Month: July 2012

Weather or Not People are Bayesians

A new paper by Tatyana Deryugina finds that people make inferences about global warming from local weather but, given that they use local information, their inferences are mostly consistent with rational updating with some deviations in the very short run. Much more important than local weather, however, are other factors such as education and ideology.

…a Bayesian who is perfectly informed about world weather and science should
not give signicant weight to recent weather in his county when updating his beliefs. However, I
find that some forms of temperature and precipitation abnormalities have an effect over short time
scales of 1-2 days. Average weekly deviations and extreme events such as heat waves or droughts
weeks or months before the survey have no effect on beliefs, suggesting that the short run effects
are temporary and due to psychological heuristics.

Unlike previous studies, I also consider the effects of prolonged periods (1-12 months) of
abnormal weather. I find that abnormally low precipitation and abnormally high temperatures are
signicant predictors of the degree to which people believe the effects of global warming have
already begun to happen. The estimated patterns are consistent with how a Bayesian who only
observes local information would update his beliefs, but I cannot rule out that informed individuals
simply overweight their local weather.

…The marginal effects of education, relative to high school [on “the effects of global warming have already begun to happen”]  is 0.045 for “some college”, 0.101 for “college”, and 0.166 for “graduate school” A day on which precipitation is 2.5 standard deviations above normal would produce a change
in beliefs about the timing of global warming comparable to the estimated correlation between beliefs and “some college”. Precipitation would have to be 8 standard deviations above normal to produce a change in beliefs comparable to the coefcient of “graduate school”…In addition, the [weather] effects are short-lived because the average standard deviation over the past week does not change beliefs.

Hat tip: @jzilinksy via @bryan_caplan.

Addendum: Yes, the title of the post was on purpose!

Who becomes an entrepreneur?

There is a new paper by Ingrid Schoon and Kathryn Duckworth:

Taking a longitudinal perspective, we tested a developmental– contextual model of entrepreneurship in a nationally representative sample. Following the lives of 6,116 young people in the 1970 British Birth Cohort from birth to age 34, we examined the role of socioeconomic background, parental role models, academic ability, social skills, and self-concepts as well as entrepreneurial intention expressed during adolescence as predictors of entrepreneurship by age 34. Entrepreneurship was defined by employment status (being self-employed and owning a business). For both men and women, becoming an entrepreneur was associated with social skills and entrepreneurial intentions expressed at age 16. In addition, we found gender-specific pathways. For men, becoming an entrepreneur was predicted by having a self-employed father; for women, it was predicted by their parents’ socioeconomic resources. These findings point to conjoint influences of both social structure and individual agency in shaping occupational choice and implementation.

Here are Powerpoints for the paper.  Here is a gated copy.  For the pointer I thank Michelle Dawson.

How did Germany become such a strong net exporter?

Christian Odendahl writes:

The soaring export demand from Europe for German products is one of those often-heard truisms about the euro crisis that is actually false.

What did change massively, however, were Germany’s imports from the euro area as measured by market share. The collapse in German import share is a sign of a weakening domestic economy. The German current-account surplus vis-à-vis the rest of the euro area was therefore accompanied by import contraction, not unusually high export growth. Wherever the German savings recycling took place, it was not in the euro zone.

The full post is here.

The culture that was Japan

“It was a generation,” Kuroda said through an interpreter, “when [baseball] coaches believed you should not drink water.”

Born in 1975, Kuroda is one of the last of a cohort of Japanese players who grew up in a culture in which staggeringly long work days and severe punishment were normal, and in which older players could haze younger ones with impunity.

Summer practices in the heat and humidity of Osaka lasted from 6 a.m. until after 9 p.m. Kuroda was hit with bats and forced to kneel barelegged on hot pavement for hours.

“Many players would faint in practice,” Kuroda said with the assistance of his interpreter, Kenji Nimura. “I did go to the river and drink. It was not the cleanest river, either. I would like to believe it was clean, but it was not a beautiful river.

“In order to play,” he added, “you had to survive. We were trained to build an immune system so that we could survive and play.”

Here is more, hat tip to Hugo.  As I often say, I am a utility optimist and a revenue pessimist, for Japan most of all.

A bit more on workplace freedom

You’ll find two responses from John Holbo and Henry Farrell to my initial post.  I recall also reading good posts from Modeled Behavior, Matt Yglesias, and here, and Miles Kimball, among others, on the topic.

In a sense, I don’t think Holbo and Farrell realize how “fundamental” my initial response was.  I don’t actually find “libertarianism and the workplace,” literally construed, to be a useful debate.  How about debating “the workplace”?  (I’ve declared my own allegiance to positive liberty some time ago, and I think this was even discussed on CT at the time.)  Or some specific proposed change to workplace law?  In general the CT blog, while overall excellent, suffers from the disease of spending way too much time on libertarianism as a target for not-so-empirical, mid-range conceptual blog posts which focus on doctrines and hypothetical philosophic comparisons rather than concrete results.  I view my own response as simply saying this: give me some (non-anecdotal) evidence, and give me some conceptual framework or model which implies something more definite than that we should maximize wealth, productivity, and move towards full employment, all good but uncontroversial ideas.  Give me something more than the time-honored arguments in favor of the civil rights movement.  Without those, in my view the initial complaint has not even been registered.  Reading the responses, I stick with my original sense, namely that a meaningful complaint has yet to be registered at all.

The pivot, across the Atlantic

Euro-zone countries would still have to guarantee the loans their banks receive from the region’s permanent bailout fund, the European Stability Mechanism, even if it directly recapitalizes them, a senior European Union official with direct knowledge of the situation said.

The remarks Friday cast doubt on what was seen as a breakthrough at a euro-zone leaders’ meeting last week, where it was decided that once a central euro-zone bank supervisor was in place, the ESM would be able to directly recapitalize banks.

“I need to make clear what the ESM can do: The ESM is able… to take an equity share in a bank. But only against full guarantee by the sovereign concerned,” the official said. He added that while the member state’s guarantee wouldn’t directly show on the government’s official debt burden, the loan “remains the risk of the sovereign.”

Here is more, from the excellent Matina Stevis, and I suspect next time the markets won’t be tricked so readily.  Not good.

The pivot

…since the Supreme Court upheld the Democrats’ 2010 health care law, Republicans, led by Mitt Romney, have reversed tactics and attacked the president and Democrats in Congress by saying that Medicare will be cut too much as part of that law. Republicans plan to hold another vote to repeal the law in the House next week, though any such measure would die in the Democratic-controlled Senate.

“Obamacare cuts Medicare — cuts Medicare — by approximately $500 billion,” Mr. Romney has told audiences.

I have been predicting this.  There is more here.  Paul Ryan offered this account:

Mr. Ryan, of Wisconsin, was unavailable for comment, but, pressed on the issue on ABC’s “This Week” on Sunday, he said: “Well, our budget keeps that money for Medicare to extend its solvency. What Obamacare does is it takes that money from Medicare to spend on Obamacare.”

Still room on the downward side (Italo-Polish fact of the day)

Consider this: In 2009, Fiat’s five biggest Italian assembly plants produced 650,000 cars using 22,000 workers. That same year, a single Fiat plant in Tychy, Poland, produced 600,000 cars with 6,100 workers. Too many inefficient plants, coupled with a plunge in consumer demand, have left not only Fiat, but other car makers such as PSA Peugeot, Citroën and Adam Opel…bleeding cash.

That is from “Fiat Chief Retools Car Maker,” the story is here.  I thank Kurt Busboom for a pointer.

Assorted links

1. IMF podcast for An Economist Gets Lunch.

2. Finland may be the first out of the eurozone after all.

3. Winning and leading submissions for the Wolfson Prize on leaving the euro.

4. Update on Austro-Chinese business cycle theory, funny about that excess capacity isn’t it?

5. Summary coverage of the LIBOR scandal, from The Economist.

6. Arnold Kling on the economics of PEPCO.

7. New urbanization blog by Paul Romer and Brandon Fuller.

8. Josh Barro is completely correct and many commentators on my original post failed a reading test.

Solitary Confinement

In the United States, approximately 100,000 prisoners are kept in solitary confinement. Colin Dayan reports:

Prisoners there are locked alone in their cells for 23 hours a day. Their food is delivered through a slot in the door of their 80-square-foot cell. They stare at unpainted concrete walls onto which nothing can be put. They look through doors of perforated steel, what one officer described to me as “irregular-shaped Swiss cheese.” Except for the occasional touch of a guard’s hand as they are handcuffed and chained when they leave their cells, they have no contact with another human being.

In this condition of enforced idleness, prisoners are not eligible for vocational programs. They have no educational opportunities; books and newspapers are severely limited; post and telephone communication virtually nonexistent. Locked in their cells for as many as 161 of the 168 hours in a week, they spend most of the brief time out of their cells in shackles, with perhaps as much as eight minutes to shower. An empty exercise room — a high-walled cage with a mesh screening overhead, also known as the “dog pen” — is available for “recreation.”

These are locales for perpetual incapacitation, where obligations to society, the duties of husband, father or lover are no longer recognized. An inmate wrote me, “People go crazy here in lockdown. People who weren’t violent become violent and do strange things. This is a city within a city, another world inside of a larger one where people could care less about what goes on in here. This is an alternate world of hate, pain, and mistreatment.”

Occasionally, solitary confinement may be necessary to separate prisoners but why forbid books and newspapers? This is retribution not deterrence. Indeed, as Peter Moskos has argued, physical punishment would be a better deterrent and more humane.

Hat tip: Robin Hanson.

Markets in everything durable goods monopoly edition add urgency to your reading

Argentina-based publisher Eterna Cadencia has released El Libro que No Puede Esperar – which translates as ‘The Book that Cannot Wait’ – an anthology of new fiction printed in ink that disappears after two months of opening the book.

The link is here, check out how the title looks on the cover, and for the pointer I thank Michael Rosenwald.

The culture that is Germany

Hard to believe, but ultimately not a surprise:

In the United States, many lament that it takes students too long to graduate. In Germany, the School of Economics and Management in Essen is suing Marcel Pohl, for $3,772 that the institution lost in tuition revenue when he finished a bachelor’s degree and a master’s degree in 3 semesters, not the 11 that would have been expected, UPI reported. The university declined to comment. Pohl said, “When I got the lawsuit, I thought it couldn’t be true. Performance is supposed to be worth something.”

The link is here.  He went through the course material so quickly by divvying up the lectures with two friends of his, and sharing the resulting notes, thus attending only a fraction of the lectures the school was offering to him.  Here is a German language account, consider this gem of a passage:

“Sie sagen, sie bestellen jetzt eine Cola, und haben nur ein halbes Glas und sagen: Dann möchte ich auch nur ein halbes Glas zahlen. Das ist ja auch völlig in Ordnung. So, sie haben aber die ganze Cola nur furchtbar schnell ausgetrunken und sagen: Jetzt möchte ich nur die Hälfte zahlen. Das geht einfach nicht.”

Just imagine if he had had on-line options.

Richard Perle reviews *An Economist Gets Lunch*

In Commentary magazine, not on-line, I especially like the end:

The only problem with this splendid book is where to put it in one’s library, with the food books or the economic books? It’s really two books with a common quality: Thinking can make things better.

Here is a short excerpt from the review, and the gate is there for subscribers.  You can order the book here.