Month: September 2009

My preferred exile

A loyal MR reader requests the following:

If you were exiled from the United States and had to go live semi-permanently in some other country, which country would you choose?

Another reader asks:

Let's say you had enough cash (would 10 million do it?) and needed to disappear. Where would you go? Option one, you only spoke English. Option two, you could endow yourself with any language(s) you wished.

Secondary question: would 10 mil be enough?

$10 million would be enough, thank you.  Toronto or even London would be obvious choices but then it's not interesting so let's restrict it to the non-English speaking world.  And I'm assuming the choice is for me alone, otherwise it boils down to how altruistic I am.

I pick either Berlin or Cologne, the latter for its central location in Europe.  In either city there would be plenty of art and music, lots of smart people to talk to, access to other good locales, and the near-certainty of public order, yet with bearable winters and good health care.  The key question between the two would be whether I need my Germany to be on the Rhein and conquered by Romans. 

Germany may seem like an odd choice but I prefer northern Europe yet don't want a small country or a very cold country and England is out by assumption.  The Mediterranean world would not be grundlegend enough for me, not for permanent residence.

Buenos Aires and Mexico City would be tempting, and more fun than Deutschland on any given day, yet I couldn't bring myself to pull the trigger on either one.  I can't stay up late (B.A.) and I don't like horrible air pollution (D.F.).  As much as I enjoy seeing the children and the families, the Spanish-speaking world is best to roam through. 

Asia has too much population density for my taste.

Would I really rather live in Braunschweig than Barcelona?

The Fatal Conceit

Here is a bit more on insurance and states of nature.  In the language of economics a rational, utility maximizer allocates income to equate the marginal utility of income across all contingent-states.  Thus, a rational, utility maximizer moves income from states where the marginal utility is low to states where is high, e.g. home insurance moves money from the state in which your house doesn't burn and transfers it to the state in which your house does burn  - that's good because if your house burns the marginal utility of money will be high.  Usually, the marginal utility of money is high in the "bad" state but not always.  The classic case is that it's not generally a good idea to buy death insurance for your kids.  If your kids die you are going to be miserable and more money won't help much – better to not buy the insurance and take the kids to the movies.  Bertram and Dworkin are probably right that more money doesn't buy you much more utility if you are a vegetable, thus you don't want big transfers of income to this state.  Summarizing, the first notion of insurance is transferring money across states.

The second notion of insurance is using money to avoid the bad outcome.  It doesn't make sense to buy death insurance for your kids but it does make sense to buy them health insurance.  Similarly, you don't want to win the lottery when you are a vegetable but you might be williing to use lottery winnings to avoid becoming a vegetable.  

Arrow and especially Hirshleifer laid this all out in the 1960s.

More Assorted Links

Austin Frakt reviews Modern Principles: Macroeconomics.  Austin's blog, The Incidental Economist, covers game theory, investment planning and health economics among other topics.

Here is an updated version of my paper Life Savings Incentives: Consequences, Costs and Solutions to the Organ Shortage.  Did you know that it is legal to offer compensation for donating a whole body (e.g. for research purposes) but not legal to compensate an organ donor to save a life?  Crazy.  Alvin Roth links to a survey of transplant surgeons indicating increasing support for legalizing some forms of compensation (Roth also links to a recent radio interview with yours truly.)

House built from Lego, yes really.  

What if John Kerry had won?

A loyal MR reader writes to me:

I love when you think through counterfactuals, so here’s
one that’s been on my mind.  Imagine John Kerry wins in 2004.  What are
the implications for the 2006 midterms and more importantly the 2008
presidential election?  We probably pull out of Iraq without ever attempting the
surge, and leave the country in chaos.  But more importantly, the housing
bubble collapses on a Democrat's watch, not [a] Republican's.  Regardless of what
anyone says, the housing bubble was going to burst.  Maybe the collapse takes a
different path under Kerry than Bush, but it still happens, leaving his administration
to deal with it.  Does he win re-election?  Is McCain still the Republican
candidate?  And what becomes of a little known back bencher named Barack Obama?

I am sorry to disappoint such an excellent reader but I genuinely do not know what would have happened, if say Kerry had been more personally appealing to more voters (that counterfactual more or less holds constant other factors which are more directly political).  I do know this is a reason why I think it is very hard to forecast the net impact of a single election.  Do you remember the furor and then the agony from 2004?

How to test theories of beautiful women

No, I don't mean you should do that.  I mean you should apply location theory.  Maybe you think that Alex's claims don't adjust for the nationality or ethnicities of the women under consideration.  Pick then a city of your choice in a country of your choice.  Ask where, in that city, can the beautiful women be found.  Will you find them in the most globalized parts of the chosen city?  Probably so.  Will the least globalized parts of the city have less attractive women or perhaps even the least attractive women?

I also believe, in accord with my previous hypothesis, that you'll find the most beautiful women in the parts of the city where different income classes mix and there is lots of inequality among passersby.  That's in a museum, or in the Village, not in a Tiffany store or even in most of the upper East Side.   

I think about location theory a lot.

A Theory of Beautiful Russian Women

Anne Applebaum, author of the excellent Gulag: A History, asks where did all the gorgeous Russian women, now gracing Vogue covers and tennis courts everywere, come from?  "Whatever you may say about the Soviet Union in the 1970s and '80s," she writes, "it was not widely known for feminine pulchritude."

The answer, of course, is that the beautiful women were there all along (Russia is a big country) but

…they didn't have the clothes or cosmetics to enhance their looks, and, far more important, they couldn't use their faces to launch international careers…

Instructive, in this light, is the career of a real Vogue cover girl, Natalia Vodianova. Born in Nizhny Novgorod to a single, impoverished mother, Vodianova ran away from home at 15 to run a fruit stall in the local street market (successfully, according to her official biography). At 17, she was spotted by a French scouting agent and told to learn English in three months. She did–after which she moved to Paris, married a British aristocrat, and went on to become "the face" of a Calvin Klein perfume and to earn $4 million-plus annually. 

The deeper point is about not about fashion but about markets and globalization:

Ultimately, what goes for the fashion world goes for other spheres of human activity…what open markets do for beautiful women they also do for other sorts of genius. So, cheer up next time you see a Siberian blonde dominating male attention at the far end of the table: The same mechanisms that brought her to your dinner party might one day bring you the Ukrainian doctor who cures your cancer or the Polish stockbroker who makes your fortune.

See also my theory of why Latvian women are beautiful, Tyler's simple theory of where the women are beautiful and my TED talk which has no beautiful women but does discuss other benefits of globalization.

Hat tip Daniel Lippman.

*The Pattern in the Carpet: A Personal History with Jigsaws*

Many writers (including W.H. Auden, Georges Perec, Julian Mitchell, Julian Barnes, Ronald Harwood and Jonathan Raban) have been addicted to crossword puzzles, but I have never taken to them either.  The hours of freedom from words are a relief to me, though of course I acknowledge that, paradoxically, I then seem to feel the need of words to try to analyse the nature of this freedom.

That's because writing is an illness. A chronic, incurable illness.  I caught it by default when I was twenty-one, and I often wish I hadn't.  It seemed to start off as therapy, but it became the illness that it set out to cure.

That is from the new Margaret Drabble book, which indeed is about her obsession with jigsaw puzzles.  While I do not myself have an interest in jigsaw puzzles, or crosswords, I am nonetheless finding the book very interesting.  It will baffle many of her traditional fans but that's probably for the better.

What happens when there are no more world records left?

Hello Tyler

I'm a British blogger and avid reader of your superb blog. I have a question for you and your readers.

In the wake of the World Athletic Championships (and Bolt's spectacular achievement) I've been wondering: what will happen when the last world records are set?

For example: nobody will ever run the 800m in one second.

Which means someone, somewhere will set a record in that event that never gets broken.

Similarly, nobody will ever throw a javelin five miles. There's got to be a limit point.

What happens after that? What happens when all the Final Records, as it were, have been set?

Of course, we won't know it when it happens. We'll keep striving to break them. But at some point we'll look back on the preceding twenty years and remark on the fact that no new records have been set. In the meantime, incrementally, everyone has caught up to a similar level as everyone else.

What happens then? Does track and field die?

Of course a new record may beat an old record in asymptotic fashion, but at some point this ceases to be exciting.  One partial solution is to redefine the unit of achievement: how many 100-meter races in a row did the person win against peers?  There can be a "Grand Prix" of accumulated race performances.  Another partial solution is to introduce weights or enhancements, to redefine the terms of the competition.  In short, I expect entrepreneurs will always find ways around this problem.  In chess the gaps between the top fifteen players have narrowed considerably, yet the public doesn't seem to have lost interest in the game.  Alternatively, individual basketball scoring performances still interest the fans, even though Wilt Chamberlain's 100-point game probably will never be topped.  It's enough if the activity itself is fun.  What else will happen?