Things to Read at Lunchtime on February 17, 2015
Must- and Shall-Reads:
- : “If it takes eight pages, three charts and 25 footnotes to explain why a simple bet is going very wrong, is it effectively a concession of defeat?… The S&P 500 is a particularly ill-suited benchmark for judging the success of hedge funds…. Yet this sophisticated manager of hedge-fund portfolios willingly and confidently bet… they would do exactly that…. Seides notes that perhaps now… the time is approaching for hedgies finally to thrive…. But would you bet on it?”
- (2011): “Data cannot distinguish between power laws and other functional forms… size predicts relatively little of the variation between cities. The striking appearance of scaling in previous work is largely an artifact of using extensive quantities (city-wide totals) rather than intensive ones (per-capita rates). The remaining… is explained by concentration of specialist service[s]… in larger cities, in accordance with the long-standing economic notion of the ‘hierarchy of central places’…”
- : “Should central banks really worry so much about balance-sheet profits and losses?… No…”
-
: Climate Change Progress Is Possible: “Many in today’s Congress are responding to the urgency of the climate threat not with action, but with obstruction, skepticism, and outright denial. This week, the Senate held a hearing on the EPA’s proposed Clean Power Plan rule, which would set the first-ever limits on how much carbon pollution power plants can put in our air and vastly improve public health as a result, averting up to 150,000 asthma attacks in children per year. Republicans criticized the proposal from every angle–including by claiming it doesn’t do enough. Since we in the United States cannot solve the complex, global challenge of climate change solely through actions taken within our own borders, their argument goes, we should do nothing. This is a fallacy. Failing to take steps today to curb carbon pollution and other greenhouse gas emissions in the U.S. would endanger our economy, our national security, and our children’s future…” -
: Argentina’s Lessons for Greece: “The first lesson from Argentina is that if the economics are on your side, you can and should ignore politicians prophesying disaster. The vast majority of economists (outside of Germany) agree that Greece’s debt should be written down and its fiscal policy relaxed. There is also little doubt that this is the view of senior economists within the IMF…. The second lesson of the Argentine crisis is that a short period of political turmoil can cost surprisingly little compared to a long period of mindless pursuit of misconceived policies…. Sacrificing Greek interests in the name of European or systemic financial stability may have once been the correct path for the IMF to pursue, but the crisis there is well past the point at which these policies ceased being justifiable. Now that Greece’s ineffectual and unpopular government has been swept away (another accurate prediction), it is time for the rest of Europe to clean up the financial mess… -
: Putin’s European Fifth Column: “There can be no doubting [Vladimir Putin’s] awareness of the role that European ideals–and the possibility of EU membership–has played in motivating the struggle in Ukraine and constraining his actions. The popular desire to join Europe’s community of democratic states was a key force behind the collapse of right-wing dictatorships in Greece, Spain, and Portugal in the 1970s. It also played a critical role in the collapse of communist regimes in Central and Eastern Europe after the fall of the Berlin Wall. And it certainly contributed to the ouster of Ukrainian President Viktor Yanukovych–a key Putin ally–in 2014. Indeed, the existence of a European model continues to guide and encourage those pursuing transparent, democratic governance in many post-communist countries…” -
: No Time for Games in Europe: “The trouble with game theory, as I used to tell my students, is that it takes for granted the players’ motives…. In the current deliberations between our European partners and Greece’s new government, the whole point is to forge new motives. To fashion a fresh mind-set that transcends national divides, dissolves the creditor-debtor distinction in favor of a pan-European perspective, and places the common European good above petty politics, dogma that proves toxic if universalized, and an us-versus-them mind-set…. I am convinced that we have one option only: to shun any temptation to treat this pivotal moment as an experiment in strategizing and, instead, to present honestly the facts concerning Greece’s social economy, table our proposals for regrowing Greece, explain why these are in Europe’s interest, and reveal the red lines beyond which logic and duty prevent us from going…” -
: Cleaning up the standing mess in King: “Difficult questions about standing and the viability of the lawsuit…. The King lawyers have an ethical obligation[:]… ‘[w]hen a development after this Court grants certiorari… could have the effect of depriving the Court of jurisdiction due to the absence of a continuing case or controversy, that development should be called to the attention of the Court without delay.’… Without standing, the federal courts lack jurisdiction…. When standing problems become apparent after full briefing, the Court sometimes chooses to dismiss cases as improvidently granted–to ‘DIG’ them…. There’s a better way… call for… plaintiffs’ lawyers to explain the factual basis for their clients’ standing. Ordering such briefing wouldn’t be unprecedented: in a case decided in 2000, for example, the Court ordered supplemental briefing on standing the day after oral argument. And such briefs often address questions pertaining to mootness…. Doing nothing in the face of continued silence from the plaintiffs is no longer a tenable approach.” -
: Crush the Financial Sector, End the Great Stagnation?: “Productivity growth in the rich world started slowing down around the same time that the financial sector’s share of economic activity started rising rapidly…. The interesting question, then, is whether this process can be put into reverse. Maybe there is a deeper wisdom behind financial regulations that appear to be (at best) pointless. Harassment that encourages an unproductive, resource-hoarding industry to get smaller might be exactly what’s needed in economies plagued by chronically slow growth.”
Should Be Aware of:
- : “Stratechery.com is supported by subscriptions to the Daily Update… 12~15 articles a week delivered via five daily emails… covering the news… timely, but also timeless in their investigation of ‘Why’ and ‘What’s next.’ If you love Stratechery’s articles, you’ll love the Daily Update…”
- : The View from the Kremlin: Putin’s War on the West
- : “Might it also be true that Boehner is just terrible at his job? Look at… two stories… today… the possibility of a shutdown of the Department of Homeland Security…. Boehner can say ‘Senate Democrats should be to blame,’ but that won’t make it so…. The second… [is] the upcoming speech to Congress by… Netanyahu… roundly condemned for politicizing the relationship between the two countries…”
-
: DEAR WINTER: A Report From Snow-Buried Wine-Drunk Cookie-Eating Boston, Capital of New Hoth: “Today I watched with rapt fascination as two men fought to carve a path through waist-high snow filling a vacant lot under my office window. Their apparent goal was to reach a fence. Their tools consisted of a shovel and a snow blower that seemed to be only 50 percent functional. Shovel Guy was simply shoveling snow into the stationary snow blower, while Snow Blower Guy kept a broom wedged into the machine because I guess this is the only way it works. From the sidelines, an older man yelled instructions and gesticulated animatedly at their ineffectual struggles. I couldn’t tear myself away. I considered going downstairs to interview them about their efforts; part of me just wanted to join the battle. Occasionally the trio would pause to yell and wave their hands at each other in a beautifully choreographed display, but would then continue the work…. And then a snowplow appeared, crashed into the narrow path they’d cleared like a charging rhino, and promptly got itself stuck…. Snow is a factor in the northeast, but the past few weeks have tested even the steadfast resolve of typically stone-faced New Englanders…. Sure, Buffalo (and other places, like, ALL OF CANADA, or Alaska… often gets more snow more often, but Boston is not equally equipped to handle it…. Snow problems are not always a question of volume, but one of preparation and resources…. ‘People’s normal coping skills and strategies erode’, Green said. ‘Instead of eating a healthy diet, they eat cookies, maybe even drinking more’.” Mmm hmm. If you need me, I’m not going anywhere. I’ll be here trying to figure out what wine pairs best with Mallomars.” -
Morning Should-Read:
: Income Over the Lifetime: “How exactly does income growth vary over the lives of workers?… Guvenen… Karahan… Ozkan… and… Song…. Income growth–pretty much all of it–happens in the first decade of workers’ careers…. A worker at the median of the income spectrum will have a growth rate of about 38 percent, while a worker at the 99th percentile will see his income grow by 1,450 percent…. Variance decreases as a worker moves up the income ladder…. [until] worker starts earning over the 90th percentile… variance increases as incomes get close to the very top of the ladder…. The distribution of income growth is quite different from what is usually suspected. Instead of an anticipated smooth bell curve, the distribution has a very high peak and long tails, in addition to being negatively skewed…”