This is so, so wrong
When she said yes, he asked the more important question, would she attend a performance of the Black Watch, an international bagpipe and drum group, the next weekend at UT Tyler’s Cowen Center.
Here is the full but totally non-interesting story.
On a less incorrect but still odd note, someone just built a column around this point:
There are some restaurant dishes that I order because they sound better than everything else on the menu, and there are some I order because they sound worse. My reasoning goes like this: If a chef dares to offer something as unappealing as, say, a raw kale salad, chances are it’s fantastic.
RAND Hits Back
Joseph Newhouse and the other RAND researchers have responded to Nyman’s paper arguing that attrition bias biased their results. The RAND researchers were aware of these issues and in fact designed the experiment to avoid incentives for non-random attrition. Most importantly, the basic RAND findings have now been replicated in many other studies (smaller and not always experiments but the results are solid). I call it a knockout for RAND.
It’s a credit to the many insightful commentators on Marginal Revolution that many of these points were made already in the comments on my original post.
Thanks to Jason Furman for the pointer.
Uh oh
George Mason is updating to a new network system. We are told, "MESA was designed specifically for George Mason University."
In other words, MESA has not been thoroughly tested, no other universities have found it worthwhile to adopt the same system and we will be utterly dependent on the designers. Ahhhrghhh! Run for the hills!
Is Hillary electable?
At this point it is ridiculous to claim that Hillary cannot win, but her chances are overestimated. I apply what I call The Angry Ape Test to the candidates. Imagine each mimicking an angry ape, and ask how pretty or appealing the resulting picture is. Most swing voters perceive America as being at war and so they demand toughness. They demand An Angry Ape, if not at every moment in time, at least in principle. Most Americans don’t find an angry Hillary to be a pleasant Hillary, whereas an angry, raging Giuliana fits his basic image. Americans claim not to be biased, but at their core they don’t much like angry women; being female remains Hillary’s biggest barrier, even when explicit prejudice is absent. Related prejudicial forces will keep Barack Obama from the presidency. Being black, he is supposed to sound reasonable and intelligent all the time. He is not allowed to mimic An Angry Ape. Americans want their first women President to be like Margaret Thatcher — firm, no-nonsense schoolmarmish strength without much radiation of anger — and they want their first black President to be like Colin Powell. We will allow "Magisterial" — I’m too strong to need to throw a tantrum — to trump Angry Ape, but Hillary can’t play that card. Barack is too young, too inexperienced, and doesn’t have the military record.
Mitt Romney also can’t do The Angry Ape. This same hypothesis suggests McCain still has some chance, though obviously his path to the top is no longer clear, given his limited resources. He can at least do The Ape. This is the main reason why I still think Giuliani will win.
Under this theory foreign policy disasters, no matter who caused them, will help the Republican candidate. We will demand An Angrier Ape.
Have median wages stagnated?
This is a very common charge. It is true that median wage growth has been slower than usual over the last thirty years. But it’s not quite the grim picture it is often made out to be.
For instance: "Including estimated benefits adds 6 percentage points to the growth rate of
average hourly earnings and 8 percentage points to the growth rate of the median hourly wage." For the last thirty years, twenty-eight percent growth in median wages is the best available estimate. Don’t let anyone tell you it is zero or negative.
Here is the one good summary article on this topic. Thanks to a loyal MR reader for the pointer.
Why do college costs outpace inflation?
Tuition and other costs, not including room and board, rose on average
to $6,185 at public four-year colleges this year, up 6.6 percent from
last year, while tuition at private colleges hit $23,712, an increase
of 6.3 percent…In recent years, consumer prices have risen less than 3 percent a year,
while net tuition at public colleges has risen by 8.8 percent and at
private ones, 6.7 percent.
Etc., and please note that explanations for high costs (i.e., lazy professors who won’t blog) do not automatically translate into explanations for rising costs.
Rrecall that 78 percent of the buyers in this market choose the public sector. Tuition is going up because it can, to paraphrase the old saw about the dog (or is it the monkey?). But too big a sticker shock across one year would irritate voters, who might then insist on tighter regulations on public sector higher education. Think about the equilibrium. Many state schools could earn more money by forgoing state aid and raising tuition to profit-maximizing levels, or some approximation thereof. Step-by-step, we are moving toward some version of this outcome.
Why do low-tuition goodies for middle class parents no longer figure so prominently in the political calculus? Could it be the aging of the population? Or simply that some schools tried raising tuition and found that it did not backfire?.
If the market discounters — who capture 78 percent of the customers — can raise their price, so can the other suppliers.
If more people want to get into Harvard, Harvard doesn’t have much incentive to increase the size of a yearly class. The academic departments don’t want to lower standards by hiring more professors or adjuncts, and the development office seems OK with just raising the size of the required bribe for admission, rather than hoping that a bigger class means more donations thirty years from now.
At the same time the returns to skilled labor are rising, so many people even feel they’re getting their monies worth. Toss in a dash of Robin Hanson’s "showing that you care" ("I’m sorry Johnny, but we won’t be spending a penny more on you") and the market seems to hang together.
Nor do universities have the best governance structures for controlling costs. Here are some good comments on the problem.
Tradeoffs
The boys were tossed out of the ball pit for rough-housing. The wife began to sternly lecture them "Why are you so wild? Don’t you know you could get hurt?!" The 5-year old retorted, "Mom! No risk, no fun."
Naturally I burst out laughing. Need I explain why this was not wise? I should have kept quiet, but I learned another tradeoff; no fun, no risk.
The economics of blogging, MP4 videocast
Me talking, at UC Davis, thick file, and yes I do name names, tell tales, and ascribe motives. All honorably, of course.
How much is America taxing its rich?
Lots, at least for some:
It might be fair to have the rich pay half their income . . . but when you factor in other taxes, many of them do. My old colleagues moving to New York City from London were frequently heard to say "What is this rubbish we’ve been talking about America having low taxes? My taxes are higher here!" That’s because New York State and New York City together levy an additional income tax of 10% once your income is over $100K, which pushed two-income families above Britain’s 40% top tax bracket. A 50% tax rate on top incomes would result, for New Yorkers, in a 60% effective total income tax rate total, with their incomes further eroded by the city’s 10% sales tax. Since pretty much the entire increase in inequality in the last few decades seems to have come from a few zip codes in the high tax zones around New York and San Francisco, this matters.
There are broader lessons. First, tax incidence is tricky. If location is such an enormous source of economic value, will local income tax rates, and also sales tax, in fact fall on landowners in those cities?
Second, not all of these people can convert their labor income into capital gains income, which is taxed at a much lower rate. In other words, high-earning Manhattan journalists face exorbitant rates of taxation, as do doctors without their own practices. That’s one reason why it is becoming a city of equity holders.
Third, those who can opt for capital gains, for tax reasons, end up with more exposure to income risk than they ideally want. Boo-hoo for the billionaires you might say, but the added risk raises income inequality for the winners who constitute the top one percent, relative to other income classes. That doesn’t bother me much, but the policy is helping create a result it was designed to counteract.
Fourth, if you’re planning on raising marginal tax rates on the wealthy, there may be less "give" in the system than you might have thought. This of course depends on tax incidence, but if behavioral considerations matter, many people resent nominal marginal rates of 60 percent, even if they are earning some of it back in the form of higher wages.
Perceptions of Corruption
Transparency International produces a much cited index of corruption, the Corruption Perceptions Index (CPI). But here is something, shall we say… interesting.
"Transparency International commissions the CPI from Johann Graf Lambsdorff." Lambsdorff, who likes to be called the "father" of the CPI, has another kid on the side, a firm called Anti-Corruption Training and Consulting. And what does this firm do? Well I will let them speak for themselves:
Following an invitation of the Chinese Ministry of Supervsion Prof.
Graf Lambsdorff and Mathias Nell went to China from July 22 to July 29
2007. The trip encompassed anti-corruption consultations in Beijing,
Nanjing and Chengdu as well as the release ceremony at Tsinghua
University of the Chinese version of Prof. Graf Lambsdorff’s new book
“The Institutional Economics of Corruption and Reform: Theory, Evidence
and Policy”.
China, let us recall, scores a 3.5 out of 10 on TI’s Corruption Index where the most corrupt country in the world, Somalia, has a score of 1.4. Pretty corrupt, eh? Here is a picture, from the ACTC website illustrating some of ACTC’s consulting:
Hat tip to CPI-Watch.
What went wrong with subprime loans in 2006?
Yuliya Demyanyk and Otto Van Hemert report:
We analyze the subprime mortgage crisis:
an unusually large fraction of subprime mortgages originated in 2006
being delinquent or in foreclosure only months later. We utilize a
loan-level database, covering about half of all US subprime mortgages,
and identify two major causes. First, over the past five years, high
loan-to-value borrowers increasingly became high-risk borrowers, in
terms of elevated delinquency and foreclosure rates. Lenders were aware
of this and adjusted mortgage rates accordingly over time. Second, the
below-average house price appreciation in 2006-2007 further contributed
to the crisis.
Neither point is shocking news, but the mystery deepens upon inspection. After 2006, 2001 was the next worst performing year for mortgage repayment, a puzzling fact. I had expected a rising crescendo of failures; why did things suddenly get so much worse when they did? Furthermore variable rate loans and low documentation loans do not seem to worsen disproportionately in 2006, contrary to common suppositions. The ratio of loan value to house value is a critical variable, but again there is the puzzle of why 2006 was so much worse for these loans than preceding years. Unless you think everyone is "flipping," (not the case), falling home prices don’t stop you from repaying your loan. Note also that lenders could see the risk of these loans worsening, and it was reflected in the rates they charged, although apparently not enough.
Addendum: Here is James Hamilton on same.
Dan Klein critiques Bryan Caplan
Slugfest of the classical liberals. Dan stresses he wrote these comments off the top of his head, which is how most criticism of colleagues should be done.
Perhaps the most interesting discussion is whether Bryan has identified the key biases in voter behavior. Bryan identifies anti-foreigner, make-work, pessimistic, and anti-market biases. Like Dan, I see pro-conformity biases as essential, and as shaping the form that other biases will take, including the biases of high-status academics. I also don’t think that voters are pessimistic per se; on many issues (Iraq, global warming) they have seemed quite cavalier and willing to ignore pending problems. It is fairer to say that voters either ignore or overestimate low probability events, depending on framing, rather than getting it right.
My list of the essential biases in voter (and human) behavior are: feel good about oneself bias, conformity bias, and anti-foreigner bias. Robin Hanson might cite signaling bias. The remaining biases are numerous and important, but they will flow from how these initial deeply rooted biases interact with the social environment. Among other things, this means that people can be too biased toward Bryan’s point of view and that we can’t always trust academics over the common person.
I often joke with Bryan that the time has come for him to accept the consensus of what the experts in moral philosophy (or atonal music) tell us (him) to do.
Assorted links, revised
1. Monkey wars?
3. A new Amazon feature: who writes short and long sentences?
4. Farewell to Alms MP4: Tyler Cowen, Brad DeLong, and Greg Clark.
It was much fun, as Brad and I realized we hadn’t seen each other since
graduate school. Greg goes first, we each speak for about fifteen
minutes, Brad presents Michael Kremer, I talk about institutions, then
there are questions from the audience.
5. "After losing embassy employees to attacks, he advised staffers to keep a six-sided die in their glove compartments; to thwart ambushes, they should assign a different route to work to each number, he said, and toss the die as they left home each morning." More here.
Sovereign wealth funds
This issue will throw market-oriented economists into conniption fits. On one hand, it sounds like free trade. On the other hand, it sounds like nationalized industry. If we don’t want the U.S. government owning a chunk of the S&P 500, why should we embrace Russian government ownership? Do you feel better at a 19 percent share in a local public utility? The $3 trillion and maybe someday $12 trillion in these funds will force us to define exactly where national security considerations start and end, never a fun job. On the bright side:
1. Having the other country’s stock shares to nationalize gives the U.S. foreign policy leverage (wait: is that good?)
2. A falling dollar will to some extent limit this issue, though it won’t reverse the current accumulation of liquid reserves.
3. Foreigners and foreign governments rarely buy Google at the ground floor level and I suspect they earn sub-normal returns, relative to the pool of American investors as a whole. They’ll end up financing yet some more of our consumption, albeit through a new mechanism. What a racket!
4. As Dani Rodrik indicates, the existence of the California pension system hasn’t exactly sent U.S. companies into chaos.
5. There is a genuine chance that China and other countries, as they want to invest more themselves, will feel additional pressure to open up to foreign investment. I’ll recognize that free capital movements are not always a boon for development, but sooner or later China has to take this plunge, if only to move toward greater freedom and transparency.
The best news I’ve heard in ages
What’s an old person anyway? Does it depend on how many years are behind you, or how many years you still can expect to live? Here is John Shoven:
The current practice of measuring age as years-since-birth, both in
common practice and in the law, rather than alternative measures
reflecting a person’s stage in the lifecycle distorts important
behavior such as retirement, saving, and the discussion of dependency
ratios. Two alternative measures of age are explored: mortality risk
and remaining life expectancy. With these alternative measures, the
huge wave of elderly forecast for the first half of this century
doesn’t look like a huge wave at all. By conventional 65+ standards,
the fraction of the population that is elderly will grow by about 66
percent. However, the fraction of the population that is above a
mortality rate that corresponds to 65+ today will grow by only 20
percent. Needless to say, the aging of the society is a lot less
dramatic with the alternative mortality-based age measures. In a
separate application of age measurement…GDP would be between seven and ten percent higher by 2050 if retirement
lengths stabilize.
Here is the paper (I can’t find a non-gated version). Note that the entire increase of life expectancy of the twentieth century has been taken in the form of retirement, rather than extra work. Of course our social security and Medicare policies have encouraged early retirement, and we have not adjusted age eligibilities for longer life spans and better health. For fiscal reasons, we will likely have to increase eligibility ages; not only will we spend less money but it will encourage more work.
If you have been thinking that a demographically-based American economic collapse is virtually inevitable, this paper gives some grounds for hope. Here is further commentary.