Live from Munich

Since last Friday, I've been in Munich, splitting my time between touristic activities and work. I'm visiting at the Max Planck Institute - not on the view that physics, no less than novel-writing, should be added to my portfolio, but because of the excellent tax group here, headed by Wolfgang Schon. So far this week, I've given talks on my foreign tax credit paper as well as the S-S-S- financial institutions paper (a revised version of which should be up on SSRN shortly), and have also attended the Richard Musgrave Lecture, given this year at a nearby public economics institute, CES-ifo, by Michael Keen of the International Monetary Fund.

Mick's very interesting paper is similar in spirit to S-S-S (reflecting some dialogue back and forth), but has a formal economic model designed to elucidate the question of whether Pigovian taxes, as opposed to capital adequacy regulations, should be used to address financial institution failure that threatens the broader economy. Broadly speaking, he concludes that taxes should be used to fund government rescue of failing firms, while regulation should be used to prevent failure that the government will permit (a la Lehman Brothers). One problem outside the model is that the government also has to decide on its rescue vs. permit to fail strategy, a hard problem in itself and made worse by time consistency problems. E.g., one wishes one could credibly tell the firms they'll be allowed to fail, but then rescue them ex post where the stakes are high enough. But good luck on the credibility aspect.

Munich is a charming city. It's been warm but not by the standards of what I gather has been a hideous U.S. East Coast heat wave. (About which I would have considered myself estopped from complaining, as I prefer to concentrate my fire on hating the winters.) I've even been able to find nice fruit, particularly in the Viktuellenmarket. This is something that I care about, perhaps more than I should, as farm market fresh fruit is one of the things I love about NYC in the summer. I've certainly had more beer, sausages, and pork products generally than would be typical while in NYC, and I've also observed the intense but benign German soccer mania that came crashing down last night with their defeat by Spain in the World Cup. I even went so far as to find that game enjoyable though I am not generally a soccer fan. It's tactically the same sport as ice hockey though with key parameters that are set very differently (e.g., how fast people and the ball/puck can move, size of the arena, out of bounds vs. boards on the side). So it's all about ball control, advancing into the other team's territory, and centering it in front of the goal, all factors that I can recognize. (For that matter, basketball is pretty close to being in this general sense the same game as well.)

Touristically, we're living in a small private house, doing things that actual Muncheners do, such as shopping and commuting, and have seen various tourist sites, including (on a much somberer note than the rest) a trip to Dachau.

Next week, pure-vacation trip to Lake Garda, then back to Munich & then to New York.