My thoughts on food

by  Tyler Cowen in

The Baltimore Sun interviews me on food, dining, and globalization. Here is my favorite bit:

Sociologist/food scholar Alice Julier of Smith College says she’s not sure if Foodland is characterized by more abundance or just the absence of clear authorities on how to make choices.

“There’s sort of a continual argument going on,” says Julier, who will not be attending the conference. “There’s a pastiche of voices speaking to what’s good and what’s not.”

In the din is the voice of Tyler Cowen. He knows the complexity of it all, yet a brief conversation with him suggests that on one level, at least, it’s simple: Try the China Star, order the Szechuan chili chicken.

Read the whole story, as they say. Just don’t put down your Szechuan chili chicken.

Addendum: Here is my on-line ethnic dining guide for the DC area, which includes a longer review of China Star.

Self-delusions keep us going

by  Tyler Cowen in

Philosopher Alfred Mele asks:

Suppose you learn of a kind of psycho-surgery that enables people to bring all of their beliefs about their positive and negative attributes into line with the facts. Suppose you also learn that only this psycho-surgery would eliminate all of your biased beliefs about yourself, that it is very expensive, and that it would probably cut ten years off your life. Would it be rational for you to sign up for the surgery? Obviously not.

I would go further, don’t even do it for free. Mele informs us:

There is a phenomenon called “depressive realism”. Depressed people tend to be significantly more accurate about their positive and negative attributes than do people who are not depressed. Whether depression is a cause of the accuracy or the accuracy is a cause of the depression is an open question. But should you want to cause yourself to be depressed so that you can be more accurate about yourself or work hard to be more accurate about yourself at the risk of causing yourself to be depressed?

Psychologists claim that the depressed are extremely unrealistic about at least one variable: their likelihood of remaining depressed forever. For the depressed, it feels as if the cloud will never lift. When it comes to the rest of us, our delusions [surely a familiar concept to most bloggers!] help motivate us and keep us happy.

So do you agree with my answer to the first thought experiment? Would you reject a free surgery that would lift your delusions? If so, do you feel bad about not being a truthseeker [N.B.: this link is now repaired]? Do you take this fact into account when debating passionately with others? Just my thought for the day.

Does free trade make a welfare state harder to maintain?

by  Tyler Cowen in

I’ll say “no.”

The common argument for “yes” confuses absolute and comparative advantage. If you can see that conclusion right away, I commend your economic intuition. Eric Rasmusen unpacks the core insight:

The naive view is that if Canada has lower productivity in all its industries than the US, then if trade opens up, Canada will produce nothing, and will instead import everything from the US. The fallacy in this is that if Canada produces nothing, it will have nothing to export to the US, and the American sellers will not send anything to Canada. What actually would happen is that Canada would import from the US the goods it has the biggest productivity disadvantage in, and export to the US the goods for which it has the smallest productivity disadvantage. Free trade will benefit some Canadian producers, despite the fact that their productivity is lower than that of their American counterparts.

It would also be true that even if Canada has onerous regulations that hurt its productivity, Canada would benefit from opening up trade with the US. It would actually become easier for Canada to maintain its welfare state, because the country would become richer.

Here is more:

Suppose we have two countries, one and only one of which imposes costly regulations on all its industries– a family leave law, or a minimum of 6 weeks of vacation, or something like that. Let’s call them Canada and America. Initially, the countries do not trade, because of prohibitive tariffs. Then we drop the tariffs. What will happen?

In this situation, nothing will happen that is any different from the opening of free trade between any two countries. Each country has a comparative advantage in one or more goods, and will export those goods and import the others. If Canada’s onerous regulations are equally onerous for all Canadian industries, the regulations will have no effect on trade patterns. Instead, it will be the same sort of effect as if Canadian labor productivity were 10% lower than US productivity. Whether lower productivity is because of regulations, taxes, or anything else doesn’t matter.

More weight on the scale: Trade is a substitute for factor migration. The more a welfare state country trades, the less likely it is to lose factors of production. And the richer the country it becomes, the more likely it can afford higher levels of taxation. It is because of free trade, in part, that today’s world can invest so much in welfare states.

That being said, I am less convinced that very high levels of immigration make it easier to have a welfare state. In this regard trade and migration are not perfect substitutes, especially once politics enters the equation.

Somalia and the theory of anarchy

by  Alex Tabarrok in

Somalia continues to provide a unique test of the theory of anarchy (competitive governments) promoted by David Friedman, Murrary Rothbard and others. Somalia has no government but in many respects it is booming. Somalia has what is perhaps the best phone system in Africa, for example, because entrepreneurs are unburdened by any regulation. See, Andew Cockburn’s amazing piece in National Geographic (not all here but watch the videos) for more description.

A prominent critic (you know him well) of the economics of anarchy once argued that even if anarchy was a good idea competitive governments would devolve into unitary government. Possibly so, but so far the trend has been in the opposite direction. Here is the Economist

There is still no proper central government but, where once there was only a handful of warlords, there are now at least 24, and that is only the serious ones. With smaller fiefs to pillage, few can now afford the $100,000 or more that it costs to wage a six-hour battle, so such battles are less common. This is what passes for peace in Somalia, and it is enough to tempt many homesick exiles to return. They bring money as well as skills and contacts. In the past few years, hospitals, schools, businesses and even a university have appeared.

In some ways, anarchy makes doing business easier. There are no formal taxes–given how heavily-armed the average Somali is, these would be hard to collect–and no regulation whatsoever.

On the other hand anarchy is turning out to be quite expensive. The Economist continues:

But the costs of chaos outweigh the benefits. You can roar through a warlord’s road block unmolested if you have ten gunmen in the back of your pickup, but you have to pay your gunmen. Nationlink, one of the country’s three mobile-phone operators, employs 300 guards to protect 500 staff. Everyone yearns for a restoration of stability and a proper government.

Is American health care more productive?

by  Tyler Cowen in

Advocates of national health insurance point out that the U.S. spends more on health care, per capita, than any other country in the world. At the same time, Americans rank only in the middle when it comes to actual health and longevity. So you might believe that we could nationalize the industry, save money, and improve our health. Think again:

The proper way to measure the performance of health care is to measure the difference it makes in the quality of life of people who come for help…What we need to know is whether the higher level of spending means the United States is much less productive in health care than other countries.

In an attempt to test the limits of knowledge here, we studied the treatment of four diseases — diabetes, cholelithiasis (gallstones), breast cancer, and lung cancer — in three countries: Germany, the United Kingdom, and the United States. These three countries were the only countries for which comparable data existed for these diseases, either nationwide or for large regions.

The relevant measures were either life expectancy after treatment or measures of the quality of life. And how about the results:

The United States is more productive in all these diseases except for diabetes in the United Kingdom. [emphasis added] The reasons for this result can be traced directly to the huge differences in the way the health care sector is organized and governed across these three countries. The UK health care system is almost entirely government owned and run…The result has been that the United Kingdom has no invested as quickly in technologies that have dramatically improved the diagnostic capabilities of medicine and significantly reduced recovery time…Germany, on the other hand, has a system more like the United States had twenty years ago. In Germany, medical expenses are paid for on a task-by-task basis for services of doctors and hospitals. As a result, hospitals in Germany have no financial incentive to reduce length of stay.

In other words, Americans pay more but get better health care in return. We die sooner because we eat too much and exercise too little, among other facts. For similar results, see this comparison of the U.S. and Japan.

The quotations are from William Lewis’s interesting The Power of Productivity, see p.97. Lewis is a partner at McKinsey, an economics and management consulting firm. Here are other McKinsey writings on health care ($$), including the comparison with the UK and Germany.

By the way, this essay suggests that most of the productivity benefits of health care spring from pharmaceutical consumption. Of course we lead pharmaceutical production but also pay the highest prices. It would be a disaster for the world as a whole if we tried to save money on this front with tight price controls.

The bottom line: National health insurance is unlikely to save on medical costs, unless it cuts back on treatment drastically.

Does caste matter?

by  Tyler Cowen in

If discrimination against an historically oppressed social group is dismantled, will the group forge ahead? This paper presents experimental evidence that a history of social and legal disabilities may have persistent effects on a group’s earnings through its impact on individuals’ expectations. 321 high-caste and 321 low-caste junior high school male student volunteers in village India participated in an experiment in which their caste either was not revealed or was made salient. There were no caste differences in performance when caste was not revealed, but making caste salient created a large
and robust caste gap in performance. When a non human factor influencing rewards (a random draw) was introduced, the caste gap disappeared. The results suggest that when caste identity is public information, low-caste subjects anticipate that their effort will be poorly rewarded. The experimental design enables us to exclude as explanations socioeconomic differences and a lack of self-confidence by low-caste players.

What are they really saying? When the Experiment-Meister knows who belongs to which caste, and this is common knowledge, the low caste players don’t try very hard. It seems the low caste players don’t expect to keep anything they might win.

Use the same players, but “caste blind,” and the low caste players put in a good showing. Their supposed “self-confidence” problems disappear. In fact the high caste players try harder too.

“Mistrust undermines motivation”, write the authors. How is that for a nice three word sentence?

The bottom line: File under: “More problems with Iraq.” No the Iraqis don’t have a caste system, but they are not used to playing by fair rules either. So we can’t expect them to trust the incentives we put before them.

Here is the full paper, which includes the details on experiment design. Of course one experiment doth not a full conclusion make, but I found this work fascinating. If I had an award for “paper of the week” [hmm…], this one might win it.

Wal-mart watch

by  Tyler Cowen in

Imagine that, a new blog devoted solely to news about Wal-Mart, the “best and the worst.”

Did you know that Wal-Mart will be selling DVD players that edit out the offensive content from movies?

A recent Economist article look at how Wal-Mart keeps on growing bigger:

The mathematics of big numbers suggests that Wal-Mart’s growth must slow. Amazingly, the opposite appears to be happening. In America this year, Wal-Mart intends to open some 50 new discount stores and more than 220 new supercentres, some of which will be existing stores moving to new locations. Overseas, it plans another 140 or so new stores, including relocations. This adds up to some 50m square feet of new space–even more than many of its rivals operate in total.

So why shouldn’t it get its own blog? I don’t know whether the topic will sustain a blog in the long run, but I predict we will see more specialty blogs of this kind. (Read this on babyblogs, which are also accused of violating privacy.) As blog readership continues to rise, the division of labor will increase.

Thanks to the Mises blog for the original pointer. By the way, Kevin Brancato puts out a request for co-bloggers.

Asteroids

by  Alex Tabarrok in

Ironically, we spend very little on one of the few public goods that I support, asteroid detection and deflection. Even among the strange group that I interact with, this predilection of mine about avoiding asteroids is considered a little odd. But consider that the probability of being killed by an asteroid collision is about the same as being killed in a commercial airplane disaster – small, but all of humanity is aboard that plane.

Assuming there are enough of us around after a hit, I can just see the commission now.

Q. Why was our government woefully unprepared to prevent the deaths of millions of citizens and world-wide devastation?

A. We had only vague, historical information.

Q. What about 2002 EM7?

A. That was a previous administration.

Q. What about 2004 FH

A. NASA did not provide us with a specific threat.

Q. Didn’t you know about Tunguska?

A. That was a foreign threat.

Much more information, with plenty of references, comes from Randall Parker, the far-seeing Future Pundit, who actually works on things like asteroid detection.

China fact of the day

by  Tyler Cowen in

Latest research shows that every day in China at least 300 people are killed in traffic accidents, ranking the country top in the world for both the death toll and the death rate. And the figure is accelerating by 10 per cent every year.

Here is the full story

Peter Gallagher points out the following:

That’s a huge rate of slaughter: 110,000 deaths and 560,000 injured on China’s roads last year. It’s more than 200 times the death rate from SARS (for example) which killed 349 people in China in the eight months from November, 2002 to July 2003 (WHO data), creating a much higher level of anxiety.

The Chinese have fewer cars on the road and drive at slower speeds. Nonetheless “driver negligence” catapults them to the top [bottom] of these rankings.

Nauru goes bankrupt

by  Tyler Cowen in

Remember Nauru? That small Pacific island that got rich off phosphates? The BBC narrates:

Nauru’s rich reserves of phosphates – an ingredient for high-grade fertiliser – created enormous wealth during the 1970s and 1980s.

The island’s 10,000 inhabitants enjoyed one of the world’s highest standards of living, as well as exemption from tax and immigrant labour to perform all menial jobs.

But the phosphates have run out and things have turned sour. Amanda Butler tells us that the government faces foreclosure on 5 May if it does not pay a debt of 230m Australian dollars (US$169m; £94m).

What does it mean for a government to face foreclosure? Well, this government owns the Mercure Hotel in Sydney, a shopping center in the suburbs, and a “derelict” Melbourne tavern. But heck, why not close up the country altogether?

There have been reports that the island’s inhabitants could be given Australian citizenship as a reward for their help with asylum [seekers].

Alternatively, there have occasionally been proposals to move Nauru’s population to another unoccupied Pacific island.

The politically incorrect question: Why do these very small countries exist in the first place? Before answering that question, check out some photos and a short travelogue of Nauru. Or look elsewhere. New Zealanders claim that there are more Tongans in New Zealand than on the mainland of Tonga. Does either the world, or the islanders, still reap a positive cultural externality from maintaining these small groups? If all these islanders simply moved to Australasia, wouldn’t everyone be much better off within a generation? Those are questions, not answers. But I, for one, would not mourn the disappearance of Nauru. Or as the philosophers would say “Nauru as we know it.”

Addendum: Here is some radio narrative. Thanks to Nathan Fong for the pointer.