Friday, October 31, 2008
Thursday, October 30, 2008
MFI
Becker and Posner talk about the Milton Friedman Institute over at their blog. Not surprisingly, Becker's is much more glowing than Posner's. Posner's not negative, but it's not enthusiastic either. I don't know the story there, but on several occasions Posner has said some slightly negative things about Friedman. For instance, he seems to have felt he was ideological, whereas Becker vehemently thinks to the contrary. I would love to hear the two of them debate that point. When I was a committed libertarian, Friedman was definitely my hero. And I'm sure he would still be my hero if I were interested in money or macroeconomics, but I'm not so there's very little overlap between his work and my own work. Still, from what I understand, the naming of the institution is deserved and financially sensible. One of the things I liked in Becker's tribute on his blog, though, was his explanation of the Pinochet incident. I actually had never read these kinds of caveats about that meeting before, so it was news to me.
Almost always, the critics' own failure to see the moral dimension to capitalism is what keeps them from giving an inch there. The movement towards freer markets is itself another dimension of evil to them, and so of course Friedman's efforts are even doubly worse. But rarely is that phrased that way - it's just a strong condemnation of his talking to Pinochet only.
One of the most persistent accusations is that he advised and collaborated with the Pinochet regime. In Two Lucky People, Rose and Milton Friedman's autobiography, he discusses his dealings with that government. He also includes the relevant documents so that readers can judge a lot for themselves. He turned down two honorary degrees from Chilean universities because they were state universities under Pinochet. He made one six-day trip to Chile in 1975 at the invitation of a private bank. He gave two lectures on the "fragility of freedom". He did have a brief meeting with Pinochet and wrote a letter to Pinochet afterwards urging "shock treatment" of reduced government spending and reduced growth in the money supply in order to cure the rampant inflation then afflicting Chile. His letter contains many detailed suggestions, including a call for "generous severance allowances" for laid off government workers, and a safety net to alleviate hardship and distress among the poor.Even if I hadn't read that, I would stick by Friedman on principle. If a dictator is harming his people through his economic policies, then how is it not humanitarian to give that dictator counsel that would've improved the economy and minimized that particular source of harm on his people? The only way you can claim that his act was wrong is if you can credibly show that the people would've been better off had Friedman not explained how to deal with runaway hyper-inflation. That is, the counter-factual would need to convincingly show that Chileans were better off under hyper-inflation than without it. That's an argument I've never heard. Instead, in principle, it's wrong to help a right-wing dictator with his economy, even if his economy is killing those citizens. (What if he had been a left-wing dictator, though, like Chavez? Is it then okay to offer help?).
Almost always, the critics' own failure to see the moral dimension to capitalism is what keeps them from giving an inch there. The movement towards freer markets is itself another dimension of evil to them, and so of course Friedman's efforts are even doubly worse. But rarely is that phrased that way - it's just a strong condemnation of his talking to Pinochet only.
Recession
You technically can't say we are in a recession until the NBER calls it, and so far I don't think they've called it. But, I'm going to just call it anyway. Consumer spending is falling equal lo tov thus saith the Hebrews.
My only knowledge of macroeconomics is from Bernanke's principles textbook. I don't even recall the IS-LM model, and even that is antiquated! So my simple AD/AS model, which I think is some kind of special case of the IS-LM model though I'm not sure, is incomplete. But the story goes like this. We're in longrun equilibrium, something causes potential spending to fall. Let's say it's falling house prices, and falling investment due to difficulty in acquiring credit from banks. This shifts the aggregate demand curve left, and real GDP falls below potential GDP. The longrun equilibrium is reached as inflationary expectations result in prices falling and in turn inflation falling as the Fed responds to falling prices by decreasing nominal interest rates. The Fed is currently lowering nominal interest rates, or attempting to, via the fall in the federal funds rate, but consumption is apparently continuing to fall, and I think so is Investment, and possibly net exports due to the appreciation of the US dollar. So, all things considered, the typical responses of fiscal and monetary stimulus - do they work in this situation? Those things are meant to address issues where people start hoarding cash, or rather, reduce their spending, and the multiplier dynamics in the economy cause that reduction in spending to be "multiplied" through a money multiplier equal to one over one minus the marginal propensity to consume, which appears to be therefore a very large number given Americans low savings rate. All in all, I think I can see the simple Keynesian model, but it waves a lot of hands over financial insolvency, so I wonder how principles teachers are teaching this material this semester. I'm sure it's both exciting and a little nerve-wracking, as when you get to the chapter on the Fed, where it says they are the lendor of last resort, you're not really sure how to explain the AIG acquisition or the bailouts, or anything. And then what can be done to explain the proper response to a recessionary output gap when it's being driven by insolvency in the financial sector. Can you just lower taxes or increase transfers without actually addressing the insolvency issue? It doesn't seem like you can.
My only knowledge of macroeconomics is from Bernanke's principles textbook. I don't even recall the IS-LM model, and even that is antiquated! So my simple AD/AS model, which I think is some kind of special case of the IS-LM model though I'm not sure, is incomplete. But the story goes like this. We're in longrun equilibrium, something causes potential spending to fall. Let's say it's falling house prices, and falling investment due to difficulty in acquiring credit from banks. This shifts the aggregate demand curve left, and real GDP falls below potential GDP. The longrun equilibrium is reached as inflationary expectations result in prices falling and in turn inflation falling as the Fed responds to falling prices by decreasing nominal interest rates. The Fed is currently lowering nominal interest rates, or attempting to, via the fall in the federal funds rate, but consumption is apparently continuing to fall, and I think so is Investment, and possibly net exports due to the appreciation of the US dollar. So, all things considered, the typical responses of fiscal and monetary stimulus - do they work in this situation? Those things are meant to address issues where people start hoarding cash, or rather, reduce their spending, and the multiplier dynamics in the economy cause that reduction in spending to be "multiplied" through a money multiplier equal to one over one minus the marginal propensity to consume, which appears to be therefore a very large number given Americans low savings rate. All in all, I think I can see the simple Keynesian model, but it waves a lot of hands over financial insolvency, so I wonder how principles teachers are teaching this material this semester. I'm sure it's both exciting and a little nerve-wracking, as when you get to the chapter on the Fed, where it says they are the lendor of last resort, you're not really sure how to explain the AIG acquisition or the bailouts, or anything. And then what can be done to explain the proper response to a recessionary output gap when it's being driven by insolvency in the financial sector. Can you just lower taxes or increase transfers without actually addressing the insolvency issue? It doesn't seem like you can.
Tuesday, October 28, 2008
Your vote doesn't matter
The other day, I told my students I wasn't voting because single votes don't matter, particularly in presidential races. I immediately felt like crap and wished I had kept my big mouth shut, as I have a sneaking feeling that to even admit that out loud (which is 100% true) comes awfully close to telling students they shouldn't vote, which I suspect would make my students' parents very angry. I told them that if they were rational, and they only voted based on the presumption that their vote mattered, then they shouldn't vote b/c the probability their vote is a deciding vote is statistically equal to zero, which always tip the choice against doing it at all since voters incur costs. Of course, I immediately told them that the right reason to vote is if they think they have some moral obligation to vote, in which case, they should. But even then, I hemmed and hawed. Is it that we want people to vote or to cast informed votes? Because if it's that they should cast informed votes, then I'm definitely not going to vote. Think about it. The different policies of Obama and McCain are such that understanding them requires a lot of careful study. Not simply making sure you understand what their proposals are, but forecasting how those policy proposals will materialize under different probable scenarios where House and Senate seats go different ways. That, plus you need to have some metric that ranks those various outcomes under the different states of nature, and hopefully you're not just using something stupid and biased, but maybe something objective and helpful. Altogether, how many hours would you have to spend do you think before you felt like you had a grib on those preferred orderings based on a comprehensive understanding of the candidates' stated positions vs. their likely choices given the strategic environment they'll be placed within? Heck, let's say you're super bright and could do it all in 10 hours. That's 10 hours of foregone wages or foregone leisure consumption. Ten hours you could've spent with your kids or your wife. Ten hours you could've spent reading War and Peace. Ten hours you could've spent on your producing something really valuable for society. All for what? To basically have a chance to influence a race that apparently has a probability of between 0.5x10^(-7) and 1.5x10^(-7). Wow. Talk about great odds. Seriously, what a complete waste of time! I mean it. It is very difficult to get motivated to devote the resources needed to become informed so that I can cast one vote that has no effect whatsoever on the outcome of the race.
So of course, it's rational to be ignorant of the race itself. That is, it's optimal from the perspective of the individual voter to choose ignorance over knowledge, because choosing knowledge incurs costs that cannot be recovered through some higher benefits from a vote mattering. And then of course, given that rational ignorance on the part of voters, what do politicians do? They say crap they don't mean, or that they know no one is going to catch them on, since voters are idiots and can't be trusted to fact check anything. We end up with extremely biased speakers and lobbyists who we look to to tell us what to think because they have, we hope, done the homework needed. But do they also have incentives to produce careful analysis? Sometimes, sometimes not. Oftentimes it seems like they have only an incentive to produce output that maximizes their profits. That may or may not mean they are producing unbiased information.
I think the best argument to vote and to become informed is that it's moral to do so. And I think the morality argument is not so much a genuinely morality argument, but rather, it's a social norm constructed to deal with the collective action problems inherent in voting. That is, it's a kind of imaginary morality - we need you to believe that voting is an ethical issue because if it's not, you simply won't vote. So we tell a lot of stories about democracy, which hinges on voter participation, to try and get around this free rider problem, even if it is unsuccessful.
Somehow, though, you've got to deal with the externality issue more directly. I think you've got to actually compensate people for their foregone opportunity costs through tax incentives requiring that they present evidence from an audit that they became informed and voted. Only if you became informed and voted could you get the rebate. This way, we are aligning private benefits of voting with the social benefits of voting. But of course, we don't do that because the auditor would be the state, and the state doesn't actually have an interest in making sure voters are better informed. They just voters to vote; they don't need the voter to actually be informed. In fact, the less informed the voter is, the better it is b/c it relaxes some of the constraints individual politicians face, since they can make promises they have no intention of keeping, or do things which create serious social harm but only after they've left office (like minimum wage laws, among a billion other things).
My wife says I need to not say anything else to my students about it, but I'm simply stating the facts. It is apparently a fact, according to Gelman, et al, that the probability that the race is going to come down to your state in the electoral college, and then conditional on that, the probability that it comes down to your individual vote is about 0.0000015, and that's being generous! The theories of voting we come up with are going to always, in the end, have to appeal to some kind of explanation that forces voters to basically ignore how utterly meaningless their vote is! It's got to get them vote, b/c there are small marginal benefits associated with them becoming informed voters and voting, but it's not rational for them to reach that point on their own. It's a basic, traditional, externality/public good/agency problem. So, I realize the point, but at the same time, I have a point too, and I can't help but feel like it's a complete mirage to make the ethical argument when the ethical argument is only trying to overcome a collective action problem! Am I a bad person for feeling like collective action problems are not in the same class of other genuine ethical failings?
So of course, it's rational to be ignorant of the race itself. That is, it's optimal from the perspective of the individual voter to choose ignorance over knowledge, because choosing knowledge incurs costs that cannot be recovered through some higher benefits from a vote mattering. And then of course, given that rational ignorance on the part of voters, what do politicians do? They say crap they don't mean, or that they know no one is going to catch them on, since voters are idiots and can't be trusted to fact check anything. We end up with extremely biased speakers and lobbyists who we look to to tell us what to think because they have, we hope, done the homework needed. But do they also have incentives to produce careful analysis? Sometimes, sometimes not. Oftentimes it seems like they have only an incentive to produce output that maximizes their profits. That may or may not mean they are producing unbiased information.
I think the best argument to vote and to become informed is that it's moral to do so. And I think the morality argument is not so much a genuinely morality argument, but rather, it's a social norm constructed to deal with the collective action problems inherent in voting. That is, it's a kind of imaginary morality - we need you to believe that voting is an ethical issue because if it's not, you simply won't vote. So we tell a lot of stories about democracy, which hinges on voter participation, to try and get around this free rider problem, even if it is unsuccessful.
Somehow, though, you've got to deal with the externality issue more directly. I think you've got to actually compensate people for their foregone opportunity costs through tax incentives requiring that they present evidence from an audit that they became informed and voted. Only if you became informed and voted could you get the rebate. This way, we are aligning private benefits of voting with the social benefits of voting. But of course, we don't do that because the auditor would be the state, and the state doesn't actually have an interest in making sure voters are better informed. They just voters to vote; they don't need the voter to actually be informed. In fact, the less informed the voter is, the better it is b/c it relaxes some of the constraints individual politicians face, since they can make promises they have no intention of keeping, or do things which create serious social harm but only after they've left office (like minimum wage laws, among a billion other things).
My wife says I need to not say anything else to my students about it, but I'm simply stating the facts. It is apparently a fact, according to Gelman, et al, that the probability that the race is going to come down to your state in the electoral college, and then conditional on that, the probability that it comes down to your individual vote is about 0.0000015, and that's being generous! The theories of voting we come up with are going to always, in the end, have to appeal to some kind of explanation that forces voters to basically ignore how utterly meaningless their vote is! It's got to get them vote, b/c there are small marginal benefits associated with them becoming informed voters and voting, but it's not rational for them to reach that point on their own. It's a basic, traditional, externality/public good/agency problem. So, I realize the point, but at the same time, I have a point too, and I can't help but feel like it's a complete mirage to make the ethical argument when the ethical argument is only trying to overcome a collective action problem! Am I a bad person for feeling like collective action problems are not in the same class of other genuine ethical failings?
Monday, October 27, 2008
W.
W. is closing in on its production budget. It's weekend sales fell 49% from the first to the second weekend, but in 2008, a 49% drop off is pretty much the modal second weekend's earnings, so I'm not surprised. Stone threw together a film in a short period of time that got a lot of publicity, and thus reduced the film's overall promotional budget, and will probably turn a small profit. That'll certainly help Stone's career and reputation. It reportedly has some humor and is somewhat sympathetic of Bush (so I hear), so that too may send some good information to the Hollywood brass about ways to go about dealing with politically sensitive material. I think the lessons right now are that Hollywood, when it tries to tell the political stories the way that was done in the 70s such as with All the President's Men, which is heavy on the conspiracy and seriousness, it's not as easy to do. But when done with some sympathy and humor, and if done relatively inexpensively, it's possible to make a film that has some legs. I thought Mr Charlie's War was another good example of that kind of thing. But regardless, it's still tough finding the right balance, no doubt.
Gas in Texas
This morning I filled up the tank in the van and it only cost $35. That's literally half what it cost me to do the same roughly 2-3 months ago. I love $2/gallon gas, even if it is going to shorten the life of my great x 10^10 grandson.
Greg Mankiw's Visit to the Taxman
Put this post in my list of favorite Mankiw posts. He breaks down in simple terms the two candidates' tax plans, and examines which will affect his labor supply decision more. Both candidates have unbelievably progressive income tax plans when you compare them to having no taxes at all, but Obama's is about twice as bad as McCain's.
Dreyfuss
My cat woke me up this morning by lying his 15 pound body on my chest until I woke up. Because he had to keep his balance, he kept rocking back and forth on my chest until I finally woke up and fed him. If it hadn't been so cute, I would've killed him. But, it gave me a chance to watch another 10 minutes of Close Encounters, and to watch Dreyfuss. He gives a really great combination of dramatic and comedic performances. The only other actor I can think of who does really good characters with a combination like that is Nicholas Cage.
Sunday, October 26, 2008
Firelight
I've been watching, off and on over the last month or so, Close Encounters of the Third Kind on hulu. Hulu remembers where you left off, which surprisingly has resulted in me actually working through this movie, rather than just watching the first couple of minutes and stopping. I wonder if that was purposeful. I mean, I know it was purposeful that Hulu programmed the site to remember where you left off, automatically, but was it to make it so that people would finish movies that they didn't intend to finish in the first place? Brilliant, if so.
Watching the movie after all these years, I was surprised by what little I remembered of it. For instance, there's a scene about 30 minutes in where Richard Dreyfuss - after having already had some contact with the UFO - is driving trying to find them again, and the scene shifts perspective to a bird's eye view where we see his truck driving across farmland, dirt roads. Then, as he's driving, a giant shadow of a UFO passes over him in the moonlight. It had the kind of under-emphasized, suspenseful quality of those mid-1970s Spielberg blockbusters (like shots where you never see Jaws but see his presence indirectly), and was amazing. Also amazing is the sheer lack of technological sophistication in the film. Case in point: at one point, they're trying to pinpoint earth coordinates, and have to drag a "$2500 globe" out of a guy's office to do it. It makes the scene so much more exciting to see a group of 15-20 men trying to use their collective wits to figure out very basic things which today would be solved in a fraction of the time by a guy using his iPhone. Makes me kind of sad, in a way - there's a lot of really anachronisms in Spielberg's film that are suspenseful only because technology was so primitive. The more powerful humans are in collecting and analyzing information, the less those scenes really seem to work (maybe).
So of course, I dug around and ended up here, at Firelight, a 1964 movie that Spielberg made when he was 16. Spielberg shot the film on a budget of $600 and turned a profit of $100, which he gave to a local charity. The prints were eventually lost, so we don't know what the movie was like, but from what I understand, he eventually remade shot-for-shot several scenes in Close Encounters. Spielberg is a director that I would love to study in a really serious way. Not because I think he's one of the greatest (though I think he's too often written off as merely someone doing popular movies). Rather, he has a grasp of story structure that I would like to better understand.
Watching the movie after all these years, I was surprised by what little I remembered of it. For instance, there's a scene about 30 minutes in where Richard Dreyfuss - after having already had some contact with the UFO - is driving trying to find them again, and the scene shifts perspective to a bird's eye view where we see his truck driving across farmland, dirt roads. Then, as he's driving, a giant shadow of a UFO passes over him in the moonlight. It had the kind of under-emphasized, suspenseful quality of those mid-1970s Spielberg blockbusters (like shots where you never see Jaws but see his presence indirectly), and was amazing. Also amazing is the sheer lack of technological sophistication in the film. Case in point: at one point, they're trying to pinpoint earth coordinates, and have to drag a "$2500 globe" out of a guy's office to do it. It makes the scene so much more exciting to see a group of 15-20 men trying to use their collective wits to figure out very basic things which today would be solved in a fraction of the time by a guy using his iPhone. Makes me kind of sad, in a way - there's a lot of really anachronisms in Spielberg's film that are suspenseful only because technology was so primitive. The more powerful humans are in collecting and analyzing information, the less those scenes really seem to work (maybe).
So of course, I dug around and ended up here, at Firelight, a 1964 movie that Spielberg made when he was 16. Spielberg shot the film on a budget of $600 and turned a profit of $100, which he gave to a local charity. The prints were eventually lost, so we don't know what the movie was like, but from what I understand, he eventually remade shot-for-shot several scenes in Close Encounters. Spielberg is a director that I would love to study in a really serious way. Not because I think he's one of the greatest (though I think he's too often written off as merely someone doing popular movies). Rather, he has a grasp of story structure that I would like to better understand.
Saturday, October 25, 2008
A++
This one required that I leave the room twice I was so uncomfortable. You know it's a good episode when Michael makes you that embarrassed.
Oprah Endorses the Kindle
Opray has finally joined the ranks of such luminaries as Pomeroy Kinsey by endorsing the Kindle.
Obama vs. his Economic Advisors
Before they became his advisor, their opinions about his health plan was a little different.
Friday, October 24, 2008
Thursday, October 23, 2008
Literal Translation of Freestyle Rap
I'm nowhere near tired of these literal translation videos yet. This one is different but awesome in its own way.
Update: Whoa. I wrote the above at probably the one minute mark, before I got to the very end, and let's just say I was not expecting that closer.
Update: Whoa. I wrote the above at probably the one minute mark, before I got to the very end, and let's just say I was not expecting that closer.
Maternal Fasting and Pregnancy Outcomes
Put this in my folder of "cool identification and interesting questions". Douglas Almond and Bhashkar Mazumder attempt to measure how important in utero health is on observed health outcomes upon birth and adulthood by using the Muslim holiday, Ramadan, as a natural experiment. During Ramadan, Muslims fast for several days (including women, and apparently, including pregnant women). If fetal health is an outcome produced by some underlying health production function which takes maternal food as inputs, then we might expect the holiday to lower fetal health, all things equal. Almond and Mazumder examine using different data and different outcomes what happens to child birthweight and gestation length, as well as using Census data adult outcomes. Here's what they find.
All in all, this looks like a fascinating and important contribution. If you needed some evidence that fetal health inputs mattered for survival and both short and longrun health outcomes, this one should give you a run for your money.
AbstractVery interesting. They appear to find the effects in most places you'd expect, and not just in one place. For instance, they find a reduction in male births. This is a first order effect of reduced fetal health, but not one you may think of. The body produces statistically more males than females, but males also have a slightly lower survival rate (hence probably why more are produced). If there is a common shock to all pregnant women experienced by Ramadan fasting, then it should lower the fetal survival odds of children, but it will lower it slightly more for males than females since more males will be at that survival margin. More specifically, their results suggest fasting: (i) lowers birthweight, (ii) increases premature babies, (iii) increases miscarriages (that's my interpretation of the fewer male births), (iv) and increases vision, hearing and mental/learning disabilities among adults conceived during Ramadan. That last result is going to be the toughest to sell, as the baby is exposed to fasting during any of the nine months, but they only focus on people born nine months after Ramadan. Perhaps they use a regression discontinuity to examine both those born 10 months after Ramadan and 9 months, as someone born 10 months after Ramadan would not have gotten the same early fetal treatment of reduced fetal health inputs as the one born 9 months after. Their interpretation of the result is that early inputs matter more than later inputs for reasons similar to "compounding interest" in development.
We use the Islamic holy month of Ramadan as a natural experiment for evaluating the short and long-term effects of fasting during pregnancy. Using Michigan natality data we show that in utero exposure to Ramadan among Arab births results in lower birthweight and reduced gestation length. Preconception exposure to Ramadan is also associated with fewer male births. Using Census data in Uganda we also find that Muslims who were born nine months after Ramadan are 22 percent (p =0.02) more likely to be disabled as adults. Effects are found for vision, hearing, and especially for mental (or learning) disabilities. This may reflect the persistent effect of disruptions to early fetal development. We find no evidence that negative selection in conceptions during Ramadan accounts for our results. Nevertheless, caution in interpreting these results is warranted until our findings are corroborated in other settings.
All in all, this looks like a fascinating and important contribution. If you needed some evidence that fetal health inputs mattered for survival and both short and longrun health outcomes, this one should give you a run for your money.
Groan
"Some days, you bite the dog and other days, the dog bites you." I think that is a saying, though I may not be getting it exactly right. Today is one of the latter days. We spent the week on cost functions in Micro I for the grad students, and it felt like swimming through tar - both for them and for me. I had the darndest time working out how technology affected cost over time. Even though, in the end, a firm with constant returns to scale sees its costs change from what it cost to produce in the first year to what it costs in some other year equal to that first year's total cost deflated by the technology function, there was one step of algebraic substitution that I just couldn't understand. Even though the intuition was obvious, I couldn't figure out one thing - neither mathematically nor intuitively. It was very frustrating. And the whole deliberation on cost functions has been like that to some degree. It's weeks like these where I feel like I need about 1 and a half more hours of preparation before I should teach. I usually spend 3 hours prepping the one hour and 15 minute grad course, and about an hour on the undergrad course. And it's definitely getting better, but I can still very easily get lost in the mathematics, and really lose sight of the overall insight the math is bringing to some problem. Not to mention that there is just so much to cover in this course, and I often feel like I'm just flying through the material, even though I actually spent 4-5 hours on a single chapter (which is almost 2 weeks). Teaching at the grad level, when you yourself feel like you're only barely ahead of the students, is nerve-wracking. Thankfully, unlike other doctors, I cannot be sued for malpractice, otherwise I'd really be frightened.
Wednesday, October 22, 2008
Archie Andrews
Archie Andrews is now over 65 years old, but he's still around, still stuck in his own version of Groundhog Day where he can't figure out who he likes better, Betty Cooper or Veronica Lodge [ed: It's Betty you moron!]. Vanity Fair explains the appeal throughout all the years.
Like I said before, Archie was the first comic book I collected. What I liked about his was the multiple stories in a single magazine, the soap opera of Riverdale High, the friendships, of course the romance (I think I really did fall in love with Betty Cooper - it was the first time I actually loved a fictional character. It would happen again, years later, with Ivy Rowe), and sometimes, the mystery and intrigue. It had a mix of Scooby Doo in some episodes, and I was still at an age where a diverse crew of friends solving some crime that the adults had ignored was still incredibly exciting, and served as the fodder for countless afternoons and sleepovers with MoLT and others. I guess I always wanted to be Archie, too. Anyway, it was for me a character and a set of stories which I could easily get lost in, but which as stupid as it sounds probably gave me some of the skills I needed to anticipate high school, friendships, dating, love, parental conflict, and good times in general.
Theologians sometimes say that stories aren't just for entertainment, but that they're also providing us with skills and vision we desperately need to navigate our social existence. When you see the market providing the same kinds of stories over and over again, even if they are being repackaged into some slightly different form, you're watching a monopolistically competitive market providing us with new stories which we may need for some reason to do these very kinds of calculations in our lives. It's interesting to think about, even if I can't quite figure out what I'm saying in this post...
Like I said before, Archie was the first comic book I collected. What I liked about his was the multiple stories in a single magazine, the soap opera of Riverdale High, the friendships, of course the romance (I think I really did fall in love with Betty Cooper - it was the first time I actually loved a fictional character. It would happen again, years later, with Ivy Rowe), and sometimes, the mystery and intrigue. It had a mix of Scooby Doo in some episodes, and I was still at an age where a diverse crew of friends solving some crime that the adults had ignored was still incredibly exciting, and served as the fodder for countless afternoons and sleepovers with MoLT and others. I guess I always wanted to be Archie, too. Anyway, it was for me a character and a set of stories which I could easily get lost in, but which as stupid as it sounds probably gave me some of the skills I needed to anticipate high school, friendships, dating, love, parental conflict, and good times in general.
Theologians sometimes say that stories aren't just for entertainment, but that they're also providing us with skills and vision we desperately need to navigate our social existence. When you see the market providing the same kinds of stories over and over again, even if they are being repackaged into some slightly different form, you're watching a monopolistically competitive market providing us with new stories which we may need for some reason to do these very kinds of calculations in our lives. It's interesting to think about, even if I can't quite figure out what I'm saying in this post...
Tuesday, October 21, 2008
Prostitution and Income
I was reading an article the other day on the economics of the commercial sex industry and the author said we really don't have an estimate of the income elasticity of demand for prostitution services. I've actually only seen one measure of any elasticity of supply for prostitution and it was Levitt and Venkatesh's street prostitution paper that found the price elasticity of supply to be 2.0 (even though they mistakenly write 0.5 in the paper (p. 19). That estimate means if the wage rate of street prostitutes in Chicago went up 10% (say from $50/hr to $55/hr) that the number of prostitution services performed would increase 20% (say from 100 to 120). They found this mostly occurring on the external margin because they used an interesting instrument for demand which was a holiday. On the 4th of July, there was an increase in demand, and it led to both higher wages and more women working on that day - particularly by women who normally didn't work as prostitutes. That is only valid if the holiday shifted demand but not supply, though you can imagine it shifting both and so the elasticity would not have been identified.
Finding instruments that only affect one part of a labor market but not both is very difficult, since you're at the victim of letting random world events do these things for you, and then hope you can identify these natural experiments as they occur. Finding things that shift the incomes of clients, but not the incomes of providers, is even more difficult. In the article I read, the economists said they couldn't find any estimates of the income elasticity of demand (ie, by what percent does demand increase when client incomes increase by 1%?). The only thing they reported was evidence that wealthier people wanted to wear more condoms, which is hardly the same thing. Of course, it's not easy to get these things, and at least that paper acknowledged caveats, but I was really surprised to read this paragraph from Edlund and Korn's 2002 "A Theory of Prostitution" as I think they should know better. How did this get past a referee? It's not a big deal, the paper is still I'm sure fine, but this little piece of evidence is still annoying.
The problem is that everyone knows Kinsey's original studies suffered from serious self-selection bias. It was because of the severity of that selection bias that NORC even decided to do the "new" sex study, NHSLS, at all. The problem was that Kinsey did not randomly draw his interviewees from the population, but rather from a non-representative social network. This was the homosexual friendship network, prisons, and the participants who voluntarily came to his lectures. Thus he tended to over-sample people with certain types of characteristics which were correlated with their sexual behavior and expression, and so tended to find much more larger estimates of various sexual behaviors and attitudes than NORC later found. All of the estimates were skewed, in fact. He estimated that 10% of all American males were currently homosexual (actively) and an even higher percentage had ever been, but NORC found closer to 1-2%. Do we also conclude homosexuality has been falling in the population over time, or do we like NORC simply note that his study was flawed and proper statistical sampling frames reveal more accurate current estimates. I'm not sure we can even compare these at all.
I would've preferred at least some recognition of this problem from Edlund and Korn. Like I said, not a big deal, but it seems like such a gross error. And the "evidence" is so typical of economists to just find something that could plausibly support your story, even if it's not as rigorously checked out as the rest of your paper. If Kinsey's problems were really obscure, it'd be no big deal, but everyone knows about them, so it's weird.
Finding instruments that only affect one part of a labor market but not both is very difficult, since you're at the victim of letting random world events do these things for you, and then hope you can identify these natural experiments as they occur. Finding things that shift the incomes of clients, but not the incomes of providers, is even more difficult. In the article I read, the economists said they couldn't find any estimates of the income elasticity of demand (ie, by what percent does demand increase when client incomes increase by 1%?). The only thing they reported was evidence that wealthier people wanted to wear more condoms, which is hardly the same thing. Of course, it's not easy to get these things, and at least that paper acknowledged caveats, but I was really surprised to read this paragraph from Edlund and Korn's 2002 "A Theory of Prostitution" as I think they should know better. How did this get past a referee? It's not a big deal, the paper is still I'm sure fine, but this little piece of evidence is still annoying.
Prostitution has seen a secular decline in rich countries. For instance, while the Kinsey study, conducted in 1938–47, concluded that about 70 percent of the American white male population will ultimately purchase sex from a prostitute, the incidence among men surveyed in the NHSLS was 18 percent (Kinsey et al. 1948; Sullivan and Simon 1998). One may also note that during the half century that separates the two studies, male contact with prostitutes ceased to be considered common and normal. Part of this is undoubtedly due to better and cheaper contraceptives, which have increased the supply of noncommercial, nonmarital sex (e.g., Posner 1992, p. 132). However, higher income levels may also have played a role in the shift away from prostitution.The only thing I have a problem with is noting that Kinsey concluded 70 percent of all American white males in the late 30s and early-to-mid-40s purchased prostitution services, but based on a NORC study in 1992, only 18% say they did recently. Reading this, if you didn't know anything about the NORC study (NHSLS was handled by NORC) or Kinsey's original sex studies, you'd think, "Hm. Looks like prostitution is an inferior good. Higher incomes and falling prostitution. May not be causal, but it's correlated."
The problem is that everyone knows Kinsey's original studies suffered from serious self-selection bias. It was because of the severity of that selection bias that NORC even decided to do the "new" sex study, NHSLS, at all. The problem was that Kinsey did not randomly draw his interviewees from the population, but rather from a non-representative social network. This was the homosexual friendship network, prisons, and the participants who voluntarily came to his lectures. Thus he tended to over-sample people with certain types of characteristics which were correlated with their sexual behavior and expression, and so tended to find much more larger estimates of various sexual behaviors and attitudes than NORC later found. All of the estimates were skewed, in fact. He estimated that 10% of all American males were currently homosexual (actively) and an even higher percentage had ever been, but NORC found closer to 1-2%. Do we also conclude homosexuality has been falling in the population over time, or do we like NORC simply note that his study was flawed and proper statistical sampling frames reveal more accurate current estimates. I'm not sure we can even compare these at all.
I would've preferred at least some recognition of this problem from Edlund and Korn. Like I said, not a big deal, but it seems like such a gross error. And the "evidence" is so typical of economists to just find something that could plausibly support your story, even if it's not as rigorously checked out as the rest of your paper. If Kinsey's problems were really obscure, it'd be no big deal, but everyone knows about them, so it's weird.
Harder than Hard
(That's what she said). Seriously, though, you know what's harder than hard? Trying to explain multivariate regression analysis to one of your sophomore students from principles of microeconomics. We had a seminar speaker present a paper on racial discrimination, and he came. How do you explain that this speaker "controlled for" a ton of crap and that the correlation coefficient was positive and statistically significant for a variable that reflected the measure of discrimination? Answer: you talk really fast, repeat yourself a million times, don't use any graphs or talk about slopes, and answer all their questions when they say "well what about this or what about that?" I don't think he understood multivariate regression any better, but at least he understood what it was required to topple the evidence in the paper - it must be the case that the discriminator acts differently whenever there is a minority present because something the econometrician doesn't observe is going on. For this particular speaker, it was very hard to imagine what that "something" would have to be, but it at least helped me frame the issue to him much better, and I think he at least understood that.
Monday, October 20, 2008
More Gifts from Hollywood
Ah, please be good. I know you are, like Heroes, just an X-men ripoff, but be good anyway.
Median Votes and Political Losers
So I'm fully prepared for a liberal supermajority in both the House and the Senate, and a Democratic administration. I've got my bags of rice stockpiled in the basement and a trap door under my welcome mat in case someone ever attacks me. I do, after all, list my political beliefs at facebook as at the 53rd percentile, so I'm technically right of center. But in all seriousness, it's worth thinking a little bit about the median voter theorem and what we can expect in 2016.
The median voter theorem is based on some older theories by an economist named Hotelling who wrote about a "linear city" in which hot dog vendors had to decide, based on the distribution of customers, where to set up shop. The city was mathematically represented as a line, and so normally the story to make it seem realistic is that the vendors are setting up shop on a beach shore (which is kind of like a line). Where do the two vendors locate? Well, imagine that everyone who buys hot dogs is just randomly distributed along the city, equally spread out. And if people just want to go to the vendor that's closest to them, then there's an incentive for each vendor to keep moving to the middle of the shoreline. Let's say the city is a shore, and there's a left side of the shore and a right side of the shore. Then the vendor on the right will keep moving to the middle because then he gets to collect in his pocket all the people to his right (as he's now closest to them compared to the vendor on the left) as well as some of the ones now to his left. In the simplest model, though, they basically set up shop right beside one another, at the median point of the shoreline, and collect half the market themselves. This is usually considered to be the reason why American politics for all its rhetoric and rage is in the end a kind of benign centrist politics - at least when it comes to the Presidential elections. It's why Republicans sound so right-wing in the primaries, and Democrats so left-wing in the primaries, but become soft and mushy when they face one another in the general election. The system is set up, in other words, to create this kind of race to the middle.
In 2008, it's almost certainly going to be a bloodbath for Republicans. Obama is not just going to win, but he's looking like he's going to win a ton of states - even states that were solidly in McCain's pocket not a month ago are now a dark blue on the map. One of the strange things about American politics is the level of interest Americans give to the Presidential election, but the diminishing interest they give at the more regionally disaggregated races - even though at the local and state level, political involvement has a much higher payoff in terms of being able to influence the outcome of the race. A single vote cast in a national election has no statistical effect on the outcome of a race, and yet people are extremely energized it compared to the lower level races. Thus, if a single party can have an electoral landslide, not only does their candidate win in the Presidential race, but their party wins most likely in all the trickle-down Senate, Congressional and other races on the ticket that day. That's because people tend to vote in political blocs, and so if they vote for Obama in Nov. for the general election, they're also going to vote Democrat for everything else, even if they're ignorant of those races. Thus, this is setting the stage for a major revolution, for lack of a better word, at various levels of government.
Most likely, the first face we see of this new political regime will be a vastly liberal one. Without a way of filibustering in the Senate, the Republicans will have little bargaining power. But at some margin, there should be a realization of the median voter theorem coming back, and you will see again the tendency of politicians to become centrist again, particularly in years of re-election. In that time, though, a lot of things can be changed, and it will be in that time that the right side of the shoreline will sit and watch and become frustrated again. And out of that frustration will come a kind of purity of commitment and zeal - commitment to some philosophical system about governance and proper economics - that will raise up a bench of candidates who will be the perfect yin to this political age's yang. It will be effective because inevitably Obama will be a moderate in his ruling, just as Clinton was a moderate - though the loss of the House and the Senate in this case means Obama may actually have something Clinton never had, and that's the freedom to pursue executive, judicial and legislative goals that otherwise are kept in check by the Republican party (and vice versa). Depending on your beliefs, this is either very good or bad. To me, it's likely to be a mixed bag (hence why I'm a 53rd percentile person) with some things on domestic policy that I'll likely support as I'm closer to modern Democrats there, and some things on foreign policy that I am not comfortable with, as I'm more like the hawkish Republicans in that sense.
Still, the point remains that Obama will at some point be a disappointment to his left base, just as Bush was a disappointment to so many of his right base. But b/c Republicans are out of power, Republicans can afford to be as zealous and committed as they want to be, without paying any price or face any incentives to shift to the middle. And this seems to be the way American politics is always going to be - and personally the one thing that makes it so interesting to watch and so confident that whatever course we go on, we likely cannot do really, really terrible things to ourselves. I'd have to ask a political scientist, though - I'm sure that the democratic election does not guarantee any kind of minimax outcome, where the least worst thing is chosen. But still, it could be much worse.
The median voter theorem is based on some older theories by an economist named Hotelling who wrote about a "linear city" in which hot dog vendors had to decide, based on the distribution of customers, where to set up shop. The city was mathematically represented as a line, and so normally the story to make it seem realistic is that the vendors are setting up shop on a beach shore (which is kind of like a line). Where do the two vendors locate? Well, imagine that everyone who buys hot dogs is just randomly distributed along the city, equally spread out. And if people just want to go to the vendor that's closest to them, then there's an incentive for each vendor to keep moving to the middle of the shoreline. Let's say the city is a shore, and there's a left side of the shore and a right side of the shore. Then the vendor on the right will keep moving to the middle because then he gets to collect in his pocket all the people to his right (as he's now closest to them compared to the vendor on the left) as well as some of the ones now to his left. In the simplest model, though, they basically set up shop right beside one another, at the median point of the shoreline, and collect half the market themselves. This is usually considered to be the reason why American politics for all its rhetoric and rage is in the end a kind of benign centrist politics - at least when it comes to the Presidential elections. It's why Republicans sound so right-wing in the primaries, and Democrats so left-wing in the primaries, but become soft and mushy when they face one another in the general election. The system is set up, in other words, to create this kind of race to the middle.
In 2008, it's almost certainly going to be a bloodbath for Republicans. Obama is not just going to win, but he's looking like he's going to win a ton of states - even states that were solidly in McCain's pocket not a month ago are now a dark blue on the map. One of the strange things about American politics is the level of interest Americans give to the Presidential election, but the diminishing interest they give at the more regionally disaggregated races - even though at the local and state level, political involvement has a much higher payoff in terms of being able to influence the outcome of the race. A single vote cast in a national election has no statistical effect on the outcome of a race, and yet people are extremely energized it compared to the lower level races. Thus, if a single party can have an electoral landslide, not only does their candidate win in the Presidential race, but their party wins most likely in all the trickle-down Senate, Congressional and other races on the ticket that day. That's because people tend to vote in political blocs, and so if they vote for Obama in Nov. for the general election, they're also going to vote Democrat for everything else, even if they're ignorant of those races. Thus, this is setting the stage for a major revolution, for lack of a better word, at various levels of government.
Most likely, the first face we see of this new political regime will be a vastly liberal one. Without a way of filibustering in the Senate, the Republicans will have little bargaining power. But at some margin, there should be a realization of the median voter theorem coming back, and you will see again the tendency of politicians to become centrist again, particularly in years of re-election. In that time, though, a lot of things can be changed, and it will be in that time that the right side of the shoreline will sit and watch and become frustrated again. And out of that frustration will come a kind of purity of commitment and zeal - commitment to some philosophical system about governance and proper economics - that will raise up a bench of candidates who will be the perfect yin to this political age's yang. It will be effective because inevitably Obama will be a moderate in his ruling, just as Clinton was a moderate - though the loss of the House and the Senate in this case means Obama may actually have something Clinton never had, and that's the freedom to pursue executive, judicial and legislative goals that otherwise are kept in check by the Republican party (and vice versa). Depending on your beliefs, this is either very good or bad. To me, it's likely to be a mixed bag (hence why I'm a 53rd percentile person) with some things on domestic policy that I'll likely support as I'm closer to modern Democrats there, and some things on foreign policy that I am not comfortable with, as I'm more like the hawkish Republicans in that sense.
Still, the point remains that Obama will at some point be a disappointment to his left base, just as Bush was a disappointment to so many of his right base. But b/c Republicans are out of power, Republicans can afford to be as zealous and committed as they want to be, without paying any price or face any incentives to shift to the middle. And this seems to be the way American politics is always going to be - and personally the one thing that makes it so interesting to watch and so confident that whatever course we go on, we likely cannot do really, really terrible things to ourselves. I'd have to ask a political scientist, though - I'm sure that the democratic election does not guarantee any kind of minimax outcome, where the least worst thing is chosen. But still, it could be much worse.
The Truth about the Apple Tax
I wish Obama would also address the problem of the regressive Apple tax.
The real takeaway about the Apple Tax is that it's regressive—that is, lower-priced models get hit harder. It's like a tax break for the rich, cuz it almost always makes more sense to buy the higher-end product, especially given that build quality, customer support and warranties are all equal here. This is especially galling now, since being able to configure a cheaper model with what you really need—just the better graphics card, for instance—matters more than ever in this crappy ass economy.
Obesity Causes
From an interesting new article in Science, scientists attempt to answer why obese people are obese at all. They find evidence using MRI scans and a controlled experiment that to the obese person, food is not as satisfying as it is to the control group - measured by the amount of activity in an area of the brain with a lot of dopamine receptors. So, in order to feel full, they have to eat more, and therefore they become heavy.
It's an interesting, simply story, but I don't quite understand the link between food satisfaction (ie, the taste and the utility) and being full. But, I guess they're saying that the marginal utility of food consumption is diminishing at a lower rate for the obese person than it is for the non-obese person, in which case each additional bite is still yielding more utility. But then if that is what they're saying, that sounds like the opposite of the "less satisfaction" story. If food is actually yielding less satisfaction, then it seems like they'd stop eating sooner and substitute to something else.
I'd also like to point out the weakness in studies like this. Obesity is not exogenous. They didn't assign obesity to the control and treatment groups - individuals were selected into the study based on existing obesity. Thus it's entirely possible obesity itself causes the things they observed in the MRIs, rather than itself being a cause. That kind of reverse causation is not going to be easily dealt with in studies like this.
Another study once focused on MRIs between gay males and straight males, found differences, and concluded they had found evidence of something in the brain that caused homosexuality, but again, it's entirely possible that homosexuality caused the thing they observed. The same story applies here - obesity could be causing the thing they are observing. Kind of amazing when you think about it - that's such an obvious point and yet the article is in Science.
It's an interesting, simply story, but I don't quite understand the link between food satisfaction (ie, the taste and the utility) and being full. But, I guess they're saying that the marginal utility of food consumption is diminishing at a lower rate for the obese person than it is for the non-obese person, in which case each additional bite is still yielding more utility. But then if that is what they're saying, that sounds like the opposite of the "less satisfaction" story. If food is actually yielding less satisfaction, then it seems like they'd stop eating sooner and substitute to something else.
I'd also like to point out the weakness in studies like this. Obesity is not exogenous. They didn't assign obesity to the control and treatment groups - individuals were selected into the study based on existing obesity. Thus it's entirely possible obesity itself causes the things they observed in the MRIs, rather than itself being a cause. That kind of reverse causation is not going to be easily dealt with in studies like this.
Another study once focused on MRIs between gay males and straight males, found differences, and concluded they had found evidence of something in the brain that caused homosexuality, but again, it's entirely possible that homosexuality caused the thing they observed. The same story applies here - obesity could be causing the thing they are observing. Kind of amazing when you think about it - that's such an obvious point and yet the article is in Science.
Saturday, October 18, 2008
Casey Mulligan vs. Mark Thoma vs. Brad DeLong
University of Chicago economist, Casey Mulligan, has been writing over at Supply and Demand that this is all much ado about nothing, and now has a NYT oped saying the same thing. Mark Thoma says Mulligan is using Ricardian Equivalence which we all know is theoretical (boy, did RE give me fits in grad school. I threw up in my mouth just re-reading it in Thoma's post...), and it sounds like Mulligan and Thoma (with Brad DeLong taking a few swipes too) are fighting in a traditional Keynesian vs. the whoever else fight. So I kind of only took a glancing look at this, in other words, once I realized I was going to have to pick sides, and I had picking sides. But maybe you'd like it?
Bloodbath
Man, I think the Republicans are just going to get pummeled in November. Everyone's talking of 60+ seats the Democrats will hold in the Senate, making a Republican filibuster impossible, and clearing the way for some serious overhaul. Pelosi is also talking about 250 seats in the House. The next eight years are going to be interesting to watch.
Relapse
Eminem has a new album coming out called "Relapse," as well as a memoir. Here's a single from the album. Here's an article about his attempted comeback. I've always felt like David Galenson's work on the artist applied possibly to Eminem. There are certain artists who break out big at early ages, and then there are others who improve with age, and I've always suspected Eminem was the former - but let's hope I'm wrong. The single below is okay. It's got a Jamaican vibe going on, but he doesn't sound comfortable in it to me.
InTrade Manipulation Confirmed
Both Krugman and Tabarrok point us to an article that confirms someone ("rogue investor") was manipulating the stock price of McCain and Obama in the inTrade contracts to make it appear that the race was closer than it really was. This was, interestingly, always something detectable if you were watching it closely, which may mean in the subsequent races, savvy investors can take these dollars laying on the ground at little risk. For instance, there was no comparable spread in the general Republican-Democratic contracts, nor was there similar spreads in the Iowa Electronic Market. Plus, from what I could gather studying the state contracts several months ago when these differences first started showing up, McCain was going to have to get incredibly lucky in order to win, since it would require winning all of the swing states. Even at swing states in which he had a 50/50 chance, winning all five of those swing states was not simply 50/50 but rather the joint probability, which made it much lower. So for anyone who was paying attention, you could infer that this was not going the way it looked. So, for the next time, we should conclude this. B/c this happened in both the 2004 and 2008 races, it's likely to happen again and again. But so long as the person in question is targeting a single site, it may be detectible by studying all the sites closely, or by trying to match up the state-specific contract probabilities with the national contract probability to see if they are in fact working out to be one and the same. Because if they aren't - and especially if these contract prices are changing a lot a few months out from the election date, but had been fairly stable up to then - then you'd expect to have some money lying on the ground that you can pick up rather easily.
Movies and the Moral Adventure of Life
This new book looks great. Ignore the editorial review posted allegedly from Publisher's Weekly, because it's apparently been misplaced by Amazon's editorial staff (it appears to be referring to a book by The Onion), and just read the others. Alan Stone is a professor of psychiatry at Harvard and former president of the American Psychiatric Association, and this collection of essays explores to how movies both reflect and drive our spiritual and moral yearnings (something I wholeheartedly agree with). Here's the book jacket's description.
For Alan Stone, a one-time Freudian analyst and former president of the American Psychiatric Society, movies are the great modern, democratic medium for exploring our individual and collective lives. They provide occasions for reflecting on what he calls "the moral adventure of life": the choices people make—beyond the limits of their character and circumstances—in response to life's challenges. The quality of these choices is, for him, the measure of a life well lived.If anyone knows anyone who is a member of the Pomeroy Kinsey clan, they should maybe pass along this link, noting that both used copies can be acquired for $7.00 from Amazon's used bookstore, and Pomeroy has a birthday coming up which marks either the first or second year of the second act of his life, depending on how you time it. Just saying.
In this collection of his film essays, Stone reads films as life texts. He is engaged more by their ideas than their visual presentation, more by their power to move us than by their commercial success. Stone writes about both art films and big-budget Hollywood blockbusters. And he commands an extraordinary range of historical, literary, cultural, and scientific reference that reflects his impressive personal history: professor of law and medicine, football player at Harvard in the late 1940s, director of medical training at McLean Hospital, and advisor to Attorney General Janet Reno on behavioral science. In the end, Stone's enthusiasms run particularly to films that embrace the sheer complexity of life, and in doing so enlarge our sense of human possibilities: in Antonia's Line, he sees an emotionally vivid picture of a world beyond patriarchy; in Thirteen Conversations about One Thing, the power of sheer contingency in human life; and in American Beauty, how beauty in ordinary experience draws us outside ourselves, and how beauty and justice are distinct goods, with no intrinsic connection. Other films discussed in these essays (written between 1993 and 2006 for Boston Review) include Un Coeur en Hiver, Schindler's List, Pulp Fiction, Thirteen Days, the 1997 version of Lolita, The Battle of Algiers, The Passion of the Christ, Persuasion, and Water.
List
1. I'm watching the new Heroes, and while this episode and the entire season are on average compensating me in terms of joy for the 45 minutes it takes to watch it, only barely. The main problem seems to be the ensemble narrative. There are so many characters, and since there's a fairly big narrative told each season, it seems to shortchange the characters in terms of dialogue and development. It's cliche'd, but characters come off existing to propel the narrative. I enjoy the narrative a lot, but the dialogue! Even this comic geek is getting tired. But, I will say that the most recent episode is showing certain characters migrating from the good side to the bad side and others unexpectedly from the bad side to the good side, and that's one of the best things that's happened to this series in a while.
2. I've got a co-author that is apparently Mr. Hyde. He took a job after graduation at a consulting firm, and a project we had together has suffered. Which is fine - I expected things would be slow as he moved out of academia. But I wasn't expecting this. He quit responding to my emails and phone calls six weeks ago. I finally reached him at his office, had a brief conversation in which he said he'd call me later in the day, and still nothing. I'm now wondering if I have to take more drastic measures, and am considering trying to replicate the results from the entire paper and take his name off it.
3. Loury discusses the trappings of "group identity" and Sullivan explains why he blogs. Both interesting, very personal essays.
2. I've got a co-author that is apparently Mr. Hyde. He took a job after graduation at a consulting firm, and a project we had together has suffered. Which is fine - I expected things would be slow as he moved out of academia. But I wasn't expecting this. He quit responding to my emails and phone calls six weeks ago. I finally reached him at his office, had a brief conversation in which he said he'd call me later in the day, and still nothing. I'm now wondering if I have to take more drastic measures, and am considering trying to replicate the results from the entire paper and take his name off it.
3. Loury discusses the trappings of "group identity" and Sullivan explains why he blogs. Both interesting, very personal essays.
Friday, October 17, 2008
Where is Crayon Physics?
With World of Goo making people go crazy insane, I can't help but wonder when is Crayon Physics coming out?! In that time, copies are coming out from everywhere (of which I consider World of Goo), including this flash game.
Bad Movies Do Badly?
James Surowiecki at the New Yorker puts forth a radical hypothesis, so you should probably sit down as I say it. People say that Americans don't like movies about the war in Iraq or war on terror because these movies all do so badly at the box office. But James says probably what it really is is that those movies do so badly because they suck so bad. In other words, it's a spurious correlation. The war on terror movies have been consistently crap, and apparently the new Ridley Scott movie, Body of Lies, is no exception. I'm scoring James a point for this one, and adding him to my slim blog roll.
Take On Me Remix
Lives up to the original, which is probably my favorite music video of all time. Funny how I still get a little teary-eyed when he's slamming himself against the hallway trying to turn back into a human. They love each other! You can't keep their love apart!
Thursday, October 16, 2008
Ebert Gives W. 4 Stars
I had a feeling in my gut that Ebert was going to give W. four stars and he did. His opening line,
That's probably my bias against Stone showing though, and my bias towards Bush. But, I'm definitely going to see it, even if it does go against my biases.
Oliver Stone's "W.," a biography of President Bush, is fascinating. No other word for it. I became absorbed in its story of a poor little rich kid's alcoholic youth and torturous adulthood. This is the tragedy of a victim of the Peter Principle. Wounded by his father's disapproval and preference for his brother Jeb, the movie argues, George W. Bush rose and rose until he was finally powerful enough to stain his family's legacy.The issue for a movie like this is two-fold. Is it a good movie? Ebert says yes. That is answered based technically on the power of the storytelling, and all the inputs involved in such a process. But whether it's a true story is something others beside Ebert can answer. Whether it's a true story doesn't necessarily effect whether it's a good story - in fact the two may be completely uncorrelated. True stories are oftentimes not all that great of stories, or rather, to be good stories too requires something other than simply telling the truth if that makes sense.
That's probably my bias against Stone showing though, and my bias towards Bush. But, I'm definitely going to see it, even if it does go against my biases.
Wednesday, October 15, 2008
Where's Roger?
Right now, W. has a score of 45 over at Metacritic. There are, of course, only 4 reviews posted up there, so take that with a grain of salt. But, Newsweek, The Hollywood Reporter, Variety and the Village Voice all expressed disappointment. Maybe this was just a rush job done to try and influence the election and nothing more. If it is a bad movie - which would be unusual for an Oliver Stone movie as, even when you hate the politics, you can't help usually but love the storytelling and the execution of the film - then maybe that explains why it's not so great. I'm still waiting to hear Roger Ebert's review, though. Ebert is the bellweather for all things for me, so if he likes it, I'll be inclined to see it, otherwise no.
Links
Just some things I've ripped off from other bloggers this morning.
1. Against Monopoly notes the declining prices and increasing innovations in the market for illicit drugs and wonders if the government were to subject illicit drugs to the kind of patent regulations that legal drugs get, if we wouldn't see the opposite trends - rising prices and falling innovations.
2. Malcolm Gladwell writes about David Galenson in next week's New Yorker. Galenson has, for the last ten years or more, written almost exclusively about the economics of art, and specifically artists and art-styles, providing a tremendous amount of evidence that certain types of thinkers peak at different ages, in terms of the quality of their output. Some artists are like fine wines and improve with age (eg, Pollock), and some artists are like bright flashes of phosphorous and do brilliant work at very early ages (e.g., Warhol). (hattip to kottke)
3. Christopher Hitchens endorses Obama and calls McCain a bunch of names. Probably will be a piece I refer to occasionally as I continue to think about Obama.
4. An old piece on the rise and fall of development economics by Paul Krugman. (Hattip to Blattman)
1. Against Monopoly notes the declining prices and increasing innovations in the market for illicit drugs and wonders if the government were to subject illicit drugs to the kind of patent regulations that legal drugs get, if we wouldn't see the opposite trends - rising prices and falling innovations.
2. Malcolm Gladwell writes about David Galenson in next week's New Yorker. Galenson has, for the last ten years or more, written almost exclusively about the economics of art, and specifically artists and art-styles, providing a tremendous amount of evidence that certain types of thinkers peak at different ages, in terms of the quality of their output. Some artists are like fine wines and improve with age (eg, Pollock), and some artists are like bright flashes of phosphorous and do brilliant work at very early ages (e.g., Warhol). (hattip to kottke)
3. Christopher Hitchens endorses Obama and calls McCain a bunch of names. Probably will be a piece I refer to occasionally as I continue to think about Obama.
4. An old piece on the rise and fall of development economics by Paul Krugman. (Hattip to Blattman)
Monday, October 13, 2008
Business Ethics
Okay, about 9 minutes in, this went from funny to me almost throwing up it was so funny funny.
Economic Geography
Ed Glaeser's defense of Krugman's win is the first one I've seen yet to really dig into the economic geography for which Krugman won. It's an overall great piece.
The Big Pictures of the Sun
The Big Picture has some spectacular pictures of the Sun. In the 10th picture, there's even a small man with either a rod and reel or a golf club being awkwardly held. Really weird.
11%
The S&P500, Nasdaq and the DIA were all up over 11% for the day. Small yay! Now just do that about ten more times so we can get off the operating table in more or less one piece.
One in Three???
According to this Atlanta-Journal Constitution article, one in three Atlanta police-persons has a criminal record. The article notes that the problem is due to budget problems combined with the need to expand the department. If you think of the supply curve for policemen of certain characteristics, then what determines that supply curve? The opportunity costs of being a policeman, meaning at least what their next best alternative, matters. Thus if you cannot pay them to compensate for that next best alternative plus some compensating differential due to the higher risks of police work, you're either going to have the position unfilled or have to draw from a slightly less qualified candidate pool. One of the downsides of being a former convict is that it is difficult to get work again. So it makes me wonder if in the longrun a war on drugs drives up the price of fighting crime by reducing the pool of candidates. That has to be compared against the benefits to society of lower crime due to higher enforcement of drug-related laws in order to determine what overall effect it has for social welfare.
Ebert on Scorsese
Roger Ebert has a new book out called Scorsese by Ebert, which I'm sure will be wonderful. Maybe he is going to start doing a series of such biographical-themed books? We can only hope. Only Ebert can write the Spielberg book, or should. Here's the dust jacket for the Scorsese book.
From Publishers WeeklyFor those who know my wife, they are now given permission to recommend this book to her for my imminent birthday.
Ebert, film critic for the Chicago Sun-Times, is an unabashed fan of Scorsese, whom he considers the most gifted director of his generation. To prove it, he's compiled his reviews of every Scorsese film—beginning with I Call First in 1967 to his latest, Shine a Light. Along the way, Ebert pays special tribute to five masterpieces, including Taxi Driver, Raging Bull and Mean Streets, which he calls one of the source points of modern movies. These three films in particular, Ebert argues, reflect Scorsese's ongoing preoccupation with sex and guilt, themes fueled by a Catholic upbringing and his childhood in New York City's Little Italy. Citing the director's strong collaboration with actor Robert De Niro and screenwriter Paul Schrader, Ebert says all three men seem fascinated by the lives of tortured, violent, guilt-ridden characters, usually men who cannot relate to women, such as Travis Bickle in Taxi Driver or Jake LaMotta in Raging Bull. Of special note are interviews with Scorsese over a 25-year period, in which the director candidly discusses his body of work. (Oct.)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.
Review
"This book is proof that the greatest criticism is simply careful and educated observation that connects a filmmaker with his subject, his audience, and his time. Ebert is one of the most acclaimed and perceptive critics of his time, and this unique book is an invaluable study in the canon of both film and criticism."-Library Journal (Library Journal )
Product Description
Roger Ebert wrote the first film review that director Martin Scorsese ever received—for 1967’s I Call First—when both men were just embarking on their careers. Ebert had never been touched by a movie in quite the same way before, and this experience created a lasting bond that made him one of Scorsese’s most appreciative and perceptive commentators. Scorsese by Ebert offers the first record of America’s most respected film critic’s engagement with the works of America’s greatest living director. The book chronicles every single feature film in Scorsese’s considerable oeuvre, from his aforementioned debut to his 2008 release, the Rolling Stones documentary, Shine a Light.
Here Ebert puts Scorsese’s career in illuminating perspective, exploring the different phases of his development and the abiding themes (many of which reflect Scorsese’s Catholicism) that give his work such complexity and depth. All of Ebert’s incisive reviews of Scorsese’s individual films are here, of course, but there is much more. In the course of eleven interviews done over almost forty years, the book includes Scorsese’s own insights on both his accomplishments and disappointments. One of these interviews, the single longest ever conducted with Scorsese, appears here for the first time. Ebert has also written and included six new reconsiderations of the director’s less commented upon films, as well as a substantial introduction that provides a framework for understanding both Scorsese and his profound impact on American cinema.
As Scorsese himself notes in his foreword to this volume, history is the only critic that counts, but the dialogue from which its judgments arise begins with the kind of emotionally alert, historically informed, and intellectually honest writing that Ebert has collected here in this, the ideal pairing of filmmaker and critic.
Manski on the Drug War
From the Charles Manki entry at wikipedia.
The NRC's Committee on Data and Research for Policy on Illegal Drugs found that existing studies on efforts to address drug usage and smuggling, from U.S. military operations to eradicate coca fields in Colombia, to domestic drug treatment centers, have all been inconclusive, if the programs have been evaluated at all: “The existing drug-use monitoring systems are strikingly inadequate to support the full range of policy decisions that the nation must make...It is unconscionable for this country to continue to carry out a public policy of this magnitude and cost without any way of knowing whether and to what extent it is having the desired effect.” The study, though not ignored by the press, was almost entirely ignored by policymakers, leading Manski to conclude, as one observer noted, that "the drug war has no interest in its own results."In my most idealistic, incredibly selfish and myopic moments, I believe an Obama administration will be different in this one way. I will probably be very disappointed, though, to learn it's no different than any other administration when it comes to prisons and drugs. The reason for these policies is not person-specific, but probably rooted in the complex relationships between the political sphere and the median voter - who is White, middle class, and a big supporter of the current war on drugs, regardless of any inefficiencies or inequities that it may bring.
Was Krugman's Win Political? No, says Rosser.
From Barklay Rosser:
To those who are convinced this is simply anti-Bush, I remind that two years ago the prize went to Kydland and Prescott, whose views are very different from Krugman's on macroeconomics, and who are definitely Republicans, if not former members of the Bush administration. Prescott followed his award by writing a column in the Wall Street Journal effectively praising Bush's fiscal policies and calling for supply side tax cuts. So, this argument is a pile of manure, although I am certain there are plenty of people around the world who will be cheering the political aspect of appearing to kick the very unpopular George Bush as he goes out the door, even as you folks are upset by this appearance.Read Rosser's entire comment - around #60, I think. He also notes the Dixit oversight.
Anyway, if they are political, they try to keep a balance. Plenty of strongly pro-free market people have gotten the prize, and the University of Chicago remains Number One as the university with economics Nobel recipients.
Is Prostitution Counter-Cyclical?
Venkatesh posted in Slate a few weeks ago that the income elasticity for demand for prostitution was pretty small, since many prostitutes with whom he spoke reported business to be up during these hard economic times. I am skeptical, personally, but another article in the NY Daily News says that mid-priced prostitutes in NYC report brisk service right now, but that high priced escorts are struggling (the opposite, mind you, of what Venkatesh said.
The effect of recessions on prostitution is ambiguous theoretically. Here's my analysis. For the demand side, commercial travel will certainly be down as firms curtail such traveling. As a result, being away from a wife (one of the key determinants of demand) falls and with it demand for services as well. Likewise, incomes are falling - people will be laid off, housing prices are plummeting, and stock prices are in a nosedive. All together, we see real income and real wealth falling for households, which leaves less money to buy these services. Insofar as prostitution is a normal good, then we should expect in aggregate some decline.
This is not the end of the story, though, for the demand-side. Say that a man can choose between either sex with $1000/hr prostitute or sex with a $500/hr prostitute, as well as no commercial sex at all. It's true he will likely substitute to some no commercial sex, but he may also substitute towards the $500/hr prostitute just as well. And that, I think, is what is being reported by some NY-based prostitutes. For some prostitutes, they are seeing new clients who previously solicited higher-priced prostitutes but now cannot due to the hard times, and two, they are seeing some regular clients substituting towards cheaper services. On net, though, we could reasonably predict a decline in demand, which would imply both falling prostitute wages and falling services.
The supply side, though, complicates matters, for it is affected by the recession too. The most obvious effect is the entry of new prostitutes into this work. A common justification for entering prostitution are economic shocks - a divorce or losing one's job. Since both divorces and unemployment are common responses to the recession, it's not surprising to therefore suspect an increase in both and therefore a rightward shift in the supply curve. Insofar as we believe the Della Giusta, et al (forthcoming 2008 Journal of Population Economics) model of prostitution whereby increasing prostitution reduces the social norms that stigmatize prostitution in the first place (thus causing even more enrollment), then these recessionary effects on supply are likely larger than we might initially believe possible. The recession will send more women into the industry as they struggle to make ends meet due to their loss of jobs and recent divorces.
A leftward shift in demand and a rightward shift in supply therefore does one thing clearly and one thing unclearly. First, together, it should cause prices to fall. The leftward shift in demand pushes prostitution wages down, and the rightward shift in supply pushes them down even more. So that much should happen, we think. The second is ambiguous. Approximately how many prostitution services will be bought/sold as a result? The demand effects reduce services, but the supply effects increase them, making the net effect ambiguous.
There are maybe some ways to get at this stuff, but it's obviously very difficult too because of the huge obstacles facing economists collecting data on this group. Maybe the best we have to go on presently are the ethnographic observations of sociologists like Venkatesh or journalists. One way to reconcile the fact that some people are reporting good business while others are not is that maybe there are menu costs associated with prostitution that make the ability of prices to change impossible. After all, many mid and high-priced escorts advertise independently through various prostitution clearinghouse websites which post prices and services. Anecdotally, I've heard it's difficult to get compliance from system operators when prostitutes go and request that wages be changed. One woman told me her request to have her posted prices increased resulted in the website deleting her entire profile - including the hundreds of customer reviews she'd accumulated over several years. That may suggest prostitutes at that level have difficulty changing prices in the shortrun, which in turn would theoretically result in an imposed price floor such that prostitutes cannot immediately lower the price below the new market price. This would keep wages high, but create excess supply situations wherein prostitutes are idle and unable to work. Only those, maybe, who are new to the market and can select the correct wages will be able to do so, since they face no frictions. Whether this is a real problem or not is unclear. Again, we have no data so we don't know. But, it's a possibility.
The effect of recessions on prostitution is ambiguous theoretically. Here's my analysis. For the demand side, commercial travel will certainly be down as firms curtail such traveling. As a result, being away from a wife (one of the key determinants of demand) falls and with it demand for services as well. Likewise, incomes are falling - people will be laid off, housing prices are plummeting, and stock prices are in a nosedive. All together, we see real income and real wealth falling for households, which leaves less money to buy these services. Insofar as prostitution is a normal good, then we should expect in aggregate some decline.
This is not the end of the story, though, for the demand-side. Say that a man can choose between either sex with $1000/hr prostitute or sex with a $500/hr prostitute, as well as no commercial sex at all. It's true he will likely substitute to some no commercial sex, but he may also substitute towards the $500/hr prostitute just as well. And that, I think, is what is being reported by some NY-based prostitutes. For some prostitutes, they are seeing new clients who previously solicited higher-priced prostitutes but now cannot due to the hard times, and two, they are seeing some regular clients substituting towards cheaper services. On net, though, we could reasonably predict a decline in demand, which would imply both falling prostitute wages and falling services.
The supply side, though, complicates matters, for it is affected by the recession too. The most obvious effect is the entry of new prostitutes into this work. A common justification for entering prostitution are economic shocks - a divorce or losing one's job. Since both divorces and unemployment are common responses to the recession, it's not surprising to therefore suspect an increase in both and therefore a rightward shift in the supply curve. Insofar as we believe the Della Giusta, et al (forthcoming 2008 Journal of Population Economics) model of prostitution whereby increasing prostitution reduces the social norms that stigmatize prostitution in the first place (thus causing even more enrollment), then these recessionary effects on supply are likely larger than we might initially believe possible. The recession will send more women into the industry as they struggle to make ends meet due to their loss of jobs and recent divorces.
A leftward shift in demand and a rightward shift in supply therefore does one thing clearly and one thing unclearly. First, together, it should cause prices to fall. The leftward shift in demand pushes prostitution wages down, and the rightward shift in supply pushes them down even more. So that much should happen, we think. The second is ambiguous. Approximately how many prostitution services will be bought/sold as a result? The demand effects reduce services, but the supply effects increase them, making the net effect ambiguous.
There are maybe some ways to get at this stuff, but it's obviously very difficult too because of the huge obstacles facing economists collecting data on this group. Maybe the best we have to go on presently are the ethnographic observations of sociologists like Venkatesh or journalists. One way to reconcile the fact that some people are reporting good business while others are not is that maybe there are menu costs associated with prostitution that make the ability of prices to change impossible. After all, many mid and high-priced escorts advertise independently through various prostitution clearinghouse websites which post prices and services. Anecdotally, I've heard it's difficult to get compliance from system operators when prostitutes go and request that wages be changed. One woman told me her request to have her posted prices increased resulted in the website deleting her entire profile - including the hundreds of customer reviews she'd accumulated over several years. That may suggest prostitutes at that level have difficulty changing prices in the shortrun, which in turn would theoretically result in an imposed price floor such that prostitutes cannot immediately lower the price below the new market price. This would keep wages high, but create excess supply situations wherein prostitutes are idle and unable to work. Only those, maybe, who are new to the market and can select the correct wages will be able to do so, since they face no frictions. Whether this is a real problem or not is unclear. Again, we have no data so we don't know. But, it's a possibility.
Krugman Wins!
Wow. My dark horse prediction (or at least half of it) materialized. Congratulations to Paul Krugman for winning the Nobel Prize in economic science. Unbelievable.
Tyler, as always, gives a great roundup for the cliff notes of "why this guy won", as he does every year. He also notes Dixit's chances of winning fall a lot. They said the same thing when Buchanan won sans Tullock. Stolen from Cowen, here's a great article about Krugman by Dixit. I love the opener explanation of why he's such a good economist in the first couple of paragraphs.
But, I really like this essay, How I Work. Very personal and inspiring, especially to the young assistant professor beginning his or her career.
Tyler, as always, gives a great roundup for the cliff notes of "why this guy won", as he does every year. He also notes Dixit's chances of winning fall a lot. They said the same thing when Buchanan won sans Tullock. Stolen from Cowen, here's a great article about Krugman by Dixit. I love the opener explanation of why he's such a good economist in the first couple of paragraphs.
But, I really like this essay, How I Work. Very personal and inspiring, especially to the young assistant professor beginning his or her career.
Friday, October 10, 2008
Katrina and the Students
Finally the paper using Katrina as a natural experiment that assigned kids to new school environment is out, and it's by none other than Bruce Sacerdote. The title is (wait for it) "When the Saints Come Marching In: Effects of Hurricanes Katrina and Rita on Student Evacuees." I've been telling people ever since just after Katrina that it was only a matter of time til this paper was written.
I examine academic performance and college going for public school students affected by Hurricanes Katrina and Rita. Students who are forced to switch schools due to the hurricanes experience sharp declines in test scores in the first year following the hurricane. However, by the second and third years after the disaster, Katrina evacuees displaced from Orleans Parish appear to benefit from the displacement, experiencing a .15 standard deviation improvement in scores. The test score gains are concentrated among students whose initial schools were in the lowest quintile of the test score distribution and among students who leave the New Orleans MSA. Katrina evacuees from suburban areas and Rita evacuees (from the Lake Charles area) eventually recover most of the ground lost during 05-06 but do not experience long term gains relative to their pre-Katrina test scores. High school age Orleans evacuees have higher college enrollment rates than their predecessors from the same high schools. Meanwhile, Katrina evacuees from the suburbs experience a 3.5 percentage point drop in their rate of enrollment in four year colleges. Those evacuees do not to make up for the decline in the subsequent two years. Later cohorts of suburban New Orleans evacuees are unaffected. The results suggest that for students in the lowest performing schools, the long term gains to achievement from switching schools can more than offset even substantial costs of disruption.This is intuitive. I once tutored kids in the 9th ward for the ACT. When I did that, I was told that 50 of the 57 worst performing high schools in the state of Louisiana were in New Orleans. If you believe that there are peer effects and causal effects running from school quality to student outcome, then taking kids out of the 9th ward and putting them anywhere else in the world is going to expose them to better environments. The 9th ward was, more or less, the bottom percentile of all schools in the entire world as far as I could tell.
MIT Panel
MIT had a panel yesterday of experts on the financial crisis, as has most universities across the country. Ours did, too. One of the comments made during ours yesterday has stuck with me. A student asked one of the panelists what he thought of McCain's plan to spend $300 billion to buy up excess inventory of housing stock in order to deal with the falling home prices. The panelist in question thought that that got closer to the right solution, because it addresses the root cause of the problem and not simply the middle-men, which is where the Paulson plan and its derivatives are focused. William Wheaton, professor of economics and real estate at MIT, seems to agree.
William Wheaton, professor of economics and urban studies and director of research for the Center for Real Estate, stressed that part of the reason for the real estate bubble -- and its resulting collapse -- had to do with an excess of capital globally. Much of that ended up going into American real estate, as a result of these financial instruments that bundled mortgages in a way that was perceived as greatly reducing the risks involved. That influx added to the pressure for lenders to offer more loans "to people who were incredibly more risky," he said.
While the averaging out created by these securities helped to smooth out the risks of individual mortgages, Wheaton said, that process "really offers no advantage against systematic risk," such as the overall downturn in housing prices -- an event he compared to a "100-year flood" in economic terms. But the storm was created in large part, he said, by an excessive boom of housing construction while the prices were rising. "I actually think it was oversupply" of housing that caused much of the problem, Wheaton said.
To fix the problem, he said, in economic terms it is more important to stabilize house prices than it is to keep people in their homes. While that may seem cold, he said, much of the boom was fueled by what he called "marginal" buyers -- those buying second homes or investment properties on speculation, who had no strong attachment to the properties. The current slump in home construction, he said, may actually be good for restoring the economy.
Thursday, October 9, 2008
The Financial Crisis Explained to a 14-year-old
I'm just going to rip off the whole Kottke post on this one, as both the original quote and Kottke's commentary are too good.
This is perhaps the most succinct explanation of the current financial crisis I had read: The Financial Crisis, as Explained to My Fourteen-Year-Old Sister.Kevin: Imagine that I let you borrow $50, but in exchange for my generosity, you promise to pay me back the $50 with an extra $10 in interest. To make sure you pay me back, I take your Charizard Pokémon card as collateral.The only thing that's missing is the part of the explanation where the parents swoop in and pay Kevin full value for that Pokémon card, which allows him to keep lending money in exchange for cardboard rectangles.
Olivia: Kevin, I don't play Pokémon anymore.
Kevin: I'm getting to that. Let's say that the Charizard is worth $50, so in case you decide to not return my money, at least I'll have something that's worth what I loaned out.
Olivia: Okay.
Kevin: But one day, people realize that Pokémon is stupid and everyone decides that the cards are overvalued. That's right -- everybody turned twelve on the same day! Now your Charizard is only worth, say, $25.
Mankiw's Plan to Fix the World
Mankiw argues for a kind of matching program whereby any private monies that banks raise will be matched by public investments from the state. The state, which is the taxpayer's proxy, would get the same terms as the private investor, but would be a nonvoting party. Read the rest yourself.
Wednesday, October 8, 2008
Gun Shows and Gun-Related Deaths
In a new working paper from the NBER, Mark Duggan, Randi Hjalmarsson and Brian A. Jacob study the effect of gun shows on gun-related deaths. They find no effect. They also find that increased regulations of gunshows to have any effect, thus providing even stronger evidence that there's no causal connection. Here's the abstract:
AbstractTo those who don't know, Mark Duggan has written extensively on gun availability and gun violence. In many of his papers, he finds a causal connection that gun availability does increase gun violence (for instance, here). Duggan is probably not a member of the NRA is what I'm saying.
Thousands of gun shows take place in the U.S. each year. Gun control advocates argue that because sales at gun shows are much less regulated than other sales, such shows make it easier for potential criminals to obtain a gun. Similarly, one might be concerned that gun shows would exacerbate suicide rates by providing individuals considering suicide with a more lethal means of ending their lives. On the other hand, proponents argue that gun shows are innocuous since potential criminals can acquire guns quite easily through other black market sales or theft. In this paper, we use data from Gun and Knife Show Calendar combined with vital statistics data to examine the effect of gun shows. We find no evidence that gun shows lead to substantial increases in either gun homicides or suicides. In addition, tighter regulation of gun shows does not appear to reduce the number of firearms-related deaths.
How to Rap by Mr. T
Will I ever get tired of watching old Mr. T music videos? (ht to jq)
Seriously, though. This may be the worst rap song ever written and ever performed.
Tuesday, October 7, 2008
W Reviews Coming In
Variety's review of W. makes it sound like it could be an interesting movie. I may actually see it.
Trillion(s) Dollar Write Down
The market continues its decline. There's some great deals out there, I'm sure, so long as you're a young (wo)man saving for retirement, and you're looking 30-40 years down the road. But boy is it a blood bath today.
This book, The Trillion Dollar Meltdown, is apparently already out-of-date b/c Drudge has a lead story right now saying that retirement assets are down TWO TRILLION.
This book, The Trillion Dollar Meltdown, is apparently already out-of-date b/c Drudge has a lead story right now saying that retirement assets are down TWO TRILLION.
Are you a Realist?
Imagine Jimi Hendrix singing that title as you read Paul Romer's piece in which he argues you're a fundamentalist if you oppose the Paulson Plan, but a realist if you support it. Are you going to take that? Are you going to let him say that to you? Seriously, though, I suspect that his argument does apply to about 80-85% of the critics for whom opposition is rooted in ideology. Still, thems are fighting words, so get mad at them thar beans!
Sunday, October 5, 2008
His Name is Mud(d)
Daniel Mudd was the CEO of Fannie Mae, and according to interviews with executives, steered the GSE into riskier and riskier purchases of subprime mortgages from lendors from 2004-present. The nyt has an expose on him and the company that looks like a valuable companion piece to this entire situation.
Saturday, October 4, 2008
26 Actors Whose Careers Deserve Better
From the Onion AV, a series entitled "Someone fire their agents! 26 actors who deserve better careers." Michael Keaton, Jamie Lee Curtis and Tony Hale all make the list, deservedly.
AIG Post
AIG has already burned through 3/4 of the $85 billion loan from the Fed (or what Eric Posner described as an acquisition, not a loan).
Shares of American International Group (nyse: AIG - news - people ) sank 5.5%, or 22 cents, to $3.78, after soaring 18.3%, earlier in the day, as analysts worried that the credit crunch may make it difficult for AIG to sell its assets at attractive prices. According to TradeTheNews.com, Chairman Edward M. Liddy of AIG said there may not be any buyer for the firm's mortgage insurance unit, although he added that there have been inquiries.
The company said it has drawn down $61.0 billion of its $85.0 billion credit facility from the Federal Reserve as of Tuesday. (See " Investors Not Assuaged Over AIG.")
Standard & Poor's revised the outlook on its ratings of American International Group to "negative" from "developing," because of risks related to the asset sales. S&P is concerned that AIG may have trouble selling its assets at good prices because of the credit crunch.
The agency has an' A-minus rating on AIG, four notches above "junk" status. AIG's insurance operating units remain on review with a "developing" outlook, said S&P.
Friday, October 3, 2008
The Effects of the Recession
Here's an interesting theory of the effects of the recession not at all beyond the realm of possibility.
The most likely scenario, as of 3 PM this afternoon: The stock market continues to drop. Some version of the bailout passes in the next week. The American economy staggers into a recession, but passes through the storm without 1930s-style suffering; the Republican Party is not so fortunate. Even though most Americans claim to oppose the bailout [update: not anymore], the House GOP's obstructionism is widely viewed as having worsened the economic situation; the fact that these are contradictory positions does not faze an electorate that wraps all of the country's current troubles up, ties them with a bow, and lays them at the feet of the Bush-led GOP. John McCain loses by a landslide in November. The Democratic Party regains years or even decades worth of ground among the white working class, consolidates the Hispanic vote, and locks up a large chunk of highly-educated voters who might otherwise lean conservative. The much-discussed liberal realignment happens. And a politician running on a Ron Paul-style economic platform does very, very well in the GOP primaries of 2012.Whew. Bush's legacy will be much like Carter's, I suspect. He gets the full blame of everything that happened this 8 years, including this recession, I suspect - some he deserves, some he doesn't, and some good things that happened will be swept under the rug, at least for a while til no one cares about the politics and what his real value was can then be studied objectively.
Twelve Virtues of Rationality
From Eliezer Yudkowsky, they are:
1. CuriosityWhat about the 12th? It's apparently a nameless virtue. It is explained in a round-about way by this quotation.
2. Relinquishment
3. Lightness
4. Evenness
5. Argument
6. Empiricism
7. Simplicity
8. Humility
9. Perfectionism
10. Precision
11. Scholarship
"The primary thing when you take a sword in your hands is your intention to cut the enemy, whatever the means. Whenever you parry, hit, spring, strike or touch the enemy's cutting sword, you must cut the enemy in the same movement. It is essential to attain this. If you think only of hitting, springing, striking or touching the enemy, you will not be able actually to cut him. More than anything, you must be thinking of carrying your movement through to cutting him."So, which disciplines train you in these virtues? I'm going to put my discipline in for the running (economics), but maybe others? I know that I see a lot of these virtues as personal goals on my part, and they never existed before I started my graduate training in economics, so I'm assuming it's because of that. But, I think we also need a list of the twelve vices of rationality, too. Cynicism would be high on the list.
Horizons are Important
Chris Blattman reminds us to keep the current economic problems in perspective. Good points, but at the same time, fluctuations are also important given the social costs attached with them. Nevertheless, the upward trend in GDP per capita for the United States is upward sloping, and there's no reason to believe that this marks the end.
inTrade Manipulation
Wolfers points to some evidence of manipulation at inTrade. It appears that inTrade is a low liquidity betting market, and during some of the periods of calm, it's more vulnerable to manipulation since large trades can go unnoticed and may take some time to readjust, which will only happen as others notice the arbitrage opportunities and take advantage of it. That probably explains why a month ago, I couldn't reconcile what inTrade was showing in the main contract versus the state contracts. The state contracts showed Obama needing only to win one of the five swing states in order to win. Or to put it differently, McCain needing to win all five of them to hold on. And these states were, at that time, Virginia, New Hampshire, Colorado, Nevada and Ohio. He couldn't lose a single one of them. So to win, it was going to hinge on the joint probabilities of winning all five, which given that they were so close to begin with, should've translated into a very clear advantage of Obama winning, that should've translated into a much higher contract price at the national level.
Which means, I should've just bought the national contract on Obama at that point, since it was so clearly undervalued based on the state contracts. Wolfers says basically that was probably right - the state contracts never showed the same kind of movements and volatility as those national contracts did, nor did other betting markets either in the US or in the UK. So, what does it mean? I think one thing it means is that because inTrade is so illiquid, there are more arbitrage opportunities there exist in more liquid markets. The more liquid the market, the more efficient it is, the more the current stock price reflects all available information and thus the less likely it is that you actually possess information than isn't already factored into the price. This is called the efficient market hypothesis for those not familiar with it. But, it sounds to me like inTrade is not efficient, which means why it may be less reliable for accurate predictions all the time (except Wolfers says it probably is still accurate in the longterm, but not always at every moment. Those weird anomalies do eventually get ironed out after all) but could be a source of easy money for the better.
Which means, I should've just bought the national contract on Obama at that point, since it was so clearly undervalued based on the state contracts. Wolfers says basically that was probably right - the state contracts never showed the same kind of movements and volatility as those national contracts did, nor did other betting markets either in the US or in the UK. So, what does it mean? I think one thing it means is that because inTrade is so illiquid, there are more arbitrage opportunities there exist in more liquid markets. The more liquid the market, the more efficient it is, the more the current stock price reflects all available information and thus the less likely it is that you actually possess information than isn't already factored into the price. This is called the efficient market hypothesis for those not familiar with it. But, it sounds to me like inTrade is not efficient, which means why it may be less reliable for accurate predictions all the time (except Wolfers says it probably is still accurate in the longterm, but not always at every moment. Those weird anomalies do eventually get ironed out after all) but could be a source of easy money for the better.
Lap Dancers, Menstrual Cycles, and Earnings
Yes, there is a study even of that. I saw it in today's announcement of the annual ig-Noble awards - work that is just plain funny because it's actually real scientific research. In the economics category, Geoffrey Miller, Joshua Tybur, and Brent Joran (all from the University of New Mexico) were recognized "for discovering that a professional lap dancer's ovulatory cycle affects her tip earnings." The paper was published in Evolution and Human Behavior, November 2007, and is entitled "Ovulatory Cycle Effects on Tip Earnings by Lap Dancers: Economic Evidence for Human Estrus?". Here's the abstract.
To see whether estrus was really “lost” during human evolution (as researchers often claim), we examined ovulatory cycle effects on tip earnings by professional lap dancers working in gentlemen's clubs. Eighteen dancers recorded their menstrual periods, work shifts, and tip earnings for 60 days on a study web site. A mixed-model analysis of 296 work shifts (representing about 5300 lap dances) showed an interaction between cycle phase and hormonal contraception use. Normally cycling participants earned about US$335 per 5-h shift during estrus, US$260 per shift during the luteal phase, and US$185 per shift during menstruation. By contrast, participants using contraceptive pills showed no estrous earnings peak. These results constitute the first direct economic evidence for the existence and importance of estrus in contemporary human females, in a real-world work setting. These results have clear implications for human evolution, sexuality, and economics.I've not read the paper yet, but it's definitely provocative. I'm printing it out now.
Thursday, October 2, 2008
Sapra on Mark-to-market accounting
Here's a paragraph from the Sapra piece:
Of course, if that's true, then it would make sense that no one on Wall Street said a word during the run-up. Mark-to-market would've been a boom, since the feedback was creating a feeding frenzy on homes. But the same thing driving it up drives it down, and I think the theory is that mark-to-market is creating a kind of massive volatility and variance in the asset prices themselves, and thus the same variability among those institutions leveraged with them.
"Allen and Carletti identify an interesting and novel endogenous cost of marking-to-market: whenever a crack appears in some part of a financial system, a mark-to-market measurement regime may serve as an important catalyst in propagating this crack to other parts of the system. Such propagation, in turn, may lead to financial contagion which is detrimental to welfare. Put differently, marking-to-market has financial stability implications because it may amplify the nefarious effects of liquidity pricing.The entire paper, along with the Allen and Carletti paper that this paper is building off of, is worth reading. It's basically a model of how this particular kind of accounting rule ("mark to market") can exacerbate small vibrations in an economy and turn them into massive ones via the feedback effect between demand for assets and their present market value. What's new to it is its focus on non-liquid assets, like houses, where I think the point being made is that they are more susceptible because they trade so irregularly (maybe once every 5 years, unlike bonds which exchange hands constantly everyday) that marking them to current market values is not going to reveal their underlying value as well as marking to a model's estimates, which are based on longterm valuations.
Of course, if that's true, then it would make sense that no one on Wall Street said a word during the run-up. Mark-to-market would've been a boom, since the feedback was creating a feeding frenzy on homes. But the same thing driving it up drives it down, and I think the theory is that mark-to-market is creating a kind of massive volatility and variance in the asset prices themselves, and thus the same variability among those institutions leveraged with them.
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