# Month: June 2012

## Very good paragraphs

Through much of the 1990s, the ratio of owner’s equity to GDP fell, but in the early 1990s, that was partly a result of depressed regional real estate markets in certain states in the aftermath of the collapse of many savings and loan institutions in the late 1980s and early 1990s (which made the numerator of the ratio decline), and also a result of fast economic growth from the mid-1990s on (which made the denominator of the ratio rise). Again, the bottom line is that the spike in the total value of housing that ended around 2006 is well outside the post-World War II historical experience. And the drop since 2006 takes this ratio from by far its highest value since 1950 to by far its lowest value since 1950.

We are not as wealthy as we had thought.

## Vincent Ostrom has passed away at age 92

Very sad, two weeks after the death of his wife Elinor, there is a report here.

## What do John Roberts and Ben Bernanke have in common?

Their “simps” think they should have done better.  In their own, unconstrained models of the world, they each wish they could be doing better.  They each have refused to “do better” out of an understanding of limited institutional and moral capital.  They each are given relatively little epistemic deference by their critics on this point of omission.

They are each very smart men who were appointed by Republican Presidents.

There are some who understand Roberts but damn Bernanke for not “doing his job.”  I see fewer who understand Bernanke but damn Roberts for not “doing his job.”  You may think Bernanke has committed a worse sin of omission, or you may believe that BernankeApologetik is somehow a higher and more difficult art to master.

## India markets in everything

Premarital investigations cost \$200 to \$400 and take seven to 10 days. Detectives follow the subject for 12 to 18 hours daily and chat up co-workers, domestic help and tradesmen under various pretexts. “Beware — your neighbor knows everything,” says Sanjay Singh, chief executive of New Delhi’s Indian Detective Agency. “Sometimes more than you know yourself.”

Particularly useful are fake marketing surveys. Enticed into participating with the promise of a free gift, sometimes something as modest as a bottle of shampoo, the subject or a neighbor may reveal a secret relationship or details of a would-be bride or groom’s late-night entertainment activities and smoking or drinking habits.

“People love freebies,” says Krishna Kumar, an Anapol Institute graduate. “Most fall for it hook, line and sinker.”

She worked at a computer company for four years before deciding detective work would be a lot more challenging. Women have a big advantage as sleuths because they’re non-threatening, can mingle better and are more intuitive, she says.

“I like doing premarital investigations best,” she says. “You’re watching someone go in a new direction, and your work could make or break their future.”

…Most premarital investigations are ordered by parents, although sometimes spouses-to-be want a little snooping done, including women keen to size up their prospective mothers-in-law in a society where it is common for couples to live with the husband’s extended family.

The story is here, and for the pointer I thank Vishal Ganesan.  Oh, and the results?:

According to detectives, investigations turn up significant problems in about 60% of cases. In about 10%, the discoveries are explosive enough — such as previously undisclosed marriages or serious hereditary diseases — to cause cancellation of the wedding.

For the caste-conscious, a hidden Dalit relative, or so-called untouchable, is also problematic. “Caste and dowries remain huge issues today, and people like to exaggerate,” says Sachit Kumar, director of Globe Detective Agency.

A factor driving premarital investigations is the growing number of cases in which foreigners of Indian descent marry and then disappear, often taking huge dowries with them. It happens to 30,000 brides every year in northern Punjab state alone, according to India’s National Commission for Women.

## Ten conspiracy theories for nerds (or conspiracy theory theory)

Not your usual cup of tea, here is one of them:

The Simulation Argument. This is legion in popular culture from “The Matrix” and “Inception” and other sci-fi, so we’ll just refer you to Nick Bostrom’s formulation of it. In theory we could tell the difference if something happened in the manner of The Truman Show where a light labeled “Sirius” falls from the sky. But are there any such events?

We offer one complexity-related observation. Although it is routine to say that classes like ${\mathsf{P}}$ and ${\mathsf{BQP}}$ have universal simulation, this isn’t strictly true. The universal function for ${\mathsf{P}}$ doesn’t belong to ${\mathsf{P}}$—if it did, then ${\mathsf{P}}$ would be in some fixed polynomial time bound, which it isn’t. Although proving this is technically murkier for “random” or “promise” classes like ${\mathsf{BQP}}$, the essential idea holds for any reasonable complexity class. Thus a universal simulation involves dropping down to a lower grade than the resources on which you draw. If our universe is convincingly universal, perhaps this is a well-motivated reason to reject the argument.

Perhaps the conspiracy is that so many people are intent on getting us to believe the simulation hypothesis.  Here is another one:

${\bullet }$ Factoring Really Is Easy. This is similar to the last, but now they can factor in polynomial time on a laptop, rather than need a quantum computer. Ken and I think this one has a much higher prior, almost on the order of “Breaking Engima Really Is Easy” in 1939.

If I understand properly, that is from a collaborative post from Pip and Ken Regan.

## The Supreme Court and ACA

I liked Will’s post, these comments from John Cochrane, Ross Douthat, Megan McArdle, and these remarks by Ezra, among others.  See also Krauthammer.  A few points:

1. Trust is higher now, and that is worth something, even if like me you never favored the mandate segment of ACA.

2. Implicit in some of these writings is the notion of “contingent on the fact that Roberts upheld ACA.”  You might have thought ex ante: “I don’t think Roberts should uphold ACA.”  But Roberts is a smart and savvy guy, smarter and savvier than most of us and of course better informed about the Court than just about anyone.  You could have held this view ex ante and still now hold: “Conditional on the fact that Roberts upheld ACA, I should think he did the right thing.”

Hardly anyone employs that line of reasoning, but that is a sign of our irrationality.

3. The Court maximizing or at least defending its prestige is sometimes necessary, even in a well-established constitutional democracy.  The Court is not there to do what you want it to, or even necessarily to do what is right.  Get used to that.

4. You may have noticed that I haven’t blogged the legal challenge to ACA all year.  I think that plenty of what our government does is unconstitutional; just remember back to when an amendment was considered necessary for “The War against Alcohol”.  But I’ve also long considered health care policy a matter to be settled by the legislature not the courts.  Those are the modern rules of the game, for better or worse, and all along I have thought that trying to live outside those rules was a fool’s errand of sorts.

5. The Republican Party, by the way, still doesn’t have a coherent alternative for health care reform, nor do they seem willing to embrace many of the better parts of ACA, such as (partially) deregulating dentistry or the Medicare Advisory Board.  Romney seems to want to replace the mandate with more expensive tax credits.  Furthermore, I believe that many Republican legislators would rather run against an unpopular Obamacare than to have to craft an actual, legislate-able alternative.

6. I still believe the mandate segment of ACA will prove unworkable, but I won’t be expecting the courts to fix that.

7. I don’t vouch for this, but it is an angle I had not considered: “Making the mandate a tax has at least one other effect. It makes repeal easier. Now that the mandate has been deemed taxation, it can likely be jettisoned through use of the reconciliation process — meaning the Senate will need to muster only a bare majority for repeal, not 60 votes.”

8. I do think the Medicaid alterations in the Court’s decision will prove a big deal.  I am well aware that the large federal subsidies mean it still makes financial sense for states to continue with the program and the various extensions embedded in ACA.  But overall the program is not popular, and bringing it into the limelight in this fashion will go a long way toward making that common knowledge.  Most of the coverage extension under ACA came through Medicaid, I saw that as in danger in the first place, and now all the more so.

## Euro auction markets in everything (a good start)

…an entire Tuscan village has gone up for sale on eBay.

Nestled among oaks at 850 metres altitude and blessed with stunning views over the Casentino valley, the medieval village of Pratariccia has stood empty for 50 years, ever since its population of farmers and shepherds abandoned their stone cottages for factory jobs during Italy‘s economic boom.

Now the owners of the remote village – reportedly a religious order – are seeking to cash in with an online sale.

“They tried and failed to sell the village through agencies for years but have got a lot of attention by putting Pratariccia on eBay and should get a result,” said Luca Santini, mayor of nearby Stia, who walked in the woods around the village as a child picking mushrooms.

## How should economists write code?

From Matt Gentzkower and Jesse Shapiro (pdf), addressed to their RAs:

Every step of every research project we do is written in code, from raw data to final paper. Doing research is therefore writing software.

Over time, people who write software for a living have learned a lot about how to write it well. We follow their lead. We aim to write code that would pass muster if we worked at Google or Microsoft.

For the pointer I thank Bo Cowgill.

## “Star Wars: The Empirics Strike Back”

That is a new paper by Abel Brodeur, Mathias Lé, Marc Sangnier, and Yanos Zylberberg:

Abstract:

Journals favor rejections of the null hypothesis. This selection upon results may distort the behavior of researchers. Using 50,000 tests published between 2005 and 2011 in the AER, JPE and QJE, we identify a residual in the distribution of tests that cannot be explained by selection. The distribution of p-values exhibits a camel shape with abundant p-values above .25, a valley between .25 and .10 and a bump slightly under .05. Missing tests are those which would have been accepted but close to being rejected (p-values between .25 and .10). We show that this pattern corresponds to a shift in the distribution of p-values: between 10% and 20% of marginally rejected tests are misallocated. Our interpretation is that researchers might be tempted to inflate the value of their tests by choosing the specification that provides the highest statistics. Note that Inflation is larger in articles where stars are used in order to highlight statistical significance and lower in articles with theoretical models.

For the pointer I thank Michelle Dawson.

Addendum: Here is related commentary from Mark Thoma.

## I answer food questions over at Freakonomics

I liked the whole interview, here is the concluding segment:

Q. What restaurant or food type would Tyler Cowen, Murray Rothbard and Ludwig von Mises enjoy for lunch? Why? –Bill N.

A. Rothbard was quite a conservative eater, but he loved the Bavarian culture of the Baroque.  Mises grew up in the Austro-Hungarian Empire.  So I suggest that we would all sit down and have a Wiener Schnitzel together.

You can buy An Economist Gets Lunch here.