I had three reactions to yesterday's cap-and-trade vote, two of which came from The New York Times article that I read this morning and one of which came from Stan's very smart post.  Here they are:

1. From the article, "Only eight Republicans voted for the bill, which runs to more than 1,300 pages."
2. From the article, "The bill would grant a majority of the permits free in the early years of the program, to keep costs low."
3. From Stan, "But the bigger story is that the White House once again has demonstrated an excellent ability to get Congress to go along with the things it wants."

And now let me take each one in turn.

David Skeel takes on the conventional wisdom regarding the bailout of Bear Stearns, with the benefit of 15 months of hindsight, and questions the wisdom of now institutionalizing "bailout in lieu of bankruptcy:"

An interesting video from the development office at Dartmouth:

Noam Cohen, who has been covering internet issues for The New York Times for the past few years, assesses the role Twitter has played in the old and new media coverage of the election and protests in Iran.  Worth a read this morning.

Any country can have problems with its elections.  Only in a few do the incumbents kill the citizens over them.

Writing at the Health Affairs blog, my colleague Amitabh Chandra answers the criticisms of using the Dartmouth Atlas studies of health care spending variation as a basis for policy reform (see this post from last week and a related post from earlier this week).  He is particularly concerned about some spotty reasoning that appeared in this Wall Street Journal editorial.  He ends with five recommendations for what to do politically based on the evidence on regional variation in health care spending:

1. Do not cut reimbursements.
2. Focus on cost growth.
3. Be realistic about the gains from bundled payments.
4. Think accountable organizations
5. Worry about spillovers.

Read the whole thing.

Writing at Economix, my colleague Jonathan Skinner answers the criticisms of using the Dartmouth Atlas studies of health care spending variation as a basis for policy reform (see this post from last week).  From his fourth point, on what to do about regional variation:

The critics are also right to be worried that simply cutting reimbursement rates won’t turn an expensive and fragmented health-care system (like Miami’s, with 2006 Medicare costs of $16,351 per person), into an efficient, integrated system of care (like that of Grand Junction, Colo., with costs of $5,873). How then can regional systems of care be transformed? One proposal is to establish accountable care organizations, or A.C.O.’s. These are physician-hospital networks designed to encourage providers to coordinate care, improve quality, and share some of the resulting savings. Elliott Fisher of Dartmouth and Mark McClellan of the Brookings Institution have argued that this is the key building block for any health-care reform.

You can also see Jon discussing these ideas as part of this Rockefeller Center panel (his talk starts about an hour into the program).

Today I heard one of the very best valedictory addresses in fifteen years on the Dartmouth faculty.  From Geoffrey Kirsch, who was one of two students who graduated with a perfect 4.0:

And so it is easy enough to lament that such comfort and convenience have come at a price; that the wilderness is gone and with it the adventurous spirit of “old Dartmouth”; that the College is already built on the Hill, the voice in the desert already heard, the books already read; that we stand here today, “magnificently unprepared for the long littleness of life,” crying out for nothing more than a job in this miserable economy.

I do not believe this. As long as economy and environment alike are ruined by myopia and greed, as long as hunger and disease plague the world, we languish in a winter as dark and iron and oppressive as the early months of 1771. Wherever we set our learning against ignorance and ideology, we as Dartmouth graduates stand on the edge of a wilderness every bit as tangled and trackless as that which Eleazar Wheelock traveled in 1770.

Read the whole thing.

I read this statement by Senator Kerry in a New York Times article on regional disparities in Medicare spending earlier this week and predictably went crazy:

“There is too much uncertainty about the Dartmouth study to use it as a basis for public policy,” said Senator John Kerry, Democrat of Massachusetts. “Researchers can’t explain why some areas of the country spend more on health care than others. There are many reasons spending could vary: higher costs of living, sicker people or more teaching hospitals.”

“States like Massachusetts are concentrated centers of medical innovation where cutting-edge treatments are tested and some of the nation’s finest doctors are trained,” Mr. Kerry added. “This work might cost a little more, but it benefits the entire country.”

May I also add that sticking your head in the sand (a euphemism) and ignoring statistically significant differences in average spending per capita is no basis for public policy?

Courtesy of the Associated Press, in its coverage of President Obama's latest proposals for limiting top executive compensation at firms receiving government assistance, we discover Representative Barney Frank's left hand not knowing what his right hand is doing:

To Rep. Barney Frank, the chairman of the House Financial Services Committee, Geithner's plan doesn't go far enough.

"It is not the government's business to discourage risk taking," said Frank, D-Mass. "But neither should we allow systems which have existed up until now whereby decision-makers are handsomely rewarded if they take big risks that pay off, but suffer no penalty whatsoever if those risks result in losses to the company."

An interesting new working paper by Jonathan Meer and Harvey Rosen:

A substantial experimental literature suggests that a personal solicitation is an effective way to induce people to make charitable donations. We examine whether this result generalizes to a non-experimental setting. Specifically, we estimate the effect of a marginal personal solicitation using observational data on alumni giving at an anonymous research university, which we refer to as Anon U. At Anon U, volunteers use lists provided by the Development Office to telephone classmates and solicit them for donations. The names on these lists are always in alphabetical order. The volunteers who do the soliciting often run out of time before they reach the end of their lists. These observations suggest a simple strategy for testing whether personal solicitation matters, viz., examine whether alumni with names toward the end of the alphabet are less likely to give than alumni with names toward the beginning, ceteris paribus. If so, then a marginal personal solicitation matters.

Pete's post on "Deficits Matter" discusses the impact they may have on future interest rates if debt becomes high relative to GDP.  I contend that even if deficits never had an adverse impact on interest rates, they are still critically important as a matter of policy.  Even if they don't matter for efficiency, they always matter for equity.  The debt one generation of taxpayers runs up must be serviced or repaid by a subsequent generation. 

Picking up on an earlier post, it appears that the holders of Chrysler's secured debt will have their day in court -- appeals court to expedite the process.  From the Wall Street Journal today:

The Second U.S. Circuit Court of Appeals in New York said it would hear an appeal by a group of Indiana pension funds challenging the sale of most of Chrysler's assets to the company's proposed partner, Fiat SpA of Italy. Oral arguments in the appeal will begin Friday, according to the court's order. Chrysler had hoped to potentially exit bankruptcy as soon as this week.

The article goes on to point out the main issue:

Senior lenders owed $6.9 billion would receive $2 billion, giving them a recovery of about 29 cents on the dollar.

I agree with most of what Stan and Pete have already posted.  Paul Krugman nicely pointed out the obvious: " ... California has immense human and financial resources. It should not be in fiscal crisis ..."  California's current predicament has been caused by its self-imposed political dysfunction.

There are plenty of resources in California to tax to pay for the state's budget.  If the California legislature is unable to raise the needed revenue or cut the excess spending beyond the revenue it can raise, then the governor may have to go hat in hand to Washington.  What should he find when he gets there?  A firm response that a precondition for any special assistance in the short term is a set of fiscal changes that ensure that there will be more than enough money in the state's general fund to pay back the money, at a high rate of interest, over the long term. 

My prior post generated some followup when it was linked by Brad DeLong, including from David Boaz in the comments (and this post at a blog called Free Advice).  This issue is important -- the Republican Party, broadly construed -- is going to have to get its fiscal policy straight if it wants to earn its way back into positions of power, rather than merely being there when the Democrats evenutally falter.

Reactions to the prior post suggest that the tea party participants were protesting not just high taxes but higher spending, particularly from the stimulus and bailout plans.  I am still left wondering where the outrage was over all of the spending during the eight years of the Bush administration.  The budget wasn't in balance even before the current downturn -- that's why the question, "Where were the Medicare Tea Parties?" is a good one. You get your credibility on this issue only by opposing higher spending even when the incumbents are giving you other things that you like, including conservative supreme court justices, lower taxes, looser regulations, and the like.

I'll let Keith Hennessey count the ways, in this tour de force of blogging.  I've blogged about CAFE standards each time they've been the subject of policy discussion over the past few years.  Here is some essential reading:

1. Fuel Efficiency or Fuel Consumption?
2. New CAFE Standards
3. Fuel Economy and Safety
4. Cleaning Up the CAFE

Earlier this week, as my family was driving through town, we stopped to let an enormous SUV back out of its parking spot on Main Street.  I thought that the driver must be happy to have heard about the CAFE standards -- that behemoth she was driving just got more valuable, since the new, tighter standards only apply to new vehicles.

On Tuesday, I participated in a panel at Dartmouth on "Facebook: Its Impact on Us and on Society," sponsored by the Institute for Security, Technology, and Society.  Below is an edited version of the remarks I made:

My tag line on the panel announcement was, "A professor, using Facebook? What for?"  That may be a bit misleading - I am certainly "on" Facebook and Facebook knows that I am a professor, but it is not clear that there is any meaningful way in which I am "using" it as a professor as opposed to any other 39-year old guy with a desk job.

Facebook may be the latest great thing, but we should understand it just as much for what it has in common with its predecessors as how it is innovative.  I think of Facebook as a tool for communication.  How good a tool it is depends on how well it allows us to broadcast, to connect, and to target.  I'd like to structure my remarks around my perceptions of how well or how uniquely Facebook performs in each of these aspects and then note how well it serves me as a professor.

I woke up today very thankful to see the words "arrest" and "alleged" in an otherwise gruesome and ominous headline:

FBI arrest four in alleged plot to bomb Bronx synagogues, shoot down plane

Home grown terrorism in the post-9/11 United States is going to change everything when it finally appears.

I wonder, Stan, from your description of the problem whether the parallels to public education aren't informative here.  Consider your statement:

The current business structure of the news doesn’t take externalities into account.  There are indeed substantial costs involved when people are not as well informed.  But from a public policy perspective, how do you estimate, let along capture, those costs? 

There is a belief that I am better off as a citizen if you are educated as opposed to uneducated.  The rationale is that an educated person can make better choices and better contribute to democratic self-government.  We describe education this way as something that happens largely in the pre-adult phase.  Doesn't it strike you as odd that we spend all that money on education so that people will have the capacity to be good citizens and then the choices they make about what programming they will favor in adulthood suggest that they have almost no interest in using that capacity?

With two caveats, the short answer is, "I hope so."  It is paper, for heaven's sake.  Why do we need to go through the trouble of printing when posting will do?  That's so 19th century.

I mentioned two caveats, so here they are.  First, I will always be willing to pay some small fee (like our current $3.75 a week) for an organized presentation that provides me with my local news.  I think there will always be a market for that.  The presentation doesn't have to be printed, but at present, that's the best way for us to get it.  Second, I do not really care about the disappearance of the newspaper, but I do care about the disappearnce of newsrooms -- the independent, aggressive search for new information to be reported.  I wouldn't be surprised if most of that activity migrated to the non-profit sector over the coming decade.  I would always be willing to pay some small fee (like a charitable donation of $100 a year) to support a well designed non-profit information gathering entity. 

The big news last week was that the annual Trustees Reports for Social Security and Medicare were released, and the financial condition of the programs worsened compared to the prior year's report.  When I read the Trustees Report for Social Security, I go straight for Table IV.B7, which shows that the unfunded obligations for the program over the infinite horizon are projected to be $15.1 trillion, which is equivalent to 3.4% of taxable payroll or 1.2% of GDP in perpetuity.  (Those numbers are up from 3.2% and 1.1% in last year's report.)  For an excellent set of comments on the reports, see the handouts from this panel convened by the National Academy of Social Insurance.