“Ten years ago, we used to dream that cities would become slum-free,” says Muhammad Khadim of UN-Habitat. “The approach has changed. People see the positives. The approach now is not to clear them but to improve them gradually [and] regularise land tenure.”

Cameron Sinclair, who runs the non-profit design firm Architecture for Humanity, goes further. “A slum is a resilient urban animal. You cannot pry it away,” he tells me. “It’s like a good parasite. There are some parasites that attack the body and you have to get rid of them but, within the city, the informal settlement is a parasite that acts in harmony with the city, keeps it in check.”

Chris Martenson: Is that where you are? So in your estimation, conventional oil has peaked? I think that’s in the rearview mirror, but you’re now going out and saying all liquids that we would call oil; forget about the funny stuff out there, the ethanol and whatnot, but in terms of stuff that comes out of the ground we would call oil, we’ve peaked?

Nate Hagens: Well, I’ve stopped paying attention to that, Chris, because I don’t think it really matters. I think Peak Oil is a constraint going forward, but it’s not the real driver on the energy side. It’s that our marginal cost keeps going up for liquid fuels, which are basically the hemoglobin of global trade and global commerce, so that’s relevant. But whether we have another million, or two million, or two million less, isn’t the real story. We’re not going to be able to meaningfully grow something that the entire world depends on, and so I think all this bickering about which month or which year is the highest is missing the point. And then I’m sure, we’ll probably touch on it later, the greater threat right now is not Peak Oil, but Peak Debt or Peak Credit, and that’s the much more clear and present danger.

James Howard Kunstler on his excellently titled blog Clusterfuck Nation:

One wild card is how angry the American people might get. Unlike the 1930s, we are no longer a nation who call each other “Mister” and “Ma’am,” where even the down-and-out wear neckties and speak a discernible variant of regular English, where hoboes say “thank you,” and where, in short, there is something like a common culture of shared values. We’re a nation of thugs and louts with flames tattooed on our necks, who call each other “motherfucker” and are skilled only in playing video games based on mass murder. The masses of Roosevelt’s time were coming off decades of programmed, regimented work, where people showed up in well-run factories and schools and pretty much behaved themselves. In my view, that’s one of the reasons that the US didn’t explode in political violence during the Great Depression of the 1930s - the discipline and fortitude of the citizenry. The sheer weight of demoralization now is so titanic that it is very hard to imagine the people of the USA pulling together for anything beyond the most superficial ceremonies - placing teddy bears on a crash site. And forget about discipline and fortitude in a nation of ADD victims and self-esteem seekers.

The overall set-up of IKEA minimises tax and disclosure, handsomely rewards the founding Kamprad family and makes IKEA immune to a takeover. And if that seems too good to be true, it is: these arrangements are extremely hard to undo. The benefits from all this ingenuity come at the price of a huge constraint on the successors to Ingvar Kamprad, the store’s founder, to do with IKEA as they see fit.

The parent for all IKEA companies—the operator of 207 of the 235 worldwide IKEA stores—is Ingka Holding, a private Dutch-registered company. Ingka Holding, in turn, belongs entirely to Stichting Ingka Foundation. This is a Dutch-registered, tax-exempt, non-profit-making legal entity, which was given the shares of Mr Kamprad in 1982. Stichtingen, or foundations, are the most common form of not-for-profit organisation in the Netherlands; tens of thousands of them are registered.

Most Dutch stichtingen are tiny, but if Stichting Ingka Foundation were listed it would be one of the Netherlands’ ten largest companies by market value.

Posted at The Economist.

Tim Bray on Sun:

Sun is going through a lousy spell right now. Well, so is the world’s economy in general and the IT business in particular, but this is about Sun. This is my opinion about what my employer should do about it. [. . .] Sun should adopt a laser focus on building a Sun Web Suite and becoming the Web application deployment platform of choice. It’s a large space, a growing space, and one where we can win.

He is obviously absolutely right, there is no place for the old Sun in this world. However Sun does have some excellent tech, and importantly they seem to still have a lot of top engineers, so if they can manage a major restructuring they have a fighting chance.

Clay Shirky, author of Here Comes Everybody: The Power of Organizing Without Organizations, talks about the economics of organizations with EconTalk host Russ Roberts. The conversation centers on Shirky’s book. Topics include Coase on the theory of the firm, the power of sharing information on the internet, the economics of altruism, and the creation of Wikipedia.

And a great bit of discussion on representative vs. direct democracy and the possibility that networks can enable direct democracy.

Via EconLog.

In the Economist:

In the late 1990s a generation of academic economists had their eyes opened by Mr LeDoux’s and other accounts of how studies of the brain using recently developed techniques such as magnetic resonance imaging (MRI) showed that different bits of the old grey matter are associated with different sorts of emotional and decision-making activity. The amygdalas are an example. Neuroscientists have shown that these almond-shaped clusters of neurons deep inside the medial temporal lobes play a key role in the formation of emotional responses such as fear.

These new neuroeconomists saw that it might be possible to move economics away from its simplified model of rational, self-interested, utility-maximising decision-making. Instead of hypothesising about Homo economicus, they could base their research on what actually goes on inside the head of Homo sapiens.

However, not everyone is convinced. The fiercest attack on neuroeconomics, and indeed behavioural economics, has come from two economists at Princeton University, Faruk Gul and Wolfgang Pesendorfer. In an article in 2005, “The Case for Mindless Economics”, they argued that neuroscience could not transform economics because what goes on inside the brain is irrelevant to the discipline. What matters are the decisions people take—in the jargon, their “revealed preferences”—not the process by which they reach them. For the purposes of understanding how society copes with the consequences of those decisions, the assumption of rational utility-maximisation works just fine.

See also: Commodity traders superior to chimpanzees, research shows

Lewis Page in The Register:

Professor David J C MacKay of the Cambridge University Department of Physics holds a PhD in computation from Cal Tech and a starred first in Physics, so we can take it that he knows his numbers. And, as he points out, numbers are typically lacking in current discussion around carbon emissions and energy use.

MacKay tells The Reg that he was first drawn into this field by the constant suggestion — from the Beeb, parts of the government etc — that we can seriously impact our personal energy consumption by doing such things as turning our TVs off standby or unplugging our mobile-phone chargers.

Anyone with even a slight grasp of energy units should know that this is madness. Skipping one bath saves a much energy as leaving your TV off standby for over six months. People who wash regularly, wear clean clothes, consume hot food or drink, use powered transport of any kind and live in warm houses have no need to worry about the energy they use to power their electronics; it’s insignificant compared to the other things.

The article goes on to summarize some of the solution scenarios MacKay worked out for the UK, and as you would expect nuclear is the only one that is close to achievable.

Via Arts & Letters Daily.

The WSJ does a timeline of the Bear Stearns deal:

Mr. Paulson was frequently on the phone with Bear and J. P. Morgan executives, negotiating the details of the deal, the senior Treasury official said. Initially, Morgan wanted to pick off select parts of Bear, but Mr. Paulson insisted that it take the entire Bear portfolio, the official said.

This was no normal negotiation, says one person involved in the matter. Instead of two parties, there were three, this person explains, the third being the government. It is unclear what explicit requests were made by the Fed or Treasury. But the deal now in place has a number of features that are highly unusual, according to people who worked on the transaction.

Via Paul Kedrosky's Infectious Greed.

Anthony de Jasay at Cato Unbound:

This paper is a sequel of an article I wrote twenty years ago that I now think can be put more tightly and clearly. That early paper was born of the irritation I felt, and continue to feel, at much of the classical liberal discourse about limited government. At least since Locke, that discourse sets out a normative ideal of government: the protector of “rights” its citizens are in some fashion endowed with, and the guarantor of liberty that ranks above rival values. Such government uses coercion only to enforce the rules of just conduct. This ideal is attractive enough to the liberal mind. The reason why it nevertheless irritates is that it makes it seem that the writing of a constitution of liberty is a plausible means for transforming the normative ideal into positive reality. The message is that “we” can have limited government in the above sense if only “we” understand why we ought to wish it. The “we” is crucial, for it suppresses the essence of collective choice. Collective choice starts where unanimity ends, and involves some deciding for all, where the “some” control the apparatus of government. It is the potential for some to benefit morally and materially at the expense of others that creates the bone of contention and that limits on government are meant to move out of reach. It is odd that little or no awareness is shown of the “incentive-incompatibility” (if we may use ugly but handy jargon) of limits that would exert real rather than illusory restraint.

Fairly simple and easy to read look at the impossibility of legislatively constraining government, and on the other hand the natural economic limits that do constrain all governments (though in a painfully wide band that they can and do tend to oscillate in).

Via EconLog.

Alexander Campbell at Risk:

In a radical overturning of conventional wisdom, scientists in Georgia and California have found significant differences between commodity traders and chimpanzees. Chimps are, in fact, not very good at commodity trading.

Read on for the hilarious analysis.

Via Paul Kedrosky's Infectious Greed.

Jennifer Senior in New York Magazine

In 2000, there were 7,000 American households worth $100 million or more; in 2003, there were 10,000; and today, though the data isn’t yet in, Boston College estimates that the number will be 14,000 or 15,000, or double what it was at the beginning of the millennium. If you pare back the standard from eight zeroes to seven, the numbers are even more surprising: Boston College has calculated that in 2004, the last time the Fed provided data, there were 649,000 American households worth $10 million or more, a nearly 300 percent jump since 1992. […]

At some point, the offspring of this charmed class will be the stewards of the dollhouse nation their parents have created—and, more important, the caretakers of its treasury. Already, Boston College projects that inheritances received between 2003 and 2007 will be 50 percent larger than those received between 1998 and 2002, and that’s after adjusting for inflation.

Posted to The Economist.

The conclusion:

Nobu, the young salaryman, likes his job but plans to start his own business one day. The older men in his office struck compromises that he is not prepared to endure. “After 1945, we were left with nothing, so we had to work together, with the same goal and as one team. We were a success, and Japan grew,” he says. “But this organisation doesn’t work any more. It has stayed the same for too long. The system has rusted.”

Forget "Think of the Children!", try "Think of the Environment!"

Divorce is not just a family matter. It exacts a serious toll on the environment by boosting the energy and water consumption of those who used to live together, according to a study by two Michigan State University researchers.

The analysis found that cohabiting couples and families around the globe use resources more efficiently than households that have split up. The researchers calculated that in 2005, divorced American households used between 42 and 61 percent more resources per person than before they separated, spending 46 percent more per person on electricity and 56 percent more on water.

But be careful, as your partner may just reply "I've found someone new":

"There's strong evidence, which emerges clearly in this paper, that merging what otherwise would be separate households will reduce energy and other resource needs," Cavanagh wrote in an e-mail. "The best advice to those who are miserable together is not, however, to avoid divorce for the sake of the environment, but to find someone else as quickly as possible."

Via Jonathan Adler at Volokh.

There’s a “green line” that runs down the middle of Ohio. For points to the West of that line, it is more carbon efficient to consume wine trucked from California. To the East of that line, it’s more efficient to consume the same sized bottle of wine from Bordeaux, which has had benefited from the efficiencies of container shipping, followed by a shorter truck trip.

Via cityofsound.

Authors sign bad contract for 10% of net rather than usual 15% of gross, get screwed by publisher selling at cost, and then pull out this wonder:

“It suddenly occurred to us that Regnery is making collectively jillions of dollars off of us and paying us a pittance.” He added: “Why is Regnery acting like a Marxist cartoon of a capitalist company?”

And might this have something to do with it?

“These guys created the conservative book market,” Mr. Mowbray said. “Before them, conservatives were having to fight, generally unsuccessfully, to get books published.”

Via Gruber.

Ok I hate Ze Frank, but he hits the mood of public perception about this strike about spot on.

Via Gruber at Daring Fireball.

Posted by MICHAEL KIMMELMAN to NYT > Arts.

I called Rafael Corazza, director of the Competition Commission, to ask what he was thinking. “It’s not normal for one market to have special regulations,” he explained. “It was a cartel. The German and Swiss booksellers said it was for a good purpose — they made a cultural argument, but we are an economic commission. They said the system fosters a broader, deeper market for books, that discounting will hurt the small booksellers who support the small publishers, and then you will have fewer books and more focus on best sellers.”

Are they right? I asked.

“I’m not quite sure they’re completely wrong,” he said. “Nobody knows for sure yet. But nobody can read one million titles, so the question is, is it better that more people read fewer books or that fewer people read a lot of different books?”

CDOs had functioned as the collateral on the quants’ short positions. When the subprime crunch squeezed the financial markets, the value of those CDOs declined, forcing quants to increase the collateral in margin accounts, buy back the shorted stocks, or both. But in either case, in order to supplement their shrinking collateral, quant funds were forced to sell strong blue-chip stocks, whose prices consequently fell. At the same time, as quants bought back shorted stocks, the prices of those stocks increased, demanding the posting of yet more collateral to margin accounts at the very time that the value of CDOs was suffering. That the quants were, apparently, long on the same strong stocks and short on the same weak stocks was a result of a number of strategies, pairs trading among them.

Read Part 1 and Part 2.

Via Paul Kedrosky’s Infectious Greed.

Michael Lewis in New York Times Magazine

Right away, [John Seo] could see the problem with natural catastrophe. An insurance company could function only if it was able to control its exposure to loss. Geico sells auto insurance to more than seven million Americans. No individual car accident can be foreseen, obviously, but the total number of accidents over a large population is amazingly predictable. The company knows from past experience what percentage of the drivers it insures will file claims and how much those claims will cost. The logic of catastrophe is very different: either no one is affected or vast numbers of people are. After an earthquake flattens Tokyo, a Japanese earthquake insurer is in deep trouble: millions of customers file claims. If there were a great number of rich cities scattered across the planet that might plausibly be destroyed by an earthquake, the insurer could spread its exposure to the losses by selling earthquake insurance to all of them. The losses it suffered in Tokyo would be offset by the gains it made from the cities not destroyed by an earthquake. But the financial risk from earthquakes — and hurricanes — is highly concentrated in a few places.

Via Paul Kedrosky's Infectious Greed.