What caused the housing crisis?  The answer is simple.  Us.  And our avarice.  Not just the avarice of mortgage brokers and depraved hedge-fund managers.  But the avarice of the American homeowner, who worships his home like the Temple of Baal.  We worship our fabulous and modern and spacious and ultra-convenient new homes.  We worship, especially in cities like the beautiful and historic city of Savannah (where I live), historic homes and preserved homes and the history and faux family legacies they connote. 

House worship, encouraged by lifestyle publications like Southern Living, has long been a cult and a vice among more fortunate Southerners, not least in my hometown of Hillsborough, North Carolina, where tours of historic homes attract herds of orderly, often elderly tourists with guidebooks and maps.

Whether our homes are historic and magnificent or modern and magnificent, we want them to identify us and define us.

Way beyond comfort or any aesthetic considerations, the great houses tower and sprawl because, as Thomas Sutpen grasped, “How else would they know how much money I have, how far I’ve come?” […] I’m old enough to remember when the boss’s house on the hill, valued in an awed whisper at a hundred thousand dollars, occupied the pinnacle of envy. Now a hundred grand won’t buy a goat barn in most markets, and I’ve seen a private home listed at fifty-five million dollars, which I’m sure is no record. McMansions have become McVersailles and McBlenheims, McTaj Mahals. On the lovely beach west of Panama City, Florida, part of what was once known as the Redneck Riviera and recently as the Emerald Coast, a fifteen-mile hell of reckless development and architectural psychosis is crowned by a stadium-size beach house (built, I was told, by an heir to one of America’s famous fortunes) that looks like an alien spaceship crash-landed on the dunes. If its architect didn’t subsequently take his own life, he must have been one of the aliens.   

You may not live in a giant, climate-controlled alien spaceship that crashlanded on the dunes of the Gulf Coast, but do you really need everything you have?

The world is full of surprises and the counterintuitive.  Take for example: the slower I eat, the fuller I seem to get.  Or, the more firm I am with my children or my students, the more they seem to respond to me.  They could be faking.  The British Psychological Society Research Digest reports some other counterintuitive information: soccer goalies do better not to jump to block penalty kicks.

Ofer Azar and colleagues in Israel watched hours of archival footage and noticed that goalkeepers save substantially more penalty kicks when they stay in the centre of goal than when they jump to the left or right. Yet paradoxically, in 93.7 per cent of penalty situations, keepers chose to jump rather than stay in the centre.

In fact, analysis of 286 penalty kicks taken in elite matches around the world showed that keepers saved 33.3 per cent of penalties when they stayed in the centre, compared with just 12.6 per cent of kicks when they jumped right and 14.2 per cent when they jumped left.

Do you have any other freakonomic and counterintuitive data like that?

Everybody says the economy is tanking, so to provide some perspective - or maybe some reason for why it’s tanking - take a look at how a (roughly) $100,000 investment would turn out now, a decade later.

• An $85,000 “One-Bedroom Apartment on the Upper East Side” would now be worth $515,000.
• $99,991, worth of gold would now be worth $301,488.
• $97,500 worth of Hermès Kelly bags (20 total) would now be worth only $86,000.
• $92,100 worth of BMW (A BMW 750IL) would now be worth $11,999 (with low mileage).
• $99,995 worth of Apple Stock would now be worth $1,997,797.

The lesson is: Do what wise Americans have always done: Invest in good companies and buy a house.

Last week on American Idol, they raised a lot of money for a lot of people.  Millions and millions of dollars, raised by celebrities, by regular people, by everyone who watches TV.  None of this was bad.  It’s good to see people moved by pain and need to give.  But the whole spectacle of “Idol Gives Back” glosses over the truth of real charity.  No glut of cash from anyone, including the government, can change a human life like the simple solution of discipline.  Also called initiative.  Also called work.  After all, only a small percentage of America’s poor are unable work. 

In college, [Adam] Shepard read Barbara Ehrenreich’s Nickel and Dimed, which argues that only government intervention can rescue the working poor from what Ehrenreich portrays as a desperate plight. Shepard doubted her thesis and wanted to test it. So after graduating, he went to Charleston, South Carolina, with a sleeping bag, a change of clothes, $25, and a made-up tale of woe. He spent the first two months in a homeless shelter while he worked as a day laborer. He later found a permanent position with a moving company, which gave him a stable income. This allowed Shepard to buy a (very) used pickup truck, rent and furnish an apartment with a coworker, and start saving. 

During this time, he was on a strict budget, buying clothes at Goodwill and lunching on peanut butter crackers and Vienna sausages. After ten months, he left Charleston due to an illness in his family. By that point, he had saved over $5,000. Along the way, he had met dozens of marginal citizens whose lives he found relentlessly fascinating. 

And he wrote a book about it called Scratch Beginnings, “to disprove Ehrenreich’s argument about endemic poverty.” 

Critics have dismissed Shepard’s claims by pointing to the fact that he enjoyed an array of government services, from food stamps to bus rides to homeless services. But everyone Shepard encountered at the shelter and in the bad neighborhood he later lived in was already using the same services. It wasn’t the public services that lifted Shepard out of destitution-it was his own initiative. Indeed, if spending money on government services were the best way to cure poverty, it would no longer be a problem. 

You really ought to check out the story, and the book.

If anyone still thinks utopian political ideologies are a good idea, one should keep in mind that Cuba used to be pretty awesome.  In 1958, near the time when Castro and his monkeys came down from the mountain and turned it into a zoo, Cuba had a per capita GDP of $3,170, outranking “all other Latin American countries except four: Argentina, Chile, Uruguay and Venezuela.”  Cuba’s GDP was also “higher than any East Asian country or colony, save Japan, which barely beat Cuba at only $3,290. Hong Kong had a per capita GDP of $2,924, Singapore’s was $2,294, the Philippines’ was $1,447, Taiwan’s per person GDP stood at $1,387 and South Korea’s was $1,112.”

Fifty years later, Cuba is one of the poorest countries in Latin America.

That’s the fault of an ideology that sought the impossible and refused to deal with the realities of human needs, human nature, and the human condition.  For all the evils of capitalism, it’s a system based on human needs, human nature, and the human condition.  It’s the last best way of organizing a society. 

HT: AL Daily

Oil just passed $109 per barrel. Run for the hills, or at least for your hybrid vehicle. The alarm mentality is thick in the air today, but everyone just needs to take a deep breath. Given that oil prices are based on speculation, the worst possible response is worldwide panic.

The more we worry out about the price of oil the higher it will go in our speculative economy. Oppenheimer & Co. oil analyst Fadel Gheit thinks high prices are giving people an incentive to sell crude oil now and restock supplies later. In theory, this should lower the price over time as supplies increase, but prices have only gone up. “It’s pure speculation,” Gheit said. “What’s changed that we didn’t know in January?”

Some blame the war in Iraq for this price spike, but most don’t understand the correlation. The intent of the war was to stabilize the region and maintain a steady flow of oil to Western nations. The United States has achieved the second goal at the cost of the first as tensions in the region have steadily pushed prices up the speculative ladder.

While the war has created instability, the alternative might not have been better. The war in Iraq has engaged the enemy on their home turf and, in effect, kept them off ours. Had we not gone into Iraq, letting al-Qaeda easily move their bases there from Afghanistan–which they were able to do even with us there–perhaps we would have suffered another major attack on U.S. soil. This would have destabilized our markets again, driving up the price of oil anyway.

We are also not the only player in the Middle East. Associated Press commented Friday that Turkey’s incursion into northern Iraq is another reason for oil’s continued price rise.

The many hypotheticals in the oil debate, along with the vast array of causes, should take us away from the blame game and encourage us to focus on solutions, like drilling in Alaska or playing hardball with OPEC. Oil is high because we are fighting a war. Oil is high because people are scared.

The Economist says that Obama, for all his talk about being the candidate of hope and bipartisanship and a new way forward, he ”can sound pretty darned depressing.” 

[T]he front-runner’s speeches have begun to paint a world in which laid-off parents compete with their children for minimum-wage jobs while corporate fat-cats mis-sell dodgy mortgages and ship jobs off to Mexico. The man who claims to be a “post-partisan” centrist seems to be channelling the spirit of William Jennings Bryan, the original American populist, who thunderously demanded to know “Upon which side shall the Democratic Party fight-upon the side of ‘the idle holders of idle capital’ or upon the side of ‘the struggling masses’?”

There is no denying that for some middle-class Americans, the past few years have indeed been a struggle. What is missing from Mr Obama’s speeches is any hint that this is not the whole story: that globalisation brings down prices and increases consumer choice; that unemployment is low by historical standards; that American companies are still the world’s most dynamic and creative; and that Americans still, on the whole, live lives of astonishing affluence.

But he’s not the only one who paints a gloomy, sad picture of America.  His’s opponent does, too.  McCain is the only candidate on either side that has said anything about the necessity of globalization and how some jobs won’t be coming back anytime soon.  This is Obama’s weak spot: the necessarily dark picture of America he must paint to justify change, hope, and him.  If McCain can turn that argument back on his opponent (either one), he could do well for himself.

Popular economics is fun, applying economic models and tools to figure out human behavior.  Books like Freakonomics and Naked Economics are easy to read (I’d also recommend the decidedly less easy, but brief and lucid Economics in One Lesson).  Here’s an article about young (32-year old) Harvard economist Ben Olken, who has discovered, among other things:

• Assassinations of autocratic leaders usually leads to democracy.  Assassinations of democratic leaders usually have no effect.
• Democratic leaders have very little effect on economies, even when they die in office.
• The clarity of your TV-antenna reception in Indonesia is directly correlative to your lack of participation in social institutions.

If you liked any of those books mentioned about, keep reading.

America is The Great Reality Show.  We are the land of competition.  We spend all day in competition.  We come home at night and watch competition.  We go to sleep and dream about one day being in a televised competition ourselves.  But we sometimes feel bad about this.  Policy analyst Daniel Akst says competition is good, and it gets a bad rap.  So before you go feeling bad about the dangers of economic competition, in particular, he says to remember these points:

1. “It used to be worse. Think of the Roman gladiators!”
2. “Life is not as competitive as the media might have us believe. It’s important to remember that our cultural elites live with so much competitive anxiety that their lives simply aren’t representative.”
3. “It’s our nature. This is probably not a great argument for anything, but it’s worth noting that competition is at least as natural to us as cooperation.”
4. “Competition ­is - ­dare we admit it? - good for us. The desire to win was surely one of the things that motivated Branch Rickey to break baseball’s color barrier by bringing ­an African-­American ballplayer to the Dodgers.”

#3 is the scariest argument, though.  Lots of bad things are a part of our natures, too.  Violence, for example.  But he’s right, in the main.

Education matters, and the doctrine we teach the young today will be the practice of tomorrow.  And so, it makes little sense that Europe, a continent that needs to get its economy going as much as anyone, is teaching its children that free markets are evil, evil, evil.

Just as schools teach a historical narrative, they also pass on “truths” about capitalism, the welfare state, and other economic principles that a society considers self-evident. In both France and Germany, for instance, schools have helped ingrain a serious aversion to capitalism. In one 2005 poll, just 36 percent of French citizens said they supported the free-enterprise system, the only one of 22 countries polled that showed minority support for this cornerstone of global commerce. In Germany, meanwhile, support for socialist ideals is running at all-time highs-47 percent in 2007 versus 36 percent in 1991.

The scary thing is, so many teachers and educators - at all levels - in the U.S. might agree with so much of this stuff.