Month: December 2006

Global Orgasm Day

Today is global orgasm day.  Why?  Well, why not?  But the organizers do have a larger goal: "To effect positive change in the energy field of the Earth through input of the largest possible surge of human energy, a synchronized Global Orgasm."

Lest you think this is purely prurient, do note that there is an interesting scientific component.   The Global Consciousness Project  is a peculiar project run out of Princeton University that has for many years been running experiments correlating random output devices with human consciousness.  Results from 12 years of experiments show small but highly statistically significant results.

Beginning in 1998 the group started to record data from "eggs" (non-deterministic random number generators) located around the world.  The data show or seem to show higher than random correlations with "global events" such as the funeral of Princess Diana (the events are designated in advance or before examining the data).  The eggs will record whether today’s global orgasm is associated with a perturbation in the global consciousness field.

Do I believe any of this?  No.  Will I participate in the experiment?  Anything for science.

Giving to my Wild Self

The economist in me says the best gift is cash.  The rest of me rebels.  Some people argue that the reason we don’t give cash is because that is too easy – to show that we know the person well we must signal by shopping for something "special."

Yet this can’t be quite right, either.  Imagine the following thought experiment.  Someone gives you $100 cash.  You go out to the store and buy a set of car tires.  Purchasing the tires clearly maximizes your utility.  Now imagine that instead of $100 the gift giver gave you a set of car tires.  Would you be happy that they know you so well that they purchased for you just what you would have purchased for yourself?  I don’t think so.

The example illustrates that we want the gift giver to buy something for us that we would not have bought for ourselves.  Or more precisely one of our selves wants this – the self that is usually restrained, squashed, and limited, the wild self, the passionate self, the romantic self.

Gift giving, therefore, is about reaching out and giving to the wild self in someone else.  Why would we want to do this?  Because we want the wild self in someone else to be wild about us. 

The bottom line?  If you want to please the economist in me, send me cash.  If you want to please my wild self (I know, not many of you, but you know who you are!) use your imagination.


Arthur Pigou wasn’t a KGB agent after all

Or so it seems.  For twenty-five years I thought he was.  As I recall, the John Costello and Richard Deacon books said he recruited impressionable young British men to the Soviet side.  Now, using Google BookSearch I read that he was mistakenly accused.  Pigou, by the way, no matter what his politics, remains one of the most underrated economists.  He was, among other things, also a father of behavioral economics.

Do the Denver Nuggets refute the theory of comparative advantage?

I’m referring to the trade for Allen Iverson, of course, not the brawl.  For background Matt Yglesias is of course the go-to guy (it also turns out he is right about *The Wire*).  Some of us, like me, feel that Denver will be a worse team for the trade.  Not because of what they are giving up, but because of what they are getting.  The sports logic is straightforward, namely two shooting guys and only one ball, resulting in a discombobulated offense.  (You don’t have to agree in this particular case, the point is that this could be true.)  But how exactly, in the language of microeconomics, does this make Denver worse off?  Aren’t there gains from trade in all cases and thus also between AI and Carmelo Anthony? 

There are two partially unpriced resources, first the basketball and second the attention of the public (which produces endorsement income in the longer run).  Both induce excess and premature exhaustion of shooting opportunities.  (One correspondent tells me the two are each averaging about 24 shots a game, an NBA team averages maybe 80 shots a game, note that AI connects on 41 percent, below the league average, and plays no defense.)  The trade between the two players brings some benefits but also makes these "tragedy of the commons" problems worse.

The lesson for international trade?  The more impressively talented countries you have trading with each other, the greater the need for well-defined property rights in common pool resources such as clean air and ocean use.

Allen Iverson needs to join the Pigou Club.  The presence of Yao Ming in the league — as a force whose time has come — makes this all the more imperative.

New Jersey fact of the day

Paramus is one of the nation’s strongest shopping magnets, generating roughly $5 billion a year in retail sales, an amount about equal to the gross domestic product of Cambodia, Nicaragua or the sultanate of Brunei.

…In an already densely populated state, Paramus has more parking spots than people…It is a Faustian bargain that brings 200,000 cars a day into town during December, turning the roads into virtual parking lots, but also keeps property tax rates in Paramus relatively low – $1.55 per $100 of assessed value, compared with $3.88 in Maywood, the next town over.

…Already, Paramus has 320 stores with more than $1 million in annual sales each, second in the country only to the 10021 ZIP code on the East Side of Manhattan.  The vacancy rate for stores is 3 percent, several percentage points below the rate for similar real estate elsewhere.  Some properties are filled even before the previous tenants move out.

Here is the full story.  I liked this bit:

Irma Weishaupt and her husband, Lou, who have lived in Paramus for 45 years, say they stick to side streets and sometimes leave town to shop.

How good was Pinochet for the Chilean economy?

Currency policy: The early to mid 1980s were a disaster, largely because Chilean banks were unsound and Chile pegged to a rising U.S. dollar.  This was the biggest economic mistake of the Pinochet regime.  It was a huge error which ruined the Chilean economy for years.  It should be noted, however, that the move from 1000 percent inflation to 10 percent inflation is never an easy one.

Copper: Rising copper prices were a key part of Chilean economic success, and yes Allende had nationalized the copper mines.  Pinochet did not re-privatize them.  You can count this in his favor, but not in a free market way.  Note that copper often counted for 50 percent or more of Chilean export earnings.  You can talk about voucher privatization, but in fact the Chilean state needed a fiscal base to avoid the distortionary (but revenue-raising) policies that are otherwise so common in Latin America.

Agriculture and diversification: Chile moved from very high tariffs to virtual free trade.  The Chilean economy diversified and became far less dependent on copper; this included some moves to hi-tech and light industry.  The regime gets high marks on this score, as few modern nations have benefited more from free trade.  Under Allende tariffs were commonly 100 percent or higher.  Conception was the most rapidly growing Chilean city during much of the reform era, and this shows that the story is not just about copper.

Welfare: As in the New Zealand economic miracle, social welfare spending rose over the broader course of the Pinochet reforms.  I take this to be for public choice and social control reasons, not benevolence.  The distributional consequences of the Chilean reforms were generally inegalitarian, although there was the creation of a large and growing middle class.

Social security: The vaunted "privatization" was in fact done on top of an already-existing government-run system.  Its free market nature is much overrated.  It probably was a good idea at the time, given the stellar performance of the Chilean stock market (which it helped drive), but it has created long-run problems and it is no longer a system to be envied.

School vouchers: Not clear they had much of an effect.  But I recall seeing a more positive recent study, which I can no longer find.  Here is more debate.

Privatization: Pinochet sold off steel, fertilizer, and an airline, among other companies.  The procedures were corrupt, but nonetheless an improvement overall.  There was no good reason why those companies should have been owned by the state.

Banks: Interest rates were freed up and financial repression was replaced by financial liberalization.  Do note that the Chilean government took over the banking system in 1983 or so, to avoid collapse, but later returned it to private hands.

The Allende regime: It was ruining the Chilean economy.  The recipe included deficits, foreign debt, high inflation, price controls, and devaluation, the usual stuff.  The guy was brave, but as a leader we should not idolize him.  He was an economic disaster.

Credibility: The Pinochet regime did restore the economic credibility of Chile.  Investors came to expect pro-commercial policies.  Although Pinochet himself was deeply corrupt (this was not known at the time), on net Chile extended its reputation as the least corrupt country in Latin America.

The 1990s: Much of the superior economic performance of Chile came after Pinochet left the stage (do look at the graph behind that link).  But the roots of this growth spring from the Pinochet years.  The moderate and left-wing successors left virtually all of his economic policies in place and of course they were democratic and eliminated the torture.

The bottom line: Many economic mistakes were made.  The biggest gains came from agricultural diversification, general credibility, the rising demand for copper, and the move away from terrible economic policies.  Chile had the best economic policies in South America from the late 1980s onward and it was and still is the envy of the continent.  But Chilean history from this period is as much a "state-building" miracle as a "free market" miracle. 

The Wikipedia entry on Chilean economic policy is reasonably good.  Here are some other linksOut of the Ashes is the most comprehensive defense of Pinochet; it has useful material but overall it is not to be trusted.  Google yields up many more critiques than defenses.

Pinochet the man behaved so badly, both during his term and after, as to be morally indefensible.  From second hand accounts I have heard, it is also not clear how much the man himself was personally responsible for the good economic policies.  Still many good policies happened.  We need a closer look at the Chilean economic legacy, which is a complicated story and by no means wholly negative.

Addendum: It is worth asking which reforms could have succeeded in a democratic environment, but that would require a post all its own.  Someday you will get it.

Alan Reynolds update

Many of you have been writing in, asking what *I* think of the new Alan Reynolds book.  What I think is that I should first read a copy before commenting.  You’re welcome to send me your ideas, and relevant links, critiques, whatever, or post them as comments on this blog.  If I am quiet in the meantime, it is because I am investing in human capital, not out of lack of interest.

What are street bums good for?

This officer’s views are typical of law enforcement officials who work in Maquis Park.  Namely, street hustlers are a potential threat to public space, but there is little chance of removing them from the community altogether.  Thus, officers must employ an alternate strategy – other than outright removal, one grounded in a quid pro quo wherein the police tolerate some street hustling while using the street traders to gather information on crimes.  In this manner, street hustlers along West Street have developed a symbiotic relationship both with merchants and with the police.  All three have an interest in maintaining accessible public spaces suitable for pedestrian traffic.  So, the parties have developed ways of working with one another to ensure that their personal needs are met.

That is from Sudhir Alladi Venkatesh, Off the Books: The Underground Economy of the Urban Poor.  Here is my previous post on the book.

Optimal presents

I grew up with agnotheistic Christmas traditions, but now I live under a Russian version of Hanukkah gift-giving conventions.  I prefer the latter because I get something every night, not to mention that I (usually) get it sooner.  Last night I got Civilization IV, and it was Sao Tome dark chocolate the night before that.  Getting five or ten things all at once doesn’t make me five times happier, so the new system is more neuro-efficient.  Plus, the gift card for Natasha is less likely to be lost under a big pile of stuff…