Two Aces Of Spades In Windows Solitaire Deck: Definitely A Computer Glitch: Should I Stop Trusting Computers?

The above is a cropped screen shot of a Windows solitaire game I was playing Thursday (December 30, 2010) evening that shows a deck with two aces of spades. The game is running on a Dell laptop with Windows XP Professional, SP3 and all updates, and 2GB RAM. The solitaire game software is the original installed Microsoft game included with Windows XP.

On which ace do I put the two of hearts?

In over a decade of playing Windows Solitaire on various computers, I have never seen two of the same cards in a single game before.

I think it is such an odd curiosity, I just had to post it on my blog.

In some ways, it is frightening. We rely so much on government, business and personal computers these days to store our personal information, and do our computations. Imagine what could happen if one of those computers suddenly duplicated information from a file and stored it under another person's name or id number, or made occasional mathematical errors.

The systemic risk from our reliance and over reliance on computers is immense. Just like in the financial sector, where there is an element of trust that enables interactions to work smoothly, individuals, firms and governments trust the stored data and computations from computers. If that trust is weakened, economic and political activity will feel the negative effects of lost trust in our technological infrastructure. The prospect of lost trust in our technological foundation due to random errors is a huge systemic risk to commerce and we are unprepared to deal with it.

Addendum:

After a few more cards, there are five aces, two spades, one heart, one diamond and one club.

Securitization Not Obstacle To Modifying Mortgages

From Federal Reserve Bank of Atlanta, " Revisiting real estate revisionism: Concessionary mortgage modifications during the Depression" by Kris Gerardi, Research economist and assistant policy adviser at the Federal Reserve Bank of Atlanta and Chris Foote, senior economist and policy adviser at the Federal Reserve Bank of Boston:

Fortunately, a recent paper by Andra Ghent of Baruch College exploits a new data set to shed considerable light on this topic. Her findings argue against the idea that lender reluctance to modify is a recent phenomenon .... her findings ... bury the notion that securitization is the primary obstacle to renegotiation in the current foreclosure crisis. [Emphasis added.]

Governments Are An Unregulated Source Of Systemic Risks: Atlanta Fed

From the Federal Reserve Bank of Atlanta Center for Financial Innovation and Stability, "The Economics of Regulating Systemic Risk" by Gerald P. Dwyer:

After the 2007–2008 financial crisis, it is natural to suppose that private firms and people are the sources of systemic risk. But they are not the only sources and maybe not the main ones (Reinhart and Rogoff 2009). Recent events in Europe have made this point dramatically. The sovereign debt problems in Greece, Ireland, and elsewhere in Europe make it plain that governments can be the source of systemic risk. The increases in interest rates and credit default swap rates for these countries pose a substantial risk to credit markets and the ability of the government to function. At least to some extent, these increases in spreads and rates are the result of decisions made by those in government. For example, Ireland's problems are largely a result of the government's guarantee of all the liabilities of Irish banks. It is not clear how such choices can be regulated other than through the ballot box. [Emphasis added.]

Is it possible that all systemic risk to our financial and economic systems is due to government actions, laws, regulations and policies? Think of FDIC insurance, Too Big To Fail, legislated bankruptcy preferences, TARP, US GM takeover lasting effect, union favoritism by government, Fed's money supply manipulation, etc.

New Economists Are Unaware Of Coase's Work

From "Happy Birthday Ronald Coase" by Mario Rizzo:

Today most students at the top economics have never been exposed to Coase’s work.

If economists are not exposed to Ronald Coase's work on property rights and transaction costs, it is unlikely the untrained economists will incorporate Coase's important ideas into their thinking and analyses.

No wonder most economists push for more regulations to solve problems, more taxes and government subsidies to modify consumer and corporate behavior, and more regulatory and government interference in markets to correct undesirable, unwanted and sub-optimal outcomes.

A Coasean analysis of unwanted outcomes would identify the various property rights and look for a market based approach to reduce and eliminate the negative effects without an imposition of more taxes or prohibitory regulations.

Coasean Property Rights Without Pigouvian Externality Taxes Can Solve Environmental Problems

From The Percolator Blog, "Coase’s 100th Birthday: No More 'Externalities' " by Terry Anderson:

Unlike the Pigouvian approach, which claimed that market failure could be corrected by taxes, subsidies, and regulations, Coase taught us to view these issues in light of property rights and markets. In short, Coase taught against the use of the word “externality.”

Read the complete blog post here.

The Unrelatedness Of Global Warming And The East Coast Snow Blizzard

Pepper...and Salt
(Source Wall St Journal, 12/29/10)

Despite what one believes, hears on Cable and Network TV, and reads in newspapers and blogs, weather events like snow blizzards, record setting cold temperatures, heat waves, torrential rains and droughts, where you live or in other parts of the world, do not prove or disprove global warming and climate change.

Global warming is about the increase of a few degrees (probably around 5 degrees Fahrenheit) in the Earth's atmospheric average temperature.

There will be tremendous temperature variation in different parts of the world in the amount of temperature change. Some areas will see more change than the average, some will see less, some by the average amount and some parts may even see temperatures decline.

The average 5 degree change, plus or minus one or two degrees, is a high probability prediction. The extreme event of a much greater temperature change is not impossible under the current models. It is a low probability, but a possible, unlikely frightening and devastating occurrence.

Because there is so much weather variation around the globe at any given time and during a year or a decade, there is tremendous uncertainty about the effect global warming will have on any particular place's weather. Some places may see little or no change. Some places may see tremendous increases or decreases in temperatures. Some places may see big changes in weather patterns and others may see no changes at all.

Global warming will increase ocean water temperatures and will increase snow and ice melting at the polar caps. In different parts of the world, sea levels and coastal flooding will occur, with variations as to the amount of flooding and sea level rise.

Global warming makes no predications about any particular hurricane, tornado, tsunami, snow blizzard, torrential rain or drought. Global warming does not make any predictions about the amount or seasonal totals of those weather events, locally, regionally, or worldwide.

Global warming just says that due to the increase retention of heat in the atmosphere, the average temperature of the world will rise by a few degrees. Global warming does not predict how this will affect weather in any particular part or parts of the world.

The science of global warming is much more certain than the science about the effects global warming will have on the earth's weather. Global warming is a much more sure thing than how it will affect us.

What we should do to stop and to reverse global warming and when is speculation and guesses at this point in time.

Global warming is a concern because it will affect people's lives. Some people will be affected more than others. Those that are most affected will see their livelihoods, their wealth, and their countries' wealth affected.

It could cause mass migrations and movement of animals, plants and people, or it could not. It could change disease prevalence or it could not.

How and if it affects future weather in any particular place or country is unknown and unpredictable.

So, all those blogs, talk shows, news commentators and media stories about weather events and global warming are like Santa's sleigh tracking stories on Christmas Eve. The stories are make believe and media filler to retain and attract audiences.

The severity of the recent East Coast snow blizzard is unrelated to global warming. The storm proves nothing about the existence or non-existence of global warming.

Happy Birthday Ronald Coase

Happy Birthday Ronald Coase.

His Nobel Prize autobiography.

His 1960 paper, The Problem of Social Cost.

A current article in The Economist about Ronald Coase, "Why Do Firms Exist?"

Spending Cuts Are The Only Way To Successfully Balance The US Budget: Tax Increases Fail To Balance The Budget

From The Wall Street Journal article "The Right Way to Balance the Budget: The experience of 21 countries over 37 years yields a simple truth: Cutting spending works, and raising taxes doesn't" by Andrew G. Biggs, Kevin Hassett And Matt Jensen:

The data also clearly indicate that successful attempts to balance budgets rely almost entirely on reduced government expenditures, while unsuccessful ones rely heavily on tax increases. On average, the typical unsuccessful consolidation consisted of 53% tax increases and 47% spending cuts.

By contrast, the typical successful fiscal consolidation consisted, on average, of 85% spending cuts.***Consistent with other studies, we found that successful consolidations focused on reducing social transfers, which in the American context means entitlements, and also on cuts to the size and pay of the government work force. A 1996 International Monetary Fund study concluded that "fiscal consolidation that concentrates on the expenditure side, and especially on transfers and government wages, is more likely to succeed in reducing the public debt ratio than tax-based consolidation."***While tax hikes slow revenue growth, policies that credibly reduce government spending in the long run boost economic growth by more than their simple effects on deficits might imply. Any attempt to address the federal government's budget shortfall that relies on less than 85% spending cuts runs too large a risk of failure.

Read the complete Wall Street Journal article here.

Taxing The Rich Is Taxing The Middle Class

From Part I of the excellent four part Forbes Commentary "The 'Tax The Rich' Con" by Charles W. Kadlec:

In reality, the call to "tax the rich" is a cover story for levying higher tax rates on the prosperous middle class.***In addition, the "tax the rich" mantra assumes that the same individuals make the same amount of money each and every year. The reality is that, in many cases, producing an annual income of $250,000 is achieved after years of hard work and career advancement. Those who report incomes of more than $250,000 in a single year in many cases are also individuals who have owned and operated a business, built it over a life-time as they earned a modest income, and sell the business in the current year.

Thus, the higher tax rates the Democrats say are aimed at the rich actually are targeted at the baby boomers as they hit their peak earning years. There are no precise data on the demographics of those who make more than $200,000 a year. But based on Census data for 2007, the latest year available, it is clear that incomes tend to peak between the ages of 45 and 64--that is currently for those who were born between 1947 and 1966. Of the 23.6 million households with incomes of $100,000 and more in 2007, 12 million, or 50%, were within this 20-year group of baby boomers.

But where is the justice in reducing these individuals' financial ability to pay for their children's college educations, save some extra money for retirement or take a nice family vacation?

The complete Part I is available here.

Part II is available here.

Part III is available here.

Part IV is available here.

Health Care A Right, Comment

My comment posted on Cafe Hayek, "Is Basic Health Care a ‘Right’?" by Don Boudreaux:

If there is a right to healthcare, then it is my right not to exercise it.

Freedom of speech does not require me to speak. The right to a jury trial and an attorney gives me the right to refuse a jury trial and an attorney, and instead to be tried before a judge, to represent myself w/o an attorney, and to plea bargain with the Prosecutor.

In contradiction to a right, the right to US healthcare requires me to obtain health insurance, requires me to obtain a government approved form of health insurance with mandatory coverage provisions. As a senior single male, I am required to obtain a health insurance policy that includes payment for mammograms, pregnancy and birth control and prevents the insurer from charging me a different price than a childbearing aged female.

A right includes the right to refrain to exercise, and the right to give away all or part of my right. For example, the constitutional right against self-incrimination includes the right to waive that right and negotiate with the government the right to full or partial immunity from prosecution.

Healthcare as implemented under the new law is the antithesis of a right.

Gulf of Mexico Suffered Little Damage From Deepwater Horizon Oil Spill

From the Weekly Standard, "Oil Spill Hysteria: The Gulf of Mexico suffered remarkably little damage. Why were so many so willing to believe otherwise?" by Robert H. Nelson, professor of environmental policy at the University of Maryland:

top White House staff were consumed by the spill and its political fallout for much of the spring of 2010. As staffers now lamented privately, this had diverted attention from other pressing issues—above all, the sputtering economy.

The political fortunes of the Democratic party were not the only collateral damage from the spill. Gulf coast tourism plummeted, even in areas untouched by oil. Seafood restaurants in New York and Chicago proudly advertised that they did not serve Gulf fish. And many oyster beds were devastated when they were flushed with fresh water from the Mississippi River as a “preventive” measure. Most recently, on December 1, Interior Secretary Ken Salazar cancelled previous plans for much expanded offshore oil and gas drilling, killing thousands of jobs and forgoing an opportunity to reduce the nation’s enormous foreign energy bill.

Oddly enough, however, the ecosystem of the Gulf itself turns out to have suffered remarkably little damage from the continuous gushing of oil into the water from April 20 till July 15, when the leaking well was capped. [Emphasis added.]

Read the complete article here.

20 Best Performing City Housing Markets of the Decade

From Zillow Blog, "Top 20 Best Performing Cities of the Decade" by Alison Paoli, Zillow PR Specialist | December 23, 2010:

By-Laws Are Better For Stopping Insider Trading Than The SEC And Government Enforcement

From the very good article, "Inside Insider Trading" by Warren C. Gibson, who teaches engineering at Santa Clara University and economics at San Jose State University:

Shareholders who object to insider trading are usually thought to have no alternative but government regulation. That’s just not so. Insider trading could be prohibited or restricted by corporate bylaw provisions. Outside auditors would monitor management behavior, and suspected violations would be referred to arbitrators. It might seem inefficient for small shareholders to expend the time and energy necessary to get together and pursue possible corporate violations. But following David Friedman’s innovative ideas on law and economics, we can imagine shareholders selling in advance their rights to recover damages from possible future violations. Specialists could acquire these rights and pursue violations efficiently. Corporate management would be well aware of the watchful eyes of these specialists.

Read the complete article here.

The comment I posted to the above article on Freeman Blog:

There is no need to make a by-law exception for takeovers. Acquiring companies will not pay more than their valuation of the worth of the target company or their ability to make a profit and increase shareholder value at the acquiring price. If the market raises the stock price too high for the acquiring company, the buying company will walk away. If the price stays above the original target price, it is an indication that the target company is worth more to another acquiring company.

Earlier release of the information that there is a possible acquiring company buying up shares will prevent shareholders of the target company from selling prematurely, while the buying company is acquiring shares prior to announcement. Earlier release of takeover information will also allow other companies to evaluate a takeover of the target and it could result in another company that gets a greater economic benefit from the acquisition bidding a higher price than the original acquirer would.

While it is cheaper to acquire shares before an announcement and run-up in the share price, it is at the expense of the target shareholders of a potentially higher acquisition price and at the expense of target shareholders that trade in the short period prior to announcement. Additionally, allowing more time for other companies to evaluate and bid could result in a better economic allocation of resources.

Other Checkout Lines More Likely To Move Faster Than Your Line: You Are More Likely To Be In The Slowest Line

As you always suspected, you have a knack for choosing the slowest checkout lane at the store.

From "Scientifically, You Probably Are in the Slowest Moving Line" by Michael Santo:

scientifically, it can be proven that the other line is more likely to move faster than your line. As shown in the video, in a system with three checkout lines, 2/3 of the time, the other lines will move faster than yours. Watch the video below.

Anti Big Government, Anti Income Redistribution Americans Give 4 Times As Much To Charities As Liberals

From The Wall Street Journal article, "Tea Partiers and the Spirit of Giving" by Arthur C Brooks:

When it comes to voluntarily spreading their own wealth around, a distinct "charity gap" opens up between Americans who are for and against government income leveling. Your intuition might tell you that people who favor government redistribution care most about the less fortunate and would give more to charity. Initially, this was my own assumption. But the data tell a different story.

....the General Social Survey (GSS) found that those who were against higher levels of government redistribution privately gave four times as much money, on average, as people who were in favor of redistribution. This is not all church-related giving; they also gave about 3.5 times as much to nonreligious causes. Anti-redistributionists gave more even after correcting for differences in income, age, religion and education.

Of course, there are other ways to give than with money....those who said the government was "spending too much money on welfare" were more likely to donate blood than those who said the government was "spending too little money on welfare." The anti-redistributionists were also more likely to give someone directions on the street, return change mistakenly handed them by a cashier, and give food (or money) to a homeless person.

NY Med Schools Act Like Cartel: Try To Prevent Clinical Training And Influx Of Foreign Educated Doctors

From the New York Times, "Medical Schools in Region Fight Caribbean Flow" by Anemona Hartocollis:

New York State’s 16 medical schools are attacking their foreign competitors. They have begun an aggressive campaign to persuade the State Board of Regents to make it harder, if not impossible, for foreign schools to use New York hospitals as extensions of their own campuses.***More than 42,000 students apply to medical schools in the United States every year, and only about 18,600 matriculate, leaving some of those who are rejected to look to foreign schools. Graduates of foreign medical schools in the Caribbean and elsewhere constitute more than a quarter of the residents in United States hospitals.***The New York schools want the state to adopt the position of the American Medical Association, that “the core clinical curriculum of a foreign medical school should be provided by that school and that U.S. hospitals should not provide substitute core clinical experience.”***“There is evidence,” Mr. Muñoz [a deputy state education commissioner] said, that the more mature Caribbean schools “admit students with very competitive backgrounds. It appears that many of these students were not granted admission to domestic schools because of the limited number of available seats.”

Read the complete NY Times article here.

City Stops Paying Public Retirees Their Government Pensions

From The New York Times article, "Alabama Town’s Failed Pension Is a Warning" by Michael Cooper and Mary Williams Walsh:

Then Prichard [Alabama] did something that pension experts say they have never seen before: it stopped sending monthly pension checks to its 150 retired workers, breaking a state law requiring it to pay its promised retirement benefits in full.***So the declining, little-known city of Prichard is now attracting the attention of bankruptcy lawyers, labor leaders, municipal credit analysts and local officials from across the country. They want to see if the situation in Prichard, like the continuing bankruptcy of Vallejo, Calif., ultimately creates a legal precedent on whether distressed cities can legally cut or reduce their pensions, and if so, how.

“Prichard is the future,” said Michael Aguirre, the former San Diego city attorney, who has called for San Diego to declare bankruptcy and restructure its own outsize pension obligations. “We’re all on the same conveyor belt. Prichard is just a little further down the road.”***A lawyer representing the city, R. Scott Williams, said that the city simply did not have the money. “The reality for Prichard is that if you took money to build the pension up, who’s going to pay the garbage man?” he asked. “Who’s going to pay to run the police department? Who’s going to pay the bill for the street lights? There’s only so much money to go around.”

Consumers Have Higher Auto And Credit Card Delinquencies Following Foreclosures

From "Foreclosure's Wake: The Credit Experiences of Individuals Following Foreclosure" by Kenneth P. Brevoort and Cheryl R. Cooper:

Our analysis documents the substantial declines in credit scores that accompany foreclosure and examines the length of time it takes individuals to return their credit scores to pre-delinquency levels. The results suggest that, particularly for prime borrowers, credit score recovery comes slowly, if at all. This appears to be driven by persistently higher levels of delinquency on consumer credit (such as auto and credit card loans) in the years that follow foreclosure. Our results also indicate that the experiences of individuals whose mortgages entered foreclosure from 2007 to 2009 have followed a similar path to borrowers foreclosed earlier in the decade, though post-foreclosure delinquency rates for the recently foreclosed have been higher and, consequently, credit score recovery appears to be taking longer.

The authors speculate in their paper as to cause and effect of the subsequent defaults in consumer credit. Bankers, however, know that one of the best indicators of a future loan default is a recent previous loan default.

Some borrowers characteristically feel less of an obligation to repay loans. Other borrowers suffer a persistent economic shock, such as a loss of a job, death of a wage earner, divorce, or an unexpected major expense, which impairs the borrower's ability to repay the loan.

Foreclosure in many cases is a signal of a borrowers unwillingness to repay or of the borrower's inability to repay due to loss of income from an economic shock.

I would guess that if the researchers looked at an opposite effect, consumer credit card and auto loan defaults prior to a foreclosure, they would have found a similar effect, but with the order of the loan defaults reversed. They would have found that consumer credit card and auto loan defaults of mortgage borrowers impaired future credit scores from subsequent mortgage foreclosures.

Mixing Cornstarch Into The Top-kill Could Have Stopped Gulf Oil Spill Sooner

From "Cornstarch might have ended the Gulf spill agony sooner" posted on ScienceBlog:

Jonathan Katz, PhD, professor of physics in Arts & Sciences at Washington University in St. Louis, ... suggested a simple fix, a change to the mud recipe ... the addition of a shear-thickening polymer like cornstarch to a dense top-kill mud might have allowed slugs of mud to descend against the upwelling oil instead of being ripped up and spat out of the well. Eventually, the column of mud would have prevented any further infiltration from the oil reservoir, killing the well.

15 To 19 Year Old Teen Birth Rates At 70 Year Low

From "Teen Births Hit Low in Hard Times" by Mike Esterl in The Wall Street Journal:

The birth rate among U.S. teenagers fell to a record low in 2009, and some experts attributed the decline to the recession.

The overall birth rate in the U.S. dropped 4% to a historic low last year, to 13.5 per 1,000 people from 14.0 in 2008, the Centers for Disease Control and Prevention said Tuesday. But a steeper decline occurred among those 15 to 19 years old, with the rate falling 6% to 39.1 births per 1,000 females in that age group, the lowest in seven decades of tracking. Rates among teens of all ages, races and ethnic groups also hit record lows in 2009.

Read the complete article here.