Month: October 2006

Public choice and the Nazis

by  Tyler Cowen in

On average, family members of German soldiers had 72.8 percent of peacetime household income at their disposal.  That is nearly double what families of American (36.7) and British soldiers (38.1) received.

Götz Aly’s new and noteworthy Hitler’s Beneficiaries: Plunder, Racial War, and the Nazi Welfare State tells us how.  The sad answer is that the Nazi regime lived off the resources it stole from conquered nations, forced labor, Jews, and refugees. 

The magnitude of the theft was much larger than I had thought.  In the fiscal year 1938-9, "Aryanization" increased government revenue by 9 percent.  At its peak, Nazi theft was able to finance 70 percent of war revenues, noting that "war revenues" is a flow but the concept does not measure the real resource costs of fighting the war.  See the book’s appendix for a response to some not totally unjustified criticisms of the author and his methods (the author’s claims seem to be correct as worded but the wording has narrower meaning than might strike an ordinary reader at first glance). 

The good news, if you could call it that, is simply that the wartime Nazi regime was less stable than believed and it would have encountered very serious economic and military difficulties once the full plunder was extracted from abroad.  If you are looking for a context where the long-run Laffer Curve holds, you’ll find it here. 

Don’t buy product warranties

by  Tyler Cowen in

If the expected utility calculations don’t convince you, maybe this will:

Neither Circuit City nor Best Buy discloses how much of its bottom line comes from extended warranty sales.  But analysts have estimated that at least 50 percent and in some lean years 100 percent of profits at the electronics retailers come from extended warranty sales.

Here is the full story.  The paper (but not on-line) edition notes that a desktop computer has a 37% chance of needing a repair in the first three years; if you are going to buy one warranty, maybe that should be it.  But you are still best advised to buy insurance only when a) the potential loss is very large, or b) your wife insists.

Gabaix and Laibson have a very good paper on myopia, consumer ignorance, and shrouding.

Trading one kind of inequality for the other

by  Tyler Cowen in

…we show that the two major developments experienced by the US labor market – rising inequality and narrowing of the male-female wage gap – can be explained by a common source: the increase in price of cognitive skills and the decrease in price of motor skills.  We obtain the implicit price of a multidimensional vector of skills by combining a hedonic price framework with data on the skill requirements of jobs from the Dictionary of Occupational Titles and workers’ wages from the CPS.

We find that in the 1968-1990 period the returns to cognitive skills increase four-fold and the returns to motor skills decline by 30%.  Given that the top of the wage distribution of college and high school graduates is relatively well endowed with cognitive skills, these changes in skill prices explain up to 40% of the rise in inequality among college graduates and about 20% among high school graduates.   In a similar way, because women were in occupations intensive in cognitive skills while men were in motor-intensive occupations, these skill-price changes explain over 80% of the observed narrowing of the male-female wage gap.

Here is a link to the paper.

Death vs. torture: uncomfortable thoughts

by  Tyler Cowen in

Under one view, it is worse to torture someone than to kill him, at least provided the level of torture is sufficiently high.  That can hold, a’la Amartya Sen, even if the person, in the Paretian sense, would prefer to be tortured than to be killed.

Most of us, including left-wing opponents of torture, think it is OK to kill al Qaeda operatives to stop an operation in progress or perhaps even kill them pre-emptively with reasonable cause.  Those same people don’t think it is OK to torture, except under extreme circumstances.  They also usually think that the slow torture of jail, including the homosexual rapes, is OK or perhaps to be ignored rather than to be either endorsed or countered (read Jane Galt on related questions).

One question is why (traditional) torture should be so much worse than murder.  For instance we might think that torture is worse for "public choice" reasons.  Perhaps the "mentality of the torturer" infects the body politic more than the "mentality of the murderer."  Perhaps it is more likely that torture privileges will be abused than that murder privileges will be abused.  Well, maybe, but I haven’t seen the evidence.  At the very least our current state of knowledge on these questions does not justify the extreme aversions of the anti-torture critics.

(Could it be that torturers are simply less admirable than murderers, as Robin Hanson suggested to me, and thus we like torture less?)

I toy with the moral view that torture is simply worse than painless murder.  Pain is a bad in a way that a missing life is not, noting that we must make adjustments for the pain of the relatives of the murdered.  Forget about comparing just the consequences of each action, there is something relational and enduring about the torture which is highly objectionable.

But no matter where I come out on that issue, I endorse a strong anti-torture view because I am in general anti-punishment.  Punishment is sometimes necessary, but in my core I think it is also wrong to send people to jail and that we should do so only with great trepidation.  Of course this view is unacceptable to the American public.

Many torture critics, willingly or not, end up with a waffling view on the sanctity of life.  In their moral schema murder is less bad than torture.  Sure, murder can still be "very very bad," but surely we start to wonder why lives are worth less than avoiding pains.  Some extreme pacifists will argue that we have no license to kill the same operatives we might otherwise be torturing.  That position would at least be consistent.

I believe the anti-torture forces, of which I count myself a member, find it easy to posture on the torture question, but overall they do not sit in an easily defensible , or for that matter popular, moral position.

Last week Robin Hanson dared me to write a pro-torture post; this is the closest I can come to that.

Addendum: International law, and other legal documents, surely creates other differences between torture and murder, but I am asking the prior question of how those laws should read.

Typepad comments

by  Tyler Cowen in

Sometimes it shows up on the blog that there are zero comments, but of course MR readers have more to say than that.  Don’t be fooled by this recurring glitch in Typepad.

MR readers also have complained that when writing comments, the right side of the line runs into the ads and is impossible to read when editing.  Do any of you have useful suggestions for addressing this problem?

Why don’t redistributionists like big band music?

by  Tyler Cowen in

Gabriel Rossman writes to me:

A few days ago there was a discussion on this blog about the book Conservatize Me and more broadly, about taste and politics.  Many of the questions can be answered systematically since in 1993 the General Social Survey included a list of questions about musical taste.  The simplest question to ask is how different types of music correlate with ideology (polviews).  Generally speaking, the stereotypes hold up.  Country is correlated with the right whereas classical, rap, rock music, and heavy metal are all correlated with the left.  Opinions about folk music aren’t correlated with politics.  Note though that even the strongest correlations are relatively weak (r<0.20) so there are plenty of liberals out there listening to country and no shortage of conservative rap fans.

Another way to look at it is to break politics into two dimensions.  Let’s treat whether the government should reduce income differences (eqwith) as a measure of economic attitudes.  Folk, classical, and big band music are very unpopular with redistributionists.  (I guess nobody dreamt about Joe Hill the night before the survey).  Rap, metal, and blues are popular with redistributionists.  Country, rock, and bluegrass aren’t correlated with fiscal attitudes.  For social attitudes, let’s use opinion of sex before marriage (premarsx).  Folk, country, classical, bluegrass, and big band fans tend to disapprove of fornication, whereas rap, rock, metal, and blues fans think it’s fine.  (If you substitute gay sex for premarital sex the pattern is the same, except for rap fans who tend to oppose it).  I experimented with looking for distinctively "libertarian" taste patterns but couldn’t find any.

This is all back of the envelope stuff.  A more sophisticated analysis would use factor analysis on dozens of attitudinal questions and find corresponding patterns in them.

You can find the 1993 GSS at Princeton’s Cultural Policy and Arts National Data Archive.  http://www.cpanda.org/codebookDB/sdalite.jsp?id=a00006.  There’s a self-explanatory web engine that allows you to compare any two variables.  (Want to know how many opera fans have been in fist fights?  Or how people who have paid for sex feel about nuclear power? Now is your chance.)  More advanced users can download the full dataset in SPSS, ASCII, or CSV and do whatever they want with it.

Gabriel Rossman is very smart.  Here is his home page.  Here is a summary of his dissertation.  Here is an abstract of his paper on the Dixie Chicks and where they received less play time.  Here is his paper on "Who Picks the Hits on Radio"? 

Addendum: Here is Benny Goodman on YouTube.  Here is Stan Kenton.  Here is Count Basie.  I could give you more.

Race and Culture

by  Alex Tabarrok in

The NYTimes reports that in Queens the median income for blacks is above the median income for whites, the only large county in the nation for which that is true.  The median income for blacks in Queens, $51,836, is also well above the national median income ($46,000).

What makes the statistics especially interesting is that many of the blacks in Queens are recent immigrants from the West Indies.  Malcolm Gladwell, whose own genealogy traces to the West Indies, recognizes the implication:

The implication of West Indian success is that racism does not really
exist at all–at least, not in the form that we have assumed it does.
The implication is that the key factor in understanding racial
prejudice is not the behavior and attitudes of whites but the behavior
and attitudes of blacks–not white discrimination but black culture. It
implies that when the conservatives in Congress say the responsibility
for ending urban poverty lies not with collective action but with the
poor themselves they are right.

but ultimately he can’t accept the implication and offers instead a strained interpretation.  West Indian blacks are successful only because, according to Gladwell, they provide a convenient way for whites to distinguish "good" and "bad" blacks allowing themselves to pat themselves on the back for not being racist while at the same time continuing to practice racism against the majority black class.

Gladwell offers scant evidence for his hypothesis, the most interesting point being his claim that Jamaican blacks are perceived as bad citizens in Toronto where they are dominant but as good in New York where they can define themselves in opposition to American blacks.  Gladwell’s argument is weak, however, because West Indian blacks distinguish themselves not just in dress or accent but in just those behaviors that also increase income for whites and other successful minorities: they get married and stay married, pursue education, work hard and are entrepreneurial.  Gladwell himself notes:

When the first wave of Caribbean immigrants came to New York and
Boston, in the early nineteen-hundreds, other blacks dubbed them
Jewmaicans, in derisive reference to the emphasis they placed on hard
work and education.

The title of the post refers of course to Thomas Sowell’s classic.

What I’ve been reading

by  Tyler Cowen in

1. The Naked Brain: How the Emerging Neurosociety is Changing How We Live, Work, and Love, by Richard Restak.  A good summary of a bunch of results I already knew, but a suitable introduction for most readers.  It doesn’t cover neuroeconomics.

2. Light in August, by William Faulkner.  I am rereading this, wondering whether I should use it for my Law and Literature class in the spring.  My memory was that this is the "easy" classic Faulkner but the text is tricker than I had remembered.  Not quite as good as As I Lay Dying or Absalom, Absalom.

3. Matthew Kahn, Green Cities: Urban Growth and the Environment.  From Brookings, a good and balanced treatment of the intersection between environmental and urban economics.  Here is Matt’s blog.

4. Richard Dawkins, The God Delusion.  I’m still at p = .05, if only because I fear such a heavy reliance on the anthropic principle.  This book didn’t sway me one way or the other.  And while I am not religious myself, I am suspicious of anti-religious tracts which do not recognize great profundity in the Bible.  Furthermore, as Dawkins recognizes, civilization requires strong loyalties to abstract principles; I’m still waiting to see a list of the relevant contenders to choose the best.  Here is Dawkins speaking.

5. Michael Lewis, The Blind Side: Evolution of a Game.  I loved Liar’s Poker and Moneyball but this one did not grab me at all.  I stopped.  Perhaps the reader needs to love football.  Here is a radio interview with the author.  Here is his NYT article.

How has the Swedish welfare state survived?

by  Tyler Cowen in

…the Scandinavian welfare states have an above average growth record during the period 1970-2000: Sweden has to some extent lagged behind, but Finland and especially Norway have grown steadily.

Andreas Bergh offers two answers:  First, if we look at measures of economic freedom, especially those measures which track freedom independent from the size of government expenditures, the Scandinavian countries have become much freer.  (Note that the Netherlands, which until very recently was outperforming the other European welfare states, experienced the greatest gains in this category.) 

Second, the Scandinavian economies have become much more globalized.  The old story was that globalization rendered welfare state expenditures unsupportable; it is more likely that the opposite is true, at least provided trade is open, credibility is high, and business regulation is light.

I wish this paper were 100 rather than 20 pages, but I believe the author is on to something very important.

Addendum: Here are other versions of the link to the Bergh paper, if the given link is still down.