When to put on a gas tax

by  Tyler Cowen in

MR readers will know that I favor a gas tax, at least if it is made part of a broader fiscal bargain, including spending cuts, favorable treatment for savings, and redoing the AMT, among other reforms.  But note: I don’t want to replicate our current fiscal problems at higher levels of government spending.  Then we would be left with no wiggle room, if and when the likely demographic crunch comes.  If we are not careful, that is what a gas tax could lead to, so take my endorsement of the idea with that qualifier.

The best time to put on a gas tax is right after a big market-induced spike in prices.  That means now, or more realistically after the November elections.

Yes I know about tax smoothing, but that is not the central consideration.  The key question is how to get broader fiscal reform, while taxing some negative-externality activities.

When it comes to high gas prices, people can only get so upset at once.  Plus they will never quite understand who is to blame for what.  Why are prices high?  Was it the government?  The evil oil cartel?  al Qaeda?  The Chinese?  Such signal extraction problems are beyond most voters. 

Waiting for gas prices to fall is the least likely way to get from where we are to where we ought to be.  I await, but do not expect, The Grand Fiscal Bargain.

Futures markets in everything, NOT

by  Tyler Cowen in

A Wall Street lawyer gave new meaning to the term
"futures market" when he tried to auction his future Social Security
checks – money did doesn’t now have – on eBay for $200,000 so he could
use the cash for a down payment on a Manhattan apartment.

"I’ve put a lot of money into the Social Security system, so why can’t I sell it to someone else?" mused Thaddeus Wojcik.

File that under "Department of HA!."  Ebay yanked the auction.  Here is the full story, and thanks to Chris D. for the pointer.

Avian flu update

by  Tyler Cowen in

Indonesia seems to show a cluster of cases of human-to-human transmission; here is one analysis.  Here is a BBC report.  Sadly Silviu Dochia has had to discontinue writing on our avian flu blog, but if matters get much worse we will resurrect the blog in some form or another.  In the meantime, here are assorted updates.  Here is the home of speculative doom and gloom.

Update: Here is further information, none of it terribly encouraging.

The importance of poetry for economics

by  Tyler Cowen in

Hugo Mialon writes:

Is economics an art?  I address this old, but important, question empirically by examining the impact of rhetorical features of the titles of published economics articles on the ultimate success of these articles, as measured by their cumulative citations over the six-year period following their publication.  Twenty-eight percent of articles in the sample have a fresh figure of speech in their title.  Surprisingly, adding a rhetorical device to the title of an empirical article adds more than four citations to the article’s "lifetime" count, which represents about twenty percent of the lifetime citations of the average empirical article.  This result testifies to the continuing power of rhetoric and poetry in economics science.

Here is the paper.  To be sure, quality of author and article are elusive variables, especially since we cannot assess them by citation counts (here the dependent variable).  Smart authors might write better papers and come up with better and more poetic titles; maybe the poetry is not what matters.

Nonetheless this paper has many fun facts.  Poetry in the title doesn’t help theoretical papers.  Coming from a top school boosts the cites for empirical work more than theory.  Having a research assistant, or a math appendix, correlates negatively with the number of cites for a theory paper.  It is easier for an empiricist at a non-top school to get into the top journals than for a theorist; the latter market shows greater presence of "superstars" in the Sherwin Rosen sense.

Why I love the suburbs

by  Tyler Cowen in

1. We live 30 minutes from Washington but we also have a fox in the backyard.  Deer are a frequent sight as well.

2. Chinese restaurants are usually better in the suburbs these days.

3. Driving is fun and a good way to experience music.  MR readers know I favor a (revenue-neutral) gas tax.  My worry is that car culture makes people more individualistic and thus I have some reluctance to tax this trend.  Try Chuck Berry’s "No Particular Place To Go."

4. A few weeks ago, the first Fairfax County police officer died in the line of duty.  That’s the first ever.  In New Jersey, where I grew up, you might speak of the first local cop to die today.

5. Many of my friends who live in Manhattan lose interest in global travel or never acquire it.  Sadly they feel they already have everything they need from the world right at home. 

Natasha and I talk of retiring in New York City.  But are we up for it?  I’ve started subscribing to New York magazine.  Sometimes it is interesting; more to the point I can pretend I might someday live there.

I’ll cover Jane Jacobs soon.

Das Einwanderungsmanifest

by  Alex Tabarrok in

My Open Letter on Immigration has been published in German in the Financial Times Deutschland.  The letter will be officially released shortly, in the meantime Brad DeLong, Greg Mankiw and Vernon Smith have been joined as signatories by a number of other prominent economists including Franklin M. Fisher (MIT) , Ed Glaeser (Harvard), Roger H. Gordon (U.C. San Diego) and many others.  I would be delighted to have further signatories from economists and other social scientists.  You can sign by sending an email with your name and affiliation to [email protected].  Thanks!

The culture that is French, a continuing series

by  Tyler Cowen in

The best-selling book in French history?

Sadly it is The da Vinci Code.  It is estimated that five million copies are already purchased and that one-quarter of the French reading public has read the work; see Business Week, 29 May 2006.

I fly to Bordeaux tonight, wish me luck, and don’t expect Latino immigration to be the topic of this blog for the next week…

The symmetry thesis

by  Tyler Cowen in

The thesis is simple, and almost everyone disagrees with it upon first hearing.

The symmetry thesis: A given person likes (loves) you as much as you like (love) him or her.

I have encountered many apparent refutations of the symmetry thesis,
but with time most have turned out to be spurious.  I find the symmetry
thesis a surprisingly strong predictor of human behavior and
inclination.

Do I want to know how much you like me?  It is simple.  I imagine
how much I like you.  (If you do the same, are we circular?  Or does
some kind of fixed point theorem apply?)

Let me rule out or explain some obvious "counterexamples."  If a guy
stalks you, and you can’t stand him, the reality is that he is probably
more hostile to you than loving.  The thesis fits.

Break-ups are tricky and they provide the best counterexamples.  But
who really left whom is not always obvious; it can take several years
to figure out what was going on.  Often the leaving party is the one
who first develops a narrative of how things might be different; this
is distinct from liking or loving the other person less.  Other people
leave pre-emptively.

Unilateral crushes are possible and indeed common, although with
repeated contact they usually collapse into symmetry, one way or the
other.

I can imagine several (non-exclusive) mechanisms in support of the
symmetry thesis.  Perhaps "having a connection" — which is mutual by
nature — is the key to true liking and attraction.  That is my favored
view.  Note that it creates a possible exception for people who can
like or love others without having any real connection with them.  I
tend to think of such likes as delusional.

Alternatively, perhaps at least one person is a "fraidy cat," and
won’t let himself or herself fall for the other, or even like the
other, without witnessing signs of reciprocity.  The two people then
lead each other down the pathway of like, in a kind of low-key
intertemporal seduction, sans the sex.  Or with it.

Perhaps we like other people for their intrinsic qualities less than
we pretend.  Mostly we like people for liking (loving) us. 

Yes I know that most of you don’t believe it, and have plenty of
counterexamples to offer.  But keep it in the back of your mind, and
see if it proves useful over the next few years.

What if all books were in Google?

by  Tyler Cowen in

Kevin Kelly considers this possibility in the Sunday New York Times Magazine.

The basic incentive would be to write material that was easy to search for.  That means very literal chapter titles and clearly delineated themes.  Fiction would be penalized, at least in relative terms.  Topic would matter more and mood would matter less.  Or might search engines evolve to offer you "something Proustian and nostalgic"?

What other ideas do you have?

Why I believe David Card’s results on immigration and wages

by  Tyler Cowen in

As MR readers will know, a famous David Card paper shows that the presence of many immigrants in a city does not much lower wages, if at all.

The obvious rejoinder is that cities with growing wages might attract more immigrants.  The new immigrants will cause local wages to fall back down, resulting in a lack of regional correlation between wages and immigration.  Without the immigrants maybe those locales would have had higher wages.  So what does the Card paper really show?

Keep three points in mind:

1. The skeptical story does not consider all possible adjustments.  Had there been no new immigrants in the growing cities, American workers would have moved in to take advantage of the higher wages, thereby pushing wages back down again.  The U.S. has the most mobile labor supply of any developed country.  So the net wage depression effect of new immigrants — taking all supply adjustments into account — still would be zero or very small for many places.

Note that this point, while it responds to Card skeptics, also creates some problems for the Card paper.  It suggests that the labor market is defined at the level of the nation as a whole rather than the city or region.  It is then no surprise — no matter what your view of immigration — if local labor conditions do not much correlate with local wage levels. 

But invoking this point about the national scope of the labor market also blunts fears about how immigrants depress wages.  Suddenly the question is not how many Mexicans are pouring into Texas, California, and Arizona.  The question is rather how many Mexicans are pouring into the United States.  But the larger the relevant market size, the better a job we will do absorbing immigrants.  And the smaller the effect on domestic wages we should expect.  To run a contrasting thought experiment, just try putting them all in Geneva, or better yet Soglio.

2. Have I mentioned capital mobility?  Foreign capital flows into the U.S. all the time.  Even when the Chinese buy T-bills, this frees up domestic private capital to put more people to work.  Having more immigrants encourages more capital to flow in.  If both labor and capital enter the country, there is no reason to expect immigration to lower domestic wages.

3. Are rising wage levels the key factor in drawing Mexicans to a region?  El Paso appears to be one counterexample.  In many cases proximity to the border and clustering effects seem to be more important.  In that case the Card test has less of a problem with endogeneity.  Still, I do not know the formal evidence on this point, so in the comments please pass along your expertise…