Month: November 2011

Who gets what wrong?

My colleague Daniel Klein reports from the front:

…under the right circumstances, conservatives and libertarians were as likely as anyone on the left to give wrong answers to economic questions. The proper inference from our work is not that one group is more enlightened, or less. It’s that “myside bias”—the tendency to judge a statement according to how conveniently it fits with one’s settled position—is pervasive among all of America’s political groups. The bias is seen in the data, and in my actions.

And what do the “right-wing” thinkers get wrong?

More than 30 percent of my libertarian compatriots (and more than 40 percent of conservatives), for instance, disagreed with the statement “A dollar means more to a poor person than it does to a rich person”—c’mon, people!—versus just 4 percent among progressives. Seventy-eight percent of libertarians believed gun-control laws fail to reduce people’s access to guns. Overall, on the nine new items, the respondents on the left did much better than the conservatives and libertarians. Some of the new questions challenge (or falsely reassure) conservative and not libertarian positions, and vice versa. Consistently, the more a statement challenged a group’s position, the worse the group did.

A college education, by the way, doesn’t help much.  Here is another statement of the conclusion:

A full tabulation of all 17 questions showed that no group clearly out-stupids the others. They appear about equally stupid when faced with proper challenges to their position.

That’s a lesson David Hume would have appreciated.

The very best books of the year 2011 (so far)

This year there are three stand-out winners, which is not usually the case.  These are all major books which virtually everyone should read, at least provided you read non-fiction (fiction) at all:

1. Steven Pinker, The Better Angels of Our Nature: Why Violence has Declined.  My review is here.

2. Walter Isaacson, Steve Jobs, interesting on every page and lives up to the hype.  Here is a good review by Michael Rosenwald.

3. Haruki Murakami, IQ84.  I haven’t finished it yet, but I feel confident putting it on the list (I’m about one-third through).  I even agree with many of the reservations expressed in this review but the book is nonetheless a major achievement.  There are dozens of reviews here.

Here is the (lame) PW list of the ten best books of the year.  And if you are wondering, I have sour impressions of the new Eco and Joan Didion books.

Soon I’ll prepare a longer list of my favorite books of the last year, in part for your gift-giving purposes.

Euro contagion

Credit conditions have steadily eased since the end of the recession but that process almost ground to a halt in the last three months, with only five domestic banks out of 50 saying that they relaxed their standards for lending to large companies. Two banks had tightened conditions.

There was also a sharper retrenchment by US branches of foreign banks: 23 per cent of such operations tightened their lending terms, raising their interest rate spreads and cutting back on the amount and period for which they are willing to lend.

Here is more, from the FT.  There is also a negative dynamic playing out within the European banking system itself:

Banks are selling debt of southern European nations as investors punish companies with large holdings and regulators demand higher reserves to shoulder possible losses. The European Banking Authority is requiring lenders to boost capital by 106 billion euros after marking their government debt to market values. The trend may undermine European leaders’ efforts to lower borrowing costs for countries such as Greece and Italy, while generating larger writedowns and capital shortfalls.

Roubini claims the ECB is doubling its rate of bond purchases, yet as of today the Italian yield was hitting an unsustainable 6.74 percent.  Here is Italian gdp growth since 1960:

What is the future of solar power?

Joshua Gans nails it:

If we believe Moore’s Law in solar, then the safe bet in terms of behavioural reactions is not to react. Within a decade or two, energy will be socially as cheap as it is privately as cheap now. That means that changing habits for environmental austerity is not the way to go.

I would make a simpler but less optimistic point.  If a solar breakthrough is now likely, in which market prices do we see it reflected?  It is true that fossil fuel prices took a steep tumble in the last few months, but I’ve never heard anyone suggest that price plunge had to do with a forthcoming solar revolution.  It seems cyclical in nature, or perhaps related to the spreading news of further fossil fuel discoveries, including natural gas.  For better or worse, those shale oil and natural gas discoveries — which by the way will create lots of jobs — will further raise the bar against solar power, and it’s not just the Republicans who will promote them.

Alternatively, is there a bubble in the stock prices of solar power specialists?  What’s the total market cap of companies selling solar panels?  Or is there a bubble in the share prices of companies which supply cheap and reliable power storage?  The evidence on these points seems weak to say the least.  Keep in mind that other countries can make the switch even if you think political conspiracy will prevent it here.  And solar panels can be cheap in the sense that my bicycle is cheap, the real question is whether we see industry-wide price changes as would befit a systematic solar energy revolution.

Is there any reason, based in industry-wide market prices, to be optimistic about the near-term or even medium-term future of solar power?  I don’t see it.

Sentences to ponder, job market edition

Surrounded by labor history and anarchy books, thrift-store furniture and a male pet rabbit named Mrs. Crackers, Katchpole noticed an e-mail from an outfit called SumOfUs and read it aloud…

She has heavy student debt and does not know how to pay it back; in the meantime she has become an activist against Bank of America’s proposed debit card fee.  She doesn’t have a full-time steady job and her story is here.

She majored in art and architectural history and spent her summers interning at art museums.  Here is more:

She and her boyfriend — a law firm paralegal working against the proposed AT&T and T-Mobile merger — spend their days living frugally. They have no television or car. They rarely eat out. They just bought a tub of 48 random beers for $15 at a grocery store.

She has sent job applications to Planned Parenthood, the Center for American Progress and SEIU but has heard nothing. She is fretting that a grace period for her student loans ends in December.

I should stress that I am sympathetic with some of her choices (not the tub of beer), and you can read this as reflecting some strengths of American higher education.  Still, not all liberal arts students have her organizational and media talents, and this kind of story goes a long way toward explaining the current job market malaise for the young.  Even she is having a hard time finding remunerative work and getting on a career track.  Furthermore, she doesn’t seem to be striving for that.

As a capital theorist she is less than qualified.  Here is her take:

“I don’t know what I am going to do!” said Katchpole, a freelance account manager at a political consulting firm called Winning Over Washington. (Its main client is the progressive group “I am going to have to defer my loans. I have no idea. Why should I be expected to pay them off now? Why are colleges charging interest on that stuff? Give us a break. Really.”

Bohm-Bawerk forget to include her in his commentaries on sundry theories of interest.

I wonder if she has considered moving to Nebraska or North Dakota?  Probably not, I am sure she will get a job right here in Washington, D.C.

All hail Mike Mandel!

In June, I wrote How the FDA Impedes Innovation citing Mike Mandel’s excellent paper on Melafind, an innovative device for identifying melanomas that the FDA had deemed “not approvable.” Well just last week, the FDA backed down and approved Melafind for board-certified dermatologists who undergo a specialized training course. Importantly, that decision keeps the company in business and prepares a path for evolutionary improvements.

I believe that the FDA would not have reversed its decision without Mandel’s paper and the extensive media that covered this issue. All hail Mike Mandel!

Here is another piece of good news on an item recently covered by MR.

In September, I wrote Crowd Investing versus the SEC, discussing how expensive SEC regulations made it uneconomic for small firms to solicit small investments from large groups of investors. Last week the House passed the Entrepreneur Access to Capital Act, which lets businesses use crowd investing to sell unregistered securities as long as the total amount raised is $2 million or less and no individual investment exceeds $10,000 or 10 percent of the investor’s annual income. Another bill, The Small Company Capital Formation Act lets companies seeking less than $50 million in capital (previously just $5 million), proceed without going through the lengthy and costly SEC registration process.

Neither bill has passed the Senate but both passed the House overwhelmingly and President Obama endorsed both bills, saying they would reduce “the red tape that prevents many rapidly growing startup companies from raising much-needed capital.” Keep your fingers crossed.

Hat tip: PM.

Addendum: Holman Jenkins also deserves a special shout out on the FDA issue for covering this issue early and well in the WSJ.

*The Russian Origins of the First World War*

That is the new book by Sean McMeekin; I enjoyed it and found this passage striking:

From the raw data, it is easy to see why policymakers in Berlin felt time was not on their side: Russia’s population had grown by forty million since just 1900, and was approaching 200 million to Germany’s sixty-five.  By the time the Great Program was complete in 1917-1918, Russia’s peacetime army…would number 2.2 million soldiers, or roughly trip the size of Germany’s.  Russia’s economy, although still only fifth-largest in the world…was growing at a “developing economy” rate of nearly 10 percent annually, rather like China’s is today…It was not hard to extrapolate forward a geopolitical map on which Russian territory included half of China, Afghanistan, northern Persia, Anatolia, Constantinople and the Straits, Austrian Galicia, and Eastern Prussia.

That book is from Belknap; Oxford University Press sent me a new short book by Allan H. Meltzer, Why Capitalism?  Thomas Hazlett’s new, short The Fallacy of Net Neutrality is a clear take in line with its title.  Also noteworthy is Richard B. McKenzie’s new Heavy! The Surprising Reasons America is the Land of the Free — and the Home of the Fat.

Hansonian prediction market TV

Eric Crampton writes:

I love that we’re now getting punditry informed by market odds. Even better would be if the commentators disclosed the trades they were making consequent to their analysis rather than saying which way they would trade were they to trade!

There is now a whole prime-time TV show, in New Zealand, where pundits discuss various events through the market of prediction windows.  At the link you will find full clips of all the shows.  Bomber Bradbury hosts the programme.

What is quirky about the United States?

Via Joseph Burke, here is a long list of answers from foreigners.  I enjoyed many of them, how about this?:

My Norwegian friend visiting right now says,

4700 kinds of toothpaste.

Surprisingly clean big cities.

Everyone complains bitterly about the suckitude of government and is suspicious of it but they all follow the rules anyway even if nobody is watching.

How supermarkets not just let you wander off with carts into the wild blue yonder but will set up displays of firewood, plants, pumpkins, etc., out front with nobody watching and trust you’ll bring it indoors to pay for it. (see also rule-following above)

He finds these last two especially jarring given the U.S.’s high incarceration and violent crime rates.

Or this, from a Brit:

When Americans kid one another, they will wait a few seconds and then let the kidee know that they were just kidding. Every time. This shocked me for a while.

Or this:

I dated a guy from Austria and he asked why we have those concrete things in parking spaces.

I explained it was to keep us from running into the car in the opposite spot.

And then I bumped the concrete thing with the tires.

That seemed to make him nervous for some reason….

What can you all add?

Fanfare Meta-List and other picks for classical music this year

Every  year I cull through the Fanfare Critics “best of” lists and provide a meta-list of the new recordings which are mentioned more than once.  This year we have a fairly short meta-list:

1. James Willey, String Quartets, 3, 7, and 8, Esterhazy Quartet.

2. Michael Colina, Violin Concerto, other works, not on Amazon; and by assorted artists, The Art of Gregor Piatigorsky, also not available on Amazon.

3. Claude Frank: 85th Birthday Celebration.

My classical CD picks for the year are:

Scarlatti, volume I, by Carlo Grante (the most significant achievement), Diabelli Variations by Paul Lewis, Bach’s Trio Sonatas for Organ by Robert Quinney (probably my favorite of the entire year), and Shostakovich Symphony #10, by Vasily Petrenko.

Who is against individual responsibility?

I agree with most of Matt’s recent post, but one sentence struck me as noteworthy.  Matt writes:

I suppose I agree with Will Wilkinson about the importance of “an ethos of initiative, hard work, and individual responsibility” though I have no real idea why he thinks most progressives are against such an ethos.

I could write that sentence without the “I suppose”!  The final clause of the sentence I see as showing just how broad the perceptual gulf between progressives and conservatives/libertarians can be.

I would not quite say that progressives are “against such an ethos,” but where does it stand in their pecking order?  Look at fiction, such as famous left-wing or progressive novels, or for that matter famous left-wing and progressive movies.  How many of them celebrate “an ethos of initiative, hard work, and individual responsibility”?  Is there one?  Maybe as part of a broader struggle against a corrupt system or against “The Man,” but that tripartite of values is not celebrated in its own right.  Do any of these novels and films have business heroes?  To be sure, hard work from labor is celebrated, provided the workers are tough, exploited, but nonetheless hearty and worthy of respect.

I have no problem with praising these novels and movies for their celebrations of social justice, solidarity, or for their unveiling of corruption, but still it is a stretch to those values cited above.  Wanting to blame George Bush, or try Dick Cheney for war crimes, is a kind of individual responsibility, but in a very particular political context.  How often will a progressive stress that the poor should develop greater conscientiousness rather than looking to government support?  Many progressives are genuinely unaware of how unusual a moral code they often are communicating and celebrating, if only implicitly.  Matt in fact is one of the least guilty in this regard, and you can see this when you examine his writings on the Nordic countries.