Congress opts out
Here is my latest column. Excerpt:
It’s not that anyone is behaving illegally or unconstitutionally,
but rather that Congress seems to want to be circumvented and to
delegate more power to the executive branch as well as to the Fed, at
least temporarily.
While Congressional leaders are consulted on
the major policies, Congress is keeping its distance, perhaps to
minimize voter outrage. This way, Congress can claim credit if a
recovery comes, but deny responsibility if the price tag ends up higher
than advertised or if banks seem to be receiving unfair benefits from
the government.
The Fed and the FDIC have become the major tools for enhancing executive power and working around Congress:
The traditional division of labor among policy makers was that the Fed
determined the quantity of money in the economy – it set monetary
policy – and Congress decided precise government expenditures – it
handled fiscal policy. These new programs blur that distinction and, in
essence, the Fed is running some fiscal policy.
The FDIC issues guarantees under the expectation that Congress will have to ratify them ex post but ex ante the executive branch is calling the shots.
Is this all good or bad? For any single choice, it is probably good. Congress does not, in general, improve the quality of economic policy, relative to the executive branch. But it is also a kind of deficit spending on the quality of future governance. The more Congress is accustomed to being allowed to punt, the worse Congress will become in the longer run. The executive branch will overreach more and also voters will apply successively more cynical standards to evaluating Congress, leading to a self-fulfilling prophecy.
To put it more concretely, this Congress shies away from accepting responsibility for the various bailouts, yet we think it will somehow solve far tougher problems? I, for one, am worried.
Why is it so hard to hug?
Gretchen Rubin reports:
After I looked at my list, however, I realized that I’d never made a
specific resolution to “Kiss more, hug more, touch more.” So I’ve added
that to my ever-growing list of resolutions.
This is intriguing, precisely because it strikes a chord with so many people. Why exactly do so many people need a "nudge" to hug more? There is evidence that hugging is both fun and good for us. What is it about hugging that is so often resisted?
Oddly, many people wish to be hugged by Florence Henderson.
I am reminded of my old post on why people don't have more sex with each other than they do. Fortunately, I have solved this problem and if you keep on reading MR for enough years you will learn my answer.
Assorted links
The personality traits of stand-up comedians, and owners of vicious dogs
They don't quite fit the stereotype:
Stand-up comedians are a vocational group with unique characteristics:
unlike most other entertainers with high creative abilities, they both
invent and perform their own work, and audience feedback (laughter or
derision) is instantaneous. In this study, the Big Five personality
traits (NEOFFI-R) of 31 professional stand-up comedians were compared
to those of nine amateur comedians, 10 humor writers and 400 college
students. All four groups showed similar neuroticism levels.
Professional stand-up comedians were similar to amateur stand-up
comedians in most respects. However, compared to college students,
professional and amateur stand-up comedians on average showed
significantly higher openness, and lower conscientiousness,
extraversion, and agreeableness. Compared to stand-up comedians, comedy
writers showed higher openness, conscientiousness, extraversion, and
agreeableness. These results challenge the stereotype of comedians as
neurotic extraverts, and suggest a discrepancy between their stage
persona and their true personality traits.
The paper is here. Here is another paper on personality profiles, for owners of vicious dogs, summarized as follows:
Findings revealed vicious dog owners reported significantly more
criminal behaviors than other dog owners. Vicious dog owners were
higher in sensation seeking and primary psychopathy. Study results
suggest that vicious dog ownership may be a simple marker of broader
social deviance.
I thank BPS Research Digest for the pointers.
What I’ve been reading
1. Brian Boyd, On the Origin of Stories: Evolution, Cognition, and Fiction. If you've read Geoffrey Miller, Karen Dissanayake, Denis Dutton, and Comeuppance, this is the next book in line. It's well-written and intelligent, but also a little underwhelming. The main point is that the arts are an extension of the play instinct. Blog audiences, who expect rapid delivery of the main points, may be especially frustrated.
2. Richard Goldthwaite, The Economy of Renaissance Florence. Dull for some, definitive for others. If the thesis about commerce sounds a little late to the party, it is only because of Goldthwaite's own previous work.
3. John Reader, The Potato: A History of the Propitious Esculent. Not as good as his excellent book on Africa, but I liked the sections on potatoes in the Incan empire. This book could have been great, it isn't, but it is still above average.
4. Portfolios of the Poor: How the World's Poor Live on $2 a Day, by Daryl Collins, Jonathan Morduch, Stuart Rutherford, and Orlanda Ruthven. A good overview of how the world's poor intersect with financial institutions at the micro level.
5. Twenty Thousand Roads: The Ballad of Gram Parsons and His Cosmic American Music, by David N. Meyer. A serious and excellent book, noting that every now and then the reader is hit by a strange sentence like: "Of course the temptation to get all bourgeois on Gram's a** is irresistible." Meyer underrates the album Burrito Deluxe, however.
Star Trek, II
The key line is about non-rivalry and non-excludability. I didn't like that Harold played Sulu or that Bones sounded just like Sawyer. Young Kirk and Spock were superb. Sadly, there was no information about the progress of monetary institutions. Bryan Caplan complained that the implied rate of economic growth was so low. I've long wondered why there is not more technology transfer to Vulcan. The soundtrack was poor. Everything Alex says is true. The best part was Uhuru but I won't say more on that.
Star Trek
The new movie is a good revitalization of the franchise. It's most enjoyable moments build on, foreshadow and deepen our appreciation of its familiar characters. The casting and actors are all superb on this score. The action is passable, although the fight scenes are poor and I wish they had put more effort into the plot.
Best piece of Star Trek trivia: Vulcan education includes rigorous training in mathematics, physics and economics. (Listen carefully during the education scene!)
Addendum: Aha! I am told unofficially that we can thank economist turned screenwriter Glen Whitman for adding the economics lesson to Vulcan!
Assorted links
1. Via Seth Roberts, Robert Caro on Jane Jacobs.
2. Seth Roberts on the paleolithic diet.
3. Russell Hardin: The Economics of Ordinary Knowledge.
4. In Praise of Isabel Paterson.
5. Greg Mankiw passes his stress test.
Separation of powers
Rep. Maurice D. Hinchey (D-N.Y.) vowed to force the White House to accept delivery of a new
presidential helicopter Obama says he doesn't need and doesn't want.
The helicopter program, which cost $835 million this year, supports 800
jobs in Hinchey's district. "I do think there's a good chance we can
save it," he said.
Here is much more. The Congressional Democrats don't like Obama's proposed "cuts" in spending.
Going to Extremes
That's the new book by Cass Sunstein and the subtitle is How Like Minds Unite and Divide. I am a fan of Cass Sunstein and I hope they confirm him for OIRA, but I am not persuaded by the main thesis of this book.
I take the main point to be that polarization is increasing and in a bad way. Sunstein offers plenty of good evidence that when people discuss a problem together, they tend to polarize if they disagreed in the first place. But this does not mean polarization is increasing in absolute terms. You can find poll-based public opinion diagrams which point in either direction, but viewing the problem in general and longer-run terms, here are a few offsetting forces:
1. Most of the time people aren't talking with others about controversial problems. During these "cooling off periods" their polarization might well decrease. It's not a one-way ratchet effect.
2. The population is aging in many countries. Even if you believe in the notion of "crochety old men," they are tame crochety old men.
3. Highly polarizing ideologies, such as communism and Nazism, have been on the decline. Maybe jihadism is on the rise but even that is not clear.
4. Wealth and commerce soften morals.
5. Public reactions to the financial crisis have been quite low-key for the most part.
6. Obama goes out of his way to adopt a non-polarizing style (no matter what you think of his policies) and it brings him considerable popularity. That suggests a demand for non-polarization, or at least the perception thereof. In many countries politicians have an incentive to straddle the median and bring outlying groups closer to the center, for purposes of governance and re-election.
Polarization is highly visible in certain segments of the media, including the web. But I am not convinced that increasing polarization is occurring or is a major problem, once we adjust for what one might call "perennial stupidity."
Some reasons why Canadian banking is special
Via Scott Sumner, here is a list from Nick Rowe:
1. We never had restrictions on interstate banking, so Canadian banks spread their assets and liabilities across Canada. (So it doesn’t matter if a local housing market goes bust).
2. We don’t have Glass-Steagal. The investment banks joined the retail banks some years ago.
3. We don’t have mortgage interest deductibility from taxes. So paying down your mortgage is a tax-free investment. So most people want to pay down their mortgages.
4. (Except in Alberta), mortgages are fully recourse. You can’t just walk away from a negative equity home and hand the keys to the bank; the bank will come after you for the difference.
I wouldn’t describe those differences as “Canada is more regulated”.
But we do have higher capital requirements. And mortgages over 80% must be insured (mostly by the government-owned CMHC).
I would add one more feature of the Canadian banking system, which it shares with a number of other systems. If a Canadian investor wishes to take some risk, the New York-based banks may be the most efficient means of doing that.
Addendum: Megan McArdle offers a theory of Canada.
Gerald Scully, RIP
David Henderson reports. He was a pioneer in the economics of sports and a very good applied microeconomist. Here is Scully on scholar.google.com. Here is John Goodman's write-up.
Tips for the workplace
I do not vouch for these tips, but they are interesting to ponder. Here is one of them:
Choose women who are happy, but they shouldn't smile too easily.
This is hard for men to do. Because men are hard-wired to be drawn to women who laugh at their jokes. Men want to be funny. But women who are slower to smile do better at work, according to communications consultant Neil Lowndes. So you should date women who smile a lot, but work with women who don’t. (Hat tip: Derek Scruggs.)
That's from Penelope Trunk. I wonder what the implied model looks like. Is this a coordination game or does a hard-to-mimic smile create a separating equilibrium in a signalling game? Since men compete against each other for dates, should they not choose a randomized mixed strategy when it comes to female smiling? (Multiple dimensions have value, even if smiling predicts some of them on average.) Can a taste for arbitrary markers serve as such a mixed strategy? Are the eyes the window to the soul? Etc.
Assorted links
1. Torture and the bank stress tests: more related than you might think.
2. Lessons from the 2009 influenza epidemic.
3. How wage cuts can help aggregate demand.
4. Maybe binding arbitration is the real problem with EFCA.
Chavez and the Power of the State
Between 2002 and 2004 millions of Venezuelans signed petitions calling for a vote to remove Hugo Chavez from office. Signatories were not anonymous and during the petition campaign Chavez supporters hinted darkly that there would be retaliation. Chavez was in fact forced into a recall election, but unfortunately he won (not one of democracy's better moments). After the election, the list of signatories was distributed to government agencies in an easy-to-use database. The database included the names and addresses of all registered voters and whether they had signed an anti-Chavez petition. Technology thus provided Chavez supporters the information they needed to retaliate.
Technology cuts both ways, however, and in a truly remarkable paper, Hsieh, Miguel, Ortega and Rodriguez match information in the petition database to another database on wages, employment and income. What the authors find is shocking, albeit not surprising. Before the recall election, petition signatories and non-signatories look alike. After the election, the employment and wages of signatories drop considerably, about a 10% drop in wages relative to non-signatories. Survey evidence conducted by the authors is consistent with retaliation by Chavez supporters especially in the form of job losses in the public sector. The authors estimate that the retaliation was so widespread, many workers were pushed into informal employment, that the Venezuelan economy was significantly damaged.
This is original, important and actionable research. Bravo to the authors, especially to Ortega who–as of this posting–has a job in Venezuela.