Democrats gloats, say stupid things

Over at Talking Points Memo, John Marshall publishes an e-mail in which a fellow Democrat pontificates on the fall of the Republicans from electoral grace, and the letter ends with the line: "Voters have little patience for politicians who seem blind to their own mistakes," to which John Marshall responds "True," without qualifications.

Seriously?! The median voter has very little actual understanding of the economy. They might have little patience for people they perceive as blind to their mistakes, but to say something that implies that voters don't tolerate bad governance is just laughable from their elected officials is just ridiculous.

The FSB accused yet again of being behind Beslan

Just two weeks ago, I wrote about Alexander Litvinenko's accusations that the Beslan school hostage taking was orchestrated by the Russian secret services. Now, today, I read (via translation) that Ella Kesayeva – co-chair of the persecuted Voice of Beslan group – has alleged, too, that Russian secret services were behind the incident. She wrote yesterday Novaya Gazeta (in Russia, which I can't read, but the translation isn't too bad), in which she outlines the suspicious history of many of the terrorists: all of them had at one point been in FSB and UBOP custody, and many were suspiciously released from government custody right before the incident, with their criminal proceedings having been mysteriously terminated without explanation. Kesayeva concludes that the only explanation for what appears to be widespread negligence on the part of Russia's security services is that they themselves were behind the attacks.

While it's good to see someone continuing on with Politkovskaya and Litvinenko's crusade, Novaya Gazeta's article and Kesayeva's statement are more formalizing and publicizing the things that Litvinenko (who had inside information on the workings of the FSB) has already stated. But we still don't know what Anna Politkovskaya had discovered about Beslan that led to her being killed, and next time Putin orchestrates a false flag attack to justify a power grab, neither Politkovskaya nor Litvinenko will be there to tell us about it.

A note about sources: both of these news organizations (ingushetia.org and Novaya Gazeta) are highly credible. One measures of credibility of oppositional media in Russia is the extent to which a given organization is persecuted, and by that measure, ingushetia.org is as credible as the New York Times – its founder, Magomed Yevloyev, was shot and killed while in police custody just a few months ago, and his website was chased off the Runet. Novaya Gazeta is a very famous dissident newspaper, and was the employer of über-investigative report Anna Politkovskaya, before she was assassinated (likely for coming to the same conclusion that still-alive Kesayeva has just expressed).

A note about translation: I used a translation from a blog, but if you use any online translation site, you can see for yourself what the Russian-language sources say. Google has a surprisingly good Russian translator.

A further note about translation: Problem solved! Dave Essel at La Russophobe has made a high-quality English translation of the original Novaya Gazeta article.

The FHA tries to reinflate the housing bubble

Throughout this whole real estate bubble-induced economic disaster, the most shocking thing to hear has got to be the idea that we need to stop housing prices from falling. Fortunately, you aren't likely to hear it from any economist or anyone with passing knowledge of the matter. But unfortunately, the people who run the American government (both elected and unelected, it seems) don't seem to have caught on to the fact that the answer to the real estate bubble popping is not to pump air (money) back into the balloon (hole).

BusinessWeek reports on a downright stupid new trend in mortgage lending: subprime lenders metamorphizing into Federal Housing Administration loan purveyors. These lenders are substituting the implicit guarantee of the Fannie, Freddie, and the mortgage market in general and low interest rates of a bubble at its height with the artificially low interest rates that come with the explicit government guarantee of the FHA.

The scale of lending backed by the FHA has grown rapidly in the wake of the meltdown. BusinessWeek reports that "[b]y fall 2008, FHA loans accounted for 26% of all new mortgages being issued nationwide, up from only 4% a year earlier." Part of that is due to the fact that lending is down generally, but that's not the whole story: the FHA approved 140,000 new loans in September of this year, compared to 60,000 just eight months prior. The number of lenders "approved to market federally insured home loans" is up 140% since December 2006, as subprime lenders are driven by market incentives out o the subprime market, and by government incentives into the government housing sector. Financial heavyweights like Goldman Sachs have been cashing in on the government guarantees by buying subprimes and refinancing them as FHA-backed loans, reaping the rewards of arbitraging between the market rate and the subsidized rate.

The scope of the problem is much narrower than the interventions in the housing market that created the bubble in the first place, as the FHA only guarantees about half a billion dollars in single-family home loans. But it is nevertheless disturbing that lawmakers are still so eager to promote and subsidize personal home ownership after the most recent meltdown.

The political economy of cucumber curvature

A lot of people have heard about the EU's ridiculous restrictions on selling misshapen fruits and vegetables, recently in the news because many of the rules were relaxed. But just today, after years of having read probably a dozen stories on the matter, I finally found the first real analysis of why the rules were enacted in the first place. The Christian Science Monitor reports:

Farmers in sun-challenged Britain and other growers across northern Europe have protested for years against the regulations, claiming the standards force them to waste more than 20 percent of their crops. [...]

The decision to relax most of the rules drew strong criticism from farmers in Spain and Italy, who, with help from the Mediterranean sun, pride themselves on the production of the continent's most geometrically perfect fruits and vegetables. The farmers fear the change opens the door to competition from less scrupulous growers outside Europe, namely places where labor is cheap.

That 20% figure seems suspiciously high, though I'm not an agronomist – but if it's true, then that's a serious trade barrier that's just been lifted. It's ironic (but all too predictable) that the EU, an organization designed primarily to foster free trade among members, would foist this protectionist regulation on members whose national legislatures had not adopted it.

Obama's FCC guy is big on open spectrum

Today I read perhaps the most positive thing about Obama as I've read in a long time: one of the two people heading his "FCC transition team" is a vocal proponent of open spectrum. His name is Kevin Werbach, and he's written the most complete and compelling open spectrum manifesto that I've ever read (despite the fact that it's six years old). He veers off into silly analogies (the highway analogy halfway through irked me a lot) that muddle his point more than anything, so skip those, but other than that, highly recommended. However, it's really, really, really long, so I've just excerpted some of the best parts.

First, a great two-sentence summary of open spectrum:

The assumptions underlying the dominant paradigm for spectrum management no longer hold. Today’s digital technologies are smart enough to distinguish between signals, allowing users to share the airwaves without exclusive licensing.

And here, an explanation of what interference is, and why it's all relative:

“Interference” is thus highly contingent on real-world factors. Again, this shouldn’t be surprising. Put two television sets next to one another, and you may get a sharp picture on one but a fuzzy image on the other. The difference is that one set has a better tuner. Do we register “interference” when it shows up on one set, or both? Should the most poorly designed set define the requirements for everyone else? What if there is no set in the room but a hypothetical set with certain characteristics might experience a degraded picture there? Under current spectrum policy, such hypothetical “interference” prevents frequency sharing.

Whatever rules we set will influence behavior. If “interference” is defined with reference to a dumb receiver, vendors will try to save money and make receivers as dumb as possible. If, on the other hand, manufacturers have no guarantee of spectrum exclusivity, they will have the opposite incentive. They will build devices robust enough to deal with a variety of situations...

...and this is something I had know idea about: the sinking of the Titanic set the precedence for the laws that still regulate our spectrum. Imagine that...the fate of the Titanic had profound consequences for the telecommunications industry for almost a century!

Here he explains that all of the "science" that current spectrum regulation is based on is flat-out wrong, and we don't even know enough today to say how much we can really jam into the thing (though this question is mostly theoretical...the limit is definitely very high):

Nonetheless, the licensed spectrum model has been the dominant paradigm for so long that there is a surprising amount we simply don’t know about how radios work. For example, we don’t know as a theoretical matter what the maximum capacity is of a geographically defined system filled with randomly distributed radios.

We do know that many of our intuitions are wrong. Research has shown that many factors we believe should decrease the capacity of a system—adding more transmitters, creating more alternative paths for signals to travel, or putting receivers in motion, for example—can actually increase capacity. This occurs because the more data a smart receiver has about the surrounding environment, the better it can do in distinguishing the desired signal.

The commercial viability of any system using these techniques will depend on business conditions.

I'll stop there, because there's just so much in it to quote that I don't even know how to excerpt it all. But if there's one tech-related thing you read this year, it should be this. Let's just hope this guy's thoughts are actually borne out during Obama's presidency.

Free market solution vs. state solution: Somali piracy

In an article on Somali piracy, the Washington Post has this to say about the recent move that shippers have made from using the Suez Canal (which involves passing the pirate-infested Somali waters) to sending their ships southwards down to the Cape of Good Hope:

Experts say the much longer journey adds 12 to 15 days to a tanker's trip, at a cost of between $20,000-$30,000 a day.

So essentially, the shipping companies are taking a hit of $240,000–$450,000 in order to avoid Somali pirates. The question almost asks itself: they can't hire someone for the few days (surely shorter than 12 days) to protect the oil tankers while they pass by the parts of East Africa where pirates prey?

One possible answer is that shippers have traditionally depended on governments' militaries to subsidize them in the form of providing protection on the high seas, and assuming responsibility for protecting themselves in Somalia might open the Pandora's box of having to defend themselves elsewhere. Another explanation is that the subsidized protection has meant that the companies simply have never had to do it before, and they're not likely to have to do it much in the future – as the article notes, governments around the world are already getting together to protect the area at no cost to the shippers.

Somali pirates in the news again

Yet again, Somali pirates deliver a valuable lesson in political economy. The price of oil spiked this morning after the news broke that Somali pirates off the coast of Kenya had taken an oil supertanker ferrying 2 million barrels of oil through the treacherous waters. This is an excellent illustration of what a free market in oil (and, more importantly, sea transport) would look like: securing ships traveling across the globe is expensive. As it stands now, the US government (and governments around the world) effectively subsidizes the industry with their navies, ensuring safety for ships on the high seas. But this protection isn't free, and should be rightly counted as a subsidy for goods shipping internationally (such as crude oil).

For more on Somali piracy and what it can teach us about the world, see here. And for all my posts on Somalia (there's more than you'd think), click here.

Obama to possibly pick anti-medical marijuana congressman as drug czar

In May, an Obama spokesman said that were Obama to become president, he would "end U.S. Drug Enforcement Administration raids on medical marijuana suppliers in states with their own laws." Now, we hear from an anonymous Democratic congressman, that Obama is considering picking Rep. Jim Ramstad as drug czar (officially the head of the White House Office of National Drug Control Policy). According to Politico:

Ramstad has consistently voted against medical marijuana in Congress, opposing an effort to prevent the federal government from raiding or arresting medical marijuana clubs in states where it is legal.

And what's worse than a drug warrior? A self-righteous former addict drug warrior. Politico describes Ramstad as a "recovering person" who's "[suffered] the ravages of chemical addiction." According to an unsourced Wikipedia section, Ramstad was an alcoholic. Funny that in all of his zeal to eradicate illegal drugs, he hasn't proposed prohibiting alcohol – his old drug of choice.

Could Obama's energy plan destroy the environment?

Wired has a headline story today about about a biofuel start-up, and while the article is generally pretty disappointing (nothing about whether or not this company is receiving – or looking for – subsidies?), it's got an absolutely horrifying caveat at the end that some environmentalists think that a biofuel-based energy industry could spell environmental disaster. The article (.pdf) cites a report by the ETC Group, an environmental organization, which warns that even if our economy comes to depend on biofuels not made from food, there is still the risk that the land needs of whatever biomass we end up using will become untenable, and the impact on global food prices could be analogous to what happened with ethanol and food prices in 2007-08.

They term this a "sugar economy," and by sugar they mean carbohydrates in general – foods like corn, but also just generally anything that has ever been living (switchgrass, trees, leaves, etc.). These environmentalists worry that the Economist was being naïve when it said "there's plenty of biomass to go around," and that the poor of the global South will be the ones who end up yielding their cropland to the production of biomass to be liquified for use as America's fuel. The parallel with one form of biofuel – ethanol – is striking. The US government recently believed (ridiculously enough) that ethanol would be an effective and environmentally-friendly way of weening the US off of oil. As it turns out, ethanol is both environmentally deleterious and was responsible for the vast majority of the recent spike in global food prices, which hit developing countries especially hard.

Ethanol's rise began when the government started subsidizing it, and the ETC Group's conclusions would suggest that Obama's promise to subsidize biofuel research and production could lead to similar problems, as biofuel production crowds out the marketplace for food and land in general. What's even more jarring, though, is that Obama's energy plans are much more ambitious than America's recent corn ethanol subsidies, which barely made a dent in the market for fuel in the US. The world's big biggest rent-seekers feel the subsidies about to stream in, and have begun partnering with biofuel startups – the list (36-37 of the report) is a who's-who of America's greatest rent-seeking corporations, with ADM, DuPont, GM, and literally every major pharmaceutical and oil company looking to get in on Obama's promised subsidy binge.

As for the veracity of ETC's claims, it all depends on a) the efficiency that biofuel producers can achieve; and b) whether or not they receive the subsidies that Obama promises, and on what basis he chooses to allocate them. I guess we'll see in the coming months and years how serious Obama is about creating a new government-dependent energy industry, and how firms react to the incentives of his policy.

Edit: More on potential ecological destruction caused by non-food biofuels.

The NYT on the black vs. African-American debate

The NYT usually, as far as I can tell, uses the term "black" instead of "African-American." The latter sounds a bit self-conscious and overly PC these days, with the former seeming to win over among blacks themselves. But I found this excerpt from an article about the riveting (not) discussion of which private elite school the Obamas will send their kids to, where the Times goes totally schizoid:

Washington is typically a socially segregated city, but the schools the Obamas are considering appeal to the elite across color lines. (Mr. Holder and Ms. Rice, the two Obama advisers, are African-American.)

Sidwell administrators say its student body is 13 percent black. Georgetown Day and Maret officials say their schools are 20 percent African-American. (Officials at the Laboratory Schools in Chicago say the population there is about 10 percent black.)

And for many black parents and students, the buzz has been thrilling. Dylan McAfee, an African-American girl in second grade at Georgetown Day, met Mrs. Obama last Monday and has been star-struck ever since. “I touched her hand and she smelled like cherries,” she said.

The pattern we have here is African-American/black/African-American/black/black/African-American. I know what the idea is – to avoid word mirrors by not repeating the same word so many times – but it's just a little jarring to see two words repeated so often that are usually mutually exclusive in a given text.