Month: February 2011

Markets in everything the future of kung fu?

Today, however, temple officials seem more interested in building the Shaolin brand than in restoring its soul. Over the past decade Shi Yongxin, the 45-year-old abbot, has built an international business empire–including touring kung fu troupes, film and TV projects, an online store selling Shaolin-brand tea and soap–and franchised Shaolin temples abroad, including one planned in Australia that will be attached to a golf resort. Furthermore, many of the men manning the temple's numerous cash registers–men with shaved heads and wearing monks' robes–admit they're not monks but employees paid to look the part.

Over tea in his office at the temple, Yongxin calmly makes the case that all of these efforts further Buddhism.

As for some of the traditional styles, perhaps Baumol's cost disease is operating:

"There are no high kicks or acrobatics," he says. Such moves create vulnerable openings. "Shaolin kung fu is designed for combat, not to entertain audiences. It is hard to convince boys to spend many years learning something that won't make them wealthy or famous." He seems drained by the thought. "I worry that is how the traditional styles will be lost."

Here is much more, and for the pointer I thank The Browser.

Facts about India

Four decades after the Green Revolution seemed to be solving India’s food problems, nearly half of Indian children age 5 or younger are malnourished.


There is no agribusiness of the type known in the United States, with highly mechanized farms growing thousands of acres of food crops, because Indian laws and customs bar corporations from farming land directly for food crops. The laws also make it difficult to assemble large land holdings.

Yet even as India’s farming still depends on manual labor and the age-old vicissitudes of nature, demand for food has continued to rise – because of a growing population and rising incomes, especially in the middle and upper classes. As a result, India is importing ever greater amounts of some staples like beans and lentils (up 157 percent from 2004 to 2009) and cooking oil (up 68 percent in the same period).

The story is here.

Better than the filibuster?

To avoid a vote on a proposal to limit collective bargaining rights in the state of Wisconsin, 14 legislators have fled the state, to an undisclosed location. I am not sure if there is a precedent for this. The reason they crossed state lines was to dodge the Wisconsin police.

It turns out that "Republicans hold a 19-14 majority, but they need at least one Democrat to be present before voting."  The link is here and for the pointer I thank Brian Hooks.

Arnold Kling quiz of the day

Which of the following impediments to economic adjustment do you believe to be the most important?

a) the cost of establishing a new enterprise
b) the cost of integrating new workers and equipment into an existing enterprise
c) the cost of adapting physical and human capital to new circumstances
d) the cost of whiting out an old price list (menu) and updating it with new prices

If you answered (d), then congratulations–you have shown your New Keynesian bona fides.

Arnold, by the way, does not answer (d).  The link is here.  Elsewhere at EconLog, here is a very good Bryan Caplan post on the evolution on punditry and the political spectrum.

A theory of liberal churches

From Michael Makowsky:

There is a counterintuitive gap in the club theory of religion. While it elegantly accounts for the success of strict sectarian religious groups in recruiting members and maintaining commitment, it is less satisfactory when attempting to account for groups requiring neither extreme nor zero sacrifice. Moderate groups are always a suboptimal choice for rational, utility maximizing agents within the original representative agent model. The corner solutions of zero and absolute sacrifice, however, are rarely observed empirically compared to the moderate intermediate. In this paper, we extend the original model to operate within an agent-based computational context, with a distribution of heterogeneous agents occupying coordinates in a two dimensional lattice, making repeated decisions over time. Our model offers the possibility of successful moderate groups, including outcomes wherein the population is dominated by moderate groups. The viability of moderate groups is dependent on extending the model to accommodate agent heterogeneity, not just within the population of agents drawn from, but heterogeneity within groups. Moderate sacrifice rates mitigate member free riding and serve as a weak screening device that permits a range of agent types into the group. Within-group heterogeneity allows agents to benefit from the differing comparative advantages of their fellow members.

Also via Kevin Lewis, here is an interesting Dan Ariely paper on who benefits from religion.  And here is a rational choice model of papal infallibility.

The evolution of American federalism

Refresh my memory, are we expanding or contracting Medicaid?  Why is it that I can't seem to remember!?

The Obama administration would permit a controversial plan by Arizona's governor to cut an estimated 250,000 impoverished adults from Medicaid, despite a provision in the new health-care law barring states from tightening their eligibility standards for the program, federal officials said Wednesday.

Here is more.  In a not totally unrelated development, Florida's governor rejects $2 billion in federal aid for a high-speed rail line linking Tampa and Orlando.  What's the implicit MRS on federal funds vs. unrestricted funds here?

What will "the new federalism" look like?  I see rapid evolution.

The Great Stagnation in medicine

Here is one bit from a very good Robert Gordon essay (which I will cover again in a while):

…if one starts down the road of comparing changes in life expectancy, the yearly rate of increase in life expectancy at birth during 1900–50, resulting in substantial part from the inventions of the Second Industrial Revolution, was 0.72 percent per year, the 0.24 percent annual rate during 1950–95.

James Le Fanu, in his 2000 history of modern medicine, lists definitive moments of modern medicine.  In the 1940s there are six such moments, seven moments in the 1950s, six moments in the 1960s, a moment in 1970 and 1971 each, and from 1973-1998, a twenty-five year period, there are only seven moments in total.

For his "Dates of the discovery and sources of the more important antibiotics," the list starts in 1929-1940 with penicillin and ends in…1963, with Gentamicin.

Ezra has a very good post on penicillin.  Megan has a very good post and piece on the drying up of the pharmaceutical pipeline.  Andrew Jack has a very good and scary piece on the withering of pharmaceuticals innovation in the UK.

As Le Fanu writes: "Currently most medical researchers would concede that progress has slowed in recent years…"

As an aside, this has a number of political economy implications for health care reform, none of them cheery.  In both Washington and in the blogosphere, we're very focused on insurance and coverage issues, but is not the innovation pipeline more important?  Does it receive one-tenth the discussion?  One-fiftieth?  Does a slow pipeline mean that health care policy is doomed to be unpopular?

Quick quiz: is health care a growing or a shrinking part of the U.S. economy?

Rescuing Jews is a normal good

From Mitchell Hoffman, based on Holocaust data:

I find that (1) Richer countries had many more rescuers than poorer ones, and (2) Within countries, richer people were more likely to be rescuers than poorer people. The individual-level effect of income on being a rescuer remains significant after controlling for ease of rescue variables, such as the number of rooms in one's home, suggesting that the correlation of income and rescue is not solely driven by richer people having more resources for rescue. Given that richer people might be thought to have more to lose by rescuing, the evidence is consistent with the view that altruism increases in income.

Hat tip goes to BPS Digest.

Government is raising the value of a life

The Environmental Protection Agency set the value of a life at $9.1 million last year in proposing tighter restrictions on air pollution. The agency used numbers as low as $6.8 million during the George W. Bush administration.

The Food and Drug Administration declared that life was worth $7.9 million last year, up from $5 million in 2008, in proposing warning labels on cigarette packages featuring images of cancer victims.

The article is here.  If the goal is to give current people what they want, arguably this makes sense and perhaps it does not go far enough.  Death is…BAD.  If the goal is to maximize real gdp per capita, or most other macroeconomic indicators, it makes sense to value human life at replacement cost (and here) and this policy change does not make sense.  I'm not arguing for either standard and indeed I think they both lead to absurdities.  Instead the point is this: theoretical ordinal welfare economics and applied welfare economics, as represented by wealth measures, do not coincide as much as many economists like to think.  This gap becomes increasingly important as health care and safety provision increase, relative to the size of the economy as a whole.

What the Chinese have done is to neglect health care investments (until very recently) and basically maximize gdp growth.  They wanted to have fewer people anyway, so why spend money to keep ailing people around?  We find this horrible when presented in such explicit terms, and yet we admire their achievement of the end of growth maximization.

Markets in everything — who buys this stuff?

They do:

Like many women who buy runway styles, Ms. Berkowitz wears much of what she buys to charity galas. She gets multiple wearings out of her gowns, including a red Zac Posen one-shoulder gown and a silvery Marc Jacobs dress with a dark-brown sash. She carefully keeps track of which she has worn where and rotates them from season to season.

Christine Chiu wears most items only once. The 28-year-old, who is married to the founder of Beverly Hills Plastic Surgery, goes to events every night of the week–often making multiple wardrobe changes in a single night.

"If you're going to a gala for some kind of disease and then you go to a hip art event, you can't wear the same thing," Ms. Chiu says.

I loved this article, recommended.

Egypt fact of the day

From David Leonhardt:

Just as important as the skills deficit, however, is the trouble that many Egyptians have using their skills in the country’s sclerotic economy. Three researchers – Michael Clemens, Lant Pritchett and Claudio Montenegro – recently found a novel way to measure how well various countries use the workers they have. The three compared the wages of immigrants to the United States with the wages of similar workers from the same country who remained home.

A 35-year-old urban Egyptian man with a high school education who moves to the United States can expect an incredible eightfold increase in living standards, the researchers found. Immigrants from only two countries, Yemen and Nigeria, receive a larger boost. In effect, these are the countries with the biggest gap between what their workers can produce in a different environment and what they are actually producing at home.

The article is interesting throughout.

The Failure of Keynesian Politics

Let's accept for the sake of argument the truth of Keynesian economics. It is now clear that Keynesian politics has failed. But don't take my word for it. Here's Paul Krugman on the great abdication:

…without saying so explicitly, the Obama administration has accepted the Republican claim that stimulus failed, and should never be tried again.

What’s extraordinary about all this is that stimulus can’t have failed, because it never happened. Once you take state and local cutbacks into account, there was no surge of government spending.

If that sounds familiar let's remember that by their own admission Keynesians believe that Keynesian politics also failed during the Great Depression. Again, Paul Krugman on the New Deal:

…you might say that the incomplete recovery shows that “pump-priming”, Keynesian fiscal policy doesn’t work. Except that the New Deal didn’t pursue Keynesian policies. (emphasis in original).

So we have had two major cases that massively favored Keynesian economics but Keynesian politics failed both times. Not that this should be surprising, Keynes himself told us that his theory was more suitable to totalitarian regimes:

The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state [eines totalen Staates] than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.

More recently, other people (including Paul Krugman as I recall although I can't find a good link) have said similar things about the chaos of democracy versus the Chinese government's ability to stimulate at will.

Now I will take a large degree of laissez-faire and the chaos of democracy over authoritarian political and economic regimes any day. I assume most Keynesians would as well. Thus, if we can't count on massive increases in government spending during a recession to mop up problems ex-post shouldn't we all, Keynesians and otherwise, be spending more time thinking about ex-ante alternatives to Keynesian politics?

What are the alternatives to Keynesian politics?  Greater regulation to prevent crises from occurring is a legitimate response, although one that I wouldn't necessarily buy into in all particulars. Along the same lines, increasing wage, price and real flexibilities (e.g. relocation flexibility and public and private savings flexibility) would benefit us in future recessions. Automatic stabilizers such as unemployment insurance are one area that has worked quite well. What other areas can be automatized? Funding for states? How about an automatic payroll tax cut tied to the unemployment rate? (fyi, Keynes favored the latter).  

More generally, we can probably get more agreement today on policies that will operate tomorrow than we can get agreement today on today's policies or agreement tomorrow on tomorrow's policies.

Addendum: Ezra Klein comments and here is Megan McArdle and here is Paul Krugman.

What I’ve been reading

1. Carsten Jensen, We, the Drowned.  A series of generational tales from a Danish fishing village, starting with the 1864 conflict against Germany.  The WSJ loved it, the Danes loved it, eight Amazon readers loved it, and I liked it quite a bit at first.  Eventually I was wandering in a "tweener" novel — serious enough not to be stupid, yet not enough giddy fun to be a page turner, not serious enough to be deep, and ultimately a European novel of ideas by the numbers.  Some of you are likely to enjoy this, but I put it down with no regrets before p.200.  Artificial gusto, I say.

2. Adrian Johns, Death of a Pirate: British Radio and the Making of the Information Age.  A very good book on the history of radio, but the real bonus is the history of economic thought section, covering what Coase, Hayek, Arnold Plant and others thought of the BBC in its early years and how that related to debates over The Road to Serfdom.  I hadn't know that some of the British pirate stations of the 1960s were inspired by Hayek.  Plus it's only $4.68 in hardcover.

3. César Aira, An Episode in the Life of a Landscape Painter.  Commonly portrayed as an Argentina eccentric, he writes a few short books each year and over time he has accumulated the reptutation as one of the most important contemporary Latin writers.  Broadly in the Borges tradition, scattered and philosophical, there is little downside to giving him a try.

4. Javier Cercas, The Anatomy of a Moment: Thirty-Five Minutes in History and Imagination.  In the waning of Franco's time, how did Spain turn away from military rule and toward democracy?  Can a mediocre man make a difference in history simply by retreating at the right moment?  Can a political life boil down to a single response, under gunfire at that?  Half of this book is brilliant writing, the other half is brilliant writing combined with obscure, hard-to-follow 1970s Spanish politics (does Adrian Bulli understand the life of John Connally?  I don't think so).  Cercas is a novelist, intellect, and historian all rolled into one, and he is sadly underrated in the United States.  There's nothing quite like this book.  On top of everything else, if you can wade through the thicket, it is an excellent public choice account of autocracy.

5. Patrick Cockburn and Henry Cockburn, Henry's Demons: Living With Schizophrenia, A Father and Son's Story.  Interesting but never insightful (can I coin that as a new phrase?).  On the surface this book shows the difficulties of having a son with schizophrenia, from both the perspective of the parents and also in the son's own words.  In reality, it turned me (further) against the idea of forced institutionalization of an adult.  They lock the son up for years and they don't seem to regret it, even though he repeatedly tries to escape from what are obviously inhumane conditions and brutal, dehumanizing medications.  They were there and I wasn't, but still by putting it into a book they invite reader reactions and that is mine.  Is the ultimate argument for the son's commitment that they cannot live with the thought of his suicide risk?  For me that's not enough and I wonder if "empathy" always leads to better moral decisions.  The parents themselves stress that he probably was not a danger to others and also he had committed no crime.