Month: April 2005

China fact of the day

In a recent on-line survey of 200,000 people by official Xinhua News Agency, the poor-performing stock market ranked as the biggest concern [in the country], beating out corruption, the No.2 worry, by a 3-to-1 margin.

That is from The Wall Street Journal, 21 April, p.A1.  In case you are wondering, the Chinese stock exchange is littered with poor performing state-owned enterprises; many bribed their way onto the exchange, thereby linking perceived problems #1 and #2.

How much sex tourism is there in Thailand?

More British citizens visit Thailand than those of any other non-Asian country. In 2003 (the last year for which full figures are available) some 545,000 British residents arrived on visits. If you remove the children, and the British citizens visiting for business or reasons other than a holiday, you arrive at about 489,000–314,000 men and 175,000 women. That is 139,000 more British men than women coming to Thailand for a holiday–a gap of 28 per cent. The French gender disparity–60,500 more men than women–is 32 per cent, about the same as that of visitors from the US. The Japanese, at 35 per cent, is the highest–over 300,000 more men. If you take Europe as a whole (though there are some countries, like Finland and Sweden, with virtually no disparity) the gap is 25 per cent–494,000 more men than women.

A look at the major rich-nation visitors–those from the US, Australia, Europe and Japan [TC: hey, try the Saudis, predicted ratio infinite]–shows that 952,000 more men than women visited Thailand on holiday in 2003, a disparity of 28 per cent…This pattern is unique among major tourist destinations. Take, for example, the Caribbean, another popular tropical destination for economy tourism. Here, the disparity runs at 2 or 3 per cent–the only country with a significant gap in favour of men, nearly 11 per cent, is Cuba, the Caribbean country most notorious for sex tourism.

Do nearly a million men from the rich world come to Thailand to buy sex every year?

Here is the full story.

My questions: If you go for two weeks, and it costs you $1000 from Europe, how many times must you "do it" to get your money back?  Or is the trip really about saving shame, since sex is so flaunted by Thai prostitutes? (TC: I have been to Thailand, but frankly was disgusted by the thought of partaking).  Is it so unusual that fear of shame drives one to an alternative that is ultimately more shameful?

Intellectually Consistent Discrimination

A new study in the BePress journal The Forum (subs. required) verifies that college faculties are overwhelmingly liberal (see also Dan Klein’s research here and here).  In addition to political attitudes, the authors also have information on the respondent’s academic achievement (number of articles published in the past 5 years, presence on editorial boards, percent of time spent in research etc. – see further below).  Finally, they also have a measure of university quality (based on the Carnegie Foundation and US News and World Report rankings).  Put it all together and what do they find?

…being a Republican or conservative significantly reduces the predicted quality of the college or university where he or she teaches, after taking scholarly achievement into account.

I must admit that for a moment I enjoyed basking in my own victim hood.  My failings are not my own but are due to discrimination!  Ahhh, that feels good.

Much as I would like to lay my failings at the feet of the system, however, I cannot do so.  In truth, the system has treated me well and I think myself lucky (no doubt others say the same! 🙂 ).  Perhaps that is one reason why I reject studies that show bias against conservatives in academia.  But it is not the only reason.  I also reject these studies out of intellectual consistency.

When I am confronted with evidence that women earn less than men I do not take this as a sign of discrimination.  Instead, I point out that if you add to the regression a variable measuring continuous attachment to the work-force the difference in wages fades away.  In fact, most "discriminatory" findings fade away when variables like work force attachment, ability, and IQ are included – and don’t forget that there are many unobserved variables of importance and these can also differ systematically across race, sex, and ethnicity. 

I also point out that for whatever reason, men and women prefer different professions and thus make different career choices, all perfectly legitimate.  Different choices lead to different wage distributions.

Taking all of this together along with my understanding of competitive markets and I find it difficult to believe that there is much discrimination in wages. 

I think the same arguments apply to conservatives.  Consider the variables for academic qualifications used in the aforementioned study, number of published articles etc., these are all self-reported with no control whatsoever for quality!  The authors measure quality just like your Dean (according to the old saw, he can count but not read).  Include some better measured variables and I bet the results will fade, and don’t forget that many variables are not observed by the econometrician.

Conservatives and liberals prefer different professions and thus make different
career choices, all perfectly legitimate.  Different choices lead to
different wage distributions.

I am skeptical about the old-boys club.  I am skeptical about the old-liberals club.  I don’t say that these clubs don’t exist.  I just don’t believe that these old clubs are preventing much accomplishment by either women or conservatives.

I think that my positions are consistent.  Wrong, perhaps, but consistent.  Now consider that the same study which finds bias against conservatives also finds bias against women.  I reject the study in its entirety.  Where stands the liberal-left?

Do NFL teams overvalue their draft picks?

Cade Massey and Richard Thaler say yes:

…we analyze the decision making of National Football League teams during their annual player draft. This is a domain in which incentives are exceedingly high and the opportunities for learning rich. It is also a domain in which multiple psychological factors suggest teams may overvalue the "right to choose" in the draft — non-regressive predictions, overconfidence, the winner’s curse and false consensus all suggest a bias in this direction. Using archival data on draft-day trades, player performance and compensation, we compare the market value of draft picks with the historical value of drafted players. We find that top draft picks are overvalued in a manner that is inconsistent with rational expectations and efficient markets and consistent with psychological research.

Here is the NBER link; here is a free version of the paper.  Here is an article on the biggest NFL draft busts.

Why hasn’t China grown more rapidly?

Yes even since the boom it has underperformed relative to Japan, Taiwan, and South Korea. Ben Muse cites Martin Wolf:

The key to the puzzle, Wolf says, is, "inefficiency of investment." 

He points out that, among other things, the ratio of investment to additional output is high (that’s bad, because "the lower [the ratio] the greater the bang for the investment buck."  China’s five year moving average of this ratio is now 5; Japan, Taiwan, and S. Korea all had lower ratios.   The volume of bad loans by Chinese banks is also very high (in the Foreign Policy piece he notes that 40% of loans made by Chinese banks are bad).

"The principal explanation for the high level of losses [and I assume he means for the slow growth in general – Ben] has been the pouring of credit into the voracious maw of the state-owned enterprises…"

This is interesting:

    "Still more remarkably, inward foreign direct investment was only about 4 per cent of GDP in the first half of the 1990s and 5 per cent in the second. Yet, according to two other IMF economists, FDI generated almost all of the efficiency gains. The share of foreign-owned companies in gross exports is also close to 50 per cent. Their share in the gross output of industrial enterprises rose from nothing in the early 1980s to 12 per cent in 1995 and 29 per cent in 2002."

Should we have an estate tax?

Yes I know all about our current fiscal mess and the need to restore balance.  But ideally, under a well-crafted tax system and a responsible administration, should there be an estate tax?

My best guess is no, and for a simple reason.   When an estate is inherited, there are two beneficiaries.  First, someone receives the estate.  Second, someone wanted to pass along that estate, often to his or her children.

Death is tragic, but nonetheless a double benefit is created from the inheritance.  And a double benefit is diminished by the tax.

Now we might, like Steven Landsburg, decide that the "preferences of the dead" (in that case, Terri Schiavo) should not count for anything.  I reject that view, if only because the power of anticipation is so powerful.  That is, we like the idea of leaving bequests to our loved ones.  Respecting the preferences of the dead is one way to make the living happier.

Yes this sounds like craven apologetics for the rich.  But if you wish to tax the wealthy, tax their consumption, not their bequests and gifts. 

The best remaining case for an estate tax is if American politics will not otherwise support the requisite degree of "soaking the rich" at the consumption level.  But I worry about this kind of argument.  I prefer to reserve my public support for cleaning up previous messes rather than creating new ones.  And for those MR readers who consider yourself "left wing," it will do your cause no favor to convince the American people you want to tax the rich more no matter what.  Indeed it is the backlash against the sometimes-elitism of the left that has led to the very situation (i.e., Bush) where the estate tax might be repealed.  That is a development I would not have predicted fifteen years ago.

Addendum: One argument for an estate tax suggests that it is worthwhile to tax bequests, so as to encourage donations to non-profits.  To the extent this argument works, the estate tax is no longer a revenue-raiser.  Or read Mark Kleiman on the dangers of an inherited plutocracy, though this does not worry me.

By the way, here is Jane Galt’s proposal for estate taxation, and here is Jane on taxation more generally.

Econometrics joke

Three econometricians go hunting, and spot a large deer. The first econometrician fires, but his shot goes three feet wide to the left. The second econometrician fires, but also misses, by three feet to the right. The third econometrician starts jumping up and down, shouting "We got it! We got it!"

That is courtesy of the now-in-England Jane Galt.  Jane (Megan) is on a roll more generally, check out her blog.

Huge errors we might possibly make

Using the threat of tariffs to pressure the Chinese to revalue their currency

Matt Yglesias considers the politics, don’t forget Dan Drezner either.  Brad DeLong offers the full economic analysis.  The bottom line is a bit difficult to parse from Brad’s lengthy post, but I’ll offer my summary. 

The Chinese (and other foreigners) are offering a massive subsidy to current levels of U.S. federal spending.  It happens to coincide with their desire to subsidize their exporters.  A low renminbi implies high Chinese exports, high dollar reserve accumulation in China, and relatively low interest rates in the U.S..  Forcing this picture to end overnight would run a significant risk of plummeting U.S. asset prices and a run on the dollar.  In the longer run the not-really-stable Chinese currency might end up whipsawed by international capital markets (Indonesia?  Thailand?  Argentina?).

I’ll make all the concessions here you want.  The current Chinese arrangement is screwy and harms the Chinese citizenry.  I don’t usually favor fixed exchange rates or export subsidies, implicit or explicit.  Somehow, sometime, someway, the Chinese should look toward another policy.  I’ll make those concessions until they are coming out of my ears.  But I still won’t favor dropping a lit match on an open field of gasoline, which is what this American pressure would amount to.  Nor does it matter whether or not you "trust the Chinese," whatever that might mean.  This is not the right way to deal with them, and yes it will remind them of the Opium Wars.

I am not a pessimist about our current economic course, but we can still wreck things if we choose.  And right now we may well make this gross mistake.

What are the ten priciest neighborhoods in the world?

Here is the list:

1. Kensington Gardens, London (by the way, few of the homes here are owned by Brits)

2. Jupiter Island, Florida

3. Belle Haven, Greenwich, Connecticut

4. Pacific Heights, San Francisco

5. Victoria Peak, Hong Kong

6. Sea Island, Georgia (apparently the wealthy live here, I never would have guessed)

7. Shibuya, Tokyo

8. Tribeca, in Manhattan

9. La Jolla (California, near San Diego)

10. The Seventh Arrondissement in Paris, which contains both Invalides and the Eiffel Tower.

You will notice that careful definition of a neighborhood is important.  Furthermore it is easy to have the riff-raff keep down your average.  Who would have thought that Tribeca would beat out the Upper East Side?

Thanks to Newmarks’ Door for the pointer.  #1, 7, 8 and 10 appeal to me; I wouldn’t live on #2 or #6 for any price.

Revolutions (Again)

Jeffrey Rosen’s NYT Magazine piece on possible libertarian Supreme Court Justices was surprisingly reasonable (the photographer, however, must have been a real statist).  It’s funny, however, how frightened the center is of Epstein, Barnett, Greve et al.  Consider this:

…Epstein was promoting a legal philosophy far more radical in its
implications than anything entertained by Antonin Scalia, then, as now,
the court’s most irascible conservative. As Epstein sees it, all
individuals have certain inherent rights and liberties, including
”economic” liberties, like the right to property and, more crucially,
the right to part with it only voluntarily. These rights are violated
any time an individual is deprived of his property without compensation
— when it is stolen, for example, but also when it is subjected to
governmental regulation that reduces its value or when a government
fails to provide greater security in exchange for the property it

Can’t you just hear the fear?  ‘Sir, all this talk of "economic" liberties, that is wild, crazy talk.  Irresponsible, I say.  Serious people shouldn’t go around promoting this kind of thing – it’s liable to stir up the population.  Why sir, your views, they reek of revolution.’