Month: January 2005

The obsolescence of classical music labels

Deutsche Gramophon pulled the plug on John Eliot Gardiner’s plans to record the complete Bach cantatas.  So how did he respond?

"At the end of 2001 we put together a CD compilation from the tapes and sent it to lots of people who had helped with the project. We raised £40,000 from people who had come to concerts.

"Most of it was in £100-£200 chunks from people who had been in the audience, plus a couple of large chunks. Then we received £130,000 from a donor."

The Prince of Wales is the project’s patron; donors include American arts philanthropist Alberto Vilar, charitable foundations and corporate sponsors…

The cheaper model of recording live from concerts (as does the LSO’s label, LSO Live), rather than from expensive and lengthy studio sessions, also points the way forward.

The performers are paid on the basis of royalties, a far cry from the fat contracts handed out by record companies in the heyday of the industry.

Ms de Sabata estimates that in order to recoup costs and allow them to continue putting out the CDs from the cantata project they need to sell 4,000 to 5,000 copies each.

"Our orders and preorders suggest we are going to make it," she said.

Gardiner has now launched his own label and plans further recordings; here is the full story.  But you can see the future: more live recordings, more not-for-profit recordings, and a smaller role for music companies as the relevant intermediaries.

Love is blind

People who were in love and other people who were not in love were
asked to view film clips of couples interacting who were in different
levels of emotional involvement. The viewers who were in love were least able to identify which viewed couples were in love.

In fact many people had no idea at all who else was in love.  Read Randall Parker’s analysis here.  And here is Parker on whether gamblers enjoy gambling much at all.

How to fight AIDS in Africa

A new paper, "Sexually Transmitted Infections, Sexual Behavior and the HIV/AIDS Epidemic"
by Harvard economics graduate student Emily Oster, asks why prevalence
rates for HIV/AIDS are ten to fifteen times higher in Africa than in
the United States. Using a simple model that decomposes infection
levels into differences in sexual behavior and differences in
transmission rates, she attributes the entire difference in HIV
prevalence between the United States and Sub-Saharan Africa to
differences in transmission rates. The intuition, as she writes, is
that "Higher transmission rates produce more infections this period,
and each new infected person can infect people next period, so the
result of a higher transmission rate is multiplied many times over."

of the implications of her findings is that lowering transmission rates
by targeting STDs is more cost effective than trying to reduce HIV
prevalence using expensive antiretrovirals or education programs aimed
at changing behavior.

Read more here.

My Law and Literature class today

Today I start my Law and Literature class, my reading list is here.  If you are wondering what I am excerpting, from the Bible we are doing Exodus, Deutoronomy, and Job,
from Melville we are doing "Bartleby," and from Kafka we are doing "In
the Penal Colony."  All are favorites of mine.  Check out the list for
the rest plus five films.

By the way did you know the following?

Students asked to watch five seconds of soundless videotape of a
teacher in the classroom came up with evaluations of the teacher’s
effectiveness that matched those given by his own students after a full
semester of classes.

The link is here, already supplied by Alex immediately below.

In defense of the regressive payroll tax

Brad DeLong, Irwin Stelzer and many others complain that the payroll tax is unfair because it is regressive.  True, but twice misleading. 

The payroll tax is regressive but benefits are progressive and on net
the social security system is progressive – a 45 year old male with an income twice the
national average, for example, will in present value pay into the
system $243,700 more than he will receive in benefits (Murphy and Welch, 1998, Table 2 (JSTOR)).   (Part of this net loss comes from progressivity and a larger part from the fact that all currently young workers will pay more in present value taxes than they will receive in benefits).

More fundamentally, if you want to complain about the regressivity of the payroll tax, go ahead, but then you ought to admit that the social security system is a welfare program and defend it, and reform it, on those grounds (as usual, Tyler has the right idea).

It makes sense to complain about a regressive welfare system but it makes no sense to complain about a regressive social insurance or forced savings program.  Is the unemployment insurance system unfairly regressive because construction firms, and thus construction workers, pay higher UI tax rates than professors?  Are IRAs unfair because people who put more in get proportionately more out?

Face Analyzer

The FaceAnalyzer purports to analyze faces and correlate them with personality traits.

By using state of the art face recognition technology, we are able to provide
you with a patented process that correlates certain facial types to personality
features. By applying the most recent developments in the field of evolutionary
psychology, we’ve correlated certain personality traits to key facial features.
This allows us to determine your inherent personal characteristics.

Here is some of what it said about me:

Your main drive is to be admired by those with similar interests to you. Money
and influence is not of your concern.   You are interested and may be active in
certain political movements which you consider to be moral. 

Not bad so far, especially the last comment, but then it started to get downright insulting.

Intelligence: 3.9 (out of 4 maybe but out of 10?  I am crushed).
Ambition: 3.7 – low.  Low ambition?  I’ll show them!
Gay Factor: 1.0 – very low.  Good, I think.  Maybe.  Not that there is anything wrong with that.
Politeness: 3.2 – low.  Stupid Face Analyzer.  What do you know.
Income: 10-30 thousand.  Hah!
Promiscuity: 6.1 average.  My highest score.  Don’t tell my wife.

and the final blow?  Expected Occupations: Cashier, Unskilled laborer.

Maybe I should have used this first.  And no, I don’t want to show you the picture this was based upon.

Thanks, or no thanks, to J-Walk Blog for the pointer. 

Are we undermeasuring U.S. savings?

Savings are hard to measure; the government’s Bureau of Economic Analysis almost surely understates the true figure…

Perhaps the biggest problem with the way the government measures
savings is its failure to take account of changing asset values like
rising home prices. If we looked at the balance sheets of American
families, instead of just subtracting consumption from income, we would
find a more favorable picture, despite some short-term volatility.

a speech last fall, Roger W. Ferguson Jr., vice chairman of the Federal
Reserve, expressed concern that households weren’t saving more, but he
acknowledged that the ratio of household net worth to disposable income
"has been essentially trendless over the past two decades," adding in a
footnote that "this alternative concept of the personal saving rate
has, in fact, shown a slight positive trend since the early 1950’s."

treatment of capital gains in the widely cited saving figure leads to a
number of problems. Consider pensions. Employer contributions are
counted as personal income, but later – and larger – payouts to
retirees register as consumption, while the capital appreciation that
substantially finances these payouts registers nowhere.

according to a Dartmouth economist, Steven F. Venti, who contended in a
2003 report written with two Dartmouth colleagues, Annamaria Lusardi
and Jonathan Skinner, that the treatment of pensions had played a large
role in dragging down savings to record levels, "accounting for over 40
percent of the total decline in the personal saving rate from 1988
through the turn of the century."

Other measurement issues also
play a role. In a paper on alternative measures of personal saving,
Marshall B. Reinsdorf, a research economist at the Bureau of Economic
Analysis, asserts that adjusting the calculation for several such
factors, including the treatment of spending on durable goods and the
effect of inflation on interest rates, can account for much of the
apparent decline in personal saving in the 1990’s.

Daniel Akst at The New York Times offers more; I’ve added the links in the above quotation.

Note also that the U.S. spends more on education than most countries, but this is counted as consumption not savings (admittedly we wish to measure outputs, not inputs, but U.S. higher education is excellent).  R&D investments do not count toward national savings figures either; on these facts see the Michael Mandel article in 17 January Business Week.

Energy economics

What most of us think about energy supply is wrong.  Energy supplies are unlimited; it is energetic order that’s scarce, and the order in energy that’s expensive…

Our main use of energy isn’t lighting, locomotion, or cooling; what we use energy for, mainly, is to extract, refine, process, and purify energy itself.  And the more efficient we become at refining energy in this way, the more we want to use the final product.  Thus, more efficient engines, motors, lights, and cars lead to more energy consumption, not less…

These are the seven great energy heresies we propound in this book:

1. The cost of energy as we use it has less and less to do with the cost of fuel.  Increasingly, it depends instead on the cost of the hardware we use to refine and process the fuel.  Thus, we are not witnessing the twilight of fuel.

2. "Waste" is virtuous.  We use up most of our energy refining energy itself, and dumping waste energy in the process.  The more such wasteful refining we do, the better things get all around.  All this waste lets us do more life-arrirming thing better, more clearly, and more safely.

4. The competitive advantage in manufacturing is now swinging decisively back toward the United States…[information technologies]

6. The raw fuels are not running out.  The faster we extract and burn them, the faster we find still more.  Whatever it is that we so restlessly seek — and it isn’t in fact "energy" — we will never run out.  Energy supplies are infinite…

That is all from the new Peter Huber and Mark Mills book, The Bottomless Well: The Twilight of Fuel, the Virtue of Waste, and Why We Will Never Run Out of Energy.  The authors do not quite connect their premises to their conclusions, but it makes for interesting reading.  I took away the lesson that our energy consumption will rise indefinitely (and why), at least until our civilization falls.

Robert Heilbroner has passed away

Robert Heilbroner, author of Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers and among the most influential economic historians of the 20th century, has died in New York. He was 85.

Heilbroner, who had suffered for the past three years with Lewy Body
disease, a rare Alzheimer’s-like illness, died of a stroke last
Wednesday, according to his son, David.

Here is an obituary.

100 Things We Learned This Year

Number one is:

Street brawlers sometimes arm themselves with potato peelers, according to the Home Office, which wants to make them banned weapons.

But we are wiser yet:

Crows apparently like the taste of windscreen-wiper blades.

Here is the full list.  And the nationality most likely to read spam?  The Brazilians, of course.  Sightings of UFOs are way down since the late 1990s, but for a step backwards:

Lasagne has replaced chicken tikka massala as the favourite dish of Britons.

The AEAs

I have just returned from the annual meeting of the American Economic Assocation.  I was mostly stuck in a hotel room interviewing job candidates but what David Warsh reports about the conference I can also say was true of our interview candidates.

When historians look back on economics in the last quarter of the 20th century, one of its more striking features will be the explosion in the quantity and quality of empirical work that was done…

[T]he advent of the desk-top computer made it possible to make a distinguished career doing something besides theory, namely sorting through the rich details of the real world in hopes of illuminating underlying mechanisms that are supposed to exist, or even finding relationships whose existence was unexpected.   

That much was on conspicuous last week when the American Economic Association and its many affiliates held its annual meeting here….

Work was presented on all kinds of of practical topics. For example: cars,  gas and pollution policies; downtown parking and traffic congestion;  kidney exchange; private funding in china’s education system; patent examiners impact on enforcement;  rural and urban poverty in Africa; the sources of racial differences in health care in the United States; the relationship between wealth and democracy; the U.S. gender pay gap; the growing population of postdoctoral students in U.S. universities; the question of who receives IPO allocations and why  — all of them buttressed by careful empirical work….

And in the forthcoming spring 2005 issue of the Journal of Economic Perspectives, David Colander of Middlebury College reports the results of a survey of students in seven top graduate schools of economics that he conducted, first in the early 1980s, then again last year….

The proportion of those reporting a belief that empirical work was very important had doubled (to 30 percent), while those describing excellence in math as vital to a successful career halved (to 30 percent). 

The Alphabet Diet

Eric Husman writes to me:

I have a personal theory I call the Alphabet Diet.  I always begin with the fact that everyone who is eating anything is "on" a diet, and that when people do what is considered to be "going on" a diet, they are really *changing* their diet.  I think the reason that most diets work at first is that they require you to change your eating habits.  Since you are unfamiliar with the new rules, you basically cut back on the number of calories because you don’t know what’s "legal" and are confined to collections of suggested recipes based on a best-selling author’s preferences.  As you discover foods within the diet that you like, you gradually get back to your previous calorie intake, i.e. you learn to "game" the diet.  So I suggest that if you picked five letters at random from the alphabet and confine your diet to foods whose name does not contain those letters, you will see the same initial effects as the Atkins or any other diet.  If the diet ceases to be effective, pick 5 new letters.  It’s hard to write a best-selling book based on a principle that simple because there is no pseudo-scientific justification for random letters that will dazzle your would-be readership.

This is simple to graph with indifference curves.  If you deny a person her ideal point, given previous income and prices, that person will then eat less.  Over time, learning effects can counteract this tendency to some degree.

Here is my previous post on why the diet you choose does not seem to matter much.

Annual awards for prediction markets

Which prediction markets ("information futures") had the best year last year?  Worst?  Which contract performed the best or was the most interesting?  What was the best academic paper in the area?

Find the answers to these questions, and many others here.

Thanks to Robin Hanson for the pointer, I will note that Robin was named (deservingly) as person of the year in this area, even though he bet Saddam would not be captured.