Results for “age of em” 15637 found
Has there been a free trade breakthrough?
Remember that old saying, something like “Things are never as bad, or as good, as they seem.” It applies to international trade as well.
Numerous reports suggest that the WTO has achieved a breakthrough. The core deal appears to suggest that many poor countries will lower their tariffs on manufactured goods and the rich countries will limit or eliminate export subsidies and protection for agriculture. But there is more here than meets the eye.
The first worry is an obvious one. There is no date given for the change in agricultural policies. Keep in mind that the rich countries are masters of obfuscation and delay on this issue, if not outright obstruction. Plus the rich countries can exempt “special” products, if they so choose.
Arvind Panagariya suggests that our concerns should run deeper:
Current production and export subsidies flood world markets with the subsidised products and drive their prices down. The removal of these measures will raise the prices of the products in question. This will benefit the exporters and hurt the importers of these products. Food products happen to be among the most heavily subsidised items and as many as 45 of the world’s least developed countries are net food importers, according to calculations by the economists Alberto Valdes and Alex McCalla. Even when we consider all agricultural products, 33 least developed countries are net importers.
A counter-argument may be that, once the subsidies are eliminated and world prices increase, the least developed countries will become net exporters of the products. But this is doubtful for two reasons: such a change can turn at most only a handful of these countries into net exporters and the switch from net importer to net exporter status by itself is not enough to bring an overall benefit. As food prices rise, so will losses on food imports. Only if a country becomes a sufficiently large exporter will it be able to offset these losses.
In other words, even if reform comes about, the main beneficiaries will be the taxpayers in the rich countries. Export subsidies benefit consumers abroad, even if they do not maximize aggregate value.
Nonetheless it is trickier than Panagariya indicates. Many agricultural interventions keep world prices up, not down, by preventing the reallocation of farming to its most productive geographic venues. Nonetheless it is not obvious that the very poor countries would be big winners in any competitive reshuffling of sectoral specializations. In fact we might expect technology to make agriculture increasingly high-tech. We are then back to the case where export subsidies hurt taxpayers in rich countries but help consumers in poor countries.
Also keep in mind that many poor countries already enjoy free bilateral access to EU markets for many agricultural commodities, with rice, sugar, and bananas being prominent exceptions. So if liberalization causes food prices in Europe to fall, agricultural exporters in the poor countries may again be worse off.
I am all for free trade, as loyal readers of MR will know. But it is a common myth to think that agricultural free trade will cause say, Africa, to blossom or achieve significantly greater gains from world markets. Even if African consumers end up paying lower prices for food, African producers will see very mixed results. And how effectively do we expect the damaged producers to be reallocated to other sectors? Africa as a whole could still benefit in the longer run, given the theory of comparative advantage, but this is hardly the scenario that everyone has in mind.
Addendum: Ben Muse offers an analysis and extensive links.
Dad is a stinker
Children rate their fathers as among their least popular playmates because they are too competitive, according to research among more than 1,000 youngsters.
They “played to win”, lacked imagination or were simply at a loss as to how to play games, said the Children’s Play Council, which commissioned the survey with the Children’s Society.
Children up to the age of 12 would rather play with their friends, their mother or their brothers and sisters.
Only one in 16 chose their fathers as their ideal companion. Dads were rated slightly above grandparents (one in 33) [so what’s wrong with them, TC asks?]. One in 50 children said they would rather play on their own.
Tim Gill, director of the Children’s Play Council, said: “Dads have difficulty not being too competitive. Several fathers said they found it hard to get down to their children’s level. And they don’t find it easy to let children win.
And what does the resident sociologist say?
Frank Furedi, professor of sociology at the University of Kent at Canterbury, said: “Fathers are living through their children much more which means they lose sight of the line that distinguishes adult from child.
“It’s also partly a power control issue. Fathers want to let their children know they are still ‘players’.”
Here is the full story.
Profits and an Independent Press
He who pays the piper, picks the tune. In China, that moral has proved to be a surprising link between economic reform and political reform.
More than a quarter century after China launched economic reforms while continuing to restrict political freedom, the government still owns and controls all of the country’s newspapers and television stations. But journalists have fought off party censors in one sensitive subject area after another, and they are waging a daily battle for even greater freedoms.
This push is driven in part by economics. In a sweeping industry overhaul, the government is withdrawing subsidies from state media outlets, holding them responsible for their own profits and losses and opening the door to private investment. The market has led newspapers to set aside propaganda and deliver stories that readers are actually interested in. Many have turned to gossip or entertainment, but there is also a financial incentive to produce a scarce commodity: journalism that challenges the government.
That’s from a very good Washington Post story about a courageous newspaper editor in China, jailed for questioning the local police.
Government Sues to Raise Drug Prices
The headline in the NYTimes read “Schering Case Demonstrates Manipulation of Drug Prices.” The article continued:
A $345.5 million settlement by Schering-Plough yesterday to resolve a government Medicaid investigation provides a detailed glimpse into how drug companies can manipulate prices to overcharge state and federal programs.
Government officials have taken a keen interest in how drug makers price and market their drugs in recent years, and the settlement is the latest in a series reached with large drug makers over accusations that they have overcharged Medicaid. Last year, Bayer paid $257 million and GlaxoSmithKline paid $86.7 million to settle similar allegations.
Now you probably think this article is about how drug firms acted collusively in order to raise prices, right? Nope, read carefully and you will see that intense competition from Allegra caused Schering to reduce the price of Claritin. Great! Not according to the Feds. The price reductions violated Medicare’s Most Favored Customer clause which requires pharmaceutical manufacturers to give Medicare the lowest price they offer any other customer.
Most Favored Customer/Nation clauses are routinely analyzed in game theory texts as ways for firms to tacitly collude to raise prices. The idea is simple – it’s easier to commit not to compete if lowering price for one customer means lowering prices for all customers. Indeed, this is precisely why the antitrust authorities often sue to prevent firms from using MFC clauses. The evidence supports the theory, after the MFC clause was introduced pharmaceutical prices rose.
The US Attorney may think that “we’re fighting to keep the costs of health care down for everyone,” but in truth by reducing competitive pressures to lower prices they are helping the pharmaceutical firms to maintain a cartel.
Addendum: Put it this way, now that the government has successfully sued the firms for reducing prices do you think a) the firms will now cut the price to Medicare to match the rebates or b) stop giving rebates?
Has urban architecture declined?
Strolling the streets of Edinburgh, it is hard not to be struck by the beauty and general consistency of the older buildings. It is hard to find post World War II examples where a wealthy Western region has done something comparable. Suburbs have sprung up around the United States, but few of them have architecturally notable exteriors on a consistent basis. There are so many new suburban developments, cannot just one of them be lovely and aesthetically challenging?
What might have gone wrong? I can think of a few possible explanations:
1. Architecture has suffered from the “cost disease.” In this context, a rising general level of wages makes quality handwork more expensive in relative terms. In other words, they don’t handweave many carpets in Silicon Valley. There may be something here, but then why don’t the poorer countries of the world become architectural leaders? And I see home interiors as improving significantly over time.
2. In older times governments at various levels were less democratic. Competition for status within an oligarchy may have upped the incentive to produce beautiful exteriors. This mechanism clearly operated in Renaissance Florence.
3. Perhaps consumers and lenders were less well informed in times past. A nice exterior was a good way to signal the quality and long-term commitment of a business enterprise. Just look what happened to the quality of bank architecture in this country once the FDIC was instituted.
4. Perhaps we idealize times past. The so-called “Royal Mile” is today a leading tourist sight in Edinburgh. In the eighteenth century it was considered “a dark, narrow canyon or rickety buildings, some stacked ten or even twelve stories high, thronging with people, vehicles, animals, and refuse…Sanitation was nonexistent.” (That is from Arthur Herman’s notable book on Scotland.) We may be co-authors in the beauty of the past more than most people realize.
5. Perhaps contemporary suburban developments will be seen as beautiful by future generations. I’ll bet against this one, but we will see.
I am hardly suggesting that architecture is declining in every regard. I love the lights of the Ginza district in Tokyo. And our best stand-alone buildings are no less wonderful than those from times past. But I still wonder why urban architecture no longer yields consistently beautiful urban regions. Anyone who has walked around the major European cities, or even glanced at the Chrysler building, surely has asked the same question. Why is the quality of exteriors declining relative to interiors? Given that nice exteriors are a public good, why were they ever so nice in the first place?
Dumb Delta
E-Loan offers customers a choice of processing their loan paperwork in 12 days using all-domestic workers or 10 days by bringing on some workers in India, 85 percent choose the quicker turnaround.
Delta is now considering something “similar,” charging a fee to have calls handled by U.S. agents. What genius came up with this? You don’t need to be a behavioral economist to predict that framing the deal this way just won’t fly. Instead, offer your customers a new option; lower prices if they choose to use overseas agents. Or, as Gary Leff suggests, offer the customers shorter wait times. “All our US agents are busy right now, would you like to be directed to an overseas agent for immediate service?”
How did Scotland grow so quickly?
Scotland had been an economic backwater at the time of the 1707 union with England. By 1770 at least the Scottish cities were among the most developed and intellectually advanced parts of Europe. How could this happen?
Arthur Herman supplies at least one piece of the puzzle:
…the fact that Scotland was very much the junior partner in this union also turned out to be an advantage. The new Parliament largely ignored Scotland; outbursts such as the malt riots and the threat of Jacobitism apart, the government in London paid little attention to what was happening north of the border. Scots ended up with the best of both worlds: peace and order from a strong administrative state, but freedom to develop and innovate without undue interference from those who controlled it. Over the next century, Scots would learn to rely on their own resources and ingenuity far more than their southern neighbors would…
A strong government that leaves well enough alone: this was the dual, seemingly contradictory, nature of the British state as it became part of life in post-union Scotland. Scots became used to these dualities, and learned to accept them as basic reality, just as the Union itself involved a fundamental duality: “a ship of state with a double-bottomed hull,” as Jonathan Swift put it. They also learned to think in a new way as a result of the Union: in terms of the long term.
Many economic development problems today stem from a similar conundrum. Ideally we would like a state that is both strong and not too large. Most parts of the world are unable to institute this duality; of course Hong Kong was a notable exception. I am not in general an imperialist, but the most successful instances of imperialism are likely to be highly successful indeed.
The Movie Review Index Fund
Index funds are one of the most important practical spin-offs of academic economics. If fund managers are unable, on average, to beat the market index, why not just buy-and-hold the market index, saving transactions costs? Millions of people have profited from this insight.
If you like movies, an analogous tool is available at movies.go.com. Instead of posting a review of a new movie, movies.com tabulates ALL the reviews of ALL the new movies, and archives them forever. I have used this tool for a couple years, and find that – unlike individual reviewers – this “index fund” of reviewers is amazingly informative. For example, based on today’s post, I’m going to try to talk my wife out of seeing The Village and into seeing The Manchurian Candidate. (Aside: If you haven’t seen the original, you must!)
Good as this index fund is, I do have three caveats:
1. Comedies are systematically under-rated. If half of a comedy’s reviews are positive or mixed, it is probably worth seeing.
2. If any review contains the words “measured pacing,” the movie is probably over-rated. I’d only go if the reviews are 80% positive.
3. Contrary to popular stereotypes, action movies are not graded more harshly. Lots of action movies get great reviews. The Bourne Supremacy, for instance, got 11 positive, 0 mixed, 1 negative.
Gratitude Journals and Loewenstein’s Challenge
Background: George Loewenstein is one of the leading figures in Economics and Psychology.
While walking in Pittsburgh one afternoon, Loewenstein tells me that he doesn’t see how anybody could study happiness and not find himself leaning left politically; the data make it all too clear that boosting the living standards of those already comfortable, such as through lower taxes, does little to improve their levels of well-being, whereas raising the living standards of the impoverished makes an enormous difference. (full story)
Of course, you don’t need Loewenstein to make this point. You could just listen to my favorite song by Johnny Cash, featured in the so-good-it-hurts soundtrack for Kill Bill, Volume 2:
How many times have
You heard someone say
If I had his money
I could do things my wayBut little they know
That it’s so hard to find
One rich man in ten
With a satisfied mind…
Money can’t buy back
Your youth when you’re old
Or a friend when you’re lonely
Or a love that’s grown coldThe wealthiest person
Is a pauper at times
Compared to the man
With a satisfied mind
The answer to Loewenstein’s challenge can be found in the growing psychological literature on gratitude. Several interesting experiments (like this one) ask subjects to keep a “gratitude journal.” Main idea: Every day, write down things you are grateful for. Depending on the experiment, control groups either do nothing, or keep an “ingratitude” diary, or write down a random childhood memory. The main finding is that keeping a gratitude journal makes people happier than the other treatments.
So what? Almost all redistributive rhetoric urges people to dwell on the negative – you or other people aren’t getting what is due. This in turn makes people want to “do something” about the problem. And you can rest assured that no matter how much redistribution there is, egalitarians will never say “OK, life’s fair now. We’re done complaining.” No, what they foster is literally a lifestyle of ingratitude – a recipe for unhappiness.
If we really want to make people happier, we would do almost the opposite. Tell people to be grateful for what the market gives them, and try to emulate more successful people instead of envying them. Children hear this all the time, and it is damn good advice. Adults should practice what they preach.
Paul Krugman, Guilty Pleasure
There are lots of good reasons to be annoyed with Paul Krugman. (Like here, here, and here). But as a cock-eyed optimist, I’m very happy to have him around. Think about it: The world’s most famous left-wing economist:
1. Blames European unemployment on labor market regulations that hold wages above the market-clearing level. (The Accidental Theorist, Part 1)
2. Publicly and articulately advocates free trade without hemming or hawing. (Pop Internationalism)
3. Identifies anti-globalization activists as the enemies of the world’s poor. (The Accidental Theorist, Part 3)
4. Titles an essay “In Praise of Cheap Labor: Bad Jobs at Bad Wages Are Better than No Jobs at All” (The Accidental Theorist, Part 3)
5. Points out that if you oppose Big Government, you should favor cutting Social Security, Medicare, and other popular programs. (“The Lost Fig Leaf”) Sure, he’s hoping to scare us away from libertarian rhetoric, but there’s no use running away from the truth.
Yes, he’s been slipping. And it’s tiring to hear an economist so much more successful than me prattling about equality! I don’t begrudge you your publications, Paul, why can’t you let Bill Gates, Monty Burns, and Scrooge McDuck count their billions in peace?
Still, I can’t imagine Paul Samuelson doing any of the above, much less Galbraith. At least in economics, the intellectual climate hasn’t been as good as it is now for a century.
Is more Congressional oversight good?
The bipartisan committee on terrorism has argued that Congress did not exercise sufficient oversight of the CIA and other intelligence agencies. For a pithy analysis read Daniel Drezner here and here.
More oversight will make the intelligence agencies, however they are structured, more risk-averse. The President or Congress will peep in every now and then, and the agencies will scurry to respond to the emergency of the day. They will work harder not to look bad. This is hardly the best way to encourage imaginative, long-run thinking in defense of our nation.
Excess risk-aversion already happened with Iraqi WMD. One CIA analyst noted: You have to understand,” he said. “We missed the Indian and Pakistani nuclear tests last spring. We’re under a lot of pressure not to miss anything else.”
Now you might think that risk-aversion in intelligence is a good thing. Should we not take all possible care to protect America against foreign threats? But bureaucratic risk-aversion is not the same as a secure national defense. It brings groupthink, excess formalism, protecting against yesterday’s threat, and an unwillingness to take responsibility for mistakes. Furthermore it can make effective pre-emption virtually impossible; decisionmakers and their allies will no longer trust their intelligence communities.
Rather than making intelligence agencies more accountable, how about making them more independent? Create some small, elite groups and staff them with the best people we can find. Pay them well. Give them arsm-length protection from political pressures. Treat them like the Federal Reserve, an independent agency renowned for the quality of its staff. Give them a culture of internal pride. Richard Clarke reminds us that: “It is no accident that the only intelligence agency that got it right on Iraqi weapons of mass destruction was the Bureau of Intelligence and Research at the State Department – a small, elite group of analysts encouraged to be independent thinkers rather than spies or policy makers.”
Sometimes the way to get what you want involves less control, not more control.
Should we ban the peanut?
I have to point out that many common foods — the peanut is a good example — couldn’t pass the screening of GMOs [genetically modified organisms] in the United States.
That is from James Trefil’s illuminating generalist tract Human Nature: A Blueprint for Managing the Earth — By People, For People. Trefil argues that better science will prove the most effective way to save our planet from environmental disaster. He is an unabashed fan of ecological management and is skeptical about the idea of pristine wilderness. How about this?:
The real advance in genetic modification…[will come] from a second wave of plants already being developed. One example of this new wave is what are called neutraceuticals [nutraceuticals]. These are food plans that have been engineered to produce molecules that are specifically beneficial to humans. You can imagine, for example, a banana whose DNA has been modified so that it produces the recommended daily allowance of vitamins. Once such trees are planted, they would continue to produce the vitamins without any further intervention…
We can even imagine a banana that would provide protection from cholera or other diseases. Golden Rice already has the potential to alleviate vitamin A deficiencies; read an update here.
Nerd Pride
The word “nerd” appears to have been coined in 1950 by none other than Dr. Seuss. From the webpage of Eric Raymond:
nerd: n.
1. [mainstream slang] Pejorative applied to anyone with an above-average IQ and few gifts at small talk and ordinary social rituals.
2. [jargon] Term of praise applied (in conscious ironic reference to sense 1) to someone who knows what’s really important and interesting and doesn’t care to be distracted by trivial chatter and silly status games. Compare geek.
The word itself appears to derive from the lines “And then, just to show them, I’ll sail to Ka-Troo / And Bring Back an It-Kutch, a Preep and a Proo, / A Nerkle, a Nerd, and a Seersucker, too!” in the Dr. Seuss book If I Ran the Zoo (1950)… How it developed its mainstream meaning is unclear, but sense 1 seems to have entered mass culture in the early 1970s (there are reports that in the mid-1960s it meant roughly “annoying misfit” without the connotation of intelligence.
When I was a kid, no one wanted to be a nerd. Nowadays, though, nerds are “out of the closet.” People (well, guys) are proud to be nerds. Is this just part of the nerd life cycle – unpopular at 10, proudly nerdy at 33? I very much doubt it. Nerds of my dad’s generation (like, say, my dad!) wanted to fit in with regular folks, not embrace their nerdity.
Why the change? Alex Tabarrok attributes it to the rising education premium. The ratio of nerd to non-nerd earnings has gone up, and the group’s status has risen along with it. This is probably part of the reason, but I primarily credit the Internet. Communication, not economic success, is the foundation of group identity. Lots of non-nerdy sub-cultures have profited from the free-fall in the cost of social interaction. But in contrast to most other sub-cultures, nerds are virtually 100% computer literate. The Internet has been the One Ring of nerddom.
In case you haven’t guessed, yes, I consider myself a nerd. I’m such a nerd that I worry that my sons will fail to embrace their nerd heritage. The best game show in history, Beat the Geeks, began by asking each contestant “What’s the geekiest thing about you?” I still wish I could have been a contestant just to give my response:
“I am the Dungeon Master for an all-economists’ Dungeons and Dragons game.”
Beat that, geeks!
The Eye of the Needle
“If I could have the answers to five questions in political science/sociology, the appeal of Stalinism to intellectuals would be one of them,” wrote Tyler not long ago. There are few statements, in my judgment, that shed more light on his question than the following passage from the diary of Joseph Davies, US Ambassador to the USSR from 1936-38. (His diaries were later published as Mission to Moscow).
Davies freely admitted that Stalin was guilty of massive atrocities, but admired him anyway for his good quasi-Christian intentions. I kid you not:
Both Germany and Soviet Russia are totalitarian states. Both are realistic. Both are strong and ruthless in their methods. There is one distinction, however, and that is as clear as black and white. It can be simply illustrated. If Marx, Lenin, or Stalin had been firmly grounded in the Christian faith, either Catholic or Protestant, and if by reason of that fact this communistic experiment in Russia had been projected upon this basis, it would probably be declared to be one of the greatest efforts of Christian altruism in history to translate the ideals of brotherhood and charity as preached in the gospel of Christ into a government of men… That is the difference – the communistic Soviet state could function with the Christian religion in its basic purpose to serve the brotherhood of man. It would be impossible for the Nazi state to do so. The communistic ideal is that the state may evaporate and be no longer necessary as man advances into perfect brotherhood. The Nazi ideal is the exact opposite – that the state is the supreme end of all. (Journal entry, July 7, 1941)
This all makes me very glad that Liberation Theology did not come along earlier. A Christian Marxism would have fared far better with the common man.
On the Contradictions of the People
Larry Bartels has gotten national attention for his work on Bush’s income tax cut, inheritance tax cut, and public opinion. (Here is the full article; here is the digest version; here is what Alex Tabarrok had to say about Bartels). Bartels’ main point is that public opinion verges on contradictory: the public believes that inequality has gone up, agrees that inequality is bad, agrees that the rich should pay more taxes, BUT still supports two tax cuts that mostly benefit the rich.
Bartels is right, although since I belong to the tiny minority of people who favors however much inequality the free market delivers, for once I have to celebrate the public’s folly.
What Bartels does not seem to realize, however, is that the contradiction he laments is only one of many. Here are a few more:
1. Spending. The public wants less total government spending. In the 1996 General Social Survey, for example, here were the public’s views on cutting government spending:
Strongly in Favor of 40%
In Favor of 41%
Neither in Favor nor Against 10%
Against 4%
Strongly Against 2%
Don’t Know/No Answer 3%
However, the public also opposes cuts in virtually every kind of government spending except for foreign aid! Browse any of the numbers at the GSS webpage by clicking on “subject,” then “spending.”
2. Regulation. The public leans strongly toward less government regulation of business. From the 1996 GSS:
Strongly in Favor of 15%
In Favor of 33%
Neither in Favor nor Against 31%
Against 14%
Strongly Against 3%
Don’t Know/No Answer 3%
But the public is favorable toward virtually all particular forms of regulation. Browse any of the numbers at the GSS webpage by clicking on “subject,” then “economy.”
3. Welfare. 64% believe we spend too much on welfare, according to the excellent National Survey of Public Knowledge of Welfare Reform and the Federal Budget. But only 26% are willing to actually enforce a 2-year limit if welfare recipients would have to take a “low wage that would make it difficult to support a family.” Just 16% favor cutting off benefits to a person who is “unable to get a job” (whatever that means).
Since low-wage jobs are the only ones that former welfare recipients are likely to get (and who should do low-wage jobs, if not former welfare recipients?!), the public is in a quandary. It wants to spend less, but as a practical matter is unwilling to kick anyone off the rolls. In fact, the public heavily favors not only job training, but guaranteed government jobs/community service when the deadline runs out. Yea, that’ll save a lot of money.
The big lesson is that public opinion is not just wrong, but downright silly. On balance, the leftists who hate the Bush tax cuts should be thankful. If the public started being logical, we could easily see spending cuts, deregulation, and American citizens “forced” to take the “demeaning” jobs currently done by illegal immigrants. As Eric Cartman would say, “Sweeeeeeet!”