Month: July 2006

New research on what triggers autism

1. Here is the story.

2. Your English is better than you think.  But on incorrect uses of "hopefully" I will not cede ground.

3. Some books do better in paperback.

4. A Delta list of best barbecue restaurants, based on reader input, via Bob Lawson.  The Virginia selections are weak plus they left off Lockhart, Texas altogether.  It is a better list for the South proper.

5. Jane Galt on deficits, and also on "unfair competition," do go send her some compliments in return…

6. Gorbachev on Bush and Putin.

Those Michelin Stars Translate as Dollar Signs

Here is my latest New York Times column, on the economics of fine dining and The Society for Quantitative Gastronomy.  It is fitting that I am now in Lyon.  Excerpt:

Receiving a Michelin star increases prices in a Parisian restaurant
by 20 percent, controlling for measures of quality, décor and location.
Michelin-starred restaurants in fancy hotels, or in areas with other
Michelin-starred restaurants, also have higher prices, again adjusting
for quality. Diners are paying more to eat in fine or prestigious
surroundings, whether or not the food is better. One gastronomy expert,
speaking in Le Nouvel Observateur, noted, “Gaining a Michelin star
ensures that your banker will be kind to you.”

For those who hold
the food as their main concern, the researchers offer a way forward.
Dr. Verardi and Dr. Gergaud have built an index for overpriced and
underpriced restaurants, relative to their food. They use the Zagat
Survey to Parisian restaurants – whose popularity rankings are
generated by diners’ reports, not critics – to provide an independent
measure of customer satisfaction, which is then compared with price.

There is also a new Journal of Wine Economics, see the column for more information.  Here is Dubner, on the same.

Trade against Jim Cramer

We document market inefficiency in the
in the days following the buy recommendations of Jim Cramer, host of
the popular CNBC show Mad Money. The average cumulative abnormal
overnight return for the smallest quartile of recommended stocks is
5.19%, and these returns completely disappear within 12 trading days.
We also find that trading volume, buy-sell imbalance, and short sales
volume are all significantly higher than normal on the day following
Cramer’s recommendations. These findings allow us to test hypotheses
about the behavior of different types of traders. Finally, our GMM
estimates of the components of the bid-ask spread suggest that market
makers are aware of Cramer’s recommendations and anticipate the order
flow imbalance following Cramer’s recommendations.

Here is the paper.

Harry Was Correct

Addendum: Restored with the help of Ted Frank and others.

Harry: You realize of course that we could never be friends.
Sally: Why not?
Harry: What I’m saying is – and this is not a come-on in any
way, shape or form – is that men and women can’t be friends because the sex
part always gets in the way.
Sally: That’s not true. I have a number of men friends and
there is no sex involved.
Harry: No you don’t.
Sally: Yes I do.
Harry: No you don’t.
Sally: Yes I do.
Harry: You only think you do.
Sally: You say I’m having sex with these men without my
knowledge?
Harry: No, what I’m saying is they all WANT to have sex with
you.
Sally: They do not.
Harry: Do too.
Sally: They do not.
Harry: Do too.
Sally: How do you know?
Harry: Because no man can be friends with a woman that he
finds attractive. He always wants to have sex with her.
Sally: So, you’re saying that a man can be friends with a
woman he finds unattractive?
Harry: No. You pretty much want to nail ’em too.
Sally: What if THEY don’t want to have sex with YOU?
Harry: Doesn’t matter because the sex thing is already out
there so the friendship is ultimately doomed and that is the end of the story.
Sally: Well, I guess we’re not going to be friends then.
Harry: I guess not.
Sally: That’s too bad. You were the only person I knew in
New York.

Here’s an abstract from a recent meeting of the Human Behavior and Evolution Society (no online paper that I could find):

Getting Both Sides of the Story: Sexual Attraction and Sexual Events
Between Opposite-Sex Friends

Matteson, Lindsay K. (University of Wisconsin-Eau Claire,
[email protected]); Gragg, Brittany I.; Stocco, Corey S.; Bleske-Rechek, April

Debate exists on whether opposite-sex friends experience sexual
attraction to one another and, if so, whether that attraction adds
spice or strife to the friendship. Little systematic research,
however, has evaluated these questions; and existing studies have not
asked for both friends’ perspectives. In the current study, 89 pairs
of young adult opposite-sex friends (mean friendship duration = 2
years) reported on their friendship. Men reported more sexual
attraction to their friends than did women, and this sex difference
endured after controlling for men’s greater sexual unrestrictedness.
Approximately 25% of friendship pairs had romantically kissed, and
over 10% had "fooled around." Attraction to friend was not related to
friendship duration, and sexual events occurred at various time
points in the friendship, suggesting that attraction to friends isn’t
something that is "overcome" with time. We discuss our findings in
the context of mainstream literature suggesting that opposite-sex
friendships are inherently platonic.

Harry was Correct

Harry: You realize of course that we could never be friends.
Sally: Why not?
Harry: What I’m saying is – and this is not a come-on in any
way, shape or form – is that men and women can’t be friends because the sex
part always gets in the way.
Sally: That’s not true. I have a number of men friends and
there is no sex involved.
Harry: No you don’t.
Sally: Yes I do.
Harry: No you don’t.
Sally: Yes I do.
Harry: You only think you do.
Sally: You say I’m having sex with these men without my
knowledge?
Harry: No, what I’m saying is they all WANT to have sex with
you.
Sally: They do not.
Harry: Do too.
Sally: They do not.
Harry: Do too.
Sally: How do you know?
Harry: Because no man can be friends with a woman that he
finds attractive. He always wants to have sex with her.
Sally: So, you’re saying that a man can be friends with a
woman he finds unattractive?
Harry: No. You pretty much want to nail ’em too.
Sally: What if THEY don’t want to have sex with YOU?
Harry: Doesn’t matter because the sex thing is already out
there so the friendship is ultimately doomed and that is the end of the story.
Sally: Well, I guess we’re not going to be friends then.
Harry: I guess not.
Sally: That’s too bad. You were the only person I knew in New York.

Here’s an abstract from a recent meeting of the Human Behavior and Evolution Society (no online paper that I could find):

Getting Both Sides of the Story: Sexual Attraction and Sexual Events
Between Opposite-Sex Friends

Matteson, Lindsay K. (University of Wisconsin-Eau Claire,
[email protected]); Gragg, Brittany I.; Stocco, Corey S.; Bleske-Rechek, April

Debate exists on whether opposite-sex friends experience sexual
attraction to one another and, if so, whether that attraction adds
spice or strife to the friendship. Little systematic research,
however, has evaluated these questions; and existing studies have not
asked for both friends’ perspectives. In the current study, 89 pairs
of young adult opposite-sex friends (mean friendship duration = 2
years) reported on their friendship. Men reported more sexual
attraction to their friends than did women, and this sex difference
endured after controlling for men’s greater sexual unrestrictedness.
Approximately 25% of friendship pairs had romantically kissed, and
over 10% had "fooled around." Attraction to friend was not related to
friendship duration, and sexual events occurred at various time
points in the friendship, suggesting that attraction to friends isn’t
something that is "overcome" with time. We discuss our findings in
the context of mainstream literature suggesting that opposite-sex
friendships are inherently platonic.

How to write a book on foreign aid

The current books critical of foreign aid all catalog the failings of that aid.  They should instead start with and study the foreign aid successes.  The next question is whether those successes, once we understand them better, are replicable.  Maybe not, but then we would know.  And if they are replicable then we could, um, replicate them.

No one has written the book I am asking for.  Are you surprised?

Trudie’s advice to would-be economists

Trudie responds:

It is not foolish to want to become an economist, but it is foolish to be attracted by this blog.  Yes we have serious posts about the option value of gold.  But graduate study in economics will not sample "Markets in Everything" (remember the Whizzinator?), not consider whether teenage Thomas Jefferson would have a crush on Veronica Mars, nor will it ask "Why Don’t People Have More Sex?".  Liking this blog, on average, is a sign that you have broad interests and thus are ill-suited for graduate study in economics.  There is also, dare I say it, a chance that you are simply a silly goose with time to kill.  On the other hand, Greg Mankiw is now reading Jacqueline Passey, so anything is possible.  Welcome, Bizarro Universe.

Two core groups of people are well-suited to be economists:

1. You math GRE score is over 800, you are totally focused, you love working long hours on your own, and you have good enough letters of recommendation to get into a Top Six or perhaps Top Ten graduate school.   Note that white Americans from this category have been partially preempted by competition from foreigners.

2. You could be happy as an academic without much of a research career.  Working at a teaching school is a rewarding life, albeit a poor one relative to your investment in human capital.

There is a third category, although you will fall into it (or not) ex post:

3. You do not fit either #1 or #2.  Yet you have climbed out of the cracks rather than falling into them.  You do something different, and still have managed to make your way doing research, albeit of a different kind.  You will always feel like an outsider in the profession and perhaps you will be underrewarded.  But you will have a great deal of fun and in the long run perhaps a great deal of influence.

Sadly, the chance of achieving #3 is fairly low.  You need some luck and perhaps one or two special skills other than math.

Did I mention that if you have a clearly defined "Plan B" your chance of succeeding at #3 diminishes?  It is important to be fully committed.

Greg Mankiw is a classic #1.  Brad DeLong started off as a #1, although he has been evolving into a #3.  Maybe he was a #3 in hiding all along.  I’ve been a #3, although with a dose of #1 from having gone to Harvard.  Alex is a classic #3.

Another thing: Don’t expect any classes to be interesting.  How should I put it?  "Most professors suck."  But a good professor can make almost any topic interesting.  So your reaction to the courses is just a reaction to the instructors you have sampled.  Treat that as noise, although I will ask why you are worse at picking teachers than at picking advice columnists.

Should you become a legal academic?  You will have a greater chance to work with ideas and concepts.  A greater chance to write books and also to read them.  You are more likely to strut, wear three-piece suits, and speak in stentorian tones.  If I were starting out today, perhaps I would take that route, although I would fail at the strut and the suits.  The pay is higher and upward mobility is easier to accomplish.  But overall the quality of intellectual debate is higher in the economics profession.  In economics the return to rhetoric is lower and you can’t get away with blather.  Your articles are refereed by your peers, and not by graduate students (well, it depends what journal you submit to…).  The academic world of law has weaker quality filters, which of course also makes it more open to new ideas.

Your choice, but note that many would-be legal academics end up lured by the private sector or government work.

And by the way, buy her roses, ask her to marry you, and live happily ever after.  The rest probably won’t matter so much for your happiness and life satisfaction.

Markets in Everything — alibi edition

Our very first installment of Markets in Everything dealt with fake alibis for philandering husbands.  Now the concept has been carried further:

For
$500, nobody will believe you weren’t sunning yourself last week on
Copacabana Beach, just before you trekked through the Amazon rain
forest and slept in a thatched hut. Hey! That’s you, arms outstretched like Kate Winslet on the bow of the Titanic, on top of Corcovado!

Persey Tours was barely keeping the bill collectors at bay before it
started offering fake vacations last year. Now it’s selling 15 a month
– providing ersatz ticket stubs, hotel receipts, photos with clients’
images superimposed on famous landmarks, a few souvenirs for living
room shelves.

If the customer is an errant husband who wants his wife to believe he’s
on a fishing trip, Persey offers not just photos of him on the river,
but a cellphone with a distant number, a lodge that if anyone calls
will swear the husband is checked in but not available, and a few dead
fish on ice.

Thanks to Pablo Halkyard for the pointer.

Private Foreign Aid

The LATimes has a superb set of articles on remittances, it focuses not just on remittances from the U.S. to Mexico but also from Japan to the Phillipines, Italy to Kenya and  Florida to Haiti. 

Migrants have been sending money home, in one form or another, for
centuries. But only recently have economists recognized its
significance. Today, remittances are the largest, fastest-growing and
most reliable source of income for developing countries. Poor nations
reported $167 billion in receipts from overseas workers last year,
according to the World Bank, more than all foreign aid. Including
unrecorded transactions, the bank estimates that the total exceeded
$250 billion.

…Mexico’s annual remittance inflow has doubled since 2002 and reached
$20 billion last year, second only to petroleum as a generator of
wealth for the country.

Other developing nations also depend
heavily on their migrants’ money. Brazilian laborers in Japan send home
more than $2 billion a year, out-earning their country’s coffee
exports. Remittances bring in more than tea exports do in Sri Lanka and
tourism does in Morocco. In Jordan, Lesotho, Nicaragua, Tonga and
Tajikistan, they provide more than a quarter of the gross national
product.

Remittances_1

Thanks to Carl Close for the pointer.

Todd’s academic bureaucracy bleg

Todd Zywicki asks:

I’m looking for literature analyzing academic bureaucracies, especially
from a public choice-type perspective. The parallels with government
bureaucracies seem obvious in terms of empire-building and
budget-maximizing proclivities, but I haven’t been able to turn up any
good resources that gives me a good model and analysis of the problem.

Leave your suggestions in MR comments, also check the unusually quiet VC readers.  I’ll recommend Henry Hansemann on non-profits, plus that JPE article on why tenure allows professors to hire smart people without fear of being laid off because of the new competition.  Who is the market-oriented researcher from the south with all the papers on academic rent-seeking?  Let’s not forget Tullock’s The Organization of Inquiry or Buchanan’s Academia in Anarchy, that rant against the 1960s. 

The quest for control is often more important than budget maximization, but arguably the same is true in political bureaucracy as well.  Budget maximization is an overrated hypothesis.  Status also often plays a larger role than budget, especially in research universities.

My view is that the gains from making the most productive people autonomous (i.e., tenure) outweigh the costs from all the resulting nonsense, but of course that is a self-serving attitude.  Unlike in a political bureaucracy, a small percentage of the workers produce most of the valued outputs.  So if many people shirk, tenure doesn’t actually waste that much in terms of resources.

And why do good universities need those silly silly endowments? 

It can’t hurt to ask?

Asking someone how likely they are to take illegal drugs in the future
can actually increase the likelihood that they will indeed take drugs –
a finding with worrying implications for health research.

Patti Williams and
colleagues recruited 167 undergrads and asked some of them about their
intentions to take drugs, and the others about their intentions to
exercise. Two months later, the students were contacted again, and
those who had been asked about drugs reported taking drugs an average
of 2.8 times in the intervening period, compared with an average of 1.1
times among the students previously asked about exercise.

The
effect was even more dramatic when those students who said they hadn’t
taken any drugs at all were omitted from the analysis. Among the
remaining students, those asked about their drug-taking intentions said
they’d used drugs an average of 10.3 times over the past two months,
compared with an average of 4 times among the students previously asked
about their exercise intentions.

This observation, together with further analysis, suggested it wasn’t
that new drug users had been created, but rather that the questioning
had led to increased use among current users who presumably had a
positive attitude towards drugs in the first place.

Here is the full story.