Behavioral Economics in Song
Liam Delaney gives The Flaming Lips "a honourable place in the
behavioral economics songs hall of fame for the 'yeah yeah yeah song' which
reminds us that it is 'a very dangerous thing to do exactly what you
want because you cannot know yourself…'."
I take Delaney's Yeah, Yeah, Yeah and raise it with Chris Smither's Heh, Heh, Heh song which runs in part:
Pretty soon you're gonna ask me,
How come the life you lead,
Doesn't make you very happy,
Or satisfy your needs,
You talk about your needs as though
You know just what they are,
When in fact to really know them,
Is like traveling to a star,
It takes so long you die along the way,
So I say hey, hey, hey.
One of my papers, which never got very far, took this as inspiration to think about how preference discovery could modify various economic concepts.
Your nominations?
What is theft?
Chris Hartman does a fill in the blank exercise on Google — "_______ is theft?" — and reports this:
It's #2 that warms my heart. Of course you'll note that it's publishers who appear on this list four times.
Addendum: Chris reports some additional results.
Assorted Links
- Andrew Gelman can't take von Mises seriously as a philosopher. Oh brother.
- To improve happiness, imagine valued things gone.
- Charlie Munger's parable.
Hat tip: Andrew.
*The New Yorker* writes up Peter Chang and *China Star*
Yes I know the article is gated but I wanted to blog the link anyway, out of sheer enthusiasm. It's a superb piece. China Star is my favorite Fairfax restaurant and it's the #1 restaurant for GMU blogger lunches and debates (though one of us hates it; can you guess which one? We make him go nonetheless). It's also where we take job candidates, at least the ones we respect. Even though Chang is now gone, the restaurant remains superb in the hands of his successors, who have kept many of his original recipes. Some people claim they get better meals when I go there to eat with them. It's so close to our house that sometimes Natasha and I walk there. They know us well and are rarely surprised by our order. For two, our default is the braised fish and Sichuan chili chicken, on the bone of course. Scallion fried fish is a must for larger groups. John Nye likes General Kwan's Spicy Beef there. They have real kung pao shrimp. Kudos to Calvin Trillin for covering Chang and his mobile culinary empire.
Lots of assorted links today, the world has been busy
1. What Brad DeLong really needs (hint: Peter Orszag already is getting it).
2. Claims about education and attention.
4. Problems with India's Green Revolution.
5. The well that never runs dry: the culture that is Japan, with a cameo by Gorbachev, who is being fed eels.
Sentences to ponder
You cannot imagine really solving the Greek imbalance without – at least somewhat – correcting the German imbalance.
Here is more, mostly on why the IMF cannot solve the problem.
Haiti fact of the day
Between 25% and 30% of postearthquake surgeries will need to be done again to avoid problems, says Dr. Jean "William" Pape, an infectious disease authority who is founder of Gheskio, an HIV/AIDS clinic next door to a field hospital set up by the U.S. Department of Health and Human Services.
The title of the article is "Emergency Doctors Leave Haiti."
The culture that is Japan
“The concept of this restaurant is that Robot No. 1 is the manager, which boils the noodles, and Robot No. 2 is the deputy manager, which prepares for soup and puts toppings,” said Famen’s owner, Kenji Nagaya. “Human staffs are working for the two robots.”
Here is much more, interesting throughout. Here is one more bit:
One entry, Beerbot, detects approaching people and asks for beer money. When it acquires enough, it “buys” itself a beer. Bystanders can watch it flow into a transparent bladder. As for other humanizing behaviors, “like a robot that doesn’t stop short at lighting a cigarette but actually goes ahead and smokes it?” Mr. Wurzer says, “We had that.”
The rice fields of Japan
I thank Yan Li for the pointer. Here is more information.
Assorted links
1. Myron Scholes lecture on YouTube.
2. Eliot Spitzer on taxes and growth.
3. Marriage and jobs: we're slowpokes in both.
4. Why has the Australian property bubble yet to burst?
5. Revisionist claim that Haiti death toll is below 100,000; hard to evaluate.
6. Hollywood Stock Exchange to go "real money."
7. Sometimes the internet complements TV.
8. Lars von Trier directs Danish tourism ads (or maybe this is a joke?)
*Reputation and Power*, a new theory of the FDA
The subtitle is Organizational Image and Pharmaceutical Regulation at the FDA and the author is Daniel Carpenter. Here is the book's home page but I don't yet see an Amazon listing. Here is a Barnes&Noble listing, note the price discount.
Where to start? It exhausts me to even write about this book, which is the most comprehensive and most detailed study of a regulatory agency written — ever – to the best of my knowledge. It supplements and overturns all existing work on its subject and it will prove a model for future investigations. It's not short!
The starting point is the notion of reputational capital and the claim that the FDA seeks to preserve and extend its reputation, for a variety of political reasons. One implication of this is that the FDA is sometimes too loose and other times too strict but that both biases are possible. The framework is then used to address numerous questions, including the following:
1. Why the U.S. has the most bureaucratically intensive drug regulation in the world.
2. Why the 1962 amendments were passed.
3. Why FDA regulation is so often treated as de facto irreversible.
4. Why the tenure of a division director matters for how the decisions of that division are treated.
5. Why there is so much judicial deference to the FDA.
6. Why the FDA has been so influential on a global scale.
7. How public attention affects the speed of FDA procedures.
The author makes a strong case that the FDA is one of the most powerful and most important regulatory agencies in the world and one of the most important extensions of state power. Everyone interested in the economics of regulation should read this book, just be prepared to be a little overwhelmed. I would also note that this is not mainly a partisan book in one direction or the other, though on net I read the author as wishing to see a stronger FDA. (On p.379, for instance, I read Carpenter as overly dismissive of the "drug lag" argument.)
Here is Carpenter's previous book, which I have not read. For the pointer to this work I thank Steve Teles.
The laws of New York City (not from *The Onion*)
Here is a new one:
Months after it barred schools from holding most food fundraisers, the city says bake sales can go on–as long as no homemade treats with undisclosed calorie counts grace the fold-out tables. The new regulation, designed to combat ever-increasing childhood obesity, limits bake sales to "fresh fruits and vegetables, or one of 27 specific packaged items" that include low-fat Doritos, Nutri-Grain Cereal Bars (blackberry only) and Linden’s Cookies (butter crunch, chocolate chip or fudge chip cookies in two cookie packs) among other things.
The article is here and hat tip goes to Elmira Bayrasli.
Do imperatives in the past tense exist?
Douglas Krupka refers me to the following:
Although in discussion of the imperative clause type it is routinely denied that it could ever feature a past tense, imperatives in the past tense do exist. Specifically, past imperatives can be found in (Northern) Dutch and Frisian, many speakers of which can produce and understand sentences like (1) and (2).
(1) At liever eens wat minder! (Dutch)
ate rather once somewhat less
The English equivalent seems odd to me, but you would think it is hard to translate into a language which does not have imperatives in the past tense. Best to put the English out of your mind and focus on the:
At liever eens wat minder!
You can do a Google search on the concept here.
Assorted links
2. The future of the Republican Party?
3. Should there be a European Monetary Fund?
4. Jonathan Gruber's new estimates for how much the tax exclusion of health insurance matters.
6. Curling win probability table (for baseball here).
What happened in the shadow banking market?
Gary Gorton has a new and excellent paper on this question. It is called "Questions and Answers About the Financial Crisis." Here is one excerpt:
Q. Why doesn't the repo market just use Treasury bonds for collateral?
A. A problem with the new banking system is that it depends on collateral to guarantee the safety of the deposits. But, there are many demands for such collateral. Foreign governments and investors have significant demands for U.S. Treasury bonds, U.S. agency bonds, and corporate bonds (about 40 percent is held by foreigners). Treasury and agency bonds are also needed to collateralize derivatives positions. Further, they are needed to use as collateral for clearing and settlement of financial transactions. There are few AAA corporate bonds. Roughly speaking (which is the best that can be done, given the data available), the total amount of possible collateral in U.S. bond markets, minus the amount held by foreigners, is about $16 trillion. The amount used to collateralize derivatives positions (according to ISDA) is about $4 trillion. It is not known how much is needed for clearing and settlement. Repo needs, say, $12 trillion.
…to get a sense of the magnitudes, suppose the repo market was $12 trillion and that repo haircuts rose from zero to an average of 20 percent. Then the banking system would need to come up with $2 trillion, an impossible task.
One bottom line is this: the repo market funds the banks and there isn't enough "safety" to ensure the repo market is always working well. We ended up using synthetic securities, including those backed by mortgages. So every now and then we get a run on our banks. Gorton predicts the crisis was not a one-off event and it could happen again.
One implication of this (my inference, not found in the paper) is that most (all?) major current proposals for banking reform don't get at the real problem. You might wish to go back to "old banking" but according to Gorton that stopped being profitable during the 1980s. There's always an uninsured place to put your money, regulation can't stop that, and such money can find its way back to help fund the banking system, right? The systemic implications of that can prove scary.
I read all the same material that you do about "shrinking the banking system" or "decreasing leverage." This paper makes you realize just how far we are from making those recommendations work.
Gorton's short paper is one of the best essays on the crisis so far. Here are earlier posts on Gary Gorton and the crisis.