Month: January 2006

Bilmes and Stiglitz on the costs of the Iraq War

I’m not allowed to quote this paper without their permission, but here is the link.  Here is a summary.

I’ve read the paper through once.  All goes well until the authors count the interest payments on the debt as an extra cost.  I say count the expenditure once and do not adjust for how it is financed.

Starting on p.14, the authors consider macroeconomic costs; if not for the war our rate of growth could have been higher.  In particular these costs stem from higher oil prices, higher defense expenditures, and increased insecurity.  This part of the paper is highly speculative.  Our economy has done fine, and it is not clear that the residual problems are due to the war.

Before counting macro costs, the authors estimate the costs of the war to run about $700 billion and $1 trillion dollars.  This appears well-founded but the higher estimates (about twice that) do not.  Note, of course, that none of this considers the costs (and benefits) to the Iraqis.  Returning to the American side, the authors do adjust for the costs of running the pre-war no-fly zones, but they do not attempt to estimate what other costs would have been incurred in the absence of invasion.

Comments are open, especially for those who have read at least part of the paper.  Analysis is welcome, but general or polemic opinions on the war will be deleted.

Addendum: Anthony Battey directs my attention to another paper on this topic.

In Marrakech

The streets of Marrakech run with blood today.  It is Eid Al Adha, the feast of the sacrifice, to comemorate Ibraham’s (Abraham) willingness to obey God by sacrificing his son Ishmael (Ishmael/Isaac, who can say?).  (If a booming voice told me to sacrifice my son, I’d tell him to go to hell.  My failure to see the virtue in Abraham’s more faithful actions lets me reject three religions in one go.  Convenient.)  In anycase, God relented at the last minute and said sacrifice a ram instead.  So today rams are being sacrificed all over town, the heads are then cooked in the streets over barbecues made from old bedsprings.  It’s not to my taste but if I wanted things to my taste I would have gone to Starbucks.

Many thanks to all who gave tips earlier.  I will write more later the kybrd here is hard to use.

When did the Industrial Revolution start?

Had I mentioned that the Journal of Political Economy is my favorite academic journal?  In the December 2005 issue, the still under-valued Gregory Clark writes:

I use building workers’ wages for 1209-2004 and the skill premium to consider the causes and consequences of the Industrial Revolution.  Real wages were trendless before 1800, as would be predicted for the Malthusian era.  Comparing wages with population, however, suggests that the break from the technological stagnation of the Malthusian era came around 1640, long before the classic Industrial Revolution, and even before the arrival of modern democracy in 1689 [TC: was that when it came?].  Building wages also conflict with human capital intepretations of the Industrial Revolution, as modeled by Gary Becker, Kevin Murphy…and Robert Lucas.  Human capital accumulation began when the rewards for skills were unchanged and when fertility was increasing.

Here is an earlier but longer version of the paper.  Here is an on-line version of his book on growth.  Here is a previous MR post on the long, slow nature of the Industrial Revolution.

Daniel Klein categorizes classical liberals

Here is the abstract:

To participate in establishment political culture one must win recognition by the establishment. Classical liberals have to choose between forthrightness and establishment respectability. Klein will present a framework for distinguishing three types of classical liberal prophets:

  • Challengers focus on fundamentals and point to major policy reforms, notably abolitions. They attack the establishment and its entire culture, and seek to influence the young. Examples: Thomas Paine, Frederic Bastiat, Ludwig von Mises, Thomas Szasz, and Murray Rothbard.
  • Bargainers point to incremental liberalization and obscure the deeper principles. They enjoy mainstream position and seek to influence the currently influential. Examples include Friedrich Hayek, Aaron Wildavsky, Richard Epstein, and Tyler Cowen.
  • Royalty: Whereas the first two types are critics who feel somewhat alienated from establishment culture, royalty are those who enjoy cultural pre-eminence, particularly high academic prestige. Royalty ride a sense of ascendancy. They downplay radicalism. The leading examples are Adam Smith and Milton Friedman.

        Klein will develop two ideas:

1. In the current ideological climate there is little prospect for classical-liberal royalty. In fact, Milton Friedman was something of an aberration.

2. Challengers and bargainers sometimes regard each other with disdain and mistrust. But both are vital to the advancement of their common cause.

Here is the full paper, entitled "Mere Libertarianism: Blending Hayek and Rothbard." 

I view my own writings as less strategic and less "negotiating" than Klein’s analysis would indicate.  Of course Klein has the right — I would say the duty — to read an author as he pleases and not as that author would self-describe.  After all, we all know that Melville’s "Bartleby" is really about the contagious nature of homosexual obsession.  It really is.

Addendum: Dan Klein informs me this is an abstract for a related talk, not for the paper itself.

The Case for Mindless Economics

Faruk Gul and Wolfgang Pesendorfer, of Princeton University, defend neoclassical economics against behavioral economics.  They write: "Neuroscience evidence cannot refute economic models because the latter make no assumptions and draw no conclusions about the physiology of the brain."  Their lengthy and defensive piece denies that economics has to concern itself with the content of preferences, or with the content of human irrationality. I am more than willing to admit that the merits of behavioral economics remain an open question.  But if this is the best neoclassical economics can do in defense, we are all in a bit of trouble.  On a related note, here is a short piece on what it is like to have your brain scanned.

Thanks to Dan Houser for the pointer.

The Scots are sick

David Bell and David Blanchflower report:

On almost all measures of physical health, Scots fare worse than residents of any other region of the UK and often worse than the rest of Europe. Deaths from chronic liver disease and lung cancer are particularly prevalent in Scotland. The self-assessed wellbeing of Scots is lower than that of the English or Welsh, even after taking into account any differences in characteristics. Scots also suffer from higher levels of self-assessed depression or phobia, accidental death and suicide than those in other parts of Great Britain. This result is particularly driven by outcomes in Strathclyde and is consistent with the high scores for other measures of social deprivation in this area. On average, indicators of social capital in Scotland are no worse than in England or Wales. Detailed analysis within Scotland, however, shows that social capital indicators for the Strathclyde area are relatively low. We argue that these problems seem unlikely to be fixed by indirect policies aimed at raising economic growth.

Here is the full paper, but there is no dummy variable for who eats deep-fried Mars bars.  Here is the Strathclyde Hilton.  On another note, I’ve long thought that the Scots and Irish are central to understanding the evolution of the American national character.

Elsewhere on the NBER front, here is a new paper on self-deception and voting.

How quickly should I go through my stock of Battlestar Galactica?

The Hotelling rule tells us to consume a stock so the shadow value rises at a rate commensurable with the rate of interest…or something like that.  C’mon, let ‘s get real.  Here are a few options:

1. Set aside one day for a BSG fest.  I would lose the pleasures of anticipation, so no way.  (Would you want all non-currents-events-specific MR posts available all at once?)  The pleasures of memory would be weaker as well.

2. Have a strict rule, such as one a day.

3. Have a stranger impose a rationing pattern.  Sometimes we call this stranger the Science Fiction Channel.  But what about the accumulated stock of programs on DVD?

4. Watch it when your wife lets you (not an issue for those that have married well).

5. Refuse to watch the last episode, in an attempt to deny your mortality.

6. Watch them at an increasing rate.

#3 is appealing, but so far I am opting for #6.  Comments are open, if you wish to rationalize what you already have done.

Addendum: This question will become more important.

Friggonomics

Here is a data base on legal Nevada prostitutes.

The average rate is about $400 an hour, and the average customer believes he is getting a woman 31 years of age.  I won’t summarize the rest, but there is a table of correlation coefficients for many variables.

Here is a concluding excerpt:

I have been informed of many instances of guys walking into a legal
Nevada brothel, picking a lady and going back to her room to negotiate,
and then quoting to her the averages I found in previous surveys. This
is not good negotiating strategy, a topic I usually prefer not to give
advice on.

Thanks to the excellent Cynical-C blog for the pointer; they swear they found the data by accident.  And here is a good piece on whether Heidi Fleiss’s brothel for women will succeed, I predict no.