Month: May 2008
In their arguments with Christopher Hitchens and Richard Dawkins, the
faithful have been defending the existence of God. That was the easy
debate. The real challenge is going to come from people who feel the existence
of the sacred, but who think that particular religions are just
cultural artifacts built on top of universal human traits. It’s going
to come from scientists whose beliefs overlap a bit with Buddhism.
That’s from David Brooks.
The only way speculation can have a persistent effect on oil prices, then, is if it leads to physical hoarding – an increase in private inventories of black gunk. This actually happened in the late 1970s, when the effects of disrupted Iranian supply were amplified by widespread panic stockpiling.
But it hasn’t happened this time: all through the period of the alleged bubble, inventories have remained at more or less normal levels.
I’ve never been one to push the bubble hypothesis to explain the high price of oil but I find this an unusual argument to make against bubbles. Isn’t it easy enough to argue that the relevant hoarding is of oil in the ground rather than oil in strategic reserves or panic stockpiles? We have lots of state-owned oil companies and maybe their way of speculating is simply to remain sluggish in their exploration and extraction activities, at least for the time being.
I think of a bubble as a market price which is above the fundamental value of the asset, largely for psychological reasons. But with a commodity like oil the fundamental value of the asset depends on the marginal unit and thus how much oil is supplied. Fundamental value, at least at the margin, adjusts to the price and in that sense the bubble hypothesis can seem tautologically false if we apply the traditional definition of a bubble.
The key question, in my view, is how much more the oil-producing nations could bring to the market if a) their state-owned oil companies were not incompetent, and b) they did not tolerate this incompetence as an implicit form of speculation and collusion. I will not offer an estimate here (I genuinely don’t have one) but b) does leave some room for bubbly-like phenomena, whether or not stockpiles of pumped oil are high. Note that in b) collusion and speculation work together and a) tosses incompetence into the mix. The whole foul brew is probably easier to sustain in times of rising demand and thus oil price explanations are not going to be very simple, or easily separable, by the nature of the problem.
AdultVest, Inc., the Beverly Hills-based investment bank, which concentrates its practice exclusively on adult industry investments, mergers, and acquisitions, announced today it had been selected by Alternative Investment News as one of four funds nominated for the "Hedge Fund Launch of the Year" award.
Robin Hanson, citing the work of Arthur Brooks, asks:
- Would you or I be happier if we let ourselves think more conservatively, such as by attending church more and believing we can pull ourselves up by our bootstraps?
- Would society be happier if we encouraged more conservative thoughts?
Robin answers that he would rather "believe whatever is true even if that makes me unhappy." But there is always adjustment on some truthful margin that can be made. Robin could play up the relatively conservative thoughts he already believes in and do more of the church-like activities he already partakes in, even if he does not go to church per se. So these results probably should influence our behavior even though of course we should reject the deliberate pursuit of untruth.
In December, the Fed had $775B worth of Treasury securities. That
stock will soon have dwindled to $300B, give or take. The difference,
about $475B, represents an investment by the central bank in risky
assets of the US financial sector.
$475B is an extraordinary sum of money. It is as if the Fed borrowed
more than $1500 from every man, woman, and child in the United States,
and invested that money on our behalf in Wall Street banks that private
financiers were afraid to touch. For bearing all this risk, if things
work out well, taxpayers will earn about what they would have earned
investing in safe government bonds.
…If the Fed were to blow through the rest of its current stock of
Treasuries, it would have invested more than $2500 for every man,
woman, and child in America. Public investment in the financial sector
would have exceeded the direct costs to date of the Iraq War by a wide margin.
Here is much more; the Interfluidity post focuses in fact on the implications of paying interest on reserves. The sad thing is: if I had my finger on the button, I would not have reversed these loans. Ouch!
The American political system has lost the ability for large-scale compromise, and it has lost the ability to accept some pain now for much gain later on.
That is from Fareed Zakaria’s The Post-American World, a book remarkably full of common sense. It’s #7 on Amazon and a good overall guide to globalization and why it matters that America no longer dominates the world, either economically or culturally.
The paper is titled "Hepatitis B Does Not Explain Male-Biased Sex Ratios in China"; here is the abstract:
Earlier work (Oster, 2005) has argued, based on existing medical
literature and analysis of cross country data and vaccination programs,
that parents who are carriers of hepatitis B have a higher offspring
sex ratio (more boys) than non-carrier parents. Further, since a number
of Asian countries, China in particular, have high hepatitis B carrier
rates, Oster (2005) suggested that hepatitis B could explain a large
share (approximately 50%) of Asia’s missing women". Subsequent work
has questioned this conclusion. Most notably, Lin and Luoh (2008) use
data from a large cohort of births in Taiwan and find only a very tiny
effect of maternal hepatitis carrier status on offspring sex ratio.
Although this work is quite conclusive for the case of mothers, it
leaves open the possibility that paternal carrier status is driving
higher sex offspring sex ratios. To test this, we collected data on the
offspring gender for a cohort of 67,000 people in China who are being
observed in a prospective cohort study of liver cancer; approximately
15% of these individuals are hepatitis B carriers. In this sample, we
find no effect of either maternal or paternal hepatitis B carrier
status on offspring sex. Carrier parents are no more likely to have
male children than non-carrier parents. This finding leads us to
conclude that hepatitis B cannot explain skewed sex ratios in China.
We should hold up Emily Oster as a role model of a truth-seeker. If the abstract does not make it clear, Emily Oster first won her fame by reporting the opposite result about sex ratios. Here are our previous posts on Emily Oster.
A more general lesson, of course, is simply how difficult it is to get at truth. This is a well-defined data set with a (more or less) well-defined answer. Most policy questions aren’t so tractable.
That’s the first sentence of the article, read more, from The Boston Globe.
Brad DeLong writes:
Altonji, Bharadwaj, and Lange do not know.
The whole post is interesting, but from this I can only conclude that Altonji, Bharadwaj, and Lange have never taught Introduction to Composition to a large group of freshman in a public university in the United States. Anyone who has taught such a class — or for that matter talked to anyone who has — will have some inkling why more people are not going to college. Herein lie the roots of growing inequality — on the bottom side at least — and don’t let anyone induce you to take your eye off the ball by playing switcheroo and bringing up the (separate) topic of the growing wealth of the top one percent.
Gary Becker, James Buchanan, Robert Lucas, Robert Mundell, Vernon Smith, Michael Boskin, John Cogan, Steven Davis, Francis X. Diebold, Martin Eichenbaum, Martin Feldstein, Kevin Hassett, Douglas Holtz-Eakin, Glenn Hubbard, Anne Krueger, Deepak Lal, Burton Malkiel, Paul W. McCracken, Allan Meltzer, Tim Muris, June O’Neill, Michael E. Porter, Kenneth Rogoff, Richard Roll, Harvey Rosen, George Shultz, Beryl Sprinkel, John Taylor, and Arnold Zellner.
I was sent that list in an email. The opening of the statement reads:
We enthusiastically support John McCain‘s
economic plan. It is a comprehensive, pro-growth, reform agenda. The
reform focuses on the real economic problems Americans face today and
will face in the future. And it builds on the core economic principles
that have made America great.
His plan would control government
spending by vetoing every bill with earmarks, implementing a
constitutionally valid line-item veto, pausing non-military
discretionary government spending programs for one year to stop their
explosive growth and place accountability on federal government
No, I don’t do endorsements but if I were tempted to (and I’m not) I would this year be even more suspicious than usual. I feel that the candidates are trying to trick me and the one who isn’t — Hillary Clinton, whose negatives are too transparent to my eyes — has been trying to trick everyone else.
I’ll put the rest of the letter in the first comment, but in the meantime my advice — at least for this year — is to vote on the basis of foreign policy.
Blog post of the day, from Brad DeLong, excerpt:
Somebody last week–was it Jan de Vries? John Ellwood? Somebody
else? I forget who, but it is not original to me–said that the right
model for Harvard over the past century is Yugoslavia. Remember the
story of the Yugoslavian socialist worker-managed firm? If you add
another worker to the firm, that worker gets a pro-rata share of the
firm’s value added. The firm’s value added has a component attributable
to the firm’s capital stock, a component attributable to the ideas
embedded in the firm, a component attributable to the firm’s market
position, and a component attributable to the workers. Hire another
worker, and only the last of these goes up: the first three do not, and
so average compensation falls.
This means that a worker-managed firm is likely to shrink whenever
it gets good news that makes it more productive–the larger is the
value added due to ideas, capital, or market position, the more
expensive does it become for the existing workers to replace workers
who leave, let alone hire enough workers to expand. While a competitive
market capitalist firm responds to good news about its productivity and
value to society by increasing employment, a Yugoslavian-model market
socialist firm responds to good news about its productivity and value
to society by shrinking. On this analysis, the very success of Harvard
over the past two generations together with its degree of worker
management has created enormous internal pressures not to expand, the
better to share out the surplus among the existing stakeholders.
This reminds me of Leonard Read’s "I, Pencil," but of course it came much earlier:
Ben Zoma once saw a crowd on one of the
steps of the Temple Mount. He said, Blessed is He that discerneth
secrets, and blessed is He who has created all these to serve me. [For]
he used to say: What labours Adam had to carry out before he obtained
bread to eat! He ploughed, he sowed, he reaped, he bound [the sheaves],
he threshed and winnowed and selected the ears, he ground [them], and
sifted [the flour], he kneaded and baked, and then at last he ate;
whereas I get up, and find all these things done for me.
And how many labours Adam had to carry out before he obtained a
garment to wear! He had to shear, wash [the wool], comb it, spin it,
and weave it, and then at last he obtained a garment to wear; whereas I
get up and find all these things done for me. All kinds of craftsmen
come early to the door of my house, and I rise in the morning and find
all these before me.
Credit goes to Stephen Dubner.
At the end of the day, the true advances won’Â€Â™t come in the Kindle, but
in the content. Just as the capabilities of the device will shape what
authors decide to do with it, so too will the decisions of authors
shape the evolution of the device. The Kindle aÂ€Â™s homepage already
features videotaped testimonials from such literary luminaries as Toni
Morrison, Michael Lewis, James Patterson, and Neil Gaiman. But what the
Kindle, and Amazon, need is not their kind words, but more of their written
words, composed with an eye toward the possibilities offered by
electronic text. Just as the early television shows were really radio
programs with moving images, the early electronic books are simply
printed text uploaded to a computer. Amazon could use its unique
position to change that.
Nixon, who became vice president at age 40, was well described as “an old man’s idea of a young man.”
That is from this review of Nixonland, a book which is rapidly approaching the top of my pile.
Until recently, nearly all the thinking about the risks of space-rock strikes has focused on counting craters. But what if most impacts don’t leave craters? This is the prospect that troubles Boslough. Exploding in the air, the Tunguska rock did plenty of damage…
That is Gregg Easterbrook in the latest Atlantic Monthly, June issue, "The Sky is Falling," not yet on-line. Here are previous MR posts on the asteroid problem.