Month: June 2004

Mourning in America

Reagan was the first, and so far the only, politician who I have ever found inspiring. I came of political age during the Reagan years when I was a high school student in Canada. In political science class we learned that the essence of the Canadian philosophy of government could be remembered with the mnemonic POGG – peace, order, and good government. I preferred life, liberty, and the pursuit of happiness and hearing Reagan speak was always a thrill for me.

The record, of course, is never as glorious as the rhetoric but a number of important accomplishments occured under Reagan’s watch. In the economic sphere, the reduction in marginal tax rates was a great and lasting achievement. It’s hard to believe today that top marginal rates used to approach 70%.

Reagan also deserves great credit for standing up to the air traffic controllers thereby sending a strong signal that the country would not be taken hostage by the labor unions as had happened and continues to happen in much of Europe.

Inflation was also brought under control under Reagan – the 1982 recession was second only to that of the Great Depression but it’s hard to see how that pain could have been avoided. Reagan had the fortitude to take the political heat of the downturn and stay the course thereby laying the groundwork for growth in the following decades.

Deregulation began under Carter but continued under Reagan, leading to innovation in previously moribund industries.

In foreign policy of course, Reagan saw further than anyone else. Only Reagan predicted that communism would end up on the dustbin of history and at critical moments he took the actions necessary to make it happen.

Not all was positive of course but the rest can wait for another day.

An argument for genetic engineering

Soon we will have cows that are immune to mad cow disease. We’re not about to engineer cows on a large scale, and probably we don’t need to; my interest is in how this upsets the usual spectrum of ecological worries. I’ve found that people who fear mad cow disease also tend to fear genetic engineering of animals. But now, which way to turn? It reminds me of those reports saying we need not fear global warming, because we will run out of oil in the meantime!

Eggers vs. Supply and Demand

Dave Eggers, accalimed author of works of genius, has written an article in Mother Jones bemoaning the relatively low pay of teachers (click here). Here’s a representative excerpt:

The first step to creating an education system full of the best teachers we can find is to pay them in line with their importance to their communities. We pay orthodontists an average of $350,000, and no one would say that their impact on the lives of kids is greater than a teacher’s. But it seems difficult for everyone, from parents to politicians, to shake free of a tradition in which teaching was seen as something of a volunteer project for women whose husbands brought home the real money. Today’s teachers need to, but very often can’t, support a family on their salaries. They find it difficult or impossible to buy homes, to save money, to live comfortably, and, in wealthier areas, to live in or near the towns where they teach.

Eggers misses a basic point about work: The salary one makes is determined by supply and demand. A price doesn’t indicate how important the job is, or even if people think it is important. Take a simple example: water – it’s cheap because there is plenty of it, not because we don’t think it is important!

Same goes for work – the price of someone’s labor – their salary – is the result of how badly people want the labor and how many other people do the job. People want education for their kids – they pay thousands of dollars in locals taxes, have significant college savings accounts and the most prestigious colleges can harge over $30,000/year. Seems like the demand is there.

So why the low pay? Teacher’s low pay is due mainly to the fact that there are tons and tons of teachers! There is a huge supply of teachers. Education schools have huge enrollments – and surveys routinely report that education is one of the most popular majors in the country. Click here for a short Yahoo article reporting the most popular intended majors among incoming freshmen in 2002.

Some solutions for low teacher pay are non-starters. For example, simply demanding higher pay for public school teachers isn’t going to cut it because that means shifting money from other public services. There is a political solution – limit by fiat the number of teaching certificates awarded each year. That’s why the orthodontist makes a lot of money – there are few orthodontists relative to the demand for nice teeth. This might have undesirable consequences. Wealthier school districts might employ all the teachers. Perhaps the best response to low teacher pay is to realize that it’s a signal that fewer people should go into teaching. Next time you see someone express a desire to be a teacher, just tell them that we have too many!

My favorite Polish things

My favorite Polish novel: Solaris, by Stanislaw Lem. Don’t worry if you hate science fiction, this is possibly the best novel ever penned about erotic guilt and the nature of personal identity.

My favorite Polish music: My traditional favorites have been the Chopin Etudes and the Polonaise Op.40. But arguably the Mazurkas hold up best over time. Here is a recent Chopin CD that will blow you away.

My favorite Polish movie: Kanal, directed by Andrzej Wajda. A European movie of great depth with a plot as gripping as Hollywood.

My favorite Polish TV show: The Decalogue, episode four. This audiovisual classic is now available in its entirety on DVD. In the fourth episode, a daughter receives an envelope from her father, with the written instructions: “Don’t Open This Until I Die.” I leave the rest up to your imagination.

I’m enjoying my time here very much, soon I will be in Kracow.

Addendum: Let’s not forget the goose in cranberry sauce, the pork knuckle pate, the wild boar with dumplings, the sour soup with sausage, the duck with cherry sauce, or the wonderful Brazilian restaurant they have here. Polish food in Brazil is fantastic, so now they are returning the favor, all to the benefit of me.

The benefits of corruption

Increases in the price of rice are making a bad situation worse in Haiti. The problem, however, is not solely due to increases in the world price but also because, believe it or not, Haiti has customs duties on rice even though most people can afford nothing else for their one meal a day.

[Under Aristide] an Aristide crony received a near exclusive concession on rice imports and evaded customs duties. That evasion allowed the rice concessionaire to cut about $3 a bag off the market price, pass some of the savings on to the market and pocket the rest.

The new government is apparently less corrupt or at least the lines of corruption have not yet been formed, and as a result the price of rice has risen.

Chowhound Hero!

Here’s a profile of Tyler and his wonderful ethnic dining guide. Even if you are not local take a look at the guide – aside from restaurant picks, Tyler also offers a theory of ethnic dining!

Cowen has become a sort of folk hero to an underground group of food adventurers, some of whom call themselves “chowhounds” who are loosely organized around an online message board. The chowhounds keep a close watch on Cowen’s list, said Marty Lederman, a chowhound from Montgomery County, Md. “We tend to discuss it whenever he comes out with a new [entry],” he said. “There’s usually a short discussion about it. … Some people don’t like the way he does things or disagree with his stuff, but almost everyone appreciates the amazing reference that he creates.”

Exchange rates

Imagine living in a world where you had to have yen to buy a TV, renminbi to buy toys, and dollars to buy food. Think how complicated life would be.

Surprise. That’s the world we live in. Most TV’s we buy are manufactured in Japan, most toys come from China, and most of our food is produced in the United States. And by and large, the workers who produce those goods want to be paid in their domestic currency.

Luckily, this complexity is hidden from consumers; those nice currency traders handle all the grungy details.

That’s the introduction to an admirably clear introduction to exchange rates by Hal Varian writing in the Times.

Econometrics and New Yorker fiction

What kind of stories get published?

Ms. [Katherine] Milkman, who has a minor in American studies, read 442 stories printed in The New Yorker from Oct. 5, 1992, to Sept. 17, 2001, and built a substantial database. She then constructed a series of rococo mathematical tests to discern, among other things, whether certain fiction editors at the magazine had a specific impact on the type of fiction that was published, the sex of authors and the race of characters. The study was long on statistics…the thesis segues to the “Kolmogorov-Smirnov Two-Sample Goodness of Fit Test” and the “Pearson Correlation Coefficient Test.”

And what is the main conclusion?

…male editors generally publish male authors who write about male characters who are supported by female characters

More generally:

Under both [fiction] editors the fiction in the magazine took as its major preoccupations sex, relationships, death, family and travel.

Are you surprised? And what does the magazine say?

“I was personally riveted by the whole thing,” said Roger Angell, a writer at The New Yorker who worked as a fiction editor during part of the period scrutinized by Ms. Milkman. He spent a significant amount of time talking to Ms. Milkman and helped connect her with other people at the magazine. He was charmed by the results but worries they may sow confusion.

“Some unpublished writers are going to read this and say, `I now know what I have to do to get published in The New Yorker,’ and it’s not helpful in that way,” he said. “In the end we published what we liked.”

Here is the New York Times story.

The bottom line: Expect to see more of this kind of analysis in the future. In the longer run I expect all of the humanities disciplines to have a quantitative branch.

College Admissions in California

A few months ago, administrators at the University of California asked about 7,000 students who had been admitted to the prestigious UC Berkeley and UCLA campuses to defer enrollment. To save money, students were asked to enroll at a California community college for 2 years and then apply for a guaranteed transfer to the Berkeley or UCLA campuses.

The San Francisco Gate news site reports (click here) that only about 1,000 students took the offer. I don’t know whether this is good or bad, except to note that the students are probably the best judges of whether it’s better to immediately attend another college or take the UC offer. The Gate article notes that many went to very expensive private schools, suggesting that budget shortfalls could have been recouped with a price increase.

The problem this incident highlights is how the political process interferes with market mechanisms. Once the political decision to educate a certain segment of the population has been made, administrators should view a surplus of customers as a signal that the market can bear some price increases. Instead, California legislators tend to fight tuition increases because they might exclude low income students. This is truly a bad tactic because one can simply lower the price for low income students through grants and financial aid, which is what happens at many universities. Price hikes for the wealthy and subsidies for the needy is surely a better policy than arbitrary price ceilings and the exclusion of many who are able and willing to pay.

Starting out as a Professor

Alex and Tyler like to post advice to graduate students (click here), which is usually on the mark. Here are some reflections from someone who has just finished the first year as a professor. I hope non-academic readers will enjoy knowing what this job is about.

1. Being a professor is all about time management. It’s important to spend time preparing classes and completing research but you have to be efficient. Unlike graduate school, you can’t spend years on a single dissertation chapter. It has to go to review soon, so you had better learn to write well and quickly.

2. This is really a cool job, but it is not for everybody. Although I am at a research university, I am expected to teach a fair amount – large undergraduate classes and doctoral students – and I must do a fair amount of administrative work. Anybody who is allergic to either activity should seek other employment. But if you like teaching, and you can thrive when you are expected to produce a lot in an unstructured environment, then it can be very satisfying.

3. Success in the academy is about writing skill – even in technical areas. Tyler might be interested in knowing that I learned this from him. Having brilliant ideas and doing the research to prove you are right is only half the battle. You must work very, very hard to clearly express your ideas and persuade skeptical readers.

While I consider myself to be a happy person, I still advise people not to go into academia – it is very competitive, smart people can make much more money elsewhere, there is little security pre-tenure and you can enjoy great ideas without getting a Ph.D. by reading Marginal Revolution every day.

A serious health care proposal

Brad DeLong argues that the government should pick up all health care costs above $50,000. Among other things, this would diminish the incentive for HMOs to neglect sick patients or try to push them off the books. It also would provide comprehensive catastrophic insurance. By lowering the cost of private insurance, it will lead more people to be insured, which will lower governmental costs elsewhere in the system. Being on the run in Poland, I don’t have the ability to offer a full analysis. But it’s one of the best economics posts I’ve read in the blogosphere in a long time.

One question I have is how many of these expenditures are worth subsidizing at all. A big chunk of our health care bill is spent in the last year or two of life, without always bringing much of a payoff. A second question is what would happen to cost control at these higher levels of expenditure. In particular what would happen to cost care as we approached the $50,000 threshold?

The proposal can be viewed in one of two lights. From one perspective, it will bring catastrophic care to many who are otherwise uninsured. From another perspective, we already have too much catastrophic care, at the expense of prevention and healthy lifestyle habits. Government catastrophic insurance will lead to price controls, either explicit or implicit, and rationing. Catastrophic care will decline, but in a way that might be beneficial. This latter alternative is not politically appealing, but we cannot rule it out as the relevant scenario.

But read Brad’s post and make up your own mind. Health care reform is an area where no one (i.e., you, the reader, and me, the writer) should feel they already have a pat or satisfactory answer.

Academic Freedom

Earlier Tyler posted the story of Daniel Sumner, the agricultural economist at the University of California at Davis who has been accused of “treason” for analyzing US cotton subsidies for Brazil in a WTO case. One of the most troubling aspects of the case is that instead of backing him to the hilt, Sumner’s dean bowed to King Cotton and questioned his judgment.

Michael Ward a professor of economics at the University of Texas at Arlington (and a regular MR reader, I might add) has authored a Petition in Support of Academic Freedom stating in part:

To the extent that it is within their expertise and terms of employment:

1. It is appropriate for scholars to engage in public policy debates regardless of the comments’ effects on US producers or consumers.
2. It is appropriate for scholars to consult with interested parties in policy-making or judicial matters even when the adversary is the US government or US interests.

You can express your support here.

The myth of free trade Britain?

Was nineteenth century Britain really a free trade wonder? Just how entrenched is protectionism in French national history?

John Nye offers some provocative answers:

Britain preached the gospel of free trade and France was cast in the role of the sinner, but there was little truth in this stereotype. France did have more protected products than England did but the average level of French tariffs (measured as total value of duties divided by total value of imports, cf. Figure 1) was actually lower than in Britain for three-quarters of the nineteenth century.2 In other words, tariffs had a smaller impact on French trade than British duties had on Britain’s trade. The French, while eschewing free trade, and openly rejecting the Anglo doctrine of open markets, actually succeeded in making their trade more liberal and more open than that of the more vocal British. The master of this was Napoleon III–Bonaparte’s nephew–who throughout the 1850s promoted the most radical liberalizing reforms of the French economy, all the while insisting that France was only interested in moderate reform.

The revisionism continues:

Indeed, it was not British unilateral tariff reduction that moved the world to freer trade. Despite the belief that is still common today that British exhortation opened the doors to European free trade in the late 19th century, it was the 1860 Treaty of Commerce, promoted by the Napoleon III and concluded between Britain and France, that really ushered in the age of nineteenth century “globalization”. British demands for unilateral tariff reduction usually fell on deaf ears.

Might this advantage of bilateralism be true more generally? If so, it would mean that a serious U.S. free trade agreement with Japan would be the best outcome imaginable for promoting free trade.

Read the whole thing, and don’t miss the illustrative chart.

Beauty and Brains

Last week, Alex wrote about how smart people live longer. Today, we learn that smart people may be better looking too!

Satoshi Kanazawa of the London School of Economics and his colleague, Jody L. Kovar, assert that beautiful people also tend to be smart people — and vice versa.

In the July issue of Intelligence, the sociologists offer a theory to explain the confluence of beauty and brains. Their argument, in a nutshell: Intelligent men achieve higher status and marry beautiful women, who pass their genes on to their disproportionately attractive and smart kids, who win mates who are good-looking or brainy, and so on. Or at least that’s what they put forth in the journal article, “Why Beautiful People are More Intelligent.”

Here is the full story. Here is a home page for one of the researchers. But wait…he’s the same guy who says that marriage ruins male productivity.

Addendum: I just stumbled upon Randall Parker’s treatment of the same study.