Why are so many scammers from Nigeria?

Its a screen to get the gullible to identify themselves.

Why, given the scam is relatively well known these days, would a scammer still purport from Nigeria or from another West African nation given the association of advance free fraud with the region?

In retrospect the answer to this question is obvious. According to Cormac Herley, principal researcher at Microsoft Research's Machine Learning Department, it's because scammers aren't necessarily interested in seeming believable: They are looking for the most gullible victims they can find, to maximise return on their effort.

The screen ensures that the scammers spend time only with those gullible enough to send money

Even through rose-colored glasses, Illinois pensions look terrible

Illinois is cooking the books:

A quick bit of pension accounting 101- -The “funding ratio” (currently 46% according to this article) is basically how much money the fund will have as a percentage of how much it should have (so, in the case of Illinois, even if the fund magically doubled they still wouldn’t be where they need to be).

-The “return target” is a number used to calculate the funding ratio (a higher return target makes predictions more rosy). Illinois Teachers’ return target of 8.5% is extremely high; if they lower it to 7.5%, where Tennessee is, the funding ratio will go way down (and make things look much worse).

Bottom line: things look terrible even using overly optimistic assumptions; it’s going to get nasty if and when they use more appropriate ones. They are already having to sell billions of assets every year to meet their payroll. ... I don’t know how this plays out, but I do know it’s going to hurt.

Latest from Nashville's own Merle Hazard

Behind this homage to 60's surf music are a couple of ideas from the book: "look ahead and reason back"; and "the alternatives to agreement determine the terms of agreement."

Simple models can be used to predict that two parties bargaining over what happens in the future would reach some kind of compromise today that reflects what happens after we hit the fiscal cliff: whomever is hurt more by the cliff should be more willing to reach agreement, and that should be reflected in any compromise.

However, for some, it may be that the cliff is preferred to compromise, perhaps because past compromises have dug us into such a deep hole.

Oregon experiments with its Medicaid program

In 2008, Oregon randomly assigned 10,000 to its Medicaid rolls. The random assignment meant that any difference between the experimental group (the 10,000) and those in the control group (who didn't get in) could be attributed to the Medicaid program.

So what did we learn about Medicaid? That Medical care is like every other good, if you lower the price, you get more consumption (moral hazard).

...The likelihood of having a hospital admission rose from roughly 7 percent to 9 percent. Average outpatient visits rose from 1.9 to 3. Mammograms for women over age 40 increased from 30 percent to 49 percent, and diabetes screening increased from 60 percent to 69 percent. Average spending was about 25 percent (or $778) higher for Medicaid enrollees in the first year.

This finding casts doubt on the premise of President Obama's health care program, that by providing people with medicare we "prevent" later expenditures.

What about Health?  Here the findings are mixed.  No change in mortality.

Though the president has claimed his health-care law will “save lives,” the OHIE detected no evidence that extending Medicaid to 10,000 adults did so in the first year. 

But an increase in subjective well being:

 ...the likelihood of screening positive for depression fell from 33 percent to 25 percent, and the share reporting their health to be good or better rose from 55 percent to 68 percent. However, two-thirds of the improvement in self-reported health occurred almost immediately after enrollment, before any increases in medical consumption. The authors posit that much of this improvement could reflect “an improved overall sense of well-being” rather than “changes in objective physical health.”

I applaud these kinds of experiments designed to measure the performance of government programs.   See raise the quality of the debates about the effects of these programs.   

Humor: the EU crisis explained in 2 minutes

http://www.testosteronepit.com/clarke-and-dawe-european-debt

Is the stock market over-valued?

Business Insider reports that one of the world's-most-famous value investor's favorite valuation metrics is turning bullish.

I have a better question: why is this a good metric? My favorite investment advisor (not Buffet) has some answers:

if more and more of a country’s business is conducted by public companies rather than private ones, that ratio will change over time. There’s an implicit assumption in it that the proportion of a country’s output that is made by public companies is constant. I doubt that’s true! ...

For fun I just looked the total return on the S&P 500 performance from11/30/2001 to 5/31/2012, and the annualized total return of the index, which bears no expenses and includes the effect of both dividends and stock price movement. It was 3.4% per year.

Not sure exactly what that means (among the possibilities are that one could interpret as saying stocks were higher than Buffett thought back then, or that they are too cheap now, for example).

We report, you decide.

Finally, a euro solution that makes sense

From ZeroHedge

...Germany will leave the Euro. It will reestablish the old Deutche Mark (DM). The Euro, without Germany in it, would fall against all currencies. The necessary adjustments to restore competitiveness will have been achieved. The DM will be very strong against the Euro. This will hurt Germany, but not for long. In the end this is the only solution that I can see.

Why Democrats and Republicans are talking past each other

Democrats are concerned with the short run; Republicans with the long run.

Lefty: Why not wait to negotiate austerity? Growth is more urgent, and we both know how hard it will be to reach agreement on solving our long-term fiscal problem. 

Righty: A weak short-term economy is not a valid excuse for delaying the legislative enactment of policy changes that would solve our deficit and debt problem. It is an excuse only for beginning the immediate implementation of those policy changes, and we can delay that implementation to address short-term growth concerns. Long-term austerity can be proposed, negotiated, and enacted while the short-term economy is weak and even if it is getting weaker.

How many economists does it take to reduce CO2 emissions?

None, the market will do it.

Mark Perry notes that the unexpected reduction in carbon consumption in the US had nothing to do with government investments in wind, solar, or other forms of clean energy.  Rather, the discovery and development of new sources of natural gas increased the supply of natural gas, which caused a reduction in price.  The reduction in price caused consumers to shift demand towards this lower-priced, and lower-carbon substitute.

It makes me wonder about all the heated political debate, litigation, treaties, and studies that have been spilt over this issue.  

Making people pay for their prejudices

WARNING: POLITICALLY INCORRECT VIDEO

 The equal pay bill was defeated in the Senate. Thirty-four years ago, Uncle Milton showed that this another application of the indifference principle.
 

On Modeling

An NPR story this weekend on blacksmithing alluded to nice little story:

During lunch, Aspery tells an old story about King Arthur.

In the story, the king asks artisans to explain why their work was important to building Camelot. Tailor, carpenter, stone mason, goldsmith — each make a strong case. But then Arthur thinks twice. He asks them where they get their tools, and all say they go to the blacksmith. Then Arthur asks the blacksmith who makes his tools. The blacksmith says, "Sire, I make my own tools. That is my craft."

And so it is in the business school. The study of Accounting, Information Systems, Finance, Management, and Marketing are all important and worthy subjects. Where do they get their tools (models)? Not all come from economics but a large number do. And where do we get our tools? We make them, that is our craft.

“...and the kindly King moved the humble blacksmith to the head of his table, as he had made all the tools for all the trades.”

                                                                                            -King Arthur

What happens as the price of physicians rises?

in India, where there are fewer physicians than in the United States, and thus a higher marginal cost, hospitals are shifting towards cheaper inputs:

Dr Shetty’s goal is to offer as many surgeries as possible, without compromising on quality. To do that, he ensures that his surgeons do only the most complex procedures; an army of other workers do everything else. The result is surgeries that cost less than $2,000 each, about one-fifteenth as much as a similar procedure in America.

Why politicians are driving us off a fiscal cliff

Anyone who has read this blog knows that I worry about entitlements, the automatic spending programs that are growing much faster than our ability to pay for them.  I have run out of metaphors ("fiscal train wreck," "demographic time bomb," "debt explosion") trying to warn politicians, and my friends who vote for them, about our unsustainable entitlements.

But last week I read an article in Forbes that explained why my entreaties are falling on deaf ears.  It even has a name, the "Curley Effect." Coined by Economists Edward Glaeser and Andrei Shleifer in 2002, it is the political strategy of “increasing the relative size of one’s political base through distortionary, wealth-reducing policies.” Here is how it works:

... Let’s say a mayor advocates and adopts policies that redistribute wealth from the prosperous to the not-so-prosperous by bestowing generous tax-financed favors on unions, the public sector in general, and select corporations. These beneficiaries become economically dependent on their political patrons, so they give them their undivided electoral support—e.g., votes, campaign contributions, and get-out-the-vote drives.

Meanwhile, the anti-rich rhetoric of these clever demagogues, combined with higher taxes to fund the political favors, triggers a flight of tax refugees from the cities to the suburbs. This reduces the number of political opponents on the city’s voter registration rolls, thereby consolidating an electoral majority for the anti-wealth party. It also shrinks the tax base of the city, even as the city’s budget swells. The inevitable bankruptcy that results from expanding expenditures while diminishing revenues can be postponed for decades with the help of state and federal subsidies (“stimulus” in the Obama vernacular) and creative financing, but eventually you end up with cities like Detroit—called by Glaeser and Shleifer “the first major Third World city in the United States.”

Its the incentives, stupid, which are similar in Nashville, in Detroit, and in Washington DC.

HT: John Tamny