Wednesday, May 30, 2012

Zingales on the Political Clout of Banks

The University of Chicago Business School Professor explains that the "too big too fail" phenomenon is a consequence of a vicious cycle of increasing market concentration and increasing political clout. Here at

Monday, May 28, 2012

Memorial Day Ride

Just me and Dr. Jim for a 35-mile ride north on Old 37 past the State Forest, almost down to Martinsville. We crossed over 37 and headed way out West, where we discovered a new (for us) hill to climb on Buskirk Road. It's a longish climb with a max grade of 17%. We then headed back south to Bottom Road, by which time the wind was gusting up towards 20 mph in our faces. When we hit the climb leading back to 37, my legs were just about dead and I was beginning to wilt in the heat. But I made it back across 37, up Old 37 and back home. It wasn't a huge climbing ride, only about 2500 feet, but it was my fourth day in a row of riding (having ridden only that many times in the preceding three weeks). Tomorrow I will rest.

BTW, Karl would have loved today's ride.

Sunday, May 27, 2012

Celebrating Karl's Life

After yesterday's lovely memorial service celebrating Karl's life, today Team Treachery and Deceit organized a ride in his honor. The turn-out was truly inspiring. Nearly 100 riders, including Karl's wife Sandi and their two daughters, participated in the ride on roads that Karl virtually owned. Riding with the gang on a route we had so often ridden with him in the past choked me up as much as anything said at yesterday's service. We missed him today, as we will miss him on every group ride.

Here's a photo from the staging before this morning's ride:

Saturday, May 26, 2012

Barry Obama at Occidental

An excerpt from David Mariniss' new biography, Barack Obama: The Making of the Man (published in the US as Barack Obama: The Story (Deckle Edge 2012)) appears in this morning's The Guardian (here). It is mostly about his first two years at Occidental College in the late 1970s. I was a senior there when Obama was a freshman. Surprisingly for such a small college (with only about 1800 students), I don't recall ever meeting him.

Wednesday, May 23, 2012

Sen on "The Crisis of European Democracy"

Here, in today's New York Times. It's really about the lack of forethought, theoretical justification, and democratic discussion of austerity measures that are playing havoc throughout and beyond the Eurozone. As usual, Sen's argument is thoughtful and incisive, but it is unlikely to convert the deficit hawks, with their "let-them-eat-cake" attitude about those who are bearing the brunt of the suffering created by the bankers and politicians, who don't suffer from cuts in public and social services.

Obama v. Kentucky

In yesterday's otherwise irrelevant Democratic primary in Kentucky, President Obama only beat "Uncommitted" by 58% to 42%. The Republic primary, by contrast, wasn't nearly so close (see, e.g. here). This has been a common theme in recent primaries in Southern states (see, e.g., here). The Chicago Tribune (here) suggests that it is "an apparent sign of voter dissatisfaction with his first term." That is surely true to some extent. But I wonder whether these outcomes say as much about Southern democrats (and other voters) as about Obama's performance as president. At the very least, it's worth noting the large north-south divide in his primary vote tallies. (It's also worth noting that, according to a report I heard on NPR this afternoon, Obama received more total votes in Kentucky's Democratic primary, which he lost in the last campaign to Hillary Clinton, than Mitt Romney received in that state's Republican primary.)

Monday, May 21, 2012

RIP: Karl Raynor

Karl Raynor was one of the toughest cyclists, both mentally and physically, and one of the kindest individuals, I've ever known. He was a leading podiatrist in Indianapolis and co-founder of the Wilkes-Raynor Cycling Group (a.k.a., "Team Treachery and Deceit"), which, despite its nickname, is a rare collection of wonderful people who happen to be (present company excluded) excellent cyclists.

Last night, Karl, who was in his mid-50s, died in his sleep apparently from the same heart problem that nearly took his life just a few months ago. In January, he suffered a massive heart attack at the start of a winter (indoor) training session. His life was saved on that occasion thanks to fast work by Dr. Larry Stevens, Dr. Dave Wilkes, and others who were present. At the hospital, Karl had a stent inserted to open up the blocked artery, and he recovered quickly. Within a few weeks, he was back on the bike, riding hard as ever with the group. With more blood flowing to his heart, he said he was feeling better on the bike than he had in a long time. Despite his recent heart scare, he said he had no fear of going too hard. It was the only way he knew how to ride.

I used to joke that when Karl got to the front on a bike ride he would turn off the all but the reptilian part of his brain to conserve energy. He wasn't always the fastest guy in the group, but he nearly always took the most pulls. Things were no different this past weekend, according to those who rode with Karl on Saturday and Sunday. And there was no sign that he was feeling anything but fine when he went to bed last night.

On this very sad day, my thoughts are with his wife and family, whom Karl loved dearly. He left them too soon. But I hope they can find some solace in the few extra months they were able to spend with Karl after his heart attack and the fact that he died peacefully, in his sleep.

I will think of Karl every time I ride.

Sunday, May 20, 2012

Sunday Ride

Dr. Jim and I had a comfortable 17-mph ride up Old 37 to the Morgan-Monroe State Forest, which meant I finally got a chance to descend Beanblossom hill, instead of going up; it was a blast. Only 25 miles, but it was all I needed today. Plus, it gave me a chance to see the very exciting finale of today's Giro stage, when Matteo Rabottini would not be denied his breakaway victory, despite being caught in the final kilometer by a hard-charging Joaquin Rodriguez. Rabottini managed to claw his way onto Rodriguez's wheel and them come around him in the final 100 meters. How he found the energy after being out front on his own for such a long time I'll never know.

Saturday, May 19, 2012

Diamond on Acemoglu and Robinson's "Why Nation's Fail"

In the New York Review of Books (here), Jared Diamond provides an incisive and insightful critique of Daron Acemoglu and James Robinson's Why Nation's Fail: The Origins of Power, Prosperity, and Poverty (Crown 2012). While acknowledging their claims about the central importance of institutions for explaining the success and failure of societies, Diamond argues that they do not pay sufficient attention to ecological factors, including geography and the resource base.

I have not yet read the Acemoglu and Robinson book (which Diamond, after all, considers required reading). So, I cannot assess the extent to which I agree with Diamond's critique of it. However, his critique is fully consistent with work ongoing at the Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis at Indiana University to develop a multi-factor and multi-level framework for understanding and analyzing combined (and co-productive) social-ecological systems. See, for example, Lin Ostrom's 2009 article in Science on "A General Framework for Analyzing Sustainability of Social-Ecological Systems" (here).

Regulation-Induced Fuel-Switching

A story in today's New York Times (here), explains that EPA's new regulations of CO2 emissions from power plants is unlikely to have much of an impact because, instead of installing expensive carbon capture and storage (CCS) technologies (which can cost up to $380 million or more) to meet the standards, utilities are switching to less expensive natural gas. EPA, in fact, anticipated and may have intended this response to its regulations (see my earlier explanation of the new rule here). Natural gas emits far less carbon dioxide than coal (see here), which means that power plants can meet EPA's CO2 standards simply by fuel-switching. However, burning natural gas can increase methane emissions, and methane is a far more powerful greenhouse gas than carbon dioxide. Indeed, according to some studies (see, e.g, here), a large-scale switch from burning coal to burning natural gas for electricity will have little impact on climate change. For the time being, at least, EPA seems to have concluded that controlling emissions of CO2 from coal is more important than controlling methane emissions from natural gas. Building an effective climate policy is, of course, a tricky business, which EPA is approaching incrementally. Others will disagree, but I think this is a sensible approach.

Friday, May 18, 2012

New Executive Order on Ex Post Regulatory Review

Yesterday, President Obama issued Executive Order 13,610, which fleshes out the ex post regulatory review requirements initially imposed on executive branch agencies last year in EO 13,563. Those agencies have for several decades by required by various EOs to conduct ex ante economic analyses of proposed regulations.

I strong support the addition of ex post assessments of regulations to the existing system of ex ante regulatory impact analyses (RIAs). Arguably, ex post economic assessments are more valuable because they can be based on hard data about the relative performance of regulations over time, and provide a greater opportunity for learning about what kinds of regulations work best in different circumstances.

What EO 13,610 specifically adds are requirements for public input, including taking suggestions about which regulations should be reviewed and how they might be modified in light of review. The EO also requires agencies to prioritize regulatory review based on the potential cost-savings, reductions in regulatory burdens (consistent with statutory requirements), and paperwork reductions. Agencies are to report to the Office of Information and Regulatory Affairs (OIRA) in the President's Office of Management and Budget (OMB) twice each year on their regulatory review efforts.

The only part of this new EO that concerns me is the biannual reporting requirement, which could consume a large number of staff-hours that might be better devoted to other matters. It's not clear to me that reporting once a year would be insufficient.

The new EO can be read here.

Wednesday, May 16, 2012

A Border Comparison

I was very impressed by the friendly nature of the passport control and customs officers at Schipol Airport in Amsterdam. Even as a non-citizen, the process was both speedy and courteous.

By contrast, when I arrived back in my own country yesterday afternoon, I got the sense that Homeland Security (the name and the agency both strike me as positively Orwellian) views all Americans who travel abroad as a suspect class. Today, I was treated to a "random" inspection, which included a hand search of my luggage and interrogation in an office outside the main customs room at Dulles airport. Fortunately, I was not greatly inconvenienced; it only took about 15 minutes and I did not miss my connecting flight. But it was a rather unpleasant interlude with people who apparently are trained to make their own citizens feel as uncomfortable as possible. I was required to stand against a wall, a couple of feet from where an HSA officer was leafing through my luggage and asking questions, with my hands out of my pockets.

I'm not against border security, mind you. But when you feel more welcome, and less threatened, entering a country other than your own, some kind of recalibration seems in order.

UK Geoengineering Demonstration Project Postponed Because of IP Claims

Nature has the story, here. Apparently, one of the advisers to the project, which was designed to inject sunlight-reflecting sulfur aerosols high into the atmosphere, has filed a patent claim for the method (which is depicted in the story). Aside from the evident conflict of interest, I have my doubts about the novelty of technology for receiving a patent. I'm no expert in patent law in the US, let alone in the UK, but I don't see anything in the process that appears either novel (aside from the application of old technologies to the new geoengineering purpose) or non-obvious.

The more interesting aspect of the decision to postpone or cancel the demonstration project for me was the project leader's suggestion that more of an institutional framework was required to govern such experiments: "Although 'it is hard to imagine a more environmentally benign experiment', in the absence of an agreed architecture, Watson said that the field trial would be 'somewhat premature'.

Tuesday, May 15, 2012

Heading Home from Holland

It's been a good trip. Josephine van Zeben did an excellent job on her dissertation defense, earning her PhD (in Law & Economics) cum laude (awarded to about 10% of all successful dissertations). The formal ceremony was very impressive (my wife said I looked fine in my cap and gown), and Josephine's diploma was among the largest and most beautiful I have seen. Needless to say, the celebration that followed with family and friends extended long into the night. My wife and I felt honored to be included in the festivities, which included (unsurprisingly) plenty of excellent food and drink.

Sunday, we took the train from Amsterdam to Groningen (who knew you could take a 2+ hour train ride in Holland without leaving the country?), where I gave a public lecture at the University yesterday. I'm pleased to say that the three discussants of my presentation were kind and gentle (though not completely uncritical), and I found their comments insightful. Below is a photo taken during my presentation.

I  enjoyed the company of several scholars I met on this trip, including Edwin Woerdman and Oscar Couwenberg (among others in Groningen), and Giuseppe Dari-Mattiacci, Dean C.E. du Peron, and Deirdre Curtin (among others in Amsterdam). A lot of interesting work is going on at the intersection of law, economics, and environmental policy in Holland.

One ironic aspect of the trip: in Amsterdam, a city of one million bicycles, I traveled on foot.

Chon on Cole on Polycentric Climate Governance

Thanks to Andrew Chon at RegBlog for plugging my working paper on polycentric climate governance. That paper has been published by Climate Law, and the final published version can be read here.

Wednesday, May 9, 2012

Off to Amsterdam

I was supposed to go to Amsterdam last Spring for the annual meeting of the Society for Environmental Law & Economics (which I'm hosting at the IU Maurer School of Law next month), but I had to cancel because of the impending move from Indy to B-town. So, I'm making up for that missed trip now. It's just a short trip - 4 days - for two functions. First, I'm on a dissertation defense committee for a Law & Econ PhD. The dissertation on the the allocation of responsibilities among different levels of government for climate policy, in the context of the EU Emissions Trading Scheme is excellent. Second, I'm giving a public talk next Monday at the University of Groningen's on "Property Theory 2.0: Toward a Less 'Naive' Theory of Property Rights."

Here is the (inchoate) "provocation" for that talk (prepared especially for the use of three discussants):

Neoclassical theories of private property (e.g., Demsetz 1967 and Umbeck 1981) have rightly been labeled as “naïve” (e.g., by Eggertsson 1990 and Cole and Ostrom 2012) for presuming that private ownership is a universal, first-best solution to commons tragedies. Demsetz’s theory, for example, has given rise to especially pernicious theories of “free market environmentalism,” according to which all that is needed for optimal environmental protection is completely specified property rights in all natural goods (plus common-law remedies).
Part and parcel of the presumptions of naïve property rights theories is the equally naïve supposition that the old Roman law types of res privatae, res publicae, and res communes are completely coherent and useful for categorizing actually-existing property regimes. In fact, unalloid examples or pure private property or pure public property are rare, if they exist at all (outside the imaginations of some strict libertarians and Austrian economists). What one always finds instead are admixtures of public, private, and common rights (and obligations). For this reason and others, property theory has failed to keep up our empirical understanding of actually existing and inevitably mixed property systems. More work is needed –especially with respect to notions of public rights and obligations – to construct a new, more nuanced, and more accurate theory of property. Some of the groundwork for this has been laid with more recent jurisprudence on private property and Lin Ostrom’s work on common property regimes. Much less attention has been paid, however, to theories of public property (especially since the fall of the Berlin Wall). 

Monday, May 7, 2012

Assault and Battery in the Giro

The bunch sprint in today's stage of the Giro was marred by a terrific crash caused by a beyond-reckless move by Roberto Ferrari (Androni-Venezuela), who in the final 300 meters lurched at least five feet to the right, taking out a hard-charging Mark Cavendish  and several other riders, including the maglia rosa Taylor Phinney, who suffered his second crash in as many days. Cavendish who looked to fall the hardest got up quickly and was able to carry his bike across the line. Phinney, who was on the ground for a long time with what looked like an ankle injury, eventually was able to make it to the finish as well, although it remains to be seen whether he'll be able to start tomorrow. No doubt the offending rider will be relegated, but I really hope he is tossed from the race for such a dangerous, amateurish, and harmful move.

Here are the final 10 kilometers. The crash comes, of course, towards the very end (note the magnificent bike-handling by Farnese-Vini rider Elia Favilli to hop over the prone Cavendish):

Sunday, May 6, 2012

Sunday Ride

Wow, it sure gets hot fast down here in South Central Indiana. 85 energy-sapping degrees this afternoon, pretty darn humid, and not much breeze to speak of. I rode over to Dr. Jim's house on the east side of B-town. I was already feeling low on energy by the time I got there. From his house, we went south on 446 toward the north end of Lake Monroe, skirted west on Swartz Ridge Rd, which includes a long and nasty climb, then worked our way back through the south end of Bloomington, across the eastern edge of the IU campus, and back up Hinkle to my house. After 28 miles and 2250 feet of climbing, the post-ride air-conditioning never felt so good.

A Good Day for Gooners

After a disappointing draw yesterday at home to middling Norwich City, Arsenal's prospects for claiming third place in the Premier League looked a bit bleak. Newcastle and Tottenham each trailed the Gunners by just two points with games in hand. Of the two chasers, Tottenham were best placed to leap-frog Arsenal into third place, playing away at Aston Villa, a club at risk of relegation. Newcastle had the far harder chore of hosting high-flying Man City. Toon played well, but succombed in the end 2-0. More fortunately for the Gunners, Spurs only managed a 1-1 draw at Villa. So, as things stand at the end of the penultimate weekend of the season, Arsenal hold third place with 67 points, Tottenham are one point behind in fourth, and Newcastle sit in fifth with 65 points. Once again, Arsenal hold their destiny in their own hands, playing away at West Brom next weekend. A better performance is to be expected.

Saturday, May 5, 2012

Giro d'Italia Prologue

Congrats to Taylor Phinney for winning the opening time-trial prologue in the Giro d'Italia, the first three stages of which are taking place in Denmark this year. Americans traditionally have not shined in the Giro. Phinney is just the ninth American ever to win an indvidual stage of the three-week race, and only Andy Hampsten has won the final maglia rosa. Tomorrow, Phinney will start stage 1 of the Giro wearing that jersey.

Saturday Ride

It felt like early summer out there today - not too hot but quite muggy. I hadn't ridden in a week because of a shoulder strain. I rode the 25-mile Orchard route with Dr. Jim. We were taking it pretty easy, and the route has only about 1700 feet of climbing, but the ride still felt plenty tough to me. I might head up to Indy for my Sunday ride, depending on what Team Treachery & Deceit have in mind.

Arsenal 3 - Norwich City 3

Arsenal got off to the best possible start with birthday-boy Youssi Benayoun scoring just over a minute into the game on a beautifully curled shot from the left channel into the right corner of the net. Almost immediately the entire Gunners squad seemed to switch off, as if they already had the match in their back pockets. And Norwich punished them with two goals to take a well-earned lead into the halftime break. (It really should have been 3-1 at the break, but the referee inexplicably didn't see or punish Koscielny for grabbing and pulling a shirt in desperation in the Arsenal box).

Arsenal's first-half lethargy, exemplified by the failure of Ramsey, Song, and Rosicky to track back on defense, was incomprehensible given the stakes. Today's game was a must-win for the Gunenrs. With Chelsea playing in the Champion's League (CL) final (admittedly at a huge disadvantage to Bayern Munich because several key players are rendered ineligible by the accumulation of yellow cards in earlier rounds), Arsenal must  play as if finishing in the top three (rather than the top four) is necessary to qualify for the Champion's League. Should Chelsea prevail in the CL final, they would automatically qualify for next year's competition, notwithstanding their failure to finish in the top-four of the Premier League (PL); as a consequence only the top three PL finishers would go into the CL.

Heading into today's game, Arsenal were in third place in the PL and firmly in control of their own destiny, but with no margin for error, leading both Tottenham and Newcastle by 1 slim point. Winning both of their remaining games (today at home against Norwich and next weekend away against West Brom) would assure the Gunners a CL spot. A loss or draw in today's match would open the door for both Spurs and Toon to overtake them. I'm sure Arsene Wenger did not have to remind his players of that fact at halftime. But he did have to light a fire under them.

Whatever Wenger said at halftime, it worked at least temporarily. Arsenal upped the pace and piled on the pressure at the start of the second half, but didn't find the back of the net. Meanwhile, their tracking back on defense proved no better than in the first half, and Norwich continued to create good chances on the counter. In fact, the visitors created more and better chances than the Gunners. Arsenal were lucky to still be in the game when, in the 59th minute, they mounted a good counterattack of their own but somehow conspired not to score, when a goal seemed inevitable.

With a quarter of the match to go, a Norwich victory seemed more likely than an Arsenal comeback.  But then, in the 72d minute, Arsenal finally scored, when Alex Song picked out van Persie with a pass over the top, and RvP finished calmly (as usual) past the goalkeeper.

With the game back in balance, Arsenal continued to pile on the pressure, and should have had a penalty of their own on a hand-ball in the box (evening out the score after the referee's decision not to give a penalty on Koscielny's shirt-pulling in the first half). All of a sudden, the entire Arsenal side started playing with more pace and more belief, knowing that a single point was not enough - they needed a win. And they looked to have secured it in the 80th minute, when RvP (who else) took advantage of a ricocheted pass that fell to his feet, and he blasted the ball with his weaker left foot. The Norwich goalie got a hand to the shot, but wasn't strong enough to keep it out of the net.

But Norwich weren't done. Like Arsenal, they used their subs to put more attackers on the pitch, and the gamble paid off when Morrison got behind them and scored on a well-placed shot from the right channel. After that all bets were off on the outcome of the match. Arsenal could not afford to leave the match at 3-3,  and piled on even more pressure, which left their own defense vulnerable. The last 10 minutes of the match, plus stoppage time, Gunners fans had their hearts in their mouths, waiting to see which team would score the seemingly inevitable tie-breaking goal. But it was not to be. In the last two minutes of stoppage time, the Gunners had a wealth of chances but could not put the ball in the net.

Norwich clearly were the better side for most of the match, outplaying and outworking the Gunners throughout the first 75 minutes of the match. For Arsenal, this was the most baffling performance of an up-and-down season. With their destiny in their own hands (or feet, as it were), the Gunners were inexplicably poor for most of the match. In the end, they could only manage a draw, which wasn't good enough. The door is now open for both Spurs and Toon, both of whom could finish above Arsenal in the table by winning their final two matches of the season, shutting the Gunners out of the CL regardless of Chelsea's result in this year's CL final. If the Gunners don't make the CL next year, they will have only themselves to blame. Even worse, it could increase the probability that RvP will leave in summer.

UPDATE: The news gets worse. Bacary Sagna left the game in the second half after suffering what has since been confirmed as a fractured leg. Not only will he miss the last game of the season, but this summer's European Championships as well. He's been among Arsenal's more consistent performers this season.

Friday, May 4, 2012

Workshop Named for Ostroms

This morning, the Indiana University Board of Trustees officially renamed the Workshop as the "Vincent and Elinor Ostrom Workshop in Political Theory and Policy Analysis." Many Workshoppers have been referring to it informally as the "Ostrom Workshop" for quite some time because few outsiders know what the "Workshop" is but everyone knows Lin (and political theorists are only just beginning to rediscover Vincent's very important contributions to the literature). Given all that the Ostroms have done for IU it is only fitting that their chief legacy to the University - the Workshop - will bear their names. The official press release is here.

Thursday, May 3, 2012

IU Students Extorting Other IU Students Over Graduation Tickets

The Indy Star has the story here. Obviously it's deplorable that some Kelley Business School here at IU students have hoarded free graduation tickets and are now offering them at extortionate prices to other students, who without them are unable to attend their own graduation ceremony this weekend.The extortionists, err, capitalists are merely applying lessons learned in 4 years of business school (although I thought they were required to take at least one course in business ethics).

Don't get me wrong, I believe in the laws of supply and demand as much as they do. But I also believe that social context matters. Not every social interaction is, or should be, a for-profit market. In this case, profiteering should take a back seat to cooperation and fellow-feeling, which are among the "Moral Sentiments" Adam Smith wrote about in his book of that title, which is less read but every bit as important as his Wealth of Nations.

Some might be inclined to look upon this episode as a natural experiment confirming the natural acquisitiveness (or greed) of humans. In fact, we cannot generalize from this case to the population as a whole because the subjects are, after all, business students.They are not representative of human subjects.

Still, it's a black eye for the IU and especially the Kelley School

We're Even Smaller than We Thought

A fascinating and easily understandable essay by Cambridge cosmologist Martin Rees on the likelihood of multiple universes, here at Prospect.

Tuesday, May 1, 2012

Stephen King Translates Warren Buffett into Working-Class Language

Stephen King explains, in no uncertain terms, why additional voluntary contributions by the super-rich (like himself) are not a substitute for marginally higher tax rates, here at the Daily Beast.