Month: November 2009
*You Are What You Choose*
Scott DeMarchi and James T. Hamilton have a new book out and the subtitle is The Habits of Mind That Really Determine How We Make Decisions. I take this to be the key paragraph:
It's called fast food, but your decision-making process in ordering a chicken sandwich can be incredibly complex. In the following section, we describe six core habits of mind that affect how you make decisions in all areas of your life. We call these TRAITS: Time, Risk, Altruism, Information, meToo, and Stickiness.
Here is a review and explication of the book.
The wisdom of Garett Jones
Workers mostly build organizational capital, not final output. This explains high productivity per 'worker' during recessions.
That is from Twitter, the link is here.
Give them your tired, your poor, your huddled masses
Three countries that relied on low-skilled immigrant workers during good times – Japan, Spain, and the Czech Republic – have recently introduced voluntary return programs programs, popularly known as "pay-to-go" programs, in an effort to reduce the number of unemployed immigrants.
The programs established in 2008-2009 generally provide unemployed legal migrants with stipends that cover the cost of a one-way plane ticket "home." Some programs also offer migrants a lump-sum payment.
More here.
Assorted links
1. Geithner meets with bloggers, and here: "We were offered a tray of cookies at the meeting, from which I
abstained on principle. Those of you who think that's silly have no
idea how much I like cookies."
2. Assuming a can opener, more on health care costs.
3. More on the multiplier (shout it from the rooftops).
Do cellphones outnumber light bulbs in Uganda?
Hat tip goes to the always-impressive Rachel Strohm.
One path to the Georgist solution?
Without bankruptcy protection, a city that couldn’t pay bondholders
would be forced to raise taxes until it could. This happened to West
Palm Beach, Florida in the Depression and property tax rates rose to
42.5 percent of assessed value.
Here is more (interesting throughout) and I thank Chug for the pointer.
Fifty Years of Economic History in one Figure
David Beckworth sums up a lot of recent economic history in one figure.
A few thoughts: I wish Arnold Kling were correct that inflation is around the corner. We could use some inflation to get back on track. Nominal wages are simply not flexible enough to get the job done in short order and there is much to fear from populist backlash.
See also the link above for a remarkably similar figure for the OECD which illustrates the US's role of monetary hegemon.
How to save The New York Times?
I was reading an NYT account of its finances and came across the following:
More radical moves, like dropping the sports section, have been rejected because they would undermine the quality of The Times or would not save much money, Keller said.
"Or"? Which is it? It would not undermine the quality of the paper from a Platonist point of vew; the NYT sports section isn't even as good as USA Today. It's hard to believe the section is cheap to produce, but if it were that again would imply it wasn't so special.
Is Keller trying to say something like: "We also don't think the section is that good, but if we cut it we'll lose those subscribers who take only one paper and still demand minimum sports coverage"? For these subscribers, is it not possible to rent out somebody else's sports section and stick it in the paper with a NYT label on it and maybe an extra article about the Knicks?
Assorted links
1. Jeff Ely will laugh at this.
2. Markets in everything: waiting in line for swine flu shots.
Dolphin markets in everything, Gresham’s Law edition
I enjoyed this story:
Kelly has taken this task one step further. When people drop paper into the water she hides it under a rock at the bottom of the pool. The next time a trainer passes, she goes down to the rock and tears off a piece of paper to give to the trainer. After a fish reward, she goes back down, tears off another piece of paper, gets another fish, and so on. This behaviour is interesting because it shows that Kelly has a sense of the future and delays gratification. She has realised that a big piece of paper gets the same reward as a small piece and so delivers only small pieces to keep the extra food coming. She has, in effect, trained the humans.
Her cunning has not stopped there. One day, when a gull flew into her pool, she grabbed it, waited for the trainers and then gave it to them. It was a large bird and so the trainers gave her lots of fish. This seemed to give Kelly a new idea. The next time she was fed, instead of eating the last fish, she took it to the bottom of the pool and hid it under the rock where she had been hiding the paper. When no trainers were present, she brought the fish to the surface and used it to lure the gulls, which she would catch to get even more fish. After mastering this lucrative strategy, she taught her calf, who taught other calves, and so gull-baiting has become a hot game among the dolphins.
Here is the full article and I thank David Curran for the pointer.
So how would dolphin bimetallism work? I think we know!
Geoengineering with Iron Fertilization
As even their critics admit, Levitt and Dubner have performed a useful service in drawing greater popular attention to geoengineering. Garden hoses to the sky,however, are not the only approach. Iron fertilization is simpler, cheaper and much more easily testable.
Most people are aware that CO2 and temperature are positively correlated in the long historical record but fewer people know that iron dust correlates negatively on the same scale – that is, temperature and CO2 levels are low when iron-dust is high. The graph illustrates.
The basic mechanism that appears to drive the association between low temperature, low CO2 and high iron-dust levels is that iron-rich dust sometimes sweeps off the continents into the oceans where it creates a plankton bloom. Phytoplankton take up CO2 in order to grow and as they die and produce fecal matter (I kid you not) carbon sinks to the lower depths or bottom of the ocean where it may remain for 100 to a 1000 or to even to millions of years (in the latter case eventually becoming oil).
A big advantage of iron fertilization as a way of reducing CO2 is that this process occurs naturally all the time and thus may be studied. It is also possible to run experiments. Indeed a dozen small-scale experiments over the past decade have already been run with all showing that iron fertilization does create phytoplankton blooms and some showing carbon sequestration. Interestingly, private firms looking for future carbon offset sources are driving much of the research into iron fertilization.
Of course, all the usual caveats about uncertainty and unintended consequences apply. Oceanus, the magazine of the Woods Hole Oceanographic Institution has an excellent issue on this topic.
Famous Economists Quiz
The Jeopardy contestants didn't do very well but here is your chance. Robert Whaples has created a quick quiz for his students on famous economists. I expect most MR readers will get all the answers right but fortunately the quiz is timed. I answered all questions correctly in 49 seconds. Go for it!
The test of time?
Eighty years ago the Manchester Guardian (as this paper then was)
ran a poll to discover from its readers' votes the "novelists who may
be read in 2029".George Simmers, on his literary
greatwarfiction blog, has jumped the gun by 20 years with some
satirical reflections on the top five novelists in that poll.Only another 20 years to go, and the top five are already looking shaky:
They are John Galsworthy (1,180 votes), H. G. Wells (933), Arnold Bennett (654), Rudyard Kipling (455), J. M. Barrie (286).What
of James Joyce, Virginia Woolf, DH Lawrence, Henry Green, Ivy
Compton-Burnett, Agatha Christie, EM Forster, and Jean Rhys? This
distinguished crew either do not figure in the 1929 poll, or clock in
with derisory counts (Joyce gets fewer than 10 votes – alongside Max
Beerbohm, it's pleasing to note).
I love Galsworthy and for that matter Wells. Here is the article. Here is further commentary. By the way, no one back then voted for Agatha Christie, who is now probably the most frequently read of the British writers from that era.
For the pointer I thank the always-excellent Literary Saloon.
How should we price the “public option” for dogs?
David, a loyal MR reader, asks:
Why do I have to make an appointment, wait in line, fill out a slew of paperwork, and pay $70 to adopt a dog that otherwise would likely have been euthanized (at the taxpayers' expense), and yet bringing your very own human child into the world takes nothing more than a few shots of tequila or a broken condom?
I am not suggesting that we stand at a first-best equilibrium, but I can think of one reason for this apparent pricing anomaly. If dogs were free (or if dog ownership required only that you show up with a fresh condom), too many people would experiment with owning dogs and then abandon them to the public commons. The $70, or whatever it costs, screens for serious dog owners, as does the paperwork requirement.
So should the price of kids be changed? I would suggest that for most women bringing a child into the world (much less raising it) requires more than "a few shots of tequila or a broken condom". That too screens for serious mothers to some extent. If we raised the price of kids, as we could do easily with tax law and EITC reforms, we'd have fewer kids in the world. If we raised the price of adopting dogs, there would be more do-it-at-home puppy production and more dogs. Neither population change strikes me as an especially desirable outcome and thus we have what we have.
The rising fortunes of John Geanakoplos
It is a front-page WSJ article, read it here. Excerpt:
In a 2000 academic paper, Mr. Geanakoplos offered a theory. He said that when banks set margins very low, lending more against a given amount of collateral, they have a powerful effect on a specific group of investors. These are buyers, whether hedge funds or aspiring homeowners, who for various reasons place a higher value on a given type of collateral. He called them "natural buyers."
Using large amounts of borrowed money, or leverage, these buyers push up prices to extreme levels. Because those prices are far above what would make sense for investors using less borrowed money, they violate the idea of efficient markets. But if a jolt of bad news makes lenders uncertain about the immediate future, they raise margins, forcing the leveraged optimists to sell. That triggers a downward spiral as falling prices and rising margins reinforce one another. Banks can stifle the economy as they become wary of lending under any circumstances.
I thank Daniel Lippman for the pointer.