Month: February 2011
Why didn’t economists predict the crisis?
Raghu Rajan nails it:
I would argue that three factors largely explain our collective failure: specialization, the difficulty of forecasting, and the disengagement of much of the profession from the real world.
Read the whole thing, hat tip to Mark Thoma.
How much is a planet worth?
Greg Laughlin, via Kottke, interviewed by Lee Billings, tells us that there is a new equation:
This equation's initial purpose, he wrote, was to put meaningful prices on the terrestrial exoplanets that Kepler was bound to discover. But he soon found it could be used equally well to place any planet-even our own-in a context that was simultaneously cosmic and commercial. In essence, you feed Laughlin's equation some key parameters — a planet's mass, its estimated temperature, and the age, type, and apparent brightness of its star — and out pops a number that should, Laughlin says, equate to cold, hard cash.
At the time, the exoplanet Gliese 581 c was thought to be the most Earth-like world known beyond our solar system. The equation said it was worth a measly $160. Mars fared better, priced at $14,000. And Earth? Our planet's value emerged as nearly 5 quadrillion dollars. That's about 100 times Earth's yearly GDP, and perhaps, Laughlin thought, not a bad ballpark estimate for the total economic value of our world and the technological civilization it supports.
If you tweak the reflectivity of Venus a bit, you can get it up over a quadrillion dollars. Sell short, I say, and buy some Mars. The equation itself is at the third link, and it does not seem to be based on the idea of arbitrage.
Let’s empty out Belarus
Employers in many sectors of the German economy are facing labor shortages, under the dual pressures of an aging population and inflation-fighting measures that have kept wages low in comparison with its neighbors.
The problem was thrown into sharp relief on Tuesday with the release of official figures showing that Germany’s unemployment rate was the lowest in 18 years. While a jobless rate in single digits would be cause for celebration in many countries, in Germany it is the sign of a critical lack of workers.
Here is more.
Assorted links
1. Via Chris F. Masse, the forthcoming tunnel between Germany and Denmark. Is anyone else excited?
2. Behavioral economics reading list.
3. When is ptarmigan running more efficient than ptarmigan walking? (via Michelle Dawson, and gated paper here)
4. Prophets of the Marginal Revolution.
Let us Now Praise Non-Famous Men
Charles H. Kaman, an innovator in the development and manufacture of helicopter technology and, following a wholly different passion, the inventor of one of the first electrically amplified acoustic guitars, died on Monday in Bloomfield, Conn. He was 91.
Here is more. This bit is neat:
Mr. Kaman, a guitar enthusiast, also invented the Ovation guitar, effectively reversing the vibration-reducing technology of helicopters to create a generously vibrating instrument that incorporated aerospace materials into its rounded back. In the mid-1960s he created Ovation Instruments, a division of his [aerospace] company, to manufacture it.
And this:
With his second wife, Roberta Hallock Kaman, Mr. Kaman founded the Fidelco Guide Dog Foundation, which trains German shepherds as guide dogs for the blind and the police. Since 1981, Fidelco has placed 1,300 guide dogs in 35 states and four Canadian provinces, said Eliot D. Russman, the foundation’s executive director.
“It came down to the helicopters, guitars and dogs,” Mr. Kaman’s eldest son, C. William Kaman II, said in a telephone interview.
It is a well-written obituary.
Racial stereotypes and death statistics
Andrew Noymer, Andrew Penner, and Allya Saperstein report:
Recent research suggests racial classification is responsive to social stereotypes, but how this affects racial classification in national vital statistics is unknown. This study examines whether cause of death influences racial classification on death certificates. We analyze the racial classifications from a nationally representative sample of death certificates and subsequent interviews with the decedents' next of kin and find notable discrepancies between the two racial classifications by cause of death. Cirrhosis decedents are more likely to be recorded as American Indian on their death certificates, and homicide victims are more likely to be recorded as Black; these results remain net of controls for followback survey racial classification, indicating that the relationship we reveal is not simply a restatement of the fact that these causes of death are more prevalent among certain groups. Our findings suggest that seemingly non-racial characteristics, such as cause of death, affect how people are racially perceived by others and thus shape U.S. official statistics.
Iceland fact of the day
The total literature of Iceland is under 50,000 books, which is easily scannable in 2 years by 12 people using the scribe scanners of the Internet Archive.
Indeed they might put it all on-line. Hat tip goes to Annie Lowrey.
Assorted links
3. Why Norway deported the Norwegian of the Year.
4. How flu spreads among schoolchildren.
6. Leonhardt on Cowen vs. Meyerson; I view inequality as a residual of processes in the real economy. Some common factors are causing both inequality and stagnation (e.g, lack of major broad-based innovations, problems with the financial sector, aging), and to some extent inequality and stagnation have different causes. As Scott Sumner says: "do not reason from a price change," I say: "do not reason from a distribution change." Changes in distribution are not autonomous causes of stagnation.
Household size and stagnant median income
One loyal MR reader writes to me:
However, census Bureau data show that the size of the average US household decreased from 3.1 to 2.6 from 1970 to 2007…
The underlying question is whether figures for the median household are underrating the true growth in average living standards. A few points are in order.
1. Here is one passage from The Great Stagnation: "Since 1989, the size-adjusted and size – unadjusted measures have been rising at roughly the same rate, and post-1979 the difference between the size-adjusted and the size-unadjusted median income measures is never more than 0.3 percent." For more on this, see Lawrence Mishel, Jared Bernstein, and Heidi Shierholz, The State of Working America 2008/2009, chapter one.
2. David Leonhardt writes: "In fact, households were shrinking more quickly in the 1960s, ’70s and ’80s than they are now – and incomes were growing." Read the rest of this post as well.
3. That households are smaller decreases the aid and assistance available to those living in them.
4. There are an increasing number of women in the labor force, and that factor biases the household number to be higher than true productivity growth alone would dictate. Unmeasured household production is a mix of "lower than it would have been" or more harried than it would have been. I suspect this is a large effect, not a small effect.
5. On the issue of students and retirees, see the adjustments performed by Lane Kenworthy, pp.37-38.
Overall I do not see that changing household size allows one to dismiss the notion of relatively stagnant median income.
Hernando de Soto on Egypt
†¢ Egypt's underground economy was the nation's biggest employer. The legal private sector employed 6.8 million people and the public sector employed 5.9 million, while 9.6 million people worked in the extralegal sector.
†¢ As far as real estate is concerned, 92% of Egyptians hold their property without normal legal title.
†¢ We estimated the value of all these extralegal businesses and property, rural as well as urban, to be $248 billion–30 times greater than the market value of the companies registered on the Cairo Stock Exchange and 55 times greater than the value of foreign direct investment in Egypt since Napoleon invaded–including the financing of the Suez Canal and the Aswan Dam. (Those same extralegal assets would be worth more than $400 billion in today's dollars.)
My video dialogue with Nick Schulz
Find it here, and Nick's summary is very good:
In my conversation with Tyler about his new and much-debated book, The Great Stagnation, I was particularly struck by his explanation (at around 21:30) for how he came to embrace the idea that we are experiencing an innovation slowdown. His remarks about Julian Simon are also very noteworthy.
It would be an innovation for this blog if I could embed, but alas it is not to be…
Assorted links
1. China mega-city of the day.
2. Michael Mandel reviews TGS: he says buy not just one copy, but two.
3. Harold Meyerson of WaPo on TGS. And more from Brink.
4. "Sparks and Praise Fires: A Theory of Unanticipated Revolution."
Dialogue with David Leonhardt
It's about how to spur innovation, read it here. Here is one excerpt:
I would also like to see more of our elite institutions of higher education take the explicitly meritocratic and indeed arguably anti-egalitarian approaches of Caltech and also University of Chicago. Those two institutions are big successes – M.I.T. too – yet they are not always so easy to copy. We should be trying harder. In terms of respect for intelligence, achievement, and science, we should be more like Singapore.
The question did not come up, but I also favor reduced liability standards for major new innovations. Take the various plans for robot-driven cars. They will kill some people, as do human-driven cars. We run the risk of having the status quo so locked into place, so grandfathered, and so implicitly favored by the realities of regulation and lawsuits, that such an idea might never get off the ground. That in turn affects the incentives of innovators ex ante.
Is a charter city coming to Honduras?
David Wessel reports:
Honduras is interested. Two weeks ago, with only one "no," its Congress voted to amend the constitution to allow for a ciudad modelo.
(No filibuster there!) And:
In early January, Mr. [Paul] Romer went to the capital, Tegucigalpa, to meet privately with various groups, then make his case at a public gathering. "You can't change the rules in the middle of the game," he said, flashing a photo of a soccer game on a screen. "Create a new playing field and see if anyone wants to play." Think big, he pleaded. Build an airport big enough to be a hemispheric hub, he said, turning to his father Roy, former governor of Colorado, to tell the story of how Denver got its big airport.
The evolution of regionalisms on Twitter
Postings on Twitter reflect some well-known regionalisms, such as Southerners' "y'all," and Pittsburghers' "yinz," and the usual regional divides in references to soda, pop and Coke. But Jacob Eisenstein, a post-doctoral fellow in CMU's Machine Learning Department, said the automated method he and his colleagues have developed for analyzing Twitter word use shows that regional dialects appear to be evolving within social media.
In northern California, something that's cool is "koo" in tweets, while in southern California, it's "coo." In many cities, something is "sumthin," but tweets in New York City favor "suttin." While many of us might complain in tweets of being "very" tired, people in northern California tend to be "hella" tired, New Yorkers "deadass" tired and Angelenos are simply tired "af."
The "af" is an acronym that, like many others on Twitter, stands for a vulgarity. LOL is a commonly used acronym for "laughing out loud," but Twitterers in Washington, D.C., seem to have an affinity for the cruder LLS.
That is from Science Daily, hat tip goes to LanguageHat and the original paper (pdf) is here.