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Monday, December 22, 2003

Update 

Sorry for the lack of posting lately. My computing situation is not ideal for blogging right now. I probably will not add much until after the New Year.
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Wednesday, December 17, 2003

Lomborg Cleared 

Bjorn Lomborg has been cleared of "scientific dishonesty" by the Danish Committee on Scientific Dishonesty (also see here). The author of The Skeptical Environmentalist, Lomborg has been under a constant state of attack since he published this book, which challenges the current feeling of environmental pessimism.

Lomborg has really gotten a bad rap on this. I actually read the entire book about a year ago, and I was quite impressed with the amount of work he had done. Clearly, he reaches a conclusion that is unpopular and could be perceived as promoting a political agenda. But, if you read the book you certainly don't get the impression of Lomborg doing anything but compiling and analyzing data from objective sources. And his work is extremely well-documented in footnotes (so many in fact that one critic said there were "too many" footnotes to be believable). Lomborg also maintains a site of all critiques of his work and admits and corrects any discovered errors. And while Lomborg has been gracious in his dealings with critics, some of his detractors have gone so far as throwing a pie in his face. How classy! For a picture visit the anti-lomborg site. It is interesting to note that this site does not yet mention the latest action.
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Pete Rose is Back? 

If you would like another reason to hate Bud Selig, add this to the list. According to speculation by Rob Neyer it looks like Rose's apology may happen in Charlie Hustle's new book, due out in January. So what does the timing of the book release mean? Update: the portion of the Neyer article devoted to Rose has been moved here.

Rose wouldn't be publishing a book unless he'd cleared the contents and its publication date with the Commissioner's Office. I'll bet dollars to doughnuts that Rose will finally admit that he did wrong, that he did bet on baseball and he's really, really sorry. Really.

Of course, the minute this becomes public, it will be the big story for days. Weeks, probably. And that explains the release date. On Jan. 6, the Hall of Fame's Class of 2004 will be announced. That will be big news on the 6th, and also the 7th. Dennis Eckersley and Paul Molitor will get their two days in the limelight ... and then on the 8th it's Charlie Hustle's turn. For months, I suspect, all this has been carefully orchestrated by Rose, Bud Selig, and the good people around them. And this time next year, Pete Rose will be headed for the Hall of Fame.

You can book it.


Why do we have rules, stated consequences for rule-breaking, and then ignore them? Did Rose bet on baseball? Yes. Did he bet on the Reds? Yes. Did he bet against the Reds? There is no evidence of this, but he only had to do the first one to be booted from the game from a year. The second results in a ban for life. But it seems Bud doesn't care much for rules. See here for a discussion of the evidence against Rose (especially post #585).

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The Wright Brothers and North Carolina 

Today is the 100th anniversary of the Wilbur and Orville Wright's historic first flight in Kitty Hawk, NC. This was truly an amazing feat, and I am all for celebrating the occasion. However, I have to say I am a bit bored with this event. Why? I grew up in North Carolina. NC still markets itself as "First in Flight," as if the state somehow played a significant role in the event. I guess Florida was the first in space. The point being, NC is a great state. It has an interesting history, plus it is just a fantastic place to live. But, when each state got to pick its design for the quarter, what does NC pick? Of course, that damn plane that looks the a hobby shop balsa wood project. Why not cite the 1775 Mecklenburg Declaration of Independence that preceded the more famous document produced in 1776, the "Hornet's Nest" defense of the Revolutionary War, or the state's stubborn resistance to signing the Constitution? Well, these events may not be all that exciting either, but at least they told us something about the people of NC. NC is not just the softest gym mat for two inventors from Ohio.

NC motto : Esse quam vederi (To be rather than to seem).
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Another Reason I'm Glad My Ancestors Left France 

This just makes my skin crawl.

"Secularism is one of the great successes of the Republic," Chirac said in an address to the nation. "It is a crucial element of social peace and national cohesion. We cannot let it weaken."

Chirac said he would push for a law to be enacted in time for the school year that begins next autumn. Islamic head scarves, Jewish skullcaps and large crucifixes would fall under the ban.

Companies should also be free to ban the wearing of head scarves and other religious signs for reasons of safety or customer relations, Chirac said.

Adoption of a law seemed likely, as lawmakers from both sides of the political spectrum have voiced support for a law on secularism, insisting France must retain its separation of religion and state.


I do not ever want to hear about enlightened European social policy ever again. Also, see Tyler's post on this at MR.

Addendum: Jacob Levy also comments on this at VC.
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Monday, December 15, 2003

The Indirect Costs of Saddam 

We already know what an awful ruler Saddam was. The beatings, torture, rapes, murders, gassings, etc. It was bad. But, that is not all. What Saddam did to the Iraqi economy was not without its human rights consequences as well. Here is some information on the economic consequences of Saddam by William Nordhaus of Yale (you have to scroll down to his chapter). The calculations that follow are my own.

GDP per capita peaked in 1979 at around $9,000 in 2002 prices. The year 1979 also marked Saddam Hussein’s rise to power. Since that time, Iraq has experienced one of the most catastrophic economic declines in modern history. It appears that per capita income was in the range of $1,000–1,200 in 2001. These figures suggest that in the 23 years since Saddam came to power, living standards in Iraq’s economy have declined by around 90 percent.

Some of this is due to the UN sanctions, for which Saddam is culpable, but the majority of the loses occurred prior to the sanctions.

The first phase of the economic decline came during the Iran-Iraq war (1980–1988), and second during the first Persian Gulf war and under the subsequent UN sanctions. The Iran-Iraq war dealt a devastating blow to the Iraqi economy. The war destroyed a large part of Iraq’s capital stock, reduced oil production and exports, and depleted much of its foreign assets and foreign exchange reserves. Kamran Mofid estimated that the total cost to Iraq was $450 billion (in current dollars), which amounts to about eight years of Iraq’s GDP at that time.

The First Gulf War and the sanctions that followed did not help the situation.

The first Persian Gulf war and the ensuing sanctions dealt two more blows to Iraq’s economy. The war destroyed about $230 billion of infrastructure. The UN sanctions in place since 1991 have been the most severe ever imposed. Under sanctions, oil production during the 1991–2002 period averaged 1.4 million bpd. Assuming that Iraq could have produced 3 million bpd during this period, the revenue shortfall since the first Persian Gulf war was about $150 billion. Although reliable statistics on the Iraqi GDP are unavailable, it probably averaged $25 billion in the 1990s. This suggests that the sanctions reduced Iraq’s oil revenues by approximately six years of GDP, and the total cost to the Iraqi economy was probably even larger than that. Overall, the wars and sanctions during the Saddam regime probably cost Iraq in the order of two decades of GDP in lost output, capital, and financial resources. There are no parallels in modern history to economic devastation on that scale.

So what does a few hundred billion dollars mean? We know that wealth brings many good things, but how can we use this to measure human suffering? Economists have developed methods to convert monetary losses into human losses. That is to say some amount of dollars can result in persons living or dying according to measured correlations between wealth and health. The most recent measure by Lutter, Morrall, and Viscusi finds a life lost for every $15 million decline in income. (This study focuses on the US economy, so I suspect this number actually underestimates the income needed to cause a death in a poor country such as Iraq.) So let’s do the calculations.

Pre-Gulf War Saddam: $450b/$15m = 30,000 lives lost
War losses: $230b/$15m = 15,300 lives lost
Sanctions: $150b/$15m = 10,000 lives lost
Total Losses: = 55,300 lives lost

It is important to remember these lives are in addition to the other hundreds of thousands of people Saddam directly killed.
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1000th Visitor 

This morning Fishinghat received it 1000th unique visitor. Thanks to all the readers out there. I am having a great time with this, and I am glad that others are enjoying it -- or being annoyed by it -- enough to check in. Comments, suggestions, and pointers are always welcome.
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Sunday, December 14, 2003

Laughing At or With the Rich 

An interesting observation from Geoffrey Colvin. In the new rich kid reality show The Simple Life, most Americans can better identify with jet-setting Hilton and Richie, than their country hosts.

By odd coincidence, just as the season of peak acquisitive madness grips the nation, we're being treated to a glut of TV programs about some of America's most revoltingly excessive consumers, our hyperwealthy kids.... The Simple Life (Fox) places Paris Hilton (hotel money) and Nicole Richie (daughter of former pop star Lionel Richie) in a tiny Arkansas town so that we can marvel at their cluelessness about real life; Richie, for example, had never pumped gas "because my guard usually does that. "

What's your reaction? Laughing? Loathing? Fine -- but be careful. Because the truth is, if average Americans of even 30 to 40 years ago could see us today, they'd think we were all spoiled just as rotten as any young Trump, Newhouse, or Bloomberg.



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OPEC Seeks Relief From Kyoto 

I cannot believe Saudi Arabia has the nerve to say something this stupid.

Delegates said that Saudi Arabia, the world's biggest oil exporter, wanted promises of aid if Kyoto spurs a shift to renewable energies like tidal, solar or wind energy at the expense of fossil fuels.

Let's see, you limited world oil markets for decades so that a few corrupt dictators could live in splendor... I'm not feeling too much sympathy for this idea.
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Saturday, December 13, 2003

Collusion in MLB? 

If this is the best the evidence that exists regarding owner collusion in MLB, then we don't even have to worry about a trial. This article by Tim Marchman might possibly be the wost piece of journalism I have seen this year. Here is why.

Mistake 1) "It was for violating this deal in the 1980s that owners agreed in the early 1990s to pay the players $280 million, a payment which drove expansion as owners sought to recoup the money by charging huge fees for the rights to new teams."

So you are saying greedy owners would have passed on $280 million if they did not have to make this payment? Whether or not that penalty happens, the owners are better off by $280 mil. Revisit Econ 101: sunk costs are sunk and not relevant to present decisions.

Mistake 2) 3 reasons for collusion: 1) Player salaries are down 2) Teams are not offering arbitration and 3) "and perhaps most important -- clubs are, for the first time, declining to offer contracts to players whom they expect to get larger awards in arbitration than they want to pay. (This is called non-tendering.) Hence, in late December, the market is flooded with a new crop of free agents, driving everyone's market value down."

Um, this is entirely consistent with teams noticing the success of Beaneball, and player salaries adjusting to this fact. Oh, but wait, Marchman mentions this in the next paragraph. Then, why did you just make the preceding irrelevant points Tim? Oh yeah, you need some bologna filler to make it look like you are proving a point that you never prove in the article. A story titled "My Uniformed Hunch about Collusion" just will not sell.

Mistake 3) The chief council of MLB is "keeping tabs on who will be offered arbitration and who won't. Teams sharing information about arbitration is not specifically illegal under the CBA, and it doesn't take a conspiratorial turn of mind to see how any sentient baseball executive could exploit that."

What? Were there really any surprises in this area? The sports media seemed to know just as much about arbitration prospects as the owners. And do we have any evidence that this is happening? Oh, thanks for the hypothetical story to "prove" that "it's almost certainly happening. If it's not, Coonelly should be fired for not pressing the advantage this loophole offers him."

In summary, this is awful. Read more about this on Primer.

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Friday, December 12, 2003

Chimp DNA and Adam Smith 

Researchers have finished mapping the DNA of our closest relative, the Chimpanzee. Chimps and humans share 99.2% of the same DNA structure. So how does a 0.8 percentage-point lead to such different creatures? This is a tough question, and if you are interested in it Jared Diamond has a great book on this subject. The DNA map is a huge step in determining where the differences are. The initial findings indicate this biggest differences are in hearing and smell. Hearing seems to be the more interesting of the two. According to Svante Paabo of the Max Planck Institute "It is tantalizing to speculate that this could have to do with language." This is also interesting in light of one of Adam Smith's lesser known observations. According to David Levy and Sandra Peart,

[Smith] claimed that the real mark of humanity was the ability to use language. For Smith, language was important because it allows people to trade, and thus to specialize. So in the end, it was the ability to trade that distinguished man from the animals.

...Smith argues that humans are set apart from other animals by their ability to cooperate, an ability that requires them to trade and to talk. Dogs, who vary more physically than humans, could also gain from cooperation. Yet because dogs lack language, they cannot negotiate, and thus can not reap the gains from trade.


In 2003, we are testing a hypothesis over two-centuries old, and the initial signs point to Smith being right. You just have to marvel at the wisdom of Adam Smith.

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It's Not the Media - Karen Sternhiemer -Book Review 

Tyler Cowen featured this book on his blog about a month ago, and I found the topic interesting, so I read it last weekend. As the title proclaims, this book attempts to show that the media via movies, television, videogames, and music does not make children violent. The author, Karen Sternheimer, does a good job of attacking the methodology of studies purporting to show that the media makes children violent. She points out that most such studies use small samples to conduct experimental research using weak proxies for violent behavior. The book largely lacks original research, but does point out that as media saturation has increased in the last 20 years, violent acts committed by children have declined.

If the book had merely stopped after challenging the convention wisdom of the media bashers, it would have been a valuable contribution. Unfortunately, we find out that the media is not entirely blameless for our current culture. Though it doesn’t make kids violent, it does turn them into racists, sexists, and Euro-centric bigots. Sternheimer singles out Disney films to make her points. Films like Pocahontas and The Road to El Dorado:

Justify European colonialism and dominance, specifically male dominance. Explores refine savages, so European power appears natural and for the greater good. (101)

The spirit of adventure within Disney films is often drawn from the European history of colonialism with any mention of the genocide or slavery that often came with “exploration”. The 1999 remake of Tarzan is a great example. Historian John Newsinger argues that the film is a powerful metaphor of the Disney corporation’s (and the American) goal to colonize world markets. (102)


Apparently Sternheimer would prefer Disney make historically accurate cartoons for kids. Maybe for next Christmas, they could tell the heartwarming tale of “Pizzaro Meets the Incas”. In addition to glorifying colonialism, Disney, in moves like Cinderella and Snow White, they leave out the most important elements of women’s history:

Of course the realities of women’s disenfranchisement are absent: no scarlet letters, no legal beatings, rapes, or murders, as was often the case when women challenged the patriarchy throughout history. In this past women knew their place and if they played their cards right, could end up in the lap of luxury (104)

Gosh, I never realized the Disney Corporation was a wing of the Talaban, out to brand and disenfranchise women. If only they had made “Snow White verses the Patriarchy” or “Cinderalla Gets Beaten for Attempting to Vote” back in the 50s we would probably live in an gender neutral paradise by now.

Unfortunaly, Sternheimer only reveals her loony Marxist movie reviews half way trough the book. In the future, I would like to ask all sociologist to put such material in the first chapter or preferably on the book jacket, so I don’t make the mistake of buying and reading such nonsense.

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A Bad Sign  

For some strange reasons I won't go into here, I just started to read the book Living Wage by Robert Pollin and Stephanie Luce (in keeping with my practice of reading at least five books at a time instead of finishing one before getting distracted by a new topic). I can tell how bad this is going to be by this quotation chosen to open Chapter 1.

Whenever you hear a speech or read a paper which tells you that the "living wage" is against an "economic law" ask the speaker or writer these questions:

1. What is the actual working of the economic law?
2. In what book on political economy can that law be found?

In every case...the speaker or writer will be unable to tell you.


--Robert Blanchford (sic), The Living Wage and the Law of Supply and Demand (1895)

This makes my eyes roll for more than one reason.

First, I had never heard of "Robert Blanchford," so I Googled him. Luckily, some other person also misspelled Robert Blatchford's name. This is just great. This man is so inspiring to your work that you cannot spell his name correctly.

Second and more importantly, not only can I answer these questions, but so could have the author of the quote in 1895. He was either ignorant or a liar. 1) The Law of Demand states that if you raise the price of labor, individuals will purchase less labor. If you employ a minimum "living wage" you are going to cause unemployment among poor people. 2) Alfred Marshall's Principles of Economics (first published in 1890) provides an excellent introduction to this law.

So now that I have answered the supposedly unanswerable what I am supposed to think of the rest of the book?

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Don't Unplug Your Refrigerator! 

A recent study in the medical journal Lancet has found a positive correlation between refrigerator sales and Crohn's disease (a digestive track disorder).

"We propose a link between Crohn's disease, the cold chain and chronic infestation of the digestive tract by psychotropic bacteria," said Jean-Pierre Hugot, a gastroenterologist... in Paris.

That is a fine hypothesis, let's see you test it.

Dr. Hugot and his colleagues also showed that refrigerator sales match increases in Crohn's. The number of people suffering from the condition rose sharply in developed countries beginning in the 1950s. Prior to the Second World War, fewer than half of homes had a refrigerator.

I am not even sure where to begin criticizing this awful test. I would suspect refrigerators sales would correlate with many other factors such as wealth, longer life, red meat consumption, more correct diagnosis of Crohn's disease, etc.

Addendum: I forgot to mention that if refrigerator sales are correlated with these other variables not included in the analysis, this results in omitted variable bias. Also, to be fair to the author, I cannot gain access to the entire article online. But, if you are going to put out a press release you are responsible for providing sufficient information for those to read it to make judgments about the analysis. As Lee points out in the comments section, this looks like a bivariate analysis without relevant controls.
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Generic Newspapers 

I just ran across this in The Progress Paradox. Gregg Easterbrook takes the NYT to task for its hypocritical stance on drug patents.

In recent years The New York Times, especially, has crusaded on the point that drug patents should be curtailed so that any manufacturer could produce lower-cost generics. By that logic, why should The New York Times be allowed to charge one dollar per edition when it's only reporting the same news as everybody else? Plus, its stories are manufactured using the same words as less expensive newspapers! Perhaps Congress should order The New York Times to become a twenty-five-cent generic newspaper; bylines could say, BY A REPORTER. Or Congress could curtail the paper's copyrights, decreeing that anyone could run New York Times articles without a fee. Such steps would cut costs. They would also, of course, lead to reduced product quality, and the same logic applies to drugs.

Nice analogy!
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Thursday, December 11, 2003

Nader May Run for President Again 

Why? He got 2.7% last time. If Howard Dean gets the nomination (by default) as it now appears he will, then we can expect that vote share to fall. My guess is that most Green party voters would prefer Dean to Nader. If you doubt Dean's chances (as I once did) check out the Iowa Electronic Market, where no one else is trading above a 12 cents. What is also clear from the price graph is the true "importance" of Gore's endorsement. What is Nader thinking? Last election he had a reasonable shot at reaching 5% to guarantee federal matching funds in the future. I guess he can pay himself a bigger salary.

The title to this CNN story is "Nader Eyeing Another White House Run." Is it just me, or do you think the author of this headline is poking fun at Nader's bum eye?

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Thinking About The Flu? 

Here is an interesting graphic on flu rates over the past few years. It seems that there is generally a spike around the New Year, but that the infection rate peaks in late-January or early February. Interestingly, the last season with higher flu rates was 1999-2000. The peak that year was higher than our current infection rate; however, of the few years charted in on the graph this is the only one that peaked at the New Year and steadily declined after that. Maybe we are just getting this one out of the way early. I hope so, but this is just my mostly uniformed guess.
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Bush Did Not Steal Florida 

You know, I am so very tired of hearing current Democratic candidates complain that Bush, the Republicans, or the Supreme Court stole the election from Gore. This is false, plain and simple. Please stop saying this.

1) If the Supreme Court had accepted the Fla. Supreme Court verdict, Bush would have won the recount. We know this thanks to a recount by a consortium of respected news agencies that included NYT, WSJ, and the AP.

2) The Supreme Court overturned the Fla. Supreme court 7-2, not 5-4. The majority included liberal justices Souter and Breyer (Clinton appointee). The vote on the remedy was 5-4.

There are several good arguments not to re-elect Bush. Stealing the election is not one of them. Stop annoying me with this. For some other thoughts on this see John Lott's article .
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More on the BCS 

The creator of one of the computer polls used in the BCS speaks out. Wes Colley is an astronomer at UVA, who developed the Colley Matrix to rank college football teams "bias free." I think his thoughts on the current controversy with the BCS are interesting.

"I would probably have LSU No. 1," Colley said this week, although his own Colley Matrix had Oklahoma on top, followed by LSU and USC. "I saw them play Saturday night in person. They are tough and they are fast.

"After that, I guess, I'd probably have Southern California No. 2 and Oklahoma No. 3, if I had to pick."


Why would he say such a thing?

"I don't know why I would vote that way. I think Oklahoma has had a more impressive season by a little. It's hard as a person not to take into account what's happened recently. I would probably as a person take that into account.

"But I don't think that's what the computer rankings should do. They should not emulate what people would do. They should be producing a list of the most deserving teams to be playing."


My emphasis in bold. Here are some other good points from the article.

"Look, Berkeley, Kansas State and Florida, which one doesn't fit?" Colley asked, referring to the three schools that beat a top-ranked team. "Southern Cal - you can't lose to Berkeley. There's nothing else to say."

"Next time, don't leave it up to us," Colley said. "It bothered me when (USC coach) Pete Carroll said Southern Cal did everything they could possibly do to be in the national championship game. No, you didn't beat Berkeley. You didn't do everything possible."

"None of the professional leagues have a chronology factor when they're seeding their playoffs....To me, the philosophy should be the same in college football. Otherwise, why play in September?"


Also, see my earlier post on the BCS controversy.


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Wednesday, December 10, 2003

Robert Bartley 

I was sad to hear that Robert Bartley died yesterday, at the relatively young age of 66. He was a great friend of freedom. The current Wall Street Journal editorial page’s strong free market tilt and sterling reputation are largely the result of his three decade stewardship. On a more personal note, it was his book in the early nineties entitled The Seven Fat Years which first made me believe that some of the answers to the world’s problems could be addressed with economics.

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"A Sad Day for the Freedom of Speech" 

Scalia from today’s Supreme Court Decision (p. 169) on campaign finance reform:

This is a sad day for the freedom of speech. Who could have imagined that the same Court which, within the past four years, has sternly disapproved of restrictions upon such inconsequential forms of expression as virtual child pornography, Ashcroft v. Free Speech Coalition, 535 U. S. 234 (2002), tobacco advertising, Lorillard Tobacco Co. v. Reilly, 533 U. S. 525 (2001), dissemination of illegally intercepted communications, Bartnicki v. Vopper, 532 U. S. 514 (2001), and sexually explicit cable programming, United States v. Playboy Entertainment Group, Inc., 529 U. S. 803 (2000), would smile with favor upon a law that cuts to the heart of what the First Amendment is meant to protect: the right to criticize the government. For that is what the most offensive provisions of this legislation are all about. We are governed by Congress, and this legislation prohibits the criticism of Members of Congress by those entities most capable of giving such criticism loud voice: national political parties and corporations, both of the commercial and the not-for-profit sort. It forbids pre-election criticism of incumbents by corporations, even not-for-profit corporations, by use of their general funds; and forbids national party use of soft money to fund issue ads that incumbents find so offensive.

It is unbelievably bad news for America that the Supreme Court has bought the argument that too much money in politics corrupts elections. As bad as it would be, I would prefer public funding of campaigns to this current regime of speech rationing. Also, I can't help be feel that this law and decision is the inevitable consequence of Stigler's original "Economic Theory of Regulation" and much public choice research that has given so much empirical support to the idea that money corrupts politics. I am not saying that Stigler or any public choice economist would be for this law, but that you can't demostrate over and over again for 30 years that money corrupts politics and expect no one to listen. Unfortunately, the Supreme Court was listening, and has decided that money so corrupts politics that it is worth giving up on the first amendment. I don't beleive that politics in American is corrupted by special interest money. I think that government does many stupid and unfair things, but it does them because a majority of Americans desires it to.
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Tuesday, December 09, 2003

Good News on Debt Relief for Iraq 

Instapundit links to this statement by Bush.

The future of the Iraqi people should not be mortgaged to the enormous burden of debt incurred to enrich Saddam Hussein's regime. This debt endangers Iraq's long-term prospects for political health and economic prosperity. The issue of Iraq debt must be resolved in a manner that is fair and that does not unjustly burden a struggling nation at its moment of hope and promise.

I find it interesting that Bush does not mention concern for creditors anywhere.
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Advice to Liberal Arts Graduates 

Alex Tabarrok has some good advice for an "Ask Marilyn vos Savant" question from a disgruntled young woman with a liberal arts degree.

Many of my friends and I are intelligent, liberal-arts graduate(s) who, due to an economic system that glorifies science, medicine, business, and law, are toiling as secretaries and retail clerks. Is there any hope for the philosopher, writer, dancer, poet or sculptor to find paying work in Western society? Or are we doomed to relegate our talents to hobbies while working in drudgery until we die, just to pay the bills?

Alex answers:

First, stop whining. You had a choice of poetry or business and you chose poetry. If your love for the subject is not enough to make up for the loss in income then go back to school. Two, stop blaming "an economic system" that glorifies science etc. and notice that these jobs pay highly because the skills they require are rare and people are willing to pay for the product of these jobs. If you produce something that people want you will be paid highly also but don't expect other people to pay so that you can fulfill your dreams of writing poetry that no one wants to read. Third, what do you mean by it's difficult to find work for the philosopher, writer, dancer, poet or sculptor in "Western society." Do you know of any society at any time or place that has offered more for the arts? A retail clerk who does sculpture on the side has a far higher income than does your typical sculptor working in India. Try visiting most of the rest of the world - where science and business are not glorified - if you want to truly understand "drudgery."

I very much agree with Alex's assessment; however, I am a little more peeved with the "intelligent" questioner. Does the liberal arts education prepare you solely for life as an unemployable pretentious philosopher-artist? That is strange, because there are certainly many liberal arts institutions with huge endowments built upon the successes of their graduates.

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A Happy Discovery 

After reading on Volokh that world population growth has slowed, I decided to do a little Googling of the most infamous doomsayer, Paul Ehrlich. Type in "population bomb" into Google and hit the "I'm Feeling Lucky" button. If you are too lazy to do this here is what you will find.

Nelson Munce: Haha.
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Who Cares about $1 Billion?  

The Chronicle of Higher Education highlights a survey of university revenue from inventions.

Universities collected nearly $1-billion from the commercialization of their academic inventions in the 2002 fiscal year, according to the latest annual survey by the Association of University Technology Managers. They also executed more than 3,700 licensing deals, filed for more than 6,500 U.S. patents on new inventions, and spent nearly $160-million in legal fees.

This sounds like a lot until you realize the size of the education industry in the US. According to the this NBER briefing

In 2002, states spent about $66 billion on higher education subsidies, a substantial fraction of the $289 billion spent on U.S. post-secondary education.

Which, in turn leads me to this article by Laband and Tollison discussed here.

"This generates our major conclusion: the enormous increase in the social investment in academic research is, by and large, wasted and comes at the expense of time and effort that could have been devoted to providing education. . . . "

The Laband and Tollison study is about economics research, but I bet it is not irrelevant to other areas as well.
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New Moneyball Review 

If you hadn't noticed, I like Michael Lewis's latest book Moneyball. There is a new review of the book by Matt Welch at Reason, and you can read commentary on it at Primer. Here is a good plug for the book.

Though Lewis has called Moneyball "the story of an idea" (the idea being sabermetric thought), in fact it's the story of the temperamental, bull-headed revolutionary who was able to impose this idea on an unwilling host and take advantage of his market's irrationalities. It's a management tale and morality fable, which may be why the book has been so popular among Wall Street traders and Web geeks. I know at least two people who, after reading the book, decided to rethink their entire mental approaches to life.

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In Defense of the BCS 

Actually, I am not 100% defending the BCS. I think it is a shame that Division I-A college football lacks a playoff system. That is all I have to say on this matter. However, with the recent exclusion of USC from the BCS national championship game, I want to respond to some unnecessary BCS bashing. Most people agree the top three teams in the country are USC, LSU, and Oklahoma. All three teams have one loss. Following the BCS ranking formula Oklahoma and LSU will play for the national championship. The ranking formula was determined prior to the season, and it is derived from four components: 1) Two Human Polls 2) Eight Computer Polls 3) Strength of Schedule and 4) Team Record.

So why is everyone upset? Well, the human polls (AP and ESPN/USA Today) both have USC ranked as the top team in the nation. In the pre-BCS days, these were the only measurements of champions. My argument: It is the human polls that are wrong, not the BCS. The BCS formula is protecting us from myopia (or excessive crack smoking) that causes journalists and coaches to weigh OU’s recent loss to a very good team more than USC’s October loss to a bad team. If we do not have a playoff, at the least I want to see the best two football teams in the country play. After looking over the evidence, I prefer the BCS-determined match-up.

Since USC outdoes both teams in the human polls and all the teams have the same number of losses, where do Oklahoma and USC make up the difference? Everywhere else.

First, let us glance at the team schedules.

USC: USC beat one ranked team (Washington St. #14) and they lost to Cal (7-6). USC plays in the Pac 10, which as a conference beat a total of 4(5) ranked teams in the ESPN (AP) poll. Patsies outside the Pac-10 on their schedule included Hawaii, BYU. Notre Dame and Auburn were also pretty weak this year.

LSU: LSU beat three ranked teams (11th ranked UGA twice) and lost to Florida (8-4, ranked 16th). The SEC as a conference beat a total of 11 ranked teams (6 within LSU’s division). LSU out of conference patsies include Louisiana Monroe, Louisiana Tech, and Western Illinois.

Oklahoma: Oklahoma has beaten two ranked teams (including a 52-point drubbing of 5th ranked Texas), and has only the loss to 10th ranked Kansas St. The Big 12 beat 12 ranked teams (8 within OU’s division). Patsies included North Texas, Fresno St. and a few really weak in conference teams. Until this past Saturday, Oklahoma was considered the best team in the country by far. But, after a 28-point loss to Kansas St. in the Big 12 Championship game, many BCS critics think OU should be out. In fact, it seems this one event is the reason so many people want to tear down the BCS.

Here is an interesting result. According to the human poll rankings, OU has played a tougher schedule than USC. Yet, the humans think USC is better than OU, because its loss was more recent. I see no reason why that should matter.

Next let us go to the computer polls.
The eight computer polls attempt to rank teams by mathematically estimating strength of schedule (as opposed to the human “guestimation”). 6 of the 8 polls rank OU first. The other two rank OU 2nd and 5th. In the formula the lowest rank is dropped for all teams. So, all of the polls in the rankings agree that OU should be in the championship game. LSU finishes 2nd in all but one of the computer polls, where it finishes 1st. Without even looking at USC, the computers unanimously agree that OU and LSU are the two best teams in the country. USC does finish 1st in one poll (the same one that has OU 5th) but is a solid 3rd, with one 4th, for all of the others.

One final argument that critics have made is that because OU did not win its conference championship it should not be eligible. That is the biggest bunch of bologna I have ever heard. Name one major sport where winning your conference is a requirement to being the national champion. Second, OU would have been its conference champion if the Big 12 championship game did not exist. The Pac 10 does not have a championship for its fans, so USC did not have a chance to blow it. OU should not be punished for doing something that is beneficial to all college football fans. See, this argument doesn’t hold up. This is an excuse to dump on OU, a team that no one likes (myself included) except OU alums.

After looking at the data I just have to say thank goodness we have the BCS! USC is the clear number 3 in this group of teams. The sportswriters and coaches who determine the rankings ought to be ashamed for bumping OU to number 3.

Addendum: A good article on the subject.

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Monday, December 08, 2003

Libertarian Paternalism? 

I turned on Saturday Night Live this past weekend to find "The Best of Steve Martin." Hadn't NBC bombarded me all week with advertisements for Al Sharpton as the host? Well, today my wife checked it out and found the culprit: FCC equal time rules. Apparently, by devoting a non-news broadcast segment to a candidate the station must give the option to all qualified Presidential candidates. I find it interesting that news programs are exempt. (So, it is OK for the news to be biased?) Anyway, though I cannot find any record of it, Sharpton must have qualified for the ballot in Tennessee. Either that or some kind TV executive in Nashville saved me the pain of sitting through 90 minutes of Al Sharpton. Plus, I always enjoy seeing Mr. Steve Martin on SNL. I can always use a little extra regulation in this area. ;-) Seriously, what a stupid law.



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If My Grandfather Could Have Seen This... 

Sometimes you just have to stop and admire the state of our technological advance.

This weekend I watched my Wofford Terriers defeat the Western Kentucky Hilltoppers in the NCAA I-AA football playoffs. I live in rural Tennessee, 300 miles from the game in Spartanburg, SC. To see this event I have a little piece of plastic on my roof that receives signals from a satellite. To activate the signal I called a woman in India, who instantly gave me access to this game. And what did this cost me? $20. And it would have been $5 cheaper had I not called the woman in India. My wife, daughter, and I would have had to pay $50 to actually attend the game! Unbelievable. Go T-dogs!
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The Incredible Flexible US Economy 

EconLog links to an interesting article by Alesina and Giavazzi on The Great Job Machine we call the US Economy.

[D]on't look for any improvement in US employment to come through factory jobs. Instead, it is the greater flexibility of services that has produced the resumption of employment growth in the US.

The outcome is that in Europe, contrary to the US, an increase in the demand for services produces higher rents, rather than more jobs. Take the simple case of taxi licenses: if the number of taxi licenses is fixed, and consumers start using taxis more often, what you will observe is, at most, an increase in the demand for powerful Mercedes cars that taxi drivers use, not an increase in jobs.

In other words, a good indicator of the state of the US economy is how many people take care of you at a supermarket cashier. In many European countries, you should instead look at the quality of the stereo in your taxi.

The labor market flexibility in the US service sector is truly remarkable. During recessions and booms, you can feel the changes in quality and number of waitresses in restaurants, in the size of staffs in shops, in the availability of cleaning services. In the roaring 1990's, it was almost impossible to find qualified restaurant staff to fill vacant jobs. During the stagnant economic years of the Bush administration, such workers were plentiful. In Europe, you simply certainly can't see these differences: waiters, busboys, and cooks all have job security.


My first independently developed economic hypothesis after taking Econ 101 involved this exact observation. After noticing bad service at some of my formerly favorite restaurants I recall saying to my party "there seems to be an inverse relationship between the employment rate and waitering service." My friends then chastised me for ruining the conversation. Apparently, I wouldn't have noticed this had I been living in another country. But now I wonder, is service normally always bad or always good in other countries?
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Privatization of Public Universities in SC 

South Carolina governor Mark Sanford is pushing a very novel idea to stop the bureaucratic waste in higher education.

"Given the unusually high number of colleges and universities we have in South Carolina and the scarce dollars with which we've got to fund all of them, this is a way to give certain schools the flexibility they want while saving the state money at the same time," Gov. Sanford said. "It also stems from the fact that we're going to be aggressively pushing for a governing board in South Carolina - one that can implement a true statewide vision for higher education that gets at the waste and duplication currently in the system and makes sure the right arm knows what the left arm is doing. That kind of coordinated approach is going to be central to our efforts moving forward."

The governor's proposal would transfer all buildings, real estate and capital improvements from the state to those institutions which choose to accept the offer. Those institutions would forego any direct appropriations from the state, organize under IRS Code 501 (c) (3) and agree to charge a preferred tuition rate for qualified South Carolina residents - a permanent covenant.

Governor Sanford ought to be commended for proposing such a unique idea. According to a story in The Chronicle of Higher Education (password required), "while other states have given certain public colleges enough independence to function almost as private institutions, no state has opened the door to the wholesale transformation of public colleges into private ones." The most likely beneficiaries of this policy are Clemson, Coastal Carolina, and The Citadel, which all receive less than 20 percent of their funding from the state.

While I think it is a great idea (minus the new "governing board" -- why add a new bureaucracy to cut bureaucracy?), I am afraid that it is not politically feasible. For an example of the disadvantages public universities face relative to privates see Tyler's post at MR. Also, see Stanley Fish's partially incorrect justification for privatizing higher education. He too, sees the benefits of private flexibility. Finally, visit Arnold King's post on the potential of vouchers in higher education.
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Saturday, December 06, 2003

How to Get Things in the Army 

Donald Rumsfeld is upset about the allocation of resources in the military. As well he should be. It is just a minor annoyance when I face bureaucratic ineptitude while waiting for a driver's license, but these things can be more of a problem in the middle of a war zone. But, my grandfather found a way to keep his unit stocked.

In post D-Day France my grandfather's troops were sorely in need of new uniforms. One day jeep drove by with a foul tempered general as its main passenger. The general, who wore four stars, got out and asked to speak to the man in charge of this tattered outfit. My grandfather hesitantly spoke up. The general said, "Why are these men in such shoddy uniforms?" My grandfather replied, "The Army depot told us it was out." Disappointed, the general changed his tone and said, "You go down to the supply dump and you tell them that General Patton said to give your men new uniforms!" By the afternoon, all the men had their new clothes. And I am pretty sure that was my grandfather's most enjoyable trip to the depot.

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Wal-Mart in Mexico  

This story in the NYT warms my heart. Here are some of the tidbits.

Wal-Mart, the biggest corporation in the United States, is already the biggest private employer in Mexico, with 100,164 workers on its payroll here as of last week. Last year, when it gained its No. 1 status in employment, it created about 8,000 new positions -- nearly half the permanent new jobs in this struggling country.

Last year, 585 million people -- nearly six times the population of Mexico -- passed through its check-out lanes. With 633 outlets, Wal-Mart's Mexican operations are by far the biggest outside the United States.

Its sales represent about 2 percent of Mexico's gross domestic product -- almost the same as in the United States. Analysts say it now controls something approaching 30 percent of all supermarket food sales in Mexico, and about 6 percent of all retail sales -- also about the same as in the United States.


And what about the "multinational exploitation" of the people? Just ask Wal-Mart shopper José Carrillo.

"It doesn't matter to me if I'm buying from a multinational company, as long as they give me what I want."

Boy, doesn't that just make you want to build puppets, put on black masks, and find the nearest globalization protest?


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Financial Markets or Crony Capitalism 

Virginia Postrel has a review a new book by economists Raghuram G. Rajan and Luigi Zingales of the University of Chicago in the NYT. Saving Capitalism from the Capitalists highlights the liberating forces of financial markets for empowering outsiders and maximizing competitive pressures.

"Relationship capitalism is basically where a lot more is done through contacts - who you know, how you know them - rather than through arm's-length contracts, more transparency, more open dealing and so on," says Professor Rajan, who is now serving as the International Monetary Fund's chief economist. In relationship capitalism, "we do less through contracts and more through handshakes."

The system sometimes arises as the best way out of a bad situation. Personal relationships can replace an unreliable legal system in which formal institutions don't enforce contracts and the law doesn't require the information disclosure on which competitive finance depends. Extended families, close ethnic groups, or local social sets substitute reputation and social sanctions for courts and contracts. These arrangements are particularly common in developing countries.

But relying on reputation means keeping the group small. And keeping the group small conveniently limits competition. So relationship capitalism tends to survive when it's no longer needed, hampering economic growth.

Professors Rajan and Zingales argue that financial markets make the biggest difference between open, market capitalism and closed, relationship capitalism. Free financial markets allow outsiders with good ideas to raise funds, even when their businesses will compete with insiders.

"Free financial markets are the elixir that fuels the process of creative destruction, continuously rejuvenating the capitalist system," they write. "As such, they are also the primary target of the powerful interests that fear change."


I especially like the last statement. I may have to pick this one up.
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Friday, December 05, 2003

Boras and the Baseball Conspiracy 

Power sports agent Scott Boras is upset that his baseball clients are not getting the big contracts this year. He blames this on MLB teams hiding revenue. According to Boras,

"To say the Braves are losing money is fictional.... Atlanta Braves fans suffer and the organization suffers, because the corporate entity does not want to tender the true rights value for what the franchise brings in."

I have a suggestion for Mr. Boras.

Since you are so obviously aware of all the excess profits teams are making, and you have numerous top-dollar clients, then why don't you start your own baseball league? Certainly you could scrape up an 8 team league. Put teams in DC, Nashville, Charlotte, Portland, San Antonio, etc...everywhere MLB teams are threatening to move. Sign a TV deal with ABC/ESPN. But please, stop complaining about how MLB teams "hide" revenue, as if there is some actual number out there that is correct. Of course they report low numbers, just like you guys report the high numbers on unguaranteed contracts that will never be paid out in football. Baseball teams make money, lots of it. We don't know how much, and we never will. If you have clients that will generate wins that increase revenues, your guys will get their contracts. What the public books say is irrelevant. And speaking of irrelevance, you are about to be now that Sheff seems to be doing just fine without you and no one is drooling over Milwood. Your old strategy of selling over-hyped stars to idiot GMs ended with the Billy Beane era. Stop blaming your problems on some grand conspiracy before you get to black helicopters, Area 51, and the Trilateral Commission.

You can also find a version of this rant on Primer.
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Intellectual Snobbery 

In an article about controversial playwrite Tony Kushner, NYT reporter Alex Abramovich followed his main subject to nearby Vanderbilt University, a fantastic nationally acclaimed academic institution. During this visit Abramovich carefully sets the scene by describing the school as "a campus where Confederate flags hang proudly in dormitory windows." This is odd considering

"There are no Confederate flags hanging from dormitory windows," says a clearly miffed Michael Schoenfeld, Vanderbilt's vice chancellor for public affairs. Others agree with Schoenfeld's assessment. In fact, Nashvillians may recall that Vanderbilt is the place where officials removed the word "Confederate" from a dormitory name last year, much to the consternation of the Daughters of the Confederacy. The word is not much appreciated there.

But, the next statement he makes really riles me up even more, because I believe he flat out 100% fabricated this event.

As the crowd filtered out, an elderly man leaned over to his wife and registered his surprise at Mr. Kushner's performance. "Smart Jew!" he said.

I have lived in the South my whole life. I have met many a racist old man (both here and in the North), but very few rabid anti-Semites (in fact, I can't think of one). I have never heard someone make such a statement in public before. Do men who make such statements exist in the South? Yes, but they especially avoid places like Vanderbilt. And even if such a person were to happen upon a lecture by this ultra-liberal playwrite, he would certainly be the exception, not the rule as Abramovich portrays him. I guess Mr. Abramovich had good luck in finding his pigeon to frame his article as "enlightened Northerner saves backwater Southern hicks from their ignorance." In a day he heard something I haven't heard in 30 years of life in "the South." So, I will go on the record now in calling Abramovich a liar, a 100% no good liar. I doubt he cares to prove it, but it just makes me sad that people still think like this. His opinion of Southerners mirrors the superiority feelings of racists whom he mocks in this article. And it appears that his facts are about as correct as many of the "facts" put forth by racists in support of their prejudice. I will also say that I believe Mr. Abramovich is an exception among Northeasterners, whom I generally like just as much as any random Southerner.

Mr Abramovich: Put a sock in it, and go back where you came from. You are lowering the average IQ of the region when you visit us. And given your prejudices I am sure you find this very insulting.

I found out about this from Instapundit.
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Thursday, December 04, 2003

Best Country CDs of 2003  

Amazon.com, CMT and Country Standard Time always offer very good lists of their 10 best CDs of the year, so I figured I would as well. These are my favorites from this year, though some were released in earlier years and were just new to me.

Laura Cantrell - When the Roses Bloom Again and Not the Tremblin’ Kind: These two albums have consumed me for the last year. Cantrell worked on Wall Street until earlier this year when she quit her job to try her hand at being a full-time singer. You can read about her here in the New York Times, and here from the Wall Street Journal. Her sound ranges from honky-tonk to bluegrass to upbeat alt-country rock and is dominated by steel and rickenbacker guitar. Her taste in picking songs is fantastic and the few she herself penned, including a tribute to Bonnie Owens, are surpurb. You can download a few of her songs for free at her website, I recommend “Not the Tremblin’ Kind”.

Gillian Welch - Soul Journey: Welch’s first three albums were largely acoustic and stuffed with songs about dreary coal miners and sharecroppers living their miserable lives. They were all three terrific. Her latest offering, from last summer, is more upbeat and slightly more rocking.

Patty Loveless - On Your Way Home: After doing a magnificent bluegrass record, Loveless returns with what is easily the best traditional country record of the year, and as an entire album, probably the best of her career. It seems like now that George Jones doesn’t make many records, that Patty gets to have first crack at all the best Nashville penned songs about drinking and pain, and she has never sounded better. The title track, written by Matraca Berg, is depressingly fantastic.

Chris Knight - The Jealous Kind: Knight is a sort of country music William Faulkner, with a real gift for telling four minute stories about poor southerners who smoke Camels, rob liquor stores, or murder their inlaws. He sounds a little like the 50s Johnny Cash, though my mom insist he sounds like John Mellencamp, which is an insult I would not use against a member of Al-queada.

Waylon Jennings - Waylon Live: The Expanded Edition: This is a re-release of a much shorter live album from the mid-seventies. If you only know Waylon from the Dukes of Hazzard theme, you should really get this album, because it shows him at his artistic best.

Various Artists - Livin’, Lovin’, Losin’: This is a tribute to the Lovin’ Brothers, who were one of the greatest brother duet acts in country music. Their songs and sound had a huge and lasting influence. This tribute features great songs by Patty Loveless, Rodney Crowell, Vince Gill and Allison Krauss.

Lucinda Williams - World Without Tears: Williams voice is as rough and raw as you will hear, and her new set from last summer contains some terrific songs, particularly the title track. If you don’t know her, you should definitely check out her previous CD Car Wheels on a Gravel Road. It is probably one of the top 10 country CDs ever recorded.

Kathleen Edwards - Failer: A next generation, Canadian version of Lucinda Williams. She has a great voice and sound, and writes great songs.

Gram Parsons - Anthology: Sacred Hearts and Fallen Angels : Parsons joined the Byrds in the late sixties and inspired them to record Sweethearts of the Rodeo, the best hard-core country record ever recorded by a rock band. Drugs and a grating personality caused Parsons to start and quit several bands, making it difficult to get all his best work in a single collection. This two-disk set solves the problems and contains almost every great song that he recorded solo or in various bands.

Best Country Chirstmas Record: Happy Holidays from Kelly Willis and Bruce Robison

Best Country DVD - Allison Moorer - Show: Her best songs performed live. It comes bundled with the CD and sounds great in Dolby Digital.

Best Hillbilly Song of the Year: Sara Evans - Suds in the Bucket
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Economists' Faith in Markets 

I have been thinking about Bill's post on Tyler's discussion of a survey of economists. My thoughts are too long for a simple comment, so I will post them here. I too was shocked to see so many economists making "mistakes" about issues on which I perceive most economists agree. The main one being, that with some basic assumptions, markets properly allocate resources. After glancing over the actual study by Heckelman and Whaples, I am not so sure what these results reflect.

For example, Tyler highlights the fact that 66% of the Public Choice Society believes bureaucrats are "budget maximizers." Tyler interprets this to mean: 66% believe the Niskanen model of predicts well. However, were I a participant in this study (I am a PCS member) I would have sided with the 2/3 majority. I would do this not because I think the Niskanen model is right, in fact I believe it is very wrong. I believe that even though bureaucrats are budget maximizers they are not in a position to have anywhere near the effect on their budgets as the initial Niskanen model predicts. (I don't mean to knock Bill Niskanen. His initial idea was really neat, I just don't think it holds up.)

So how does this apply to Bill's comment? Were I asked the evaluate the statement "absent transactions costs, markets efficiently allocate resources" on a quick survey I might answer "no" even though I believe markets are the best way to allocate most resources. The reason why: Market Failure. It's been in our brains since Paul Samuelson put it in his first textbook. How might the 3 classes of MF affect the survey. Monopolies are not a problem here. To me, Public Goods involve a type of transactions cost problems known as excludability, but I suspect many members of the AEA think of excludability as a problem separate from transactions costs. Likewise, Asymmetric Information is a transactions cost problem, but others may think of it as a separate problem. Therefore, I would answer "yes," but I could see many survey takers who mean "yes" might say no on a quick survey. This is one reason why I hate survey data.

Economists are very careful about assumptions, so minor and trivial exceptions to rules (such as markets properly allocate resources) can drastically alter the responses you get from this profession. I have too much faith in my fellow economists to believe that nearly half of the profession thinks markets fail.

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Brad DeLong and Productivity 

What is the magnitude of the current computer-driven technological boom relative to the history of innovation? Brad DeLong answers:

The computer-and-communications technology revolution we have been living through transforms twice as large a share of the economy as did the British Industrial Revolution, looks to last three times as long, and proceeds at a pace three times faster than the revolution in spinning and weaving: it is, relative to the size of the economy, eighteen times a bigger deal than the original.

But what I find more interesting is DeLong's contribution to the boom. In the WSJ piece discussed below we learn DeLong "tries to spend no more than an hour a day on his site."

One hour a day! If he is serious, which I believe he is, Brad DeLong must be the single most productive person on earth. Wow! If you don't believe me, check out his site.


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Article on Disabilities and Unemployment 

Here are some links about the article I discussed in class this morning on the determinants of the "unemployment rate."

Alex Tabarrok discusses the NYT Op-ed of Austan Goolsbee discussing the paper by David Autor (MIT) and Mark Duggan (Maryland).

Abstract:
Between 1984 and 2000, the share of non-elderly adults receiving benefits from the Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs rose from 3.1 to 5.3 percent. We trace this growth to reduced screening stringency and, due to the interaction between growing wage inequality and a progressive benefits formula, a rising earnings replacement rate. We explore the implications of these changes for the level of labor force participation among the less skilled and their employment responses to adverse employment shocks. Following program liberalization in 1984, DI application and recipiency rates became two to three times as responsive to plausibly exogenous labor demand shocks. Contemporaneously, male and female high school dropouts became increasingly likely to exit the labor force rather than enter unemployment in the event of an adverse shock. The liberalization of the disability program appears to explain both facts. Accounting for the role of disability in inducing labor force exit among the low-skilled unemployed, we calculate that the U.S. unemployment rate would be two-thirds of a percentage point higher at present were it not for the liberalized disability system.
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More on Health Care 

The other day I posted on the good news from the Health Misery Index, determined by the cost of health care and the number of uninsured. Well, it turns out the news is better than I thought. Tyler points out that today's level of uninsured is much different than in the past. New immigrants account for much of the growth in the uninsured. Many of these immigrants voluntarily chose to remit their money to family left behind in much worse health situations of poor countries instead of purchasing insurance. That is the numbers look bad because the US is opening up its borders to increase the wealth of its entrants.

From a worldwide health perspective would you rather have more uninsured and more immigrants, or less uninsured and less immigrants? I'll take the former.
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Econ Blogs 

My father points me to an article in the WSJ on economics blogs. It is nice to see two of the best, Brad DeLong and Marginal Revolution made the cut.

The Internet makes it easy to get the latest data, latest headlines and latest blather about the economy. But also lurking on the Web, if you know where to look, is some trenchant commentary on the most puzzling features of the modern economy.

So here are some sites that one gray-bearded economics reporter checks frequently for thought-provoking takes on what's happening in today's economy and what's shaping tomorrow's. Three are blogs, the electronic musings of those who can't bear to keep their thoughts to themselves. Two are sites where the writers regularly post brief essays. All are free. All the writers are opinionated; that's what makes them worth reading.


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Math: The New Anti-Terror Weapon 

Today's Chronicle of Higher Ed. discussses the new mathematical weapon in the War on Terror, produced my MIT mathematician Jonathan David Farley.

When FBI agents arrest a few members of a terrorist cell, how can they know if the cell has been disabled?...We should imagine terrorist cells not as graphs but as ordered sets, he says. "Lattice theory, my field, is the abstract study of order and hierarchy. In terrorist organizations, hierarchy appears to matter."

Such hierarchy complicates the project of destroying a cell. "People have been interested in simply splitting terrorist cells apart," says Mr. Farley. "That would be like blocking various intersections around D.C. so that it was impossible to get from, say, the northwest to the southeast. That might seem like a good model, but one can quickly see that you could break a terror cell apart and still have two functioning terrorist cells, even if they could not speak to one another. Whereas if you take the perspective of the ordered set, you see that what you want to do is cut the leaders off from the followers."

Mr. Farley offers an equation for calculating the probability that a given cell has been disrupted. His formula is gloomier than the "graphic" models offered recently by other scholars. In an example in which four members of a 15-member cell have been captured, he says, the standard graphic model would suggest a 93-percent probability that the cell had been broken; Mr. Farley's equation yields only a 33-percent probability. "I'm not selling mathematical snake oil, suggesting that we can actually make exact predictions," he says. The point is instead to give law-enforcement agencies a rough idea of how to allocate their resources.


Here is a link to the academic article in Studies in Conflict and Terrorism.

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Wednesday, December 03, 2003

Economics Puzzle 

From a post by the great Tyler Cowen at Marginal Revolution:

When you ask economists whether markets, in the absence of transactions costs, achieve efficient outcomes, 57.1 percent agree. This is itself odd, since I would interpret the proposition as a tautology, but I guess some people simply can't bring themselves to praise the market.

Cowen is right. Assuming that to be included in the survey as an “economist” means you have a PhD, not from some English diploma mill, but a real PhD, how can this possibly be? If you surveyed physicists as to whether or not a feather or a brick falls faster in a vacuum, I expect you would get 99.9% agreement that they fall at the same speed. This is the sort of survey that scares the crap out of me and makes it hard for me to go to sleep.

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NASCAR Dads? 

It was reported on Fox News last night and is now in many newspapers that the key swing voters for next year’s election will be “NASCAR Dads”. Here is a definition of the group from the Detroit Free Press:

The term NASCAR dad was coined last year by Democratic political pollster Celinda Lake as she described mostly white, culturally conservative Southern rural men who once voted Democratic but switched parties to vote for Ronald Reagan and, with few exceptions, have been doing so ever since. They have been instrumental in turning the South from solid Democratic into a Republican stronghold.

I always thought the term “swing voters” described a group of undecided voters likely to vote for either party. I find it very hard to believe that “NASCAR Dads” are likely to switch back to the Democrats in this particular election, choosing to vote for a rabidly anti-war Dean over Bush. In fact, other than a Republican fundraiser or military base, there are probably few places that George Bush would be more welcome that at any NASCAR event.

Even though I think that NASCAR dads are in no sense swing voters, I do hope that the media and politicians buy into this. I can’t wait to see the following newspaper stories:

“Speaking through a translator, Bill Elliot announced his support for John Kerry”

“Rusty Wallace today announced that he would support Wesley Clark for president. It is believed that the endorsement was given in exchange for a potential seat in Clark’s cabinet, where Wallace will be diplomatically known as “Secretary Rusty”

“Today John Edwards promised, if elected, to replace the unpopular Sacagawea one-dollar coin with a an orange colored one depicting an angry Tony Stewart”

“Howard Dean today stunned his own campaign staff by announcing his support for a law mandating spittoons in all public buildings”

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New Rising Star Economist 

My father e-mailed me this interesting article in The Chronicle of Higher Education about the next "hot" scholar in economics. MIT's Sendhil Mullainathan is apparently making some big reputational waves for his unconventional approach in tackling economic problems. For instance, he examined racial discrimination in the labor market by sending out similar resumes with traditionally black and traditionally white names. He found that for both low and high skilled applicants, the "black" resumes were more likely to induce a callback. And he is also honest in admitting that this may have more to do with untraditional names than racism. In any event, I think this a very neat test.

"The more I got to know economics," says Mr. Mullainathan, "I kind of started to feel like -- it didn't seem that the highest returns are in mathematical models of one thing or another. Little by little I was led to empirical work. ... I'm not that motivated by theoretical questions. Usually I'm just motivated by real stuff. And if something theoretical comes of it, that's great."

It is so nice to see the economics profession moving in an interesting direction. In no way am I opposed to mathematical formalism that dominates the discipline, but to me it is just boring (I also lack the high level math skills and the desire to acquire them). Economists such as Steven Levitt, Daniel Hamermesh, and Sendhil Mullainathan are great examples of intelligent scholars who have decided to put their intelligence to work in original, relevant, and interesting problems.

PS -- The Chronicle may require a password for this article. If you cannot read it, just check out his webpage.

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Tuesday, December 02, 2003

Useless Innovation 

I believe that the private market will underproduce innovation due to positive externalities, but this does not imply that the government necessarily does a good job of fixing the innovation deficit. Here is a perfect example.

Thanks to a government subsidized research program, the Central Japan Railway Co. has developed a train that can go 361 mph. Supposedly, the US and Germany have similar research projects in progress, too.

Why does the world need a train that can go this fast? Airplanes are faster, cheaper, safer, and already exist. What possible use does anyone gain from this? What is next, new and improved wagon wheels?
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Sales Taxes and Internet Purchases 

According to Les Jones, Nashville is AOL's top Internet purchasing city. This is no surprise given Tennessee's sales tax of nearly 10%. This conveniently offsets my faculty discount at the school bookstore.

Chip Taylor comments by pointing to a study that notes a positive correlation between sales tax rates and Internet purchases.

I see the beginning of a good Public Finance senior comp question here.
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Quidditch for Muggles 

Apparently, someone has figured out how to modify Quidditch for play without flying brooms or enchanted game balls. Check out the story on Leaky Cauldron, and here are the actual rules.
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Christmas Reading List 

As the Christmas break approaches, I thought I would post some reading recommendations. Often, students ask for suggestions to read or to ask for as Christmas presents. I think this is a good place to post my suggestions.

One qualification: The books must be enjoyable. That is, you could read them on vacation. No mega-classics or important texts allowed.

Old Standards: These are books I have recommended in the past and will continue to do so in the future.

The Armchair Economist by Steven Landsburg: Great practice in thinking like an economist.

A Conflict of Visions by Thomas Sowell: Sowell breaks down how assumptions, not goals or moral sentiments, explain political opinions.

The Elusive Quest for Growth by William Easterly: If you care about global poverty but you have not read this book, then you have to read this immediately. Very rarely does such a well-respected academic researcher write so well for the general public about a complicated and important subject.

Guns, Gems, and Steel by Jared Diamond: Answers Adam Smith’s famous question with a twist. Why were some nations rich, and others poor? The answer will surprise you.

The Third Chimpanzee by Jared Diamond: How can the small difference in DNA between humans and chimps make us so different?

Trout Bum by John Gierach: Actually, any book by Gierach is worth reading more than once. I have read all of them at least twice (except the new one). I picked his first book, because it is better to start at the beginning...before he quit drinking. If you cannot make it out to fish, Gierach is a close substitute. If you do not fish, you will after reading some of these books.

Harry Potter and the Sorcerer’s Stone by J.K. Rowling: Again, any of the Harry Potter books are fantastic. If you think these books were just for children, you are really missing out on the fun. The first in the saga is actually the weakest (though very good), but you will be lost unless you start at the beginning.

Books I have read recently:

Moneyball by Michael Lewis: A well-written story about how to win baseball games at bargain prices. It made me an A’s fan. See my earlier post.

Human Accomplishment by Charles Murray: Ranking the best in art and science, while offending everyone along the way. See Bill’s review.

The Progress Paradox by Gregg Easterbrook: Why are we not happier about being rich? I am about 100 pages in on this one. It is a good question. I do not know if I am going to like his answer, but definitely a good read.

May the Best Team Win by Andrew Zimbalist: Zimbalist is one of the few economists who write on the economics of baseball. I read it recently, but plan to glance over it again before I post a review. I actually do not think Zimbalist is right, but no one else is discussing the current state of baseball economics.

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Health Misery Index 

Chip Taylor points to an article on a new measure to quantify the affordability of medical care.

So you think that our health care is becoming less affordable?
Check out Rexford Santerre's Health Misery Index.



Using the intuition of the economic misery index of inflation and unemployment, Santerre calculates "the percentage of Americans without health insurance and added to it the "excess" health care inflation rate — that is, the percentage by which annual increases in medical costs have exceeded general price inflation."

The result:

For one thing, it explodes some myths in the current health-care debate. For example, critics of the system often imply that we were better off 40 years ago because medical spending was the equivalent of only about 5 percent of the gross domestic product, whereas today it is some 14 percent. Yes, health care has gotten more expensive, but the facts are that more people are insured today and those insured have more comprehensive coverage. Thus in 2002 the index stood at 17.9 percent, less than half of the misery observed in 1960.

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More Bad News from Bryan Caplan 

In Part II of his hypothesis of democratic failure, Bryan updates us on some hard truths about the economic illiteracy of the population.

The most plausible reading of this data is that the public wants a free lunch. They hope to spend less on government without touching any of its main functions. If forced to face a realistic trade-off, though, they abandon anti-government rhetoric. Thus, when asked "If the government had a choice between reducing taxes or spending more on social programs like health care, social security, and unemployment benefits, which do you think it should do?," the split was roughly 40/60 in favor of more spending. In all probability, adding the status quo as a third choice would reveal that the median respondent's first choice is to keep things as they are.

He also reports similar opinions on regulation and protectionism. For a discussion of Part I, follow this link.
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Thank You WTO 

I would like to thank the WTO for existing. The World Trade Organization was designed a commitment device for countries to enforce free trade agreements among its member. You see, the political pressures in democracy often temp politicians to bend to the whims of protectionist dogma to stay in power. George Bush fell into temptation with his steel tariffs, and thankfully he now has political cover to reverse this awful policy. The WTO declared these tariffs "illegal" and now Bush plans to repeal them. He can now show his face in the Rust Belt without the political fallout. Plus, he regains some respect from the free-trader wing of his party. And the big plus for the avergage US citizen is the removal of this stupid tariff.
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Soros Bashing 

I always enjoy a good George Soros bashing. So I was delighted to find a link to this article on Volokh.

From the article:

If you put a pile of cash upon a donkey's back, underneath it he is still a donkey.

The post on Volokh has the good stuff. I don't care to pile on with the "you're an anti-Semite Semite" crowd, which is the main focus of the article, even if it is true. I'm content with the "Soros is a rich idiot" camp.
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Monday, December 01, 2003

Creative Destruction at Work 

The U.S. economy is the most dynamic and creative in the world. It has continued to grow and prosper in the last 30 years while other similar economies, like France, Germany and Japan have not. What makes the difference? People lose their jobs in America.

Recently, economists Richard Alm and Michael Cox in the essay highlighted how much job turnover happens in the U.S. The Bureau of Labor statistics tracks how many jobs are lost and gained in any year. In an average year, over the last 10, about 30 million people lost a job in the United States. The total number of potential workers in the U.S. (the labor force) is about 140 million, so in any year about 1 in 5 Americans becomes unemployed. Fortunately, the U.S. Economy creates on average 32 million jobs a year.

Most people, even most economists, constantly bemoan the harm done by job destruction, but rarely look at the benefits. In America, certainly more so than France, Germany or Japan, unprofitable businesses are allowed to fail. Businesses that are unprofitable are by definition misusing resources. They are converting the economy’s scarce raw materials into products that consumers don’t want and making us all poorer in the process. Anyone can make something less valuable; just take a baseball bat to a new car. It takes talent to make something more valuable and therefore earn profits. It is important that unprofitable firms fail and lose jobs, so their resources and employees can switch to the profitable and growing sectors of the economy. This process leads to lower prices, increasing production of profitable products, and ultimately rising GDP.

Some sectors still argue that they should be exempt from this process, like farmers and steel workers. Some politicians continue to agree and seem to think that losing money is somehow more honorable than making it. Fortunately for us all, Americans continue to be tolerant of the job losses that characterize the creative destruction of a dynamic economy. We are all much richer because of it.


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