Fred Smalkin has two questions

by  Tyler Cowen in

This is great. I have two requests (for Tyler or anyone who may have some answers):

1. Could you address the idea of preference preferences? It strikes me that psychoactive drugs alter one’s utility function. Can that be modeled, or does that put you in non-linear-dynamical-system territory that doesn’t admit functions as we know them?

2. Am I being overly simplistic in this stripped-down political model? It seems to me that ideal welfare would measure your lifetime productivity at birth and then compensate you to the extent that it falls below $X. Obviously this comes at some cost, but it seems to me that a consequence of Arrow’s impossibility theorem is that there’s no political solution to choosing X (and how the cost of X would be distributed).

Thanks to Tyler and all who can shed some light!

When it comes to meta-preferences, it is usually acceptable to assume convergence through a fixed point theorem.  So whether I have a preference for a preference for a preference, etc. comes to a coherent finish and we can speak meaningfully of meta-preferences.  That said, I don’t see why we should always favor the meta-preference over the (“baser”) preference.  “Wanting to listen to Top 40” is not obviously a worse preference than “wishing I enjoyed opera more.”

The second question refers to a longstanding debate in optimum taxation theory.  There are a few reasons why we don’t grant transfers contingent on ability alone.  First, we may find the outcomes of privately accepted gambles unacceptable and wish to grant aid to the losers.  Second, there is sometimes a higher social rate of return from investing more money in the skilled.  A final question is why we make so many transfers near or at the end of life and so few, relatively speaking, at the beginning of life.  Obviously the elderly vote at a high rate but I don’t think it is just that.  There is a more general intuition that the elderly deserve the aid and the young do not to an equal extent.  That intuition is a big obstacle to fiscal balance.

You say “The culture that is Brazil,” I say “price discrimination”

by  Tyler Cowen in

Or is it the other way around?  From the always-excellent Leonard Monasterio, in turn from Adriano Dutra Teixeira:

Angélica Grill, a all-you-can-eat barbecue buffet (rodízio) in São Paulo, offers a 50% discount for people that went through bariatric surgery.  In Portuguese: In English (Google Translation of the page).

Why is Swiss unemployment so low?

by  Tyler Cowen in

Why does Switzerland have a low unemployment rate?

…is a question from Really Curious.  Here are some data, but right now it is at 3.1%.  I see a few factors:

1. The Swiss have few ZMPers, so their natural rate is fairly low to begin with.

2. The Swiss do not have the same kind of welfare state and labor legislation that you find say in France, which also lowers their natural rate, and which makes adjustment to negative shocks easier.  Unemployment benefits are not so generous and they pretty much force you to try to find work again.

3. In the past the Swiss have managed their immigration policy in accord with the domestic unemployment rate.  For instance if unemployment was rising they would send some Italian guest workers back home.  Immigration into Switzerland is now so substantial, however, and integrated into so many sectors, that this procedure has lost its potency.

4. Swiss jobs are relatively permanent, compared to the United States.  You will note that #4 interacts with #3; immigration is by no means always or even usually zero-sum with respect to the jobs in a country, but it can be for some well-defined pockets of manufacturing jobs in Switzerland.

5. The Swiss central bank does not hesitate to engage in sophisticated schemes of quantitative easing when an appreciating exchange rate is squeezing their export industries or they otherwise face unpleasant macroeconomic situations.

Here is a JSTOR piece on said question.  Here is a good paper on the overall topic (pdf).  I have never seen a good paper on why the Swiss unemployment rate rose somewhat in the early 1990s, falling again in 1996 or so I believe, but MR readers can help us out here.  I also do not have knowledge of exactly how the Swiss calculate their unemployment rate, though it is unlikely that the difference in rates is a mere statistical artifact.

Law and Literature reading list

by  Tyler Cowen in

Class started yesterday, the reading list is here (pdf):

The New English Bible, Oxford Study Edition, Billy Budd and Other Tales, by Hermann Melville. The Metamorphosis, In the Penal Colony, and Other Stories, by Franz Kafka, In the Belly of the Beast, by Jack Henry Abbott, Borges and the Eternal Orangutans, by Fernando Verrissimo, Glaspell’s Trifles, available on-line, Sherlock Holmes, The Complete Novels and Stories, Sir Arthur Conan Doyle, volume 1, I, Robot, by Isaac Asimov, Moby Dick, by Hermann Melville, excerpts, chapters 89 and 90, available on-line. Year’s Best SF 9, edited by David G. Hartwell and Kathryn Cramer, G.K. Chesterton, The Man Who Was Thursday, Edgar Allen Poe, The Gold-Bug, available on-line, Joseph Conrad, The Secret Agent, Running the Books, by Avi Steinberg, Sakhalin Island, Anton Chekhov. tr. Brian Reeve, Death and the Maiden, Ariel Dorfman, The Pledge, Friedrich Durrenmatt. tr. Joel Agee, Red Harvest, Dashiell Hammett, Red April, by Santiago Roncagliolo, The Crime of Sheila McGough, Janet Malcolm, Leslie Katz, “John Keats’s Attitudes to Lawyers,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1307146.

Some additions to this list will be made as we proceed, mostly a few short articles.  We also will view a small number of movies on legal themes. You will be responsible for obtaining these or for viewing them in the theater.

What will be Europe’s next major religion?

by  Tyler Cowen in

Probably not this:

The Church of Kopimism, whose principal tenent is the right to file-share, has been formally recognized as a religious organization in Sweden.

The Swedish government agency Kammarkollegiet registered the Church of Kopimism as a religious organization in late December, just before Christmas, the group said in a Wednesday statement. Members of the church applied three times in their more than year-long quest to have the religion formally recognized in Sweden.

Sweden is now the first and only country to recognize Kopimism as a religion, the group said.

“For the Church of Kopimism, information is holy and copying is a sacrament,” it said in a statement.

Christianity remains the leading contender.  In the meantime, file under “The Culture that is Sweden.”  I thank Eric H. for the pointer.

Addendum: And here is Matt Yglesias on Europe as Conservative.  I agree with the points he makes, but that Europe is not very Christian, and that America tries to do more to raise the status of Christianity and Christians, deserves further discussion.

Assorted links

by  Tyler Cowen

1. Whence no liberals.

2. Eugene Fama’s life in finance, and interesting new paper on whether derivatives can increase risk, try this paper too.

3. Via Chris F. Masse, new website on charter cities, apply for a job here.

4. David Frum’s new blog.

5. The culture that is Japan, with obscenity.

6. Scott is right on the mark (not a surprise).  That’s the place to start the dialogue, not endless rehashing of the errors of others.

*Demystifying the Chinese Economy*

by  Tyler Cowen in

That is the new book by Justin Yifu Lin, who is also Chief Economist of the World Bank.  It is derived from lectures delivered in China.  Much of the book is an OK survey, though I did not find it added much insight to extant accounts.

The discussion of why China had no Industrial Revolution does not consider individualism or liberalism, a’la McCloskey.  And what am I to make of sentences like this?:

Building the new socialist countryside, now on the right track, has produced remarkable results.

I suppose it can be held to be true in both the literal and Straussian senses, but when I read it (and some others) frankly I felt my intelligence was being insulted.

There is plenty of talk lately about ethics standards for economists.  How about a new proposal?  For anything in the social sciences written by a citizen of China, or by someone with relatives living in China, or by someone working in or for China, there should be a disclaimer on the publication: “Produced under conditions of censorship and threat of career penalty.”  I don’t favor actually doing that, but the absence of this idea from the debate is itself revealing.

What I’ve been reading

by  Tyler Cowen in

1. Dave Prager, Delirious Delhi: Inside India’s Incredible Capital.  An excellent book on India, an excellent book on a city, and an excellent book on Delhi, all rolled into one.  Unlike many travel books, it tells you a lot about the city.  Here is a short excerpt.  I believe it does not yet have full availability in the United States; order it from the first link above, the author tells me that the current Amazon link is actually a fraud.

2. Katerina Clark, Moscow, The Fourth Rome: Stalinism, Cosmopolitanism, and the Evolution of Soviet Culture, 1931-1941.  A detailed and insightful revisionist look at Soviet culture during that period, asking whether it really can all be boiled down to communism or if there was more behind it and it turns out there was.

3. David Roodman, Due Diligence: An Impertinent Inquiry into Microfinance.  Puts microfinance into a broader historical perspective, balanced and insightful throughout, informationally dense, recommended.  A good model for many other non-fiction books.

4. Michael Erard, Babel No More: The Search for the World’s Most Extraordinary Language Learners.  A fun and useful book, you can take the subtitle literally.  You need to ignore the very weak material on neurodevelopmental issues.

5. John Cowper Powys, Wolf Solent.  Unlike George Steiner’s claim, this is not comparable to Tolstoy.  Still, it is an excellent if uneven 1920s novel that ought to be read more widely.  The best passages are frequent and striking.  The bottom line is that I can imagine someday reading it again.  If you are tempted, give it a try.

There is also the self-explanatory Emrys Westacott, The Virtues of Our Vices: A Modest Defense of Gossip, Rudeness, and Other Bad Habits.

ECB collateral requirements for lending

by  Tyler Cowen in

…we said the ECB’s decision in September to accept unlisted bank bonds — i.e., bonds that the banks could have issued purely to themselves solely in order to pledge them as collateral for central bank funding — was “potentially very significant”.

There is much more at the link, all along the same lines.  For better or worse, the ECB is engaging in lots of (de facto) unsecured lending.  Hat tip goes to Sober Look.