Partisanship Bias II
David Leonhardt points to another example of partisanship bias, this one from the latest Gallup Poll:
Despite Federal Reserve Chairman Ben Bernanke’s solid roots in the Bush administration, new Gallup polling finds 64% of Democrats nationwide feeling confident in Bernanke’s input on the economy, compared with only 36% of Republicans. This is a complete reversal of the Fed chairman’s image among partisans a year ago, under President Bush, when Republicans had the greater confidence in Bernanke, 61% vs. 40%.
Partisanship Bias and the Economy
Andrew Gelman and John Sides, writing at FiveThirtyEight, have a very good post on how partisanship biases perceptions of the economy. It's well known that views of the economy often differ by partisan identification but that could be explained by differences in interests. What Gelman hammers home is how partisanship can cause people to have views widely at variance with reality (regardless of interest) and how quickly views can change when partisanship changes even when the facts stay the same.
of Larry Bartels. He analyzed a 1988 survey that asked “Would you say that
compared to 1980, inflation has gotten better, stayed about the same, or gotten
worse?” Amazingly, over half of the self-identified strong Democrats in the
survey said that inflation had gotten worse and only 8% thought it had gotten
much better, even though the actual inflation rate dropped from 13% to 4% during
Reagan’s eight years in office. Republicans were similarly biased about the
Clinton-era economy: in 1996, a majority of Republicans thought that the budget
deficit had increased. This partisan filter was also evident after the
Democrats’ retaking of Congress in 2006. Research
by Alan Gerber and Greg Huber shows that Democrats became much more optimistic,
and Republicans more pessimistic, about the national economy.
Views
about foreign policy manifest a similar bias. For example, from 1965 through
1968, Democrats were more likely than Republicans to support the Vietnam War,
but starting in 1969, it was the Republicans who were (slightly) more
hawkish.
Could such biases be a product of the relatively mild economic
conditions of the past twenty years? Early returns from 2008 and 2009 suggest
that partisan biases still operate. According to Gallup Poll data from just
before the November election, 20% of Republicans and 8% of Democrats were
“satisfied with the way things were going in the United States.” Immediately
after Obama’s inauguration, the parties flipflopped: 18% of Democrats and 14% of
Republicans expressed satisfaction. That gap has only grown. In February
polls, 20% of Democrats but only 10% of Republicans expressed
satisfaction.
The same pattern emerges in consumer confidence. ABC News
surveys surveys show that the
views of Republicans became 19 points more negative between October and
mid-April. Meanwhile, the views of Democrats improved by 10 points, even as the
economic news became grimmer.
Are Good Times, Bad Times?
a mutual fund which invests in the so-called "sin" industries like
distillers, casino operators and cigarette companies, has lost 42% over
the past twelve months. That's actually four percentage points worse
than the Standard & Poor's 500 index overall.
Meanwhile the Ave Maria suite of mutual funds, which invest only in
companies that comply with certain Roman Catholic values, have done
better. The Ave Maria Growth Fund is only down 33%. It's beaten Vice by
nine points and the S&P by five.
It's hardly a miracle — but maybe enough to raise eyebrows on Wall
Street, a secular place where the usual invocation is "let us prey."
More here. Hat tip to John Chilton.
Saint Augustine on Pirates
The quote is from Noam Chomsky's Pirates and Emperors and is cited by Ralph Raico at the Liberty and Power Blog. Hat tip to Sheldon Richman.
Lobbying Pays
In a remarkable illustration of the power of lobbying in Washington, a study released last week found that a single tax break in 2004 earned companies $220 for every dollar they spent on the issue — a 22,000 percent rate of return on their investment.
The study by researchers at the University of Kansas underscores the central reason that lobbying has become a $3 billion-a-year industry in Washington: It pays. The $787 billion stimulus act and major spending proposals have ratcheted up the lobbying frenzy further this year, even as President Obama and public-interest groups press for sharper restrictions on the practice.
From the Washington Post. We will never get the money out of politics until we get the politics out of money.
Communists
Here's a piece from the WSJ on the latest intervention into the market for executive compensation:
…[The] government disclosed that it had set limits on executive pay for 2008 at state-owned financial companies, the latest effort to address public concern over pay at companies controlled by the country's nominally socialist government.
Total compensation for last year was capped at 90% of the amount executives received in 2007, the Ministry of Finance said in a brief statement. For companies whose revenue fell last year, the limit was set at 80%, it said. The statement, issued late Thursday, said the new rule had been issued "recently," but didn't elaborate. A ministry spokesman declined to comment Friday.
Need I tell you that the story is about the communist party and China? Sadly, I think I do need.
Hat tip to Helen Yang.
Shoe Fetish
Zappos maps shoe sales, with shoe pictures, online in real time. Check it out. For some reason, I think this is awesome but I couldn't tell you why.
Hat top to Flowing Data.
The War on Drugs: Methamphetamine
Remember when you could walk into a pharmacy and buy a decongestant like Sudafed? The key ingredient was pseudoephedrine, a precursor to methamphetamine. A series of laws made it more and more difficult to buy or manufacture pseudoephedrine (despite it's legality). So what did we get for our loss of liberty? A new paper (AEA) (free here) in the March AER says not much:
In mid-1995, a government effort to reduce the supply of methamphetamine precursors successfully disrupted the methamphetamine market and interrupted a trajectory of increasing usage. The price of methamphetamine tripled and purity declined from 90 percent to 20 percent. Simultaneously, amphetamine related hospital and treatment admissions dropped 50 percent and 35 percent, respectively. Methamphetamine use among arrestees declined 55 percent. Although felony methamphetamine arrests fell 50 percent, there is no evidence of substantial reductions in property or violent crime. The impact was largely temporary. The price returned to its original level within four months; purity, hospital admissions, treatment admissions, and arrests approached preintervention levels within eighteen months.
The authors conclude:
This is quite possibly the DEA’s greatest success in disrupting the supply of a
major illicit substance. The focus on disrupting the supply of inputs rather than of the drug itself proved extremely successful. This success was the result of a highly
concentrated input supply market and consequently may be difficult to replicate for drugs
with less centralized sources of supply, such as cocaine and heroin. That this massive
market disruption resulted in only a temporary reduction in adverse health events and
drug arrests and did not reduce property and violent crimes, is disappointing. (italics added)
FYI, this paper makes its case almost entirely by carefully laying out the data rather than with theory or econometrics–that was nice to see in the AER.
New Deal Revisionism
The NYTimes has a short piece in the arts section on "new deal revisionism." Rich Vedder gets the best line:
Mr. Vedder playfully offered another analogy: the recession of 1920. Why was that slump, over and done with by 1922, so much shorter than the following decade’s? Well, for starters, he said, President Woodrow Wilson suffered an incapacitating stroke at the end of 1919, while his successor, Warren G. Harding, universally considered one of the worst presidents in American history, preferred drinking, playing poker and golf, and womanizing, to governing. “So nothing happened,” Mr. Vedder said.
Of course Mr. Vedder does not wish ill health – or obliviousness – on any chief executive. Still, in his view, when you’re talking about government intervention in the economy, doing nothing is about the best you can hope for from any president.
By the way, I am looking forward to hearing Bob Higgs on C-Span this weekend. Higgs is a top-rate economic historian from whom I learn something new everytime I hear him.
Levitt and Mankiw to Join Obama Team!
Steve Levitt and Greg Mankiw will join the Obama team. Here is a key paragraph from the blog that broke this important story:
Colleagues at the University of Chicago economics department are cheering the move. “I could not think of a better choice than Steve Levitt to move to Washington and help the Obama team” says Nobel Laureate James Heckman, adding that he expects the job to occupy Levitt for two full Obama administration terms. “We will miss him, but he has an important job to do.”
The Case Against Breast Feeding
Hanna Rosin's article on breastfeeding in the latest Atlantic is excellent and would make a topical and accessible introduction to causality studies in an econometrics or statistics class. (And lest that sound damning it's also a great read.)
The general point will be familiar to the audience at Marginal Revolution. The studies that show breastfeeding leads to lower weight, fewer ear infections, less allergies, less stomach illnesses and so forth are almost all observational studies.
An ideal study would randomly divide a group of mothers, tell one half to breast-feed and the other not to, and then measure the outcomes. But researchers cannot ethically tell mothers what to feed their babies. Instead they have to settle for “observational” studies. These simply look for differences in two populations, one breast-fed and one not. The problem is, breast-fed infants are typically brought up in very different families from those raised on the bottle. In the U.S., breast-feeding is on the rise–69 percent of mothers initiate the practice at the hospital, and 17 percent nurse exclusively for at least six months. But the numbers are much higher among women who are white, older, and educated; a woman who attended college, for instance, is roughly twice as likely to nurse for six months.
Moreover, the better we control for other factors that might account for differences in child outcomes between mothers who breastfeed and those who do not, the less evidence there is for breastfeeding's benefits. Even looking at children within the same family (still far from the gold standard of randomization), shows many fewer benefits from breastfeeding than studies that look across families. Some modest evidence suggests a gain in IQ and better evidence suggests minor improvements in avoiding some diarrhea. Rosin does not discount these benefits (so the title of her piece is unnecessarily sensationalistic) but she very appropriately does point to opportunity cost.
The debate about breast-feeding takes place without any reference to its actual context in women’s lives. Breast-feeding exclusively is not like taking a prenatal vitamin. It is a serious time commitment that pretty much guarantees that you will not work in any meaningful way. Let’s say a baby feeds seven times a day and then a couple more times at night. That’s nine times for about a half hour each, which adds up to more than half of a working day, every day, for at least six months. This is why, when people say that breast-feeding is “free,” I want to hit them with a two-by-four. It’s only free if a woman’s time is worth nothing.
One final point, Rosin's article is also usefully read as a study in propaganda and social psychology.
I wish Obama were more like FDR
Only in this respect.
To Pay for our Debts
Buy a House, Get a Visa (2)
The buy a house, get a visa program which I have been pushing for some time is getting some serious play. Writing in the WSJ, Richard Lefrak and Gary Shilling note:
The blueprint for a program to sell surplus housing to immigrants is already in place with the EB-5 visa program. Each year, 10,000 EB-5 visas for this country are available for foreigners who each invest $1 million in a new enterprise ($500,000 in economically depressed areas) that creates at least 10 full-time jobs. After two years, the entrepreneur and his family can become permanent residents.
Quantitative Easing
It's about time. Shows how peculiar it is to define a liquidity trap in terms of short-term rates. The fact that the Fed usually buys short-term bonds is a minor issue as far as monetary theory is concerned, like the fact that the Fed usually prints $1 bills but not $2 bills.