Month: October 2007
1. Monkey wars?
3. A new Amazon feature: who writes short and long sentences?
4. Farewell to Alms MP4: Tyler Cowen, Brad DeLong, and Greg Clark.
It was much fun, as Brad and I realized we hadn’t seen each other since
graduate school. Greg goes first, we each speak for about fifteen
minutes, Brad presents Michael Kremer, I talk about institutions, then
there are questions from the audience.
5. "After losing embassy employees to attacks, he advised staffers to keep a six-sided die in their glove compartments; to thwart ambushes, they should assign a different route to work to each number, he said, and toss the die as they left home each morning." More here.
This issue will throw market-oriented economists into conniption fits. On one hand, it sounds like free trade. On the other hand, it sounds like nationalized industry. If we don’t want the U.S. government owning a chunk of the S&P 500, why should we embrace Russian government ownership? Do you feel better at a 19 percent share in a local public utility? The $3 trillion and maybe someday $12 trillion in these funds will force us to define exactly where national security considerations start and end, never a fun job. On the bright side:
1. Having the other country’s stock shares to nationalize gives the U.S. foreign policy leverage (wait: is that good?)
2. A falling dollar will to some extent limit this issue, though it won’t reverse the current accumulation of liquid reserves.
3. Foreigners and foreign governments rarely buy Google at the ground floor level and I suspect they earn sub-normal returns, relative to the pool of American investors as a whole. They’ll end up financing yet some more of our consumption, albeit through a new mechanism. What a racket!
4. As Dani Rodrik indicates, the existence of the California pension system hasn’t exactly sent U.S. companies into chaos.
5. There is a genuine chance that China and other countries, as they want to invest more themselves, will feel additional pressure to open up to foreign investment. I’ll recognize that free capital movements are not always a boon for development, but sooner or later China has to take this plunge, if only to move toward greater freedom and transparency.
What’s an old person anyway? Does it depend on how many years are behind you, or how many years you still can expect to live? Here is John Shoven:
The current practice of measuring age as years-since-birth, both in
common practice and in the law, rather than alternative measures
reflecting a person’s stage in the lifecycle distorts important
behavior such as retirement, saving, and the discussion of dependency
ratios. Two alternative measures of age are explored: mortality risk
and remaining life expectancy. With these alternative measures, the
huge wave of elderly forecast for the first half of this century
doesn’t look like a huge wave at all. By conventional 65+ standards,
the fraction of the population that is elderly will grow by about 66
percent. However, the fraction of the population that is above a
mortality rate that corresponds to 65+ today will grow by only 20
percent. Needless to say, the aging of the society is a lot less
dramatic with the alternative mortality-based age measures. In a
separate application of age measurement…GDP would be between seven and ten percent higher by 2050 if retirement
Here is the paper (I can’t find a non-gated version). Note that the entire increase of life expectancy of the twentieth century has been taken in the form of retirement, rather than extra work. Of course our social security and Medicare policies have encouraged early retirement, and we have not adjusted age eligibilities for longer life spans and better health. For fiscal reasons, we will likely have to increase eligibility ages; not only will we spend less money but it will encourage more work.
If you have been thinking that a demographically-based American economic collapse is virtually inevitable, this paper gives some grounds for hope. Here is further commentary.
Here’s a cool idea from a new Hollywood movie producer, a money back guarantee!
Nicholas Tabarrok is putting his money where his mouth is. The
producer from Toronto-based Darius Films is certain that audiences will
crack up during the screening of his oddball comedy Weirdsville, opening Friday, or he will refund their movie-ticket money come Monday morning.
Tabarrok tells Playback Daily it was a "spur of the moment" idea.
"It occurred to me that this is a common thing… If you buy a
product and you’re not satisfied, you get your money back… The same
principle [should apply] to film," he says.
Brilliant, innovative, incentive-compatible! You’d think this guy had an economist for a brother or something.
It will not surprise readers to know that I’d enjoy a good smash of Paul Krugman’s book Conscience of a Liberal but historian David Kennedy’s negative review in the NYtimes is more trash than smash. First, there is a bizarre attempt to argue that Krugman is not an economist because he is not laissez-faire!
And yet maybe Krugman is not really an economist – at least not
according to the definition offered more than a century ago by Francis
Amasa Walker, the first president of the American Economic Association,
who wrote that laissez-faire “was not made the test of economic
orthodoxy, merely. It was used to decide whether a man were an
economist at all.”
Most modern economists continue to celebrate
Walker’s orthodoxy, and behind it, the classical doctrines of Adam
Smith, whose fabled “invisible hand” regularly works wonders of
production, distribution, innovation and efficiency, provided it is
kept free of the meddlesome “nanny state.” Against the constant threat
of encroachment from that benighted quarter the free-market faithful
are ever vigilant.
Admittedly, even though this view is nonsense it’s nonsense that is repeated often enough so that an outsider could be forgiven for drinking the heterodox cool-aid. At this point I was willing to forgive.
Unfortunately, the rest of Kennedy’s review has very little meat. If the best that historian Kennedy can say against Krugman’s "factually shaky" history is that "Kansas, whatever its other crimes and misdemeanors, is not customarily
regarded as the birthplace of Prohibition; the Voting Rights Act passed
in 1965, not 1964." then maybe Krugman is on to something. (For the record, the first point is arguable the second point is a trivial error.)
Worse yet, Kennedy agrees with Krugman when Krugman is wrong. It’s not true, for example, that Americans "have become markedly less [secure] in
recent decades." Nor is it true that "A tidal wave of risk-shifting – from defined-benefit to
defined-contribution retirement plans, and from employer-financed to
individually-paid health care insurance, to cite but two examples – has
set millions of American families anxiously adrift on a sea of
uncertainty." (See e.g. Tyler here and here).
I don’t understand the divisions within the liberal fold which explain Kennedy’s review (he is no right-winger) but I know something is up when Tyler says "The Conscience of a Liberal is um…not that polemic. It’s not that shrill." While liberal Kennedy says "Like the rants of Rush Limbaugh or the films of Michael Moore,
Krugman’s shrill polemic may hearten the faithful, but it will do
little to persuade the unconvinced or to advance the national
discussion of the important issues it addresses."
My ultimate response to Kennedy’s review? I bought the book.
Addendum: Brad DeLong points out that Kennedy blows the Walker quote as well. Walker, in 1889!, was pointing out that economists were not doctrinaire proponents of laissez-faire.
In today’s America, there are more World of Warcraft players than farmers.
Hat tip to Paul Krugman.
1. Days on the Family Farm, by Carrie Meyer. An interesting economic study of life on an early twentieth American family farm, based on personal diaries, and an antidote to anyone who thinks that all GMU economics faculty are like the bloggers you know.
2. Theory of Clouds, by Stephane Audeguy. I loved this novel, which was the rage in France but sadly will die here stillborn. Think Julian Barnes, Sten Nadolny, or Kazuo Ishiguro. Short, fun, dreamy, and conceptual. Its quality illustrates one of my favorite book-buying algorithms, which is to snap up serious foreign fiction translated into English, if only because the selection pressures are so severe.
3. Free Trade Reimagined, by Roberto Unger. This is the fourth book this year to challenge the doctrine of comparative advantage, a more important fact than any argument in the books themselves. The book is weak on empirics but it does present the sophisticated version of the anti-free trade arguments. I don’t believe in open borders, so I suppose I’m not a free trader either. Unger is smart, smart, smart, but that doesn’t mean he should be Minister of Long-Term Planning in Brazil, which he is. Here’s the whole thing on-line.
4. The Bad Girl, Mario Vargas Llosa. That makes two wonderful novels in one week. I don’t enjoy all of his recent work, but this one is very fun, hearkening back to the tradition of Aunt Julia and the Scriptwriter. The Edith Grossman translation is first-rate as always.
5. The Rest is Noise: Listening to the Twentieth Century, by Alex Ross. Ross won’t quite say it, but he tries to convince the reader that
the twentieth century is the best century for music, ever.
That’s without pushing serialism too hard or resorting much to popular
music. Sibelius, Janacek, Messiaen, and John Adams are among the heroes in this story. If you
are only going to buy (and read) ten books on music, ever, this should be one of
them. Here is one good review. Here is a Jason Kottke interview with Ross, very interesting.
It was an amazing week for reading (the best since I’ve started doing MR) mostly because it was an amazing week for flying. There’s more to come…
Leaders who make history are often provincials: Provincials attempt what sophisticates consider naive. The two current candidates for world leadership [Reagan, Gorbachev] were both country boys, a state park lifeguard and a champion harvester, each an outsider to the inner elites of the government he headed, each in his own way an idealist determined to push beyond the status quo. Reagan had been tailored in Hollywood, but the sophistries of Washington’s nuclear mandarins had failed to complicate his apocalyptic Dixon, Illinois, worldview. Gorbachev’s southern Russian accent and hillbilly grammar offended the ears of the suave Moscow bureaucracy he outmanipulated a dozen times on any ordinary day.
That is from Richard Rhodes’s interesting Arsenals of Folly: the Making of the Nuclear Arms Race. I’ve never seen a good quantitative study of how leadership biography matters for policy outcomes, and I expect that solid results are as hard to find as in birth order studies. Does anyone know of a good, concrete stylized fact here?
The Nepali Times in Kathmandu recommends Marginal Revolution.
I don’t think comparative advantage will keep (inclined) top economists away from blogging:
1. Very good economists can better use blogs to attract an amazing audience; even Dani is seeing the light, and yes his new post does mean that for trade policy he can worry less about low-cost outsourcing! Opportunity cost may be higher but value-created is higher as well for the better economists.
2. A blog can be a loss leader; Greg’s blog promotes his textbook and Dani’s blog helps his new book. Prominent economists are more likely to have promotable ancillary products. Don’t the high productivity companies often spend the most on advertising?
3. Temporary blogging will become more popular. When Ed Glaeser writes for The New York Sun, he is writing for the blogosphere more than he is writing for Sun readers but at the end of the day he doesn’t have to come up with another post for tomorrow.
4. I predict there will arise a rotating blog, run by a consortium of top economists. Figures such as Justin Wolfers will blog their research for two or three weeks and then turn the reigns over to a buddy, moving on, and returning perhaps a year later for another brief stint.
5. If you are wondering about me, I face an especially low marginal cost of blogging and thus I am likely to continue for a long time. For both consumption and research reasons, I was already reading and absorbing lots of outside material (a key base for my blogging content, though I miss being able to read quite as much as I used to), so turning it into blog posts is relatively cheap. Dani and others will probably agree that coming up with the content is the problem, not the actual writing of the post.
Here is another good post on the benefits of econ blogging, stressing the concept of self-experimentation.
Attacking conservatism, Greg Anrig writes:
I think it’s fair to equate Heritage with the conservative movement…the whole unitary executive concept about executive power began to be
formulated in the Reagan Justice Department. Those guys were pretty
much all conservatives, wouldn’t you say, Tyler?
I find the clarity here extraordinary, namely how much Anrig focuses upon labeled individuals and groups of individuals. Conservatism (yes, the concept, truly understood, includes some well-known liberals) stresses that institutions and ideas are what matter, not which group of people is in power. When institutions are bad, and the general tenor of public ideas is off base or depraved, it is not better to be governed by "conservatives," and arguably it is worse. Of course conservatives, once they achieve power, will view political matters in terms of people just as Anrig does ("we can’t let those guys back into Treasury"), if only because natural political selection eliminates those conservatives who do not.
That is one reason why conservatives so often act against conservative ideas, and why conservative politicians so often lie. In fact the better a conservative politician sounds to conservative listeners, the more inconsistent those ideas will be with the actual process of governing.
If you are a conservative looking to improve the world, one option is to improve the quality of religion in society. You should consider politics an inherently corrupting activity for conservative ideas; yet this fact, taken alone, does not prove it is better to follow left-wing ideas.
Addendum: Here is a link to Matt and Ezra on same.
I’d long wanted to offer my thoughts on this topic, so when Today’s Machining World approached me, I thought they were an ideal outlet. I wrote:
Absolutely. Most of all, the Harry Potter series is a social phenomenon. It’s not mainly about the books. It’s about kids – and often adults – sharing a common reading experience. We crave this kind of social connection – that’s what Oprah’s Book Club is about too. We like to look forward to the same books, read them at the same time, and talk about them afterwards. If you took these same kids, put them on a desert island, and just gave them copies of Harry Potter, with no further information or explanation, most of them wouldn’t be so impressed.
With the current Potter series now over, we are looking for something else to latch on to. We may not find it right away, but when we do, the world will be wealthier and have more readers. Some other book series will trump the popularity of Harry Potter – it is simply a question of when.
For a differing point of view, scroll to p.50 to read Megan McArdle, and on p.51 is Kevin Hassett.
…[compared to the United States] income plays a larger role in buffering children’s health from the
effects of chronic conditions in England. We find no evidence that the
British National Health Service, with its focus on free services and
equal access, prevents the association between health and income from
becoming more pronounced as children grow older.
Here is the paper. Of course equity is not the only argument for single payer systems. Here is part I of the series, concerning Canada and the (possible) continuation of the health-income gradient there. Many of you were skeptical about the reported result, but here is further evidence. Most of all, the determinants of health are not well understood; that is itself a sobering fact no matter what your policy point of view.
Chapter one: Politicizing the government, and lowering the quality of governance, should not be considered conservative ideas. The incompetence of Bush, a self-professed conservative, doesn’t make this so. The Founding Fathers cared about governance, and there have been plenty of bad Democrats. Furthermore when the Clinton administration improved FEMA, it was praised at George Mason and very vocally.
Chapter two: The Unitary Executive. No way is this a true conservative idea. No way. Checks and balances is a fundamental conservative idea.
Chapter three: Iraq. I’ll leave this aside for the sake of keeping the comments thread manageable. You’ll have a chance to comment on this soon, but not today.
Chapter four: Tax cuts for the rich. Even if you think these were a bad idea, don’t blame conservatism. The standard conservative idea is Milton Friedman’s nostrum that the real burden of government lies in the level of spending (and how it is spent), not the level of taxation per se.
Chapter five: State tax-and-spending limits. The Colorado plan for spending limits really didn’t work out so well and Anrig scores major points in this chapter. Major, major points. If you have a revisionist take on this, please do tell us in the comments.
Chapter six: "Smart" regulation. The regulatory burden has grown, for better or worse, with each administration. Anrig criticizes John Graham and his ilk, but his points boil down to disagreement with the conservative view rather than an indictment of what has been tried. We’d all like to have better regulation, and we can all admit it is very hard to get there procedurally.
Chapter seven: School choice and vouchers. The available evidence — see for instance Caroline Hoxby — suggests that vouchers are an improvement, albeit much overrated by conservatives and libertarians. However that hardly makes the idea bankrupt.
Chapter eight: Health savings accounts and malpractice reform. Health savings accounts are another tax break for savings and they won’t much improve U.S. health care. The malpractice crisis is overrated as a cause of high health care costs. Anrig scores points here, but mostly against wheel-spinning. It is worth stressing that "the right" doesn’t really have much of a health care plan at all, and that can count as an indictment.
Chapter nine: Social security privatization. I’ve argued that the Bush plan was just bad economics, even from a conservative or libertarian point of view. We already had private accounts in the form of Merrill Lynch, so why put a government-engineered, jerry-rigged structure on top of that?
The bottom line: Two strong points that can be scored against conservatism or market-oriented ideas, as opposed to the Bush Administration. First, state-level tax and spending limits haven’t worked out. Second, "the right" doesn’t (yet?) have a coherent health care plan. But the biggest problems faced by conservatism or libertarianism are along the lines of "won’t ever be tried," not "we just tried it and it failed."
Addendum: Anrig responds.