Tuesday, January 12, 2010

Trouble in Argentina

After Hugo Chavez passed a constitutional referendum removing Venezuelan presidential term limits, he jubilantly declared that “this soldier is a pre-candidate for the presidency, for the period 2013-2019.” Though he is still the dominant force in Venezuelan politics, 2010 has started poorly for Chavez. The recovery of oil prices from their early 2009 lows has given Chavez some welcome budgetary slack, Friday’s announced devaluation of the bolivar suggests that all may not be well with Venezuela’s public finances. As an analyst quoted in the Financial Times points out, such a politically costly move in an election year means that the country’s budgetary situation is likely grim. Much of this miscalculation stems from the fact that Venezuela’s budget assumes production of 3.4 million barrels of oil a day, while according to OPEC and other independent sources, the country only produces 2.4 million barrels per day.

Mr Chavez’s popularity stems largely from the fact that he portrays himself as a fighter for Venezuela’s poor, who by all accounts had a very raw deal in the period running up to his election in 1999. One surefire way to erode one’s base of middle and lower class support is to create high inflation. According to the Economist, consumer prices have increased 28.6% in the year up to last November. The rush of consumers to spend their newly-devalued bolivars before stores can raise their prices will only create more inflationary pressure and will further erode the wealth of his power base.

Many Venezuelans angry with the disappearance of their purchasing power will be forced to stew about it in the dark, as low water levels in the country’s main hydroelectric dam will likely lead to increased blackouts across the country. The 2002 coup against Chavez dissolved due to a disorganized and inopportunistic opposition. At some point, blame for the country’s problems will have to fall somewhere besides the “oligarchs.” A opposition leader who can voice support for the country’s poor while honestly criticizing Chavez’s mismanagement could make electoral success for Chavez in 2013 less certain than it seems.

Monday, December 14, 2009

Hate Crimes

Sudhir Venkatesh reviews the latest statistics on hate-crimes over at Freakonomics. According to Wikipedia, hate crimes "occur when a perpetrator targets a victim because of his or her perceived membership in a certain social group, usually defined by racial group, religion, sexual orientation, disability, ethnicity, nationality, age, gender, gender identity or political affiliation." Phew.

Are these laws necessary? This summer, before the passing of the new hate-crimes bill that expanded the definition to include the sexual orientation, gender, and gender identity, Lexington argued they are not. His argument centered around a man from Texas who received 75 years in prison for a violent assault of a gay man. Surely, Lexington says, if juries in Texas are being sensitive to such issues, there is no need for a special distinction for these crimes. I tend to see the passing of these stricter sentencing guidelines as a signaling measure from legislators that they are committed to protect those who are usually discriminated against. This is a good signal to send, but whether or not these laws accomplish that goal, well, they jury is still out.

Saturday, December 12, 2009

Sumner on Macro Double Standards

Scott Sumner, who has quickly filled the void left by Willem Buiter as my favorite macro blogger, is angry about the terms in which the economics community has been framing the potential benefits of monetary and fiscal policies. The idea here is that no one (until lately) has seriously considered the potential for expansionary monetary policy. This is largely due to the fact that the Fed has had interest rates near the zero bound. I don't follow all of Sumner's views, such as his insistence that the Fed target NGDP, but the idea that monetary policy has no potential seems spurious. As Sumner points out, long as interest is being charged on deposits at the central bank, there is still some wiggle-room. Charging negative interest on these deposits is a start.

I find the left's attraction to a second fiscal stimulus weird. I recently read (I think on Delong's blog, of all places) that only about 50% of the previous stimulus' funds have been spent. Wait it out! I'm no deficit hawk, but more fiscal expansion when the first fiscal stimulus hasn't totally worn off is too much of a good thing. I hope that Sumner's ideas get even more momentum and that monetary ease is strongly considered.

Friday, December 11, 2009

Economics and Physics

I have had an ongoing debate with one of my smartest friends about whether or not economics should be considered a "science" on par with the natural sciences. Tangentially relevant to this discussion is this guest post at Aid Watch which starts by comparing economics to physics:

"The laws of economics are more powerful than the laws of physics. I once saw Deirdre McCloskey illustrate this by placing a $100 bill on the table. The laws of physics, she reminded the class, dictate that an object at rest tends to stay at rest. Economics tells us that errant $100 bills laying out in the open do not remain unattended for long. She assured the students that, were she to leave the room for several hours, economics would better predict Mr. Franklin’s fate."

What is Going on with the FT Website?

The Financial Times' website is an incomprehensible mess. Just yesterday, I was looking for a phone number and found two separate places to get a one year print subscription: one cost $99 and the other was $398. Felix Salmon has already discussed their strategy with FT.com's managing director almost a year ago, and at that time it seemed as though paywalls and truncated rss feeds would be the norm. Now, it appears that some things may be gradually changing.
A few days ago they rolled out a new blogger, Banquo. Though it's early to get the tone of the blog, he appears to be sop to the zero hedge crowd: an"insider" who hates the system and holds radical views that are so controversial he can't use his own name. Though the blog may be lame, there is one plus: a full rss feed. I quickly checked Alphaville and Gideon Rachman to see if this has become the new norm, but unfortunately this development is limited to Banquo.
(Sidenote: yesterday I saw a USA Today lying on someone's lawn. That's right, someone actually subscribes to USA Today! I thought people only read it because they were forced to in hotels.)

A Cold Game

An interesting strategic situation arose yesterday. A local bookstore is running a promotion in which it gives away iPhones, which they scatter at different local businesses. It gives clues about the location of the phones, and whoever finds them first wins. I have an old Nokia and I'm exasperated with its spontaneous vibrations, small screen, and inability to access the internet. I thought this iPhone promotion would be a good way to update cheaply.
The phone to be given away yesterday was at a store on campus called the Safe Sex Store. The store opens at noon, and whoever was the first person to enter and ask the person at the register for the prize would win. All throughout the morning, I debated my strategy and consulted with one of my professors. His first response was that I should "just go buy one yourself!", but after an explanation of my budget constraint, this is what we came up with.
  • The first person to arrive should never leave. As tempting as it may be to go across the street and enjoy a hot coffee in the -4 windchill temperatures, the chance that someone else comes and takes the top spot is too great to risk. Leaving the position of control would be a bad choice: if you get there first you should be there for the long haul.
  • The second arriver should stay and wait behind the first arriver. There is a nontrivial probability that the first arriver chickens out and leaves, gets distracted and leaves his spot open, or that the store owner will randomly select the winner from all those who are waiting. Of course, if the latter is the best possibility, the second arriver should probably leave the line as it gets longer, then show up at the very end. A line with ten people creates an expected value (assuming random selection) of only $20, an amount that most would not want to wait for. The second arriver could also attempt to pay the first arriver for his rights to the first spot.
  • A third arriver should not stay in line at all and only appear a little before noon in hopes that random selection will take place.
And what happened? I arrived at the store at 10:30, a time which I though would be more than sufficient. To my dismay, I was the second arriver. The first arriver was ridiculously bundled up and looked like he would not be deterred from his prize. Although there was probably a nontrivial probability of random selection, I did not choose to stick around: after one thirty mile-per-hour gust of wind, I was out of there.

Thursday, December 10, 2009

Guantanamo Mystery

Democracy in America discusses a report about the three mysterious deaths at Guantanamo Bay. A sampling from the report:

"There is no explanation of how three bodies could have hung in cells for at least two hours while the cells were under constant supervision, both by video camera and by guards continually walking the corridors guarding only 28 detainees."

And things only get weirder from there. Still, no direct evidence seems to link any guards or third parties to the deaths. This will be interesting to follow.