Month: November 2009

Markets in everything?

A gang in the remote Peruvian jungle has been killing people for their
fat, the police said Thursday, accusing the gang’s members of draining
fat from bodies and selling it on the black market for use in

Three suspects have confessed to killing five people for their fat,
said Col. Jorge Mejía, chief of Peru’s anti-kidnapping police. He said
the suspects, two of whom were arrested carrying bottles of liquid fat,
told the police it was worth $60,000 a gallon.

Colonel Mejía said
the suspects had told the police that the fat had been sold to
intermediaries in Lima, the capital. While police officials suspect
that the fat was sold to cosmetic companies in Europe, he said he could
not confirm any sales.

That's from The New York Times, not The Weekly World News.  Medical "experts" express varying degrees of skepticism about the depth and liquidity of this market, but if you read the whole article you will encounter some truly graphic descriptions of the production process.  Caveat emptor.

Assorted links

1. How much will U.S. taxes ever go up?

2. Useful lateral thinking and how it is described by the lateral thinker.

3. The biological bases of business and entrepreneurship.

4. One hour show with me in Second Life; they even did up a Tyler Cowen avatar.  Other shows are here, including economist Robert Frank and libertarian Adam Thierer.

5. Matt Kahn on "cash for caulkers".

6. The new AEA calendar of economists.  To whet your appetite, here is a photo of Francis Ysidro Edgeworth.

*The Unincorporated Man* and slavery

As long as we are on the topic of slavery, why not consider fiction?  This science fiction novel has an intriguing economic premise: you're born a slave and you're not free until you can buy yourself back from your owner (which may be a corporation).

It may sound funny to think that a slave can save money but arguably an optimal slavery contract in a high-productivity society will give the slave some residual claimancy and some property rights, in order to spur work effort.

At some point you wonder whether a slave in this futuristic society is better off buying the rights to himself or herself.  (Then he has to find individual health insurance!)  If the system of slavery is truly secure, it's like living under Laffer Curve-maximizing taxation.  That's oppressive, but many people have lived under worse.  There would be lots of "Nudge" as well and with advanced technology very effective monitoring and control.

Is it possible that in such a world you would trust only a person who was a slave?

In many historical instances, slaves cannot precommit to "no revolt."  So slaves aren't allowed to earn at the Laffer maximum point, for fear they will rebel or otherwise receive or lobby for greater rights.  Real world slavery is much much worse than this hypothetical portrait might make it seem.

I won't have time to read through the novel (the new Alice Munro is out, for one thing) but I thought the premise was an intriguing one.  The Amazon reader reviews are favorable.

In praise of Robin Hanson

My fondest memory of Robin Hanson is when we interviewed him for a job and, during his on-campus visit, I gave him some papers I had been working on.  Later he emailed me back, before getting the offer I might add, and told me the papers weren't very good and what was wrong with them. 

Ten years later, as his colleague, I disagree with Robin on many topics, including futarchy, whether we will become computer uploads, and meta-ethics (oh, if Robin would only advocate the ethical theory he so consistently lives by!..instead of his contorted contractarian version of preference utilitarianism, which he sometimes calls "dealism.").  Despite our disagreements, Robin and I are oddly in frequent common agreement on practical "life topics."  Most of all, I view Robin as a reductionist thinker to a greater degree than I am comfortable with for myself; relative to Robin, I'm more attached to the mumbo-jumbo of the mess and the piling on of multiple perspectives to the point of squishiness.

Those of us who speak regularly with Robin know how brightly his star blazes.  He's a truly original and important thinker in a way that few are, plus on analytic back and forth he is blindingly fast and accurate.  But you can't expect him to be a "I'm going to agree with him all around" kind of guy; he isn't.  If you are one of his detractors, or even just a common sense skeptic, you can always find many of his beliefs to be outright absurd,  The real question, however, is how much you can learn from him and on that he is an A+.

Addendum: Robin responds.

Assorted links

1. Scott Sumner's most absurd belief: India as #1 in gdp by 2109.

2. Click "play" and watch unemployment grow.

3. Who is Hollywood's most overpaid star, relative to box office returns?  Will Farrell is #1 it seems.

4. Markets in everything: NYC McDonald's with sleek Danish furniture.

5. Saddam's strategic thinking.

6. Via Caroline Flyn, China ethnicity of the week, good for a whole year (photos, recommended).

7. The Political Economy of Trust, by Henry Farrell.

MR vocabulary guide

1. “Self-recommending”: the very nature of the authors and project suggest it will be good or very good.  This also often (but not always) means I haven’t read it yet.  I am reluctant to recommend *anything* I haven’t read, but I am signaling it is very likely recommendation-worthy and I wish to let you know about it sooner rather than later.

2. An “Assorted link” that ends with a question mark: Worth thinking about, but I wish to distance myself from the conclusion and the methods of the study, without being contrary per se.

3. Hansonian: of, or relating to Robin Hanson.

4. The Jacksonian mode of discourse.  I am opposed to this.  Political and economic pamphlets in the Jacksonian era were excessively polemical and sometimes the Jacksonian mode is still used today, in 2009, believe it or not.

5. Wunderkind: Take the average age of that person’s relevant peers.  If said person is either under twenty or less than half that average, that person may qualify for “Wunderkind” status.

6. Markets in everything: Some of these are celebratory but many of these are sad or tragic.  Usually I am trying to get you to think about — as a philosophical question — why the market exists at all and not whether it should be legal.

7. Tyrone is my brother and alter-ego who believes the opposite of what Tyler believes.  Trudie offers personal advice.  Neither has good time management skills and thus they don’t write very much these days.

8. “Shout it from the rooftops”: What to do with wordy, obscure truths which the world badly needs to learn.

What have I left out?

Is this why the Senate bill has an ok CBO rating?

Because the program would begin taking in premiums immediately
but would not start paying benefits until 2016, congressional budget
analysts have forecast that it would generate a nearly $60 billion
surplus over the next 10 years, cash that would help the larger
measure's balance on paper.

Not long ago I filed this under "Department of Uh-Oh."  In the longer run it is very bad for the budget and it is simply an accounting trick.  It's a sign that fiscal responsibility will never come to U.S. health care.  And yes there is a long-term care provision in the Senate bill.  Although I have not read through its current incarnation of 2000-some pages, I am willing to bet we are getting the cost back-loaded version of the idea.

*From Poverty to Prosperity* watch

That's the title of the new and self-recommending book by Arnold Kling and Nick Schulz.  This work has text by the authors, interspersed with interviews with famous economists, including Robert Fogel, Robert Solow, Joel Mokyr, Doug North, Bill Easterly, Edmund Phelps, Amar Bhide, William Lewis, and Bill Baumol.  Here is Paul Romer:

It's the kind of culture that can tolerate rap music and extreme sports that can also create space for guys like Page and Brin and Google.  That's one of our hidden strengths.

You can buy the book here.  The subtitle is Intangible Assets, Hidden Liabilities and the Lasting Triumph over Scarcity.

Giovanni Peri’s latest on immigration and productivity

Here is the abstract and it has to do with a Smithian theme, namely division of labor:

Using the large variation in the inflow of immigrants across US states we analyze the impact of immigration on state employment, average hours worked, physical capital accumulation and, most importantly, total factor productivity and its skill bias. We use the location of a state relative to the Mexican border and to the main ports of entry, as well as the existence of communities of immigrants before 1960, as instruments. We find no evidence that immigrants crowded-out employment and hours worked by natives. At the same time we find robust evidence that they increased total factor productivity, on the one hand, while they decreased capital intensity and the skill-bias of production technologies, on the other. These results are robust to controlling for several other determinants of productivity that may vary with geography such as R&D spending, computer adoption, international competition in the form of exports and sector composition. Our results suggest that immigrants promoted efficient task specialization, thus increasing TFP and, at the same time, promoted the adoption of unskilled-biased technology as the theory of directed technological change would predict. Combining these effects, an increase in employment in a US state of 1% due to immigrants produced an increase in income per worker of 0.5% in that state.

The paper is here.

What did Obama eat in China?

I've been trying to find out what Obama ate in China and this is the closest I can come:

"We're also hosting a 'Stars and Stripes' week featuring iconic
American cuisine," said a hotel spokesperson, who declined to give her
name due to company policy.

"The White House guests may want to enjoy New Orleans flavors, American steak BBQs and Jack Daniel's cocktails," she added.

That was the Marriott but I suspect the Chinese government had a say in things or at the very least it was negotiated.  It's an interesting question which side is signaling the dominance with that choice; I say the Chinese.  Fortunately in Beijing it seems he had:

Obama-Hu 90 min
meal feat. prawns, soups and lamb chops, plus a presentation of Chinese
noodle making, which the Americans enjoyed.

Economics and biography

I think of the biographer as standing up and demanding that economists take their own method seriously.  Surely the economist should at some point be required to explain something in the life of an actual human being.

That is from my (favorable) review of E. Roy Weintraub and Evelyn L. Forget, Economists' Lives: Biography and Autobiography in the History of Economics.  The review will be published in a journal called Biography.

How do you convince someone to stay away?

The feverish but resilient Megan McArdle refers us to a problem in signaling theory:

Slate ponders how to communicate the danger of radioactive waste to the far future.  The problem is, if they can't read English, or recognize the radiation trefoil, anything you do sounds more likely to intrigue future anthropologists than to warn them off…

Juliet Lapidos at Slate writes:

Even if future trespassers could understand what keep and out mean when placed side by side, there's no reason to assume they'd follow directions. In "Expert Judgment," the panelists observe that "[m]useums and private collections abound with [keep out signs] removed from burial sites."

…Likewise, a scavenger on the Carlsbad site in the year 12,000 C.E. may dismiss the menace of radiation poisoning as mere superstition. ("So I'm supposed to think that if I dig here, invisible energy beams will kill me?") Hence the crux of the problem: Not only must intruders understand the message that nuclear waste is near and dangerous; they must also believe it.

How can we solve this problem?  Similarly, if an attractive woman tells you "You don't want to go out with me" do you believe her and act on that?  What other problems have this structure?

Monitoring the bureaucracy in Dubai

Sheikh Mohammed oversees a cadre of undercover mystery shoppers…They pose as prickly members of the public seeking the government's help.  Their reports are instrumental in firings and promotions.  No bureaucrat can be sure the demanding customer across the counter isn't secretly reporting to the boss.  Once in a while, Sheikh Mohammed turns up at 7:30 on surprise inspections.  He's been known to fire late-arriving managers on the spot. 

That is from Jim Krane's fascinating City of Gold: Dubai and the Dream of Capitalism.  This is pretty clearly the best book on Dubai.  It has an insider's perspective but is also analytical.  Recommended