Well, with global warming, over hunting, and as I’ve learned Chinese, wildlife doesn’t stand a chance.
Apparently, I’m not the only wildlife conservator up in arms with an old Chinese meal that isn’t only cruel, but dramatically decreasing shark population. It’s called Shark finning to make Shark Fin Soup. Not only are the Chinese satisfied with killing an animal, they like to torture them before killing them. The Chinese catch shark and then cut off the fins, then throw it back in the water. Well, then the shark can’t swim and dies slowly at the bottom.
This meal is killing of many species of shark which is destroying the whole sea ecosystem.The shark population has dropped almost 90% in the last couple of decades due to the Chinese, that’s over 100 million sharks deaths per year. Just because they like soup.
Not all Chinese support this horrible practice, though. The CWCA (the Chinese Wildlife Conservation Association) is fighting against it.
But, wait, I’m not done with the Chinese, not even close.
Again just because they like soup, the Chinese have found killing baby birds as well as mature birds O.K. to make there beloved soup.
Bird Nest Soup is made by Chinese going into caves, and finding bird nests made by a couple species of the Swiflet bird family. The male bird makes a perfect nest over a month on a wall of a cave and then lives in it with his mate. Well, a Chinese person comes around and shoos the birds away and if there’s baby birds, they just dump them on the floor, leaving them to die. And the adult birds don’t have any where to live so they die too.
If you agree with me and the rest of the world, stop going to Chinese restaurants, even if they don’t serve Shark Fin Soup. And, stop buying China made products. This would crush China’s economy and send them into a downward spiral.
What started as a “Ha, do you libertarians endorse this?” dare by Mike of Rortybomb has turned into a somewhat interesting discussion between him and Megan McArdle about to what extent it’s possible to protect people who are not good at understanding complex financial products (the elderly, or people who just aren’t good at understanding complicated service agreements) from being victimized by banks without in the process hurting the people you’re trying to help. This as the new credit card legislation is going into effect, trying to crack down on banks which raise interest rates quickly if you’re late paying, have hidden fees, or move due dates around (theoretically in an attempt to keep people from paying on time.)
Mike suggests that banks should be required to offer a “plain vanilla option” of products such as credit cards or checking accounts.
And that solution would be mandating financial services to provide Vanilla Option financial products. Boring, low-reward trap-fee products you’d probably have to pay a yearly fee for.
So much of our financial services are predicated on tricks and traps but also have a lot of benefits. You get free checking, but if you overdraft you lose more than you gained. Now with a vanilla option, you could pay more upfront to not take the risk of losing later. This is banking how it used to be, boring. And this is exactly the kind of product that people with weak cognition would want to have available. Someone approaching older age, but before getting there, could opt for the “extra boring” financial services package. People buy renter’s insurance; some might view a yearly-fee on their checking account or credit card as a “trap insurance.”
Megan doesn’t think the idea would be very successful:
It’s not a terrible idea, necessarily, but if it’s an actual option, I doubt it would accomplish much. Banks will find ways to steer you into the more lucrative product–unless, of course, you’re the sort of highly informed, financially disciplined consumer who doesn’t need a vanilla option, and is in fact better off in the current system.
The “plain vanilla” idea is somewhat with an idea I’ve kicked around at times in regards to health care, which is that perhaps one could achieve many of the good effects of regulation (while avoiding its pitfalls) via certification instead. The idea would be to have some sort of certification organ (either governmental or private, but something with sufficient credibility and reach to inspire confidence and get the message out) create some sort of standard guidelines for a product. If it was a health care plan, this would involve very clear and simple parameters for what was covered, copays, percent you pay, max out of pocket, etc. Perhaps there’s even be a standard disclosure form that everyone offering such a certified policy had to offer, which was only one or two pages long, and was formatted in a specific way so that you could easily compare different plans. There would not be a mandated price, or mandated copay, or a mandated max out of pocket — just a very clear disclosure format and coverage structure you had to follow.
Insurance companies could decide to offer a certified plan or not, but if they did, they could list their plans on the certifying agency’s website, brand their advertising with the certification, etc.
Now, the value in this would be that in products which have a reputation for being hideously complicated, and potentially biting you with a nasty surprise at some later date, customers would assign a value to a certification which allowed them to know the product they were buying met certain uniform standards. It might be that they could get non-certified coverage which worked just fine for them, and was cheaper, but part of what you’d be paying for would be the knowledge that you were getting a known quantity. If there was enough demand for this certainty, the prices on certified policies would actually be quite competitive since different companies would vie for the certified policy market. In coordination with this you would, of course, remove all the current regulation on what policies have to cover, as well as allowing interstate insurance purchasing. So you’d have the wild and crazy, totally free market, and you’d have the voluntarily certified market.
It seems to me that, if an institution with sufficient credibility created a set of certifications for complex, important products such as health insurance policies, and really marketed them, there would probably be a pretty decent market for the certified products. (If you were trying to solve the problem of people not being able to afford insurance you could also prove subsidies for those at certain income levels — perhaps making the subsidies only good on certified plans, or perhaps on any.) However, some people would, of course, still get themselves into trouble by getting uncertified plans which unbeknownst to them turned out to be have all sorts of nasty pitfalls. Just as there’s always a market for home study courses which can teach you how to become a millionaire, available on DVD for just ten easy payments of $49.95, it will inevitably be some of the hardest luck characters who are just sure that the policy costing only $129 per month for their entire family will be a great bargain. And unfortunately, if you want to preserve people’s freedom at all, you need to give them the chance to abuse it.
The problem with the idea of applying this kind of certification-as-regulation to products such as credit cards or checking accounts is, I think, that while a fairly large percentage of people in the individual insurance market might consider themselves sufficiently bewildered by insurance policies (and the danger of getting a policy that doesn’t really do a good job of covering you would be so great) very few people think that they aren’t equal to evaluating a credit card or checking account. Nor do they tend to imagine that the danger of selecting a bad one would be great. Sure, it might have nasty results for not paying on time your credit card on time, or for bouncing checks, but no one intends to bounce checks or pay late. You can always tell yourself that you won’t fall into these problems, and the rewards by comparison sound so great and so easily won.
So on credit cards and checking accounts, I tend to think that Megan is right: most people simply wouldn’t select a “plain vanilla” option. If checking accounts and credit cards were widely viewed in our culture as dangerous and tricky, people might opt for certified products. But although a few people might, I think most of the people who end of in the saddest straights would not.
(Stephen McKnight) The start of a new year (and decade this time around) is an ideal time to reflect and plan. Looking back, one of the more significant additions to our communication lexicon may just be ”Social Networking.” For the past several years, I have been teaching an economic development marketing course. And each year I call out the importance for economic developers to recognize potential investors (or customers) as not the “corporation” or “industry sector,” but rather as individuals (humans if you will) each motivated by both rational and irrational factors. They can choose locations based on factors such as friends, family and alumni connections just as easily as they may on cost, incentives, infrastructure resources or market statistics. But up until now, economic developers found it difficult to communicate or discuss the more discrete qualities of their location directly with the potential client. They only had the old dusty website or static print advertising to promote their ”Great Quality of Life” tag lines – only to then hope the message hits the target.
I think all economic developers would agree that their business is more personal, relationship driven, network reliant, and value focused than most. And social networking? Well, it is most often a self selecting and responsive, offering economic developers a more managed yet virtual community in which to market. If done correctly, cities, towns or regions can quickly develop a growing list of “friends” or ”members” that represent at the very least, good spokes-persons and in some cases, new investment.
Last year, the International Economic Development Council (IEDC) in partnership with the Development Counselors International, conducted a social media survey of 307 IEDC members. 63 percent indicated that they have been using social media tools for less than one year. More than half rated social media and networking as the most important aspect of their most immediate future marketing plans. So the message for the start of a new year (and decade) - “Don’t hold back on building your virtual social networking skills economic developers!” It is a tool that will evolve quickly in the coming months and, like this whole internet thing, I think it is here to stay.
Ryan Avent at Free Exchange criticizes University of Chicago economists Gary Becker, Kevin Murphy, and Steven Davis, for arguing in a WSJ op-ed that potential government action is causing uncertainty in the energy sector, which is in turn potentially causing a decrease in investment. Ryan argues that:
“…if American businesses are confident enough in their beliefs about a high carbon price to reduce investment in fossil fuels, then certainly they are also confident enough to increase their investment in alternative energies, are they not? Indeed, this is the entire point of a carbon price, passed or merely expected—that it will shift views about relative costs, thereby using market mechanisms to channel investments into lower emission sectors. In the authors’s view, by contrast, markets are simply dumb: able to see the downside to expected policy changes, but too stupid to go looking for the opportunities created by the shift.”
On the one hand, Free Exchange is right that the Chicago boys are ignoring the increase in alternative energy investment that will likely occur. However, if this increase will be far outweighed by the decrease in investment in fossil fuels, then the admission is not so conspicuous as Ryan has made it out to be.
My guess is that Ryan probably agrees with that, but he also thinks the increase in investments in alternative energies will be significant; at least significant enough that not mentioning it is a serious omission. So the real question is what will the net effect on investment be?
One important determinant is the level uncertainty about the increase in demand for particular alternative energies. The appetite for risk right now is not great, and if alternative energies are highly risky investments relative to fossil fuels, then total investment may drop substantially.
So if the government announced they were going to pass a cap and trade bill in 3 months, for sure, how certain would we be about what alternative energies were good investments? I don’t know. But one thing that would likely cause high uncertainty in estimating this is unreliable government subsidies or other policies that are greatly distorting the market, and the fact that the next “winner” in alternative energy might be whomever the Department of Energy decides. Wind energy, in particular, has been known to have boom and bust cycles based on government policy. Given the degree to which our and other governments have decided they will be picking winners and losers in the alternative energy market thus far, including the $163 billion globally that will be spent on green stimulus, I think it’s likely that marginal alternative energy investments are much riskier than marginal fossil fuel investments.
Of course there are others factors the will contribute to the net investment impact of cap and trade, some of which tilt the scales in favor of positive net investment. But the simple issue of uncertainty that I mentioned shows, I hope, that even if businesses are confident enough in their beliefs that a high carbon price will reduce investment in fossil fuels, it is far from certain that they should be confident enough to increase their investment in alternative energies by a substantial amount.
The critical question that many Americans are obviously concerned about is the question of what do we do with the banks. And on that, he again was very clear that he recognized the anger that Americans have about the way the banks have taken our taxpayer money and misspent it, but he didn’t give a clear view of what he was going to do.
Is President Obama holding the banks accountable?
So far, it hasn’t happened. I think the more fundamental issues are the following. He says what we need is to get lending restarted. If he had taken the $700 billion that we gave, levered it ten-to-one, created some new institution guaranteed—provide partial guarantees going for, that would have generated $7 trillion of new lending. So, if he hadn’t looked at the past, tried to bail out the banks, bail out the shareholders, bail out the other—the bankers’ retirement fund, we would have easily been able to generate the lending that he says we need.
So the question isn’t just whether we hold them accountable; the question is: what do we get in return for the money that we’re giving them? At the end of his speech, he spent a lot of time talking about the deficit. And yet, if we don’t do things right—and we haven’t been doing them right—the deficit will be much larger. You know, whether you spend money well in the stimulus bill or whether you’re spending money well in the bank recapitalization, it’s important in everything that we do that we get the bang for the buck. And the fact is, the bank recovery bill, the way we’ve been spending the money on the bank recovery, has not been giving bang for the buck. We haven’t gotten anything out.
What we got in terms of preferred shares, relative to what we gave them, a congressional oversight panel calculated, was only sixty-seven cents on the dollar. And the preferred shares that we got have diminished in value since then. So we got cheated, to put it bluntly. What we don’t know is that—whether we will continue to get cheated. And that’s really at the core of much of what we’re talking about. Are we going to continue to get cheated?
Now, why that’s so important is, one way of thinking about this—end of the speech, he starts talking about a need of reforms in Social Security, put it—you know, there’s a deficit in Social Security. Well, a few years ago, when President Bush came to the American people and said there was a hole in Social Security, the size of the hole was $560 billion approximately. That meant that if we spent that amount of money, we would have guaranteed the—put on sound financial basis our Social Security system. We wouldn’t have to talk about all these issues. We would have provided security for retirement for hundreds of millions of Americans over the next seventy-five years. That’s less money than we spent in the bailouts of the banks, for which we have not been able to see any outcome. So it’s that kind of tradeoff that seems to me that we ought to begin to talk about.
the banks that have not been managed very well, we need to not only fire them, we have to change their incentive structure. And it’s not just the level of pay; it’s the form of the pay. Their incentive structures encourage excessive risk taking, shortsighted behavior. And in a way, it’s a vindication of economic theory. They behaved in the irresponsible way that their incentive structures would have led them to behave.
if you get an incentive structure where you say you get huge pay if things go well, but you don’t pay any consequences if things go badly, and you’re going to look at it only in terms of the profits that you make this year, not the losses that you make next year and the year after, then of course you’re going to try to get a gamble, because if you gamble and you win, you walk off with the money; if you lose, somebody else picks up the losses.
So what happened was, the banks gambled. They gambled very big. They had big profits for four years. But in the fifth year, the losses were greater than all the profits that they had in the first four years. But meanwhile, they walk off with the bonuses based on the four-year performance, and then, the fifth year, they don’t—I mean, it was quite remarkable, they didn’t even—they even got big bonuses for the record losses. Then that’s what, of course, has gotten Americans angry, so that the bonuses were described as incentive pay. But that was all a charade.
But the basic thing is, you know, our bankers are—many of them, not all of them—are, you might say, ethically challenged. But even were not they ethically challenged, the fact is they had incentive structures that led them to behave in the way they did.
Americans don’t like to use the word “nationalization.” We do it all the time. We do it every week.
if banks don’t have enough capital so that they can meet the commitments they’ve made to the depositors, at the end of every week the FDIC looks at the balance sheet, and it says, “You don’t have enough capital. You’re not allowed to continue.” And then what they do is they either find some other bank to take it over and fill in the hole, or they take it into government control—it sounds terrible, to take it into government control—and then sell it.
And that’s what other countries have done when they faced this kind of problem—the countries that have done it well. One of the important lessons is this is the kind of thing can be done well, could be done badly. And the countries that have done badly have wound up paying to restructure the bank 20, 30, 40 percent, even 50 percent of GDP. We’re on our way to that kind of debacle. But that shows you how bad things can be, how costly it can be, if you don’t do it well.
Most interesting case is actually AIG, not even a bank, and we poured in $150 billion. Originally, they said they only needed $20 billion. And then, every few hours, every few days, the losses got bigger, another $60 billion. Now, that fact, the fact that we keep getting bad news and have to pour money in, should make us really worried. The question is, why did we bail out AIG? What they said is, the reason we bailed it out is if we didn’t bail it out, there would be consequences somewhere else. They didn’t tell us where.
It would make much more sense if we looked at where the consequences were and deal with the problems as they turn out. Just for instance, some of the, quote, “insurance policy derivatives” were not in the United States. The people that would have problems may be gamblers, may be other institutions abroad. Do American taxpayers want to be bailing out institutions abroad? That’s a question we ought to be debating. There may be pension funds that may be hurt. Well, some of the pension funds may be able to withstand it; other pension funds will need to have assistance. But let’s get the money going to where we think it ought to go, rather than this trickle-down approach that we’ve been using with AIG.
Sweden and Norway did things very well back in the end of the ’80s, beginning of the ’90s.
The UK, has been doing it much better than the United States. Its problems are bigger— we have to realize that—because its banking sector was a more important part of the economy, and one of the banks actually had liabilities greater than the GDP of the UK. So it’s going to be facing a very difficult time. But the fact of the matter is, the way Gordon Brown did it, replacing the heads of the banks—it was real sense of accountability there. Government got control and shares commensurate with the money that it was paying in—it wasn’t a giveaway—and now trying to make sure that they start lending, forward-looking. So it’s clearly—they have a much clearer concept of what is needed.
Why is Obama saving these bankers?
we could all guess about the politics. We know one of the problems about American politics is the role of campaign contributions, and that’s plagued every one of our major problems. Under the Bush administration, we couldn’t deal with a large number problems, like the oil industry, like the pharmaceutical, the healthcare, because of the influence of campaign contributions. One of the problems is that whether it’s because of that or not, it lends an aura of suspicion. The fact that there was so much campaign contributions from the financial sector at least raises the concern.
There is one other legitimate concern, that Wall Street has done a very good job of fear mongering. They say, “If you don’t save us, the whole system will go down.” But, when these banks that I talked about before, when they go down, there’s not even a ripple. The fact is, you change ownership. It happens on airlines all the time. An airline goes bankrupt, a new ownership, financial reorganization—not a big deal. What they’ve succeeded in doing is instilling a sense of fear, so that it’s a kind of paralysis that hangs over what we’re doing. And you could understand a politician. He’s been told if you do one thing, the whole system—the sky is falling, it’s going to fall. That induces political leaders to try to do the smallest incremental step, and that’s what got Japan in trouble.
The question is, are Geithner and Summers willing to take the bold measures that are necessary? Everybody keeps saying we need to take bold measures, inaction is not a possibility. That’s not the issue on the table. Action will be taken. The question is, which action? Is the action pouring more money into the banks without any effect on lending, increasing the deficit, which the President talked about, or the actions which could be taken, starting on new banks, looking forward rather than looking to the past, significant financial restructuring?
Are we going to bail out the shareholders, bail out the bankers, rather than focusing on saving the systemically important parts of these institutions? There are some important parts of these institutions that we’ll have to save. The question is, are you going to go do it like with a bludgeon, throw money at it, or are you going to try to do it more surgically and save the parts that need to be saved? And one of the things that went wrong is when we went—let Lehman Brothers go. It caused this enormous trauma. And that’s increased the fear about—but that’s an example of doing things wrong. We didn’t ask the question. There was a systemically important part of Lehman Brothers.
Which were the commercial paper that was part of the money market funds that were—people were using like banks, like part of our basic payment mechanism. We could have saved that part and let the gambling part of Lehman Brothers, which is not part of the payment mechanism, go down. And because we took this blunt approach, we failed. And what the financial markets are doing are saying, “You have to save everything, if you’re going to save anything.” And that’s just wrong.
Plans to cut the deficit in half.
What we have to remember is we are in for almost like—most likely a long and extended downturn. Now, we will eventually recover. That’s not a question. But in 2011, 2012, will we be in a sharp recovery or in a more slow recovery?
One of the lessons from Japan was that in 1997, when they were in the beginning of their recovery, they increased taxes because they wanted to get rid of their deficit, and the economy sank down back into a downturn.
The way to look at it is the following. Right now, in 2009, 2010, we’re talking about, per year, something like a stimulus bill of $350 billion per year. To cut the deficit in half, with a deficit as we go into—without the stimulus is one-and-a-half trillion dollars, so we’re talking about pulling out $600, $700, $750 billion. That’s the reverse of an expenditure, taking out the stimulus and cutting back expenditures by another $600 billion—we’re talking about a turnaround of a trillion dollars. Do you really believe that by 2010, by 2011, 2012, our economic recovery will be so strong that it can withstand that kind of taking out of expenditure? I don’t think so. And so, if you went ahead and did that, we will go back into a downturn.
effect of war on the economic crisis.
The President did have two things that I really welcome. And several of the suggestions that we made in our book (The Three Trillion Dollar War: The True Cost of the Iraq Conflict), he has adopted. For instance, in the past, under the Bush administration, the war was totally funded by—or almost totally funded by emergency appropriations. It was as if every year was a surprise. And he said he’s going to put that on the books so that we can evaluate it, make sure their money is going in the best possible way.
A second thing in our book that was, very moving was the way we treat our veterans is terrible. And he said, you know, they fought for us; we have to fully fund the Veterans Administration. So those were really important moves in the right direction.
But on the other side, the move into Afghanistan is going to be very expensive. Things are not going very well. Our European—those who—NATO partners are getting disillusioned with the war. The people in Europe, really feel this is a quagmire. And one of the things that we do talk about in our book is that if you keep a residual force in Iraq, it’s going to be very expensive. That’s the experience that Britain has had. They’ve kept a relatively few troops, and the result of that is the savings that they had hoped weren’t materialized. So that goes back to the part that he talked about at the end of his speech: the deficit. If you’re going to be spending all this money in Afghanistan and in Iraq, that deficit is just going to be that much greater.
The fact is that when the economy is weak, as it is, you need to stimulate aggregate demand. If you don’t do that, the economy gets weaker. And what’s good about most of Obama’s plan is that it’s creating assets. So, while the liabilities go up—we’re going to have to borrow—we also are creating assets. If we had spent a few billion dollars under the beginning of the Bush administration on the levees in New Orleans, we would not have had to spend so much money in the cleanup, in dealing with the devastation that it brought. That would have been money that would have had an enormous return. $5 billion would have saved $150 billion. And so, that’s an example where there are certain kinds of investments—investments in technology, investments in people—that the private sector can’t do and the government can do in ways that give us a very high return.
We’re in the tenth anniversary of the mass protests in Seattle, the Battle of Seattle. What about the questions raised in corporate-led globalization?
I think two very important issues. One of them is the model that was behind much of the impetus for that globalization was a model based on free unfettered markets. And we know that model, deregulation, has failed. That was the kind of thinking that led into the problems the United States is in today.
The second point is that while we talk about free and open markets, what the United States has been doing has destroyed a level playing field and will have profound implications for the evolution of globalization going forward.
And for developing countries, it’s having a devastating effect. Just a couple days ago, the other American banks were complaining about the huge subsidies that were given to Citibank. They say, “How can we compete when the government is subsidizing Citibank to that extent?” Now, if you think these other American banks that have gotten massive subsidies are complaining, you can imagine the kind of feelings that people have in developing countries that say, “We can’t afford those mega-subsidies. How can we compete against Washington being able to write a check any time anything goes wrong?”
there are some fundamental problems in the efficiency of our healthcare system. And what we’ve seen is that the private healthcare insurers do not know how to deliver an efficient way.
Joseph Stiglitz talking.
Joseph Stiglitz, winner of the 2001 Nobel Prize in Economics. He is a professor at Columbia University and the former chief economist at the World Bank. He is the co-author of The Three Trillion Dollar War: The True Cost of the Iraq Conflict.
So here are some interesting things from around the internet on this the first EcoMonday of the new year:
Other Worlds Are Possible: the sixth report from the New Economics Foundation. If you’re looking for something to read that isn’t wholly pessimistic, this is pretty interesting stuff. Note that it’s a PDF download and pretty big.
Law requiring solar energy heaters in new homes – well, I guess if any state was going to do this, Hawaii’s the one to start it.
Chemical regulations that might actually work: the Environmental Defense Fund’s blog discusses the EPA’s new “Chemical Action Plans”.
Peace Teaching: stories from North Kivu, the Congo – by Zawadi Nikuze.
The Obligatory Bicycle-Related Link.
Finally, things to write to your MP about! Here are some private members’ bills you may be interested in.
Establishing a National Ecosystems Council
Prohibiting the Export of Water
Establishing an Oil and Gas Ombudsman
And then there’s The Tartan Day Act – yeah, I don’t know either.
Have you heard of all these colleges offer online courses to the public for free? They are excellent opportunities to learn things that you might not have considered before, or even thought you needed to know. Maybe you never went to college, or maybe you just have not had the chance to study everything you wanted when you did. Or perhaps you realize suddenly that the country faces difficult economic conditions and appalling rate of unemployment, it is time to give you an advantage over other people looking for there ahead.Well, these colleges and universities, and there are lots of them, trying to help. They open their courses to the public in some way. You do not get college credit, and you're not really following the course (who has time to do anyway, other than a dedicated student?), But you can always get the education online finance degree.It's called OpenCourseWare, and it can be anything from text notes from university courses, in audio and video podcasts of lectures open so you can see exactly what you would if you were sitting in class same. It was launched by MIT years ago, but has spread to universities around the world, creating vast educational resource for those interested in broadening their knowledge and understanding.Why study online?…
Read full article: Never Stop Learning with Free Online Studies
Stephen McKnight) The start of a new year (and decade this time around) is an ideal time to reflect and plan. Looking back, one of the more significant additions to our communication lexicon may just be ”Social Networking.” For the past several years, I have been teaching an economic development marketing course. And each year I call out the importance for economic developers to recognize potential investors (or customers) as not the “corporation” or “industry sector,” but rather as individuals (humans if you will) each motivated by both rational and irrational factors. They can choose locations based on factors such as friends, family and alumni connections just as easily as they may on cost, incentives, infrastructure resources or market statistics. But up until now, economic developers found it difficult to communicate or discuss the more discrete qualities of their location directly with the potential client. They only had the old dusty website or static print advertising to promote their ”Great Quality of Life” tag lines – only to then hope the message hits the target.