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MRUniversity New Courses!
We have four new courses at MRUniversity and a brand new design! The new courses are
- The Euro Crisis, a 90 minute mini-course over 3 weeks.
- The Economics of Media, 4 hours over 4 weeks.
- The American Housing Finance System, 15 hours running to June taught by Arnold Kling.
- Mexico’s Economy, a 4.5 hour course over 4 weeks taught by Robin Grier.
You can find our more about all of the courses at MRUniversity. Lots of new features as well. After registering, for example, you can click the “Follow this Course” button on the main course page and receive weekly email updates on course content, video chats and what other MRU users are up to. We have also made it easy to add material by clicking the “User Contribution” section under the videos. There you can add videos, research, news and opinions related to the video. We’ll feature the best user contributions on our homepage.
Also do check out the new home page and be sure to scroll down to see The List, all of our videos released so far. And remember, all of our videos are freely available for non-commercial use. If you teach economics or related material feel free to assign a video for homework or try flipping the classroom!
Even more courses coming soon!
Finally, a big hat tip to MRU’s web guru and program manager, Roman Hardgrave, who has done a stellar job on the new features and design.
Assorted links
1. Fish conformism, and one fish rebel (photos).
2. Thomas Edison State College, a results-only approach.
3. Marie Gryphon Newhouse has a new blog on think tank ethics.
4. Leading economists vote on raising the minimum wage.
6. How well was ARRA funding allocated? By the way, here is another reason why citizens get frustrated and support methods such as the sequester.
What Republicans are thinking on the sequester (one man’s guess)
Ezra on Twitter asks for a Republican version of this Jonathan Chait column, which basically suggests the Republicans don’t know what they are doing with their policies on sequestration. Ezra has himself raised similar questions. I am not a Republican, but I do like a challenge, so here is a brief attempt.
Correctly or not, many Republicans believe some mix of these propositions:
1. Much of government spending is massively wasteful.
2. Deep historical pessimism is justified, as the United States is sliding into a morass of ever greater statism on the economic, government spending, and taxation fronts, if not right now over the next ten to fifteen years. Currently a majority of the public does not agree with the conservative Republicans and that is where the pessimism comes from.
3. All recent Republican strategies to stop this slide have been failing (this is evident to the Republicans, although not always admitted publicly so gladly, for obvious reasons). Furthermore, short-term deal-making and policy trade-offs, even if they represent moderate improvements, will not reverse or even much slow down this slide.
4. There is a long-term dynamic whereby the rich will get taxed more and more in an unstable dynamic, ending in the Frenchification of the American economy or worse.
OK, now let’s go to the sequester. The upfront costs are not viewed as so high, even on the defense side (see #1). Furthermore something must be tried (see #2). Given #1, there is some chance the public might see that government spending can be cut without causing disaster and this gives some chance the public might then support yet further cuts in government spending. Maybe this chance isn’t so high, but all other approaches have been failing (#3). Ideally, a big budget deal might be better on paper, but a line must be drawn in the sand on taxing higher earners (#4), especially given recent tax hikes, so right now a big budget deal is out of the question; this isn’t 1986 any more.
Draw up the Venn diagrams, or do the expected utility calculations, and you are left with sticking to the sequester. Furthermore it allows some Republicans to take a “victory” back to supporters, and that gives a “practical” reason to support the “intellectual” ones. Keep also in mind that a despairing group is a skeptical group, so how would Republican voters really know or trust that they got a good bargain with the Democrats, especially given the Democrats would have to sell it as a good bargain to their voters? Who understands baselines anyway?
Here is a related Justin Green piece.
I’m not seeking to debate the points in this post, but rather consider this anthropology. But if you ask about my views, I largely agree with #1, have mixed feelings about #2 (lately there is evidence of the health care cost curve bending; we will see), agree with the first sentence of #3 (though with a different normative slant), and don’t much agree with #4. In my view the ranks and influence of the rich are growing, some factions of the Democrats will become more like the old anti-tax Republicans, and I don’t see U.S. tax rates on the rich as having a big chance of reaching unsustainable or catastrophic levels. (If anything I worry much more about regulation stultifying the economy.) So I would myself definitely prefer a “grand bargain” to the sequester. The grand bargain would of course raise taxes further, but I don’t see this as a “slippery-slope-beginning-of-the-end.”
That I said, I have an affinity with #1, over fifty percent of the sequester cuts are obviously good ideas, and we could reverse the worst aspects of the sequester rather easily. So while the sequester is far from my first choice, I also don’t think it is the end of the world. I am distressed by the number of blogs posts emphasizing the “seen” costs of the spending cuts rather than the “unseen” benefits. I am distressed by the notion of agencies which might play the “Washington Monument” strategy. And I am distressed by the unwillingness of both sides — and possibly Obama will end up as the greater villain here — to make the cuts more flexible. (It is funny by the way how much Republicans distrust Obama, and yet want to give him that discretion so that he will own the costs of the spending cuts to a greater degree.) Given all that behavior, is a total shock to think that the public — or at the very least the Republican public in the partially gerrymandered House districts — might not want to trust so much of its money with those institutions?
Assorted links
1. Noahpinion on the politics of Django Unchained.
2. Indian cities, ranked by sanitation quality.
3. New Thomas Pynchon due out this fall. I haven’t liked one of his for a long time. And Roko’s Basilisk.
4. Too PC, but still a good smash of Oscar night.
5. How Andrew Sullivan’s metered paywall is going.
6. 1974 was a bad year (or was it 1973?). And why so many jobs in the UK?
Assorted links
1. Scott Sumner speaks up for China, and Scott on movies.
2. On Finnish “preschool by any other name,” my previous post was wrong on this topic.
3. Paul Romer is on Twitter; so far he seems to be taking it seriously.
4. FDI performance for France, better than you might think but can it last?
5. How easily can the Fed back out of its portfolio? Sober Look and Arnold Kling.
6. Jobs where the gender wage gap is largest and smallest. And do the costs of minimum wage hikes fall mainly on outsiders?
7. How the Italian Senate works (doesn’t work), further explanation here, and why there was no real alternative to Monti’s Italian austerity.
Cognitive Democracy: Condorcet with Competence
We usually think of democracy as a way of aggregating diverse preferences but we can also imagine that we share similar preferences and that what we disagree about is the best way to achieve those preferences. From this perspective, democracy can be thought of as a tool for information aggregation. Using simple probability theory, Condorcet showed in 1785 that even when each individual voter has only a slightly better than chance probability of choosing the bettier of two options the probability that majority rule chooses the better outcome quickly goes to 1 as the number of voters increases (the wisdom of the crowds).
A number of writers at Crooked Timber have been discussing Knight and Johnson’s The Priority of Democracy, one strand of which involves such an cognitive defense of democracy. Cosma Shalizi, for example, writes:
Democratic debate is a tool for cognition, for harnessing the dispersed knowledge of the citizens and their diversity of perspectives and insights.
But does an cognitive defense of democracy lead to universal suffrage? Or does it suggest what Melissa Schwartzberg calls “epistocracy”, rule by the educated? (See also Henry Farrell’s comments). The wisdom of the crowds breaks down when the crowd’s errors are systematically biased rather than random. As Peter Boettke notes, Bryan Caplan makes a strong case in The Myth of the Rational Voter that better educated voters are less systematically biased than the average voter and more likely to agree with experts on questions of fact.
When voters are not equally competent some remarkable mathematical results show that the best cognitive democracy is not universal suffrage and one-person, one-vote but a specific form of weighted voting.
Begin with a simple example. Suppose there is one correct decision and there are three voters each trying to reach the correct decision with competence levels of {.55, .55, .55}, where the competence levels are just the probabilities that each voter chooses the correct decision. The best a dictator could do in choosing the correct decision is .55 but if use majority rule the probability of reaching the correct decision is 0.57475, higher than that of any individual voter. (We reach the correct decision if all three voters reach the correct decision which has prob .55^3 or if two voters reach the correct decision and one does not, as this can happen in three ways the probability of the latter is 3*.55*.55*(1-.55) for a grand total of .57475.) Moreover, if we were to increase the number of voters to 100, the probability of majority rule reaching the correct decision goes to 84%–far above that of any dictator, this is the essence of Condorcet’s theorem.
Now let’s assume that the voters have competences of {.55,.60,.70}. Majority rule, using the same reasoning as before, gets us a democratic competence level of .673, not bad but notice that this is less than the competence level of the highest competence individual. The ideal voting system in this case would weight voter three enough so that she determines the outcome, thus giving democracy a competence level of .7.
More generally, if the voter competences levels are {p1,p2,p3} then the cognitively most efficient voting scheme gives each voter a weight of Log[pi/(1-pi)]–the result is remarkable for a being such a simple formula of the voter’s own competence level (note that the individual’s weighting is not a function of the competency levels of the other voters.) The result was shown first in this context by Nitzan and Paroush, Nobel-prize winner Lloyd Shapely and Bernard Grofman also made important contributions and see Grofman, Owen, Feld for some related results.)
Democracies make many decisions which are information based (Does Iraq have weapons of mass destruction? Will an invasion make the US safer? Do phthalates cause significant health risks?). Note also that we might also use this method for many committee decisions. Which scientific approach is deserving of greater funding? Which marketing plan should we adopt? Is surgery the best option? and in these decisions weighting votes by a measure of competence, which can be estimated from past decisions, may lead to significant improvements in outcomes.
Voters have diverse preferences not just competences but we could combine cognitive and preference aggregation theories of democracy by using high competence voters from different demographics categories to estimate what people would think about issues if only they were better informed. In this way we can distinguish differences due to knowledge from those due to preferences and we could upweight the competent while maintaining demographic balance thus creating a cognitive democracy based on enlightened preferences.
Assorted links
Very good sentences about Bulgaria, the EU, and the DDR
For years people complained about the absence of labour mobility in the EU. Now we have it, the flaw in the institutional infrastructure is obvious.
Young people are moving from the weak economies on the periphery to the comparatively stronger ones in the core, or out of an ever older EU altogether. This has the simple consequence that the deficit issues in the core are reduced, while those on the periphery only get worse as health and pension systems become ever less affordable.
That is from the excellent Edward Hugh, here is more. Among other points, Hugh stresses just how much the “East German answer” involved extreme levels of labor mobility. There is also an illuminating analysis of the problems facing Bulgaria:
According to the 2011 census, Bulgaria has lost no less than 582,000 people over the last ten years. In a country of 7.3 million inhabitants this is a big deal. Further, it has lost a total of 1.5 million of its population since 1985, a record in depopulation not just for the EU, but also by global standards. The country, which had a population of almost nine million in 1985, now has almost the same number of inhabitants as in 1945 after World war II. And, of course, the decline continues.
Assorted links
1. Ripple, or Bills of Exchange 2.0? And new Bitcoin paper (pdf).
2. The decline of Jewish delis.
3. We buy White Albums (recommended).
4. Is the FAA engaged in political posturing?
5. What it is like to wear Google Glass (piece starts slow, picks up and improves)
Assorted links
1. There is no great stagnation (mechanism design), and Andrew Sullivan on TGS and video about jet packs.
2. Dolphins may call each other by name.
3. Adam Phillips on frustration.
4. John van Reenen, and the books that inspired him. And his on-line course materials.
5. Business Ethics Journal Review, modeled in part on Econ Journal Watch.
Napoleon Chagnon and his *Noble Savages*
I started reading Napoleon Chagnon’s Noble Savages: My Life Among Two Dangerous Tribes — the Yanomamo and the Anthropologists. The first fifty pages are excellent fun and well-constructed, though I cannot speak to the details of his claims about the frequency of conflict or the motivation of conflict by sexual competition for women. At some point, however, I realized I don’t want to read an entire book on either tribe, at least not at this moment. I am not suggesting that the book gets worse, but my interest did ebb.
I do not have a view about the controversies surrounding Chagnon, and ultimately that is what should decide the merits of this work. Here is Dreger’s systematic defense of Chagnon. Here is a survey of the Chagnon disputes. I wonder if he has ended up with less credibility from having the first name “Napoleon”?
Assorted links
1. Thomas Hubbard on Armen Alchian.
2. How to get a multiplier of 35.
3. The minimum wage in Canada, and did somebody kill Canadian literature?
4. Vem Aí A Troika, new Portuguese card game. And Meg Greene on the forthcoming Italian election. Via Christopher Koons, here is some factor price equalization being applied to France.
5. Tales of 3-D printing; “It took 45 minutes and it was kind of crappy, but I was encouraged,” Mr. Drumm said.
6. Japanese advertising markets in everything, and superhero markets in everything (at a children’s hospital).
My favorite things Oklahoma
1. Humorist: It is hard not to pick Will Rogers. But was he funny? You tell me. I’ll go with Chuck Norris.
2. Jazz musician: Charlie Christian, and as runner-up Chet Baker.
3. Folk music: Woody Guthrie, here is Do Re Mi.
4. Popular music: Eddie Cochran, and overall the music categories are turning out better than one might have expected. I feel there should be lots in country music but I could not tell you who that might be.
5. Musical, set in: Duh. A favorite of my favorites.
6. Novelist: Ralph Ellison.
7. Painter: Ed Ruscha.
8. Outlaw: Pretty Boy Floyd.
9. Movie, set in: I can think only of Rumblefish.
Here are images of Tulsa Art Deco.
People, this is an underrated state. I hope to end up there later tonight.
Assorted links
1. Don’t forget to be reading Carola Binder.
2. Long vs. short-run effects for the minimum wage.
3. De Gustibus (I don’t like either!).
4. The culture that is Norway, or as Alex wrote “Isn’t it good, Norwegian Wood?”
5. David Henderson on Armen Alchian.
6. Bulgaria fires economist Simeon Djankov.
7. UK inflation rates on the essentials, yikes and also related to AD/AS debates.
Assorted links
1. Where does Greece stand right now? Another take here.
2. NYT reports on Israeli Ethiopian birth control. I’ve read some of the supposed debunkings of this episode, but I still think it newsworthy and the NYT account largely supports this view.
3. Markets which were never meant to be (celebrity perfumes), and how’s Detroit doing?
4. Why do we get bored with really great works of art?
5. What will the digital reading revolution look like in Africa?
6. The future of weaponized drones. And 3-D printers and gun control.
7. What data can’t do, by David Brooks.