At the Beijing Airport
At the Beijing airport as the customs official questions you, you get to rate them – there is an electronic box, hidden from their view, that asks for your rating of service. Damn, this is better than democracy! I was "extremely satisfied."
On the other hand, MarginalRevolution is blocked but I can still access Typepad.
Krugman gets a Rotten Tomato
Paul Krugman is attacking Milton Friedman (again) for rotten tomatoes. Here’s Krugman in 2007:
These are anxious days at the lunch table. For all you know, there
may be E. coli on your spinach, salmonella in your peanut butter and
melamine in your pet’s food and, because it was in the feed, in your
chicken sandwich.Who’s responsible for the new fear of eating?
Some blame globalization; some blame food-producing corporations; some
blame the Bush administration. But I blame Milton Friedman.…Without question, America’s food safety system has degenerated over the past six years.
and here he is today repeating himself:
Lately, however, there always
seems to be at least one food-safety crisis in the headlines – tainted
spinach, poisonous peanut butter and, currently, the attack of the
killer tomatoes.How did America find itself back in The Jungle?
I was curious so I collected data from the Center for Disease Control on Foodborne Disease Outbreaks from 1998-2006. The data only go back to 1998 because in that year the CDC changed its surveillance system creating a discontinuity but note that we are covering a chunk of the Clinton years and are well within the time frame over which Krugman says the safety system has degenerated. Here’s the result:
What we see is a lot of variability from year to year but a net downward trend. You can also look at cases per year which are more variable but also show a net downward trend. No evidence whatsoever that we are back "in The Jungle."
Your Favorite Things China?
I’m off to China next week. A few days in Beijing, then Kunming in the South then Hong Kong – two weeks in all. Recommendations, reviews, ideas are all welcome.
How the military subsidizes is subsidized by private industry
An American military supercomputer, assembled from components
originally designed for video game machines, has reached a
long-sought-after computing milestone by processing more than 1.026
quadrillion calculations per second.
From the NYTimes.
Rodrik on Foreigners
Rodrik writes:
So the "us" and "them" characterization that Tyler attributes to irrational nativism perhaps has more to do with the absence of a common set of international rules on labor standards, environment, consumer safety, and so on.
Tyler responds ably here, I will add a few more comments. A testable implication of Rodrik’s hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us. In reality, people are more upset by immigration than by trade and as a result we are much closer to free trade than to free immigration.
Rodrik has a very Ivory-tower view of what people care about. Rodrik may be upset that people in other countries have poor on-the-job safety but (for the most part) workers who lose their jobs to foreigners really don’t give a damn. What U.S. workers are upset about is losing their job and if asked to name the problem the U.S. worker will almost certainly say it’s the low wages of foreigners not their poor working conditions. Moreover, the worker’s diagnosis of the problem (problem to him or her that is) is correct and Rodrik’s diagnosis is wrong. Why? Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad, which is what the worker cares about. I assume that Rodrik knows this even if the worker does not.
Rodrik’s deeper argument is also peculiar, especially for a liberal economist. A liberal economist should understand that for the most part labor, environmental and consumer safety standards are chosen not imposed (not always, of course, but for the most part in the long run). In the United States we have a lot of job safety because we are wealthy and are willing to pay for job safety with a reduction in our (already high) wages. In other words, Americans buy a lot of on-the-job safety for the same reasons we buy a lot of smoke alarms and DVD players. (OSHA has very little effect on job safety.) Job-safety is thus a choice Americans make about what to consume – we use some of our wealth to buy safety both at home and at work and some of our wealth to buy DVD players. Thus, to argue that we shouldn’t trade with foreigners because they don’t have the same job safety as Americans makes about as much sense as arguing that we shouldn’t trade with foreigners because foreigners don’t buy as many DVD players as Americans.
Food Fight
In a story rich with irony the Senate, led by Democrat Dianne Feinstein, has voted to privatize its restaurants and food services. The House privatized twenty years ago. The result? Sort of like East and West Berlin.
In a masterful bit of understatement, Feinstein blamed [millions of dollars in losses] on "noticeably
subpar" food and service. Foot traffic bears that out. Come lunchtime,
many Senate staffers trudge across the Capitol and down into the
basement cafeteria on the House side. On Wednesdays, the lines can be
30 or 40 people long.House staffers almost never cross the Capitol to eat in the Senate cafeterias.
Naturally some of Feinstein’s colleagues were not pleased.
In a closed-door meeting with Democrats in November, she was
practically heckled by her peers for suggesting it, senators and aides
said.
"I know what happens with privatization. Workers lose jobs, and the
next generation of workers make less in wages. These are some of the
lowest-paid workers in our country, and I want to help them," Sen. Sherrod Brown (D-Ohio), a staunch labor union ally, said recently.
The reporter adds without comment, "The wages of the approximately 100 Senate food service workers average $37,000 annually." Who says we can’t get a better press corps?
Feinstein had an ace in her sleeve, however, and when push came to shove she unleashed her threat. Feinstein warned "that if they did not agree to turn over the operation to a private
contractor, prices would be increased 25 percent across the board." Well that was it – the Senate voted to privatize.
Buffett’s Big Bet
Warren Buffett recently bet an ambitious hedge fund operator $1 million that
they won’t beat the returns of S&P 500 after their extremely hefty fees are
accounted for. Buffett claims investors will do as well with a no-load index
fund over the ten years of the bet. He has long been critical of the performance
claims of hedge funds, and his bet is intended to put his money where his mouth
is.
Details here. Of course, my money is with Buffett. Even if he doesn’t win the bet he is correct about the advantages of index funds. The academic research on this topic is voluminous and the lesson is straightforward – mutual fund managers don’t beat the market on average. Note that this doesn’t mean the market is perfectly efficient but it does mean that *you* are unlikely to beat the market. For more see my earlier post and also one of Tyler’s.
The Wisdom of Whores
She explained, as if to an enthusiastic but slightly dim child, that a waria who is hanging around on a street corner to be interviewed by a research team is a waria who is not with a client. ‘You are talking to all the dogs, obviously’.
Not something I learned in the lecture halls of London…but Ines is quite right. Our sample is biased towards the ‘dogs,’ who get picked up less than the cuter girls. So the study results underestimate the true number of clients per seller…
Ines’s comments…prodded us into changing the sampling strategy…now we work with the powers-that-be (the mami, the pimps, the brothel owners) to arrange off-hours time for data collection. The principle….is that you are not cutting into people’s work time, so there is less chance of talking only to the remnant sex workers who can’t get a client.
Kudos to Krugman
In the long run we are all the Grateful Dead.
That’s Paul Krugman summarizing the economics of digital information. Damn, I wish I had written that.
Markets in Everything: Pay to Stay
A small number of California jails have begun to offer pay to stay programs. These programs allow inmates in for minor crimes to "upgrade" to a private or public jail with better facilities. Evidently the fees are profitable to the jails. Take a look at how Santa Ana county advertises it’s hotel jail.
The Santa Ana Jail is pleased to host a full range of alternatives to
traditional incarceration. Our offerings include weekends in jail,
non-linear jail sentences, and a variety of work release options. Our
philosophy is designed to allow our clients (!, AT) to serve their obligations
to the court in a manner that respects them as human beings and permits
them to continue to provide for themselves and their families….
- Programs that include 2-day or 3-day weekends with minimal impact on
the client’s professional life. Work on Saturday and Sunday? No
problem… - Programs that permit jail sentences to be served in multiple parts.
Perfect for clients that live out of the area or clients with frequent
business travel. - Programs that permit the client to leave jail for work everyday. We
have helped everyone from 9 to 5 business people to oil-rig workers, so
no work schedule is out of the question.
The Santa Ana Jail is the
most modern and comfortable facility in the region. Our housing areas
are a world away from cement and steel bars….Most clients can be approved immediately, over the phone. We can also provide same-day acceptance letters for the court.
I have mixed feelings about these programs. On the one hand, someone has to pay for the jails and who better than the inmates? And note that to make an inmate-pays program effective you have to give them an incentive to pay.
But on the other hand the profit-maximizing strategy for a monopolist with different quality levels of service is pretty scary in this context. A profit maximizer will reduce the quality level of the lowest class service – perhaps even spending money (!) to make the quality level lower – in order to push people to pay for the higher quality. (For more on the theory, see Hal Varian’s elegant explanation.)
On the other hand (I know, I know, three hands) California’s prison system is already so overcrowded, violent and dysfunctional that one federal judge referred to medical care in the CA system as "outright depravity," thus we may already be close to the lowest quality level. See this classic MR post for an expert’s take on the incentives of private and public prisons.
More on pay-to-stay at a Michigan Law Review Symposium. Hat tip to Timothy Taylor at the Journal of Economic Perspectives.
Norman Borlaug on the Food Crisis
Here is Norman Borlaug, father of the green revolution, from about a decade ago but highly relevant today:
Yields can still be increased by 50-100% in much of the Indian sub-Continent,
Latin America, the former USSR and Eastern Europe, and by 100-200% in much of
sub-Saharan Africa, providing political stability is maintained, bureaucracies
that destroys entrepreneurial initiative are reigned in, and their researchers
and extension workers devote more energy to putting science and technology to
work at the farm level….I now say that the world has the technology – either available or
well-advanced in the research pipeline – to feed a population of 10 billion
people. The more pertinent question today is whether farmers and ranchers will
be permitted to use this new technology. Extremists in the environmental
movement from the rich nations seem to be doing everything they can to stop
scientific progress in its tracks. Small, but vociferous and highly effective
and well-funded, anti-science and technology groups are slowing the application
of new technology, whether it be developed from biotechnology or more
conventional methods of agricultural science. I am particularly alarmed by those
who seek to deny small-scale farmers of the Third World -and especially those in
sub-Saharan Africa – access to the improved seeds, fertilizers, and crop
protection chemicals that have allowed the affluent nations the luxury of
plentiful and inexpensive foodstuffs which, in turn, has accelerated their
economic development.
And here is an awesome graph showing how much land has been saved by improved agricultural productivity in the United States. 
The Economics of Sawdust
I was in Vermont over the weekend and talking to a dairy farmer about the rising price of milk. I was surprised when she said that higher sawdust prices was one of the causes. Sawdust? Sawdust, it turns out, is used for bedding the cows and the price of dust has doubled in the past year. I surmise that the downturn in housing construction has meant a reduced demand for lumber and thus less sawdust.
The connection between the housing market and the milk market is an interesting example of the dense connectedness of markets, "general equilibrium" in the language of economics.
The economics of sawdust also reminds us that the capitalist production system minimizes waste – entrepreneurs search out ways to extract the most value from every input and from every output. Thus even sawdust, as trivial a waste product as one could imagine, is turned into an input into milk production as well as into particle board, fuel nuggets, mulch and other useful products.
Addendum: The WSJ has more on sawdust.
The Singularity is Near
Department of No Clue
Christopher Hayes writing in The Nation.
The vast majority of interest groups in
Washington, from the Sierra Club to the AFL-CIO to Planned Parenthood,
are pursuing what Edsall calls "substantive reform"–attempting to push
legislation and enact policies that will provide public goods, protect
citizens from harm and redistribute benefits, rights and privileges away
from the powerful and toward middle-class citizens and disenfranchised
minorities.
And if you believe that, might I mention that if you act quickly I have some land in Florida just ripe for development.
The Education Transformation of China
University education in China is skyrocketing. In 1996 China had less than 1 million freshmen, in 2006 there were over 5 million freshmen. The freshman class is continuing to grow and university graduates, of course, are just 4 years behind. About half of the entering students are in a hard science or engineering program. As a result, China today produces 3 times more engineers than the United States and will quickly overtake the U.S. in total graduates.
Many people worry about what the Chinese education explosion means for
the United States but I am optimistic. First, as China and other countries grow wealthy the
incentive to invest in R&D is increasing. If China and India were as wealthy as the U.S. the market for cancer drugs, for example, would be eight times larger than it is today – and a larger market means more new drugs for everyone.
Second, the growth in Chinese education is
increasing the supply of new ideas and that too is a benefit to people around the world.
Surprisingly, China’s education system is being
transformed to a
considerable degree by private forces. As late as 1999 the Chinese government
paid for most university education but from 2001 onwards tuition and
fees account for more than half of total educational expenditures.
I have drawn much of the data in this post from a fascinating new paper, The Higher Educational Transformation of China and its Global Implications by Li, Whalley, Zhang and Zhao. The paper has much else of interest.
I will be traveling to China to give a talk at Yunnan University in late June and will report on the transformation as it looks on the ground.