Month: January 2011

Stata Resources

Here are some Stata resources that I have found useful. Statistics with Stata by Hamilton is good for beginners although it is overpriced. For the basics I like German Rodriguez’s free Stata tutorial best, good material can also be found at UCLA’s Stata starter kit and UNC’s Stata Tutorial; two page Stata is good for getting started quickly.

Christopher Baum’s book An Introduction to Modern Econometrics using Stata is excellent and worth the price. The world is indebted to Baum for a number of Stata programs such as NBERCycles which shades in NBER recession dates on time series graphs–this was a big help in producing graphs for our textbooks!–so buy Baum’s book and support a public good.

I have found it hugely useful to peruse the proceedings of Stata meetings where you can find professional guides to using Stata to do advanced econometrics. For example, here is Austin Nichols on Regression Discontinuity and related methods, Robert Guitierrez on Recent Developments in Multilevel Modeling, Colin Cameron on Panel Data Methods and David Drukker on Dynamic Panel Models.

I found A Visual Guide to Stata Graphics very useful and then I lent it to someone who never returned it. I suppose they found it very useful as well. I haven’t bought another copy, since it is fairly easy to edit graphs in the newer versions of Stata. You can probably get by with this online guide.

German Rodriguez, mentioned earlier, has an attractively presented class on generalized linear models with lots of material. The LSE has a PhD class on Stata, here are the class notes: Introduction to Stata and Advanced Stata Topics.

Creating a map in Stata is painful since there are a host of incompatible file formats that have to be converted (I spent several hours yesterday working to convert a dBase IV to dBase III file just so I could convert the latter to dta). Still, when it works, it works well. Friedrich Huebler has some of the details.

The reshape command is often critical but difficult, here is a good guide.

Here are many more sources of links: Stata resources, Stata Links, Resources for Learning Stata, and Gabriel Rossman’s blog Code and Culture.

The wisdom of Katja Grace

She puts together some very good points and aphorisms.  It starts with this:

Do what your heart tells you ‘means ‘stop making up excuses and do what my heart tells you’. ‘Clearly’  means ‘so unclearly I don’t want to explain it’. ‘We’ means different things to those with different political leanings, which helps them disagree.

Aphorisms tend to be cynical because only knowledge you don’t want to believe is short and easily verifiable enough to be an aphorism. People are more inclined to praise long, poorly written writing than short well written ones because it is easier for the former to cheat quality heuristics. Thinking is more fun than reading because it is more like ‘chasing’ than ‘searching‘. It’s interesting that reading isn’t better suited to chasing.

There is much more, read the whole thing.

*Theories of International Politics and Zombies*

That is a new pocket-sized book by the excellent Daniel Drezner and it is indeed about zombies:

It is indeed to neoconservatism's credit that its doctrine is consistent with extant work on how best to respond to the zombie menace.  A war against zombies would, surely, be a war against evil itself.

Here is Dan's preview of the book.  A few days ago a loyal MR reader wrote to me and asked, if I were surrounded by a hoard of zombies, and could have only one weapon to fend them off, what would it be?  The answer is obvious: the rule of law.  Alternatively, a constitutional amendment against zombies.

Does disability insurance discourage employment?

Jagadeesh Gokhale writes:

Jobs lost during the recent recession caused a deluge of applications to the Social Security Disability Insurance program – more than 6 million each year in 2009 and 2010 – and threw into relief the fact that the SSDI program is structurally unsound.

The current applications surge will accelerate the exhaustion of SSDI's trust fund and will force Congress to have to choose among two unpalatable options – increase SSDI payroll taxes or reduce benefit allowance rates.

But that is not enough. If the particularly vulnerable population the SSDI is designed to serve is to be protected, while preserving incentives to work, the program has to be radically restructured.

Even in normal economic times, those with marginally physical or mental impairments apply in the hope of acquiring disabled status under SSDI. Among those already receiving SSDI benefits, the incentive to return to the work force is very poor.

Revealing one's ability to work, especially if it's in a low-paid occupation, could cause permanent loss of SSDI benefits. Strong work disincentives under SSDI result from its eligibility standard that guides benefit awards: an inability to engage in substantial gainful activity for 12 months or more.

Is this an underreported story?  What's the success rate on coming out of disability and finding a decent job?  What percent of the disabled, permanently unemployed are truly unable to engage in productive work?  I was put onto this question by a tip from Larry Katz.

Public choice: what to read

Jonathan G asks:

What concepts in public choice economics do you think liberals are under-exposed to? Can you recommend some books or articles?

I am not sure what he means by "liberals" so I will answer the question straight up about public choice.  I recommend:

1. Dennis Mueller, Public Choice III.  The best survey of the field, though this is an academic rather than a popular book.  On voting theory — an overrated area in my view – try Peter Ordeshook.

2. Mancur Olson, The Rise and Decline of Nations.  The best applied explanation of the logic of concentrated benefits, diffuse costs.  

3. Bryan Caplan, The Myth of the Rational Voter.  On the democratic side of the equation.  Anthony Downs is still worth reading as well, though it needs a cheaper edition than $75.  Also read Daniel Klein on The People's Romance.

4. For "pro-government public choice," see Amihai Glazer and Lawrence Rothenberg, Why Government Succeeds and Why it Fails.  Also see my piece, with Glazer (an underrated public choice economist), "Rent-Seeking Promotes the Provision of Public Goods" (gated).

5. Buchanan and Tullock are among the most important public choice economists, but they don't come in canonical, easy to digest form.  Any recommendations here?  Liberty Fund has done the complete works.

6. Read Robin Hanson's blog posts on "politics isn't about policy."

7. An underrated topic is the application of behavioral economics to politicians and also voters and even special interest groups.

8. For understanding the U.S. system, I very much like David Stockman's The Triumph of Politics; oddly the paperback is priced at four times the hardcover.

9. Overall I recommend comparative approaches with other countries (start with Arend Ljiphart, plus Matt Yglesias has had good blog posts on this topic) and acquiring an anthropological and sociological understanding of political legitimacy and perception of interest.  The rational choice literature often neglects those topics.

10. Here is my short review on the public choice of finance and big government.

11. For frontier research, see the papers of Andrei Shleifer and Daron Acemoglu.  There is plenty of good applied research in political science, although this is less of a foundational place to start.

From the classics, there is Plato's Republic (a critique of tyranny in my view), Robert Michels Political Parties, Tocqueville's Democracy in America (politics as culture), and various Vilfredo Pareto essays, I am no longer sure which volume they are collected in (edited by Finer?).  The Federalist Papers are impressive, but are they impressive to read?

What am I neglecting?

Assorted links

1. Mandatory menu labeling may not work.

2. New results on intelligence and attractiveness.

3. Honduras is considering Romer's "charter city" idea, here, and here (both in Spanish).

4. Why aren't more people buying into the high-risk health insurance pools?

5. The endgame for the euro and what the Germans are thinking (see also the first comment, and by the way Crooked Timber has an entire symposium on Germany).

6. Who are the best Chilean poets?: RB on literature and exile.

7. The division of labor.

8. Robin defends uploads, Lee responds.

9. Scott Sumner on the dangers of a gold standard; I agree completely.

*The Great Stagnation*

The Great Stagnation: How America Ate All The Low-Hanging Fruit of Modern History,Got Sick, and Will (Eventually) Feel Better.

That's the title and it's by me, the Amazon link is here, Barnes&Noble here.  That's an eBook only, about 15,000 words, and it costs $4.00.  If you wish, think of it as a "Kindle single."

Your copy will arrive on January 25 and loyal MR readers are receiving the very first chance to buy it.  Very little of the content has already appeared on MR.

Many of you have read my article "The Inequality that Matters," but there I hardly touched on median income growth.  That is because I was writing this eBook. 

Has median household income really stagnated in the United States?  If so, why?  Are the causes political or something deeper?  What are the important biases in how we are measuring national income and productivity and why do they matter for economic policy?  Are we getting enough value for all the extra money we are spending on the health care and education sectors?  What do some major right-wing and left-wing thinkers miss about this phenomenon?

How does all this relate to our recent financial crisis? 

I dedicated this book to Michael Mandel and Peter Thiel, two major influences on some of the arguments.  

Why did big government arise in the late 19th and early 20th centuries, what is its future, and why is science so important for macroeconomics?  How can we fix the current mess we are in?

Read (and buy) the whole thing.

I wish to thank my publisher, Dutton, for accommodating this experiment in a new medium.  I believe it will be one piece of our new publishing future and here is your chance, as a reader, to try it out.

The doc fix

Jon Chait has a column on the doc fix and he complains about some of the other policy analysts.  I understand that the doc fix is not a net cost of ACA, since we have been doing it anyway, and I understand that the Republicans are being hypocrites on the issue.  But I have a broader question.  Should we be doing the doc fix at current levels?  If I were a supporter of single payer, I would wish to cut the doc fix.  That is, after all, how single payer systems save so much money, compared to the U.S. system.  They use monopsony to lower reimbursement rates and the quality of outcomes does not always suffer much, if at all.

So are the single payer advocates in fact advocating an end or limit to the doc fix?  That is a literal and naive question — I am not pretending I have caught anyone in a contradiction.  Is Krugman here endorsing the doc fix?  I am not sure, but he does call it "necessary."

One might argue "cutting reimbursement rates works only when you can do it to all rates."  Otherwise doctors flock to the privately insured patients and ration the rest.  Maybe so, but Medicare covers a lot of health care in this country and it's hard to see most doctors giving up on covering old people.  Medicare ought to give the government some monopsony levers and even if supply is a constraint, pushing some elderly further back in the queue does not have to be a bad thing, all constraints considered.  Furthermore we are often told that cutting reimbursement rates will work when it comes to pharmaceuticals, so why not doctors?

Why don't I hear more about this issue?  I would consider joining a liberaltarian alliance to lower the doc fix.  Is there one to be had?

Addendum: Here is Levin's response to Chait.

Why is labor hoarding diminishing?

Paul Krugman offers three good explanations of why today's recessions are involving larger labor losses than in the past.  Bubble-based recessions are tougher to get out of, unions are weaker, and many leading firms face more volatility.  All taken together, these mean the incentive for labor hoarding is weaker than before (yet Krugman cannot bring himself to mention that labor hoarding models are based on…a zero MP condition.  And that a lot of the real work in the account of the cycle is suddenly being done by structural explanations.)  

We can all agree with:

1. Some workers are temporarily zero MP because demand is low. 

Are there additional factors behind ZMP-like conditions?  Those might be:

2. Some workers weren't producing much to begin with and short of retraining they aren't worth so much.

3. Some workers were better than idle, but a one-time, post-firing reorganization of production (e.g., computerizing their task) has since rendered their efforts largely unnecessary.  In other words, they are zero MP ex post but not ex ante.

4. Laid-off workers did not start off as zero MP but they will end up as zero MP as their skills and attitudes deteriorate.

5. The Garett Jones hypothesis: many laid-off workers were building up organizational capabilities, and so their perceived MP falls as the discount rates of managers rise.

6. Workers are like advertising: new developments in information technology allow us to better isolate the ones who are not adding value.

The bottom line is that we do not know how long these labor market predicaments will last.

For general background, here is a useful survey of hypotheses for the cyclicality of productivity pre-1990.  Here is a good piece on how labor hoarding and productivity measures are related.  From Arnold Kling, here are related comments from the structural side.

China Fear of the Day

This NYTimes piece on China and solar power is a must read as it touches upon environmentalism, protectionism, nationalism, the stimulus, the financial crisis and more! Here are a few grafs and comments.

Aided by at least $43 million in assistance from the government of Massachusetts and an innovative solar energy technology, Evergreen Solar emerged in the last three years as the third-largest maker of solar panels in the United States.

But now the company is closing its main American factory, laying off the 800 workers by the end of March and shifting production to a joint venture with a Chinese company in central China. Evergreen cited the much higher government support available in China…[and] plunging prices for solar panels. World prices have fallen as much as two-thirds in the last three years…

Good news, right? Plunging prices for solar is just what we want and shouldn't we applaud subsidies for green energy? Not so fast according to the article:

…solar power experts see broader implications. They say that after many years of relying on unstable governments in the Middle East for oil, the United States now looks likely to rely on China to tap energy from the sun…

China monopolizes the sun!

Ian A. Bowles, the former energy and environment chief for Gov. Deval L. Patrick…said the federal government had not helped the American industry enough or done enough to challenge Chinese government subsidies… “The federal government has brought a knife to a gun fight,” Mr. Bowles said.

I guess Bowles didn't get the memo about the new civility, or perhaps that only applies domestically. The reporters also seem to signal their views.

Evergreen’s joint-venture factory in Wuhan occupies a long, warehouselike concrete building in an industrial park located in an inauspicious neighborhood. A local employee said the municipal police had used the site for mass executions into the 1980s.

Woah, a little gratuitous no?

See here for more of interest including a discussion of how the financial crisis and the Lehman bankruptcy are involved.

Hat tip: Daniel Akst.

What happened to all the hard-core left bloggers?

Some of you want more comment on this Freddie deBoer piece on why the harder left is underrepresented in the blogosphere.  Here is RortyBomb, here is Matt, both good responses.  Here is a one-sentence excerpt from the original:

The truth is that almost anything resembling an actual left wing has been systematically written out of the conversation within the political blogosphere, both intentionally and not, while those writing within it congratulate themselves for having answered all left-wing criticism.

My thoughts turn to the market-oriented and right-wing sides of the blogosphere.  I see a few approaches out there:

1. Hold strongly to a pure free market line, but not much consider the toughest issues, starting with Social Security, Medicare, and Medicaid, and finishing with the inability of government to precommit to a lot of policies which might work as rules but never can be rules.  There are plenty of easy issues to focus on, starting with farm policy and free trade and on those the market-oriented point of view is a slam dunk.

2. Hold forth on the really tough issues, take what is considered an extreme point of view, and not convince anyone who doesn't already agree with you.  These bloggers also frequently find that their arguments are sufficiently a priori that a) they don't have much to say about new developments in the world, and b) their arguments end up being repeated and do not evolve much.  Even if you think those are good intellectual qualities when truth is on your side, you probably can see that they will not attract the largest or broadest of audiences.  A popular blog needs more of a plot.

3. Give ground on the tough issues, honestly and sincerely.

4. Focus on lowering the relative status of people on the other side of the debate.  This serves some functions similar to #1 and of course there is a large supply of targets.

If a lot of left-wing bloggers are following #3, that is very good (I don't pretend to judge what is a very large canvas) and we can root for that practice to spread, including of course to non-left-wing bloggers.

Freddie deBoer seems to be very smart.  I had never heard of him before, which I suppose means he is not extremely famous as a blogger.  So let's see how he evolves when it comes to his critique that "labor rights are undercut everywhere for the creation of economic growth" in an ongoing debate with some people who know more about it than he does.  He shows much better rhetorical skill than he does an understanding of labor economics.

Who exactly are the exiled left-wing (or right-wing) bloggers who deserve more attention?  From deBoer, there is a mention of Daily Kos and I checked in there again (I hadn't for years) and I wasn't exactly awestruck at the content.  Nor was it obvious to me that it was extremely left-wing.

I will readily grant that points of view can be stronger than they appear in a blogosphere debate and it is worth thinking through the biases here.  Arguably the more serious corners of the blogosphere overencourage moderate, "defensible" positions, with few weak spots for obvious bone-crushing attacks, "gotchas," and charges of apparent moral turpitude from onlooking scolders.  Still, that incentive is mostly a healthy one.  Whether the blogosphere as a whole encourages moderation, I am not sure.  But the better corners of it certainly do and that should be counted as one of its virtues. 

China fact and sentence of the day

China has lent more money to other developing countries over the past two years than the World Bank, a stark indication of the scale of Beijing’s economic reach and its drive to secure natural resources.

Here is more.  China, of course, is also one of the top borrowers from the World Bank.  And here is a good sentence about China, from Frank Fukuyama:

Indeed, the Chinese government often overreacts to what it believes to be public opinion precisely because, as one diplomat resident in Beijing remarked, there are no institutionalised ways of gauging it, such as elections or free media.