I know who is going to win this debate

Between economists and politicans:

Obama is being pulled in opposite directions by those whose priorities are fiscal and those whose No. 1 concern is electoral.

Treasury Secretary Timothy Geithner, National Economic Council Director Gene Sperling and Sperling’s deputy, Jason Furman — leading figures in the president’s economic team — are pressing Obama to cut Social Security benefits if necessary, say sources familiar with their positions.

But Obama’s political team, led by David Axelrod, David Plouffe and Jim Messina, are urging the president to understand that backing benefit cuts could prove disastrous to his 2012 reelection hopes, sources say.

Set-Asides and Subsidies in Auctions

A new working paper (gated version here) by Susan Athey, Dominic Coey, and Jonathan Levin examines the effects of set-asides and subsidies in auctions.

ABSTRACT
Set-asides and subsidies are used extensively in government procurement and natural resource sales. We analyze these policies in an empirical model of U.S. Forest Service timber auctions. The model fits the data well both within the sample of unrestricted sales where we estimate the model, and when we predict (out of sample) bidder entry and prices for small business set-asides. Our estimates suggest that restricting entry to small businesses substantially reduces efficiency and revenue, although it does increase small business participation. An alternative policy of subsidizing small bidders would increase revenue and small bidder profit, while eliminating almost all of the efficiency loss of set-asides, and only slightly decreasing the profit of larger firms. We explain these findings by connecting to the theory of optimal auction design.

SELF SERVING UPDATE: We find that designating a sale as a set-aside reduced e¢ ciency by 17% and cost the Forest Service about 5% in revenue. FOOTNOTE{Brannman and Froeb's paper, which looks at Forest Service timber auctions, is particularly interesting because although the approach is quite different from ours (they do not consider bidder participation, use di§erent data, and consider a logit value model of second price auctions), they reach a similar conclusion about the revenue e§ect of the Forest Service set-aside program.}

The Tsunami and the Internet

I can do little more than echo Melissa Bell and marvel:

Within hours of the earthquake, a Wikipedia page popped up with information on the event and a list of tsunami warnings. ...

Google created a people finder in Japanese and in English and deployed it shortly after the event. There are currently about 6,100 records ...

A map on Google marks possible shelters.

YouTube immediately started compiling citizen videos of the quake.

Ushahidi built a database to help those offering aid connect to those in need.

The speed of the development of "crowd-sourced" resources is pretty amazing. How many more lives would have been lost if this event had hit just five years earlier?

When do "Greens" pollute?

When the price of pollution falls, they consume more pollution. It looks as if they respond to incentives, just like the rest of us.

According to statistics from the Swedish Transportation Agency, average emissions from new cars in the country decreased from 164 to 151 grams of CO2 per kilometer driven, Swedish drivers used their green cars to cover more territory than ever before. Thanks in part to better fuel economy and the idea that a green vehicle has a slimmer impact on the environment, the overall result is more fuel burned, more emissions spewed.

Greece unemployment at 14%; 10 year bonds yielding 12.9%

Things do look so good in Greece

Will Gaddafi last until 2012?

The Intrade prediction market puts the chance at about 20%.

Who has an idea to get men back to work?

The red is the median wage of all working men; the blue is the median wage of all men of working age.  By assigning a zero wage to the men who have dropped out of the work force (largely low skilled ), we see a much bigger effect of the recessions on men.



There is a $25,000 prize for the best ideas for creating jobs:

The Hamilton Project is seeking new ideas for creating jobs and enhancing productivity and will award $25,000 in prizes to the winners of its 2011 policy innovation competition. The problems facing America’s workforce are challenging and real and will not resolve themselves. Our goal is to highlight targeted, evidence-based policies that can help close both the job gap and the decline in earnings that stand in the way of a brighter future for American workers. 

HT:  the Economist

Who is going to lend us money after June 30?

Bill Gross is taking a wait and see attitude:

Investors should view June 30th, 2011 not as political historians view November 11th, 1918 (Armistice Day – a day of reconciliation and healing) but more like June 6th, 1944 (D-Day – a day fraught with hope for victory, but fueled with immediate uncertainty and fear as to what would happen in the short term). Bond yields and stock prices are resting on an artificial foundation of QE II credit that may or may not lead to a successful private market handoff and stability in currency and financial markets. 

The fear is that demand for US debt will fall when the Fed stops buying debt, and interest rates will go way up.  (Remember that the "price" of debt is the inverse of the interest rate, so when the demand for debt declines, price of debt falls, and interest rates increase.)

UPDATE:  Just saw this cartoon in the Economist.

Why are public sector unions better at bargaining than their private sector counterparts?

Because they can choose who gets to sit across the table from them.

 They do this by taking funds earned through collective bargaining and sending them right back to the people they bargain with in the form of political contributions.

If the politicians who bargain against them know that the public sector unions can help put them out of a job, they have less incentive to bargain hard.  The end result is that public sector unions in places like California earn 30% more than comparable private sector workers.  

What really matters if you are running an auction

Paul Klemperer distills wisdom from the 3G spectrum auctions:

while the European and Asian 3G spectrum auctions famously raised over 100 billion euros in total revenues, Hong Kong's, Austria's, the Netherlands', and Switzerland's auctions, among others, were catastrophically badly run yielding only a quarter or less of the per capita revenues earned elsewhere – and economic theorists deserve some of the blame

Instead of focusing on elegant mathematical theory, they should have paid more attention to parochial concerns like making sure that the auctions attracted enough entrants, and discouraged the bidders from colluding.