Month: April 2009

Partisanship Bias and the Economy

Andrew Gelman and John Sides, writing at FiveThirtyEight, have a very good post on how partisanship biases perceptions of the economy.  It's well known that views of the economy often differ by partisan identification but that could be explained by differences in interests.  What Gelman hammers home is how partisanship can cause people to have views widely at variance with reality (regardless of interest) and how quickly views can change when partisanship changes even when the facts stay the same.

A good example comes from the research
of Larry Bartels. He analyzed a 1988 survey that asked “Would you say that
compared to 1980, inflation has gotten better, stayed about the same, or gotten
worse?” Amazingly, over half of the self-identified strong Democrats in the
survey said that inflation had gotten worse and only 8% thought it had gotten
much better, even though the actual inflation rate dropped from 13% to 4% during
Reagan’s eight years in office. Republicans were similarly biased about the
Clinton-era economy: in 1996, a majority of Republicans thought that the budget
deficit had increased. This partisan filter was also evident after the
Democrats’ retaking of Congress in 2006. Research
by Alan Gerber and Greg Huber shows that Democrats became much more optimistic,
and Republicans more pessimistic, about the national economy.

about foreign policy manifest a similar bias. For example, from 1965 through
1968, Democrats were more likely than Republicans to support the Vietnam War,
but starting in 1969, it was the Republicans who were (slightly) more

Could such biases be a product of the relatively mild economic
conditions of the past twenty years? Early returns from 2008 and 2009 suggest
that partisan biases still operate. According to Gallup Poll data from just
before the November election, 20% of Republicans and 8% of Democrats were
“satisfied with the way things were going in the United States.” Immediately
after Obama’s inauguration, the parties flipflopped: 18% of Democrats and 14% of
Republicans expressed satisfaction. That gap has only grown. In February
, 20% of Democrats but only 10% of Republicans expressed

The same pattern emerges in consumer confidence. ABC News
surveys surveys show that the
views of Republicans became 19 points more negative between October and
mid-April. Meanwhile, the views of Democrats improved by 10 points, even as the
economic news became grimmer.

There is always a bull market somewhere


…it's also clear that part of the gun-buying rally is driven by
people like Mr. Chambers who are buying weapons the way others invest
in a hot stock. The buying is pumping up prices. Many popular models of
guns are back-ordered for a year or more. Some manufacturers are
operating plants 24 hours a day. According to the 2009 edition of the
Blue Book of Gun Values, the average price of European-made AK-47s —
the famous Soviet-era military weapon now made in several countries —
doubled from $350 last September to more than $700 by the end of 2008.

Bert Collins, an Atlanta commercial
real-estate manager, recently bought two AR-15 rifles for about $1,600
each. He's keeping one in its box, untouched, with the hope of selling
it at a profit should Congress re-enact the law, which expired in 2004.
"It's certainly a better investment than my 401(k) has performed," Mr.
Collins said.

Bubba Sanders, owner of Bullseye Supply LLC, in Brandon, Miss., said
he has "a number of doctor clients whose financial advisers have told
them to invest in ammunition. Beats the hell out of money markets and
CDs. You can double your investment in ammunition in a year."

I thank John de Palma and James Solier for the pointers.

Markets in everything, or Department of Why Not?

Bouncers, ex-soldiers and former police officers are being brought into schools to provide "crowd control" and cover absent teachers' lessons, a teacher has revealed.

school, thought to be in London, employed two permanent cover teachers
through an agency for professional doormen, the National Union of
Teachers annual conference in Cardiff heard today.

Bouncers, who
more usually work nights keeping order in pubs and clubs, are being
employed in schools because they are "stern and loud", said Andrew
Baisley, a teacher at Haverstock school in Camden, north London.

Here is the story.

Financial crisis update

The TARP money seems to be for bank bondholders (not bank lending), banks are gaming the system like crazy and winning the public relations earnings announcement battle, and step-by-step the Obama team has ended up painted into a corner and now needs to publicly announce the results of the bank "stress tests."  No one wins when the government pronounces a bank "weak" (and thus destroys it) and no one wins when the government pronounces a bank "good" (and thus to some extent owns it).

That's the latest.

Food in Portugal notes

Many of you recommended the pasteis in Belem, so when we were picked up at the airport we were immediately whisked there: "We know already that you wish to go" was the explanation.   

The white asparagus is in season and they stack ham on top of many things, including trout.  No other cuisine can make the blend of rabbit and clam seem so natural.  A good rule of thumb here is to order game, beans, and any combination of ingredients which sounds like a mistake.  The biggest mistake here is to try to replicate the kind of seafood meal you might enjoy in the U.S.

If you prefer Michelin "two-fork restaurants" to their starred alternatives, Portugal is the eating country for you.  I haven't seen a single Chinese restaurant.  It is Lusaphone eating: for your foreign options, you can find Brazilian, Mozambiquean (good chicken), Cape Verdean, and excellent Goan.  French and Italian are rare.

If I had a thousand dissertations to research, one of them would be: "The historical interconnections between the Portuguese dessert and the Calcutta sweets shop."

The fact that I found this post interesting to write makes me fear that Western Europe is not yet an optimum currency area.

Why do people like streetcars so much?

Will, a loyal MR reader, asks:

I just ran across an interesting post by a Jess Weiss on a
pro-streetcars-for-DC blog that asks the following question – "In
several places in the U.S., most notably Portland, Oregon that's built
the most extensive streetcar system in the U.S. to date, they report
"people simply like streetcars more than buses", but nobody seems to be
able to really point their finger at hard data why that is.

Why do you think streetcars are better than buses?"

Here in Lisbon the streetcars are full of pick-pockets, overcrowded, and hard to keep your balance in.  Yet those same streetcars are beloved by the tourists and common on the postage stamps.

I believe this is a question for Mrs. Cowen, not me.  I did ride them in Lisbon — once.  I'm still wondering why so many people are reluctant to take cabs for cheap, short rides.

Here is a Megan McArdle post on streetcars.  Natasha believes that street car lovers wish to "affiliate themselves with the past."  (When I heard this phrasing I realized we are no longer newlyweds.)  I believe that streetcars help you avoid that "low class feeling" which all too often comes from riding on the bus.  The whole point of a streetcar is to avoid creating an ambience separate from the urban trappings which surround you.  Which is precisely why they are charming yet not always so comfortable.

Here is a short article on the popularity of streetcars.  Putting aside the social cost-benefit analysis, and focusing only on the individual ridership decision, why do people like streetcars so much?

Markets in everything, Psycho edition

Sometimes I get fooled and from Portugal I cannot be sure this one is real.  But here goes:

Worried about not making a good impression on the date you’ve just
brought over to your place for a nightcap? Spice up the bathroom with
these matching bloody bathmats and shower curtains!

Blood Bath Mat

Blood Bath Shower Curtain

(via Street Anatomy)

I thank TheBrowser for the pointer.

The culture that is Swedish: a story of optimal tax enforcement


Sweden's tax authorities are cracking down on unreported webcam stripper income.
They estimate that hundreds of Swedish women are dodging the law,
resulting in a tax loss of about 40m Swedish kronor (£3.3m) annually.

search involves tax officials examining stripper websites, hours upon
hours, for completely legitimate purposes. A slightly disheveled
project leader said 200 Swedish strippers had been investigated so far,
adding the total could be as much as 500. "They are young girls, we can
see from the photos. We think that perhaps they are not well informed
about the rules," he said.

Here is the cited link.  Here is one story.

Are European nations free-riders when it comes to fiscal policy?

I don't think so.  I think the truth — hard for some people to digest — is simply that these smart Social Democrats, rightly or wrongly, don't much believe in massive fiscal stimulus.  They're used to the idea that their economies have big structural problems that government spending cannot eliminate.

If fiscal policy can work for a large country such as the United States, it should work for the Netherlands (or Portugal) as well, even if it would work with less potency.

The benefits from the first round of spending would be captured almost completely within the Netherlands.  If unemployed resources can be well targeted, and without messing up incentives too badly, (big "ifs" in my view), that provides an almost automatic case for extra Dutch government spending.

It is a good question whether the Dutch already have too much government spending.  I will say yes but I don't much hear this from fiscal policy advocates.  Maybe they think the current Dutch balance is "just right" but again that means at the margin fiscal policy, targeted at unemployed resources, won't wreck the overall balance.

What about the second round of expenditures from the fiscal policy?  Well, if a big chunk of those newly employed workers increase their spending on food, shelter, and local transportation, lots of the second round is captured in the Netherlands as well.  Even buying a T-shirt from China will likely benefit a Dutch retailer to some extent.

You will hear the common tale that "everyone not crazy thinks fiscal policy is a good idea, but some countries are too selfish, or too cowardly, to do it."

That story is an easy out, but the truth is that not everyone is so enamored of massive fiscal policy stimulus.  If they were, they would be doing it.  But they're not.

Hong Kong, by the way, is preparing a relatively aggressive stimulus package.

Here is a relevant blog post on Germany.

Questions that are rarely asked

Is euchre making a comeback?

I played frequently as a child, as I was taught by my partly Irish grandmother.  No one else in my grammar school knew the game.  Then I heard nothing about it for more than thirty years.  Now, twice in the last month, I've heard the game mentioned in public, "on the street" as it were.  What is up?

The alternative is that the question is rarely asked because, in fact, euchre is not making a comeback.