A few notes from two Liberal paradises

"BLUE MODEL CRISIS: The Illinois Meltdown".

Years of cascading fiscal crisis and insoluble political gridlock have driven the Land of Lincoln to the edge of the abyss. . . . The collapse of governance in America’s fifth-largest state is on a different scale from the problems (and there are many) in other indebted state capitals.

"Officials Warn Illinois Finances in 'Massive Crisis Mode'".

The Illinois official responsible for paying the state's bills is warning that new court orders mean her office must pay out more each month than Illinois receives in revenue.

"Jerry Brown’s Pension Loan Does NOT Pay Down Pension Obligations".

As frugal as Jerry Brown is, if his own money were at risk I can’t imagine that he would not grasp the difference between (i) using his own discretionary cash to pay down his obligations and (ii) borrowing from a family member to speculate on stocks in the hope of reducing future costs relating to his obligations.

"California’s descent to socialism"

California is widely celebrated as the fount of technical, cultural and political innovation. Now we seem primed to outdo even ourselves, creating a new kind of socialism that, in the end, more resembles feudalism than social democracy.


John Cochrane offers a calm, even-tempered, but brutal dissection of some recent comments by columnist Noah Smith. You can read it for that--it's fun--but if that doesn't interest you, scroll down a bit for a detailed refutation of the claim that markets have big trouble providing health insurance because of the "market failures" of incomplete markets, uncertainty, adverse selection, and moral hazard. It features these two fine lines:

(Remember, the free market case is not that markets are perfect. It is the long and sorry experience that governments are worse.)

Adverse selection due to fundamental information asymmetry in an unregulated market is, as far as I can tell, a cocktail-party market failure.

"Tackling the 'Nastiest, Hardest Problem in Finance'"

Hey, econ and finance grad students:

[William] Sharpe has created what he calls the retirement-income scenario matrix project. He has published all of his materials, programs, findings and the underlying data at his Stanford University website, and made them available free of charge. His hopes that a graduate-level course in financial engineering will build upon his work.