Month: September 2010

Haiti fact of the day

By some estimates, the quake left about 33 million cubic yards of debris in Port-au-Prince – more than seven times the amount of concrete used to build the Hoover Dam. So far, only about 2 percent has been cleared, which means the city looks pretty much as it did a month after the Jan. 12 quake.

The story is here and for the pointer I thank the eagle-eyed Daniel Lippman.

Zero price markets in everything, religious search engines

Shea Houdmann runs SeekFind, a Colorado Springs-based Christian search engine that only returns results from websites that are consistent with the Bible. He says SeekFind is designed "to promote what we believe to be biblical truth" and excludes sites that don't meet that standard.

Houdmann says a search on his site would not turn up pornography. If you search “gay marriage,” you would get results that argue against gay marriage. And if you type in “Democratic Party,” your first search result is a site on Marxism.

But SeekFind isn’t the only search engine carving a niche market among religious Internet users. There is also Jewogle for Jews and I'mHalal, a Muslim search engine that started in the Netherlands.

The Muslim site is already getting ten million users (or is that site visits?) a month.  The full story is here and for the pointer I thank Anastasia.

Addendum: I couldn't get the Christian search engine to work at all; the site blames heavy traffic [I tried again; googling my name gets you to Tyler Perry.  If you google "economics", "Islamic economics" pops up before "Christian economics" and "postmodern economics" comes before both].  The Halal site brought up more or less normal results both for my name and for "economics," although page one for the latter had some squirrely (non-Muslim) results, such as Hunter College.  I don't appear in Jewogle at all, but an economics query will bring you to a list of Nobel Laureates.

Which public figures have integrity?

UWC pleads:

I'm having a hard time coming up with many independently and oddly Google is failing to find a list.

Nelson Mandela
Garry Kasparov
Oprah Winfrey
Ellen DeGeneres
David Letterman
Simon Cowell


How did David Letterman get on that list?  Does Simon Cowell make the cut?  Is it about who has integrity or who is perceived as having integrity?

It also depends who you count as a public figure and whether they still must be living or only recently deceased.  For a few, how about Margaret Thatcher, Hans Blix, Anna Politkovskaya, Ben Goldacre, Lech Walesa, Christopher Reeve, Neil Armstrong, the passengers who downed the flight hijacked by al-Qaeda, leading members of the Iranian opposition, and any number of political dissidents, starting with Burma and Aung San Suu Kyi.  Lee Kuan Yew is a more controversial option; he has been a non-corrupt leader who led his country to a very good place, and more or less eliminated corruption, but he has not always respected civil liberties.  Nonetheless integrity is not the only value and I don't wish to use the word as a stand-in for all other values of import.

Who am I forgetting?  What would Robin Hanson say about this list?

Very bad incentives in New York State

State institutions for the developmentally disabled generate so much federal Medicaid money that New York's other programs for people with intellectual disabilities would be threatened without them, state officials acknowledge in an internal document obtained by the Poughkeepsie Journal.

The article is here.  It gets worse:

The document, labeled "Confidential – Policy Advice," raises questions about the state's decision to keep 1,100 institutional beds at eight centers that were once slated to close.

And that is not all:

The Medicaid reimbursement rate for state institutions is $4,556 per person per day, the Poughkeepsie Journal has reported, three to four times higher than the cost of care.

Or this:

Put another way, just 1 percent of New York's developmentally disabled population – its 1,400 institutionalized people – generates about 40 percent of federal Medicaid money for the system, operated by the state Office for People With Developmental Disabilities.

This is one root of the problem:

The reason New York's rate is so much higher than the cost of care is a provision in the formula that, since the 1980s, allowed the state to keep two-thirds of federal payments for residents moved from institutions into community homes.

The Poughkeepsie Journal uncovered quite a story.  How does this sentence grab you?:

New York is well-known among disability researchers and providers for its ability to maximize Medicaid revenues, reaping more federal money for the developmentally disabled than any other state.

And does it put people to work?

New York's nine high-cost institutions are part of the reason, but a greater factor is the sheer size of the system, which serves 125,000 people including nearly 37,000 in 7,500 state and private group homes. The state even has a $27-million-a-year research center on developmental disabilities, and a huge bureaucracy to manage all that: 27,000 employees in 2009 earning an average of $42,000. This includes 278 people who made more than $100,000, according to an analysis of the state's salary database.

If we pursue an earlier story, and ask about the people living in the system, it gets truly scary:

Opened in 2001 without public input or review, the LIT [Local Intensive Treatment Unit, part of this system] serves what officials say are people who have had a brush with the law. Residents are classified by "offending behaviors," and, unlike those in two other units of what is now called the Wassaic campus of the Taconic Developmental Disabilities Service Office, they are not free to leave.

The Wassaic LIT and 10 other "intensive treatment" units – some with uncomfortable resemblance to prisons – mark a stark departure from the state's historically non-punitive approach to care of people with mental disabilities.

…In fact, numbers the state did provide show the LIT is populated mostly by people who have been transferred not from the criminal justice system but from other units here and across the state system.

To return to one of the original facts:

Every one of the unit's residents, among 1,400 residents in nine state institutions, generates $4,556 per day in state and federal Medicaid reimbursements.

Twelve percent of the residents are listed as being institutionalized for "elopement."  This guy offered an skeptical perspective on what is happening:

"I don't believe that that is the case, that these people are offenders," said Sidney Hirschfeld, director of the statewide Legal Service office.

He said a very small number had any involvement in the criminal justice system and was concerned that residents were being classified by offenses for which they were not charged, tried or convicted.

Need I relate stories such as this?

In one case, a mildly disabled woman in her 50s was kept in a unit so long – 15 years – that she developed aggressive "institutional behaviors" that became the justification to keep her there. A judge ordered her released, Shea said, but months later a community home still has not been found.

“Those situations are not unique,” Shea said. “Lengths of stay are 10 to 12 years.”

And here is another perspective, from inside the politics:

“Whatever they do there, my preference would be to obviously save jobs,” Euvrard said

For the pointer I thank the ever-vigilant Michelle Dawson.

Which requests do I not respond to?

BM has a request:


would you take a hand few requests (maybe 10 or so) from the comments here and tell us (in a word:'NO' or a short sentence why) you will NOT fill them?

I hope this request is excluded from your picks!

I won't handle those I have already written about and have no new insight on, those I will soon write about (I prefer for most of my non-blog writing to be relatively fresh), and those I have nothing to say about at all, usually because of my own lack of knowledge.  On top of that big pile, a small number of requests — small in percentage terms at least — strike me as best addressed by a quizzical, offbeat non-response.

I answer all the rest.

What will Basel III do?

Felix Salmon has one good summary, here a bit on community banks, overall emerging markets get off lightly, and Germany is unhappy (in this case probably a good thing).  A few points:

1. This agreement is probably good news.

2. It is difficult to divine the net future effects of such changes upon announcement.  There is also the question of how binding this ends up being and whether the implementation lags will matter.

3. One key question is how much current systems prevent regulatory arbitrage, namely driving more intermediation into less regulated, less reliable and less easily monitored institutions.

Stay tuned…

Did France cause the Great Depression?

Here is Doug Irwin, I remember once hearing a related argument from David Glasner (was his piece on that ever published?):

The gold standard was a key factor behind the Great Depression, but why did it produce such an intense worldwide deflation and associated economic contraction? While the tightening of U.S. monetary policy in 1928 is often blamed for having initiated the downturn, France increased its share of world gold reserves from 7 percent to 27 percent between 1927 and 1932 and effectively sterilized most of this accumulation. This “gold hoarding” created an artificial shortage of reserves and put other countries under enormous deflationary pressure. Counterfactual simulations indicate that world prices would have increased slightly between 1929 and 1933, instead of declining calamitously, if the historical relationship between world gold reserves and world prices had continued. The results indicate that France was somewhat more to blame than the United States for the worldwide deflation of 1929-33. The deflation could have been avoided if central banks had simply maintained their 1928 cover ratios.

The non-gated copy is here.

Winner take-all economics

Ezra Klein writes:

The top 1 percent, for instance, has gone from capturing about 8 percent of the
national income to 18 percent. But there's no obvious skills differential
between workers in the top 1 percent and the workers directly beneath them. It's
not like hedge fund managers are the only guys able to use Excel.

In a winner-take all economy, however, small differences in skills can mean large differences in returns and we have moved towards a winner take-all economy because technology has increased the size of the market that can be served by a single person or firm.  Sherwin Rosen laid this out in a 1981 classic, The Economics of Superstars and Robert Frank and Robin Cook have a good popular account, The Winner Take All Society.  Here is how I explained it a few years ago in a post titled Harry Potter and the Mystery of Inequality.

J.K. Rowling is the first author in the history of the world to earn a billion dollars
I do not disparage Rowling when I say that talent is not the
explanation for her monetary success.  Homer, Shakespeare and Tolkien
all earned much less.  Why?  Consider Homer, he told great stories but
he could earn no more in a night than say 50 people might pay for an
evening's entertainment.  Shakespeare did a little better.  The Globe theater could hold 3000 and unlike Homer, Shakespeare didn't have to be at the theater to earn.  Shakespeare's words were leveraged.

Tolkien's words were leveraged further. By selling books Tolkien
could sell to hundreds of thousands, even millions of buyers in a year
– more than have ever seen a Shakespeare play in 400 years.  And books
were cheaper to produce than actors which meant that Tolkien could earn
a greater share of the revenues than did Shakespeare (Shakespeare
incidentally also owned shares in the Globe.)

Rowling has the leverage of the book but also the movie, the video
game, and the toy.  And globalization, both economic and cultural,
means that Rowling's words, images, and products are translated,
transmitted and transported everywhere – this is the real magic of Ha-li Bo-te.

Rowling's success brings with it inequality. 
Time is limited and people want to read the same books that their
friends are reading so book publishing has a winner-take all
component.  Thus, greater leverage brings greater inequality.  The
average writer's income hasn't gone up much in the past thirty years
but today, for the first time ever, a handful of writers can be
multi-millionaires and even billionaires.  The top pulls away from the

The same forces that have generated greater
inequality in writing – the leveraging of intellect, the declining
importance of physical labor in the production of value, cultural and
economic globalization – are at work throughout the economy.  Thus, if
you really want to understand inequality today you must first
understand Harry Potter.

Hat tip to Matt Yglesias who understands the issue and points out how it applies to newspapers.

Henry on “markets in everything”

But Hayek is remarkably incurious about the actual social processes through which markets work, and in particular the forms of standardization that are necessary to make long-distance trade work. I imagine Scott’s counterblast going something like this: It is all very fine to say that markets provide a means to communicate tacit knowledge, and it is even true of many markets, especially small scale ones with participants who know each other, know the product and so on. But global markets do not rely on tacit knowledge. They rely on standardization – the homogenization of products so that they can be lumped under the appropriate heading within a set of standard codified categories. Far from communicating tacit knowledge, the price system (and the codified standards that underlie it) destroys it systematically.

Here is much more, mostly on James Scott. 

I agree with the frustration about a lack of detail about markets.  Nonetheless, I am more optimistic than this.  Standardized products often fund a more general trade or communications infrastructure which the non-standardized products then piggyback upon.  Think of funding a port with oil shipments (by the way, how many grades of crude are there?) but at the margin using it to trade strange toys as well.  Alternatively, a highly standardized product can be communicating the (sometimes tacit) knowledge that liquidity and interchangeability and lots of direct competition matter more than does product diversity.

The Grossman-Stiglitz framework helps us think through the trade-off between the average and the margin.  Let's say that some trades shift into the more standardized, liquid market and out of the more idiosyncratic market.  Some knowledge is lost.  But at the margin, there is now a stronger incentive for information-gathering, or knowledge mobilization, in the less liquid market.  It will be easier to beat the rest of the market (price is not much of a sufficient statistic) and so people will try harder.

This topic is related to the current controversy over whether swaps contract will be overly customized (wider spreads and harder to monitor and higher regulatory risk?) or overly standardized (more liquid but less useful?).

Is this more or less humane?

Inmates on death row are not told when they will be executed until the last minute – a procedure Japanese officials say prevents panic among inmates – and their family members and lawyers are informed only afterward, as are the news media.

And this:

The inmate is handcuffed and blindfolded before entering the execution room, officials said. Three prison wardens push separate buttons, only one of which releases the trapdoor [for hanging] – but they never find out which one. Wardens are given a bonus of about $230 every time they attend an execution.

The full story is here, interesting throughout.  The murder conviction rate in Japan is 99 percent, some of which is likely due to false or pressured confessions.

Assorted links

1. What were the top TV words this last year?

2. What a fig is.

3. How the WSJ and NYT really work, in the eyes of the Chinese (video).

4. Camille Paglia on Lady Gaga (negative).

5. The culture that is Australia, part I, and here parts II and III.

6. Against the R&D tax credit.

7. Video of Manne, Sen, Ostrom, and Buchanan at George Mason; at 90 years old Buchanan still stole the show.

*Sakhalin Island*

That is a book by Anton Chekhov, part memoir, part ethnographic study of a penal colony and the surrounding economic institutions on Sakhalin Island.  I hardly ever hear of this work, but it is both a literary and social science masterpiece; I will teach it next spring in my Law and Literature class.  Here is one review of the book.  This excerpt reminded me of some recent events:

On the fifth line I marked their age.  The women who were already over forty remembered theirs only with difficulty, and had to think for a bit before answering.  Armenians from the Yerevan Region had no idea of their age at all.  One of them answered me: "Might be thirty, but it could be fifty by now."  In cases such as these, the age had to be determined approximately from their appearance and then verified from the relevant prison documents.  Youths of fifteen and slightly older would usually reduce their ages.  Some women would already by married, or have been engaged for ages in prostitution, yet still said they were thirteen or fourteen.  The point about this is that children and juveniles in the poorest families receive a food ration from the state; which is issued only up to the age of fifteen, and here a simple calculation induces young people and their parents to tell lies.

These days, lying about age, and continued existence, seems to a standard practice in Japan.  Here is more on Japan's "missing elderly".  Apparently 884 people are listed as over 150 years of age; it is believed that many of these pensions still are being collected.