Assorted links
1. How to use experiments to generate ideas
2. Where are war deaths occurring? (scroll a short bit)
More evidence on immigration and wages
As of 2004 California employed almost 30% of all foreign born workers
in the U.S. and was the state with the largest percentage of immigrants
in the labor force. It received a very large number of uneducated
immigrants so that two thirds of workers with no schooling degree in
California were foreign-born in 2004. If immigration harms the labor
opportunities of natives, especially the least skilled ones, California
was the place where these effects should have been particularly strong.
But is it possible that immigrants raised the demand for California’s
native workers, rather than harming it? After all immigrants have
different skills and tend to work in different occupations then natives
and hence they may raise productivity and the demand for complementary
production tasks and skills. We consider workers of different education
and age as imperfectly substitutable in production and we exploit
differences in immigration across these groups to infer their impact on
US natives. In order to isolate the "supply-driven" variation of
immigrants across skills and to identify the labor market responses of
natives we use a novel instrumental variable strategy. Our estimates
use migration by skill group to other U.S. states as instrument for
migration to California. Migratory flows to other states, in fact,
share the same "push" factors as those to California but clearly are
not affected by the California-specific "pull" factors. We find that
between 1960 and 2004 immigration did not produce a negative migratory
response from natives. To the contrary, as immigrants were imperfect
substitutes for natives with similar education and age we find that
they stimulated, rather than harmed, the demand and wages of most U.S.
native workers.
In other words, if lots of Mexican carpenters move to California, we don’t see the non-Mexican carpenters leaving in droves, due to lower wages.
Here is the paper. Here is a non-gated version. The article makes the interesting observation that if California were counted as a nation (and the U.S. not), it would receive the second largest number of immigrants per year of any country, with only Russia beating it out.
My podcast, #2
Tyler Cowen, professor of economics at George
Mason University, talks with Bloomberg’s Tom Keene from Fairfax, Virginia, the
impact of celebrities on politics and the economy, XM Satellite Radio Holdings
Inc.’s possible combination with Sirius Satellite Radio Inc., and the effect
of blogs on the news industry.
Scroll down from here, there are many other economist podcasts as well. I predict that both XM and Sirius will go under, the iPod is the real competitor.
Addendum: Here is the new podcast link.
Behavioral microeconomics bleg
A loyal MR reader writes:
For a research on how undergraduate teaching of microeconomics incorporates the recent developments in behavioral economics, I have been trying to get the syllabuses of undergraduate microeconomics courses…
Syllabus or not, do you have information on how behavioral economics is being taught at the micro level? Comments are, of course, open…
Diet and politics
A loyal MR reader wants to hear about:
’08 elections. where Kurzweil and company are most right and most wrong. veganism/vegetarianism/cave man diet/pescatarianism/organic.
1. Yes it does matter who wins but my gut reaction is to compare candidates to soap commercials. At the end of the day there is a soap bar in your hand, but interest in the topic is driven mostly by our irrational side, programmed to respond emotionally to human faces and characters. Candidate blogging usually bores me. If you are figuring out who to vote for, try to predict a politician’s ruling coalition. The current political question is whether the bad tendencies of Bush 43 are one-time or represent a shift in the political equilibrium and what it takes to govern; I think it is about 50-50 in each direction.
2. Here is my earlier post on the singularity, try to spot the facetious sentence.
3. I have nothing against eating animals per se, even live ones, but I think it is immoral to eat animals raised under awful conditions, such as factory farming. Personally, I often try to be good but I often fail as well. I never feel bad eating meat in Europe, and animal welfare is the best argument for European farm subsidies. I will pay more for humanely-raised food, but I won’t drive through ten minutes of extra traffic to get it.
4. For a diet I recommend fish, nuts, fruit, green vegetables, and lots of braised pork belly. At least that’s what tastes good. Few processed foods are worth buying; I come close to the caveman diet view without being dogmatic. A good bread is not to be rejected and come on, can rice really be that bad for you? Just avoid all junk foods.
#26 in a series of 50.
Tyrone says it is easy to stop global warming
Tyrone, like many other people, enjoys reading Instapundit. Today he sent me the following by IM, or was it Google Talk?:
Global warming is easy to stop. Is a carbon tax costly? No way. Didn’t we already agree that stopping global warming is wealth-maximizing for the world as a whole? Then we just have to work out the right set of transfers. As a first-order oversimplification, global warming benefits North Dakota but harms Bangladesh by a greater amount. North Dakota cuts a deal with Bangladesh. The two state Senators will support a carbon tax in return for FREE CALL CENTRES FOR FIFTY YEARS. Or whatever is needed. After all, a bargain is there. We might even use the UN, or a revamped Kyoto agreement, to support and organize the deal.
You can see this agreement is self-enforcing, right? If payment is not made, we can always take the carbon tax away. Or do something even nastier with those silos up there in the Peace Garden State. Obviously America could turn a profit on this whole carbon tax deal. This might sound unfair, but surely it is less unfair than ignoring the problem altogether…
Sadly, Tyrone is still waiting for a response from Tyler. Tyler thinks Tyrone is a nasty, nasty man, who has grasped only the worst of Edgeworth and understood none of the best…
Is there a political solution to global warming?
Some say no. The challenge:
Name one government programme, in a democracy, for anything other than a war (on people, I mean, not ideas or natural conditions), that has ever forced the entire citizenry to do something as painful and inconvient as cut their energy usage by 20-50%. If you can do so, I will reconsider my stance. I note that Britain is in the early stages of just such a plan, and if it works, I will eat my words with a glad smile.
Life at teaching colleges
Amber asks:
You have written about how to (and who should) become an economist at a research university, but what are the differences for those at teaching colleges? How much are they expected to publish?
I would like to hear from the bloggers and commentors at teaching colleges. My aggregated sense is that teaching colleges expect more publishing, or even more fundraising, than before. That said, five non-top tier articles is probably enough at most teaching schools, provided of course you are a good teacher. As to who should work at a teaching school, the naive answer — those who love teaching — is essentially the correct one.
My warnings about teaching departments would concern their size and the departmental cliques; I am a fan of anonymity and sorting, which is most likely in larger departments. Teaching schools tend to be small schools, and if you are on the outs, life can be pretty tough.
#25 in a series of 50.
Is this why I haven’t become addicted to Civilization?
Jason Kottke reports on Will Wright:
Notes from Will Wright’s keynote at SXSW 2007. "Movies have these wonderful things called actors, which are like emotional avatars, and you kinda feel what they’re feeling, it’s very effective. Films have a rich emotional palette because they have actors. Games often appeal to the reptilian brain – fear, action – but they have a different emotional palette. There are things you feel in games – like pride, accomplishment, guilt even! – that you’ll never feel in a movie."
#24 in a series of 50, and yes I do recommend you read the Wright speech, which deals with the human need for stories.
Does dollarization raise prices?
A loyal and possibly even addicted MR reader writes:
El Salvador has been dollarized since 2001. What the overwhelming majority of Salvadorans tell me is that, *everything is much more expensive since we switched to the dollar.* Now I feel like this cannot be wholly true. For sure the transaction cost of receiving remesas has been reduced (is the reduction significant to the individual receiving $200 a month?), it will protect against volatile inflation, and eliminate any double currency issues, but I have little more understanding than that. El Salvador’s monetary policy decisions are now made in Washington, D.C. and thus not all of the policies made will be in the best interest of El Salvador, but would it be naïve to believe that prices have not actually risen any more than they normally would have with the colon?
I too felt that El Salvador was relatively expensive for its income level, as is Panama. (I haven’t been to Ecuador since the shift to the dollar, but that is an obvious natural experiment.) But why?
1. Dollarization makes the El Salvador exchange rate hostile to strong "reserve currency" demands for dollars.
2. Dollarization makes it easier to compare prices with the U.S., which leads to more arbitrage, different expectations, and could be inflationary. I know that sounds lame, but we have seen similar effects in the Eurozone.
3. The trick is to figure out whether the Bela Balassa argument applies. In 1964 Balassa noted that an exchange rate is determined mostly by a country’s tradeables. So if compared to the U.S. El Salvador is less productive in tradeables, but comparably productive in some untradeables (e.g., haircuts), the haircuts will be especially cheap in El Salvador. U.S. productivity in tradeables makes the dollar very strong in terms of the non-tradeables. That’s one reason why people go to Thailand for you-know-what.
Think of the El Salvador haircut as (previously) cheap for two reasons: low real wages in El Salvador, and the dinky value of the (former) colon. When El Salvador moves to the U.S. dollar, the latter reason goes away and the haircut becomes more expensive.
You might think that everything should be neutral in terms of the currency unit, but the demand for money matters too. This means the Balassa effect is a special case of #1 above.
So, following dollarization, the relative price of the El Salvador non-tradeables is higher for people coming from the United States. Those relative prices are also higher for El Salvadorans working in their country’s tradeables sector.
Or so I believe. I’ve been worrying about this one for weeks, folks. Get a life!
#23 in a series of 50.
Should we return to a gold standard?
A loyal MR reader requests:
…your thoughts on fiat currency vs currencies backed by precious metals.
could a return to the gold standard for the US dollar, as advocated by
US congressman Ron Paul, bring about a superior economic system?
A gold standard has few advantages over a responsibly run fiat currency, as we have had since about 1980. A real, laissez-faire gold standard involves a pro-cyclical money supply, and who wants that? Why let the money supply shrink during bad times? Some prices and wages are sticky in nominal terms, if only because people feel they are being taken advantage of, not "holding their ground," or losing relative status. Just read Truman Bewley’s book. Nominal stickiness is rooted in human nature.
Maybe we could get used to periodic or ongoing deflation, but it would take some doing. In the meantime two percent inflation is not so bad. On the other side of the debate, the resource costs of the gold standard have been overplayed.
The best and indeed only argument for gold is the view that we must, sooner or later, return to rampant inflation. That has been the rule for fiat money throughout most of human history. I think today seigniorage is not an important source of government revenue and financial markets punish politicians for inflation pretty quickly. So I am willing to wait for the "later" to come before making any switches away from fiat money. Keep in mind, people can already denominate their contracts in terms of gold, and hardly anyone wishes to do so.
#22 in a series of 50.
Susan Sontag on America
It is the genius of the United States, a profoundly conservative country in ways that Europeans find difficult to fathom, to have elaborated a form of conservative thinking that celebrates the new rather than the old.
That is from Susan Sontag’s new At the Same Time: Essays and Speeches. This volume is not her best work, but it is still better than what almost anyone else comes up with.
When to boycott
Should we refrain from consuming the cultural products of those producers who hold morally objectionable views, when our consumption of such products will benefit said producers?
I think of this as a Ramsey tax problem: we are willing to sacrifice a certain amount of goods and services to do the world some good, how can we do so at minimum damage to our utility?
Just as lump sum taxation is efficient, so should we give away money, rather than distort the MB=MC ratios on our consumption decisions. So my inclination is to avoid boycotts. It is better to just send money to the people or groups you wish to help.
Sometimes boycotts are motivated by the wish to hurt other people — the target of the boycott – rather than by desires to help some oppressed group. Or punishing a group’s critics may be the best way to help that group. Then boycotts make more instrumental sense, especially if the target of your hate has a declining MC curve, as would a movie star or music star with an easily reproducible product. There is less point in boycotting someone in a relatively competitive industry, who is earning little on selling extra units of the product.
Note that if you are facing a monopolist with a durable good, boycotts can make that monopolist better off by helping him to restrict quantity. In other words, boycott rock stars, not painters or sculptors.
A boycott also might be preferable to sending money if your action has a snowball effect on the behavior of others, but that will not be the general case. In fact boycotts often give more publicity to the person or cause you are trying to oppose. "You opposing X" is not, in the eyes of the world, always a negative signal about X.
Sorry.
#21 in a series of 50.
Addendum: See also my post on fair trade.
What I’ve been reading
1. Ice, by Vladimir Sorokin. A totally lurid, highly sexed, contemporary Russian, pre-apocalyptic mix of science fiction and horror. I finished it.
2. The Once and Future King, T.H. White. Oddly absent from Law and Literature syllabi, I’m teaching this in my next class. This is many people’s favorite book. It’s written in a simple manner, but it cumulates in an oddly beautiful way.
3. What economists should learn from sociology, not to mention Arnold Kling on me, and Brad DeLong on Milton Friedman.
4. How to Improve Your Marriage Without Talking About It, by Patricia Love and Steven Stosny. The claim: talking about relationship problems is an inherently shameful activity for the man and thus it will fail; the couple should just read this book and do what is best.
5. Econoblog with Ed Glaeser and Daron Acemoglu, on democracy and economic growth. If Greg Mankiw can debate Jacqueline Passey, Ed can cite Borat as evidence in a dialog with a world-class economist.
6. Invading Mexico: America’s Continental Dream and the Mexican War, 1846-1848 by Joseph Wheelan. If you wish to embarrass your friends (and yourself), ask them whether they would in retrospect support the U.S. conquest of territory from Mexico.
How much music is enough?
I’ve been sampling the Bach box and I pronounce it worth buying. Compared to the available full-price recordings, I give it a 7 out of 10 and that is for 65 cents per disc. The sound is generally quite good, the performances of the chamber music are excellent, the harpischord occasionally stale (I prefer Bach on piano), the masses and passions are above average, and most of the cantatas are "good enough." It won’t displace my very favorite Bach recordings, but these make good second choices pretty much across the board. To be frank, even among experienced classical music listeners, no more than one person in ten can tell the difference and yes that means you.
Yesterday Jane Galt asked "how much music is enough." Ha! But two days earlier, after receiving the new Amon Tobin CD, I vowed not to buy another CD for an entire year. It’s not a question of money, rather I am looking for a new listening experience.
Let’s see how long I last, I’ll let you all know when I snap.