Month: May 2008

Assorted links

1. Megan Non-McArdle quits blogging, at least for the time being. 

I’ve long felt that the routine of married life fits the routine of blogging very well; I really do wake up the same hour each morning, more or less.  If I weren’t married I would still blog but I would feel more conflicted about it and perhaps she does too.  ("You’re funnier on the blog" one loyal (and beautiful) MR reader once told me upon meeting.)  Dating and blogging either means the blog is a secret (but for how long?) or the potential partner "dates the blog" before dating you.  Do I really want to be explaining "Markets in Everything" on a first or second date?  ("No, I don’t want you as a prostitute.  Most of the entries are sad, or satirical, but there is a secret code to indicate the ones I approve of.  For further explanation, go to the middle chapter in Montaigne’s second book of Essays.")  Maybe the blog is more charming than I am and I would do better to send it on my dates but that’s still an odd place to be.  In any case my guess is that Megan Non-McArdle is doing the right thing by quitting.  We all wish Megan Non- well in her quest for Mr. Non-McArdle, and in her quest for everything else, etc.

Rappers on *The Economist* magazine

"The style in which they write is simple and concise, how do they get their sentences so precise?" the rappers wonder.

And the chorus is a gem, too: "He reads the Economist so he can get the gist, its solid competence gives him confidence that his intelligence is correct."

The rappers also weigh in on accusations that the Economist pushes a particular line: "Yes, they have a bias; it’s pro-democratic. And pro-free trade; they are very emphatic."

The source is Chris Blattman.

Fragments of wisdom

Yet economists talk much more about trade than they do about health care policy, because they think they know something about it in a way the laity don’t…don’t let economist’s tendency to overemphasize their areas of expertise distort your view.

I don’t agree with every claim in this Krugman piece, least of all his defense of you-know-who, but I think that psychoanalysis of economists is spot on.

Get politically uninvolved!

The great P.J. O’Rourke:

All politics stink. Even democracy stinks. Imagine if our clothes were selected
by the majority of shoppers, which would be teenage girls. I’d be standing here
with my bellybutton exposed. Imagine deciding the dinner menu by family secret
ballot. I’ve got three kids and three dogs in my family. We’d be eating Froot
Loops and rotten meat.

But let me make a distinction between politics and
politicians. Some people are under the misapprehension that all politicians
stink. Impeach George W. Bush, and everything will be fine. Nab Ted Kennedy on a
DUI, and the nation’s problems will be solved.

But the problem isn’t
politicians — it’s politics. Politics won’t allow for the truth. And we can’t
blame the politicians for that. Imagine what even a little truth would sound
like on today’s campaign trail:

"No, I can’t fix public education. The
problem isn’t the teachers unions or a lack of funding for salaries, vouchers or
more computer equipment The problem is your kids!"

Hat tip to Newmark’s Door.

What is the best country music?

That is a request from Bill Russell, a loyal MR reader, and yes I will get soon to more of your requests.  I’m no expert, but my picks are as follows:

1. Hank Williams Sr., get both discs and don’t look back.

2. The Byrds, Sweetheart of the Rodeo, The Flying Burrito Brothers (the first two albums), plus Gram Parsons’s Grievous Angel.

George Jones and Bob Willis and Merle Haggard are all in my view somewhat overrated.

3. Louvin Brothers, Tragic Songs of Life (some call it bluegrass), Dolly Parton, Dock Boggs, Patsy Cline, the essential Johnny Cash (there’s lots of it), and the country/gospel of Elvis Presley.  Dylan’s country music is good but is not his strongest suit.

Arguably the best songs of Ryan Adams (alas they are scattered but "Amy" and "La Cienega Just Smiled" are two places to start; does anyone know a more general sourcing?) are as good as anything in the genre.  I like Lucinda Williams as well plus Shelby Lynne, most of all I Am Shelby Lynne.

Alternatively, the best collections from the 20s and 30s are mind-blowingly good; for instance try American Primitive on John Fahey’s Revenant label, or the Harry Smith collections.  That’s some of the best American music period though in some ways the blues shouts are closer to rock and roll than to country.

I might add the whole list comes from someone who was initially allergic to country music, so if that is you give some of these recommendations a try.  Just think of it as White Man’s Blues.


Hillary Clinton’s proposal is particularly stupid, in my humble
opinion, because it tries to get the money back from the oil companies
with a windfall profits tax. Tax incidence is tax incidence: if the oil
companies can make consumers pay most of the excise tax, then probably
consumers can stick them with your windfall profits tax too.

I believe that is what they call "true enough."  Here is more.

Two Indian success stories

Yes, the first is about agricultural productivity, that still-neglected issue:

Ajit Singh, a farmer in the poor northern state of Uttar Pradesh, had never seen a computer until four years ago when ITC, the Indian agribusiness-to-hotels conglomerate, installed a PC in his village, Kurthia.

Now the thin 47-year-old farmer visits the ITC station, known as an "e-choupal" after the Hindi term for "gathering place", every day for online access to news-papers, crop prices, weather forecasts and farming techniques. As ITC’s village manager, he passes on what he gleans to fellow farmers.

Knowing the fair market value of crops allows farmers to fetch better prices and circumvent local traders who used to dictate terms. Farmers can also sell wheat and other crops to ITC.

The result has been a big jump in crop productivity. Annual incomes in Kurthia have risen from Rs40,000- Rs50,000 ($1,000-$1,230) before e-choupal to Rs100,000- Rs120,000 now, says Mr Singh.

Here is the link.  Here is the second story, with photos at the link:

Mukesh Ambani, the fifth richest man in the world, is building the most expensive single family residence ever, a $2 billion — yes, BILLION — 27-story skyscraper in downtown Mumbai.

Guesstimation, or The City in the Sky

On average, how many people are airborne over the US at any given moment?

That’s a typical question from the new Princeton University Press book by Lawrence Weinstein and John Adam.  The title is Guesstimation and the subtitle is: Solving the World’s Problems on the Back of a Cocktail Napkin.

What’s your guess and why; let us know in the comments and I’ll post their answer later today.  The book also tackles such hoary chestnuts as "How many piano tuners are there in Los Angeles," although for mysterious reasons (are they mostly part-timers?) they fall far short of the actual number in the L.A. Yellow Pages.

This book isn’t for everyone but if you think you might like it you probably will.

Addendum: I post the authors’ answer at about comment #31.

When should you take photographs?

JKottke, a loyal MR reader, asks:

Is taking a photo or video of an event for later viewing worth it, even
if it means more or less missing the event in realtime? What’s better,
a lifetime of mediated viewing of my son’s first steps or a one-time
in-person viewing?

If you take photos you will remember the event more vividly, if only because you have to stop and notice it.  The fact that your memories will in part be "false" or constructed is besides the point; they’ll probably be false anyway.  In other words, there’s no such thing as the "one-time in-person viewing," it is all mediated viewing, one way or the other.  Daniel Gilbert’s book on memory is the key source here.

Furthermore you don’t need the later viewing for the photo or video to be worthwhile.  It’s all about organizing your memories in the form of narratives and that is what cameras help us do, if only by differentiating the flow of events into chunkier blocks of greater discreteness. 

A photo that requires retakes might be more effective than a photo you get right the first time.

Personally, I take pictures of Yana only when she tells me to, which I might add is often.  I’ve never owned a camera, but for most people I recommend the photos. 

By the way here are 21 ways to take better photographs.

What do I think of the Cowles Commission?

Angry at the Margin asks in the comments:

I’m curious to know what you think of these authors, beyond the fact
that they achieved mainstream success, given that the Economics that
came out of the Cowles Comission is more or less the exact opposite of
the Economics coming out of GMU.

Here goes:

1. Tjalling Koopmans.  He is a father of operations research and certainly worthy of a Nobel Prize, although perhaps in mathematics (if they had one).  His work on optimal routing theory remains central to transportation management and he also laid some foundations for quantum chemistry.  True, he doesn’t really appeal to my inner Austrian but he was an awesome intellectual figure and he also helped us win WWII.  We should all bow down and pay homage to Tjalling Koopmans.

2. Kenneth J. Arrow.  His reputation now far surpasses that of Samuelson’s and he was more philosophical to boot.  Where to start?   He understood his own impossibility theorem better than did the commentators plus he is the father of modern health care economics and that is maybe 1/10th of his total contribution!  People who know him also claim he is the greatest polymath they ever met.

3. Gerard Debreu.  He is the father of general equilibrium theory and also, as a philosopher of time, the real successor to Proust, as he once explained in an interview.  His extremely minimalistic approach to economics is better when it comes from the star than from the second-tier imitators but of course a real star he was.  I think of him as the father of economic science fiction and no I don’t mean that as a snub.

4. James Tobin.  About fifteen years ago I realized he was in fact one of the deepest Keynesian thinkers.  He also proposed the Tobit model and laid the foundations for modern portfolio theory.  He lives in an intellectual world different from my own but he is clearly deserving of his Nobel Prize several times over.

5. Franco Modigliani.  He is one of the guys who could have won more than one Nobel Prize.  That’s one for the Modigliani-Miller theorem (the implications of being able to chop up and carve up assets), one for the lifecycle hypothesis, and perhaps even another for his 1944 article on liquidity preference, which showed the concept was probably not enough to drive the Keynesian model except for the unusual case where liquidity preference was infinitely strong.  Sadly this piece remains neglected by modern purveyors of the liquidity trap idea.

6. Herbert Simon.  Bounded rationality and behavioral economics have already taken the profession by storm; his insights on computation, neurology, and artificial intelligence have not yet been incorporated into the mainstream in an effective manner, so his long-run influence will only increase.

7. Lawrence Klein.  I can’t say I am a fan of his macro modelling approach, but I’ll admit I haven’t spent much time with his work.

8. Trygve Haavelmo.  He pioneered how to attack identification problems in econometrics; among other things without him there would be no Steve Levitt and no Freakonomics.  He didn’t just get the Nobel Prize because he was a Scandinavian.

9. Harry Markowitz.  The father of modern portfolio theory, enough said. 

Amazing, isn’t it?  I still think the profession as a whole overdoes theory (even today) and undervalues breadth and real world experience, but these are nonetheless thinkers to be revered.  Arrow and Simon are, by far, the two who have influenced me the most.  It’s also fair to say that GMU economics often extends in other directions, but except perhaps for Herbert Simon these are well-mined thinkers by the rest of the mainstream so not every economist need run in their direction.

The Cowles Foundation Monographs in Economics

You’ll find them here, free and on-line, courtesy of Division of Labor and Michael Greinecker.  The most famous is Kenneth Arrow’s Social Choice and Individual Values but there are many classics in the series; in fact the hit rate is remarkably high even if they are not all recommended for the general reader.  Here is Wikipedia on the Cowles Commission, and by the way it is pronounced "coals."  Here is much more background, including links to photos.  Here is the current home page of an institution which is no longer distinctive precisely because it triumphed.  How is this for a casual sentence:

Several Cowles associates have won Nobel prizes for research done while at the Cowles
Commission. These include Tjalling Koopmans,
Kenneth Arrow, Gerard Debreu,
James Tobin, Franco Modigliani, Herbert Simon,
Lawrence Klein, Trygve Haavelmo and Harry Markowitz.

Economic update

On, the probability of a formal recession (two successive quarters of negative growth) in 2008 has fallen from the 70 percent range to the 30 percent range.

Some time ago I had proposed "the N word" economic indicator, namely that things would be really bad if lots of people were talking about the idea of nationalizing the banks.  That hasn’t happened and indeed the people who predicted widespread solvency problems seem to have been wrong.

Paul Krugman has had numerous good posts on the Ted spread as an indicator of ongoing problems in financial markets.  I’ll say this: during the Great Depression no one had to cite a spread to convince anyone that things were going very badly. 

Economic knowledge is always subject to revision, but so far the evidence points in the direction of a mild recession, in the informal sense, and that The Great Moderation is still with us.

Do local currencies do any good?

You know, like BerkShares, the local "currency" in Massachusetts.  Tim Harford is skeptical:

True, community currencies may very gently encourage trade with locals
rather than strangers. But the gains from more trade with locals are
more than offset by the losses from less trade with strangers.

See the full post for much more.  I am more positively inclined than is Tim.  First, local currencies blossom when the nominal money supply is too low and wages and prices are sticky downwards.  A boost in the real money supply is needed and the private sector will do it — albeit at high transactions costs — even if the government will not.  That’s why so many of these local currencies blossomed in the 1930s but then disappeared.  They did good but then they were stamped out or ceased to be necessary.

Second, private currencies can serve as a form of price discrimination.  By accepting private currency from your local customers, and indeed only your local customers, you can charge them a lower net price and without being very public about it.  That’s useful if the local economy is in the dumps.  Note that as the local community recovers, this motive for the local currency goes away as well.  It also implies that local currencies will be most popular with merchants who hold excess inventory and have some market power.