perfidy

Over at Begging to Differ, Venkat collects a few musings from around the inter-web on the subject of social security and investor choice, and asks the astute question, "they sound like they have it all figured out. I wonder why these people aren't money managers??"

For instance, Professor Bainbridge (an actual economist) fisks a Los Angeles Times article by Peter Gosselin, saying:

nvesting is really rather simple. You park your money in no-load passively-managed index funds, weighted as heavily to equities as your risk tolerance can take, and then you get on with the rest of life. As Nobelist Clive Granger told Gosselin (not that Gosselin got the point): "I would rather spend my time enjoying my income than bothering about investments," which is exactly what passive investing allows you to do. If you need proof at length, be sure to check out the latest edition of Burton Malkiel's classic A Random Walk Down Wall Street.

By the by, Gosselin has tapped into (but not really understood) some of the learning on behavioral economics:

Analysts examining the actual behavior of individuals — as opposed to what most economists' theories predict — find that it rarely conforms to standard notions of what's rational. Instead, it often involves systematic mistakes that end up producing the very opposite of what people say they intend.

That's not exactly right, especially the adjective "rarely," but set that aside. As I wrote in a TCS column a while back, Richard Thaler, the leading exponent of the behavioral finance theories Gosselin invokes, has made a telling admission:

Mr. Thaler … concedes that most of his retirement assets are held in index funds, the very industry that Mr. Fama's research helped to launch. And despite his research on market inefficiencies, he also concedes that "it is not easy to beat the market, and most people don't." (Link)

So if personal accounts come down the pike, put your money in passively-managed no-load funds and forget about it. If the Democrats and their MSM allies like Gosselin manage to block personal accounts, put what little discretionary money Uncle Sam leaves you after taxes in passively-managed no-load funds and forget about it. In the long run, you'll come out ahead of the game with a lot less stress.

Well, yeah. Bainbridge is dead right: if you're not a professional investment manager, or if you don't have the time or inclination to keep yourself constantly updated as to what moves to make to optimize your market position, it's best to park your dough where it will do the most good for the least amount of work. Investing is simple... it's just not easy. But t's also easy, per Bainbridge, Galt, and Collier, to sit back and armchair-quarterback other people's best interests. It's even easier to look at, say, GM's pension plan and say "how stupid for them to fund pensions with debt!" Sure, it's clear now that that scheme didn't work out so well for the company or for GM's pensioners, but you know what they say about hindsight. Not that there's nothing to objecting to recent scandals and stories -- it is in fact dumb to invest your pension in the company you work for. But what do you do when, like my father-in-law, the company invests your pension in its own stock, and you don't get a say in that?

So it is that I am brought to wonder about Social Security and what's actually a solid idea. Maybe I'm being unspeakably naive, but I really do wonder have to wonder about these "private accounts" they talk so much of these days. They sound in theory like a decent proposal, but without more information it's not worth deciding whether they are a good idea or a bad one. Kind of like saying "yes, I would like a sandwich," but not knowing whether you're getting shit or salami.

I'm assuming that if private accounts ever get off the ground, the Social Security folks will have to offer a limited and relatively risk-averse basket of intrinsically diversified investment instruments to consumers (i.e., me and you.). But if we are held to investing our SS monies in, say, a limited group of mutual funds or even hybrid instruments containing a yearly adjusting blend of mutual funds and bonds like Vanguard's "Target Retirement" funds, then how much "choice" will we really have? As I see it, that's probably the best outcome for everyone, but it raises tough questions as to who gets to manage that money and how they will get paid. Harvard University recently weathered a controversy during which the money managers for their endowment got gigantic bonuses after a very, very good year. The controversy was over whether it was right for a private institution, whose income is dedicated to the future improvement of the institution only, has a right to pay money managers huge bonuses. On the "no" side, there's what I just said. Universities exist to educate students, and funds need to be carefully and dutifully put to that end. On the "yes" side, there's the very powerful argument that to attract and retain top managers who are more likely to achieve top returns, you have to pay them as well as they'd be paid at Fidelity or Goldman Sachs.

Who will be the government's money managers? Will those contracts be competed for by private firms? Will their fee structures and practices then be regulated by the government, making those contracts into golden handcuffs for the companies that win them? Is it right for the US government to funnel Social Security through private firms?

And what if the government's money managers work for... the government? Not only will we see the Harvard controversy writ in flaming letters ten miles high every time a good year comes around, but when's the last time a government bureaucracy excelled at anything productive? Just what we need... surly underpaid career bureaucrats with bottom-tier MBAs chucking our money into whatever's easiest.

But if we as investors are given more latitude to invest our gubmint pensions, is that better? I have asked, and been assured that, even if everyone in the country puts all the weight of their social security money into index fund account, it isn't enough to skew the market. That's a big market. But what happens if we are given more freedom to invest, and actually use it? In Sweden, every citizen got a telephone book sized pamphlet listing every single investment choice they could ever want for investing their state pensions. That turned out very poorly. If the menu gets too big, and no guidance is given, investors make wildly foolish choices. Even if we were offered a more modest palette of investment choices, what would the effects be of periodic "dumb" investor-driven SS-money gold rushes on small market segments that get a lot of hype? Will the emerging markets securities market and the small-cap widgets market periodically bubble and crash as overeager and underthinking investors move their money around? Not that most people will, probably. But the dim stars could ruin the game for everyone.

Hei Lun of Begging To Differ expects that whatever options we get, it will probably be something like we now get for our 401(k)s - a dozen or two dozen limited options keyed to different horizons and risk aversities. That would be perfect. But again, who will manage that money?

Me, I'm not a money manager because I don't have the quant skills, and because I spend too much time wringing my hands over naive questions like I've just posed. But naive as they are, I would really like to see them answered before I throw my support behind the President's, or anyone's, plan to overhaul Social Security.

One more thing. Some critics see the President's proposal to means-test Social Security payments as an attempt to frame Social Security as welfare. I hope that doesn't happen, and I really hope that pensions and welfare don't become conflated in people's minds. We're a rich country, and as I see it there's nothing wrong to lending a hand to old people who have worked all their lives and have nothing (or very little) to show for it.

In a comment to my economics post below, GeekLethal coins the term "onanomics" to describe that branch of economics that manages, through narrowly modeled, tightly construed conditions, to describe absolutely nothing of use. Good coinage.

This weekend, I was watching the Sunday news cycles when I saw footage of Laura Bush speaking at the yearly dinner they throw to persuade the White House Press Corps that they are something better than slime you scrape off a shoe. The networks all replayed that sorta-funny but really upsetting set of jokes where W is so dumb he once tried to milk a male horse, so easygoing he is in bed by 9, and so unsubtle that he likes to fix every problem on his ranch no matter how big or small with a chainsaw... which is why he gets along so well with Cheney and Rumsfeld. What? Did Laura Bush just call her husband cack-handed and dim, with a penchant for unintrospective bumbling and jerking off horses, and then play that for laughs?

Almost as good as last year when they did that whole "nope... no WMDs under here montage" with George looking under couches and in closets. Laff freakin riot.

Anyway, the word that popped into my head to describe Laura Bush's performance at the Press Corps dinner was "macrotesticularity." As in, "my, that was awfully macrotesticular of her to play our nightmares for laughs like that."

Bet you didn't know that a post about neologisms was going to degenerate into a takedown of the President's speechwriters, foreign policy, and taste for chainsaws, didja?

[wik] I should probably be clear here. I don't think the President is stupid. To begin with, that would mean that his opponents are even stupider than he is, and although there is ample evidence to support that thesis, all that can be proven is that his opponents are less smart, not that the President is stupid. Moreover, stupid men don't make President. Period. Now, that does not mean that George W. Bush is far to incurious and prone to what I would call lack of insight, but that's a matter of taste. Au chaque ses propres, you know?

But to make a funny out of the President's supposed lack of intelligence is neither funny, reassuring, or particularly worthwhile for anybody. If he's that stupid that he jacks off horses and can't be bothered to figure out why, say, Turkmenistan's Islamic crisis is different from Sudan's, that's horrible. If he's not that stupid than joking about how he is is just sort of tasteless.

[alsø wik] I should also be clear on another point. I thought Laura Bush was pretty funny; they were funny lines. Or as it occurred to me later, they would be funny lines in another context. Unlike certain moral majoritarians, I have no problem with the First Lady making horsejacking jokes, and unlike some uptight liberals, I think it's funny to laugh at the President while retaining some respect for the office. But my mind's subprocesses have been working it over the last couple of days, and at some point I began to realize that jokes about the President's smarts are weak, tired and lame. Where's Bruce Vilanch when you need him?

[alsø alsø wik] I should also also be clear that I really haven't spent very much time thinking about this. Reading this post over, I come off pretty uptight. In reality, I'm not all that bothered by any of this and in fact have spent far more time writing about it than I have fretting about it. So I'm going to move on now, and post something about robots or music or boobies, or robots with musical boobies.

[wi nøt trei a høliday in Sweden this yër?] Ohhh, but this is too good to pass up! Big Time Patriot of blogcritics recommends that we test the mettle of the FCC and lodge formal complaints about the hot man-on-beast penile manipulation talk aired on CSPAN. If a blurry accidental nipple is worth half a mil, what's the going fine for horse dong?

I'm going to continue the amateur econoblogging, this time courtesy of Loyal Reader #0016/EDog.

DEMOCRATIC
You have two cows.
Your neighbor has none.
You feel guilty for being successful.
Barbara Streisand sings for you.

REPUBLICANISM
You have two cows.
Your neighbor has none.
So?

SOCIALIST
You have two cows.
The government takes one and gives it to your neighbor.
You form a cooperative to tell him how to manage his cow.

COMMUNIST
You have two cows.
The government seizes both and provides you with milk.
You wait in line for hours to get it.
It is expensive and sour.

CAPITALISM, AMERICAN STYLE
You have two cows.
You sell one, buy a bull, and build a herd of cows.

BUREAUCRACY, AMERICAN STYLE
You have two cows.
Under the new farm program the government pays you to shoot one, milk the other, and then pours the milk down the drain.

More below the fold.
AMERICAN CORPORATION
You have two cows.
You sell one, lease it back to yourself and do an IPO on the 2nd one.
You force the two cows to produce the milk of four cows. You are surprised when one cow drops dead. You spin an announcement to the analysts stating you have downsized and are reducing expenses.
Your stock goes up.

FRENCH CORPORATION
You have two cows.
You go on strike because you want three cows.
You go to lunch and drink wine.
Life is good.

JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.
They learn to travel on unbelievably crowded trains.
Most are at the top of their class at cow school.

GERMAN CORPORATION
You have two cows.
You engineer them so they are all blond, drink lots of beer, give excellent quality milk, and run a hundred miles an hour.
Unfortunately they also demand 13 weeks of vacation per year.

ITALIAN CORPORATION
You have two cows but you don't know where they are.
While ambling around, you see a beautiful woman.
You break for lunch.
Life is good.

RUSSIAN CORPORATION
You have two cows.
You have some vodka.
You count them and learn you have five cows.
You have some more vodka.
You count them again and learn you have 42 cows.
The Mafia shows up and takes over however many cows you really have.

TALIBAN CORPORATION
You have all the cows in Afghanistan, which are two.
You don't milk them because you cannot touch any creature' private parts.
You get a $40 million grant from the US government to find alternatives to milk production but use the money to buy weapons.

IRAQI CORPORATION
You have two cows.
They go into hiding.
They send radio tapes of their mooing.

POLISH CORPORATION
You have two bulls.
Employees are regularly maimed and killed attempting to milk them.

BELGIAN CORPORATION
You have one cow.
The cow is schizophrenic.
Sometimes the cow thinks he's French, other times he's Flemish.
The Flemish cow won't share with the French cow.
The French cow wants control of the Flemish cow's milk.
The cow asks permission to be cut in half.
The cow dies happy.

FLORIDA CORPORATION
You have a black cow and a brown cow.
Everyone votes for the best looking one.
Some of the people who actually like the brown one best accidentally vote for the black one.
Some people vote for both.
Some people vote for neither.
Some people can't figure out how to vote at all.
Finally, a bunch of guys from out-of-state tell you which one you think is the best-looking cow.

CALIFORNIA CORPORATION
You have millions of cows.
They make real California cheese.
Only five speak English.
Most are illegals.
Arnold likes the ones with the big udders.

Late last week I came upon a new paper from the National Bureau of Economic Research that caught my fancy, called Rockonomics: The Economics of Popular Music. The abstract reads

This paper considers economic issues and trends in the rock and roll industry, broadly defined. The analysis focuses on concert revenues, the main source of performers ' income. Issues considered include: price measurement; concert price acceleration in the 1990s; the increased concentration of revenue among performers; reasons for the secondary ticket market; methods for ranking performers; copyright protection; and technological change.

For economists, this is actually a pretty interesting idea; I don't know of any solid studies that exist on the economics of the music biz.

However, I hadn't reached page two before I found something so egregiously lazy and wrong that I had to put the paper down and stop reading. Authors Marie Connolly and Alan B. Kreuger, both of that cidadel of Rock known as Princeton, of course have to start their paper by defining what the "Rock and Roll Industry" is in the first place. Leaving aside the incredible conceptual and grammatical slippage inherent in categorizing popular music over the last few decades as "The Rock and Roll Industry," the coauthors do a pretty good job of nailing down what their sample set will be:

Here, we will define popular music as music that has a wide following, is produced by contemporary artists and composers, and does not require public subsidy to survive. This definition rules out classical music and publicly supported orchestras. It includes rock and roll, pop, rap, bebop, jazz, blues and many other genres. What about Pavarotti? Well, we warned you that the border of the definition can be fuzzy. If the three tenors attract a large following and are financially viable, we would include them in the popular music industry as well.

So far so good, except for the weird decision to separate out bebop from jazz, and the continued insistence on using "rock and roll" as the defining paradigm of blues-based (mainly) white-people music as though Billy Joel can be comfortably put in a basket of commodities alongside Minor Threat.

But that's where the going gets really nutty. The authors write,

Why is popular music worthy of a handbook chapter? There are several responses. . . .[F]or many fans popular music transcends usual market economics and raises spirits and aspirations. In this vein, for example, Bruce Springsteen once commented, “in some fashion, I help people hold on to their own humanity, if I'm doing my job right.” Dewey Finn, the character played by Jack Black in the hit movie, School of Rock, went even further, immodestly claiming, “One great rock show can change the world.” The rock and roll industry arguably started as a social movement intended to bring about political, economic and cultural change, as much as it did as a business. Certainly, popular music is an important cultural industry. [My emphasis]

Bullshit. Bullshit. Bullshit. "Rock and Roll" did not arguably start as a social movement yadda yadda, unless by "argument" you mean "irritatingly lazy statement that will cause people to argue with you." "Rock and Roll" did not start as a social movement except in the fusty cheap-pulp pages of Rolling Stone compilation books full of lazy mythologizing and glory-days reminiscing about the time in 1967 when the Airplane played that one benefit for the Diggers that raised some cash for some homeless people to eat with. Leary was there too! With LSD! Ahh...those were the days! What was the explicit sociopolitical agenda of "My Ding-a-Ling?" Or of the film soundtrack extract "Rock Around the Clock?"

"Rock and Roll," to use the authors' term, started for two reasons: for artists to get paid, and for artists to get laid. Just because the martini set thought Lead Belly's singing was perfect for their Worker's Struggle don't make it a movement. Just because Bruce Springsteen writes bad poetry about factories and bad cops doesn't make it a movement. No matter what it might from time to time temporarily become (and rarely for long, or to much end), the music business has always been a business, whether the incentive for the performer is increased social capital, a tangible good, or currency.

I don't mean to shovel all my vitriol on these two well-meaning economists, but it really bugs me that every time a new discipline discovers that music is worthy of study they feel compelled to try to reinvent the Stratocaster. In this case, it's as if dozens of journal articles, hundreds of books, and thousands of published interviews don't already exist in the popular press, musicology, sociology and history-- articles that have long since evolved a highly refined set of assumptions about the history of popular music that no longer have much room for arbitrary handwaving about Rock And Roll as a Social Movement For Uh Making The World Better And Stuff. That's high school term paper thinking. In internet terms, these authors have not RTFFAQ and are acting like total n00bz begging to be pwned. QED. DOA. SOL. etc.

Rock and Roll changes lives because people hear the music and are compelled to do something. It's internal; it's individual; it's atomized, ephemeral, and (unfortunately for economists) almost totally unmeasurable. Rock and Roll does not, NOT NOT NOT, change lives because an artist sits down in the studio and says, "today, I'm going to change the world." That's what got us "We Are The World! A paper on the economics of the concert industry need not even go down this road if it aims to be taken seriously.

As for the rest of the paper, I haven't been able to pick it up again thanks to my lingering irritation. The lesson for today is: even the most revolutionary theses can be derailed by lazy hand-waving in the introduction.

A new government report says that the net worth of American households jumped $2 trillion over the last quarter to $48.53 trillion. That means that if Ross had his way, every single person in the US would have $150,000 and then the economy would immediately collapse.

This no comments BS is really, well... BS.

GeekLethal's cockleswarmer about the VA's "no money down" home loans remind me of the ol' Lionel Hutz classic:

Hutz: All right gentleman. I will take your case. But I will require a thousand dollar retainer.
Bart: A thousand dollars!? But your ad says "no money down".
Hutz: Oh, they got this all screwed up. [corrects ad with felt-marker to read, "Works on contingency? No, money down!]
Bart: So you don't work on a contingency basis?
Hutz: No, money down! Oops, I shouldn't have the Bar Association logo here either. [Hutz eats ad]

I'm convinced that buying a house or car is a form of psychological torture, and it is a poor reflection on human nature that car salesmen and mortgage brokers exist. In a just world, they would not. Then again, what would we do with all our sadists...? You can only have so many prison guards and DMV staffers.

(Thanks to snpp.com for just bein' them.)

As many loyal readers know...alright, as BOTH loyal readers know, there is a multitude of benefits that come from military service.

Some benefits are genuinely and immediately useful, like the GI Bill or Army College Fund; some more abstract, like learning how to lead or, if you're a slack-dick, at least learning how to follow properly. Other bennies are too grim for many to consider, such as survivors' benefits from life insurance or, under certain circumstances, burial at Arlington National Cemetery. Yet more are just fucking cool, like never, ever getting a speeding ticket while in uniform, or having chicks dig you.

But one in particular I've learned is not all it's cracked up to be: the VA mortgage guarantee. Assuming your credit history and income are in order and you can get a mortgage in the first place, the VA will back 100% of the purchase price. In other words, qualifying veterans can buy qualifying homes for no money down.

Thing is, you have to find out the hard way that this program has nothing to do with other up-front costs or fees. Now, I was a soldier and then a student before I got my first big-boy, grown-up job. In essence, I didn't make a penny beyond my immediate survival needs between 1989 and 2000. So I figger, "Super, I'm a veteran and can buy a house with enough dough to make the payments on it. That 20% down is for suckers. Sweet!"

Not so fast, stud:

-Expect to have at least 3% of the selling price on hand. Unless you have cash money to put down, even 3%, few sellers will take you seriously. And if the seller has other offers, from people who can put 10%, 20% down on the spot, you're not competetive. So, in this part of the world, have at least $6,000 for that.

-Plan on $600 for mandatory inspections and appraisals.

-Plan on at least $800 for 1 year's homeowner's insurance prior to closing.

-Figure, conservatively, $6,000 cash available at closing for attorney's fees and any other fees levied by the bank or other activities.

-And don't forget establishing that escrow account for property taxes! (in my case, $2,700)

So this "100% financing", while technically factual, doesn't actually mean that you can buy a house without having alot of cash at hand. Like, $10,000 to throw at mortgage officers, lawyers, and bug inspectors without even beginning to apply $$ toward the sale price.

I can't honestly slag the program, because without it I'd be back in a condo, and I would rather eat BOTH pairs of my size 10 (UK) 8-eyelet Docs than deal with the boneheaded foolishness of condo associations.

But hey VA, it might be nice if you let folks know that no money down kinda doesn't really mean no money down.

It depends on which ten days you look at!

If any of us tried this, the IRS would hit us so hard our granchildren would feel it. Our Fearless Leader's Fiscally Prudent And Unassailably Conservative Medicare plan will now cost north of One... Trillion... Dollars all told. In case you're confused, $1.2 Trillion is more than $720 Billion, which is another estimate, which is bigger in turn than the $400 Billion that we were all told - and none of us ever believed - the program would cost in the first place.

So how'd they do it? Simple! They lied!

When the Medicare bill was passed, the Congressional Budget Office said the cost would not exceed $400 billion over 10 years. In a letter to The New York Times published on Nov. 20, 2003, Thomas A. Scully, who was then the Medicare administrator, wrote, "We are spending $400 billion."

Just two months later, in January 2004, the White House said the cost, for the same 10-year period, would be $534 billion.

Dr. McClellan said Tuesday that "there has been no significant change in the cost of the drug benefit" for the years 2006 to 2013. But, he said, the new estimate covers two additional years, 2014 and 2015, when Medicare enrollment will be larger and drug prices will be higher. In 2015 alone, he said, Medicare will spend well over $100 billion on the drug benefit.

Assumptions about the cost of the Medicare drug benefit were included in the budget that Mr. Bush unveiled on Monday. A table in one volume of the budget, titled "Analytical Perspectives," shows the drug benefit as costing $345 billion from 2005 to 2010.

Lawmakers said they were shocked to see that number because it was close to the $400 billion figure they had previously been given as the price tag for a full decade. Estimates prepared by the chief Medicare actuary show that the spending for the prescription drug benefit will total $1.2 trillion from 2006 to 2015, before taking account of income that will offset some of that cost.

The best part of the foregoing is the ludicrous misdirection employed to sell the plan. See, the original estimate was from 2004-2013, which is in fact a ten year period - just not a ten year period in which the bill takes effect. The new new estimates cover the years 2006-2015, ten years in which the bill will be fully funded and the Giant Money Hoover fully operational. See how it works? Costs + Timeshift = Big Big Savings!

Let's say my car costs $10000, payable in monthly installments over five years.(Actually, it would cost me plenty more than that with interest factored in, but interest is haaaaaard so I will leave it aside for now.) If I say my car will cost me $10000 over five years, I can't just save some money by picking a random five-year window and computing the cost then (My car cost me $0 - free! - from 1888-1893). But the car is not free, and that $10000 is still due in a very real and binding sense, if I am going to continue having the dual pleasures of a car and a sound credit history. There's no getting around it. And yet, picking a time series at random seems to be good enough for government accounting.

I wonder if I could try this the next time I get audited. "Yes sir, I did make $0 last year. I only counted the hours from midnight-6 AM, and I made no money during that time. Why - is that a problem?"

[wik] Not to harp on this but... if these are the kinds of 'facts' that entered into the Bush administration's policy planning of Medicare reform, what other 'facts' are attached to other initiatives? Not that every President doesn't do it, but I seem to recall myself carping about the same tactic when Clinton used it, and Bush I before him. Before that, I only cared about GI Joe, rock guitar, and homework.

Loyal reader #0017 (EDog) notes that pizza delivery drivers in Detroit are trying to start a national union of pizza drivers, arguing "the large chains have been taking advantage of them for years."

Well, yeah. That's why a union won't fly. It's also why there's no union in the music industry or the temp agency world. Any job that requires marginal skills and draws on a mobile or unstable workforce can never unionize: there are literally hundreds of people who would gladly kill you for your shitty job.

But still, good luck guys. If you succeed, and my pizza is late, am I gonna have to file a grievance?

Something to raise the ire of our beloved Ross and the economic question, by way of relatively-new-to-blogging, just-moved-to-DC Clutch Pearls.

The idea shop's subtitle, "Where the dismal science gets groovy" seems like an impossible claim, on the order of Kerry's idea that Republicans will reinstitute the draft. But reading a few of the posts over there, it seems that they are making good their boast.

I have recently been trolling job sites in a desultory fashion just to see if there's that one hott opportunity out there that I cannot afford to pass up. I have a pretty good gig here at the Institute for Advanced Ensmartening, but you never know what might be out there.

Job searching is just about the least fun pastime I can imagine, even now, when for the first time in my life I'm not under the gun to find something before I get evicted for non-payment of rent. To lighten the time with some gallus-pole humor, I like to play a game called "Bid Johno Low" where I try to find the job listing with the most outrageously insulting salary offer based on my education. I got an MA in history for two reasons: I am absolutely apeshit in love with US history; and I thought it might be cool to be a professor. While both conditions still apply, I found out that graduate school life is not for me and washed out with a "terminal MA," which in a history world which values Ph.D's only for prof jobs might as well be "terminal cancer." I've also got an undergraduate degree in music, which qualifies me to play in subway stations around the world, and also to scowl disapprovingly when bar bands play solos in pentatonic minor over songs in major keys. I should get a degree in English Lit just to round things out.

Today I came across a job that seems fairly cool, especially for one such as myself who has an MA in US History, has focussed on the American Revolution and Massachusetts history, and who wishes to work in a teaching or otherwise public role. The job: Historical Interpreter for the USS Constitution Museum. The responsibilities: research aspects of the Constitution's history and place the stories in a context both entertaining and enlightening for the edification of the museum's patrons. Full time including one weekend day. The pay: $8 an hour.

The last time I checked, I could make almost that much slinging coffee at a Starbucks. Again. I shoulda gone to business school.

As if you needed further evidence that the mooks at Enron represent the basest, crassest and most nakedly amoral side of America's financial industry, well... they were kind enough to tape their crime spree.

CBS has the details. Roll film!

"He just f---s California," says one Enron employee. "He steals money from California to the tune of about a million."

"Will you rephrase that?" asks a second employee.

"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day," replies the first.

When a forest fire shut down a major transmission line into California, cutting power supplies and raising prices, Enron energy traders celebrated, CBS News Correspondent Vince Gonzales reports.

"Burn, baby, burn. That's a beautiful thing," a trader sang about the massive fire.

"I want to see what pain and heartache this is going to cause Nevada Power Company," says one Enron trader on the tapes. "I want to f--k with Nevada for a while."

"What do you mean?" a second trader asks.

"I just, I'm still in the mood to screw with people, OK?" the first trader answers.

During California's rolling blackouts, when streets were lit only by head lights and families were trapped in elevators, Enron Energy traders laughed, reports CBS News Correspondent Vince Gonzales.

One trader is heard on tapes obtained by CBS News saying, "Just cut 'em off. They're so f----d. They should just bring back f-----g horses and carriages, f-----g lamps, f-----g kerosene lamps."

And when describing his reaction when a business owner complained about high energy prices, another trader is heard on tape saying, "I just looked at him. I said, 'Move.' (laughter) The guy was like horrified. I go, 'Look, don't take it the wrong way. Move. It isn't getting fixed anytime soon."

Employee 1: "All the money you guys stole from those poor grandmothers in California?

Employee 2: "Yeah, Grandma Millie man.

Employee 1: "Yeah, now she wants her f-----g money back for all the power you've charged right up, jammed right up her a—for f-----g $250 a megawatt hour."

And the giant kick in the nuts:

officials at the FERC, the very agency charged with regulating energy companies, has not only known about the tapes for two years, but fought attempts to release them.

Now Senator Barbara Boxer of California has called on the FERC to go after those who gouged energy consumers and end those expensive contracts -- or else.

"I said wait a minute, who are you representing here, those folks who cheated us or the consumers," says Boxer.

"I'm calling on President Bush to ask for the resignation of any FERC commissioner who continues to stand in the way of justice for California consumers who were victimized during the energy crisis," she says.

But to add insult to injury, Enron and other energy companies hope to pull themselves out of bankruptcy by collecting on the contracts, and are now suing their victims.

What I don't understand is why Bush isn't making a load of populist political hay out of crusading to have these mongoloids hung from the nearest lamppost. It would be so easy, and so good for his polling! "I may be a Texan businessman, but there are lines you do not cross. These evildoers must be brought to justice." But sadly, no. Just a black hole of procedure, obfuscation, and casual lassitude.

This should be right up Ross' ally - software and economics. A fascinating read.

Today in Slate, an argument against individual investment Social Security accounts.

The short version:

Average yearly return of US stock market over last 20 years: 12%
Average yearly return on holdings of individual holders of Vanguard 401(k) accounts: 4%

In general, institutional investors and trustee investors do a good job, Joe and Jane blow do a terrible job. Of course, this has far greater implications than just it maybe being a good idea to keep the Blows from meddling in their SocSec porfolios, but that's the hot button issue of the the day, so I'm gonna lean on that button 'til Buckethead squawks.

Laura writes on the income issue. She's discovered a census bureau paper with an interesting take on the income issue. Because I think there is a good chance it was my comment that got her to do it...

Hello, Laura! There's a good possibility that I am the commenter who inspired you to write this article. I've written quite a bit about the income distribution issue, and have quoted the Piketty/Saez paper often. For some additional historical perspective, there is an IRS study that tells us about income tax rates and how they have changed, over many decades. Saez has an additional paper which analyzes the mathematical effects of tax policy.

You've got a good find here. Read on...
I need some time to digest it, but here's some food for thought:

1. P and S specifically address this issue in their paper. What they indicate is that for the purposes of calculating income, the changes in households (decrease in the number of persons per household) holds roughly even across all income levels. That is, poor and middle class folks have about the same change in household size as rich folks do.

2. What we're talking about here is whether we're really "better off" than we were 30 years ago. By the median income measure adjusted for inflation, 99% of Americans are not. Their income levels have stayed almost constant. You make the argument that _per capita_ income is a better measure of how well off we are, and by that measure things have improved quite a bit; certainly far in excess of 4%-6%, depending on time frame. You also say that while the top income earners have seen dramatic increases in their incomes, per capita income has not remained flat, and that in the median, we are better off. I hope I have accurately represented your position.

Under debate is the following proposition: Tax policy over the past thirty years has resulted in improved circumstances for the median US person. I say it has not; I'd prefer not to characterize your position on that proposition directly, as you haven't addressed it.

The general discussion of whether we are better off or worse off, independent of government policy, is a different argument and has a different set of variables. The per-capita income argument is interesting, but has these flaws, in my opinion:

1. To a very large degree, smaller households are the result of cultural change. Government policy has probably had a minimal effect. If tax policy had not changed, we would still have smaller households.

2. It is distinctly possible that at some point in the future, the size-of-household trend might reverse itself. This would lower the per-capita income rate.

3. Taxation rates on our median individual are very important. The income numbers we are discussing are before taxes. An example: the Social Security Administration gives us a table of social security rates over time. We can see from this table that in 1969, the household income was reduced by about 9.6% (4.8 + 4.8). By 2003, this has risen to 15.3% (7.65 + 7.65). Tax rates have risen substantially over the time frame we are discussing. I'm not sure if that effect has been taken into account in the inflation adjustments.

4. The short-term effect of a drop in the number of persons per household may be beneficial in terms of income per capita. The backside of that is the forthcoming baby-boomer retirement. Taxes will have to rise dramatically, or benefits be cut, to preserve the system we have in place.

5. Employment to population ratios have altered over the time frame, as well. Using the tools at the BLS site, I'd say that we've seen roughly a 5% increase in employment to population.

6. Other forms of taxation have also risen dramatically (state, local, property, fees).

7. Maintaining a house is maintaining a house! Anyone who's had a roommate knows that it's a lot cheaper to share costs. Far more people today maintain their own households, and thus forgo the opportunity to share costs. This brings higher per-capita incomes into focus -- people need to be making more, per person, to maintain the same standard of living as before.

My sense of it is this: Income per capita is a poor way of judging how "well off" we are. The dramatic drop in "married with children" homes is a primary driver; that coupled with dramatically higher numbers of women working makes income per capita too squishy to work with.

And it's besides the point -- we're trying to figure out if tax policy has resulted in higher incomes! Tax policy has resulted in a drop of the top rate from over 90% (which was paid by only 500 taxpayers in the entire nation) way back when to the current top rate of 38.6%, which is paid by over 500,000 taxpayers (from the second Saez paper). The general trend has been a tremendous flattening of the tax system. We have pushed the tax burden "down" the income scale; the idea here is that this will lead to increased economic performance, which will "float all boats".

One of the most striking quotes from the Saez paper:

"Top income shares within the top 1% show striking evidence of large and immediate responses to the tax cuts of the 1980s, and the size of those responses is largest for the very top income groups. In contrast, top incomes display no evidence of short or long-term response to the extremely large changes in the net-of-tax rates following the Kennedy tax cuts in the early 1960s."

Very recently detailed studies have become available that show us what's really happened with household income. Using them, we can see that the supply-siders were just flat-out wrong. The huge tax cuts generated little other than massive increases in wealth for the recipients. While we were cutting these top tax rates, tax rates at the bottom and in the middle have been rising to compensate. The predicted effect of across the board increases in income simply did not materialize.

The statistic I would most like to see is after-tax income, broken down into per-capita and per-household measures, in inflation-adjusted dollars. Maybe there's a way to get there with the information sources I have.

Only ten, you say? Chris Edwards has a list of ten problems he sees with our current tax system. Most of this is fairly obvious, but it is rather disturbing to see it all at once.

I'd add to his list the problem of tax withholding. This is the big con, that allows the government to get away with confiscatory taxation. If you had to pay, as I have, all your taxes at once - you'd never think of it the same way again. When the IRS takes a little bit each paycheck, money that you never see, it's relatively painless. Like the frog/boiling water concept. You think, "wow! I'm getting money back!" if you have a refund. Of course, you're not. But if hundreds of millions of people had to write a check equal to a third to a half of their yearly income on this day, you'd have a tax revolt immediately after.

What if you could decide how your tax dollars could be allocated? How would you divy up the government's share of your income? More money for butter, or guns? Food stamps for whales, or send the Marines to Mars? James at Outside the Beltway links to an article by Charles Murray posing that very question.

I've thought about this before, and even posted this on the subject, though I'm too lazy to find the link. I think that a system like this would be hideously complex to implement. It would wreak havoc on the smooth functioning of the government, since budgets could be subject to wild swings tax dollars follow the fickle whims of the taxpayers. It might even be unconstitutional, since the Legislature is given the power to disburse funds from the treasury.

However, it would also be really cool. It would be a stupendous demonstration of faith in the common people. Lobbying would take on whole new forms, and arguable far less corrupt ones. Special interest groups would actually have to convince real, individual people that their particular hobby horses are the ones that deserve money. Groups of citizens could organize to direct funding to favored projects. Public involvement in politics would (alright, might) soar as people follow the projects they sent their money to. Think of the pride you would feel when you see a mars probe that you funded lands and starts poking the Martians in the belly. Or when a bomb that you funded blows up an enemy compound. And so on.

You'd have to allow some flexibility though - something on the order of a discretionary fund that would allow the government to maintain funding of secret projects, and of projects that got zeroed out by the populace but are deemed important enough to be maintained. Citizens could also be given the option of putting their money in this fund, or assigning one of several default distributions.

But I think that Charles and James are right that a large percentage of the funds would be pointed in the direction of tangible government services. And I really can't think of a downside to that.

Dean Esmay has another post on the whole jobs thingy. He excerpts a bit from a New York Times article:

The sharpest contrast can be seen by looking at the Labor Department's household survey, which shows a record high level of total employment. This survey reported an employment level of 138.3 million as of March - 600,000 more working Americans since President Bush took office in 2001.

Since the recession ended in November 2001, the payroll survey has reported 323,000 fewer payroll jobs, but the household survey has found 1.9 million more overall jobs. Common sense tells us that payroll jobs aren't the end-all, be-all of jobs in the new economy. Economists reflexively like payroll data because it has a bigger sample, but quantity doesn't always ensure quality.

An even bigger problem with the payroll survey is the evolution of what constitutes work. We can think of the payroll survey as counting all workers at traditional firms, plus some workers at start-up companies who have payroll records. But the payroll survey doesn't count individuals who are self-employed - despite the fact that their ranks have surged by at least 650,000 in just two years.

To which I would add this bit:

The payroll survey counts jobs, not workers. But counting payroll jobs is a questionable way of measuring America's evolving work force, especially in light of declining job turnover. The payroll survey's biggest problem is that it systematically double counts workers when they change jobs. Since somewhere between 2 percent and 3 percent of the work force changes employers every month, payrolls tend to be noisy. The illusion of lost jobs in recent years occurred because job turnover declined after 2000, first with the recession, then even more sharply after 9/11. As a result, 1 million jobs have been artificially "lost" in the payroll survey since 2001.

Despite last month's jobs surge, the payroll survey remains stubbornly out of whack with other economic indicators, even other labor indicators. Unemployment has been very low and is now near what economists call a "natural" rate. Real earnings rose by 3 percent over the last three years. Jobless claims are 10 percent below their historical average, and that's without adjusting for population.

Dean also links to this interesting post from soundfury, who makes the argument that except for the low payroll survey reports, the economy is better in every respect than in 1996, just before the tech bubble started inflating. Something to keep in mind, and bad news for Kerry.

Back when I worked in the music biz, we used to joke when times got desperate. Toward the end of my time at one company, when it was clear that the revenue stream had become a brackish drip, the marketing people came up with a bunch of naked pleas we thought would be funny to use as marketing taglines: "Wave/Particle Records: Catalog Sales Are Down." "Wave/Particle Records: Hey... We Gotta Eat Too."

The companies I worked for were not, and never will be, big-time labels with multiple chart topping releases. When the entire music industry suffered at the dawn of the new millennium, we suffered too. Broadly speaking, when industry-wide sales were off 11% one year to another, we could count on a dip too. It never seemed right to me to blame downloading for our woes. It stands to reason that the most-downloaded tracks, and therefore the albums most ostensibly affected by the loss of revenue that downloading might suggest, are blockbusters, not critical darlings or cult hits selling fewer than 50,000 copies (that's three orders of MAGNITUDE lower than a big #1 hit record sells). The records I worked were obscurities, not teenybopper rages, and even if they were being downloaded, it was not at any appreciable clip. And yet, everyone's sales dipped in lockstep.

(Interesting side note... it's actually a little disheartening to log on to KaZaA looking to see if anyone is sharing copies of the record you just spent six months working on, only to find that nobody is.)

Now there's actual Facts and Research to back up my gut hunch about downloads. A new working paper from two professors of business, titled "The Effect of File Sharing on Record Sales,' has concluded that "downloads have an effect on sales which is statistically indistinguishable from zero, despite rather precise estimates."

Professors Koleman Strumpf and Felix Oberholzer-Gee took a 17-week sampling of downloads made from the major filesharing networks, corrected for a galaxy of variables, and mapped the popularity of downloads to the Billboard sales charts and SoundScan data for a given week. Their findings: in the worst cases, downloading may cannibalize one in every 500 record sales, and for most releases it's more like 1 in 5000. Not exactly the stuff of industry holocausts.Although I'm not much of econometrician, and can't speak to the math, their conclusions are sound and reasonable based on the methods they used.

Predictibly, the RIAA is firing back (see this NY Times piece). Unfortunately for them, they're bad shots, pooh-poohing the notion that statistical sampling can be an accurate indicator of an entire population. Unfortunately for us, most people don't know or understand that.

Amy Weiss, an industry spokeswoman, expressed incredulity at what she deemed an "incomprehensible" study, and she ridiculed the notion that a relatively small sample of downloads could shed light on the universe of activity.

The industry response, titled "Downloading Hurts Sales," concludes: "If file sharing has no negative impact on the purchasing patterns of the top selling records, how do you account for the fact that, according to SoundScan, the decrease of Top 10 selling albums in each of the last four years is: 2000, 60 million units; 2001, 40 million units; 2002, 34 million units; 2003, 33 million units?"

Critics of the industry's stance have long suggested that other factors might be contributing to the drop in sales, including a slow economy, fewer new releases and a consolidation of radio networks that has resulted in less variety on the airwaves. Some market experts have also suggested that record sales in the 1990's might have been abnormally high as people bought CD's to replace their vinyl record collections.

That last bit there is the nut of the matter. The 1990s were the decade in which the first and possibly the last generation to treat recorded music as a major entertainment commodity went back to buy all the Beatles and Stones albums on CD. While they were at the store, maybe they stuck around to pick up the Stone Roses too. Those days are gone, and the that one change, along with other certain structural changes in how records are distributed, have hosed the deal for good.

The Times article makes another good point. Each album downloaded doesn't necessarily represent a lost sale. The burns I have in my collection are of records that I wasn't going to buy anyway, at any price.

Go read the paper-- it's long and mathy, but I can't find much to complain about. The numbers are there. Downloading represents a continued consumer interest in music, and if the labels cannot understand the difference between paying $0 for an album and paying $18, tough. The RIAA are a bunch of dupes, and it's too bad for them they, and the labels they purport to represent, can't understand that demand is not a given, profits are not a right, and that if they shit their own bed, it's they who have to sleep there.

Dean Esmay (whose last name always sounded vaguely piglatinish to me) talks about the miraculous or nefarious jobless recovery we find our selves in the midst of:

Bill Hobbs' ongoing investigation of the formation of Limited Liability Corporations--used exclusively by small businesses--has shown record growth in 10 states, now including Texas. Hobbs also notes that this explosive growth in small businesses does not show up at all on standard measurements of job growth, and would go a long way to explaining why unemployment is going down, welfare rolls are not increasing, homelessness is not increasing, but "jobs" are supposedly not being created.