Best non-fiction books of the twentieth century
Here is a left-wing list. Here is a National Review list, with Hayek and Robert Conquest near the top. Here are two Random House lists. The critics elevate Henry Adams, William James, and Booker T. Washington. The readers favor Ayn Rand, L. Ron Hubbard, and John Lott. The readers’ list has all kind of libertarian books, including David Boaz and Tibor Machan. Thanks to the ever-interesting www.politicaltheory.info for the link. All of the lists make for fun browsing, especially once you start thinking about the contrasts.
How free market is the Chilean miracle?
The major economic successes of Chile are commonly considered to be a free market miracle. To be sure, there is much truth to this characterization. The Pinochet regime engaged in extensive privatization and deregulation and moved to free trade. Agriculture, services, copper mining, and telecommunications all boomed. The Chilean economy has been the envy of Latin America for some time now. The country also has few problems with corruption.
The reality nonetheless is more complex than a simple market story may imply, read this thorough account. The Chilean state has grown stronger as the Chilean economy has prospered. In the 1990s, Chile has doubled corporate taxes, almost doubled its minimum wage, and more than doubled spending on health and education. Here is another account of how social spending has gone up during the 1990s. Chile also has maintained tight capital controls on foreign investment until 1999. The vaunted Chilean social security privatization in fact superimposed a system of private accounts on an already-existing governmental system, which did not disappear. Yet in the 1990s the country continued to prosper. Chile grew by an average of 5.9 percent a year.
The bottom line: The world has seen massive liberalizations over the last twenty-five years and all for the better. But with few exceptions these reforms have strengthened rather than overturned welfare states. New Zealand, for instance, also has not cut its welfare spending. Welfare states are, in part, the price we pay for public order, whether or not they always make economic sense. When it comes to economic development, the question is not state vs. market. Rather poorer countries need both stronger markets and stronger (as distinct from more tyrannical) states. Chile is generating strong institutions across the board, in both private and public realms. In contrast, look at Mexico, where government taxation takes only 12 percent of gdp. In Mexico the problem is not to cut the absolute size of government per se (although I can think of some obvious and good steps in this direction, such as introducing more electricity competition) as to reduce corruption and improve the quality of governance. Until market-oriented reformers understand this basic distinction, we will continue to give bad advice and generate only mixed results for market-oriented ideas.
Sleep on it
A good night’s sleep can help you think better and solve problems more effectively.
German scientists say they have demonstrated for the first time that our sleeping brains continue working on problems that baffle us during the day, and the right answer may come more easily after eight hours of rest.
The German study is considered to be the first hard evidence supporting the common sense notion that creativity and problem solving appear to be directly linked to adequate sleep, scientists say. Other researchers who did not contribute to the experiment say it provides a valuable reminder for overtired workers and students that sleep is often the best medicine…
Scientists at the University of Luebeck in Germany found that volunteers taking a simple math test were three times more likely than sleep-deprived participants to figure out a hidden rule for converting the numbers into the right answer if they had eight hours of sleep. The results appear in Thursday’s issue of the journal Nature.
Here is the full story. Here is another account, with a link to the original research. I will note that I typically review previously written MR postings after a night of good sleep.
Did a big chill kill off the Neanderthals?
Read this recent article. They just didn’t have the technology to adopt to colder climes. You also can feel better about Homo Sapiens. According to this account, human beings, far from having killed off the Neanderthals, almost suffered the same fate of extinction.
Automatic parallel parking
You operate the brakes, the computer controls the car and fits it into the parking space. This is now a $2,200 option, available on some Toyotas in Japan. Here is the full account. Eighty percent of the eligible customers are opting for this package. My view? If you can’t parallel park, I bet you screw up on the operation of the machine.
Are athletes Bayesians?
Mark A. Walker and John C. Wooders, economists at the University of Arizona, recently studied old videotapes of tennis matches involving stars like Bjorn Borg, Ivan Lendl and Pete Sampras. The economists looked at the serves in each match to see how well players randomly altered playing the ball to an opponent’s forehand or backhand.
Many people do poorly on similar tests when they are conducted in a laboratory. Ask somebody to write down a list of hypothetical coin-flip outcomes, for example, and the result will probably contain too few streaks of heads or tails. Because people know that the overall odds are 50-50, they underestimate how often three straight tails or four straight heads turn up.
But professional tennis players realize, on some level, that their opponent will have an advantage if he knows that a serve to the forehand is likely to be followed by one to the backhand. They do a relatively good job of mixing serves, though still not as randomly as a computer program would, Professors Walker and Wooders reported in a 2001 paper.
Controlled experiments yield similar results, read this account from The New York Times.
Here is the bottom line:
The more uncertainty that people face – be it caused by wind on a tennis court, snow on a football field or darkness on a country highway – the more they make decisions based on their subconscious memory and the less they depend on what they see.
Related research by Doru Cojoc of Clemson shows that chess players play mixed strategies to keep their opponents off balance. Furthermore they are more likely to play such sophisticated strategies, the higher the rewards on the line.
By the way, even plants seem to perform implicit calculations when they breathe, read this recent account. Armen Alchian, of course, once postulated a similar conjecture, namely that plants maximize sunlight without any conscious awareness of such a process.
Smoking less doesn’t always help
Many smokers manage to smoke fewer cigarettes. The problem is that they often puff all that much harder. In the long run they may not end up much healthier, read this account. By the way, Sam Peltzman has studied this phenomenon more generally. We can do things to make people safer, but they respond by taking more risks. Thanks to Jon Klick for this latter link.
A wonderful Australian painting
Click here for an image of a painting by Fred Williams. Here is a more general site about the painter.
The case for lifetime savings accounts
Glenn Hubbard, former chair of the CEA, argues that we should not tax savings:
While the Lifetime Saving Account (LSA) offers substantial simplification benefits, it also offers a vehicle to save more easily for a downpayment on a home, children’s education, or for medical expenses. With no withdrawal penalties, the account’s greater liquidity will encourage individuals to save, particularly moderate-income households worried about tying up funds for a long period of time. Like the president’s proposal to eliminate investor-level taxes on dividends, the LSA lays claim to the idea that income should be taxed only once. Indeed, given the generous contribution limits, most households could avail themselves of a consumption tax akin to the Flat Tax. They would pay taxes once when they earned wages or business income, but not again on returns to saving. This is an important step toward fundamental tax reform, particularly if the administration continues its recognition of the costs of double taxation of corporate income.
How much would capital accumulation go up?
To assess the impact on capital formation, one should compare the present value of additional private capital formation to the present value of lost tax revenue. Jonathan Skinner of Dartmouth College and I estimated that with even 25 cents of each dollar contribution as new saving, IRA contributions generate $2.21 of new capital per dollar of net revenue cost. If, as suggested by Harvard economist Martin Feldstein, one includes corporate income tax revenue from the higher capital stock made possible by the saving incentives, the ratio rises to $4.84 of net capital per dollar of new revenue cost. If each dollar of contributions contains 40 cents of new saving and one incorporates higher corporate income tax receipts, the savings incentives are actually self-financing.
My take: I’m totally on board kind of sort of. Until we address runaway government spending, tax changes will only bust the budget in the shorter run. Even with elasticity optimism, we won’t ever arrive at the self-financing equilibrium. Furthermore I will never have that much faith in any particular numerical projection. My main worry is stopping the current drain of resources from the private sector. And no, a trip to Mars is not just what the doctor ordered. Right now U.S. fiscal policy needs credibility and needs it badly. Won’t markets just think that any revenue boost will fly out the window as quickly as it comes in? Isn’t politics, and thus economics, first and foremost about subjective perceptions? Hubbard’s proposal, for all its merits, doesn’t address the core problems.
Addendum: Here is Brad DeLong’s recent post on the fiscal costs of social security privatization plans.
Fact of the day
The States and Puerto Rico, combined, spent $24,875,170 on lobbying the federal government, in the 1998-2002 period. About four-fifths of this money – $19,804,609, was spent by Puerto Rico. Much of the lobbying is directed at either statehood or greater federal benefits. One (partisan) source estimates that Puerto Rican statehood would involve a $3 billion welfare tab, in addition to food stamps for half of the island’s population. Here is the full story.
Why do parents adopt so many girls?
The evidence suggests that fathers prefer boys over girls. For instance a couple is more likely to stay married when they have a boy rather than a girl. Here is my earlier summary of the research.
At the same time couples are far more likely to adopt girls rather than boys? How can this be?
A recent Slate article offers some figures:
Numbers vary, but it’s pretty safe to say that somewhere between 70 percent and 90 percent of parents looking to adopt register some preference for a girl with an agency. It doesn’t matter if they’re adopting from China, where girls far outnumber boys; from Russia, where the numbers are about even; or from Cambodia, where there is typically a glut of orphan boys and a paucity of girls. Everywhere, demand tends to favor the feminine.
Steven Landsburg had suggested an adverse selection argument. Yes boys are favored but if a boy is put up for adoption, you can figure there is something wrong with the boy, for precisely that reason.
Or perhaps it is easier to nurture girls, and the nurturing motive may be central to the adoption decision. It also may be the case that mothers prefer girls and mothers also drive adoptions:
“The extent to which women are the driving force in most adoptions is probably a factor,” he says. “It’s usually true that the women are filling out the paperwork, going to the conferences, the support groups.” He adds, “If I speak at a conference–whether it’s on adoption or family issues–at least 80 to 90 percent of any of these audiences are women.”
My take: Having a boy is a riskier investment than having a girl. The risk rises dramatically with adoptions, given the associated genetic uncertainty. Males are more likely to have genetic roots for criminality and mental illness. So if you don’t know much about the parents, better to play it safe and opt for a girl.
Why can’t you find your favorite song?
… fans who venture onto any of the pay music sites will not find the most popular band ever, the Beatles. They will not find other top-selling acts, such as the Dave Mathews Band, Garth Brooks, the Grateful Dead, AC/DC and the Cars.
They will find that top-selling acts Madonna and Red Hot Chili Peppers sell their songs by the album, but not as singles.
They will find some musicians on one service, but not on others. They will find puzzling choices: Led Zeppelin fans can buy a 47-minute spoken-word biography of the band online, but no Zeppelin songs because the band has not licensed them for sale on the Internet.
Why are these potential gains from trade not being exploited?
1. Some artists are holding out for a higher price or better terms. This can mean either a better cut for the artist, or the artist does not like the “all songs for 99 cents” model of iTunes.
2. Many artists feel that selling songs on an individual basis takes them out of proper context or cannibalizes sales for the album.
3. Pre-1998 contracts do not specify Internet rights to the songs. Assignment of Internet rights can require the underlying contract to be renegotiated.
4. Renegotiations must involve both the performer and the songwriter.
5. Often the relevant parties cannot be found or are otherwise difficult to deal with. One executive said: “You can be sure the heirs are a son and daughter who aren’t talking to each other and one of those two is getting divorced.”
Here is the full account. You will find stories of high transaction costs, poorly defined property rights, and stubborn holdouts, all the classic predictions of institutional failure theories.
The bottom line: Selection, not just price, remains a big advantage for non-legal downloading. If iTunes and related services are to make it in the long run, they will need to offer near-universal choice of music.
Bottom lines:
The strategy of bankrupting the country to appease various interest groups hasn’t worked too well.
Andrew Sullivan on the Bush administration, read the whole post.
What is the most corrupt state?
In a recent study Louisiana only comes in third, Mississippi takes top honors, followed by North Dakota. The District of Columbia has a disproportionate share of convictions, but it does not count as a state. Nebraska is measured as the least corrupt state, Oregon, New Hampshire, and Iowa are also near the bottom. Here is the story, here is the source account and study.
A Baton Rouge headline reads “La. not No.1 in Corruption.” Former governor Edwin Edwards received ten years in prison for corruption-related charges, one case of many in Louisiana history. The last three insurance commissioners have gone to jail for corruption.
Crime, cocaine, and marijuana
Serious and violent crimes dropped more than forty percent during the 1990s, more than can be explained by demographic shifts. One reason for the crime drop has been the shrinking trade in crack cocaine, here is one account and a more detailed treatment. For whatever reasons, crack has turned out to be a one-generation drug. As crack fell in popularity, crime rates have fallen in turn.
Richard Rosenfeld, writing in the February Scientific American, raises but does not answer the question why crack markets have bred so much violence compared, say, to marijuana markets. I have thought of several possible and related hypotheses:
1. Cocaine supply, which requires processing in Colombia labs, is more centralized in nature. Centralization leads to monopoly profits and thus a greater incentive for violence to protect territory. There will be mobs and mafias at the top of the supply chain. They will feel threatened if anyone invades their turf, and the tendencies for violence work their way down to the retail level.
2. Marijuana is closer to a constant cost supply drug. You can always grow some in your backyard. The power of mobs is limited correspondingly and the incentive to invest in marketing and addicting your customers is weaker.
3. Marijuana is more of a depressant than is crack. Users are less likely to turn violent when deprived of the drug. Marijuana is less addictive in the sense of inducing total desperation.
4. Crack, which was essentially a new drug, required greater marketing than did marijuana. Marketing led to fights over turf and to violence.
5. Marijuana is used by many members of the middle and upper middle classes. Crack has been more popular in ghettos and with lower income groups, in part because it is potent and cheap. The reasons for the violence differential are found in the nature of the respective clienteles, rather than in the nature of the drugs per se. For instance, when drug carriers walk through a ghetto to supply their customers, they are at greater risk, more likely to carry a gun, more likely to meet with a gang, and so on.
Further ideas from readers are welcome.
The bottom line: When it comes to crime, it matters a great deal which drugs people are taking. Furthermore, if we are able to legalize some but not all drugs, we should consider legalizing the most objectionable drugs, not the tamest ones. Legalizing marijuana, whatever its merits and demerits, would not make a huge dent in the crime rate.
Addendum: Ed Lopez adds the following:
1. Crack is split up a lot more than marijuana so it has (had) far higher markup once it hit the street.
2. The early profiteers were the street distributors who discovered how to multiply the number of doses from the uncut cocaine. That gave suppliers higher up the chain something to grab at.
I think a lot of the violence question boils down to risk-takers competing for rents that weren’t protected by contract.
3. Crack is more ephemeral than pot and used with greater frequency, so users are more prone to commit crimes to acquire additioanl doses.