International lender of last resort: Kindleberger's take
Hey, I've learned how to use Latex. So, here's my first Latex generated paper. I wrote it as an 'article' summary for my Int'l Economics course.

Admittedly, I was a little sloppy with the facts (e.g. I didn't bother to look up what country the IMF took 21 days to help or in what year the Bank of London displayed gold... yer, maybe that was Paris). Anyway, its a summary of the main points of the Chapter 11 and actually of the whole book.
  As ordered...
... Tyler Cowen's Avian Flu blog.
  Back to basics: How does the Fed "set" short and long term interest rates?
Prof. DeLong continues his public service and posts a discussion of how the Fed does its work. I think people tend to believe the Fed sets interest rates directly, as if by fiat. However, the Fed doesn't just declare what interest rates are. They participate in markets to help adjust short term rates (e.g. those rates of very short-term loans between banks). In these few markets, the Fed has a direct and large impact on the price (i.e. the short-term interest rates).

Indirectly, these activities in short-term markets impact longer term interest rates. You can think of long-term interest rates as having two components: the cost of risk and the cost of short term rates. There is risk to lending money for a long term. With more time, the borrower is more likely to default (i.e. not pay the loan back) so the bank charges a premium for these types of loans. For the second component, you can think of the short term component of a long-term interest rate as the bank's cost of the loan. Instead of lending out the money, they could keep investing in short-term investments. It's easy to see how the Fed's activities in the short-term markets impacts this second component.

If it appears that the Fed will undertake activities that will increase (decrease) short-term interest rates then banks will begin to charge more (less) for loans. The Fed helps to set these expectations by having a continuous and transparent dialogue with the public. This is why you always see statements from the Fed or you read about Chairman Greenspan testifying before Congress. The Fed is trying to signal how it will be adjusting short-term interest rates.

Question: Why doesn't the Fed just tell us what it thinks the rates will be for the next year or so? Why the signaling and not just objective targets?
  A joke, right?
"Grandmama is old and I think it is time she went home to Jesus," Gaddy told Magouirk's brother and nephew, McLeod and Ken Mullinax. "She has glaucoma and now this heart problem, and who would want to live with disabilities like these?"

Two weeks ago, Magouirk's aorta had a dissection, and she was hospitalized in the local LaGrange Hospital. Her aortic problem was determined to be severe, and she was admitted to the intensive care unit. At the time of her admission she was lucid and had never been diagnosed with dementia.

Claiming that she held Magouirk's power of attorney, Gaddy had her transferred to Hospice-LaGrange, a 16-bed unit owned by the same family that owns the hospital. Once at the hospice, Gaddy stated that she did not want her grandmother fed or given water.
  Starbucks delocator
Find good indy coffee shops with the Starbucks delocator. BTW, for fear of legal trouble, the Starbucks delocator is just called the delocator at the website. But if everyone that links to it refers to it as Starbucks delocator then google will associate that phrase with the site and those that search for "starbucks" in google with be more likely to get the Starbucks delocator.
  Back to basics: Why the value of a good is NOT the sum of the labor used to create it
Prof. Delong rings the school bell. Nervous pre-first year econ grad students, anxious to make a good first empression impression (heh, learning to spell would be a start) at their new school and not to appear to misunderstand the basics, pull up a chair:

Let's run through Marx's labor-theory-of-value argument in a simple finger-exercise model:

Start with 100 identical farm families on 100 identical farms, each of which produces 3000 pounds of wheat (and other crops, but let's assimilate them all into wheat) each year.

Now suppose that ten of these families starve themselves for a decade--living on little more than half-rations--to raise the cash to buy farm machinery, irrigation systems, fruit trees, et cetera from the cities. As a result of their sacrifice, saving, and investment, thereafter their farms require four times as much labor each year to operate, but also produce crops worth eight times as much because of the capital investment. They then hire thirty additional families' worth of workers, leaving the remaining ninety original farmsteads to be worked by sixty families.

If diminishing returns do not set in and if the sixty families that remain in the family-farm sector expand their crops to take over the now-idle land, each of them can now produce 4500 wheat-pound equivalents of product each year: their standard of living has gone up by 50%. The owners of the capital-intensive farms have to pay each of the 30 families they hire 4500 wheat-pound equivalents to get them to work in the capital-intensive farm sector. Each of the proprietor families is then left with 24000 - 13500 = 10500 wheat-pound equivalents in income--4500 wheat-pound equivalents of which is the "wages" of the proprietor family, and 6000 wheat-pound equivalents is profit.

Now in Marx's schema, the first situation--where average labor productivity is 3000 pounds of wheat per family, and each family receives 3000 pounds of wheat in income--is one of no exploitation: labor is paid its average product:

Average Labor Product: 3000
Real Wage: 3000
_____ _____
Surplus Value per Worker: 0
Total Exploitation: 0

And in Marx's schema, the second situation--where average labor productivity is 5100 wheat-pound equivalents, and each non-proprietor family earns or is paid 4500 wheat-pound equivalents--is a situation of exploitation in which the proprietor class extracts surplus value from the workers by using their market position to pay those that they hire less than the true value of their labor.

Average Labor Product: 5100
Real Wage: 4500
_____ _____
Surplus Value per Worker: 600
Total Exploitation: 60000

Now it should be clear that this labor-theory-of-value-based analysis makes no sense at all. The proprietor families starve themselves for a decade, and yet Marx views them as exploiters? The heavy investments of the proprietor class and their resulting demand for labor raises the real wage by 50%, and yet the working class is oppressed? Something is very wrong here.

Now at this point the standard response is that the example is rigged: that in the real world those who own property and hire labor and live richly gained their wealth not through sacrifice but through a combination of luck and theft and having chosen the right parents. Thus it is unfair to set forth an example in which the proprietors' moral claim to their higher income is so clear and strong.

And the rebuttal is that, yes, this example is rigged: that's the point. The aim is to construct useful analytical categories that will help one identify and assess injustice. The aim is not to construct analytical categories--like the labor theory of value--that claim to find injustice whether there is in fact injustice or not. The fact that the labor theory of value finds injustice whether it is there or not is a sign that it is not the brightest light on the tree of good ideas.

Marx's labor-theory-of-value-schema makes no distinctions between profits on capital that have their origins in luck, theft, and choosing the right parents on the one hand; and profits on capital that have their origins in sacrifice, industriousness, or flashes of genius on the other. They are all, to Marx, "exploitation," "unjust enrichment," "extraction of surplus value." They are all, to Marx, signs of evil. But in this particular example the proprietors are, in reality, not evil. The proprietors are, in reality, public benefactors. The effect of their savings and investment is to raise not just their own incomes (after an extended period of sacrifice) but everyone else's incomes as well.

Thus the labor theory of value category of "exploitation" does not map onto what either ordinary language or our moral intuitions call "exploitation." There are social and economic changes that are good that are, in Marx's schema, increases in the rate of exploitation. There are social and economic changes that are bad that are, in Marx's schema, increases in the rate of exploitation. It's simply not a useful tool for either moral philosophy or political action.

Moreover, the labor theory of value is of little help in predicting what average market prices will be. It's not a useful tool for economic analysis either. In my view, the labor theory of value is pretty much useless.

If you want to make a compelling criticism of economic and social relationships, you cannot do so by saying that there is Marxian "exploitation"--which exists wherever workers are paid less than the average product of labor. You have to, instead, inquire into the origins of the wealth and property rights on which the proprietor class's income is based. The labor theory of value is simply a red herring.

  Neat example of moral hazard
Via Engadget the Honolulu Star-Bulletin reports:
When many had given Albert Lowe up for dead, he answered his cell phone.

Two years ago the 58-year-old hiker fell more than 200 feet down a steep slope in Waianae. He was unconscious on the ridge overnight, with several broken bones, until coming to the next morning to hear the familiar ring of his cell phone.

The call saved his life. He answered, and rescuers were able to quickly determine his location -- a spot thick with brush, and not visible from the trail.

Lowe's survival story stresses the importance of carrying a cell phone when hiking. But the same recommended equipment that is often the fastest way to get help in an emergency has also created a predicament for rescuers, say some expert trail leaders, who warn that many Oahu hikers are relying too much on their cell phones.

The experienced hikers say cell phones are lowering people's guards, convincing them (if only subconsciously) that it's OK to start a hike shortly before dusk, wander off a trail or not pack necessities -- like water, a flashlight or first-aid kit -- because help is only a 911 phone call away.

They also say there is an issue of overuse -- novice hikers calling for help simply because they are too tired to get back down from a trail

There were more than a dozen on that list last year, experienced trail users say, but fire officials could not provide statistics because such information is not included in incident reports.

Fire Capt. Emmit Kane, a spokesman for the Honolulu Fire Department, declined to comment on whether cell phones are creating a problem for rescuers because of overdependence or overuse, saying no one should hesitate before calling 911.

But he did say that hikers should consider cell phones one of a number of things that need to be taken on a trail. "It's a tool," Kane said. "It's not something we think people should be dependent on. We do know that they don't always work."

IN 2004 the Fire Department responded to 110 calls of hikers in distress on Oahu -- just slightly up from 2002 and 2003, when rescuers responded to 102 and 106 hiking distress calls, respectively.

Kane could not provide data on how many of the hikers who were rescued called for help from their cell phones.

But Mabel Kekina, who heads the Hawaiian Trail and Mountain Club and often helps the Fire Department in missing-hiker cases because of her knowledge of Oahu's trails, said she has seen a firsthand increase in hikers calling 911 from their cell phones "for the silliest things."

She told several stories of hiker rescues that could have been avoided, including one that involved a member of her club who went hiking with two tourists on a difficult trail, kept going up well after lunch time and needed help getting down by the time she had gotten to the top, which was near nightfall.

Kekina said amateur hikers are using their cell phones as a safety net -- an excuse to become more adventurous, straying from marked paths or trying trails more difficult than their level of experience.

"They just don't use common sense," said Kekina, who hikes nearly every weekend.

"It's hard to educate the public, but that's not to say we shouldn't do it. If we reach even 50 percent of the public, that's 50 percent we don't have to go out and look for."

John Hall, a coordinator for Hawaiian Trail and Mountain Club who has been hiking on Oahu since 1962, said he also believes hikers are relying too much on their cell phones and not using common sense.

"I'm often amazed," Hall said, at "finding people just starting in on a trail when we're coming out."

THE CALL for more hiking safety awareness in a world of cell phones comes as a bill is moving through the Legislature that would allow the state to charge unprepared or risk-seeking individuals -- including hikers -- for their rescue.

The bill, introduced by Sen. Shan Tsutsui and now before the House, specifies what situations are subject to reimbursement, essentially putting enforcement authority into an existing law that allows the government to charge for search and rescue operations.

Tsutsui (D, Wailuku-Kahului) said the measure is similar to those on the books in other states and is intended for residents or visitors who "disobey warning signs," putting themselves in danger.

"As hiking becomes more and more popular, some end up off the beaten path," Tsutsui said. "I think it's important to exercise some level of common sense, not take extreme risks."

The bill has drawn good reviews from many hikers, Tsutsui said. But the Fire Department has expressed opposition, saying it could cost lives if people end up not calling 911 because they are worried about paying for the costs of a rescue.

Kekina said she is also not sure whether the measure is the right answer.

"The fire rescue people and the police, they're on the payroll, that's their job," she said, with a laugh. "There's no cure for stupid people."

AARON LOWE, trails and access specialist for the Department of Land and Natural Resources' Forestry and Wildlife Division, said the amount of money it costs for search and rescue operations is a factor for authorities, especially with a tightening budget.

But he also said that there is no way of determining "the extent of a situation" until rescuers are on site.

"We put on the list there to bring a cell phone," said Lowe, referring to things to take when hiking. "It's pretty much a good tool to have. I hope people don't use this tool frivolously."

In 2001 the state took a survey at 14 popular trails on the four major islands to determine how prepared the "average hiker" is, and found that most did not have all the recommended equipment.

About half brought water along and just 27 percent brought food. On Oahu trails about 10 percent of hikers surveyed had cell phones.

In a recent interview, Kekina started off by telling the story of the lucky hiker, Lowe, who had been saved because he brought a cell phone. She said she had made that morning phone call to him after others had tried to get through to him but had failed.

"I'm an experienced hiker," she said, later in the conversation. "I carry a cell phone."

Graduate school. Can I survive the experience being able to see what is important? Posted by Hello
  If only they could hear themselves speak such nonsense...
I wonder which quality of French culture makes the democratic PageRank algorithm unFrench. Liberte? Egalite? Fraternite?

Oh, I bet its the quality of French culture that makes it necessary for the Ministry of Culture to justify its own existence. Of course, this aspect of French culture isn't really French... A bureaucrat is a bureaucrat is a bureaucrat.
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