Month: October 2011

Alebron asks

He is a loyal MR reader:

The combination of powerful smartphones and social internet sites has given rise to an interesting phenomenon at concerts: people spend a massive chunk of the time at concerts documenting their concert-going. Is technology like this making meta-experience more important to people than experience? Is an experience that you can’t document/signal less valuable? Is this a new phenomenon?

Arguably the meta-experience was always more important, we just produce the meta-experience more efficiently these days.  The very best cultural experiences are thus more leveraged in the direction of potent final output, and thus they sell for higher prices.  On top of that is a sector of really cheap stuff, mostly illusory in nature.  Imagine someone who reads every day and fancies himself a follower of the NBA, without hardly seeing a game or spending money on the sport.  There is a polarization of cultural prices and experiences, and hollowing out of the middle.  If your output isn’t spectacular or culturally central, it will be hard to cover your fixed costs and you will have to go niche and super-cheap.

That’s what I think we are seeing.  Overall it is good for consumers, bad for Platonists.

On the theory of unemployment

This is from the NYT, about a farmer who tried to hire American workers rather than illegal immigrants:

Six hours was enough, between the 6 a.m. start time and noon lunch break, for the first wave of local workers to quit. Some simply never came back and gave no reason. Twenty-five of them said specifically, according to farm records, that the work was too hard. On the Harold farm, pickers walk the rows alongside a huge harvest vehicle called a mule train, plucking ears of corn and handing them up to workers on the mule who box them and lift the crates, each weighing 45 to 50 pounds.

The article is interesting throughout.  See also Alex’s earlier post, for some added interpretation.

The You Have Two Cows Challenge

No doubt you are familiar with the two cows guide to political philosophy.

  • Socialism: You have tTwo-Cowswo cows. The government takes one and gives it to your neighbor.
  • Communism: You have two cows. You give them to the Government, and the Government then sells you some milk.
  • Capitalism: You have two cows. You sell one and buy a bull.

So under what type of ism do you have two cows but the government says that you can’t drink their milk? Whatever we call such an ism it may help to know that it is the one we live under. In a recent case in Wisconsin, as summarized by the judge (earlier case here):

Plaintiffs argue that they have a fundamental right to possess, use and enjoy their property and therefore have a fundamental right to own a cow, or a heard [sic] of cows, and to use their(s) in a manner that does not cause harm to third parties. They argue that they have a fundamental right to privacy to consume the food of their choice for themselves and their families and therefore a fundamental right to consume unpasteurized milk from their cows.

In response, Judge Fiedler wrote:

No, Plaintiffs do not have a fundamental right to own and use a dairy cow or a dairy herd;

No, Plaintiffs do not have a fundamental right to consume the milk from their own cow;

No, Plaintiffs do not have a fundamental right to produce and consume the foods of their choice…

So MR readers, here is the challenge: You have two cows. The government says that you cannot drink their milk. What ___ism?

My suggestions?

Paternalism is the obvious choice but I am going to go with Animal Farmism.

Confronting the cost of health care

Megan McArdle writes:

There are entitities in the private sector like unions who do, in fact, directly confront the tradeoff between benefits and pay.  Many unions run their own health plans; most of them negotiate a pay package in which the tradeoff between more pay or more benefits is extremely specific.  What these entities seem to show is that even people who are very well aware of how much things cost, choose bundling and price insulation over transparency and efficiency.  As far as I know, they rarely choose cost control in any way that significantly inhibits participant autonomy, or increases price exposure.

There is more here.

Is New York getting safer?

New York is America’s safest large city, the city that saw crime fall the most and the fastest during the 1990s and the early part of this decade.  Yet New York’s murder rate is 80 percent higher now than it was at the beginning of the twentieth century — notwithstanding an imprisonment rate four times higher now than then.  That crime gap is misleadingly small; thanks to advances in emergency medicine, a large fraction of those early twentieth-century homicide victims would survive their wounds today.  Taking account of medical advances, New York is probably not twice as violent as a century ago, but several times more violent.  At best, the crime drop must be counted a pyrrhic victory.

That is from The Collapse of American Criminal Justice, by William J. Stuntz, hat tip to Chug Roberts.

Google and the Power of Positive Feedback

Just about everything Google does allows Google to do just about everything it does better. Here’s an example:

By 2007, Google knew enough about the structure of queries to be able to release a US-only directory inquiry service called GOOG-411. You dialled 1-800-4664-411 and spoke your question to the robot operator, which parsed it and spoke you back the top eight results, while offering to connect your call. It was free, nifty and widely used, especially because – unprecedentedly for a company that had never spent much on marketing – Google chose to promote it on billboards across California and New York State. People thought it was weird that Google was paying to advertise a product it couldn’t possibly make money from, but by then Google had become known for doing weird and pleasing things.

…What was it getting with GOOG-411? It soon became clear that what it was getting were demands for pizza spoken in every accent in the continental United States, along with questions about plumbers in Detroit and countless variations on the pronunciations of ‘Schenectady’, ‘Okefenokee’ and ‘Boca Raton’. GOOG-411, a Google researcher later wrote, was a phoneme-gathering operation, a way of improving voice recognition technology through massive data collection.

Three years later, the service was dropped, but by then Google had launched its Android operating system and had released into the wild an improved search-by-voice service that didn’t require a phone call. You tapped the little microphone icon on your phone’s screen – it was later extended to Blackberries and iPhones – and your speech was transmitted via the mobile internet to Google servers, where it was interpreted using the advanced techniques the GOOG-411 exercise had enabled. The baby had learned to talk.

…If, however, Google is able to deploy its newly capable voice recognition system to transcribe the spoken words in the two days’ worth of video uploaded to YouTube every minute, there would be an explosion in the amount of searchable material. Since there’s no reason Google can’t do it, it will.A thought experiment: if Google launched satellites into orbit it could record all terrestrial broadcasts and transcribe those too. That may sound exorbitant, but it’s not obviously crazier than some of the ideas that Google’s founders have dreamed up and found a way of implementing: the idea of photographing all the world’s streets, of scanning all the world’s books, of building cars that drive themselves. It’s the sort of thing that crosses Google’s mind.

More of interest.

Why I do not like the IS-LM model

1. It fudges the distinction between real and nominal interest rates, so it can put the two curves on the same graph.  Every time you write down an IS-LM model you should hear a clock start ticking in your head.  The longer the clock ticks, you more you need to worry about this problem because the more that a) the price level may change, or b) expectations about future price level changes will start to matter.

2. It fudges the distinction between short-term interest rates (for the money market curve) and long-term interest rates (a determinant of investment).  They’re not the same!  Don’t assume they are the same, just to squash the two curves onto the same graph.

3. It leads you to think that the distinction between non-interest bearing currency and short-term interest-bearing securities is a critical wedge for the economy.  It also implies that if all currency paid interest (a minor change, most likely, macroeconomically speaking), the economy would behave in a totally screwy way.  It probably wouldn’t.

3b. The model leads you to believe that interest rates are more important than they probably are.

3c. For a while it treats “money” as the non-interest-bearing security, and then for a while it treats money as the transactions media behind AD, something closer to M2.

4. It overemphasizes flows and under-emphasizes stocks of wealth.  The quantity theory approach, as wielded by Fisher and Friedman, does not induce individuals to make this same judgment.  For one thing, this distinction really matters when you’re trying to predict the macro effects of “window breaking.”  The flows perspective will usually be more optimistic than a perspective which recognizes both stocks and flows.

5. Those aggregate curves are not invariant with respect to expectations, including expectations of government policy.  You don’t have to believe in an extreme version of the Lucas critique to worry about this one.  Those curves are conditional and the ceteris paribus assumption is not to be taken lightly here.

6. In the LM curve, what is the embedded reaction function of the Fed?  Good luck with that one.  Pondering this issue leads you to conclude that the whole model was written for an economy fundamentally different than ours.

7. The most important points, for instance about the significance of AD, one can derive from a quantity theory or nominal gdp perspective (for the latter, see my Principles text with Alex).

Why take on all that extra baggage?

Here is why Scott Sumner does not like IS-LM.  After writing this post, I remember I had an earlier 2005 post on why I do not like IS-LM; I didn’t like it back then either.

Addendum: For a few sources, here is Roubini on IS-LM.  Here is Wikipedia.

A sad story in the history of Italian justice, it seems

I was passing by the Perugian courthouse when they announced the acquittal of Amanda Knox, and the reaction of the crowd was not completely exemplary.  It seems they wanted her to be guilty, even though the supposed proof of her guilt was far from satisfactory.  I, for one, am happy to see her freed:

Knox seems determined to use prison as a comparative-literature graduate program. She continues to study Italian (which she now speaks fluently, with occasional sallies into jailhouse vernacular), reading textbooks from cover to cover three times each. She has also become proficient in German and French, and is studying Japanese, Chinese and Russian. She is devouring the Western canon, and lists in her journals each book she completes. She has become something of a specialist in Existentialism (Nietzsche’s Beyond Good and Evil, Sartre’s No Exit and Nausea), Magical Realism (Calvino, Borges, Eco), Absurdism and Despair (Vonnegut, Beckett, Woody Allen, Kafka).

One story on the original trial is here.