Author Archives: jly

I haven’t really given much thought to the relative profitability of federal loans for the US government – I always assumed that they were just major losses; subsidizing the education of the populace. It turns out that that may not be the case – so says the Credit Slips Blog:

As student loan debt passed the $1 trillion mark, President Obama, speaking at Chapel Hill yesterday, called the upcoming interest rate hike on student loans a tax. He didn’t tell the half of it. Congress’ dirty secret is that the government makes a huge annual profit on student loans. According to the scrupulously nonpartisan Congressional Budget Office, $37 billion will flow IN to Treasury from student loans made this fiscal year at the 3.4% rate (on a net present value basis and net of about $1.5 billion to administer them.) The President’s current dispute with Congressional Republicans is about whether to increase this annual profit next year. The interest rate that students pay on the basic “subsidized” loan is slated to rise from 3.4% this year to 6.8% next year, unless the lower rate is extended by Congress.

But how can this be?

Treasury can borrow money at 0.5% or less, and lends it to students at 3.4%. Administrative costs are well below 1%. Prepayment risk is minimal; repayment stretches over many, many years, and the yield spread just keeps on coming. Interest rate risk is also minimal, given that Treasury can issue debt in a range of maturities.

What about the credit losses, you ask? While many loans go into default (about 10% projected for 2013 loans), credit losses are relatively modest. The Education Department assumes it will collect between 75% and 80% of defaulted loans (on a discounted NPV basis), using its supercreditor powers, especially wage garnishment and tax refund intercepts. There is no statute of limitations on student loans, and even bankruptcy discharge is difficult. The $37 billion Treasury profit for FY2012 is after allowing for estimated credit losses in the $5 billion range.

Check out the rest (and the comments) here.

Apparently getting on the wrong end of monkey social culture has important genetic implications.

Monkey 1: "You are not of the caliber of monkey for us"
Monkey 2: "Seriously"

Stephens Dubner and Levitt provide their take on the power of the president in their most recent podcast. Here’s a glimpse:

The episode begins with this simple, heretical question: Does the President of the United States really matter as much as we believe, and on which dimensions? In this new episode, you’ll hear men from both sides of the aisle, Donald Rumsfeld and Austan Goolsbee, agree quite heartily, at least on the topic of the President’s influence on the economy. You’ll also hear Steve Levitt talk about how President Obama let him down. Also: Justin Wolfers and Bernadette Meyler talk about how the President’s actual influence can be measured.

The conversations with Rumsfeld are particularly interesting. They then ask two economists, a law professor, and a business professor about the power of the presidency. I guess all of the political scientists were busy that day.

I’ve recently come across two articles in the New York Times that speak to internship programs and class issues. A response in The Ethicist provides a nice backdrop on the legality of internships (or lack there of in some situations).

The Fair Labor Standards Act requires employers to pay everyone — not just official employees, but anyone whom they “suffer or permit to work.” Purely educational positions are exempt from this requirement, but to qualify, an internship has to exist for the exclusive benefit of the intern. It can’t help the employer in any way; in fact, it’s a bonus if it actually impedes the employer’s operations.

Plenty of internships that violate employment law might still benefit the intern, of course, by giving her an inside track in a competitive field. Even crummy internships have some value. A firsthand glimpse of the mailroom may not be the stuff of dreams, but it’s more informative than no glimpse whatsoever.

Ethicist columnist Ariel Kaminar then goes on to comment on the underlying class issue:

That’s why, whether an individual internship is fun or awful, the system as a whole is unethical: it reserves those foot-in-the-door opportunities for people who can afford to go without a paycheck. That only entrenches the advantages that children of privilege already enjoy, further tilting an uneven playing field. And it undermines paid employees, who have the same interest you do in making sure every worker is fairly compensated.

You can check out the rest of the reply here. Also commenting on the internship situation is Charles Murray. To say that Murray’s work is controversial would be an understatement. However, he may have found common ground with critics in his op-ed article “Narrowing the New Class Divide.” In it he outlines a number of proposals to narrow the divide between the rich an not so rich. One of them involves internships.

For one thing, we should get rid of unpaid internships. The children of the new upper class hardly ever get real jobs during summer vacation. Instead, they get internships at places like the Brookings Institution, the American Enterprise Institute (where I work) or a senator’s office.

It amounts to career assistance for rich, smart children. Those from the middle and working class, struggling to pay for college, can’t afford to work for free. Internships pave the way for children to move seamlessly from their privileged upbringings to privileged careers without ever holding a job that is boring or physically demanding.

So let the labor unions win this one: If you are not a religious organization and have more than 10 employees, the minimum wage law should apply to anyone who shows up for work every day.

You can find the rest of his proposed reforms here.

Paul Krugman relays some of the work of his colleague (Alan Krueger) on inequality and social mobility with the graph below -first, a little context:

On the horizontal axis is the Gini coefficient, a measure of inequality. On the vertical axis is the intergenerational elasticity of income — how much a 1 percent rise in your father’s income affects your expected income; the higher this number, the lower is social mobility.

What would Daisy Buchanan say? I’m guessing that the movie version will be a disappointment. Check out more here and here.

The Situationists Blog details an interesting study on losing weight that has little to do with counting calories or carbs per se. Apparently it’s all in your head. Here’s an excerpt: Continue reading →

Some of these Gallup poll results outlined in the NY Times may surprise you – but most seem pretty predictable. Continue reading →

A recently posted paper on SSRN caught my eye - “Unconscious Influences on Judicial Decision-Making: The Illusion of Objectivity” by John Irwin and Daniel Real. Here’s an excerpt: Continue reading →

See it on 60 Minutes (via Boing Boing) here.

Soldiers of the 353rd Infantry near a church at Stenay, Meuse in France, wait for the end of hostilities.

… from the Department of Veterans Affairs website:

World War I – known at the time as “The Great War” – officially ended when the Treaty of Versailles was signed on June 28, 1919, in the Palace of Versailles outside the town of Versailles, France. However, fighting ceased seven months earlier when an armistice, or temporary cessation of hostilities, between the Allied nations and Germany went into effect on the eleventh hour of the eleventh day of the eleventh month. For that reason, November 11, 1918, is generally regarded as the end of “the war to end all wars.”

In November 1919, President Wilson proclaimed November 11 as the first commemoration of Armistice Day with the following words: “To us in America, the reflections of Armistice Day will be filled with solemn pride in the heroism of those who died in the country’s service and with gratitude for the victory, both because of the thing from which it has freed us and because of the opportunity it has given America to show her sympathy with peace and justice in the councils of the nations…” (See the rest here)

Here’s Robert Reich (below) addressing the economy in just a couple minutes with the aid of a magic marker and poster boards. You can check out the rest of the story here. H/T JL

... and this is where Google was born ...

Yes. One thing that some people may not know about the late Steve Jobs is that he and Steve Wozniak started Apple Inc. out of his parent’s garage. Indeed a lot of great business were started that way … and nearly every good band ever. Check out a cool listing of the garage origins of some businesses on History.com.

H/T J. Lax

and  why they are generally horrible. (Sigh) If only this was a real show … well done Saturday Night Live, well done. Enjoy…

Mebane Faber (Cambria Investment Management) has posted an intriguing paper on the social science research network, titled “Where the Black Swans Hide & The Ten Best Days Myth”. Here’s the abstract: Continue reading →

According to a recent poll, people have more confidence in blogs than in congress, but only by a bit – and both are at the bottom of the institutional pile with regard to public confidence — see the post on Volokh Conspiracy here and the table below: Continue reading →

Here are some interesting thoughts on the American financial situation by the guy who brought you “Black Swans” (and his co-author, a hedge fund manager). An excerpt: Continue reading →

“Should any political party attempt to abolish social security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a tiny splinter group, of course, that believes you can do these things. Among them are H. L. Hunt…, a few other Texas oil millionaires and an occasional politician or business man from other areas. Their number is negligible and they are stupid.” – President Eisenhower, 1954

See origins here.

H/T Prisonrodeo

Whether you agree or disagree this article by a former GOP staffer is certainly thought provoking and provides an interesting take on the future of trust in Congress. Here’s a brief excerpt:

Both parties are rotten – how could they not be, given the complete infestation of the political system by corporate money on a scale that now requires a presidential candidate to raise upwards of a billion dollars to be competitive in the general election? Both parties are captives to corporate loot. The main reason the Democrats’ health care bill will be a budget buster once it fully phases in is the Democrats’ rank capitulation to corporate interests – no single-payer system, in order to mollify the insurers; and no negotiation of drug prices, a craven surrender to Big Pharma.

But both parties are not rotten in quite the same way. The Democrats have their share of machine politicians, careerists, corporate bagmen, egomaniacs and kooks. Nothing, however, quite matches the modern GOP.

HT – Haptonstahl

I just got an email letter from the Starbucks CEO on the current political situation – or at least I think I did – it may be from someone else posing as him. I’m guessing that anyone who is on their list got this. In any event here it is: Continue reading →

I’m a little surprised that the mainstream press hasn’t picked up this story. From Universal Hub site:

A Boston lawyer suing the city and police officers who arrested him for using his cell phone to record a drug arrest on the Common won a victory today when a federal appeals court said the officers could not claim “qualified immunity” because they were performing their job when they arrested him under a state law that bars audio recordings without the consent of both parties.

See the rest of the article here. Read the First Circuit Court of Appeals opinion here.

So says Timothy Ferriss – well-known fitness and lifestyle expert. Beyond any interest Ferriss might garner regarding his cooking ideas (which I assume will be slow-carb oriented) the deal is interesting. Ferriss is a known commodity in publishing and his decision to go with Amazon means that he is passing up traditional publishing houses – which have worked very well for him in the past. It will be interesting to see how this all works out and I’m sure that the big publishing houses will be watching carefully — What is the future of the traditional book in an age of easy and effective self-publishing?

Please find below the abstract for my 2011 American Political Science Association Conference paper “Judicial Response or Litigant Strategy: Examining the Success of the Solicitor General” (with Brent Boyea and Damon Cann). If you find the abstract interesting, then you can download the paper here. Continue reading →

Again, from Boing Boing (and PBS):

Boing Boing posts on a new study featured in The Economist in which we gain some insight on why people of pretty modest means still support tax breaks for the rich. The conventional wisdom is that they aspire to be rich someday. Somehow this always seemed more like a made up, throw away line – especially when people are over a certain age and it’s not very realistic. In any event, it appears that experimental evidence suggests that it may be about keeping the people slightly below you in their place.

Instead of opposing redistribution because people expect to make it to the top of the economic ladder, the authors of the new paper argue that people don’t like to be at the bottom. One paradoxical consequence of this “last-place aversion” is that some poor people may be vociferously opposed to the kinds of policies that would actually raise their own income a bit but that might also push those who are poorer than them into comparable or higher positions.

Check out more of the post here.

Jon Stewart on how we perceive entitlements – with a nice case study (and a clip of George Carlin!).

http://www.hulu.com/embed/Gv5cnVPUttI2495yq2ArLA/4/292

In a rare showing of good economic news, it was announced recently that Georgia could sell peaches to Mexico – ending a 15+ year ban on Georgia peaches in the country due to concerns over invasive pests. Continue reading →

Billionaire Bill Gates has discovered what many have already known – improving meaningful education outcomes is not as easy as it sounds. Even his large contributions to education entities didnt make as big of an impact as he had hoped. He wisely points out that his contributions, which seem large, are actually small in the overall scheme of things. He still seems to believe that small classrooms matter, even despite the disappointing results. Here’s a brief excerpt of the interview: Continue reading →

Slate Magazine has an interesting piece on eating right in America – the question at issue is whether it’s really realistic for people to eat healthy in an era in which the government essentially subsidizes poor eating habits and, hence, you can get a Big Mac, large fries and a Coke for about $5 – whereas a healthy meal costs a good bit more – if you factor in costs of the food and preparation time. Here’s a sample from the post: Continue reading →

A recent article on Yahoo! news discusses the approaching “Silver Tsunami”and how cities are preparing. Continue reading →

Don’t worry about a zombie attack – the introverts are coming and we’re taking over – and it’s a good thing

One way we manifest this bias is by encouraging perfectly healthy shy people to see themselves as ill.

This does us all a grave disservice, because shyness and introversion — or more precisely, the careful, sensitive temperament from which both often spring — are not just normal. They are valuable. And they may be essential to the survival of our species.

See the rest of the story in the NY Times article “Is Shyness and Evolutionary Tactic?”

Check out my e-interview post with Melinda Gann Hall and Chris Bonneau here.

Check out my post on the documentary movie “Inside Job” on prawfs here.