Results for “average is over”
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Why are people getting healthier?

The New York Times runs an excellent article.  It is often forgotten how sick people used to be:

[Robert Fogel and colleagues] discovered that almost everyone of the Civil War generation was
plagued by life-sapping illnesses, suffering for decades. And these
were not some unusual subset of American men – 65 percent of the male
population ages 18 to 25 signed up to serve in the Union Army. “They
presumably thought they were fit enough to serve,” Dr. Fogel said.

Even
teenagers were ill. Eighty percent of the male population ages 16 to 19
tried to sign up for the Union Army in 1861, but one out of six was
rejected because he was deemed disabled.

Heart disease rates and even cancer rates (per age cohort, I believe) were higher in times past.

The big question, of course, is why people are so much healthier (or for that matter smarter, see the Flynn Effect).  It seems to be more than just better nutrition and sanitation.  Scientists are focusing on time in the womb plus the first two years of life.  Children born during the 1918 pandemic, for instance, fare much worse later in life in terms of health.  The hypothesis is that the poor health of their mothers programmed them for later troubles.

The Netherlands is a land of giants.  The people look quite healthy, despite high reported rates of disability.  Average height is 6’1" or 6’2".  And the Dutch are growing taller quickly.  Why?  Is it lots of Gouda cheese for Mommy?  The mayonnaise on the french fries?  Do small families play a role?  The Protestants of the northern Netherlands are taller than the Catholics of the south.  And if it is the cycling, are the teenagers in Davis, CA tall as well?

The French wealth tax

Via Don Boudreaux, excerpt:

On average, at least one millionaire leaves France every day to take up
residence in more wealth-friendly nations, according to a government
study.
….

[France’s] wealth tax — officially called the solidarity tax — is
collected on top of income, capital gains, inheritance and social
security taxes. It’s part of the reason France consistently ranks at
the top of Forbes magazine’s annual Tax Misery Index — a global
listing of the most heavily taxed nations.

Wealthy citizens’ tax
bills can be higher than their incomes, according to tax analysts.
President Jacques Chirac’s government attempted to rectify that
disparity last year with changes intended to guarantee that no one
would pay more than 60 percent of income in taxes. But many
businesspeople say actual maximum tax rates still hover at around 72
percent.

Addendum: Here is a new French council, via Chris Coyne.

Why is the top one percent earning more?

Brad DeLong writes:

The big rise in inequality in the U.S. since 1980 has been
overwhelmingly concentrated among the top 1% of income earners: their
share has risen from 8% in 1980 to 16% in 2004. By contrast, the share
of the next 4% of income earners has only risen from 13% to 15%, and
the share of the next 5% of income earners has stuck at 12%. The top 1%
have gone from 8 to 16 times average income, the next 4% have gone from
3.2 to 3.7 times average income, and the next 5% have been stuck at 3
times average income.

It’s hard to attribute this pattern to a rise in the premium salary
earned by the well-educated by virtue of the skills their formal
education taught them. Such a rise in the education premium would
produce a much smoother rise in relative incomes among the whole top
tenth of the income distribution. The cross-percentile pattern doesn’t
fit.

It is especially hard because most theories of the rising education
premium attribute it to skill-biased technological change generated by
the high-tech computer industrial revolution. But the high-tech boom’s
effects on overall productivity became large only in the second half of
the 1990s, well after the biggest increases in inequality. The timing
doesn’t fit either.

Something else is going on.

Leisure time improvements, opportunities like the Internet, and CPI quality mismeasurement have made the lot of the bottom tiers somewhat better than these statistics indicate.  (The absorption of would-have-been real wage gains into more expensive health benefits is another relevant factor.)  Still the relative pattern is undeniable.

My intuition is that there has been an increase in the ability of very smart and very wealthy people to buy up undervalued assets and turn them into greater value.  Improvements in capital markets and market liquidity are behind this trend, as well as the mere demonstration effect that many people have tried this and succeeded.  Julio Rotemberg remains an underappreciated economist.  American entrepreneurs were building up capabilities which exploded in value once the economy stabilized in the early 1980s.  Michael Milken-as-we-knew-him could not have existed in 1973.

Note two features of this hypothesis: First, it is correlated with but not coincident to productivity improvements, which will follow with some lag, thus fitting the data.  The capital gains come before the improvements.  Second, it might explain the non-linearity of the spike in incomes.  A modest multi-millionaire is not wealthy enough to play at T. Boone Pickens or Warren Buffett.  He can "go along for the ride" in a hedge fund, but won’t reap most of the value from the major arbitrage opportunities.  Those end up concentrated in a relatively small group of people and of course this tendency may be self-reinforcing with the accumulation of wealth and arbitrage expertise.

It might also help explain why the Bush changes in marginal tax rates seem to have produced more revenue than had been expected (yes I know about the weird baselines and projections and the like, but still it was a surprise and a welcome one).  It is not a classic supply-side substitution labor supply effect, but rather a wealth effect.  The very wealthy can put their assets to especially productive uses, or at least especially high capital-gains-producing uses.  That puts high capital gains revenue, high productivity, and growing disparity of incomes all together in the same pot.  Sound familiar?

Addendum: Here is Brad DeLong on press coverage of the revenue boost, and also on the small size of the self-financing effect; we also thank him for the endorsement (though note I’ve never been a member of any political party).

Trade against Jim Cramer

We document market inefficiency in the
in the days following the buy recommendations of Jim Cramer, host of
the popular CNBC show Mad Money. The average cumulative abnormal
overnight return for the smallest quartile of recommended stocks is
5.19%, and these returns completely disappear within 12 trading days.
We also find that trading volume, buy-sell imbalance, and short sales
volume are all significantly higher than normal on the day following
Cramer’s recommendations. These findings allow us to test hypotheses
about the behavior of different types of traders. Finally, our GMM
estimates of the components of the bid-ask spread suggest that market
makers are aware of Cramer’s recommendations and anticipate the order
flow imbalance following Cramer’s recommendations.

Here is the paper.

Trudie’s advice to would-be economists

Trudie responds:

It is not foolish to want to become an economist, but it is foolish to be attracted by this blog.  Yes we have serious posts about the option value of gold.  But graduate study in economics will not sample "Markets in Everything" (remember the Whizzinator?), not consider whether teenage Thomas Jefferson would have a crush on Veronica Mars, nor will it ask "Why Don’t People Have More Sex?".  Liking this blog, on average, is a sign that you have broad interests and thus are ill-suited for graduate study in economics.  There is also, dare I say it, a chance that you are simply a silly goose with time to kill.  On the other hand, Greg Mankiw is now reading Jacqueline Passey, so anything is possible.  Welcome, Bizarro Universe.

Two core groups of people are well-suited to be economists:

1. You math GRE score is over 800, you are totally focused, you love working long hours on your own, and you have good enough letters of recommendation to get into a Top Six or perhaps Top Ten graduate school.   Note that white Americans from this category have been partially preempted by competition from foreigners.

2. You could be happy as an academic without much of a research career.  Working at a teaching school is a rewarding life, albeit a poor one relative to your investment in human capital.

There is a third category, although you will fall into it (or not) ex post:

3. You do not fit either #1 or #2.  Yet you have climbed out of the cracks rather than falling into them.  You do something different, and still have managed to make your way doing research, albeit of a different kind.  You will always feel like an outsider in the profession and perhaps you will be underrewarded.  But you will have a great deal of fun and in the long run perhaps a great deal of influence.

Sadly, the chance of achieving #3 is fairly low.  You need some luck and perhaps one or two special skills other than math.

Did I mention that if you have a clearly defined "Plan B" your chance of succeeding at #3 diminishes?  It is important to be fully committed.

Greg Mankiw is a classic #1.  Brad DeLong started off as a #1, although he has been evolving into a #3.  Maybe he was a #3 in hiding all along.  I’ve been a #3, although with a dose of #1 from having gone to Harvard.  Alex is a classic #3.

Another thing: Don’t expect any classes to be interesting.  How should I put it?  "Most professors suck."  But a good professor can make almost any topic interesting.  So your reaction to the courses is just a reaction to the instructors you have sampled.  Treat that as noise, although I will ask why you are worse at picking teachers than at picking advice columnists.

Should you become a legal academic?  You will have a greater chance to work with ideas and concepts.  A greater chance to write books and also to read them.  You are more likely to strut, wear three-piece suits, and speak in stentorian tones.  If I were starting out today, perhaps I would take that route, although I would fail at the strut and the suits.  The pay is higher and upward mobility is easier to accomplish.  But overall the quality of intellectual debate is higher in the economics profession.  In economics the return to rhetoric is lower and you can’t get away with blather.  Your articles are refereed by your peers, and not by graduate students (well, it depends what journal you submit to…).  The academic world of law has weaker quality filters, which of course also makes it more open to new ideas.

Your choice, but note that many would-be legal academics end up lured by the private sector or government work.

And by the way, buy her roses, ask her to marry you, and live happily ever after.  The rest probably won’t matter so much for your happiness and life satisfaction.

It can’t hurt to ask?

Asking someone how likely they are to take illegal drugs in the future
can actually increase the likelihood that they will indeed take drugs –
a finding with worrying implications for health research.

Patti Williams and
colleagues recruited 167 undergrads and asked some of them about their
intentions to take drugs, and the others about their intentions to
exercise. Two months later, the students were contacted again, and
those who had been asked about drugs reported taking drugs an average
of 2.8 times in the intervening period, compared with an average of 1.1
times among the students previously asked about exercise.

The
effect was even more dramatic when those students who said they hadn’t
taken any drugs at all were omitted from the analysis. Among the
remaining students, those asked about their drug-taking intentions said
they’d used drugs an average of 10.3 times over the past two months,
compared with an average of 4 times among the students previously asked
about their exercise intentions.

This observation, together with further analysis, suggested it wasn’t
that new drug users had been created, but rather that the questioning
had led to increased use among current users who presumably had a
positive attitude towards drugs in the first place.

Here is the full story.

What a great paper, what a blah abstract

Corruption is believed to be a major factor impeding economic development, but the importance of legal enforcement versus cultural norms in controlling corruption is poorly understood. To disentangle these two factors, we exploit a natural experiment, the stationing of thousands of diplomats from around the world in New York City. Diplomatic immunity means there was essentially zero legal enforcement of diplomatic parking violations, allowing us to examine the role of cultural norms alone. This generates a revealed preference measure of government officials’ corruption based on real-world behavior taking place in the same setting. We find strong persistence in corruption norms: diplomats from high corruption countries (based on existing survey-based indices) have significantly more parking violations, and these differences persist over time. In a second main result, officials from countries that survey evidence indicates have less favorable popular views of the United States commit significantly more parking violations, providing non-laboratory evidence on sentiment in economic decision-making. Taken together, factors other than legal enforcement appear to be important determinants of corruption.

Here is the paper.  I might have tried the following:

During a period of diplomatic parking immunity, the average Kuwaiti diplomat to the United Nations racked up 246 parking violations.  No Swedish diplomat had any parking violations.  This paper explores how that might possibly be the case.

Comments policy

In response to a few inquiries, here is a reminder about our comments policy.  Having "comments on" is neither a default nor a right for the reader.  Usually the quality of the comments is excellent; I read them with learning and real joy.  But some topics attract, or have attracted, poorly thought out or overly emotional comments.  Some topics fall into very predictable debates.  In other cases previous comments already have attracted significant and noteworthy discussion.  Paul Krugman, free will, religion, Iraq, and yes immigration are a few examples of these tendencies.  Once low-quality comments get started, they tend to feed upon themselves, sometimes for days at a time.  We know that good comments attract readers to this blog, so we wish to maximize the average quality of comments.  Sometimes this means no comments, but that is in the interests of good debate, stochastically speaking and properly construed over time. 

Don’t overanalyze this.  Other times comments are turned off simply because neither of us is available to monitor for spam.  There is also something to be said for randomization per se.  We also do not favor off-topic comments, which tend to be deleted.  "Comments off" is not an attempt to stifle debate; there are thousands and indeed millions of other outlets for your views and that is debate too. 

Myths about France

1. The French are extreme cultural protectionists.  Not true.  The French do spend large amounts of money pretending they are cultural protectionists and making noise in various international arenas.  And the language restrictions are binding on audiovisual media.  But for the most part France is quite open to foreign cultures.  Just trying seeing a foreign film in Paris, you’ll hardly find a better place. 

2. French labor productivity is about as high as that of the United States.  Call this one a half-truth.  The measured average productivity is close, in part because French labor law discourages low-wage, low-productivity jobs.  A better test is if a French-English bilingual person moves from one country to the other, where is productivity higher?  I’ll put my money on the United States. 

3. Within fifty years, France will be half Islamic.  Very unlikely, read this sober assessment of the demographics.

4. Frenchmen hate the United States.  Personally I’ve never found this to be true.  I’ve spent maybe three months of my life in this country, and I can’t recall one time that anyone was ever rude to me.  Can I say that about any other country?  Remember that many peoples distinguish between citizenries and governments more than Americans do.  In this regard the French are more libertarian then we Americans are.  Here is one look at the poll evidence on whether the French hate Americans.

5. French culture dried up after World War II.  OK, French painting has not been impressive, though I am fond of Yves Klein.  But try Georges Perec, Robert Bresson, or Olivier Messiaen, or Yves Nat for some brighter moments.  Let’s not forget the key role of Paris in supporting music from Africa and the Arabic world.  (America isn’t the only country which should get credit for the culture of its immigrants.)  Nor is French rap a total wasteland.

The bottom line: France, like the United States, is very good at confounding our expectations.

Getting Lucky on My Way to the Top

The market for economists was in a slump when I graduated.  I was fortunate to earn a visitor’s position at the University of Virginia and then a tenure-track position at Ball State University in Muncie, Indiana, but I had few alternative offers.  My colleagues in Muncie were good but after a few years I was unhappy enough with the university and the town to take a flying leap to become director of research at the Independent Institute in Oakland, CA.  At the time, I thought this was the end of my academic career.

David Theroux at the Independent Institute encouraged my academic work, however, seeing it as consistent with the Institute’s focus on research, and I kept publishing.  Events (and especially Tyler!) then conspired to bring me to GMU for which I am very grateful.

All this is by way of introducing Austan Goolsbee’s latest column in the NYTimes.  Goolsbee discusses two new papers which demonstrate that economic conditions in the year in which you graduate can have a surprisingly long-lasting effect on career earnings. 

The Stanford class of 1988, for example, entered the job market just
after the market crash of 1987. Banks were not hiring, and so average
wages for that class were lower than for the class of 1987 or for later
classes that came out after the market recovered. Even a decade or more
later, the class of 1988 was still earning significantly less. They
missed the plum jobs right out of the gate and never recovered….

These data confirm that people essentially cannot close the wage gap by
working their way up the company hierarchy. While they may work their
way up, the people who started above them do, too. They don’t catch up.
The recession graduates who actually do catch up tend to be the ones
who forget about rising up the ladder and, instead, jump ship to other
employers.

I take three points from my career and this research.  Leaving the academy turned out to be the just the thing to set me apart from the pack.  It didn’t have to work out that way but when your mean is low you need to throw some variance into the mix.  Finance theorists will recognize this lesson from options pricing theory. 

Second, I moved across the continent twice – from Fairfax, to Charlottesville, to Muncie, to Oakland and then back to Fairfax – sometimes with my wife and sometimes not – all in the space of about 10 years.  After moving so often, when I browsed book stores my decision to buy was based more on the weight of the book than on the price.  Jumping ship repeatedly, however, did help me to recover from a difficult beginning.

Third, luck matters.

Addendum: Now Open to Comments.

The importance of poetry for economics

Hugo Mialon writes:

Is economics an art?  I address this old, but important, question empirically by examining the impact of rhetorical features of the titles of published economics articles on the ultimate success of these articles, as measured by their cumulative citations over the six-year period following their publication.  Twenty-eight percent of articles in the sample have a fresh figure of speech in their title.  Surprisingly, adding a rhetorical device to the title of an empirical article adds more than four citations to the article’s "lifetime" count, which represents about twenty percent of the lifetime citations of the average empirical article.  This result testifies to the continuing power of rhetoric and poetry in economics science.

Here is the paper.  To be sure, quality of author and article are elusive variables, especially since we cannot assess them by citation counts (here the dependent variable).  Smart authors might write better papers and come up with better and more poetic titles; maybe the poetry is not what matters.

Nonetheless this paper has many fun facts.  Poetry in the title doesn’t help theoretical papers.  Coming from a top school boosts the cites for empirical work more than theory.  Having a research assistant, or a math appendix, correlates negatively with the number of cites for a theory paper.  It is easier for an empiricist at a non-top school to get into the top journals than for a theorist; the latter market shows greater presence of "superstars" in the Sherwin Rosen sense.

Social signaling reductionism

Activity, or the fraction of time each person talks, is the simplest measurement. Not surprisingly, the more someone talks, the more interested in the conversation he or she is assumed to be. Engagement measures how the speakers influence one other. Are they talking in smooth succession, or are there long pauses between utterances? Does one speaker hesitate more often than another? Stress measures the variation in the pitch and volume of each speaker’s voice to determine whether his or her voice betrays any discomfort or anxiety. Mirroring, finally, is a measurement of the speaker’s empathy–how frequently he or she adopts the vocal intonations and inflections of the other, or repeats short phrases such as "uh huh" and "OK" if the other says them first.

Pentland then collaborated with other researchers in fields ranging from psychiatry to business in order to put his markers to the test. Could they be used to predict what would happen in various social situations, say, landing a date, or getting a job or a raise?

In most scenarios, the predictions that Pentland and his colleagues were able to make turned out to be shockingly accurate. Using nothing but these simple, nonlinguistic clues–and analyzing conversations that lasted between five minutes and just over an hour, depending on the experiment–the researchers were able to calculate the likelihood of a given outcome with an average accuracy rate of almost 90%.

If men engaged in mirroring, for example, women were more likely to be attracted to them. Men, by contrast, were more attracted to women who varied the tones of their voices. Pentland and several Media Lab graduate students used his markers to analyze more than 50 speed-dating sessions, where participants interacted with one another for five minutes before deciding if they wanted to contact the other person for an actual date. By the end of the analysis, the researchers could predict with 83% accuracy whether or not two people would exchange phone numbers.

Here is the full story.  Here is the researcher’s home page, which includes work on the concept of "smart rooms."  Read "About this Picture" on the home page.

What does Robin Hanson say?: "There must be some reason we are unconscious of these cues, even though our subconscious clearly notices and uses them.  So some sort of hell will probably break loose when tech makes it easier for us to see and publicize these cues."

Beautiful People are Mean

Several year ago, I read about the experiment showing that average faces are judged more beautiful than non-average faces.  In Judith Rich Harris’s No Two Alike there is an arresting figure which demonstrates.  With a little search on the web I was able to duplicate the figure, which is based on the original research.  The top two pictures are the averages of two faces, the next two are averages of 4, 8, and 16 faces and the final picture is an average of 32 faces. 

Wow, now I will no longer be upset when people say I have average looks.

Average_1

Negative charity

Buried away in a tiny Telegraph column this week was a reference to one of the best academic studies
to emerge in a long time. Doctors in a Scottish hospital have looked at
the hidden costs of charitable parachuting, to the health service in
particular, and published the results in the journal Injury (the link
is to the abstract unless you or your institution subscribe). They
found that the injury rate was 11% and the serious injury rate 7%.
Minor injuries cost the National Health Service £3751 on average and
serious injuries £5781.

As the average parachutist raised all of
£30 (this is just a day out after all) each pound raised for charity
cost the NHS £13.75. Every one of the charitable types who feels
terribly virtuous raising money for charity in this way is actually
preventing the health service treating the sick.

Here is the link, and thanks to Matthew Sinclair for the pointer.  Can you think of other comparable examples of negative charity?

Addendum: Jeff Ely directs my attention to this example; buy and drink some water, so that Starbucks will donate money to address the water shortage (in other countries).

Department of Uh-Oh, a continuing series

Reading web sites raises my estimate of the benefits of being already married:

Half of all women make their minds up within 30 seconds of meeting a man
about whether he is potential boyfriend material, according to a study
on speed-dating.

The women were on average far quicker at making a decision than the
men
[emphasis added] during some 500 speed dates at an event organised as part of
Edinburgh Science Festival.

The scientists behind the research said this showed just how
important chat-up lines were in dating. They found that those who were
"highly skilled in seduction" used chat-up lines that encouraged their
dates to talk about themselves in "an unusual, quirky way".

The top-rated male’s best line was [TC: yikes, and what kind of British abomination is this?] "If you were on Stars In Their
Eyes, who would you be?", while the top-rated female asked bizarrely:
"What’s your favourite pizza topping?"

Failed Casanovas were those who offered up hackneyed comments like "Do
you come here often?", or clumsy attempts to impress, such as "I have a
PhD in computing".

Here is the link, and yes sadly I prefer my pizza plain.  Perhaps some of you must now, over longer periods of time, simply blog your potential conquests into submission.  By the way, the researchers also suggest that "travel" is the best topic of conversation for spurring a connection and future dates.