Month: May 2007

The Norwegian investment fund

The government began salting away its oil proceeds in a special reserve in 1996.  Known until last year as the Petroleum Fund, it was renamed the Pension Fund, which is supposed to make Norwegians aware that the fund’s purpose is to provide for future generations.

With the spike in oil prices, it has become the biggest public fund in Europe.  At the rate it is growing, experts say it will be worth $800 billion to $900 billion in a decade.  That translates into $180,000 for every man, woman and child in Norway.

“Inevitably, Norwegians feel bad about having all this money,” said Gro Nystuen, a human rights lawyer who is chairman of an ethics council that screens investments.  “Our job is to make the Norwegian people feel less guilty.”

The Norwegians won’t invest in Wal-Mart, but they will invest in Saudi Arabia.  And get this:

Blacklisting companies that worsen climate change, she said, would put Norway in an awkward spot as its national fortune rests on fossil fuels.

Here is the full story.

Munger for Governor!!

My grad school officemate, friend, and co-author Michael Munger (better known as the Chair of Duke’s Political Science department and North American editor of the journal Public Choice is running for Governor of North Carolina). Sadly for Mike, when he chose among the many parties clamoring for him to be their standard bearer, he chose the Libertarian Party, which is not even on the ballot in the state!

Actually Mike is running to get the Libertarian Party back in the long term political debate in NC and is engaged in a signature drive to get the party on the ballot. Although I doubt that any libertarians read MR, I thought I’d give Mike a shout out and see if any supporters might emerge (NC natives for signatures and votes and true friends of liberty anywhere for $$$). 

By the way, Mike’s previous elected offices include being President of the Wash U. economics grad student association (which I’m pretty sure he rigged. I know for sure he rigged the election of his successor because I had massively stuffed the ballot box for a candidate who didn’t win) so he may well be OVER-qualified for the post he seeks.

C’mon people, we can’t let this happen:


What Danny Glover and I have in common

In a kind of a weird back-door way, I also support Hugo Chavez. Or put another way, and going a little Hegelian, as Tyler likes to say, I think Chavez is an historical necessity, and a richly deserved one at that.

Venezuela has relatively high levels of income inequality (a gini coefficient in 2000 of around .44 compared to .36 for the US according to the UN) from a relatively low base and was run by a corrupt elite class who swallowed up oil wealth while the economic standing of the country plummeted. In 1957, Venezuela’s GDP per capita was 51% of the US, in 2003 it stood at 18.5% of the US.  Existing institutions had no credibility with a very large
portion of the population and simply could not continue to exist as they had.

Don’t get me wrong here, I’m NOT endorsing Hugo. Do I think that Chavez and his policies are going to serve the long term economic interests of Venezuela? NO. Do I think Chavez is a charming guy? NO. Would I be sad if Chavez lost power? NO. If George Bush and Chavez were in a burning building and I could only save one would it be Chavez? NO.

I am just saying that Venezuela was run into the ground by its ruling class and Chavez is the (I hope only temporary) result of their short sighted, poor governance.

A similar analysis applies to Evo Morales. Bolivia has even higher income inequality (year 2000 gini of .60) from an even lower base, and has fallen even more precipitously in economic standing relative to the US, From 25% of US per-capita GDP in 1951 to 8.7% in 2003. That is just a disaster. The ruling elite of Bolivia had Evo Morales coming and I hope he gives it to them but good.

I am not sure whether this type of path is inevitable in Latin America. Lula was a populist firebrand but has governed quite moderately.  Brazil though, did not suffer nearly the same fall in its relative living standards. Their peak of per-capita income relative to the US occurred in 1980 at 31% and it "only" declined to 21% by 2003. Income inequality though is very high (2003 gini of .58).  Will Brazil avoid a Chavez, or is that yet to come for them?

Note that the GDP figures used here are from the Penn World Tables 6.2 and are adusted for deviations from purchasing power parity (the variable I use is "CGDP relative to the United States" and it is available from 1950 – 2003).

How much of a jerk do you have to be to oppose immigration?

YouNotSneaky has a great post in which he calculates how big a "jerk" you have to be to oppose immigration.  The answer – proven with considerable mathematical sophistication – is that the exact "jerk factor" depends on theta, the extent to which marginal utility diminishes with income.  The results, which you are unlikely to see in the JPE, make me laugh (but note that others will be insulted) are graphed here.  Read the whole thing for details on the calculations which do make a serious point.

Hat tip to Dani Rodrik.

My favorite things Norwegian

1. Film: The 1989 Pathfinder is one of the best "unknown" movies, why is there no DVD reissue? 

2. Classical music.  My favorite Grieg recording is Lyric Pieces, by Emil Gilels.  Mostly the composer bores me, but if you get the piano concerto try Dinu LipattiPeer Gynt reminds me of a bad coffee commercial, which in fact it once was.  For contemporary composers, Arne Nordheim is consistently interesting.

3. Jazz: Norway is now a world leader in this field; start with the Tord Gustavsen Trio, Changing Places.  Here are more resources.  That said, Jan Garbarek has never thrilled me.

4. Playwright: Almost everything by Ibsen is superb, and yes it does repay a rereading.  Too many smart people had A Doll’s House forced on them in high school and then take him for granted.  His fantasy piece Peer Gynt is one of the most imaginative literary creations, period.

5. Novels: Knut Hamsun was a fascist, still Hunger holds the reader’s attention.  My favorite is Sigrid Undset; Kristin Lavransdatter is long but a must-read.  Ole Rolvaag’s tales of the American frontier often have interesting property rights themes.

6. Pianist: Leif Ove Andsnes is remarkably consistent and tasteful.  HÃ¥kon Austbø is a strong and underrated runner-up, I love his Messiaen on Naxos.

7. Soprano: Kirsten Flagstad, anything by Wagner.

8. Economist: You’ve got Trygve Haavelmo and Finn Kydland, both Nobel Laureates, plus Ragnar Frisch; the overall slant here is technical.  I also enjoy the social science books of Jon Elster, a political scientist by training but a polymath by nature.

The bottom line: In almost every category the top offerings of Norway are underrated or at least underexplored.

This is taking Bela Balassa too far

Here in Oslo a bottle of water costs five to six dollars.  That’s not a bottle of water in a starred Michelin restaurant with molecular gastronomy.  That’s not a bottle of Voss served by a ravishing Norwegian blonde in a cool lounge with modern Scandinavian design, surrounded by hipsters.  That’s not a bottle of water served next to the main church or a lovely fjord.

That’s not even a super-large bottle of water.  That’s a mid-sized plain water from 7-11.

A so-so kung pao chicken costs 25 to 30 dollars, and that is for lunch.

What can I do with an economics major??

At the University of Oklahoma, they (rightly) pretty much keep me away from the undergrads. But I gather this is a frequent question, often answered with "anything that you could do with a business degree only for less money"!! Hence I offer up this list of way cool economics majors to inspire your students:

Brian Stann (won silver star, and now mixed a martial arts fighter) US Naval Academy

Scott Adams (creator of Dilbert) Hartwick College

Danny Glover (actor) San Francisco State University

Greg Ginn (punk rocker and entrepeneur) UCLA

Bill Belichick (NFL coach with super bowl bling) Wesleyan University

Mick Jagger (international sex symbol??) London School of Economics

Mike Musina
(Yankees Pitcher)  Stanford

I don’t want to be sexist with this list; I am pretty sure the pro poker player Vanessa Russo was an econ major at Duke, but I couldn’t confirm this. Are there any cool female econ majors that I’m missing (Robin (world’s greatest co-author) was a political science major and Sandra Day O’Connor (ex-Supreme) AIN’T cool)?

PS on the down side there is always Ken Lay (evildoer, Missouri) and Kofi Annan (conflicted bureaucrat, Macalester College).

Are hedge funds worth it?

Here is Dave Leonhardt’s stimulating piece.  Here is the key fact:

Last year, the Standard & Poor’s 500-stock index jumped 14 percent, while the average hedge fund returned less than 13 percent, after investment fees, according to Hedge Fund Research in Chicago…Since 2000, the average hedge fund hasn’t done any better, after fees, than the market as a whole, according to research by David A. Hsieh, a finance professor at Duke.

My guess is that a small number of very bright individuals can in fact beat the market on a systematic basis.  Today the world can mobilize enough capital so that these people become very very rich and have a larger impact on market prices than in times past.  These individuals also spawn overconfident imitators, which lead to subnormal returns for the non-superstars.  On average the gains and losses are a wash, but the true stars must limit the amount of capital they manage, for fear of pushing around market prices too much.  Some set of insiders thus continue to gain wealth whereas most outsiders are playing the usual efficient markets game, with slightly subpar returns, due to the informed trading of the insiders.  The geniuses are in effect taxing the uninformed trading of the non-genuises, but I do not see the trading volume of the latter group falling in response.  In that model, in the first best, it is the trading of the losers — not the winners — which should be taxed.

meet the new boss, same as the old boss?

Notwithstanding the seductive academic merits of free trade, real world multilateral trade agreements are all about power and power politics. Negotiations cover items further and further away from simple trade and tariffs (eg. TRIPS, TRIMS, and the Singapore issues) pressing more and more concessions on poor countries without giving them what they really want and need: open access to rich country markets in agriculture, textiles and footwear (I know the multifiber agreement has expired, but what did the US and the EU do? Impose sanctions on "temporary surges" as allowed under the successor to the MFA). I for one have never understood why poor countries have continued with this process.

Last month I was at a conference and was opining that this time the poor countries would stick to their guns and scuttle the deal if no true agricultural opening was forthcoming. A fine gentleman named Rorden Wilkinson politely begged to differ and referred me to his excellent book: The WTO: Crisis and the Governance of Global Trade. The book argues that ministerial collapses and apocalyptic rhetoric are common throughout the history of GATT/WTO negotiations and often serve to advance, rather than deter, progress towards a conclusion satisfactory to the great powers. Even though I still think there will be no major trade deal, I highly recommend the book.

Does immigration bring Nordic welfare states to the verge of collapse?

They all seem to think so, but I’ve long found this fear puzzling.  These states could solve many of their fiscal problems by either cutting taxes/spending a few percentage points, or by moving to complete dual benefit status (read: non-whites receive less money).  No matter what you think of those ideas, they would stave off fiscal crisis.

The trick is that Americans and many of the Nordics have such different senses of what counts as a major political problem.  For better or worse, we are used to tolerating waste and disorder.  They fall apart if even a single piece of the machinery of government is out of order.  (Similarly, the Japanese are aghast over tiny tears in the fabric of social order.)  So if someone is collecting benefits "who shouldn’t be," it threatens their entire basis of social and legal organization.  I, as a New Jersey-bred American think "too bad, but big deal, what else is new?"

Would it help them to be more like me?  Can they simply overlook these instances of immigrant abuse?  Maybe not.  If they were more like me, they wouldn’t be them in the first place. 

And that is why so many Nordics think their welfare state is in such danger from immigrants.  Often the countries most able to handle problems are — for that same reason — the most worried about those problems.  It is their own vigilance which makes them so vulnerable to exceptions and scattered loose ends.

But if they could be more…um…Hegelian…their future would be brighter.

How banner ads work

A quick test: how many of you can name the product being advertised in
the banner ad at the top of the page?  Chances are, the ad’s presence
didn’t even register with most seasoned web browsers.  But that’s
probably okay, at least according to research that appears in June’s Journal of Consumer Research.
The research concludes that repeated exposure to a product via banner
ads generates a positive feeling towards that product.  The good news
for consumers is that a critical reevaluation of the product can make
these positive feelings vanish.

Here is more.  I’ve also thought that clicking to make the ad go away makes the ad, in terms of your subconscious, more effective than watching it.  Once you associate the ad with feelings of control, the product becomes something you can deal with.

The pointer is from

How to debate with one’s wife

Even if I can debate with the devil himself, I cannot debate with my wife.  She has, namely, only one syllogism, or rather none at all…The consequence of this is that all my skill in debating becomes a luxury item for which there is no demand at all in my domestic life.  If I, the experienced dialectician, fairly well exemplify this course of justice, which according to the poet’s dictum is so very long, my wife is like the royal Danish chancery, kurz and bündig [short and to the point], except that she is very different from that august body in being very lovable.

That is again Kierkegaard, from Prefaces.