I’ve been wondering about a few questions.

Internalizing externalities is a common theme in economics,and it’s also called capturing the value you create.  Don’t economists believe this happens — and happens increasingly — all the time?  Karl Smith writes (and you can find his caveat here):

TFP growth depends on the returns to innovation not being captured by the innovator. Otherwise it becomes a return to the factor of production rather than total factor productivity.

Does TFP tend to fall once it has been high for a while?  Is falling TFP, following a technological breakthrough, a sign of the market’s ability to capture value and internalize externalities?  And is this another reason why we might prefer imperfectly defined intellectual property rights?

The second question concerns the Industrial Revolution.  There is a large cottage industry about the origins of “the rise of the West,” and so on.  I am not disputing the particular causal claims made in this literature.  Still, I wonder what is being explained.  Arguably the potency of the technological platform of “powerful machines plus fossil fuels” was not well understood in advance.  Ex post, that it led to the “rise of the modern world” was somewhat of a technological accident.  In this sense, studies of the origins of the Industrial Revolution, analytically speaking, are explaining “the Industrial Revolution” (to some extent).  But the “sense-reference distinction” matters here.  These studies are not so much explaining “the rise of the modern world,” which is more of a technological accident than we might wish to think.

Third, there remains the issue of unmeasured gains in real wages.  Let’s try a simple thought experiment.  Say I’ve been at George Mason twenty years (much less since 1973) and my real wage had never gone up (not the case).  But my Dean were to say to me: “Tyler, U.S. health care has some new procedures, when you’re 73 you’ll have stents, and now can surf the internet and watch reruns of Battlestar Galactica.  We’ve treated you very well!”  Such a claim would not pass the laugh test and few people would accept it as applied to their own employment relation.  Yet many of those same people make this same argument in the aggregate.  I still think that if measured real wages for a group (or individual) have not gone up very much, over a long period of time, something is wrong.  Wrong with the Dean, wrong with me, whatever, but something is wrong.  Who would have predicted in 1972 that measured male median  wages were going to stagnate and even possibly fall?  You should be shocked by this result and indeed I am.

The administration recently did a rough calculation of the nation’s gold reserves, including the stash at Kentucky’s Fort Knox (technically, it’s in the fortress-like United States Bullion Depository) and concluded that it was worth about $370 billion.

The story is here.

The piece, by Daniel Klein, et.al., has this abstract:

A sample of 299 U.S. economics professors, presumably random, responded to our survey which asked favorites in the following areas: Economic thinkers (pre-twentieth century, twentieth century now deceased, living age 60 or older, living under age 60), economics journals, and economics blogs. First-place positions as favorite economist in their respective categories are Adam Smith (by far), John Maynard Keynes followed closely by Milton Friedman, Gary Becker, and Paul Krugman. For journals, the leaders are American Economic Review and Journal of Economic Perspectives. For blogs, the leaders are Greg Mankiw followed closely by Marginal Revolution (Tyler Cowen and Alex Tabarrok). The survey also asked party-voting and 17 policy-view questions, and we relate the political variables of respondents to their choice of favorites.

The favorite twentieth century economists are Keynes, Friedman, Samuelson, and Hayek, in that order.  Kenneth Arrow doesn’t do as well as he should, though he comes in second, after Gary Becker, in the category, favorite living economists, sixty years or older.

As for favorite living economists, under age sixty, Paul Krugman wins by a long mile, followed by Greg Mankiw, then Acemoglu, Levitt, and David Card.  I do not deserve my position at #16, but thanks if you voted for me!  Scroll to p.13 for that list.

On p.14 there is a fascinating chart about the political orientations of the voters for various favorite economists.  Krugman for instance is more popular among left-wing economists.

The votes for favorite journal are on p.16, no surprises there.  p.17 has the favorite blogs chart.  Krugman and DeLong are third and fourth, after Mankiw and MR.

It is a fascinating paper which says much about our profession.

That is all from the latest issue of Econ Journal Watch, the link to the whole issue is here.  Here is a good piece about the embarrassment of Richard T. Ely.

Sometimes simple interventions are the best. From research by Glewwe, Park and Zhao.

About 10% of primary school students in developing countries have poor vision, yet in virtually all of these countries very few children wear glasses….This paper presents results from the first year of a randomized trial in Western China that began in the summer of 2004. The trial involves over 19,000 students in 165 schools in two counties of Gansu province. The schools were randomly divided (at the township level) into 103 schools that received eyeglasses (for students in grades 4-6) and 62 schools that served as controls. The results from the first year indicate that, after one year, making eyeglasses available increased average test scores by 0.09 to 0.14 standard deviations (of the distribution of the test scores). For those students who accepted the glasses, average test scores increased by 0.12 to 0.22 standard deviations….

These are rather large effects; similar tests given to children in grades 5 and 6 in Gansu province show that an addition year of schooling leads to an increase of 0.4 to 0.5 standard deviations of the distribution of test scores, which implies that these impacts are equivalent to one fourth to one half of a year of schooling. Thus providing eyeglasses is a relatively low cost and easily implementable intervention that could improve the academic performance of a substantial proportion of primary (and secondary) school students in developing countries.

It’s interesting that many students/parents refused the glasses.

Hat tip to Stephen Dubner who has a good segment on this at Freakonomics Radio.