The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. – F.A. Hayek
Posted in Money, incentives on Mar 10th, 2010
Did you know that the U.S. government created an agency colloquially known as “Farmer Mac?” Yep, in 1988 Congress chartered a company to do in agriculture exactly what Fannie and Freddie have done in the mortgage market. Farmer Mac, a “private” company, is “allowed” to purchase loans from agricultural lenders and then repackage them into [...]
Posted in incentives on Feb 4th, 2010
Yesterday, we explored why it might not make sense to be too tough on crimes – the reason being is that raising the penalty on petty crimes at the same time effectively lowers the penalty on more violent crimes. This seems to be an unattractive and inescapable constraint in law enforcement. At some point, the [...]
Posted in incentives on Feb 3rd, 2010
The economic way of thinking demonstrates that it is marginal ðecisions that matter. Thus, students that learn about the economic way of thinking understand that it might not be a good idea to institute the death penalty for crimes like littering and petty theft, even if society really hates having litter and petty theft. Why [...]
Posted in incentives on Jan 22nd, 2010
The Grameen Bank has (rightly I think) been recognized for promoting bottom-up development in poor countries. One thing they do is make small microloans available to entrepreneurs without collateral (thus, traditional lenders would typically not lend to them, either due to lack of collateral, or the risk of their business and the cost of administering [...]
Posted in incentives on Nov 20th, 2009
I have my students write papers on the intersection of markets and some sticky ethical questions. Should parents be permitted to sell their babies? If you allow a market in kidneys, would it be permissible for a purchaser to use it as wall decoration or a lawn ornament? And so on.
Let’s be agnostic about all [...]
Posted in incentives on Nov 6th, 2009
An example of what the “too big to fail doctrine” gets you:
Mr. O’Neal, the man considered most responsible for Merrill’s disastrous foray into risk-taking, told me in an interview last year that in the fall of 2007, when he saw that the firm’s problems were insurmountable, he had a deal to sell Merrill to Bank [...]
Posted in incentives on Nov 2nd, 2009
Let’s see the results of a horserace between one-sized fits all standards versus more flexible approaches to funding:
In this paper, we exploit key differences across funding streams within the academic life sciences to estimate the impact of incentives on the rate and direction of scientific exploration. Specifically, we study the careers of investigators of the [...]
Posted in incentives on Sep 11th, 2009
I’ve not wanted to weigh in on the housing market too much over the past couple of years, perhaps out of bitterness from getting crushed in the crash. But I feel better now. Some of the more reasonable people out there are recommending very simple reforms to the housing market, in particular eliminating all of [...]
Posted in Resources, Ultimate Resource, incentives on Sep 2nd, 2009
Maybe it’s not a marble-sized balloon after all? BP finds another new oil source.
A 20%-30% recovery rate, which would be typical for this kind of field, would imply recoverable reserves of 600 million to 900 million barrels of oil equivalent, said Mr. Hutton.
…
The Tiber well, 250 miles southeast of Houston, Texas, is in 1,259 meters [...]
Posted in incentives on Jul 14th, 2009
Inspired by my recent trip to the Monroe County DMV:
By the way – I got there at 1:15. When I returned at 3:30, the wait was STILL over 2 hours for me, and for the rest of the poor souls who thought to come by leaving work early – they had a 4 hour wait. [...]
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