Month: June 2011

Not From the Onion

The headline says it all:

House keeps farm subsidies, cuts food aid

Here are some of the other provisions which seem designed just to be ridiculed by Jon Stewart:

Directs the Agriculture Department to rewrite rules it issued in January meant to make school meals healthier. Republicans say the new rules, the first major overhaul of school lunches in 15 years, are too costly.

Forces USDA to report to Congress every time officials travel to promote the department’s “Know Your Farmer, Know Your Food” program, which supports locally grown food, and discourages the department from giving research grants to support local food systems. Large agribusiness has been critical of the department’s focus on these smaller food producers.

Prevents USDA from moving forward with new rules that would make it easier for smaller farmers and ranchers to sue large livestock companies on antitrust grounds. The proposed rules are meant to address the growing concentration of corporate power in agriculture.

Delays for more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. A Republican amendment adopted Thursday would require the Commodity Futures Trading Commission, which funded in the bill, to first have other rules in place to facilitate its collection of derivatives market data.

Prevents the FDA from approving genetically modified salmon for human consumption, a decision set for later this year.

Questions the scope of Obama administration initiatives to put calories on menus and limit the marketing of unhealthy foods to children.

Don’t get me wrong, I’d probably do away with a number of these rules as well. But anyone who argues against making school meals healthier because it’s too expensive at the same time as they vote for keeping billions of dollars in farm subsidies is not concerned about expenses. What unites the bill is not ideology but protection of agribusiness.

Perhaps the most outrageous provision was one the good guys won:

Critics of farm subsidies did score one victory: The House voted to block a $147 million annual payment to Brazil’s cotton industry. The United States agreed to make that payment last year after Brazil’s industry complained to the World Trade Organization that Washington unfairly was subsidizing U.S. cotton farmers. The United States lost the WTO case and agreed to make the payments to Brazil as a settlement.

So not only have we been subsidizing cotton farmers but we have been paying Brazil to allow us to keep subsidizing cotton farmers. Incredible. I wonder whether this provision will make it into the final bill.

Anadolu University

It’s in Eskisehir, central Anatolia, a long way from home.  And yet the campus looks remarkably like George Mason University.  It has about the same number of students, the same kind of suburban feel, the same kinds of sculptures and fountains scattered around campus, the buildings use steps in a similar way, the cars are parked in similar configurations, there is similar signage, and there are related styles of architecture for the buildings.  Here are some photos.  All in all, it is quite unheimlich.

Both schools have women wearing Islamic head scarves, slightly more here.  The Anadolu campus was designed by an economist, unlike George Mason, and the school is a leader in distance education.

I would describe Eskisehir as the Curitiba of Turkey.  I am told it used to be much worse.

Here is a good recent piece on Eskisehir.

From a reader

One point on your post on U.S. money market funds’ ownership of European bank paper: much of what the U.S. money
market funds own is paper issued by the U.S. domiciled subsidiaries of those banks (a partiallist of DB’s: This is according to the CEO of Federated Investments (one of the largest operators of MM funds), speaking at the KBW investment conference last week. Obviously, the turmoil in Europe isn’t helpful to these subs, but, as they have their own U.S.-domiciled assets backing them, they carry considerably less risk than parents do.

The initial post was here.

Murder markets in everything

Mr. Kahan estimated that there were perhaps half a dozen murderabilia vendors in the United States who advertise online. They include,, and

Just type in the address and behold: A holiday card signed by Joel David Rifkin, convicted of the murders of nine women in New York City, available for $350. A shirt worn by Richard Ramirez, a k a the Night Stalker, can be yours for as little as $1,400. Paintings by the executed serial killer John Wayne Gacy are especially popular and pricey; a portrait of his alter ego, Pogo the Clown, is currently going for $19,999.

And why would anyone want this stuff?

“Each piece tells a story,” Joe Turner, a British collector who owns a Gacy painting and a lock of Charles Manson’s hair, wrote in an e-mail.

“Agitated honeybees exhibit pessimistic cognitive bias”

Via Michelle Dawson, here is a new paper by Melissa Bateson,

Whether animals experience human-like emotions is controversial and of immense societal concern [1,2,3]. Because animals cannot provide subjective reports of how they feel, emotional state can only be inferred using physiological, cognitive, and behavioral measures [4,5,6,7,8]. In humans, negative feelings are reliably correlated with pessimistic cognitive biases, defined as the increased expectation of bad outcomes [9,10,11]. Recently, mammals [12,13,14,15,16] and birds [17,18,19,20] with poor welfare have also been found to display pessimistic-like decision making, but cognitive biases have not thus far been explored in invertebrates. Here, we ask whether honeybees display a pessimistic cognitive bias when they are subjected to an anxiety-like state induced by vigorous shaking designed to simulate a predatory attack. We show for the first time that agitated bees are more likely to classify ambiguous stimuli as predicting punishment. Shaken bees also have lower levels of hemolymph dopamine, octopamine, and serotonin. In demonstrating state-dependent modulation of categorization in bees, and thereby a cognitive component of emotion, we show that the bees’ response to a negatively valenced event has more in common with that of vertebrates than previously thought. This finding reinforces the use of cognitive bias as a measure of negative emotional states across species and suggests that honeybees could be regarded as exhibiting emotions.

From the comments

Albert Ling writes:

How about this: Amy Chua’s method is better in raising successful kids career-wise, at the expense of emotional attachment, family warmth, etc. It’s a trade-off. If you envision your child’s future life to be of economic hardship and misery, maybe it’s a GOOD trade-off (as evidenced by the stricter methods of parenting on poorer societies, and also in the past when being poor really influenced your happiness).

If you already earn more than USD 25,000$ a year (which is the threshold after which income stops correlating positively with happiness), then it’s probably better to be a B.Caplan-style parent. (if your goal is to maximize your child’s total future happiness).

I think the answer is that simple.

Is information technology a general purpose technology?

Here is a 2006 paper by Susanto Basu and John Fernald, relevant to some current debates:

Many people point to information and communications technology (ICT) as the key for understanding the acceleration in productivity in the United States since the mid-1990s. Stories of ICT as a ‘general purpose technology’ suggest that measured TFP should rise in ICT-using sectors (reflecting either unobserved accumulation of intangible organizational capital; spillovers; or both), but with a long lag. Contemporaneously, however, investments in ICT may be associated with lower TFP as resources are diverted to reorganization and learning. We find that U.S. industry results are consistent with GPT stories: the acceleration after the mid-1990s was broadbased—located primarily in ICT-using industries rather than ICT-producing industries. Furthermore, industry TFP accelerations in the 2000s are positively correlated with (appropriately weighted) industry ICT capital growth in the 1990s. Indeed, as GPT stories would suggest, after controlling for past ICT investment, industry TFP accelerations are negatively correlated with increases in ICT usage in the 2000s.

This is further evidence for the view that we are in the preparatory stages of a longer-run boom, that many of the gains have yet to come, and the productivity-enhancing impact of IT so far has been overstated.

Health care queuing: this will get worse

The study used a “secret shopper” technique in which researchers posed as the parent of a sick or injured child and called 273 specialty practices in Cook County, Ill., to schedule appointments. The callers, working from January to May 2010, described problems that were urgent but not emergencies, like diabetes, seizures, uncontrolled asthma, a broken bone or severe depression. If they were asked, they said that primary care doctors or emergency departments had referred them.

Sixty-six percent of those who mentioned Medicaid-CHIP (Children’s Health Insurance Program) were denied appointments, compared with 11 percent who said they had private insurance, according to an article being published Thursday in The New England Journal of Medicine.

In 89 clinics that accepted both kinds of patients, the waiting time for callers who said they had Medicaid was an average of 22 days longer.

Here is more.  Once again, health care policy needs to be about the supply side.

Addendum: Ezra Klein reports that the budget deal may involve significant Medicaid cuts.

Ralph Waldo Emerson on books

From his Notebooks, (the best Emerson to read, in my view) circa 1841:

We are too civil to books.  For a few golden sentences we will turn over & actually read a volume of 4 or 500 pages.  Even the great books. “Come,” say they, “we will give you the key to the world” — Each poet each philosopher says this, & we expect to go like a thunderbolt to the centre, but the thunder is a superficial phenomenon, makes a skin-deep cut, and so does the Sage — whether Confucius, Menu, Zoroaster, Socrates; striking at right angles to the globe his force is instantly diffused laterally & enters not.  The wedge turns out to be a rocket.  I have found this to be the case with every book I have read & yet I take up a new writer with a sort of pulse beat of expectation.

Another look at why both AD and AS matter

Often I read blog posts by other economists, using the AD-AS model.  The implicit assumption is that there is either too little AD, or too little AS, but the two problems do not and indeed cannot exist together.  If the economy is well-described by these two curves, that is indeed the implication: if AD is shifted in too far to the left, how can there be too little AS?

I suggest a slightly more complex model.  During the financial crisis the American economy took a big AD hit due to debt overhang, falling asset prices, unemployment, imperfect monetary policy, credit contraction, and several other factors.  After the peak of the crisis there were massive layoffs, largely because of these AD problems, toss in an increase in the risk premium and perhaps higher fixed costs of employing people.  A lot of the labor market problems from this hit still have not been cleaned up, and furthermore with lower net wealth many of these jobs are never coming back, with or without monetary stimulus.

Now fast forward.  These days, the layoffs are no longer so frantic, but the rate of new job creation is slow.  Some of the unemployed (not all) could find new work by moving to North Dakota or Australian mining communities, but few of them will do so, mostly for the obvious reasons.  They are waiting for good, new jobs in areas they are willing to live in.  But slow underlying rates of innovation mean slow job creation and so many of these unemployed continue to wait.  It also means a very low quit rate, which we have observed too, because employed workers can’t so easily step into new jobs.

The economy still has a problem with weak AD.  The economy also has an ongoing problem from weak AS.  Both are true, though you won’t see this if you think those two AD and AS curves sum up the whole picture.  Again, it is about the disaggregated aggregate demand.

Thinking even a little bit hard about the derivation of the AD curve (especially in “p space” rather than “p dot space”) should cure one of the tendency to take these models too literally.  Note also that most AD-As models are not integrated with growth theory, though the Modern Principles text with Alex is a big exception here.

Here is further simple proof, using seasonal data, that both blades of the scissors matter.  Via Matt Yglesias, here is a iscussion of how productivity growth in the recovery — if you could call it that — is lagging behind other U.S. business cycles.

An outline of Austro-Chinese business cycle theory

From Martin Wolf:

Investment has indeed grown far faster than GDP. From 2000 to 2010, growth of gross fixed investment averaged 13.3 per cent, while growth of private consumption averaged 7.8 per cent. Over the same period the share of private consumption in GDP collapsed from 46 per cent to a mere 34 per cent, while the share of fixed investment rose from 34 per cent to 46 per cent.

Professor Pettis argues that suppression of wages, huge expansions of cheap credit and a repressed exchange rate were all ways of transferring incomes from households to business and so from consumption to investment. Dwight Perkins of Harvard argued at the China Development Forum that the “incremental capital output ratio” – the amount of capital needed for an extra unit of GDP – rose from 3.7 to one in the 1990s to 4.25 to one in the 2000s. This also suggests that returns have been falling at the margin.If this pattern of growth is to reverse, as the government wishes, the growth of investment must fall well below that of GDP. This is what happened in Japan in the 1990s, with dire results.