Category: Current Affairs

The myth of the rational donor? (model this)

At first glance this may sound a little whacky, but perhaps the deeper question is why more donors are not like this?:

“I’m all mixed up between being a conservative and a liberal,” said Kurt Schoeneman, a grape grower from Northern California, who added that some of his friends thought he was “senile.” He had found himself seized by waves of enthusiasm, Mr. Schoeneman said — first for one candidate and then for the other.

“Some of these people, they just loathe Obama, and they’ll write something really nasty about him,” said Mr. Schoeneman, who has given checks to both candidates, most recently $100 to Mr. Romney in June and $100 to Mr. Obama in July. “And then something else will happen, and I’ll go give Romney some money.”

Charles Y. Chen, a salesman in Virginia, gave Mr. Romney $100 on the day of his convention speech in late August. But in September, Mr. Chen donated to Mr. Obama every few days, $50 here, $55 there. Then he switched again, giving Mr. Romney $50.

“I think the Republicans have better ideas on the economy and the Democrats have better ideas on social issues, immigrationand social justice,” Mr. Chen said in an interview. “Just like anything, both have something that they do great and something that they need to improve.”

Gretchen Davidson, a homemaker in Birmingham, a Detroit suburb, said she had gone to several events to hear different ideas and arguments. She gave $500 to Mr. Romney in early August and $1,500 to Mr. Obama in late September.

“You have friends that throw parties on each side, and honestly, I am someone in the middle that didn’t really know which way I was going,” Ms. Davidson said. “You try to sort of see what people are so excited about.”

These are not lobbyists who need to hedge their giving:

Mr. Bagchi gave $100 each to both candidates on Sept. 8, he said, because “they are doing good work for the country. And I want them to come together. So for that reason, I gave to them both.”

Mr. Bagchi said that while he usually gave equally to both candidates, he had recently responded to a particularly personal appeal from the Obama campaign.

“I have given a little more to Barack Obama because he and Michelle were celebrating their anniversary,” he said. “But on balance it was very equal.”

When the hoarding equilibrium sets in

There were no laws against price gouging. But the petrol stations knew that every single customer would hate them if they were the only station to let prices rise such that supply and demand came back into equilibrium. And so because the stations didn’t gouge, we were in a terrible equilibrium where everyone’s rational response to the below-clearing price was to hoard, because there was real risk that the stations would run out of fuel. And there was real risk of running out of fuel because of the hoarding. Breaking the hoarding equilibrium would have required a coordinated price hike that both allocated fuel to its highest valued uses and told everyone that there would be fuel available for them in an emergency if they really really needed it. That latter part is crucial – it kills the incentive to hoard.

That is from Eric Crampton.  Eric makes a further point.  Even in the absence of laws against price gouging, individual stations may be reluctant to raise prices and incur the wrath of customers.  Yet if all stations would raise prices, and markets would clear, consumers would know they could get emergency gasoline if they had to.  That would help break the hoarding equilibrium, if done collectively.  The real market failure may be the unwillingness to raise prices.

Addendum: Here is what we are getting: “He also said the Defense Department was sending in 12 million gallons of fuel to be pumped from five mobile stations. “They’ll have a 10-gallon limit,” the governor said. “The good news is, it’s going to be free.”

A Bet is a Tax on Bullshit

Nate Silver, whose models give Obama a high probability of winning reelection, has offered one of his critics a bet. “Putting your money where your mouth is,” is a time-honored principle of integrity in my view but the NYTimes Public Editor is very upset. Margaret Sullivan, however, never offers an argument against betting instead treating it as unseemly.

[Betting is] inappropriate for a Times journalist, which is how Mr. Silver is seen by the public even though he’s not a regular staff member.

“I wouldn’t want to see it become newsroom practice,” said the associate managing editor for standards, Philip B. Corbett. He described Mr. Silver’s status as a blogger — something like a columnist — as a mitigating factor…

…When he came to work at The Times, Mr. Silver gained a lot more visibility and the credibility associated with a prominent institution. But he lost something, too: the right to act like a free agent with responsibilities to nobody’s standards but his own.

The closest to an argument against betting is this:

…whatever the motivation behind it, the wager offer is a bad idea – giving ammunition to the critics who want to paint Mr. Silver as a partisan who is trying to sway the outcome.

My best parse of the argument is that by betting Silver has given himself an interest in the election and this hurts his credibility. Nothing, however, could be further from the truth.

A properly structured bet is the most credible guarantor of rigorous disinterest. In order to prove his point, Silver is not required to take the Obama side of the bet! At the odds implied by his model (currently between 3 and 4 to 1) Silver should be willing to take either side of a modest bet. Indeed, we could hold a coin toss, heads Silver takes the Obama side, tails he takes Romney.

In fact, the NYTimes should require that Silver, and other pundits, bet their beliefs. Furthermore, to remove any possibility of manipulation, the NYTimes should escrow a portion of Silver’s salary in a blind trust bet. In other words, the NYTimes should bet a portion of Silver’s salary, at the odds implied by Silver’s model, randomly choosing which side of the bet to take, only revealing to Silver the bet and its outcome after the election is over. A blind trust bet creates incentives for Silver to be disinterested in the outcome but very interested in the accuracy of the forecast.

Overall, I am for betting because I am against bullshit. Bullshit is polluting our discourse and drowning the facts. A bet costs the bullshitter more than the non-bullshitter so the willingness to bet signals honest belief. A bet is a tax on bullshit; and it is a just tax, tribute paid by the bullshitters to those with genuine knowledge.

Very good points on FEMA

From Jordan Weissmann:

We’ve nationalized so many of the events over the last few decades that the federal government is involved in virtually every disaster that happens. And that’s not the way it’s supposed to be. It stresses FEMA unnecessarily. And it allows states to shift costs from themselves to other states, while defunding their own emergency management because Uncle Sam is going to pay. That’s not good for anyone.

When FEMA’s operational tempo is 100-plus disasters a year, it’s always having to do stuff. There’s not enough time to truly prepare for a catastrophic event. Time is a finite quantity. And when you’re spending time and money on 100-plus declarations, or over 200 last year, that taxes the system. It takes away time you could be spending getting ready for the big stuff.

Nobody is taking the position, that I know of, saying get rid of FEMA, the federal government should have no role responding to disasters. The position is, no no, we need to save FEMA and the Federal Government for the big stuff: Sandy, Katrina, Northridge. But states should be charged to take care of the other, more routine stuff that happens every year. There are always going to be Tornadoes in Oklahoma and Arkansas. There are always going to be floods in northwest Ohio and Iowa. There are always to be snowstorms in the Northeast. There are always going to be rain storms, fires in Colorado. They happen every year. There’s no surprise here. And they don’t have national or regional implications, economically or otherwise. If they do, that’s a different question.

Read the whole thing.

Andreu Mas-Collel calls for Catalonian secession

The article, in Spanish, is here.  He refers to staying in Spain as “el camino de la decadencia.”  By the way, he is now the finance minister of Catalonia.

He taught me Ph.d Micro I at Harvard, so it’s too bad he wants to wreck both Spain and Europe, and for so little in return.  Didn’t one of his theorems suggest this was a bad idea?  It’s not as if Catalonia is treated like Tibet.  (Haven’t I spent a few nice days walking around Barcelona in my time?  Didn’t Air Genius Gary Leff get a decent meal at El Bulli?  Didn’t they once make a young people’s movie about the place in which no one has to do any work?)  Don’t we have bigger problems to worry about?  How easily does he think negotiations for separation can go, especially with entire eurozone deals at stake and a Spanish history of sending in troops?  He mentions that the territory is subjected to «humillación constante» de España.  Maybe he’s been misquoted, but from what I see I take this as a paradigm example of how a really smart person can be taken in by rather primitive tribal arguments.

The only way to defend this move is a kind of Leninist “things must get worse before they get better” approach to the eurozone.  Even if that is true, this hardly seems like the smoothest way of traversing that path.

For the pointer I thank @AlexFont.

Price flexibility

If you think Chinatown normally has an unpleasant odor, imagine what it smells like 24 hours following no refrigeration. Street vendors were trying to unload perishables at bargain prices. I saw a fish weighing roughly 20 pounds and spanning 3 feet from head to tail go to a buyer for $1 dollar. $1 dollar!!!!!

Here is more, sad and tragic and informative throughout.  Hat tip goes to David Wessel and @lisang.

The french fry culture that is Japan

The supposed employee added that other customers had complained. The issue seems to have been that the French fry eating went on for three hours, with the group eating sixty orders of French fries. It looks like one table was used for the feeding frenzy, while the adjacent walkway was packed with their friends who watched. Basically, the supposed employee seemed most upset about the lack of courtesy on their part.

What’s more the supposed employee pointed out that sixty orders of French fries the roughly the equivalent of one home crate of frozen fries.

“Plus, during our restaurant’s busiest period, 11am to 2pm, there was no prior notice about such a large order [from you], and this impacted what food and what tables we could offer to other customers.” The supposed employee asked them to be aware of the time. Though, this McDonald’s really should have been more aware of what would happen when a group of kids order sixty large fries.

That’s not even the main point of the story, good photos too.

For the pointer I thank Michael Rosenwald.

The EconLog team winning strategy

Pretend Arnold Kling has departed, get under the salary cap, take on Garett Jones and Luigi Zingales (sixth man), keep Bryan and David in the starting line-up, and then get Arnold back again.  Here is Arnold’s very important post on NYC recovery.  I don’t myself have any particular prediction, but I will say this is a real test of how well this country can these days do infrastructure.

Tuition by Major

A task force convened by Florida Governor Rick Scott has recommended changes in tuition subsidies according to job market demand:

Tuition would be lower for students pursuing degrees most needed for Florida’s job market, including ones in science, technology, engineering and math, collectively known as the STEM fields.

The committee is recommending no tuition increases for them in the next three years.

But to pay for that, students in fields such as psychology, political science, anthropology, and performing arts could pay more because they have fewer job prospects in the state.

“The purpose would not be to exterminate programs or keep students from pursuing them. There will always be a need for them,” said Dale Brill, who chairs the task force. “But you better really want to do it, because you may have to pay more.”

The task force has the right idea but the right way to target subsidies is not to the job market per se (let alone Florida’s job market), wages already reflect job market needs. Subsidies instead should be targeted to fields where education has the greatest positive spillovers, benefits that spill over wages and flow to the public at large. Overall, this likely means subsidizing the STEM fields more than anthropology which is why the taskforce has the right idea. If the task force wants to explain the idea, however, they should make it clear that the goal is to focus subsidies on those fields where education most benefits the taxpayer.

Words of wisdom

Some people I know will hate it when I say this, but as written by E.J. Dionne, this seems to me true, true, true:

The right wing has lost the election of 2012.

The evidence for this is overwhelming, yet it is the year’s best-kept secret. Mitt Romney would not be throwing virtually all of his past positions overboard if he thought the nation were ready to endorse the full-throated conservatism he embraced to win the Republican nomination.

…The right is going along because its partisans know Romney has no other option. This, too, is an acknowledgment of defeat, a recognition that the grand ideological experiment heralded by the rise of the tea party has gained no traction.

There is more at the link.

The nature of UK austerity

Veronique de Rugy sums up many points I continue to be thinking:

When I looked at the data back in June, we saw that of the roughly £40 billion that was shaved from the deficit during the 2010–2011 budget cycle, for every £3 of new tax revenue, U.K. taxpayers got £1 in cuts — exactly the reverse of what was promised.

What’s more, the evidence indicates that U.K. has, at best, slowed down the growth of spending, but it has not engaged in actual spending cuts. I documented the trend in British spending earlier this year:

A look at the data in Her Majesty’s Fiscal Year 2012 Budget shows (see table 2.3) that total managed expenditures will increase from £696.4 billion in 2011–2012 to £733.5 billion in 2014–2015, and further to £756.3 billion in 2016–2017. Adjusted for population growth, this is slow growth, but not a savage cut. That table also shows a “projected” drop in Public Sector Gross Investment between 2012–2013, but if it ever materializes, it will be contained to that year alone.

Spending cuts in the UK can’t be blamed for the weak growth path the country is on. On the other hand, tax increases can. Here is a list:

(For more, go here.) The bottom line is that the U.K. is another case of private-sector austerity (i.e., tax hikes) without public-sector austerity (i.e., spending cuts).

For more detail, here is a new and very good paper by Anthony Evans.  Here are some interesting remarks from Nicholas Crafts.

There is a great stagnation

Singapore Airlines Ltd. (SIA) will end non-stop services to Newark, the world’s longest commercial flight, next year as it phases out the aging planes used on the route.

The all-business-class flights will end in the fourth- quarter of next year, along with similar services to Los Angeles, the airline said in a statement yesterday, as it announced an order for 25 Airbus SAS aircraft. The Toulouse- based planemaker will acquire the five four-engine A340-500s used on the non-stop routes as part of the deal.

The end of the almost 19-hour service to Newark will lengthen Singapore travelers’ trip by more than three hours as they will have to change planes in London.

Here is more, and note that the new aircraft are designed to serve the budget market in the future.