Friday, December 11, 2009
I reached Delhi yesterday after taking a flight from Pune. Two weeks back on Nov. 26 we celebrated Thanksgiving at our home in Danbury with family and friends. Rubina and Shaun were the first to arrive from NYC, followed by Sheena on a flight from Austin.
Then Anita's close friends (now mine too :-) ) from New Jersey, Neeta and Sunil Dudani joined us in the evening. They were accompanied by their daughters Sonam and Tanya, and their cousin (also Anita's nephew) Karthik who was visiting from Chicago. The last to arrive was good sport Champa who made it despite having a hectic schedule ahead of her departure the next day for a month long trip to Munich and India.
As in earlier Thanksgivings we followed the meal with a celebration of Rubina's birthday that's close enough date wise. Shaun's folks had their post-Thanksgiving get-together in Massachusetts that was attended by Shaun, Rubina and Sheena who later took a flight back to Austin from Boston. Rubina, Shaun and his sister Shannon briefly stopped at our place on their way back to New York, and Anita had them try on some Indian dresses.
All said, we had a very good, enjoyable weekend, and here are the pictures to show for it.
Tuesday, November 24, 2009
Shaun earned his bachelor's from New York University and his master's from the CIA (not THAT one - this is the California Institute of Arts.) He is now lighting designer in a specialist firm that works on large buildings and high rises in the US and internationally. He is of Irish American descent, and grew up in Bedford, MA, near Boston. Rubina is a graphics editor in the Wall Street Journal since March of 2008.
Last month on October 10 we had Shaun's family (parents Kathy and Tim, and sister Shannon) over at our home in Danbury. We had a great time - though we had met and spent time together over two months ago this was the first time after the official engagement. To my amusement Rubina several months back had described Shaun as "the least cynical guy in New York." His family is as warm and wonderful as he. Here's a link to some pictures from our October get-together:
We missed Sheena but she will be joining us over Thanksgiving on Nov. 26 as are Rubina and Shaun. On Saturday, Nov. 28 all three will go to Springfield, MA to meet Shaun's family and extended family for a post-Thanksgiving get-together.
Since last month we've remained in touch with Shaun's family, and along with Rubina and Shaun had been looking for wedding venues and dates. Though I had heard about this all these years, I was still somewhat surprised to see how so many of the wedding places get all booked up over a year in advance. Rubina and Shaun preferred a Fall wedding since the Northeast fall foliage will be a bonus for those attending the ceremony.
The planned wedding will be decent sized by US standards, though small in comparison to typical Indian ones. After visiting a few wedding places, the couple (and Shannon and us parents too) liked one of these a lot that Anita had first located on the internet. It is a mansion south of Hartford, CT, that is under an hour's drive from our Danbury home and quite close to Boston and central Massachusetts area as well where a lot of Shaun's folks stay. It was heavily booked but available on Sunday, October 17, 2010 which should be peak fall season, so we lost no time reserving this place for that day.
So the decision about the place and date has been made. It'll be fun for us all deciding on the mix of ceremonies, plus making other plans and arrangements over the coming months.
Thursday, September 17, 2009
We carried GEICO auto insurance for several years till they heavily jacked up rates when we changed one of our cars for a new one. That's apparently a common way for insurers to reward loyal customers that they figure will stick around no matter what. So we switched to AllState that offered much lower rates.
If we do want to switch again some time we'll probably steer clear of GEICO even if they offer low premium rates. This is because of their ineptness and questionable practices that we experienced at first hand. Some instances:
- Our car driven by daughter Sheena was lightly hit in the rear side by a car jumping a red light. That other driver was deemed at fault and ticketed by the investigating police officer. We reported the incident to GEICO and were assured this wouldn't reflect adversely on our record. The operator advised us to let GEICO fix our car in their own workshop and they'd recover expenses from the other driver's insurer. The car was repaired all right at a cost of $700. We then received a letter that GEICO had decided not to pursue the claim with the other insurer as the amount involved was too small and billed us the deductible of $100. Years later we learned that GEICO had without our knowledge recorded this claim in the insurers' common database, showing our daughter to be at fault. Why? Because this way we would get higher rate quotes from competing insurers.
- GEICO has its claims adjusters who assess damages and then offer the claimant the choice of a cash settlement , or proceeding to a GEICO designated workshop for getting the repair done. The problem I saw is that adjusters typically offer a very low cash settlement, forcing the car owner to go to the designated workshop that vastly inflates the claim after the drop-off, which the GEICO adjuster then readily allows. The workshop obviously has a kickback arrangement with the adjuster. This is corruption remniscent of practices in a third world country. The inflated repair charges adversely affect the claims history of the policy holder. They also affect GEICO's bottom line since the amount paid out may be far higher than claimants would have agreed to receive in fairer settlements.
- We saw a surprising number of clerical errors (e.g., in recording VINs, coverage and billing) in the policies issued. When I called to seek correction we'd typically get a lot of duplicate and contradictory mailings. It sometimes took multiple iterations for them to get things right, only to have the process repeated when even minor changes were required to be made.
Thursday, September 10, 2009
First, it neatly captured the essence of how two schools of economists (which includes finance academics) differ in their approach to markets. Krugman presented this so skillfully that it can be grasped by readers without a background in economics. At the same time it was immensely useful and interesting as a recap and to put issues in perspective even for practitioners in the field.
Second, the article is fully eight pages long - much longer than his Op-Eds, and I thought it would be too "heavy" for most readers. Yet to my surprise it was the most popular and emailed article for a couple of days. That's as much of a tribute to the caliber of the Times' readership as to Krugman's writing. I strongly recommend this piece to anyone who wants to get an insightful overview (admittedly from Krugman's eyes) of the rival schools of thought and of the issues separating them.
Though I studied at Chicago, I find myself agreeing with much of what Krugman says. This is particularly so in regard to the Keynesian belief in helping the economy through temporary stimulus spending, and events showing markets can be grossly inefficient for long periods of time. In fact, in my post back on Feb. 10 I had voiced strong misgivings about the statements of some prominent Chicago professors who opposed the fiscal stimulus plans.
However, Krugman is still a little unfair to the Chicago school by painting them as largely unified against Keynesian beliefs, firmly believing in efficient markets, and lumping them all as "freshwater" economists. Krugman did acknowledge that the danger of a financial market meltdown was first pointed out by another Chicago economist, Raghuram Rajan. But Krugman didn't mention that a leading academic of the theory of "behavioral economics" (rival to efficient markets theory) also belongs to the Chicago school. That professor is Richard Thaler who is at least as well known as the other proponent of behavioral economics, Robert Shiller, whom Krugman repeatedly mentioned.
In fact, during my time there I had found it great about Chicago that rival theories could be freely and vigorously debated in the weekly finance workshops and other academic forums. I remember how Eugene Fama (dubbed "the father of the efficient market theory") in his highly popular fnance class had included Thaler's papers as required reading. And though a lot of friendly riffs about opposing beliefs were exchanged, Thaler used to be invited to Chicago's finance workshops to discuss his papers even when he taught at MIT or Cornell. Then about 10 years ago he was welcomed into Chicago as a tenured professor.
But apart from setting the record straight about Chicago and other other schools (about their not having monolithic, misplaced beliefs) I really like and commend Krugman's article.
Thursday, September 3, 2009
This is where I'd want a more liberal shift:
- Avoid handcuffing non-violent suspects before they obtain bail. Why did Martha Stewart, Michael Jackson, or the two Bear Stearns fund managers have to be handcuffed and confined before appearing in court when (a) they seem highly unlikely to pose physical danger to the arresting officers, and (b) had ample advance notice of impending charges, so they could be allowed to do something about it? Being handcuffed would be very humiliating and an affront to our dignity for most of us - something that can't be undone even if we're subsequently cleared. Since 1980 the Indian Supreme Court has barred handcuffing of suspects who are not likely to be violent or dangerous. There is also a clear provision for anyone to approach the court and seek anticipatory bail to avoid needless humiliation and inconvenience. If a developing country like India can have these safeguards, why not the US?
- Have much stricter gun control. What age are we living in? The 2nd Amendment giving the right to bear arms is an anachronism, though this will be hard to repeal because of entrenched beliefs. It's almost inconceivable for someone coming from India (and I'm sure most developed countries) to see how easily any punk in the US can acquire a firearm. Even assault weapons can be bought, with the NRA and the loony gun-toting fringe vigorously defending this right in the name of self-protection. And there should be strict background checks and stringent penalties for disqualified applicants possessing illegal firearms. Thanks to guns the US has a much higher homicide rate than other first world countries. With shootings at Columbine, Virginia Tech, Washington Beltway sniping, "going postal" and other workplace violence, perhaps the average American is now ready for more Europe style arms restrictions.
- Freely let DNA evidence and new techniques be used to revisit old cases of conviction to reassess guilt. Some of these convictions have been successfully challenged, DNA tests allowed and convictions reversed. But we know how jury verdicts can be so flawed and arbitrary - why assign a false sanctity to such verdicts and not allow DNA tests in all such cases?
- Decriminalize victimless crimes like acts between consenting adults, or using (as opposed to dealing with) drugs. What former NY Gov. Elliott Spitzer did in hiring a call girl may be bad for his family life, but shouldn't have been a crime.
- Much stiffer penalties for criminals. True to our sense of fair play, justice should be retributive, not just reformative or a deterrent as liberals maintain. There's no reason to take capital punishment off the table for egregious murders so long as guilt is established beyond all lingering doubt (say with 99.99% certainty), not just reasonable doubt. There also shouldn't be a blanket minimum age or intelligence threshold for capital punishment. After all, a juvenile showing extreme cruelty or sadism while knowingly committing crimes is more, not less, likely to become an even bigger monster as he grows older.
- A tougher and lower cost jail environment. There's something wrong about criminals (especially hardened ones) sentenced to punishment spending their time watching TV, pumping iron, eating well and enjoying better medical care than many people outside the prison. Criminals should repay their debt to society through work and depending on the gravity of their offenses (think Dahmer, Bundy, the Beltway snipers, or the killers of my childhood friend Aasha) as a resource for medical testing and organ donation against payment to the state. These measures will at least lower the taxpayer burden, and if they act as some kind of a deterrent against crime, that's a bonus. (The Chinese till recently were harvesting and selling organs of executed prisoners. That disturbed many of us because we weren't sure if (a) those people had actually committed crimes deserving of the death penalty, and (b) if the profit from organ sales was itself an incentive for executing prisoners.)
- Close monitoring of inmates and strict punishments for offenses committed in jails. I've don't understand how prison rapes and inmate on inmate violence can still go undetected given our advances in technology. We can cheaply video monitor (and record) every cell, every square foot of prison space, and every movement by every inmate. Any offenses can be easily proved by playing back the recordings and inmates severely punished, preferably in a revenue positive fashion (see point above.) Guards who fail to act can also be identified and disciplined. This will also crimp in-prison gang activity and prevent the worst and most dangerous inmates from victimizing weaker ones.
- Further limiting or completely eliminating trials by jury. The US is one of the few countries where jury trials, which are highly wasteful with often arbitrary verdicts, are still widely prevalent. Other countries use just judges, whose verdicts can be appealed to superior judges and panels of judges. Given our multicultural society with ethnic divides and loyalties, jury trials are even more vulnerable to unfair outcomes, especially when the alleged crimes cross racial boundaries. Remember how O.J. Simpson was let off for double murder by a mostly black jury in 1994, and lost in the subsequent civil case decided by a mainly white jury (though this case admittedly required a lower burden of proof.)
- Requiring every US resident to submit a DNA sample and to carry a national ID card. Objections by the ACLU to maintain privacy have little merit, since safeguards can be imposed to ensure the information is used only to detect or prevent major crimes. Besides, consider the huge upside of such measures. Any DNA on a crime scene can be matched against a national database of the entire populace to solve crimes. Terrorism can be severely limited with a national ID, possibly combined with biometrics. The system can be carefully designed of course to protect most privacy, but this exercise to guard against "Big Brother" excesses should be very feasible.
Tuesday, August 25, 2009
Stubbornness sometimes pays off. For years I had resisted getting rid of our 1992 Chrysler Town & Country minivan. It served as our (and occasionally our friends') spare car, and my father's car whenever my parents came visiting. It was also good for hauling five plus passengers or bulky home supplies when needed.
Then this Cash for Clunkers (CARS) program was launched last month. Anita and I happily traded in our minivan for a fuel efficient SUV, getting a $4,500 rebate from Uncle Sam in the process.
Nationally in the US, this $3 billion taxpayer funded program has benefited automakers, dealers and about 700,000 buyers like us. The implementation by the government could have been a lot better, especially in avoiding internet outages and speed of processing claims. But overall this was a huge success and has boosted the recession-hit auto industry. This clunker mania also drew in many shoppers to dealerships who did not qualify for rebates, but were enticed to buy cars anyway.
What now? Consider three factors. First, some pundits have predicted that with the ending of this program the sales of autos will slump. Second, a lot of owners of old sedans are feeling left out. That's because only the old cars and light trucks with a rated gas consumption of 18 mpg or less qualified for the rebate, and this excluded most sedans. Third, some eligible clunker owners couldn't buy a new car because of shortages of popular fuel efficient models due to the enthusiastic response to the program.
The following steps by the Obama administration and Congress can address all these issues:
- A new version of the program raises the mileage ceiling for clunkers so it includes many more sedans. Say, the EPA mileage ceiling for clunkers can be raised from 18 mpg to 21 mpg. This will create a second wave of new car buyers, as well as help those who were eligible but couldn't complete their transactions under the just ended program.
- At the same time the rebate per vehicle can be slightly reduced so that the same public funds cover more cars. For example, the rebate can be $3,000 for the new car's fuel economy improvement of 6 mpg or more (4 mpg for new SUVs), and $2,000 for 4 - 6 mpg (2 - 4 mpg for new SUVs.)
- The implementation should be considerably improved this time around. With even halfway decent capacity planning there was no reason to have website crashes or overloads. Just 700,000 claims with each file of a few MBs size were being uploaded over a period of several weeks. Any decent data vendor could have made many times such capacity available even at short notice. The same applies to human claims processors using back of the envelope calculations, especially now, with the benefit of hindsight.
Another aspect bothers me, though I've no solid solution. Some experts have decried the requirement that the engines of the old traded vehicles be disabled to take them permanently off the road. This in a macro sense is a destruction of value since some of these vehicles may have many years of useful life left. It is worse if the vehicle in question now happens to be a car with somewhat better fuel efficiency than the existing 18 mpg threshold.
Can we spare such cars, and only require them to be converted so they can use compressed natural gas (CNG) that is much cheaper and less polluting than gasoline? This conversion is very popular in India and costs $1,500 - $2,000. Can such converted used cars be allowed to be exported to countries like India, so that the US owner bringing them in gets a much higher trade in value, in addition to the government rebate? That can draw more owners of less old cars to avail of the CARS program and buy new vehicles. But I haven't thought this through and it needs more study.
Monday, August 17, 2009
I had paid inadequate attention to what Dean had to say and thought he leaned too far left on some issues at that time. But as 2008 rolled along I was impressed by his articulation of Democratic values and even-keeled stance as DNC chairman during the Hillary - Obama primary slug fest. And now he's been making direct, succinct and insightful comments in TV news shows on health reforms, including on the issue of the public option that he strongly supports.
In the Morning Joe program on MSNBC he offered this very interesting perspective on death panels and why Obama seemed to be backing away from the public option ahead of a Senate vote. He said this was a way to get a bill past the Senate with 60 votes when Democrat senators like Ben Nelson and Kent Conrad are sabotaging the public option provision. This provision can then be re-introduced through a "reconciliation process" with the House of Representatives bill that then needs only 50 votes to pass. If that's truly what Obama has in mind then I won't be so hasty in judging him.
Others have also noticed how Dean is such an effective voice for health reforms and for batting down misinformation by opponents. Here is a YouTube clip by a group called The Young Turks showing how Dean counters three arguments against key reform provisions. The commentator wonders why Dean isn't the Health and Human Services Secretary. Now that he's done being DNC chairman I hope he gets to assume another high public office. And yes, if I could revisit 2004 he'd be my top choice among those presidential candidates.
Monday, August 10, 2009
Following the Henry Gates arrest in his own home I had the same initial reaction about probably stupid police behavior as Obama articulated to his cost. So I sympathize with him and his need amidst the media circus to make amends through a beer fest. The Cambridge police union had a nerve asking for Obama's apology. How does a uniformed law and order force get to have a union anyway? In India such a practice is rightly banned. It is interesting to see the racial divide on who people think was at fault.
My views on this incident and the larger issue of profiling are unlikely to please either camp.
First, I think the policeman James Crowley acted improperly in arresting Gates and was much more at fault. When Gates said he lived in the house Crowley clearly should have realized how an African-American Gates would be upset about his perceived profiling by the police. Gates probably assumed that cops happening to pass by had stopped to challenge him simply because they saw a black man getting into this upscale house. All Crowley had to do was to civilly inform Gates that the police had received a 911 call about a possible break-in so they needed to verify identity. Instead, Crowley mechanically repeated orders in this just-do-as-I-say-since-I'm-a-cop manner that inflamed Gates who was probably unaware of why the police were there. Too bad Crowley's misconduct was rewarded with beer in the White House, though I completely understand Obama's recognizing political realities and defusing an unexpected firestorm.
At the same time I think that some forms of ethnic profiling can be reasonable, useful and appropriate if done right. At our University of Chicago campus which is surrounded by some rough neighborhoods, in almost all muggings, break-ins and other crimes the perpetrators were black. So our campus police on patrol would frequently watch for black youths without book bags to enquire as to where they were heading to ensure they were on bona fide business. Were they wrong to do so? The chance of the accosted youth being up to no good was very low, say, 1 in 200. But for non-blacks that probability would be more like 1 in 20,000. So what's a more efficient use of limited resources? The only thing is, the university police went out of their way to be polite, pleasant and apologetic once the subject of their attention was confirmed to be okay.
Take also the case of South Asians and Middle-Easterners, including myself, after the 9/11 attacks. I know many of my fellow-Indians and especially Muslims were livid when they were pulled aside for detailed searches at airports. I had much more than my fair share of such searches, but I thought differently. How can I blame the poor security personnel? From my looks I could easily be a Middle-Easterner, and even Anita says I can have an intimidating gaze. So even if the absolute probability is minuscule, I'm a 100 or 1000 times more likely to be a fanatical hijacker than your average homegrown American traveler.
During and after my full searches at airports I'd put screeners at ease and thank them for keeping us safe, and mostly got a lot of gratitude and goodwill in return. Some screeners would then confess to being stressed by the indignant reaction of many passengers pulled out for this special treatment. Subsequently, to achieve balance and perhaps political correctness I'd see random passengers including teenage girls being identified for additional searches. There's some merit to this approach, but using it to supplant (rather than supplement) the traditional way including profiling is likely to make us more vulnerable.
Tuesday, July 21, 2009
What does she do as a graphics editor? She obtains the data and material and then uses it to create charts, tables, inset summaries and other visuals (except pure photographs) that accompany news stories. For her and her colleagues it can be a charged - some will say stressful - environment with tight deadlines. But she has a passion for it.
For the most part she and her colleagues walk into work in the morning, learn about developing stories and then conceive of the graphics in consultation with reporters, columnists and editors. Then it's data and materials search, verification, creation, iterations and all to be completed before "press time" by late evening.
They each do anything from two to five graphics on a typical day, depending on the complexity and the workload. To maintain an efficient and collaborative environment without worries about who gets credit the graphics folks generally do not put their names on their creations. We don't know about her precise handiwork till she tells us, though we can make some guesses.
Want to see a sample of Rubina's work? Unfortunately, most of the online versions are not the same as the ones in print, and need a subscription to view. If you have one, here's one from May 12 that she did on the US federal highest bracket tax rates going back all the way to 1913. The print version was better. It is overlaid with the terms and pictures of US Presidents. Rubina had to work with some IRS folks to get a major part of the information. When the story came out the IRS called to compliment the WSJ on the graphic.
Addendum on July 22: Today, Rubina had a graphic on childhood obesity so I thought I'll add it. Here's what she had to say:
I have a U.S. map on today's Currents page on child obesity rates by state. Rather than color-coding the states like we usually do, we decided to make the heights of the states correspond to their obesity rates. This was done using a program called Cinema 3-D, which I used for the first time on Monday. You can see the print version on page A11 or online here by clicking on the small map: http://online.wsj.com/article/SB124821547930269995.html
Friday, July 10, 2009
Of all papers, business-oriented ones like the WSJ should make the case as I did about compensation for US lawmakers being substantially boosted in line with their responsibilities. They should also have a public funding option for their election campaigns if they agree to forego private fundraising through campaign contributions. Even at salaries of $1 - $2 million annually and an equivalent amount for election expenses the annual taxpayer tab will be $3 billion. That's money well spent to reduce lawmaker vulnerability to petty Abramoff style inducements and lobbyist influence. It's a natural extension of campaign finance reform efforts, for which McCain and Feingold deserve a lot of credit even if they've had very limited success.
As I've said before, the WSJ has instead tried to whip up a UK style news storm about lawmaker "splurges" in the US. To some extent it has succeeded. Starting with its May 16 article, Expensing It, the US Way" the WSJ has played up travel and office expenses of at most a few thousand dollars per individual Congressmen that also happen to conform to all the rules and are available for public scrutiny in hard copy. But the WSJ wants to go further and sought full online disclosure of every expense detail. After its strident articles and reporting of May 20, May 30, June 1, June 3, Nancy Pelosi decided on June 4 to require all expense details to be posted online, with the Senate promising to follow suit.
All this detracts from the lawmakers focusing on infinitely more serious matters facing the country. Such journalism reflects poorly on a prestigious publication like the WSJ, and yet it hasn't stopped there. It has continued with these front page expose's including on July 2 highlighting the foreign travel tab of lawmakers of a whopping $13 million in 2008 (costing the average American 4 cents) and a July 3 article about such official records understating these expenses. Even so, the listed expenses are so trivial as to be laughable, but politicians know too well that they shouldn't over-estimate the wisdom of (at least a significant proportion of) the readers.
Ridicule by another part of the media may be the best way to stop such cheap and irrelevant reporting. Any takers, Jon Stewart or Stephen Colbert?
Saturday, June 27, 2009
Of all the interviews about Michael that I saw on TV the one I liked best is this one last night by Deepak Chopra with Keith Olbermann on MSNBC. It not only gives great insights into Michael's psyche, life and the trauma that he faced, but also shows Deepak to be forthcoming, as well as a true and caring friend.
Sunday, June 14, 2009
The cute toddler ran around, being minded and doted upon by her two moms (one the biological mother through sperm donation) as well as her grandpa, a cheerful and mild-mannered cardiologist. He and his wife introduced the female couple as their daughter and daughter-in-law.
Considering that it was a family affair with everyone related by blood or marriage, our group of 10 was remarkably diverse. Five distinct mother tongues - English, Gujerati, Hindi, Malayalam and Panjabi. A mix of four Indian ethnic groups and one Caucasian. Four different religions - Christian, Hindu, Muslim and Sikh. In answer to Rodney King's question two decades ago, yes, we can all get along beautifully.
The female couple talked of their quest, hope and anxieties about getting recognized as spouses. They first got married in San Francisco, then last month in Massachusetts and are now looking forward to legalization of same sex marriage in New York where they live. They sought marriages in multiple states because of uneven laws recognizing these, and the validity being subject to referendums and court challenges. One of them talked about the hurt she felt when her uncle (the cardiologist's brother) whom she was very close to didn't attend their wedding.
I've supported gay marriage in a "why-not-if-it-makes-people-happy" sense, brushing aside those religious objections as meaningless. But I didn't consider it very different from civil unions and was hence not too invested in the issue. Now having seen it up close and personal, I am much more sympathetic to the cause and hope it gains universal acceptance.
Monday, June 8, 2009
Now across the pond a top paper like the WSJ began orchestrating a move to require all members of the US Congress to post their expenses online. The Congressmen's expenses are already available in hard copy for anyone who is interested, but this apparently isn't enough. In three front page articles (imagine, they thought THIS was the most important news to report) the WSJ had big scoops about some members using their allowances on certain items. These included a lease of Lexus or other cars costing an average of $640 a month, 7 HD screens costing $2K each, uniform shirts costing $12K (total, not each) and so on...
You call THIS in the WSJ articles sensational or top news? The WSJ and other media drumbeat ultimately succeeded on June 4 in getting the House to agree to post all expenses online. Whoopee. I'd have liked some prominent journalists or leaders to point out how misplaced and ridiculous this whole coverage is. There's some hope. Mayor Bloomberg opined that the US President is grossly underpaid. There were predictable howls of indignation but at least one journalist Dan Thomasson supported his views and also advocated much higher pay for other public servants.
I'd like such views to be the rule rather than the exception.
Friday, May 29, 2009
I think this whole controversy is deplorable, and a commentary on the quality of our media coverage. In an August 2007 post I disagreed with criticism of what we pay our lawmakers. I am strongly of the view that we should pay our apex lawmakers well, considering the enormous responsibilities and the public trust we place upon them.
That's not only fair but also expedient, as it will insulate them somewhat from the petty blandishments (like sports event tickets, rides on private jets, or stays in vacation homes of people seeking favors.) This won't prevent misdeeds by the heavily corrupt, but at least give the fundamentally decent lawmakers (hopefully the majority) the financial cushion to better follow their conscience. I'd also like to reduce the dependence of candidates to Congress (or Parliament in the case of UK or India) on special interests for raising funds for elections. This can be achieved, for example, by providing them public funding to contest elections, with the amount depending on their poll performance.
So how much should we pay them? I'd say $1 - $2 million a year to US members of Congress, and about 1 million GBP annually to UK MPs. For UK's 646 MPs it will work out to about 1 billion GBP including associate expenses, a drop in the bucket as compared to the UK central budget of 600 billion GBP. In the current MP scandal the total amount claimed by all MPs put together was 92 million GBP, not all of it improper. Given UK's population of 61M, that's less than 2 pounds per capita.
So yes, I consider this whole scandal to be a storm in a tea cup. And I know of no opinion leader or journalist of standing who has had the sense - or the courage - to pronounce it as such.
Wednesday, April 29, 2009
Despite its noble sounding name this deliberately misnamed Act subverts workers' free choice about whether to unionize or not. Instead of voting by secret ballot, this Act also requires unions to be formed and recognized if half or more of the workers in an establishment sign pledge cards in support of this. So say, Tony Soprano style thugs knock on workers doors, stare across the dining table and hold the pledge card for workers to sign. Those who refuse can be intimidated, and everyone knows who is unwilling, leaving them open to retaliation down the line, or ostracism by fellow workers, or other unpleasant consequences.
So how do Krugman & Co. favor this over a free and fair vote by secret ballot? They essentially say that the means however imperfect justify the end, which is more unionization. This in turn will improve the lot of workers by extacting concessions from employers, and better redistribute wealth, thus narrowing the gap between the classes. If such ends justify the means, how about allowing the poor to extort money from the rich, or burglarize their homes to achieve redistribution?
Thankfully, it looks like card-check won't be able to clear the Senate with a filibuster-proof majority. Though many people take it as a given, I question the value of unions in many situations, or at least the premise that the pros outweigh the cons.
Unions to me are the most needed when through collective bargaining they are a counterweight to (mostly tacit) collusion by employers to keep wages and benefits below what would prevail in a free market. One example is of US hospital chains that were hit with a lawsuit over colluding to keep nurses' salaries artificially low, despite a national shortage of nurses. Another is of players' unions in professional sports (even though players may be super-rich.) They bargain with a handful of sports team owners that collectively decide on salary caps or player pay structure. But such employer collusion is relatively rare, and generally illegal.
Other pluses of unions include workplace safety, health and social benefits that they can win from employers through collective bargaining and the threat of strikes. I'm certainly for such health and safety measures, but for most of them they are better realized through passage of broader laws applying to all, instead of individually won through unions with the most leverage for their limited set of workers. Thus we have OSHA, or the Workmen's Compensation Act, and even the Minimum Wage Act and can go further along this route.
Wednesday, April 8, 2009
We hear much more about countering discrimination against minorities and women, and resultant affirmative action. Despite vigorous denials from its liberal advocates this often becomes a drive to fill quotas. Barack Obama last month quoted some gender disparities in pay and top executive positions to imply unequal treatment of women. Now if there is any real bias or violation of the principle of "equal pay for equal work" I'm all for vigorous corrective action. But just the numbers being thrown around do not establish this, and there are more benign explanations.
The fact that many working women opt for a better balance between work and family, and take some years off to raise children can explain their making 78 cents for every dollar that men make. Similarly, there may be very few women who are prepared to put in 14 hour workdays to have a shot at the corner office. That, rather than a glass ceiling, may largely be why only 3% of Fortune 500 CEOs are women. To use these statistics to equate salaries or senior executive elevations among the genders may very well be reverse discrimination against men.
Other countries like India have quota-based intake of disadvantaged groups (like caste-based reservations) into government or public sector jobs, or into many educational institutions. So similar US practices do not surprise me as much as the "protections" against age discrimination. In India I never questioned the logic of having a mandatory retirement age. It used to be 58 years for most government jobs, and was subsequently raised to 60 years. For a few, mainly high positions, it extends to 62 or 65 years. After that, retirees who are willing and able to work can seek employment as contractors or consultants, or even be re-employed in the public sector as special cases. Private companies are free to have or not have mandatory retirement policies.
These practices make a lot of sense. Employees are recognized for their years of useful service while accepting the effects of age, and are given a cordial send-off after reaching a threshold. They leave with their memories and morale intact, making way for younger, more vigorous successors. Employers are free to retain exceptional workers past that point. But the rank and file know and accept the retirement age as a natural conclusion of this stage of their careers. If they want to work more they'll see no shame or a blow to their self-image to seek lighter or different, less paying work that may be more suited to their present stage of life. Even usually more liberal Europe recognizes the right to set an age for forced retirement.
This was pretty much the case in the US as well, till the ADEA of 1967 was amended in a series of steps from 1978 till 1993 to bar mandatory retirement in most sectors. Remarkably, the biggest blow was struck in the sweeping restrictions of the 1986 amendment when a Republican (Ronald Reagan) was President. Ideology notwithstanding it's hard to resist signing legislation favoring a key voting bloc like seniors ahead of the next Presidential election (that was won by Bush Sr.)
Adverse consequences of the US ban on mandatory retirement (many of which I've seen at first hand) include:
- Older employees drawing the highest salaries have reason to stick it out as long as they can. Employers have to push them out for bad performance after documenting negative evaluations. Not only do the departing seniors feel humiliated at this ignominous end to their long career, but this can also hurt employees morale all around.
- Managers in these situations have to give negative evaluations and terminate employees which subjects them to needless stress. Incidents of workplace violence and other fears of retaliatory action make the managers' job even harder.
- Reducing "natural" turnover adversely affects the career prospects of promising younger employees, which can create friction among employees and again affect morale.
- Older employees who manage to coast or "get by" are not replaced for many years by better, cheaper and more energetic younger employees. This makes for suboptimal company performance that aggregates to a drag on the economy, making it less competitive.
Bad, populist laws like these are politically hard to resist and block. Worse, once they are passed they're almost impossible to undo. Anyone attempting to do so despite the merits is likely to be painted as "anti-senior " and risks political suicide. So despite the pressures it is still much better to stop such laws before they are enacted.
I hope lawmakers (particularly Democrats) draw this lesson while considering the proposed Employee Free Choice Act ("Card Check Law.") This awful law being pushed by unions and liberals would allow unions to be formed without needing workers to vote their preferences by secret ballot. But that's another story.
Wednesday, February 25, 2009
The first by Steven Kaplan appearing in a Feb. 17 Op-Ed in The Chicago Tribune warns that "Restricting bank executives' pay would stall recovery." He acknowledges that high and flawed financial incentives were at the root of high risk-taking and illusory profits that brought down these banks, and that the massive taxpayer bailout justifies "some" government say in executive compensation. But he then asserts, "Even though $500,000 is a lot of money, banking executives have a different salary market. They would find the compensation low, and that is likely to create four problems:
- Banks would avoid accepting government assistance unless the situation is grave. Only the worst firms would accept government help.
- Many executives would leave the "bailed-out" banks for jobs that pay more, and the best employees would leave the troubled firms at exactly the wrong time.
- It would be difficult to hire new executives because the best ones would choose other opportunities.
- Stronger firms that have accepted federal money would give it back to avoid the restrictions.
All these factors would slow the recovery of the financial system."
I find these arguments to be deeply flawed. To his first and fourth points, most banks seeking and continuing to receive government help, even the so-called stronger ones, have little discretion in the matter. They know full well that their failure to do so will expose them to a ruinous bank run or its equivalent with depositors. Their leeway can be further curtailed by imposing regulatory capital requirements that forces them to seek timely government help. Further, the push towards better governance and heightened awareness of potential conflicts of interest will make vigilant bank boards compel their management to do the right thing.
Mr. Kaplan's second and third points are anchored on a "greed is best" premise that the most suitable executives for bank turnaround are lured by outsized financial awards alone. But it is this brand of managers and the existing compensation structure that substantially contributed to the crises in the first place. They stood to make enormous fortunes by fudging numbers, taking massive gambles with other people's money and limiting themselves to short-term "on my watch" perspectives. Instead, we need managers who want to establish their legacy of building or rescuing great institutions. A lack of outsized compensation structure is more likely to attract these types of managers, encourage sounder decisions and reduce their temptation to gamble. Just compare the CEO salaries and the fortunes of Japanese and US automakers. Or consider if hiking the annual pay to a billion dollars will really get us a much better US President.
So I largely disagree with Mr. Kaplan though there is ambiguity in the stimulus amendment limiting top executive pay as reported in a Feb. 14 CNN story. That can lead to some loopholes and confusion even if the measure is directionally correct.
The other article is a Jan. 21 Op-Ed in the Wall Street Journal by Alberto Alesina of Harvard and Luigi Zingales of Chicago Booth. They repeat the Republican refrain of stimulating the economy by cutting taxes, homing in on the complete elimination of capital gain taxes in 2009, and to the exclusion of government spending. Here's a quick counter to their main contentions:
a) Regardless of it starting as a financial / credit crisis, the US economy obviously now fits their description of a "bad equilibrium." That's where layoffs and job loss fears lower consumer demand that makes firms cut back that causes more layoffs that... They concede government spending can change this "bad" equilibrium into a "good" one, yet they still oppose it.
b) Their proposed solution of tax cuts (eliminating all capital gains for investments "begun" during 2009, etc.) is an extension of the Bush efforts for the past eight years. Where did that get us? Plus they want to make all capital expenditures and R&D investments tax deductible. Wouldn't that mean losing a lot of government revenue on the bulk of such expenditures that the companies would have incurred anyway, incentive or no incentive?
They see their role here "... to courageously propose the right economic policy, even when it is unpopular." I wouldn't call it particularly courageous for business academics to write in support of the finance industry and business interests that directly or indirectly sustain them. My friend RS wryly alluded to this equation as one hand washing the other.
To be fair RS thinks highly of Luigi Zingales and his writings in general, and considers this particular WSJ Op-Ed by him to be an anomaly.
Other writings by the Chicago business professors are more insightful and objective, including those relating to the current state of the economy. For example here's a good commentary in the Feb. 12 New York Times by Doug Diamond, Anil Kashyap and Raghuram Rajan on the Geithner Plan. They express reservations about elements of the plan, in particular the public-private partnership to buy up toxic assets, though they don't come up with an alternative. That's why I find Paul Krugman (alas, not of Chicago) to be better. In his Feb. 22 Op-Ed in the New York Times (among other writings) he makes a clear and cogent case for the temporary nationalization of banks. I'd like anyone opposing his proposals including the Chicago crowd to address his arguments head on.
Friday, February 13, 2009
The first (and the one I'll focus on) is an authoritative paper opposing more regulation of the financial derivatives market, which includes sub-prime mortgages and CMOs. It was written about 10 years back by 1990 Nobel laureate (in Economics) Prof. Merton Miller.
He says that: a) Regulating this market further will impose an undue burden and stifle it, and drive away business from the US to overseas competitors. b) There will of course be winners and losers, but no chance of a system wide failure because of the strong and well capitalized institutions participating in this market, the tough oversight by the SEC, and the rigorous credit rating of the participants by S&P, Moody's, etc. c) The customers are mostly sophisticated institutions that need to freely use this market for hedging or risk-based investment purposes. They ought to know how the securities work and the attendant risks, and if they don't they'll learn to do so in a decade or so as the market matures. d) The valuation of these financial derivatives is typically very complex and dependent on the model being used, so it is very hard to specify disclosure requirements.
As Kaku says, "it is almost comical to see Prof. Miller's arguments so completely refuted by the causes of today's financial crisis" and wonders if "he is man enough to eat his words (which are still used as evidence by so many on the right)."
I've been taught by and interacted with Prof. Miller up close, and he was as fine, brilliant and witty a person that you could meet, with a heart to match. His paper here should not detract from his seminal work in finance that earned him the Nobel prize (including the famous Modigliani and Miller theorem of dividend irrelevance that's a staple in finance classes.) He passed away in 2000 at age 77, and so cannot retract his words.
I also think he deserves some benefit of the doubt as his stance was based on market conditions in the mid 1990's. He didn't see the explosion of sub prime mortgages and CMOs in the early 2000's that made Paul Krugman rightly and urgently call for more regulation, and for Greenspan to wrongly and disastrously oppose this. Had Miller been alive and observed the new developments, he may just for all we know have changed tack and weighed in on Krugman's side.
Here are the condensed reasons for blaming lack of regulations for letting the financial crisis occur, contrary to Miller's assessment:
a) The principal - agent problem. The "agent" here is the mortgage originator who gets paid on selling mortgages, even over-valued ones to financially unsound borrowers. Or it's the fund manager who makes large and risky bets on CMOs. If the bet pays off the fund manager gets filthy rich, and if it doesn't, it's the investor loses heavily and the fund manager pays nothing. In either case the "agent" has incentives not to act in the Principal's (investor's) interest.
b) The information asymmetry problem. The buyer or investor does not know or understand the risks involved in the funds like the originator does. This is especially true when the securities involved are highly complex and what is in them is not revealed. So the buyer is at a disadvantage unless regulations force greater transparency.
c) The time horizon mismatch. This can cause agents like fund managers with near term outlook to take risks or pump up short term performance that is not sustainable. The consequences eventually catch up with the investors, but by then the agent (hopes that he) has left.
d) Cozy regulator and rating agency relationships with their target entities. The S&P and Moody's are hired and paid by the very firms whose credit they rate - an inherent conflict of interest. Miller lauds "the two way nature of the flow of top regulators and top executives" within the industry, but this can be a curse instead of a virtue, as such connections weakens oversight.
e) Systemic shocks. Everyone is happy and buoyed up by bubbles in stocks or the rising tide of real estate prices. But a reversal of this trend causes a downward spiral that (absent of safeguards) sinks a lot of boats.
f) Letting the ignorant and the stupid self-destruct. This is a harder sell, but we may need laws to protect the ignorant from their own bad decisions, just as we have laws to compel use of seat belts while driving, or those banning the use of heroin or crack.
Moreover, special interests and right-wingers have bastardized the term "free markets." It should mean freely traded goods and services in a competitive setting without the burden of distorting taxes, duties or undue restrictions. What it shouldn't mean is lack of checks on deception, the selling of spurious products, withholding information about what's being sold, or failure to mandate safety standards. Regulations compelling transparency in where money is being invested and in the detailed disclosure of returns, and better scrutiny enhances free markets, not detract from them. It may also prevent the havoc wreaked by future Bernie Madoffs, or ill-conceived CMOs.
The other U. of C. paper that Kaku looked up is titled "Are CEOs Rewarded for Luck? The Ones Without Principals Are." Note the spelling of "Principals" as they're referring to main investors, not ethics. This topic needs a separate discussion, and this academic paper is (as typical) fairly long and involved. You can see the conclusions at p. 23 - 24: essentially that a major chunk of the CEO salary depends on luck (the fortunes of that industry rather than individual performance) and the problem is worse for poorly governed firms. It undercuts some big arguments for large US-style CEO compensation.
The findings aren't surprising. For instance, compare the salaries in past years of the CEOs of the Big Three US automakers with their Japanese (Toyota, Honda, etc.) counterparts who make a fraction of that. Look at the fortunes of these respective companies now. Still, there are defenders of the US (and detractors of the Japanese) system: see for example this Feb. 23 BusinessWeek article titled "Japan: No Model For Executive Compensation." I am underwhelmed by the logic and the case sought to be made out here, though.
Tuesday, February 10, 2009
Denying the need for the "right" government stimulus plan seems so preposterous that I expected the signatories to be clueless economists from lightweight institutions. Or charlatans and political hacks who are selling debunked ideology for their narrow ends.
But I see Nobel laureates and prominent figures from top universities like "my" University of Chicago in this list. They include two renowned professors who were on my Ph.D. dissertation committee, and one of these professor's son-in-law who is a top academic in his own right. Why they have signed on is beyond me, as I totally subscribe to Paul Krugman's rationale of the need for massive governmental intervention to get us out of this economic crisis. Krugman actually argues that the current economic stimulus plan is too small and misdirected towards Republican causes to do the job.
On the Cato website there is more of this criticism of Obama and the Democratic efforts. On the lower right of this web page there is a YouTube presentation with sleazily deceptive arguments against the Obama / Democratic approach. Reagan's virtues are extolled while Obama's approach is likened (of all people) to that of George W. Bush whose overspending drove the economy to ruin.
I can't address all of the Cato fallacies here. But some comments:
(a) Heavy spending (and ill-conceived at that) in GWB's time could not counteract bad governance and lack of oversight that landed us in this mess.
(b) Japan's "lost decade" of stagnant growth in the 1990's is widely ascribed to its failure to quickly overhaul its ailing banks and credit infrastructure. That was a necessary condition that didn't happen, for other measures (like public spending on infrastructure) to work. Keep this in mind the next time you hear a Republican mouthing off on Japan's lost decade in spite of spending 6 trillion yen on infrastructure.
(c) We therefore need better governance and more regulation to complement a heavy fiscal stimulus.
(d) I'd heed Krugman and drop this nostalgia for Reagan. Even the "supply side" linkage that Republicans like to make between tax cuts and revenue increases in the Reagan era is misconceived.
(e) Reagan's nearer term focus and budget deficits created cumulative problems that haunted his successor.
(f) In the debate on stimulus options tax cuts have the value of immediacy as they get more money across to the consumer quickly. But the recession-wary consumer may save rather than spend most of it (a personal virtue but it defeats the objective of a stimulus.) Government projects and continuing grants to cash-strapped state and local governments on the other hand will spend the allocations dollar for dollar.
(g) To my knowledge none of the Cato signatories warned against the consequences of insufficient regulation of mortgage lenders, or deplored Alan Greenspan's role in opposing such regulation. Nor did they see the housing crisis and the bursting of the bubble coming. Krugman did all three and years ago, way before it happened. So to me he deserves his 2008 Nobel prize (officially given for unrelated research done decades earlier) as well as greater credibility than the Cato crowd.
While our University of Chicago is synonymous with the ideas of free markets and deregulation we had plenty of faculty teaching and researching the concepts of necessary government oversight and intervention, public goods and anti-trust responsibilities. I'm perplexed to see so many respected economists including some of my U. of C. professors having signed on to the Cato ad. I hope they have better arguments than the YouTube presentation on the Cato website.
Meanwhile, today's (Feb. 10) issue of The Journal has the more nuanced views of two other U. of C. economists, Nobel laureate Gary Becker and Prof. Kevin Murphy. In "There's No Stimulus Free Lunch" they concede that government stimulus measures can create net jobs and expand GDP, especially during a recession. At the same time they warn that such benefits will dissipate once the economy recovers and works closer to full capacity, and that such measures carry a price.
No one is arguing against that, or we'd have a permanent stimulus budget for every past, present and future year. The stimulus package is being worked now to fix our present recession and job losses. And that part about it not being absolutely "free", the question is, do we want to starve by forsaking a substantial lunch just because it carries a small price, or to go for it since the benefits far exceed the costs?
Thursday, January 15, 2009
Anita and I stayed in Mumbai with her cousin Ashok and were (as usual) very well looked after, while Sheena stayed in the suite in NSCI Club that was reserved for Ira, the bride. There were lots of fun events and we thoroughly enjoyed ourselves. It was also a great opportunity to hang out and reconnect with Anita's extended family and friends.
We (mainly Sheena) took many pictures. I'm adding the link here to the ones taken Jan 8 - 10 in the lead up to the actual wedding day of Jan 11 that will be posted separately. There are 200+ pictures of which a handful have been labeled.
Tuesday, January 6, 2009
In the late afternoon of Dec. 28th when we flew into Delhi from Pune, I called up my fast friends and IAS batchmates, Rajan Katoch and Jitesh Khosla. True to form they were game to meet over dinner despite the lack of prior notice. Jitesh hosted it in the Delhi 'O' Delhi restaurant of The Habitat Center. It was a fun meeting and great catching up.
The first three pictures in this link are of all of us (Jitesh and wife Rashi, Rajan and wife Kirti, Anita and I, and one includes Sheena who took the other two) after the meal. The remaining five feature Laboni the following morning, the first two with her dad Dharmi, then one by herself and the last two with Sheena. She's amazingly bright and does parents Dharmi and Bidisha proud.
Then Anita, Sheena and I drove up to Shimla. Indu and Yogesh Khanna (IAS '73, retd., now the regulator for the HP Electricity Board) had graciously insisted that we stay with them in Shimla and we spent two very comfortable and enjoyable days with them. On December 30th we visited our still unfinished house in Shimla. Then Anita and Sheena spent the afternoon with Anita's long time friend and former St. Bede's College faculty colleague Anuja Sharma in Theog, and then went shopping in Shimla. I visited friends and former colleagues in the HP Secretariat.
In the evening we headed to a dinner hosted by Yogesh and Indu and attended by old friends who were braving the Shimla winter. (Over half the people we know typically leave for the milder weather of Delhi or other plains.) Again much fun and laughter. In these pictures from our Shimla trip I missed many folks. Among them Anju and Daljit Minhas (our good friend from the IPS) had left our dinner gathering early before we started clicking.
We returned to Delhi late on New Year's eve and hurried to a party in the home of Anu and Ravi Sachdev. Ravi is a good college friend whom Anita and I hadn't met since 1984, and it was even longer since I'd met inveterate world traveler Rahul Sud, another college comrade who was also there. So it was a great reunion. Ravi's son and his daughter-in-law whisked Sheena off to a farm bash attended by about a 150 people and they enjoyed partying past 5 am. Quite remarkable considering that Sheena left for a visit to Sri Lanka that same day.
For Anita and I the remaining two days in Delhi flew by, and included a dinner at the Gymkhana Club with my parents and friends besides smaller gatherings before we returned to Pune on Jan. 4. On our last morning we finally visited the impressive Akshardham Temple in Delhi, currently the largest Hindu Temple in the world. I wish our stay in North India could've been longer but I'm thankful that we can regularly make it there.