Month: August 2008

Economic Philately

Which stamp predicts development and which stamp dissension?

For the answer, Chris Blattman points us to Michael Kevane’s paper on stamps and development.

An analysis of the imagery on postage stamps suggests that regimes in Sudan
and Burkina Faso have pursued very different strategies in representing the
nation. Sudan’s stamps focus on the political center and dominant elite (current
regime, Khartoum politicians, and Arab and Islamic identity) while Burkina
Faso’s stamps focus on society (artists, multiple ethnic groups, and
development). Sudan’s stamps build an image of the nation as being about the
northern-dominated regime in Khartoum (whether military or parliamentary);
Burkina Faso’s stamps project an image of the nation as multi-ethnic and

The new “Chicago Boys”

The number of Chileans who studied Ph.d. economics at the University of Chicago in the 1990s: 4

The number of Chileans studying there since 2001: 10

According to this interesting article, studying at Chicago no longer bears the stigma of association with the Pinochet regime.  Nor do those who study at Chicago aspire to be hard-core market reformers.  This is a sign of how "normal" Chile has become, and also a sign of how "normal" the University of Chicago has become, but most of all the former.

Another example of randomized Nash equilibrium

From an interview with Vladimir Kramnik.  Note that Kramnik is playing in a regular chess tournament, shortly before with world championship match with Anand:

Is it difficult for you, because of course you cannot show your preparations, your openings for the match, so you have to choose, let us say, not your real openings…

Yes, sometimes. But it is nor really about this, it is about that fact that sometimes it would be too simple if you don’t show anything. That also gives a lot of information to your opponent. Then he knows that what you played you will for sure not play in the match. That is why you need to mix. Some things. I have to show, some things I don’t show. So I am trying to confuse as much as possible my opponent. And this is a bit difficult. Before each game I start to think if he plays this should I play this or should I play that, or even during the game I start to think maybe I should play this or maybe I shouldn’t play it. It is a little bit confusing I would say. It is easier to play when you don’t have such an event in front of you.

Kramnik has been playing indifferently lately, yet when times demand he can be the world’s strongest match player.  Anand is the current world champion, noting that he won the title through a tournament structure.  Match chess is all about adjustments and stamina and defense and preparation and strength of will.  Winning tournaments requires that you beat the weaker players consistently and that has never been Kramnik’s strength.

Anand, by the way, can play speed chess almost as well as he plays classical slow chess.  He is an amazing tactician and a brilliant defender.  But does he have a deep enough strategic style to prevail in a longer and tougher setting?  I’ll let you know how the match goes.

Markets in Everything: Panhandling

In Memphis, a local FOX News reporter, Jason Carter, donned old
clothes and hit the streets earlier this year, earning about $10 an
hour. “Just the quasi-appearance of being homeless filled my cup,”
Carter observed. That all the money is beyond the tax man’s clutches
adds to the allure of professional panhandling.

Carter prepared for his stint on the street by surfing the Internet,
where a variety of websites dispense panhandling advice. NeedCom, for
example–subtitled “Market Research for Panhandlers”–offers tips from
Baker and other pros on how to hustle. The website’s developer, Cathy
Davies, wants it to get people “thinking about panhandling as a
realistic economic activity, rather than thinking that panhandlers are
lazy or don’t work very hard.”

More here, overly sensationalistic but interesting in parts.

Thanks to Tim Groseclose for the pointer.

Does grandpa matter?

Even fathers with only one wife provided no [longevity] benefit to their grandchildren, a finding supported by previous research.

That is based on a study of Finnish church data from the 18th and 19th centuries.  The thrust of the entire piece is the claim that polygamous men will live longer than monogamous men.  But note, all you Lotharios out there, this result is correlated with actual [multiple] marriage, not running around in bars and the like.

If I Believed in Austrian Business Cycle Theory, part II

Karl, a loyal man, has a request:

In your post from a few years ago, "If I believed in Austrian business
cycle theory," you made some of the most apt predictions you have made
on this blog. Nearly everything has come true. Obviously though you are
not touting these predictions because being associated with the
"intransigent" Austrians will damage your credibility as a hip, quirky
thinker. So instead, can you just give me a socio-economic cost-benefit
analysis of breast implants.

Here is my original post.  Two points:

1. What happened is best thought of as a bubble where loose monetary policy was one of several triggers but the market response was more at fault than was government.

2. Second, one important false market signal was that people thought rising asset prices could substitute for savings out of disposable income.  That is not the Misesian or Hayekian scenario.

My "predictions in the subjunctive" were largely correct — more correct than I knew at the time — but that doesn’t mean Austrian business cycle theory is largely correct.  I would, however, endorse a modified version of the theory which goes beyond the "blame the government inflation" for everything interpretation.

On Karl’s other question, it’s not just a zero-sum game, socially speaking, but my personal preference would be for Q = 0.

Addendum: Walter Block wrote a 58-page critique of my earlier writings on ABC.  He has sent it to me twice and I am happy to link to it.  Update: Here is the correct Block link.

The Return of the Zombie

The Congressional Budget Office estimates that there is only a 7% probability that someone born in 2000 will receive their Social Security benefits as promised today. The better news is that with a probability of 58% the cut in benefits will be 20% or less.

Since the CBO isn’t trying to predict future policy, these "probabilities" should be taken with more than a grain of salt.  Sill these numbers are an arresting way of presenting the basic data on projected Social Security revenues and scheduled payments. 

Hat tip to Paul Krugman.

Are there reasons to be dogmatic?

That’s another request; the exact wording was "The five best reasons to think you should be more dogmatic about the economic beliefs you are not dogmatic about." 

I’ll give one reason, namely that, somewhat counterintuitively, dogmatism can further the generation of new ideas.  Yes, this does require a special meaning of the word dogmatic.  I’m not talking about a grouchy guy who goes "harumph" whenever he counters a new idea.  I’m talking about the person who generates the new idea!  In strict Bayesian terms, most innovators are not justified in thinking that their new ideas are in fact correct.  Most new ideas are wrong and the creator’s "gut feeling" that he is "onto something" is sometimes as epistemologically dubious as is the opinion of the previous scientific consensus.  Yet we still want that they promote these new ideas, even if most of them turn out to be wrong. 

In this view, the so-called "reasonable" people are selfishly building up their personal reputations at the expense of scientific progress.  They are too reasonable to generate new ideas.

To put it another way, there are two kinds of truth-seeking behavior:

1. Hold and promote the view which leads to society most likely settling upon truth in the future, or

2. Hold and promote the view which is most likely to be correct.

These two strategies coincide less than many people think.  Which do you prefer and why?

Addendum: Here is a recent NYT article.  Excerpt:

Voters who insist that they are undecided about a contentious issue are
sometimes fooling themselves, having already made a choice at a
subconscious level, a new study suggests.  Scientists have long known that subtle biases can skew evaluations of
an issue or candidate in ways people are not aware of. But the new
study, appearing Thursday in the journal Science, suggests that
professed neutrality – sitting on the fence – leaves people more
vulnerable to their own inherent biases than choosing sides early.

Will Bryan Caplan endorse this?

Ways that sheep can die

Getting stuck on their backs and dying of suffocation
Attacked by flies
Eaten by maggots
Being attacked by dogs or any other living creature
Being frightened into a heart attack by imagining the dog is going to attack, even though it is not
Drowning (Are we surprised sheep cannot swim?)
Suffocating in snow (surprisingly common)
Hoof infections that poison the blood
Almost exploding with grass because they have eaten too much and are unable to pass wind
If they get too hot
If they get too cold

That’s from Marti Leimbach and I wonder how many sheep die of old age.  With that, it is time to leave Santiago and return home.

Why this recession might last a while

The column is entitled: "Finding the Mess Behind the Mess."  The key line is:

The fundamental [macroeconomic] problem in the American economy is that, for years,
people treated rising asset prices as a substitute for personal

After discussing some adjustment problems, here are comments on policy:

One path that is likely to prove
counterproductive is further fiscal stimulus in the form of tax
rebates. Such stimulus can raise consumer spending and bolster the
economy in the short run, but it works – if it works at all – only by
pushing consumers to spend rather than to save. It merely postpones
needed adjustments by providing a grab bag of goodies at exactly the
wrong time.

Here is the conclusion:

Have you ever tried to undo a bunch of tangled wires or cords? If
you don’t pull on the right wires in the right order, the mess becomes
worse. If you pull too hard, the whole thing can break. But if your
first pulls are good ones, the untangling becomes easier with each

That’s like our economy’s situation today. If we expect
too much too quickly, we’ll make matters worse. But there is a way out
of the mess, and it lies in our hands.

Be careful, and start pulling.

I’ve become increasingly interested in how an economy can be "tangled up," a notion I first learned from Axel Leijonhufvud.  The literature on self-organizing critical systems considers this idea, but I don’t think it has been expressed in simple, intuitive form and in a manner that can be integrated with other macroeconomic ideas.

Top Chef

This one is a request from a long time ago.  Wintercow20, a loyal MR reader, asked:

What do you think of Top Chef? I am an addict!

I am a fan of reality TV but mostly I have chosen blogging instead.  I’ve seen about a dozen Top Chef episodes, mostly through the urging of darling Yana.  Mark of excellence: the drama is so good that the commentary makes sense even though you can’t taste the food.  It’s a show about learning, excellence, and motivation.  The voice-over narratives are an object lesson in behavioral economics and self-deception.

Here is a wonderful post by Grant McCracken on reality TV; excerpt:

Reality programming is not just cheap TV, it is responsive TV. Surely,
one of the most sensible way for the programming executive to
get back in touch with contemporary culture is to turn the show offer
to untrained actors who have no choice but to live on screen, in the
process importing aspects of contemporary culture that would otherwise
have to be bagged and tagged and brought kicking and screaming into
the studio and prime time.  Reality programming is contemporary culture
on tap.  It is by no means a "raw feed."  That is YouTube’s job.  But
it is fresher than anything many executives could hope to manage by
their own efforts.  In effect, reality programming is "stealing
signals" from an ambient culture, helping TV remain in orbit.  (Mixed
metaphor alert.  Darn it, too late.)

Grant adds: "Reality programming also serves as a way for a divergent culture to
stay in touch."

Addendum: I don’t see why she married Salman Rushdie; books are reproducible after all.

Second addendum: Here is Matt Yglesias, on the new form of reality TV…markets indeed in truly everything.

The wisdom of Tim Harford

Libertarian paternalism is the brainchild of Profs Thaler and
Sunstein, but nudging is not. Nudging is good architecture, good design
or good marketing and most nudges have been invented by private sector
companies. Prof Thaler’s best policy idea – a pension plan called Save
More Tomorrow – was tried by a manufacturing company rather than a

Effective nudges are so common in the private sector
that politicians should be asking themselves why.

Here is more.

Rules for eating in Chilean restaurants

1. Order the avocado ("palta," not "aguacate") whenever you can.

2. Order crab, in any manifestation possible, whenever you can.  There is nothing you should prefer over the crab.

3. Scallops are next in the hierarchy.  The sea urchin is quite good if you like it.

4. The fish is of excellent quality but the preparations are usually boring.  The greater the number of sauces you are offered, the less likely you should take any of them.

5. Fear not the mayonnaise.  It is good.  Really.

6. Parmesan cheese on either clams or scallops is excellent.

7. If you can, try a ham and cheese sandwich, roast beef, figs, mashed potatoes, vanilla ice cream, honey, butter, and the juices.

8. Provided you obey these rules, do not be put off by simple-sounding menus.

9. The overall quality of the food is very high, but the very best restaurants are not much better than the good restaurants.  This is often the case in areas with excellent natural ingredients, as human labor becomes a less important input.

10. A subtle blending of Chilean and Peruvian food is occurring in Santiago; the Peruvian restaurants by the way are first-rate.

The economics of Joseph Biden

Here are his votes on trade issues.  They could be better, noting that this is unlikely to be his major function.  Cato gives him 42 percent on trade issues, noting that he once wanted to ban all toy imports from China.  Here is Biden on budget issues; more conservative than I would have thought.  Here is Biden on internet issues.  David Brooks offered an interesting personal portrait of the man:

Honesty. Biden’s most notorious feature
is his mouth. But in his youth, he had a stutter. As a freshman in high
school he was exempted from public speaking because of his disability,
and was ridiculed by teachers and peers. His nickname was Dash, because
of his inability to finish a sentence.

He developed an odd smile
as a way to relax his facial muscles (it still shows up while he’s
speaking today) and he’s spent his adulthood making up for any comments
that may have gone unmade during his youth.

Today, Biden’s
conversational style is tiresome to some, but it has one outstanding
feature. He is direct. No matter who you are, he tells you exactly what
he thinks, before he tells it to you a second, third and fourth time.

Maybe he would have done well in academia.

Walter Benjamin’s tips for writing

An occasional MR reader sent me these:

Anyone intending to embark on a major work should be lenient with
himself and, having completed a stint, deny himself nothing that will
not prejudice the next.    

Talk about what you have written, by all means, but do not read from it
while the work is in progress. Every gratification procured in this way
will slacken your tempo. If this regime is followed, the growing desire
to communicate will become in the end a motor for completion. 

In your working conditions avoid everyday mediocrity. Semi-relaxation,
to a background of insipid sounds, is degrading. On the other hand,
accompaniment by an etude or a cacophony of voices can become as
significant for work as the perceptible silence of the night. If the
latter sharpens the inner ear, the former acts as a touchstone for a
diction ample enough to bury even the most wayward sounds. 

Avoid haphazard writing materials. A pedantic adherence to certain
papers, pens, inks is beneficial. No luxury, but an abundance of these
utensils is indispensable.    

V. Let no thought pass incognito, and keep your notebook as strictly as the authorities keep their register of aliens.   

Keep your pen aloof from inspiration, which it will then attract with
magnetic power. The more circumspectly you delay writing down an idea,
the more maturely developed it will be on surrendering itself. Speech
conquers thought, but writing commands it.   

Never stop writing because you have run out of ideas. Literary honour
requires that one break off only at an appointed moment (a mealtime, a
meeting) or at the end of the work.   

VIII. Fill the lacunae of inspiration by tidily copying out what is already written. Intuition will awaken in the process.   

IX. Nulla dies sine linea — but there may well be weeks.   

X. Consider no work perfect over which you have not once sat from evening to broad daylight.   

XI. Do not write the conclusion of a work in your familiar study. You would not find the necessary courage there.   

Stages of composition: idea — style — writing. The value of the fair
copy is that in producing it you confine attention to calligraphy. The
idea kills inspiration, style fetters the idea, writing pays off style.   

XIII. The work is the death mask of its conception.