Month: April 2004
What makes for media bias?
Economists are taking a greater interest in the media. Here is an interesting new paper by Andrei Shleifer and Sendhil Mullainathan, The Market for News .
Abstract: We investigate the market for news under two assumptions: that readers hold beliefs that they like to see confirmed, and that newspapers can slant stories toward these beliefs. We show that, on the topics where readers share common beliefs, one should not expect accuracy even from competitive media: competition results in lower prices, but common slanting toward reader biases. However, on topics where reader beliefs diverge (such as politically divisive issues), newspapers segment the market and slant toward the biases of their own audiences, yet in the aggregate a conscientious reader could get an unbiased perspective. Generally speaking, reader heterogeneity is more important for accuracy in media than competition per se.
Also read Alex’s earlier post, Surprise! Fox News is Fair and Balanced!.
Your new $50 bill
Check out the new colors. The redesign, of course, is designed to stymie counterfeiters. Counterfeit money was a huge problem in the eighteenth and nineteenth centuries:
The London Gazette of 1848 gives some idea of the impact of forgery on daily business. Nothing could be purchased without a dispute. Over every counter there was a wrangling from morning till night. The workman and his employer had a quarrel as regularly as the Saturday came round. No merchant could contract to deliver goods without making some stipulation about the quality of the coin in which he was to be paid. The simple and careless were pillaged without mercy by extortioners whose demands grew even more rapidly than the money shrank. The cost of necessities of life rose fast…the labourer found that the bit of metal, which when he received it, was called a shilling would hardly, when he wanted to purchase a pot of beer or loaf of bread, go as far as sixpence.
Here is a brief history of banknote security features. I’ve read estimates of one third to one half of American and British money supplies being counterfeit rather than real during this era.
What if modern technology made counterfeiting unstoppable? I can think of a few outcomes:
1. The value of money would fall to its marginal cost of production. This would likely be very low.
2. People would stop accepting cash.
3. Penalties for counterfeiters would increase dramatically.
That being said, it is hard to do away with cash altogether. And serious counterfeiters might reside abroad in rogue states. So we are left with #1. The net result would be a huge tax on the underground economy and on dollar economies abroad.
The new music gatekeepers, namely you
Do you want to know what other people are listening to? Go to Webjay.org, where you can find large numbers of playlists. The old Napster used to offer user song directories, but of course the new file-sharing companies have to plead ignorance of what their downloaders are doing. So it is only natural that such a “recommendations” service should migrate elsewhere.
WebJay is designed for music that is freely available on the web, though it is not restricted to such music.
Clay Shirky writes:
…you get three filters in one – someone else has vetted the music for quality, the music is rolled up in thematic playlists, further raising the “If you like X, you might also like Y” quotient, and everything you hear is (at least putatively) music libre.
This is just a start but the idea has enormous potential. Where else can you follow “Brazilian techno pop rock experimental and (why not?) samba”?
Is the welfare state good for growth?
It’s not as simple as you might think. First, let us start with the bad news:
Whatever one might have thought, the smaller-government countries such as Japan, the United States, Switzerland, Canada, and Australia tax capital and private property at least as heavily as the welfare states of Scandinavia, Germany or the Netherlands.
That’s Peter Lindert, writing in a recent research paper. Now the plot thickens. It turns out that welfare state spending does not diminish economic growth, drawing from a sample of OECD countries. This result, however, requires qualification. If you spend more on welfare, your other policies are more favorable for growth:
…the welfare state choice of a large overall tax burden to support transfers is usually accompanied by the political choice of taxes that promote growth and environmental quality…This is not just a temporary condition captured by our 1995 snapshots. It has been the case over the last third of the twentieth century…
Lindert suggests the following principle: “The higher the social budget as a share of GDP, the higher and more visible is the cost of a bad choice.“
So when it comes to growth-damaging policies, governments can only get away with so much. Many interventions will appear in the data to be growth-neutral. Yes you do something bad, but the system reacts by kicking something good back to you. Or vice versa. In a true ceteris paribus thought experiment, however, more social spending still damages growth.
If you are a policy advisor, what is the correct perspective? Say John Kerry calls you up and asks you about social spending. Should you answer the ceteris paribus question, and look at the increase in welfare spending alone? Or should you answer the general equilibrium remixing question, and consider what other good policies will come bundled with some more welfare spending? If you opt for the latter, does it mean you should be indifferent toward inefficient policies? After all, you will find a way to make up for the loss (a bit like being a writer and having part of your day’s work crash; your second draft is usually better). Do you still get the favorable general equilibrium remixing if everyone advises that anti-growth policies do not matter at the margin? Does this mean that we should complain less about Bush’s fiscal irresponsibility?
Read the Lindert paper, it is sure to provoke your thinking. I just ordered his new book on the same topic.
The bottom line: These questions should make everyone uncomfortable. Let’s say you favor free markets. Perhaps you only get some of the goodies you want (i.e., trade) because the government is allowed to spend the resulting surplus in ways that it wants (i.e., welfare). You can’t always simply pick and choose policies a’ la carte. By the way, is it an accident that Bush boosted social spending but also cut taxation on capital?
Random Numbers
Here are some random numbers between 0 and 100:
69 64 12 6 73 42 43 65 61 16 77 87 86 65 42 35 100 76 65 47 67 45 3 93 38
I’m not sure what to do with them either but they were generated by a quantum process and hence are truly random. Most “random numbers” are generated by a computer and hence are only pseudo-random. Although this sounds like a frivolous distinction, generating true random numbers is actually quite difficult and getting them right can be important for testing all kinds of scientific theories as well as for doing simulations and numerical integration via Monte Carlo methods.
You can get your own quantum generated random numbers here.
Hat tip to Michael Statsny and his excellent blog Mahalanobis.
Addendum: Patrick Livingood points me here where you can get “4.8 billion random bits, in sixty 10-megabyte files. They were produced by a combination of several of the best deterministic random number generators (RNG’s), together with three sources of white noise, as well as black noise (from a rap music digital recording). My intent is to provide an unassailable source for those who absolutely positively have to have a large, reliable set of random numbers for serious simulation (Monte Carlo) studies.”
Empathy update
There may be less to empathy than meets the eye:
The ability to empathise is often considered uniquely human, the result of complex reasoning and abstract thought. But it might in fact be an incredibly simple brain process  meaning that there is no reason why monkeys and other animals cannot empathise too.
That is the conclusion of Christian Keysers of the University of Groningen in the Netherlands and his colleagues. The team used a functional MRI scanner to monitor volunteers while their legs were touched and while they watched videos of other people being touched and of objects colliding.
To the team’s surprise, a sensory area of the brain called the secondary somatosensory cortex, thought only to respond to physical touch, was strongly activated by the sight of others being touched.
This suggests that empathy requires no specialised brain area. The brain simply transforms what we see into what we would have felt in the same situation. “Empathy is not an abstract capacity,” Keysers concludes. “It’s like you slip into another person’s shoes to share the experience in a very pragmatic way.”
Even more surprisingly, seeing objects collide generated the same activity. “We expected a big difference,” Keysers says, “but the results are not restricted to the social world. In a certain way we share experiences with objects.”
Other studies have produced comparable results: emotional faces activate emotional areas, for instance. It seems that the brain not only generates a visual sense of what we see, but also activates other sensory components to give us a complete “sense” or feeling for what we are observing.
This means we can feel empathy without building up complex theories about what others feel, Keysers says. Instead, after we have learned what feeling goes with being touched ourselves, our brains become conditioned to trigger the same feeling when we see others being touched.
“We do not need to assume a separate mechanism to understand the social world,” he says.
Here is the full story. Here is an earlier MR post on sympathy, here is another. Here is the home page of the researcher.
Anti-Rousseau
What kind of human being would chuckle at the opening paragraph of this post?
The economics of Google
What is Google’s key asset and comparative advantage? I am no insider but here is one interesting account:
Last Thanksgiving, the New York Times reported that Google had crossed the 100,000-server mark. If true, that means Google is operating perhaps the largest grid of computers on the planet. “The simple fact that they can build and operate data centers of that size is astounding,” says Peter Christy, co-founder of the NetsEdge Research Group, a market research and strategy firm in Silicon Valley. Christy, who has worked in the industry for more than 30 years, is astounded by the scale of Google’s systems and the company’s competence in operating them. “I don’t think that there is anyone close.”
It’s this ability to build and operate incredibly dense clusters that is as much as anything else the secret of Google’s success. And the reason, explains Marissa Mayer, the company’s director of consumer Web products, has to do with the way that Google started at Stanford.
Instead of getting a few fast computers and running them to the max, Mayer explained at a recruiting event at MIT, founders Sergey Brin and Larry Page had to make do with hand-me-downs from Stanford’s computer science department. They would go to the loading dock to see who was getting new computers, then ask if they could have the old, obsolete machines that the new ones were replacing. Thus, from the very beginning, Brin and Page were forced to develop distributed algorithms that ran on a network of not-very-reliable machines.
Today this philosophy is built into the company’s DNA. Google buys the cheapest computers that it can find and crams them in racks and racks in its six (or more) data centers. “PCs are reasonably reliable, but if you have a thousand of them, one is going to fail every day,” said Hoelzle. “So if you can just buy 10 percent extra, it’s still cheaper than buying a more reliable machine.”
Working at Google, an engineer told me recently, is the nearest you can get to having an unlimited amount of computing power at your disposal.
In other words, they are experts at building a reliable, robust system on the cheap. Here is the full story.
Tu Quoque
Treasury Secretary John Snow gave a talk to a group of school kids in East Harlem on Thursday and implored them to save money:
It takes discipline to put money in the bank instead of using it to buy something that you really want, but its worth it.
Later that day, former President Clinton spoke on the virtues of sexual abstinence.
Just kidding about the last remark, but you gather my meaning. Hat tip to Al Kamen at the Washington Post.
Don’t they hold bake sales any more?
And what ever happened to micro-credit?
Here is just one excerpt:
The principals at the two schools in Oslo where the girls attend are horror-stricken by the fact that the girls are willing to go this far to finance their bus.
«This is something [sic] of the most shocking I have ever had the misfortune to experience,» said one of the principals to the paper. «Don’t doubt for a second that I will discuss this with the class immediately.»
It’s that strict Norwegian discipline kicking in at the end. Here is another Norwegian update, you can now file your tax return by cell phone.
Free trade with Australia?
It is widely known that the United States and Australia have been working on a free trade treaty. It is less widely reported how the treaty would handle culture. The Australian government feels it has been taking an unpopular stance, and has been reluctant to publicize the likely outcome. So what might the treaty bring?
The proposed deal caps the amount of local [Australian] content at existing levels of 55 per cent on free-to-air commercial television and 25 per cent for commercial radio, and at 10 per cent on pay TV.
If the government reduces these content levels, they cannot be raised again.
The deal also prevents the government from regulating local content levels for new media without consulting the US, which can challenge any proposed changes.
McLeod’s Daughters actress Bridie Carter told the hearing that the agreement would trade away Australia’s cultural identity.
That’s 55 percent local content, Bridie, hardly the death of Australian culture. Why not just shut out American TV altogether? And what does 2004 hold for Bridie’s show McLeod’s Daughters?
Life on Drovers Run in 2004 offers new faces and unexpected surprises [sic], heartache and laughter, and for two-star-crossed lovers, a wedding.
How about this remark:
“The Free Trade Agreement … threatens to reduce what is left of the vibrant Australian voice to a mere whisper in the future.”
In reality Hollywood gives Australian directors and stars a world platform that they otherwise would not have. Peter Weir, Russell Crowe and Mel Gibson earn huge box office around the world.
Here is the full story.
By the way Pat Boone just issued a call for cultural censorship. When will it become clear that cultural protectionism is simply another attack on free speech?
Here is a recent article on the (slow) progress of U.S.-negotiated trade agreements around the world.
Politically Incorrect Paper of the Month, v.2
Less than three percent of the highest-paid U.S. executives are women. Why? In Performance in Competitive Environments: Gender Differences, a new paper in the Aug. 2003 QJE, the authors suggest an intriguing answer.
The authors compare male and female performance at solving mazes across different incentive systems. In a simple piece-rate system men perform slightly but not markedly better than women, on average the men solved 11.23 mazes in 15 minutes compared to 9.73 for the women, a difference of 1.5. But in a tournament, in which only the highest-paid performer wins, the men significantly improve their performance and the women hardly improve at all. As a result, the gender-gap in performance rises (men complete 15 mazes, the women only 10.8 for a difference of 4.2, stat. significant at p=0.034).
Now here is where it gets really interesting. One might think that this shows that women are less competitive than men. To test this the authors run single-sex tournaments. Surprisingly, in the single-sex tournaments the women’s performance improves considerably relative to both their performance in the piece rate system and to their performance in the mixed tournament. Women do like to compete just not against men! Men’s performance stays about the same as in the mixed tournament. As a result, when comparing the peformance of the all-male groups versus the all-female group, the gender gap shrinks considerably. Results are summarized in the figure below.
What could account for these differences? Tournament theory suggests one answer. In a tournament only the best player wins; so if some of the players are known to be better than the others, this reduces the incentives to compete. Why expend effort if the other player will amost surely win anyway? The men are slightly better at the task than the women and this effect is magnified by the numbers – there are 6 players (3 men, 3 women) so the women have to contend with 3 people who on average have slightly higher maze-solving ability.
If this explanation were the case, however, then we would expect men and women of the same ability to perform similarly but in fact women compete less aggresively than men of the same ability. This suggests another possibility. Relative to women, men may be more (over?) confident. As a result, they think they have a greater chance of winning the tournament and therefore they compete more vigorously. When given the option of choosing what level of maze to solve (with increasing rewards for more difficult mazes) the men do systematically chose more difficult mazes than the women.
What do we make of all this? First, we have an additional explanation for wage differences between men and women, especially at the highest levels where competition for promotion is a tournament. Second, we have added support for single-sex education and perhaps even single-sex firms (Astute readers will recall what happened to the women on The Apprentice before and after the groups were mixed). See also the related first volume in this series.
The authors focus on a third potential implication – the benefits of making women feel more confident (e.g. in reducing drop out rates in science and engineering). The latter, conclusion, however, doesn’t take into account the costs of effort. If men are over-confident about their abilities then they put too much effort into tournaments. Increasing women’s confidence would only make them (and the men) worse off. Other than restaurant customers, would anyone be better off if more people thought they could become a Hollywood star?
Food predictions and pronouncements
I very much enjoyed giving the keynote address to the International Association of Culinary Professionals. But this was not a crowd that wanted to hear about standard errors, or indeed numbers of any sort. They wanted raw predictions and proclamations. Here is an edited sample of what I offered up:
1. Fast food will get much better, and soon.
2. Look to eat in strip malls, not shopping malls. Low rents encourage culinary experimentation and attract immigrants.
3. America’s culinary profile is defined increasingly by ethnicity and demographics, not by geographic region.
4. French cooking, for all its virtues, is stagnating.
5. The UK, Canada, Australia, and New Zealand are all up-and-coming culinary hotspots.
And what about investment advice?
That’s what economists are really good for, no? And no one wants to hear that you believe in the weak form of the efficient markets hypothesis.
Put on the spot, I offered the following principle. If sushi restaurants are new to a country, and are succeeding, buy shares in the stocks of that country. Raw fish, of course, can be toxic. Quality can be hard to monitor with the naked eye. Sushi consumption is a sign that people are starting to trust each other.
Union-busting as cultural policy?
Once again the French are at strike:
Protesting French actors and technicians, who prompted the cancellation of most summer arts festivals last year and forced the resignation of the French culture minister this spring, are now threatening to disrupt the Cannes film festival next month. They want to pressure the government to bow to their demands on unemployment benefits.
On Monday the protesters muscled their way into a Paris theater where the annual Molière theater prizes were being awarded. Amid raucous scenes, that ceremony was held without lights or microphones. Across town they also forced “Il Trovatore” to be given in concert version at the Bastille Opera.
Here is more background:
The protesters want to revoke an agreement, reached in June by three unions and the national employers’ association in France, that reduces unemployment benefits for about 100,000 self-employed artists and technicians. The employers said that an earlier agreement was being widely abused and cost them $1 billion a year. Two leftist unions, which refused to sign the deal, have been leading the protests. Before the June agreement, if employees worked 507 hours during a 12-month period they were guaranteed 12 months of unemployment benefits. Now they must work 507 hours in 11 months to earn 8 months of unemployment benefits.
In theory the unemployment fund for cultural workers is managed exclusively by employers and representatives of artists and technicians. But inevitably the government has been drawn into the fray, with the wrath of protesters frequently directed at Jean-Jacques Aillagon, who was the culture minister until March 31. His successor, Renaud Donnedieu de Vabres, is caught between the employers’ refusal to cede and the countdown to Cannes.
Instead of all those subsidies and quotas, why don’t they just bring the unions in line? Here is the full story. Here is a post on how well the French can run a strike. To be continued…
Shanghai MagLev
Well, sir, there’s nothing on earth
Like a genuine,
Bona fide,
Electrified,
Six-car
MagLev Train!
Wow, 268 mph! But of course it’s government funded so you won’t be surprised to learn that it is hugely expensive and no one is riding it.
