Month: February 2011

Ireland fact of the day

by  Tyler Cowen in

A single bank, Anglo Irish, which, two years before, the Irish government had claimed was merely suffering from a “liquidity problem,” faced losses of up to 34 billion euros. To get some sense of how “34 billion euros” sounds to Irish ears, an American thinking in dollars needs to multiply it by roughly one hundred: $3.4 trillion. And that was for a single bank.

That is from the new Michael Lewis piece on Ireland, hat tip to Daniel Lippman.

What I’ve been reading

by  Tyler Cowen in

1. Tino Balio, The Foreign Film Renaissance on American Screens, 1946-1973.  One of the best pieces of U.S. cultural history I've read in years.  This book explains and recreates the time when foreign films were culturally central in the United States.  Here is a recent article on how we are consuming foreign films today; we're in a new renaissance of production, but few people seem to know the films themselves.

2. Darin Strauss, Half a Life.  The author, as a young man, runs over a young girl on her bike and it ruins much, but not all, of his life.  It wasn't his fault.  This tract was well done enough to hold my interest, but I'm not sure how much it goes beyond the summary I offer right here.  Nominated for a National Book award.

3. Martin Gilman, No Precedent, No Plan: Inside Russia's 1998 Default.  This is not the definitive study it could have been, but it is a start toward writing a serious economic history of a still-neglected period.

4. Jeffrey Friedman, editor, What Caused the Financial Crisis.  Of all the books on the crisis, this one is arguably the most conceptual.  The authors of the essays include Stiglitz, John Taylor, Acemoglu, and Richard Posner.

5. New readings on the Euro include Paul Krugman's essay, Philipp Bagus, The Tragedy of the Euro, and Matthew Lynn, Bust: Greece, the Euro, and the Sovereign Debt Crisis.

6. Richard B. McKenzie, Predictably Rational: In Search of Defenses for Rational Behavior in Economics.  The subtitle says it all, and the cover inverts the colors on the Dan Ariely book.  Here is a short McKenzie piece on the book and here is Mario Rizzo on the book.

Stan Kenton and Leslie Kenton

by  Tyler Cowen in

I never knew my paternal grandfather, but I was told he loved the music of Bartok, Stravinsky, Hindemith, and above all, Stan Kenton.  My grandfather was a professional jazz drummer in the era of big band, supposedly with more talent than workplace discipline.  Maybe because it's a way of keeping a connection with Grandpa Tom, but I've been listening to the music of Stan Kenton for about thirty-five years.  In any case the best Kenton cuts (download here) still strike me as underrated.  Despite the clunky and sometimes elephantine side of Kenton's style, his work draws upon, and anticipates, developments in compositional jazz, European modernism, Phil Spector's "Wall of Sound," and early Latin rhythms, all topped off with an energetic American brashness.  I eagerly lapped up last year's new Kenton biography.  But now — what am I to do? I've just read Leslie Kenton's Love Affair: A Memoir of a Forbidden Father-Daughter Union, which among other things is a very good treatment of how little consent lies behind father-daughter incest (review here, and it was from ages 11 to 13).

None of Kenton's previous biographers seems to have suspected this horror and overall he had the reputation of a straight-laced man.  I had long thought of him as a somewhat dour disciplinarian, firmly wrapped up in middle American values. 

The lesson is how little we know of an individual life.  And what do we still not know?  When we judge others, or decide not to, that is worth keeping in mind. 

Are IVs Going the Way of the Atlantic Cod?

by  Alex Tabarrok in

It's hard to come up with a good instrumental variable (plausible source of exogenous randomization) so when someone does come up with one (e.g. legal origin) it's tempting to want to use it again and again. Unfortunately, as Randall Morck and Bernard Yeung point out in Economics, History and Causation, IVs with more than one use are deeply problematic. If a variable is a good IV for X then it can't also be a good IV for Y without also controlling for X and vice-versa. What this means is that every new use of an IV casts doubt on every previous use. Or as, Morck and Yeung, memorably write:

A Tragedy of the Commons has led to an overuse of instrumental variables and a depletion of the actual stock of valid instruments for all econometricians. Each time an instrumental variable is shown to work in one study, that result automatically generates a latent variable problem in every other study that has used or will use the same instrumental variable, or another correlated with it, in a similar context. We see no solution to this. Useful instrumental variables are, we fear, going the way of the Atlantic cod.

I am not quite so pessimistic, I don't see this as a fundamentally new problem or one specific to IVs. Nevertheless, I appreciate their advocacy for a wide variety of empirical methods as a solution to the over-fishing problem.

Among the alternative methods Morck and Yeung recommend, are event studies and Granger causality. I couldn't help but laugh at the last. But I wholeheartedly applaud their primary recommendation which is greater use of and respect for narrative history.

China state-contingent markets in everything

by  Tyler Cowen in

Pandas

China stopped handing them out to foreign dignitaries 30 years ago, having spotted their potential as currency earners. These days all pandas are leased out, typically for 10 years at a time. The standard fee paid by the four US zoos that hold pandas – Memphis, San Diego, Zoo Atlanta and the National Zoo in Washington DC – has been $1 million a year for each pair, plus roughly the same again in sponsorship for panda research and conservation projects, plus an annual premium of $600,000 if the pandas mate and produce cubs (only the Memphis pandas have failed on this score)…

The article is here and hat tip goes to The Browser.

The culture that is Italy?

by  Tyler Cowen in

It is not just birds, rabbits and wild boar who meet a sticky end in the Italian hunting season.

According to statistics published today, 35 people have also been killed in the past four months, and another 74 injured. Italy's anti-hunting league, the LAC, said all but one were hunters killed accidentally by their shooting companions.

But the 35th victim was a mushroom collector shot dead near Arezzo in Tuscany. Of the injured, 13 were also non-hunters, mostly people out for a walk in the woods or cycling down a country lane.

The annual bloodletting is a result of the unusual freedom allowed to shooting parties under Italian law. They can go on to private property and fire anywhere not within 50m of a road or 150m of a house.

Here is more.

Interview with Mark Pauly

by  Tyler Cowen in

Via Ezra, with Ezra:

Tell me about your involvement in the development of the individual mandate.

I was involved in developing a plan for the George H.W. Bush administration…One feature was the individual mandate. The purpose of it was to round up the stragglers who wouldn’t be brought in by subsidies. We weren’t focused on bringing in high risks, which is what they're focused on now. We published the plan in Health Affairs in 1991. The Heritage Foundation was working on something similar at the time.

What was the reaction like after you released it?

There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea, but Democrats in Congress said it was "dead on arrival." So that was the end of my 15 minutes.

Assorted links

by  Tyler Cowen in

1. Kevin Drum reviews TGS.  And Lane Kenworthy.  And Nick Schulz at Forbes: "It’s possible the most important non-fiction book this year won’t be published on paper."

2. Megan on the 1954 kitchen.  And "densifying" to get more low-hanging fruit, from Ryan Avent.  And more from Scott Sumner on the book: "Tyler Cowen’s book has been both a marketing coup and an intellectual game changer.  It has gotten people to focus on issues they intuitively knew were out there, but for which they lacked a framework for thinking about."

3. Eric Falkenstein on TGS.

4. "Mobile money," in Kenya.

5. Index method?  why not just read the thing?

6. Do "Best Actress" winners have shorter marriages?

7. More on Iceland vs. Ireland.

How to make better decisions?

by  Tyler Cowen in

I never thought of this method:

What should you do when you really, REALLY have to “go”? Make important life decisions, maybe. Controlling your bladder makes you better at controlling yourself when making decisions about your future, too, according to a study to be published in Psychological Science, a journal of the Association for Psychological Science.

Sexual excitement, hunger, thirst–psychological scientists have found that activation of just one of these bodily desires can actually make people want other, seemingly unrelated, rewards more. Take, for example, a man who finds himself searching for a bag of potato chips after looking at sexy photos of women. If this man were able to suppress his sexual desire in this situation, would his hunger also subside? This is the sort of question Mirjam Tuk, of the University of Twente in the Netherlands, sought to answer in the laboratory.

Tuk came up with the idea for the study while attending a long lecture. In an effort to stay alert, she drank several cups of coffee. By the end of the talk, she says, “All the coffee had reached my bladder. And that raised the question: What happens when people experience higher levels of bladder control?” With her colleagues, Debra Trampe of the University of Groningen and Luk Warlop of the Katholieke Universiteit Leuven, Tuk designed experiments to test whether self-control over one bodily desire can generalize to other domains as well.

In one experiment, participants either drank five cups of water (about 750 milliliters), or took small sips of water from five separate cups. Then, after about 40 minutes–the amount of time it takes for water to reach the bladder–the researchers assessed participants’ self-control. Participants were asked to make eight choices; each was between receiving a small, but immediate, reward and a larger, but delayed, reward. For example, they could choose to receive either $16 tomorrow or $30 in 35 days.

The researchers found that the people with full bladders were better at holding out for the larger reward later. Other experiments reinforced this link; for example, in one, just thinking about words related to urination triggered the same effect.

“You seem to make better decisions when you have a full bladder,” Tuk says. So maybe you should drink a bottle of water before making a decision about your stock portfolio, for example. Or perhaps stores that count on impulse buys should keep a bathroom available to customers, since they might be more willing to go for the television with a bigger screen when they have an empty bladder.

The pointer is from Michelle Dawson, although I do not take her to be necessarily endorsing (or rejecting) the results.  There is related work here and here (pdf).

I wrote this post with an empty bladder.

Does immigration account for relatively stagnant median income?

by  Tyler Cowen in

It's a common claim that increasing immigration accounts for the slowdown in U.S. median income growth.  No, I don't mean the claim that immigrants lower wages.  Even according to George Borjas, that effect isn't large enough to much budge the median and most of it is concentrated on workers without a high school degree.  Rather I am referring to the mere addition of immigrants to the rolls, which itself shifts the median of the distribution.

I don't see that the immigration effect explains much of the data.

1. Look at Dew-Becker and Gordon, p.62.  They consider panel data for hourly compensation, and they still find a stagnant median.  Also see p.78, where they summarize their results that the stagnation extends upward through the 90th percentile of the income distribution.  The U.S. didn't come close to taking in enough immigrants to produce that result.

2. Look at Lane Kenworthy's figures, p.41.  Median income growth for the category "White, non-Hispanic" is only barely better than for the general population.

3. This paper measures the effect of immigration on the Gini coefficient and finds that a given year's worth of immigration has a peak effect on the Gini at four years' time and the effect disappears altogether within six years' time.

4. Researchers who work in this field are well aware of the phenomenon of immigration and generally they do not use it to dismiss the issue of declining median income growth.

I've heard from one reader that the eBook is now available in France, from another that it is in Australia, but Canada will take a little more time.