Opinion warning signs

by  Tyler Cowen in

Robin Hanson makes a list of "Signs that your opinions function more to signal loyalty and ability than to estimate truth:"

  1. You find it hard to be enthusiastic for something until you know that others oppose it.
  2. You have little interest in getting clear on what exactly is the position being argued.
  3. Realizing that a topic is important and neglected doesn’t make you much interested.
  4. You have little interest in digging to bigger topics behind commonly argued topics.
  5. You are less interested in a topic when you don’t foresee being able to talk about it.
  6. You are uncomfortable taking a position near the middle of the opinion distribution.
  7. You are uncomfortable taking a position of high uncertainty about who is right.
  8. You care far more about current nearby events than similar distant or past/future events.
  9. You find it easy to conclude that those who disagree with you are insincere or stupid.
  10. You are reluctant to change your publicly stated positions in response to new info.
  11. You are reluctant to agree a rival’s claim, even if you had no prior opinion on the topic.
  12. More?

I would add: You feel uncomfortable taking a position which raises the status of the people you usually disagree with.

Strange prices at Johnny Rocket’s

by  Tyler Cowen in

Ben Daniels writes to me:

Seen at Johnny Rocket's near LACMA:

Pancakes. Delicious buttermilk pancakes, served with bacon or sausage & warm syrup.

Two pancakes 4.99  

Three pancakes 4.99

Error aside, how might we account for this?  One option is that the company wants to give the "three pancake consumers" the sense they are receiving a bargain.  I suspect, by the way, that the marginal supply cost of an extra pancake is quite small.  The extra pancake may also increase your demand for high-margin beverages.  What else might be the explanation? 

JohnnyRockets 

Adam Savage on scientific testing

by  Tyler Cowen in

I had a whole episode written called the surreal gourmet, which ended with tenderizing steak with dynamite, but it had all those other things like poaching fish on your catalytic converter or cooking eggs in your dishwasher, Jamie loves the idea of tenderizing meat in the dryer.

…Also the idea of is it safe to eat fresh road kill.  We think that would be just hilarious and gross.

That is Adam Savage, from Jeff Potter's new and periodically interesting book Cooking for Geeks: Real Science, Great Hacks, and Good Food.  This is most of all a book for those who wish to think of cooking in terms of engineering, but without going the molecular gastronomy route.

Ilya Somin and Alison Schmauch are now married

by  Tyler Cowen in

I am honored to have been the speaker at their wedding this evening.  Part of my remarks discussed Charles Darwin's notes on marriage – arguments for and against – which are well worth reading (I thank A.C. for the pointer to those). He was afraid of no more balloon trips, not being able to visit America, having to visit relatives too often, and having less time and less money to spend on books.  But still he did it and here is the closing bit:

Never mind my boy– Cheer up– One cannot live this solitary life, with groggy old age, friendless & cold, & childless staring one in ones face, already beginning to wrinkle.– Never mind, trust to chance–keep a sharp look out– There is many a happy slave–

The Shape of Things to Come and Not to Come

by  Tyler Cowen in

Here is a very good post from Matt Yglesias, who gets to keep his name on the Yglesias Award.  I am reluctant to pull any bit out of context (do read the whole thing), but here is one excerpt:

Get 40 Senators together to filibuster everything and that’s what you get. And when you add in state and local government, that’s a pretty healthy big government agenda right there, especially when you consider that states are shouldering a health slice of the Medicaid bill. Realistically, does anyone think we’re going to increase the overall size of the government faste than that? I sure don’t.

…So the future of American politics is necessarily going to be about things like making the tax code more efficient, finding areas of government spending to cut relative to projection, and thinking of policy measures that will help people that don’t involve spending more money.

I've arrived at somewhat similar conclusions, though from a different direction.  Here is an alternative version of What is Not to Come:

1. Obamacare won't be repealed or declared unconstitutional, nor will Republican candidates be running against it six years from now.  Trying to repeal parts of it would likely backfire and destroy the private insurance industry, given that the process would be ruled by public choice considerations rather than rational technocracy.  We still would end up with a larger public sector role in our health care institutions.

2. I don't view "$200 billion a year to redistribute what is for this purpose a largely fixed supply resource" as an especially good investment, but it won't bring this country to its knees.  The policy won't do much for fiscal responsibility.

3. Social Security won't much change, keeping in mind that the number of elderly voters is growing larger every day.  Given all their elderly white voters, the Republicans are already "the party of Medicare."  The Democrats have become "the party of Medicaid."  That locks three major programs into place, more or less.  I don't hear serious talk of major cuts in defense spending.

4. Taxes won't be raised much (do the Dems seem to have great love for reversing the Bush tax cuts?), spending won't be cut enough (the recent Republican document is extremely weak), and within twenty years we will have a sovereign debt crisis in the United States, as one day a Treasury auction won't go well.  I'll predict, but not favor, the emergency passage of a VAT, a' la TARP, which will restore fiscal stability but lower the long-term rate of growth.  When that time comes, the VAT will indeed be necessary, though ex ante I would opt for less social protection and a higher rate of economic growth.

5. The most important changes will come from aging, how other nations in the world fare especially China and India, the rate of technological progress, and foreign policy events which are exogenous from the point of view of economic policy.  Overall it will be more interesting to follow other nations than the United States.  Get ready for this and pick a few countries.

6. We should try to take back many of our vanquished civil liberties.  Such a fight may or may not succeed, but at least fiscal considerations won't rule out this counterblow for liberty.

7. On issues such as drug legalization and gay rights, I see a more cyclic than melioristic pattern.  We will see marginal improvements but we won't enter a new age of reason, in either the public sector or the private sector.  The Netherlands is backing away from its very liberal social policies, including on drugs, and the cause of gay rights could as easily fall back as progress.  I believe that many people are broadly programmed to be prejudiced in this area.

8. We will tweak financial regulation, but whether this is for better or worse, the link between reforms and final outcomes will continue to be opaque, to say the least.

9. More and more laws will be frozen in place.  This already seems to be the case with immigration policy.  More and more expenditures will be frozen into place.  Politics will become more symbolic, and in some ways more disgusting, in response to the absence of real issues to argue over.

10. Climate change will remain an important yet insoluble issue.  Even major legislation (which seems unlikely) would not change this much, not for a long time at least.

11. People will write profound books and papers on how and why "status quo bias" has strengthened, and then one day some new technological development will change everything.  It's an open question whether this will happen before or after the sovereign debt crisis.

12. In the meantime, the United States will experience an ongoing "late" period of cultural blossoming, driven by the proliferation and democratization of new electronic media.

That's all for now!

GMU needs food truck deregulation

by  Tyler Cowen in

Maksim Tsvetovat writes to me:

I'm a fellow professor at Mason Fairfax Campus. As I was reading about Sodexo monopolist hold on food service at Mason and their despicable labor practices and working conditions, I started wondering if there was a way to deal with this WHILE improving food options on campus. The answer is actually pretty simple — FOOD TRUCKS! I can almost taste the fresh tacos and arepas, or bahn mi, or udon noodles or… you name it.

This worked very well on the campus of my alma mater (Carnegie Mellon Unviersity) where food trucks coexist peacefully with Aramark but forced Aramark to improve quality of food, lower prices and improve labor practices (they were not happy about it and sued but lost in court — there's good precedent)

I'm talking to owner of one tasty taco truck to see if he'll come and park near Enterprise Hall at lunchtime — just as a trial balloon, to see how Mason reacts. I'm wondering if you (as a well-known local authority on ethnic food as well as a fellow professor) might be able to lend your voice to this and rally some support behind it. Even a simple blog posting would be a huge help!

Here is Matt Yglesias on DC food cart deregulation.  Here is a good piece on black and grey market food on the other side of the Anacostia River.  Here is the latest on food trucks in DC.

The wage premium at large firms

by  Tyler Cowen in

Do very wealthy CEOs yank potential wage gains away from median-like workers?  The excellent Adam Ozimek writes to me:

You say: 6. If the top earners are screwing over their wage earners in the big companies, by pulling in excess wages, options, and perks, we should observe non-stagnant median pay for people who avoid working in firms with fat cat CEOs.  Or we should observe talented lower-tier workers fleeing the big corporations, to keep their wages up.  Yet no evidence for these predictions is given, nor are the predictions considered.  It is likely that the predictions are false.

And in fact isn't this precisely the opposite of what the evidence on the employer size wage-premium tells us? If large firms were better at keeping wages down, then the employer size wage-premium would be negative, since small firms would pay more for comparable workers. Apparently this has been true for a long time, for instance from this paper http://gatton.uky.edu/Faculty/Troske/publish_pap/restat_sizewage_feb99.pdf

The fact that large employers pay higher wages than small employers has long been recognized as an important component of the variation in worker wages.This phenomenon was first documented by Moore (1911) and later confirmed by King (1923), Mellow (1982), Oi (1983), and Brown and Medoff (1989) among others.

That paper also argues:

Davis and Haltiwanger (1991) show that the gap in real hourly wages between production workers in plants with 20 to 49 employees and production workers in plants with more than 5,000 employees increased by 79% between 1963 and 1986, and that the gap for nonproduction workers in these same plants increased by 49% over this period.

So the firm size premium is growing. This seems inconsistent with their story.

That is all connected to my earlier review of the new Hacker and Pierson book.

The Value of Political Connections

by  Alex Tabarrok in

In an excellent paper titled, Revolving Door Lobbyists, Jordi Blanes i Vidal, Mirko Draca and Christian Fons-Rosen use data on the lobbying revenues of ex-Senate staffers to show:

[L]obbyists connected to US Senators suffer an average 24% drop in generated
revenue when their previous employer leaves the Senate. The decrease in revenue is out of line with
pre-existing trends, it is discontinuous around the period in which the connected Senator exits Congress
and it persists in the long-term. The sharp decrease in revenue is also present when we study separately
a small subsample of unexpected and idiosyncratic Senator exits. Measured in terms of median revenues
per ex-staffer turned lobbyist, this estimate indicates that the exit of a Senator leads to approximately
a $177,000 per year fall in revenues for each affiliated lobbyist….We also fi nd evidence that ex-sta ffers are more likely to leave the lobbying industry
after their connected Senator or Representative exits Congress.

Here is the key figure showing the drop in revenues at the time the Senator exits:

Graph_Senators_Fig6_Press

From my paper on for-profit education

by  Tyler Cowen in

Up through the 1980s, the Philippines offered a relatively level playing field for non-profit and for-profit institutions of higher education.  What was the result?:

Unlike Filipino non-profits, the for-profits typically did not have entrance examinations, and accepted any student who has completed a secondary education and can pay the relevant fees (Zwaenepoel 1975, pp.163-4).  From a survey of Manila institutions, the for-profit institutions had an average student to fulltime faculty ratio of 27:1, whereas the non-profit religious institutions had an average ratio of 19:1 (Miao 1971, pp.71-2). For-profit institutions tend to invest in classrooms to accommodate large enrollments, rather than investing in library facilities, book holdings, or laboratory facilities. Furthermore, Filipino for-profit institutions tend to limit their class offerings to low-cost, labor-intensive classes, such as teacher education and commerce (Zwaenepoel 1975, pp.322, 342, 348, 587).  As of 1970, nonsectarian institutions (typically for-profits) spent four percent of their total budget on sites, equipment, and facilities, whereas sectarian institutions (typically non-profits) spent a much higher 12.41 percent (Isidro and Ramos 1973, p.157).  As of 1971, for-profits held an average of 2.58 books per student, whereas non-profits held an average of 8.9 books per student (Zwaenepoel 1975, pp.347-8).

Filipino for-profits also produce a different kind of education. Students from for-profit institutions tend to take standardized vocational exams in much greater number, although they pass them at a lower rate.  These facts reflect both the vocational emphasis of for-profits as well as the lower academic reputation of their students.  Based on a sample of institutions from the Manila area (from 1963 and 1968), students from nonprofit religious institutions pass these standardized tests at an average rate of 38 percent, whereas students from for-profit institutions pass the same tests at a lower rate of 18 percent.  For-profits, however, produce a much greater number of students taking the tests, and therefore pass a much greater number of students through the tests.  Students at for-profits are approximately ten times more likely to take the tests.  Adjusting for the lower pass rate from for-profits, the for-profits are putting about five times the number of students through the tests as the non-profits, even though for-profits educated no more than three-fifths of all Filipino students at the time (Miao 1971, p. 207).

This is broadly similar to the patterns we see in the United States.  You might conclude that the for-profit status is more useful when an external test takes care of the signaling, and that a non-profit status is required when no test certifies quality.  But why exactly should that be the case?  Is the non-profit institution, by being so jealous of reputation, perks, and donations itself, a better producer of signals?  If signaling yields so much private value, why can't a private for-profit make a sufficiently strong commitment to a credible signal?

My paper has been published in this book.

Guess who is lobbying against marijuana legalization?

by  Alex Tabarrok in

Yup, beer distributors and the police.  Ryan Grim of The Huffington Post does a very nice job on the politics:

The California Beer & Beverage Distributors is spending money in the
state to oppose a marijuana legalization proposition on the ballot in November,
according to records filed with the California Secretary of State. The beer sellers are the first
competitors of marijuana to officially enter the debate; backers of the
initiative are closely watching liquor and wine dealers and the pharmaceutical
industry to see if they enter the debate in the remaining weeks…

Public Safety First is largely funded by a different industry whose interests are threatened by the legalization of marijuana: law enforcement. Police forces are entitled to keep property seized as part of drug raids and the revenue stream that comes from waging the drug war has become a significant source of support for local law enforcement. Federal and state funding of the drug war is also a significant supplement to local forces' budgets.

Amusingly, the Teamsters and the teachers (!) are supporting legalization:

The Service Employees International Union, a major presence in California, has endorsed the proposition. The Teamsters in September made its first successful foray into organizing pot growers. The United Food and Commercial Workers is backing the initiative and organizing cannabis club employees in the Bay Area. The teachers union, citing the revenue that could be raised for the state, is also backing the initiative.