds as collateral from European banks with liquidity constraints, it might also have to call the loans and return the bonds to those banks, or ask them to make up the lost value of the collateral with cash. The banks would then need to find almost €330 billion in cash to pay back the ECB or compensate it for the losses brought about by the collateral default. The ECB might even invite questions as to its own solvency, though which European government would be ready and willing to recapitalize it is an open question.

Loud and persistent voices have recently called for the creation of a European TARP. Simply put, the idea is that European banks on the verge of collapse would be buying bonds from a special government-funded vehicle that is itself stocked full of bonds issued by some of those same insolvent European governments. The banks will then use these bonds as collateral to borrow money from the ECB, which is underwritten by European governments. The ECB would end up holding the loans to undercapitalized and almost insolvent banks, as well as bonds backed by debt issued by insolvent countries as collateral. Is it any wonder the ECB has resisted Greek haircuts for so long?

It's become fashionable to compare Greece and the CDS-swamped euro crisis to the Lehman Brothers meltdown. Given the true scale of the problem though, it's hard not to worry that Europe's crash, and the ripple effects around the globe, could be even worse.

For more, see The Greek Debt Fallout by Athanasios T. Ladopoulos, October 26, 2011 at WSJ.com.

Monday, October 31, 2011

Health:  Childhood Obesity

In 2009, a 555-pound, 14-year-old South Carolina boy was removed to foster care after his mother was arrested and charged with criminal neglect. The state's Department of Social Services had determined that without state intervention, the boy was at risk of serious harm.

For more, see Obesity Fuels Custody Fights by Ashby Jones and Shirley S. Wang, October 29, 2011 at WSJ.com.

Taxes:  Ronald Reagan's Tax Increases

Republicans today prefer to forget that Ronald Reagan signed into law 11 major tax increases, including the Tax Equity and Fiscal Responsibility Act of 1982, the largest peacetime tax increase in American history.
Of course, there was still a net tax cut during the Reagan administration. ... the federal budget for fiscal year 1990 shows that revenue was $264.4 billion lower in 1988 than it would have been without the 1981 tax cut. But Reagan effectively took back half of it by his last year in office.

For more, see The Republican Idea of Tax Reform by Bruce Bartlett, October 25, 2011 at Economix.

Health:  Alcohol Linked to Better Survival After Heart Attack

Women who drank anywhere from a few alcoholic drinks a month to more than three a week in the year leading up to a heart attack ended up living longer than women who never drank alcohol, according to a study.
"One thing that was interesting was that we didn't see differences among different beverage types," said Joshua Rosenbloom, a student at Harvard Medical School who led the study.
After at least 10 years of follow up, the team found that 44 out of every 100 women who had abstained from alcohol had died, while 25 out of every 100 light drinkers and 18 out of every 100 heavy drinkers had died.
In an earlier study including men and women, O'Keefe found that people who continued to drink moderately after having a heart attack had better health than those who abstained.

"You don't need to assume that people need to stop drinking once they develop heart disease," he said. "The problem is that alcohol is a slippery slope, and while we know that a little bit is good for us, a lot of it is really bad."

For more, see Alcohol Linked to Better Survival After Heart Attack October 28, 2011 at Fox News.

Sunday, October 30, 2011

Economics:  Back to Where We Began. Finally.

The American economy has finally reached the size it was before the recession began four years ago, according to the latest gross domestic product report from the Bureau of Economic Analysis.

For more, see Back to Where We Began. Finally. by Catherine Rampell, October 27, 2011 at Economix.

International:  Brazil Trails Swaziland in World Bank Competitiveness Study

Brazil slipped six places in the World Bank's annual competitiveness study, as the world's seventh-largest economy fell behind countries including Swaziland and Nicaragua for the ease of setting up a business.

Brazil slipped to 126th place among 183 economies ranked in the World Bank's Doing Business survey published yesterday. The decline comes even as Brazil's central bank expects record foreign direct investment this year of $60 billion and the country invests in roads, ports and stadiums ahead of its hosting the 2014 World Cup and 2016 Olympics.

In Brazil it takes 119 days to start a business, compared with 14 days in Colombia, which was among the 12 countries that most improved its business climate last year, according to the study. The Andean nation jumped five spots to 42nd in the world. Chile rose two places to 39th, taking back from Peru, which fell two spots to 41st, the title of Latin America's most business- friendly economy.

For more, see Brazil Trails Swaziland in World Bank Competitiveness Study by Randall Woods, October 20, 2011 at businessweek.

Wealth:  Top Earners Doubled Share of Nation's Income, Study Finds

From an article Martha contributed ...

... the Congressional Budget Office said Tuesday, ...

that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275% for the 1% of the population with the highest income. For others in the top 20% of the population, average real after-tax household income grew by 65%.

By contrast, the budget office said, for the poorest fifth of the population, average real after-tax household income rose 18%.

And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40%.

The findings, based on a rigorous analysis of data from the Internal Revenue Service and the Census Bureau, are generally consistent with studies by some private researchers and academic economists. But because they carry the imprimatur of the nonpartisan budget office, they are likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.

For more, see Top Earners Doubled Share of Nation's Income, Study Finds by Robert Pear, October 25, 2011 at NYTimes.com.

Saturday, October 29, 2011

Education:  Cost of College on the Rise (Again)

Is this smart?

For more, see Cost of College on the Rise (Again) by Matthew Philips, October 27, 2011 at Freakonomics.

Health:  Study Shows Why It's Hard to Keep Weight off

For years, studies of obesity have found that soon after fat people lost weight, their metabolism slowed and they experienced hormonal changes that increased their appetites. Scientists hypothesized that these biological changes could explain why most obese dieters quickly gained back much of what they had so painfully lost.

But now a group of Australian researchers have taken those investigations a step further to see if the changes persist over a longer time frame. They recruited healthy people who were either overweight or obese and put them on a highly restricted diet that led them to lose at least 10% of their body weight. They then kept them on a diet to maintain that weight loss. A year later, the researchers found that the participants' metabolism and hormone levels had not returned to the levels before the study started.

Dr. Stephen Bloom, an obesity researcher at Hammersmith Hospital in London, said the study needed to be repeated under more rigorous conditions, but added, It is showing something I believe in deeply — it is very hard to lose weight. And the reason, he said, is that your hormones work against you.

For more, see Study Shows Why It's Hard to Keep Weight off by Gina Kolata, October 26, 2011 at NYTimes.com.

Economics:  The Path Not Taken

... bailing out the banks while punishing workers is not, in fact, a recipe for prosperity. But was there any alternative? Well, that's why I'm in Iceland, attending a conference about the country that did something different.

If you've been reading accounts of the financial crisis, or watching film treatments like the excellent Inside Job, you know that Iceland was supposed to be the ultimate economic disaster story: its runaway bankers saddled the country with huge debts and seemed to leave the nation in a hopeless position.

But a funny thing happened on the way to economic Armageddon: Iceland's very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.

So how's it going? Iceland hasn't avoided major economic damage or a significant drop in living standards. But it has managed to limit both the rise in unemployment and the suffering of the most vulnerable; the social safety net has survived intact, as has the basic decency of its society. Things could have been a lot worse may not be the most stirring of slogans, but when everyone expected utter disaster, it amounts to a policy triumph.

And there's a lesson here for the rest of us: The suffering that so many of our citizens are facing is unnecessary. If this is a time of incredible pain and a much harsher society, that was a choice. It didn't and doesn't have to be this way.

For more, see The Path Not Taken by Paul Krugman, October 27, 2011 at NYTimes.com.

Friday, October 28, 2011

Education:  College Is Worth It

For more, see College Is Worth It by Catherine Rampell, October 27, 2011 at Economix.

International:  Iran's Supreme Leader Floats Proposal to Abolish Presidency

Ayatollah Ali Khamenei, who was appointed supreme leader for life in 1989 by Shiite Muslim clerics, said in a speech last week that, if deemed appropriate, Iran could do without a president.
Under the proposal, Iran would be ruled by Khamenei working in tandem with parliament, which would continue to be directly elected and would appoint one of its members to serve as prime minister.

Such a change could happen in the near or distant future, Khamenei said. The last time Iran's constitution was altered was in 1989 after the death of Ayatollah Ruhollah Khomeini, the founder of the Islamic republic and its first supreme leader. The position of prime minister was abolished at that time.

For more, see Iran's Supreme Leader Floats Proposal to Abolish Presidency by Thomas Erdbrink, October 25, 2011 at The Washington Post.

Society:  U.S. Government Requests for Google User Data Jump

U.S. government agencies sent Google 5,950 criminal investigation requests during the first half of 2011 compared with 4,601 requests during the last six months of 2010. Google complied in part or completely with 93% of those requests which can include court orders and subpoenas.

The number of users and accounts affected: 11,057.

Google has an agenda here. It wants to spread this kind of information -- albeit incomplete as it does not include certain terrorism-related requests -- to push for reform of federal laws that give law enforcement unfettered access to online communications without a judge's order.

For more, see U.S. Government Requests for Google User Data Jump by Jessica Guynn, October 25, 2011 at the LA Times blog "Technology".

Thursday, October 27, 2011

Religion:  Survey of Muslims in American

Foreign born American Muslims dislike al Qaeda more than native born Muslims ...

For much, much more, see Muslim Americans: No Signs of Growth in Alienation or Support for Extremism, August 30, 2011 at Pew Research Center for the People & the Press.

Wealth:  Why America's Highest Paid Ceos Are Insanely Overpaid

... the most rapacious pillage of shareholder property is John H. Hammergren, chairman and CEO of McKesson Pharmaceuticals. His compensation which is doesn't really capture the essence of his remuneration, was a mind blowing $131.2 million U.S. dollars. This number is obscene. It is just shy of 11% of the total $1.2 billion in net income for the entire company.

For more, see Why America's Highest Paid Ceos Are Insanely Overpaid by Christopher Helman, October 25, 2011 at Forbes.com.

Wednesday, October 26, 2011

Society:  Which Americans Are Most Generous, and to Whom

For more, see Which Americans Are Most Generous, and to Whom by Catherine Rampell, October 18, 2011 at Economix.

Economics:  The Wild Ride of the 1%

For decades after World War II, the top-one-percenters were the most steady line on the income and wealth charts. They gained less during good times and lost less during contractions than the rest of America.

Suddenly, in 1982, the wealthiest broke away from the rest of the economy and formed their own virtual country. Their incomes began soaring higher during good times. The top 1% of earners more than doubled their share of national income, to 20% as of 2008. Looking at another measure, the richest 1% increased their share of wealth from just over 20% to more than 33%.

Those surges were often accompanied by mini-crashes, even though the direction over time was always up. A top 1% that had once been models of financial sobriety set off on a wild ride of economic binges.

This marked a new personality type in the history of wealth: the High-Beta Rich.

"High beta" is a term used in financial markets to describe a stock or asset that has exaggerated up and down swings with the market. Tech start-ups and casino stocks have high betas, for example. Yet studies show that today's rich have higher betas than many of the riskiest gambling stocks. Between 1947 and 1982, the beta of the top 1% was a modest 0.72, meaning that their incomes moved relatively in line with the rest of America. Between 1982 and 2007, their beta soared more than three-fold.

The fallout from the "high betas" is likely to grow. As the wealthy gain a greater share of wealth and income, they account for a growing share of spending, taxes and investments. The top 5% of earners now account for 37% of consumer outlays, according to Moody's Analytics. The top 1% of earners pay 38% of federal income taxes. The richest 1% of Americans own more than half of the country's individually held stocks, according to the Federal Reserve.

As go the high-beta rich, so goes America. Their hyper-cycles will become our own, as the consumer economy, financial markets and tax revenues experience more rapid and extreme spikes and crashes.

The spending of the rich is even wilder than their incomes. The spending volatility of the top 10% of earners is now more than 10 times the spending volatility of the bottom 80%, according to one study.

For more, see The Wild Ride of the 1% by Robert Frank, October 22, 2011 at WSJ.com.

Monday, October 24, 2011

Economics:  Tax Rates and Taxes Paid, by Wealth

Here's a look at effective tax rates, a measure that includes federal income taxes, payroll taxes, and excise taxes [by income level].
Here are two more graphs to take you home: the first shows share of income by quintile and the second shows share of federal income taxes by quintile. What you'll see is that income inequality is behind tax burden inequality.

For more, see One of These Graphs Will Make You Angry About the Rich and Taxes by Derek Thompson, October 6, 2011 at The Atlantic.

Healthcare:  Our Health-Care System, in One Report Card

For more, see Our Health-Care System, in One Report Card by Sarah Kliff, October 18, 2011 at Ezra Klein.

Saturday, October 22, 2011

Economics:  Percent of Total Assets, by Wealth

For more, see Where the Top 1% Work by Derek Thompson, October 11, 2011 at Mother Jones.

Mind:  Who You Are

Before Kahneman and Tversky, people who thought about social problems and human behavior tended to assume that we are mostly rational agents. They assumed that people have control over the most important parts of their own thinking. They assumed that people are basically sensible utility-maximizers and that when they depart from reason it's because some passion like fear or love has distorted their judgment.

Kahneman and Tversky conducted experiments. They proved that actual human behavior often deviates from the old models and that the flaws are not just in the passions but in the machinery of cognition. They demonstrated that people rely on unconscious biases and rules of thumb to navigate the world, for good and ill. Many of these biases have become famous: priming, framing, loss-aversion.

Kahneman reports on some delightful recent illustrations from other researchers. Pro golfers putt more accurately from all distances when putting for par than when putting for birdie because they fear the bogie more than they desire the birdie. Israeli parole boards grant parole to about 35% of the prisoners they see, except when they hear a case in the hour just after mealtime. In those cases, they grant parole 65% of the time. Shoppers will buy many more cans of soup if you put a sign atop the display that reads Limit 12 per customer.

We are players in a game we don't understand. Most of our own thinking is below awareness. Fifty years ago, people may have assumed we are captains of our own ships, but, in fact, our behavior is often aroused by context in ways we can't see. Our biases frequently cause us to want the wrong things. Our perceptions and memories are slippery, especially about our own mental states. Our free will is bounded. We have much less control over ourselves than we thought.

This research yielded a different vision of human nature and a different set of debates. The work of Kahneman and Tversky was a crucial pivot point in the way we see ourselves.

They also figured out ways to navigate around our shortcomings. Kahneman champions the idea of adversarial collaboration — when studying something, work with people you disagree with. Tversky had a wise maxim: Let us take what the terrain gives. Don't overreach. Understand what your circumstances are offering.

For more, see Who You Are by David Brooks, October 20, 2011 at NYTimes.com.

Friday, October 21, 2011

Economics:  Average Hourly Earnings, 1964-2008

For more, see Who Really Robbed the Middle Class? Maybe It Was Health Care by Derek Thompson, October 13, 2011 at The Atlantic.

Health:  Vitamin E Is Linked to Prostate Cancer

Researchers studying vitamin E supplements as a way to reduce men's risk of prostate cancer found they actually had the opposite effect, increasing the risk slightly, according to a study funded by the National Institutes of Health.
The findings, published in the Journal of the American Medical Association, are based on long-term follow-up of participants in a large cancer-prevention trial known as Select. That trial, meant to study whether supplements of vitamin E, selenium or a combination of the two nutrients could prevent prostate cancer, was stopped three years ago because a review of the data showed no benefit, compared with a dummy pill.

For more, see Vitamin E Is Linked to Prostate Cancer by Katherine Hobson, October 12, 2011 at WSJ.com.

Tuesday, October 18, 2011

Economics:  Bankers' Salaries vs. Everyone Else's

For more, see Bankers' Salaries vs. Everyone Else's by Catherine Rampell, October 11, 2011 at Economix.

Mind:  The Brain on Trial

After Charles Whitman shot 45 people from the top of the University of Texas Tower, ...

[his] body was taken to the morgue, his skull was put under the bone saw, and the medical examiner lifted the brain from its vault. He discovered that Whitman's brain harbored a tumor the diameter of a nickel. This tumor, called a glioblastoma, had blossomed from beneath a structure called the thalamus, impinged on the hypothalamus, and compressed a third region called the amygdala. The amygdala is involved in emotional regulation, especially of fear and aggression. By the late 1800s, researchers had discovered that damage to the amygdala caused emotional and social disturbances. In the 1930s, the researchers Heinrich Klüver and Paul Bucy demonstrated that damage to the amygdala in monkeys led to a constellation of symptoms, including lack of fear, blunting of emotion, and overreaction. Female monkeys with amygdala damage often neglected or physically abused their infants. In humans, activity in the amygdala increases when people are shown threatening faces, are put into frightening situations, or experience social phobias. Whitman's intuition about himself—that something in his brain was changing his behavior—was spot-on.
When your biology changes, so can your decision-making and your desires. The drives you take for granted (I'm a heterosexual/homosexual, I'm attracted to children/adults, I'm aggressive/not aggressive, and so on) depend on the intricate details of your neural machinery. Although acting on such drives is popularly thought to be a free choice, the most cursory examination of the evidence demonstrates the limits of that assumption.
Many of us like to believe that all adults possess the same capacity to make sound choices. It's a charitable idea, but demonstrably wrong. People's brains are vastly different.

Who you even have the possibility to be starts at conception. If you think genes don't affect how people behave, consider this fact: if you are a carrier of a particular set of genes, the probability that you will commit a violent crime is four times as high as it would be if you lacked those genes. You're three times as likely to commit robbery, five times as likely to commit aggravated assault, eight times as likely to be arrested for murder, and 13 times as likely to be arrested for a sexual offense. The overwhelming majority of prisoners carry these genes; 98.1% of death-row inmates do. These statistics alone indicate that we cannot presume that everyone is coming to the table equally equipped in terms of drives and behaviors.

Free will may exist (it may simply be beyond our current science), but one thing seems clear: if free will does exist, it has little room in which to operate. It can at best be a small factor riding on top of vast neural networks shaped by genes and environment. In fact, free will may end up being so small that we eventually think about bad decision-making in the same way we think about any physical process, such as diabetes or lung disease.

For much more about how the law should be changed due to this, see The Brain on Trial by David Eagleman, July, 2011 at The Atlantic.

Wednesday, October 12, 2011

Health:  The First Genetically Modified Animal for Consumption

The FDA has completed its analysis of the first genetically modified animal likely to hit supermarket shelves: the AquAdvantage salmon, made by Massachusetts-based AquaBounty Technologies, Inc. Thanks to some added genes, the salmon grows 2-6 times the size of a normal Atlantic salmon in half the time, promising some respite for the planet's heavily taxed natural fish stocks, a third of which are near extinction or exhaustion.

For more, see FDA Completes Review of First Genetically Modified Animal for Consumption by Veronique Greenwood, October 11, 2011 at 80beats.

Government:  U.S. Evaluating Government Programs More than Ever

According to a new report commissioned by the National Endowment for Science, Technology and the Arts in the U.K. (because the Brits would like to figure out how to do this, too), the Obama administration is instituting the most sweeping and potentially groundbreaking emphasis on rigorous program evaluation ever conducted by the federal government. It has been trying to identify social programs that work, scientifically evaluate how they work and apply those models in awarding grant money.

The hope is that Uncle Sam — with the help of rigorous social science — will stop supporting teen pregnancy prevention programs that don't actually prevent teen pregnancies, or childhood literacy programs that don't teach all that many children how to read.

The authors cited six initiatives begun under Obama in which they conclude the role of evidence has been unprecedented. The Department of Health and Human Services has commissioned literature reviews on programs targeting teen pregnancies and parental home visitation. Expert panels have reviewed applicants for the Social Innovation and Investing in Innovation funds. Program guidelines for the Community College Challenge Fund and the Workforce Innovation Fund through the departments of Labor and Education have stressed the importance of evidence-based strategies and evaluation.

For more, see U.S. Evaluating Government Programs More than Ever by Emily Badger, September 14, 2011 at Miller-McCune.

Sunday, October 9, 2011

Diversion:  Gallery Los Olivos to Display Martha Inman Lorch Artwork

Travel and discovery will be on display during October at Gallery Los Olivos when featured artist Martha Inman Lorch exhibits a collection of watercolors and jewelry in an aptly titled show called “Artist with a Passport.”

The exhibition runs Oct. 1 through 31

For more, see Gallery Los Olivos to Display Martha Inman Lorch Artwork, September 29, 2011 at Santa Ynez Valley News.

Friday, October 7, 2011

Technology:  India Announces $35 Tablet Computer to Help Lift Villagers Out of Poverty

Developer Datawind is selling the tablets to the government for about $45 each, and subsidies will reduce that to $35 for students and teachers.
... the Aakash has a color screen and provides word processing, Web browsing and video conferencing. The Android 2.2-based device has two USB ports and 256 megabytes of RAM.

For more, see India Announces $35 Tablet Computer to Help Lift Villagers Out of Poverty, October 5, 2011 at The Washington Post.

Wednesday, October 5, 2011

Education:  U.S. Still Dominates in Research Universities

The chart, based on new data from the Organization for Economic Cooperation and Development, shows the distribution of the top 50 universities for a range of disciplines. Rankings are based on citations of work coming from each university's department.

The darker blue bars at the bottom of the chart refer to American universities. And as you can see, at least at the post-secondary level, we still have some top-notch schools.

For more, see U.S. Still Dominates in Research Universities by Catherine Rampell, September 30, 2011 at Economix.

Economics:  The Case Against Commodities

"I would rather back human ingenuity," says Dylan Grice, a London-based global strategist for Société Generale and a self-proclaimed skeptic about investing in commodities. "If there's no copper, we will find something else."
Natural gas as an energy source is now roughly the equivalent of $24-per-barrel oil, says Philip Verleger, an energy economist and publisher of Petroleum Economics Monthly. Ethanol, mostly made from corn or sugar cane, is also on the rise.

"We expect the oil industry's monopoly on transportation to be broken," Mr. Verleger wrote in July. In an interview, he adds, "There will be oil. I'm just not sure there will be anybody to consume it." He thinks that projections of crude-oil demand in 2025 are typically 20% to 30% too high, and that crude-oil prices are likely to drop sharply as those forecasts go awry.

Spot prices for raw materials have been basically flat, after adjusting for inflation, since 1871, vastly underperforming stocks and bonds, [Mr. Grice] wrote in a December research note titled, "Commodities for the long run? Not on your Nellie—I'd rather eat coal!"

For more, see The Case Against Commodities by Liam Pleven, October 5, 2011 at WSJ.com.

Tuesday, October 4, 2011

Mind:  How Did Researchers Manage to Read Movie Clips from the Brain?

Wow.

In a study published last week, researchers showed they could reconstruct video clips by watching viewers' brain activity. The video of the study's results, below, is pretty amazing, showing the original clips and their reconstructions side by side.

For more, see How Did Researchers Manage to Read Movie Clips from the Brain? by Valerie Ross, September 28, 2011 at 80beats.

Economics:  Jobless Benefits Discourage People from Finding Jobs

Many people getting unemployment start work only when it's running out.

The chart displays the fraction of persons (in Pittsburgh) receiving unemployment benefits who began working again, as a function of the number of weeks until their unemployment benefits were scheduled to be exhausted. For example, a hazard value of 0.04 for week -14 means that, among unemployed persons with 14 weeks remaining until their benefit exhaustion date, 4% of them either began working a new job or returned to their previous job.
Very few people started working during the two to three weeks prior to the exhaustion of their unemployment benefits (weeks -3 and -2 in the chart). But almost 30% started work just a week later (19% started a new job, 10% returned to a previous job).

Demand may have been lacking in Pittsburgh in the early 1980s, but that did not stop unemployed people from responding to the work incentives presented to them by the unemployment insurance program (economists also looked for this pattern during a Swedish recession, and found it there too).

For more, see Do Jobless Benefits Discourage People from Finding Jobs? by Casey B. Mulligan, March 17, 2010 at Economix.

Monday, October 3, 2011

Mind:  The Limits of Empathy

In one experiment in the 1970s, researchers planted a dime in a phone booth. 87% of the people who found the dime offered to help a person who dropped some papers nearby, compared with only 4% who didn't find a dime. Empathy doesn't produce anything like this kind of effect [a temporary burst of positive emotion].

For more, see The Limits of Empathy by David Brooks, September 29, 2011 at NYTimes.com.

Economics:  Phony Fear Factor

The starting point for many claims that antibusiness policies are hurting the economy is the assertion that the sluggishness of the economy's recovery from recession is unprecedented. But, as a new paper by Lawrence Mishel of the Economic Policy Institute documents at length, this is just not true. Extended periods of jobless recovery after recessions have been the rule for the past two decades. Indeed, private-sector job growth since the 2007-2009 recession has been better than it was after the 2001 recession.

We might add that major financial crises are almost always followed by a period of slow growth, and U.S. experience is more or less what you should have expected given the severity of the 2008 shock.

But aren't business people complaining about the burden of taxes and regulations? Yes, but no more than usual. Mr. Mishel points out that the National Federation of Independent Business has been surveying small businesses for almost 40 years, asking them to name their most important problem. Taxes and regulations always rank high on the list, but what stands out now is a surge in the number of businesses citing poor sales — which strongly suggests that lack of demand, not fear of government, is holding business back.

For more, see Phony Fear Factor by Paul Krugman, September 29, 2011 at NYTimes.com.