Month: July 2009

Intrade vs. MSM: Sotomayor Nomination

by  Alex Tabarrok in

What tells you more about the Sotomayor nomination, all of the chatter and debate in the MSM over her "controversial" remarks or the single number from intrade: bids at 98,5, i.e. an estimated probability of confirmation of 98.5% (as of July 14, 11:12 pm EST)?

Loyal-reader Jim Ward writes: 

Do reporters and news Agencies even know to check the betting markets? Or do they just ignore it, because “X sure to happen, nothing to see” is not a story?
Or they don’t want to seem biased, and have to provide 2 sides to every story…Why not just throw Intrade odds into every story as an addendum?

I'm actually amazed at how far prediciton markets have come.  In Entrepreneurial Economics I wrote:

…perhaps one day, instead of quoting an expert, the
New York Times editorial section will refer to the latest quote on "health
care plan A" available in the business pages.

At the time, I didn't think that day would be just a few years in the future. Admittedly, we are not quite there yet but during the last election it was common for media outlets to refer to the prediction markets.  I think this trend will continue.  Can futarchy be far behind?

My Spanish article on Obama

by  Tyler Cowen in
Guessing the “true economic views” of
Barack Obama has grown into a small industry. Some people are convinced
that he is a radical left-winger, while others claim he absorbed free
market economics during his time as a law professor at the University
of Chicago.  Obama’s voting record in the Senate is left-wing, but
since he’s been planning on pursuing the Presidency for years, maybe
those votes were for public consumption.

My view of Obama’s economics is
straightforward one and it is consistent with his public
pronouncements. I view Barack Obama as an economic pragmatist who is
willing to borrow good ideas from many different sources. He stands
further to the left than do most Americans (myself included) but he has
lined up the very best centrist economic talent to advise him.

What’s
the reason for thinking that Obama is such a pragmatist? If you read’s
Obama first memoir (Dreams from My Father: A Memoir of Race and Inheritance),
which he wrote before he was famous, issues of identity dominate  He is
acutely aware of being a mixed-race person in a community of largely
white American leaders. Most of all, I think Obama wants to do a good
job as President and he wants to be seen as having done a good job.  That
would pave the way for improved race relations and, although Obama
would not use these words, it would bring higher status to
African-Americans.  When it comes to his
subconscious, I see Obama as more attached to the notion of
excelling than to any particular view of economic policy. Keep in mind
that Obama was raised by a white mother (the father was absent) and he
“decided to be black,” and decided to marry a black woman and attend a
black church, only later in his life. Oddly, his hopes for improved
race relations are the hopes that would be held by a utopian white
liberal rather than the vision held by most African-Americans. That is
one reason why African-Americans were initially so slow to support him
and why so many educated white elites feel so at home with him.

Obama is also famously detached and
it seems he never loses his cool. He does not fixate on economic
ideology but instead he is focused on creating his own personal success.  That implies a very strong ego but also it again leads to an economic and also a foreign policy pragmatism. 

If Obama is elected, I expect the
major economic storyline to be Obama pushing policies in the national
interest (as he perceives it) and Congress pushing back with earmarked
expenditures and privileges for special interest groups.  It won’t be about Democrat vs. Republican.

There is plenty of talk about Obama
being half-black but perhaps the more important fact is that Obama is
from Hawaii. Many Hawaiians barely think of themselves as North
Americans and they live thousands of miles from the continent. The
Hawaiian background is part of where Obama’s cosmopolitanism – which is
strong and sincere – comes from.

My description may sound like a very
favorable portrait of Obama on economics but he will likely encounter
serious problems if he wins the election.  The
important American Presidents are those like Reagan who “know a few big
things” and push them unceasingly, without much regard for the
pragmatic or even the reasonable.  Obama is not
used to connecting with mainstream America and if he wins it is because
the country is fed up with Republicans, not because the voters have
absolute confidence in him.  Congress will test him.  The chance that he makes big mistakes will be small, and that’s all for the better.  But the best prediction is that he will be ineffective in tackling most of America’s biggest problems.

Markets in everything; the culture that is Japanese

by  Tyler Cowen in

This year Japan has gone konkatsu-crazy, with the trend spawning countless magazine articles, a weekly TV drama and a best-selling book.

A Tokyo shrine now offers konkatsu prayer services, a Hokkaido baseball
team has set up special seats for those looking for mates, and a Tokyo
ward office arranges dating excursions to restaurants and aquariums.

A lingerie maker has even come up with a konkatsu bra with a ticking clock that can be stopped by inserting an engagement ring.

Here is much more.  I thank KunLung Wu for the pointer.

Questions which are rarely asked

by  Tyler Cowen in

Today it is from Megan McArdle:

Veterinary spending is rising just about in line with human medical
spending.  Kudoes to AEI for publishing a graph that seriously
undercuts one of the major conservative arguments about health care: 
that the main problem is consumers who don't bear their own costs. 
Veterinary spending is subject to few of the perversities that either
left or right suppose to be the main problems afflicting health care
spending.  Consumers pay full frieght most of the time.  They are price
sensitive, and will let the patient die if keeping him alive costs too
much.  There is no adverse selection.  There is no free riding on
mandatory care.  Government regulation is minimal.  Malpractice suits
are minimal, and have low payouts.  So why is vet spending rising along
with human spending?

There is a very nice graph in the post.

Getting stuck in the bad equilibrium in India

by  Alex Tabarrok in

The poor in India are victims of state indifference and corruption; somewhere between a quarter and a half of all subsidized food meant for them, for example, is stolen by corrupt government officials.  And yet if one asks the poor what jobs they would like their children to have the number one answer is to work for the government.  (See also my earlier post on Regulation and distrust for a model.)

In his magnificient, if poorly titled, In Spite of the Gods: The Strange Rise of Modern India, Edward Luce provides a sadly, poignant analogy: 

To the poor the state is both an enemy and a friend.  It tantalizes them with a ladder that promises to lift them out of poverty but it habitually kicks them in the teeth when they turn to it for help.  It inspires both fear and promise. To India's poor the state is like an abusive father whom you can never abandon.  It is through you that his sins are likely to live on.

Luce's book is the best of recent books on India, highly recommended.

*A Brain Wider than the Sky*

by  Tyler Cowen in

The author is Andrew G. Levy and the topic is migraine headaches:

Even more remarkably, triggers seem to be culturally particular.  French migraine researchers, testing a French population, found widespread complaints about white wine and chocolate.  British researchers, testing their own countrymen and women, found red wine and cheese to be the more potent triggers.  Such anomalies might point to flaws in the studies, but more likely, they point to something mysterious about the human temperament that migraine reveals.  It's not the chemical in the wine that triggers the migraine generator, but something else inside the wine entirely, something in what the wine means to the drinker — something that might change by region, by individual, by culture, that simply obliterates the border between the somatic and the psychosomatic.

The subtitle is A Migraine Diary and you can buy this very interesting book here.  Levy outlines his struggle with migraines, their possible roots, and what they reveal about the broader human condition.  According to Levy, Asians and African-Americans are less prone to migraines and the differences may be partly genetic in origin.

The trip so far

by  Tyler Cowen in

Not everyone liked it when I suggested that vouchers have the potential to be "TARP for the elementary schools."  With New York and Los Angeles in some disarray, Chicago is arguably North America's "coolest" city right now; the new contemporary wing of the Art Institute is the best "new U.S. museum" in many years.  The Austrian-language dialogue in Brüno is the funniest part of the movie and enough to make it, despite its flaws, a comedy classic.  I should not have told my Las Vegas cabbie (while he was driving) that the real estate market there will not recover for another twenty years.  Lotus of Siam, in Las Vegas, is one of the best Thai restaurants in the United States.  In case you had forgotten, here is how to order in a good ethnic restaurant.  I haven't arrived in Mobile yet.

*A Happy Marriage*

by  Tyler Cowen in

That is the title of the new novel by Rafael Yglesias.  Here is a tiny excerpt:

Although a credulous consumer, Enrique was a skeptical lover, and he demanded to know what was wrong.

I devoured this book eagerly on a plane flight and I recommend it highly to those who are married, have been married, will be married, should be married, and should not be married. 

The blogger son Matt, in the form of a fictional persona, makes numerous cameo appearances.  The economist Paul Joskow, in the form of a fictional persona, makes a cameo appearance.  In real life he is Matt's uncle.

How many other novels explain to you — tongue in cheek — the exact difference between microeconomics and macroeconomics?

In my view Rafael Yglesias is one of the best American novelists of the last twenty years and probably the most underappreciated.  Here is my earlier post on his earlier novel Dr. Neruda's Cure for Evil.

ATMs in casinos

by  Tyler Cowen in

Should the service fee by high or low?  It could cut either way.  A low service fee encourages withdrawals and thus gambling, which is profitable for the casino.  A high service fee takes in money from the desperate and those with high time preference.

It was $4.99.  (Of course that is n = 1.)

On the other hand, they let you take out up to $1000, well above the average.

Another user told me you are especially likely to get $100 bills from the machine.  Perhaps the hope is that you will buy $100 in chips rather than trying to break the bill.

When does libertarian paternalism work?

by  Tyler Cowen in

Not always.  Here is the abstract from a new paper:

We develop a theoretical model to study the effects of libertarian
paternalism on knowledge acquisition and social learning. Individuals
in our model are permitted to appreciate and use the information
content in the default options set by the government. We show that in
some settings libertarian paternalism may decrease welfare because
default options slow information aggregation in the market. We also
analyze what happens when the government acquires imprecise information
about individuals, and characterize its incentives to avoid full
disclosure of its information to the market, even when it has perfect
information. Finally, we consider a market in which individuals can
sell their information to others and show that the presence of default
options causes the quality of advice to decrease, which may lower
social welfare.

I do not yet see an ungated version.  Of course anyone interested in this topic should also pursue the papers of Mario Rizzo, Glen Whitman, and Daniel Klein.