Thursday, July 17, 2008

I'm glad this happens to other people too...

Thanks to Juliet for showing me these...

This is why Chloe gets shut out of the bedroom every night.

This is what Chloe does when she is shut out of the bedroom... or bathroom... or anywhere else you close the door.

And this is how you hang out with Chloe when she is not shut out.

It's really pretty endearing - I'm not complaining. But it's amazing how universal these experiences are. Down to the exact sound of the meow...

Wednesday, July 16, 2008

New Safety Net

Last post of the day, I promise.

The Urban Institute opened a new website today for it's "New Safety Net" project. The website contains a series of recommendations to modernize the social safety net, along with comments by major voices in the field. I'm not familiar with everything up there, and I'm not coming out to advocate it all here, but it's a great project that has been in the works at Urban for a while.

My understanding is that it will also be updated with new installments periodically.

Take a look!

The Downturn - Part 3

So I just traced Krugman's post back through the original blog post that he cites, and I was reading some of the comments - and two, "Ex-Worker" and "dan" (not me), make the same point I do about Krugman only better.

First, they make the basic point that "just because Fannie and Freddie aren't ultimately responsible for the crisis doesn't mean that they're not at risk of experiencing what the S&L's did". That's the point I made in "The Downturn - Part 2".

The second point Ex-Worker and dan make is even better and more interesting... Fannie and Freddie basically subsidized risk taking with public money (federal government guarantees their loans), so they subsidized all the good lending that was out their to do (Fannie and Freddie are pretty responsible in their lending). By bringing down the cost of risk, though, Fannie and Freddie made it cheaper for other less scrupulous lending institutions to take on the bad risks that caused this crisis.

Moral of the story:

1. Subsidizing "good loans" isn't going to solve these problems because it will just artificially lower the cost of credit, which is just going to make it that much easier for the bad loans to be made by someone else - the solution is to regulate ALL lending to turn those bad loans into good loans... and yes, this may raise the cost of capital.

2. Just because Fannie and Freddie aren't culpable for bad loans doesn't mean they're not at risk.

BOO-YAH Paul Krugman!

The Downturn - Part 2

Not sure how it's playing in the rest of the country, but Fannie and Freddie are top-of-the-fold news in Washington right now. Not surprisingly, then, Paul Krugman - one of the world's top economists right now, and perhaps the top trade economist - is talking about it on his blog. He kind of puts a positive spin on it the way Samuelson does - and I'm similarly sorta-convinced.

Krugman cites another guy who suggests that Fannie and Freddie essentially took the place of S&L's over the 1990s... this is theoretically bad because S&L's crashed in the late 1980's in a very bad banking crisis. His argument is "yes - they grew, but they were crowded out by other, riskier lenders who are the real risk now". Essentially he's saying that Fannie and Freddie won't follow in the footsteps of the S&L debacle because they aren't at the heart of the REALLY bad lending that's going on.

Fair enough - they're not at the heart of it - but their stock price is still in the dumps and they exist in the context of a very bad credit market! They may not be the source of the problem this time, in the way that the S&L's were in the 80's - but so what? Who do you think is more vulnerable - a large bank with no involvement in the mortgage market that has done some moderately risky lending, or Freddie and Fannie who may also be only moderately risk in their lending but live and breathe the mortgage market! They may not have started the fire, but I don't see how they're not going to get burned! And the problem with that is that Freddie and Fannie are household names - trouble there is a much bigger deal than trouble at some random local lending institution down the street. Krugman is right that they're not the center of the story here in the sense that they're not going to spark anything major... but that doesn't reassure me that much.

The Downturn

OK, so I don't usually feel like posting on the "state of the economy" except as it relates to specific interests of mine (competitiveness, etc.), but it seems necessary to at least provide news updates. If you haven't been paying attention, the economy is looking increasingly bad with every passing day. Now the hopes that this recession may not even happen or that it may be relatively painless are pretty much restricted to the President during his press conference , and the absolutely repugnant comments of McCain's economic advisor, Phil Graham, who provides the obvious solution - "we're a nation of whiners"!

1 - Mortgage lending giants Freddie Mac and Fannie Mae are in trouble. According to, they've lost 80% of their stock value in the last year, and Washington is panicking (Freddie and Fannie are pseudo-public corporations... I'm not sure what the deal is specifically, but the federal government has a big hand in what they do). Bernanke assures us they have enough capital that they won't fail, but that doesn't do much for consumer and investor confidence right now.

2 - Banks are starting to fail across the country - in addition to the massive collapse of Bear Stearns that cost a good friend of mine his job - IndyMac, a California based bank, has recently collapsed. And to provide a little bit of perspective, IndyMac is the second larges bank failure since the Great Depression - and technically speaking this recession hasn't even started yet!

3 - Bernanke is justifiably pessimistic in his Congressional testimony this week, and his statements are causing a slump in the dollar. However, most of his pessimism revolves around high inflation , something that economists do not like to see doing a duet with a slowing economy. I heard part of his testimony on NPR, and I think it's sensible - he said that he's not concerned about the solvency of the vast majority of banks... we're not going to see wave after wave of bank failures like we did in 1932 in response to the 1929 crash and subsequent economic contraction. Bernanke said he's more afraid of the possibility that banks won't be able to or won't want to provide the capital that the economy needs to keep growing. The sub-prime crisis made bankers extremely skiddish about risk. If bankers don't take risks, they won't extend credit, and if they won't extend credit the economy won't grow.

4 - Summer isn't nearly up, so oil price relief shouldn't come any time soon (although it shouldn't go too much higher, either... unless we get into another dumbass war).

5 - Robert Samuelson - an excellent columnist for the Post - puts a positive spin on all this, by pointing out that consumer confidence isn't at all in line with our relatively mild unemployment rate (a more technical and diplomatic version of Graham's "we're a nation of whiner's" argument) - but this rubs me the wrong way because the low consumer confidence is the whole point! Low consumer confidence signals weak demand, and if demand is weak you can expect that unemployment rate to tick up in the near future. Samuelson does raise very scary points about international confidence in their investments in the U.S.. If you know me well, you already know my fears about that.

Are we crashing? No. Is this going to be a cake-walk? That's a definite no as well. This recession will be a memorable one - it's not going to be the easy, two-quarter slump that a lot of people thought it might be. But it doesn't have to be a crisis. It will become a crisis if it gets compounded by:

- A war in Iran that drives up the price of oil
- International investors withdrawing their investment from the U.S. economy in response to (1.) the weak dollar, (2.) poor performance of U.S. assets, (3.) continuing budget deficits.
- Continuing inflation

I think all bets are off if we get into a war with Iran or if inflation hits near double-digits. This could get really bad. Hopefully we pull out of this. We may - I'm not macroeconomist, so I can't assign probabilities to any of these things. We just need to tread carefully for a while.

Tuesday, July 15, 2008

Interesting Science, Technology, and Innovation Research Resources

So "skilled labor" is a pretty firm part of my fluctuating list of research interests now, and I've been collecting a bunch of research resources - mostly data - that I'd like to use one day for some work on it. Some is on the high skill labor market, some on innovation in general (patents, R&D spending, etc.)

1. SESTAT is a collection of datasets maintained by the National Science Foundation, and I believe the surveys themselves are done by Mathematica. SESTAT focuses on college graduates in science, technology, engineering, and math fields (STEM). The most interesting dataset in SESTAT to me is the survey of recent college graduates. This survey has detailed employment information on recent STEM graduates - including job search variables and information on how much they use what they learned in school on the job. I could think of some great "human capital utilization" variables that could be constructed from this that would be comparable to the "capital utilization" data collected on manufacturing plants by the federal reserve banks. There is also a survey of all college graduates that surveys a sample drawn from the decennial census. The advantage of this data is that it provides a cross section of the skilled laborforce. The disadvantage is that since these aren't recent graduates it doesn't give a good picture of recent changes to skilled labor supply, or what to expect in the future.

2. NSF provides lots of other data as well - the most interesting to me being a long time-series on R&D funding by source. It would be interesting to track how federal vs. state R&D funding has changed over time, and where they've been spending it.

3. Just yesterday I discovered the National Bureau of Economic Research's (NBER's) Science and Engineering Workforce Project. It's just a general forum and resource for relevant research - the usual suspects are here: George Borjas, Richard Freeman, etc. It also has a link to an intriguing project called the “Nanobank". This is how the Nanobank describes it's work:

This project uses econometric methods to estimate the impact of nanoscale science and technology (nano S&T) research, and associated interdisciplinary research, directly on firms' entry and success and hence on U.S. economic growth, standard of living, and competitiveness. The research team also performs scientometric and institutional analyses of diffusion and networks in nano S&T and converging fields, and the reciprocal effects of institutions on nano S&T and of academic scientists' involvement in commercialization on their scientific productivity and teaching.

It also has some beta test data available for download on patents, patent citations, NSF grants, and NIH grants. I assume it is all nano-specific patents and grants here. The patent data interest me most. Another NBER source for patent data is Hall, Jaffe, and Tratjenberg's (2001) file. It looks like these patents are from 1963 to 1999 - roughly 3 million of them, with data on 16 million citations. I get the impression these are only specific industries, though - much like the nano-data. That's not a major constraint for me with the "innovation diffusion" modeling I have in mind, but if you need more than that you can always go to the Patent Office website. It's REALLY obnoxious to get data from here - you have to do it a page at a time so extracting millions of patents right from the website is not an option - but you do have access to information on every single patent ever issued since the beginning of the republic... that's pretty freaking cool.

4. The Integrated Postsecondary Education Data System (IPEDS), produced by the National Center for Education Statistics in the Department of Education has detailed graduate data for every postsecondary institution in the country - including graduations by field, race, and gender. It also has lots of finance information at the school level, although unfortunately not at the degree program level (i.e. - you can track federal grants going to the school, but not federal grants going to the school's physics department). I used this data in a report by Hal Salzman on the STEM workforce , but I think there is a LOT more that could have been done with it. I still need to read the final product, but I think I would take issue with some of the intepretations that Hal applied (more related to the labor demand side of the skilled labor market, which I didn't not help him with or even read yet - rather than the labor supply side which I'm more familiar with).

More resources to come, potentially... maybe I should put up some international resources for potential research on comparing the U.S. to other countries.

Monday, July 14, 2008

The Terrorist Threat

I don't have much to say about this Post article now, but it's an interesting assessment of how threatening global terrorism really is. The author argues that it's not really as bad as a lot of people think. Al Qaeda is the only organization that is truly global and is interested in and capable of attacking the U.S. on it's own soil - and that capability is severely weakened. Most other groups we (rightly) label as "jihadists" have regional focuses and wouldn't think twice about striking our interests where they find them - but don't really pose a threat to U.S. soil.

I'd challenge the author on two points - first, while the threat of a nuclear attack by Al Qaeda using "loose nukes" from one of the former Soviet republics may be small, it would be so devastating that we can't dismiss it as easily as he does. I don't even mean devastating in terms of the loss of life or the cost - it would most likely be a "dirty bomb" attack that wouldn't have too catastrophic a casualty roster - I mean devastating in terms of what it would do to the American psyche. So I think he could have elaborated more about how serious a threat that really is.

I also wish he would take the next step... these terrorists don't just come out of nowhere. Although I hate the "blame America first" style rhetoric, I can still acknowledge that our actions sometimes contribute to the problem. For example - more Middle Eastern muslims can probably be legitimately labeled "terrorists" today because the U.S. invaded Iraq. In other words - the terrorist threat would be smaller today if we had not invaded Iraq. The same threat is looming for us if we invade Iran. We aren't responsible for terrorism or anything - that's not what I'm saying. These jihadists bear full responsibility for what they're doing. But we have to understand what makes sense strategically and how our actions influence the conditions that give rise to terrorism.

Still - it's refreshing for someone to say this. And I think the comparison the author makes to 19th century anarchists is apt. Terrorism is a real threat - the biggest security threat in the world right now. But long-term it will eventually be erradicated. We may have one failed state turn theocratic over the ordeal, and we'll have some bad national scars that will take a long time to heal - but terrorism will be erradicated. The trick is not to create more problems as we work to erradicate it over the next couple decades.

In other security news, this Union for the Mediterranean announced in Paris this weekend sounds interesting. It would be a shame, though, if the EU came out on top diplomatically in the Middle East because of it's willingness to be... well... more diplomatic than us.

Sunday, July 13, 2008

Wine Party Insights

Clearly, this one had a little too much wine...

So my wife and I had a wine tasting party last night as a belated housewarming and birthday party that also turned into a job celebration party when we found out that morning that she got a job offer!!!

The idea of the party was that we would provide lots of food that would pair well with different kinds of wine, and the guests would bring a bottle of wine. Tempting as it was to fill my glass, I tried to stick to about half an inch of wine every time I refilled so that I could try several of the wines that came through the door. Here are some reflections:

1. Agiorgitiko Red Wine: Two of our good friends came over early to have dinner with us (mmm... venison from western Maryland) and help set up. They brought us a Greek red table wine to have with the dinner, and it was really tasty. It wasn't very sweet - quite dry, but still very fruity. It was heavier as well which helped it stand up to the red meat. I'm reading the label of the bottle now and it says that it's aged in oak which really came across to me as I drank it - the flavors are soft, not crisp like you would get in stainless steel.

2. Riesling: We also had a Riesling - a traditional German white wine that is crisp and refreshing. It usually has undertones of green apples, and tastes great chilled. The guests that brought the Riesling also brought food of their own to go with it - sliced green apples with a slice of parmesan cheese on top, and crackers with salmon. The apple - cheese combination was awesome! The tartness of the apples and the sharpness of the cheese really canceled each other out and blended well - and of course the apples went well with the Riesling.

3. Rappahannock Cellars Cabernet Franc: A Virginia wine, this was brought by another Virginia winery aficionado friend. I probably kept going back to this bottle more than any other. The Cab Franc is a lot like the Cabernet Sauvingnon - it's a light bodied wine, but has a peppery taste to it almost. However, the fact that I'm still a little green in my wine knowledge came through last night over this wine. Another guest asked me if the Cab Franc was peppery, and honestly I didn't know. I knew I always liked Cab Franc, and I had just had some of this one maybe half an hour before, but I didn't know. So I told him - "no not really"... oh well. One day I'll be better about communicating these characteristics off the top of my head. A good wine nonetheless.

4. Some staples: We also had friends bring two staples that are regulars on the grocery store shelves - the Three Blind Moose Merlot, and The Red Bicyclette Syrah. I made sure I tried both of them - both soft and light - with a little bit of cherry. Nothing unexpected but very good. I actually found myself going back to the Syrah a couple times. I was musing about the Three Blind Moose Merlot with another guest, and we figured that being blind should heighten the other senses of the mooses, so they must know what they're talking about when it comes to wine.

5. The other good wine I had was an unpronounceable French wine - "Domaine Andre Brunel, Cotes du Rhone". It was a red - fairly gentle and light, like a merlot. I'm guessing it was a Bordeaux of some sort but I really just don't know!

A final tip from one of our guests (the one who brought the Rappahannock Cab Franc): If you didn't already know, 2007 was a good year for Virginia wine - perhaps one of the best since Prohibition. It was drier, which was bad for other crops but great for wine because the sugars in the grapes are more concentrated. We've already seen and grabbed one or two 2007 whites that have come out, but the reds typically come out later than the whites. Well, our friend told us that she heard that a lot of 2007 reds from Virginia will be going reserve immediately - so the wineries will hang on to them to age them in their own cellars. So if you see a 2007 Virginia red - go ahead and grab it. They may be hard to come by for awhile. And look forward to seeing some amazing reserves a little while down the road.