## Ramblings

## Lengthen your horizon, and invest ...

Yes, no typo here: I wrote *lengthen* your horizon, rather than *broaden *your horizon. It seems to me that, more and more, this is one of the important challenges that we face: how can lengthen the horizon of consumers, firms, and investors? I'm sure there's a paternalistic answer to this: regulate (read: let the rules set the horizon, for example in pension decisions). But I'm equally sure that another solution is to be preferred: what if we can create incentives for people, firms and investors to lengthen their horizon?

Why I am writing this now? Well, here's the inspiration. A piece by Adam Davidson in the NY times that describes the dangers the US faces in losing its competitive edge as a result of sharply dropping investments in R&D.

## Competition and the cost of government borrowing

I've started a paper that looks at syndicated lending: the cases where a firm receives a loan from a syndicate of banks, led by one of the banks. It's a fascinating world - especially if you're interested in competition. Can collusion in this market help overcome market failure? If so, how do you know when it does?

Whatever the answer, it seems that governments may have to wrestle with a similar question … urgently. A recent Bloomberg article discussess the way governments issue bonds. Who gets to be the top underwriter?

In a recent case, in the state of Massachusetts, state treasurer Steven Grossman is quoted as saying that "[T]here's always a certain amount of competition going on out there." Had adds that "[T]hat's good. We like competition."

So do I. But how much competition is there in this market? The same article states that in the US, only "about 20 percent of debt issues by states and local governments is sold through competitive bids."

In the remaining 80 percent, so-called 'negotiated underwriting' takes place. Rolling Stone magazine, in a recent post, is highly critical of this 80 percent, citing research by University of Connecticut professors Mark Robbins and William Simonsen, who find that competitive issues lower borrowing costs.

Worthy of more attention, imho….

## A bit more on Stata graphs

In a recent post, I mentioned the new edition of "A Visual Guide to Stata Graphics". In principle, I'm all for the 'notepad' approach: whenever I need to come up with a new way to display information (a table, a graph, etc.), I head for the whiteboard and try to sketch what I need.

Nevertheless, a bit of inspiration can be very helpful. Here are some suggestions…

My number one tip: Friedrich Huebler's blog called International Education Statistics. With his blog, Huebler achieves a very nice balance between form and content. I ran across the blog when looking for a nice way to make maps with Stata. Highly recommended, even if you're not interested in education statistics ;-).

Second tip: a set of Stata graph examples, reproduced by UCLA from the Stata originals. Click on each of the graphs to see the underlying code that produces the graph.

Third, the graphics section of the Stata daily blog: particularly helpful for those nasty details, like changing the color of elements of a graph, stacking graphs in unusual ways, etc.

Finally, a new development: here's a blog post on recent advances in bringing network graphs to Stata. Still requires a bit of work, but very promising.

## Picture perfect: Gates Foundation Infographics

A good picture 'sells' a story. A great picture tells a story … And the best pictures make the story redundant. Finding out how to present the facts in a way that is both fair and appealing can be tough.

Looking for pictorial inspiration? Check out the Gates Foundation Infographics, here.

## Should you buy what I say?

Of course not! Sometimes, however, it is not so straightforward. What do you get when you combine deep thinking, sincere entrepreneurship and smart writing? The piece just published by Outside Magazine about Patagonia's Black Friday ad. Check out the article here and make up your own mind….

## Negative externalities, anyone?

A lot of my own research is about productivity, transforming inputs into outputs. Delve into this literature, and you may find some strange words (well, more than just 'some', really). Things like 'netputs' or 'badputs'. Things that would be considered 'negative externalities': the stuff that is also produced as inputs are transformed into outputs, destroying (often) someone else's value, rather than adding (to the company's) value. It's an intriguing concept, and at the core of why we impose some minimum amount of regulation on firms. But it is also hard to grasp. So, some examples (that, frankly, are not so hard to grasp) here.

## A quick fix? Draghi and ECB lending

An article in the New York Times of December 22 discusses the fact that 523 banks have now borrowed a total of 489.2 billion euros ($640 billion) at the ECB's new, favorable rate.

A bit surprising, to me at least, the same article states that "[I]t turns out that may be enough to stem the European crisis for at least a few years, and go a long way to recapitalizing banks in the process."

A few *years*? Really?

See the article here.

## What's it like to be dismal?

From my years as a bachelor student in economics, I remember two interesting questionaire results (ok, probably more than two, but that is a bit besides the point right now): first, the two best predictors of academic success in the first year of a Dutch economics student at Maastricht University (where I studied) were highschool exam grades in math and Dutch, respectively. So much for highschool economics education? I'm afraid so…

A recent paper in the Journal of Economic Behavior and Organization by Yoram Bauman and Elaina Rose reminded me of the second result: more than anything (and more than other students), my fellow economics students cared about … making money. The paper studies what, in a recent NY times oped, the authors call the Grinch stereotype.

There is good news as well (for me at least, since nowadays I teach economics): the author find that the attitude towards altruism of economics students is mostly a selection effect. In their own words, "taking economics classes did not have a significant negative effect on later giving by economics majors."

Check out the original article here. And the NY Times piece here.

## New edition of "A Visual Guide to Stata Graphics"

The new edition of "A Visual Guide to Stata Graphics" is out. It's a great book with many, many (many) detailed examples of how to make great Stata graphs. Here's the **link**.

## Al Gore on sustainable finance

In the Wall Street Journal of December 14, 2011, Al Gore has written a very interesting piece about sustainable capitalism. He cites recent work by Rob Bauer and Daniel Hann on this topic. Rob and Daniel are two colleagues of mine, both affiliated with the European Center for Corporate Engagement, **ECCE**.

Check out the article **here**

For more on the work of Bauer and Hann, see **www.corporate-engagement.com**

## How to interpret regression coefficients

Always wonder how to interpret that coefficient after you ran your regression? Lefthand side variable is in logs, righthand side variable is a dummy. Etc, etc.

Bill Evans, at the University of Notre Dame has written a very nice document that describes the most common combinations:

**http://www.nd.edu/~wevans1/econ30331/interpreting_coefficients.pdf**

## Stiglitz on the 1% ….

One of the eye openers for me, as an economics student, was the idea of Pareto improvement: the elegant (if not always realistic) notion of an improvement that leaves at least one person better off, without leaving others worse off. Who'd be against such a deal? The catch is, of course, that Pareto improvements often require some ex-post redistributions.

Here is a very nice Vanity Fair article by Joseph Stiglitz about (in his own words) "an inequality even the wealthy will come to regret":

**http://www.vanityfair.com/society/features/2011/05/top-one-percent-201105**

Also check out **this**