Six Degrees

by  Tyler Cowen in

I learned from this new book.  Most of all it shows how the earth likely will change as temperatures rise.

For instance Lima and the Andean parts of Ecuador and Boliva are heavily dependent on Andean glacial melting for their water.  An earth warmer by two degrees would create very serious problems for them, once the glaciers disappear.  Most of all I came away with a renewed sense of the importance of water issues and the need for greater investment in desalination technologies (yes I know it’s not easy and transporting the desalinized water is often a greater problem than getting the salt out.)  Stopping the destruction of tropical forests is another partial remedy for warming and it seems more doable than shutting down all or most carbon emissions.

That said, parts of the book struck me as very weak.  The discussions of biodiversity destruction did not convince me that the scope of pending losses is unacceptable.  There’s a lot of handwaving and listing of lost species as if that ends the argument.  We’re in a mass extinction anyway and I’d like a serious analysis of the marginal impact on global warming on this process.  "It’s so bad anyway that further species loss must be unacceptable" doesn’t cut it for me.

It is also claimed (p.236) that an earth five degrees warmer would result in the culling of "billions."  Of humans that is.  There is little talk of substitution or technological adaptation.  Nor do I buy the claim that carbon rationing would bring "a dramatic improvement in our quality of life" by getting us off the streets, out of the planes, and bringing us closer to the rest of the community. 

Overall I found this the best, most accessible, and most vivid book for visualizing the actual problems from global warming.  But the Cassandras of global warming need to be more responsible, and more wary of overstatement, if they wish to press home their very important arguments.

Jonathan Adler has a good recent round-up post on some global warming issues.

What would it cost to cover the uninsured?

by  Tyler Cowen in

Jonathan Gruber has just written a very useful and comprehensive paper on health insurance (I don’t yet see ungated versions).  He estimates that without a universal mandate, but using subsidies, a typical plan for covering the uninsured would cost $4500-$5000 a year per person, and that is cost in the narrow budgetary sense.  With a mandate the fiscal cost of the government (again, not social cost, which includes the cost of paternalistically forcing people to buy health insurance) is estimated at $2732 per person per year.  Of course it is cheaper to tell people what to do, comparing to paying them to do it.  That cost estimate is assuming that the mandate is effectively enforced, which I do not expect.

I would have preferred the primary estimates to be in terms of social cost.  And I would have liked a discussion of how mandates and minimum benefit requirements distort the price of health insurance and limit competition.  Read Shikha Dalmia.  Nonetheless this remains is one of the best papers on health care economics to be had.

Gruber also poses an interesting philosophical question for the paternalists: would you rather be uninsured in today’s America or obese?  And if you, like I, answer "uninsured," why not first direct paternalistic interventions toward obesity?  And I’m not talking about subsidies to olive oil, I mean real mandates.  After all, they will lower health care costs, no?
 

Chapter 3 of Logic of Life: Many Could Have Been Mrs. Rojas, but There is Only One Mrs. Rojas

by  Fabio Rojas in

This review is cross posted at the orgtheory.net, the management and social science blog.

In chapter three, "Divorce is Underrated," Tim Harford explores the economics of love, marriage, and divorce. It’s the kind of topic that makes people hate economists. Of all the subjects studied by economists, can’t love be spared the rational choice treatment? Of course not! If you spend a few moments thinking about how men and women scheme in the dating world, you’ll quickly see that a rational choice theory of relationships isn’t such a crazy idea after all.

Harford hits the major points you’d expect. People make substitutions, and they respond to supply and demand in dating and sex. One interesting section talks about the “optimal” divorce rate and how in the post-1970s era, we’re probably switching from a situation of many marriages with many divorces, to less frequent marriages and less frequent divorce. Harford quotes MR regular Justin Wolfers in saying that there is social learning and that we should appreciate that the optimal divorce rate is not zero, lest we believe in perfect marriages.

The average person probably hates this econo-talk because it seems to devalue love. Here’s where it helps to be a sociologist. Yes, from the bird’s eye view, there is a “love market” and you are just a love widget. But let’s take the symbolic interactionist perspective. Relationships are highly customizable. Once you bond with a person, you can make the relationship highly unique and hard to substitute. Even if two people are similar, they can form very different relationships with different histories. If you’ve done that, then you’ve created a fairly unique thing that’s hard to replace. By yourself you might be generic, but in a relationship you can be very special.

Translating back into econo-talk, people in loving relationships differentiate their “love product.” A person in a couple with a special history knows that there will never be another person who has lived the same life with them. That knowledge makes them stick it out. If you can do that in a way that improves both parties, then you won’t contribute to the optimal divorce rate.

I don’t quite agree with Jason Furman today

by  Tyler Cowen in

I very often do, but I think he overreaches when responding to Steven Landsburg (who himself overreaches).  Jason writes:

…there is near universal agreement (and if it were not for you I probably would not have needed the word "near") that when the economy is operating below its productive capacity the problem is insufficient aggregate demand, and the solution is to temporarily boost spending or investment through monetary or fiscal policy.

Usually, yes.  Sixty percent of the time, I will agree.  But sometimes real shocks and sectoral shifts are the problem.  Can expansionary monetary policy help an economy adjust to sectoral shifts?  Sometimes but not always.  Is Furman correct that deregulation won’t help in the short run?  Yes.  Is "the solution…to temporarily boost spending or investment through monetary or fiscal policy"?  Probably not.  The solution is for the economy to adjust.  The flow of investment is hard to encourage and the best monetary policy can do in such instances is to prevent a deflation.  If the government can do something to help short-run sectoral adjustments, it is usually clarity of expectations and legal and regulatory benchmarking in the interests of transparency.  Today that means clear standards for future lending and securitization.

As an aside, if you are someone who complains about stagnant American median wages, that means many particular nominal and real wages have been falling.  (It could be in theory that the entire distribution is strictly stagnant but in reality no.)  Tricky distinctions between real and nominal wages lie beneath the surface, but overall this flexibility of wages makes it harder to embrace the Keynesian framework.  Keynesianism requires sticky nominal wages and since we have been having low inflation times (until now, at least) that means relatively sticky real wages as well.  Yet it is claimed implicitly that many real and nominal wages have been falling.  Beware the Keynesian who wants to have it both ways (I’m not accusing Jason of this).

Do “influentials” drive The Tipping Point?

by  Tyler Cowen in

In the past few years, Watts–a network-theory scientist who recently
took a sabbatical from Columbia University and is now working for Yahoo
(NASDAQ:YHOO) –has performed a series of controversial, barn-burning
experiments challenging the whole Influentials thesis. He has analyzed
email patterns and found that highly connected people are not, in fact,
crucial social hubs. He has written computer models of rumor spreading
and found that your average slob is just as likely as a well-connected
person to start a huge new trend. And last year, Watts demonstrated
that even the breakout success of a hot new pop band might be nearly
random. Any attempt to engineer success through Influentials, he
argues, is almost certainly doomed to failure.

Here is the full article.  Here is the home page of Duncan Watts.  Thanks to John DePalma for the pointer.

Tyler whines to an Indian readership

by  Tyler Cowen in

Here is the opening of the piece, in the latest Mint:

Sometimes my life feels like a series of never-ending frustrations. The
last three products I bought at Best Buy–a large electronics store–had
to be returned because they simply didn’t work. The DVD from Amazon has
a fatal skip. My wife’s new Mac computer doesn’t function on our
wireless network. I dread any call to customer service. A wait is
followed by a transfer, which is followed by two more transfers, which
is in turn followed by a promise to call me back. The return call never
comes. My billing dispute on my AT&T credit card dragged on since
May, mostly because they simply didn’t find it worth their while to
respond to my letters.

But there’s a happy ending, sort of:

If you need consolation, I have two suggestions.

First, count your blessings and read some Buddhist or Stoic philosophy. Second, take your revenge in the form of lower prices.

In
the short run, one supplier can rip you off pretty easily. In the long
run, it is harder for the world as a whole to avoid giving you a pretty
good deal.

Blog what you know

by  Tyler Cowen in

I have to side with Matt Yglesias’s claim that Russian women have been beautiful for a long time and that it is not the recent advent of capitalism which elevated their looks.  I’ve seen pictures of the younger Natasha, pre-capitalism, and she was beautiful back then too.  I know many of her female friends, or have seen early photos of them, and almost all of them are (and were) beautiful.  I visited Russia in the early 90s, just as capitalism was taking hold.  There was plenty of beauty to go around, although admittedly people dress better now.  Countries don’t develop networks of beautiful women overnight.  Furthermore, once you get past the point of malnutrition, beauty is not related to per capita income in any simple way.  I’ll take Cuba, Croatia, Senegal, and Brazil over Australia and Finland, or to cite a closer comparison Slovakia over Austria.  One hypothesis is that inequality of male income and power encourages female beauty for competitive reasons.  Admittedly much more research needs to be done on this question.

Addendum: Free Exchange weighs in.

John Edwards and the virtues and limits of democracy

by  Tyler Cowen in

Mark Thoma writes: "I’m getting pretty tired of Democrats caving in on important issues rather than standing up and fighting for their core principles…"  The lesson is that politicians’ core principle is reelection and pandering, not promoting the ideas of Mark Thoma or Paul Krugman or for that matter Milton Friedman or Tyler Cowen. 

I find the (former) support for John Edwards to be one of the most striking features of the primary season.  Although Edwards ran an explicitly progressive campaign, a great deal of his (meager) support came from Democrats in lower socioeconomic strata.  They were voting their demographic, or perhaps their feelings of victimization, rather than their ideology.  (Here is Chris Hayes on John Edwards, worth reading.)  There is no large-scale progressive movement coalescing around stagnant median wages and the inequities of skill-based technical change.  Instead we have Hillary Clinton insulting Barack Obama, and maybe it is working. 

The lesson is this: democracy is a very blunt instrument.  Especially as it is found in the United States, democracy just isn’t that smart or that finely honed or that closely geared toward truth or "progressive" values.  (NB: Democracy in smaller, better educated, ethnically homogeneous nations is, sometimes, another story.)

But unlike one of my esteemed colleagues, I believe that we should revere democracy as one of the modern world’s greatest achievements.  We should step off a British Airways flight with a tear in our eye, in appreciation for all that country has done to promote democratic government (sorry, former colonies, but perhaps you are democratic today).  This is no exaggeration or blog tease: I want to see you crying at Heathrow.  The future is far more likely to have "too little democracy" than "too much democracy."  I do believe in checks and balances, but within a broadly democratic framework, such as we have in the United States.

That all said, we should not demand from democracy what democracy cannot provide.  Democracy is pretty good at pushing scoundrels out of office, or checking them once they are in office.  Democracy is also good at making sure enough interest groups are bought off so that social order may continue and that a broad if sometimes inane social consensus can be manufactured and maintained.  We should expect all those things of democracy and indeed democracy can, for the most part, deliver them.

But democracy is very bad at fine-tuning the details of economic policy.  Democracy is very bad at bringing about political solutions which are not congruent with the other sources of economic and social influence in a country.  The solution is not to be less democratic, but rather to appreciate democracy for what it is good for.  And the excesses of democracy should be fought with ideas, albeit with the realization that not everyone will be convinced.  Those are the breaks, as democracy needs all the friends it can get.

Just as I love democracy, so do I love Chiles in Nogada.  But I do not ask that Chiles in Nogada can solve most of the world’s problems or for that matter get me to work in the morning.  Social democrats and progressives often view democracy as a potential instrument of control, and as a way of giving us "the best policies."  I do not, and that includes for my own economic views as well.

Here is Matt Yglesias on libertarianism and democracy.  Here is a Hilton Root review of the new Michael Mandelbaum book praising democracy.

Didn’t Bob Tollison write a paper on this once?

by  Tyler Cowen in

What words of wisdom.  Via email, Ed Lopez fills me in:

Laband and Tollison’s 2000 JPE paper speaks to your MR post yesterday on co-authorship [TC: I’ve added the links]:  

"In this paper, we compare the incidence and extent of formal coauthorship observed in economics against that observed in biology and discuss the causes and consequences of formal coauthorship in both disciplines. We then investigate the economic value (to authors) of informal comments offered by colleagues. This investigation leads us naturally into a discussion of the degree to which formal collaboration through coauthorship serves as a substitute for informal collaboration through collegial commentary. Data on manuscript submissions to the Journal of PolzticalEconomy permit us to shed additional empirical light on this subject. Finally, we demonstrate that while the incidence and extent of formal intellectual collaboration through coauthorship are greater in biology than in economics, the incidence and extent of informal intellectual collaboration are greater in economics than in biology. This leads us to search for evidence (which we find) of quids pro quo offered by authors to suppliers of informal commentary on manuscripts and to speculate that the greater importance of intellectual collaboration in economics (relative to biology) might imply greater pay compression in economics than
in biology (Lazear 1989). We find compelling evidence of such pay
compression in terms of the distribution of formal intellectual property rights to scientific contributions."

They
find the more quantitative work increases likelihood of co-authorship.
It’s also been increasing over time with decreasing information costs.
They also cleverly get citation and salary effects from the number and
stature of scholars listed in the acknowledgments.