Why the EU won’t become a federal government
I was struck by Larry’s Siedentop’s words from today’s Financial Times (subscription required):
…the new member states will be very assertive once the formalities of enlargement are over. We can expect an unapologetic defence of national interests, a suspicion of encroachments from Brussels and an intense dislike of what might be called lurking double standards in the EU…It will be a pluralist vision rather than a unitary one, a preference for something more like a confederation than a federation. For behind the quasi-federalist form projected for Europe that is promoted, at least intermittently, by France, such countries detect a wish to give the EU some of the attributes of a unitary state. Their contribution could decisively shift the balance of the debate away from that particular vision.
Cannabis Emptor
When goods are prohibited, quality tends to fall because of lack of competition and legal recourse. Quality in illegal markets, however, may still beat that available from government production. Health Canada spends millions of dollars growing marijuana for distribution to patients with medical need. The government grown pot is so awful, however, that patients are returning their 30 gram bags and asking for refunds! The government certifies and advertises that their product contains 10.2% THC but independent labs report only 3% THC. Furthermore, the government pot is contaminated with lead and arsenic. “This particular product wouldn’t hold a candle to street-level cannabis,” said Philippe Lucas of Canadians for Safe Access, the group that sponsored the tests. Thanks to Eric Crampton for alerting us to this story.
The value of a lone dissenter
People will often abandon their opinions to conform to what a group expects of them, but a lone voice of reason can save the day. Cass Sunstein’s new book, Why Societies Need Dissent, reports the following (see chapter one):
You can give people a problem and allow them to solve it. Also give them a group of confederates, who unanimously advocate the wrong answer to the same problem. One confederate, proclaiming the wrong answer, will have little influence on the problem solver. Two confederates increased errors to 13.6 percent. Using three confederates increased errors to 31.8 percent. Under some results, more than three confederates do not increase the error rate, although this is controversial. But putting one voice of sanity in the group, who knows and proclaims the right answer, makes a big difference. “Conformity errors” were reduced by an average of three quarters, even if a strong majority of the group leaned the other way. Sunstein draws upon the work of Robert Baron, at the University of Iowa.
The economics of diets
Meat sales are up and bread sales are sluggish. The Atkins diet tells us to dump bread, pasta, and rice, and allows us to eat plenty of meat. Could it be driving this trend? Slate examines the economic impact of diets and offers a cautionary note. Only six million people –about three percent of national population — have tried the Atkins diet. Most people are buying convenience, the growth is beef sales is centered in ready-to-serve products. By the way, sales of Krispy Kreme donuts grew last year. In case you didn’t already know, they are forbidden under the Atkins plan. Cookie and potato chip purchases are up as well. When it comes to weight gain, some economists blame sedentary jobs and cheap, readily available foods.
Addendum: Today’s Wall Street Journal reports that Krispy Kreme sales are now sagging, though keep this in perspective, the company has averaged a 63% growth in operating earnings, per quarter, over the last ten quarters.
Which philosophers will last the ages?
Yes MarginalRevolution is about economics, but most of all it is about ideas. The blog Crooked Timber and legal scholar Lawrence Solum both offer fascinating takes on which contemporary philosophers will still be read decades or centuries from now.
My personal nomination is Derek Parfit. I think his Reasons and Persons will provide a source of conundrums for undergraduates, graduate students, and researchers for many years to come. Parfit is not just a philosopher, he is also a social choice theorist. He challenges our very notions about what it means to say that one outcome is better than another. He ponders how we should think about the timing of costs and benefits, whether personal identity matters for just distribution (who cares what you got yesterday?), how we should regard moral theories that are self-defeating when implemented, and how we should value future generations.
The beast isn’t starving
I caught a lot of flak from conservatives when I wrote in an op-ed that the so-called Bush tax-cuts were a fraud. If spending isn’t cut then in the long run taxes can’t be cut either. Since spending has gone up under Bush, all he has done, I argued, is to raise our future taxes (at precisely the wrong time too given the coming fiscal problems created by demography) . Conservatives complained that I missed the strategic beauty of the Bush plan. A tax cut, they said, will keep spending down, it will “starve the beast.” Well Bush is now asking for another $87 billion to fight the war in Iraq, employment is down everywhere but in the federal government where it is higher than under Clinton, and Bush is already touting how his administration is responsible for the largest increase in Medicare in its 38 year history. Apparently, on the Bush diet you can eat all you want and still lose weight.
The Democrats have the rich Senators
It is not even close. Look at this, the link is borrowed from Geekpress. Some of the effect may be regional, I suspect that the Republican-leaning states have less “old money” than do the Democratic-leaning states.
Globalization and poverty: a debate
The Cato Institute offers an on-line debate on globalization and poverty, here is the last installment. Johan Norberg, author of In Defense of Global Capitalism, takes on Robert Kuttner, of The American Prospect. I am closer to Norberg’s market orientation, but Kuttner gets the better of this exchange. Norberg needs to concede a clear role for government in development, in producing public goods and basic infrastructure, and emphasize that most developing countries today don’t have strong enough markets or anything close to it. That debate he could win.
Who is Leo Strauss?
Leo Strauss is often considered a leading influence behind the neo-conservatives in the Bush administration. Or perhaps you have met a “Straussian” at a Liberty Fund conference. Or perhaps you have read Allan Bloom praising Strauss. To my mind Strauss is one of the most important twentieth century intellectuals, either directly or indirectly, he taught several generations of scholars how to read classic texts. I’ve had many economists ask me about Strauss (note: I am not a Straussian), here is one good recent summary, by Steven Lenzner and William Kristol, drawn from The Public Interest.
California Recall Postponed
A federal appeals court says the California Recall election should be postponed because some counties will use punch cards (read the decision here).
A quick read suggests that the court did not consider how often punch cards are mistaken. Since no system is perfect, an important question should be: how many more votes will be accurately counted by delaying the vote? Anybody know how accurate the different voting mechanisms are? In short, will the costs of delay be less than the benefits?
Art careers
The world of the arts seems chaotic to outsiders, but there is quite a bit of order. Three books provide insights into the careers of creative individuals. (a) David Galenson’s Painting Outside the Lines argues that outstanding artists tend to have critical insights early in their carreers, or they develop an original vision after decades of slow development. Very little in between. (b) I Bought Andy Warhol is about one art dealer’s mission to purchase an Andy Warhol painting for his own private collection. He talks about the hierarchy of artists and the nuts and bolts of the art dealing business. (c) Hit Me, Fred: Recollections of a Sideman is a biography of Fred Wesley, highly respected trombonist and member of the James Brown band. Wesley discusses the life of those skilled musicians known as “sidemen,” who spend their carreers playing in the ensembles of higher profile musicians. These three books give you a nice view of the business of art in the late 20th century, from the perspective of producers and sellers.
Should we be surprised that the Cancun WTO talks failed?
Cnn.com and other major news sources use the word “collapse.” The rich countries won’t give up their agricultural subsidies, some of the poor countries won’t open up their investment and procurement rules.
A recent IMF Working Paper, “The WTO Promotes Trade: Strongly but Unevenly,” by Arvind Subramaniam and Shang-Jin Wei (not on-line) provides an account of the longer history. In the early days of WTO (GATT), developed nations used the institution to reduce their average tariff barriers from 27 to 4.5 percent. Since that time the institution grew and deteriorated in quality: “our result is a more damning indictment of the WTO than even that in Rose [the link is from me, of course, not the authors of the paper]…He found that membership in the WTO had no significant effect on trade. We find that membership has a significantly negative effect on trade…”
It is the developing countries that drive the negative result. The authors emphasize that the result is not statistically robust, but in any case this is hardly a ringing endorsement of WTO.
Addendum: The paper is now on-line.
More on student evaluations of professors
“…the correlation between Quality and Easiness is 0.61, and the correlation between Quality and Sexiness is 0.30. Using simple linear regression, we find that about half of the variation in Quality is a function of Easiness and Sexiness.” The result is from three professors at Central Michigan University, reported by the SCSU Scholars blog. An earlier post of mine cited a paper by Michael Huemer, arguing that students reward easy professors with good evaluations.
The Demise of Crypto Anarchy
Crypto anarchists and cyber-libertarians promised a new world of privacy and liberty built on the foundations of the internet and public key cryptography. As David Friedman memorably put it public key cryptograpy allows “anonymity with reputation” thus it becomes possible in theory to evade the taxman while still maintaining a public presence.
All of this now looks somewhat naive. Consider, for example, how internet gambling has been quashed. First, the credit card companies caved into government pressure and refused to process gambling related transactions. Initially, gamblers shrugged this off and routed their transactions through PayPal but a U.S District Attorney accused PayPal of violating the USA Patriot Act and to avoid charges PayPal was forced to pony up 10 million dollars. (Why am I not surprised that a law intended to go after terrorists has been used to most affect against peaceful gamblers?). Entrepreneurs have taken their online gambling sites to places where it is legal like Antigua and Costa Rica but don’t try coming home again. When Jay Cohen, founder of the World Sport Exchange, did that he was tried, convicted and jailed in a Federal prison.
The cyber-anarchists and libertarians were correct about the technology – public key cryptography can do what they say it can do – so where did the argument go wrong? In part, the cyber anarchists forgot that most of the value of cyberspace comes from its overlap with real space. I don’t blog anonymously because I want to be rewarded for my blogging with something that I can use to buy a car (ok, maybe a toaster is more realistic). Even if privacy is perfect in cyberspace the many margins of overlap with real space leave plenty of room for authority to insert its hooks especially when authority itself is technologically adept. Moreover, as Richard Posner has noted, the demand for privacy is more often than not a demand for control over the public presentation of self and cryptography does nothing to help and may even impede that demand.
The cyber-anarchist world works in a thought-experiment when everyone demands privacy and as a result the technology for getting privacy is built into all of our communications structures and used as a matter of routine. But that’s a description of an equilibrium and not a description of how to get there from here. At present, most people are not that bothered with privacy and so do not, for example, encrypt their email. As a result, privacy is not convenient even for those who want it. Indeed, someone who encrypts their email or phone conversations is probably calling more attention to themselves than they otherwise would.
The cyber anarchists may yet be proven right but today David Brin’s forecast of a Transparent Society in which no one has privacy, including authority, is looking far more realistic. Need I mention this as proof of Brin’s thesis?
Islamic Banking
Thanks for the kind words, Alex. It’s a pleasure to be here.
First entry: During my undergraduate economic sociology class week, we engaged in a discussion of Islamic banking after a Malaysian student said that banks in her country were engaging in interest free banking. A web search revealed that Maylasia has a well developed dual banking system, with some banks engaging in interest-free lending. There are now money markets and other economic institutions based on observance of Islam (a summary).
Another student pointed out that it was difficult for international organizations to loan money to Islamic nations because its hard to tell how much debt has been incured. Apparently, a lot of accounting in Islamic nations deals with making interest payments invisible. For example, a bank is allowed to purchase something and sell it to a “borrower,” with fees for late payments. Once you have the idea that you can trade such contracts, you can have securities markets.
Which leads to a question: if you can reproduce most Western banking practices in Islamic banking, does it make a difference in the banks performance? How are the non-Islamic banks in Malaysia doing?