Economics professor emeritus Daniel Hamermesh will withdraw from his position next fall, citing concerns with campus carry legislation.

The law will allow the concealed carry of guns in campus buildings beginning Aug. 1, 2016. Hamermesh said he is not comfortable with the risk of having a student shoot at him in class. He teaches a course with 475 students enrolled, according to a letter Hamermesh wrote Sunday to UT President Gregory Fenves…

Hamermesh, who said he is under contract to teach his course in fall 2016 and fall 2017, said he will complete the semester at UT and will teach at the University of Sydney next fall.

Hamermesh said he thinks the legislation will impact the University’s ability to draw new faculty and staff to work at UT.

There is more at the link, via Catherine Rampell.

Months after winning a national title, Harvard’s debate team has fallen to a group of New York prison inmates.

The showdown took place at the Eastern Correctional Facility in New York, a maximum-security prison where convicts can take courses taught by faculty from nearby Bard college, and where inmates have formed a popular debate club. Last month they invited the Ivy League undergraduates and this year’s national debate champions over for a friendly competition.

The Harvard debate team was crowned world champions in 2014. But the inmates are building a reputation of their own. In the two years since they started a debate club, the prisoners have beaten teams from the US military academy at West Point and the University of Vermont. The competition with West Point, which is now an annual affair, has grown into a rivalry.

At Bard, those who helped teach the inmates were not particularly surprised by their success.

And what did they debate?

Against Harvard the inmates had to defend a position they opposed: they had to argue that public schools should be allowed to turn away students whose parents entered the US illegally. The inmates brought up arguments that the Harvard team had not considered. Three students from Harvard’s team responded, and a panel of neutral judges declared the inmates victorious.

Note that the inmates learn without the help of the internet.  The article is here, pointer from Phil Hill.  Here is confirmation of the story.

Addendum: Here is commentary on how it might have happened.

1. When it comes to South Carolina, he is a cornball, but a likable one.

2. He played Strato-O-Matic baseball as a kid.  No mention of Jim Bunning in that context.

3. After two years at Harvard, he had taken only Econ 101.  Later Dale Jorgensen became his mentor.

4. He is a fan of Borges, with the influence coming from his wife, who has taught Spanish literature.

5. He regrets his earlier tough rhetoric on the Japanese central bank.

6. Greenspan’s marriage proposal to Andrea Mitchell was riddled with his trademark ambiguity.  Bernanke, in contrast, proposed after two months of courtship.

7. Bernanke underestimated the extent of the housing bubble.  Various negative consequences were to ensue from the collapse of housing prices.

8. “I had never gone overboard on libertarianism…”

9. Ben got really, really mad at the AIG chief executives, in fact he “seethed.”

10. The Fed did not have a good, legal way to bail out Lehman.  It needed a buyer, and no buyer was to be found.  A short-term infusion of cash would not have sufficed.  And Ben was afraid at the time that if he confessed the Fed’s impotence in this regard, the market reaction would have been negative.

11. The idea of a mortgage cram down made good sense but was never politically feasible.

12. “So, by setting the interest rate we paid on reserves high enough, we could prevent the federal funds rate from falling too low.”

13. I found the discussions of Wachovia and WaMu came the closest to offering new perspective and information.  Perhaps he was able to say more because these actions did not skirt the possibility of the Fed exceeding its mandate.

14. He had a favorable impression of the frankness of John McCain.

15. He thought QE should been done through the purchase of corporate bonds, but the Fed didn’t have the right kind of authority at that time.

16. He argues that the idea of ngdp targeting is too complicated and could not easily be made credible, given that the Fed has built up its reputation as an inflation fighter.  It also raises the risk that a non-credible ngdp target wouldn’t boost output, but would deliver price inflation, thereby resurrecting stagflation as a potential problem.  (By the way, here is Scott’s response.)

17. He is still upset at the coverage he received from Paul Krugman.

18. In Nunavut he passed on raw seal meat and a dogsled ride.

The bottom lines: This book has way, way more economics than I expected and probably more than the publisher wanted.  It really is Ben’s attempt to defend his place in history, and yes the book does deliver a huge dose of Bernanke.  This is not ghostwritten fluff.  It does not however dish much “dirt” or shed much new light on the key episodes of the financial crisis.  Both in public and in the book Ben has been extremely gentlemanly.  Still, as I kept on reading I could not escape the feeling that he is deeply, deeply annoyed by many of his critics, and very much determined to tell the story from his point of view.  That is what you get from this book.

The incompetence of thieves

by on October 4, 2015 at 2:07 am in Economics, Education, Law | Permalink

I investigate self-reported theft data in the NLSY 1997 Cohort for the years 1997–2011. Several striking patterns emerge. First, individuals appear to be active thieves for extremely short periods – in most cases in only one year, and fewer than 5% of thieves for more than three years out of the 15 years of data. Second, self-reported earnings from theft are generally very low and there is little evidence of “successful” criminals or consistent earnings from theft. Third, measures that proxy impatience (smoking, for example) are highly correlated with theft. Fourthly, thieves and non-thieves have similar earnings during the years of peak theft activity, but thieves have lower earnings in their late 20s (after most have long since stopped committing theft). Attrition of survey respondents, underreporting and incapacitation effects do not appear to explain this. There may be “professional thieves” too rare to show up in even large samples such as the NLSY. Theft in the United States thus appears to be substantially a phenomenon of individuals entering a temporary period of intensified risk-taking in adolescence.

That is from a new Geoffrey Fain Williams paper in JEBO, via the excellent Kevin Lewis.  Kevin also links to new evidence that concealed carry laws are orthogonal to crime rates.

Despite the cloud cast by the Volkswagen scandal, automakers are proposing that they be allowed a 70 percent increase in the nitrogen oxides their cars emit, unreleased documents show, as part of new European pollution tests.

Under the new plan, cars in Europe would for the first time be tested on the road, using portable monitoring equipment, in addition to laboratory testing.

The automakers, which include Volkswagen, General Motors, Daimler, BMW, Toyota, Renault, PSA Peugeot Citroën, Ford and Hyundai, are essentially conceding what outside groups have said for some time — that the industry cannot meet pollution regulations when cars are taken out of testing laboratories.

Here is the Danny Hakim NYT story.

Are free trade agreements contagious?  The negotiations for TPP seem to be coming to a close, but there is the potential for a much more beneficial arrangement, namely for the subcontinent and thereabouts, can we toss in Ethiopia too?

India has said that all South Asian economies need to speedily work towards a free trade area within the region with a defined time-line, preferably 2020, as the first step towards achieving the joint vision of a South Asian Economic Union.

“I am confident that consensus can be achieved for a defined time-line for 100 per cent tariff liberalisation with special and differential treatment for Least Developed Countries (LDCs) and vulnerable economies,” Commerce & Industry Minister Nirmala Sitharaman said at the South Asia Economic Conclave organised by the Commerce Ministry and industry body CII on Tuesday.

While India has already allowed duty-free access to goods from LDC countries of South Asia as part of the South Asia Free Trade Agreement (SAFTA), it is ready to go to 100 per cent for non-LDCs, too, as per the Safta roadmap agreed by India with Pakistan in November 2012, Sitharaman said.

At least four of the eight SAARC countries — which include India, Pakistan, Sri Lanka, Maldives, Nepal, Bhutan, Bangladesh and Afghanistan — are looking at a free trade area by 2020. India is willing to take asymmetric responsibility towards achieving the goal, she added.

The full story is here.

*Henry Kissinger*

by on October 1, 2015 at 7:40 am in Books, History, Law, Political Science | Permalink

The subtitle is 1923-1968: The Idealist, and the author is Niall Ferguson.  This is really an impressive book and we all should be envious that we did not write it ourselves.

Here is one line from Kissinger, cited by Ferguson:

“Ninety percent of the politicians give the other ten percent a bad reputation.”

Over at NYT Andrew Roberts very much likes the book and basically calls it a masterpiece.  Some people are all aflutter over this supposed Greg Grandin Gawker “take down,” but in fact both the book and the review are superb and I am glad the Times stood by it.  Definitely recommended, this is one of the year’s musts.  I know you are all mature enough not to let your opinions on Ferguson’s politics interfere with your assessment of this work.

A loyal MR reader writes to me:

If you taught the principles of effective altruism to a rich person in (say) 1400, what would they have thought was the most effective thing to do with their money?  What was in fact the most effective thing they could have done?

I say send some money to Henry IV.  On the year 1400 Wikipedia notes:

January – Henry IV of England quells the Epiphany Rising and executes the Earls of Kent, Huntingdon and Salisbury and the Baron le Despencer for their attempt to have Richard II restored as king.

England and the Industrial Revolution seemed to have worked out OK, and besides the Henriad provides some of Shakespeare’s most profound work, Orson Welles too.

I think you can see the problem.

But what would a rational Effective Altruist have thought at the time?  How about revising those early versions of the Poor Laws?

Alternatively, 1400 also was the year Chaucer died, and he was a pretty smart guy.  Since he worked for Henry’s father and was close to him, he might have given good advice, if only for self-interested reasons.  But who in 1400 was the best or most logical representative of Effective Altruism?  The theologian Alan of Lynn?  He might have told you to invest the money in making indexes of books, which seemed to be his main interestJean Gerson, if one looks to France for a thought leader, focused his energies to reconciling the Great Schism in the papacy.  Good idea or bad?  As Zhou Enlai said

The NYT symposium is here, including Robert Reich, Dan Ariely, and myself, among others.  Here is my piece, excerpt:

One plausible estimate suggests this additional pollution has been killing 5 to 27 Americans each year, with that number worldwide reaching up to 404 as a maximum.

To put that number in context, the World Health Organization estimates that about seven million people die each year worldwide from air pollution. Even within the United States, early deaths from air pollution have been estimated to run about 200,000 a year, in comparison to which the losses from the Volkswagen scandal are a rounding error. For the American deaths, however, the culprits are often cars, trucks and cooking and heating emissions, so there is no single, evil, easily identified wrongdoer at fault. As Pogo recognized, often the real enemy is us.

Here are alternative estimates of the death from Volkswagen, published after my piece was set to run but the comparisons do not change fundamentally.  From that same article here are two paragraphs of note:

Don Anair, deputy director of the vehicles program at the Union of Concerned Scientists, said the precise effect of the Volkswagen fraud would require intense and complex computation.

Still, he cautioned against taking the view that the Volkswagens have reversed the progress with pollution from automobiles. Since the standards went into effect from 2004 to 2009, he said, emissions of nitrogen oxides have been 90 percent lower. “It’s not like this is going to offset the majority of the benefits of these standards,” he said. “But there will be some impact, and we need to get a better handle on it.”

“Since the standards went into effect from 2004 to 2009, he said, emissions of nitrogen oxides have been 90 percent lower.” is a sentence which I fear will not receive much attention in the current debate.

Slate has an interesting interview with Leon Nayfakh speaking to John Pfaff, here is the critical excerpt from Pfaff:

What appears to happen during this time—the years I look at are 1994 to 2008, just based on the data that’s available—is that the probability that a district attorney files a felony charge against an arrestee goes from about 1 in 3, to 2 in 3. So over the course of the ’90s and 2000s, district attorneys just got much more aggressive in how they filed charges. Defendants who they would not have filed felony charges against before, they now are charging with felonies. I can’t tell you why they’re doing that. No one’s really got an answer to that yet. But it does seem that the number of felony cases filed shoots up very strongly, even as the number of arrests goes down.

You will note that district attorneys are relatively politically independent at this level.  And this:

But just letting people out of prison—decarcerating drug offenders—will not reduce the prison population by as much as people think. If you released every person in prison on a drug charge today, our state prison population would drop from about 1.5 million to 1.2 million. So we’d still be the world’s largest incarcerating country; we’d still have an enormous prison population.

Keep in mind that some in prison on drug charges are actually violent offenders who did a plea bargain down to a drug charge.

The interview also offers evidence against alternative explanations of the boom in the prison population, such as putting the blame on longer sentences.  Here is Pfaff’s home page and his related papers.

Claims about cars

by on September 27, 2015 at 2:21 pm in Current Affairs, Economics, Law, Science, Web/Tech | Permalink

New high-end cars are among the most sophisticated machines on the planet, containing 100 million or more lines of code. Compare that with about 60 million lines of code in all of Facebook or 50 million in the Large Hadron Collider.

The Gelles, Tabuchi, and Dolan NYT piece is interesting throughout.  I thought of a parallel with empirical research in economics.  In the 1980s, often you could pick up a research paper and know rather quickly how good it was, if only by glancing at the basic technique and source of data.  These days the model, estimation, and data collection are so complicated and non-transparent that the errors, however large or small they be, are very difficult to find.

You’ll find a list of skeptical worries here from Chris Buckley, most of them justified.  In a nutshell, if you can’t believe their gdp numbers you also can’t believe their cap and trade plan.  I am nonetheless more optimistic about this recent development.  It signals a few things:

1. The Chinese have decided to make “doing something about carbon” a potential source of soft power in the international arena.  They are giving themselves an option on this path, and in the meantime trying to minimize the reputational deficit they face from being the world’s largest source of carbon.

2. The Chinese plan to cut pollution in at least some of their major cities soon, and they want to claim credit for that action in advance.  (In fact they are surprised how rapidly some of those days of blue skies have appeared in Beijing, whether that be the added regulation or the economic slowdown.)  “Carbon emissions” and “pollution” are hardly identical, but still the government is repositioning itself rapidly on the issue of pollution more generally.  This is one welcome part of that broader shift, so don’t worry if not all the details add up.

3. The Chinese leadership expects the domestic economy to be weak for a while, so they can announce a semi-serious carbon cap and meet it, without actually giving up any economic growth.  Of course this #3 isn’t good news on the economic front, but maybe the Chinese government first does need a period of time where such a policy has zero economic cost.

The evidence from the European Union is that their cap and trade program hasn’t worked well, mostly because of time consistency problems, namely that more and more permits are issued and the cap ends up weak over time.  That same problem may or may not apply to China.  But even a strong pessimist about cap and trade can be modestly optimistic about the new Chinese announcement.

I have a few points:

1. There is decent evidence that many other car companies have done something similar.  Read this too.  Besides, Volkswagen committed a related crime in 1973.  When I was a teenager (maybe still?), it was commonly known that New Jersey service stations would help your car pass the emissions test if you slipped them a small amount of money.  So we shouldn’t be shocked by the new story.  The incentive of the agencies is to get the regulations out the door and to avoid subsequent bad publicity, not to actually solve the problem.  So yes, there is a “regulation ought to be tougher” framing, but there is also a “we’ve been overestimating the benefits of regulation” framing too.  Don’t let your moral outrage, which leads you to the former lesson, distract you from absorbing some of the latter lesson too.

2. We are more outraged by deliberate attempts to break the law, compared to stochastic sloppiness leading to mistakes and accidents.  But it is far from obvious that the egregious violations should be punished more severely in a Beckerian framework.  In fact, if they are harder to pull off, compared to sheer neglect, perhaps they should be punished less severely, at least from a utilitarian point of view.  I am not saying we should discard our intuitions about relative outrage, but we ought to look at them more closely rather than just riding them to a quick conclusion.  I’ve seen it noted rather frequently that the head of the supervisory committee at Volkswagen is named Olaf Lies.

3. Don’t think this is just market failure, it springs from a rather large government subsidy program.  Clive Crook makes a good point:

Remember that “clean diesel” was a government-led initiative, brought to you courtesy of Europe’s taxpayers. And, by the way, the policy had proved a massively expensive failure on its own terms even before the VW scandal broke.

…At best, the clean-diesel strategy lowered carbon emissions much less than hoped, and at ridiculous cost; at worst, as one study concludes, the policy added to global warming.

4. One back of the envelope estimate is that the added pollution killed 5 to 23 Americans each year.  Now I don’t myself think we should always or even mostly use economic methods to value human lives.  But if you wish to play that cost-benefit game, maybe here we have $25 million to $100 million in economic value a year destroyed.  It’s not uncommon to spend $100 million marketing a bad Hollywood movie.  So in economic terms (an important caveat), this is a small event.  Most of the car pollution problem comes from older vehicles with poor maintenance, not fraud on the newer tests.  It also seems (same link) that diesel engines are 95% cleaner since the 1980s.

5. The German automobile sector exported about $225 billion in 2014.  That’s almost as big as Greek gdp.

6. Manipulated data will be one of the big, big stories of the next twenty years, or longer.

7. It is worth citing Glazer’s Law, which is designed to classify explanations for microeconomic puzzles: “It’s either taxes or fraud”

This one isn’t taxes.

The drug Daraprim was increased in price from $13.60 to $750 creating social outrage. I’ve been busy but a few points are worth mentioning. The drug is a generic and not under patent so this isn’t a case of IP protectionism. The story as I read it is that Martin Shkreli, the controversial CEO of Turing pharmaceuticals, noticed that there was only one producer of Daraprim in the United States and, knowing that it’s costly to obtain even an abbreviated FDA approval to sell a generic drug, saw that he could greatly increase the price.

It’s easy to see that this issue is almost entirely about the difficulty of obtaining generic drug approval in the United States because there are many suppliers in India and prices are incredibly cheap. The prices in this list are in India rupees. 7 rupees is about 10 cents so the list is telling us that a single pill costs about 5 cents in India compared to $750 in the United States!

drugs India

It is true that there are real issues with the quality of Indian generics. But Pyrimethamine is also widely available in Europe. I’ve long argued for reciprocity, if a drug is approved in Europe it ought to be approved here. In this case, the logic is absurdly strong. The drug is already approved here! All that we would be doing is allowing import of any generic approved as such in Europe to be sold in the United States.

Note that this in not a case of reimportation of a patented pharmaceutical for which there are real questions about the effect on innovation.

Allowing importation of any generic approved for sale in Europe would also solve the issue of so-called closed distribution.

There is no reason why the United States cannot have as vigorous a market in generic pharmaceuticals as does India.

Hat tip: Gordon Hanson.

Hillary Clinton has proposed a new plan to bring down prescription drug prices, but so far the reception is cool.  Here is one comment:

But when I ran it by some health economists and other health policy experts, several strongly disliked the idea because it misunderstands the diversity of companies in the pharmaceutical industry. They say it would create perverse incentives that could raise instead of lower the costs of developing new drugs.

“This is an astonishingly naïve approach,” said Amitabh Chandra, a professor of public policy at Harvard University, in an email. He argues that the plan could encourage wasteful research spending without necessarily doing much about the prices charged for medications.

That is from Margot Sanger-Katz at the NYT, not the Heritage Foundation.

I would stress a different point, and this concerns pharmaceutical prices more generally, not just the Clinton plan.  Higher prices induce more innovation, and those innovations benefit patients in many countries.  Note that connection is true even if you think most innovations come from universities or the NIH rather than being hatched Big Pharma.  There is still a pot at the end of the rainbow for the significant innovators in this process.

OK, so how much does innovation go down if prices go down?

Here is an earlier post by Alex on Frank Lichtenberg’s estimation: “Thus, price controls or other restrictions that reduce prices are almost certainly a bad idea.”

Here is another earlier post by Alex, citing Megan, noting that Apple spends three cents of every dollar on R&D, and other inconvenient facts and that was from 2009.

If the advocate of lower drug prices does not have clear quantitative evidence for a conclusion of “lowering drug prices will not harm innovation very much,” commit the analysis to the flames, for it harbors nothing but sophistry and illusion.  And while agnosticism about elasticities might weaken the argument for keeping prices high, that’s not an argument for lowering prices, that is an argument for agnosticism.

This same point applies to most commentaries on TPP I might add, and intellectual property analysis.  Write it on the bathroom wall: “Without an elasticity, there is no answer.”  And scream it from the rooftops while you are at it.