Month: July 2011

Blogging the debt ceiling

At this point, what is there to say?  The Asian markets open soon.  The InTrade contract, which for some reason is defined around the end of August, is up somewhat today.  Who knows why?  Brad DeLong and Rortybomb wrestle with the question of how to respond to the credit rating agency vigilantes.

Calculated Risk surveys options.  Ezra Klein’s coverage continues to be very useful.  Keith Hennessey defends some version of a “Republican point of view.”

A Twitter search on “Boehner” yields good updates.  What else works?

Shortly I’m headed out for some food from Sierra Leone, we’ll see what I come back to.  I’m currently predicting a two-stage process, announced fairly soon, without the deal itself quite being there, but the confidence intervals on that call are pretty wide.

Via Michelle Dawson, here is an article on what happens to seven-footers after they retire from the NBA.

Econometric papers on the Israeli-Palestinian conflict

Ending violent international conflicts requires understanding the causal factors that perpetuate them. In the Israeli–Palestinian conflict, Israelis and Palestinians each tend to see themselves as victims, engaging in violence only in response to attacks initiated by a fundamentally and implacably violent foe bent on their destruction. Econometric techniques allow us to empirically test the degree to which violence on each side occurs in response to aggression by the other side. Prior studies using these methods have argued that Israel reacts strongly to attacks by Palestinians, whereas Palestinian violence is random (i.e., not predicted by prior Israeli attacks). Here we replicate prior findings that Israeli killings of Palestinians increase after Palestinian killings of Israelis, but crucially show further that when nonlethal forms of violence are considered, and when a larger dataset is used, Palestinian violence also reveals a pattern of retaliation: (i) the firing of Palestinian rockets increases sharply after Israelis kill Palestinians, and (ii) the probability (although not the number) of killings of Israelis by Palestinians increases after killings of Palestinians by Israel. These findings suggest that Israeli military actions against Palestinians lead to escalation rather than incapacitation. Further, they refute the view that Palestinians are uncontingently violent, showing instead that a significant proportion of Palestinian violence occurs in response to Israeli behavior. Well-established cognitive biases may lead participants on each side of the conflict to underappreciate the degree to which the other side’s violence is retaliatory, and hence to systematically underestimate their own role in perpetuating the conflict.

That link is here.  One of the researchers, Johannes Haufhofer, has a Ph.d. in economics from the University of Zurich and a Ph.d. in neuroscience from Harvard.  His other papers are here.  Here is one of his recent grants, it looks quite interesting.

For the pointer I thank a loyal MR reader.

Assorted links

1. “Blaming the Republicans” is used as a false substitute for “rejecting the doctrine.”  We can do both!

2. The Great Factor Price Equalization; in this framework I have been focusing on our inability to move U.S. labor up the value chain of production with new, complex ideas.  You can discuss the causality in a number of different ways, such as putting more causal emphasis on how outsourcing has chipped away at the previous networks of production.

3. The importance of Google+?

4. Markets in everything: snore absorption rooms.

5. Disputes over the size of Chinese debt.

6. Poor choice of words.  And how can the now-expensive city of Budapest make that list?

7. What are Norwegian prisons like?

New and excellent manuscript on the economics of the family

By Martin Browning, Pierre-André Chiappori, and Yoram Weiss, you will find it here, on-line and free.  Perhaps in this post-Freakonomics era you are jaded and feel you have seen too many “economics of the family” books.  This is a scholarly rather than popular manuscript, and it is full of data and (simple) models.  At some point it will come out from Cambridge University Press.

For the pointer I thank Scott Cunningham; “All of the models of household production, bargaining, sorting in marriage and dating, and the numerous other strands within this literature have been finally brought together into one place.”

If you’re looking for some good news…

Astronomers found a reservoir of water in space that measures 140 trillion times the earth’s ocean water.

It is also the farthest reservoir of water ever discovered in the universe, according to two teams of researchers.

The water surrounds a huge, feeding black hole called a “quasar” more than 12 billion light-years away. The quasar is powered by a giant black hole which gradually consumes a surrounding disk of gas and dust, while spewing out enormous amounts of energy.

Astronomers studied a quasar called APM 08279+5255, where the black hole is 20 billion times greater than the sun. They discovered Water vapor distributed around the black hole spanning hundreds stretching out to hundreds of light-years in size.

In other words,  “It’s another demonstration that water is pervasive throughout the universe, even at the very earliest times.”  But wait, oops, Katja Grace will tell us this isn’t really good news at all…

The future of Ontario (Canada?)

Daniel Drache reports on some trends which I had not quite been following:

Ontario has the densest concentration of car production probably in the world…

From a North American perspective, Ontario, Canada’s industrial heartland, ranks 16 out of 18 on his competitiveness ranking index, just ahead of Michigan.

…the job boom in resources including minerals and agricultural exports offset less than one-fifth of the jobs lost in Canadian manufacturing facilities.  The big winners in terms of job growth are private services and government…

…the incredible growth in services challenges one of the standard assumptions of globalization — that Canada is becoming more integrated into the global economy.  Most service production is consumed domestically and virtually all public services are not traded…the most remarkable structural change in the Canadian economy is that Canada was less integrated in world markets at the end of 2006 than it was a decade earlier measured by intense export openness…Canadian exports reached their peak at over 45 percent of the share of Canada’s total GDP in 2000; by 2007 this had declined by 10 points to 35 percent.

Here is yesterday’s related post on America.  Here is my earlier post on Harold Innis.

Specs that see right through you

The glasses can send me this information thanks to a built-in camera linked to software that analyses Picard’s facial expressions. They’re just one example of a number of “social X-ray specs” that are set to transform how we interact with each other. By sensing emotions that we would otherwise miss, these technologies can thwart disastrous social gaffes and help us understand each other better. Some companies are already wiring up their employees with the technology, to help them improve how they communicate with customers. Our emotional intelligence is about to be boosted, but are we ready to broadcast feelings we might rather keep private?

For one thing, it could be used to improve the efficiency of sales calls, albeit at a cost to privacy.  The full article is here and Robin Hanson thinks we might ban such devices.

Give Directly

Here is Tyler summarizing the principles of charitable giving:

1. Cash is often the best form of aid.

2. Give to those who are not expecting it, and,

3. Don’t require the recipients to do anything costly to get the money.

Loyal readers will recall that Tyler followed through on his advice by sending money to random people in India, as suggested by MR readers (see also here).

A new charity is formalizing Tyler’s system and reducing the transaction cost of efficient donation. GiveDirectly takes donations over the web, locates poor households in Kenya using people on the ground, and then transfers money directly to the recipient’s cell phone (even very poor households typically have cell phones but GiveDirectly provides SIM cards for those who do not.) Transactions costs are low, just 10%.

You will not be surprised to learn that the CEO and founders and are all economists (one MBA/MPA). All the founders also have extensive experience in development. A randomized control trial is under way to evaluate the program.

Transfers, following point #3, are unconditional. The founders write:

GiveDirectly intentionally provides unconditional, rather than conditional, cash transfers. We do this for three reasons. First, empowering the poor to make their own decisions advances our core value of respect. Second, it lets recipients purchase the things they need most, enhancing impact. Third, imposing conditions on the use of funds requires that costly monitoring and enforcement structures be put in place. One detailed estimate put the administrative costs of a conditional cash transfer scheme at 63% of the transfers made over the first three years of the program (Caldes & Maluccio 2005).

Points one and three are excellent. The second point is a bit disengenous, yes it lets recipients purchase they things they need but it also lets recipients purchase alcohol, cigarettes and prostitutes. Even in poor countries, a substantial amount of poverty is caused by poor choices. Still, there is no special reason to think that cash grants will increase the proportion of money spent on “bad goods.” Cash grants could even reduce bad-goods spending. Some people drink to escape depressing circumstances, for example, so if you make things less depressing, drinking can fall. Moreover, even if you give people housing, health care, or food (stamps!) it’s not so easy to get around bad-goods spending because money is fungible.  Thus, I have no problem with donating cash.

Indeed, Tyler and I wish to encourage experimentation in charity and we have therefore made a donation to GiveDirectly.

AddendumGivewell, our favorite charity evaluator, says GiveDirectly is too new to evaluate but they like the idea and they note that GiveDirectly has been unusually forthright in providing them with advance plans on evaluation.

North America has always (since colonialism) been wealthier than Latin America

From a new paper by Robert Allen, Tommy Murphy, and Eric Schneider:

We begin by measuring real wages in North and South America between colonization and independence, and comparing them to Europe and Asia. We find that for much of the seventeenth and eighteenth centuries, North America was the most prosperous region of the world, offering living standards at least as high as those in the booming parts of North-Western Europe. Latin America, on the other hand, was much poorer and offered a standard of living like that in Spain and less prosperous parts of the world in general.

It is a common view that North America had to play catch-up, but the extensive data sets in this paper suggest that North American wages were up to twice as high as the general level of wages further south.

For the pointer I thank Mark Koyama on Twitter.

How guilty should you feel about eating lamb?

A few days ago this chart made the rounds in the blogosphere.  It shows, among other things, that eating lamb is much worse for the environment than is eating beef.  A key part of the problem is that a greater percentage of the cow ends up being used for food, compared to the sheep.  You therefore might be tempted to apply a heftier carbon tax, or “personal guilt tax,” to the lamb, but not so fast.

To the extent that farmers feed a whole big lamb and get a little squib of meat in return, the price of lamb is already correspondingly higher than the price of beef (where the tripe is sold to Italy, the cheese is sold to Kraft, etc.).  Consumers are already internalizing this relative price difference between cows and sheep.

The correct response is to eat less meat of all kinds.  It’s not obvious you need to apply a special tax (fiscal or conscience tax) to lamb, above and beyond the general meat tax which is called for.

You may reject a constant returns to scale or proportionality assumption and view the proper tax as a fixed mark-up on both beef and lamb.  That still will lower the relative price of the costlier item.

In terms of animal welfare, a sheep is probably free range with greater probability than is a cow, which somewhat favors lamb consumption again in relative terms only.

You can make other assumptions and get other results, naturally.  Still, in relative terms there is no prima facie presumption against lamb compared to beef.

The new Greek bailout plan, digested

By now I’ve read many more other commentariesMy basic opinion hasn’t changed much, but here’s another way to frame it.  The EU pledges that Greek creditors will take a hit but that this will never ever happen again, not with Spain or Italy in particular.  That’s not a credible promise, if only because of the magnitudes involved, and so over time it shouldn’t influence the borrowing rates of those countries very much.  It’s worth a small amount to have the promise made at all, but the comparable promises made about Greece were just broken so who is being fooled here?

Behind the scenes, Merkel probably committed to a more direct German financial support of the bailout fund, although that pledge is not yet ready for public consumption.  That’s arguably the biggest event of the day.  If that’s not the case, it’s not clear where the fund gets its extra oomph from.  It’s also not clear how many other parliaments will have to approve comparable financial commitments or backstops and that is potentially a stumbling block for the whole plan.

It is also suggested that the bailout fund will be enabled to recapitalize banks in ailing countries on a preemptive basis.  If you’re pro-bailout and wish to give this a positive spin, that may be your best bet.  Private recapitalization probably isn’t in the cards; are you running out to buy equities in Greek, Irish, and Portuguese banks right now?  Spanish and Italian?  The prices have been falling but I bet you’re sitting on your hands.

There is also acceptance of Greek default, a theory (ha) that it will be regarded as temporary, and some still not yet transparent deal with the ECB, so that the ECB continues to prop up Greek banks (i.e., accept Greek government bonds as collateral for loans) post-default.

The truly credible signal is that all future EU aid will be doled out with an eeny-weeny, itsy-bitsy eye drop squeezer.  It’s an extra signal that there will be no big “step up to the plate.”

On top of that toss in a renewed pledge to contractionary macro policy, lower rates for Ireland and Portugal too, a semi-voluntary rollover of Greek debt from the private sector (twenty percent haircut?…with complicated options), and lots of empty, reassuring words, all packaged with a bunch of press releases.  I would discount the talk of a new Greek “Marshall Plan.”

The bottom line: Whatever your forecast was in the first place, this probably shouldn’t change it.