Month: March 2009
Assorted links
1. Harlequin romances, a countercyclical asset?
2. By request: Tyrone on the crisis, here and here.
3. Has Portuguese drug decriminalization been a success? Possibly so.
4. Ten Chinese proposals for stimulating economic growth.
5. Life at GMU.
6. Steven Johnson on the future of the newspaper.
Answering the multi-request
AO has lots of questions:
What's the newest research and the current state of the literature on
school vouchers? Is there a good economics of education blog you
follow? You teach one part of the PhD I.O. sequence at GMU and have
given us your reading list, who teaches the other part and can we have
their reading list as well? Would decriminalization of drugs make us
worse off (by increasing the black market for drugs without allowing
the creation of legal markets) even though complete legalization would
make us better off? Are there other policies where marginal steps
towards the right direction make us worse off? Debate Nassim Taleb or
Dean Baker on bloggingheads.tv! More bloggingheads.tv with any
economists that you find large disagreement with!
In a nutshell: vouchers are better than the status quo but overrated by many market-oriented economists; evidence from Chile and Colombia and Sweden — the more systematic experiments — does show gains. In the U.S. the key question is how selectively or universally to apply vouchers; universal application creates a new middle-class entitlement and brings the federalization of education. In the old days I would read Joanne Jacobs on education. Alex teaches the other part of IO! Decriminalization for drugs keeps the rents from turning into profits for drug gangs; marginal steps in the right direction are usually all we have. Likely I am soon doing a Bloggingheads with Peter Singer; Brad DeLong and Arnold Kling are on the list as well.
What I’ve been reading
1. The Rape of Mesopotamia: Behind the Looting of the Iraq Museum, by Lawrence Rothfield. The definitive book on its topic.
2. Edward Skidelsky, Ernst Cassirer: The Last Philosopher of Culture. A very clear and readable book on a still underrated thinker.
3. The Euro: The Politics of the New Global Currency, by David Marsh. I can't say this book is fun to read, but it is the new go-to source on an increasingly up-for-grabs topic. It's at least as much about the EMS as about the Euro.
4. Richard Dowden, Africa: Altered States, Ordinary Miracles. Another mega-book on Africa, with mixed results. At least half of it is worth reading, and I learned a great deal (or at least I think I did) from the analysis of how Somalia is a relatively ethnically unified nation, by African standards at least.
5. Sarah Blaffer Hrdy, Mothers and Others: The Evolutionary Origins of Mutual Understanding. Does our cooperative nature come from our love of babies? Maybe my expectations were too high, but I found her earlier book more revelatory.
Markets in everything, and their advertisements
How Israel sells arms to India (YouTube).
I thank an anonymous (but loyal) reader for the pointer.
Betting your views, part II, Nouriel Roubini edition
John dePalma directs me to this article, excerpt:
…Just ask Nouriel Roubini
of New York University, who has a reputation as the most pessimistic
economist in academe. He deserves it. His most recent paper, published
last week, is entitled: "Can the Fed and Policy Makers Avoid a Systemic
Financial Meltdown? Most Likely Not." Nobody is more aware of the
gravity of the financial situation, and nobody has done more to point
out the risks of a systemic crisis. So how are Roubini's
own funds invested? They are 100 per cent in equities. In the long run
stocks do best and he is not yet close to retirement, so he keeps
putting more money into index funds each month. Fully aware of the
gravity of the financial situation, he is also aware of the futility of
trying to take action or to time the market. Those tempted to make the
investing equivalent of a goalkeeper's despairing dive should take note.
That's what I call taking mental accounting to an extreme.
Must you bet your views?
A reader asks:
How about some comments on the refusal by Krugman to bet some of his Nobel money against Mankiw?
Put aside Krugman and Mankiw and let's consider the issue in the abstract. Bryan Caplan believes that scholars should be ashamed if they do not publicly bet their views. In contrast I fear this requirement would become a tax upon ideas. How would you feel about an obligation (if only a moral one) for scholars and commentators to publicly reveal the content of their investment portfolios? Those portfolios are their real bets. Yet I still favor the privacy norm and I should note that Bryan never has (nor need he) revealed his portfolio to others at GMU, much less to the broader public.
Let's say that I, as a prolific blogger, express opinions on hundreds of economic policy topics, often involving either explicit or implicit predictions. Then say that hundreds of people wish to bet with me. Can I not simply turn them all down as a matter of policy and practicality?
If you're wondering, I practice "buy and hold and diversify," with no surprises in the portfolio and a conservative ratio of equity purchases. But those investment decisions don't necessarily reflect my views on any given day. I think it is intellectually legitimate (though perhaps not always prudent) to engage in mental accounting and separate those two spheres of my life. I change my mind lots of times, on many economic issues, but does that mean I have to become an active trader? I hope not and I'm not going to.
On long-run economic growth I'm still an optimist, though I am increasingly uncertain as to how much extant firms will capture those gains. On the short run issue at hand, I am fully with Mankiw, and Megan McArdle, in very much doubting the "rosy scenario" emanating from the Obama budget process.
Why do people assume that Jim Cramer is smart?
This was the first reader request:
Why do people assume that Jim Cramer is smart? More bluntly: why
does possession of a JD from Harvard Law School signal to people that
they should listen to you?
Surely an economist has some insights into this odd quirk of human nature.
Not everyone assumes that Jim Cramer is smart but in fact Jim Cramer is smart (though his advice is no smarter than that of a monkey's). Watch the early Jim Cramer and you will see (can anyone find a good YouTube link?). But take the smartest person you know and put him or her on TV for hours a week, for years, and see what happens. (See my book What Price Fame?.) Usually only very smart people get to experience such fates. Lots of screaming is an added bonus.
I'm not sure that the average person thinks so much of the typical Harvard Law graduate.
Megan McArdle had a good post on the Cramer dust-up with Jon Stewart.
The economics of prostitution pricing and prostitution bleg
From Allison Schrager, this was striking:
“I only charged $300 when I lived in San Francisco,” Andrea says.
Unlike most industries, escorts can charge higher prices when they are
in greater supply. This is because price is one of the few metrics sex suppliers
can use to convey quality. (In this way it is not unlike the hedge-fund
industry.) There are only about 30 VIPs in San Francisco, but nearly
100 in New York, so Andrea can charge more here. The customer
demographic is also wealthier, and a higher price deters customers from
bargaining, which is considered poor taste.
Alas, I cannot vouch for its accuracy. But in April I am participating in a NYC debate over the morality of prostitution, later to be broadcast on NPR. Notwithstanding my praise for Ross Douthat, I will be defending prostitution (with the Mayflower Madam on my side), against Catherine MacKinnon and others.
My bleg is this: other than Bernard Mandeville, what should I read to prepare? Any and all assistance is appreciated.
Request for requests
Here is your chance, yet again, to ask for what you would like. Comments are open.
By the way, I'll be resuming the Keynes symposium Tuesday, with a discussion of chapter ten of the General Theory.
Stephen Colbert on Ayn Rand
Some of it is funny. "Hell no, we won't C.E.O"!
Decisive arguments for and against multilateralism
For: The United Nations will hold a seminar on Battlestar Galactica, March 17, by invitation only.
Against: Whoopi Goldberg is slated to be the moderator.
I thank Pablo Halkyard for the pointer.
Markets in everything China-Israel fact of the day
Addendum: Patrick Walsh comments:
I asked my Chinese friend to translate it and he started giggling. He
says that it is something that you attach to the bottom of a toilet
seat so that when someone lifts it up there is a tiny explosion that
emits a loud noise.
I kind of want one now.
Ross Douthat as a conservative on social policy
Brad DeLong cites some critics of Douthat on social policy, including on abortion, and (via Matt Y.) there is more here, from his college writings. This post, on eugenics, is one of Ross's most controversial (btw overall I like it). I am myself more libertarian than conservative but at the same time I am on Douthat's side in questioning the common presuppositions behind modern opinion. There is a presumption that liberal, tolerant people should have certain views on abortion, stem cell research, and other matters and I am happy to see Douthat breaking the mold. On these issues, the derivation of current liberal policy views from underlying liberal principles is in fact extremely tenuous, even if one views those conclusions as ultimately correct. I view the current alignment of stances on social policy as more of a sociological regularity ("look at how rotten are the people on the other side") then an intellectual necessity.
Take abortion. Let's say that the mainstream modern liberal understanding of when life begins is correct with p = 0.92. That's a pretty high p on a matter where so many intelligent people disagree so vehemently. Does such a "p" provide enough reason to follow through with modern liberal policy conclusions? That's far from obvious. In this debate you'll find lots of fury and very little willingness to apply stochastic reasoning to ethics. There are far too many smart people who offer lip service to the toughness of these questions and then simply go ahead and take sides.
Assorted links
1. In defense of quantitative easing.
2. China's recycling market is sagging.
3. Felix Salmon is moving to Reuters.
Markets in everything China fact of the day
I enjoyed this one and I wonder what the sequel will look like:
Drawing inspiration from a best-selling Japanese manga adaptation of Das Kapital, Chinese theater producers are planning to bring Marx's masterpiece to the stage.
Yang Shaolin, general manager of the Shanghai Dramatic Arts Center, told the Wen Hui Bao that, together with Fudan University economics professor Zhang Jun and other experts, he is preparing a dramatization of Das Kapital. They've already decided on a director: He Nian, who directed the stage adaptation of the hit martial-arts spoof My Own Swordsman (æ¦æž—å¤–ä¼ ).
He Nian says he will combine elements from animation, Broadway musicals, and Las Vegas stage shows to bring Marx's economic theories to life as a trendy, interesting, and educational play.
I thank Robert C. for the pointer.