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…

Measuring sports performance

by  Tyler Cowen in

Yesterday I learned the following:

1. Team payroll and team wins are not strongly correlated in the major U.S. sports.

2. Labor disputes and lock-outs do not have a long-run negative effect on attendance and receipts.

3. Problems of competitive balance come from the distribution of playing talent, and sports leagues do not much remedy the problem by salary caps and the like.

4. In the NBA, team wins attract crowds more than does star power.

5. The great NBA players do less to make their teammates better than is often supposed; in fact many great players make their teammates worse.

6. In statistical terms, the better players do not play much better, if at all, during the NBA playoffs.  (TC: But for sure they try harder, especially on defense.)

7. NBA decision-makers do not seem to understand the value of players.  In particular they tend to overvalue scoring.

All of that is from the new The Wages of Wins: Taking Measure of the Many Myths in Modern Sport, by David Berri, Martin Schmidt, and Stacey Brook.  Here is the book’s home page.  Here is the book’s blog.  Here are my early season NBA predictions.

Addendum: Here is Malcolm Gladwell’s review.

Med Mal Price Gouging?

by  Alex Tabarrok in

I have an op-ed in today’s Wall Street Journal on medical malpractice insurance premiums.  Here’s a sample:

On its face, price gouging is a peculiar explanation
for recent increases in insurance premiums. Is greed new to the world?
Were insurance companies followers of Mother Teresa just a few years
ago? If greed and gouging are the explanations for rising premiums, why
did the St. Paul group — one of the nation’s largest suppliers of
medical malpractice insurance — pull out of the market in 2001? Were
the profits from all that gouging just too much for St. Paul’s guilty
conscience? And consider that almost half of doctors are insured
through mutual, i.e., doctor-owned, insurance companies. Are the
doctors gouging themselves?

The gouging explanation fails more than the credulity
test. Price gouging can work only if firms have monopoly power — so if
gouging is the explanation for higher premiums, we would expect to see
higher premiums in states with less competition. My student, Amanda
Agan, and I tested this hypothesis in a study released two days ago by
the Manhattan Institute. Contrary to the gouging hypothesis, we found
that a 10% increase in industry concentration reduces premiums
by $2,200. The result makes sense if we remember that, to increase
market share, firms don’t raise prices but rather lower them. Wal-Mart
has grown into the nation’s dominant retailer by lowering prices, not
raising them.

Dismal’s Paradox

by  Alex Tabarrok in

Here is the Daily Show’s John Hodgman explaining how the Dismal Science got its name:

Jon Stewart: Uh, the way you’ve explained the tax cuts doesn’t really seem fair.

John Hodgman: Fairness isn’t really the point.  They don’t call economics the dismal science because it’s fair. 

JS:  Well, I suppose not.

JH: No, no, they call it that after Sir Eustice Dismal.  The 18th century English economist who proposed making smokestacks out of children. 

JS: I uh, I actually never knew that.

JH: Yes, it was a very interesting proposal but ultimately flawed.  I mean if you make the smokestacks out of children who will you force to clean them?…

JH: Yes, it’s referred to as Dismal’s paradox.

The real story which, contrary to popular opinion has nothing to do with Malthus, can be found here.

Sensation seekers trade stocks more frequently

by  Tyler Cowen in

This study analyzes the role that two psychological attributes–sensation seeking and overconfidence–play in the tendency of investors to trade stocks. Equity trading data are combined with data from an investor’s tax filings, driving record, and psychological profile. We use the data to construct measures of overconfidence and sensation seeking tendencies. Controlling for a host of variables, including wealth, income, age, number of stocks owned, marital status, and occupation, we find that overconfident investors and those investors most prone to sensation seeking trade more frequently.

Here is the full paper.

Which Mexicans end up coming here?

by  Tyler Cowen in

Here is a long and valuable paper on the topic.  From the abstract:

Consistent with positive selection of emigrants in terms of observable skill, emigration rates appear to be highest among individuals with earnings in the top half of the wage distribution.

There is much more along those lines.  To be frank, I know this paper will not convince most of the skeptics.  They will say, or perhaps think, "Yikes, what must the others be like?"  But at the very least evidence should improve a debate.  The next time you hear it argued that we receive "the dregs" of Mexico, send along this link.

The paper also finds that wages tend to rise in parts of Mexico where many people leave.  You could argue this one of two ways.  First, it might cause you to doubt David Card’s view that wage effects in the U.S. are small (although the U.S. is a much bigger economy and thus the labor shift should have a smaller impact here).  Second, it raises our estimate of how much Mexico benefits from emigration.

Thanks to Eric Husman for the pointer.  Here is another relevant paper on Mexican emigration, forthcoming in the Journal of Economic Literature.  Full of facts, as they say.