What I’ve been reading
1. Gavin Maxwell, A Reed Shaken: Travels Among the Marsh Arabs of Iraq. One of my favorite travel books. It avoids both being too impressionistic and being too didactic. It never assumes that the writer’s state of mind is interesting to the reader per se. It brings a little-known and by now largely destroyed corner of the world to light.
2. Ludwig Mises on the exhuastion of the reserve fund. I first read that passage when I was fourteen years old and I was scared.
3. Dubner’s excellent memoir, largely about religion, will become a movie.
4. Henry Mayhew, London Labour and the London Poor. There is a splendid new Oxford University Press edition. Browsing or reading this book is one of the best ways to get a feel for Victorian England (circa 1850-51), or for how labor markets have changed.
5. The Last Werewolf, by Glen Duncan. Half of this is quite fun, the other half is quite stupid. Your call, but half fun is actually a lot.
I’ve also relented and finally tried Game of Thrones. I’m just at the beginning; we’ll see whether it ends up owned or liberated.
Means testing is a marginal tax increase
So says Modeled Behavior, citing also Paul Krugman. All true, but the need to point this out to people suggests it is not widely understood. Which suggests the tax, at least right now, brings a relatively low deadweight loss. A lot of people don’t really see that it is a tax at all. Admittedly, that state of affairs may not last forever.
There is also hyperbolic discounting, namely that the marginal extra loss from earning more income may be coming many years in the future. Even if you’re sixty-two years old, the reduction in subsequent Medicare benefits may last through your eighties or longer. That also makes it a less distorting tax.
Because it tricks people in this manner, it may well be a less fair tax. But still it is a more efficient tax, at least if it can be enforced.
Blogging the debt ceiling
At this point, what is there to say? The Asian markets open soon. The InTrade contract, which for some reason is defined around the end of August, is up somewhat today. Who knows why? Brad DeLong and Rortybomb wrestle with the question of how to respond to the credit rating agency vigilantes.
Calculated Risk surveys options. Ezra Klein’s coverage continues to be very useful. Keith Hennessey defends some version of a “Republican point of view.”
A Twitter search on “Boehner” yields good updates. What else works?
Shortly I’m headed out for some food from Sierra Leone, we’ll see what I come back to. I’m currently predicting a two-stage process, announced fairly soon, without the deal itself quite being there, but the confidence intervals on that call are pretty wide.
Via Michelle Dawson, here is an article on what happens to seven-footers after they retire from the NBA.
Assorted links
1. El Mundo interview with me, in Spanish.
2. Why do criminals brazenly wear gang colors? (pdf)
4. Markets in everything: will the police sell your phone number to journalists?
Econometric papers on the Israeli-Palestinian conflict
Ending violent international conflicts requires understanding the causal factors that perpetuate them. In the Israeli–Palestinian conflict, Israelis and Palestinians each tend to see themselves as victims, engaging in violence only in response to attacks initiated by a fundamentally and implacably violent foe bent on their destruction. Econometric techniques allow us to empirically test the degree to which violence on each side occurs in response to aggression by the other side. Prior studies using these methods have argued that Israel reacts strongly to attacks by Palestinians, whereas Palestinian violence is random (i.e., not predicted by prior Israeli attacks). Here we replicate prior findings that Israeli killings of Palestinians increase after Palestinian killings of Israelis, but crucially show further that when nonlethal forms of violence are considered, and when a larger dataset is used, Palestinian violence also reveals a pattern of retaliation: (i) the firing of Palestinian rockets increases sharply after Israelis kill Palestinians, and (ii) the probability (although not the number) of killings of Israelis by Palestinians increases after killings of Palestinians by Israel. These findings suggest that Israeli military actions against Palestinians lead to escalation rather than incapacitation. Further, they refute the view that Palestinians are uncontingently violent, showing instead that a significant proportion of Palestinian violence occurs in response to Israeli behavior. Well-established cognitive biases may lead participants on each side of the conflict to underappreciate the degree to which the other side’s violence is retaliatory, and hence to systematically underestimate their own role in perpetuating the conflict.
That link is here. One of the researchers, Johannes Haufhofer, has a Ph.d. in economics from the University of Zurich and a Ph.d. in neuroscience from Harvard. His other papers are here. Here is one of his recent grants, it looks quite interesting.
For the pointer I thank a loyal MR reader.
Assorted links
1. “Blaming the Republicans” is used as a false substitute for “rejecting the doctrine.” We can do both!
2. The Great Factor Price Equalization; in this framework I have been focusing on our inability to move U.S. labor up the value chain of production with new, complex ideas. You can discuss the causality in a number of different ways, such as putting more causal emphasis on how outsourcing has chipped away at the previous networks of production.
4. Markets in everything: snore absorption rooms.
5. Disputes over the size of Chinese debt.
6. Poor choice of words. And how can the now-expensive city of Budapest make that list?
New and excellent manuscript on the economics of the family
By Martin Browning, Pierre-André Chiappori, and Yoram Weiss, you will find it here, on-line and free. Perhaps in this post-Freakonomics era you are jaded and feel you have seen too many “economics of the family” books. This is a scholarly rather than popular manuscript, and it is full of data and (simple) models. At some point it will come out from Cambridge University Press.
For the pointer I thank Scott Cunningham; “All of the models of household production, bargaining, sorting in marriage and dating, and the numerous other strands within this literature have been finally brought together into one place.”
If you’re looking for some good news…
Astronomers found a reservoir of water in space that measures 140 trillion times the earth’s ocean water.
It is also the farthest reservoir of water ever discovered in the universe, according to two teams of researchers.
The water surrounds a huge, feeding black hole called a “quasar” more than 12 billion light-years away. The quasar is powered by a giant black hole which gradually consumes a surrounding disk of gas and dust, while spewing out enormous amounts of energy.
Astronomers studied a quasar called APM 08279+5255, where the black hole is 20 billion times greater than the sun. They discovered Water vapor distributed around the black hole spanning hundreds stretching out to hundreds of light-years in size.
In other words, “It’s another demonstration that water is pervasive throughout the universe, even at the very earliest times.” But wait, oops, Katja Grace will tell us this isn’t really good news at all…
The future of Ontario (Canada?)
Daniel Drache reports on some trends which I had not quite been following:
Ontario has the densest concentration of car production probably in the world…
From a North American perspective, Ontario, Canada’s industrial heartland, ranks 16 out of 18 on his competitiveness ranking index, just ahead of Michigan.
…the job boom in resources including minerals and agricultural exports offset less than one-fifth of the jobs lost in Canadian manufacturing facilities. The big winners in terms of job growth are private services and government…
…the incredible growth in services challenges one of the standard assumptions of globalization — that Canada is becoming more integrated into the global economy. Most service production is consumed domestically and virtually all public services are not traded…the most remarkable structural change in the Canadian economy is that Canada was less integrated in world markets at the end of 2006 than it was a decade earlier measured by intense export openness…Canadian exports reached their peak at over 45 percent of the share of Canada’s total GDP in 2000; by 2007 this had declined by 10 points to 35 percent.
Here is yesterday’s related post on America. Here is my earlier post on Harold Innis.
Specs that see right through you
The glasses can send me this information thanks to a built-in camera linked to software that analyses Picard’s facial expressions. They’re just one example of a number of “social X-ray specs” that are set to transform how we interact with each other. By sensing emotions that we would otherwise miss, these technologies can thwart disastrous social gaffes and help us understand each other better. Some companies are already wiring up their employees with the technology, to help them improve how they communicate with customers. Our emotional intelligence is about to be boosted, but are we ready to broadcast feelings we might rather keep private?
For one thing, it could be used to improve the efficiency of sales calls, albeit at a cost to privacy. The full article is here and Robin Hanson thinks we might ban such devices.
The new Commanding Heights
That’s Arnold Kling’s phrase, here is the fact:
…close to 98 percent of the 27.3 million new jobs in the American economy in the last two decades were created in the nontradable sectors, led by government and health care in first and second place.
Elsewhere, I call these the “low accountability” sectors.
Will this wage prove flexible downwards?
Williams may also be upset over the financial fallout. He was golf’s top-earning caddie, earning $1.27 million for lugging Woods’ bags in 2007.
The guy was just fired. This guy may be facing a wage cut too.
Assorted links
1. Emergency markets in everything.
2. The dolphin Solow residual.
3. How much is life expectancy expected to rise?
4. From the Levy and Peart Summer Institute, history of economic thought videos and papers.
North America has always (since colonialism) been wealthier than Latin America
From a new paper by Robert Allen, Tommy Murphy, and Eric Schneider:
We begin by measuring real wages in North and South America between colonization and independence, and comparing them to Europe and Asia. We find that for much of the seventeenth and eighteenth centuries, North America was the most prosperous region of the world, offering living standards at least as high as those in the booming parts of North-Western Europe. Latin America, on the other hand, was much poorer and offered a standard of living like that in Spain and less prosperous parts of the world in general.
It is a common view that North America had to play catch-up, but the extensive data sets in this paper suggest that North American wages were up to twice as high as the general level of wages further south.
For the pointer I thank Mark Koyama on Twitter.
How guilty should you feel about eating lamb?
A few days ago this chart made the rounds in the blogosphere. It shows, among other things, that eating lamb is much worse for the environment than is eating beef. A key part of the problem is that a greater percentage of the cow ends up being used for food, compared to the sheep. You therefore might be tempted to apply a heftier carbon tax, or “personal guilt tax,” to the lamb, but not so fast.
To the extent that farmers feed a whole big lamb and get a little squib of meat in return, the price of lamb is already correspondingly higher than the price of beef (where the tripe is sold to Italy, the cheese is sold to Kraft, etc.). Consumers are already internalizing this relative price difference between cows and sheep.
The correct response is to eat less meat of all kinds. It’s not obvious you need to apply a special tax (fiscal or conscience tax) to lamb, above and beyond the general meat tax which is called for.
You may reject a constant returns to scale or proportionality assumption and view the proper tax as a fixed mark-up on both beef and lamb. That still will lower the relative price of the costlier item.
In terms of animal welfare, a sheep is probably free range with greater probability than is a cow, which somewhat favors lamb consumption again in relative terms only.
You can make other assumptions and get other results, naturally. Still, in relative terms there is no prima facie presumption against lamb compared to beef.