Assorted links

by on March 19, 2013 at 12:38 pm in Uncategorized | Permalink

1. Excellent post on the biases of economists, and penguin plays an iPad game for cats.

2. The distraction-free iPhone.

3. Is North Korea running a current account surplus?

4. Meg Greene on the Cyprus deal.

5. A staring game and its resolution (short video, profound along multiple dimensions).

6. An “option clause” proposal for Cyprus, Felix Salmon likes the idea.  And Pissarides on Cyprus.

Millian March 19, 2013 at 1:19 pm

1. It’s far from excellent. Conflating the college wage premium and the marriage wage premium agrees with your mood affiliation towards conservatives, but it’s foolish and vulnerable to easy attack. Most trivially, we have a sensible causative model as to why learning how to be an engineer/financier increases your income in a way that doesn’t depend on selection bias. We do not have a similar, sensible causative model about marriage. Economists distinguish between these two premia because of the credibility of the underlying model, not a bias. That’s why the marriage premium is ignored. It’s the same reason why socialist alternatives to the price mechanism are ignored. Apart from rebuttals that have been done years ago, nothing’s there.

Brian Donohue March 19, 2013 at 1:24 pm

Anecdotal, but I recall some baseball manager talking about how he likes his young players to get married, because then they behave more maturely and responsibly.

The civilizing influence of woman? It’s a theory anyway.

anon March 19, 2013 at 1:44 pm

The civilizing influence of woman? It’s a theory anyway.

My male friends who have daughters have all told me that having a daughter changed them in unexpected and good ways.

Miley Cyrax March 19, 2013 at 3:37 pm

Brings to mind the Moneyball line about how having an ugly girlfriend signals a player’s lack of confidence.

Cliff March 19, 2013 at 8:32 pm

Contra the Curb Your Enthusiasm theory that having an ugly girlfriend signals integrity

Claudia March 19, 2013 at 1:27 pm

Actually I just listened to a sensible paper yesterday that showed empirically how important spousal labor supply adjustments are for insuring (or buffering) consumption against labor shocks….much more important than financial savings. There are agnostic models which show the benefits of two adult rather than one adult households. Not just conservative values.

Millian March 19, 2013 at 1:30 pm

I absolutely find those mechanisms credible.

I don’t find credible the idea that marriage is the explanatory part of that story. A non-married loving couple will probably buffer each other more than a resentful married couple. Making the latter couple get married, so they can enjoy conservative-proposed state benefits, will not force them to share their finances.

Finch March 19, 2013 at 1:58 pm

I don’t know, finding significant differences between how married and non-married-cohabitating couples function is not exactly unusual.

I’m reminded of Luis Angeles’ paper on the effects of children on happiness in which he shows that children are a significant source of happiness for the married, but a big negative for the single and the cohabitating. The cohabitating results are most definitely not just like the married results. http://link.springer.com/article/10.1007%2Fs10902-009-9168-z?LI=true#page-1

It really does seem to matter that the couple has made a difficult-to-sever legal bond.

Roy March 19, 2013 at 2:07 pm

What matters is that the couples who have not made that bond are self selecting, especially with children.

JWatts March 19, 2013 at 2:12 pm

What matters is that the couples who have not made that bond are self selecting, especially with children.

Yes, much like intelligent individuals who don’t get a college education are self selecting.

Rahul March 19, 2013 at 3:27 pm

The single and the cohabitating (at least in the US) are much more likely to have had that child unintentionally?
Further, the cohort that has changed status to become single, that transition itself may bring along its attendant unhappiness.

I think it’s a case needing use of the right controls and not much to do with the difficulty of severing the bond.

Finch March 19, 2013 at 3:31 pm

It’s not completely beyond belief that the presence of that difficult-to-sever legal bond might make people act differently. It would make a big difference to a rational person’s response to pregnancy, for example. If you aren’t married, pregnancy is a (big?) increase in risk, especially for the woman. It might destabilize the relationship. If the relationship ends, it might increase the risk of poverty. That must blunt other positive effects of a child. If you are married, a lot of that risk isn’t there, or is at least mitigated. Pre-commitment to making the relationship hard to dissolve may have real effects on otherwise similar people.

Finch March 19, 2013 at 3:35 pm

> The single and the cohabitating (at least in the US) are much more likely to have had that child

> unintentionally?

There must be some of that, even today when it’s hard to have a child unintentionally. The first question out of the doctor’s mouth when you tell him you’re pregnant is “Are you going to keep it?”

I don’t mean to say there’s no ability bias in marriage. Obviously, it’s huge. But there are other possibilities as well, and it doesn’t seem so different from college to me.

Finch March 19, 2013 at 3:36 pm

> The single and the cohabitating (at least in the US) are much more likely to have had that child
> unintentionally?

There must be some of that, even today when it’s hard to have a child unintentionally. The first question out of the doctor’s mouth when you tell him you’re pregnant is “Are you going to keep it?”

I don’t mean to say there’s no ability bias in marriage. Obviously, it’s huge. But there are other possibilities as well, and it doesn’t seem so different from college to me.

Finch March 19, 2013 at 5:53 pm

> Further, the cohort that has changed status to become single, that transition itself may bring along its
> attendant unhappiness.

That cohort is accounted for separately in the paper (widowed, separated, divorced, iirc). I think cohabitating is pretty close to what Millian means when she describes a long-term committed relationship that isn’t marriage. It’s sort of milquetoast marriage.

Claudia March 19, 2013 at 6:26 pm

Ok, so now that I have read the article…I think it mischaracterizes economists. Not the “unbiased” part, of course economists’ policy views are colored by their personal values. I thought that was well established before the NYTimes piece..it’s a *social* science, y’all. But here’s the thing lost in the article…ask an economist if married men earn more than unmarried men…answer: an unequivocal yes, ask an economist if an unmarried man should get married..answer: probably. [Also few economists would recommend college to an 18 year old without knowing more about them, no investment is always a winner.] Also there is plenty of economic analysis on the benefits of marriage and partnership, so it is by no means an off limits area of research and discussion. MR-affiliated books are by no means representative of the discipline. But it’s true that marriage is not stamped with a ‘right’ thing to do normative seal of approval by economists as conservative might give it. Words like risk sharing, home production, assortative mating are the types of terms used by economists…nothing to do with making someone honest, taming the barbarian, or sanctity.

Brian Donohue March 20, 2013 at 9:06 am

God forbid we stray from the way economists think about these items.

Millian commented: “We do not have a similar, sensible causative model about marriage.”

I offered one. It’s plausible, and moreover, probably true.

And maybe you just don’t read the literature widely enough. Check out George Akerlof’s 1998 paper “Men Without Children” (gated)

http://onlinelibrary.wiley.com/doi/10.1111/1468-0297.00288/abstract

Claudia March 20, 2013 at 10:02 am

You did not read what I said. Do that before throwing insults, please.

Brian Donohue March 20, 2013 at 10:09 am

I did read what you said and I did not mean to insult you, but I felt like you were passively-aggressively attacking me with your ‘nothing to do with…taming the barbarian’ comment, which a fair-minded person like yourself will now see is mistaken.

Claudia March 20, 2013 at 10:16 am

I was not responding to you, but to my first comment. I more a fan of open arguments than passive agreesion. the barbarian thing was a quote from the OP’s related tweet. me trying to be funny. Conversations here are such a pain. Oh well still fun to read.

Millian March 19, 2013 at 1:28 pm

Similarly, “economists’ thinking and proposals almost exclusively focus on productivity growth and completely ignore population growth” for another very simple reason. Almost every economist has heard of Malthus. His productivity growth forecast was wrong, but his assessment of the demerits of a high-population, high-output world seem broadly sensible to modern economists. Appallingly, the author didn’t even explain why economists ought to care about population growth. He simply states that economic growth matters. That means his policy advice to Ireland would be “become Nigeria, if possible, to enjoy a huge surge in GDP”, which seems quite dubious. Economists don’t tell countries to increase population as a spur to economic growth because they value economic growth as a phenomenon that makes the population better-off.

Jim March 19, 2013 at 2:05 pm

I agree mostly, but there are studies on higher populations leading to higher economic growth. Growth increasingly is a product of innovation, much of which is not necessarily rival once discovered. The thoughts go something like this, more people, more innovations, more innovations per person, higher productivity per person. Now likely most things in economics there is not a corner solution. Population growth that is too fast could make it too difficult to incorporate new innovations, etc. There is also some absolute bound on what innovation can do with regards to efficiency, you will always need some minimal amount of natural resources. In any case, here is the example of some of the research.

Population Growth and Technological Change: One Million B.C. to 1990*
Michael Kremer
– Author Affiliations

Department of Economics, Massachusetts Institute of Technology
Abstract

The nonrivalry of technology, as modeled in the endogenous growth Literature, implies that high population spurs technological change. This paper constructs and empirically tests a model of long-run world population growth combining this implication with the Malthusian assumption that technology limits population. The model predicts that over most of history, the growth rate of population will be proportional to its level. Empirical tests support this prediction and show that historically, among societies with no possibility for technological contact, those with larger initial populations have had faster technological change and population growth.

http://marginalrevolution.com/marginalrevolution/2013/03/assorted-links-736.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+marginalrevolution%2Ffeed+%28Marginal+Revolution%29

Jim March 19, 2013 at 2:05 pm
Millian March 19, 2013 at 2:42 pm

But in 1900, we had approximately 1.5 billion people. Now, in the middle of The Great Stagnation, we have 7 billion.

Jim March 19, 2013 at 3:02 pm

We could debate about the great stagnation, I rather not. I think the more important point right now, one that I didn’t set up too well in the last post, is the claim that economists don’t think about the possibility of population impacting growth. The fact is they do, though there can be disagreement over the importance of it.

Ricardo March 19, 2013 at 1:46 pm

Agree… came here to post exactly the same thing.

Also the idea of caring about population growth as a contributor to “growth” seems silly, because what we really care about is *per-capita* growth.

MikeAZ March 19, 2013 at 2:45 pm

Yes but population growth implies an increasing group of 16-35 year olds ever generation. These people are routinely the innovators and supply cheap labor. This is a necessary thing for even per capita gdp growth and I think that’s really what the article is referring to.

Finch March 19, 2013 at 3:39 pm

Aren’t we better off having two people at a particular utility than one person at the same utility?

Millian March 19, 2013 at 4:34 pm

A difficult question, that. It depends on what moral value you ascribe to non-existent people’s non-experiences. If a person doesn’t exist, can he really be said to lose anything, even relative to a world in which he does exist? Caveat one: One/two person thought experiments are irrelevant in a world of seven billion people, who compete for scarce resources. Caveat two: Most philosophers aren’t utilitarians and don’t use sum-of-utility maximisation as the test for right action.

derek March 19, 2013 at 11:48 pm

Not if you are running a ponzi scheme. Many many government programs depend on population growth as well as per capita growth.

JWatts March 19, 2013 at 2:09 pm

Most trivially, we have a sensible causative model as to why learning how to be an engineer/financier increases your income in a way that doesn’t depend on selection bias.

Granted, but most economists don’t recommend specific college majors. They recommend increasing the amount of college participants regardless of major. Or at the very least, outside of a few outliers like Cowen, there is never a discussion of incentivizing high value majors and decentivizing low value majors.

We do not have a similar, sensible causative model about marriage….That’s why the marriage premium is ignored. You don’t really make a case here, you just state an opinion.

Jim March 19, 2013 at 2:16 pm

I do! (sort of) I have shown unemployment by major to my freshman seminar in semesters past. I usually say something along the lines that college is about helping your future career and becoming a better person. Some majors help you more with one than the other. Often the best course of action is to double major with both goals in mind.

Millian March 19, 2013 at 2:45 pm

“most economists don’t recommend specific college majors. They recommend increasing the amount of college participants regardless of major.” – Right, so we’ve already made some progress here. We can see some good, precise policy advice we can give to 17-year olds. Whereas we have absolutely no reason whatsoever to think marriage causes income, and no useful advice to give those kids. (Marry whom? Random strangers? A guy I already liked a lot – what difference would a ring make to that?)

JWatts March 19, 2013 at 3:25 pm

Whereas we have absolutely no reason whatsoever to think marriage causes income, and no useful advice to give those kids.

Married people tend to be happier, live longer and have higher wealth. Perhaps it’s all a spurious correlation, but it’s not the way I’d bet.

Millian March 19, 2013 at 3:29 pm

The mechanism is RIGHT THERE in the article Tyler cites. “Selection bias”. When we look at married people, we look at people in long-term relationships, and we almost automatically exclude the divorced (and not remarried) and the most unfortunate social outcasts. We exclude many of the poor, too, given cultural preferences for marriage among what Europeans call the middle class (I’m not sure what Americans call it – it seems that what Americans call the middle class, we call the working class).

What matters? It’s the relationship, not the ring.

Finch March 19, 2013 at 3:41 pm

It’s the pre-commitment to risk sharing?

mike March 19, 2013 at 3:50 pm

“When we look at married people, we look at people in long-term relationships, and we almost automatically exclude the divorced (and not remarried) and the most unfortunate social outcasts.”

As opposed to higher education, which is completely unselective.

JWatts March 19, 2013 at 4:36 pm

“When we look at married people, we look at people in long-term relationships, and we almost automatically exclude the divorced (and not remarried) and the most unfortunate social outcasts. We exclude many of the poor,”

As opposed to higher education, which is completely unselective.

Exactly. When selecting for college graduates, you are automatically excluding those intellectually incapable of getting a degree, uninterested in getting a degree, lazy, poor, disaffected, etc.

Anyone in a marriage (or long term committed relationship, just to avoid pedantry) will benefit from stability and also pressure to maintain a consistent work schedule. When you are single it’s far easier to decide to take Friday off and spend 3 days playing video games with your friends. Or just to quit because the boss is an idiot and you don’t need the job. Once you are married there is a strong influence to work full time and save towards future housing and retirement needs.

Millian March 19, 2013 at 4:39 pm

“As opposed to higher education, which is completely unselective.”

Can you please read the discussion we have had so far, if you are going to contribute to it? The college premium has selection bias (clearly, the people who go to Harvard would probably do alright if they skipped college) but there is a clear, causative mechanism between the policy and the outcome (they learn skills essential to be an engineer, financier, etc., which yield income premia over being a low-education worker). The marriage premium has a very obvious selection bias and no obvious causative mechanism between the ring and the income boost.

Millian March 19, 2013 at 4:49 pm

“Anyone in a marriage (or long term committed relationship, just to avoid pedantry) ”

It’s not pedantry, you’ve reached the core of the issue. The conservatives want us to tell people to marry someone, ANYONE, just to get some supposed benefits. Now, as you recognise, it’s the relationship that matters, not the ring.

Speculative pol sci digression. Conservative elites advocate marriage rather than long-term relationships even though they know the two aren’t the same. Implicitly, they want to confuse the two topics to pass policies to reward people like them. Also implicitly, these policies will punish people not like them. In Europe, that’s cosmopolitan young people; in America, that’s African-Americans. In other words, the same thing that explains the US conservative movement’s favourite policies, about 65% of the time (“let’s design a welfare state that doesn’t reward African-Americans”). End of digression.

Economists don’t recommend marriage, or even long-term relationships, as a policy for individuals to follow, because it would lead to useless policy recommendations, some preposterous. Most obviously: marry whom? Marry a random person I’ve just seen, to try to get on to all those correlations? Marry a person I’m already in a very long-term relationship with, as if that will make a difference? But also: Stay married despite incompatibility? The answers, from the economic perspective, are not clear. At least the vast majority of college courses will at least give you skills that you can use in the labour market, and be entertaining enough for a few years to compensate the costs (but this isn’t the main point of my argument: the main point is the lack of a causative mechanism between wedding rings and income).

JWatts March 19, 2013 at 7:52 pm

It’s not pedantry, you’ve reached the core of the issue. The conservatives want us to tell people to marry someone, ANYONE, just to get some supposed benefits

I think you are fighting strawmen at this point.

Cliff March 19, 2013 at 8:41 pm

Millian,

Everything you are saying is wrong (!). A person who attends Harvard learns little or nothing useful to their actual job. A better explanation than that would be a networking effect, which is still not any better than the explanations for why marriage increases income, which others have already provided. It’s not really marriage conservatives are concerned about, it is stable long-term relationships. It’s just that such relationships are nearly nonexistent outside of marriage, so it would only confuse people to pretend that was a viable alternative.

Basically your argument amounts to “college increasing income makes sense to me, but marriage increasing income does not make sense to me.” Which no doubt has nothing to do with your biases.

Finch March 20, 2013 at 8:39 am

Cliff, that’s a great articulation.

Miley Cyrax March 19, 2013 at 3:55 pm

Perhaps the married male wage premium exists because employers subconsciously prefer married men, because being married signals commitment, loyalty, dependability, ability to take shit, etc.?

In which case, young men would be intimately concerned with how beingh married or not might affect their careers, enough to influence marry or not decisions at the margins. Or maybe they could just wear gold-painted rings bought from costume jewelry stores to the office.

Go Kings, Go! March 19, 2013 at 3:52 pm

Does your causative model explain why “learning how to be an engineer/financier” is the same thing as the college wage premium?

Millian March 19, 2013 at 4:54 pm

“Does your causative model explain why “learning how to be an engineer/financier” is the same thing as the college wage premium?”

Which I translate as “And going to college doesn’t have a selection bias?”. I refer you to my response below.

Norman Pfyster March 19, 2013 at 4:07 pm

And going to college doesn’t have a selection bias?

Also, if you believe the signaling theory of eduction, there is no causal mechanism for going to college and income outside of the signal.

Millian March 19, 2013 at 4:52 pm

“And going to college doesn’t have a selection bias?”

Not my claim, but the kind of inchoate counter-argument I expect conservatives to offer, to make themselves feel better about the absence of a causative mechanism between marriage and income.

Cliff March 19, 2013 at 8:42 pm

This is not even a conservative blog. You’re just assuming your desired conclusions

derek March 20, 2013 at 12:23 am

Put it another way. The skills, abilities, habits etc. that make for a successful marriage are similar to the ones that would make for success in other endeavors. Very seldom do people finish college as the same person who started. People grow and learn. Maybe a more apt comparison would be all comparing all those who apply for college to all those who marry. Very large numbers fail at both endeavors, the interesting groups are those who succeed. Why do they succeed and how that is reflected in other aspects of their lives.

Finch March 20, 2013 at 8:34 am

You make it sound like people don’t grow and learn in marriage. Maybe that’s not what you meant, but if it was, I find it implausible.

For that matter, a great deal of the growth and learning that happens “in college” is more aptly described as happening “between 18 and 22.”

E. Barandiaran March 19, 2013 at 1:31 pm

Tyler, regarding Cyprus. Right now Parliament is meeting but most likely it will fail to approve the agreement despite some last-minute concessions. There are rumors of Michael Sarris’s resignation as Minister of Finance. His departure may facilitate an agreement tomorrow with the Russian government for additional funding as Anastasiades faces the Troika’s threat of stopping ECB funding of failed banks by this Thursday (a deadline set last January as an extension of one set in the course of negotiations leading to last November MoU). It seems that Anastasiades has no choice but to call Draghi’s bluff.

Rahul March 19, 2013 at 1:57 pm

#2. The distraction-free iPhone.

Why does he then need an i-Phone in the first place?

JWatts March 19, 2013 at 2:10 pm

Prestige signalling?

Dan Weber March 19, 2013 at 4:20 pm

If you look at his pages:

maps, music, alarm clock, notes, weather, photos.

I don’t have my email account linked to my phone, there is no Facebook, and I wouldn’t mind too much if the browser disappeared.

But I’m weird since the primary reason I have a smart phone is that so I can write apps for it.

prior_approval March 19, 2013 at 2:39 pm

So, some reporting from Cyprus –

March 17 – ‘Neoclassical economist and Nobel prize winner Christoforos Pissarides, who heads the newly-formed National Council for the Economy, echoed these words, when he said there is no other option than taking these measures, otherwise the country’s credit system would crumble leading the country to chaos. “This may be a painful solution but it is the only hope we have to save the economy of Cyprus.”’ http://thenextrecession.wordpress.com/

Or this – ‘Pissarides told CNA “the truth is hard to swallow. If the law is not approved tomorrow the consequences will be much worse. There will be large scale bankruptcies and most small Cypriot bank depositors will lose everything, because they will discover that their banks will not open again.”

And this, he stressed, “will not happen in some vague future date; it will happen now, this week. Our economy will collapse”.

Pissarides said “I believe that however painful it is to accept the memorandum, it is our only hope for saving our economy from instant collapse. We will be able to overcome our troubles and we will see good days again, even better than the ones that we have known, because Cypriots know how to work hard to overcome adversity and succeed.

But first we have to accept that the deal that our government managed to work out in Brussels is the best hope that we have to avoid new disasters and make a new start”.’ http://www.parikiaki.com/archives/63847

Sounds as if a Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel winner knows that different audiences can be told different things. Especially when one of those audiences is generally less than well informed about what is going on, compared to an audience actually made up of his fellow citizens.

Millian March 19, 2013 at 2:48 pm

The two positions aren’t contradictory. Of course you tell different audiences different things, depending on what you need them to do for you. It’s like telling Bloomberg that losing a leg is worse than expensive surgery, then telling your compatriots that losing a leg is less bad than losing two legs.

You seem to be very good at snarky attacks without any basis. Go on, tell us again about the Shadowy Tyler Cowen NoVa Mind Control Conspiracy.

ad*m March 19, 2013 at 3:21 pm

+1
and I dont see the contradiction in what he said anyway. Since Cyprus rejected the deal, it is all moot now.

Here is hoping for some more ‘reporting’ from our weaker-in-German-than-he-thinks euro-crisis reporter, PA. /snark

prior_approval March 20, 2013 at 1:31 am

‘Since Cyprus rejected the deal, it is all moot now.’

So let me quote from Pissarides again – ‘If the law is not approved tomorrow the consequences will be much worse. There will be large scale bankruptcies and most small Cypriot bank depositors will lose everything, because they will discover that their banks will not open again.’

You have an interesting definition of ‘moot,’ at least compared to a Cypriot.

‘from our weaker-in-German-than-he-thinks euro-crisis reporter’

I’m very weak in German, even after working as a translator for an ERP software house in Germany for over two decades. But only from German to English, and never the other way round. Interesting to see that you too recognize that translation is best done from a foreign language into one’s mother’s tongue, and not in the other direction.

And from where I live, the euro crisis is pretty boring – which is why I keep requesting the Prof. Cowen return to his predicting eurogeddon any day now, to spice up everyone’s life.

prior_approval March 20, 2013 at 12:54 am

Note the comment from a Greek speaker below as to the real point.

As to a ‘Shadowy Tyler Cowen NoVa Mind Control Conspiracy,’ I’ve never heard of it.

As to the Mercatus Center, however, let me refer you to this link – http://www.sourcewatch.org/index.php?title=Mercatus_Center – ‘The Mercatus Center, part of George Mason University, is one of the best-funded think tanks in the United States at the moment. It is listed as “sister organization” to the Institute of Humane Studies.’

I actually did PR for IHS back in the late 80s while working at GMU – there is nothing shadowy to me about people like S. Fred Singer. But this ‘Shadowy Tyler Cowen NoVa Mind Control Conspiracy’ seems pretty strange – DC is where the game is actually played, not Northern Virginia. Maybe you should read up on money flows, or ask yourself where did MRU get the cool cash to fund a 1250 billed hours website?

Nothing is for free, and such a wonderful group of inquiring minds just might want to ask themselves why the story of two professors, Youtube, and a $4 app creating a new free online university turns out to be such a wonderful PR sham compared to the reality. A reality that was never actually presented when introducing MRU, where the sign-up e-mail went through a Mercatus Center address – again, just a basic fact, nothing shadowy about it in the least. Maybe you could also ask inQbation for a price quote for your own modest 1250 project hour endeavor – http://www.inqbation.com

Careless March 27, 2013 at 12:17 pm

” As to a ‘Shadowy Tyler Cowen NoVa Mind Control Conspiracy,’ I’ve never heard of it.”

Indeed, the people making all those posts in his name wanted you to think he was behind it.

Morrie March 19, 2013 at 4:38 pm

So the IMF is a coconspirator in the Cypriot deposits grab. Does this mean their new role is to destabilize international banking?

johnshade March 19, 2013 at 6:13 pm
Ray Lopez March 19, 2013 at 8:11 pm

@#6 – No credibility for this Nobelian: “Did the EU, ECB, and IMF inadequately monitor the Cypriot banking system? No! They seem to think that all big depositors are Russians with dirty money. But after months of searching they couldn’t find a single one. ” – certainly not true, and after this statement I realized this man is playing politics (aka political economy). Speaking as a Greek speaker.

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