Month: September 2005

How to teach driving

Yana has her learner’s permit, so the role of instructor falls upon the blogger in the family.  I have the following three tips, all of which assume you are in a safe area, such as an empty parking lot:

1. Ask the driving student to hit the curb, but just barely.  This is the only way to learn where the curb is.  They are going to find the curb anyway, so let this learning occur under safe circumstances.

2. Make them drive while you are making funny noises, "acting retarded," and screaming "Billy Bob has a crush on Yana."  At some point their friends will hand out the same treatment — make sure they are psychologically prepared.

3. Tell them to put the car in "Park" before it has come to a complete stop.  The same reasoning applies as above.

Why don’t most people teach these lessons (or do you all?)?  You want to feel safe and lower your stress during the lesson, rather than prepping the future driver for real world circumstances.  (So how should we teach prospective central bankers?)  Comments are open, in case you have other tips for how to teach driving…

Dollar decline: optimism vs. pessimism?

Read Brad DeLong (the best econ post this week; for better or worse, no one gets impeached).  My view is simple: I don’t much trust any very specific macro model.  So I look at current market prices and I ask two questions.  First, does the country in question have relatively sound fundamentals, relative to other parts of the world?  Despite the erosion in the quality of governance in the U.S., I still answer yes.  Second, I try to develop a crude but intuitive "theory" of what the market hasn’t taken into account.  I don’t have a strong guess here but the Setser-Krugman pessimistic view seems well enough known that it doesn’t fit this bill.  That gives me a second reason not to be a pessimist.

More specifically, I am not what Brad calls an "international finance economist":

International finance economists, by contrast, look at the asset markets. A 40% decline in the dollar over four years is a decline at the rate of 10% per year. Once financial markets convince themselves that such a decline is coming and that they need to be compensated for it, that ought to drive a 400 basis point wedge between U.S. and foreign long-bond expected returns.

I would be surprised if a dollar decline led to such consistently high interest rates in anticipation.  Uncovered interest parity is an unreliable relationship and often the relevant variables behave more like random walks, whether or not they should according to theory.  Also read this Economist article on why interest rates may not skyrocket if the dollar dives; links to specific papers are at the bottom of the article.

Addendum: I don’t think I have had any influence on his specific subsequent views, but I am proud to have had Stephen Jen as an undergraduate in the first class I ever taught at UC Irvine.

Markets in everything: kidnapping and humiliation

These get harder to do each time (without descending into the gross, that is), but semagoediv [that’s "videogames" backwards] makes my life easy:

[Brock Enright] has had some 40 clients to date, and what they ask for can vary enormously. One woman he is currently working with in New York, in a game lasting several months, is trying to conquer her fear of deceit, and so, as if to inoculate her, Enright has inveigled around 25 new characters into her life, using actors. He has about 25 barmen on his books. “I’m not a therapist; I’m more like a cartoonist,” he says.

Of his kidnap subjects, some enjoy a three-day “game”, in which Enright and his team follow their movements and (subject to request, safety and various legal agreements) abduct them for around six hours before dumping them. I opted for the budget “Fantasy Photo” option, in which it was understood that the artist would stage a kidnapping and take a series of souvenir pictures. It was no picnic.

After our tea, Enright sent me off down a side street to wait. The precise form my adventure would take wasn’t clear until a Jeep careered around a corner, and figures in balaclavas jumped out and forced me into the back. I was hooded and held down. We drove a short distance and I was manhandled into what I later realised was an artist’s studio, and slammed down into the corner.

I won’t report the accompanying sexual humiliations, and yes the "weakies" are (supposedly) weeded out in advance by "psychological tests."  Legal waivers are signed as well.  Get this:

Kidnapping isn’t all he does, he emphasises, but his other projects seemed similarly unpleasant. They include one in which he simulates mass murders on a basketball court chalked up like a Ouija board, and another in which he acts as an internet counsellor encouraging suicide…

Here is the main story.  Here is a story of how the torture of your kidnapping is custom-designed to match your fears.  Enright has many repeat customers.

Self-experimentation with comments

Since we believe in self-experimentation (by the way, Seth Roberts is now guest-blogging over at Freakonomics), I recently ran an experiment with comments on this blog.  The results:

1. Visitor stats rise considerably.  But this happens so quickly, I believe it is people hitting "reload" to read additional comments, rather than more readers.

2. The more that comments are regularly available, the more rapidly the quality of comments falls.  The quality of comments stays high when it is periodic, not automatic, and when we request comments specifically.

3. The quality of comments is highest when the matter under consideration involves particular facts and decentralized knowledge.  Posts which mention evolution, free will, or Paul Krugman do not generate the highest quality of comments.

So my current sense (Alex chooses his own course, though I believe he agrees) is to ask for comments periodically rather than always having comments open.  The goal is to maximize the real value of comments, rather than the number of comments (or measured visits) per se.

Comments on this post are not open!

Why blogging will survive

More and more, I find that if I can’t share something (that is, can’t point to something using e-mail or my own web site), it’s not worth my time.

Just imagine, the asocial bloggers free ride upon the social propensities of others.  What a marriage of convenience. 

The quotation is from John Battelle’s The Search, his new book on Google, worth a quick read for the asocial.

Fear of Floating

The Washington Post has a good article on an interesting email scam. 

Typically, here’s what happens: You advertise a car for sale
online. A fraudster posing as a buyer responds via e-mail agreeing to
purchase the car for the asking price…

Next, the scammer persuades the buyer to
accept a cashier’s check or personal check for significantly more than
the agreed-upon price. The excess is allegedly to cover the cost of
shipping the car abroad. Or the check’s too big, he claims, because it
had already been cut for a car deal that fell through. Or the buyer
simply apologizes for the mistake.

The key to the
scam is duping the seller to deposit the check and, once it clears in
the seller’s account, return the excess money via an irreversible wire
transfer, such as Western Union.

Now what always confused me about this scam is that it seems very easy to avoid.  Just wait for the check from the scammer to clear, right?  Wrong.

The scam turns on most people’s misunderstanding of the
check-clearing process. Bank clerks and managers usually aren’t experts
at identifying counterfeit checks. So they deposit the check and tell
the seller it requires 48 hours to "clear." Then the money appears on
the seller’s account statement and can be withdrawn.

people assume that means the check is valid. But the real
check-clearing process can take weeks. Phony checks generally aren’t
nabbed until after the seller has wired the overpayment to the scammer.
And after the wire transfer is picked up, it’s gone.

What is the value of think tanks?

So asks Daniel Drezner, read his post.  I see no need to focus on think tanks per se, but I see four critical gaps in our current understanding.  Someone (moi?…no, you) should be working on these problems:

1. Applying frontier social science to issues of disaster preparedness.  This includes how to respond and be ready for avian flu, terrorist attacks, and the next Katrina.

2. A good health care plan that is practical, not too far from politically feasible, and applies competition to lower costs and improve service quality.  It must be incentive-compatible, yet at the same time it can’t be seen as heartless and simply letting people die.  That probably rules out "cut health care spending in half and have everyone eat better and exercise more," otherwise an appealing option.

3. How should we respond to the possibility that very small groups will have the ability to attack or blackmail us, using nuclear weapons or other decentralized sources of extreme power?  What does this equilibrium look like, and how can we make it better rather than worse?

4. How can Africa actually develop?  Don’t beg the question by listing the needed outputs — such as markets, democracy, or the rule of law — as the inputs of your policy recommendation.

Any institution — think tank or not — which tackles those problems has earned my respect.  And note that all four overlap to some extent.  All relate to how a centralized sphere of control should respond to a decentralized abuse of incentives, or how we can stop those decentralized abuses in the first place. 

Rebuilding New Orleans: what does it signal?

Read a critique of rebuilding here, Richard Posner raises doubts as well.  Ed Glaeser notes:

"We have an obligation to people, not to places," says Edward Glaeser, a Harvard professor who specializes in urban economics. "Given just how much, on a per capita basis, it would take to rebuild New Orleans to its former glory, lots of residents would be much [better off] with $10,000 and a bus ticket to Houston."

My predictive view is closest to that of Joel Garreau: the core tourist sites of New Orleans will be restored, but like Galveston, Texas (hurricane of 1900), the city will not return to its previous prominence.  How many major corporations had their headquarters there as it was?  You could service the port with a city half of New Orleans’ previous size or less.

For better or worse, the necessity of signaling "political will" suggests a significant rebuilding effort will be made.  What kind of rebuilding must we do to convince ourselves we have tried hard enough?  I see a few options: 

1. The rebuilding effort will give central attention to culture, a main source of pride in the city.  That being said, the actual rebuilding will complete the transformation of New Orleans into a dead museum of past glories.  The city’s poor neighborhoods — which bred many of the ideas — will never be the same and in fact had already lost much of their creativity.

2. The rebuilding effort will give central attention to race.  This will attempt to convince voters that our government really does care about poor blacks.  The attempt will fail.

3. The rebuilding effort will give central attention to spending money for the sake of spending money.  When that does not suffice to restore the city, many Americans will blame the residents, thinking back on the looting and collapse of order.

None of these efforts will in fact signal that we are ready for the next disaster headed our way.

The worst business regulations in the world

The "winner" is Democratic Republic of the Congo, the loser New Zealand, here is a longer list.  Here is an excellent chart; for getting licenses the U.S. is only number seventeen, for getting credit the UK is number one.  Do take a look.  Here is the related document.  In 2004 Serbia and Montenegro reformed the most for job creation incentives.  Africa had the lowest propensity for reforms in 2004.  Thanks to Tim Harford for the pointer, this work should make a big splash.

Are autocratic successors less fierce?

Hypothesis A: Successors to tyrants will be less fierce, because tyrants themselves fear fierce wanna-bee underlings. 

Hypothesis B: Hereditary monarchy does not breed for love of power, therefore successors will become less fierce than the first usurper monarch.  Bryan Caplan attributes this view to Gordon Tullock.

Hypothesis C: Any method of orderly succession is better than recurring contests for national leadership.

Hypothesis D: Over time orderly succession becomes difficult to maintain, given the lack of fierceness of the rulers.

Hypothesis E: If you can prevent repeated coup d’etats, you are on your way toward economic growth.


Here is a Jonathan Klick paper on autocracy.  Here is a Daniel Sutter piece on the transition from autocracy.  Here is another painting by Neo Rauch.