Month: August 2007

My favorite things Pennsylvania

Growing up, I regarded Pennsylvania as the most typical and most American part of the country; I loved it.  I loved the mid-sized towns with old industrial and domestic architecture, I loved the museums of Philadelphia, and I loved the bridges of Pittsburgh.  Of course this was before America moved South and I gave the honor of most American place to Knoxville, Tennessee. 

This list didn’t require much thought, and the candidates poured out right away:

1. Eugene Ormandy recording: He introduced me to so much in classic music and somehow I felt he would never let me down; I’ll pick either his Beethoven 5th and 6th or his Shostakovich 10th.

2. Painting: The Gross Clinic, by Thomas Eakins. and my second choice would be the Andy Warhol car crash or electric chair paintings.  Mary Cassatt, George Catlin, Andrew Wyeth, John Sloan, Stuart Davis, and Keith Haring all deserve honorary mention.  And I’m sure there are others.  Wow.

3. Sculptor: Alexander Calder, but only the little ones, the more delicate the better.  The big ones in plazas are garish and misplaced.

4. Book on free trade: Henry George’s Protection or Free Trade remains a wonderful introduction to economics.

5. Writer: John Updike, or Benjamin Franklin.  John O’Hara never clicked with me, though he was my grandmother’s favorite after Shakespeare.  I’ll pick The Coup as my favorite Updike; I don’t think he’s written a good novel in a while.

6. Popular music: Todd Rundgren was remarkably talented, never quite fulfilled his promise, but Something/Anything remains a wonderful double album.

7. Jazz: Art Blakey, Keith Jarrett (The Koln Concert, or his Shostakovich), Erroll Garner, Earl Hines, and George Benston was good at the very beginning.  Stanley Clarke is amazing to hear live.  Wow.  And that’s not even counting jazzmen who played long stints in Philly, such as John Coltrane and Sun Ra.

8. Rap music: Schooly D, The Adventures of Schooly D, remains one of my favorite rap albums.

9. Stepdaughter: Yana (it feels funny to list her as a thing, but in the metaphysical sense yes indeed she is), who as of today is moved in at Franklin and Marshall.  Boo hoo!

Note we haven’t even touched the Amish quilts, Fraktur drawings, mighty rivers, the Barnes collection, fall foliage, sports, Reading, or philanthropy.  Harrisburg, however, is a blight.

The bottom line: Almost certainly, Pennsylvania is better than your state.  If you are a foreigner, and want to understand what made America great, study and visit Pennsylvania.

Discover Your Inner Ecumenicist

I loved this blog post, it is wonderful when a reader sees what you are getting at:

So how can Cowen’s approach be applied to questions of faith? ReligionWriter contends that for many people, religious observances present problems similar to those of Cowen’s art museum. We want to enjoy the experience, and it’s part our self-image to believe we find going to the church or synagogue or mosque meaningful and fulfilling. Yet who has not yawned their way through a sermon or prayer at one time or another? How do you keep your mind from wandering from the divine service to thoughts about grocery shopping later in the day or your next work assignment?

Applying Cowen’s logic, the first and probably most difficult step is admitting that we don’t always enjoy religious services and observances as much as we would like to think we do.

The conclusion?

Next time you look for a book on religious inspiration, don’t walk too quickly past the economics section.

I’ll write more soon about the implicit theology in Discover Your Inner Economist.

Space Tourism II

Three years ago I wrote a controversial article, Is Space Tourism Ready for Takeoff?, in which I argued:

The vision is enticing but the facts suggest that space tourism is not
ready for market. The problem is not the monetary expense, there are
enough millionaires with a yearning for adventure to support an
industry. The problem is safety. Simply put, rockets remain among the least safe means of transportation ever
invented. Since 1980 the United States has launched some 440 orbital
launch rockets (not including the Space Shuttle). Nearly five percent
of those rockets have experienced total failure, either blowing up or
wandering so far from course as to be useless. The space shuttle has a
slightly better record of safety — it was destroyed in two of 113
flights. There are lots of millionaires willing to spend one or two
million dollars for a flight into space but how many will risk a two to
five percent chance of death?

Predictably my article generated a lot of criticism, especially from people in the industry, e.g. here and from the CEO of Masten Space systems here.  (I responded briefly at the time.)  Some of the criticism was justified, I should have noted that space tourists don’t want to go as fast or as high as the space shuttle or orbital launch rockets, but most of the criticism was a simple denial that the evidence from decades of space flight was relevant.  "Everything changed with SpaceShip One," I was told.

Unfortunately everything has not changed.  I am sad to report that rockets remain very dangerous.

Fantasy Journals

Carl Bergstrom has a good idea, fantasy journals.  A fantasy journal is a virtual collection of articles from other journals.  As with fantasy baseball or football the fun part is when fantasy journals compete with one another based upon a common ranking system such as citation counts.   Care to go head to head with Steve Levitt (JPE), Robert Moffit (AER) or Ed Glaeser (QJE)?

Prufer and Zetland take the idea one step further, how about auctioning papers and paying editors and referees based on future citations?

The Cato gas tax critique: is this claim true?

The second problem is that an increase in gasoline taxes would have very little effect on aggregate tailpipe emissions.  That’s because consumers will primarily respond to a fuel tax over the long run by purchasing more fuel efficient vehicles, not by driving less.  And for every incremental increase of automotive fuel efficiency, a 20 percent increase in vehicle miles traveled follows, and this increase in driving will greatly reduce the emissions reductions that we might otherwise see in response to the tax.  Economist J. Daniel Khazzoom, for instance, calculates that doubling the gasoline tax under the current regulatory regime would only reduce tailpipe emissions by 6 percent over the long run.

Here is the paper.  You’ll see the footnotes and citations in the original text.  Here is one relevant Khazzoom piece, JSTOR only.  How is this work regarded?

Fighting for the pooling equilibrium

Citigroup , Bank of America and other
top banks took the rare step of borrowing $2 billion from the
U.S. Federal Reserve on Wednesday, in a bid to reassure markets
and remove the stigma associated with getting financing from
the central bank.

U.S. shares rose after the move, as the banks’ moves
signaled that battered credit markets may start to heal, though
bank stocks were mixed amid lingering concern about mortgages.

Borrowing money directly from the Fed has historically been
seen as a sign of weakness, but Bank of America, JPMorgan Chase
& Co, and Wachovia Corp said they did it for the sake of the
financial system. All four banks emphasized they have access to
other, cheaper funds.

Here is the story.  I don’t know if this will work, but it is a neat trick.  Imagine that you, as a smart person, went around saying stupid things, in an attempt to limit discrimination against the stupid.  You can come up with other analogies of your own.

The market for lemmas

It’s not that big:

Of the sixty articles in AER, EJ, JPE, and QJE that had been cited more than 500 times, only one article contained an author written lemma.

Here is the paper, and thanks to Johan Almenberg for the pointer.  On p.6 you see a good graph, "Lemma frequency by decade."  Note also that a top paper in Econometrica is much more likely to have a lemma.

So You Think You Can Be President?

Our system for choosing presidents doesn’t work very well.  Voters are woefully uninformed on the most basic of issues and many end up voting on whim.  I don’t think restricting the franchise is a good solution, however.  A better idea is to create procedures that encourage voters to become better informed.  Our current institutions for providing information are lousy.  Debates, for example, are boring, the politicians don’t answer the questions and most importantly the voters don’t know what a good answer is.

(If the voters, for example, don’t know the difference between Sunni and Shia then how can they distinguish foolish and uninformed approaches to foreign policy from intelligent and informed approaches?  And if the voters can’t tell who is uninformed from who is informed then politicians have little incentive to become informed.)

Thus what we need is a way of conveying information to uninformed, unsophisticated voters in a way that is entertaining yet produces information about politicians that is correlated with real skills.

I suggest a game show, So You Think You Can Be President?  SYTYCBP would have at least three segments.

Coase it Out: Presidential candidates have 12 hours to get a bitterly divorcing couple to divide their assets in a mutually agreeable manner.  (Bonus points are awarded if the candidate convinces the couple to stay together.)

Game Theory: Candidates compete in a game of Diplomacy.   I would also include several ringers – say Robin Hanson, Bryan Caplan and Salma Hayek.  Why these three?  Robin is cold, calculating and merciless – make a logical mistake and he will make you pay.  Bryan is crafty and experienced.   And Salma?  I couldn’t refuse her anything but presidents should be made of stronger stuff so we need a test.   

Spot the Fraud:  Presidential candidates are provided with an economic scenario (mortgage defaults are up, hedge funds are crashing, liquidity is tight).  Three experts propose plans.  The candidate must choose one of the plans.  After the candidate chooses, the true identities of the "experts" are revealed. One is a trucker, another a scuba diver instructor and the last a distinguished economist.  Which did the candidate choose? 

Entertaining?  Check.  Correlated with important skills for governing?  Check.  Can the voters tell who the winner is?  Check.

What segments for So You Think You Can Be President do you suggest?

Addendum: Yes, I am serious.

Department of Yikes

Overall, 74 percent [of men visiting streetwalkers] reported that they always wear a condom (men with stable relationships were less likely to use protection, at least with prostitutes).

It’s not so hard to write down the underlying utility function here, is it?

That is from the September 2007 issue of Atlantic Monthly, citing research by economist Marina della Giusta and others, published in Applied Economics.  The working paper seems to be here.

In another development at Atlantic Monthly, but unrelated to the above factoid, or to the more general idea of yikes, the new Megan McArdle blog is now up and running.  Here is Megan’s post on what old people deserve.

One proposal for improving the rating agencies

…Levy and Peart propose a simple solution: randomization. 
Rotate ratings firms the way that baseball rotates umpires. 
If they were assigned by lottery, rating agencies would have enhanced incentives to take the public interest into account — and diminished incentives to try to please underwriting institutions that were paying the bills.  Something of the sort was incorporated among the reforms mandated for accounting firms by the Sarbanes-Oxley Act of 2002 — the rotation every five years of the lead audit partner and the reviewing audit partner was required, for example, and more frequent changes of firms themselves was recommended. But the measures stopped well short of randomization.

Here is the full discussion.  Yes that Levy is my colleague David Levy, who has been a major influence on our department, most of all through his book The Economic Ideas of Ordinary People.

A Farewell to Alms, pp.1-112

1. Did hunter-gatherers really have living standards as high as people in 18th century England?  By focusing on the long run, Clark neglects the pains of equilibration.  Hunter-gatherers who survived to 30 maybe had decent lives, but population was very low.  It was kept low, in part, by lots of brutal and painful death.  We can’t just focus on the steady-state conditions in making welfare comparisons.  Modern research is also discovering that primitive societies have very high levels of war and violent death; if we’re playing time travel games, I’m opting for 1800, and not just to have a chance of hearing Haydn.  I’ll also take modern Tanzania over the hunter-gatherers, in a heartbeat, contra what Clark implies.

2. Why should we aggregate income comparisons by country (or the whole world) rather than by city?  World history looks very different if we do the latter.  Aren’t most countries relatively recent inventions anyway?  More generally, I would like a more disaggregated look at the data.  Big chunks of the urbanized human population — pre 1800 — seem to have violated Malthusian precepts for centuries on end.  "Stadtluft macht frei" was the old German saying.

3. How long is the long run?  This is one of my biggest questions about the work and about Malthusian predictions more generally.  Are we just comparing 30,000 B.C. to 1800 A.D.?  If so, we have only two data points.  If we look at times in between, there is much more scope for non-Malthusian results, even if they hold for "only centuries."

4. Violent conflict and predation are not given enough (any?) importance.  Cities that avoid violent conflict do pretty well.  Admittedly, violence is itself endogenous to Malthusian considerations, but I’m not going to reduce war to population pressures (and certainly Clark never tries to.)  Isn’t part of the historical inability to boost long-run living standards simply the result of recurring wars and depredations?  17th century European history, among other times, shows just how much war matters.

5. Should I reject the Julian Simon model I grew up with?  In that view there are increasing returns to scale within cities, where people usually don’t starve.  The countryside languishes in poor countries, in part because it is underpopulated.  Rather than having a "one population model" with an aggregate "n," labor markets are local.  The "plagued by diseconomies of scale rural folk" cannot sufficiently connect with the "economies of scale urban sophisticates," mostly because of bad institutions and backward infrastructure.  And the cities prove unable to protect themselves against all ongoing predations.  Doesn’t that model fit the data too, and fit the disaggregated and shorter-run data better?

6. I can’t find the single place where Clark directly tests the Malthusian model.  I fear he will regard this observation as unfair, since there is argumentation and data of some kind on virtually every page.  But I still am not satisfied.  I see lots of evidence for "history shows mean-reversion and population pressures are one factor affecting wages."  It is harder to find a) what "best alternative" the Malthusian model is being tested against, b) what evidence would adjudicate between models, c) what is the short-run claim about the response of population to real wages, and d) what in history are the "hard cases" for the Malthusian model and how does Clark handle them?

7. Charles Kenny argues that the Malthusian model does not explain observed short-run dynamics for population and real wages.  I don’t regard this piece as a refutation of Clark by any means, but the evidence on how well real wages predict population growth seems to me murky rather than decisively in Clark’s favor.  There’s just not a single, simple model at work here.

If you are coming to the book blind, here is a short piece by Clark.  Here is my earlier column on the manuscript.  Here is a survey paper on the Industrial Revolution and the Malthusian trap.  Here is more good background.  Peter Lindert considers how much real wages predict population growth in British history.  Read this too.

What do you all think?