More Wilkinson comment watch

[W]hat if the house isn’t even on fire? What if there was just a short circuit and all the electronic devices have gone haywire and are lighting up the place like a spastic Christmas tree. In that case, we need may need electrician, or we may just need to reset the breakers, but we certainly don’t need a bunch of confused firemen with high-powered hoses blasting everything they see because everything they see looks like its on fire.

Todd

Extensive margin watch

Will Wilkinson says (where to find permalinks for “disqus” comments?) I should take non-behavioral data more seriously. Fine. Here’s a quote from a business owner facing the prospect of Obama’s doubling of income tax on the top 2% of earners:

I own my business and, unlike an employee, I have the option to work as much or as little as I like. At some tax rate, the marginal dollar won’t be worth earning. I’ll fire some employees, scale down the business or retire altogether and stick my money in tax advantaged muni bonds and do all the traveling and relaxing I can’t do now.

Irrefutable damning evidence that people respond to incentives?

Nope. Its not even an anecdote; its just some thing somebody said in a blog comment.

Oscars

Went to see all five best picture nominees yesterday. Its something like torture watching five of those kinds of movies in one day.

Benjamin Button was a terrible movie and I have no idea why this badly done Forrest Gump wannabe (which was a crappy movie too) got nominated.

The Reader is an ok movie, but it failed. They wanted us to have sympathy for the woman and be outraged that she got unfair treatment by the court. The Kid as normal-Germans-not-speaking-out thing didn’t work either. Also, I hate when I have to think about what the directors and producers or who ever wanted me to think about.

Slumdog Millionaire was good, but it became very predictable somewhere about 1/2 way through. The best parts were the early scenes in the slums. If this movie wins because of those scenes, then Wall-E should win because its first third was much better.

Milk was great because Sean Penn was great. The story was interesting, but I would have gotten as much from wikipedia.

And the Oscar goes to… Frost/Nixon… it made me feel sympathetic towards Richard Nixon. The closest I came to crying all day was when Frost broke Nixon in the last interview; the look on Nixon’s face. I know this was a good movie because it was the fifth to show, it was the eleventh hour when it started, my neck had a crick and it was still enjoyable.

PS – I’m out of commission for the next week or so.

Stimulus is a very large number

Iowahawk reporting on the largest integer ever found:

“Unlike previous large numbers like the Googleplex or the Bazillionty, the Stimulus has no static numerical definition,” said Xiao. “It keeps growing and growing, compounding factorially, eating up all zeros in its path. It moves freely across Cartesian dimensions and has the power to make any other number irrational.”

Best of all, “three pounds of Humboldt County Chronic” were responsible for the discovery.

Knightian uncertainty

Uncertainty, rather than just plain risk, leads to over-insurance:

A simple example can reinforce this point. Suppose two investors, A and B, engage in a swap, and there are only two states of nature, X and Y. In state X, agent B pays one dollar to agent A, and the opposite happens in state Y. Thus, only one dollar is needed to honour the contract. To guarantee their obligations, each of A and B put up some capital. Since only one dollar is needed to honour the contract, an efficient arrangement will call for A and B jointly to put up no more than one dollar. However, if our agents are Knightian, they will each be concerned with the scenario that their counterparty defaults on them and does not pay the dollar. That is, in the Knightian situation the swap trade can happen only if each of them has a unit of capital. The trade consumes two rather than the one unit of capital that is effectively needed.

This is a classic negative externality and so Caballero suggest government intervention when so-called Knightian uncertainty — the fear of unknown unknowns — rears its head (e.g. now).

Just because I have a single tracked mind… I’m wondering if the fiscal stimulus will do anything to calm fears of the unknown unknowns.