Game Theory at 190 MPH

NASCAR visits Talladega this weekend. There is a old paper on game theory on superspeedways that is a classic read. Read it for an excuse for smart people to watch this seemingly dumb sport.

At this year's Daytona 500 the drivers figured out that position doesn't really matter until near the end of the race. They broke into smaller packs for safety to avoid having the "big one", at least until the end of the race.

Transferable Fish Quotas

From Econotarian a link to a study showing that transferable fish quotas make fishing more efficient in British Columbian waters.

Contradicting previous assumptions, new fisheries research shows that allocating catch among vessels reduces the amount of fish discarded at sea.

The study in Canada's British Columbia waters compared so-called individual transferable quotas with a previously used system of trip limits where vessels are only allowed to land a certain quantity of each species every two months.

The findings come at a time when individual transferable quotas are being considered for the west coast of the United States.

The system was implemented in 1997.

Inventories from Q1 GDP

Angrybear has an analysis on inventories from the GDP report.

How much of the inventory growth is domestic and how much is imports, especially oil? Inventories of imports will reduce future foreign production and future imports and add to future GDP. Crude inventories surged at the end of the quarter. Are we also seeing a stockpiling of Chinese imports in expectation of future increases in import and export tariffs and currency valuations? Is there a breakdown on import inventories anywhere?

2005 Q1 GDP up 3.1%

Real GDP increased at an annual rate of 3.1% this quarter. This is less than the 3.5% estimate, but above the rate used for most economic and budget projections.

David Altig of macroblog writes:

I'm not sure I had ever contemplated what the day would look like when 3.1 percent growth was considered bad news, but now I know for sure.

Elastic Demand

Division of Labour analyzes the economics of this AP report that only a quarter of condoms made in India are used for sex. The condoms are given away for free, but the parts, lubricant and latex, are worth more than the finished product.

His climax:

Economic moral (also noted here): demand is very elastic at a near-zero price.

Alan Greenspan again

More from Alan Greenspan before the Senate Budget Committee.

The Fed chief called for "major deficit-reducing actions" and proposed several procedural steps Congress could implement to restrain the deficit's growth.

Greenspan has frequently said he would prefer the deficit be shrunk as much as possible through spending cuts -- including reductions in Social Security and Medicare benefits -- before taxes are increased. He said yesterday that he believes raising taxes restrains economic growth and that there is "no way you can raise tax rates enough" to cover future spending commitments.

It is good to see Greenspan calling tax increases unsustainable, which he did not mention in his prepared testimony. We can neither raise taxes enough to cover future spending commitments nor increase deficits sustainably. We need to treat the disease and not the symptoms. The disease is future spending commitments. The headline needs to be about cutting spending, not about cutting deficits.

Environmental Economics

Two articles from the Economist about valuation of the environment and market trading of those values and about the green movement's decreasing resistance to these markets.

The France-China Axis

The French show which side of the democracy-tyranny conflict they are on.

During a state visit to China, French Premier Raffarin threw support behind a law allowing China to attack Taiwan and continued to push for a lift of the EU arms embargo.

Raffarin also signed or finalized major business deals with Beijing valued at around $3.2 billion (2.4 billion euros).

"The anti-secession law is completely compatible with the position of France,"

I really hope that this is another case of the Chinese misinterpreting the statements of visiting foreigners. Are the peace protesters going to protest this belligerent action?

Greenspan Testimony

Alan Greenspan speaks for himself:

But, as the latest projections from the Administration and the Congressional Budget Office suggest, our budget position is unlikely to improve substantially in the coming years unless major deficit-reducing actions are taken.

With spending projected to increase substantially we need to take spending-reducing actions. Neither deficits nor taxes can sustainably increase forever as a share of GDP.

I fear that we may have already committed more physical resources to the baby-boom generation in its retirement years than our economy has the capacity to deliver.

The boomers collectively did not have enough children to fund the retirement they have voted for themselves.

Crafting a budget strategy that meets the nation's longer-run needs will become ever more difficult the more we delay. The one certainty is that the resolution of the nation's unprecedented demographic challenge will require hard choices and that the future performance of the economy will depend on those choices. No changes will be easy. All programs in our budget exist because a majority of the Congress and the President considered them of value to our society. Adjustments will thus involve making tradeoffs among valued alternatives. The Congress must choose which alternatives are the most valued in the context of limited resources. In doing so, you will need to consider not only the distributional effects of policy changes but also the broader economic effects on labor supply, retirement behavior, and national saving. The benefits to taking sound, timely action could extend many decades into the future.

Congress has been able to cut deficits and cut taxes in the past. Can we ever vote for a congress that will successfully cut spending?

Why I don't care about the deficit.

Jane Galt wonders why no one cares much about deficits. Because deficits matter less than taxes

People have an archaic conception that deficits are a failure to raise enough money from taxes. There is a demand for treasury bonds, and selling them is a perfectly legitimate means of raising money for the government. Deficits are perfectly progressive. Bonds are voluntarily sold on the open market where the people who buy them are the people who can most afford them. Bonds harm the economy because extra money must be spent on interest. Taxes are involuntary, and harm the economy because deadweight loss and disincentives reduce growth. The question is do deficits matter more or less than taxes at current levels?

In theory, to maximize the net benefit of government, the budget should be balanced so that the marginal harm of deficits equals the marginal harm of taxes equals the marginal benefit of spending. The political equilibrium is probably quite different from the economic equilibrium.

It is a complete mystery to me why libertarians insist that all funds be raised involuntarily, by a balanced budget, rather than voluntarily by selling bonds.

Make Life First.

Glenn Reynolds talks about the potential of (embryonic) stem cells to restore life. Of course embryos are completely capable of completely restoring life -- their own. It doesn't really make sense to destroy life in order to preserve life. However, I think there is a change that can be made to the current embryonic stem cell compromise. I think that we can allow leftover embryos from a fertility process that has already successfully created a living baby to be used, with permission, for embryonic stem cell research. I think we should create embryos only for the process of creating life, and we should destroy embryos for research only if the creation of life is successful.

Personal Copies

Sandy Berger only walked away with several different annotated personal copies of Richard Clarke's millennium report.

Would anybody mind if someone walked off with Fermat's personal copy of Diophantus' Arithmetica?

Dying Will

The question the court did not ask. If you were in that situation would you want to die like that?
Absolutely Hell No!

The difficult question. Would you want to live if you were in that situation?
... I don't mean her, I mean the husband, or the lawyer, or the judge.
Would you want to live with brutally starving an innocent person to death?