Marginal Revolution

Father Time

Watching Star Wars today is like watching It's a Wonderful Life (1946) in 1977.

Here are more such comparisons.

The economics of spam

"After 26 days, and almost 350 million email messages, only 28 sales resulted," says the research paper. Yet even with this apparently abysmal response rate of less than 0.00001 per cent, the researchers still estimate that the controllers of a network the size of Storm are still bringing in about $7,000 (£4,430) a day or $3.5m (£2.21m) over a year.

Here is more.

Markets in everything

Restaurants for dogs with Hall of Fame baseball players as waiters edition.

I thank John de Palma for the pointer (and the name of the edition).

Can libertarianism limit corporate statism?

Matt Yglesias opines (the piece is interesting throughout):

… the larger problem is that libertarianism, even at its very best, tends to suffer from an impoverished set of ideas about how corporate domination of the public policy space might be prevented. The political left has, by contrast, the tradition of community organizing, a set of public interest advocacy organizations, allies in the trade union movement, efforts to improve the quality and independence of the civil service, and various notions about changing the methods by which campaigns are financed in the United States. This is hardly a perfect toolkit, and it can be enhanced in some ways by drawing on libertarian insights, but it’s something. And libertarians tend to be either indifferent or hostile to it, campaigning against public financing, strong labor unions, and the civil service.

In practice, libertarianism seems to have little to say about how to bring about political change except to work hand-in-hand with business lobbies when the interests of business and free markets are aligned, or else when business interests are masquerading as libertarianism.

Here is Will's response.  In my view at the margin it would be better to have both less corporate privilege and less labor union privilege.  Maybe we have no good theory (much less a strategy) for how to get there, but surely some marginal improvements are possible and who knows maybe more.  Chile is much less corporatist than it used to be and the relatively free economy of New Zealand was never that corporatist in the first place.

"Libertarianism in practice" will be excessively pro-corporate but so are most ideologies.  Rahm Emanuel, for instance, served on the board of Freddie Mac and earned $16 million in a two-year stint at an investment bank. Wall Street has been the single biggest backer of his political career.  He won't be pushing to destroy this sector but I don't take those facts to be some great refutation of Obama as a President. 

Sometimes the left-wing tactics, especially supporting labor unions, are exactly what lead to greater corporatism.  Look at the forthcoming GM bailout.  Or consider France, which has strong labor unions but arguably it is also more corporatist than is the United States.

But let's say that turning America over to the labor unions would in fact limit corporate power.  It's still difficult to get the unions more anti-corporate power, just as limiting corporate statism is difficult.  And these two tasks are difficult for more or less the same reasons.  The bottom line is this: ultimately the "feasibility objection" may cut against very radical change, but it doesn't cut against change in one particular direction more than the other.

Book medley

Burton Folsom, New Deal or Raw Deal?: How FDR's Legacy has Damaged America; this book has a good compendium of free market critiques of Roosevelt, although I would not look here for a balanced review of the evidence.  Senselessness, by Horacio Castellanos Moya; this is now my favorite novel from either Honduras or El Salvador, depending how you classify the nationality of the author.  Alex Beam, A Great Idea at the Time: The Rise, Fall, and Curious Afterlife of the Great Books.  A fun inside history of the Chicago Great Books series.  Lily Tuck, Woman of Rome: A Life of Elsa Morante; I liked this book very much, without even being a previous devotee of Morante.  Gilles Kepel, Beyond Terror and Martyrdom: The Future of the Middle East.  Both Kepel and Belknap Press are wonderful, but there's not much here.  Paul Krugman, The Return of Depression Economics, with a new section on the 2008 crisis.  Joseph Schumpeter, Capitalism, Socialism, and Democracy, a new edition.  I wanted to read this again but in fact it is unreadable, I am sorry to report.  After about forty pages I believe that 2666 is as good as the reviews, here is the latest survey of them.

China fact of the day

Electrical power generated in October is 4% below a year earlier.

Is there any chance that this is more reliable information than the gdp statistics offered up by the Chinese government?

Headlines from *The Art Newspaper*

For the first time in history, the Grand Canal and St. Mark's Square are carrying huge advertisements

Deutsche Bank offers 600 major post-war works cut-price...

Christie's has "worst Islamic sale in 17 years"

Contemporary Chinese art levels off

This year's Sao Paulo Bienal shows almost no art; is this conceptual choice or just lack of funding?

What should we now think about the bailout?

One very loyal, and libertarian, MR reader writes to me:

But I was actually somewhat (not altogether) surprised by your support for the bailout package.  So let me ask you again, what would cause you to disagree with yourself?  I guess I'm asking because I can't provide good answers to the following questions: What information do policymakers have to get it right? And what incentive do they have to get it right? Therefore, I don't see how they will get it right, and are more likely to do long and short run harm.

In my view the real bailout is the existence of the FDIC which, like it or not, is not a commitment we cannot walk away from.  Had nothing been done, the required FDIC bailout of bank depositors would have been enormous, given frozen interbank credit markets plus a certain level of panic.  So in reality I favored a smaller bailout than did most of the "purer" libertarians, although MR commentators rarely frame it as such.   

A combination of bank recapitalization (which I was first skeptical about and thus have changed my mind on) and a greater emphasis on an "identify and isolate the bad banks" approach was the right bailout to do, not to allocate $700 billion for TARP.  I agree with everything Arnold writes in this post, but still in my view "doing nothing" wasn't really an option, again if only because of the preexisting FDIC commitment, not to mention the disaster associated with a plummeting money supply. 

Now that financial confidence is partially restored, we can hope that the Obama administration redoes the deal.  But the money is being committed rapidly and the demands of the interest groups are piling up, so I hardly expect much ex post improvement.

As for changing one's mind, it is hard to get real evidence on this since we won't be running the counterfactual of no bailout.  If I learned that interbank exposure and counterparty credit risk was much less than I had thought, and that the number of potentially insolvent banks was quite small, then yes I would change my mind and favor no bailout at all.  But I haven't learned that.

Mexican alchemy?

A method of producing synthetic diamonds using tequila - Mexico's favourite alcoholic drink - has been discovered, scientists there say.

Not from The Onion.  I thank Michael Makowsky for the pointer.

Assorted links

1. Dark flow?

2. Canadian banks

3. Photo of Bora Bora.

4. Is shipping food really an environmental problem?

5. More good reasons not to trust former Nazis. 

6. First pictures of extrasolar planets.