Miscellany

In no particular order, here are a few things I stumbled across in the past week or so.

Arnold Kling has a fable about producing and consuming loaves of bread. It will only take you a couple of minutes to read it but you will think about it for a longer time.

John Hempton writes:

Underlying Roddy’s books are a few financial truths that bear repeating. Firstly anything that has any chance of going wrong if done for long enough will go wrong. It doesn’t matter if your model tells you that you will be fine in any mortgage default environment short of the great depression: if you continue to bet on that model you will lose. Maybe not next year. Maybe not in ten years but you will eventually lose.

Likewise if you write large quantities of out-of-the-money puts you will eventually lose a lot of money.

Likewise if your model assumes that there is always going to be a deep liquid market in any security (with the possible exception of a Treasury bond) then one day you will wake up and the buyers will have scampered like antelopes from a waterhole at first sight of a lion. Any business that has to roll a large amount of debt at regular intervals is dangerous.

Ignore these truths and you take a risk. Ignore them on a grand enough scale and the risk will be fatal.

This is from a really fine post in which he reviews Fatal Risk by Roddy Boyd. John not only makes you want to buy the book but manages to put up an article that will have you thinking along a lot of other lines as well.

David Henderson has an interesting take on “sustainability” and manages to weave the issue of propaganda in higher education into the post.

Megan McArdle has some thoughts on the debate about whether it is better to entrust health care cost control to government boards or to consumers. I go back and forth on the issue but found this from the WSJ to be telling:

All attempts to reduce bureaucracy increase it, and the same goes for cost. Such, at any rate, has been my experience of the British health care system—its famed, or infamous, National Health Service.

Thus, I could not but smile a little wanly when President Barack Obama said this week that he hoped an increase in the use of generic drugs, together with an expert commission to examine the cost-effectiveness of medical treatments, would make a significant impact on the vast budget deficit of the United States. We in Britain have been there and we have done that, and our health-care costs doubled, perhaps not as a result, but certainly at the same time.

The best that might be said for these measures is that the increase in health-care costs was lower than it might otherwise have been. That is certainly not enough to save a country from a financial apocalypse, or even enough to be a major contribution to its salvation.

It’s written by a doctor who has the advantage of having witnessed the actual workings of a national health plan. He shows how people have a propensity for destroying the best laid plans of well meaning technocrats.

Finally, for some fun read That’s Not A Dinosaur !. Scientists have a decidedly different new view of what the creatures looked like.

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