Seemed like a good idea at the time

But, as usual, the politicians forgot to ask what unintended consequences might ensue when retail outlets weren't allowed to provide their customers with bags;

When the Seattle City Council unanimously passed a ban on plastic bags and required businesses to charge a nickel for paper bags, city leaders believed it would be better all around.

"I think we've gotten to a place where it's really going to work for the environment, businesses and the community in general," Councilman Mike O'Brien said at the time.

But the bag ban is contributing to thousands of dollars in losses for at least one Seattle grocery store, and questions have been raised about the risk of food-borne illness from reusable bags that shoppers don't often wash.

It works this way;

... the shoplifters' patterns are difficult to detect.

They enter the store with reusable bags and can more easily conceal items they steal. The reusable bags require staff to watch much more closely, and even though the store has a loss-prevention officer and more than a dozen security cameras, it's tough to tell what a customer has paid for and what they may already have brought with them.

 Of course, the geniuses who promoted the idea pretended not to notice (hey, it's not like it's THEIR money);

According to data released in January by Seattle Public Utilities, 21.1 percent of business owners surveyed said increased shoplifting because of the plastic bag ban was a problem. Results of another survey released in January – one done by an environmental advocacy group that found the ban "popular and successful" – didn't mention the problem of shoplifting.

And, it's unhealthy to boot;

San Francisco was the first major U.S. city to ban plastic grocery bags in 2007. Multiple research papers have said there are negative repercussions to public health, though supporters question or discount the findings. One study released late last summer cited emergency room treatment data and said after the bag ban began there was a spike in the number of E. coli cases and an increase of deaths from foodborne illnesses.

Banks too heap big to fail?

Simon's girl, asks when we'll be rid of Too Big To Fail.  Fed Chairman says, ask your colleagues; they're the ones who wrote the law (Dodd-Frank) not I.  And, btw, one 'study' doesn't cut it.

But she had her lines down, like any good actress.

Ventured in movie criticism [UPDATED]

Apparently Roger Moore (in true Hollywood fashion) wishes to stick to his knowledge of WWII gleaned from watching Tora, Tora, Tora;

Go sell crazy someplace else, sport. You’re off topic and off your nut.

Off topic?   It's a movie based on the Emperor's culpability for Pearl Harbor.

Nor is it new, as Howard Zinn, in his People's History of the United States mentioned it;

One of the judges in the Tokyo War Crimes Trial after World War II, Radhabinod Pal, dissented from the general verdicts against Japanese officials and argued that the United States had clearly provoked the war with Japan and expected Japan to act. Richard Minear (Victors’ Justice) sums up Pal’s view of the embargoes on scrap iron and oil, that “these measures were a clear and potent threat to Japan’s very existence.” The records show that a White House conference two weeks before Pearl Harbor anticipated a war and discussed how it should be justified.

Now, Zinn's analysis in most things could be criticized as 'being off [his] nut', but his citing the Indian jurist Pal is accurate.

We guess Jack Nicholson was right, some people 'Can't handle the truth.'
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At Roger Moore's Movie Nation's Next Screening posting on The Emperor with Tommie Lee Jones; 

The actual facts about Pearl Harbor have been known since 1996, when retired KGB General Vitalii Pavolov published his memoir, 'Operation Snow'.  Essentially, Soviet intelligence knew that Hitler was going to turn on them and attack--it was obvious, Hitler was transferring troops and tanks from France to Poland.  In order to meet that threat Moscow had to be able to free up its troops from the far east of Russia (where they stood ready to repulse an attack from their historical enemy, Japan) and move them west.  Problem; Stalin refused to believe his new best friend Adolf would be so treacherous.

So in the spring of 1941, Pavlov  (then a newly minted espionage agent), was dispatched to Washington DC to re-activate one of their most valuable assets within New Deal Washington; Harry Dexter White.  White, a former Harvard economist, was the brains behind then Treasury Sec'y Morgenthau.  Pavlov, over lunch at a restaurant, filled White in on Hitler's plans and gave White the assignment of provoking Japan into attacking the USA.  Meaning they couldn't also attack Russia at the same time.

White's machinations were successful.  Essentially, he got the American govt to change its diplomatic stance toward Japan from neutrality toward outright hostility.  Historians had long been puzzled by the diplomatic blunders in the summer of 1941--especially cutting Japan off from its lone source of petroleum, which made the oil fields of Indonesia suddenly a prize for the taking--Pavlov's story makes those 'blunders' understandable; they had a purpose.

Japan did not want war with the USA, but were left with little alternative thanks to the Soviet penetration of the American govt at the highest levels.  Whether or not MacArthur knew this story is doubtful.  But, he could have, as the FBI had been on to Harry Dexter White thanks to the Venona decrypts for some time before the end of WWII.

I'm making a wild prediction; none of the above will be in this movie.

Let's see what makes it into Mr. Moore's blog.

A Tiyin for...

But, make it snappy, as they ain't worth much;

The lowest-value coin of all is the Tiyin from Uzbekistan. Some 3,038 equate to one UK penny (and 2,000 tot up to one US cent).

Though the 20 Tiyin piece goes for $4.  Need a paper weight?

Shoes of the Fisherman Emeritus

Details, details;

Benedict XVI will be known as "pope emeritus" and will retain the honorific "His Holiness" after he abdicates on Thursday, Vatican official say.

He will also continue to be known by his papal title of Benedict XVI, rather than reverting to Joseph Ratzinger.

He will wear his distinctive white cassock without any cape or trimmings.

He will surrender his gold ring of office, known as the fisherman's ring, and his personal seal will be destroyed in the same way as when a pope dies.

Benedict XVI will also give up wearing his specially-made red leather loafers, instead wearing brown shoes hand made for him by a Mexican craftsman during a brief visit to Mexico last year, Vatican spokesman Federico Lombardi said on Tuesday.

Thanks for the info.

Wanna be like Yank?

Be careful, Europe, you could trigger a new war, if you do it like the United States (if we take Harold James and Hans-Werner Sinn literally);

Thomas Sargent used the bully pulpit of the Nobel Prize acceptance speech to tell Europe to follow the US example in the aftermath of the War of Independence and assume the debts of the individual states (2011). Such an assumption of debts was, for Hamilton, “the powerful cement of our union”. Paul de Grauwe has recently stated the case quite simply: “The euro is a currency without a country. To make it sustainable a European country has to be created” (2012).

But;

In fact, the fiscal union turned out to be dynamite – rather than cement – because the tariff dispute turned into a constitutional struggle by the 1830s in which southern states claimed that the Constitution was merely a treaty between states and that the southern states could ignore federal laws that they deemed to be unconstitutional. The fiscal mechanism designed to allow servicing of a common liability raises inherently explosive distributional issues.

Which, the two economists argue, is just what could happen in a Eurozone, and even worse;

The fiscal union [of the American states] was also dangerous because it allowed states to recommence their borrowing. As with the dispute over the tariff, this problem became very apparent in the 1830s. As international capital markets developed in the first decades of the nineteenth century, US states used their newfound reputation to borrow on a large scale, and ruined their creditor status fairly quickly as a result.

Ending in The Civil War!  Though there was a (temporarily) happy ending;

The eventual solution lay in the adoption of debt restraint or balanced budget laws. At the end of the 19th century, many states set a very low ceiling on permissible state debt, and other states limited indebtedness to a (small) share of total taxation. Only the northern states (New Hampshire, Vermont, Massachusetts, Connecticut and Delaware), which had never really experienced the debt problem, allowed their legislatures to contract unlimited debt. By the early 21st century, such legislation limits state indebtedness in all but one of the 50 states. 

Cry, Monetary Union!  And let lose the dogs of war?

DeLong's Denizens Denied!

Once more, the acolytes of Berkeley economist J. Bradford DeLong are deemed to be too sensitive to be exposed to historical fact (even in a post about history).  So dilbert dogbert will remain (presumably) blissfully ignorant of his challenged reading comprehension:

I was the only vote for [former VP Henry] Wallace in my schools mock election. Always the outcast outsider. Not really, but that was the way I felt back in grammar school.It was an interesting era to grow up in. I remember the Red Hysteria well. The Hysterics were all wrong. Wallace was right.

Which HSIB readers can confirm by scrolling down to the immediately below post (presciently saved for posterity). As that's exactly the opposite of what Wallace himself is saying in the featured piece from which DeLong extensively quotes. I.e. Wallace was admitting that the 'hysterics' were right all along, and he had been wrong about Stalin (until his post war depredations, specifically in Czechoslovakia, couldn't be ignored).

That brings us to a recently published book on the treachery of Stalinist agent, former Harvard economist, and Treasury official in FDR's New Deal, Harry Dexter White; Operation Snow: How a Soviet Mole in FDR's White House Triggered Pearl Harbor, by John Koster.

The thesis isn't new, even to Professor DeLong, as an informed (and kindly) commenter long ago pointed out to him that Eric Breindel and Herbert Romerstein in the Venona Secrets: Exposing Soviet Espionage and America's Traitors , had exposed White as the man who provoked Japan into attacking America at Pearl Harbor.

That information came out inadvertently in the publication of KGB General Vitalii Pavlov's memoirs (in Russian) back in 1996.  Pavlov was, in early 1941, a newly minted NKVD espionage agent, whose superiors entrusted him with the assignment of contacting White in Washington DC to tell him that their intelligence indicated that Hitler was soon going to turn on his ally Russia.  

Soviet intelligence needed to have their armies free to meet that attack without needing to also worry about Hitler's ally Japan attacking them in the far east. According to Pavlov, White willingly accepted his assignment of doing what he could to provoke Japan into attacking America rather than Russia. The subsequent diplomatic history between the US and Japan shows he succeeded.

What is new in Koster's book is a logical speculation about White's timely demise; he died of an apparent heart attack three days after testifying (at his request) before Richard Nixon and the House Committee on Un-American Activities in 1948.  Unsuccessfully making his case that Whittaker Chambers and Elizabeth Bentley (both former Communist couriers) had lied about him being an agent of Stalin.

White knew his performance hadn't been believed, and he knew something else that neither Bentley nor Chambers knew about him, but would likely be exposed if he lived to be prosecuted for espionage; that he was responsible for the disaster of Pearl Harbor.

Koster surmises that White didn't want to stick around for that disgrace which would also redound to the discredit of his family.  So, already a heart patient with a prescription for digitalis, he simply overdosed on it, and brought on his fatal heart attack.

Whether that was true will never be known since White's body was cremated.  And anybody who relies exclusively on Brad DeLong's 'Liveblogging of WWII' won't even know of the theory.

Nothing ventured...

J. Bradford DeLong  allows FDR's VP Henry Wallace's confession of error to be read on his blog;

Before 1949 I thought Russia really wanted and needed peace. After 1949 I became more and more disgusted with the Soviet methods and finally became convinced that the Politburo wanted the Cold War continued indefinitely, even at the peril of accidentally provoking a hot war.

In this article eI shall speak frankly of some of the circumstances which have caused me to revise my attitude.

Which Wallace went on to do, quite admirably and candidly--even admitting that he'd been hoodwinked when he visited the Soviet Union in 1944.  A trip on which he'd been accompanied by (at least) two Americans we now know were secret Soviet Agents; Owen Lattimore and John Carter Vincent.

Though he did not admit that there were plenty of people who were right about Russia who took a lot of grief for their prescience.  People such as Whittaker Chambers and Joe McCarthy, say.

That said, we eagerly await news of whether this comment makes the Semi-Daily Journal (Reality Based Economics) cut;

17Patrick R. Sullivan said...

'This plus the testimony of American ex-Communists convinced me that Russia had been getting information illegally to which neither she nor any other nation was entitled.'

Two of the people responsible for giving that information, illegally, to Russia were former Harvard economists Lauchlin Currie and Harry Dexter White.

'I remember the Red Hysteria well. The Hysterics were all wrong. Wallace was right.'

Wallace, as quoted, says the hysterics had it right, and he was wrong.

Also, there are a couple of new books out that bear on this. 'Stalin's Secret Agents' by Evans and Romerstein, and 'The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order', by Benn Steil

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February 24, 2013 at 10:38 AM

Ann up

'For alleged individualists you're very mob-like.'  And, 'You're not stoners, you're nerds.'

Whatever one thinks about the quality of her arguments, it can't be denied that she has the courage of her convictions and is intimidated by no one.

Separazione e la dolce vita

Or at least the high paying life, in Italy; keep the girls and boys away from each other when they're in high school, say Massimo Anelli and Giovanni Peri;

The high school years (13 to 18 in Italy) are crucial for young women in shaping their preferences and self-confidence. In part, girls may shape those attributes by comparing themselves to male students. If there are fewer men for comparison, they may more readily consider themselves to be good at math, or interested in science, or fascinated by technology, attributes our society stereotypically assigns to men. Recent experimental research shows that gender-specific roles may be perpetuated at the high-school level (see Mobius et al. 2012 on how women and men adjust their beliefs about themselves). With fewer men around, some women are freer to choose to pursue what they love and what they are good at.

....If an objective of schooling is to increase women’s career opportunities and thereby their salaries, our results would suggest that gender-separated classrooms would be an effective step in the right direction. Incidentally, men will also benefit, being encouraged to enroll in high-earning majors. Gender-separated classrooms would increase the probability of choosing high-earning majors for both women and men. 

Rhee-ly good advice

Stop with the self-esteem stuff, tell your kids the hard, harsh, realities of life and they'll be the better for it;

Michelle Rhee has some suggestions for the Washington state school system.
The controversial Students First founder and former chancellor of schools in Washington, D.C., said this state should remove seniority as a factor in teacher layoffs and allow families to choose where to send their children to school.

....In D.C., Rhee closed schools and fired teachers she determined to be underperforming. She implemented a system that based teacher evaluations in part on their students’ test scores, and she increased resources for teachers.

Critics call her anti-teacher. They say that while she claims to be advocating for students, she doesn’t care about the people who educate those students. They also say there is no research to back up her policies, which resulted in at least 241 teachers being fired in D.C. during her tenure.

....Rhee said educators coddle their students too much. She used her parenting technique as an example of what should be done instead.

Her daughters play soccer, but not well, she said. They have medals and trophies attesting to their proficiency, so she felt it was her duty to sit them down and tell them they were just bad at playing soccer.

“We spend so much time making children feel good about themselves, we’ve lost the ability to make them feel good,” she said ....

Rhee is married to a former NBA star, so maybe she knows something about how winning teams are built. 

Whippersnappers...who needs 'em

It's an age old story, told by a geezer economist (born 1943!) Daniel S. Hamermesh;

• First, it is clear that through the 1990s top-level economic research was very much a young person’s game – almost nobody over age 50 published a paper in these premier outlets;

• Second, this fact has changed in the last 15 years;

Although 80% of authors are below age 50, well above the fraction of PhDs teaching at North American and European universities, the percentage of ‘old’ (ages 51 years old and above) authors has increased from 5% to nearly 20%. 

Cackle, cackle;

There’s hope for us older economists – the slowdown in technological advances has made the profession less like pure mathematics, more like a humanistic field. Old folks are demonstrably more able to compete at the frontiers of research than before. For younger economists, it might be a bit depressing. They no longer have the same advantage of the novelty of their skills as my generation did – the earlier unlikelihood that an ‘old guy’ would be intellectually readily substitutable for them. 

Olerud Sluggers?

It's not over til it's over, and the pine tree is outtahere!

Bruce and Linda Baker’s Chinese pine was cut down to improve the view from the home of retired baseball star John Olerud and his wife, but woodworker Warren Weber will create new objects from the wood.

Now that it's been determined that one can not only covet thy neighbor's view (in Clyde Hill, WA), but get it handed to you by politicians without having to pay the market value for it--conservatively estimated by the Olerud's to improve the resale value of THEIR property by over a quarter million dollars--all that's left is to decide what to do with the wood.

Well, they hit baseballs don't they?

Whodunnit?

Now here's a real mystery, what were the jury members thinking, not to mention, what were the finance guys thinking when they took on this client;

US crime writer Patricia Cornwell has won a $51m (£33m) lawsuit against her former financial managers, after a jury agreed their negligence cost her millions in losses.

The firm Anchin, Block and Anchin LLP said no funds were missing from the author's account.

It blamed losses on the recent recession and on Cornwell's supposedly extravagant spending habits.

Cornwell is best known for novels about heroine medical examiner Kay Scarpetta.

....Cornwell found out "that Anchin had borrowed on [her] behalf collectively several million dollars, comprised of mortgages for real property and a loan for the purchase of a helicopter," the complaint says.

Cornwell also accused her financial managers of failing to arrange temporary accommodation for her when renovation on her home took longer than expected.

The complaint adds that because Cornwell suffers from bipolar disorder - a condition she says her business managers were aware of - the author's "ability to write is dependent upon the ability to avoid distractions".

"A quiet, uninterrupted environment, free of the distractions of managing her business and her assets, including her investments, is essential to her ability to write and to meet her deadlines," it says.

Get ya coming and going

Why exchange rate movements don't show up much in prices to the end users, (thanks to Mary Amiti, Oleg Itskhoki and Jozef Konings).  The exporters and importers are often the same guys;

...we show that in order to understand this exchange rate disconnect we have to take into account the fact that the largest exporters are also the largest importers. This is important because when exporters are hit by an exchange rate shock in their destination market, they typically face a compensating movement in the marginal costs if they are importing their intermediate inputs.

For example, an appreciation of the euro relative to the US dollar, while increasing the domestic costs of European firms (in US dollars), typically reduces their euro costs of international sourcing of intermediate inputs. This effect is most intuitive when inputs are sourced from the US but it turns out to be, in effect, more general. Why? Because empirically, the movements in the value of a country's currency are correlated across its trade partners. This natural hedging from exchange rate movements, inherent in the imports of intermediate inputs, reduces the need for exporters to adjust their export market prices.

Which has possibly dire consequences for a Eurozone in recession; 

These results imply that the international competitiveness effects of a euro devaluation are likely to turn out to be modest given the extensive international sourcing by major exporters. In addition, a weaker euro is likely to have limited effects on prices and quantities, with the changes largely reflected in the profit margins of major exporters.

Been down so long...

It may look like up to Barack Obama, but Keith Hennessey is made of sturdier stuff and has the pictures to prove his point, as in the above.  Take note of where the red line (actual GDP) diverges from the blue (normal, aka 'potential', GDP growth).

The last time we had a serious recession(s), 1980-82, the economy quickly rebounded to the blue line.  Same story for the periods immediately after mild recessions of '90-91 and 2001.

This time IS different.  And, according to the CBO, don't expect a return to normalcy soon;

CBO’s GDP projection has three significant features:

1. CBO projects that real GDP will continue to grow only as fast as potential GDP this year;

1. They then project that growth will accelerate; but

1. They project that the output gap won’t close until the end of 2017, almost five years from now.

Attaching numbers to this, CBO projects real GDP will grow 1.4 percent in 2013, 3.4 percent in 2014, and 3.6 percent per year from 2015-2017, reaching potential GDP at the end of 2017.

This translates into their (un)employment projections as well. CBO projects an 8.0% unemployment rate in the fourth quarter of this year and a 7.6% rate at the end of 2014, only three-tenths of a percentage point below where we are now. They then project that the unemployment rate will decline to reach full employment by the end of 2017.

Be careful what you vote for!

Non Tobin

Three economists say, corporate governance will respond to incentives. They are Alex Edmans, Vivian W Fang and Emanuel Zur, but you have to think a second time to see why;

The stock market is a powerful tool for controlling corporations’ behaviour. But which is better, a highly liquid market or a number of large blockholders? This column argues in favour of liquidity. Evidence suggests that policymakers should not reduce stock liquidity through greater regulation [or a Tobin Tax]. While the idea that liquidity encourages short-term trading – rather than long-term governance – sounds intuitive, deeper analysis shows that liquidity is beneficial because it encourages large shareholders to form in the first place, and allows shareholders to punish underperforming firms through selling their stake.

After a lengthy analysis, they conclude;

...liquidity can be beneficial by encouraging large shareholders to form in the first place, and by allowing shareholders to punish an underperforming firm through selling their stake. More broadly, the paper contributes to a recent literature on the real effects of financial markets. The traditional view (e.g. Morck, Shleifer, and Vishny 1990) is that financial markets are simply a side-show that passively reflects firms’ fundamentals – for example, a fall in the stock price reflects a deterioration in firm performance. This newer literature, surveyed by Bond, Edmans, and Goldstein (2012), shows that stock prices actively affect a firm’s fundamentals – a fall in the stock price exerts governance on the manager by worsening his compensation and reputation; the threat of such a fall induces the manager to exert effort. Thus, policymakers should take into account the effects of financial markets on real economic activity when designing regulations.

Or, F.A. Hayek knew the Use of Knowledge in Society.  Yes, he did.

Un-American; graffiti

Find a need, and...erase it!

Goodbye Graffiti™ Inc. was started in Vancouver, Canada in 1997. We are a community minded company who’s mission is to "clean the world one wall at a time." Our team includes sales and franchising professionals, marketing professionals, chemists, and Certified Graffiti Technicians. We have enjoyed tremendous success and expanded at a fantastic pace. We are revolutionizing an industry traditionally dominated by unreliable methods, untried products and poor systems.

We are experts in removing graffiti from any surface anywhere. We have developed aproprietary graffiti maintenance program, a full line of graffiti removal products, and are currently expanding franchises across Canada and the United States. We have pioneeredScratchiti™ Stop Security Film and, through extensive research and development, produce War Wagon graffiti removal vehicles.

Goodbye Graffiti ™Inc. is proud to offer the worlds first turnkey graffiti removal franchise opportunity.

As the world leader in this growing niche market we are, in many ways, creating a new industry. The Goodbye Graffiti™ system has proven consistently successful in building a solid monthly cash flow, continual growth, and great profit since it’s inception in 1997. Utilizing our proprietary graffiti removal products, sales structure, and specialized Ever-Clean maintenance system, this virtually untapped market is easily accessible.

Or, non-performance art?

  

Round up the usual suspects

The Seattle Times, as always, only too happy to make itself available to those with an agenda to promote (at taxpayer expense);

Jeff Johnson is president of the Washington State Labor Council. Rob Johnson is executive director of Transportation Choices Coalition. Steve Mullin is president of the Washington Roundtable.

Who argue;

Today, valuable public assets — roads, bridges, ferries and buses — are deteriorating due to insufficient investment in their maintenance, operations and preservation. Our transportation system is like our homes. Ongoing upkeep and upgrades are needed if it’s to continue meeting our needs.

But at current preservation and maintenance funding levels we’ll be going in the opposite direction. Estimates are that if we don’t increase our maintenance and preservation investments, more than half of the surfaces on state roads will be in poor to very poor condition by 2023. 

....current funding is not enough to do the job. Current revenues cannot cover the cost of preserving, maintaining and operating our existing transportation system....

The reason for this crisis is exactly the opposite of what these three claim; it is because public assets are NOT like our homes.  Our homes are PRIVATELY owned and the costs of maintenance and upgrades fall on, and the benefits accrue to private actors; homeowners.

Roads and bridges owned by no one will always be neglected because of the political dynamic (ferries and buses are another matter entirely, they could easily be privately--and once were--owned and maintained, at a profit).

Maybe that explains why the state of Indiana leased out their interstate highway (I-80) years ago to a profit seeking firm, and don't have the problem of current funding not being enough to do the job.

The state of Washington could do the same with many of its public infrastructure assets.  That's an actual solution to this problem.

Tease it out

Which these scholars did;

Did the Community Reinvestment Act (CRA) Lead to RiskyLending?

Sumit Agarwal (School of Business, National University of Singapore)

Efraim Benmelech (Kellogg School of Management, Northwestern University, and NationalBureau of Economic Research)

Nittai Bergman (MIT and National Bureau of Economic Research)

Amit Seru (University of Chicago and National Bureau of Economic Research)

And it'll make the Housing Cause Denialists miserable

Using exogenous variation in bank incentives to conform to CRA standards around exams, we find that the CRA [Community Reinvestment Act] did indeed induce riskier lending by banks. First, we find that in the six quarters surrounding a CRA exam, lending by treatment group banks (i.e., those undergoing the CRA exam) is elevated on average by 5 percent as compared to lending by control group banks.

Second, using data that track loan performance, we show that loans originated by treatment group banks around CRA exams are 15 percent more likely to be delinquent one year after origination as compared to those originated by control group banks. The evidence therefore shows that around CRA examinations, when incentives to conform to CRA standards are particularly high, banks not only increase lending rates but appear to originate loans that are markedly riskier.

What a surprise!  Banks responded to incentives to lower their lending standards when banking regulators had a club in their hands (the ability to give a grade of non-compliance with CRA, that could be used to deny a bank the right to expand or merge with another bank) to see that they did what powerful political forces wanted; more 'affordable housing' loans.

The reasoning being neatly summarized here;

We provide several pieces of evidence that support our interpretation of these findings. 

First, CRA assessments place particular weight on the fraction of loans targeted to low-income areas – i.e., so-called CRA-eligible tracts. We therefore expect the differential lending behavior between treatment group and control group banks to be more pronounced in these CRA-eligible tracts. This is precisely what we find in the data.

Second, we exploit the fact that all loans within a CRA-eligible tract are taken into account in a CRA assessment, regardless of borrower income.

We hypothesize that in attempting to comply with the CRA, banks take advantage of this regulatory feature by concentrating lending in CRA tracts to higher-income borrowers, who presumably are less risky. Consistent with this hypothesis, our results show that the effect of aCRA exam in CRA-eligible tracts indeed rises with borrower income.

Third, we find that large lending institutions drive our main findings on the impact ofCRA exams on the quantity and quality of extended loans. This is to be expected: federal regulatory agencies consider depository institutions’ CRA scores when considering applications for deposit facilities, including branch openings as well as mergers and acquisitions. To the extent that larger banks are more heavily engaged in mergers and acquisitions activity and expansion through branch openings, they will have a greater incentive to maintain a high CRA score and thus to adjust their lending behavior to satisfy CRA exams.

Fourth, we find that the reduction in loan standards associated with elevated lending around CRA exams is based primarily on unobservable characteristics. In other words, there is no meaningful change in the observable characteristics of loans made by treatment group banks relative to the control group banks around the CRA exam.

This, again, is to be expected under our interpretation of the results, since banks have an incentive to convince regulators that loans extended to meet CRA criteria are not overly risky. This would be consistent with the CRA mandate of “encouraging financial institutions to help meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation" (CRA 1977, Section 802). 

Which should be so obvious that (pace Wealth of Nations) it should be unnecessary to even have to point it out, except for the interested sophistry by denialists confounding the common sense of mankind.

Finally, the authors also point out that the total impact of the CRA is probably higher (worse).  They're only measuring the minimum distortions by their method;

We note that our estimates do not provide an assessment of the full impact of the CRA. This is because we are examining the effect of CRA evaluations relative to a baseline of banks not undergoing an exam. To the extent that there are adjustment costs in changing lending behavior, this baseline level of lending behavior itself may be shifted toward catering to CRA compliance. Because our empirical strategy nets out the baseline effect, our estimates of CRA evaluations provide a lower bound to the actual impact of the Community Reinvestment Act. If adjustment costs in lending behavior are large and banks can’t easily tilt their loan portfolio toward greater CRA compliance, the full impact of the CRA is potentially much greater than thatestimated by the change in lending behavior around CRA exams.

Mo' is a fickle player

But right now, according to the WAPO, he's signed with the Charter Schools team;

It’s the latest sign that the District is on track to become a city where a majority of children are educated not in traditional public schools but in public charters: A California nonprofit group has proposed opening eight D.C. charter schools that would enroll more than 5,000 students by 2019.

The proposal has stirred excitement among those who believe that Rocketship Education, which combines online learning and face-to-face instruction, can radically raise student achievement in some of the city’s poorest neighborhoods.

Rocketship’s charter application — which is the largest ever to come before District officials, and which might win approval this month — arrives on the heels of Chancellor Kaya Henderson’s decision to close 15 half-empty city schools, highlighting an intense debate about the future of public education in the nation’s capital.

Even the mayor is willing to go along!

Can get it for you retail

It's to your advantage to Walmartize, India, say economists Beata Javorcik and Yue Li;

India is still a nation of small shopkeepers, where only 10% of total retail sales between $450 billion and $500 billion a year take place in modern stores. In September 2012, the government, led by Prime Minister Manmohan Singh, announced the reform to allow 51% foreign direct investment in supermarkets and department stores, as a part of an unexpected and ambitious reform package. Only a year ago, the government had to back down on a similar reform in the face of stiff opposition from politicians and small shopkeepers.

According to the details of the announcement, foreign investors need to meet a list of requirements and individual states have the right to opt out from the retail-sector reform. So far only ten states said they would allow global retail chains like Wal-Mart, Tesco and Carrefour to enter. Foreign investors are only allowed to operate in and near cities with populations of at least one million – there are 53 such cities. Foreign investors are required to invest at least $100 million and to buy 30% of their supplies in India.

At least if we look to the example of Romania; 

During 1997-2005, foreign chains rapidly became important players in the Romanian retail sector. Their employment increased from virtually zero to more than 18,900 in 2005, when they accounted for almost a quarter in total retail sales (see Figure 1).

We find that during this period the Romanian retail sector witnessed high rates of job churning and market reallocation, followed by a sizeable increase in labour productivity. Entry and exit played a critical role in the reallocation; 62% of employment expansion was due to entry of new firms, while 23% of employment contraction was accounted for by exiting firms. We document a sizeable (17%) increase in labour productivity in the retail sector and show that entry of new firms and expansion of more productive firms at the expense of lesser performers was the main driver behind this development.

Which had the effect of increasing the productivity of Romanian manufacturing; 

• Our results suggest that the performance of upstream industries is positively correlated with access to foreign retailers.

• The magnitude of the effect is economically meaningful: a 10% increase in the number of foreign chains’ outlets in Romania is associated with a 2.4% to 2.6% increase in the productivity in the supplying industries.

An alternative exercise focusing on eight Romanian regions suggests that the presence of a foreign chain in a region raises the productivity of the supplying industries by 3.8% to 4.7%.

Pretty much as the textbooks draw it up.

De nada

Steve Landsburg gives credit where it's due;

RF: What have you learned from writing your blog and the comments you receive from readers?

Landsburg: My readers are amazing. I am absolutely blown away by the brilliance of the commenters on my blog. I don’t know where they came from, but they dazzle me every day with their commentary and insights. They pick my arguments apart, they force me to defend myself, and sometimes they force me to retreat, and sometimes they force me to rethink things entirely. I don’t know any other blog wherethe quality of the discussion is as high as it is on mine. 

Even the other blogs that are certainly as smart as mine, other blogs that are as entertaining as mine, don’t get the quality commenters that I do, on average. And I feel extraordinarily blessed by that. These are people who will go deep into the heart of a logical argument and will insist that assumptions be clearly spelled out, insist that every step of logic will be clearly spelled out. We have very lively discussions there. It’s almost a re-creation of what I used to have at lunch [with colleagues at U of Chicago].

Chicago, Chicago

It's an encouragin' town...for would-be economists, according to the author of Fair Play and the Armchair Economist: Economics and Everyday Life, Steve Landsburg, who, upon being asked about influences on his work cites;

Donald (now Deirdre) McCloskey first and foremost, who had such a tremendously unique and down to-earth style of applying price theory to all human behavior, and sometimes to nonhuman behavior, with these beautiful little logical stories, where a few lines of reasoning led you to an amazingly surprising conclusion. ...he was extraordinarily encouraging and really went out of his way to inspire me and to help me along. So that’s number one.  

I also got a lot of encouragement from Gary Becker. I got a lot of encouragement from George Stigler .... he had been very encouraging, and prodded me along into thinking more and more about economics [from his training as a mathematician]. 

Bob Lucas was a huge inspiration. I always thought that Lucas was single-mindedly committed to following the truth wherever it led him. Whenever I spoke to him, whenever I saw him talk, I had the feeling that this was the most thoroughly honest man I had ever encountered. He just wanted to know what was true. He had no agenda. And, of course, he had this incredibly powerful mind and this incrediblypowerful way of thinking about macroeconomics, which I found absolutely inspiring and brilliant and made me want to emulate him. And on a personal level, he, too, was exceptionally kind to me.

They all stand on the shoulders of giants.