Assorted links
*Lost*: commentary on the final episode
Most of all, it reminded me of Jacob's Ladder and especially Michael Powell's Stairway to Heaven (A Matter of Life and Death), two movies worth rewatching in any case. The final scene, while the credits roll, is simply that of a plane crash with no survivors. I view the show's cosmology as reflecting the existence of all possible universes and we get to see, and live with, a few of them. That includes the universe where they all die in the initial crash, the universe where they all die in the hydrogen bomb explosion, the universe where the hydrogen bomb creates an alternative reality, the universe where there really is a miraculously surviving "Oceanic Six," the universe where the main island narrative happens, the universe where it is all a dream of Jack's, and bits of others as well. This Leibnizian move "explains" the show's numerous unanswered questions, such as those about the lottery numbers and many more. It was possible, so it happened, toss in the anthropic principles as well.
The most striking moment of the final episode was when Locke tells Jack, quite sincerely, that he does not in fact have a son. The question remains how the different universes fit together or interact and in some manner it seems they do. The final episode is extremely effective in bringing out the dreamy and speculative tones of many of the previous episodes.
Most of all I viewed the ending as tragic. It was not mainly about any particular account of the metaphysics of the island. It was about how few couples had the chance to actually live together, love together, and stay together. The perfect reunions of the couples in the "we're all dead" scenario only drove this point home. I found this contrast moving.
At the end, the door is left open for Jack (the body of Jack?) to become the next smoke monster on the island and you can spot some clues to this effect, such as Jack's body being strewn on the stones in the same manner as it was for The Man in Black.
I saw two major weaknesses in the denouement. First, Widmore is dispatched too summarily in the penultimate episode. That thread of the story is not so much hanging (which would have been OK), but rendered irrelevant. Years of dramatic gravitas were swept away in a single, hastily executed murder scene. Second, Ben is a weak and poorly defined character in the final episode and runs around like a puppy dog, with no clear moral stance. Since he usually dominates any scene he is in, this is strikingly incongruous.
Overall I thought it was the best final episode of a series I have seen, with close competition from The Sopranos.
Regulation vs. tort
Paul Krugman writes:
Well, here’s the thing: regulation demonstrably does work where tort law doesn’t. Consider the environmental issue: in reality, the perpetrators of oil spills never pay most of the cost; but in reality, environmental regulation has led to much cleaner air and water. (Look up the history of Los Angeles smog or the fate of Lake Erie if you don’t believe me.)
So why does regulation work? If polluters can buy off the system ex post, after a disaster, why don’t they manage to totally corrupt regulation ex ante? There’s a lot to say about that, and I’m sure there’s a literature I haven’t read. But one thing we tend to forget in this age of Reagan is the importance and virtues of a dedicated bureaucracy: when you have professional government agencies with a job to do, and treat them with respect, that job often gets done.
I'll offer a few points:
1. Here is Susan Rose-Ackerman on regulation vs tort (JSTOR). This is a standard piece in the area, and although she does not stress public choice arguments, the upshot is not extremely far from Krugman's conclusions. She thinks that tort can replace regulation to only a limited degree.
2. I agree with Krugman that the "tort only" position espoused by some libertarians does not work. Yet I do not think his remarks are pointing at the best possible understanding of the question. For instance…
3. There is in fact an agency regulating off-shore drilling and in the case under question it totally failed. How can Lake Erie, an orthogonally related success, be cited but this very directly relevant failure not be mentioned?
Furthermore standard accounts of this failure blame regulatory capture, and the Congressional desire for revenue for this failure, not the ideology of free market economics. You might also blame voter sentiment, since Obama seemed to pick up some advocacy of off-shore drilling from the Republicans and arguably this happened because that position proved to be one of the few effective Republican arguments in the last election.
4. There are plenty of problems where tort works better than regulation, most notably when behavior cannot be controlled or measured easily ex ante or where the correct decision relies on the producer's decentralized information. This encompasses numerous areas, from medical practices to accident law to injuries resulting from the handling of guns to, most of all, many micro-components of highly regulated sectors. Here is a legal and moral defense of tort law.
5. Off-shore drilling is closely related to these cases. For a number of obvious reasons, it is hard for the regulator to monitor how safe an off-shore platform really is. We thus rely a lot on ex post penalties in this area (regulatory as well as tort), not because of ideology but because the ex ante proscriptions don't have as much bite as we would like. This reliance on the ex post penalty also means that "regulation plus tort" (never mind "regulation alone" or "tort alone") may not work so well in this area, with or without free market ideology.
6. Krugman seems to argue that regulators are more protected from the ravages of bad ideology than are judges. Maybe yes, maybe no (see below), but such a comparative argument is unnecessary. The most salient point for Krugman's conclusion is simply that optimality requires a bit of regulation and a bit of tort law and that to do without regulation is, in some regards, to be too lax. He could justify his main conclusion much more simply than he does. (That said, I still believe in less regulation than Krugman does, though I accept the logic of this argument.)
7. If we need to make the said comparison – the corruptibility of regulation vs. the corruptibility of tort law – an independent judiciary need not do worse than a respected bureaucracy and indeed the former is arguably more protected from political interference. It's also the case that the judiciary is more likely to overturn very bad behavior from other parts of the government. This is an advantage for judicial approaches over reguatory approaches and it is a further sign of (partial) judicial independence.
8. I worry when numerous bloggers and writers — not just Krugman — hold a primary theory of regulatory failure based on regulators who do not agree with them ideologically. This is at odds with a big chunk of the relevant public choice literature, which stresses knowledge and incentives, yet without ruling out ideological bias as a factor. Political science approaches to regulation offer greater scope for ideological bias as a major cause of regulatory failure, but still it is hardly the dominant theory to the exclusion of others. In this matter we should follow the literature, and evidence, which are there for the taking.
Should the large banks be broken up?
Here is one piece of evidence which says no. The bottom line seems to be that large banks are better at mobilizing capital internationally:
An essential step to see if this view has ground is analysing how multinational banks have been faring in the months of the crisis, in comparison to domestic banks. Given the key role of these multinational banks in supporting the real economy, whether their subsidiaries in host countries have been restraining the amount of resources provided to local residents during the recession.
In a recent paper prepared for the Economic Policy panel in Madrid (Barba Navaretti et al. 2010), we provide both aggregate and micro evidence that multinational banks have actually contributed to the stabilisation of financial markets in Europe and to the provision of credit to the real economy (notwithstanding the systemic nature of the crisis).
The aggregate banking statistics of the Bank for International Settlements show that the total local claims held by the affiliates (branches and subsidiaries) of multinational banks in host countries in Europe have been stable and even increasing between the beginning of 2007 and the third term of 2009, both in absolute terms and normalised by GDP or total financial activities (Figure 1 for total local claims in local currency). Claims have been rising also in the major Central and Eastern European Countries where foreign banks account for the dominant share of total banking activities. This pattern is consistent with broader worldwide evidence.
Here is the conclusion:
Contrary to popular belief, our results show that a world with only small and domestic banks is no safer. Rather, we show that the size and the global extensions of the activities of multinational banks positively contributed to hedging the downturns of the crisis, even in transition economies.
The call
Bloomberg offers up this piece of not very surprising news:
European Union finance ministers pledged to stiffen sanctions on high-deficit countries and ruled out setting up a mechanism to manage state defaults, saying no euro country will be allowed to renege on its debts.
I view this as the number one policy question facing the global economy today. Do you favor patches to keep the current system up and running, or do you think we need an as-smooth-as-possible combination of defaults and devaluations? I fall into the latter camp and I believe that no such feasible patches exist. I believe that Hayek — not of The Road to Serfdom but rather the critic of rationalist constructivism — is being vindicated more and more every day. Do any current European leaders understand his perspective? We will see.
Which path shall it be? What's your call?
From Angus, here are some harsh words, but on spending I cannot say that I disagree. I am often a Keynesian methodologically, yet in practice I am usually quite skeptical of fiscal policy.
Assorted links
How will Greece get off the dole?
My NYT column is here, here is an excerpt:
Consider the World Bank’s Doing Business index, which ranks countries according to the quality of their regulatory environment for commerce. The index places Greece at No. 109, just behind Egypt, Ethiopia and Lebanon. For the category of “high-income countries,” the Greek ranking is next to last, ahead of only Equatorial Guinea, which has oil wealth.
Greece has a malfunctioning fiscal system in which the shadow economy is estimated to be roughly 20 to 30 percent of the reported economy and tax evasion may run at $30 billion a year. Simply collecting taxes that are legally due would help bring Greece’s books into balance, yet even this simple remedy does not appear imminent.
As the World Bank index suggests, government funds are often spent hindering production rather than supporting it. This gives one clue as to why the numbers make Greece appear richer than it really is. Public expenditures are valued at cost when measuring gross domestic product, yet arguably the quality of Greek public services, per dollar spent, is less than that of many wealthy countries. Nonetheless Greece plunged ahead and joined the euro zone in 2001, with some unfortunate consequences.
A few scattered points which did not make it into the column:
1. Count the economic collapse of Greece as an intellectual victory for Douglass North and his brand of "institutions matter" economics.
2. I don't see any reason why a narrower Eurozone has to collapse.
3. Greece with a default and a floating exchange rate could do OK (though not spectacularly well). The real question is how to get from here to there.
4. I don't have any problem suggesting that Greece needed, and still needs, to collect more tax revenue. Yet many writers on "the left" will bend over backward to avoid uttering these simple words: "The Greek government spent too much money." It's true, the Greek government spent too much money. Be worried if you are reading a writer who does not admit (much less emphasize) that upfront.
5. In addition to greater wealth, here are some reasons why California is not like Greece:
The United States has rich and poor regions, but the 50 states are forced to run balanced budgets, and there is greater mobility within the nation, based on a shared language and culture. Major national policies, like President Obama‘s health care plan, are not judged primarily in terms of which states win and lose; in fact the largely opposed “red states” get a lot of the benefits through higher Medicaid subsidies.
Addendum: Arnold Kling comments.
Sixteen products they sell only at the Chinese Walmarts
1. Crocodiles
2. Bulk rice (TC is this true?)
3. Mixed meat (check out the photo below)
4. Orange juice and cooking oil, wrapped and bundled together
5. Turtles
6. ???? (check out the photo)
7. Walmart brand spirits
8. Rib cages (have I seen those in Mexico Walmart?)
9. Assorted dried reptiles
10. "Beautiful boxes of liquor"
11. Frogs
12. "A Large selection of chopsticks"
13. Ducks (TC: dubious)
14. Great Value Brand Hot and Spicy Beef Granules
15. Pig faces
16. Antibacterial bikini underwear for men (awesome photo)
The link, with photos is here, and I thank Leon Bergen for the pointer.
Assorted links
3. The economics of malware and internet *orn, serious piece, safe for work.
4. Lady Gaga, full of substance.
5. David Gordon reviews the new Elaine Scarry book on torture.
The economic effects of disenfranchisement
Via Chris Blattman, here is a newish paper by Suresh Naidu, on how disenfranchisement translated into inferior economic outcomes for African-Americans:
This paper estimates the political and economic effects of the 19th century disenfranchisement of black citizens in the U.S. South. Using adjacent county-pairs that straddle state boundaries, I rst examine the effect of voting restrictions on political competition. I find that poll taxes and literacy tests each lowered overall electoral turnout by 10-23% and increased the Democratic vote share in national elections by 5%-10%. Second, employing newly collected data on schooling inputs, I show that disenfranchisement reduced the teacher-child and teacher-student ratio in black schools. Finally, I develop a model of suffrage restriction and redistribution in a 2-factor economy with occupational choice to generate sufficient statistics for welfare analysis of the incidence of black disenfranchisement. Consistent with the model, disenfranchised counties experienced a 7% increase in land and farm values per decade, despite a 4% fall in the black population share. The estimated factor market responses suggest that black labor bore a collective loss from disenfranchisement equivalent to at least 13% of annual income, much of which was transferred to landowners.
Here is Naidu's home page. Where did he end up getting a job?
What should World Bank economists do, part II?
My talk there on Thursday outlined and evaluated ten possibilities:
1. Refute the simple (and frequent) fallacies of others in the World Bank.
2. Help the Bank write better contracts — wiser about incentives – for its projects.
3. Study economic growth and Doug North and promote big picture thinking about the big questions that really matter.
4. Abandon big picture thinking — which rarely succeeds – and focus on easy-to-manage public health improvements.
5. Figure out the prevailing net bias in Bank activities and work to offset it. Arguably this bias is that the Bank Board pushes through too many contracts too quickly. Show up to work late. The theory of comparative advantage suggests you focus on what others are lacking.
6. Figure out the prevailing net bias in the economics profession, and work to offset it. Be a generalist.
7. Help the Bank make more money and let the non-economists figure out how to spend it.
8. Take whatever resouces you can, and drop them out of a helicopter onto poor countries. Give up trying to make aid work.
9. Collect and analyze more data.
10. Take a stronger interest in the most effective anti-poverty recipe we have, namely immigration.
Your answers to this question can be found here.
Books in my pile
In various stages of undress:
Sheena Iyengar, The Art of Choosing, reviewed by Virginia Postrel here. Stephen M. Davidson, Still Broken: Understanding the U.S. Health Care System (intelligent book, bad timing since it pushes a non-Obama reform). Peter Heather, Empires and Barbarians The Fall of Rome and the Birth of Europe; good book but I've read too much on this topic lately. What We See: Advancing the Observations of Jane Jacobs, has the pluses and minuses of an edited collection. Boris Groysberg, Chasing Stars: The Myth of Talent and the Portability of Performance; interesting hypothesis but I wanted to see more on regression toward the mean. Stuart Buck, Acting White: The Ironic Legacy of Desegregation, a politically incorrect reexamination of what the title suggests. Matthew E. Kahn, Climatopolis: How Our Cities Will Thrive in a Hotter Future. Nicholas Carr, The Shallows: What the Internet is Doing to Our Brains; is the joke "I couldn't finish it" or "I'm still reading it"? Daniel Rigney, The Matthew Effect: How Advantage Begs Further Advantage, I wonder how much his last book sold.
Assorted links
More Evidence for the Slartibartfarst Principle
Earlier I wrote that due to the Slartibartfarst principle,
…the evidence for intelligent design ought to be readily available in the graffiti of DNA. "Slartibartfast was here," or perhaps "3.14159265," or given what we know of economics, "All rights reserved, MegaCorp. Call for a free estimate."
The fact that, as of yet, we don't see this kind of signature in the data is evidence against intelligent design.
With yesterday's announcement we have a bit more evidence favoring the premise of my argument.
To distinguish their synthetic genome from the naturally occurring version, the researchers encoded a series of watermarks into the sequence. They began by developing a code for writing the English alphabet, as well as punctuation and numbers, into the language of DNA–a decoding key is included in the sequence itself. Then they wrote in their names, a few quotations, and the address for a website people can visit if they successfully crack the code.
Life as advertisement, this is the wave of the future!