Harvard

Interesting Vanity Fair piece on how Harvard's endowment is crashing--and taking the University with it.

There are a couple of neat tidbits. Larry Summers comes off as arrogant, but visionary. It also looks like a huge reason for Harvard's endowment is cratering is that the University scared away their big investment manager over compensation packages.

That is, because they didn't appreciate the investment staff making millions of dollars, they wound up losing billions. Sometimes, high compensation is deserved.

It's sad that University Presidents today are no longer in the same caliber as a Harper or Hutchins. They have more money than ever, but continue to blow it on landscaping and daycare for spoilt rich kids. They could use that to transform higher ed, find a cure to cancer, or other useful things. Summers understood that potential. His successors don't, and due to their tight-fistedness over manager compensation, they don't have the money to execute on that vision anyway.

What's Wrong With Chicago?

Casey Mulligan, Professor at Chicago, has apparently taken it upon himself to show that those insane caricatures of Chicago economists do apply to some people.

Here, he thinks that falling unemployment is due to workers being unwilling to work:

Suppose, just for the moment, that people were less willing to work, with no change in the demand for their services. This means that employees would have to be more productive because they have to get by with fewer workers.

Why are people suddenly less willing to work, at exactly the same time that there's a recession going on? That's left unanswered.

Here, he thinks that University endowments function like banks:

The non-financial sectors of our economy will not suffer much from even a prolonged banking crisis, because the general economic importance of banks has been highly exaggerated. Although banks perform an essential economic function — bringing together investors and savers — they are not the only institutions that can do this. Pension funds, university endowments, venture capitalists and corporations all bring money to new investment projects without banks.

You can examine for yourself how little the troubles in the financial system have fed over into other parts of the economy.

Here, he confuses correlation with causation:

The nearby chart shows the results for all of the administrations since Lyndon Johnson (I pool Richard Nixon and Ford). Johnson, Carter and Bill Clinton were all Democrats, yet none of them witnessed much labor market progress for women during their administrations. Essentially all of the labor-market progress for women occurred during Republican administrations: eight years of Reagan, four years of George H.W. Bush, and six years of George W. Bush (I do not yet have the data for the last two years of the current administration).

Women gain in relative income when Republicans are in power, so we should vote Republican.

Here, he says those people warning of a crisis on payrolls were crazy, since payrolls did not drop. He ignores the massive efforts taken to ensure employment. This is a little like saying "We shouldn't have built that levee against the flood, because thing's didn't turn out that bad."

How do these people get tenure, and op-ed spots at the New York Times?

Dream of Californication

California has long led the country. Now, it's totally dysfunctional.

The reasons for California's problems are well-known. Democrats won't cut spending; Republicans won't cut taxes. Legislative lockjam prevents action even in the best of times, and in the worst results in governance catastrophe the like of which are almost impossible to imagine in a modern country.

Is the rest of the country so far off?

Consider: the government has barely raised taxes in decades. Bush I's decision to raise them, and go back on a pledge, is widely thought to have cost him a re-election. Clinton raised some, but Bush reversed those and extended them further. Better to raise the deficit. Obama's campaign took as a central plank that taxes would not rise for the middle class. Relative to the status-quo at the end of the Clinton years, this was actually a tax decrease for the vast majority of Americans. It is becoming virtual political suicide to raise taxes on anyone except the rich--and even they complain bitterly.

Meanwhile, spending is growing out of control. Huge outlays are certain to happen on healthcare, education, and energy. Health care reform promises to curb costs, but the missing step--the one between mandating coverage for all and lowering health care bills--is totally absent. No doubt the White House's technocrats have ideas, but Congress shows no signs of letting them pass. Even the Republicans are raising all hell about 'rationing' health care--even for government funded care, which makes no sense. Iraq is more peaceful, so the Defense budget is down a bit, but Afghanistan is still going. It's soon going to be time for America's decennial war--my bet's on an irregular war within Pakistan.

Obama's term so far highlights the crisis that the legislative branch has fallen into. One might reasonably think that after winning a decisive mandate, the Democrats would find it easy to pass their favored bills. One would be mistaken. Excepting Regan's first few years, no President in recent memory has managed to pass his favored bills. Clinton's major legislative achievements are all things Republicans would love--NAFTA and welfare reform. Bush could not privatize Social Security or pass health care reform even with his majority. And now Obama can barely get Congress to cut the number of GM dealers. The one agency that acquitted itself well during the financial crisis has been the Fed, a fact largely arising from the fact that it is not accountable to Congress. The more democratic our institutions, the worse they perform.

Congress can do two things well: spend and bail out. From Wall Street to Detroit, federal funds sustain corporate America, and corporate America in turn finances Congress. In other countries, we call this crony capitalism. The deficit is huge this year--which isn't a horrible thing--but projections in the future show trillion dollar yearly deficits trailing off into the future.

True, it's hard to predict the future. But suppose the economy fails to get better as scheduled. Say we've all been living beyond our means for the past years, and need to readjust to a more sustainable level of living. Unemployment will lag growth, and the rich will not contribute to the federal pot. Then we'll face poor government revenue, spending that can't decrease, and taxes that can't go up. The legislature can't do anything productive. We'll face government debts that will get harder to pay.

In other words: California. Of course, if America starts to look like California, where will California be?

Virtuality

Just saw the pilot of Virtuality, which is great. Made from the producer of BSG, kind of a cross between Total Recall, Cowboy Bebob, and Star Trek.

Of course, it looks like Fox isn't going to pick this one up.

Wimbledon

Wow, good to watch some good tennis again. Both were great--Roddick served amazingly, Federer pulled it off. Crazy to imagine them serving at 130 MPH after four hours of play.

The Future Is Already Here

This Economist article on flying cars--apparently, they're closer to reality than you might think--got me thinking about the future.

Take someone from 50 years ago into today. Show him your iPhone, with GPS, Google Maps, and all sorts of apps, to say nothing of the internet and email. Buy some books online with your credit card and have them delivered, or buy them on your Kindle. Put on your music collection, which contains a good chunk of the world's musical output over the last thirty years in something smaller than your cell phone--which is revolutionary enough as it is. Check out some TV shows, movies, and YouTube clips. Play some X-Box, or use your Netflix account to stream some video on your flat screen TV. Type up something on your blog, or work a spreadsheet. Use wikipedia or Google.

None of these things existed fifty years ago. Any person from back then, seeing this stuff, would be amazed and convinced that the future has arrived. Except for the flying cars. So let's get on that, people.