Category: Current Affairs
Richard T. Gill
Richard T. Gill, in all statistical probability the only Harvard economist to sing 86 performances with the Metropolitan Opera, died on Monday…He was 82.
The article is here. Gill wrote many widely used texts and oddly he did not begin vocal training until he was almost forty. Up until that point, he had little acquaintance with classical music and he smoked two and a half packs of cigarettes a day. He first performed in a staging of Figaro at Harvard, directed by John Lithgow and conducted by John Adams (the John Adams). Later, he was in the world premiere of Philip Glass's Satyagraha. Gill continued to write and edit textbooks throughout his singing career.
In 1971 he gave up his tenure at Harvard. In 1984-85 he hosted a 28-part PBS show on economics. In the 1990s he wrote two books, one on population the other on the decline of the American family. Here is Gill's proposal for a Parental Bill of Rights. His short stories for Atlantic Monthly and The New Yorker were widely anthologized and in 2003 he published his first novel.
Here is his home page. At the time of his death he was working on a three to four-volume autobiography. As a Harvard undergraduate he was a successful boxer and somehow he ended up as an Assistant Dean at Harvard by age 21 and later Master of Leverett House.
Life inside the PPF
The plane came down despite no apparent mechanical problems during an internal flight in the Democratic Republic of Congo.
It has now emerged that the crash was caused by the concealed reptile escaping and causing a stampede in the cabin, throwing the aircraft off-balance
A lone survivor apparently relayed the bizarre tale to investigators.
The crocodile survived the crash, only to be dispatched with a blow from a machete.
The goal had been arbitrage, namely to sell the crocodile in the destination locale. The full story is here and for the pointer I thank A.L. and also R.
Who said this?
What governments spend on relief work is secondary to what it spends on its armies…Merchants are the knights who will save this region from famine and must avoid investing in worthless projects…
The answer is here, no peeking!
The Chinese rare earth embargo
Are they extending it to the U.S.? Didn't Nimzovich once say "The threat is stronger than the execution"? Read earlier posts by Reihan Salam and Tim Worstall on the issue and here is the background paper (pdf) I've already linked to.
China projection of the day
From Ted Fishman, the demographic turning point is coming sooner than I had thought:
In 2015, China’s working population below the age of 65 will begin to shrink. Meanwhile, the number of people over 65 will be rising to 300 million by 2050, a threefold increase.
How would Beijing respond to yuan revaluation?
Most of all the Chinese leadership is worried about maintaining jobs (sound familiar?). And so:
It will lower real interest rates and force credit expansion
This of course will have the effect of unwinding the impact of the renminbi appreciation. As some Chinese manufacturers (in the tradable goods sector) lose competitiveness because of the rising renminbi, others (in the capital intensive sector) will regain it because of even lower financing costs. Jobs lost in one sector will be balanced with jobs gained in the other.
But there will be a hidden cost to this strategy – perhaps a huge one. The revaluing renminbi will shift income from exporters to households, as it should, but cheaper financing costs will shift income from households (who provide most of the country’s net savings) to the large companies that have access to bank credit. So China won’t really rebalance, because this requires a real and permanent increase in the household share of GDP. Instead what will happen is that it will reduce Chinese overdependence on exports and increase China’s even greater overdependence on investment.
This will not benefit China. It will fuel even more real estate, manufacturing and infrastructure overcapacity without having rebalanced consumption. Expect, for example, even more ships, steel, and chemicals in a world that really does not want any more.
That's from Michael Pettis, and here is more.
Lionel W. McKenzie has passed away at 91
Here is his Wikipedia page. McKenzie was one of the most important figures in proving the existence of a competitive general equilibrium and also in developing the turnpike theorem. Here is a short bio. He was a formative factor in founding and shaping the graduate economics program at the University of Rochester, where he taught for decades. He was especially famous in Japan for having taught and guided so many Japanese doctoral students. His paper "Demand theory without a utility index" remains a classic, as it helped show how much of standard economics was independent of particular assumptions about utility. He was an early influence on the idea of computing economic equilibria. He also had respected papers in trade theory; here is McKenzie on scholar.google.com.
Markets in everything
The 33 trapped Chilean miners have moved to stop any individual from profiting at the expense of the group, drawing up a legal contract to share the proceeds from the story of their ordeal.
The group have already rejected requests for interviews and have instead made plans to jointly write a book about the days spent trapped below the Atacama Desert following the mine collapse on August 5.
We'll see if that holds up. The full story is here and for the pointer I thank Eric Hartley. Is it unethical to pay an individual miner for the story of the group?
Peter A. Diamond, Dale T. Mortensen, Christopher A. Pissarides
They are the new winners of the Nobel Prize. I'll be adding updated information for the next hour or two, so if you use RSS please visit the blog's home site for the latest!
This is a prize for search theory and labor markets and job matching, all very important ideas today, especially in the United States. It is a well deserved prize and all authors have produced very well-cited and very influential papers. It is a theory prize, although Diamond in particular also has some empirical papers. I'll write a separate post for each economist.
Maurice Allais
French physicist and economic Nobel Laureate Maurice Allais has died at age 99. Allais is best known among American economists for the Allais paradox but Allais was a polymath with contributions (and JSTOR here) in a huge number of areas many of which were often overlooked because his work was not translated into english (an unfortunate fact which is still true today).
One thing that few people know about Allais was that he was a big proponent of the gold standard and Austrian business cycle theory, even citing Mises and Rothbard in some of his work. See in particular his paper in English, The Credit Mechanism and its Implications (1987) in Feiwel (ed), Arrow and the Foundations of the Theory of Economic Policy. See also here for further citations in french.
As might be expected from a polymath, Allais's views are difficult to pigeonhole. He was a strong proponent of private property and the market economy, for example, but to create the consensus necessary to produce such a society he also favored immigration restrictions and protectionism.
Amazingly, Allais also conducted ground breaking experiments on pendulums which earned him the 1959 Galabert Prize of the French Astronautical Society and which may have revealed an anomaly in general relativity that physicists refer to as the Allais effect.
The Charter 08 document
It helped Liu Xiaobo win a Nobel Peace Prize. Here is one good paragraph of many:
Protection of Private Property. We should establish and protect the right to private property and promote an economic system of free and fair markets. We should do away with government monopolies in commerce and industry and guarantee the freedom to start new enterprises. We should establish a Committee on State-Owned Property, reporting to the national legislature, that will monitor the transfer of state-owned enterprises to private ownership in a fair, competitive, and orderly manner. We should institute a land reform that promotes private ownership of land, guarantees the right to buy and sell land, and allows the true value of private property to be adequately reflected in the market.
Hat tip goes to Matt Yglesias.
CA Organ Donor Law
California has a new law creating a live donor registry for kidney transplants and requiring California drivers to say yay or nay on whether they want to be organ donors when they renew their drivers' licenses. The law was passed with the prodding of Steve Jobs who last year had a liver transplant.
The live donor registry is very good. The required declaration is mixed but I hope it works. I see it as follows. The benefit is that if a potential donor has said yes to organ donation then next of kin almost always agree to their wishes so if more people positively affirm that is good. The cost, however, is that now "no" really means "no" and next of kin will presumably agree to that as well. Previously, next of kin might have said yes to non-signatories. Let's use some back of the envelope figures:
100 potential donors
20 signed organ donor cards
80 do not sign but, among these, half the families say yes so 40.
Total: 60 donors.
So with declaration you need more than 60 to agree to be organ donors, i.e. a huge increase in those saying yes. It could happen if what people say on surveys about supporting organ donation is true but I would have been much happier with even a small incentive to sign. How about a free iPhone for signatories? Or at least some more minutes!
See here for more on incentives and organ donation.
Addendum: Nudge blog has some helpful comment–the law appears to be closer to mandated ask than mandated choice.
Mario Vargas Llosa wins Nobel Prize
That's for literature, sadly he never had the chance to win a prize for economics, as his political career as a Peruvian classical liberal was cut short by electoral defeat. He has many fine books but I have two particular favorites: The War of the End of the World (serious and epic, concerning a millenarian revolt in Brazil) and Aunt Julia and the Scriptwriter (a fun story and spoof of telenovela culture). Conversation in the Cathedral is sometimes considered a classic but I find it unreadable. I suspect his early The Green House will resonate more with Latin Americans. His last major novel, The Bad Girl, was entertaining but not entirely satisfying and it reminded me a bit too much of an older man writing about sex. The Feast of the Goat is a very good study of political power. Here are previous MR mentions of Mario Vargas Llosa.
Here is Wikipedia on Vargas Llosa. Alex has done a good bit of work with Alvaro Vargas Llosa, son of Mario and a prominent writer on classical liberal themes, and perhaps he will relate some of that to us.
Economics Nobel odds at iPredict
iPredict is running contracts on who will win this year's Nobel Prize in Economics. As I write Oliver Hart heads the field with a 25% chance, Robert Schiller, Richard Thaler, Martin Weitzman come next, all with an 18% chance of winning.
Also listed are William Nordhaus, Jean Tirole, Angus Deaton, Richard Posner, Gene Grossman, Ernst Fehr, Gordon Tullock, Avinash Dixit, Sam Peltzman, Eugene Fama and Robert Barro.
It does seem to be a market based on real money payments, though I am not sure how much liquidity is there. The direct link to the contracts is here and right now Thaler is leading. The link cited above is here and for the pointer I thank Eric Crampton.
Should they have let the guy’s house burn down?
David Henderson blogs some of the basic information (Cohn at TNR comments here). Here is the upshot:
He refers to a story about a man who failed to pay an annual fee for fire protection and then, when his house caught on fire and he called the fire department, the fire department refused to show up.
They wouldn't even let him pay up ex post. David notes that this is a government-run fire department and thus the story is not much of a moral reductio on the market. Arguably a private company would behave the same way, sometimes, but it 's odd to claim that government failure reminds you market failure is possible and so let's damn the market. By the way, markets do pretty well at setting up schemes with a penalty for late payment; that's how my mortgage works.
I would make a broader point. Any social system must, at some stage of interactions, impose some morally unacceptable penalties. If you are very hungry, and you shoplift food, they still might prosecute you. If you don't pay your taxes, and resist wage garnishes, they might put you in jail. If you resist arrest, they might, at some point in the chain of events, shoot you while trying to escape. Somewhere along the line there is a doctor who can treat your rare disease except he doesn't feel like working so much, and so he lets you die or suffer; you can find both private and public sector examples here.
Social systems proceed by (usually) covering up the brutalities upon which they are based. The doctor doesn't let you get to his door and then turn you away, rather his home address is hard to find. The government handcuffs you so they don't have to shoot you trying to escape. And so on.
To borrow language from Thomas Schelling, social systems involve costs in terms of both "known" and "statistical" lives. It's the sum total of costs which is important. It's fine (though controversial) to argue that a "known" life should be more important than a "statistical" life, but it's not dispositive to pull out one example of a "known" life and draw a significant conclusion from that anecdote. That's what we teach students not to do in first year principles, sometimes citing Bastiat, the seen and the unseen, and so on.
I don't favor the policies of this fire department, but simply pointing out the vividness one of these social brutalities doesn't much influence me about the broader principles at stake.