Month: January 2009
Betting markets in everything
Bet on your own grades. Here is how it began:
One
Sunday afternoon, Steven and I were sharing ideas, and I mentioned to
him that I had an exam the following day and that if I were to study I
was sure to get an A. But I was enjoying my Sunday afternoon, and I
made it clear to him that I had no intention of studying. That’s when,
in order to provide me with motivation, we made the following
agreement: If I got an A on the exam, he would give me $100, and if I
didn’t get an A, I would give him $20. We thought every student would
like this type of motivation, therefore, we established Ultrinsic
Motivator Inc.
I thank Max for the pointer.
We resume with Keynes’s *General Theory*
We'll do chapter seven for Thursday. If you need to get up to speed, here are previous installments in the series.
By the way, what do you all want for the *next* book club?
Assorted links
1. Laura Miller's pieces for Salon.com.
2. The increasing use of German words in English; is it just the financial crisis?
3. One moderately fast reader.
5. Via Jim Swofford, do avatars consume as much electricity as do Brazilians?
6. Markets in everything; the usual, etc., nothing new here.
The Nude Deal
Larry Flynt's plea for a porn stimulus plan has attracted much ridicule. Nevertheless, during the thirties burlesque was part of FDR's National Recovery Administration. Here's Jonathan Bean at The Beacon on the history.
The National Recovery Administration
(NRA) was the first New Deal effort at recovery. The agency mandated
that all industries draft “Codes of Fair Competition” to benefit
business and labor. NRA codes – all 700 of them –corporatized the
entire economy. Wage and price fixing was o.k. as the experimenters rid
themselves of old superstitions that price fixing was somehow harmful
to Mrs. Consumer. As long as everyone put in the “fix,” all would be well. The Supreme Court disagreed and ended the experiment in May 1935 (Schechter v. United States).
Yet there was an upside to the code-making. It made Americans
realize how complex the economy had become by 1933. After all, there
were codes for the Dog Food Industry (Code 450), Curled
Hair Manufacturing and Horse Hair Dressing Industry (Code 427),
Shoulder Pad Manufacturing (Code 262), and the Burlesque Theatrical
Industry (Code 348). The latter limited burlesque dancers to four strip
teases per evening. The goal was to spread the work, and it simply
wasn’t fair that the pretty girls got to strip more than the other
gals.
Comparing Recessions
It you look at job losses in this recession compared to previous recessions this recession looks very bad but the labor force is much bigger today than in previous recessions. Thus, if you look at the percentage change in employment you get a different story. The Minneapolis Fed crunches the numbers:
and
Of course, this recession is not yet over but this is useful information. We might not like it but recessions are normal.
Important Addendum: The Fed defines Mildest, Median, Harshest by taking the Mildest employment drop of any recession in that quarter and plotting that. Thus, the Mildest, Median, and Harshest recessions are Frankenstein recessions, cobbled together from other recessions. I do not think this is a good way to express the data. See this update for a better method.
When have countries refused to take back land?
Matt Yglesias writes that the Jordanians don't want the West Bank back, at least not in anything resembling its current state. The Palestinians would be regarded as destabilizing by the Jordanian government. How many historical examples can you find of countries refusing to take back territory that was once, in some form or another, theirs? Spain probably wouldn't take back Ecuador but the offer will not come because the Ecuadorean government values the land. So when is the political shadow value of land negative for both governments? (Of course it's not negative for the Palestinians.) The West Bank aside, I can't think of examples where there is both a possible offer and a refusal to take the land back.
Could Puerto Rico be an example? Maybe the U.S. would gladly "give it back" (that is debatable, however) but it seems that Puerto Rican voters don't want full, unencumbered title.
Department of provisional Bayesian update
Today I read this:
Although Mr. Obama has not publicly identified which priorities will have to wait, advisers and allies have signaled that they may put off renegotiating the North American Free Trade Agreement, overhauling immigration laws, restricting carbon emissions, raising taxes on the wealthy and allowing gay men and lesbians to serve openly in the military.
Here is the article. When it comes to health care, the prediction is that we get a "down payment" on future change but not yet the whole reform.
Alan Walters passes away at age 82
He was described as "Mrs. Thatcher's monetarist guru." Here is another report.
The Commissar Appears
Check carefully the new authors' photo on EconLog (upper right hand corner of the page). If you scan the crowd with the requisite attention you will see there are now three people, with David R. Henderson (formerly a guest blogger) as the addition.
We welcome David to the blogosphere!
Eight reasons why we are in a depression
1. We have zombie banks.
2. There is considerable regulatory uncertainty in banking and finance.
3. There is a negative wealth effect from lower home and asset prices.
4. There is a big sectoral shift out of real estate, luxury goods, and debt-financed consumption.
5. Some of the automakers are finally meeting their end, or would meet their end without government aid.
6. Fear and uncertainty are high, in part because they should be high and in part because Bush and Paulson spooked everyone.
7. International factors are strongly negative.
8. There is a decline in aggregate demand, resulting from some mix of 1-7.
I have two simple points, First, a large fiscal stimulus addresses factor #8 but fares poorly in alleviating the other problems. Of course it may give a band-aid for #5 or #6 and you can tell other stories but we are in a multi-factor depression.
Second, forecasting will prove very difficult. These factors interacted with each other in a unique manner on the way down and they may well interact in an unpredictable manner on the way back up, whenever that comes. Just for a start, who has a good model of #1, #2, or #6? Right now we're seeing a lot of good faith efforts to develop forecasts, but I say don't believe any of them, whether they support your point of view or not.
Satantango
It's seven hours long and probably the greatest Hungarian movie. I'm about to start the third of three Netflix disks. One reviewer described it as "desacralized Tarkovsky." Another summarized the "plot": "Moving at a pace that would suit a glacier, Mr. Tarr [the director] contemplates a
group of grim-faced, wretched characters whose agricultural collective
has fallen into decay, and who engage in desperate forms of chicanery
as a way of denying their failure." If you love Tarkovsky, Sakurov, and Hou Hsiao Hsien, this is the next step and it does stand in that league. The Rotten Tomatoes reviews are very good too, noting there is a selection bias in who watches in the first place. Here is a review from a guy who started off totally unconvinced but was pulled in. Hardly anyone knows this movie, I can't imagine why.
“Pleonasms are abundant.”
Pleonasms are abundant. "I done done it" (have done it or did do it). "Durin' the while." "In this day and time." "I thought it would surely, undoubtedly turn cold." "A small, little bitty hole." "Jane's a tol'able big, large, fleshy woman." "I ginerally, usually take a dram mornin's." "These ridges is might' nigh straight up and down, and, as the feller said, perpendic'lar."
Everywhere in the mountains we hear of biscuit-bread, ham-meat, rifle-gun, rock-clift, ridin'-critter, cow-brute, man-person, women-folks, preacher-man, granny-woman and neighbor-people. In this category belong the famous double-barreled pronouns: we-all and you-all in Kentucky and you-uns and we-uns in Carolina and Tennessee. (I have even heard such locution as this: "Let's we-uns all go over to youerunses house.")
That is from the often quite interesting Our Southern Highlanders: A Narrative of Adventure in the Southern Appalachians and a Study of Life Among the Mountaineers, by Horace Kephart, recommended to me by a loyal MR reader.
To think that "cow-brute" is a pleonasm is truly very excellent. I might add that the discussion of the triple and quadruple and indeed quintuple negative is of interest: "I ain't never seen no men-folks of no kind do no washin'."
Stating the obvious
"We have very few good examples to guide us," said William G. Gale, a senior fellow at the Brookings Institution, the liberal-leaning research organization. "I don't know of any convincing evidence that what has been proposed is going to be enough."
Here is the article, from today's NYT. I would reword this slightly, so as to indicate that progrram size alone does not guarantee success. In fact the larger the stimulus becomes, the fewer good examples we have to guide us. Aggregate demand macroeconomics does add a great deal of value to our understanding of the economy, but as in all macroeconomic theories the limits to our knowledge are quite severe.
Homeownership should not be subsidized
Home ownership policy of the Bush and Clinton administrations was, in
essence, an attempt to pay low-income people to make a risky investment
that they would otherwise rationally avoid. I cannot understand why
anyone would think that such a policy would be sensible. In some cases,
these people will do well and enjoy the upside of their investment, but
in other cases they will do poorly, with the result that they will be
worse off than ever.
That's Eric Posner. You'll note that Henry Paulson has been calling for the mortgage agencies to be resurrected as "public utilities" of some sort. I don't understand this path. There is a very good (modern) liberal case against more home ownership: behavioral economics is true, people overestimate their prospects, poor people shouldn't take too much risk, and the natural market tendency is too much home ownership, not too little. That's without taking environmental issues into account.
Here is a recent Richmond Fed article, skeptical of the idea of homeownership subsidies.
The Magician’s Book
A recent MR request asked me which book I wished I had written and now I have a recent answer: Laura Miller's The Magician's Book: A Skeptic's Adventures in Narnia. And I'm not even a big Narnia fan (this review aside). Most of all this is a book about what it means to love another book and how deep such a love can run. It also covers the gap between children and adults, how storytelling works, what theology means in art, not to mention it gives an excellent portrait of Tolkien. Every paragraph of this book offers something of value — how many books can claim that? Bravo, and again you needn't love or even know much about C.S. Lewis.
I'll buy Laura Miller's next book, sight unseen, no matter what the topic.