Month: October 2006

Larry Summers watch

Via Daniel Drezner:

A few months after stepping down as president of Harvard University, Lawrence H. Summers has joined a $25 billion hedge fund management firm, D.E. Shaw & Co., as a part-time managing director.

Summers will remain on the Harvard faculty while he works for D.E. Shaw on strategic initiatives and high-level portfolio management, according to the company.

Joycean blogging

This paper, via Jorge, argues that a credit crunch, and an increase in contract non-enforceability, are major reasons why NAFTA did not benefit Mexico more.  Each Beck album takes a longer time to appreciate than the last one; I’m finally coming around on The Information.  Here is a further smackdown on the TV-autism study.  Panama has voted to expand the Canal; after the Grand Canyon and Iguassu, it is the most impressive sight I have seen.  Go.  A New York Times article notes that Portuguese has 230 million speakers, far more than German or Japanese; yet it is still considered a minor language.  Will Wilkinson, who has been busy lately, has a good post on positive-sum status gamesThe Wall Street Journal had a front page article today on the trend to pull the elderly out of nursing homes and pay their relatives, or in some cases their ex-wives, to care for them.  The Business of Health and The Cure: How Capitalism Can Save American Health Care are two new market-oriented books on American health care; the latter has a blurb from Milton Friedman.  Chutes and Ladders examines the upward mobility of (some of) the working poor; buy it here.  Starbucks succeeds by helping customers feel good about themselves.

Do violent movies cause violent crime?

No, at least not in the short run.  Rambo gets the bad guys off the streets.  And for a while they even seem to calm down:

What is the short-run impact of media violence on crime?  Laboratory experiments in psychology find that exposure to media violence increases aggression.  In this paper, we provide field evidence on this question.  We exploit variation in violence of blockbuster movies between 1995 and 2002, and study the effect on same-day assaults.  We find that violent crime decreases on days with higher theater audiences for violent movies.  The effect is mostly driven by incapacitation: between 6PM and 12AM, an increase of one million in the audience for violent movies reduces violent crime by 1.5 to 2 percent.  After the exposure to the movie, between 12AM and 6AM, crime is still reduced but the effect is smaller and less robust.  We obtain similar, but noisier, results using data on DVD and VHS rentals.  Overall, we find no evidence of a temporary surge in violent crime due to exposure to movie violence.  Rather, our estimates suggest that in the short-run violent movies deter over 200 assaults daily.  We discuss the endogeneity of releases.  Potential interpretations for our results include a cathartic effect of movies, displacement of crime, and decrease in alcohol consumption.  The differences with the experimental results may be due to experimental procedures, or to sorting into violent movies.  Our design does not allow us to estimate long-run effects.

Here is the full paper.

Save us from vegemite

The US has banned Vegemite, even to the point of searching Australians for jars of the spread when they enter the country.

The bizarre crackdown was prompted because Vegemite has been deemed illegal under US food laws.

great Aussie icon – faithfully carried around the world by travellers
from downunder – contains folate, which under a technicality, America
allows to be added only to breads and cereals.

Australian expatriates in the US said enforcement of the ban had
been gradually stepped up and was now ruining lifelong traditions of
Vegemite on toast for breakfast.

Here is the full story.

Sir Henry Neville

I’ve been reading The Truth Will Out: Unmasking the Real Shakespeare, by Brenda James and William Rubinstein.  The book’s major claim is that Sir Henry Neville wrote the works of William Shakespeare.  Don’t get me wrong, I’ve never been one for conspiracy theories.  I even believe that Lee Harvey Oswald was the lone assassin.  And I’ve never bought into the attribution of Shakespeare’s works to de Vere; the guy died too soon for the chronology to make sense.

But I found this book — no, "convincing" is too strong a word — but difficult to dismiss.  It has the first good arguments I’ve read that Shakespeare, were he the real guy, would have a very different paper trail than what we find.  Some of the plays appear to show detailed knowledge of the Continent that Shakespeare did not seem to have.  The topics of the plays match Neville’s life and experience closely, right down to the timing.  Some scenes from the plays match incidents from Neville’s life, down to some very particular numbers.

To be sure, there is no smoking gun.  It is all circumstancial evidence.  And we should remain skeptical toward speculative theses which captivate the giddy minds of scholars.  But — if this book were a blog post I would link to it.

Here is one brief summary of the argument.  Here is a short piece by Rubinstein.  Here is a CrookedTimber post.  Here is a Times story.  Here are links to critiques.

Claims about my friends

Robin Hanson will like this one:

The more fiction a person reads, the more empathy they have and the
better they perform on tests of social understanding and awareness.  By
contrast, reading more non-fiction, fact-based books shows the opposite
association.  That’s according to Raymond Mar and colleagues who say their finding could have implications for educating children and adults about understanding others…

If you, like Robin, are fond of signaling theory the causality can run either way.

Bryan Caplan will like this one:

In general, the students and experts believed mental disorders were
less ‘real’ than medical disorders.  For example, most of the
participants agreed that you either have a medical disorder or you
don’t, but that this isn’t true for mental disorders (although a third
of the experts felt it was).  The experts and students also believed
more strongly that medical disorders exist ‘naturally’ in the world,
than do mental disorders.  The familiarity of conditions didn’t make any
difference to the participants’ views.

Means-testing for Medicare

I’ve several times advocated the means-testing as a way out of our current and forthcoming fiscal problems.  Greg Mankiw (see also knzn) offers the classic criticism:

…from the standpoint of incentives, means-testing is equivalent to a tax
increase.  As a result, economists worried about the adverse incentive
effects of taxes (like me) should be also worried about the adverse
incentive effects of means-testing.

The point, of course, is well-taken.  But something must be taxed, and Medicare benefits for the well-off are a logical candidate.  They represent the spending of relatively wealthy people, rather than savings.  In behavioral terms, I suspect the negative incentive effects of means-testing are relatively weak.  A person might say "If I get too rich, I’ll get less Medicare when I am old," and work less.  Dollar-for-dollar I expect this effect is weaker than "They’ll take out another few percent this year from my paycheck, maybe I’ll work less."

I’ll stick with means-testing as the least bad way of raising (implicit) marginal tax rates.  Means-testing also gets people away from the seductive but dangerous idea that government should take care of everyone, all the time.

My Gap Shorts Make the FT

Economists and bounty hunters would appear to have little in common.
Duane “Dog” Chapman is a tattooed ex-convict with his own reality
television show, currently threatened with extradition to Mexico for
apprehending a US rapist there. Alex Tabarrok wears Gap khaki shorts
and is interested in tort reform. Only one of them is an economist.

That’s Tim Harford writing in the Financial Times

I wonder if I can get an endorsement deal out of this?

One Red Paper Clip

Remember Kyle MacDonald, the guy who made fourteen trades to move up from a red paper clip to a house?  From The National Post, here is my piece on how he did it, what he really did, and what he is doing today.  Kyle worked at these trades for a full year, so here is the opening puzzle:

Judging from the local real estate market, Kyle’s house is worth about
$50,000. Why didn’t Kyle just go out and buy a house? Surely such a
smart and able person could have spent the year working at a good job.

My favorite part of the story is when Kyle trades a day with Alice Cooper for a motorized snow globe with multi-colored lights.

Why law associates work so hard

I have learned a new mechanism to explain the organization of knowledge-based, client-intensive partnerships:

From the property rights perspective, large law firms are poorly suited to sustaining employment relationships because they have no enforceable means of controlling the firm’s key knowledge asset–client relationships.  The up-or-out partnership systems that have evolved over time in these firms offer an awkward but workable resolution to this problem.  By restricting partnership size to maximize surplus per partner and by making senior attorneys residual claimants, law firms limit the opportunity for sub-groups of partners to grab and leave with the firm’s clients.  This action, however, creates additional demand for inexperienced associates who serve as (imperfect) substitutes for their more experienced counterparts.  The result is that more associates are hired than can be promoted into a stable partnership.  Those associates who do not succeed outgoing partners will be dismissed before they acquire sufficient client knowledge to themselves pose a threat of grabbing and leaving.  That law firms find it worthwhile to commit to the costly practice of firing qualified attorneys in order to retain control over client relationships points to the general importance of control over assets in more conventional employment relationships.

The property rights model, in contrast to other explanations, can explain the coincidence of up-or-out promotion rules and partnerships in large law firms.  At the root of our model is the claim that law firms cannot rely upon legal mechanisms to establish control over client relationships.  We demonstrate that this is, in fact, the case under U.S. law.  In addition, the property rights model suggests two propositions that are supported by the available historical, institutional and econometric evidence: (1) up-or-out appeared first in large corporate law firms who specialized in delivering large scale, complex legal services to valuable, long-term clients, and (2) large law firms practice a style of law that limits contact between associates and clients.  Finally, the property rights model can account for the otherwise anomalous absence of up-or-out personnel policies in government agencies and large corporate litigation departments [TC: I like this latter point].

Here is the paper.  Here is another version with abstract.