Month: February 2013

Assorted links

1. Austerity wine markets in everything.

2. Will Wilkinson blogs other stuff; “defamiliarization.”

3. It is legal to buy a tank and indeed there are “tank brokers.”  (Will there be a profession using tanks to discipline errant NYC nannies?)

4. The bottom line dilemma facing the Republican Party.  (Whoops, correct link here.)  And Matt on sequestration, and Josh Barro on sequestration.

6. Some kind of weird experiment with rats, caveat emptor.  And are special interests growing weaker?

MRUniversity New Courses!

We have four new courses at MRUniversity and a brand new design! The new courses are

  • The Euro Crisis, a 90 minute mini-course over 3 weeks.
  • The Economics of Media, 4 hours over 4 weeks.
  • The American Housing Finance System, 15 hours running to June taught by Arnold Kling.
  • Mexico’s Economy, a 4.5 hour course over 4 weeks taught by Robin Grier.

You can find our more about all of the courses at MRUniversity. Lots of new features as well. After registering, for example, you can click the “Follow this Course” button on the main course page and receive weekly email updates on course content, video chats and what other MRU users are up to. We have also made it easy to add material by clicking the “User Contribution” section under the videos. There you can add videos, research, news and opinions related to the video. We’ll feature the best user contributions on our homepage.

Also do check out the new home page and be sure to scroll down to see The List, all of our videos released so far. And remember, all of our videos are freely available for non-commercial use. If you teach economics or related material feel free to assign a video for homework or try flipping the classroom!

Even more courses coming soon!

Finally, a big hat tip to MRU’s web guru and program manager, Roman Hardgrave, who has done a stellar job on the new features and design.


Watson the Spanish chef

In San Jose, I.B.M. plans to serve the assembled analysts a breakfast pastry devised by Watson, called a “Spanish crescent.” It is a collaboration of Watson’s software and James Briscione, a chef instructor at the Institute of Culinary Education in Manhattan.

I.B.M. researchers have watched and talked to Mr. Briscione as he works, selecting ingredients and building out dishes. Watson has read those notes, 20,000 recipes, data on the chemistry of food ingredients, and measured ratings of flavors people like in categories like “olfactory pleasantness.”

Watson’s assignment has been to come up with recipes that are both novel and taste good. In the case of the breakfast pastry, Watson was told to come up with something inspired by Spanish cuisine, but unusual and healthy. The computer-ordered ingredients include cocoa, saffron, black pepper, almonds and honey — but no butter, Watson’s apparent nod to healthier eating.

Then, Mr. Briscione, working with those ingredients, had to adjust portions and make the pastry.

“If I could have used butter, it would have been a lot easier,” said the chef, who used vegetable oil instead.

Michael Karasick, director of I.B.M.’s Almaden lab, had one of the Spanish crescents for breakfast recently. “Pretty good” was his scientific judgment.

There is more here, including Watson on drug discovery (not just diagnosis) and Watson on complex data analytics.  Fascinating throughout.

The culture that is New York/Los Angeles? (nanny markets in everything)

Dr. Heller, or the Nanny Doctor, as she calls herself (she has a Ph.D. in clinical psychology from the California School of Professional Psychology), is a consultant for an age of anxious parenting, acting as a mediator of sorts for parent and caretaker, at a rate of $200 an hour. She draws from her experiences, both as a mother to two daughters under 3 (she is married to Matt Donnelly, a TV writer), and as a former nanny to clients like the director Stephen Gaghan and his wife, Minnie Mortimer, a fashion designer and socialite.

“I remember her solving a conflict with the kids, who were 5 and 6,” Ms. Mortimer said. “She had them calm down and use their ‘I’ statements. Our little girl said, ‘I don’t feel safe when you throw a Lego at my head.’ Our boy said, ‘I feel that throwing a Lego at your head is the only way to get your attention.’ She treated them with such respect and dignity.”

The article is here.  For the pointer I thank @DanielMoerner.

Jeffrey Sachs on Obama and discretionary spending

…the surprising truth is that from the start of his presidency Mr Obama has planned a steep decrease in discretionary spending as a share of national income.

Each year he has put a budget on the table. Each year that budget has called for a sharp decline in discretionary spending as a share of gross domestic product in 2012 and later years. His rhetoric about increasing public investments in America’s future has always been contrary to the budgets he has presented, though most of his supporters have been unaware of this contradiction.

The administration is now vigorously blaming the Republicans for the pending cuts. Yet the level of spending for fiscal year 2013 under the sequestration will be nearly the same as Mr Obama called for in the draft budget he presented in mid-2012. In fact, so deep were the proposed cuts in discretionary spending that the budget narrative made the surprising point that the president’s plan would “bring domestic discretionary spending to its lowest level as a share of the economy since the Eisenhower administration”.

Here is more.

Assorted links

1. Fish conformism, and one fish rebel (photos).

2. Thomas Edison State College, a results-only approach.

3. Marie Gryphon Newhouse has a new blog on think tank ethics.

4. Leading economists vote on raising the minimum wage.

5. Shadow banking in China.

6. How well was ARRA funding allocated?  By the way, here is another reason why citizens get frustrated and support methods such as the sequester.

The smell test for an academic paper

As recently as the 1990s, you could pick up an academic paper in economics and by examining the techniques, the citations, how clearly the model was explained, and so on, you could arrive pretty quickly at a decent sense of how good a paper it was.

Today there are still many evidently bad papers, but also many more papers where “the bodies” are buried much more deeply.  There are many more credible “contender papers” where the mistakes and limitations are far from transparent and yet the paper is totally wrong or misguided.  For instance, it is easier to “produce” a novel and striking result with falsified privately-built data than with publicly available macro data, which already have been studied to death and do not yield new secrets easily if at all.

One implied prediction is that a small number of absolute frauds will do quite well professionally.  Another prediction is that having close (and reputable) associates to vouch for you will go up in value.  (How reliable a method of certification is that in fact?)  It may be harder for some outsiders to rise to the top, given the greater difficulty of those outsiders in obtaining credible personal certification.  What would you think of a new paper from Belarus, or how about Changchun, which appeared to overturn all previous results?

What else can we expect?

I do not think we are ready for an academic world where our smell test does not work very well.

Binyamin Applebaum on the sequester and government spending

It is a very good piece, and here are the parts citing me:

“People focus on the upfront cost and they don’t think through the whole timeline,” said Tyler Cowen, an economist at George Mason University and an occasional contributor to the Sunday Business section of The New York Times. “You have to cut spending within the next 10 years anyway. It may be time to take some lumps.”

Of course there is a contrasting attitude that we can and will do this instead in the time of a rip-roaring recovery.  And:

 “It is cutting some of the best spending that government does,” Professor Cowen said of the cuts that would fall on the domestic side of the ledger. He said Congress should focus instead on cuts to military spending, farm subsidies and health care programs like Medicare that he regarded as ripe for reductions.

He said that military contractors and personnel might be able to find new jobs with relative ease, because unemployment rates are fairly low for well-educated workers; it is those with less education who are struggling most.

Of course the piece presents some other opinions as well.  It’s also worth noting that in 2008-2009 I argued repeatedly that fiscal stimulus should have concentrated more directly on propping up state and local expenditures, and that many of the other projects, such as high-speed rail, were a waste and would only temporarily boost employment if that.  In retrospect I believe that advice is holding up quite well.

What Republicans are thinking on the sequester (one man’s guess)

Ezra on Twitter asks for a Republican version of this Jonathan Chait column, which basically suggests the Republicans don’t know what they are doing with their policies on sequestration.  Ezra has himself raised similar questions.  I am not a Republican, but I do like a challenge, so here is a brief attempt.

Correctly or not, many Republicans believe some mix of these propositions:

1. Much of government spending is massively wasteful.

2. Deep historical pessimism is justified, as the United States is sliding into a morass of ever greater statism on the economic, government spending, and taxation fronts, if not right now over the next ten to fifteen years.  Currently a majority of the public does not agree with the conservative Republicans and that is where the pessimism comes from.

3. All recent Republican strategies to stop this slide have been failing (this is evident to the Republicans, although not always admitted publicly so gladly, for obvious reasons).  Furthermore, short-term deal-making and policy trade-offs, even if they represent moderate improvements, will not reverse or even much slow down this slide.

4. There is a long-term dynamic whereby the rich will get taxed more and more in an unstable dynamic, ending in the Frenchification of the American economy or worse.

OK, now let’s go to the sequester.  The upfront costs are not viewed as so high, even on the defense side (see #1).  Furthermore something must be tried (see #2).  Given #1, there is some chance the public might see that government spending can be cut without causing disaster and this gives some chance the public might then support yet further cuts in government spending.  Maybe this chance isn’t so high, but all other approaches have been failing (#3).  Ideally, a big budget deal might be better on paper, but a line must be drawn in the sand on taxing higher earners (#4), especially given recent tax hikes, so right now a big budget deal is out of the question; this isn’t 1986 any more.

Draw up the Venn diagrams, or do the expected utility calculations, and you are left with sticking to the sequester.  Furthermore it allows some Republicans to take a “victory” back to supporters, and that gives a “practical” reason to support the “intellectual” ones.  Keep also in mind that a despairing group is a skeptical group, so how would Republican voters really know or trust that they got a good bargain with the Democrats, especially given the Democrats would have to sell it as a good bargain to their voters?  Who understands baselines anyway?

Here is a related Justin Green piece.

I’m not seeking to debate the points in this post, but rather consider this anthropology.  But if you ask about my views, I largely agree with #1, have mixed feelings about #2 (lately there is evidence of the health care cost curve bending; we will see), agree with the first sentence of #3 (though with a different normative slant), and don’t much agree with #4.  In my view the ranks and influence of the rich are growing, some factions of the Democrats will become more like the old anti-tax Republicans, and I don’t see U.S. tax rates on the rich as having a big chance of reaching unsustainable or catastrophic levels.  (If anything I worry much more about regulation stultifying the economy.)  So I would myself definitely prefer a “grand bargain” to the sequester.  The grand bargain would of course raise taxes further, but I don’t see this as a “slippery-slope-beginning-of-the-end.”

That I said, I have an affinity with #1, over fifty percent of the sequester cuts are obviously good ideas, and we could reverse the worst aspects of the sequester rather easily.  So while the sequester is far from my first choice, I also don’t think it is the end of the world.  I am distressed by the number of blogs posts emphasizing the “seen” costs of the spending cuts rather than the “unseen” benefits.  I am distressed by the notion of agencies which might play the “Washington Monument” strategy.  And I am distressed by the unwillingness of both sides — and possibly Obama will end up as the greater villain here — to make the cuts more flexible.  (It is funny by the way how much Republicans distrust Obama, and yet want to give him that discretion so that he will own the costs of the spending cuts to a greater degree.)  Given all that behavior, is a total shock to think that the public — or at the very least the Republican public in the partially gerrymandered House districts — might not want to trust so much of its money with those institutions?

The public funding of research and development

This is one of the best of all government programs (or it can be viewed as a collection of programs).  Here is a good survey of the issue, by Brad Plumer, excerpt:

There’s a long, long list of world-changing innovations that can be traced back to federally funded R&D over the years. The Department of Energy’s research labs spawned digital recording technology, communications satellites, and water-purification techniques. Pentagon research laid the groundwork for the Internet and GPS. The current shale-gas fracking boom couldn’t have happened without microseismic imaging techniques that were developed at Sandia National Laboratories.

It also can be said that this is probably the worst side of the sequester.

Assorted links

1. Noahpinion on the politics of Django Unchained.

2. Indian cities, ranked by sanitation quality.

3. New Thomas Pynchon due out this fall.  I haven’t liked one of his for a long time.  And Roko’s Basilisk.

4. Too PC, but still a good smash of Oscar night.

5. How Andrew Sullivan’s metered paywall is going.

6. 1974 was a bad year (or was it 1973?).  And why so many jobs in the UK?

7. The background story behind WEIRD.

Markets in everything the culture that is Japan there is no great stagnation

You can basically create a gummy replica of yourself to eat. It looks absolutely delicious.

FabCafe in Japan is offering the service for approximately $65 (6,000 Yen), which sounds like a complete steal to me. It’s apparently a 2-part process that requires a 3D body scanner and a lot of gummy colors. FabCafe, which made a chocolate replica for faces, is doing this for Japan’s White Day (in Asian countries, White Day is like Valentine’s Day but the girls give the gifts to the guys. Awesome).

Here is a bit more with photo, hat tip goes to Rob Raffety.

The effects of pharmaceutical promotion

Here is a new paper by Dhaval M. Dave:

This review discusses the role of consumer-directed and physician-directed promotion in the pharmaceutical market, based on the classic conceptual framework of whether such promotion is “persuasive” and/or “informative”. Implications for public health and welfare partly depend on whether, and to what extent, advertising: 1) raises “selective” or brand-specific demand versus “primary” or industry-wide demand; 2) impacts drug costs; and 3) impacts competition. Empirical evidence from the literature bearing on these effects is surveyed. These studies show that pharmaceutical promotion has both informative and persuasive elements. Consumer advertising is more effective at enlarging the market, educating consumers, inducing physician contact, expanding drug treatment, and promoting adherence among existing users. Physician advertising is primarily persuasive in nature, effectively increasing selective brand demand. There is no strong evidence the drug promotion deters entry, and there is some suggestive evidence that it may even be mildly pro-competitive. There is also no strong evidence that either consumer- or provider-directed promotion substantially raises retail-level prices. While all of these effects point to welfare improvements as a result of pharmaceutical promotion, there is also evidence that consumer ads may induce overuse and overtreatment in certain cases. Market expansion, overtreatment and shifting brands for non-therapeutic reasons further raise the concern of a sub-optimal patient-drug match at least for some marginal patients. A comprehensive evaluation of the welfare effects of pharmaceutical promotion requires a balanced assessment of these benefits and costs.

You may recall my requesting a more balanced approach from Ben Goldacre.  In terms of measuring and comparing actual costs and benefits, this goes well beyond the more negative (and I would say one-sided, though often quite on the mark)  evidence in his book, entitled Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients.  And you will notice that this paper is a survey, based upon a fairly broad published literature.

The Netherlands is not immune

A string of gloomy figures from the national statistics office CBS on Thursday show the Dutch economy is still in crisis.

The jobless rate in January hit 7.5%, the CBS said, a rise of 0.3 percentage point on December. Over the past three months, an average of 19,000 people have joined the ranks of the unemployed. The northern provinces were particularly hard hit, the CBS said.

The jobless rate among the under-25s continues to grow. The youth unemployment rate has now risen to 15%, up from 13% in December.

The source is here.  And:

House prices have also continued to decline, dropping nearly 10% in January compared with the previous year.

There is more:

Spain and Ireland are the only two countries in Europe where house prices have fallen more sharply than in the Netherlands over the past four years, according to Dutch national statistics agency CBS.

Two of the country’s four largest banks are now nationalized and the largest is still paying off state aid.