On the role of regulation in a free-market economy

Andrew Lo, professor MIT Sloan School of Management, in congressional testimony last week:

Why are fire codes necessary? In particular, given the costs associated with compliance, why not let markets determine the appropriate level of fire protection demanded by the public? Those seeking safer buildings should be willing to pay more to occupy them, and those willing to take the risk need not pay for what they deem to be unnecessary fire protection. A perfectly satisfactory outcome of this free-market approach should be a world with two types of buildings, one with fire protection and another without, leaving the public free to choose between the two according to their risk preferences.

But this is not the outcome that society has chosen. Instead, we require all new buildings to have extensive fire protection, and the simplest explanation for this state of affairs is the recognition—after years of experience and many lost lives—that we systematically under-estimate the likelihood of a fire. In fact, assuming that improbable events are impossible is a universal human trait …, hence the typical builder will not voluntarily spend significant sums to prepare for an event that most individuals will not value because they judge the likelihood of such an event to be nil. Of course, experience has shown that fires do occur, and when they do, it is too late to add fire protection. What free-market economists interpret as interference with Adam Smith’s invisible hand may, instead, be a mechanism for protecting ourselves from our own behavioral blind spots.

Via The Baseline Scenario.

The Church of Beethoven

Albuquerque, N.M., is no different from any other American city, in terms of its religious life; you’ve got churches, synagogues, a couple of Unitarian congregations and a mosque. But an abandoned gas station along old Route 66 is the unlikely home for another kind of Sunday-morning service, and it’s one that you won’t find anywhere else. It’s called the Church of Beethoven.

NPR tells about the spiritual experience you can get at a former gas station.

Thanks to Veronica for the tip.

The Last Tour

[Park Ranger] Ken Phillips got a photograph of Travis Twiggs. “I’ve made a lot of wanted posters,” he said. “But this was the first time I had to crop out the President.” The bulletins that went out over the wires gave both Travis and Will a “violent criminal history,” although before the carjacking neither had any such thing. A local lawman told me that he’d been informed they were extremely heavily armed, although all they had was the .38—“and in Arizona that’s not even close.” The Twiggs brothers might be bent on committing “suicide by cop,” according to one alert. That possibility seems closer to the mark. The two men were certainly leaving the world as they had known it. The lingering, punishing question is why. Travis, who had two young daughters whom he doted on, might have believed that he was back in Iraq. Will’s thinking was more opaque. They drove into the night, and there is no record that they ever spoke again to anyone but each other. Two days later, they were dead.

The above from a fascinating, scary, sad and important story published in the September 29th New Yorker.

Strongly recommended.

The Santa Fe Trail

… opened on this date in 1821.

William Becknell, under forced escort by Mexican troops, arrives at Santa Fe. New Mexicans, who are still celebrating their newly won independence from Spain, quickly purchase all of his goods, which he initially intended to trade with the Indians. This marked the birth of the Santa Fe Trail, originating from Independence, Mo.

New Mexico Magazine

The 1940 film Santa Fe Trail, with Ronald Reagan playing George Armstrong Custer — and starring Errol Flynn and Olivia de Havilland — has little basis in historical fact other than that there was a Santa Fe Trail.

November 16th ought to be a national holiday

W. C. Handy was born on this date in 1873, the son of former slaves.

I hate to see that evenin’ sun go down,
I hate to see that evenin’ sun go down,
‘Cause my baby has left this town.

If I’m feelin’ tomorrow, just like I feel today,
If I’m feelin’ tomorrow, like I feel today,
I’ll pack my trunk and make my get-away.

St. Louis woman, with all her diamond rings,
Stole that man of mine, by her apron strings;
If it wasn’t for powder, and her store-bought hair,
That man I love wouldn’t’ve gone nowhere!
Nowhere!

W.C. Handy is widely recognized by his self-proclaimed moniker, “Father of the Blues” due to his steadfast and pioneering efforts to document, write and publish blues music and his life-long support of the genre. Although much of his musical taste leaned toward a more sophisticated and polished sound, Handy was among the first to recognize the value of the blues, and Southern black music in general, as an important American legacy. Handy was an accomplished bandleader and songwriter who performed throughout the South before continuing his career in New York. He came across the Delta blues in the late 1890s, and his composition “Memphis Blues,” published in 1912, was the first to include “blues” in the title. Some historians don’t consider “Memphis Blues” to be an actual blues song, however it did influence the creation of other blues tunes, including the historic “Crazy Blues,” which is commonly known as the first blues song to ever be recorded (by Mamie Smith in 1920). A Memphis park was named after Handy in recognition of his contribution to blues and the Blues Foundation recognizes the genre’s achievements annually with the prestigious W.C. Handy award.

The Blues | PBS

NPR told the Handy and St. Louis Blues stories as part of the NPR 100. Click to hear the NPR report, which includes Handy’s own reminiscences and the complete recording of the song by Bessie Smith accompanied by Louis Armstrong, possibly the most influential recording in American music history. (RealPlayer file.)

It’s also the birthday of Maggie Gyllenhaal (31), Lisa Bonet (41), and Diana Krall (44).

Nobel Prize-winning author Jose Saramago is 86.

Burgess Meredith was born 101 years ago today. Meredith was twice nominated for the best supporting actor Oscar — at the age of 68 and 69 — The Day of the Locust and Rocky.

Gila Cliff Dwellings National Monument (New Mexico)

… was proclaimed a national monument 101 years ago today by President Theodore Roosevelt.

Gila Cliff Dwellings

Gila Cliff Dwellings National Monument offers a glimpse of the homes and lives of the people of the Mogollon culture who lived in the Gila Wilderness from the 1280s through the early 1300s. The surroundings probably look today very much like they did when the cliff dwellings were inhabited.

Gila Cliff Dwellings National Monument

It’s your land Americans

The Federal Government owns more than half of Oregon, Utah, Nevada, Idaho and Alaska and it owns nearly half of California, Arizona, New Mexico and Wyoming.  See the map for more.  It is time for a sale.  Selling even some western land could raise hundreds of billions of dollars – perhaps trillions of dollars – for the Federal government at a time when the funds are badly needed and no one want to raise taxes. 

Marginal Revolution has more, including a map.

But what do you think? Should we sell our public domain to rescue A.I.G.? (A question framed to tell you what I think.)

High Hopes

“Barack Obama won only 53 percent of the vote on Election Day, but he is getting a landslide greeting from the American public. Indeed, recent polls by Gallup and the Pew Research Center find the public exuberant about Mr. Obama and optimistic that he will solve the nation’s problems.”

Andrew Kohut, president of the Pew Research Center for the People and the Press, has the details.

Key point: “… Pew found 67 percent of its national sample of voters saying they thought that Mr. Obama would have a successful first term, as many as 39 percent of those voters supported John McCain.”

November 15th

Judge Wapner is 89 today. Raymond Babbitt sends his greetings.

Ed Asner, who will always be Lou Grant to me, is 79.

Petula Clark will be headed downtown to celebrate her 76th birthday.

When you’re alone
And life is making you lonely
You can always go
Downtown

Sam Waterston is 68.

Our guv, Bill Richardson, is 61 today.

Kevin Eubanks, The Tonight Show bandleader, is 51.

Justice Felix Frankfurter (1882-1965), artist Georgia O’Keefe (1887-1986), Field Marshal Edwin Rommel (1891-1944), Governor (of New York) Averell Harriman (1891-1986), and U.S. Air Force General (and George Wallace running-mate) Curtis LeMay (1906-1990) were all born on this date.

The Georgia O’Keeffe Museum is in Santa Fe. American Masters has a brief biography.

Champion

Mack, oldest of The Sweeties, took third overall and third “Sub-Bantam” boys this morning at the USATF Virginia Junior Olympic Cross Country Championships. The distance was 2K.

In other words, third at the state meet.

Mack claims to like the longer distances. He says when he starts hurting he knows every other runner is hurting too.

Next week Mack competes against against qualifiers from D.C., Georgia, Maryland, North Carolina, South Carolina and Virginia at the Region III championships. There is no national championship for Sub-Bantam kids (kids born in 2000 or later).

Consumer spending

Just for you edification, consumer spending (aka consumption) accounts for just less than two-thirds of the American economy. Drops in consumer spending like we are seeing are a very big deal.

Normally investment is about 15% of the economy, government spending 20%. Exports and imports net to about zero.

Saving Motown

I never thought I’d say this, but I think I might agree with David Brooks.

Granting immortality to Detroit’s Big Three does not enhance creative destruction. It retards it. It crosses a line, a bright line. It is not about saving a system; there will still be cars made and sold in America. It is about saving politically powerful corporations. A Detroit bailout would set a precedent for every single politically connected corporation in America. There already is a long line of lobbyists bidding for federal money. If Detroit gets money, then everyone would have a case. After all, are the employees of Circuit City or the newspaper industry inferior to the employees of Chrysler?

November 14th

Today is the birthday

… of Buckwheat Zydeco. He’s 61.

Contemporary zydeco’s most popular performer, accordionist Stanley “Buckwheat” Dural was the natural successor to the throne vacated by the death of his mentor Clifton Chenier; infusing his propulsive party music with strains of rock and R&B, his urbanized sound — complete with touches of synthesizer and trumpet — married traditional and contemporary zydeco with uncommon flair, in the process reaching a wider mainstream audience than any artist before him. (allmusic)

… of Prince Charles. He’s 60. I thought it was “ladies-in-waiting,” not princes-in-waiting.

… of Condoleezza Rice. She’s 54.

… of Yanni (Yawn-ee). He’s 54.

… of Laura San Giacomo. She’s 47.

Today is the birthday of Astrid Lindgren, born Astrid Ericsson in Sweden in 1907.

She’s the creator of Pippi Longstocking, a nine-year-old girl with no parents who lives in a red house at the edge of a Swedish village with her horse and her pet monkey, Mr. Nilsson. She has red pigtails, and she wears one black stocking and one brown, with black shoes twice as long as her feet. She eats whole chocolate cakes and sleeps with her feet on the pillow, and she’s the strongest girl in the world.

The Writer’s Almanac from American Public Media (2006)

Composer Aaron Copland was born on November 14, 1900, in Brooklyn to Russian-Jewish immigrants.

In 1942, Copland began working with Martha Graham on Appalachian Spring, a ballet that eventually won the 1944 Pulitzer Prize in music. The Library of Congress’s Elizabeth Sprague Coolidge Foundation commissioned the work from Graham and Copland. Between July 1942 and July 1943, Graham sent three scripts to Copland. On receiving the third script, Copland wrote the music we know as Appalachian Spring.

Hearing the music, Graham revised the action yet again:

I have been working on your music. It is so beautiful and so wonderfully made. I have become obsessed by it. But I have also been doing a little cursing, too, as you probably did earlier over that not-so-good script. But what you did from that has made me change in many places. Naturally that will not do anything to the music, it is simply that the music made me change. It is so knit and of a completeness that it takes you into very strong hands and leads you into its own world. And there I am.

In the end, no script accompanied what Copland called “Ballet for Martha” and Graham retitled, Appalachian Spring. A splendid collaboration between American masters of music and dance, the ballet premiered at the Library of Congress’s Coolidge Auditorium in 1944.

Library of Congress

First Lady Mamie Eisenhower was born on this date in 1896. She died in 1979.

Joseph McCarthy was born on this date in 1908. Fortunately he died in 1957.

Claude Monet was born on this date in 1840. He died in 1926.

The term “impressionist” is derived from Monet’s painting Impression, soleil levant.

Impression, soleil levant

Click to view larger version.

The first Dodge

… was completed on this date in 1914. When asked why the Dodge Brothers wanted to build their own car, John Dodge replied, “Just think of all the Ford owners who will someday want an automobile.”

Some background from This Day in History from the History Channel:

On this day, John and Horace Dodge completed their first Dodge vehicle, a car informally known as “Old Betsy.” The same day, the Dodge brothers gave “Old Betsy” a quick test drive through the streets of Detroit, Michigan, and the vehicle was shipped to a buyer in Tennessee. John and Horace, who began their business career as bicycle manufacturers in 1897, first entered the automotive industry as auto parts manufacturers in 1901. They built engines for Ransom Olds and Henry Ford among others, and in 1910 the Dodge Brothers Company was the largest parts-manufacturing firm in the United States. In 1914, the intrepid brothers founded the new Dodge Brothers Motor Car Company, and began work on their first complete automobile at their Hamtramck factory. Dodge vehicles became known for their quality and sturdiness, and by 1919, the Dodge brothers were among the richest men in America. In early 1920, just as he was completing work on his 110-room mansion on the Grosse Point waterfront in Michigan, John fell ill from respiratory problems and died. Horace, who also suffered from chronic lung problems, died from pneumonia in December of the same year. The company was later sold to a New York bank, and in 1928, the Chrysler Corporation bought the Dodge name, its factories, and the large network of Dodge car dealers. Under Chrysler’s direction Dodge became a successful producer of cars and trucks marketed for their ruggedness, and today Dodge sells a lineup of over a dozen cars and trucks.

NewMexiKen applied for a job at Dodge Main in Hamtramck in 1965 or 1966, but ended up in an electrical equipment factory nearby. Dodge Main was the original Dodge factory, ultimately demolished in 1980. Though I heard that work at Dodge Main was particularly tough and dirty I always thought it would have been cool to build cars, even if only for a summer. Or, more likely, especially if only for a summer.

Timing

An old man was lying on his death bed, wishing for one more pleasure out of life. Suddenly, he smelled the scent of cookies coming from the kitchen. With all the strength left in him, he made his way to the kitchen, where his wife was busy baking. It took all he had to reach out for a cookie. Just when he got his hands on one, his wife slapped him on the wrist. “Leave those alone,” she said. “They’re for the funeral.”

November 13th

On the 13th of November

… in 1789, Benjamin Franklin wrote, “In this world nothing can be said to be certain, except death and taxes.” Franklin died the following year.

… in 1940, the Disney film Fantasia premiered.

… in 1977, the comic strip “Li’l Abner” ended.

… in 1982, the Vietnam Veterans Memorial in Washington was dedicated.

Joe Mantegna is 61 today, Chris Noth is 54, Oscar-winner Whoopi Goldberg is 53 (birth name Caryn Elaine Johnson), Vinny Testaverde is 45, and Jimmy Kimmel is 41.

One of America’s oldest high school kids, Taylor McKessie is 28 today. That’s actress Monique Coleman of High School Musical.

Louis Brandeis was born on November 13, 1856. He served on the Supreme Court from 1916-1939.

For Brandeis, law was a device to shape social, economic, and political affairs. Law had to operate on the basis of two key assumptions: that the individual was the basic force in society and that the individual had limited capabilities. Brandeis did not seek to coddle the individual; rather, he sought to stretch individual potential to its limit.

Oyez

The End of Wall Street’s Boom

The wonderful writer, author among other things of Liar’s Poker, Michael Lewis revisits Wall Street. A short excerpt from this fascinating piece:

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.