Month: December 2006

Apocalypto, part II

The Stations themselves are usually a series of 14 pictures or sculptures depicting the following scenes:

    1. Jesus is condemned to death

Apoc: Jaguar Paw captured by cultists.

    2. Jesus receives the cross

Apoc: JP tied to slave line.

    3. The first fall

Apoc: First fall (guy forced to rise without help)

    4. Jesus meets His Mother

Apoc: Testicle-eater sees his mother-in-law?

    5. Simon of Cyrene carries the cross

Group saves wounded guy at end of slave line.

    6. Veronica wipes Jesus’ face with her veil


    7. The second fall


    8. Jesus meets the women of Jerusalem

Mayan women laugh at the guys getting painted blue.

    9. The third fall


   10. Jesus is stripped of His garments


   11. Crucifixion: Jesus is nailed to the cross

Brought up to top of pyramid.

   12. Jesus dies on the cross

Eclipse saves JP.

   13. Jesus’ body removed from the cross (Pieta)

JP sent back down the pyramid.

   14. Jesus is laid in the tomb


Overall, amazing parallelism.

And then in a later email:

…Jaguar Paw definitely returns to save his wife and sons on the third

Right on.  But for the last few Stations, I see a deliberate non-parallel with the Christian story.  I view the film as concerned with Islam as much as the Mayans.  It replays the (supposed) Islamic "myth" that Jesus climbed down off the cross, saved by a miracle, and joined his wife and kid to live in India (to complicate matters, only a minority of Muslims believe this, but many quasi-informed Christians think this is a very common Muslim view).  Gibson’s movie is saying "OK, let’s say that happened.  Jaguar Paw makes a miraculous escape.  But earthly triumph is still no means of salvation and it cannot replace the Christian notion of sacrifice; you can run but you can’t hide.  The plague is coming.  The Spanish ships are coming.  God is coming.  We must throw ourselves on God’s mercy.  Islam is no good, salvation lies only in Christ."

I also wonder if all that throat-slitting was not a reference to Daniel Pearl and various jihad-based webcam assassinations.

Pretty intense vision.  Gibson is repugnant, and his approach is distant from my own worldview, but I am still thinking about his splendid movie.

Draw Your Own Conclusions

From the list of overrated books that Tyler links to we have this nomination from economist Diane Coyle:

Freakonomics, Steven D Levitt and Stephen J Dubner (Penguin). Economics as freak show. Depressingly, this seems to be the only way to gain a wider audience for the empress of the social sciences, other than multinational bashing.

The only way to get attention?  Not at all.  You could always title your book, Sex, Drugs and Economics: An Unconventional Intro to Economics.

Why do investment bankers get paid so much?

Did you see that the average bonus at Goldman was $622,000 for a year’s work?  Arnold Kling asks why here, and here, with follow-up from M. Drapier.

The puzzle, of course, is why the supply of investment banking doesn’t expand so as to lower price and thus wages, in what appears to be a fairly competitive industry.

My take: The high payments solve an agency problem and align interests, and thus they are relatively invariant to competitive pressures.  If Goldman does an IPO, the issuing company wants to make sure that Goldman promotes the issue properly.  This means, among other things, that Goldman eschews pure market-clearing prices and instead places the issue in the hands of investors who will talk it up and promote it.  For this to happen, Goldman has to care more about its relationship with the hiring, security-issuing firm than about some of its external relationships, namely other groups which would like to buy into the offering at favorable prices but which would not promote it as effectively (NB: this is not the only relevant conflict of interest problem, it is just an example).

In other words, the company doing the IPO has to pay Goldman lots to ensure their loyalty.

Competition for doing IPOs won’t much lower the required payments needed to capture the loyalty of Goldman.  There could be one million talented investment bankers bidding to do that issue, and ex post the security-issuing firm will still pay the winner large sums to align incentives in the desired manner.

Alan Reynolds on *Income and Wealth*

architects of these estimates, Thomas Piketty of École Normale
Supérieure in Paris and Emmanuel Saez of the University of California
at Berkeley, did not refer to shares of total income but to shares of
income reported on individual income tax returns-a very different
thing. They estimate that the top 1% (1.3 million) of taxpayers
accounted for 16.1% of reported income in 2004. But they explicitly
exclude Social Security and other transfer payments, which make up a
large and growing share of total income: 14.7% of personal income in
2004, up from 9.3% in 1980. Besides, not everyone files a tax return,
not all income is taxable (e.g., municipal bonds), and not every
taxpayer tells the complete truth about his or her income.

such reasons, personal income in 2004 was $3.3 trillion, or 34.4%,
larger than the amount included in the denominator of the Piketty-Saez
ratio of top incomes to total incomes. Because that gap has widened
from 30.5% in 1988, the increasingly gigantic understatement of total
income contributes to an illusory increase in the top 1%’s exaggerated

The same problems affect Piketty-Saez estimates of share of
the top 5%, which contradict those from the Census Bureau (which also
exclude transfer payments). Piketty and Saez figure the top 5%’s share
rose to 31% in 2004 from 27% in 1993. Census Bureau estimates, by
contrast, show the top 5%’s share of family income fluctuating
insignificantly from 20% to 21% since 1993. The top 5%’s share has been
virtually flat since 1988…

the Census Bureau, Messrs. Piketty and Saez measure income per tax unit
rather than per family or household. They maintain that income per tax
unit is 28% smaller than income per household, on average. But because
there are many more two-earner couples sharing a joint tax return among
high-income households, estimating income per tax return exaggerates
inequality per worker.

amount of income Messrs. Piketty and Saez attribute to the top 1%
accounted for 10.6% of personal income in 2004. That 10.6% figure looks
much higher than it was in 1980. Yet most of that increase was, as they
explained, "concentrated in two years, 1987 and 1988, just after the
Tax Reform Act of 1986." As Mr. Saez added, "It seems clear that the
sharp, and unprecedented, increase in incomes from 1986 to 1988 is
related to the large decrease in marginal tax rates that happened
exactly during those years."

That 1986-88 surge of reported high
income was no surprise to economists who study taxes. All leading
studies of "taxable income elasticity," including two by Mr. Saez,
agree that the amount of income reported by high-income taxpayers is
extremely sensitive to the marginal tax rate. When the top tax rate
goes way down, the amount reported on tax returns goes way up. Those
capable of earning high incomes had more incentive to do so when the
top U.S. tax rate dropped to 28% in 1988 from 50% in 1986. They also
had less incentive to maximize tax deductions and perks, and more
incentive to arrange to be paid in forms taxed as salary rather than as
capital gains or corporate profits.

The top line in the graph shows
how much of the top 1%’s income came from business profits. In 1981,
only 7.8% of the income attributed to the top 1% came from business,
because, as Mr. Saez explained, "the standard C-corporation form was
more advantageous for high-income individual owners because the top
individual tax rate was much higher than the corporate tax rate and
taxes on capital gains were relatively low." More businesses began to
file under the individual tax when individual tax rates came down in
1983. This trend became a stampede in 1987-1988 when the business share
of top percentile income suddenly increased by 10 percentage points.
The business share increased again in recent years, accounting for
28.4% of the top 1%’s income in 2004.

As was well-documented years
ago by economists Roger Gordon and Joel Slemrod, a great deal of the
apparent increase in reported high incomes has been due to "tax
shifting." That is, lower individual tax rates induced thousands of
businesses to shift from filing under the corporate tax system to
filing under the individual tax system, often as limited liability
companies or Subchapter S corporations.

IRS economist Kelly
Luttrell explained that, "The long-term growth of S-corporation returns
was encouraged by four legislative acts: the Tax Reform Act of 1986,
the Revenue Reconciliation Act of 1990, the Revenue Reconciliation Act
of 1993, and the Small Business Protection Act of 1996. Filings of
S-corporation returns have increased at an annual rate of nearly 9.0%
since the enactment of the Tax Reform Act of 1986."

Switching income
from corporate tax returns to individual returns did not make the rich
any richer. Yet it caused a growing share of business owners’ income to
be newly recorded as "individual income" in the Piketty-Saez and
Congressional Budget Office studies that rely on a sample individual
income tax returns. Aside from business income, the top 1%’s share of
personal income from 2002 to 2004 was just 7.2%-the same as it was in

In short, income shifting has exaggerated the growth of top
incomes, while excluding a third of personal income (including transfer
payments) has exaggerated the top groups’ income share. [emphasis added]

There are
other serious problems with comparing income reported on tax returns
before and after the 1986 Tax Reform. When the tax rate on top salaries
came down after 1988, for example, corporate executives switched from
accepting stock or incentive stock options taxed as capital gains
(which are excluded from the basic Piketty-Saez estimates) to
nonqualified stock options reported as W-2 salary income (which are
included in the Piketty-Saez estimates). This largely explains why the
top 1%’s share rises with the stock boom of 1997-2000 then falls with
the stock market in 2001-2003.

In recent years, an increasingly
huge share of the investment income of middle-income savers is accruing
inside 401(k), IRA and 529 college-savings plans and is therefore
invisible in tax return data. In the 1970s, by contrast, such
investment income was usually taxable, so it appears in the
Piketty-Saez estimates for those years. Comparing tax returns between
the 1970s and recent years greatly understates the actual gain in
middle incomes, and thereby contributes to the exaggeration of top
income shares.

In a forthcoming Cato Institute paper I survey
a wide range of official and academic statistics, finding no clear
trend toward increased inequality after 1988 in the distribution of
disposable income, consumption, wages or wealth. The incessantly
repeated claim that income inequality has widened dramatically over the
past 20 years is founded entirely on these seriously flawed and greatly
misunderstood estimates of the top 1%’s alleged share of

Opinions?  I am embarrassed to admit I have yet to read Pikaetty and Saez.  If you would like an alternative perspective from that offered by Reynolds, here is Paul Krugman.

Addendum: Here is Greg Mankiw on same, with related links.

Bible fact of the day

Calculating how many Bibles are sold in the United States is a
virtually impossible task, but a conservative estimate is that in 2005
Americans purchased some twenty-five million Bibles–twice as many as
the most recent Harry Potter book.  The amount spent annually on Bibles
has been put at more than half a billion dollars.

That is from a fascinating article about the economics of Bible publishing.

Assorted links

1. How to network, for "introverts"

2. P.J. O’Rourke, On the Wealth of Nations, in bookstores now.

3. Is Vista worth your while?

4. "It would be healthy for everyone if the academic curriculum broadened its scope, if the lineage of conservatism were consolidated into a respectable course of study – that is, if Hayek won one-tenth the attention that Foucault receives."  Read more here.

5. A new book on income and wealth.

Off the Books: The Underground Economy of the Poor

…in [south Chicago], as in so many American ghettos, confronting the local gang requires wading through some very murky waters.  This community is in many ways held together by a prevasive underground economy, and here, in the gray areas of ethics and legality, gang members and residents are inextricably linked.  In practice, many residents might have no direct involvement in shady trading.  However…the underground economy manages to touch all households, whether as a direct source of income, as a place to acquire cheap goods and services, or as a part of the public theater.  Thus, it is not easy to separate the innocent from the perpetrator…

That is from Sudhir Alladi Venkatesh, Off the Books: The Underground Economy of the Urban Poor.  You may recall, he is the guy who helped Steve Levitt crack the finances of a drug gang; here is a home page for him.

This book treats crime, gangs, poverty, micro-finance, the foundations of cooperative behavior, urban economics, Jane Jacobs, what the police maximize, and why so many barbershops rent out their back rooms to prostitutes, all rolled into one fascinating and profound volume.

So far this year Daniel Gilbert’s Stumbling On Happiness and David Warsh’s Knowledge and the Wealth of Nations are the only non-fiction books I have urged you to buy.  This book joins that list.  Very highly recommended, and Steve Levitt loves it too.

Do the poor need jail?

You’re going to think this is funny.  But if you’re poor, you need jail.  You really do.  That’s where I disappear to.  The food is good and it’s better in the winter; the people are okay to you, except for the guards that try to get up in your kootchie.  And you get some peace.  I mean, you have to know when to go!  You can’t go right after [check day] when everyone’s in there because they’re drunk.  No.  You go middle of the week, slow time, get a few days, get rested, get warm.  See, everyone around here does that.  That’s why we know the cops so well; we see them all the time.  They’re like our landlords.

That is from an interview with Carla, in Sudhir Alladi Venkatesh, Off the Books: The Underground Economy of the Urban Poor.

Marvin Minsky speaks

Has science fiction influenced your work?

It’s about the only thing I read.  General fiction is pretty much about ways that people get into problems and screw their lives up.  Science fiction is about everything else.

That is from a fun interview, Discover magazine, January 2007.  Here is Minsky’s new book.  What makes humans special, in his view, is that they have multiple and quite different ways of thinking about virtually any problem, including the mathetmatical, the literary, the symbolic, and so on.

Scrooge is out Early This Year

Robin Hanson has his Scrooge hat on:

A student told me the other day he wanted to be a doctor, so he could help
people.  I thought, "What, as opposed to the rest of us who hurt people?" 
Contrary to the smug self-righteousness assumptions of those in "helping"
professions, like child care, teaching, counseling, or emergency services, it is
far from obvious that these professions are any more helpful than the rest…

Read the whole thing if you are not already convinced.  I agree with Robin.  Let me add that I am an equal opportunity Scrooge, I also really dislike those TIAA-CREF ads which make professors out to be saints.   

When in doubt, sell

It seems that Bildungsroman has sold her books in Costa Rica, after an agonizing Auseinandersetzung over the matter.

I know not the details of this case, but empirical economics suggests a lesson.  Endowment effects are significant, especially for people who are not professional traders  of the item in question.  That means we tend to value things more, simply because those things are ours.

With some probability, that tendency is just plain irrational.  It might make sense to treat our friends or our babies this way, or to act this way in a subsistence economy, but endowment effects should not rule the behavior of not-so-risk-averse well-off,  Americans.  So if you are even considering selling something, you probably should do so.   

Bye, bye books.  And don’t buy another commodity, invest in memorable experiences.

I might add that when it concerns equities, buy and hold is better than portfolio turnover.  For second best reasons, people would be better served by a stronger endowment effect; greater possessiveness would cancel out their mistaken belief that they can beat the market.

Addendum: I believe that endowment effects are stronger for items we have paid for or won through competitive effort.  This means that your kid should pay for some of his or her college education, read more here.