Month: July 2011

An argument for the McConnell plan

We’ve never thought the debt ceiling was the best leverage for a showdown over the entitlement state…

The tea party/talk-radio expectations for what Republicans can accomplish over the debt-limit showdown have always been unrealistic. As former Senator Phil Gramm once told us, never take a hostage you’re not prepared to shoot. Republicans aren’t prepared to stop a debt-limit increase because the political costs are unbearable. Republicans might have played this game better, but the truth is that Mr. Obama has more cards to play.

The entitlement state can’t be reformed by one house of Congress in one year against a determined President and Senate held by the other party. It requires more than one election.

The full article is here.  Ezra reports:

You’re increasingly hearing about the possibility of a split Boehner/McConnell deal, in which Boehner gets less than $2 trillion in spending cuts, which is not quite as many as he wanted, and the McConnell process is used to raise the debt ceiling beyond where the spending cuts have gone. That would, in other words, be the GOP giving on its dollar-for-dollar demand, which seems likelier to everyone involved than the party making an agreement on taxes.

Model this

As we have written before, private colleges and universities are by far the biggest offenders on grade inflation, even when you compare private schools to equally selective public schools.

There are charts and further information at the link.  By the way:

…about 43 percent of all letter grades given were A’s, an increase of 28 percentage points since 1960 and 12 percentage points since 1988. The distribution of B’s has stayed relatively constant; the growing share of A’s instead comes at the expense of a shrinking share of C’s, D’s and F’s. In fact, only about 10 percent of grades awarded are D’s and F’s.

It’s worth trying to model that too.

One of the strangest and most depressing markets in everything

The link is here.  It deserves more than a mere link in a list, yet I can’t bring myself to excerpt from it either, or for that matter to really comment on it.  It is estimated that the woman (the link is safe for work, by the way) earns $90,000 a year, although she denies this.  There’s the consumer surplus on top of that.

For the pointer I thank Andrew H.

American vs. Russian notions of friendship

Not long ago I attended an evening-long discussion group on this topic, comprised mostly of Russian emigrants and their spouses.  The Russians were generally keen to argue that they have deeper and closer friendships than do the Americans.  They also dislike that Americans will call their acquaintances “friends.”  In response I noted that:

1. Relative to Americans, Russians are far more concerned with defining who is truly a friend, or not.  (Though Google+ may change this.)

2. Russians are far more likely to conduct purges of their friends.  (“A future enemy” is one good Eastern European definition of a friend, or so the joke goes, thanks to BC.)

3. American geographic mobility has been falling for some time and so we might move back toward some closer and more durable notions of friendship; social networks play a role here too.

Since that evening, I’ve formulated a new version of the question in my mind.  Putting aside the so-called “intelligentsia” (a Russian phrase, not one which comes quickly to my tongue), are Russian lower-middle class friendships so much more “life and death” than American lower-middle class friendships, especially among the immobile?  What if seven guys grow up together in Somerville, MA, never go to college or leave town, work in auto parts stores, and end up reminding you of characters in a Clint Eastwood movie?  Maybe they’re pretty tight, albeit with grudges and perhaps even purges along the way.

The new question is then this: why does the “treatment” of greater education have so much less affect on the nature of Russian friendships, relative to American friendships?  Are there other dimensions along which the treatment of education influences Russians less?  (Examples would be child-bearing age, taste in sports, taste in food, etc.)  Influences Americans less?  Other groups?

The Russian intelligentsia will be the first to insist how much education matters in their circles, but perhaps they doth protest too loud.

The value of the internet and double counting

Continuing the exchange over the value of the internet, David Henderson writes (and do read the whole thing):

So I can imagine doubling Goolsbee’s and Klenow’s 2% to 4% to reflect the broader version of CS [consumer surplus] that users get directly and then adding another 4% to reflect the lower cost of getting goods and services delivered to us even if we never use the Internet directly. That get’s it to 8%. To me that’s “huge.”

This is useful for helping sort out where David and I disagree.  As I see it, the latter factor — the lower prices for goods and services — is already reflected in measured real wage gains, or smaller real wage losses than would otherwise hold, as the case may be.  We’re back down to four percent.

In the post, David mentions both the “lower price” gains (which he stresses in the TGS review) from the “lower time cost of shopping” gains.  The two are not quite the same.  What about the latter?  The lower time cost of shopping is already counted in WTP measures of the value of the internet — you’ll pay more for the internet if it saves you more time — and to some extent in gdp statistics and other real income measures.  How does the gdp effect work?  Let’s say it used to take half an hour to buy a book, now it takes ten seconds.  People will buy more books and that gain is already measured.  The rest of the saved half hour goes into other methods of production and shopping, which also show up in national income.  Some of the saved half hour shows up as “pure leisure” (i.e., sitting on one’s bum, doing nothing) and that one part of the saved time doesn’t show up in gdp statistics though it still does show up in WTP estimates (which again clock in below four percent).

Time use studies also count these “time saved shopping” gains, but in a different way.  Goolsbee and Klenow measure the income elasticity of leisure uses of the internet and find it is negative.  That means high value of time users find the internet a time sink, on net, rather than a time saver.  In any case the magnitude of this value already lies behind their estimate.

Goolsbee and Klenow estimate two percent for consumer surplus, not “2% to 4%,” and they worry they are overestimating the gains because of assumptions they make about substitutability.  The other studies I cited are below four percent, unless it’s for computer use more generally.  I’m the one who kicks it up to four percent, largely because of Facebook, which de facto postdates some of the papers (though not the FCC study which still gives modest sums), and also because of unmeasured workplace consumption usage.  But that’s probably as high as we should go, once we adjust for what is already counted elsewhere.

Addendum: The Billion Price Index matches the CPI pretty closely, so there is not much gain from invoking the “CPI doesn’t measure internet bargains” argument, though there may still be a small effect there.  And Matt Yglesias offers interesting comment.

The Singularity is Near: From Dust to Device

It’s now possible to scan and replicate an object with moving parts in a 3D printer. Check out what happens when the physicist reaches into the dust and pulls out a wrench. Truly, any sufficiently advanced technology is indistinguishable from magic.

(FYI, I think some post-scanning information must have been added to the computer representation to fully describe the moving parts.)

Hat tip: Kottke.

Ghana is richer than they had thought

Richard Rorty may differ, but Charles Kenny and Andy Sumner report this:

Even gold and diamond-producing Ghana, which declared itself 63% richer at the end of last year than previously thought, didn’t suggest the newfound riches were the result of mineral exports. Instead, the recalculation was driven by the fact the country’s services sector was a lot bigger than previously calculated. Part of that will reflect the incredible success of the telecoms sector – 75% of the country’s population are mobile subscribers. And, of course, the expansion of telecoms is a worldwide phenomenon. So a lot of the growth we are seeing in poor countries is broad-based, not just reliant on the current commodity boom – which is good news for the future.

They also serve up this zinger:

One prominent Zambian, Dambisa Moyo, has written of her country that “a direct consequence of the aid-driven interventions has been a dramatic descent into poverty. Whereas prior to the 1970s, most economic indicators had been on an upward trajectory, a decade later Zambia lay in economic ruin”. In the 1980s, aid to Zambia averaged about 14% of the country’s GNI. In the 2000s, a decade of strong growth, the same proportion was 17%. If Zambia’s ruin in the 1980s was the result of aid, is Zambia’s graduation to middle-income status in the new millennium a sign that aid now works really well?

Hat tip goes to Chris Blattman.

Canadian (signaling) markets in everything

Telegrams Canada will write your telegram for you—or at least suggest gram language for appropriate occasions. The “Get Well” suggestions include “The office/this place is just not the same without you,” and “Your many friends here are hoping for your quick recovery.”

The service isn’t cheap. A same business day telegram costs CAN$19.95 plus 99¢ per word. “Quebec usually next business day,” the company advises. “Rural routes and post office boxes may take longer.”

Here is more, a fascinating story about supposedly dead media forms which remain in existence.  Via The Browser.

Mood management of customers

Apple employees are banned from saying “unfortunately” when delivering bad news to a customer, urged instead to replace it with the more positive “as it turns out.” And management apparently takes the ban seriously: One former Apple employee tells us that his coworker was put under a 90-day probationary period because he said “unfortunately” too much at the Genius Bar.

As it turns out, “unfortunately” is just one of a number of “stop words” that are not supposed to pass an Apple Store employee’s lips.

Here is more.  Elsewhere, inspiration from Minnesota may motivate the median voter and help resolve the state’s fiscal disputes:

The Star Tribune of Minneapolis reported Wednesday that bars, restaurants and stores across the state are unable to replenish their liquor and beer supplies because they can’t renew $20 state-issued alcohol purchasing cards.

As it turns out, Minnesota cigarette markets will go away by Labor Day as well.  Unfortunately, it is hard to think of a comparable commitment device for the federal debt-ceiling logjam.

Harold Innis, an underappreciated economist, on commodity-driven growth

This Canadian economist (1894-1952) deserves an installment in the “underappreciated economists” series.  In addition to his seminal work on the economics of media and communications (better and earlier than McLuhan), he has some excellent pieces on the fur trade in Canadian economic history, and they are more contemporary than at first meets the eye.  Innis’s editor, Daniel Drache, sums up the main point:

Innis could not stress strongly enough that internal markets respond to a different logic and set of needs than externally based systems of exchange.  This occurs because the international price mechanism is volatile and subject to violence and instability in income fluctuation.

Most of all, Innis is worried about commodity and resource-based growth.  Five or ten years from now, will Canadians, Australians, and Brazilians be talking about Harold Innis as we do Hyman Minsky?

Innis also argued that the importance of the fur trade gave Canada a somewhat more peaceful history with its Native Americans than we had in the United States.  Here is a very good Wikipedia entry on Innis, who is still worth reading.

Do supermarkets improve our diets?

Maybe not:

Better access to supermarkets — long touted as a way to curb obesity in low-income neighborhoods — doesn’t improve people’s diets, according to new research. The study, which tracked thousands of people in several large cities for 15 years, found that people didn’t eat more fruits and vegetables when they had supermarkets available in their neighborhoods.

Instead, income — and proximity to fast food restaurants — were the strongest factors in food choice.

The original piece (gated) is here.

Very good sentences thwarted markets in everything

“Such exorbitant commercialism must stop,” said Jan Tönjes, chief editor of Germany’s St. Georg magazine. At a recent show in Wiesbaden, he said, a woman tried to buy a rubber glove that the horse had spat on as a souvenir.

The article is here (interesting throughout) and for a related pointer (not to this passage) I thank Michelle Dawson.