Stupid, or Evil?

AIG was given a bailout of billions of dollars without having to drastically restructure their company; it was rather given as funds to keep them afloat.

As it turns out, it wasn't just Major League Baseball that made terrible contractual decisions over the last decade (Juan Pierre, Sidney Ponson, Barry Zito, Albert Belle, Kevin Brown, Darren Dreifort, FOX, and I can go on forever...), nor merely homebuyers who got mortgages on houses they couldn't afford. There were also companies that gave executives huge pay packages, most of which was in the form of bonuses, most of which were practically guaranteed bonuses.

But now is the time to get upset that they make so much money. Because they're getting bailed out, damn it. Why should these people make more than the President, after all? Are they more important? Do they do more good for the world?

This is not how things work, though. The market values people for certain reasons. And the fact of the matter is that without a significant market correction, those true values cannot come out. Home prices are crashing because they were too high. The housing market has been a bubble waiting to burst, particularly with incentives towards malinvestment through the tax code. When we shield ourselves from market corrections, we delay the inevitable, and that makes things much worse. After all - the bonuses AIG is paying out amount to something like .1% of the bailout money they received. This is like paying someone who writes grant proposals for a non-profit organization that get it $50,000,000 a year in funding being paid $50,000 per year, except that's for the whole department of grant writing. Those who are disgusted by the executive compensation should be disgusted with their elected officials - they gave in, giving billions of taxpayer dollars to companies despite their poor handling of business. Not despite, BECAUSE OF their poor handling of business. If there is anyone who should be the subject of public outrage, shouldn't it be those in office who would insist on such bailouts without requiring a serious restructuring of the companies?

So enter Senator Chuck Grassley, Republican from Iowa, and his remarks on executive pay:

“The first thing that would make me feel a little bit better towards them if they’d follow the Japanese model and come before the American people and take that deep bow and say I’m sorry, and then either do one of two things — resign, or go commit suicide.”

Go committ suicide.

Go kill yourself.

For a United States Senator, who help to shape policies to create this economic environment as a longtime member of the Senate Finance committee, even serving as Chairman in 2001 and from 2003-2006, to suggest that corporate executives should kill themselves can only be classified as stupid, or evil. Either stupid, because he hasn't the brains to realize the role of government in creating the current economic environment, or evil, for suggesting others must die for something he was complicit in, while demanding to walk away.

Fish-Pig 2008

Barack Obama took heat for this one:

"You can put lipstick on a pig. It's still a pig."

Now, look, this is the kind of line that Joe Biden should have delivered. Heck, this is the kind of line Obama should have delivered if he was making a joint appearance with Dr. Phil, or Robert Byrd. But really, how many corny expressions do you expect from Obama? This isn't a guy who talks like this. To be fair, race is coming into play here too - that sounds more like a white redneck phrase, so that makes it harder to buy the figure of speech thing.

Of course, I think he might have had a shot at getting away with it were it not for this line:

"You can wrap an old fish in a piece of paper called ‘change,’ it’s still going to stink.”

It seems like that's a shot at John McCain, because he is also very old. So it makes sense that correspondingly, he probably called Sarah Palin a pig. Sure he didn't mean it, but neither did this guy.

We're getting older now!

Showing that regurgitating press releases is a hallmark of journalism worldwide, there is this story about the rising birth rate being bad for the economy (a link I found via Drudge). I like how the report points to the problem of an aging population as an immediate problem.

"And the women having the babies would be exacerbating the financial impacts on the government of the ageing of the population because the tax breaks offered to parents to have children occur up front, while the cost savings of a bigger
working population and bigger tax base from extra children are deferred until
they are of working age."

Yes, you see, aging is a real problem now. Because we're old. Sure we're still working and being productive, but we're old. This is ridiculous - the problems of the aging population are much larger when the percentage of the population that's retired increases. This is when these new people will become productive members of society.

But it gets better with this brilliant rebuttal by a commenter.

"This is rubbish - as usual, the "experts" regard paid employment as the only real job to have. With more women out of the workforce having babies (an assertion I challenge anyway), there are more jobs for our young people who actually need a job and a start in life. Stop attacking women who know that what is best for their families and therefore the society we all have to live in is to be active in bringin up their own children. Provide your proofs." - Celia of Melbourne

This is what we call the lump of labor fallacy. Bad argument against bad argument. It's election season, all right.

Best Paragraph I read Today

Our real choice is between two candidates who don't understand economics. And they both want to govern a country full of people who also don't understand economics while thinking they do. That makes the old, senile guy the only person in this scenario that isn't deluded or lying. He tells you up front that he doesn't understand economics.

From Scott Adams on the Dilbert Blog. The man does not get enough credit as an economist.

I will not cease talking about this

Good McCain:

Through his lack of support for ethanol, a fuel made from corn that benefits Iowa's farm economy, McCain, who has not campaigned in Iowa, made it clear he would take a stand for his issues. This was true whether or not the issues favored Iowa--making him look as if he was trying to appeal to his New Hampshire supporters more than gain the support of Iowans.

"I'm here to tell you that I'm going to tell you the things that you don't want to hear, as well as the things you want to hear, and one of those is ethanol," McCain said. "Ethanol is not worth it. It does not help the consumer."

And over time, he has gotten worse. Click that link. Read it.

No really, read it. And here is McCain being flat out hilarious.

But here's what's frightening: I agree with Jeff Sachs.

The issue of spiralling food and energy prices is also fueling an emerging debate over how much the rising prices can be blamed on ethanol production. The basic argument is that because ethanol comes from corn, the push to replace some traditional fuels with ethanol has created a new demand for corn that has thrown off world food prices.

Jean Ziegler, United Nations Special Rapporteur On The Right To Food, has called using food crops to create ethanol "a crime against humanity".

"We've been putting our food into the gas tank," Sachs of Columbia University said.

I mean, damn. I don't buy the right to food thing, but crime against humanity isn't so far off. Here's some of the details from a great editorial by David Ridenour.

Never mind that ethanol is helping spike food prices. Corn prices have already increased by 70 percent since 2005, and the U.S. Department of Agriculture projects they will rise an additional 10 percent to 20 percent this year.

But that's not the half of it. Corn-dependent livestock are also increasing in price. The USDA estimates that corn feed price increases added nearly 9 percent to the price of beef last year. But this doesn't include the indirect costs. U.S. beef cattle herds declined by 338,000 in 2007, increasing beef prices further, in part due to higher prices for feed, according to the American Farm Bureau Federation.

Ethanol advocates claim that rising corn costs have contributed only modestly to the overall increase in food prices. They're not being entirely honest, as they're only counting the direct costs of ethanol. They don't count, for example, increases in soybean prices resulting from farmers switching to the more lucrative corn crop. Soybean crops dropped by 11 million acres last year — much of it used to produce corn.

Here am I discovering an initial supply shock and one of the problems of ethanol - it takes fuel to transport ethanol since you can't pipeline it. Here I note congress tries to punish gas makers for charging more with the new ethanol regulations. And finally, I play the role of the silly optimist, thinking that since these problems are so simple, why not just fix them like this? You could even pay the corn growers a subidy if you'd feel better, because at least it wouldn't screw with world food prices as much. Is that too much a price to pay to make food more affordable?

Schools

So a charter school in Minnesota drew fire because it's basically a Muslim school. From the local news (HT Drudge):

Being a charter school Tarek ibn Ziyad Academy, or TIZA, is supported by tax dollars. The teacher told 5 EYEWITNESS NEWS the presence of religion she observed at the school took her b surprise.

TIZA Executive Director Azad Zaman insisted the school follows with state and federal laws.

"TIZA does not endorse any religion," he said.

However, TIZA Academy is sponsored by Islamic Relief USA, based in California.

Based in California! Gasp! The story gets interesting here:

The questions came after substitute teacher Amanda Getz taught at TIZA last month and told the Star Tribune about things she observed that day that shocked her.

"I've been in a lot of schools and I've never been in a school where they had washing rituals, or they had prayer, or where they had a room where you had to take your shoes off," Getz said.

"It is most likely that this substitute teacher was sadly mistaken," said Zaman.

He said the school follows state and federal guidelines when it comes to religion.

Granted, one can certainly argue the merits of the word ritual, especially since this is a TV news story so there is very little content. And rituals are a good way to make sure kids actually to remember to wash their hands, to be fair (maybe they should do something similar for doctors) But the blanket denials by Zaman (whose full name, Azad Zaman, is worth 31 points in Scrabble) are just plain hilarious. 'What? Washing rituals? This teacher is mistaken.' My favorite part:

State law requires the school to fly an American flag during school hours, however no flag flies outside of TIZA Academy.

Zaman told 5 EYEWITNESS NEWS he didn’t know how to work the flagpole.

THIS IS SUPPOSED TO BE A SCHOOL! If you don't know how, you learn how. Any 8 year old cub scout could tell you how. You hook the flag on and pull the rope. Not hard.

But speaking of learning, I figured I'd actually look this school up on Wikipedia, to see what I could learn. It's not that controversial, because no Wikipedia entry exists, so I went to the school's website. The school lunch menu doesn't contain any bacon, ham or pork. The school does not have a week long spring break, just the Thursday and Friday before easter, although it does offer a week long break during Ramadan. There is a break for Christmas as well as Eid-al-Adha (Abraham's willingness to sacrifice his son). They also teach the kids Arabic.

But really, this is not a religious school. The school is designed to cater to Muslim Students, who then make up more of the student body. Nothing wrong with that. But regardless, I'm still laughing at Zaman.

Local governments and sports stadiums

Lately, professional sports stadiums have been paid for through public financing more and more. Sports economists, though, have repeatedly stated that this is not an efficient use of taxpayer funding.

JC Bradbury has said a good bit over at Sabernomics about this, and he has a guest blogger, Frank Stephenson, talking about the Gwinnett Braves. Here's the traditional argument:

Adding together the $15,000 annual fee, the season ticket revenue split, and the naming rights, the Braves have paid $671,429 for their first five years in the stadium. A sensible way to compare this figure to the $14.9 million cost of the stadium is to think about the opportunity cost that taxpayers incur by having their $14.9 million tied up in a stadium rather than having it available for other uses. Economists typically measure such opportunity costs via an interest rate. Taking a conservative interest rate of 3%, taxpayers are sacrificing about $450,000 per year in interest in order to construct the baseball stadium. (Higher interest rates would imply a larger opportunity cost.) Since the Braves annual payments have averaged about $134,000 per year, they’ve paid a bit under one-third of the taxpayers annual cost of the stadium. Of course, the taxpayers aren’t really being repaid since the Braves payments go into the capital maintenance fund.

The "no, it does not pay for itself" argument, but something is missing. Fundamentally, there is the issue of the benefit derived from having a local team in terms of attracting and retaining people in the city. People who are more in demand have more options, and if given comparable salary packages when considering cost of living as well as similar advancement for oppurtunity, they may decide to go where the local amenities are more in their favor. Richmond has a symphony orchestra, a ballet company, colleges and universities, good roads, and it is within 2 hours of the beach or DC. But it is possible that someone may look at Richmond and say, there's no professional baseball team, so I will go to some other city instead.

If you think that sounds crazy, ask yourself if you would be willing to attend a large university, say more than 15,000 students, that does not have an NCAA division 1 football team. How much of Virginia Tech's reputation is based on the quality of their students, and how many of their students chose to go there at the margin because schools of similar cost and academic reputation did not have such a successful football team? If you compare schools with similar costs, reputation, often the tiebreaker will be a matter of which one looks like it will be more fun. By the same token, George Mason's applications drastically increased in 2006 during their Final Four run, and what did that do to average SAT scores and high school GPA? But what of their lack of an NCAA football team; how many musicians and music education majors were lost because they wanted to do marching band in college (although to be fair, how many were attracted because they hate marching band?)?