» Posted by Martin Weil on March 24, 2008

Steve Waldman offers an illustration for everyone, not just 5 year-olds.

» Posted by Martin Weil on March 21, 2008

...the fractional assessment of homes was easily the largest single government housing subsidy in the postwar era, and it was among the largest categories of social expenditure of any kind, direct or indirect. Fractional assessment of residential property provided a subsidy that was forty times greater than federal spending for public housing. It was ten times greater than the home mortgage interest deduction. It was five times as costly as more controversial "welfare" programs like Aid to Families with Dependent Children. Although fractional assessment did not show up on official government budgets, on the eve of the tax revolt it was providing more benefits than any other social policy in America except for the twin blockbusters of the federal budget, Social Security and Medicare.

Tyler Cowen again, citing The Permanent Tax Revolt.

» Posted by Martin Weil on March 20, 2008

The short answer: low wages in China.

That at least according to economist Tyler Cowen, who says that the falling cost of most consumer items and their increasingly short product life cycle mean that stolen goods are not worth what they once were.

» Posted by Martin Weil on March 18, 2008

A century ago we had banks. They created systemic risk. We decided to regulate them in order to limit the systemic risk they could create. That was wise.

Now we have non-banks. They create systemic risk...

Brad DeLong

I have long believed that our global financial system had some time back outgrown in size and complexity the monitoring tools available to the banking regulators in the US and abroad. Sooner or later, it was natural that this system was going to proceed to excess and have a major systemic crisis.

This looks like it.

» Posted by Martin Weil on March 13, 2008

From Odd Numbers

Out of 20 S.E.C. settlements for market timing by mutual funds, 16 involved (Elliot) Spitzer when he was New York's attorney general.

The percentage of illegally-gotten money that mutual funds had to give back in the Spitzer cases was 80 percent -- almost full restitution.

In the 4 settlements not involving Spitzer, the S.E.C. settled for 7 percent.

Why the gap?

Part of it was Spitzer's aggressiveness, but the other factor was that younger S.E.C. officials usually go work at the firms they're in charge of regulating. So, the incentive to bring the hammer is, ummm, somewhat compromised.

Justin Wolfers explains why this should matter:

It seems to me that the truly important violations of the public trust are when the power we give our government officials is sold, rather than what government officials choose to buy. Yet our political scandals are too often dominated by private mistakes, rather than public misdeeds. This is why I'm more worried about what the SEC is selling than what Eliot Spitzer has been buying.

» Posted by Martin Weil on March 12, 2008

The Fed is worried about a lack of liquidity in the credit markets. The Fed acts to make the markets more liquid. Is the Fed's action foolish? We hope so!

We like to think: "market -- trade -- liquidity -- good, etc.", forgetting the Glosten-Milgrom point that liquidity often rests upon the presence of fools.

If the problem is that there are too few fools in the market, it might make perfect sense for the Fed to step in as a fool of last resort. With any luck, once the Fed starts acting foolishly, other market participants will follow suit.

From Felix Salmon

» Posted by Martin Weil on March 05, 2008

Warren Buffett offers up his annual homily. Buffett's Chairman's Letter (pgs 3-22) is a must-read for investors.