Another blow for Nabucco

The Nabucco gas pipeline suffered anther blow this week when Gazprom held talks with Romania, apparently offering to run its proposed South Stream project through Romania instead of Bulgaria. Romania was, up until now, the last member of the Western-backed Nabucco pipeline to not be in talks with or have already made agreements with Russia's state energy giant Gazprom with regards to its South Stream project, which is in direct competition with the planned Nabucco pipeline. Romanian officials have apparently concluded that, given Nabucco's dimming prospects after the South Ossetian war (Nabucco would receive gas from the upstream BTE pipeline, which runs through Georgia), it's time to consider hedging their bets with their ex-overlords. This is in stark contrast to the picture before the August war, when back in March the Jamestown Institute was predicting that Romania, though it didn't have veto power over the project, could use its position in the Black Sea to delay South Stream.

Meanwhile, Hungary – which seems to be Nabucco's biggest advocate these days – is flailing its arms, trying to the West to reconsider Iranian gas to fill the Nabucco pipeline. (Iran, the decreasingly-independent republics of the South Caucasus, and Russia are the only land routes into Europe from the gas-rich Capsian region.) But there's little chance of that happening, and Iran seems to have taken the West's rejection personally, and has publicly sworn off the involvement in Nabucco that it never actually had in the first place.

For full coverage of Nabucco's precipitously declining fortunes, check my Nabucco archives.

"Stochastic calculus porn to satisfy young men's urge for mathematical masturbation"

Here's Arnold Kling, in a blog post entitled "Economists with Pseudo-Knowledge", where he takes macroeconomists to task for pretending to know what the hell they're talking about. He hits on something I've been thinking since freshman macro – it's all bullshit:

My main beef with economists is that standard macroeconomics does such a poor job of describing what is going on. The textbooks models are pretty much useless. Where in the textbooks is "liquidity preference" a demand for Treasury securities? Where in the textbooks does it say that injecting capital into banks is a policy tool?

Graduate macro is even worse. Have the courses that use representative-agent models solving Euler equations been abolished? Have the professors teaching those courses been fired? Why not?

I have always thought that the issue of the relationship between financial markets and the "real economy" was really deep. I thought that it was a critical part of macroeconomic theory that was poorly developed. But the economics profession for the past thirty years instead focused on producing stochastic calculus porn to satisfy young men's urge for mathematical masturbation.

Here is a post from this past summer where I take social scientists to task for their overuse of math.

Why are the libertarian standard bearers so bad?

The Economist has an omnibus article up, mainly about the causes of the subprime crisis and its global ramifications. The article, in my opinion, spends an inordinate amount of space rehashing tired talking points about deregulation and liberalization. Disappointingly, they mention Glass-Steagall, without mentioning the drastic empirical evidence pointing in the opposite direction. They also make this doozy of an error:

The share of Americans who owned their homes rose steadily. But more buyers meant higher prices, making loans even less affordable to the poor and requiring even slacker lending standards.

They have it right that rising housing prices encourage looser mortgage lending, but they don't have the reason right. The real reason is that in a rising market, a bank can be reasonably sure that even if the mortgage goes into default, the collateral (the house) will be worth more than when the mortgage was taken out, and thus will cover the principal of the mortgage. But more importantly, they know that it likely won't come to this, because rather than default and lose the extra value of the home, home"owners" are far more likely to just sell the house, pay back whatever they need to, and pocket the difference. Banks don't just loosen their standards simply because people can't afford to pay higher standards – a freshman business student who made that decision would fail.

I haven't had much respect for the Economist once I started to actually understand the issues it talked about – I agree with Andrew Sullivan that it's "a kind of Reader's Digest for the upper classes." It's disappointing that, on this crucial issue whose narrative is going to shape policy for years, the global elite's preferred "newspaper" of classical liberalism is so lacking when it comes to understanding the roots of the crisis.

But then again, even Bob Barr, in an interview on NPR (MP3 here), lays the blame of the crisis largely on the back of bad regulation – when the Economist and the Libertarian Party's presidential candidate can't even explain the statist roots of the crisis, you know that libertarianism is in trouble.

Suburbs become the city that DC never had

The Washington Post, which is pretty good at covering urban planning, has a great two-part series on possible redevelopment of Rockville Pike, a commercial road in Montgomery County, a Maryland suburb of DC. Like Reston and Tysons Corner – communities in Northern Virginia, the south suburbs of DC – the towns along Rockville Pike have been hit with New Urbanism fever, and are eager to redevelop their commercial streets into a denser urban form. Though they don't probably don't realize it, this is actually a more market-oriented approach, with developers building more dense structures than we have today if it weren't more widespread restrictions on density outside of the inner core of American cities.

But unlike Reston and Tysons Corner, Rockville Pike has the advantage of the Washington Metro's Red Line, which runs directly underneath (or something like it) the street for the length of four station stops. The line goes directly into the center of Washington, DC, and is a huge asset.

The towns, however, don't quite seem to have the ideas down. They still appear to be operating in the minimum parking mindset, enforcing rules that developers have to build more parking than they otherwise would, so as to avoid residents and customers using free city-maintained parking. They essentially offer the developers the right to build as the market demands in exchange for payments to the local coffers:

Floreen, who formerly served on the Planning Board, said there might be a way to reduce the amount of parking developers are required to provide if they are willing to pay more for greater density.

Floreen would do well to read a previous Washington Post story about minimum parking regulations in the NoVa communities that Rockville Pike seeks to emulate.

Unlike DC, these Maryland and Virginia suburbs do not always have the District's stifling height restrictions, and it is possible that a buildings 28 stories or higher could be built along Rockville Pike. The Post has a slideshow in the second article with some mock-ups of what planners want the boulevard to look like. And though the drawings always look better than reality, the only way reality will come close to the drawings is if local planners give developers the freedom to build urban buildings, without the weight of minimum parking requirements or county bribes in order to rise above the traditional suburban skyline. With all the talk of favorable tax zones and other things that amount to handouts to developers, you'd think that the planners would realize that it's their restrictions that are forcing them to have to bribe developers into building more densely.

But the potential for DC suburbs is quite good when you think about it, considering that they don't have as much competition in urban living from DC itself. Though there are areas of Washington that have distinctive urban traits, it's difficult to get over the fact that none of the buildings seem to rise much above ten stories. It isn't surprising that so many DC suburbs are adopting New Urbanism as planning guides, though it would be nice if they would recognize that recreating urbanism requires nothing more than doing away with the old Euclidean and suburban scriptures – no need to replace them with anything else!

Georgian terrorists, gas in Turkmenistan, and Putin's next power grab

In reading a headline like "Georgian Threat to Moscow Uncovered" in the state-owned Russian newspaper Izvestia, I'm startled, but not for the reasons that the FSB office that "leaked" the intelligence probably wanted. The Izvestia article reports that they received leaked communication from within the Russian government indicating that they foiled a plot by the Georgian government, disguised as Islamic terrorists, to blow up buildings in Moscow, St. Petersburg, and Sochi, and gun people down in at least Moscow.

As Stratfor notes, this is highly dubious for a number of reasons. For one, Georgia has never attacked outside of its own country, with the exception of South Ossetia and Abkhazia. Secondly, Muslims make up a small percentage of Georgia's population, and they are mostly pro-Russian.

But then there's the big one that Stratfor doesn't note: Russia has recently been given a huge incentive to cause trouble in or attack Georgia, in the form of the recent confirmation of the Caspian Sea's natural gas riches. Energy delivery, especially to Europe, and especially in the form of natural gas, is the biggest trump card that Russia has over the West. But with the confirmation of gas in Turkmenistan, the EU has also hyped expectations of connecting Europe to the Caspian region via the Caucasus. The Caucasus stand in the way of Russia's ambitions, quite literally: besides through Russia, there are only two ways to get a pipeline to Europe (i.e., Turkey or Israel): through Iran, or through the independent countries in the south Caucasus. Iran is out of the question thanks to Russia's measured support of Iran's controversial activities. And in the Caucasus, you only need two out of three to create an impenetrable bloc between the Russian north Caucasus and Iran. Russia has already cowered Armenia into not allowing Western pipelines, and with Georgia out of commission thanks to this "leaked" intelligence (or something like it), it would render Azerbaijan irrelevant.

But perhaps the most startling part of all of this is that Russia may not be bluffing: it wouldn't be the first time that they used false flag apartment bombings under the guise of Islamic terrorism as an excuse to invade a Caucasian republic. The last time they did it was in 1999: Russia's equivalent of 9/11, the apartment bombings in Buynaksk, Moscow, and Volgodonsk, and the failed attack in Ryazan that blew the FSB's cover. The Russian secret services orchestrated the attacks as an excuse to invade Chechnya, and invade they did: tens of thousands of Chechen civilians died in the Second Chechen War, and war crimes abounded. In 1999, the false flag attacks led to the invasion of Chechnya in order for the FSB and Putin to effect a virtual coup d'état in the midst of a huge national crisis. Putin was introduced to Russia, Russia loved him, and he became Russia's unelected president a few months later. If in 2008, false flag attacks (or the threat thereof) lead to the invasion of Georgia, it will be to cement control of the Caspian, in order to cement Putin's power in preparation for new power grabs.

Did the US government really invent the internet?

As a postscript to a recent blog post about the history of the government's role in technological innovation, I argued that the US government drove the development of the computer not because it was inherently more able to do so efficiently, but rather because it had a monopoly on talent, and the regulatory power to exclude competition. But it turns out that I may have been too quick to concede that government really was the driver behind the Internet. Lew Rockwell lists a whole bunch of private-sector innovations key to the Internet (except I guess the mouse), all of which preceded the Defense Department's ARPANET project, which started only in 1969:

IBM and ATT had major labs and were vitally interested in computers talking to one another as early as the late 1950s and early 1960s. Bell Labs invented UNIX in 1969; it made the internet possible. IBM invented FORTRAN and hard drives in 1956. Bell transmitted packet data over lines in 1958. Texas Instruments invented integrated circuits in 1958. In 1961 Leonard Kleinrock published a paper on packet switching networks. Bell Labs made the first modem in 1961. The mouse was invented in 1963. Digital Equipment Corporation produced the first minicomputer in 1964. In 1965 time sharing at MIT and mail command started. Intel began in 1968. The year 1966 saw the first use of fiber optics to carry telephone signals.

But as Rockwell correctly notes, even these are tainted by the ties between most of these companies and the government in other fields (which in turn might have subsidized and spurred these innovations).

Net neutrality and Wired's wishy-washy libertarianism

By most measures, the Internet is one of the most libertarian spheres of the economy. This is qualified by saying that this only applies to the non-wireless forms*, but nevertheless, internet access and content delivery are relatively competitive and free markets. Net neutrality advocates, however, are looking to change this, by forcing ISPs (this mostly applies to last-mile providers) to not discriminate with regards to bits – that is, allow all content through, and do not charge different prices for different content.

Though exaggerated, the fears of ISPs using non-neutral practices to throttle traffic are not unfounded – some ISPs have been filtering BitTorrent traffic in some way or another). But BitTorrent users and providers don't exactly have much clout, and so it cannot be that they are the only force behind the movement which has won the support of the soon-to-be president Obama. Valleywag believes that that huge ad company that also happens to have a search engine (Google) is in favor of the legislation because they believe that ISP's will eventually try to bite into its ad revenues by demanding more to move Google's bits around the Internet:

It's all about net neutrality. What's "net neutrality"? As far as we can tell, it's a bunch of rhetoric that amounts to regulations that affirm Google's God-given right to avoid giving Internet service providers a cut of advertising revenues. An Obama presidency would mean Google can save money on lobbying fees. Well, times are tough, and every penny counts. It's good to know that even the saintly Vint Cerf votes on pocketbook issues. He's the father of the Internet, and he approved this message.

What's interesting about net neutrality, though, is that it's incredibly popular among the internet literati, despite its anti-libertarian core. Wired magazine, which the cloud at Wikipedia says adheres to "strong libertarian principles," is unabashedly in favor of net neutrality legislation. In their Obama vs. McCain scorecard they award McCain a D for opposing net neutrality, and give Obama an A for supporting it. Interestingly enough, on their scorecard of five issues, they reward the libertarian position with good grades only twice (in the spectrum and H1B visas sections), while awarding good grades for statist positions on three other issues (broadband [read: broadband regulation/subsidization], investment in green tech, and net neutrality). They left out a bit one – intellectual property (where Wired favors of the libertarian approach) – though they slightly redeemed themselves by mentioning it a few days later.

When you think about it, it's kind of pathetic that Wired is supposedly the standard-bearer for techno-libertarians, when its editorial opinions on the hottest issues in technology of the day are split 50-50 between libertarian and statist. As an alternative for political ideas (Wired, despite its politics, is still an excellent source of tech/science news and analysis), may I suggest the inspiration for this post – the Technology Liberation Front blog, which bills itself as a "tech policy blog dedicated to keeping politicians' hands off the 'net and everything else related to technology."

*The electromagnetic spectrum, over which all wireless communication travels, can handle a lot, but for about a century the federal government has strictly controlled its use, creating spectacular inefficiencies and blocking out huge majorities of the spectrum to open uses à la wi-fi.

Markets in everything: Bulgarian blood edition

Surely this would be a fine edition to the Markets in Everything series: in Bulgaria, apparently black market blood dealers stand outside of hospitals and vend their wares.

As in Russia and some other Balkan nations, corruption has seeped into the fabric of life. Sofia has a thriving black market for blood outside hospitals, where patients’ families haggle over purchases with dealers, according to Bulgarian news reports that track the prices.

Black market trade in human medical parts is not at all unique to Bulgaria. See here for a WSJ discussion of the ethics and economics of the human organ trade.

The NYT on food

The NYT Magazine's subject this week is food, a topic that's nice to see covered in the Times, since it's an issue around which liberals and libertarians have common cause. The main article is about government food policy as it relates to the environment, health, and energy, and while much of the article recognizes the anti-libertarian policies that exacerbate America's addiction to high-calorie, low-nutrition foods, I can't help but think that the author doesn't spend nearly enough space discussing them. While he mentions some government distortions that I didn't even know about – after WWII, the government "encouraged the conversion of the munitions industry to fertilizer" – his list of remedies is heavy on the feel-good liberal policies that don't seem like they'd really do much, or are kludges to a problem that could be fixed with outright legislative repeal. Included on this list are such symbolic measures as putting more importance on the White House chef and converting parts of the White House lawn to modern-day "victory gardens." Also, the author digs into the dark underbelly of land use policy, and advocates "agricultural enterprise zones" and wants developers to have to write "food-system impact statements." But couldn't his ultimate goal – more farmland – be achieved in a more libertarian way, by say limiting the amount of zoning- and parking regulation-inspired low density sprawl that encroaches on farmland?

It's as if in the first half of the article, the author lays the blame at the feet of government for interfering with energy, transportation, and food policy, but then in the second half of the article, he tries to redeem himself to the liberal NYT crowd with wishy-washy crowd-pleasers like locovorism and giving food stamp recipients half price access to farmers' markets.

Criminal heroes

I'll always have a soft spot in my heart for criminals who expose government malfeasance. In recent news we have two good cases of this: the first are the Somali pirates who unknowingly tried to ransom (and seem to be succeeding) off a ship transporting weaponry from the Ukrainian government to probably rebels from South Sudan, in contravention of an agreement that ended (but apparently not for long) the decades long Sudanese civil war.

The second example of the noble criminal (I guess the pirates weren't actually that noble – they didn't realize they'd be exposing such a scandal) is the kid who hacked into Sarah Palin's e-mail account. Unfortunately, he's been arrested and is in the process of being indicted by a grand jury, but without his adept hacking (well, more like Google fu), the world would never know that Sarah Palin kept a secret e-mail account, which she used to communicate with people about government matters in contravention of laws that require that all written communication about government matters be archived (and released at some point). Since Palin never told anybody about the account, obviously she wasn't planning on turning over the e-mail contents at any point. Or at least so thought an Alaska judge when he ordered Palin to recover and save all of the e-mails kept in these previously-secret accounts.