Gary Becker of the University of Chicago has died: Created "Rotten Kid Theorem."

RIP: Prof. Gary S. Becker of the University of Chicago died.  NYT: “Households, for example, were long seen as entities intent only on maximizing consumption, but Mr. Becker saw them as small factories that also produce valuable, though nonmarketable, basics of life, like leisure and sleeping.” He also came up with the “Rotten Kid Theorem:”  He wrote, “Children have an incentive to act altruistically toward each other as their parents want them to, even if children are really egotistical.” He believed that “behavior is driven by a much richer set of values and preferences that can also include altruism, loyalty and spite.”

The thing that I most remember is that he long ago said that children had changed from economic assets (i.e. a retirement program) of parents into consumption items.  Large families would come to be seen as signs of affluence.

Indian economy turning up, according the Finance Minister Chidambaram

In an interview, India’s finance minister Chidambaram gave an upbeat outlook for the economy:  4.9% growth in the FY ending March 31 past and 6% in the current year, with inflation, now 8.3%, moderating.  He has reduced his budget deficit forecast from 4.8% to 4.6%.  A bit ruefully, Chidambaram added, “I have done more heavy lifting in the last 12 months than the RBI.”  (RBI = Reserve Bank of India)

There is some Fed-envy among the politicians in India who have to do their jobs rather than rely on an accommodative central bank.

Bank of America's $4 billion mistake is neither complicated nor trivial

Bank of America’s $4 billion mistake:  The error is not trivial compared to BAC’s $145.2 billion in regulatory capital or $11.8 billion increase yoy.  Accounting rules cause banks to mark to market assets and liabilities.  So when a liability falls in value, the bank books a gain, but when they rise, it books a loss.  These gains and losses, if unrealized, can only be applied to earnings but not to regulatory capital. An unrealized gain was properly applied to earnings but improperly also applied to capital.

Bank of America paid PWC $94 million to do last year’s auditing.  BAC’s board’s audit committee is chaired by Sharon Allen, former chairman of DeLoitte.  The risk committee is headed by Frank Bramble, former vice chairman of MBNA, and includes former Fed governor Susan Bies, and Clayton Rose, a Harvard Business School professor.

My wife teaches algebra to 14-year-olds.  She says they often make mistakes like this.

Obamacare costs will bust the budget unless healthcare is reformed

Eight year after Romneycare began, Massachusetts may show what Obamacare will mean.  Massachusetts has the lowest rate of uninsured in the county (3.1%) and the highest per capita health costs.  ($9,276 vs US average of $6,815)  Emergency room use for non-urgent care has not declined. 

Like Romneycare, Obamacare will extend coverage to virtually everyone, but the cost will be high.  If the Massachusetts model is predictive, then health costs will rise from 18% of GDP to 24% of GDP. (OECD average is 9.3%)  Like Romneycare, Obamacare extends the system without reforming it. 

Where did we put the $20 billion? Nigeria loses its oil money.

Gov. of Nigeria’s Central Bank Lamido Sanusi’s personal passport was seized today by authorities when he tried to leave the country for Paris.  Sanusi had presented a detailed report to the senate about $20 billion in oil revenues that recently disappeared. Pres. Goodluck Jonathan then dismissed him without bothering to obtain the necessary senate sanction.  The president also ignored a high court order to restore Sanusi’s previous diplomatic passport.

President Goodluck Jonathan’s actions are unfortunately bound to raise suspicions that he is somehow involved in the disappearance of the $20 billion. 

Zambian interest rates hold at 12%

Zambia decides to leave interest rates at 12% despite the decline in the kwacha. The currency weakness can be attributed to declining copper prices, which has produced a growing current account deficit.  Inflation is now 7.8% but is expected to abate over the course of the year.

Both Zambia and neighboring Malawi issue kwacha.  Malawi has much higher inflation, 24.6%. Some forex traders may liken a Kwachazone to the Eurozone except that the Malawi and Zambia each issues its own kwacha. Otherwise, Zambia might be compared to Germany and Malawi to Greece.

The lost girls of northern Nigeria are unfound. The problem is unrealizable aspirations.

The 276 teenage girls kidnapped in Moslem northern Nigeria are still missing.

The problem is the 4 wife standard. Nature has provided that half of births are men and half are women.  So if men try to change the1:1 rule to a 4:1 rule, then it is inevitable there be, (1.) periodic mass abductions of wife material, and/or (2.) large reductions in the potential husband stock.  Both things appear to be happening in northern Nigeria.