A loyal reader from Britain sends along a redesigned U.S. dollar bill to reflect the state of the economy:

Our reader didn’t know the provenance of this artwork, but considering that the Treasury secretary’s signature on the bill belongs to the late Lloyd Bentsen, I’d have to guess that this doctored bill is a remnant from a bygone economic mess, not the current one.

Out of curiosity, I pulled the dollar bills out of my wallet to see whose signatures they held. I happened to have five singles, four of which had John Snow’s signature (Series 2003), and only one of which had Henry Paulson’s. I was surprised to see so many bills that had lasted so long, for the life expectancy of a single is apparently only 18 months.

All of this did make me wonder: if a Bentsen-era bill shows George Washington in a state of high anxiety, what would a Paulson-era bill have George doing? Your suggestions are welcome.

Apparently, The Economist magazine doesn’t think a survey of economists by Dilbert creator Scott Adams is sufficient, so they’ve done their own.

Via e-mail, The Economist contacted all the economists in the National Bureau of Economic Research (N.B.E.R.) — a sample that would include just about every top economist in the United States — and 142 economists responded (I was one of the 142, but the questions got hard halfway through and I had to choose “don’t know/no opinion” most of the rest of the way).

The results were striking.

Remarkably, only about 10 percent of these economists self-identify as Republicans. Nearly half of economists called themselves Democrats; the rest were undeclared. Since when did economists get so liberal? I clearly have been hanging around the University of Chicago too long.

The good news for my friend Austan Goolsbee, who has been a leading figure in the Obama campaign, is that 80 percent of the economists polled think Obama would pick a better economic team. Even the Republicans polled think Obama has a better grasp of economics than McCain.

The financial crisis has generated huge amounts of talk about macro issues, but it also engenders a complex problem for a typical consumer: With increased uncertainty, should I save more against an uncertain future — or should I spend now in order to enjoy consumption before my savings are wiped out, or at least reduced, by a possible financial meltdown?

The answer depends on your beliefs about the future course of your income and wealth and on your discount rate for future consumption compared to present consumption. Tough enough — but the problem is even more difficult for a married couple that must make such decisions jointly.

I tell my wife, “We shouldn’t buy big-ticket items for a while given financial worries.”

She responds, “Quite the contrary — let’s spend and enjoy while we still have it.”

I think she’s irrational, but I can write down a model that rationalizes her view.

The basic problem is that our rates of time preference differ. How do we solve the bargaining problem implicit here? Fortunately, we’ve been married for 42 years and it’s pretty easy: we sort of split the difference — a common solution to such problems, and the one we use typically. But for a couple that is less used to such bargaining, I would bet these disagreements generate a lot of arguments. One more cost of the financial crisis.

One banned wrestler wants to clean up the world of sumo. (HT: Judith Ronat) (Earlier)

What happens to a cop when he goes to prison? (HT: Brad) (Earlier)

Data services from some “driven nerds.”

In uncertain times, do something safe and fun with your money.

My colleague John Cochrane has written an insightful piece on the bailout. In short, he believes that the Treasury plan needs to be shot, have a stake driven through its heart, and be buried.

His arguments, posted on his website, are reprinted below:

The Monster Returns
By John H. Cochrane
A Guest Post

Like a monster from an old horror movie, the Treasury plan keeps coming back from the dead. Yes, we are in a financial crisis that needs urgent, determined, and clear-eyed help from the government. But this plan is fundamentally flawed. It won’t even work if we leave aside its horrendous cost and long-lasting damage to the financial system. The additions and sweeteners in the Senate version, and those on the table in the house, make it even less likely to work.

A workable plan has to be based on fundamentally different principles: recapitalizing banks that are in trouble, including allowing orderly failures, and providing liquidity to short-term credit markets. These are not new and untested ideas; these are the tools that governments have used for 100 years to get through financial turmoil. However, they have to be used in forceful and decisive ways that will step on a lot of powerful toes. Read more …

Bert Sperling

As co-author of the book Cities Ranked and Rated, Bert Sperling has strong ideas about where you should or shouldn’t live. In 2007, for example, he placed Modesto, Calif., at the bottom of the rankings (number 375 of 375 metro areas) in the book. Since then, he says,

Photo: Bert Sperling

Sperling, with a background in accounting and engineering, owned a software company in the mid-1980’s. When he spotted a study that ranked Pittsburgh as the best place to live in the U.S., he wrote some software that allowed people to generate ranked lists of places tailored to their preferences. After this system was written up in USA Today, Sperling was asked by Money magazine to compile its first “best places” list.

His franchise has since grown immensely. He’s done projects like “Hot Dating in Small Towns” for MTV, “The Healthiest Places to Retire” for the A.A.R.P., and “Best Places for Lesbians” for Girlfriends magazine. He’s co-author of the book Best Places to Raise Your Family. His research is available online here.

Sperling’s research has infected our cultural bloodstream, with mentions on The Simpsons, in a Leno monologue, and as Jeopardy questions. And yes, he’s been profiled by The Times.

Photo: Bert Sperling

So where does the “best places” guy choose as his home? He’s dividing his time between Depoe Bay, Ore., and Portland, Ore.; but he’s also lived in Kodiak, Alaska; Carmel Valley, Calif.; Key West, Fla.; Oslo, Norway; and Long Island, N.Y.

He has agreed to field your questions here, so fire away. (Wasilla, anyone?) As with our past Q&A’s, we’ll keep the comments section open for a few days and then post Sperling’s responses in short order.

My latest column in the W.S.J. assesses whether Intrade’s political prediction markets have been distorted by market manipulation:

How do we sort out manipulation from regular trading?

Our resident quote bleggar Fred Shapiro, editor of the Yale Book of Quotations, is back with another request. If you have a bleg of your own — it needn’t have anything to do with quotations — send it along here.

Photo: foundphotoslj

Recently, after a Wall Street Journal article named The Yale Book of Quotations as the second-most-essential reference book for home use, I initiated a discussion about the continuing vitality of print reference books.

Now a newly published volume provides me with a splendid example of how there is still a place for print reference in the world: the Princeton Companion to Mathematics, edited by Fields Medal winner Timothy Gowers and published by Princeton University Press. Because of the close link between economics and mathematics, many readers of the Freakonomics blog may find this book of interest.

The Princeton Companion to Mathematics combines a number of elements that may not be present in Wikipedia or other online sources: entries written by some of the world’s leading mathematicians, prose of real literary distinction, and beautiful design and production. All in all, a must-have reference in mathematical literacy.

For this week’s bleg, I invite suggestions of famous or compelling mathematical quotations.

Two things that I just cannot get too excited about: baseball and politics.

Which means that Nate Silver and I have almost nothing in common.

Nate became famous among the baseball crowd for his work with Baseball Prospectus. Now he has turned his prodigious data-analysis skills to the November elections via the website FiveThirtyEight.com.

We’ve mentioned both Nate’s baseball analysis and his political analysis on the blog, but we never formally applauded what he is doing at FiveThirtyEight.com. It is really worth a look, even if you are like me and not much interested in politics.

He currently projects Obama as having an 82.2 percent likelihood of winning (with a projected popular vote of 51.7 percent to McCain’s 47.1 percent). That is much higher than any of the prediction markets right now.

Before going to a Thai restaurant near my German apartment, I asked a long-time resident how it is, and she said it’s brand new. It was a Texas barbecue (!!) joint for a few months, and something else before that.

Why the turnover? Of course, being unable to cover variable costs matters generally, as always; but the German government apparently gives a small business an incentive to open up, and an incentive to close quickly if it cannot cover its costs: certain taxes are waived if the business is small, but only for a short period of time; thereafter, the tax break phases out.

Thus the risks of opening a new business are reduced; and, if the business is not very successful, the impending loss of the tax break provides an incentive to close it down within the time period necessary to escape these taxes.

I have grave doubts about this policy and about subsidizing small businesses generally: if there are scale economies naturally, why should the government try to offset them? And it’s hard to imagine that there are too few new small businesses — or that people are so unwilling to take risks that the government should offer subsidies.

I see no good economic rationale for these policies, but they are widespread in Germany — and in the U.S. too.

So it’s nearly official that Michael Bloomberg, the mayor of New York (and onetime member of a fantasy New York trifecta in the presidential race), will seek to overturn the city’s term limits in order to run for a third term as mayor. Here’s an A.P. article and here’s an excerpt from the New York Times piece that broke the news:

I’m not sure I agree with the “significant political risk.” Because of his independence, wealth, and sky-high approval rating, he could probably win in a cakewalk and bear few scars from the electoral mud-slinging. Read more …

There have already been a number of good newspaper articles providing descriptive statistics that members with at-risk seats are more likely to vote against the House bill on Monday. Of the 19 most vulnerable house members, 13 voted against the bill. A Washington Post blog said, “The list of the 228 nays reads like a virtual target list for the two parties.â€

Congressional Quarterly provides these charts making the same point:

Alice Shih and I ran a simple (logistic) regression which confirms this result. We found that at-risk candidates were 16 percent more likely to vote against the bill than safer seats (and that Republicans were 33 percent more likely to vote “no†than Democrats). Read more …

I wrote yesterday about my dismay at the failure of Congress to pass the revised rescue package. It is time for economists to own our share of the blame.

We have failed to explain in clear language just what it is that credit markets do, and hence why it is so important that we fix them. (Dani Rodrik agrees.) This failure is all the greater, given the public’s understandable cynicism about Wall Street, the government, and economics. Our failure helps explain why Congressional populists believe that opposing the rescue plan will help their re-election prospects.

I am truly, deeply sorry we failed. Truly. But it’s not too late to remedy the situation. Here’s my first attempt, voiced in a piece on American Public Media’s Marketplace program last night (listen here):

So the bailout proposal before Congress seems to have been rejected because legislators were worried that voters back home saw it as a bailout of Wall Street at the expense of Main Street. Is such a fear rational?

It may be that voters simply don’t understand or believe that a broader Wall Street failure could quickly trickle down and harm their Main Street interests. Or could it be that they’re willing to pay a price to exhibit their disgust even if it ultimately harms their self interest?

Consider the popular academic experiment known as the ultimatum game:

Very often, the first player offers a 50-50 split. But what happens when he offers the second player only 30 percent of the total, or 20 percent? Read more …

I stumbled onto this article today, and it made me so glad that my job does not involve trying to predict the stock market.

Written in February of this year, the headline reads: “Financial Stocks: The Stars of 2008?”