Month: August 2005

Markets in everything — fake wedding guests

This report is from India:

An Indian firm which rents out wedding guests says business is booming.

The Best Guests Centre, at Jodhpur in Rajasthan, is looking to expand across the state.

The company caters for families who fear they will fall short of guests at weddings.

It hires out guests, either traditionally dressed or wearing smart western clothes, according to requirements and budget.

The guests dance and try to impress with their etiquette without letting anyone know they are being paid for it.

Proprietor M I Syed briefs his staff about the groom, the bride and their families before the wedding to avoid a faux pas.

told The Statesman: “The breaking up of joint families and lack of
affection among relatives also creates a demand for paid guests.

"Such families need to hire guests to make up for the fewer number of relatives available for attending the marriage.”

Funny thing is, I would pay people to stay away from my wedding…Thanks to Josh Edlin for the pointer.

Writing tips

Christopher Paolini (teen author of the fun Eragon and the just-published Eldest, now 21 years old) notes:

I tend [sic] to get up, grab breakfast, sit in front of my computer [and not] get up until about an hour before dinner.  I do this seven days a week, every week of the month, every month of the year.

That is from today’s Washington Post, Kids Section. 

I have a different idea, taking effort as a scarce variable.  Every day, stop writing just a short while before you really want to quit.  The next day you will be very keen to get going again.  For most mortals, your real enemy is the number of days when you get nothing written.  Getting "not enough" done each day is a lesser problem.

Addendum: Here are my previous writing tips.

Whither right-wing thought?

Original thinking often
flourishes under conditions of intellectual marginality. Unfortunately,
the conservative movement, having discovered a mass audience, risks
squandering the intellectual marginality that once made it so
interesting and daring. 

In future years, it may take a smaller, elite group of right-wingers to animate conservative ideas once more.

Read the whole thing, and prepare to be offended if you are conservative or libertarian. 

No Prisoner’s Dilemma on the Western Front

Robert Axelrod’s story of how cooperation developed between British and German soldiers in the trench warfare of World War I is so elegant few people have questioned it.  Yet in a single sentence, Andrew Gelman says the emperor has no clothes and looky, looky, he’s right!

The crux of Axelrod’s story is that the soldiers were trapped in a prisoner’s dilemma: individual incentives were to shoot the enemy while the socially optimal outcome was cooperation.  Axelrod then introduces his famous ideas of tit for tat etc. etc. to explain how cooperation could evolve even under these most hostile of conditions.

But Gelman asks why should we think that shooting the enemy was in a soldier’s best interest?  Indeed,

…it seems more reasonable to
suppose that, as a soldier in the trenches, you would do better to avoid firing: shooting
your weapon exposes yourself as a possible target, and the enemy soldiers might
very well shoot back at where your shot came from.

I believe that on this point Gelman is totally correct [insert dope slap here].  But, as he continues, "If you have no
short-term motivation to fire, then cooperation is completely natural and
requires no special explanation."

Axelrod’s story and the large literature following it sometimes suggest that cooperation is always the thing to be explained.  Cooperation is what happens when the natural order is overcome.  Gelman reminds us that sometimes cooperation is the norm, it’s conflict that needs to be explained.  In this case, we need to explain why the soldiers fought. 

Comments are open.

Hurricane futures

Here is the home page.  This is just getting started, but I predict it won’t take off.  The people who most care — shanty owners in the Caribbean — are unlikely to make bets or use the forecasts.  Nor will people find this fun betting as they did the Michael Jackson trial.  But I would be happy if you proved me wrong.

Thanks to Carrie Conko for the pointer.  By the way, go back to Alex’s addendum to his flu post, in case you missed it.

Just how bad is U.S. health care?

Malcolm Gladwell delivers a lengthy polemic.  He favors some form of national health insurance, but is this the correct conclusion?  A few observations:

1. He is correct that "too much insurance" is not the problem.  Health savings accounts are not the answer.

2. Many of the current uninsured are linked to immigration, or voluntarily uninsured.  This is not pure institutional failure.

3. Gladwell downplays moral hazard, arguing that the fully insured wealthy do not forgo their golf games for superfluous doctor visits.  But the real problem comes from the other side: doctors overbill or perform unnecessary procedures.

4. The U.S. health care system probably is the world’s best for some class of people, namely the well-off and I don’t mean just the super-rich.  Trying to extend those benefits — however this might be accomplished — is a better approach than nationalizing the sector.

5. Much of our excess spending is to make people feel they have done everything they can for themselves or their relatives.  It is partly voluntary in nature.  Socialized systems don’t allow many of these options to reach the menu in the first place.  We need to think long and hard about the right answer here; it is not useful to simply call these expenditures wasteful.

6. The whole debate is emphatically not about "a few simple questions," as Gladwell suggests at the end.

7. No one has a good plan for socializing American medical care or insurance.

8. Much European health comes from diet, walking, and tighter social networks of friends.  Don’t expect European healthcare policies to produce the same level of well-being in the United States.

Thanks to Mark LaRochelle for the pointer.

A new (old?) perspective on promiscuity

It’s time someone
praised and defended reckless teenage girls and young women who behave
badly, dress provocatively, engage in risky sex, and get pregnant. They
are the normal ones. The rest of us are the deviants. They are behaving
in the most natural way. The rest of us are mutants…

Sexually active
teenage girls, and sexually promiscuous women of any age, carry the
greatest social burden of judgements, punishments, restrictions and
risks because we haven’t got the child-care equation right.

That turns out to be a conservative argument, believe it or not.  Thanks to Glenn Reynolds for the pointer.

Modern Germs

Guns, Germs, and Steel emphasized the role that germs played in the clash of civilizations of the early modern period, say up to about 1700.  I was surprised to learn from John M. Barry’s excellent book The Great Influenza that germs continued to have a disproprtionate influence on the civilizations well into the twentieth century and perhaps even today.

The great influenza of 1918 probably killed 100 million people, about five percent of the entire world’s population.  An even higher percentage of young people died and most shockingly all of this occured in about 12 weeks.   Death was not evenly distributed:

The Western world suffered the least, not because its medicine was so advanced but because urbanization had exposed its population to influenza viruses so immune systems were not naked to it.  In the United States, roughly 0.65 percent of the total population died, with roughly double that percentage of young adults killed.  Of developed countries, Italy suffered the worst, losing approximately 1 percent of its total population….

The virus simply ravaged the less developed world.  In Mexico the most conservative estimate of the death toll was 2.3 percent of the entire population, and other reasonable estimates put the death toll over 4 percent.  That means between 5 and 9 percent of all young adults died.

In even more remote areas the death toll was much higher. One doctor visiting Inuit in Alaska found everyone dead in 3 villages and 7 other villages with a death toll of 85%.  We don’t know how many people died in India and China but the rates were certainly higher than in the more urban United States. 

By the way, an enterprising researcher should be able to make use of the 1918 influenza in Mexico (and elsewhere as well) as a shock to population that likely had important reverbations throughout the economy and society for decades.

Addendum: Bill Johnson at UVA points me to, Is the 1918 Influenza Pandemic Over? (NBER), a very recent paper by Douglas Almond.  From the abstract:

In the 1960-1980 Decennial U.S. Census data, cohorts in utero during the height of the Pandemic typically display reduced educational attainment, increased rates of physical disability, lower income, lower socioeconomic status, as well as accelerated adult mortality compared with other birth cohorts. In addition, persons born in states with more severe exposure to the Pandemic experienced worse outcomes than those born in states with less severe Pandemic exposures. These results demonstrate that investments aimed at improving fetal health can have substantial long-term effects on subsequent health and economic outcomes.

Now consider, if the effects in the United States are large then in Mexico, not to mention India and China (where data will be much harder to gather), the effects could have been devastating on a macro scale.

What is the best way of measuring productivity?

Should we include the financial sector?  Here is Daniel Gross on this debate:

In principle, economists say, the figure that represents the
broadest possible swath of the economy is preferable. That would seem
to weigh in favor of the more pessimistic nonfarm business number. But
there may be good reasons for giving careful weight to the measure of
productivity that excludes the financial world. In some ways, it may be
more accurate.

After all, it’s much easier to calculate
productivity for companies that produce widgets than it is for
companies that produce less tangible goods like insurance policies.
While the productivity of a factory worker doesn’t vary radically from
month to month, the productivity of a hedge fund manager can swing
wildly from week to week.

What’s more, it strikes some
economists as strange that including the dynamic financial sector would
somehow make the economy seem less productive. "If you see productivity
being dragged down by the inclusion of the financial sector, you have
to be a little suspicious," said David Altig, vice president and
associate director for research at the Federal Reserve Bank of
Cleveland. (Mr. Altig speaks for himself, not for the Fed.)

Read Brad DeLong for commentary. 

The bottom line: Productivity is doing better than we had thought.  The second bottom line is that the first bottom line could be wrong and productivity might be doing worse than we had thought.  The best guess, however, is that we are mismeasuring productivity in the financial sector.  Keep in mind, the rate of productivity growth is the critical variable for whether we will survive the coming Medicare fiscal train wreck, without entering the realm of perpetual economic stagnation and draconian tax rates.

Are Mexican immigrants lowering your wages?

Here is the abstract from the latest David Card paper:

Mexican immigrants were historically clustered in a few cities, mainly in California and Texas. During the past 15 years, however, arrivals from Mexico established sizeable immigrant communities in many "new" cities. We explore the causes and consequences of the widening geographic diffusion of Mexican immigrants. A combination of demand-pull and supply push factors explains most of the inter-city variation in inflows of Mexican immigrants over the 1990s, and also illuminates the most important trend in the destination choices of new Mexican immigrants – the move away from Los Angeles. Mexican inflows raise the relative supply of low-education labor in a city, leading to the question of how cities adapt to these shifts. One mechanism, suggested by the Heckscher Olin model, is shifting industry composition. We find limited evidence of this mechanism: most of the increases in the relative supply of low-education labor are absorbed by changes in skill intensity within narrowly defined industries. Such adjustments could be readily explained if Mexican immigrant inflows had large effects on the relative wage structures of different cities. As has been found in previous studies of the local impacts of immigration, however, our analysis suggests that relative wage adjustments are small. [emphasis added]

I encounter the anti-Mexican immigration segment of the blogosphere often, but I have yet to be convinced that the Mexicans are wreaking havoc on us.

Markets in everything

Monsoon vacations. They are held in India, often Goa, during the rainy season.  "Come Feel the Rain" is the slogan.  The main customers?  Citizens from the United Arab Emirates (annual rainfall 120 millimeters).  They worry if they don’t get enough rain during their vacation.  Here is a hotel ad.  Here is one colorful travel journal from such a vacation.  I like this bit: 

Let the rains plan
Don’t force the pace. Meticulously planned tour itineraries can be reduced to paper-boats for your children to play with in muddy puddles. Let the monsoons dictate your schedule.

For more detail, see today’s Wall Street Journal, front page, center column.

Bubbles and the real price of housing

Robert Shiller has put together the first, long, true index of home prices.  By true I mean that as much as possible it looks at repeated sales of the same or very similar houses over time.  Conventional indices confuse changes in size and quality with changes in the price of housing per se.

What the index shows is that real house prices have remained stable over the past 100 years.  The contrary impression is driven by inflation and as noted above, changes in what is being measured.  Stability, however, is what we should expect.  The United States remains a relatively unpopulated country.  When house prices in current population centers increase, suburbs and smaller cities expand.  People move to less populated areas and in so doing alleviate the press on house prices.  In the long run, the supply of housing is very elastic.

The glaring exception to stability is the last 6 or 7 years when house prices have skyrocketed far beyond where they have ever been before.  Can you hear the pop coming?

Graphic from the NYTimes (click to open in new window).


Why are there so many framing shops?

Bryan Caplan poses the question.  My answers:

1. This is a U.S. phenomenon, driven in part by framed photos of family members and regular turnover of decoration in one’s house.

2. The real value is often advice on which frame to buy.  This requires a reliable expert on hand and keeps framing shops small and artisanal in nature.

3. Frame shops lure people in to view and buy other overpriced items, such as pre-framed posters.  You need a separate shop for each variety of garish bad taste out there.

My puzzle is different: why is framing so expensive?  The frames are just finished wood, which you could import or buy cheap at a lumber yard.  The framing labor is often immigrants.  Yet a good framing job can cost more than a refrigerator or washer/dryer set.