In case you were sleeping

In December, the Fed had $775B worth of Treasury securities. That
stock will soon have dwindled to $300B, give or take. The difference,
about $475B, represents an investment by the central bank in risky
assets of the US financial sector.

$475B is an extraordinary sum of money. It is as if the Fed borrowed
more than $1500 from every man, woman, and child in the United States,
and invested that money on our behalf in Wall Street banks that private
financiers were afraid to touch. For bearing all this risk, if things
work out well, taxpayers will earn about what they would have earned
investing in safe government bonds.

…If the Fed were to blow through the rest of its current stock of
Treasuries, it would have invested more than $2500 for every man,
woman, and child in America. Public investment in the financial sector
would have exceeded the direct costs to date of the Iraq War by a wide margin.

Here is much more; the Interfluidity post focuses in fact on the implications of paying interest on reserves.  The sad thing is: if I had my finger on the button, I would not have reversed these loans.  Ouch!

The Post-American World

The American political system has lost the ability for large-scale compromise, and it has lost the ability to accept some pain now for much gain later on.

That is from Fareed Zakaria’s The Post-American World, a book remarkably full of common sense.  It’s #7 on Amazon and a good overall guide to globalization and why it matters that America no longer dominates the world, either economically or culturally.

Hail Emily Oster!

The paper is titled "Hepatitis B Does Not Explain Male-Biased Sex Ratios in China"; here is the abstract:

Earlier work (Oster, 2005) has argued, based on existing medical
literature and analysis of cross country data and vaccination programs,
that parents who are carriers of hepatitis B have a higher offspring
sex ratio (more boys) than non-carrier parents. Further, since a number
of Asian countries, China in particular, have high hepatitis B carrier
rates, Oster (2005) suggested that hepatitis B could explain a large
share (approximately 50%) of Asia’s missing women". Subsequent work
has questioned this conclusion. Most notably, Lin and Luoh (2008) use
data from a large cohort of births in Taiwan and find only a very tiny
effect of maternal hepatitis carrier status on offspring sex ratio.
Although this work is quite conclusive for the case of mothers, it
leaves open the possibility that paternal carrier status is driving
higher sex offspring sex ratios. To test this, we collected data on the
offspring gender for a cohort of 67,000 people in China who are being
observed in a prospective cohort study of liver cancer; approximately
15% of these individuals are hepatitis B carriers. In this sample, we
find no effect of either maternal or paternal hepatitis B carrier
status on offspring sex. Carrier parents are no more likely to have
male children than non-carrier parents. This finding leads us to
conclude that hepatitis B cannot explain skewed sex ratios in China.

We should hold up Emily Oster as a role model of a truth-seeker.  If the abstract does not make it clear, Emily Oster first won her fame by reporting the opposite result about sex ratios.  Here are our previous posts on Emily Oster.

A more general lesson, of course, is simply how difficult it is to get at truth.  This is a well-defined data set with a (more or less) well-defined answer.  Most policy questions aren’t so tractable.

Why aren’t more people going to college?

Brad DeLong writes:

Altonji, Bharadwaj, and Lange do not know.

The whole post is interesting, but from this I can only conclude that Altonji, Bharadwaj, and Lange have never taught Introduction to Composition to a large group of freshman in a public university in the United States.  Anyone who has taught such a class — or for that matter talked to anyone who has — will have some inkling why more people are not going to college.  Herein lie the roots of growing inequality — on the bottom side at least — and don’t let anyone induce you to take your eye off the ball by playing switcheroo and bringing up the (separate) topic of the growing wealth of the top one percent.

Economists who have endorsed John McCain’s economic plan

Gary Becker, James Buchanan, Robert Lucas, Robert Mundell, Vernon Smith, Michael Boskin, John Cogan, Steven Davis, Francis X. Diebold, Martin Eichenbaum, Martin Feldstein, Kevin Hassett, Douglas Holtz-Eakin, Glenn Hubbard, Anne Krueger, Deepak Lal, Burton Malkiel, Paul W. McCracken, Allan Meltzer, Tim Muris, June O’Neill, Michael E. Porter, Kenneth Rogoff, Richard Roll, Harvey Rosen, George Shultz, Beryl Sprinkel, John Taylor, and Arnold Zellner.

I was sent that list in an email.  The opening of the statement reads:

We enthusiastically support John McCain‘s
economic plan. It is a comprehensive, pro-growth, reform agenda. The
reform focuses on the real economic problems Americans face today and
will face in the future. And it builds on the core economic principles
that have made America great.

His plan would control government
spending by vetoing every bill with earmarks, implementing a
constitutionally valid line-item veto, pausing non-military
discretionary government spending programs for one year to stop their
explosive growth and place accountability on federal government
agencies.

No, I don’t do endorsements but if I were tempted to (and I’m not) I would this year be even more suspicious than usual.  I feel that the candidates are trying to trick me and the one who isn’t — Hillary Clinton, whose negatives are too transparent to my eyes — has been trying to trick everyone else. 

I’ll put the rest of the letter in the first comment, but in the meantime my advice — at least for this year — is to vote on the basis of foreign policy.

True beyond the shores of Harvard

Blog post of the day, from Brad DeLong, excerpt:

Somebody last week–was it Jan de Vries? John Ellwood? Somebody
else? I forget who, but it is not original to me–said that the right
model for Harvard over the past century is Yugoslavia. Remember the
story of the Yugoslavian socialist worker-managed firm? If you add
another worker to the firm, that worker gets a pro-rata share of the
firm’s value added. The firm’s value added has a component attributable
to the firm’s capital stock, a component attributable to the ideas
embedded in the firm, a component attributable to the firm’s market
position, and a component attributable to the workers. Hire another
worker, and only the last of these goes up: the first three do not, and
so average compensation falls.

This means that a worker-managed firm is likely to shrink whenever
it gets good news that makes it more productive–the larger is the
value added due to ideas, capital, or market position, the more
expensive does it become for the existing workers to replace workers
who leave, let alone hire enough workers to expand. While a competitive
market capitalist firm responds to good news about its productivity and
value to society by increasing employment, a Yugoslavian-model market
socialist firm responds to good news about its productivity and value
to society by shrinking. On this analysis, the very success of Harvard
over the past two generations together with its degree of worker
management has created enormous internal pressures not to expand, the
better to share out the surplus among the existing stakeholders.

Division of labor in the Babylonian Talmud

This reminds me of Leonard Read’s "I, Pencil," but of course it came much earlier:

Ben Zoma once saw a crowd on one of the
steps of the Temple Mount. He said, Blessed is He that discerneth
secrets, and blessed is He who has created all these to serve me. [For]
he used to say: What labours Adam had to carry out before he obtained
bread to eat! He ploughed, he sowed, he reaped, he bound [the sheaves],
he threshed and winnowed and selected the ears, he ground [them], and
sifted [the flour], he kneaded and baked, and then at last he ate;
whereas I get up, and find all these things done for me.

And how many labours Adam had to carry out before he obtained a
garment to wear! He had to shear, wash [the wool], comb it, spin it,
and weave it, and then at last he obtained a garment to wear; whereas I
get up and find all these things done for me. All kinds of craftsmen
come early to the door of my house, and I rise in the morning and find
all these before me.

Credit goes to Stephen Dubner.

Ezra Klein on Kindle

At the end of the day, the true advances won’€™t come in the Kindle, but
in the content. Just as the capabilities of the device will shape what
authors decide to do with it, so too will the decisions of authors
shape the evolution of the device. The Kindle a€™s homepage already
features videotaped testimonials from such literary luminaries as Toni
Morrison, Michael Lewis, James Patterson, and Neil Gaiman. But what the
Kindle, and Amazon, need is not their kind words, but more of their written
words, composed with an eye toward the possibilities offered by
electronic text. Just as the early television shows were really radio
programs with moving images, the early electronic books are simply
printed text uploaded to a computer. Amazon could use its unique
position to change that.

Here is more.  Here is Megan McArdle on Kindle: "Best thing since sliced bread."  Here is me on Kindle, before and after trying it.

Department of Uh-Oh

Until recently, nearly all the thinking about the risks of space-rock strikes has focused on counting craters.  But what if most impacts don’t leave craters?  This is the prospect that troubles Boslough.  Exploding in the air, the Tunguska rock did plenty of damage…

That is Gregg Easterbrook in the latest Atlantic Monthly, June issue, "The Sky is Falling," not yet on-line.  Here are previous MR posts on the asteroid problem.

What are the benefits of being full professor?

Dan Drezner, who just won the title (congratulations!), gives a list.  Oddly he leaves off the most important (only?) benefit, namely that no one can tell you any more that you won’t make full professor.  I know that sounds silly but in essence you choke off the ability of your university to send you one very particular negative status signal.  Nor can they hold that threat over your head.

Sometimes I think this is also a benefit of being married.  Let’s say you and your significant other are not married.  In that case proposing, and having that proposal turned down, often causes couples to split up.  By marrying you remove this scenario as the source of a possible split.

There are advantages to sitting at the very top and very bottom of status distributions; it is often the in-between spots that are problematic.

The Man Who Loved China

That’s the new Simon Winchester book and it concerns Joseph Needham, who wrote the famous series on the history of science in China and focused the attention of the scholarly world on the question: why no capitalism in China?  This books offers a love story, a story of a quest, a story of science, a tale of politics, and did you know that Needham (unwittingly) was the guy who taught the Unabomber to use explosives?

Here is one short bit from the book:

In 1989, more than half a century after they first met, Needham and Lu Gwei-djen were married in Cambridge.  She died two years later, whereupon Needham invited three other women to marry him.  All politely declined.

Definitely recommended.  The subtitle is "The Fantastic Story of the Eccentric Scientist Who Unlocked the Mysteries of the Middle Kingdom."  Here is one review.

Letter to the NEJM

The issue of off-label prescribing is heating up again.  A recent article in the New England Journal of Medicine by Randall Stafford made the case for greater regulation.  I am concerned that the benefits of off-label prescribing are not fully appreciated.  Dan Klein and I wrote a letter to the NEJM – which they declined to publish – in response.  Here’s the letter:

Dear NEJM,

R.S. Stafford writes that off-label prescribing “permits innovation in clinical practice … offers patients and physicians earlier access to potentially valuable medications and allows physicians to adopt new practices based on emerging evidence.”  Nevertheless, he calls for greater FDA regulation.

In contrast, we argue that the efficacy of off-label usage suggests that less FDA regulation of first or on-label usage would increase innovation and offer patients earlier access to new medications. 

Off-label prescribing is regulated by the judgments of doctors, medical researchers, industry, the patient community, and patients.  This system offers patients a more nuanced approach to care than a top-down approach.  We should extend this approach to new drugs as well as to new uses for old drugs.

Our perspective is bolstered by a large survey of physicians which demonstrates strong support for off-label prescribing and considerable support for reducing FDA regulations on new drugs.

Daniel Klein
Alexander Tabarrok
George Mason University

Where do the kept women go?

Zubin Jelveh reports:

If you’re a married woman living in the New York City area, there’s
a better than 50 percent chance that you don’t work, according to a recent analysis of Census data by economists affiliated with the St. Louis Federal Reserve Bank.

More specifically, only 49 percent of white high school-educated
married women in their prime working ages were holding down jobs in the
New York area as of the 2000 Census. To put that in perspective, there
are roughly 2 million woman over 15-years-old who are married in the
New York area.

The national average for this particular demographic is 67 percent.
At the other end of the spectrum is Minneapolis where almost 80 percent
of these married women are employed — that’s larger than the
percentage of working men aged 25 and older in the U.S.

And why is this?

Surprisingly, the economists argue, the most important specific thing seems to be traffic.

And if you do work in these traffic-heavy areas, you are likely to work more hours.  But is it all causal?

With all due respect to The Walker Art Center, if I wanted to be a kept woman I would not start my quest in Minneapolis.  High density, as you find in Manhattan, means lots of fun things to do in your copious free time as a kept woman and also a higher degree of income inequality and thus the hope of snaring a rich man.  There’s a reason why they didn’t set Sex in the City in Paramus and most of the women there will be working even when the traffic gets worse.