Month: February 2009

Markets in everything, Australian style

John Hoehn, a loyal MR reader, directs my attention to the following:

Tourism Queensland is seeking applicants for the best job in the world! The role of Island Caretaker is a six-month contract, based on luxurious Hamilton Island in the Great Barrier Reef. It’s a live-in position with flexible working hours and key responsibilities include exploring the islands of the Great Barrier Reef to discover what the area has to offer. You’ll be required to report back on your adventures to Tourism Queensland headquarters in Brisbane (and the rest of the world) via weekly blogs, photo diary, video updates and ongoing media interviews. On offer is a unique opportunity to help promote the wondrous Islands of the Great Barrier Reef.

Other duties may include (but are not limited to):

Feed the fish – There are over 1,500 species of fish living in the Great Barrier Reef. Don’t worry – you won’t need to feed them all.
Clean the pool – The pool has an automatic filter, but if you happen to see a stray leaf floating on the surface it’s a great excuse to dive in and enjoy a few laps.
Collect the mail – During your explorations, why not join the aerial postal service for a day? It’s a great opportunity to get a bird’s eye view of the reef and islands.

The funny thing is, my job is better than that.

Axel Leijonhufvud on fiscal stimulus

Here is one bit from a generally interesting article:

Fiscal stimulus will not have much effect as long as the financial system is
deleveraging. Even if that problem were to be more or less solved, the
government deficit would have to offset both the decline in industry investment
and the rise in household saving – a gap that is rising as the recession
deepens. Here, too, the public is sceptical and prone to conclude that a program
that only slows or stops the decline but fails to “jump start” the economy must
have been a waste of tax payers’ money. The most effective composition of such a
program is also a problem.

It is worth noting that Leijonhufvud is generally considered a Keynesian, not a rational expectations theorist.  In my opinion the sophisticated Keynesian view is still that the stimulus won’t work.

My favorite things Puerto Rican

The list came out quite well:

1. Actress: Jennifer Lopez.  Seriously.  Out of Sight is quite good and the badly misunderstood The Cell makes perfect sense once you realize it is a retelling of parts of Sikh theology.  Rita Moreno gets honorable mention.

2. Cellist: Pablo Casals (his mother was Puerto Rican and he ended up living there).  His Bach Suites, while profound, are largely unlistenable due to the scratching and scraping.  Nonetheless there are still revelations to be found in the trio recordings, Schubert, bits of the Beethoven, etc.

3. Artist: Jean-Michel Basquiat.  Sneer if you wish, but his 1982-1984 period is very good, most of all the sketches.  There are many bad Basquiat works, however, and lots of fakes.

4. Economic historian and colleague: Carlos Ramirez.  Don't forget his paper on the bailout.

5. Poet: Juan Ramón Jiménez, who left Spain for Puerto Rico.  Here is his Platero y Yo.  Although he won a Nobel Prize in 1956, this very pure poet remains underrated in the United States.

6. Reggaeton song: Gasolina, by Daddy Yankee; note that reggaeton originated in Panama.

7. Guitarist: Jose Feliciano.  Here is his Star-Spangled Banner (excerpt) and here.  Here is Jose and Johnny Cash.

8. Musical, about: Paul Simon's The Caveman (not WSS, which I actively dislike).

9. Art museum: The two notable collections of pre-Raphelite art in this hemisphere are in Wilmington, Delaware and Ponce, Puerto Rico.  Each is worth a visit.

10. Building: Puerto Rico has many fine homes and a surprising amount of Art Deco, plus the colonial buildings and fortifications in San Juan.  Here is the over the top fire station in Ponce.  But overall I'll pick the metalwork on one of the country homes, somewhere between San Juan and Ponce.

The bottom line: The achievements are strong and varied, noting that I've used a looser notion of affiliation than in some comparisons past.

Canada fest

It’s true that the U.S. has in many ways a more libertarian culture
and political tradition than does Canada. But then isn’t it all the
more interesting to note that, despite America’s unique “land of the
free” self-conception, we’re no more free than Canadians? I feel
strongly that American culture is more varied, alive, weirder,
synthetic, and creative than probably any other. This is in part
because of, and not despite, the odd conservative and religious strands
in American culture.  And it is a culture especially amenable to all
sorts of entrepreneurial experiments, which gives American culture a
level of innovation and vitality (including countless varieties of
religious weirdness) that I think partly explains why it is the world’s
dominant exporter of culture. And I think the U.S.’s wealth relative to
other countries is actually underestimated. We are astoundingly rich
(recession or no recession) and this is a place of crazy opportunity.
So I think the U.S. does better in positive liberty terms than it
sometimes gets credit for.

But that doesn’t begin to mean that we live up to our reputation for
the kind of liberty classical liberals tend to care about. My sense is
that some American libertarians have a vague sense that if Canada
really was more free, then they should want to move there. But they
emphatically don’t want to move to Canada. My diagnosis is that many
libertarians prefer to live in a place where it easy to find others who
share their individualistic and libertarian values over living in a
place where they would actually be more free, but would feel more culturally alienated.

Via Megan McArdle, here's talk of safe Canadian banks and yet Canadian is still seeing the same downturn as the United States.  One can preach the virtues of Canadian banking regulation as much as one wants, but the Fischer Black-like question remains: how much real net risk exposure did Canadian industry accept vis-a-vis all external sources of risk, U.S. financial institutions included?  Lots.  A decision not to economically decouple from a large, leveraged economy is a small bit like a decision to leverage oneself, though many people do not welcome this perspective.  The bottom line is that risk mistakes have been made by just about everybody, not just the obvious culprits.

Addendum: Arnold Kling is not Canadian but Megan McArdle defends him aptly; he wasn't guilty of anything in the first place, except perhaps having exaggerated the coercive nature of taxation,

Keith Stanovich and what IQ is good for

The always-interesting-and-still-underrated Michelle Dawson points me to this batch of work.  Here is one of the papers, by Keith E. Stanovich and Richard F. West:

In 7 different studies, the authors observed that a large number of thinking biases are uncorrelated with cognitive ability. These thinking biases include some of the most classic and well-studied biases in the heuristics and biases literature, including the conjunction effect, framing effects, anchoring effects, outcome bias, base-rate neglect, “less is more” effects, affect biases, omission bias, myside bias, sunk-cost effect, and certainty effects that violate the axioms of expected utility theory. In a further experiment, the authors nonetheless showed that cognitive ability does correlate with the tendency to avoid some rational thinking biases, specifically the tendency to display denominator neglect, probability matching rather than maximizing, belief bias, and matching bias on the 4-card selection task. The authors present a framework for predicting when cognitive ability will and will not correlate with a rational thinking tendency.

Even more interesting, in my view, is that higher-IQ people are more likely to behave rationally when they are told that a rationality issue is on the table, but less so otherwise. 

If you are interested in issues of IQ, or for that matter overcoming bias, you should read Stanovich's work.  As noted above, higher-IQ people seem to be just as guilty of "myside bias."

Stanovich has a new book summarizing some of the results, namely What Intelligence Tests Miss: The Psychology of Rational Thought.  It is more idiosyncratic than the articles (he overcommits to one very particular model of the mind; cognitive laziness, without regard for margin) but recommended nonetheless.  For those who care about these issues, a must.

Is love a countercyclical asset?

Or is it the quest for love which is countercyclical?

Online and offline matchmakers are reporting that dating interest is up, way up.,
for instance, had its strongest fourth quarter in the last seven years,
and brick-and-mortar outfits like Amy Laurent International, a
matchmaking service with outposts in New York, Los Angeles and Miami,
say business is up 40 percent among women over the last four months. Those
in the online dating industry say the increased traffic can be
explained by at least a few factors: unemployed and underemployed
people have more time on their hands to surf the Web, and online dating
is a relatively inexpensive way to meet people. Offline matchmakers add
that organized dating events are cheaper than financing a series of
potentially stultifying meals with blind dates. And some experts say
singles seek the comfort of relationships during difficult times.

Here is the full story.

Markets in everything

I'm afraid to give this one much of a subtitle:

India's Hindu nationalist movement is launching a new soft drink made from cow urine.

bovine brew is in the final stages of development by the Cow Protection
Department of the Rashtriya Swayamsevak Sangh (RSS), India's biggest
and oldest Hindu nationalist group, according to the man who makes it.

Prakash, the head of the department, said the drink – called "gau jal,"
or "cow water" – in Sanskrit was undergoing laboratory tests and would
be launched "very soon, maybe by the end of this year."

worry, it won't smell like urine and will be tasty too," he told the
Times of London from his headquarters in Hardwar, one of four holy
cities on the River Ganges. "Its USP will be that it's going to be very
healthy. It won't be like carbonated drinks and would be devoid of any

The drink is the latest attempt
by the RSS – which was founded in 1925 and now claims 8 million members
– to cleanse India of foreign influence and promote its ideology of
Hindutva, or Hindu-ness.

I thank John de Palma for the pointer.

Jon Chait defends waste in the stimulus package

Read him here, commentary from Matt Yglesias.  I know all about Keynesian ditch-digging but we should keep a few points in mind:

1. Some of these expenditures will end up being permanent or at least long-term.

2. Government expenditure does increase monetary velocity in a way that boosts aggregate nominal demand.  But these higher velocity effects may not last for more than a single round of spending, which is to say they won't last long at all.

3. The second- and third-round stimulative effects of productive investments are much greater.  Production begets further production through the complementarity of the capital structure and through its ability to create profitable, sustainable jobs.

4. A lot of the stimulus will shift people from one job to another, rather than simply employing the current unemployed.  We really don't want to take people from producing something useful to producing something wasteful.

5. Many on the left are boasting that the U.S. government could borrow lots more (look at the current T-Bill rate), forgetting they used to warn us that international capital flows, as amplified through noise traders and speculators, mean that crises can arrive in a single, whiplash moment, bringing countries from riches to rags virtually overnight.  Somehow those old narratives are being forgotten, I wonder why.

The countercyclical meal plan, Arrow-Hahn-Debreu edition

Will Wilson blogs:

Seattle’s 5 Spot has a new “Blue Plate Special” promotion, with the daily meal priced like this:

…we’re pricing these items daily according to the most
recent close of the Dow Jones Industrial Average. If the Dow closes at
8650, then your “square meal” will only cost you $8.65; if it closes at
7875, then you win your meal for a mere $7.87.

There’s a built-in stop-loss, too. They make a limited number of blue plates each night, and when they’re gone, they’re gone.

Kicking the Stimulus

Smokers are three times more likely to kick the habit for at least six months when they are paid up to $750 (£520), a new study has found.

Nearly 900 General Electric workers took part in the test across 85 US sites. The results were published in the New England Journal of Medicine.

GE will launch a similar scheme in 2010 for all US employees, believing it will be cost-effective in the long term.

A certain blogger once expressed great skepticism that such plans could work. In related news, Ted owes Ray $12,400 as of Jan. 29.