Month: August 2011

Do exogenous increases in the # of children lower child quality?

Maybe not (in which I channel Bryan Caplan):

So what does it mean for an older brother when Mom and Dad come home for the hospital with twins? What’s it like to be the younger sister of twins?

First, you get less computer time. Frenette finds that, even after controlling for family income, education, and myriad other factors, having twin siblings reduces the number of computers per child by 14.1 percentage points.

Second, you are less likely to be enrolled in private school — youth are 4 percentage points less likely to in private school when there are twins in the family, all else being equal.

Third, parents are less likely to save money for their children’s post-secondary education in families with twins.

And the impact of fewer computers, less private school, and less saving for post-secondary education on children’s academic performance is…not much.

Fifteen year olds from families with twins do no worse than other children in international standardized assessments of reading achievement. If anything, they appear to do slightly better — but there are too few families with twins in Frenette’s sample to know whether the difference is statistically significant.

As a parent, I find these results encouraging. Even if your resources are stretched, and you can’t do everything you’ve planned for your kids, they might turn out just fine anyways.

The possibly gated paper is here and here.  For the pointer I thank Michelle Dawson.

Sports number markets in everything what would Oliver Williamson say?

Pitcher Roger Clemens gave slugging first baseman Carlos Delgado a Rolex, valued at $20,000, for uniform #21.  Former NBA player Vin Baker once bought his number from another player for the relative bargain price of $10,000.   In 2007, NFL player Jason Simmons used the opportunity to do a good deed, giving new teammate Ahman Green #30 if Green agreed to pay the down payment on a home for a disadvantaged single-parent family.

Former NFL punter Jeff Feagles is one of the few who has been able to sell a number twice — although with mixed results.  His first transaction, with quarterback Eli Manning, went smoothly, and Feagles got a family vacation to Florida out of the deal.  His second one, however, did not go so well.  When wide receiver Plaxico Burress joined the New York Giants in 2005, he bought #18 off Feagles in exchange for an outdoor kitchen.  But as of August 2010, Feagles had not received the kitchen. (Apparently, this was unrelated to the fact that by this point, Burress was in prison for accidentally shooting himself in the leg at a New York City night club.)

There is more to the article here, and my Dan Lewis source is here.  Of course, given that the players are now on the same team, these are more like repeated exchanges than at may first appear.

Are chess players getting better over time?

Mostly.  Kenneth W. Regan and Guy McC. Haworth analyze games move-for-move, using chess-playing computer programs.  The result:

…we conclude that there has been little or no ‘inflation’ in ratings over time—if anything there has been deflation. This runs counter to conventional wisdom, but is predicted by population models on which rating systems have been based…The results also support a no answer to question 2. In the 1970’s there were only two players with ratings over 2700, namely Bobby Fischer and Anatoly Karpov, and there were years as late as 1981 when no one had a rating over 2700 (see [Wee00]). In the past decade there have usually been thirty or more players with such ratings. Thus lack of inflation implies that those players are better than all but Fischer and Karpov were.

Real vs. nominal dollars for discretionary spending

Matt Yglesias tweets:

Did every libertarian in America suffer mass amnesia about the difference between real and nominal dollars yesterday?

Others complain as well.  Keep in mind a few things:

1. The spending forecast itself is made in terms of nominal dollars and that is what I, and others, reported.  Bloggers report nominal dollar magnitudes all the time, without pretending to be tricking anybody.  Reporting real dollars would mix in the base information with someone’s forecast of future expected inflation and in general that is not considered to be more enlightening, all the more during a period where people disagree radically about inflation forecasts.  Graph viewers can make their own real vs. nominal adjustments ex post, as indeed they are used to doing.

2. For the Keynesian argument, it is often nominal dollars which matter most.  And also, in Keynesian terms, it is the reaction of the Fed which will be of paramount importance.  Even a not very potent version of QEIII could easily undo whatever mild contractionary effects this spending change might have.

3. Inflationary pressures are not very strong and arguably there are deflationary pressures.  That’s bad, but it means the nominal is not going to be so far off from the real.

4. On top of all that, it is far, far from obvious that those specified spending changes are actually going to take place.  The tendency is for promised spending slowdowns to be ignored or reversed.

Some MR commentators raise the issue of per capita measures of discretionary spending and whether they will decline.  It might be nice to have growing public sector per capita quality with growing population and growing wealth.  But if the good in question is a public good (and is it not supposed to be?), adding extra people to the mix, ceteris paribus with no spending boost, is compatible with those additional people getting more or less the same services as the previous consumers.  Falling per capita expenditures on public goods, if it is not too big a fall, still means a greater real quantity of public goods enjoyed, given non-rivalry of consumption.

The correct response to all this information about future projected spending is still “I guess that’s not much of a spending cut, is it?”

By the way, entitlement reform is MIA.

Instead what I see is a lot of people adding up the entire fiscal gap — ignoring that the stimulus is ending anyway and was going to end anyway — and proclaiming that Tea Party extortion is causing the economic heavens to fall.  Ross Douthat nails it.

Here’s a big “ouch” for some of you:

Sixty five percent approve of deal’s spending cuts. But it gets worse. Of the 30 percent who disapprove, 13 percent think the cuts haven’t gotten far enough, and only 15 percent think the cuts go too far. One sixth of Americans agree with the liberal argument about the deal.

The final effects of the deal are hardly a Ron Paul world and so we are seeing massive exaggeration, driven by the fallacies of mood affiliation, excess sensitivity to social information (“who won the showdown?”) and us vs. them thinking.  What we have is a weak, vacillating postponement of all the hard decisions.  In hindsight, the decision to allow no revenue increases will be seen as a huge blunder, by conservatives most of all.

Why I am more pessimistic about the euro than are most people

Here is Willem Buiter, trying to make a case that the euro will survive.  It’s an interesting piece, but in contrast I have focused my attention on two issues:

1. In my view, the survival of the eurozone is not simply a matter of adding up the current solvency deficits and comparing them to the available quantity of aid.  Rather I see the aid recipients as leaky vessels.  Pumping more money into those countries won’t recapitalize their banking systems.  In fact, once leaving the euro is seen as an option, those banking systems will systematically lose both deposits and capital.  Depositors are afraid to wake up one morning and have lost their euros.  The banks in those countries can’t ever be sound, at least not until something gives.

Imagine if the FDIC weakened or eliminated its deposit guarantees to regional banks, once those regions started experiencing some economic troubles.  That’s the parallel situation in Europe.  If sovereign debt isn’t secure, how can the guarantees of those sovereign states to their banking systems be secure?  And then why should non-guaranteed banking systems recover?

2. The best shot at patchwork regulation is to introduce a common resolution authority and a common bank deposit guarantee mechanism for the eurozone; Buiter discusses a related option.  But ultimately that leads to full fiscal union or at least a eurobond.  If you guarantee all of a country’s banking deposits, you are creating/guaranteeing a riskless security for that country.  In the limiting case, imagine the government itself opening a bank and suddenly having guaranteed liabilities.  You may or may not favor eurobonds and fiscal union, but I feel on safe ground predicting that they won’t happen.  Nothing in the partial bailouts up until now has led me to change or weaken that opinion.

I do not so much see people denying #1 or #2, but I also do not see them starting with these as the main problems to solve.  And thus I am more pessimistic than they are.  But I am pessimistic about the survival of the full eurozone, which is not the same as being pessimistic about Europe.  By the way, the latest news update is here and it isn’t good.

Sentences to ponder

Here is Nancy Youssef, via Kevin Drum:

Rather than cutting $400 billion in defense spending through 2023, as President Barack Obama had proposed in April, the current debt proposal trims $350 billion through 2024, effectively giving the Pentagon $50 billion more than it had been expecting over the next decade.

With the wars in Iraq and Afghanistan winding down, experts said, the overall change in defense spending practices could be minimal: Instead of cuts, the Pentagon merely could face slower growth.

….”This is a good deal for defense when you probe under the numbers,” said Lawrence Korb, a defense expert at the Center for American Progress, a left-leaning research center. “It’s better than what the Defense Department was expecting.”

Hey, maybe they’re not really cutting spending after all!

Discretionary spending over the next ten years

Drawing on Chris Edwards, Will Wilkinson relays the picture:

Believe it or not, some people are flipping out over this outcome.  Do read Will’s entire post.  And for Tea Partiers out there: is this the best the nuclear option can get you?  I’d say rethink your theory of public opinion.

For those who want it, a rescaled graph is here, it still goes up!

Assorted links

Has there been a shift in the political balance of power?

Brad DeLong writes:

One possibility is that Cantor and Boehner have figured out something that has been inherent in the system since FDR but that few people recognized. Perhaps the President is now the ultimate status quo player in the government: Whatever goes wrong the public takes to be his fault and his responsibility. If anything goes badly wrong his political adversaries pick up the pieces and are strengthened.

In that case, whenever the desires of the president conflict with the desires of the speaker of the House, the president has little leverage. Any speaker who does not fear disaster can roll any president. In this future, any bill that a speaker insists is must-pass gets attached to a debt-ceiling increase, and–unless there are people in the Senate equally willing to risk disaster, which is unlikely because senators are status-quo players too–so becomes law.

It’s like a parliamentary system, with the debt-ceiling votes filling the role of votes of confidence.

An alternative possibility is that Obama abetted the entire deal and in essence worked with the Tea Party to roll the Left.  But let’s say this first hypothesis is correct.  It suggests that the value of holding the Presidency is less than it used to be.  For some policy changes, the value of holding the Presidency may be negative for a political party or political movement (Obama brings along some Democratic votes, for the final deal, that Mitt Romney could not).  Will the Republicans tank the fight for the Presidency?  No, that is hard to imagine.  Will they be more willing to nominate a non-centrist and risk a greater chance of losing the election?  Maybe so.  That could be one legacy of this deal.

More from Josh Barro

This should be placed at the beginning of every blog post or column on the debt ceiling hike:

That points to a hit to annual GDP growth of roughly 0.04 percentage points from the FY 12 changes in this plan—an effect that will be impossible to pick up amidst the noise.

You can read through his reasoning here.  Here is a “least common denominator” look at the deal.