Why do we import 4 million gallons of ethanol from Brazil every year and then export 2 million gallons of it right back? Because U.S. ethanol regulations require us to use a certain amount of "advanced" ethanol — i.e., ethanol that produces less carbon than gasoline, which corn ethanol mostly doesn't — but it turns out we're not doing too well on the advanced ethanol front. Our corn ethanol subsidies are so lucrative that this is where all our R&D dollars go. But American ingenuity knows no bounds, so we're meeting the regulation by exporting our crappy corn ethanol to Brazil and receiving their sugar cane ethanol in return. It's all the same, but cane ethanol counts as advanced, so shipping our stuff to them and their stuff to us allows us to meet the minimum requirements for use of advanced ethanol. It all makes sense in a demented sort of way.

This inspiring tale comes from Timothy Wise, who has more details here. Once again, we learn that ethanol subsidies are possibly the stupidest government program ever invented. And that's saying a lot.

Who supports voter ID laws? Obviously, Republicans support them more than Democrats. Since voter ID laws are mostly aimed at suppressing the Democratic-leaning vote, that makes sense.

But there are differences even among voters who identify as either Republican or Democratic. According to a new survey from the Center for Political Communication at the University of Delaware, 53% of Democrats with low levels of racial resentment oppose voter ID laws. Among Democrats with high levels of racial resentment, that plummets to 23%.

Ditto for Republicans. Among those with low racial resentment scores, 13% oppose voter ID laws. Among Republicans with high racial resentment scores, that's cut in half, to 7%.

Racial resentment is measured by responses to only three questions, which makes it a little less robust than we might like. On the other hand, the questions are admirably straightforward. The first one, for example, is this: "I resent any special considerations that African Americans receive because it’s unfair to other Americans." That's pretty clear.

I'm not sure there's anything much we can do with these results. They aren't going to change anyone's mind. But it certainly confirms that race is bound up pretty strongly with the whole voter ID movement.

(Via Steven Taylor.)

Riffing off a post by John Kay, Felix Salmon points out that a big part of the problem with our financial system is the way that derivatives have corrupted aspects of banking that used to have an actual, concrete purpose:

Barclays’ Libor lies, for instance, started life as a way for its derivatives traders to make money: something which could never have happened when the banks reporting into the Libor system didn’t have derivatives desks.

A large part of the problem is the way in which financial tools which had a utilitarian purpose when initially designed have become primarily vehicles for financial speculation. Libor, for instance, was a way for banks to peg loan rates to their own funding costs, and thereby minimize their own risks while at the same time minimizing the amount that borrowers had to pay. Today, banks don’t fund on the interbank market any more, and Libor has become something else entirely: a number to be speculated on in the derivatives market, and, in times of crisis, an indication of how creditworthy banks are perceived to be.

Libor is no longer actually used to peg loan rates. Equity trading no longer bears much relationship to the actual value of companies. Asset-backed securities have little to do with making actual loans to actual people. As derviatives become more and more abstracted from their underlying instruments, they've morphed into independent entities to bet on, not ways to make the financial system run more smoothly:

Kay’s conclusion is sobering spot-on: the entire financial-services industry, he says, needs to be restructured so as to create the kind of institutions which thrive on increased trust, rather than on maximized arbitrage of anything from news to interest rates to regulations. In order for that to happen, we’re going to need to see today’s financial behemoths broken up into many small pieces — because at that point each small piece is going to have to earn the trust of the other small pieces which rely on it.

Felix is no more optimistic about that happening than I am. The financial crisis produced Dodd-Frank and Basel III, and that's pretty much it. Both are better than nothing, but neither comes close to addressing the fundamental problems with Finance 3.0. And I suppose we never will. The world had plenty of problems with a money economy, and plenty of problems with a credit economy, none of which were ever really fixed. So there's not much reason to think that we'll ever fix the problems with our shiny new derivatives economy either. I sort of wish we'd at least given it a serious try, though.

Germany's vice chancellor says that a possible Greek exit from the euro has "lost its terror." Paul Krugman isn't happy about that:

I find their lack of terror ... disturbing.

I’m not saying that Greece should be kept in the euro; ultimately, it’s hard to see how that can work. But if anyone in Europe is imagining that a Greek exit can be easily contained, they’re dreaming. Once a country, any country, has demonstrated that the euro isn’t necessarily forever, investors — and ordinary bank depositors — in other countries are bound to take note. I’d be shocked if Greek exit isn’t followed by large bank withdrawals all around the European periphery.

....My advice here is to be afraid, be very afraid.

Fine. I'm afraid. But here's my question. Like Krugman, I find it hard to imagine a scenario in which Greece stays in the euro. But is there any way for Greek exit to happen in some non-scary way? The problem of contagion remains real no matter how Greece leaves, and the problem of panic probably isn't solvable either. After all, Greece will leave the euro if and when other countries refuse to pony up more aid, and if that happens then Greece is doomed. What's more, this isn't the kind of thing you can plan for. Any planning for a Greek exit would inevitably become public very quickly, and that would do nothing except generate panic even sooner than the actual exit itself.

So if Greek exit really is inevitable, what's the argument against the German position? Why not go ahead and talk about it soothingly, do whatever contingency planning you can behind the scenes, and then hope for the best?

Dylan Matthews describes a recent field test in paying teachers if they get higher-than-average test score improvements from their students:

The authors split teachers in the study into a control group, who were not offered any rewards, a “gain” group, which was promised rewards of up to $8,000 at the end of the school year, and a “loss” group, which was given $4,000 upfront and asked to pay back any rewards they did not earn....Additionally, the gain and loss groups were split, with a “team” group being rewarded on the basis of theirs and fellow teachers’ test scores, and the “individual” group being reward only on the basis of their own scores. The conclusion: it worked, and it worked almost twice as well when the money was given at the start and then taken away.

This is a fascinating piece of confirmation that loss aversion is very real as a motivating factor. People respond far more strongly to the threat of loss than they do to the prospect of gain. In this case, teachers in the loss group did twice as well even though their reward per point of improvement was half as big. On the other hand, there was very little difference between team motivation and individual motivation.

Beyond that, though, I'd take this study as suggestive, but not conclusive. The gain group showed very tiny overall improvements in student performance, and none of the improvements were statistically significant. The loss group did better, showing gains of about seven percentile points.

But I'm still a bit puzzled. If I'm reading the results correctly, teachers in the gain group could expect $4,000 if their students produced average results, and $80 per percentile point extra if they did better than average. In the end, they produced results two percentile points better than average. Teachers in the loss group were paid $4,000 at the beginning of the year, and had to pay back $40 per percentile point if their kids did worse than average. They ended up producing gains of about seven points. (See Table 3 in the study here.)

This means that on average, teachers in the gain group earned $160 extra ($80 x 2) while teachers in the loss group gained $280 ($40 x 7). But the teachers must have known beforehand that their rewards were likely to be very small compared to the $4,000 baseline: In theory, they could earn thousands of extra dollars, but only by being supermen. The authors don't say how well the very best teacher did, but based on their summary results the top teacher probably generated an improvement of about 15 percentile points compared to average. That's a reward of $600 above the baseline. And that's the best result. This kind of money seems like it's far too small to produce any kind of serious impact.

So something about this doesn't really add up. Maybe I'm interpreting their results wrong, but I simply don't see how expected rewards this small could generate such significant improvements. Somehow, the baseline extra pay of $4,000 must have played a role here. right?

Thomas Edsall says that President Obama is trying to boost turnout among liberals this November, and at the same time trying to "suppress turnout" among groups less likely to support him. Ed Kilgore slaps down this choice of words:

Even if you buy Edsall's assumption that the Obama campaign's anti-Romney ads are designed to convince non-college educated white voters who won't support the incumbent to give Romney a pass as well, it is fundamentally wrong to treat such efforts as equivalent to utilizing the power of government to bar voters from the polls altogether. Voters hypothetically convinced by the Obama ads to "stay home" in the presidential contest are perfectly free to skip that ballot line and vote their preferences for other offices, just as they are perfectly free to ignore both presidential campaigns' attack ads and make a "hard choice" between two candidates they aren't crazy about. Lumping negative ads together with voter disenfrancisement under the rubric of "vote suppression" legitimizes the latter as a campaign tactic rather than what it actually is: an assault on the exercise of fundamental democratic rights.

Hoo boy. Rarely have I agreed more with somebody. Running a campaign of persuasion, whether to vote for you or to not bother voting for the other guy, is just that: a campaign. It's what politicians do. In no way is this voter suppression or anything close to it.

Maybe this was just a poor choice of words on Edsall's part. But the Republican voter ID assault, which is pretty plainly meant not to persuade, but to prevent the usual level of turnout among traditionally liberal-leaning voters, is a whole different animal. That's voter suppression.

It's unfair to spend too much time highlighting the ravings of unhinged cranks, especially if it's done with the unstated implication that they speak for a broader political movement. But then again, sometimes it's worthwhile to let people know just how demented things are getting out there. Here's a small excerpt from a fundraising email sent out by the crackpots at Teaparty.org highlighting a new video from Jerome Corsi, one of the masterminds behind the 2004 swiftboating of John Kerry:

Wasn't that the plot of Salt? Angelina Jolie really kicked some ass in that movie. I guess Corsi and the Teaparty.org folks thought it was a documentary.

Elsewhere, Steven Taylor passes along the news that certified nutcase Alex Jones doesn't believe the mass shooting in Aurora was the act of a demented maniac, but was "planned by the Obama administration (along with Fast and Furious and the Gabrielle Giffords shooting) as a plot to let the UN take our guns away." Perhaps Jones will ask Ron Paul what he thinks of that the next time he appears on the show.

I wish it were hard to see where this stuff comes from, but Corsi's lunacy is only a few ticks away from birtherism and Jones's lunacy is only a few ticks away from the idea that Fast & Furious was designed from the start to help make the case for more restrictive gun laws. Both of these are fairly widely held beliefs on the right, which makes it pretty easy to see how Corsi and Jones got where they did.

Counterparties put up a link yesterday to a recent reprint of a 1955 Fortune article that profiled the lifestyles of Eisenhower-era top executives. There's all sorts of great stuff there, most prominently the surprisingly low incomes (by current standards) of the very top of the top back then. Adjusted for inflation, they figure the top 30,000 execs earned $400,000 and up in 1955 — a sadly reduced income compared to past glory days, which meant they had to buy much smaller yachts and make do with only two servants. (I'm not making that up. Read the story!) Today, the same slice of top execs probably earns more like $3-4 million and up. (Way up.)

But that's old news. This was my favorite paragraph:

[The successful American executive] spends almost no time on politics. He entertains often because he must (i.e., for business reasons or on account of his wife) and, under much the same compulsion, he attends cultural events. He does little reading outside of newspapers, newsmagazines, reports, and trade papers....He drinks, if he drinks at all, moderately and on a schedule. Alcoholism, it is clear, does not go with success and is to be found only among some executives' bored wives. Extramarital relations in the top American business world are not important enough to discuss.

Got that? American executives of the 50s were apolitical, hardly drank at all, and never fooled around. Thus spake Fortune magazine. Methinks they didn't have their fingers on the pulse of the executive suite quite as closely as they thought they did.

Also, be sure to check out the casual sexism that marinates the entire piece. There's nothing surprising in it, but it's still a sight to behold.

On the left, this has been Domino's favorite new snoozing spot for the past couple of weeks. I don't get it. What's so special about that exact patch of carpet in front of the sofa? And it's a pain in the ass, too. We have to be mighty careful these days not to step on a cat that's quietly taken up residence in front of the sofa while we're engrossed in NCIS or Restaurant Impossible.

On the right, Inkblot hasn't changed his snoozing habits a bit. He's plonked out on the bed upstairs, rolling upside down and looking adorable when the camera approaches. There's never any danger of stepping on him.

Earlier this morning, ABC's Brian Ross reported that some guy named Jim Holmes who belonged to the Colorado Tea Party might be the same James Holmes who murdered a dozen people in a theater in Aurora last night. "Now, we don't know if this is the same Jim Holmes," Ross said "but it's Jim Holmes of Aurora, Colorado."

Needless to say, it turned out that this wasn't the guy. I don't normally call for people's heads for making a mistake, even a bad one, but this is really beyond the pale. What kind of reporter says something like this on national TV despite knowing full well that he has no idea if he's pegging the right person? Is there really any good reason Ross should still be employed by ABC News by the close of business today?