Archive for January, 2012

Charles Dickens

Tuesday, January 31st, 2012

We live in hard times, and all the indications are that they may get much, even very much, harder. No one, at any rate, would take a bet that they won’t.

The number of children in America claiming subsidized meals in school has shot up; the homeless are increasing by the hour; the formerly prosperous are laid off without so much as a thank you; the young struggle to find any work at all; beggars are making a comeback on the streets of cities as if they had been hiding all these years, waiting for the right moment to emerge from their subterranean lairs into the world above.

The February bicentenary of the birth of Charles Dickens, then, could hardly come at a more appropriate moment in economic history, for Dickens was the revealer, the scourge, the prose poet, of urban destitution—a destitution that, in our waking nightmares, we fear may yet return.

Theodore Dalrymple, “Hard Times Again“, The American Conservative, 23 January 2012.

So begins a fascinating essay on Dickens by English writer ‘Theodore Dalrymple’, the pen name of psychiatrist and retired prison doctor Anthony Daniels (born 1949). Click on the link to read the full essay.

HT: The Browser

free courses, from MIT

Monday, January 30th, 2012

This is a exciting news. MIT is launching MITx, a not-for-profit virtual university, with a wide range of free, open-access courses. For a small fee, students will be permitted to sit an exam at the conclusion of a course and, if they pass, receive a certificate of successful completion.

MITx is the next big step in the open-educational-resources movement that MIT helped start in 2001, when it began putting its course lecture notes, videos, and exams online, where anyone in the world could use them at no cost. The project exceeded all expectations—more than 100 million unique visitors have accessed the courses so far. ….

Beginning this spring, students will be able to take free, online courses offered through the MITx initiative. If they prove they’ve learned the material, MITx will, for a small fee, give them a credential certifying as much. ….

[This] could make the university the global nexus of online higher education, which is the way most people are likely to access higher learning in the future. In the hunt for the best and brightest students around the globe, MIT won’t need to guess who’s in the top 1 percent of 1 percent—it can simply pick them out of the millions of students who will enroll in MITx.

Meanwhile, it will be fascinating to watch MITx mint a brand-new form of academic currency. What happens when it enters circulation? Will other universities accept it as transfer credit, or employers as proof of skills? How will those credentials affect the fast-growing market for online credits and degrees, much of which is driven by the expensive for-profit sector?

Kevin Carey, “MIT Mints a Valuable New Form of Academic Currency“, The Chronicle of Higher Education, 22 January 2012.

MIT is the famous Massachusetts Institute of Technology, which is physically located in Cambridge, Mass. The university answers common questions about MITx here.

One question that I had was “Will MITx offer MIT degrees?” The answer is “No. MIT awards MIT degrees only to those admitted to MIT through a highly selective admissions process.”

A follow-up question I had was “Will MIT accept MITx credentials as transfer credit toward a degree?” The MIT FAQ does not answer this question. Kevin Carey seems to answer it when he writes “there should be little confusion between credentials issued by MIT and MITx. The latter won’t dilute the value of the former.” By implication, the answer is “Don’t count on MIT accepting MITx credentials for credit!”. This makes the experiment all the more fascinating.

HT: The Browser

class warfare and taxes

Saturday, January 28th, 2012

US journalist Christopher Caldwell looks at President Barack Obama’s call for a minimum 30% tax on those earning more than $1m a year.

Mitt Romney, a Republican candidate for US president, released his tax returns this week. They showed that he had paid just $3m on his 2010 income of $21.6m, which is just the tip of his quarter-billion-dollar iceberg of wealth. Mr Romney, in other words, is paying taxes at a lower rate than most of the middle-class Americans he seeks to rule. And this inequity is made possible in part by a special rule on “carried interest” that taxes the earnings of managers of private equity, such as Mr Romney, at the super-low capital gains rate of 15 per cent. ….

When Mr Obama and his fellow Democrats held the presidency, the House and a filibuster-proof majority in the Senate, they could have eliminated the carried interest accounting rule in a single afternoon. It remains in the tax code because Mr Obama’s party – which, let us not forget, holds the allegiance of 19 of the richest 20 postcodes in the US – wanted it there.

Christopher Caldwell “Class warfare need not be taxing“, Financial Times, 28 January 2012.

Mr Caldwell (born 1962) is a senior editor at The Weekly Standard, a neoconservative opinion magazine.

Cuba’s economic reforms

Saturday, January 28th, 2012

“We’re giving Etecsa a bit of competition,” says Michael Franco, who has regular takers for the iPhones he sells for $400 and no complaints about the government’s 50 per cent tax rate either. “Fifty per cent of what? It depends how much you declare.”

Cubans wonder about selling their houses – to foreigners of course, as no Cuban has sufficient capital although, paradoxically, only resident Cubans are allowed to buy.

“Judging from the Norwegian who bought next door for his Cuban wife, my house is probably worth $300,000,” says Nelly Sanchez who is thinking of downsizing from her four bedroom because her three children live abroad.

John Paul Rathbone, “Freedom comes slowly to Cuba“, Financial Times, 28 January 2012.

colonising the moon

Saturday, January 28th, 2012

Even by the grandiose standards of Newt Gingrich’s ideas, this was a big one. “By the end of my second term, we will have the first permanent base on the moon,” the presidential hopeful promised.

He may have tried to reflect the glory of a genuinely grandiose president. In 1961 John F. Kennedy announced the goal “before this decade is out, of landing a man on the moon and returning him safely to earth”. But why Mr Gingrich, who is busily trying to appeal to the Tea Party, would try to compare himself with a Democratic party icon is anyone’s guess. ….

There is one similarity between the Tea Party darling and the president of 50 years ago: both have been accused of a predilection for women who were not their wives. Beyond that, Lloyd Bentsen’s words to another Republican trying to reach the White House ring true: “You are no Jack Kennedy.”

Fly me to the moon“, Financial Times editorial, 28 January 2012.

the Inquisition

Friday, January 27th, 2012

The Vatican’s Inquisition records are kept mainly in a palazzo that is now the headquarters of the Congregation for the Doctrine of the Faith. For four and a half centuries they were closed to the public. Suddenly, in 1998 the Vatican opened the archive to outside scholars like Vanity Fair editor Cullen Murphy. In this essay, he explains what he has learned, and how the mindset of the Inquisition is with us today.

Looking at the Inquisition, one sees the West crossing a threshold from one kind of world into another. Persecution acquired a modern platform – the advantages afforded by a growing web of standardised law, communications, administrative supervision and controlled mechanisms of force. It was run not merely by warriors but by an educated elite; not merely by thugs but by skilled professionals. Every subsequent outbreak of persecution, political or religious, has been abetted by these same forces. They ensure that the basic trajectory of repression will always look remarkably the same. They suggest why persecution is so difficult to stop. And they help explain why the Inquisition template has translated so easily from the religious sphere into the world of secular governments and secular ideologies. Through the lens of the Inquisition we can glimpse the world we inhabit now.

When the Inquisition’s palazzo was built, in the mid-16th century, the Pope ordered words to be carved in a marble scroll over the front door – a kind of mission statement – establishing the building as a “bulwark against heretical depravity”. The words are gone now, removed by French troops during Napoleon’s occupation. It’s easy enough to remove some words – harder to erase a legacy.

Cullen Murphy, “Inside the heresy files“, New Humanist 127:1 (January/February 2012).

HT: The Browser

Cullen Murphy’s book God’s Jury: The Inquisition and the Making of the Modern World (Houghton Mifflin Harcourt, 2012; Allen Lane, 2012) was published in New York and London.

job satisfaction, sniper edition

Thursday, January 26th, 2012

Research in Canada has also found that snipers tend to score lower on tests for post-traumatic stress and higher on tests for job satisfaction than the average soldier.

“By and large, they are very healthy, well-adjusted young men,” says Peter Bradley at the Royal Military College of Canada, who is studying 150 snipers in Afghanistan. “When you meet them you’re taken by how sensible and level-headed they are.”

Stephanie Hegarty, “What goes on in the mind of a sniper?“, BBC News Magazine, 25 January 2012.

Not what I expected. The article, interesting throughout, focuses on the story of a particular well-adjusted sniper, Chris Kyle, who officially killed 160 people (his own estimate is much higher) during four tours of duty (2003-2008) with the US Navy Seals. Iraqi insurgents named him “The Devil of Rahmadi” and put a $20,000 bounty on his head.

Chris Kyle wrote a book about his experience, American Sniper (William Morrow, 28 December 2011), and was interviewed on 5 January 2012 by BBC World Service (Outlook). The interview can be downloaded here.

Alan Greenspan on capitalism

Thursday, January 26th, 2012

Alan Greenspan’s contribution to the FT series “Capitalism in Crisis” is a spirited defence of free-market capitalism. This comes as no surprise, since he is a follower of Russian-American novelist and philosopher Ayn Rand (1905–1982). Ms Rand was a fervent advocate of laissez-faire capitalism.

Greenspan, correctly in my opinion, attributes the economic success of countries in the past century to competitive markets. He fails, however, to defend capitalism from the charge that, unfettered, it produces a very unequal distribution of income. He touches on inequality only briefly, in two paragraphs:

During the past century …, competitive-market-driven economic growth created resources far in excess of those required to maintain subsistence. That surplus, even in the most aggressively competitive economies such as America’s, has been mainly employed to improve the quality of life: advances in health, greater longevity and pension systems that go with it, a universal system of education and vastly improved conditions of work. We have used much of the substantial increases in wealth generated by our market-driven economies to purchase what most would view as greater civility. ….

The often-assailed greed and avarice associated with capitalism are in fact characteristics of human nature, not of market capitalism, and affect all economic regimes. The legitimate concern of increasing inequality of incomes reflects globalisation and innovation, not capitalism. But an additional contributor to inequality in America is our immigration law, which “protects” many high earners from skilled migrant competitors. The American H1B programme is in effect a subsidy for the wealthy, a policy that is anathema to the supporters of capitalism.

Alan Greenspan, “Meddle with the market at your peril“, Financial Times, 26 January 2012.

I will restrict myself to just a few comments. Economic growth improves quality of life for those with rising incomes, but government action is necessary if everyone is to enjoy the gains. Markets alone do not ensure universal access to health care, old age pensions or education. Greenspan must know this. He should write it, instead of describing free markets/central planning in black and white terms. Real economies – including the US economy – are mixtures of markets and government planning (interference).

Greenspan writes that income inequality reflects globalisation and innovation. There is some truth to this. But wouldn’t incomes be almost as unequal in a closed, free-market system without international trade, capital flows or innovation? Wouldn’t there still be greed, crony capitalism and abuse of wealth? I think so, unless the initial endowment of wealth was very equal, but economists (fortunately) cannot run an experiment to test my hypothesis.

In any event, it is clear that capitalism’s ‘creative destruction’ produces winners and losers. Government can distribute some of the increased income from winners, so that everyone gains at least something from economic growth. Greenspan does not mention this. He advocates market solutions, for example allowing skilled migrants to compete with high earners. Competition from immigrants would not, I suspect, have any effect on bonuses of fund managers, or on incomes of the super-rich in general. Nor would it improve earnings of those in the bottom half of the income distribution.

Photos: Ayn Rand, Alan Greenspan

President Ronald Reagan in 1987 appointed Alan Greenspan (born 1926) to succeed Paul Volcker as chairman of the US Federal Reserve. Greenspan served in this position until January 2006, when President G.W. Bush replaced him with Ben Bernanke.

PensionReforms update

Wednesday, January 25th, 2012

The latest RPRC Update, a quarterly publication of the Retirement Policy and Research Centre at the University of Auckland (New Zealand) is now available online. On page 4 is the following note:

PensionReforms loads 500th abstract
PensionReforms, sponsored by the then newly formed Retirement Policy and Research Centre at the University of Auckland?s Business School, was launched in 2006.

The milestone abstract (the 500th), loaded on 2 November, is about the pension problems faced by China: state and private pensions aren’t working so reform is needed. Why not a Universal Pension? Benefit design will determine cost. The pension may improve social/political security and reduce the gap between rural and urban populations more.

Top ten by visitor numbers since 2006:
1. Sri Lanka – Universal Pensions (2008) more
2. Mauritius – Universal Pensions (2003) more
3. Saving in the absence of property rights (2006) more
4. Chile – 20 year review (2004) more
5. OECD – Pensions at a Glance Asia (2009) more
6. EC – ageing populations (2009) more
7. New Zealanders – behaving rationally (2007) more
9. World Bank re-thinks three pillars (2005) more
10. New Zealand – why extend KiwiSaver? (2007) more

For unknown reasons, abstract #8 is missing. This list differs somewhat  from the “Top 10” list at, so I was unable to correct it.

the US tax system

Wednesday, January 25th, 2012

Bruce Bartlett, an historian who became a senior economist at the White House, US Congress and Treasury, writes that Barack Obama missed an opportunity to call for reform of a tax code that “has become cluttered with far too many special tax breaks that cost a great deal of revenue and show little proof of effectiveness”.

Barack Obama effectively threw cold water on any tax reform effort in his State of the Union Address on Tuesday. ….

The president proposes a variety of … special tax breaks for activities in current political favour and penalties for individuals and businesses in disfavor. This is exactly the sort of thing that created America’s current tax mess. ….

Mr Obama’s decision to move away from reforming the tax code this year is both a substantive and political error that I believe he will come to regret.

Bruce Bartlett, “Obama is tinkering with a tax system that needs fundamental reform“, The A-List, Financial Times, 25 January 2012.

Bruce Bartlett (born 1951) was domestic policy adviser to President Ronald Reagan, a Treasury official under President George H.W. Bush, and worked also for Congressmen Ron Paul and Jack Kemp. He is author of numerous books, including Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy (Doubleday, 2006) and The Benefit and the Burden: Tax Reform – Why We Need It and What It Will Take (Simon & Schuster, 2012).

Bartlett left the Republican Party and now considers himself to be an independent:

I think the party got seriously on the wrong track during the George W. Bush years, as I explained in my “Impostor” book. In my opinion, it no longer bears any resemblance to the party of Ronald Reagan. I still consider myself to be a Reaganite. But I don’t see any others anywhere in the GOP these days, which is why I consider myself to be an independent. Mindless partisanship has replaced principled conservatism.

Where is the GOP of yesteryear?“, Democracy in America, The Economist, 2 September 2009.