Budget Asymmetry
The Bush budget looks pretty good but lets keep things in perspective. My prediction is that it will be easier to add $540 billion in Medicare spending than it will be to cut $5 billion in farm subsidies.
Brain Drain at the NIH?
Last week the NIH announced drastic new rules restricting employees, and their spouses and dependents, from stock holdings in drug, biotech and other companies with significant medical divisions. Consulting, lecturing and other outside income is also severely restricted. Even most prizes and awards with money are now forbidden (the Nobel is an exception). NIH employees are furious.
Word on the street is that universities, including GMU, are receiving a flood of applications from talented scientists. (Perhaps the NIH should have consulted with some economists who might have explained the concepts of opportunity costs and compensating differentials).
No doubt there were some conflicts of interest and some abuses but there were also virtues in the old system. The free flow of scientists to and from commercial and government research is a key part of what made Washington and Maryland’s biotech sector succesful. Moreover, as Steve Pearlstein notes, it wasn’t that long ago that this free flow of people, ideas and money was encouraged, precisely in order to get the scientists out of their ivory tower and into the real world of medical need. Expect less from the NIH in the future.
Honesty about illegal file-sharing
The Supreme Court has been hearing a major case on file-sharing. Should Grokster and other web-based file-sharing services be held liable for contributory copyright infringement? Forget about the law, what does the economist say? Yes "fair use" provisions are excessively stringent, but here are three reasons why I cannot accept the radical anti-copyright position.
1. In ten year’s time, what will happen to the DVD and pay-for-view trades? BitTorrent allows people to download movies very quickly. Note that DVDs already account for more than half of Hollywood domestic revenue. Furthermore the process will be eased when TVs and computers can "talk" to each other more readily. Yes, I am familiar with Koleman Strumpf’s excellent work showing that illegal file-sharing has not hurt music sales. But a song download can be a loss leader for an entire CD or a concert tour. Downloading an entire movie does not prompt a person to spend money in comparable fashion.
2. Perhaps we can make file-sharing services identify (and block) illegally traded files. After all, the listeners can find the illegal files and verify they have what they wanted. Grokster, sooner or later, will be able to do the same. Yes, fully decentralized and "foreign rogue" systems may proliferate, and any identification system will be imperfect. But this is one way to heed legitimate copyright suits without passing the notorious "Induce Act."
3. I question the almost universal disdain for the "Micky Mouse" copyright extension act. OK, lengthening the copyright extension does not provide much in the way of favorable incentives. Who innovates with the expectation of reaping copyright revenues seventy-five years from now? But this is a corporate rather than an individual issue. Furthermore economic research indicates that current cash flow is a very good predictor of investment. So the revenue in fact stimulates additional investment in creative outputs. If I had my finger on the button, I still would have pushed "no" on the Mickey Mouse extension, if only because of the rule of law. Privileges of this kind should not be extended repeatedly due to special interest pressures. But we are fooling ourselves if we deny that the extension will benefit artistic output, at least in the United States.
Is HOPE a virtue?
In response to middle-class anxiety about college costs, states have dramatically increased funding for "merit-based" scholarships. Georgia’s HOPE program (Helping Outstanding Pupils Educationally), begun in 1993, is the model. HOPE covers tuition, fees and book expenses for any high-school graduate earning a B average.
David Mustard, who spoke here last week, and co-authors have written a series of papers asking in effect, Is HOPE a virtue? Predictably, high-school GPAs increased markedly after 1993 with a pronounced spike at B. SAT scores, however, did not increase so grade inflation, not academic improvement, appears to be the cause. Once in college students must maintain a B average to keep their scholarship – the program is rather lax on how many or what courses must be taken however. The result is that scholarship students take fewer classes, take easier classes and when the going gets tough they withdraw more often. Apparently HOPE comes at the expense of fortitude.
HOPE increases the number of students enrolled in GA colleges only modestly and the bulk of the increase comes from students who are induced by the cash to stay in GA, instead of going to school in another state, rather than from students who, without HOPE, would never have gone to college. What do the students do with the cash they save on tuition? Cornwell and Mustard (2002) find that car registrations increase significantly with county scholarships!
Bottom line: HOPE is neither charitable nor prudent. The bullk of the money is a simple transfer to students and their parents. To the extent that HOPE has incentive effects these appear to reduce not increase educational effort and achievement.
Tyler and the Global Cultural War
Tyler is in Paris again, a major player in what the NYTimes calls a global cultural war.
The idea of promoting cultural diversity around the world seems reasonable enough. It recognizes that everyone profits from the free flow of ideas, words and images. It encourages preservation of, say, indigenous traditions and minority languages. It treats the cultures of rich and poor countries as equal. And most topically, it offers an antidote to cultural homogeneity.
Try turning this seemingly straightforward idea into an international treaty, though, and things soon become complicated. Since October 2003, Unesco’s 190 members have been working on what is provisionally called the Convention on the Protection of the Diversity of Cultural Contents and Artistic Expression. It is intended to be approved by consensus this fall, but don’t count on it. There is still no agreement on its final name.
But that is a minor issue compared with more fundamental differences. Led by France and Canada, a majority of countries are asserting the right of governments to safeguard, promote and even protect their cultures from outside competition. Opposing them, a smaller group led by the United States argues that cultural diversity can best flourish in the freedom of the globalized economy.
A bid to break the deadlock is now under way at the Paris headquarters of Unesco…
Tyler will continue to blog from Paris but we are also pleased to be joined this week by our returning guest, Fabio Rojas.
My favorite things French
I do one of these every time I go somewhere. I’ve held off on France out of fear of excess choice, but here goes:
French opera: Debussy’s Pelleas et Melisande is ravishing, try to find the old version conducted by Roger Desormiere. Messiaen’s St. Francis wins an honorable mention; my favorite piece of French music might be Messiaen’s Vingt Regards.
French restaurant: I’ve yet to get into Pierre Gagnaire, considered the world’s greatest restaurant by many. For quick notice, I’ve done well at the Michelin two-stars Savoy and Hotel Bristol, the latter is even open for Sunday lunch, a Parisian miracle.
French novel: Proust is the only writer who makes me laugh out loud.
French pianist: Yves Nat has done my favorite set of Beethoven sonatas. These recordings are brutally frank and direct, and deep like Schnabel, albeit with fewer wrong notes. Few aficionadoes know this box, but it stands as one of my desert island discs. Note that French pianists are underrated in general.
French artist: I find much by the Impressionists sickly sweet and overexposed. I’ll opt for Poussin (this one too), Seurat’s black and whites, and Cezanne watercolors. Right now I would rather look at Chavannes and Bouguereau than Renoir or Monet. As for the most underrated French artist, how about Delacroix? A few years ago some of his small canvases were selling for as little as $60,000.
French popular music: Serge Gainsbourg is often called the "French Bob Dylan," but he is more like "the French Beck." Buy this set for a truly eclectic mix of styles.
French movies: If you don’t usually like French movies, you still should watch Robert Bresson’s A Man Escaped, Jean Pierre Melville’s Bob Le Flambeur (a big influence on John Woo, also try Le Samourai), and Theodor Dreyer’s Joan of Arc.
I am not a number!
The libertarian in me thinks this amusing advert portrays a dystopia, but the economist in me sees the efficiency advantages. In the end I come down on the side of "screw efficiency, give me liberty!" But I am torn and fail to see the principles which will resolve my unease.
What rate of return can we expect on stocks?
And how does this fit into social security reform? Andrew Samwick has the lowdown, with all the appropriate links.
Is there life on Titan?
Their home lies further beneath sea level than Everest’s peak rises above it. And yet tiny organisms have been found living at the very bottom of the Pacific Ocean’s deepest trench, the remotest spot on the globe.
The microscopic organisms, called foraminifera, live in mud at the bottom of Challenger Deep in the Mariana Trench, almost 11 kilometres beneath the waves of the western Pacific Ocean. The pressure at this depth is a crushing 1,090 times that at the surface.
This recent story causes me to raise my prior ever so slightly…
Ernest Mayr dies at 100
Here is the Harvard account. I love his books, start with The Growth of Biological Thought: Diversity, Evolution, and Inheritance.
Markets in everything
When I originally heard about First Contact, a trip offered by Woolford’s trekking company, Papua Adventures, I couldn’t believe he was really doing what he claimed to be doing. An easygoing American expat from Springfield, Missouri, who jokingly describes himself as a "hillbilly," Woolford marches into the jungle in search of uncontacted native tribes who have never seen outsiders–and who aren’t supposed to mind tourists barging into their lives. I had trouble buying the idea that, in the 21st century, there were still nomadic hunter-gatherers out there using stone tools and rubbing sticks together to start a fire. But there are, Woolford assured me. From his home in Ubud, Bali, he explained the strategy behind his First Contact trips.
"There are a handful of places in West Papua that are untouched–still Stone Age tribes, still cannibals," he said. "It’s just that a lot of people are too scared to go look for them."
Making contact with tribal people is a risky business–a simple flu could wipe them out. But Kelly Woolford insists that he’s mindful of such risks. "We don’t try [sic] to corrupt them," he says. "Five minutes is all we do."
Here is the story. Here is the company’s website. Thanks to the ever-useful www.politicaltheory.info for the pointer.
Modeling Intellectual Property
For over half a century, kits have been sold that enable military history
buffs to assemble scale models of military ships, aircraft and vehicles. But
that era is coming to an end, as the manufacturers of the original equipment,
especially aircraft, are demanding high royalties (up to $40 per kit) from the
kit makers….Models of a company’s products are considered the
intellectual property of the owner of a vehicle design. Some intellectual
property lawyers have pointed out that many of these demands are on weak legal
ground, but the kit manufacturers are often small companies that cannot afford
years of litigation to settle this contention.
That’s from James Dunnigan. Dunnigan points to an ironic unintended consequence of this use of intellectual property law. To avoid the levies kit manufacturers are turning to items for which there is no royalty – items like aircraft from Nazi Germany.
Thanks to Cory Doctorow at BoingBoing for the pointer.
Blogging vs. long-term research?
Virginia Postrel and Andrew Sullivan ask whether blogging interferes with one’s long-term projects and commitments, such as writing books.
For me it has been simple. I’ve always tended to work on too many topics and questions in the first place. Daily blogging satisfies my intellectual "Wanderlust" very well. This makes it easy to concentrate on more specialized research, namely my main field of economics and culture. Since I’ve started blogging my research has become more focused, which is overall a good thing. In other words, the portfolio effect has outweighed the substitution effect.
Social security and our future
Given President Bush’s State of the Union address, and a number of reader requests, I am reprising my earlier posts on social security reform. I don’t pretend to have remembered them all, but here are a few links, some retitled to sound more descriptive:
Will reforming social security yield an equity premium? (the most neglected of the lot, but in my mind one of the most important; read Alex also)
Should we opt for forced savings?
Should we gradually freeze social security benefits in real terms?
Is such a reform politically feasible?
My Econoblog debate with John Irons, summarizing my views
Addendum: Here is one account of what Bush actually said, I was at a flamenco concert.
George Bush and Reason
Reason magazine asks well-known libertarian bloggers and others (including Vernon Smith, Nadine Strossen, Virginia Postrel, Jacob Levy, Daniel Drezner, Glenn Reynolds, and yours truly) to state their biggest hopes and fear for the next four years. Thanks to Daniel Drezner for the pointer.
And if you like Reason, check out the new volume Choice: The Best of Reason, edited by Nick Gillespie.