Is factor productivity due to revert to its long-run mean?

by  Tyler Cowen in

Peter Ireland and Scott Schuh write:

A two-sector real business cycle model, estimated with postwar U.S. data, identifies shocks to the levels and growth rates of total factor productivity in distinct consumption- and investment-goods-producing technologies.  This model attributes most of the productivity slowdown of the 1970s to the consumption-goods sector; it suggests that a slowdown in the investment-goods sector occurred later and was much less persistent.  Against this broader backdrop, the model interprets the more recent episode of robust investment and investment-specific technological change during the 1990s largely as a catch-up in levels that is unlikely to persist or be repeated anytime soon.

Here is the paper, have you noticed that NBER working papers seem to have been freed from the gate? 

On questions like this I prefer to be "judgment-driven" rather than model-driven, and judgment says "who knows?"  Plus two-sector calibrated RBC models are not in every regard a smashing success.  Yet why should the rate of productivity growth remain permanently higher?  At the very least, this is an admonition to be sober and modest in our economic judgments.  The rate of productivity growth is a fundamental determinant of long-run living standards.  Yet when it comes to understanding or predicting this variable, economics has been sadly deficient, especially at the turning points.  Commentators of various political persuasions rail against taxes, tax cuts, spending, spending cuts, poorly thought deregulation, whatever, but might they be chomping at gnats?

A very good two sentences

by  Tyler Cowen in

Back in 1970, the economist Harry G. Johnson pointed out that all
successful founders of schools not only are geniuses with profound
insights but also provide a road map that tells their followers and
successors what to do to make a successful academic career within the
school. Schumpeter did not do that second part.

Here is the full review, Brad DeLong on Thomas McCraw and Schumpeter.

The Commanding Heights

by  Alex Tabarrok in

Australian bloggers Andrew Norton and Andrew Leigh will debate public education in a series of posts.  Judging by Andrew Norton’s first missive it will be a good debate.

People are used to the idea of state schools, so they don’t think about how
uneasily government-controlled education fits with liberal democracy. If someone
said that Australia’s media should be owned by the state, with journalists told
by the state what they should say, with media audiences examined to make sure
they had absorbed the official line, there would be predictable and justifiable
outrage.

Yet public education means essentially that for Australia’s young people. The
government owns most schools, employs most teachers, tells them what to teach
through state-set curricula, and examines students to make sure they have it
right–even kids escaping to private schools can’t avoid these last two aspects
of state-run education. And unlike state-owned media, there are severe
consequences for ignoring state education….

Hat tip to New Economist.

Addendum: Andrew Leigh’s first reply is here.

Honduran thoughts

by  Tyler Cowen in

The best food is cooked in people’s homes, sold on the highways, or
on the beach.  I recommend grilled corn on the cob with chile and lime,
baleadas, which are fresh corn tortillas stuffed with beans and
sometimes cheese or avocado or pork, any tamales, and of course
seafood, most of all the conch ceviche (I did dare to eat it, in a
small village), and the Garifuna seafood dishes and soups cooked in
coconut milk.  Honduras is not known as a food country but that is because North American visitors take their meals in restaurants.

It is said that Honduras is too poor to afford its own oligarchy,
and the infrastructure here is poor, even by Central American
standards.  The rate of AIDS is supposed to be very high.

Natasha and I debated whether the upscale shopping mall in San Pedro
Sula — CityMall — seemed so U.S.-American because a) Honduras is
becoming so Americanized, or b) American shopping malls now attract so
many Latinos; that discussion is ongoing.  We also seem to export gang criminality to Honduras, which is no longer a fully safe
country.  Overall Honduras gets high marks on friendliness (especially
if you aren’t mugged; we weren’t), and on capturing the old feel of
Central America and the Caribbean, but there are few sights of the
traditional kind.  The country is recommended for the experienced traveler
looking for a change of pace, and luxury living at bargain prices, but
most people should try Costa Rica or Panama first.

Tela was a lovely beach community, if you are on the north Honduran
coast visit a Garifuna village and make sure you eat a home-cooked meal under the palm leaves.  Every
journey has an emotional and narrative center at its core and that was
it for us.  The way the kids play almost naked in the dirt you can see
why the rate of dengue fever is so high.

Skipping through the blogosphere (when I could connect) I saw horrified reactions to my anthropological suggestion, especially from Felix Salmon and Kevin Drum
plus many MR commentators.  Apparently I hit a nerve.  Contrary to their summaries, I am not saying that
anthropology is required for good commentary, rather than commentary
should disclose how much anthropology went into it.  Can that be so
wrong?

And here’s Michael Blowhard on Kindle.  Craig Newmark linked to this good post on the economics of the writer’s strike, see also here.  Who knows what else I missed?

Should we be happy with the low U.S. dollar?

by  Tyler Cowen in

Here is my latest column:

A low dollar simply looks bad. We are, after all, used to judging ourselves against others – comparing our salaries with the earnings of our peers, and our homes with those of our neighbors. We’re used to thinking it is a big advantage to stand at the top of a numerical list.

But when it comes to currencies, a higher value neither brings national success nor predicts future prosperity. The measure of a nation’s wealth is the goods and services it produces, not the relative standing of its currency. Take a look at 1985-88, when the dollar lost more ground than in the last few years. Those were good times, and the next decade was largely prosperous as well.

Most of the piece is standard economics, not far from recent writings by Krugman or DeLong.  The more interesting question is which measures of a national economy we, for reasons of pride, inefficiently attach too much importance to.

A second interesting question is: if we should not be worried about a low dollar, what should we be worried about?  I see two answers at the current time.  First, if a negative shock hits China, or perhaps some other negative shock hits the U.S. or Europe, we have precious little room to maneuver.  Second, there remains some chance of a cascading credit crunch.

Addendum: Here is Brad DeLong’s new piece.

Unusual thoughts about contemporary art

by  Tyler Cowen in

Contemporary art is highly individualistic.  It is about freedom of
expression, the chance to make one’s mark and to speak with a
distinctive voice – all characteristics of the right, rather than the
left.  Contemporary artists are entrepreneurs in every sense of the
word. The Brit Artists of the 1990s have turned themselves into brands,
selling a luxury commodity to a group of discerning purchasers.  The Damian Hirst skull,
retailing at £50 million, could not remotely be described as a leftwing
statement, except in the sense that, like many projects of the left, it
is massively over-priced and a colossal waste of money (only kidding
Damian).

Here is more, hat tip to www.bookforum.com.

Is there a “marriage premium” for gay men?

by  Tyler Cowen in

Data on cohabitation suggest that the answer is no, whether for gay men or cohabiting heterosexuals.  The standard selection story is that women are more likely to choose the high earning men and marry them.  But why don’t women live with these men too?  Does living together not transfer enough resources?  Could it be that real legal marriage is proxying for the ability to commit, which is positively correlated which other determinants of job success?

Primaries

by  Tyler Cowen in

The voting weights implied by the estimated model demonstrate that
early voters have up to 20 times the influence of late voters in the
selection of candidates, demonstrating a significant departure from the
ideal of "one person, one vote."

Here is the paper, I cannot find non-gated versions.  If we were aiming for efficiency, and the saving of time, rather than democratic equity, in which state should the first primary or caucus be held?

Garifuna fish soup

by  Tyler Cowen in

Base: one to two cups coconut milk, four cups chicken stock, a tablespoon of achiote [Annatto] paste, the seed is available in Latino markets.

Take some robust fish pieces, cod or monkfish will do, and roll them in beaten eggs, along with minced garlic, freshly minced ginger, coriander, cumin, chili powder, and Mexican oregano, maybe a bit of salt and pepper too.  Fry the fish in vegetable oil until cooked, making sure the oil is properly hot.  Put the resulting fish chunks into the soup.

Or something like that.  Serve with a baguette.  Very yummy.

Laissez-Faire Marriage

by  Alex Tabarrok in

Should the state be involved in marriage?  Writing in the NYTimes professor of history Stephanie Coontz notes:

The American colonies officially required marriages to be
registered, but until the mid-19th century, state supreme courts
routinely ruled that public cohabitation was sufficient evidence of a
valid marriage. By the later part of that century, however, the United
States began to nullify common-law marriages and exert more control
over who was allowed to marry.

By the 1920s, 38 states
prohibited whites from marrying blacks, “mulattos,” Japanese, Chinese,
Indians, “Mongolians,” “Malays” or Filipinos. Twelve states would not
issue a marriage license if one partner was a drunk, an addict or a
“mental defect.” Eighteen states set barriers to remarriage after
divorce.

It’s no accident that the state began restricting and intervening in the marriage contract at the same time as it was restricting and intervening in economic contracts.  It was of course the evil Oliver Wendell Holmes Jr. who dissented in Lochner v. New York and who also upheld forced sterilization laws in Buck v. Bell (writing that "three generations of imbeciles in enough.")  Economists don’t like to talk about social externalities but the connection between economic and social regulation is very clear in the progressives.

I think it’s time to restore
freedom of contract to marriage.  Why should two men, for example, be denied the same rights to contract as are allowed to a man and a woman?  Far from ending civilization the extension of the bourgeoisie concept of contract ever further is the epitome of civilization.  Our modern concept of marriage, for example, is simply one instantiation of the idea of contract.

People will claim that this means a chaos of contracts for every form of marriage.  This is wrong factually and also conceptually misguided.  Factually, we already allow men and women to adjust the marriage contract as they see fit with pre-nuptials.  Moreover, different states offer different marriage contracts with some offering more than one type.  Partnerships of other kinds have access to all manner of contractual arrangements without insufferable problems. 

More importantly, the chaos of contracts argument is fundamentally misguided.  The purpose of contract law is to give individual’s greater control over their lives.  To make contract law a restraint on how people may govern themselves is a perversion of the social contract.  To restrict people from accessing the tools of civilization on the basis of their sexual preference is baseless discrimination. 

It is time to restore
freedom of contract to marriage,  Laissez-faire for all capitalist acts between consenting adults!

Thanks to Daniel Akst for the pointer.

My favorite things Honduran

by  Tyler Cowen in

1. The best known Honduran painter is Jose Antonio Velásquez, here is a typical image.

2. America Ferrara, who plays Betty in Ugly Betty, is of Honduran parents.  I like that show, I don’t love it.

3. This guy did lots of scientific work, including the laying of some foundations for Viagra, and he married a Belgian princess.  I’ve yet to benefit from his existence.

Plus I would cite a few personal acquaintances, past and present, of whom I am very fond.  That’s what I can think of folks, and I wouldn’t have found #3 without Google.  This website assures us "There are famous people from Honduras," although the link to the list of them is broken.

I have also read one short story from Honduras, from an anthology of Latin American short stories; it is entitled "Malaria."

I might add I am very fond of airfares to Honduras; right now the roundtrip is cheaper than the one way shuttle to New York City.  And maybe the flight is quicker too, no holding patterns over LaGuardia!

Most of all I like places where no one else goes, and I expect this short weekend trip to be very worth its while.

Medicare for everyone?

by  Tyler Cowen in

Medicare spends billions of dollars each year on products and
services that are available at far lower prices from retail pharmacies
and online stores, according to an analysis of federal data by The New
York Times. A comparison of Medicare figures with retail catalogs
reveals dozens of instances of the program’s paying above-market costs.

For example, last year Medicare spent more than $21 million on
pumps to help older and disabled men attain erections, paying about
$450 for the same device that is available online for as little as
$108. Even for something as simple as a walking cane, which can be
purchased online for about $11, the government pays $20, according to
government data.

These widespread price discrepancies, including those for oxygen services, have been noted in dozens of regulatory reports.

But
when officials and politicians have tried to cut these costs, they have
often encountered a powerful foe: the companies that sell these
devices, who ask their elderly customers to serve, in effect, as unpaid
lobbyists, calling and writing to their representatives in Congress,
protesting at rallies, and even participating in political attacks
against individual lawmakers who take on the issue.

Here is the full story.  You are correct to think that not all versions of a single-payer system need discourage innovation.  You are also correct to think this is what they look like.