Cambridge to California

Renaming this blog to reflect the fact that I am now home in California. Having traveled to so many different places only makes me ever more convinced that this state is the best place in the world.

19th Century Economic Insight Is More Relevant Than Ever

I was reading Walter Bagehot's Lombard Street today and came across something directly relevant to the budget crises of this past summer.

Those who live under a great and firm system of credit must consider that if they break up that one they will never see another, for it will take years upon years to make a successor to it.

Did the Republicans who thought that it was a good idea to throw away the full faith and credit of the United States ever think about these kinds of things? But then I suppose they were never literate in economics to begin with.

Paul Ryan is a Liar

Update: The NYT link has changed for some reason, so here is the original article duplicated on FrumForum.

Evidence that Paul Ryan is a liar. From the New York Times:

Key Republican Says Companies Can't Bear New Taxes: Wisconsin's Rep. Paul Ryan tells CBS's "The Early Show" that "we are already taxing our job creators and our businesses more than our foreign competitors are taxing theirs."

Not true. The tax analysis group Citizens for Tax Justice published a report at the end of June which shows that the US ranks near the bottom among OECD countries for taxes as a share of GDP. The report also discusses corporate taxes which directly refutes Ryan's claim that "our job creators and our businesses" are taxed more than their foreign counterparts.

U.S. Is One of the Least Taxed Developed Countries: Many corporate leaders have noted that other OECD countries have lowered their corporate tax rates in recent years, but fail to mention that these countries have also closed corporate tax loopholes while the U.S. has expanded them. As a result, the U.S. collects less corporate taxes as a share of GDP than all but one of the 26 OECD countries for which data are available.

Arguments may vary when you look at the tax rates versus taxes as a share of GDP, but I think the extreme position of the US in the ranking is persuasive. Interestingly, it seems that Bill Clinton also supports a corporate tax cut.

Bill Clinton calls for corporate tax cut: President Bill Clinton says the nation’s corporate tax rate is “uncompetitive” and called for a lower rate as part of a “mega-deal” to raise the debt ceiling. 

“When I was president, we raised the corporate income-tax rates on corporations that made over $10 million [a year],” the former president told the Aspen Ideas Festival on Saturday evening.

“It made sense when I did it. It doesn’t make sense anymore — we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So we should cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a fair amount, and there’s not so much variance in what the corporations pay. But how can they do that by Aug. 2?”

Clinton is arguing that the conditions now are different from when he raised them during his administration. However, he also proposes eliminating the deductions that are creating the loopholes which, as the CTJ report argues, are keeping down corporate taxes as a share of GDP. Does Ryan propose that?

What is the Point of Doing a Masters and a PhD?

As a (post)graduate student distracted from working on my masters thesis I have always wondered what the point of doing a masters or doctoral degree is. It seems to me that the MBA and JD are relatively straightforward and self-explanatory. Having done business administration as a major modeled to be like the first year of a proper American MBA, I can see how it gives a student the practical skills to run a business or develop in a commercial and entrepreneurial world. As for a law degree, they're for several types of people who include those that have no idea what they want do after their undergraduate studies, those who seriously committed to becoming lawyers or law professors, plus a good number of young, aspiring politicians. As a side note, I'm not convinced that having a law as an undergraduate subject without a liberal arts environment (like in England) makes for an interesting legal profession, though it certainly does produce great lawyers nonetheless.

But what about the masters and doctoral programs that make up the chunk of (post)graduate studies at major universities? Obviously some people have given thought to these things, the people who organize departments and those who created the Bologna Process. I've always thought that it should be a straightforward structure. After undergraduate studies you do a masters that makes you further specialized. Then if you want to become an academic or do research, you do a PhD. Yet at Cambridge I've met people who have doing multiple masters and are now doing yet another. Some have done a masters and a PhD and are back for a second masters in a completely different area. I suppose that's what makes individuals interesting and unique, reflecting their own life circumstances and distinct career paths (or lack of). Still, I'm a bit dismayed to hear about degree inflation. Whereas in the path a bachelors was quite a distinctive achievement, my German classmates tell me they're compelled to do a masters as a minimum and recognition only really comes with a PhD. I wonder if it has anything to with the German obsession for formal titles. Somehow I feel that  although education benefits the economy by producing a skilled labor force, at some point society goes beyond the minimum point of marginal benefits when young people only leave school way past their productive youth. Maybe that's a PhD dissertation for someone studying education to spend several years of their life writing up.

Medical school is a world I know nothing about, but that seems quite straightforward as well: after several years you become a physician, surgeon, researcher, etc.

Living in Financial Times

My article for the Cambridge University Journal of Politics is now up on the the journal's website.

Food Aid Should Not Be Up for Contemplation

Christopher Hill is wrong in presenting the withholding of food aid to North Korea as a choice between short-term humanitarian aid versus medium-term strategic outcomes. There are moral and unification reasons why food aid should not be used as a tool in edging the North Korean regime towards collapse. First, it is simply unjust to let a population repressed the mismanagement (put kindly) of an authoritarian regime suffer further from malnutrition. Second, and related, the North Koreans will remember the moral stance of South Korea in history when unification eventually comes. The political and economic integration of the Korean peninsula will be orders of magnitude more difficult than Germany in 1991. Thus one of the strongest available links in preserving a future, new unified state will be the common identity of a people with shared culture and ethnicity, and with a record of helping the weak when they were helpless. It would be enormously difficult for the common North Korean to participate in the same polity as a South Korean if he or she remember that the South allowed the North to starve. Given that the "scar" of division, not just in Korea but in other countries such as China, has endured and is remembered decades after the Second World War, the memory of history will have a crucial role to play.

Mothers and Life Goals

Parents aspire for the best for their children, hoping that they will win awards, get the best grades, attend prestigious universities, and have a comfortable economic future. But do 'Chinese mothers' raise children that become the best members of society? In response to Amy Chua's article "Why Chinese Mothers Are Superior", I would offer Barack Obama's comments at the memorial service in Tucson.

[...] in the fleeting time we have on this earth, what matters is not wealth, or status, or power, or fame — but rather, how well we have loved, and what small part we have played in bettering the lives of others.

I'm certain that 'Chinese mothers' can raise children that can do well by this criteria of what matters in life. Yet they certainly have still to be proven as the superior formula for achieving it.

Sticker Shock Diet

First post of this year, and since returning to Cambridge from vacation. Walking into Marks & Spencers on my second day back reminded me of how expensive food is here in England. I don't know the relative prices of food in other European countries, but perhaps Europeans manage to control their weight better than stereotypical Americans because they buy less food. I've not looked in the relative purchasing power between America and the United Kingdom, but it sure seems like a good way to lose weight for a foreigner coming from a country where food is cheap: Sticker Shock Diet.

Oh how glad I am to be from a state that grows much of its own fresh vegetables and fruits. My stomach is missing California already.