The Winners of the MR Challenge

As expected, President Bush’s plan for a moon base and eventual trip to Mars failed to ignite. MR readers have some better ideas.

Honorable mention goes to Roger Meiners for suggesting that a moon base is a good idea so long as Congress and the President must occupy it. Now I am inspired!

Third place goes to Chris Rasch for brain freezing. Chris Rasch writes “I believe that reversible cryopreservation of the human brain could be developed. Remarkable advances have already been made on a shoestring budget. Such a technology would allow people dying today to halt the dying process until technology can advance to the point that we can cure their disease or repair their injuries. I would wager that, for a mere billion dollars, which is far more than has probably been spent on cryobiology during the entire existence of the field, we could have effectively unbounded lifespans. We could then use those extra years to pursue all of the other goals that other submitters may send to you.”

Here is a good, short summary of cryonics and you can sign up to have you brain (or more) frozen here.

I like the cryonics idea and have thought seriously about signing up (believe it or not, one of my colleagues (not Tyler) has already done so). The reason the idea takes third place is that we don’t see a big private demand for cryonics and the public is more likely to think this idea crazy than inspiring.

Second place goes to Nick Shultz for suggesting that we “provide potable water for everyone on the planet.” A number of other ideas were also motivated by the goal of alleviating abject third-world poverty. I think these ideas are inspiring but am unsure whether we can deliver on them given that so many of the problems of the third world have to do with poor governance. My suggestion would be to work on something related but more under our own control. We could do far worse, for example, than following Bill Gates’s lead and put a billion or so into the Malaria Vaccine Initiative.

First place goes to David Wood and Robin Hanson both of whom suggested a space elevator. At first, the space elevator idea seems impossible, even absurd. The idea is to string a cable some 62,000 miles long from a spot on the equator up into outerspace. Wouldn’t it fall down? No, recall that a sateillite some 22,000 miles up is in geosynchronous orbit. The space elevator would extend enough past this point so that gravity at the lower end and centripetal acceleration at the far end would keep the cable under tension. Once the cable is strung, reaching outerspace is as simple as Jack climbing the beanstock.

The most difficult part of the space elevator is finding a material strong enough to carry a load yet light enough not to collapse under its own weight – a short time ago there was no such material but today it’s believed that carbon nanotubes could do the job (nano-technology more generally was another favourite of MR readers and this proposal would advance that cause.)

A space elevator is a game-changer because it dramatically lowers the cost of putting payloads into space. Moreover, once you have one elevator it becomes much easier to get a second. In contrast, rockets are always going to be expensive because you have to carry a lot of fuel just to lift the fuel and sitting on top of 4 million pounds of explosive is always going to be dangerous. The space elevator would provide a permanent access point to the stars and it can be had for less than 100 billion. Going up anyone?

More on the space elevator idea here and here.

Women now outspend men on electronic gadgets

Yes it is true:

Women actually spent more on technology last year than men, according to the Consumer Electronics Association. It says women accounted for $55 billion of the $96 billion spent on electronics gear.

Additionally:

* Women are involved in 89 percent of all consumer electronics purchase decisions.

* Eighty-four (84) percent of women believe that new technologies can help improve their lives.

* Forty-eight (48) percent of women age 18-34 own a digital camera.

On the downside, nearly three-quarters complain that sales personnel ignore, patronize, or offend them while shopping.

Read the full post of Robert Tagorda to learn how retailers and manufacturers are making greater efforts to appeal to this customer segment.

Who Needs Progressive Taxation?

Apparently not the Swiss residents of the canton of Schaffhausen, in the northern part of Switzerland. Schaffhausen is in fact moving to a system of “degressive” taxation. That’s right, lower tax rates for the rich:

Beginning in January 2004, Schaffhausen will replace its system of increasing marginal tax rates on income with a system of degressive marginal rates. The cantonal tax rate will be set at just under 8 percent for income of SFr 100,000. It will rise to a peak of 11.5 percent for income between SFr 600,000 and SFr 800,000. Thereafter, the marginal rate declines with each incremental chunk of income: 10 percent at SFr 1,300,000; 8 percent at SFr 3,000,000; and just over 6 percent for income more than SFr 10,000,000. This is a true incentive-based tax system–the larger one’s income, the lower one’s marginal rate.

Declining marginal tax rates will also apply to wealth taxes, further enhancing the degressivity of cantonal taxes.

Schaffhausen has its own legislative parliament, which contains eighty deputies representing all regions within the canton. Eight political parties compete for these seats. Evidently Schaffhausen’s voters support a tax cut that gives the greatest benefits to the richest people. They believe that attracting wealthy individuals to reside in their midst is good for everyone.

Here is the full story. I don’t expect to have any data on this soon, but I am pleased to see the experiment. One question, of course, is whether cross-canton migration effects (as opposed to labor supply effects) are beneficial for Switzerland as a whole, or just for Schaffhausen. It does not create aggregate value to shuffle rich people from one canton to another. In any case I am amused to see an idea that finally weakens Alvin Rabushka’s loyalty to the flat tax.

Addendum: I am embarrassed to admit that co-blogger Alex tells me he posted on this topic some time ago, read his coverage as well.

Get a (Virtual) Life!!

The NY Times has a nice article on the Sims online game, where for a monthly fee you can join a virtual society and create an alter ego. Since your online personna can accumulate possessions that only exist in the game, people sell these virtual possessions for real dollars on ebay, especially the rare Sims pet – the cheetah! If you accumulate enough virtual dollars, you can sell these for real cash.

Trouble’s brewing, though. The owners of Sims online have expelled Peter Ludlow from their game, presumably because he was a virtual muckracker. In the Alphaville Herald, he’d report on criminal rings and teenage prostitution. The problem is that these are all constructs in a computer, not real world events. Of course, free speech issues come into play because Sims online has become a sort of quasi-public space, like the shopping mall. But there are important differences – you have to pay to get in and you sign away certain rights. It will be interesting to see if any regulation is ever applied to virtual online communities aside from the laws applying to any legitimate business.

Deirdre McCloskey’s Sins

Deirdre McCloskey has made a name for herself by critically examining the logic and rhetoric of economic arguments. She has a nice pamphlet summarizing her claims called “The Secret Sins of Economics.” It’s written for non-economists and nicely makes three points:

1. Some alleged problems of economics are virtues. For example, using math to describe and analyze economic behavior is actually good because math allows you to clearly deduce conclusions from premises.

2. There are some drawbacks to economics that are annoying, but acceptable. For example, economists assume people are always chasing profits. Her response is to say that this narrow focus tends to yield interesting insights. McCloskey identifies other drawbacks of economics and economists, such as professional arrogance, but asks that we forgive those because they really aren’t that bad.

3. McCloskey identifies two horrible, unforgivable economic sins – (a) economists tend to prove qualitative mathematical theorems whose conclusions depend on arbitrary, qualitative premises and (b) statistical analyses routinely confuse statistiscal and substantial significance.

These are pretty weighty charges – that much theoretical economic work is just a useless game and economists (among others) make routine statistical errors no decent statistics undergrad would ever make.

How to respond? I’m not a professional economist – so I can’t speak for the economics profession, but I think the second charge – misunderstanding of significance – is right on target. I’ve told students and colleagues many times that “not significant” does not mean “no effect.” It simply means that you can’t automatically reject the hypothesis that, according to an arbitrary standard, there is no effect, which is different than saying there really is no effect. As McCloskey says, significance is simply a measure of confidence in the effect’s measurement. The whole situation is quite bad. For a summary of anti-significance test views, see the book “What if there were no significance tests?”

This first charge doesn’t bother me too much. All academic endeavors must engage in thought experiments. In fact, bizarre, unrealistic thought experiments can lead to some great insights. But what McCloskey, I think, really focuses on is the lack of empirical discipline. That is to say, when you come up with the premise of your theorem, it should be well justified.

When I studied math, there was a real difference between how mathematicians did it and how physicists did it. Math people are purely concerned with what is logically possible (does B really follow from A?) but physicists employ “physical intuition” – a sense of what assumptions were appropriate, a gut feeling developed from doing lots of experiments and observation. That’s why a lot of physics seems mysterious to mathematicians – the math looks familiar, but why did the physics people choose mathematical model X over Y? McCloskey’s point could be rephrased as saying that economists should move away from the mathematician’s style of modelling (proving what is logically possible) to the physics style of modeling (developing models inspired and constrained by observation and experiment).

Researchers find a key gene for human intelligence

Read the ever-impressive Randall Parker over at Futurepundit.com. Here is a quotation from one of his links:

Lahn and his colleagues found that the ASPM gene showed clear evidence of changes accelerated by evolutionary pressure in the lineage leading to humans, and the acceleration is most prominent in recent human evolution after humans parted way from chimpanzees.

“In our work, we have looked at evolution of a large number of genes, and in the vast number of cases, we see only weak signatures of adaptive changes,” said Lahn. “So, I was quite surprised to see that this one gene shows such strong and unambiguous signatures of adaptive evolution – more so than most other genes we’ve studied.”

By contrast, the researchers’ analyses of the ASPM gene in the more primitive monkeys and in cows, sheep, cats, dogs, mice and rats, showed no accelerated evolutionary change. “The fact that we see this accelerated evolution of ASPM specifically in the primate lineage leading to humans, and not in these other mammals, makes a good case that the human lineage is special,” said Lahn.

The bottom line: The plausibility of the view that human beings are special has just gone up.

Parker is one of the most rigorous and versatile writers in the blogosphere, here is his recent account of our greater ability to predict earthquakes.

Addendum: Read this article on exactly why monkeys have trouble with human language.

Would potential immortals be risk-averse?

Anti-aging drugs appear closer on the horizon, but how would a fountain of youth change our behavior? Lawrence Solum asks whether potential immortals would be afraid to ever put their lives at risk:

Given eternally long lives, the real issue concerns taking risks…So the question becomes, “Would it be rational to engage in regular low-risk behaviors (like daily walking), given that over the course of an eternal life, death would be the almost certain consequence?” One might imagine that in the beginning, such behaviors would continue, but that over time one would begin to realize that the odds were catching up with friends, family, and co-workers. Would the loss of eternal life really be a greater cost than the loss of the current human span of several decades? If the answer to this question were yes, then perhaps most humans would began to avoid risk. A very cautious approach to life might add tens of thousands of years to one’s anticipated life span. I have an image of fine restaraunts serving only minced food to avoid the small (but statistically significant) risk of choking. No roller-skating, no skiing, no contact sports, no flying on airplances, no boating, no swimming. Would the eternal life lived to minimize risk be a recognizably human life?

Update: An astute reader notes that in contemporary vampire fiction, ancient vampires are generally potrayed as extremely risk averse–employing proxies when personal action in accord with their conception of the good (the bad?) would involve a significant risk to their immortality.

A related question is whether immortals would be less ambitious, since they might always feel they could accomplish their goals in a more distant future. As long as we are citing fiction, I recall seeing a television show about immortal beings. They were content to remain homeless and spent most of their time sitting around a campfire and talking. They accumulated few possessions. They never feared such a course of action would lead to death, and they always held the option of trying to do more.

Solum’s query was prompted by a Volokh Conspiracy post of mine. I asked the different question of whether an immortal is necessarily a murderer with a probability approaching one, given the recurring risk of accidents.

Addendum: Read the commentary of Randall Parker.

Why do you share?

Sometimes you share just to shut people up:

Stevens [the researcher] placed chimpanzees (Pan troglodytes) or squirrel monkeys (Saimiri boliviensis) in a cage and provided them with a meal of fruit. In an adjoining cage was a hungry member of the same species.

The primates rarely passed food through the cage to their hungry mate next door. But if the partition was opened – giving the hungry animal the chance to beg, steal or fight for food – sharing was common.

It is analogous to a parent buying a child a toy just to shut them up, says Stevens. “It’s a selfish way to stop the constant pestering,” he says.

Intriguingly, hungry chimps harassed their neighbour more when the food was cut into small chunks. This could reflect the fact that a beggar is more likely to get a handout if it doesn’t seriously deplete the donor’s stash.

This form of ‘strategic begging’ could help scroungers find success by setting their sights low, Stevens speculates. “It’s like a kid saying: ‘Can I have four cookies? Ok, how about one?’,” he says. Likewise, most street-corner beggars ask passers-by for nothing more than their small change.

Here is the full story. Right now the link to the original paper is not working.

What have international capital flows brought us?

Brad DeLong writes:

It is not possible for a card-carrying neoliberal like me to wish for any but the most minor of controls to curb the most speculative of capital flows. Capital markets can get the allocation of investment badly wrong, but governments are likely to get it even worse, and the incentives to corrupt bureaucrats do need to be kept as low as possible. But the hope for a repetition of the late nineteenth-century experience, in which core investors’ money gave peripheral economies the priceless gift of cutting decades off the time needed for successful economic development, has–so far–proved vain.

The full post — worth reading — is a very thoughtful and indeed moving elegy to the nineteenth century. DeLong points out that today a good deal of international capital flows today to the United States, rather than to the poorer countries.

Nonetheless I am more optimistic about the contemporary potential for international capital movements to spur growth. Singapore moved from a run-down port to a wealthy country in a few decades, and the transition was driven largely by foreign investment. Malaysia has faced a rockier road but by historical standards must be judged a success. Most of Africa has stood still or regressed, but clearly domestic policies are the major culprit. The more serious counterexamples have been in the Latin countries, many of which have received significant foreign direct investment, yet without coming close to eliminating poverty.

When it comes to China, we can see the glass as either half empty or half full:

China’s scorecard for attracting foreign investment reads like this: Trying hard, doing well, but could do even better. That is the assessment of a just-published OECD report, Investment Policy Review of China — Progress and Reform Challenges. In 2002, China became the world’s largest recipient of total foreign direct investment (FDI), attracting nearly $53 billion. That performance comes thanks to China’s progress on structural reforms, its accession to the World Trade Organization, and efforts to bring regulations in line with international standards.

So is China a counterexample to Brad’s claim? It depends how we count. It is only one country but of course over a billion people.

It also depends how we understand China. Liberalization has brought foreign investment, which has made its “low-wage-but-much-higher-than-before-wage” factories possible. My post immediately below cites research that finds much of the Chinese progress as coming from the shift of labor out of agriculture. This does not mean that capital flows had no role, since they helped make such a shift possible. We also should distinguish between total foreign investment and the per capita measure: “At $30 per capita, China receives less FDI than other major developing countries, such as Brazil with $195 per capita.” But of course foreign capital flows, and Chinese progress, have been concentrated in just a few regions of China.

What is the lesson? Foreign direct investment needs good domestic policies to translate into significantly higher living standards. When such policies are in place, it is amazing how far foreign direct investment can go. Even small per capita amounts of FDI can have a large and positive impact on individuals’ lives. Foreign capital flows have not lost their magic, but they will not lift all boats either.

How fast did China grow?

From 1978 to 1998 China grew a measured average of 8.0 percent a year, a breathtaking performance. But how fast did the country really grow? And how much did Chinese productivity improve?

Alwyn Young, at the University of Chicago, turned his attention to these questions in his recent “Gold Into Base Medals: Productivity Growth in the People’s Republic of China during the Reform Period,” in the December 2003 Journal of Political Economy. Here is an earlier, on-line version of the paper. Young, who is renowned for his thoroughness and care with data, found the following:

1. Chinese enterprises systematically underreport inflation.

2. In the non-agricultural sector, such underreporting accounts for 2.5 percent growth per year.

3. The main drivers of Chinese growth have been rising economic participation rates, improvements in educational attainment, and the movement of labor out of agriculture.

4. Labor and total factor productivity improvements, in the non-agricultural sector, are 2.6 and 1.4 percent respectively.

The bottom line: The Chinese economy has indeed done well. But once we cut through the mysteries of the numbers, we find an explicable reality. The Chinese growth experience is in reality comprised of “reasonable and comprehensible” numbers, rather than miracles. Young even wonders if the Chinese could not have done better than they did. On one hand, most economies would be delighted with a sustained 2.6 percent rate of labor productivity growth. But on the other hand, China has been moving away from a centrally planned economy. We might have expected even larger productivity boosts, given the incentive benefits of economic freedom. We also can interpret the figures as showing that China has enduring problems, and has not moved as far away from central planning as we might wish.

Using Placebo Laws to Test “More Guns, Less Crime†

My latest paper (written with Eric Helland) has just been published in Advances in Economic Analysis & Policy. If you don’t have access to this journal you can find the working paper version along with many of my other papers on the forthcoming and published papers section of my web site. Here is the abstract:

We reexamine Mustard and Lott’s controversial study on the affect of “shall-issue” gun laws on crime using an empirical standard error function randomly generated from “placebo” laws. We find that the effect of shall-issue laws on crime is much less well-estimated than the Mustard and Lott (1997) and Lott (2000) results suggest. We also find, however, that the cross equation restrictions implied by the Lott-Mustard theory are supported. A boomlet has occurred in recent years in the use of quasi-natural experiments to answer important questions of public policy. The intuitive power of this approach, however, has sometimes diverted attention from the statistical assumptions that must be made, particularly regarding standard errors. Failing to take into account serial correlation and grouped data can dramatically reduce standard errors suggesting greater certainty in effects than is actually the case. We find that the placebo law technique (Bertrand, Duflo and Mullainathan 2002) is a useful addition to the econometrician’s toolkit.

How do consumer reviews affect book sales?

Judith Chevalier and Dina Mayzlin have studied the impact of consumer reviews of books on word of mouth and subsequent sales, here is their NBER working paper, here is another draft. They find the following:

1. Most consumer reviews of books on Amazon.com and Barnesandnoble.com are very positive.

2. The reviews at Amazon are longer and more extensive. They are also more critical on average.

3. Better reviews on one site boost relative sales. The use of two sites gives us a controlled experiment to determine that word of mouth does indeed help authors rather than being a mere side effect of higher sales.

4. A bad review hurts you more than a good review helps you.

5. It remains to be seen whether allowing consumer reviews increases aggregate sales or simply shifts around sales to more suitable titles. Even a shifting affect, however, may increase consumer loyalty to the on-line site. If you know that Amazon helps you discover good books, you may be more likely to buy from Amazon.

My advice: I don’t put much stock in how favorable the Amazon reviews are, whether I am buying books, movies, or music. (I am most likely to buy music from Amazon.) This well-known example is one reason to distrust the reviews, although I think bad taste is more common than masquerades. Instead I look at how many reviews have been generated. I take this as a kind of sufficient statistic for how much passion the item has generated. Since I am at the tails of just about any distribution of taste, and since most cultural products disappoint in any case, look for something that creates a spark in people. I then see some chance of finding a product that I truly love. This advice will sometimes steer you wrong, but a little added intelligence will allow you to make the necessary adjustments.

By the way, there is now a whole blog, www.corante.com/many on how collaborative web enterprises shape society. Clay Shirky writes for it regularly, it is highly recommended.

Thanks to Eric Crampton for the pointer to the article.