Economics

Last night Einzige and I attended the Goldwater Institute’s award dinner for Ayaan Hirsi Ali at the Phoenician resort in Scottsdale, where she was given the 2007 Goldwater Award for her work in support of freedom, in defense of women against the oppression they face in Islamic countries. Copies of her autobiographical book, Infidel, were given to each table and I obtained the copy at our table since most everyone at the table had already read it and no one accepted my challenge to fight for it. It was a rainy night and it was a huge event, with about 800 attendees. It took me about 25 minutes to get from the entrance of the Phoenician to the event venue, where I later heard that valets parked 400 cars for the event. It seemed as if the Phoenician wasn’t used to hosting an event of that size, which can’t possibly be true. I was extremely surprised to see that the schedule for the event included an invocation. I have attended multiple Goldwater events in the past (such as the screening of “Mr. Conservative”), but this was the first time I had been to one that included a prayer. I noted at the table that it seemed disrespectful in the extreme that an event honoring an atheist would begin with a prayer. The prayer itself was an ecumenical, non-sectarian “meditation” (as the individual who spoke referred to it) of the sort likely to be as offensive to hardcore Christians as it is to atheists for its failure to appeal to Jesus Christ, but it was still a public verbal appeal to an imaginary being for his approval and support. It reminded me a little bit of the “Agnostic’s Prayer” in Roger Zelazny’s book Creatures of Light and Darkness, which goes like this (p. 40): Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you [a man about to die in a “suicide show” who the speaker has put his hand upon the head of] be forgiven for anything you may have done or failed to do which requires forgiveness. Conversely, if not forgiveness but something else may be required to insure any possible benefit for which you may be eligible after the destruction of your body, I ask that this, whatever it may be, be granted or withheld, as the case may be, in such a manner as to insure your receiving said benefit. I ask this in my capacity as your elected intermediary between yourself and that which may not be yourself, but which may have an interest in the matter of your receiving as much as it is possible for you to receive of this thing, and which may in some way be influenced by this ceremony. Amen.And I continue to fail to understand why Christians cannot abide by Matthew 6:5-7. The dinner at the event was phenomenal, though portions were small (filet mignon was the main course). Steve Forbes gave a keynote speech which was well done; it was primarily a recounting of some of the basic principles necessary for economic freedom, such as the importance of the rule of law and a system of stable property rights. Regarding property rights, I was pleased that he commented on a survey of businesses and property in Egypt that found that most businesses and buildings were illegal under the country’s laws, and noted that this is common throughout the world. Having recently read Robert Neuwirth’s excellent book Shadow Cities, I’m aware that over a billion people in the world live in squatter cities where they are illegally occupying land and often develop their own informal property rights that are not legally enforceable but tend to be respected within their own communities. Countries which manage to give some kind of enforceable title to such people can dramatically unlock wealth and improve their conditions. The part of Forbes’ talk which most caught my attention, however, was his discussion of the current mortgage crisis. He stated that this is a mere blip, so long as the government doesn’t overreact. He claimed that there is perhaps $400-$500 billion in losses hiding in securitized mortgage packages, which should be easy for the market to take since that’s the amount lost in a bad day on the stock market. The concern is that government or bankers will overreact and withdraw liquidity from everyone (rather than just bad risks) at a time when it is needed. In my opinion, Forbes understates the risks because he repeatedly assumed that the problem exists only within subprime loans, which is already demonstrably false. American Home Mortgage of Tucson, which filed for bankruptcy in August, did not originate subprime loans at all, only “Alt-A” loans, which fall between prime and subprime. The root of the problem has been people of all levels of credit risk using their homes as ATMs who are now underwater, and in particular those using adjustable rate mortgages. This article from someone inside the mortgage industry sets out a worst-case scenario that I think is far more plausible than Forbes’ rosy picture, which fails to account for the cascading effects of foreclosures, bankruptcies, and loss of real estate jobs on the broader consumer-driven economy. But in any case, he predicts that the mortgage crisis will be over before the end of 2008, so by this time next year we will know who is right. Ayaan Hirsi Ali’s talk was actually an interview conducted by Darcy Olsen, the president of the Goldwater Institute, who asked her a series of questions about growing up in Somalia, her subsequent life, what motivated her to escape Islamic fundamentalism and her arranged marriage, and so forth. She was well-spoken (especially for a non-native speaker of English) and charming, and told of being inspired by works of fiction about individual freedom while living in a community that emphasized submission to family, tribe, and nation. Her sources of inspiration were all secular, of course, though surprisingly included Barbara Cartland romance novels and Nancy Drew mysteries as well as books like Huckleberry Finn. Afterward, I stood in line to get my book signed, and had a chance to speak to her directly. Although I thought of asking her what she thought of being honored at an event that opened with a prayer, our brief exchange went something like this: JL: Have you heard of the Internet Infidels? AHA: No. (She smiles.) JL: It’s at infidels.org, it is a group critical of religion. Are you familiar with Ibn Warraq? [I had also meant to mention Internet Infidels supporter Taslima Nasrin, but couldn’t remember her last name.] AHA: Yes. JL: Some of his material is published there, though it mostly focuses on Christianity, since it’s a bigger source of problems in this country. AHA: I think I would disagree that Christianity is a bigger problem than Islam in this country. JL: It’s Christianity that has control of the government here. And then I stepped away with my book, and joined the long line at valet parking right behind Barry Goldwater, Jr. I tipped my valet with a $20, which he seemed very pleased to receive, and then thought that I should have said “this is a tip from an atheist,” since I saw several other people (not Goldwater) apparently fail to tip at all, even though they were more elegantly dressed and driving vehicles several times the price of mine. Ayaan Hirsi Ali seems to be focused exclusively on Islam–not surprising given her history. Several of her answers were somewhat defensive of Christianity (no doubt appealing to her audience), at least by comparison to Islam, much like her response to me above. Yet the Bible contains teachings very similar to the Koran in regard to calling for the death of unbelievers, the subjection of women, slavery, and so forth–the difference is that there are fewer who endorse those teachings, perhaps in part because Christianity has gone through a Reformation while Islam has not. UPDATE: Note that Wikipedia reports that Hirsi Ali has admitted to falsifying some information in her application for asylum in the Netherlands (specifically her name, date of birth, and claim to have spent time in refugee camps on the border of Somalia and Kenya), and her family disputes her account of her forced marriage, though Hirsi Ali has provided letters from family members (including her father) to the New York Times which substantiate her account. It was the exposure of her fabrications on her asylum application that led her to step down as a Member of the Dutch Parliament and led to Rita Verdonk saying that her Dutch nationality was therefore invalid, which was subsequently overridden by vote of Parliament. This blog post quotes from a Reason magazine interview of Hirsi Ali that shows that she is somewhat extreme and illiberal in her position regarding Islam, as well as having some unusual ideas about Christianity (e.g., she thinks Catholics have a conception of God where there is no hell). One commenter at the Reason blog compared her to Ann Coulter. This post critiques her understanding of Islam as overly simplistic, like confusing all of Christianity with its most extreme fundamentalist varieties. UPDATE (February 20, 2008): I’ve just finished reading Hirsi Ali’s book, Infidel, and I highly recommend it. Contrary to my statement above, it wasn’t the “exposure of her fabrications on her asylum application that led her to step down” as an MP; she had been open with many people, including the press, about having used the name Ali instead of Magan on her asylum application and claiming to be a refugee from Somalia instead of a resident of Kenya fleeing a forced marriage to a Canadian. UPDATE (May 5, 2024): Since at least November of 2023, Hirsi Ali now identifies as a Christian, which for her seems to be a cultural stance not grounded in any reasons for believing Christianity to be true. UPDATE (January 11, 2025): Ayaan Hirsi Ali is no longer a remotely serious person. ...

As this story from the Boulder Weekly shows. (This link is to a copy since the Boulder Weekly’s website has a database issue at the moment.) (Via The Agitator.)

From January through the end of October, there were 7,139 foreclosures in the metropolitan Phoenix area, compared to 1,072 foreclosures during the same period last year. It’s expected to hit 10,000 by the end of the year, compared to fewer than 2,000 last year.

U.S. foreclosure rates are double what they were last year, and the top states for foreclosures are: 1. Nevada 2. California 3. Florida 4. Michigan 5. Ohio 6. Colorado 7. Arizona 8. Georgia 9. Indiana 10. Texas 36% of homes for sale in Phoenix are vacant, either due to speculators getting caught holding the bag or people who have bought and moved to new homes without finding a buyer for their previous home. Average time to sell (for those houses that are actually selling) is 94 days, versus 73 days a year ago. Zillow seemed to have stopped updating Phoenix-area home prices on September 11, but they’ve now given an update with October 25 data, and my home’s “zestimate” value has dropped by 3.6% since the September 11 data. ...

It’s interesting to look back at old blog posts and comments to see who correctly identified that we were in a housing bubble and who inaccurately denied it. Jane Galt (Megan McArdle) at Asymmetrical Information called it correctly, way back in January 2004. I called it in September 2004, suggesting a drop in “the next year or two.” The peak for Phoenix was in the fourth quarter of 2006, so I was pretty close, but I expected the drop to come a bit earlier than it actually did. Economist Tyler Cowan was still in denial in April 2005. In the June 2005 issue of Business Week, Frank Nothaft of Freddie Mac and James F. Smith of the Society of Industrial and Office Realtors said that the housing bubble was bunk and they saw no possibility of national price declines in the future. Dean Baker of the Center for Economic and Policy Research called it a bubble. Mike Englund of Action Economics fell somewhere in between, saying that “It’s bubble behavior” but “not clear that the recent price gains in the housing market are a bubble." Economist Edward Stringham told me he didn’t think there was a housing bubble in November 2005. Economist Greg Mankiw hinted that he thought there was a bubble in June 2006. In the Fall 2007 issue of USAA Magazine, just delivered to my home yesterday, an article titled “Real (Estate) page turners” quotes “The Apprentice: Season 3” winner Kendra Todd, author of Risk and Grow Rich: How to Make Millions in Real Estate: Ms. Todd disagrees with those who say there has been a bust for real estate. “What’s dropped in some areas is market expectations more than market values,” she argues.I think Ms. Todd should start working on her manuscript for Risk and Grow Poor: How to Lose Millions in Real Estate. Of course, I doubt she makes most of her income from real estate investing, rather than book sales and her hosting of HGTV’s “My House Is Worth What?”

Municipal wireless has been a failure. The City of Tempe projected 32,000 users, but only had 600 at its last published count, which was back in April 2006. It’s also failing in Philadelphia, Minneapolis, Portland, Chicago, and Taipei. (Also see Technology Liberation Front, which makes the same point.) UPDATE (November 8, 2007): Sprint and Clearwire have scrapped a plan to jointly build out their WiMax networks, and it looks like Sprint may scale back its own WiMax plans, as well. ...

Last October, I reported that Moody’s was predicting that the Phoenix housing market would see price declines of 9.3% between the first quarter of 2006 and the second quarter of 2008, which I called “wildly optimistic." Now Moody’s has issued a new report which claims the Phoenix housing market will see price declines of 17.8% between the second quarter of 2006 and the second quarter of 2008–they’ve doubled the percentage of drop for a time period that’s three months shorter. I’m guessing this will be closer to accurate–but still shy of the mark, unfortunately. The report also predicts a drop of 11.7% for Tucson, lower than October’s prediction of a 13.4% drop.

I’ve not read Bjorn Lomborg’s new book (nor his previous one), but I have read enough of what he has written to suspect that some of those who are ridiculing one of his arguments don’t understand it. For example, Bob Park of the American Physical Society’s “What’s New” writes: Bjorn Lomborg’s “Cool It: The Skeptical Environmentalist’s Guide to Global Warming” is out. Well, yes it is getting warmer he finds, but aside from polar bears, it just means more beach weather. We’ve got bigger problems, he says. Instead of spending all that money trying to prevent warming, let’s focus on making everyone rich so they can all buy air conditioners.P.Z. Myers at Pharyngula writes: He also has a bad argument about relative spending: he suggests that spending on climate change would reduce spending on other pressing issues, like the fight against malaria. It’s a bad choice. Malaria research is already underfunded — it’s a third-world disease, don’t you know, one that mainly affects those tropical countries, so the wealthy western nations typically don’t prioritize it very highly. We don’t take our big pots of money and allocate it into aliquots appropriate to the world’s needs already, so for an economist to sit there and pretend that climate research is a drain on tropical disease research is comical. Especially since he seems unaware of how one feeds into the other. Hey, if the world warms up, tropical diseases will creep northward into Europe and North America, and then we’ll be fighting the economic effects of both direct effects of climate change and new diseases.But as I understand it, Lomborg is making a simple point about opportunity costs–that money spent on climate change mitigation can’t be spent on other things, and that it would be better off spent on things like fighting malaria (which I’m sure he would agree with Myers is underfunded, since it’s #4 on the Copenhagen Consensus 2004 list of “very good projects” to spend money on), because the amount of benefit received for each dollar spent is so much greater. To make the same point–I have looked into putting solar cells on my house, both to reduce my carbon footprint and my long-term energy costs, but I’ve decided against it because even with the tax incentives and my power company’s willingness to subsidize half the cost, it’s still not cost-effective. (I’m hoping new solar cell technologies will improve efficiency and lower cost so that I will be able to become less dependent upon the electrical grid). Instead, I’ve spent much smaller amounts of money that have had far more bang for the buck, replacing my incandescent lights with CFLs (though LEDs and other new promising technologies are on the way as better sources of light), adding insulation, and improving the efficiency of my air conditioning units through regular maintenance. These things I’ve done not only have an impact on my energy use and climate change, they are things which provide me with direct economic benefit as well–thus these are things that rational people will be doing independently of government regulation and spending. Lomborg–or at least the Copenhagen Consensus–is not saying that climate change deserves no attention. The premise of the Copenhagen Consensus is that if the world spent an additional $50 billion over the next five years to address ten categories of global challenges (one of which is climate change), how would that money best be spent to provide the greatest net benefit. That seems to me to be an entirely worthy effort, and this kind of cost-benefit calculation should be given greater weight in public policy decisions. Instead, however, most politicians like to make arguments based on the assumption that any law, regulation, or government spending that saves even one life (or prevents one child from seeing something offensive) is worth doing, whether or not that generates enormous opportunity costs. My personal behavior–and I suspect that of those criticizing Lomborg on this point–demonstrates that I don’t consider climate change my number one priority. In my case, I live in a large house that uses a lot of electricity, I travel frequently by plane, I drive a car instead of using public transportation, I eat meat instead of being a vegetarian like my wife. Each of these things causes, directly or indirectly, an increase in carbon dioxide emissions over the alternatives. UPDATE (December 16, 2008): I just came across this description of Lomborg’s overall behavior with respect to the climate change debate, which I think is likely accurate. ...

The Arizona Republic has an online database of 2007 foreclosures and notices of trustee’s sales, searchable by community (mostly cities), region, or zip code. I’m sorry to see that my neighborhood (mostly built up in the last 3-4 years) has pretty high rates of 25.9 foreclosures per 10,000 households and 115.94 notices per 10,000 households. At least I’m not in Surprise’s 85388 zip code, which has seen 310.9 foreclosures per 10,000 households and 997.8 notices per 10,000 households. Ouch! That’s over 3% of the zip code foreclosed upon already, and another 10% in danger, and we haven’t even seen the peak of ARM resets yet.

<img style=“display:block; margin:0px auto 10px; text-align:center;cursor:pointer; cursor:hand;” src="/images/07AugNTR.jpg" border=“0” alt=“Click for full size"id=“BLOGGER_PHOTO_ID_5107270921523980290” /> August’s total was 3249, beating last month’s record high by an additional 746! Historical Comments houseofpain (2007-09-07): It defies gravity, holy moley!!!