Austan Goolsbee is not a credit snob

The Center for Responsible Lending estimated that in 2005, a
majority of home loans to African-Americans and 40 percent of home
loans to Hispanics were subprime loans. The existence and spread of
subprime lending helps explain the drastic growth of homeownership for
these same groups. Since 1995, for example, the number of
African-American households has risen by about 20 percent, but the
number of African-American homeowners has risen almost twice that rate,
by about 35 percent. For Hispanics, the number of households is up
about 45 percent and the number of homeowning households is up by
almost 70 percent.

And do not forget that the vast majority of
even subprime borrowers have been making their payments. Indeed, fewer
than 15 percent of borrowers in this most risky group have even been
delinquent on a payment, much less defaulted.

Here is more.

My favorite things Italy

Sitting here in the Frankfurt Airport, on my way, I’m not going to rehash the Ghiberti-Brunelleschi feud, so let’s stick to the twentieth century:

Painter/artist: There is Morandi, Lucio Fontana, and the Arte Povera group, all of whom remain underrated.  The Futurists are dated, but early de Chirico hits the spot.  This category is strong.  For sculptors throw in Manzu, Burri, Merz, Marini, and many others.

Composer: Puccini I’ve never loved.  Scelsi is an acquired taste but for me his drones hold up.  Busoni bores me once you get past the Bach transcriptions.  I’ll opt for Berio, most of all the songs, Sinfonia, and Points on the Curve to Find, all excellent and surprisingly accessible.

Pianist: Maurizio Pollini started steely and evolved to poetic; try his Stravinsky/Webern disc, and his Chopin Nocturnes.  Arturo Benedetti Michelangeli is pure rippling glitter, try his Ravel/Rachmaninoff disc.

Conductor: Only rarely is Toscanini’s stuttering whiplash listenable, try his Tchaikovsky #1 with his then son-in-law Vladimir Horowitz.  Abbado wins this category, his Beethoven symphonies are the best available.

Maria Callas performance: I am torn between Norma and Barber of Seville, the latter with Tito Gobbi, another notable Italian.

Author: Baron in the Trees and Invisible Cities are my favorite Italo Calvino.  When I courted Natasha, she was impressed that I had a working knowledge of The Cloven Viscount at my disposal.  Alberto Moravia has compelling psychological portraits, Eco’s The Name of the Rose is fun.

Playwright: Pirandello and Dario Fo.

Film: Most of neo-realist cinema bores me.  I do admire Umberto D, most of Pasolini (Arabian Nights as my favorite), and I’ll pick Visconti’s The Leopard as my favorite, with Sergio Leone’s Spaghetti Westerns a close second.  Satyricon is my favorite Fellini, but otherwise he leaves me cold.  Sadly Italian cinema has been getting worse for thirty years.

The bottom line: The twentieth century brought a remarkable cultural renaissance in Italy.  This is not as widely recognized as it ought to be.

Muslims in Europe

Philip Jenkins notes:

…while they’re going to grow, by American standards
Muslim minorities in Europe are not going to be that huge. The other
big issue is that when people talk about Muslim minorities, they
automatically assume that everyone of Muslim background is going to
continue to be a dyed-in-the-wool, hardcore Muslim in Europe.
      

There’s
a lot of evidence that they’re not. If you look at Algerian people in
France, they have a strong sense of ethnic identity, but there’s quite
a low level of religious observance. They look like Episcopalians more
than anything. Now obviously, there’s a small and potentially very
dangerous hardcore of quite extreme Islamists, and you’d have to be a
fool to ignore that. But the majority of people are very happy to
assimilate to some kind of French or Dutch or German identity.

He also says this:

The Middle East in the last 15 years is going through the
great demographic transition and that is one of the great facts in
world politics. What it should mean is that in about 15 years these
countries should be vastly more stable. The next 15 years could be a
very rocky ride, but the long-term trend is to underpopulation

Thanks to Jeremy Lott for the pointer.

Alan Blinder worries about free trade

Mr. Blinder’s answer is not protectionism…he accepts the economic logic that U.S. trade with large low-wage countries like India and China will make all of them richer — eventually.  He acknowledges that trade can create jobs in the U.S. and bolster productivity growth.  But he says the harm done when some lose jobs and others get them will be far more painful and disruptive than trade advocates acknowledge.  He wants government to do far more for displaced workers than the few months of retraining it offers today.  He thinks the U.S. education system must be revamped so it prepares workers for jobs that can’t easily go overseas, and is contemplating changes to the tax code that would reward companies that produce jobs that stay in the U.S.

Here is the article.  Arnold Kling says technological progress will be more important than trade.  I think that China is due for a crack-up and India will soon bump up against its horrible legal and educational systems.  I saw that economists are listed as among the most threatened groups, but I doubt if the United States can look forward to the liberation of so much talented and witty labor.  I also think that corporate welfare is a bad idea, and that universities should not train everyone to be a small town divorce lawyer.  Teaching reading and writing would be a good start.

When our economists start preaching that we should look to economists and higher educators to predict the new, growing economic sectors, I again think that the Chinese are not the major problem.

Benjamin Barber’s *Consumed*

There is actually [sic] a restaurant in New Jersey called Stuff Yer Face, and fast food generally is about stuffing your face: about nutrition, fueling up, taking in the calories, food as instrumentality, eaters as mere animals responding to biological imperatives.

The subtitle of the new book is How Markets Corrupt Children, Infantalize Adults, and Swallow Citizens Whole.  Here is the restaurant’s home page, with sound.

Where are the economic historians?

Read Eric Rauchway’s excellent post.  Excerpt:

Economic history might have moved out of history departments for market reasons as well.  If, to pursue economic history, you had to master technical skills that would make you eligible for an appointment in an economics department, you would probably prefer that to an appointment in a history department: economists get paid more because they’re eligible for employment in government and business as well as universities.

Some of the economic historians are coming to George Mason; this year we hired John Nye, Werner Troesken, and Gary Richardson.  New hire Peter Leeson does some economic history as well.  We’ve gone from a minor player in the field to a top department for economic history.

But will they be fun at lunch?

When will liberty’s day arrive?

Life without socks would be… "undignified," but no one recommends government provision or even sock vouchers.  Relative to income, socks are sufficiently cheap.  There is some inequality of socks, but it seems that just about everybody — even the poor — "has enough."  We don’t even force people to buy socks for their kids.

Might there come a time when health care and education fall under the same rubric?

Yes, I know that, due to rising labor costs, health care and education might continue to eat up an increasing percentage of national income.  But still, can’t "rich enough" people make do?  Living in Aspen might cost half your income, but if you’re a multi-millionaire no one weeps for you.

Of course today’s poor aren’t rich enough for us to remove government aid.  But when will the splendid era of libertarian freedom be possible?  Today’s poor are much richer than the poor fifty years ago, and the poor of the future are likely to be richer yet.  Won’t the welfare state, at some point, simply become unnecessary?

Readers, please tell me in the comments when the time will come for dismantling the welfare state.  Will you sign your name to a pledge:

"I am a left-winger, but only until 2078"?

More elegant would be:

"I’m a 2096 libertarian."

Social democracy is but a mere transitional strategy.

If this were 1890, what Year of Libertarian Freedom would you have named?

Is Freakonomics Ruining Economics?

Writing in the April 02 issue of the New Republic, Noam Scheiber
argues Yes.  The article is no screed – it’s
well informed about economics and the state of the profession.  Unfortunately, it’s gated but do try find a copy somewhere.  This bit gives some of the flavor.

Several years after his paper on schooling, Angrist noticed
that the Armed Forces Qualifying Test had been misgraded for a few
years in the late ’70s. This had opened the doors to thousands of
subpar applicants and allowed Angrist to compare the lucky
underachievers with the people rejected once the glitch got corrected,
thereby isolating the impact of military service on wages. The
practical effect was to send the grad students scrambling to find other
instances in which life-altering decisions had been handed down
incorrectly. In 2000, a Harvard professor named Caroline Hoxby
discovered that streams had often formed boundaries to
nineteenth-century school districts, so that cities with more streams
historically had more school districts, even if some districts had
later merged. The discovery allowed Hoxby to show that competition
between districts improved schools. It also prompted the Harvard
students to wrack their brains for more ways in which arbitrary
boundaries had placed similar people in different circumstances.

Every few weeks, when a student would stumble onto some new
test-grading error or fatefully drawn boundary–what economists call
"instruments"–word of the discovery would rocket through the
department. The discoverer would become instantly, if momentarily,
famous, like the holder of a winning card at a Bingo hall, and
inspiring the same mix of reverence and jealousy. A typical
conversation around the snack machine at the National Bureau of
Economic Research, where many Harvard students had cubicles, went
something like: Hey, did you hear that so-and-so found this crazy
example of excess tax refunds in western Manitoba in the early ’60s? At
which point the other would reply, Uh, no, wow, that’s, uh, great, and
then scamper back to his desk to brainstorm for some similar quirk of
public policy. At an age when most people brood that life is too random
and arbitrary, these people’s biggest complaint was that it wasn’t
random and arbitrary enough.

In retrospect, I have come to see this as the moment I realized
economics had a cleverness problem. How was it that these students, who
had arrived at the country’s premier economics department intending to
solve the world’s most intractable problems–poverty, inequality,
unemployment–had ended up facing off in what sometimes felt like an
academic parlor game?

I think Scheiber is off in a few ways.  First, he conflates methods and
questions.  It’s true that clean identification is often found with
quirky experiments but a quirky experiment does not necessarily imply a
quirky question.  Hoxby’s work on education, mentioned above, is asking
a big question about the effect of competition on schools.  Levitt’s work
on crime uses quirks in police assignment as do those of his "pale imitators" (like those
guys that used terror alert levels
to estimate the effectiveness of police on the street.  Ha, ha!) but we
spend well over 100 billion dollars a year combating crime so it’s
pretty damn important to know how well police, prisons and punishment
work.  Scheiber criticizes Emily Oster’s work but his criticism has
nothing to do with his thesis, Oster’s work on AIDS, missing women and
so forth is on big questions. It’s possible to be clever and to think
big.

The second problem is to think that if only people did less Freakonomics they
would do more big think economics.  If only it were so.  The truth is
that even today most of economics is a wasteland of boring papers on
profoundly uninteresting questions.  The choice is not Levitt v.
Heckman it’s Levitt and Heckman (and many others like Buchanan who neither Levitt nor Heckman might appreciate) versus a huge number of non-entities (many
highly paid and famous) who answer trivial questions poorly and do it
without even the courtesy of offering some entertainment on the
side.

Addendum: Tyler has the first comment.

Boomsday

The new Christopher Buckley novel Boomsday concerns a blogger — Cassandra — who proposes that a cash-strapped, demographically-burdened society pay old people to do themselves in.  The elderly are to kill themselves for tax breaks.  In Swiftian fashion we can improve this idea by convexifying the choice.  Let’s make it a risk and subsidize sky-diving for the non-working elderly. 

There are two positive externalities from the resulting deaths; first, a bequest of material wealth passes to other individuals, second, the deadweight loss of taxation falls.  The negative externality from the death falls upon other family members and friends; whether the would-be victim internalized those costs in the first place is difficult to calculate.  Have I mentioned that economics has few good ways of modeling two-way altruism and keeping the standard welfare theorems intact?  Distribution and efficiency are no longer separate, but hey that’s the real world.

Here is a New York Times review.  Buckley is one of the most entertaining public speakers I have heard, hire or go hear him if you can.

The French economy and health care system

The French economy may be messed up in many ways, but at least you can’t complain about their health care system.

So wrote one MR commentator, that is my paraphrase I can’t find the exact quotation. 

It is worth noting that the French health care system and the failings of the French economy are closely linked.  The French economy is notorious for its resource immobility.  It is hard to switch sectors, hard to switch jobs, and hard to switch regions.  The upshot is that when government taxes factors of production, or caps the price they command, those factors usually have nowhere else to go other than to consume more leisure.  This makes it easier to cap health care prices and doctors’ wages: everything is frozen in place. 

The more mobile American economy would find it much harder to tax skilled labor and doctors.  For related reasons, American transfer programs tend to be more expensive per
dollar of redistribution, less easily based on the provision of quality services at low prices, and they require more complex bells and
whistles.  NB: This is an argument for not trying to copy Europe, not an argument for trying to copy Europe.  Call it a cost of resource mobility if you wish.

The more a European government takes advantage of immobility, the harder it is to break a vicious economic circle.  Instituting French factor mobility, even were it possible politically, would cause low-price, low-wage sectors to decline in quality.  Factors would flee to more entrepreneurial sectors.  In the meantime, pushing everyone into more leisure lowers wealth and makes it harder to finance a "grand bargain" of palatable economic reforms.  The economy will remain stuck, stuck, stuck.  Some sectors will enjoy a captive audience of skilled labor.

I have spent several months of my life in France, and I do understand that life there is truly splendid in many ways.  But it is hard for me to believe that the French system — viewed as the organic whole it is — is the best way forward for the United States.

Amazon and Tivo

I have long been skeptical of the potential for movie downloads but Amazon and Tivo have made a huge step forward in solving the major problems.  I reported earlier that Tivo connects to a home wireless system which means that I can program Tivo from work.  Yesterday, I rented a movie from Amazon.  The movie downloaded automatically via my home computer to Tivo.  Downloading still takes hours so it’s not on-demand service but I rented in the morning and watched the movie that night and I watched on television not some dinky computer screen.  The picture quality was good, albeit not as high as DVD.  Dramas, comedies and anything you would have watched on cable TV anyway are fine – save the action flicks for DVD.  What impressed me most was that the system worked flawlessly the first time, without any computer hack work on my part.

Bravo Tivo, Bravo Amazon.

Don’t get stuck in that kindness rut

…conventional wisdom suggests keeping a daily gratitude journal.  But one study revealed that those who had been assigned to do that ended up less happy than those who had to count their blessings only once a week.  Lyubomirsky therefore confirmed her hunch that timing is important.  So is variety, it turned out: a kindness intervention found that participants told to vary their good deeds ended up happier than those forced into a kindness rut.

Here is more.