Posts from — March 2010

The following were (seriously) the top three headlines last night on the RSS feed I get from Dagens Næringsliv, Norway’s biggest business and economics newspaper:

LONG, LONG LINE OF GOOD WINES

(Lang, lang rekke med gode viner)

-

APPEALING SYRAH-WINES

(Tiltrekkende syrah-viner)

-

ABDUCTED FINANCIAL ADVISOR

(Bortførte finansrådgiver)

That last link is foreign news, of course, about a something that happened in Germany. So far, it appears we are still living the good life.

By Stephan Andreas Jensen

I was recently reading some older posts on Andrew Clavell’s Financial Crookery, and came across a post from early January on the decision made by Iceland’s President Ólafur Ragnar Grímsson to let the so-called Icesave bill (with which Iceland agrees to pay back Britain and the Netherlands the deposits made by its citizens that were lost by its banks) be subject to a popular referendum that it surely would not survive. It didn’t, on March 6th 93% of voters wanted it dead, compared to a diminutive 1,6% who wanted Iceland to [Read more →]

Above: “I think this is a very good death”, Lord Katsumoto tells a perplexed Tom Cruise, soon to become The Last Samurai

Like Custer at Little Bighorn, Lehman Brothers bravely removed the possibility of surviving by means of a tactical retreat in case they were befallen by a great host of hostile Indians by making use of the now infamous repo 105 contracts. Andrew Clavell, author of Financial Crookery, posted an interesting article on how and why they work here. Especially recommended for those of our readers who aren’t working with or haven’t studied a lot of finance or derivatives.

By Stephan Andreas Jensen

A saying goes that “acceptable unemployment is defined as the level at which the Government economist writing the report still has a job.” Certainly, it can be argued that in most countries, economists tend to be quite insulated from the consequences of the policies they propose. Apparently, this is not the case in North Korea. After a major currency reform last year failed completely, the high-level economist Pak Nam Gi, former finance director for the North Korean “Worker’s Party”, was convicted of treason for “ruining the national economy as the son of a big landlord who infiltrated the ranks of revolutionaries” and executed by firing squad.

The policy environment leading the execution of the North Korean economist, who was most likely a scapegoat, is hardly one that should be emulated. However, I can’t help but think about how the U.S. or Europe might have looked in the wake of the financial crisis if a more North Korean approach had been taken during the witch-hunt that followed it (and is still ongoing).  Could you charge Richard Fuld with treason for over-leveraging, or Eugene Fama for trying to make people think that capital markets are efficient?. Certainly one would expect the emergence of a slightly more risk-averse financial sector.

For a more realistic discussion about discretionary power being given to regulators, check out The Epicurean Dealmaker’s recent post about fire alarms, strong men, and big axes.

Thanks goes to loyal Evolution-Revolution reader and good friend Jan Petter Janssen, creator of Developing Trader, for the tip about Pak Nam Gi.

By Stephan Andreas Jensen

Above: Microsoft’s Entertainment and Devices Division after one of Steve Ballmer’s “angry” days.

The Wall Street Journal reports that Microsoft management is cracking down on the use of iPhones amongst company employees. In a recent meeting executives Andy Lees (who is in charge of mobile-phone software development) and Robbie Bach (President of Entertainment and Devices Division, responsible for a.o. the Xbox) were chastised by CEO Steve Ballmer when arguing that [Read more →]

Above: “I am *this* much more awesome than all of you guys!”
Picture from unattributable.com

Attending a small rock concert this weekend (a good one, with the Estonian band Mild), I was struck by tremendous amount of unabashed ego displayed by the lead singer of the band. Now, in the case of an aspiring rock star, this is of course not a bad thing. In fact, I would argue that a big, proud, and unapologetic ego is mostly a very good thing for a most live performers, especially [Read more →]

Learning by analogy:

sometimes supposed solutions make the original problem worse. In whale-removal as well as in economics.

By Stephan Andreas Jensen

How about a really big steel plant… right here?

A friend and fellow Technology Governance student here at the Tallinn University  of Technology shared with me two papers by Tatiana Mikhailova from Harvard’s Davis Center and Boston University’s economics department, in which she argues that spatial inefficiency caused by Soviet planning may be costing Russia more than 1,2% of their GDP annually compared to a market-based counter-factual scenario, chiefly because of higher energy costs necessitated by cold weather.

I’ve included the abstract of Mikhailova’s paper The Cost of the Cold: The Legacy of Soviet Location Policy in Russian Energy Consumption, Productivity, and Growth below:

The spatial allocation of productive resources in present day Russia is inherited from the Soviet Union. Soviet system allocated investments without regard to economic efficiency, as the result the colder regions of Russia are significantly overpopulated compared to the market-based counterfactual. This paper estimates the cost imposed on Russia by this excess exposure to cold through excess energy use and loss of productivity. We show that the inherited spatial inefficiency costs Russia above 1.2% GDP annually in extra energy consumption and construction productivity alone.

Thanks to Mihhail, a loyal Evolution-Revolution reader, for sharing the papers.

By Stephan Andreas Jensen

I just came across a post at the North Korea Economy Watch blog linking to North Korean comic book translations made by Heinz Insu Fenkl, an associate professor in the department of English at the State University of New York, New Paltz . As such, I have spent the last couple of hours or so reading about the Great General Mighty Wing and the Kim Brothers in Blizzard in The Jungle. It is easy for those of us who grew up after the end of the cold war to think of authoritarian dictatorships and ultra-explicit propaganda as relics of the distant past. These North Korean comics sadly remind us that this is not the case. They are, however, [Read more →]

Question 2010 by Katinka Matson

That is the annual question of the Edge Network. They have several interesting essays on the topic here.  In particular, I like Frank Schirrmacher’s asking if  we are we turning into a new species — informavores. Recommended.

-Jørund Holterud Aarsnes