Comments on economics, mystery fiction, drama, and art.

Wednesday, October 30, 2013

Rand Paul has placed a hold on Janet Yellen's nomination to chair the Fed Board of Governors

As you all probably know, Rand Paul has placed a hold on Janet Yellen's nomination t replace Ben Bernanke to be the chair of the Federal Reserve's Board of Governors.  He has asked for a vote on a piece of legislation he first introduced in 2011, the "Federal Reserve Transparency Act." 

Here's what Paul's website has to say about this piece of legislation

One of my first actions in the U.S. Senate was to introduce legislation allowing for a full audit of the Federal Reserve. This legislation, S. 202 The Federal Reserve Transparency Act of 2011, is a Senate version of similar legislation long-championed by and introduced this session in the House of Representatives by my father, Congressman Ron Paul of Texas.

The Federal Reserve Transparency Act of 2011, will eliminate the current audit restrictions placed on the Government Accountability Office (GAO) and mandate a complete audit of the Federal Reserve to be completed by a firm deadline, finally delivering answers to the American people about how their money is being spent by Washington.

We must take a critical look at the Fed's monetary policy decisions, discount window operations, and a host of other things, with a real audit - and not just pay lip-service to the idea of an audit. At a time when we're seeing great volatility in small Euro-zone economies like Greece, Portugal, and Ireland, it is more crucial than ever that we have real transparency at our own central bank.
It's unclear to me what he means by a "full audit" of the Fed, but it appears that he wants something other than a financial audit (which is, in any case, already being performed), although Paul apparently does not believe what the GAO is doing constitutes an "audit."  Apparently, though, he wants some outside agency to review the Fed's operations--including its monetary policy actions, to make sure they are somehow appropriate. 

Here, for you edification, is the complete text of the bill.  If, after you have read it, you know what he wants, you're ahead of me.

To require a full audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks by the Comptroller General of the United States before the end of 2012, and for other purposes.
    Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,


    This Act may be cited as the ‘Federal Reserve Transparency Act of 2011’.


    (a) In General- Notwithstanding section 714 of title 31, United States Code, or any other provision of law, an audit of the Board of Governors of the Federal Reserve System and the Federal reserve banks under subsection (b) of such section 714 shall be completed before the end of 2012.
    (b) Report-
      (1) IN GENERAL- A report on the audit required under subsection (a) shall be submitted by the Comptroller General to the Congress before the end of the 90-day period beginning on the date on which such audit is completed and made available to the Speaker of the House of Representatives, the majority and minority leaders of the House of Representatives, the majority and minority leaders of the Senate, the chairman and ranking member of the committee and each subcommittee of jurisdiction in the House of Representatives and the Senate, and any other Member of Congress who requests it.
      (2) CONTENTS- The report under paragraph (1) shall include a detailed description of the findings and conclusion of the Comptroller General with respect to the audit that is the subject of the report, together with such recommendations for legislative or administrative action as the Comptroller General may determine to be appropriate.
    (c) Repeal of Certain Limitations- Subsection (b) of section 714 of title 31, United States Code, is amended by striking all after ‘in writing.’.
    (d) Technical and Conforming Amendment- Section 714 of title 31, United States Code, is amended by striking subsection (f).

Wednesday, October 09, 2013

Is a College Degree "Worth It"

A new paper, and well worth your time: 
The Case of California Higher Education
Alan Benson, Raimundo Esteva and Frank Levy1

Abstract. Using data from California’s higher education systems, this paper estimates individuals’ and society’s economic returns to a Bachelor’s (BA) degree and evaluates the quality of a beginning a BA program as an investment. We adjust for a fuller range of factors than are typically considered in prior evaluations, including non-completion, time-to-degree, accelerating marginal income taxes, and risk. Although each of these adjustments reduces the estimated return to a beginning BA program, we find doing so generally remains a good investment for individuals and society. However, rising tuition and the widening distribution of earnings among those who begin BA programs has increased the risk individuals do not recoup their investments.

Tuesday, October 08, 2013

The Comparative Advantage of Bullshit

There are worse ways to spend $3 a month than subscribing to Bill James' website (  I can't link to this, because it's subscriber-only, but it's just a piece of a much longer thing, so here's why bullshit has a comparative advantage in everyday discourse:

IV. On the Practical Advantages of BS
                Did you ever think about this:   that Bullshit has a huge advantage over actual knowledge, in that bullshit can be created and deployed wherever it is needed, whereas actual knowledge has very limited ability to travel?
                At this time of year I get a lot of questions from people who want to know who I think is going to win the World Series, and whether it is better to win your division and have a 7-day cooling off period before you go into the playoffs or whether it is better to have to compete right up to the end of the season, and whether it is meaningful that a team ends the season playing well as opposed to limping into the playoffs after a two-week slump, and whether a team whose best pitcher has two different-colored eyes has an advantage in post-season play.
                The only honest answer to these kind of questions is "I have no idea."   This is not a satisfying answer to those who ask the questions, nor is it particularly gratifying to me to have to answer so many questions by saying "I’m sorry; I really have no idea."    Some of these questions I can’t answer because there is no answer; the only way to answer the question would be just to make something up and go with it.   Others I could answer if I had done the right research, but the right research very often would be a two-week project, and I can’t really find space in my life to undertake an awful lot of two-week projects, and anyway, if I could, it would still be two weeks before I could answer the question.
                From my perspective, then, it often seems that what people want from me is that I should be a bullshitter like the guys on TV.    "The guys on ESPN,". . ..this is what I hear, when people ask me questions about which there is no relevant research. . .."The guys on ESPN are able to give expert opinions on every question under the sun.   Why can’t you?   Why can’t you just make something up and go with it, like everybody else does?"
                Generally, we decry and denounce bullshit.   My point here is that actually there is a huge advantage to bullshit.   It fits everywhere.   You never run out of it.    It’s always in stock.   Once you decide that you are happy answering questions with bullshit. . .you’re set.   The cupboard is always full.
                I was watching a football game today.   Kansas University got ahead of a much better team 10-0, then settled in to lose the game 54-16.   The announcer had a ready explanation for the surprising start (paraphrasing).    "Texas Tech had to travel in here yesterday.    They spent most of the day getting to the airport, taking the flight, getting on the bus to Lawrence, getting off the bus, getting into the hotel, sleeping in a strange room.   Sometimes, particularly to a young team, it takes you a few minutes to get your feet on the ground and to get your head back into the game."
                Bullshit?   Of course its bullshit—but he got paid to say that.   That’s the wonderful thing about bullshit:  you can never run out of it.   No matter what happens, you can make up an explanation for it on the spot.   Every effect can always be traced back to some readily apparent cause.   Whenever you have a condition (a) and an outcome (b), you can always assert that a caused b.  Since conditions and outcomes exist in almost limitless supply, any number of supposed causal links can be established.  
                That sounds pejorative, but I don’t mean it that way.  We all do that.  His assignment was to say something that might be true, and. . .that might be true.   Nobody can prove that it isn’t.   We all use bullshit, including myself, because we are all "asked questions" or confronted by issues for which there is no obvious answer except bullshit.  
                But research isn’t like that; research runs out.   Research is always in limited supply.   Research is never around when you need it most.    That’s why knowledge can never take the place of good, old-fashioned, time-tested bullshit.