I Bet You Didn't Know...

...you were decreasing the incentives for traditional media outlets to provide information while decreasing the information that is being suppressed by the mainstream media. You are, at least according to a new paper by Jeremy Burke. His new paper examines the incentives that face media providers. Here is the abstract:

A majority of Americans view news organizations as politically biased, creating a strong incentive
for firms to try to present themselves as impartial. This paper argues that the desire to appear
unbiased leads to information loss. In the formal model, firms withhold information in an effort to
appear neutral. It is shown that information loss is exacerbated by competition, policies that regulate
content are welfare reducing, and that regulating the size of the market can increase the amount of
information revealed. Finally, the introduction of imperfectly informed sources of news, such as blogs,
can decrease the incentives for traditional news outlets to provide information, yet they may also
enhance welfare when information is being suppressed.

...and the conclusion

Media outlets spend a significant amount of resources investing in their reputation for neutrality. This
paper has shown how the desire to appear unbiased can lead to information loss in the market for news. A
firm that is concerned with its appearance has an incentive to withhold information in order to maintain
its reputation for impartiality. Moreover, even if firms care arbitrarily little about their reputations, if
there is too much competition information will get lost. When there are many voices in the market, no
firm is willing to sacrifice its reputation since the chance it has an impact on the public's decision is
infinitesimal. Additionally, it was shown that policies regulating content can be welfare reducing, while
limiting the size of the market can provide an atmosphere conducive to information revelation. Finally,
the introduction of imperfectly informed sources of news, such as blogs, can decrease the incentives for
traditional media outlets to provide information, however they may also increase welfare if information is
being suppressed.

You can get the stuff in the middle here

--These conclusions seem to confirm what I already believe. The most depressing thing about problems with media incentives is that there is no effective way to attack them from a policy standpoint. This is why I encourage people speak out against the media when they see bad information is being provided. That is what I try to do. It's the only weapon we have against media pandering.

My Prediction For The Canadian Economy

....well that's not really true. The prediction comes from a question I posed on Predictify.com. The idea is that a number of people make estimations, if they guess right, they're rewarded. The average estimate should be pretty close to what actually happens. This information organization method is similar to a market. Check out "my prediction" here.

Centre for Policy Alternatives should learn from Krugman

Here's his latest column form the NYTimes:

While the United States has long imported oil and other raw materials from the third world, we used to import manufactured goods mainly from other rich countries like Canada, European nations and Japan.

But recently we crossed an important watershed: we now import more manufactured goods from the third world than from other advanced economies. That is, a majority of our industrial trade is now with countries that are much poorer than we are and that pay their workers much lower wages.

For the world economy as a whole — and especially for poorer nations — growing trade between high-wage and low-wage countries is a very good thing. Above all, it offers backward economies their best hope of moving up the income ladder.

But for American workers the story is much less positive. In fact, it’s hard to avoid the conclusion that growing U.S. trade with third world countries reduces the real wages of many and perhaps most workers in this country. And that reality makes the politics of trade very difficult.

Let’s talk for a moment about the economics.

Trade between high-wage countries tends to be a modest win for all, or almost all, concerned. When a free-trade pact made it possible to integrate the U.S. and Canadian auto industries in the 1960s, each country’s industry concentrated on producing a narrower range of products at larger scale. The result was an all-round, broadly shared rise in productivity and wages.

By contrast, trade between countries at very different levels of economic development tends to create large classes of losers as well as winners.

Although the outsourcing of some high-tech jobs to India has made headlines, on balance, highly educated workers in the United States benefit from higher wages and expanded job opportunities because of trade. For example, ThinkPad notebook computers are now made by a Chinese company, Lenovo, but a lot of Lenovo’s research and development is conducted in North Carolina.

But workers with less formal education either see their jobs shipped overseas or find their wages driven down by the ripple effect as other workers with similar qualifications crowd into their industries and look for employment to replace the jobs they lost to foreign competition. And lower prices at Wal-Mart aren’t sufficient compensation.

All this is textbook international economics: contrary to what people sometimes assert, economic theory says that free trade normally makes a country richer, but it doesn’t say that it’s normally good for everyone. Still, when the effects of third-world exports on U.S. wages first became an issue in the 1990s, a number of economists — myself included — looked at the data and concluded that any negative effects on U.S. wages were modest.

The trouble now is that these effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically — from just 2.5 percent of G.D.P. in 1990 to 6 percent in 2006.

And the biggest growth in imports has come from countries with very low wages. The original “newly industrializing economies” exporting manufactured goods — South Korea, Taiwan, Hong Kong and Singapore — paid wages that were about 25 percent of U.S. levels in 1990. Since then, however, the sources of our imports have shifted to Mexico, where wages are only 11 percent of the U.S. level, and China, where they’re only about 3 percent or 4 percent.

There are some qualifying aspects to this story. For example, many of those made-in-China goods contain components made in Japan and other high-wage economies. Still, there’s little doubt that the pressure of globalization on American wages has increased.

So am I arguing for protectionism? No. Those who think that globalization is always and everywhere a bad thing are wrong. On the contrary, keeping world markets relatively open is crucial to the hopes of billions of people.

But I am arguing for an end to the finger-wagging, the accusation either of not understanding economics or of kowtowing to special interests that tends to be the editorial response to politicians who express skepticism about the benefits of free-trade agreements.

It’s often claimed that limits on trade benefit only a small number of Americans, while hurting the vast majority. That’s still true of things like the import quota on sugar. But when it comes to manufactured goods, it’s at least arguable that the reverse is true. The highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose.

As I said, I’m not a protectionist. For the sake of the world as a whole, I hope that we respond to the trouble with trade not by shutting trade down, but by doing things like strengthening the social safety net. But those who are worried about trade have a point, and deserve some respect.

--This column stresses an important point, if trade is causing increased inequality, the answer shouldn't be protectionism. Though I seriously question the methods used by the centre for policy alternatives mentioned in a previous post, their answer shouldn't be NAFTA bashing. It should be stronger safety nets.

Canadian Centre for Policy Alternatives is oh so wrong

The new study by the Canadian Centre for Policy Alternatives argues that free trade has only benefited the elites. Their reasoning is that most big cooperations in Canada have seen their profits raise while reducing their total workforce. This analysis is very flawed. Payrolls on most big companies usually decrease with the invention of new technology. This is okay, new jobs are created and economic output of a nation is increased. This trend is seen in the numbers. Employment and wages in Canada are up! You can say that this is not strictly due to free trade, I would agree with you. However, it is the Centre for Policy Alternatives that's claiming all economic activity is due to trade.

Standard Freeholder goes with truthiness

Wealth increases with the amount of trade, not the other way around. Yet, the editorial board at Cornwall Standard Freeholder, goes with the truthiness answer:

Cornwallites over the next few days will be spending the gift money they've received over Christmas and the holidays on boxing week bargains.

Some in search of better deals will head across the border where books and electronic items are often cheaper.

In the past few months, Canadian retailers have done much to encourage Canadian shoppers to buy at home.

Sears Canada and Best Buy, for example, slashed the cost of many big ticket items and clothing.

Chapters (which also owns the Coles bookstore in Cornwall Square) has put up posters in their stores that proclaim they don't set Canadian prices on books. On just about all books sold in Canadian stores there are two different prices: U.S. and Canada.

But since then the loonie has soared and Canadian retailers have at least attempted to respond - either by slashing prices or educating consumers on why the prices are marginally (or dramatically) different.

So as Canadians set out to buy over the rest of the holiday season, we encourage them to spend that money at home.

When tempted to stray across the border, keep in mind that when that hard-earned cash or gift money is spent at home, it helps keep our local and Canadian economy strong.

--First of all the statement that spending money in Canada keeps the economy strong is false. However, ignoring that fact, we should all have to ask our selfs if the people living on the other side of the world have any less to do with you than the people living across the country. Many of these people who like to brag about buying things locally also claim to be progressives. My question to you is, "if you are so progressive why do you only care about the people who live inside a ultimately artificial border?"

Why no sovereign wealth fund?

A sovereign wealth fund is a economic tool for depreciating the currency and putting away money for future generations. Jim Flaherty is against it. I'm all for it. A lower exchange rate helps to spread the economic benefit around the country, not just those working in the energy sectors. Energy prices inevitably go down, and having a fund will help to mitigate that impact. Here's the article form bloomberg.com:

Dec. 27 (Bloomberg) -- Canada doesn't plan to join Norway and other nations that have created sovereign wealth funds to invest rising oil and natural gas revenue in foreign currencies, Finance Minister Jim Flaherty said.

``We don't have any plans to do anything extraordinary,'' Flaherty said in a Dec. 18 interview in Ottawa. ``It's in the best interest of the Canadian economy to continue to have the value of the dollar determined by properly functioning markets.''

Oil exporters such as Norway and Libya have special accounts to prevent soaring energy money from pushing up the local currency, while setting aside the bounty for future generations. Canada's currency has risen 55 percent against the U.S. dollar in the last five years, forcing auto plants and lumber mills to close as exports become less competitive.

Rising oil wealth in western provinces such as Alberta pushed the currency to parity with the U.S. dollar for the first time since 1976, squeezing factories in central Canada that export half their production. Manufacturers have fired 314,000 workers in five years.

The Canadian dollar touched a five-week high as crude oil advanced to more than $96 a barrel. The currency traded at 98.08 Canadian cents per U.S. dollar at 12:15 p.m. in Toronto. The currency earlier rose to 97.85 cents, the highest since Nov. 21. One Canadian dollar buys $1.0195.

``There are better ways of managing foreign-exchange inflows than just letting the currency appreciate, and no effort has been made to sequester some of those funds,'' said Carl Weinberg, chief economist at High Frequency Economics in Valhalla, New York. Weinberg said Mark Carney, who becomes Bank of Canada governor on Feb. 1, should ``go to Norway and talk to them,'' about the country's $377 billion fund.

`Energy Superpower'

Prime Minister Stephen Harper has touted Canada as an ``energy superpower'' that relies on private investment to develop its reserves. His Conservative Party government is reviewing whether to change foreign-ownership rules for Canadian companies, and this month outlined how it plans to protect energy sources from sovereign wealth funds.

Morgan Stanley, the second-largest U.S. securities firm, predicts sovereign wealth funds may control $12 trillion within a decade as Russia, China and smaller economies such as Bolivia invest windfalls from energy and other exports.

Separately, Flaherty said that carmakers and lumber producers in ``single-industry towns'' may get some relief in next year's federal budget.

Factory Aid

``We have some communities that are being left out of the economic growth because of, for example, the local mill closing,'' Flaherty said. The minister said help for factories may be one of the bigger items in the budget, which Harper said last week will have no major tax cuts or spending programs. The government's ``fiscal update'' in October included C$60 billion ($61 billion) in tax cuts.

Flaherty, 57, also echoed Harper's comments from last week that the government wouldn't bail out Canadian investors holding about C$33 billion in short-term debt that plunged in value. Canada's market for commercial paper sold by non-bank dealers ground to a halt in August after Coventree Inc. and other trusts failed to renew maturing debt because investors were concerned about ties to U.S. subprime mortgages.

Agreement

Investors reached an agreement on Dec. 23 to restructure their holdings into longer-term debt. The accord, which covers 20 of the 22 non-bank trusts, was approved by a group of foreign banks, Canadian lenders and pension funds after two deadlines were missed. Most holders of the commercial paper will get all their money back eventually, according to Toronto lawyer Purdy Crawford, who represents the investors.

Flaherty said in the interview, which was embargoed until today, that he was pushing commercial banks and investors to negotiate a settlement.

``We have been encouraging market participants to create a process that will result in an orderly working out of the issue,'' he said. ``Participants are going to have to take haircuts of varying degrees.''

Flaherty said his efforts on the issue included ``cajoling, encouraging, hand-holding, coordinating, that kind of thing. Not an investment of public money.''

To contact the reporters on this story: Greg Quinn in Ottawa at gquinn1@bloomberg.net ; Alexandre Deslongchamps in Ottawa at.

Overview of 2007.

Statistics Canada has a trend overview of all the sectors in the Canadian economy for 2007. Check it Out.

Ipod tax coming back?

I'll admit I'm not a big fan of taxes on digital music players. Yes I am aware that there is an external cost because people use them to steal music. However, unlike a carbon tax, the Ipod tax punishes you BEFORE you impose a cost on other people. It treats you as automatically guilty.

From CTV.ca:

Consumers could potentially be hit by a new tax on electronic storage devices such as iPods and blank memory cards in 2008.

The federal Copyright Board has given its approval for a special levy on iPods and other digital players because they can be used to copy movies and music.

The Canadian Private Copying Collective, the non-profit agency that represents the music industry, wants to make sure that artists get compensated.

Small tariffs are currently in place for such items as rewritable CDs and cassettes. The CPCC first requested a levy on removable electronic memory in its 2003-2004 tariff proposal.

The Copyright Board initially concluded that there was insufficient evidence to warrant a new tax; however, the CPCC noted the growing popularity of digital memory devices is cause for concern. A hearing in April will reexamine the proposed levies.

"Our surveys show the vast majority of copies that people put on their iPods come from sources other than legitimatly purchased copies," said David Basskin, the Director of the CPCC.

According to a CPCC media release, "During the period from July 1, 2005 to June 30, 2006, 25 per cent of all the content copied onto electronic memory cards, including cards of all formats and capacities, was music, and 14 per cent of respondents copied only music."

The proposed levies range in price including:

• 85 cents for rewritable CDs and MiniDisc
• $2 for 1 GB removable electronic memory cards
• $25 for a digital audio recorder between 1 and 10 GBs
• $75 for digital audio recorder of more than 30 GBs

Don Butcher, the Canadian Library Association's executive director, says the CLA is concerned over the proposed levies because they assume illegal behaviour on the part of consumers.

"It's almost de facto criminalizing all Canadians. We just don't think that's right. The whole issue of those tariffs on blank media makes an assumption we think is a faulty assumption," he said.

"We don't think Canadians are out there deliberately infringing on people's copy right. We think that in fact Canadians are law-abiding."

John Williamson of the Canadian Taxpayers Federation says the measures may be counterproductive.

"Normally, you do the crime and then you do the time. In this case the government is going to hit us first so people will asume it's OK to download music without paying for it," Williamson said.

The surcharge won't come into effect immediately. Retailers are fighting the tax in court, saying the Copyright Board has no right to impose an extra fee on top of the price of iPods and other audio players.

Get the full version here

More good news for Canadian Economy

More to my theory that the only person being pessimistic about the Canadian economy is Mr. Harper. Here's Econbrowser's take on the coming quarter:

Currently available data on consumer spending make it very unlikely that we'll see negative real GDP growth for the fourth quarter.

The BEA reported on Friday that seasonally adjusted real consumption spending grew at a 6.5% annual rate between October and November. As Calculated Risk has noted in the past, this takes much of the guesswork out of predicting what the fourth-quarter numbers will turn out to be. The quarterly consumption component of real GDP is just the average of these monthly numbers, so we now have two of the three months that will go into 2007:Q4 consumption spending.

Following CR, blue bars in the graph below represent the growth rate of the average real consumption during the first two months of a quarter relative to the average real consumption over the first two months of the previous quarter; (my numbers differ slightly from CR's in that I've measured growth rates from changes in the natural logarithm, which correspond to continuous compounding and make the algebra a little simpler). Green bars in the graph report the actual growth rate for the quarterly consumption component of real GDP. The October and November 2007 data imply an estimate of the growth rate of real consumption spending of 3.2% during the fourth quarter of 2007.

The two-month estimate has an R² of 80% in predicting the actual quarterly numbers, and a root mean squared error of 80 basis points. The latter can be used to construct a 95% confidence interval for the 2007:Q4 forecast. The 3.2% estimate for 2007:Q4 implies a confidence interval between 1.6% and 4.8%. That Normal confidence interval can also be bootstrapped, by the way-- only 4 out of the 69 errors since 1990:Q3 exceed 160 basis points in absolute value.

With 2007:Q4 real consumption growth in the ballpark of 3%, it's extremely unlikely that we'll see the negative real GDP growth for 2007:Q4 that some analysts had been predicting before the strong November retail sales figures came in. The stock market seems to agree:

Source: Yahoo Finance.

--Get it here

Gift Ideas?!?!

Ok, Finals have consumed my life for the last couple weeks and I've seen to forgotten about the whole Christmas thing. So if anybody has any killer gift ideas, please leave a comment on this post. I have two middle aged parents and a sister in her early twenties. Help a blogger in need! (you'll be my favourite reader).

Marginal Revolution on Cross-border shopping

I'm kinda bitter I didn't find this story first, but instead I'm just stealing it. From Marginal Revolution.

Canadian shoppers taking advantage of the parity between the U.S. and Canadian dollars are leaving behind more than cash when the head home.

They're leaving behind their old clothes.

Some Canadian shoppers wear their new clothes home to avoid paying a duty when they cross back into Canada [TC: do we reallly need the link behind that word?]. The old clothes get left behind in parking lots, dressing rooms and restrooms at malls and shopping plazas in the Buffalo-Niagara Falls region.

At the Fashion Outlets mall just outside the city of Niagara Falls, managers have placed collection bins near the exits where Canadians customers can deposit their unwanted items.

Here is the story. Thanks to Bill Griffiths for the pointer.

Mankiw on carbon taxes

Get an argument in favour of carbon taxes from a former adviser to president bush. If you don't like carbon taxes you should listen to this. If you're a fan of carbon taxes, you should still listen to learn a bunch of talking points for arguing with friends. Here's the link.

Arms Surplus in Canada

People say that it is the small trends matter the most. This is a pretty depressing statement about the state of world affairs. From cbc.ca

A new report by the federal government shows that in 2003, Canada's arms exports reached the highest level ever recorded.

The report, covering three years from 2003 to 2005 and released this week, revealed that sales of military exports hit more than $700 million in 2003.

But the report doesn't include sales to Canada's biggest customer, the United States. According to industry experts, if those sales were included, Canada's arms exports would have topped $2 billion in 2003.

More than 500 Canadian companies and tens of thousands of employees make military products across the country — everything from bullets and rockets to light armoured vehicles.

Arms control expert Ken Epps, of the arms control group Project Ploughshares, said Canada is shipping arms to questionable places.

"Sales to countries that are involved in armed conflict or where there are human rights concerns are still continuing," Epps said.

He pointed out that Colombia, China and Saudi Arabia were among the countries receiving military goods.

Epps also complained that the report is a step backward in terms of transparency because it doesn't provide as much information as past reports.

For example, sales dropped substantially by 2005 to $320 million, but Epps said that figure doesn't include shipments worth $250 million to Pakistan's military in 2004 and 2005.

"There were sales during the period of the report of helicopters to the Pakistan military, and those do not appear in the report. That is, in our interpretation, because they are dual-use items and are not listed as military goods."

The report states for the first time that the sale of military goods to Pakistan has been banned since 1998.

Foreign Affairs Minister Maxime Bernier wasn't available to comment on the helicopter sales, which took place under the former Liberal government.

Bernier promised to release the report in October after a CBC investigation raised questions about Ottawa's silence during a period of increased arms exports.

It's not clear when the report for 2006 sales — which is usually tabled in Parliament by now — will be made public.

Get it here

--What I find most surprising is that the report doesn't include arms sales to the United States. We should defiantly be considering who we are selling weapons to. At the very least, there should be a bigger national debate going on.

Haper says cutting emissions will hurt economy....

....that's because you're doing it wrong. From the globe and mail:

In another warning, Mr. Harper said Canadians should prepare for tough environmental measures in the new year on reducing greenhouse-gas emissions under the Kyoto accord.

Ottawa has promised regulations in the spring that will force industry to reduce the intensity of its greenhouse-gas emissions by 18 per cent from 2006 levels by 2010.

It will also publish regulations forcing significant reductions of air-polluting substances such as nitrogen oxides and sulphur oxides.

"This year, as we approach the 2010 targets, we will be actually implementing those regulations," he said. "Mandating mandatory reductions imposes costs. Those costs are real in the short term. There is no way to avoid them. None."

-Get the full version here

--What Harper could do is impose pollution taxes and then use the revenue to lower personal income taxes. The taxes would have an offsetting impact on the economy, while creating incentives to reduce pollution. It's funny that the press always displays carbon taxes as harsh medicine for climate change while regulation an easier solution, I see things the other way around. If you were a true cynic you would say that Harper wants these new environmental regulations to harm the economy so that support for environmental regulation will dwindle. I really hope this isn't true.

Does anybody else absolutely hate ticketmaster?

I do, and if there's any company with a illegal monopoly it's ticketmaster. Three cheers for the Albertians (even though this case had nothing to do with monopolies) From cbc.ca

Ticketmaster Canada broke the law when it required online customers to give personal information for marketing purposes before allowing them to buy tickets, said Alberta's privacy commissioner.

By making that consent a mandatory part of the transaction, the international ticket retailer contravened the Personal Information Protection Act, said a report by the privacy commissioner's office released Wednesday.

Under the act, Ticketmaster is allowed to take necessary personal information such as phone and credit card numbers to carry out a transaction, but the data cannot be passed on for other reasons unrelated to the sale, said the report.

The office began an investigation after an Albertan complained he could not buy tickets from Ticketmaster's website unless he agreed to the company's "Use of Personal Information" statement.

The customer was particularly concerned about the condition allowing Ticketmaster to share the customer's e-mail address and other information with concert promoters, clubs and artists for marketing purposes.

The investigation found Ticketmaster's online privacy policy was "complex and ambiguous," and did not give online customers a reasonable chance to decline or object to the use of their personal information.

"The main recommendation that we came up with was that Ticketmaster develop an opt-out process, so that customers either buying things over the telephone or online could opt out of giving a lot of personal information that would be then shared with other folks," said Wayne Wood, spokesman for the privacy commissioner's office.

Ticketmaster agreed to implement that change for Canadian customers, and has also posted a revised online privacy policy with a more comprehensible table of contents.

Get it here

--It would be nice to see politicians in any country go after companies that are obviously price gouging (ticketmaster) and leave the companies alone who aren't (oil and gas)

You Can Export A Haircut!

...that is assuming one of these people had their hair cut while in the states. From CBC.ca:

Canadians broke a seven-year record in October, making 2.2 million same-day trips across the border to the United States, Statistics Canada said Wednesday.

Trips made by British Columbians spiked 16.5 per cent to 431,000 same-day trips, the federal agency estimated. Consumers in the Prairie provinces made an estimated 81,000 trips. Increases in Ontario were modest, at 1.8 per cent, though the 1.2 million trips recorded in October comprised over 54 per cent of the national tally.

Overnight trips to the U.S. also increased, rising to the highest monthly level since September 1993, the federal agency said. Canadians made 972,000 overnight trips to the U.S. in October, an increase of 4.9 per cent over the previous month. Travel to countries overseas also climbed - rising 3.2 per cent to a record-high 642,000 trips.

Meanwhile, Americans made a record low 899,000 same-day visits to Canada, a 3.8 per cent drop from September. The number of visits from overseas travellers also fell, decreasing by 0.3 per cent to 375,000.

During October, the average value of the loonie was $1.03.

Here's the link

--2.2 million people in one month is pretty incredible...there's only 30 million people in the country.

List Of Economics Books

From David Leonhardt and the NYTimes:

In my column this week, I call “Overtreated,” by Shannon Brownlee, the book of the year in economics. The column also mentions a few other books from 2007: “The Age of Turbulence,” by Alan Greenspan; “Falling Behind,” by Robert H. Frank; “Supercapitalism,” by Robert Reich; and “The Bottom Billion,” by Paul Collier.

Below is a longer list of books you might want to look at. It doubtless leaves off some very good books. If you have suggestions, please e-mail me at leonhardt@nytimes.com, and I’ll add to this list.

Tyler Cowen, one of the authors of the popular Marginal Revolution blog, wrote “Discover Your Inner Economist.” Stephen J. Dubner — of Freakonomics fame — called the book “fast, furious, and fun, with great examples of how to apply economic thinking to nontraditional subjects.”

Mr. Frank, a Cornell professor and contributor to The Times’s Sunday Business section, actually wrote two books this year. The other one is “The Economic Naturalist,” based on real-world questions posed over the years by his students. He gave a lecture about the book at Google’s headquarters in July, which you can watch here.

Alan Krueger, a Princeton professor, has done pathbreaking research on why so many terrorists come from middle-class backgrounds. In "What Makes a Terrorist," he presents his argument in full. The Christian Science Monitor called the book a "a concise, accessible argument against the notion that we can defeat terrorism through aid and education."

Gregory Clark’s “Farewell to Alms” is a “delightfully written” brief economic history of the world, in the words of The Times Book Review. Mr. Clark, an economist at the University of California, Davis, has posted a long selection of other reviews here.

Jonathan Cohn of The New Republic is one of the best health-care writers out there. In his book “Sick,” he travels around the country, exposing the problems with today’s system and offering ideas for reform. “The timing of this book is perfect,” Sally Satel wrote in The Times Book Review.

In “Better,” Atul Gawande – my favorite medical writer today, which isn’t exactly an original opinion – has collected his stories from The New Yorker and elsewhere and added new material, as well. “Better” is, in many ways, an economic book.

Charles McGrath profiled Dr. Gawande in The Times earlier this year.

As for the books mentioned in today’s column:

You can read the first chapter of “Overtreated” here.

My review of Mr. Greenspan’s book is here.

Mr. Frank’s review of Mr. Reich’s book is here.

Robert Frank of The Wall Street Journal called “Falling Behind,” by Cornell’s Robert H. Frank, a “great” book. Confused by all these Robert Franks? Read on

Here is the Link

--You can thank Freakonomics and its best selling ways for this years rather extensive list of easy to read book on economics.

Increasing Income Inequality in the United States

This chart has been posted on a couple of Libertarian blogs making the point that the rich are paying increasingly more of the US Treasury. I simply take it as evidence of how scewed income distribution has become in the United States. I know that libertrians would say that the increased revenue from the rich is evidence that the Bush tax cuts are working. However, this hypothesis is shacky at best.

Tyler Cowen's roundup on the sub-prime crises

From Marginal Revoultion:

Matt Yglesias points us to the following:

Federal Reserve Chairman Alan Greenspan said Monday [February 2004] that Americans' preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives.

By the way, Greenspan's recent Op-Ed claims he is not to blame, plus he disavows blame in his NPR segment the other morning.

The other day I wrote of widespread fraud; I was referring to the fact that many lower income borrowers lied on their mortgage applications or failed to provide documentation of income. Do any of you have figures here?

The New York Times today blames many factors, including lax and fragmented regulators, but most of all the irresponsible practices of mortgage-lending affiliates of nationally chartered banks. Here are the now well-known warnings of Ed Gramlich.

If you are curious to evaluate my record as a prognosticator, my earlier posts on whether we are in a housing bubble are here [TC: it turns out I didn't buy close to the peak] and here. Am I to blame? Here is Alex's insightful post. Most to the point, here is my post "If I Believed in Austrian Business Cycle Theory."

Some of the Austrians blame Greenspan for lowering short-run interest rates to one percent. From another direction, here are tales of a real estate bubble on the moon.

I browsed through a New York Fed conference summary the other day; it was about "systematic risk" and it was held about a year ago. I did not see a word about housing bubbles. The surprise was not the bubble, but rather than its collapse could be such a source of systemic risk and that it could freeze broader credit markets so much.

Paul Krugman claimed that the fundamental problem is lack of solvency, but he doesn't make a clear enough distinction between insolvent homeowners (for sure) and insolvent banks (has he bought puts?). I haven't seen an estimate of the losses that is large enough to imply anything close to widespread bank insolvency.

Matters would be easier to understand if they were either much better or much worse than they are; it is the current state of hovering which is so puzzling.

Here is Bob Dylan on what went wrong. It's the best account I've heard so far.

--I don't know if this counts as a libertarian answer to the sub-prime crises I posed about earlier. I think his basic point is that we don't really know why it happened so any efforts we could make to prevent it would have failed.

Green party angery about automobile regulation...blame ralph nader

Ralph Nader was the top advacates for automoblie reguation during the 60's and 70's, now that same regualtion is stopping electric car compaines from being able to sell thier cars in Canada. Check out this blog post from the green party of Canada. The technology is still away off. The "zenn car" costs over $10,000 and can only travel about 25 miles an hour. What we need in a carbon tax that would increase investment in green technologies and give individuals the incentive to reduce their carbon footprint. What we don't need is more regulation that will come up to hurt us later.

Inflation News Could Mean Rate Cut

From CEP News:

Analysts are seeing a Bank of Canada rate cut written all over the latest inflation figures released Tuesday by Statistics Canada. The key core rate, which excludes volatile items like gas, oil and fresh fruits and vegetables, moved up just 1.6% on an annual basis in November, its slowest rate of increase since April 2006. That was below the +1.8% forecast by economists. The all-items or headline inflation rate rose 2.5%, a tick above analysts' expectations for +2.4%.

The tame growth rate in the core consumer price index "leaves the door wide open for further rate cuts in the new year, if the Bank (of Canada) decides financial conditions or the growth outlook warrant such help," said BMO deputy chief economist Doug Porter. "Suffice it to say that the current inflation outlook presents no block to lower interest rates in Canada, a very different picture from U.S. conditions, where headline inflation is almost 2 points higher and core is nudging up again."

CIBC World Markets economist Avery Shenfeld expressed similar sentiment. "The soft core reading is consistent with our projection for a January rate cut by the Bank of Canada which has the room to give the financial system a helping hand in dealing with the credit crunch," Shenfeld said.

Get the full version here

--As I said earlier, the lower prices we are experiancing may not be permanant, I would think that the bank of canada would wait for some more good inflation numbers before making another rate cut.

"Make up a story so they think we know what we're talking about..."

Bloomberg.com thinks that the loonie rise in that last couple days is due to diminished concerns of a North American recession. I have my doubts.

Dec. 17 (Bloomberg) -- The Canadian dollar rose against all 16 most-actively traded currencies, advancing the most in two weeks versus the U.S. currency, on speculation North American economies will avoid recession.

The Canadian dollar extended gains from Dec. 14 that followed reports showing gains in U.S. retail sales and consumer prices and increases in Canadian manufacturing and exports. The U.S. purchases about 80 percent of Canadian exports. The U.S. dollar gained against 12 out of the 16 major currencies today.

``For the past little while, the Canadian dollar had been paired with the U.S. dollar. If the U.S. were to go into recession, Canada would follow,'' said Jonathan Gencher, director of foreign-exchange sales in Toronto at BMO Capital Markets. ``Given the rebound in the U.S. dollar, the Canadian dollar is also benefiting.''

Canada's dollar advanced to C$1.0058 per dollar at 4 p.m. in Toronto from C$1.0172 on Dec. 14. It has gained almost 16 percent against the U.S. currency this year, the second-most among the 16 major currencies, trailing the Brazilian real.

Get the full version here

--Fist of all, you shouldn't be attributing a small two day rally to anything but randomness. Secondly, the reason they give...isn't true. Look at the prediction market forecasting the probability of a U.S. recession.


The line represents the probability of a recession. Do you see a large drop in the last couple days? Bloomberg does.

Statistics Canada says we're heading for a slowdown

From cbc.ca

OTTAWA - Canada's economy is charging toward the new year, but analysts say problems in credit markets, labour productivity and parts of the manufacturing sector threaten to trip it up in 2008.

Two reports released Thursday by Statistics Canada point to sluggish labour productivity and a mixed performance in the manufacturing sector, while TD Bank (TSX:TD) economists also warned that problems in credit markets are more serious than initially thought.

"We're heading into the new year with a fairly good degree of momentum, but the economy is slowing," said Scotia Economics economist Adrienne Warren.

"I think as we go into the new year, the risks to growth in Canada are growing."

Overall labour productivity advanced 0.2 per cent in the summer quarter, with the only growth occurring in services while manufacturing output per hour of work declined, Statistics Canada said.

Third-quarter productivity growth rate was the same as in the second quarter and down from 0.6 per cent in the first quarter. And it was far behind the 1.6 per cent third-quarter increase in U.S. productivity.

Manufacturing productivity slumped 0.6 per cent during the quarter as production fell 0.7 per cent, hampered by the sharp appreciation of the Canadian dollar, while the number of factory hours worked declined 0.1 per cent.

Overall labour cost per unit of production, a measure of inflationary wage pressure, continued to ease during the third quarter, rising 0.3 per cent, compared with 0.7 per cent in the second quarter.

Another Statistics Canada report said the manufacturing sector perked up a little in October, even though it was the first month in almost 30 years in which the segment was dealing with a Canadian dollar at par with the U.S. currency.

Statistics Canada said manufacturing sales edged up 0.1 per cent after decreasing in five of the six previous months. Sales of manufactured goods increased to $50.2 billion, from $50.1 billion in September.

On an industry-by-industry basis, the agency said 12 of 21 manufacturing industries increased in October, representing slightly less than half of total manufacturing sales.

"All three of the reports contribute to the fear that we are headed into an actual downturn," said Canadian Auto Workers union economist Jim Stanford.

"There are a number of indicators in U.S. consumer behaviour, continuing financial market uncertainty and continuing meltdown of our most important export sector, which is still manufacturing - all three of those spell bad news for the broader economy."

In a quarterly outlook, TD Bank economists said tighter credit conditions will aggravate the weakness in American real estate markets, depressing consumer spending.

"The outlook is that Canada economic growth is going to slow materially in the quarters that are coming," TD deputy chief economist Craig Alexander said in an interview.

"The domestic side of the Canadian economy is likely to remain solid."

The bank has cut its expectation of U.S. economic growth next year by more than half a percentage point to 1.8 per cent, and world economic growth is expected to slow by a full percentage point to 4.2 per cent.

For Canada, the strong dollar, weaker foreign demand and a cooling in domestic activity are forecast to result in 2008 growth of 1.9 per cent.

The report predicts the Canadian dollar will average 97 cents US next year, trending down toward 94 cents.

The loonie reached parity with the American dollar at the end of September for the first time in more than 30 years as it roared toward a mid-November high of US$1.10 before dipping below US$1 in recent weeks.

Get it here

--Again, I would repeat my montra that you can't take any economic predictions that seriously. I'm not sure about the quote "the domestic side of the economy looks solid".... isn't the entire economy domestic?

David Dodge is boastin'

From the CEP news:

16:34 12/12 (CEP News) Ottawa – Bank of Canada governor David Dodge heads into retirement at the end of next month satisfied that he will be leaving the Canadian economy in far better shape than it was when he first came on the federal scene more than three decades ago.

A candid and relaxed Dodge credited Bank of Canada staff and ordinary Canadians for making the changes required in the economy. “I, along with all Canadians, am quite proud of how we have developed since the beginning of the 1970s in terms of being able to seize better the opportunities presented by the world,” Dodge said in an interview with CEP News. “How we now understand it is important that public finances be kept in good shape; that we all understand the value of low and stable inflation.”

The outgoing governor, who retires Jan. 31, downplayed his own role, which he described as providing advice and working with the private sector and other central banks “so that we can do the best that we can to enhance the economic welfare of Canadians.”

Heading the Bank of Canada, he said, “has been a tremendous privilege because I just give the roar for 1,200 (people) who actually do all the work. It’s the people who do the innovative analysis, the hard, slogging work through crises … it’s those people who are really important. All I do is give voice to what they’re trying to achieve.”

There have been some major challenges, often international in nature, over the years, he said, including the Latin American debt crisis, American savings and loan problems, the Asian crisis and most recently the global credit turbulence. All of them have been difficult, and each of them has been different, he said.

The credit market meltdown, which continues to plague economies around the world, has proven tough to deal with because of its origins, Dodge said. “You can’t put your hands around it … so we’re all struggling to find ways the market can work this thing out but it is extraordinarily complex.”

It’s essential that the banking industry continue to function through the current difficulties, he said, and that was one reason several major central banks around the world, including the Bank of Canada, introduced new liquidity measures Wednesday.

If banks were forced into a disorderly unwinding of the complex financial instruments that lie at the heart of the credit market problems, the financial consequences would be enormous, he said, and would be felt all the way down to the average consumer wanting to buy a home or finance the purchase of a car.

Dodge said the Bank of Canada has been fairly successful in keeping its overnight lending rate on target during the credit crunch through the injection of short-term liquidity. Banks in other parts of the world rely more heavily on interbank financing on the one- to three-month market, he said, and “we’ve been discussing with our banks whether useful for us to operate in the term market and not just the overnight.”

That doesn’t mean that the longer-term liquidity measures announced Wednesday morning will become permanent, he said. Instead, it was recognition that “with heightened uncertainty it was worth acting together to try to the extent that we could to ensure markets functioning appropriately.”

Dodge defended the BoC record in using interest rates to battle inflation, and said it has followed a program that is clearly understood by Canadians. “There is huge transparency there. Everyone knows exactly what our paradigm is. It is very clear each time we write a report where we see the risks.

Those risks can change over time, he said, “but we clearly identify what we are concerned about.” Some analysts misread the signs around the early December rate announcement, he said, with one side betting the bank would wait and others predicting it would act. “There are times when the call is difficult … it is difficult for us as well.” But he said there was “much better anticipation around our December release than around December’s U.S. release.

“That’s not to say we do everything perfectly. But we try and ensure the framework around which make our decisions well understood, and if changes are needed, ensure we signal those changes.”

Dodge suggested that Canada is in for a period of prolonged economic growth, with emerging markets expected to place strong demand on commodities for a long period of time and consumers remaining in a spending mood.

--Like my mother always said, quit while you're ahead.

International liquidity plan

The central banks in North America and Euorope form a joint plan to stick more liquidity into the economy. From cbc.ca

Central banks around the world — including the Bank of Canada — have announced a co-ordinated plan to pump billions more into the financial system to ease the global credit crunch.

The U.S. Federal Reserve, the Bank of England, the European Central Bank and the Swiss National Bank are also part of the agreement. The Bank of Canada said the measures are "designed to address elevated pressures in short-term funding markets."

The Bank of Canada said it would provide at least $2 billion in funding on Thursday, along with another $1 billion next Tuesday. It will also expand the kind of securities it will accept as collateral.

The global plan will put more than $67 billion US in extra liquidity into the financial markets over the next six months — including more than $40 billion US by the Fed, $20 billion US for the ECB and $4 billion US for the Swiss National Bank.

The liquidity boost is meant to counter the credit crunch that followed the U.S. subprime mortgage crisis. Banks worldwide are still finding it difficult to raise money to lend out, even though central banks have injected huge amounts of money into the financial system since the credit crunch first hit in August....

Get the full version here

--I think an international plan in defiantly a good idea since what we have is defiantly an international problem. Working together also keeps central banks from free-riding on the liquidity other banks provide.

Economic slowdown in BC?

Though you can't take any economic predictions that seriously, the economic prediction council revised their forecasts for BC downward:

A weakening U.S. economy and a high Canadian dollar are among the factors that will have a negative impact on the province's economic growth next year, according to the Economic Forecast Council.

The council forecasts that B.C.'s real GDP will fall to 3.1% in 2007 from a previous prediction of 3.4%. It added that economic growth in 2008 will drop to 2.9% from a previous forecast of 3.3%.

A decline in exports and manufacturing shipments caused by a high Canadian dollar and falling demand for lumber and natural gas will continue to have a lingering impact on B.C.'s economy, the council said, as will further deterioration of the U.S. economy, volatile commodity prices, the high Canadian dollar and persistent labour shortages in the construction sector.

Get the full version here

--Despite this bad news 3.1% is hardly a recession. My main concern would be the high value/volatility of the loonie. Low skill labour shortages don't worry me because it drives up wages for poorer working people.

Overegulation in Canada

New report recommends deregulation of Canadian professionals. From canadianbusiness.com

OTTAWA - A new study is recommending Canada's lawyers, real estate agents and other self-regulated professions re-examine their rules to ensure they serve the public good and encourage competition.

The study by the Competition Bureau found rules that limit advertising, set prices and restrict who can offer professional services may go too far.

The bureau says such rules can boost prices, limit choice and restrict access to information consumers need.

Competition commissioner Sheridan Scott says rules are necessary but removing some could benefit consumers and the economy.

Scott notes professions are more regulated in Canada than elsewhere. That could be compromising productivity and Canada's economic growth.
--Get the full version here.

I know that it's hard to imagine a world where professionals are not regulated, but try comparing it to industries that are not regulated . Industries that employ professionals that aren't regulated (think engineers) are no more accident prone than industries that are. Sadly, Most of the professional regulation is used for the purpose of restricting competition.

Canadian Housing In Good Shape

From CEP news:

15:29 12/10 (CEP News) Ottawa – November’s strong construction starts in single-detached homes may be a hint that Santa has more strong Canadian housing numbers waiting in his sack for December, an economist says.

“If you look at the building permits data from the preceding month, it reflected that builders were taking out a lot more permits in the multi-unit category,” said HSBC Market Strategist Stewart Hall. “So that suggests there’s still some potential to see some fairly good upside going into December - a time when we might expect builders to switch over to the job completion phase given the weather.”

Hall noted that building permits typically lead construction by about 45 days.
The Canadian Mortgage and Housing Corporation reported on Monday that the seasonally-adjusted annual rate of housing starts was 227,900 units in November, essentially unchanged from the 227,600 units recorded in the previous month.

Bob Dugan, CMHC’s chief economist, said the continued strong performance was a result of strong activity in the single-detached market.

BMO Capital Markets economist Robert Hogue wrote in a note following the release that “despite earlier concerns about the potential impact of the financial market storm on Canadian housing demand, home building remains a pillar of strength in the Canadian economy.”

Strong job creation and favourable interest rates are providing support to the momentum of residential construction going into 2008, he said.

While there have been concerns about a credit crunch, Hall said that perhaps some of the impact of the trubulence in credit markets had been mitigated by Canadians' strong pay checques.

“Maybe for good credit, there’s always funds available,” Hall said, but added that pre-approved mortgages may also be providing a buffer between the credit market as it stands now and the real estate market.

--These numbers are good, not big surprises. Somehow I think housing wouldn't be that big of deal if it weren't doing so poorly in the states. Here's the link

Krugman On Bush's Anwswer To Subprime Crises

--From the NY Times:

By Bush administration standards, Henry Paulson, the Treasury secretary, is a good guy. He isn’t conspicuously incompetent; and he isn’t trying to mislead us into war, justify torture or protect corrupt contractors.

But Mr. Paulson’s actions reflect the priorities of the administration he serves. And that, ultimately, is what’s wrong with the mortgage relief plan he unveiled last week.

The plan is, as a Times editorial put it yesterday, “too little, too late and too voluntary.” But from the administration’s point of view these failings aren’t bugs, they’re features.

In fact, there’s a growing consensus among financial observers that the Paulson plan isn’t mainly intended to achieve real results. The point is, instead, to create the appearance of action, thereby undercutting political support for actual attempts to help families in trouble.

In particular, the Paulson plan is probably an attempt to take the wind out of Barney Frank’s sails. Mr. Frank, the Democratic chairman of the House Financial Services Committee, has sponsored legislation that would give judges in bankruptcy cases the ability to rewrite mortgage loan terms. But “Bankers Hope Bush Subprime Plan Will Scuttle House Bill,” as a headline in CongressDaily put it.

As Elizabeth Warren, the Harvard bankruptcy expert, puts it, “The administration’s subprime mortgage plan is the bank lobby’s dream.” Given the Bush record, that should come as no surprise.

There are, in fact, three distinct concerns associated with the rising tide of foreclosures in America.

One is financial stability: as banks and other institutions take huge losses on their mortgage-related investments, the financial system as a whole is getting wobbly.

Another is human suffering: hundreds of thousands, and probably millions, of American families will lose their homes.

Finally, there’s injustice: the subprime boom involved predatory lending — high-interest loans foisted on borrowers who qualified for lower rates — on an epic scale. The Wall Street Journal found that more than 55 percent of subprime loans made at the height of the housing bubble “went to people with credit scores high enough to often qualify for conventional loans with far better terms.”

And in a declining housing market, these victims are stuck, unable to refinance.

So there are three problems. But Mr. Paulson’s plan — or, to use its official name, the Hope Now Alliance plan — is entirely focused on reducing investor losses. Any minor relief it might provide to troubled borrowers is clearly incidental. And it is does nothing for the victims of predatory lending.

The plan sets voluntary guidelines under which some, but only some, borrowers whose mortgage payments are set to rise may get temporary relief.

This is supposed to help investors, because foreclosing on a house is expensive: there are big legal fees, and the house normally sells for less than the value of the mortgage. “Foreclosure is to no one’s benefit,” said Mr. Paulson in a White House interactive forum. “I’ve heard estimates that mortgage investors lose 40 to 50 percent on their investment if it goes into foreclosure.”

But won’t the borrowers gain, too? Not if the planners can help it. Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house’s value — which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

And what about people with good credit who were misled into bad mortgage deals, who should have been steered to loans with better terms? They get nothing: the Paulson plan specifically excludes borrowers with good credit scores. In fact, the plan actually provides an incentive for some people to miss debt payments, because that would make them look like bad credit risks and eligible for relief.

Now, Mr. Paulson’s attempt to help investors, while doing little or nothing for distressed and defrauded borrowers, might make sense if his plan would reduce investor losses enough to seriously improve the overall financial situation.

But only a small fraction of subprime borrowers will qualify for relief, and many of these borrowers will eventually face foreclosure anyway. So the plan is unlikely to reduce overall mortgage-related losses by more than a few percent, at most — not enough to make any real difference to financial stability. Indeed, interest-rate spreads that have been signaling a crisis of confidence in the financial system didn’t narrow at all when the plan was announced.

Still, you might say that the Paulson plan is better than nothing. But the relevant alternative isn’t nothing; it’s a plan that — like Barney Frank’s proposal — would actually help working families. And that’s what the administration is trying to avoid.

--Libertarians should have to answer to how free markets lead us to such a fiasco in the housing industry. I haven't heard one yet, not in any of the libertarian economics blogs, have you?

Good Enviroment News

The Major of San Fransisco is asking the city to approve a carbon tax. If this is approved, other politicians could gather up the courage to propose more carbon taxes. From the AP article:

Mayor Gavin Newsom plans to ask voters next year to approve a "carbon tax" on businesses that he says would provide a financial incentive for conserving energy and motivating workers to use public transportation.

The ballot measure would increase the city's 5 percent commercial utilities tax by an as-yet-undetermined amount to encourage energy-saving steps by hotels, offices and other nonresidential buildings, Newsom said in a recent interview with The Associated Press.

To keep the higher rates from becoming an economic drag on the city, the initiative would carry a corresponding decrease in the 1.5 percent payroll tax on for-profit businesses in San Francisco, according to the mayor.

--Thanks to Greg Mankiw, check out his post here.

Free Riding on Carbon Emissions

Canada's environment minister says that he won't sign climate treaty without the United States inclusion. His justification: reducing Carbon emissions unilaterally would hurt the economy without significantly reducing global warming. From cbc.ca

Canada's environment minister has dismissed the notion of signing a climate-change treaty without the United States, saying it would handicap the Canadian economy without reversing greenhouse gas emissions.

As the world gathers in Bali, Indonesia, to work toward a successor treaty to the Kyoto Protocol, the Americans are already making it clear they will not submit to binding emissions targets.

In an interview with the Canadian Press, John Baird said Canada hopes to reach a deal within two years — but only if it applies targets for the first time to all major polluters.

He used a military analogy to suggest that Canada would be handicapping its economy by adopting environmental restrictions without being followed by its closest neighbour and trading partner.

My first question is if you raise a tax on carbon emisions and then lower tax on everything else how does that hurt the eocnomy? My other question is if Canada can't have an effect on global warming, why do anything even if you have the United States on board. The best strategy for Canada would be to talk a lot about global warming but not actually reduce emissions....oh wait...that's what they are doing. Get the full version here

Economics of Textbooks

Students have much reason to be frustrated at the price of textbooks. If I had to guess, I'd say the average price of a book in a university book store is about double the local book store (also true for used books). The reason for this is that the people who are making the buying decisions (professors) are not the people who have to pay the bill (students). This causes book sellers to completely on quality and not price. If you are fortunate enough to be part of the population the buy textbooks you know that they are usually filled with glossy pages and pictures that are in no ways necessary to the subject. How do you fix this...it's hard. I think the most effective way would be to nag your teachers who make you buy unnecessary amounts of books. A textbook price ceiling might work, but then you eliminate books where it is necessary to charge the high amount.

Public Labour Action

The library workers in Victoria have been on a sort of strike for the last couple weeks. A.K.A no computer access, shorter hours. ect. This has been very inconvinent for me because my compuer in currently non-operational (I'm writing this on a university computer). With strikes at private compainies the public isn't inconvienced very much because there is almost always a subsitute. When public workers strike the public in inconvienced a great deal. Should there be different labour laws for public and private unions?

Are Canadian Bloggers More Convervative?

A trend I've noticed is that popular political blogs in Canada tend to be on the convervative side while their counterparts in the U.S. tend to be more left wing. It could be that Canadian Conservatives feel alienated politically along with left wing Americans, and alienated political voices turn to the internet. However, the governents on both sides of the border seem to be converging and this trend still exsists. If you don't believe me I would reccomend checking out blogging Candians, compared with something like Digg or the daily kos.

My Goal As A Blogger...

...check it out.

Step In The Right Direction

From the NY Times:

In-flight Internet access is finally taking off in the United States.

Starting next week and over the next few months, several airlines will begin taking the first steps toward offering Internet service on their planes.

On Tuesday, JetBlue Airways will begin offering a free e-mail and instant messaging service on one of its aircraft, while American Airlines, Virgin America and Alaska Airlines plan to offer a broader Web experience in the coming months.

“I think 2008 is the year when we will finally start to see in-flight Internet access become available, but I suspect the rollout domestically will take place in a very measured way,” said Henry Harteveldt, an analyst with Forrester Research. “In a few years time, if you get on a flight that doesn’t have Internet access, it will be like walking into a hotel room that doesn’t have TV.”

The goal is to let passengers use their laptops or smartphones to download e-mail and use the Web as they would at any wireless hotspot on the ground. Virgin America even plans to link the technology to its seat-back entertainment system, enabling passengers who are not traveling with their own hardware to send and receive messages on a flight.

-Get the full version here.

--This is a step in the right direction because the FCC finally realized that you can't interfere with a hundred thousand dollar communication system with something you bought at radioshack. Westjet also announced they'll be offering this service.

Kinda Scary

....Mr. Burns would be so proud:

The head of the Canadian Nuclear Safety Commission has blasted Atomic Energy of Canada Ltd. for violating licence requirements at its Chalk River research reactor - a situation that has now led to an extended shut down and worldwide shortage in radioactive medical materials.

"You are and were in violation of your licence that was granted, in the eyes of the commission, in August ë06," said Linda Keen, the commission's president and CEO.

"The whole understanding of this commission was that that facility was being reviewed against modern standards and was up to date and was going to go forward to the licence period ó that it could operate," she said at a public meeting on Thursday.

Ms. Keen's comments came after an AECL official explained why the company is going ahead with upgrades that include the installation of two new motor starters for the reactor cooling pumps and connecting the motors to an additional backup power supply.

"The impression's been left here that this was an interesting, nice upgrade, that it wasn't essential. It was essential," Ms. Keen said.

In Canada, the shutdown shortage of a material used in tests for cancer, heart disease, arthritis, kidney disease and other health conditions has already caused cancellations in cities such as Toronto, Halifax and Saskatoon, but so far has only led to rescheduling at Ottawa hospitals. AECL official Brian McGee said there is a 75 per cent probability that the reactor will be in operation by the end of December, and a 95 per cent chance that the reactor will return to service by the end of the first week in January. He noted that once the reactor starts up, it takes at least a few days to produce isotopes.

-Get the full version here.

I'm Incrediably Jealous...

...of whoever gets to do research like this:

The dogs chose the appropriate image by pressing their nose against the screen

To the dog lover, the ability of man's best friend to bark at the postman and fetch a stick is proof of his intelligence. But they may be even brighter than that. Scientists have welcomed dogs into a select club of species capable of using abstract concepts. The research showed that dogs are able to mentally sort objects into categories, a talent for abstract thought that has only been shown in birds and primates before.

The researchers trained four dogs with a touch-screen test which involved choosing between two images which appeared simultaneously. One was an image of a dog, the other a landscape. The animals indicated their preference with a prod of their noses. When they chose the dog they were rewarded with food. If they chose the landscape they had to wait a few seconds before the same two images appeared again.

Next the team tested the dogs - two border collies, an Australian shepherd and a mongrel - with an unfamiliar set of dog pictures and landscapes. To pass they would need to realise that "dog" is a category of object that unfamiliar objects also fall into. Their success dropped slightly from about 80% to 72%. "It shows us that dogs are able to use more or less abstract concepts," said Dr Friederike Range, who carried out the work with colleagues at the University of Vienna.

Lastly, the experimenters used familiar landscapes as background with new dog images superimposed. Again the animals were able to choose the ones with the dogs. The research appears in the journal Animal Cognition and is reported today in New Scientist magazine.

--Get the full version here.

Price Of Books

Walking into a book store last week my geekiness naturally drew me to checking the price spread between the US and Canada on a couple new releases. To my surprise the Canadian price was still about 30% higher than the American one. Granted the store had 30% off stickers on some of the new releases, but not all. I suppose they did this for two reasons, first for marketing, and second to keep people from buy the books at the American price on Ebay. I take this as meaning the book publishers aren't expecting the loonie to remain at parity with the dollar (setting prices is a long term commitment). It would be interesting to see if other import industries are behaving the same way.

Carney Gets It Right

From CBC.ca:

It would be a "mistake" to peg the Canadian dollar to the U.S. dollar, according to the incoming Bank of Canada governor, Mark Carney.

Carney told a parliamentary committee Wednesday that it's not surprising there are calls to adopt a fixed exchange rate, given the loonie's recent volatility.

"In my opinion, it would be a mistake to do so," he told members of the House of Commons finance committee.

"It would mean that, de facto, Canada would adopt U.S. monetary policy, despite the reality that the structures of our economies are very different and, as a consequence, often require different types of adjustments in response to global developments," he said.

Carney said floating exchange rates make it easier to adjust to global economic forces.

"A floating exchange rate helps to smooth that process and to minimize the adjustments in other areas of the economy."

-Get the full version here

--Personally I would replace the words "global economic forces" with rapid changes in energy prices. Though, "global economic forces" sounds a lot cooler. Canada was one of the first countries to adopt a floating exchange rate system and there was a reason for it. Canada's economy is very different from the US in that Canada mainly exports commodities while the United States exports highly refined goods. Exporting commodities makes the economy very venerable, and a floating exchange rate helps to mitigates that venerability.

Business Verses Academic Culture

I just got kicked out of the schools computer lab, which happens all the time, but this was the first time I've been kicked out by someone in business. He walked into the lab, smiled big, and gave an enthusiastic, "Hi, I'm going to be teaching a class in here. So you can leave, or you can pay a fee, in that case I suppose you could stay." He was funny and authoritative at the same time. When academics want to kick people out of the lab, the script is usually, "excuse me, I'm going to be starting a class in hear in a couple minutes, so if you could all pack up that would be great." Academics are polite only as authoritative as they need to be. If anybody else has a story relating to this feel free to leave a comment below.

On The Subprime Crises

From the NY Times:

Attorney General Andrew M. Cuomo of New York has subpoenaed major Wall Street firms including Merrill Lynch, Morgan Stanley and Deutsche Bank, seeking information about the business of packaging and selling subprime mortgages, according to people briefed on the subpoenas.

The subpoenas, sent out in late summer, are part of a wide review of the mortgage industry by Mr. Cuomo’s office into the mortgage business. The subpoenas were reported today by The Wall Street Journal.

Wall Street has played a major role in the boom in lending to buyers with weak credit records. It has extended credit to mortgage originators to allow them to offer more mortgages, bought companies that originate and service mortgages, and perhaps most importantly, packaged the mortgages into securities to sell to investors.

--It would be nice if they would have done something five years ago before we got into this mess. This political environment reminds me a lot of the post Enron period, where politicians talked a lot but did very little to solve the incentive problems. Get the full version here.

Animal Living Standards

Strangely enough, the model proposed by Malthus, that people are doomed to poverty because higher living standards brings higher reproduction rates, turned out to be true for animals and not people. Wild animals have to spend almost all their waking hours trying to stay alive. This fact was confirmed for me when I watched the discovery channel series "planet earth" (recommended). The only exceptions to this seem to be when people get involved. For instance, my golden retriever doesn't have to work all that hard to stay alive. The new book In The Company Of Crows and Ravens, takes a look at some of the survivorship patterns in birds. Credit to the folks at Marginal Revolution.

Good News For Canadian Education

From Economist.com

FINLAND produces the best science students, according to the OECD's three-yearly Programme for International Student Assessment (PISA). The survey, conducted in 2006, compares the performance of 15-year-olds in 57 countries in science, but also includes mathematics and reading. Finland, where new teachers require a masters degree and are paid well, is consistently ranked near the top in all three. Britain has pumped money into education in recent years, but has slipped down the rankings by ten places since the last science-based study in 2000. Its pupils do score above the country-average of 500, however, unlike those of other rich countries such as America and Italy.

Shutterstock

--I'm assuming that this study is based on average scores. It would be interesting to see what the median score is for every country, and how much variance you see based on things like income, race, geography...ect. Get the full version here

Viva la Capitalism

Venezuelan bonds jump with the defeat of Chavez's proposed constitutional reforms. From Bloomberg.com

Venezuelan bonds gained the most in three months after voters rejected President Hugo Chavez's plan to implement a new constitution that would have eliminated presidential term limits and given him more power to seize private property.

Investors drove up bond prices as a bet that the referendum defeat will limit Chavez's ability to implement socialism in the South American country. The gains, which sent yields on benchmark dollar bonds due in 2027 to a two-week low, pare a tumble that has made Venezuelan debt the world's worst performer this year, according to data compiled by Bloomberg.

--I know this gives the opportunity for people in English departments to repeat their mantra, "not everything is about money," but economic growth is the best indicator of living standards. What happened yesterday will lead to better lives for millions of Venezuelans. Get the full version here.

Why Economists Can't Predict Anything

People are always dogging on economists for their inaccuracy in predicting recessions. However, the problem isn't economist themselves, it's the dynamic nature of economics. Unlike the weather, economies change based on information. If companies knew for sure that a recession was coming, they would start laying off workers and cutting material orders now. Therefore, by the time you know a recession is going to happen, it's already happening. All that economists can do is say what MIGHT happen, not what WILL happen. This is also why you shouldn't take any ones economic predictions that seriously. I use prediction markets like Intrade to guess what will happen, you should too.