Results for “mood affiliation”
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Assorted links

1. The marvelous floating stage in Bregenz.  And fabric dancing, skip to 6:30 of the video.

2. This story about wealthy Raelian charity is stranger than you might expect.

3. Mercados por todo: un hotel para cadáveres.

4. Is elephant dung coffee the most expensive coffee on the planet?

5. John Cassidy reviews Piketty.  And Russia’s 19 richest people have lost $18.3 billion since the invasion of Crimea.

6. The editor of Lancet is anti-scientific and full of mood affiliation (pdf).

7. Richard Epstein has a new book on the classical liberal constitution.

Should we still get rid of the U.S. corporate income tax?

I know this argument runs against the mood affiliation of our times, but the arguments for eliminating the corporate income tax still seem pretty good to me.  Here is a recent paper by Hans Fehr, Sabine Jokisch, Ashwin Kambhampati, and Laurence J. Kotlikoff.  The abstract runs as follows:

We simulate corporate tax reform in a single good, five-region (U.S., Europe, Japan, China, India) model, featuring skilled and unskilled labor, detailed region-specific demographics and fiscal policies. Eliminating the model’s U.S. corporate income tax produces rapid and dramatic increases in the model’s level of U.S. investment, output, and real wages, making the tax cut self-financing to a significant extent. Somewhat smaller gains arise from revenue-neutral base broadening, specifically cutting the corporate tax rate to 9 percent and eliminating tax loop-holes.

The NBER copy is here.  An ungated copy you will find here (pdf).

Michael Strain’s new jobs agenda and mobility payments

I have been meaning to cover this topic, here is an overview from Reihan.  There is one brief version from Strain here.  He has many valuable ideas, and the one which has caught my attention is this:

Offering relocation vouchers to the long-term unemployed in high-unemployment areas…

There are some pretty good jobs around, including in parts of Texas and North Dakota.  The point is not that these jobs/regions could absorb all of the current unemployed, but rather that we can learn something about the current unemployed (at the margin of course) but noting that these jobs remain unfilled.

First, I would like to know what the unemployment (participation?) rate would be today if American labor had a mobility rate closer to that of the early to mid 1980s.

Second, here is a study (pdf) of a 1976 federal jobs relocation subsidy program.  The conclusion is vaguely positive, but not firm.  Here is a study (pdf) of relocation assistance in Germany, mostly positive.  Here is a good discussion of U.S. trade adjustment relocation assistance with lots of numbers (pdf), it tries to be positive but my reading of the content suggests lukewarm results.  Here is a Brookings proposal (pdf).

Some states offer relocation assistance, for Wisconsin you need to have a job elsewhere already lined up.  Perhaps that restriction should be eased, but in any case I do not hear of massive success stories from current relocation programs, even if they are net positives.  Here is a CRS overview of federal programs for unemployed workers, some of which boost mobility.  Here are some FAQs on trade adjustment relocation assistance.

Third, I wonder if a subsidy is the right response here.  After all, there is already a potential benefit from moving, assuming the subsidy idea makes sense in the first place.  Yet, if we are to accept many of the more pessimistic behavioral accounts of unemployment, a lassitude and feeling of hopelessness sets in.  Positive incentives may not suffice, at least not in the absence of a behavioral spur to change the process of decision-making and induce some more pro-active choices.

By the way, there are some bureaucratic complications — not daunting ones but costs nonetheless — if you switch states while looking for a job and collecting UI.  Perhaps these paperwork requirements could be eased and turned into a simple one-click process.

What if it turned out that a tax or penalty for unemployed non-movers was overall more effective?  Would or should we be willing to support such an idea?  Of course it would inevitably fall on some innocent victims as well, people who should not move or people who cannot move, perhaps for reasons of family ties.  How about a tax for staying combined with a benefit for leaving?

How about if the tax is based on a Big Data model to limit the number of unjust losers?  That would mean more frequent taxes for Appalachian stayers, and less frequent taxes for individuals with elderly dependents on their tax returns.

If the tax were a big net plus for the current unemployed, but hit some innocent losers, and sent the wrong mood affiliation, would we still support it?  Should we still support it?  What if the tax took the form of poor public services?  Does it need to be more aggressive than that?

Should we even be asking these questions?

Practical gradualism vs. moral absolutism, for immigration and revolution

After reading Alex’s post I was a bit worried I would wake up this morning and find the blog retitled, maybe with a new subtitle too.  Just a few quick points:

1. There is a clear utilitarian case against open borders, namely that it will — in some but not all cases — lower the quality of governance and destroy the goose that lays the golden eggs.  The world’s poor would end up worse off too.  I wonder if Alex will apply his absolutist idea on fully open borders to say Taiwan.

2. Alex’s examples don’t support his case as much as he suggests.  The American Revolution compromised drastically on slavery, among other matters.  (And does Alex even favor that revolution?  Should he?  Can you be a moral absolutist on both that revolution and on slavery?)  American slavery ended through a brutal war, not through the persuasiveness of moral absolutists per se.  The British abolished slavery for off-shore islands, but they were very slow to dismantle colonialism, and would have been slower yet if not for two World Wars and fiscal collapse.  Should the British anti-slavery movement have insisted that all oppressive British colonialism be ended at the same time?  You may argue this one as you wish, but the point is one of empirics, not that the morally absolutist position is generally better.

3. Gay marriage is like “open borders for Canadians.”  I’m for both, but I don’t see many people succeeding with the “let’s privatize marriage” or “let’s allow any consensual marriage” arguments, no matter what their moral or practical merits may be.  Gay marriage advocates were wise to stick with the more practical case, again choosing an interior solution.  Often the crusades which succeed are those which feel morally absolute to their advocates and which also seem like practically-minded compromises to moderates and the undecided.

4. Large numbers of important changes have come quite gradually, including women’s rights, protection against child abuse, and environmentalism, among others.  I don’t for instance think parents should ever hit their children, but trying to make further progress on children’s rights by stressing this principle is probably a big mistake and counterproductive.

5. The strength of tribalist intuitions suggests that the moral arguments for fully open borders will have a tough time succeeding or even gaining basic traction in a world where tribalist sentiments have very often been injected into the level of national politics and where, nationalism, at least in the wealthier countries, is perceived as working pretty well.  The EU is by far the biggest pro-immigration step we’ve seen, which is great, but we’re seeing the limits of how far that can be pushed.  My original post gave some good evidence that a number of countries — though not the United States — are pretty close to the point of backlash from further immigration.  Rather than engaging such evidence, I see many open boarders supporters moving further away from it.

6. In the blogosphere, is moralizing really that which needs to be raised in relative status?

Addendum: Robin Hanson adds comment.

And: Alex responds in the comments:

Some good points but only point number #5 actually addresses my argument. I argued that strong, principled moral arguments are most likely to succeed. Point #5 rests on mood affiliation. I know because having a different mood I read the facts in that point in entirely the opposite way. Namely that it’s amazing that although our moral instincts were built on the tribe we have managed to expand the moral circle far beyond the tribe. Having come so far I see no reason why we can’t continue to expand the moral circle to include all human beings. The open borders of the EU is indeed a triumph. Let’s create the same thing with Canada and then lets join with the EU.

Do not make the mistake (as in point #2) of thinking that the moral argument only succeeds when we make fully moral choices. It also succeeds by pushing people to move in the right direction when other arguments would not do that at all.

How happy should we be about ACA supply-side responses to work less?

Following the CBO report that Obamacare will induce many people to leave the workforce or cut back on their hours, I have read numerous blog posts suggesting this is benign or possibly even favorable.  After all, why should people be forced to work just to keep their health insurance?  Imagine a 57-year-old man, freed from the necessity to grub for pay at a second-class retail job, which he had to take just to get insurance to cover the bills for his periodic back treatments.

Alternatively, when I read about demand-side shocks which induce unemployment, I am reminded of the work of Alan Krueger.  In two papers, one of which is quite recent, and does not stem from the Heritage Foundation, Krueger shows rather convincingly that the unemployed maintain reservation wages which are simply too high.  They would be better off lowering those wages, being more realistic, accepting work, and getting back on their feet again.  In other settings (not considered by Krueger), other workers seem to be too slow to move to new areas for new jobs, given the costs of being unemployed long-term.

A lot of Keynesians try to maintain the communication of the feeling (if not the outright statement) that demand-driven employment shocks have very little to do with the choices of workers but that is closer to wrong than right.  (By the way, sarcastic comments about soup kitchens causing the Great Depression belie an understanding of both this argument and of contemporary search models for the labor market.)

OK, given all that, when those workers, hit by negative shocks, do not rush to go back to work at lower reservation wages, we then read a portrait of hysteresis, despair, and soul-crushing joblessness, a psychic swamp so difficult to escape that even summoning up the strength to go back to work may be difficult.

In other words, would-be workers irrationally undervalue the benefits of having a job and they also underestimate the costs of remaining unemployed.

Now let’s switch settings.  A benefit shock comes along, positive for many people, and it induces many of them to work less or not work at all.  How happy should we be?  And here I mean happy at the margin, due to their change in employment decision.

People, it is rather difficult to have it here both ways.  I guess it is possible that workers are irrational in changing their employment decisions in response to changes in relative dollar wage opportunities, but rational when changing their employment decisions in response to changes in relative benefit opportunities.  It really is possible.  But are any of you actually arguing that or holding some deep-seated reason for believing in that difference, other than perhaps the reason this post might have induced you to come up with?  No, I see one assumption about a destructive choice in one context and the opposing assumption about a beneficial choice in the other context, without much regard for the tension or contradiction between those two assumptions.  A lot of you may be subbing in general feelings — “unemployment is terrible,” and “ACA is good,” and simply transferring those general feelings to feelings about the respective marginal changes in employment in each case.  That is a fallacy and dare I say it is a “mood affiliation” fallacy?

And by the way, the distinction between a substitution effect and an income effect is a little tricky in this context.  But providing ACA-subsidized health insurance for non-workers is in general a substitution effect which switches them out of working in a way that, if pro-ACA stories about adverse selection and uninsurability are true, a simple equivalent cash grant would not.

A simpler possibility is that people undervalue the long-term benefits of having a job and thus in both settings the contraction in employment is a quite negative outcome.  That is then very bad news for ACA, if only in expected value terms.

I am reading what people write on this topic and seeing massive fog through my spectacles, a bit on both sides of the debate in fact.

Addendum: Ross Douthat made a good point:

At 500,000-800,000, I wasn’t *that* troubled: http://nyti.ms/1exzxlm  At 2-2.5 million, I am. Is there a # that would trouble @CitizenCohn?

Ross has additional comments here.

How and why Bitcoin will plummet in price

My post from yesterday was perhaps not specific enough, so let me outline one possible scenario in which the value of Bitcoin (and other cryptocurrencies) would fall apart.  For purposes of argument, let’s say that a year from now Bitcoin is priced at $500.  Then you want some Bitcoin, let’s say to buy some drugs.  And you find someone willing to sell you Bitcoin for about $500.

But then the QuitCoin company comes along, with its algorithm, offering to sell you QuitCoin for $400.  Will you ever accept such an offer?  Well, QuitCoin is “cheaper,” but of course it may buy you less on the other side of the transaction as well.  The QuitCoin merchants realize this, and so they have built deflationary pressures into the algorithm, so you expect QuitCoin to rise in value over time, enough to make you want to hold it.  So you buy some newly minted QuitCoin for $400, and its price springs up pretty quickly,  at which point you buy the drugs with it.  (Note that the cryptocurrency creators will, for reasons of profit maximization, exempt themselves from upfront mining costs and thus reap initial seigniorage, which will be some fraction of the total new value they create, and make a market by sharing some of that seigniorage with early adopters.)

Let’s say it costs the QuitCoin company $50 in per unit marketing costs for each arbitrage of this nature.  (Alternatively you can think of that sum as representing the natural monopoly reserve currency advantage of Bitcoin.)  In that case both the company and the buyers of QuitCoin are better off at the initial transfer price of $400 and people will prefer that new medium.  Over time the price of Bitcoin will have to fall to about $450 in response to competition.

But of course the story doesn’t end there.  Along comes SpitCoin, offering to sell you some payment media for $300.  Rat-FacedGitCoin offers you a deal for $200.  ZitCoin is cheaper yet.  And so on.

Once the market becomes contestable, it seems the price of the dominant cryptocurrency is set at about $50, or the marketing costs faced by its potential competitors.  And so are the available rents on the supply-side exhausted.

There is thus a new theorem: the value of WitCoin should, in equilibrium, be equal to the marketing costs of its potential competitors.

This theorem will hold even if you are very optimistic about market demand and think that grannies will get in on it.  In fact the larger the network of demanders, the lower the marginal marketing cost may be — a bit like cellphones — and that means even lower valuations for the dominant cryptocurrency.

(It is an interesting question what fixed, marginal, and average cost look like here.  Arguably market participants will not accept any cryptocurrency which is not ultimately and credibly fixed in supply, so for a given cryptocurrency the marginal cost of marketing more at some point becomes infinite.  Marginal cost of supply for the market as a whole is perhaps the (mostly) fixed cost of setting up a new cryptocurrency-generating firm, which issues blocks of cryptocurrency, and that we can think of as roughly constant as the total supply of cryptocurrency expands through further entry.  In any case this issue deserves further consideration.)

Note that the more “optimistic” you are about Bitcoin, presumably you should also be more optimistic about its future competitors too.  Which means the theorem will kick in and you should be a bear on Bitcoin price.  Arguably it’s the bears on the general workability of cryptocurrencies who should be bullish on Bitcoin price because a) we know Bitcoin already exists, and b) we would have to consider that existence an unexpected and unreplicable outlier of some sort.  Yet the usual demon of mood affiliation denies us such a consistency of reasoning, and the cryptocurrency bulls are often also bulls on Bitcoin price, as too many of us prefer a consistency of mood!

In theory

Now, theoretically, you might believe that the current price of Bitcoin already reflects exactly those marketing costs of potential competitors and thus the current equilibrium is stable or semi-stable.  Maybe so, but I doubt that.  The current value of outstanding Bitcoin is about $20 billion or so, and it doesn’t seem it cost nearly that much to launch the idea.  And now that we know cryptocurrencies can in some way “work,” it seems marketing a competitor might be easier yet.  (You will note that by its nature, there are some Bitcoin imperfections permanently built into the system, imperfections which a competitor could improve upon.  Furthermore the longer Bitcoin stays in the public eye, the more likely that an established institution will label its new and improved product LegitCoin and give it a big boost.)

You can think of that $20 billion — or perhaps just some chunk of that? — as a very rough measure of the prize to be won if you can come up with a successful Bitcoin competitor.  Even a fraction of that sum will spur some real effort.

In short, we are still in a situation where supply-side arbitrage has not worked its way through the value of Bitcoin.  And that is one reason — among others — why I expect the value of Bitcoin to fall — a lot.

I thank Brad DeLong for an email query and analysis which sparked this blog post.

Addendum: Maybe I’ll write another post on the possible expected deflationary bias in any cryptocurrency, given that expected price changes usually get compressed into the present and that an overall expected rate of return equality must hold.  And the question of how much an initial issuer can exempt itself from mining costs as a form of reaping upfront seigniorage. and the profit-maximizing way of sharing these gains with early adopters.  Those are two hanging issues with respect to the analysis here, in addition to the matter of cost structure discussed in the parentheses above.  And now go reread Kareken and Wallace (1981).  “=/∞” I think one has to say here.

Is the Volcker rule a good idea?

Treasury Secretary Jacob J. Lew has strongly urged federal agencies to finish writing the Volcker Rule by the end of the year — more than a year after they had been expected to do so — and President Obama recently stressed the importance of the deadline.

By the way, five (!) agencies are writing the rule, which is not a good sign.  As for the Volcker rule more generally, here are a few points:

1. If restricting activity X makes large banks smaller, that will ease the resolution process, following a financial crack-up.  That is a definite plus, although we do not know how much easier resolution will be.

2. It is not clear that banning bank proprietary trading will lower the chance of such a financial crack-up.  The overall recent record of real estate lending is not a good one, and as Edward Conard pointed out, restricting banks to the long side of transactions is not obviously a good idea.  I do see the moral hazard issue with allowing banks to engage in the potentially risky activity of proprietary trading.  Still, so far the data are suggesting that the banks which cracked up during the crisis did so because of overconfidence and hubris, not because of moral hazard problems (i.e., they still were holding lots of the assets they otherwise might have been trying to “game”).

3. There is no strong connection between proprietary trading and our recent financial crises.

3b.  Today the bugaboo is “big banks” but once it was “small banks” and for a while “insufficiently diversified banks.”  Maybe it really is big banks, looking forward, or maybe we just don’t know.  Small banks have their problems too.

4. There is some chance that proprietary trading will be pushed to a more dangerous, harder to regulate corner of our financial institutions.

5. There is some danger that loopholes in the regulation itself — especially as concerns permissible client activities — may undercut the original intent of the regulation. This will depend on exactly how well the regulation is written, but past regulatory history does not make me especially confident here.  And the distinction between “speculation” and “hedging” cannot be clearly defined.  Should we be writing rules whose central distinctions may be arbitrary?  And yet CEOs will have to sign off on compliance (with 950 pp. of regulations) personally.  Is that a good use of CEO attention?  Here is a good FT piece about how hard (and ambiguous) it will be to enforce the rule globally.

6. I do not myself shed too many tears over the “these markets will become less liquid without banks’ participation” critique, but I would note this is a personal judgment and the scientific status of such a claim remains unclear.

7. Many people, even seasoned commentators, approach the Volcker rule with mood affiliation, starting with how much we should resent our banks or our regulators or how we should join virtually any fight against either “big banks” or regulators.  I see many analyses of this issue which spend most of their time on “mood affiliation wind-up,” as I call it, and not so much time on the actual evidence, which is inconclusive to say the least.

8. We still seem unwilling to take actions which would transparently raise the price of credit to homeowners.  We instead prefer actions which appear to raise no one’s price of credit and which are extremely non-transparent in their final effects.  You can think of the Volcker rule as another entry in this sequence of ongoing choices.  That should serve as a warning sign of sorts, and arguably that is a more important truth than the case either for or against the rule.

When I add up all of these factors, I come closer to a “don’t do the Volcker rule” stance in my mind.  The case for the rule puts a good deal of stress on #1, but overall it does not fit the textbook model of good regulation.  I probably have a more negative opinion of “an extreme willingness to experiment with arbitrary regulatory stabs” than do most of the rule’s supporters, and that difference of opinion is perhaps what divides us, rather than any argument about financial regulation per se.

I really do see how the Volcker rule might work out just fine or even to our advantage.  I also see the temptation of arguing “I am against big banks, this is the legislation against big banks which is on the table, so I am going to support it.”  But let us at least present to our public audiences just how weak is the evidence-based case for doing this.

Addendum: You will find a different point of view from Simon Johnson here.  Here is a counter to his claim that prop trading losses were significant in 2008: “Loan losses didn’t just dwarf trading losses in absolute terms. Loan losses as a share of banks’ total loan portfolios also exceeded trading losses as a share of banks’ trading accounts. Yet no one’s arguing banks should stop lending in order to protect depositors (and rightly so). In short, those expecting the Volcker Rule to be a fix-all for Wall Street’s ills have probably misplaced their hope—the rule seems like a solution desperately seeking a problem.”

The assumption of “free disposal,” as applied to children

This rather horrifying link has been making the rounds on Twitter, here is the bottom line:

When a Liberian girl proves too much for her parents, they advertise her online and give her to a couple they’ve never met. Days later, she goes missing.

The practice is called “private re-homing,” and it seems plenty of it goes on, and without government scrutiny (in many cases a simple notarized statement may accompany the handover).

Maybe I’ve read too much Walter Block ($2.99 on Kindle) in my day, but well, um, well…you know.  Is the solution to make the initial adopting parents keep the girl?  That seems doubtful.  Are the children better off being sent back to an orphanage rather than being re-gifted?  Possibly so, but this is not obvious.  From a legal point of view, for sure.  But as for the utilitarian and Benthamite angle?  A lot of evil parents might keep their newly adopted children (and to the detriment of those children) because return to the orphanage could be bureaucratic, costly, and also humiliating, at least compared to giving them away rather rapidly over the internet.

Should we screen adopting parents more rigorously, so as to prevent lemon parents from adopting in the first place?  Well, maybe, and if you read the article you will see some cases where better upfront screening would have been highly desirable.  But tougher screening as a general rule?  I don’t know.  Adoption is already costly and bureaucratic, it is on average welfare-enhancing, and maybe we can’t easily screen out most of the lemon parents anyway.  Etc.

On the other side of the issue, limiting free disposal likely would improve the average quality of adopting parent through positive selection.  Quite possibly that effect will predominate but I would ask for the same standards of evidence here that we apply to other policy decisions.

I say we don’t yet know the proper policy response to this issue, but it’s worth thinking this through with more rigor than a simple “mood affiliation” response might suggest.

I am sorry, but this is absurd

Charles Manski, a well-known professor of economics at Northwestern, writes:

The anti-tax rhetoric evident in much lay discussion of public policy draws considerable support from the prevalent negative language of professional economic discourse. Economists regularly write about the ‘inefficiency’, ‘deadweight loss’, and ‘distortion’ of income taxation.

In fact he wishes to abolish those concepts for their anti-governmental implications and work only with social welfare functions directly.

That’s one easy way to limit deadweight loss from policies, namely take it out of your analytical framework.  The reality is that it is still the simplest and best way to explain why very high rates of taxation — as noted say by George Harrison or Bjorn Borg — are not such a good idea.

Manski also ignores that a belief in deadweight loss is fully compatible with the view that government spending may bring economic benefits.  In fact you often cannot understand the benefits of (some) government spending without first grasping the deadweight loss concept.

And even if you think Arrow’s theorem is overrated in its importance, as I do, working with social welfare functions isn’t exactly a recipe for wringing normative preconceptions out of your economics.  And any plausible social welfare function is going to pick up some concept of deadweight loss and stick it back into the calculations.  How about a social welfare function which says “minimize deadweight loss”, which is what you often find in Mirrlees?

It’s called microeconomics.  Yet Manski complains that “…prominent applied public economists continue to take the theory quite seriously.”  You’ll even find the notion of deadweight loss in some Principles books, believe it or not.  Must we derive a new social welfare function every time we wish to do partial equilibrium analysis, say of a tax on a single (small) commodity?

And get this example of mood affiliation:

The Feldstein article and similar research on deadweight loss appear predestined to make income taxation look bad. The research aims to measure the social cost of the income tax relative to the utterly implausible alternative of a lump-sum tax. It focuses attention entirely on the social cost of financing government spending, with no regard to the potential social benefits.

Contra Manski, I say it is fine to study the tax side of the equation while leaving the benefits (and costs) of expenditures to other researchers.  (By the way, Manski’s supposed culprit, Martin Feldstein, first made his name studying how to measure the benefits of public expenditure.)  All his point really boils down to is to note that in a second best comparison, optimum deadweight loss generally will be positive, as noted by Lipsey and Lancaster long ago in their 1955-56 ReStud piece, not to mention Frank Ramsey.

Manski wishes to cite the work of James Mirrlees for inspiration, but in fact Mirrlees has been a firm believer in the deadweight loss of taxation concept, and in comparing economies to hypothetical first best situations, as illustrated by for instance by these pieces.

I can thank Manski for reminding me that Tyrone, my evil twin, has been begging me for a chance to blog again at Marginal Revolution…

On the proper interpretation of “The Great Stagnation”

Will Hutton writes:

At least Summers sees some underlying economic dynamism. For techno-pessimists such as economist Professor Tyler Cowen the future is even darker. It is not only that automation and robotisation are coming, but that there are no new worthwhile transformational technologies for them to automate. All the obvious human needs – to move, to have power, to communicate – have been solved through cars, planes, mobile phones and computers. According to Cowen, we have come to the end of the great “general purpose technologies” (technologies that transform an entire economy, such as the steam engine, electricity, the car and so on) that changed the world. There are no new transformative technologies to carry us forward, while the old activities are being robotised and automated. This is the “Great Stagnation”.

Such views make for a convenient target, but that is not close to what I wrote in The Great Stagnation.  For instance on p.83 you will find me proclaiming, after several pages of details, “For these reasons, I am optimistic about getting some future low-hanging fruit.”  Those are not Straussian passages hidden like the extra Nirvana audio track at the end of Nevermind.  The very subtitle of the book announces “How America…(Eventually) Will Feel Better Again.”

I also argue in the book that the internet is the next transformational technology, and that it is already here, though it needs some time to mature and pay off.  I devoted an entire separate book to this theme, namely The Age of the Infovore, which suggests that for autistics and other infovores massive progress already has arrived.

It is also odd that Hutton mentions robots and automation.  My next book considers those factors in great detail, but you won’t find either term or variants thereof in the index of The Great Stagnation.  Nor do I have the dual worry that both everything will be automated and there is nothing left to automate, as stated by Hutton.

The lesson perhaps is that if a book has a pessimistic-sounding title, mentions of optimism will go unheeded, even if they are in the subtitle.  Might that be an example of the fallacy of mood affiliation?

Robert Samuelson and Jeffrey Sachs on the budget

Here is Samuelson:

…government is slowly growing larger while — in many basic functions — it’s being strangled. This paradox, it seems, will be Obama’s questionable legacy.

Here is Jeffrey Sachs:

President Barack Obama’s budget this week makes clear the real political equilibrium in the US. The federal government is shrinking. Discretionary spending in the new Obama budget would shrink to 4.9 per cent of gross domestic product in 2023, compared with 7.9 per cent of GDP in 2008. Both parties have signed on to this shrinkage. Neither will try to stop it.

Both over-personalize the result in the figure of President Obama.  For reasons of mood affiliation, one calls it government growth and the other calls it government shrinkage, drawing on the same numbers.  And both are basically correct.

Addendum: David Brooks weighs in on the same topic.

Assorted links

1. A non-English-speaker imitating an American accent (badly).

2. Can peer grading work for MOOCs?  And troubled students in MOOCs, including MOOC murder as a concept.

3. Paul Krugman drives the deeply innocent Miles Kimball into a flurry of response.  Here are some EU interchanges and reactions with Krugman, the last tweet cited is classic mood affiliation.

4. Does Chinese have a word for “nerd”?  Here is a new book on the economics of baseball.

5. Is Los Angeles falling behind?

Assorted links

1. Why are there so many murders in Chicago?

2. Edward Luce in the FT on robots, on-line education, MRUniversity.com, and falling median income.

3. The economics of Netflix’s new $100 million show.

4. Print me a condo on the moon (speculative), and why name a brand after a retina?

5. People getting mad at Jared Diamond, and more here.  Mood affiliation aside, the facts are on Diamond’s side.

6. We overregulate and underregulate too much at the same time.

Hard Rock Hotel

Until I checked in, I thought the name of the place was an affectation, but it is actually attached to a Hard Rock Cafe, in San Diego.  They play bad and overly loud rock music in the lobby.  The front desk is usually unmanned.  The concierge looks and dresses like a 1970s hippie Deadhead.  There are guitars on the wall.  The bed is extremely comfortable.

Job candidates: you need a room key to work the elevator, so if you are coming here for an interview tomorrow a) I am leaving your name at the front desk, hoping it will be manned and they will help you, b) you can try to find someone else taking an elevator up, and c) you can call up and/or email.  In any case please give yourself a little extra time, our apologies.  I promise not to ask if you have brought your demo tape to the interview, even though I will be tempted to do so.

Addendum: It’s funny how many people are tweeting and emailing me that I don’t like San Diego.  Nothing could be further from the truth.  I like it fine and I have come here repeatedly over the years.  The area where I have chosen to live and work — northern Virginia — also could be described as lacking in cultural importance for the broader United States and indeed the world.  And yet I chose it and prefer to stay there.  The whole point of public goods is that they spread far and wide!  Most generally, “reporting a fact or opinion which lowers the perceived relative status of X” does not translate into “source does not like X.”  This is closely related to the fallacy of mood affiliation.  One can have multiple moods about both San Diego and northern Virginia, namely something like “wonderful amenities and lifestyle, but culturally not nearly as impressive as the historical record of Kansas City.”  But when choosing whether or not to visit or live in Indiana, that Cole Porter was from there is really not much of a factor.  That all said, I’ll belatedly give San Diego credit for Roger Reynolds.

Ideology, Motivated Reasoning, and Cognitive Reflection: An Experimental Study

That is a new paper by Dan M. Kahan, at Yale Law School, and it has to do with what I call “mood affiliation”:

Social psychologists have identified various plausible sources of ideological polarization over climate change, gun violence, national security, and like societal risks. This paper reports a study of three of them: the predominance of heuristic-driven information processing by members of the public; ideologically motivated cognition; and personality-trait correlates of political conservativism. The results of the study suggest reason to doubt two common surmises about how these dynamics interact. First, the study presents both observational and experimental data inconsistent with the hypothesis that political conservatism is distinctively associated with closed-mindedness: conservatives did no better or worse than liberals on an objective measure of cognitive reflection; and more importantly, both demonstrated the same unconscious tendency to fit assessments of empirical evidence to their ideological predispositions. Second, the study suggests that this form of bias is not a consequence of overreliance on heuristic or intuitive forms of reasoning; on the contrary, subjects who scored highest in cognitive reflection were the most likely to display ideologically motivated cognition. These findings corroborated the hypotheses of a third theory, which identifies motivated cognition as a form of information processing that rationally promotes individuals’ interests in forming and maintaining beliefs that signify their loyalty to important affinity groups. The paper discusses the normative significance of these findings, including the need to develop science communication strategies that shield policy-relevant facts from the influences that turn them into divisive symbols of identity.

To put that in Cowenspeak, both sides are guilty, the smart are guiltiest of them all, and the desire for group loyalty is partially at fault.  Is it possible you have seen these propensities in the economics blogosphere?

Here is a related blog post by Kahan, here is another on how independents do somewhat better than you might think, here is Kahan’s blog.

I would stress the distinction between epistemic process and being more right about the issues at a given point in time.  Even if various groups of individuals are epistemically similar in terms of how they process information, at some point in time some groups still will be more right than others, just as some sports fans, every now and then, are indeed backing the winning teams.  It’s less a sign of virtue than you might think.

For the pointer I thank Jonas Kathage.