Rational Ignorants

Price Paradox

2011-02-03T16:38:00.000-08:00

A new segment where I document prices I do not understand. This one comes from my local superstore:

1/2 Gallon of milk, $1.65 (x2 = $3.30)
Gallon of milk, $3.98
Why would anyone buy the gallon?

Climatopolis

2011-01-08T15:34:00.000-08:00

Just finished Matt Kahn's book, Climatopolis: How Our Cities will Thrive in a Hotter Future. His main goal, as he states often on his blog, is to introduce some microeconomics in the climate change discussion. He does in a couple of places, however to me a large portion of the book came off as attempts to make more specific predictions than he was capable of making. A few comments:

On page 86, Kahn highlights the important changes in air quality in California brought about since the 1980s by good regulation. Among economists, there are plenty of examples of when regulation fails and produces unintended consequences. However, I never hear economists commend regulation for doing basically what it was supposed to do. With Cali regulations, there is still the complaint that they hit the poor disproportionately hard, but nonetheless the air in LA is much cleaner than it was 20/30 years ago and I think good regulation is at least a small part of that story.

Specifically on page 194, but truly throughout much of the book, Kahn at least hints at the idea that climate change presents the world with a lot of zero-sum decisions. For example, I see Kahn claiming that (basically) Buffalo, Cleveland, and Detroit will likely all be made better off by climate change; LA, Miami, and New York will likely be made worse off. I wish this would have been a major explicit theme of the book - the contrast between problems posed by climate change (where there are winners and losers) and economic problems (where there are winners and... winners). One of the most important and misunderstood aspects of economic life is the fact that it is NOT zero sum. I enjoyed the contrast and would be interested in a book/article/paper by Kahn that emphasized the difference (and implications) in greater detail.

On page 201, Kahn talks about "the victims" of climate change. Throughout Chapter 3 he also talks about the victims, stating that he is not interested in helping those who do not take into account the risk of climate change if they suffer the consequences. There is a definite parallel to the recent bank bailouts and the idea that some cities might get bailed out by the federal government if climate change does present us with a day of reckoning. Kahn hopes that governments can precommit not to protect those who suffer, but recent history suggests that is an impossible task.

Last thing - I want to commend Matt for his discussion of the role of insurance in human adaptation to climate change. I thought that was the most interesting section in the book and wish it wasn't buried at the end. If I had to recommend one portion for those who don't want to read the entire book, that would definitely be it.

Greg Mankiw's Latest Column is Mostly Nonsense

2011-01-02T09:04:00.001-08:00

Normally, I enjoy reading Greg Mankiw both on his blog and in the New York Times. His writing is thoughtful and clear, and although his blog does not allow comments, I do appreciate his explanation why (he's blogging for himself, not for me, and policing comments was too costly for a personal hobby). A recent controversial column, on marginal tax rates, elicited such a large response he even got involved in the conversation.

However, I want to disagree with the sentiment of his most recent column. On my reading, his advice to President Obama is basically that it will be easier to work with Republicans if the President simply becomes a Republican, by (for example) taking a more long-term view of the economy and not using government as a tool for redistribution. This is just silly. Obama was voted in on the Democratic ticket. Voters could reasonably expect him to support typical Democratic policies, such as redistribution of income. Changing course would be a disservice to the voters, who chose the President in part because of his party affiliation.

Greg - it's obvious that by becoming a Republican, or at least making policies that coincide with Republican ideals, it would be easier for the President to work with Republicans. But that's not a realistic or useful policy prescription. Stick to the last point (don't cast the Republicans as your enemy) and focus on how the two sides can find middle ground to make meaningful changes in deficit reduction, entitlement reform, and the future of our nation.

Department of Wow, or, Valuing a Great Teacher

2010-12-24T19:17:00.000-08:00

A new NBER working paper from Eric Hanushek makes the following claim:

A teacher one standard deviation above the mean effectiveness annually generates marginal gains of over $400,000 in present value of student future earnings with a class size of 20 and proportionately higher with larger class sizes. Alternatively, replacing the bottom 5-8 percent of teachers with average teachers could move the U.S. near the top of international math and science rankings with a present value of $100 trillion.

I am using this post to save the link because I haven't yet read the paper. But if this is true, which I wouldn't find surprising, then... Wow.
HT: Greg Mankiw

Spousonomics

2010-12-17T09:28:00.000-08:00

In the trendy fashion of applying economic logic to new fields, Spousonomics is applying economic reasoning to marriage, for better or worse.

I particularly enjoyed this interview with Economist and Game Theorist Jeff Ely of Northwestern University.

Does being an economist make you better or worse at resolving conflict with your wife?

As an economist and game theorist I have a unique understanding of the secrets of conflict resolution. And my marriage will be peaceful and harmonious once my wife accepts that.

...admittedly not terrifically funny , but I figure it was time I blogged about something.

Teaching Philosophy

2010-12-14T12:56:00.000-08:00

I've sat down and written it on more than one occasion. Though I'm certain it is naive and misguided, here is what I have (and how I feel about education). Yeah, it's long. Sorry.

I'm terrified of feedback, but that seems to be all the more reason to put this up on the internet.

I do not subscribe to the idea that students are blank slates. They come to the classroom as a collection of experiences, shaped by their own families, their peers, their environments, previous teachers, and a whole collection of factors too numerous for me to count. Many students have influences I cannot name or begin to understand. Ultimately, great teachers and poor teachers are small subset of the influences on a student. A great teacher can unlock potential within a student, often by showing them how to succeed. However, without the support of other teachers, peers, community, or family, it is nearly impossible for a teacher to succeed in bringing out the most outstanding aspects of any individual student.

Successful teaching most often is a function of repetition. I looked to athletics first, and realized that most athletes learn how to perform in their sport (throw and catch a football, hit a baseball, etc.) simply by practicing over and over again. Even professionals must practice regularly to maintain excellence. Next, I looked to music. Musicians play their instruments every day, and even professionals spend time rehearsing before they perform. Finally, I looked back to basic subjects: reading, writing, and mathematics. In my experience, I have been most successful learning each of these when I am engaging myself on a daily basis. I struggle in math, even today, when I take multiple days and do not solve any problems. I cannot read or write as quickly when I go a week without doing so. Repetition is the key to become a master of a subject, task, or craft.

The biggest obstacle to utilizing repetition is student engagement. After all, it can get boring to perform the same tasks over and over again. The best way to avoid making repetition boring is to frame the repeated task in a different way. Begin each class by doing a quick warm-up exercise. Have a contest for students to see who can do the most simple problems in a period of time. Divide students into groups and get them to solve complex problems. Provide different instructions for each task, so that it is framed differently. This will help combat student boredom while still engaging them in repeating a task until they are proficient.

Finally, when it comes to teaching, it is important to understand the power of persuasion. Too often, leaders resort to using authority to convince persons to perform a certain task. This is a mistake, because authority can be bested by a higher authority. Persuasion, however, is much more difficult to overcome when used properly. If students can be persuaded to do something, then they will be doing so willingly. This will yield greater student interest, on net, than simply requirement by force.

Overall, the most successful teachers are those who can engage their students in doing a task they might otherwise find lowly or of mean reward. The power of repetition in the classroom at all levels should never be forgotten. However, teaching only with repetition will not provide the students with the intellectual stimulation they need to remain interested in learning new material on a regular basis. Framing tasks in such a way that students participate of their own accord simultaneously maximizes student interest and learning.

School Deregulation

2010-12-13T15:16:00.000-08:00

At National Affairs, Frederick Hess has an extended piece onhttp://www.blogger.com/img/blank.gif school choice. One of his main points is that the rhetoric of "school choice" developed in a funny way (according to him, because the urban African-American leaders calling for better options in schooling had the most politically palatable rhetoric). I wonder if the fate of the school choice movement would be at all different if it were instead called school deregulation.

Lots of gems at the article, I won't quote many here because I encourage you to take some time and read it. My favorite quote:

Markets are a product of laws, norms, talent, information, and capital, and the absence of these can readily yield market failures — not because markets do not work, but because markets are not a magical salve.

I am totally fascinated by education policy right now. Is this because it's a compelling topic or because I should be studying for finals? Guess I will know next week.

(H/T Tyler Cowen)

Very Good Sentences

2010-12-10T08:49:00.000-08:00

If we are looking to remedy the harmful kinds of inequality, we should focus on good educational reform, the benefits of which start accruing to a person quite early in life but also last through the entire life.

That's from Tyler Cowen (who else?) in a recent symposium at the New York Times, available here.

One of many reasons I am looking closely not only at Teach for America, but at teaching as a vocation for the rest of my life.

Mike Munger on Writing

2010-09-07T08:45:00.000-07:00

It's all things I already know, of course, but a nice reminder of how I'm not pushing myself enough outside of class. So maybe I'll try doing this a little more. (and a few other things, I've got a medium-sized to-do list of unfinished digital projects. too bad things like BSU/VT tickets get in the way!)

The article is definitely worth a read for those who have not seen it.

Internships: Financing Human Capital?

2010-05-18T18:26:00.001-07:00

My recent post on private/public education generated a fair amount of controversy (rightfully so, as my views definitely are not set on this issue). I'm currently reading Capitalism and Freedom - something light to kick off my summer - and enjoying Friedman's discussion of education. One complaint he levies is that investment in human capital is too low (as of 1962) relative to investment in physical capital. He cites the difficulty of securing a loan as one major reason. Suppose you make a loan to your neighbor for a tractor. If he quits paying, you can take the tractor. But if you make a loan for him to go to college and he quits paying, you cannot take him and enslave him. Nor can you even expect him to work for you, because he may simply not cooperate with whatever tasks you want done.

Friedman's solution, or one possible one, is investment by companies in their future employees. He suggests in a footnote that "training financed by XYZ insurance company could be made into an assurance of quality (like "Approved by Good Housekeeping")". Is the current system of internships a step in this direction? Most college students, at least around greater DC, are strongly advised to get as many internships as possible. I would believe that an internship with a powerful company, such as the Department of State, could function as a quality assurance for a person with an education but little/no work experience. Perhaps this also explains why so many internships are unpaid; the best internships provide non-monetary compensation by opening up future earnings possibilities.

Of course, I'm not convinced this is a good system. Many internships end up involving a lot of filing and fetching of coffee (I attest to this from personal experience). It's also becoming more common for interns to be hired to do work that would otherwise require paying an employee, and to me this is unfair to the intern. How can the internship system be revised to avoid some of these effects?

Starve the Beast: Let's Take a Look at the Data

2010-05-09T11:43:00.000-07:00

Mark Thoma links to a very interesting article from Bruce Bartlett. The conclusion: "Starve the Beast" actually does very little to reduce government spending. My favorite quote:

On Aug. 7, 1978, economist Milton Friedman added his powerful voice to the discussion. Writing in Newsweek magazine, he said, "the only effective way to restrain government spending is by limiting government's explicit tax revenue--just as a limited income is the only effective restraint on any individual's or family's spending."

It's pretty obvious where Friedman's metaphor breaks down: a family has no source of spending other than its income. It can get a loan for a house, for example, but if a family isn't credibly repaying its loans it will not be able to get any further loans. Government can fail to repay a whole bunch of loans and continue to get more. This needs to get more attention... it's going to be very relevant for domestic American politics for the next few decades as we try to get our fiscal house in order.

Private vs. Public Education

2010-04-20T08:06:00.001-07:00

A friend has been in my ear about why a fully privatized education system is infeasible at this time. I'm just the third party to her debate with another economist, but I'm going to try to organize some thoughts I've had while listening to the debate.

A fully private education system would suffer, I think, from some dynamic inconsistency. It's easy to argue that parents would take all the tax money they saved to buy their children high-quality education, and in fact that quality could go up as price goes down. But it is also very possible, maybe even likely, that parents with lower incomes would prioritize spending money on things other than their children's education. If the parent has no particular incentive to send their kid to the best possible school, and a healthy skepticism of the education system (perhaps because they didn't receive a good education), it's easy to imagine a cycle taking hold for the poor that is difficult to escape.

Suppose, however, that we assume all parents value education as a good and will seek high quality education they can afford for their children. Where will the higher quality schools locate? Probably in wealthier neighborhoods, because more families there will be able to pay for education. Thus students in low-income neighborhoods may be priced out not by tuition costs, but by their location (i.e. they cannot afford to get to the quality school even though they can afford the tuition). Costs like these are often glossed over when "libertopians" consider their ideal world.

Don't misunderstand this post - I'm all for school vouchers and bringing more accountability to the education system. But I think academics often miss the point that not everyone values education the same way they do, and their proposals for reform implicitly assume education is a normal good for everyone all the time. In addition, reforms need to be considered within institutional structures. Major reforms require larger institutional changes and these challenges need to at least be acknowledged by libertopians.

Names and Success

2010-03-16T07:06:00.000-07:00

The always-interesting Eric Barker has a post claiming that your name certainly influences your success. I want to throw a bit of anecdotal support behind the claim, dating back to my time in elementary school. With a last name beginning with A-B-B-A, I have literally been alphabetically at the top of every class I have ever taken. Classes in public schools are generally seated alphabetically, at least initially, and teachers would often call on presenters, etc., in alphabetical order. Get chosen first enough times for presentations and eventually you get used to being prepared to go first - by about fourth grade, I found myself expecting to turn things in or present projects at the earliest opportunity.

One other note: I believe there are plenty of studies indicating that an A-B-C name helps you advance in academia, because your name is more likely to be cited in group works. A last name like Wilson will generally come at the end and may end up stuck under an "et al" label. Credit can often be distributed unequally alphabetically, and if/when I end up teaching a class I plan to use reverse alphabetical order as much as possible to give everyone a taste of the opposite situations.

Very Good Sentence-Paragraphs

2010-03-15T08:48:00.000-07:00

From John Nye:

In a sense, Western markets are like Western medicine: Just as an outbreak of incurable plague would lead to both a renewed search for sound cures and an atavistic appeal to folk remedies, so the Depression stimulated both productive thinking about the sources of business instability as well as destructive appeals to extreme nationalism, protectionism and military aggression.

The whole article is excellent. I'm still pondering this passage. In a plague, medicine drives people to one extreme or the other out of fear: both those who are thinking progressively and those who are appealing to folk remedies do so because they want to stem the plague. Do markets drive people to similar extremes because of fear, or is there a confounding variable in the comparison?

Global Warming & Evolution on the Same Ticket

2010-03-04T07:23:00.000-08:00

Apparently, lawmakers in various Midwestern states, such as Kentucky, Louisiana, Texas, Oklahoma, and South Dakota, are trying to link the issues of evolution and climate change together, according to the New York Times. What could these two issues possibly have in common? In this case, a group of people feels that these theories may or may not have factual evidence, and children need to be taught that in public schools.

My initial reaction was, "whatever brings the science of climate change into the classroom is probably a good thing. Making young people aware of the issue can only help, especially since they are overwhelmingly accepting that humans are changing the Earth's climate." But upon further consideration, maybe the best thing we can do is keep these issues out of the classroom. After all, kids can't remain insulated from these issues forever. Once they become curious, they'll seek out information, and honestly that might be better than learning from a teacher who is legally required to give climate change skepticism and intelligent design theories equal justification.

If these lawmakers want to teach more critical thinking and evaluative skills, I'm all for it. But they are openly admitting that they are trying to get a religious agenda exempt from separation of church and state. Students don't need anti-science to be taught alongside science, and trying to teach critical thinking by sanctioning intelligent design and climate change skepticism in the classroom sounds to me like a proposal that requires some critical analysis of its own.

Why I Am Not a Libertarian

2010-02-18T08:10:00.000-08:00

In many ways I am, but I find hard-core libertarianism to be one-dimensional and boring. It has little practical significance because realistically, Galt's Gulch isn't anywhere on the horizon. Advocating libertarianism, in my mind, is useful only if you are trying to shift the center. It doesn't represent a recipe for a long-term successful nation.

Anyway, that all stems from Arnold Kling and Nick Schulz's book From Poverty to Prosperity. I have been enjoying it and wanted to take a quote from their interview with Paul Romer:

One interesting example of a beneficial government action was when the FAA started forcing the airlines to report on-time performance for their flights. This led to really big changes in how the airlines did their scheduling, and on time performance went up dramatically...

Good example of a reform that market participants would likely not have undertaken on their own that has huge benefits for everyone. The book, so far, is full of stories like this, and I have been thoroughly enjoying it. Kudos to Kling and Schulz on a very good story!

Great Paragraphs

2010-02-10T11:49:00.000-08:00

From James M. Buchanan, continuing to demonstrate how worthy was his Nobel victory:

Unfortunately, economists, generally, failed to understand that aggregate variables that may be measured with tolerable accuracy ex post may not be variables subject to control, directly or even indirectly. The fundamental misconception here lies in the understanding of what ‘the economy’ is. The ‘economic problem’ is not (despite Lionel Robbins) an engineering problem that may be defined simply as the allocation of scarce resources among alternative uses. The economy, in some inclusive definitional sense, is perhaps best described as an order that consists of an interlinked set of exchanges, simple and complex, from which outcomes emerge that may in some respects be meaningfully measured but that cannot be chosen, and thereby controlled, by concentrated decision takers.

The whole essay seems incredibly important for any aspiring economist.

H/T Tyler

Very Good Sentences

2010-02-03T20:40:00.000-08:00

From Matthew J. Slaughter in the Wall Street Journal:

When parent firms based in the U.S. hire workers in their foreign affiliates, the skills and occupations of these workers are often complementary; they aren't substitutes.

H/T Mark Thoma

Evolutionary Economics May Not Be Useful After All

2010-02-02T08:48:00.000-08:00

Thanks to Matt Lister, via an MR comment, for recommending Alexander Rosenberg's Darwinism in Philosophy, Social Science, and Policy. "Does Evolutionary Theory Give Comfort or Inspiration to Economics" was a good cautionary tale and I'm glad to have read it, though I'm still digesting all of its implications.

The idea that Darwinian theory isn't a good predictor for individual agents was a nice ah-ha moment for me. I'm trying to resolve that with my intuition that macroeconomics doesn't necessarily need to make individual prescriptions for action. This is going to require its own dedicated post.

Additionally, Rosenberg points out that the "environment" in economics is constantly changing, while the environment in evolution is essentially constant. This problem might be resolved by looking at relative time horizons, describing economic time as instantaneous, but since I'm taking an Austrian class at the moment I'm not sure I am well-prepared to do this.

Finally, his point near the conclusion that information affects economic agents and evolving creatures very differently feels like a dagger. "The information that the environment provides about relative adaptedness is costless and universally available." This is inescapably unlike anything I have heard from an economist and will need to be closely considered.

So, my initial reading of Rosenberg has led me to three points that suggest combining economics and evolution is a dumb idea. There are certainly more but on first reading those are the ones that stuck out to me, and I'll have my hands full simply trying to address them. I wasn't going to bother but Rosenberg extensively quoted Armen Alchian's paper "Uncertainty, Evolution, and Economic Theory," so I decided I better read that over as well. Alchian sees what I saw after finishing Dawkins: "The economic counterparts of genetic heredity, mutations, and natural selection are imitation, innovation, and positive profits."

So perhaps addressing Rosenberg will be an upcoming series for me. If you've got any recommended readings that might help, please leave them in the comments. (I'll be starting into Nelson and Winter, An Evolutionary Theory of Economic Change, as soon as it gets returned to the library).

Seeking Regulation

2010-02-01T07:08:00.001-08:00

From my textbook for "Economics of Energy" (Energy, Economics and the Environment, page 61)-

Although initially skeptical, many electric and gas and telephone companies actively began to seek state regulation. They were being bedeviled by all sorts of inconsistent demands by local governments and they saw state regulation as a way to preempt them. Consequently, most public utilities acts preempted local regulation.

I heard this argument regularly last semester from Andrew Light in the run-up to Copenhagen. Right now, it looks like regional agreements are going to dominate the next few years in terms of carbon pricing. My question is this: if/when companies want to ask for one universal price on carbon, who are they going to ask? It seems the UNFCCC, with its emphasis on consensus, has played its way out of a role in future negotiations. The US is still the top dog in terms of emissions but China is growing fast; however, I don't see any country (America included) with the international clout to make a system happen quickly. Is there any chance of businesses banding together to self-regulate, and simply not providing service to any government that did not accept self-regulation?

Alex T Gets It

2010-02-01T06:43:00.001-08:00

The title is Do Animals have Animal Spirits and here is the conclusion:

Could a natural system provide a model for business cycle behavior? It would be odd if only people had animal spirits. Biology and economics have much to offer one another.

The intersection of economics and - I would use ecology instead of biology, mostly because I think it's important that they have the same prefix - is a place lots of people, myself included, should spend more time.

Orwell

2010-01-06T23:07:00.000-08:00

I've been working my way through Dawkins' The Selfish Gene over break, among other activities, but I am breaking from that before beginning the last chapter to read some Orwell. My sister gave me a copy of "Why I Write," and within four pages I have a gem I feel like sharing. (The "power of facing unpleasant facts" is a great line but it was referenced in an Econtalk not too long ago, so I don't think I'd be doing anything unique by mentioning it.)

The great mass of human beings are not acutely selfish. After the age of about thirty they abandon individual ambition - in many cases, indeed, they almost abandon the sense of being individuals at all - and live chiefly for others, or are simply smothered under drudgery. But there is also the minority of gifted, wilful [sic] people who are determined to live their own lives to the end.

The first line seems almost silly to me, until I realize that I fully place myself (rightly or wrongly) among the gifted minority. Upon further reflection, I can conclude that I am not sure whether or not this is true, but I would place the probability it is true above 50%.

Airport Security

2010-01-01T20:01:00.000-08:00

What would it take to make American airport security more like Israeli airport security?

http://www.thestar.com/iphone/news/world/article/744199---israelification-high-security-little-bother

Freakonomics Gets Back to Basics

2009-11-12T08:04:00.001-08:00

I found this post on raising pigs to be thought-provoking. This post (not written by Levitt or Dubner, I should note) does not contain a policy prescription - it simply looks at the commonly held wisdom that "pig crates are the least humane way to raise pigs" and offers a critique.

Noticeably lacking are any policy prescriptions or name-calling (neither side is called a "religion," for example). Hopefully this is a sign of things to come from this group; I'd like to see these guys get back to their roots.

Free Market Environmentalism

2009-11-05T05:51:00.000-08:00

This train of thought stems from a recent presentation I gave in my environmental ethics class. I didn't do a very good job outlining free market environmentalism, mostly because I forgot I was presenting to non-economists. Oh well. I'd like to explore free market environmentalism a little further, though, and contrast it with government regulation as the solution to our environmental problems.

One essential factor of the market is its propensity to spur dynamic innovation. Thus, we replaced horses with cars to clean up the pollution in New York City. We solved overfishing by offering every fisherman quotas, which changes their incentive structure and prevents them from depleting fisheries beyond sustainable levels. My conclusion from the recent presentation: "You cannot know in advance what solutions might be brought about by the market. (If you could, you'd be a venture capitalist or entrepreneur, or at the very least you'd sell your ideas to those people). Supporting free market environmentalism, then, isn't supporting any specific solution - including geoengineering (Levitt and Dubner, are you listening?). Rather, it is supporting market principles, based on strong historical evidence that the market has provided the best solutions to problems and will continue to provide the best solutions in the future."

The counterpart of the market is the government, at least in the current post-Cold War era. Government, in general, is not designed to spur innovation, although it does fund much of the research and development into new technologies. The whole point of government is to choose the winning technological development in advance, then alter the regulatory structure to ensure that solution is the one pursued by a majority of citizens. Government is also less dynamic in its response to problems - regulation essentially exists to slow or stop change. In the case of the environment, this is not necessarily always bad, as we may need to slow or stop emissions of CO2. If you support government regulation of the environment, then you probably disagree with the last line of my conclusion, that the market will continue to provide the best solutions. Either that, or you're intelligent enough to recognize that our "market" isn't close enough to the ideal to spur the necessary innovations.

One other thought I had while preparing for my presentation: in a liberal critique of FME, Ernest Partridge tried to claim that libertarians in general would have to outlaw cars and electric power plants, because these CO2 emissions were imposing on everyone's rights to "life, liberty, and property." The truth is, if we outlawed these, or announced that in five years they would be outlawed, I can offer a prediction of the results. Wind and solar power plants would spring up across the country. The electric car that GM has supposedly been developing would hit the road in fewer than five years. Tons of resources would be directed into making these technologies better and cheaper, and many more resources would be spent deploying them as quickly as possible. The engine of progress wouldn't shut down entirely - though it's an interesting question whether this would jolt us out of the recession or create a bubble that would pop once the regulations took effect. I think Partridge, in trying to extend an argument ad absurdum, misunderstands the dynamic nature of the market. I'm also not sure this would be the worst solution to our environmental and economic problems, though I am sure it's not politically feasible.

This post is already too long and wonky for its own good, but it has me feeling better about free market environmentalism than I have in a long time.

10 pillars of Economic Wisdom

2009-11-04T11:45:00.000-08:00

By David Henderson:

1. TANSTAAFL: There ain't no such thing as a free lunch.
2. Incentives matter.
3. Economic thinking is thinking on the margin.
4. The only way to create wealth is to move it from a lower valued to a higher valued use. Corollary: Both sides gain from exchange.
5. Information is valuable and costly.
6. Every action has unintended consequences.
7. The value of a good or service is subjective.
8. Costs are a bad, not a good.
9. The only way to increase a nation's real income is to increase its real output.
10. Competition is a hardy weed, not a delicate flower.

I think I will post these in big letters on the wall of a classroom someday. I also think I will buy Henderson's book.

IgNobel Prize winners

2009-11-03T12:43:00.000-08:00

The 2009 IgNobel Prize winners were announced last month, and I'm not sure how I missed all of their important discoveries in human endeavors. I hope to one day attend the award presentation ceremony, it seems quite fun.

What's Wrong with America's Health Care?

2009-11-03T12:15:00.000-08:00

I was recently forwarded this article by the AFL-CIO. Setting aside all of the other problems I had with the piece, I found these two paragraphs interesting:

Other cost increases hitting workers include larger hikes in the cost of family coverage, less access to needed prescription drugs through stricter HMO formularies and higher prices for more comprehensive coverage. See the Consumers Unions’ Health Care Plans and Managed Care (PDF).

Consumers are using more prescriptions, at younger ages and for more conditions, and substituting newer, more expensive medications for established products. As a result, pharmaceutical spending increased by 17.4 percent annually between 1999 and 2000 and another 16 percent from 2000 to 2001 (PDF).

The first paragraph implies that less access to prescription drugs is bad, while the second suggests that more access to prescription drugs is bad. How much access to prescription drugs is good? And how can spending be kept down if it is bad to expose patients to the costs of their medications?

Environmentalism and Persuasion

2009-10-24T13:23:00.001-07:00

Lately I've been thinking far too much about the persuasive skills of environmentalists. I've already discussed my general distaste for Joe Romm's blogging style, though I believe his information is solid. Joe is unhappy with Andy Revkin because his time spent blogging has lowered the quality of his journalism. The list could go on forever; I think any conversation will ultimately end with The Death of Environmentalism (pdf).

One shortcoming of many environmentalists was their unwillingness to claim things as certain. I was just watching Everything's Cool, a 2006 film on the public opinion and global warming, on Thursday and heard scientists talk about how, as scientists, they don't like to claim certainty. I assumed this was a major part of the reason the public could never become enamored with the cause.

Tyler says I'm wrong. According to him, experts are taken more seriously when they hedge their statements. I'm lost - I really don't know what to think about the intersections of science and global opinion any longer.

Is Global Warming?

2009-10-24T12:36:00.000-07:00

A new survey by Pew Research says more Americans would answer "no, not really." I'm struggling to understand why... as Pew says in the article, "From 2006 to 2008, these numbers had been quite stable" (regarding the number of people who viewed warming as a serious or very serious problem).

I understand that this year and last have been filled with debates about the economy and health care, both of which hit closer to home with Joe American. What I don't understand is how that translates into fewer people believing that global warming is happening.

The biggest losses are among Independents and moderate Democrats, who represent the margin of this issue, I suppose. Is anyone able to shed some light on why?

Wall Street, Climate Change, and Risk Tolerance

2009-10-18T09:15:00.000-07:00

I've been wondering for the past couple of weeks why I haven't heard anyone comparing the recent debacle on Wall Street with the upcoming mess we are making with regards to our climate. It seems to me the errors of the past decade - not understanding complex financial instruments, underestimating the likelihood and the consequences of the devastating scenarios - are the exact same mistakes we are making in the current climate change debate. So it's heartening to hear someone finally parallel the two.

We condemn Wall Street for taking risks with our economy — risks that all of you are trying very hard to reverse — but at the same time we’re taking exactly the same kind of risks, with no upside whatsoever, with regard to our climate, failing to practice even the basic risk management techniques in terms of climate change reduction.

That's J. Wayne Leonard, CEO of Entergy, addressing the US Congress. Am I imagining the parallels between the two cases or is there a similar discounting of long-term risk because we fail to recognize how catastrophic the worst-case scenario would be?

Elinor Ostrom on Climate Change

2009-10-14T07:11:00.000-07:00

Found the link at MR - where else? - for a podcast of Ostrom with Joe Cone, of Oregon State University. After reading the transcript, I'd like to highlight a couple of interesting quotes and their implications for the upcoming negotiations in Copenhagen.

...the concept of resilience caught on among ecologists big time, because it goes to some of the issues of forests and fisheries and other biological systems that they may be resilient to one kind of change, but adapting to that change may make them more vulnerable to another change. And so, nothing is eternally resilient. Basically, it means capacity to have a change and adjust, and continue functioning about like you did before, as a system. (emphasis added)

In this quote, I see support for those who believe we must act now. An economist-friend of mine has often argued that once the effects of climate change get more serious, then we will get market-based solutions to the problems, which ultimately will be the best solutions. I don't disagree that free market solutions will likely be the best, but a lot of data shows we cannot wait. The feedback loops are such that the effects will become nearly irreversible and the technology exists now to mitigate enough of the worst consequences that a "good" solution is good enough.

But Bangladesh is very poor and while there are discussions, I doubt that they will be able to take the actions that would enable them to be fully resilient.

If you believe in rights to life, which most Americans do, I think you need to take this sentence very seriously. If you are a "skeptic" who wants to wait to see further affects before committing to take action, you are going to be infringing on the rights of some people to life as the sea level rises.

Recognizing that this is something that must be done at multiple levels, so what I am concerned about is a lot of people think that the only way to cope with global change is international agreements.

Attention, America: We can act independently of Kyoto, or any other protocol that we may or may not see come out of Copenhagen. Fortunately, many states have taken the lead in taking action. Hopefully this trend continues regardless of what the federal government negotiates.

Community A has a very good plan for dealing with disasters and it’s sent around and everybody copies it verbatim. That is, I think itself a disaster. I’m strongly urging against. Because, the difference for a community that is below sea level and one that has cliffs right up to the edge of an ocean is dramatically different...we need diversity of response. I’m not recommending that nobody plan. I am recommending that people plan knowing a lot about their own ecological systems, their structure. How fragile are they to this threat versus that threat.

Ostrom clearly would support the AWG-LCA (long-term cooperative action) track, advocated by the United States, for these upcoming negotiations. I personally agree with her view, that everyone needs to plan for their own contingencies. As long as everyone is taking *some* action, this will ensure that everyone's actions will have the best results for themselves. Self-interest at its finest!

But, we’ve got to somehow get over the problems that people will screw one another upon occasion. And we have to find ways of using sanctions and other mechanisms to make sure that the people who are not trusting, or trustworthy and using reciprocity, are discovered and encouraged to change their ways or to not participate. To get out.

This is one of the final things she says, and again, I think it's easy to read her and think about Copenhagen. We have to have some kind of international monitoring system to ensure that everyone is doing their fair share. But we also have to get over this philosophy that we won't take action unless we know for sure that everyone else is going to take similar action. Ultimately, in a cooperative situation, something you have to take the plunge and assume that everyone is plunging with you.

This was a long post, but I haven't even covered everything from the transcript. I found all of it very interesting and this tends to reinforce my belief that the Nobel selections this year, in some small way at least, had Al Gore's success resuscitating Bali and the upcoming negotiations in Copenhagen in mind.

On... ?

2009-10-11T18:00:00.000-07:00

I was going to call this post "On Healthcare," then "On Americans," but ultimately I'm not sure what it's on. I'm reposting the final paragraph of a recent post by Megan McArdle because it resonated with me, but I can't figure out exactly why I loved it so much. Maybe someone else can help me describe what it is I see.

It's no good saying that well, we should try to be more like the Netherlands--you can't build a system on the assumption that you will, suddenly and for no apparent reason, be able to import someone else's political culture. Progressives are watching the whole health care legislative process with utter dismay as it produces a monster of a bill that not even its mother could love--and trying to love it anyway, on the grounds that it's a start. But this ridiculous hodgepodge, this hypertrophied Rube Goldberg apparatus, is not some startling aberration of the political process, induced by some Republican dark magic. This is the kind of thing the American political system produces. This is why all of our programs have a substantial element of the inexplicable and bizarre.

Somewhere Between Hayek and Kuhn

2009-10-07T11:42:00.000-07:00

That's the best way I can describe this article from Monday's New York Times. It's about how "nonsense sharpens the intellect" and cites psychological research describing human pattern-recognition capabilities.

F.A. Hayek would not be surprised at any of the results. In The Sensory Order, he describes the mind as a mass of connections between different impulses. Neurons that have fired together in the past are likely to fire together again in the future; hence, we are likely to recognize (perceive?) situations that are similar to those we have already experienced.

Thomas Kuhn would be equally unsurprised. In The Structure of Scientific Revolutions, he describes the progress of science (really, knowledge) as a series of revolutions, during which we break out of a "paradigm" which restricts our thoughts to view phenomena in an entirely new way.

Both of these ideas come together, in my mind, to form the foundations of this article. We see the world in a certain way, which is colored by everything we have already seen, we have learned - basically by everything we know. When something we know is challenged, we look at that something differently; the truth, however, is that we look at everything differently. Humans are able to escape the boundaries set by their own knowledge when they are reminded that these boundaries exist; this is why reading Kafka allowed above-average recognition of patterns.

Thinking about thought is one of the toughest exercises I have ever undertaken.

Rant on Glenn Beck

2009-09-26T09:34:00.000-07:00

Note: This is a poorly-written stream of consciousness thing. Apologies.

Here is a three minute video of him being interviewed by Katie Couric. He spends the entire interview refusing to define "white culture" but standing by his assertion that President Obama is a racist.

Here is his nonsensical frog analogy.

The guy goes around ranting and raving on television, and the sad truth is that people listen to him. He can't substantiate anything that he says but nonetheless continues to be gainfully employed. Tell me any other industry where this kind of thing would be tolerated!

The Van Jones thing still bugs me, too. Beck - the former alcoholic and drug addict - gets Jones fired by bringing up things he's said/done in his past. Congratulations, Glenn, for cleaning up your life, but I think being a former alcoholic really limits how much you can justifiably say about someone else's past.

The thought that people actually listen to what this guy says just terrifies me.

On Blogging

2009-09-23T08:31:00.000-07:00

I definitely shouldn't be blogging on blogging, but sometimes it's nice to just express an idea. Frankly, I suppose that's what blogging - for me - is all about.

For the last couple of weeks, I have been faithfully reading Climate Progress, a climate change blog, as part of a class I am taking on Environmental Science and Policy. If you follow the link you'll see a tremendous amount of content, and simply by reading the blog you can end up with a high-quality education on current climate issues pretty quickly. The problem? Reading the blog literally takes an hour out of my day - each day - and if I take a day off it takes even longer to catch up.

Joe, the main blogger, admits to "dictating all of [his] posts using Dragon NaturallySpeaking software," which probably accounts for part of the length. However, I think this is a symptom of climate change advocates in general. They have a ton of information, and in trying to put all (or most) of it into the public realm, they overwhelm the layman. I will try to follow Climate Progress even after the class is over, simply because it is such a wonderful source of information, but in all likelihood I won't be able to maintain an hour/day dedication to only one blog.

This is one reason, I think, that I (and so many others) really love MR. Tyler does a nice job of keeping his posts fairly short and his main page clean (Joe's long headlines are distracting and by providing me a lot of info, they become uninformative). There is definitely an opportunity, in my opinion, for a climate advocate to write a blog with a little less content that would be more easily digestable for the average citizen - is there one that I simply don't know exists?

ECOnomics and ECOsystems

2009-09-09T07:25:00.001-07:00

I think the biggest failure on both sides of the aisle in this debate is the inability of each side to see the similarities in their arguments. Economists love to argue passionately for the market - allow what is essentially a "natural system" to control human actions. I hear a similar argument flowing from many environmentalists - we want to allow natural ecosystems to continue to exist and govern themselves.

It makes me smile to see this post, on WorldChanging, about a new toilet that uses microorganisms to break down human waste. What these engineers have done is captured the power of nature to improve upon an existing human invention (there's no need to clean these biotoilets). This is a good market solution to a problem we didn't even know we had, and on balance it looks like a net positive for the environment and our society.

Popular Opinion and Climate Change

2009-09-09T06:36:00.000-07:00

Clearly at the moment, I am trying to tackle an issue that is far beyond my capabilities, but right now I am pondering the disconnect between popular opinion and climate change. Why isn't the average American (yes, I'm going to be Americentric in this post) more concerned with the end of the world? Hollywood certainly is playing on fears of total annihilation of the species. What is wrong with the narrative set forth by climatologists - why can't they capture our imaginations in the same way?

To answer this question, I want to look back two or three years, to the near-top of the recent bubble. There were economists - not many, mind you - but there were some who knew what was happening. Noted experimentalist Vernon Smith has a footnote in his recent work, Rationality in Economics, dated August 2005 and noting an anomaly in the P/E ratio of rental properties as compared to homes owned. Popular opinion never picked up on these themes, however, and it took a catastrophe - the bursting of the bubble - for people to recognize the facts of the situation.

Most professional economists, stockbrokers, and others in the financial industry were severely underweighting the possibility of a catastrophe. Monte Carlo simulations, the most popular tool for financial planners in the past decade, have been shown to be inadequate in predicting catastrophe, and investment professionals are now trying to rework their simulations to more adequately reflect both the odds of catastrophe and the devastation it causes.

The reality of climate change, though, is that the literature is crystal clear: the probability of a catastrophe is high and the effects will be, frankly, catastrophic. My personal opinion is that most people are risk averse; we don't run stop signs, even late at night, you can buy insurance for anything - the evidence is all around us. So why isn't the narrative ringing?

I think part of the answer is in the presentation. Climate Progress is trying to argue using the net present value of climate change, and listing the impact in hundreds of trillions of dollars. To me, this is kind of an absurd exercise. That's a number that is simply beyond the comprehension of most human beings and it frankly makes the situation seem rather hopeless.

Climate Progress has in its archives an Introduction to Climate Economics, and this exercise probably would hold a lot more weight if economists weren't so popularly vilified right now. We are probably the group you least want to identify with if you want the public to take your opinion seriously, considering our overall failure to predict the events of the last couple of years. Claims about the net cost of adaptation and failure to adapt may or may not be true, but I personally don't find them compelling, and I gather that the average American would agree with me.

I'm not sure how else to present the information or how else to argue for action, but I am sure that simply throwing around dollar figures isn't going to get the job done.

Tyranny!

2009-09-03T07:27:00.000-07:00

Things that make me mad: Op-Ed pieces that recommend blind faith in anything. Don't get me wrong, I very much like President Obama, but I'm not convinced that he has every answer to every problem. Here is the first sentence of the article:

PRESIDENT OBAMA’S apparent readiness to backtrack on the public insurance option in his health care package is not just a concession to his political opponents — this fixation on securing bipartisan support for health care reform suggests that the Democratic Party has forgotten how to govern and the White House has forgotten how to lead.

I'm going to go ahead and suggest that author Jean Edward Smith wasn't exactly thrilled with George W. Bush's leadership and governing skills when he ramrodded the USA Patriot Act through Congress, or took us into Iraq without Congressional approval, but anything is possible. Smith's blind faith in government, be it the Bush Administration, the Obama Administration, or any other, is downright terrifying, and not simply because I am a libertarian.

Skeptics of Macroeconomics

2009-09-03T06:21:00.001-07:00

I am currently enrolled in a course that can best be described as "A History of the Science and Policy of Climate Change" and is essentially a lead-up to the upcoming summit in Copenhagen in December. My first reading is a Synthesis Report from 2007, the Summary for Policymakers, published by the Intergovernmental Panel on Climate Change. I've read 1/3 of the report and am fascinated by the fact that every claim they make is accompanied by a listed certainty in italics: likely, more likely than not, very likely, etc. I assume this phenomenon is somehow connected to the skepticism of the science of climate change that has been perpetrated over the last 20 years.

Lately I've been fascinated by the parallels between the science of climate change and the science of economics. Climate can be subdivided into long and short-term trends, not unlike the division between macroeconomics and microeconomics. I can't help but wonder why climatologists are held to such high standards and forced to go to great lengths to try to prove the validity of their science, while macroeconomists - who, I'm beginning to think, may not be scientists at all - have not historically faced the same scrutiny. I realize that the recent economic events have changed popular views of macroeconomists, and that they do provide statistical models, confidence intervals, etc. in their work, but they simply are not forced to jump through the same hoops climatologists are. If you ask me, they should be.

The Final Chapter of Facebook?

2009-09-03T05:50:00.000-07:00

Virginia Heffernan at the New York Times claims that we've reached our saturation point with Facebook. She quotes author Julia Klam as saying “Facebook is good for finding people, but by now the novelty of that has worn off, and everyone’s been found.”

Can't say I agree with this statement, though perhaps that's because I'm in a situation (college age and member of a social fraternity) where I am often meeting new people. Facebook may be dying among its older users, but I don't see an end anywhere in sight for the average teenager or twentysomething anytime soon.

Ben Stein on Children

2009-09-02T06:01:00.001-07:00

According to Ben Stein, our falling birth rate indicates that the net value of having a child in modern, upper-middle class America is negative.

"...the birth rate is collapsing. But if we stop having enough children, because their value is so low relative to their cost, the society grinds down. It's happening right now. The native-born upper middle class barely replace themselves in America, if they do at all. In a way we are committing suicide as a class, possibly in part because of the burdens of child rearing in modern life."

Stein's conclusion doesn't say outright that this is a bad thing, but he certainly implies it. I'm not sure I feel that distraught about the collapse of the system that has produced such winners as General Motors, Enron and Bear Stearns. In addition, although it's clear he didn't have enough space to discuss everything, he fails to mention our inability to build lasting relationships, which I would argue contributes substantially to the declining birthrate. For the most part I like Ben Stein, but I can't say I buy any of what he is selling today.

Whole Foods Health Care

2009-08-15T22:54:00.001-07:00

If find myself agreeing with the eight health care reforms proposed by John Mackey, the CEO of Whole Foods Market Inc. "Enact tort reform" and "enact Medicare reform" seem much easier to say than they are to do, and "repeal government mandates regarding what insurance companies must cover" does not seem very politically feasible. But some of the proposals seem so obvious it is hard to imagine them lacking a consensus:

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

Does anybody disagree with these points? If nobody disagrees, why isn't somebody in Congress pushing hard for these types of reforms?

Additionally, Mackey mentions that "two-thirds of Americans are now overweight and one-third are obese." It makes me wonder what the definitions are for overweight and obese. Are all obese people overweight?

Anyways, with a clear thinking CEO and health food becoming trendy, the suggestion I was given to invest in Whole Foods is looking pretty good. (Current Price WFMI: $28.10)

The Market that is College Textbooks

2009-08-13T10:55:00.000-07:00

According to the New York Times, it is about to become a rental market. After reading this, I'm left wondering why it took so long for this to start. Also, much to my surprise, there was no mention of the Kindle anywhere.

Internships, in Brief

2009-08-06T16:06:00.001-07:00

The task: write one paragraph for the Nobel Laureate responsible for your summer employment expressing what you've gained from the time you spent on his dime. Can't say I succeeded, but dammit, at least I tried.

This summer began for me in Rome, where I spent five weeks doing a study-abroad program. In my course on the Italian economy, the professor spent one day talking about internships in Italy: there, internships are for college graduates and often last for up to two years. Essentially, they allow employers to test-drive employees by paying them almost nothing but giving them the duties of a regular employee. I bring this up because it is the opposite of everything I’ve experienced at ESI. This internship has been a chance for me to learn about myself as well as economics, and it’s helped me to develop intellectually in a way that my classes (at least in recent memory) had failed to do. George Mason University has a fine economics department, but many of the professors teach the same anarcho-capitalist story in their undergraduate courses. Our reading group here never bothered to debate politics; we were learning simply for the sake of gaining knowledge, and this was a welcome change. Outside of the reading group, the work I did replaying and analyzing experiments was much more interesting than I had expected. I have been a participant in experiments at GMU, in class and otherwise, but in my first attempt to design an experiment I failed to understand the experimenter’s perspective. Close examination of other experiments has helped me better understand how to begin when designing an experiment and has given me a glimpse of exactly what can go wrong – or right – once you bring subjects into the lab. Considering the knowledge I have gained about experiments, economic science, and especially the human mind, I can say this internship has been, for me, an experience of learning in the purest sense of the word.

My Letter to Chairman Boudreaux

2009-08-05T16:49:00.000-07:00

Dear Chairman Boudreaux,

As the fall semester approaches, is there any new information on who will be teaching the fall section of ECON 496 - 002 (Economics of Regulation). I am interested in the title of the course, but my college career has taught me that teachers make classes, not titles. Is the course likely to go to a particular faculty, or is the answer still a complete mystery?

Two of the classes I hoped to take this term (Economics of Information and Experimental Economics) were dropped after I signed up for them. I am told those classes had been cut several weeks before I signed up for them, but the change had not been listed on Patriotweb. Currently 26 of the 57 Econ undergraduate classes have no professor listed. This is the worst ratio for any GMU social science department. Additionally, Professor Leeson is still listed as teaching a section of 385, though I understand he will be a visiting faculty at the University of Chicago in the fall.

I have enjoyed my time as an Economics student, and have especially appreciated Mason's emphasis on undergraduate education. With or without changes I will still be a GMU Econ major in the fall. But I ask that the department (or rather its actors) make distributing course information to undergraduates a higher priority. Certainly increased information would help undergraduates secure a better use of their resources.

Thank you,
Josh Knox
George Mason University '10

Lincoln

2009-08-05T15:25:00.000-07:00

Note to self:

Finish reading this article on Lincoln.

Box Office Inflation

2009-08-04T18:55:00.000-07:00

via Slate:

The problems with our growing fixation on box office figures—they don't account for costs of the film, they don't include home-entertainment revenue, etc.—have been chronicled in the past. But as long as we continue to indulge this obsession, shouldn't journalists at least factor in inflation, instead of pretending that it doesn't exist?

What is the appropriate way to measure movie success? Is there any objective measure?

Educational Resource Fees

2009-08-04T13:01:00.000-07:00

So this year, in addition to the usual tuition increases, GMU has added Educational Resource Fees to all student bills. But what makes an Educational Resource Fee different from regular tuition? Isn't tuition supposed to be an "Educational Resource Fee". Education Resource Fees have been implemented to help Mason cover the budget shortfall in this tough economy.

These fees should really be called "Economic Downturn Fees". And these fees make sense. When the economy is down, business suffers, as do people with jobs. College students don't have jobs, so they are insulated from the economic downturn and best able to bear the hardship. Further, colleges don't adequately prepare students to get jobs meaning it could take many years after graduation before students are exposed to the harsh realities of working in a weak economy. Students should be thankful their school shelters them from the economy and be happy to keep George Mason University afloat in its time of need.

I hope I'm not the only one who sees something wrong with this picture. Maybe an alternative budget solution in the lien years would be to stop building like there's an impending shortage of bricks. But then again, maybe I'm just a cynic.

Hello, Big Brother

2009-08-04T09:34:00.001-07:00

Please don't let kids mix caffeine and alcohol! According to the Wall Street Journal, there is a significant campaign underway to ban drinks that combine the two. Not sure how this will affect popular mixed drinks such as rum & Coke, but it's safe to say the line will be completely arbitrary.

Power Point

2009-08-01T12:02:00.001-07:00

Is PowerPoint making us dumb?

Are Lotteries Just?

2009-07-31T11:00:00.000-07:00

John Goodman asks readers to consider some facts about lotteries and asks a question:

* One person becomes extremely rich.
* The winner's riches come at the expense of everyone else - the vast majority of whom have below-average incomes and many (maybe most) are actually poor.
* The winner did nothing to deserve, merit or earn his reward - everything he has is the result of sheer luck.
* In one single drawing this lottery produced more inequality (among the participants) than any act of Congress or private sector venture ever could.

So why is the left so blithely acceptant not just of lotteries, but of state-created-monopoly-lotteries? Why do columnists who become apoplectic about the salaries of CEOs ignore those whose riches are the result of random chance?

To start, I see nothing inherently unjust with lotteries, but I also dismiss arguments about relative wealth (I think absolute wealth is far more important) so my speculation is probably wrong.

That notwithstanding, I think many on the left see wealth created through business as a zero sum game. As such, the winnings go to those who started in the best initial position (through family connections or natural intellect) and the poor are victims who started at a disadvantage. The initial position is based on luck, but that luck favors certain groups. The lottery, however, has little favoritism. Everyone's ticket has an equal chance of winning. And if there is a bias to certain groups, lottery winners tend to be those who started from weaker positions in the business game (as poor people are more likely to play the lottery). So because everyone has an equal start, and the lottery frequently rewards poor people, wealth generated by the lottery is acceptable. It doesn't hurt that a portion of lottery revenue goes to the state. That the lottery makes many other poor people worse off is excusable because "they don't loose that much, only a couple bucks a day".

That's my two cents. As lotteries do not create wealth, they merely redistribute it, I support high taxes on lotteries and lottery winnings, but maybe that's just because I don't play. Would a highly taxed free market in lotteries be better or worse than the current government monopoly?

Most Interesting Typo I've Read Today

2009-07-30T11:59:00.000-07:00

Matt mistakenly calling F.A. Hayek's paper "The Use of Knowledge is Society." Think about it.

Perspective on Pittsburgh Sports

2009-07-30T09:26:00.000-07:00

I am 20 years old, meaning I was born in the year 1989. In my lifetime, the Pirates have had 16, soon to be 17, consecutive losing seasons. They also had a losing season in '89. They won more games than they lost in the years 1990, 1991 and 1992.

In my lifetime, the Penguins have won 3 Stanley Cups (91, 92, 09).

In my lifetime, the Steelers have won 2 Super Bowl Championships (06, 09).

Each of those franchises has also lost one Championship (Pens in 08, Steelers in 95). Each has lost in their respective Conference finals, each has gone through a sub-.500 rebuilding phase. Through all of this, the Pirates have maintained a consistent record of futility.

In my lifetime, Stanley Cup championships are exactly as common as winning baseball seasons. Super Bowl championships are nearly as common. Wow.

The Usefulness of Twitter

2009-07-29T18:02:00.000-07:00

So I am also on Twitter now. I'm still skeptical about twitter's usefulness. How much vital news exists which is transmitable in under 140 characters and unlikely to be covered by the MSM or google news or the blogosphere or facebook status updates or texts from my friends or handwritten letters from my mother? I have found my first such piece of news:

THE_REAL_SHAQ:Its official, today is david beckham is scared of shaq, day, he should b scared, he can never score a goal on me,

Quaterback Insurance

2009-07-27T12:30:00.000-07:00

Sam Bradford and Colt McCoy have both taken out insurance policies to hedge against a career ending injury in the upcoming season.

The way the article is written, it seems like the Texas star is paying a larger premium for his insurance policy than his Oklahoma counterpart. Is this because McCoy was sacked twice as often as Bradford, because McCoy has greater earnings potential, or because Sam Bradford's father is an insurance specialist?

Where would you assess the probability of a career ending injury to be? And as an insurer would you charge a higher premium to McCoy, Bradford, or Tim Tebow?

(HT: Nick Dipillo)

Erik on Hayek

2009-07-27T11:30:00.001-07:00

The summation of "The Use of Knowledge in Society" and The Sensory Order (which I'm proud to say we finished today):

"No Free Will. Only Prices."

My Most Famous Classmate

2009-07-25T14:50:00.000-07:00

I was certain the most famous person from my high school would be either actor Brennan Kelleher or musical genius Kai West. While each has garnered a modest amount of fame (see here and here), I was wrong. The most famous person from my high school can be found by googling "naked wizard".

At a California music festival, an officer requested that my former classmate put his clothes back on. He refused, so three officers helped him put his clothes back on using nonlethal force. Some of the onlookers felt the force was excessive (don't festivalgoers think all force is excessive?) and courageously helped their fellow man by filming the incident on their cell phones.

His right to be naked at a music festival can be debated, as can the officer's right to fire his taser gun. I believe a person in an altered state of mind does not deserve the same benefit of the doubt as a sober person, and no permanent damage was done to the wizard, so it is hard for me to be outraged.

My former classmate is fine, except he is now facing charges for disorderly conduct. He makes a living selling light toys (poi balls and rave accessories), I wonder if he could boost his sales by branding the incident. I'd much prefer to buy Naked Wizard Glowsticks than some knockoff brand.

Freegan Living

2009-07-24T14:36:00.000-07:00

Freegans are people who refuse to participate in monetary society and sustain themselves on only what they can freely acquire. There was a National Geographic special on them a while back, and a post about one of them was recently linked on Marginal Revolution.

Daniel Suelo has been living without money for nine years and has a rather extensive blog and website which he updates from public libraries. I have no plans of following his lifestyle, but it is remarkable to see a man following his convictions.

Here is a sample of his writing on pilfering food from dumpsters:

Often when you are caught at a dumpster by store owners, you are treated with contempt. What is contemptible and inexcusable is the waste, and what is both contemptible and ridiculous is locking up your waste (called anal retention) to keep hungry people from eating, and having the gall to act self-righteous in the process. This is mental illness, institutionalized and whitewashed. Notice how they almost always tell you it is "for your safety". Notice that tyranny in all its forms all over the world is almost always done "for your safety", "for your security". The corporate tyrant is turning the tables to look like the compassionate one, the intelligent one. The tyrant is telling you you are not smart enough to take care of yourself. Simply because the tyrant is a have and you are a have-not somehow makes the tyrant worthy to treat you like a child, when in actuality it is the tyrant who is living in ignorance and needs educating.

More Educational Rap

2009-07-24T14:09:00.000-07:00

I stumbled upon more educational rap music. Rhythm, Rhyme, Results (Tripple R) has tracks explaining Math, Science, English, and US History-- to my surprise the music is very well produced. Triple R is like Schoolhouse Rock, if Schoolhouse rock grew up in the streets.

I particularly enjoyed (Pump up the) Volume, where a Snoop Dog beat informs:

Next is the cylinder, but don’t be scared
It’s just the height times π times the radius squared
For the Volume of a cone, division is key
You take the height times πr² but then divide it by 3
Last but not least we’ll examine a sphere
Like the sun or the moon or the bubbles in your root beer
After our research, we must conclude
That it’s 4/3 × πr³

Certainly this information is better acquired from a chart, but if it makes the learning fun, then it's successful, right?

Yeah, I'm Two Days Too Late

2009-07-22T11:27:00.000-07:00

But this article from The Times of London offers the best perspective I've read on the impact of the Apollo missions.

I am intrigued by the fact that a publication not written by Americans offers the greatest insights on one of America's greatest accomplishments. This is a must-read.

Bold Claims About Scarcity

2009-07-22T08:57:00.000-07:00

Courtesy of Dr. Tyler Cowen:

“Along a certain dimension, there’s no scarcity,” he said. “The problem is how to find good stuff.”

Taken out of context, but nonetheless, this statement resonates about the direction the world is heading. Full text here.

Can Costs be Subjective?

2009-07-22T08:33:00.000-07:00

I was listening to a presentation yesterday for an experiment to try to uncover some of the reasons we treat intellectual property with different norms than we use with physical property. We also read an excerpt from The Economic Structure of Intellectual Property Law by William Landes and Richard Posner.

Posner and Landes raise some interesting points, though much of their stuff seems nonsensical upon further review. One claim I enjoyed was that, "Many authors derive substantial benefits from publication that are over and beyond any royalties," such as pecuniary income, prestige, etc.

One of the claims proposed by the experimenter was that intellectual property "costs a lot to create." This is supported by Posner and Landes, who claim that there is a two-tiered cost of intellectual property: the "cost of expression," for which there are no returns, and the "cost of making copies." But I'm not sure this is exactly right. For the publisher, the cost of expression can be measured in terms of dollars, but separate out the artist. For him or her, I think the cost is much more subjective, and said cost needs to be thought of as a value to be better understood (similar to the way a "wage" should be thought of as a "cost (of labor)" when plugged into an SD graph).

We see this phenomenon developing before our very eyes: software programmers collaborating to create an operating system that rivals the best operating systems available for purchase and making it available for free to all; bloggers synthesizing content and publishing original ideas for all to use; even musicians are moving towards this trend as they move away from big record companies and toward independent labels. This last movement shows that the cost of expression, for them, is probably fairly low, because they continue to produce music even as it suffers from piracy across the internet.

Posner and Landes make one other interesting claim: that close examination of historical authors, such as Shakespeare, show that much of their work was borrowed almost exactly from their predecessors. Shakespeare wrote in the age before copyright laws, and perhaps this allowed him to be creative in ways we cannot today, as we are restricted by risk of plagiarism or violating copyrights. All the new mediums of expression (see Tyler Cowen's fascinating Create Your Own Economy) are growing rapidly, and if copyright laws cannot keep up perhaps we will be allowed to borrow more from others and we will see creativity manifesting itself in new ways.

Am I the only one who believes costs can be subjective, or is this a new way to look at intellectual property in the modern world?

Frances Hutcheson Weighs In...

2009-07-22T08:00:00.000-07:00

On the history of property. Stephen Buckle quotes a passage of his:

when once Men become so numerous, that the natural Product of the Earth is not sufficient for their Support, of Ease, or innocent Pleasure, a necessity arises, for the support of the increasing System, that such a Tenour of Conduct be observ'd, as shall most effectually promote Industry; and that Men abstain from all Actions which would have the contrary effect. (An Inquiry Concerning Beauty and Virtue)

Buckle claims this passage shows that industry forms as a response to scarcity, and further that self-love inhibits industry without well-defined property rights. Thus property rights come about as soon as scarcity does. I find this history to be very compelling, but clearly it isn't complete, because writers after Hutcheson have tried to modify his theory. So I ask: what is missing from this brief history of property rights?

Hip-Hoponomics?

2009-07-20T15:54:00.000-07:00

My sister has introduced me to a group of rapping doctoral candidates in the Economics Department at UC Berkeley:

The Gang's latest rap song takes the Jay-Z single "99 Problems" in a new and proudly nerdish direction, with locations in Evans Hall stairwells and downtown Berkeley landmarks, and rhymes celebrating the peculiar joys of a sometimes-maligned social science:

If you're having research problems I feel bad for you, son
I got 99 problems, econometrics ain't one. ...

Other Metrics Gang hits include an econometric take on Kanye West's Stronger, as well as a non-rapping (I Can't Write No) Dissertation

Cap-and-Trade: A Failure of Democracy?

2009-07-20T11:44:00.000-07:00

The Economist has a special report on business in America that provides some interesting insights into my favorite issue: how to deal with climate change.

One of the main points I took from this report is that climate change seems to be, in many ways, the natural result of living in a democracy. Why? Climate change requires policymakers and citizens to simultaneously make long-term commitments to lifestyle changes. For example, citizens will only put up solar panels if they can sell surplus electricity to the electric company, otherwise it is not cost-effective for the average citizen to switch to solar. However, electric companies can reduce bills to zero, but cannot buy electricity from citizens. Change this policy - allow citizens to sell to the electric company - and you'll see more people, especially in places like Arizona or New Mexico, switching to solar power.

Is this the kind of idea that will get people elected and re-elected? Well, probably not. Solar energy is expensive and requires subsidies to be cost-effective, as the Economist points out. So it very well could be that a politician is forcing the majority (middle class) to pay for the minority (upper class) to use solar power and reduce his/her energy costs. This is not an electable position and politicians realize they will be better off pursuing pork in a cap-and-trade bill.

I'm not sure, but I suspect that the short terms served by most politicians make it much more difficult for them to adapt the long-term policies needed to solve the climate crisis. It seems the only way to fix this is to suspend the rules of democracy for a while or have the solution come from the Supreme Court (who are unlimited by problems such as elections and terms). Neither one seems imminent, unfortunately for us all...

Time for Affirmative In-Action

2009-07-20T09:15:00.000-07:00

Interesting Op-Ed in today's New York Times. The recent confirmation hearings for Sonia Sotomayor have shed new light on the history of affirmative action in America, but this piece looks the opposite way: toward a future where white is a plurality, rather than the majority, in the United States.

I must admit that I am, for the most part, not interested in affirmative action. I do not claim to be completely colorblind, but I cannot think of a time in my life when I have seriously discriminated against anyone because of race. Perhaps I am naive, but it seems nearly everyone of my peers has grown up in this same type of world. Yes, there are still bigots and racists in this world, but it is my belief that it's now socially unacceptable, and affirmative action is in fact no longer necessary. In places such as academia, social stigma has a far greater effect than legislation. It's time to move toward a world without affirmative action laws - hopefully Sotomayor is ready.

Incentives Matter

2009-07-17T12:06:00.000-07:00

Excellent post from Environmental and Urban Economics.

Everyone thought that housing prices would only go up - this is not a new insight. However, I never thought of the problem by comparing the housing market to the stock market (as they do). People who believed housing prices would go down had no way to short the market and express that fear - the housing market was in fact a very one-sided thing! Not sure how I missed this insight but thanks to those guys for pointing it out to me.

Guess this is why I am still - and truthfully, always will be - a student.

F.A. Hayek is Smarter than You

2009-07-17T11:51:00.000-07:00

I present as evidence his classic work, The Sensory Order, which I am reading because (of course) I am a huge masochist. This post will naturally be written in the subconsciously condescending tone preferred by Hayek.

Note: I have only read through Chapter 3. I will probably post something actually related to the book at an as-yet-to-be-determined later date.

I think one of the awesome insights from this book is in the first chapter. In Hayek 1.20 (yes, he does use numbered chapters and verses, not sure if he meant to parallel the Bible), he talks about the fact that organisms use their minds to take the information they have about the world and project it so that they can have representations, or models if you prefer, of their environments within themselves.

Hayek gives away his background as an economist at two different points: in 2.1 he talks about an "order than appeared," a.k.a. spontaneous order, and in 3.49 he talks about collections of events that are interconnected and through webs we cannot see they bring about certain other collections of events.

I think Hayek's non-psychology is what allows him to write The Sensory Order. He is able to escape the traps that plague the behaviorists (who he absolutely rails on) and other schools of thought circa 1952. He also recognizes the interconnectedness of everything - every thought, every neural impulse; literally everything - with everything else. This insight derives itself, at least partially, from examining the interconnectedness of every event in an economy (and then praising the price system which allows us to synthesize it all).

Top 25 Econ Blogs

2009-07-16T15:25:00.000-07:00

The Wall Street Journal has posted the 25 top Economics blogs, observing that Econ blogs have risen in popularity in the wake of the recession. The article is good, though I am confused by the rankings.

I understand the ranking of originality (though I may not agree with it) but how do they measure Geekiness? Freakonomics receives a score of 1 calculator, while Marginal Revolution gets 5. How does that work when Freakonomics is based on a book almost completely about complex statistical regressions? And as for Readability, if a blog is given 5 reading glasses, does that make it is more or less accessible than a blog with four reading glasses? It seems the most readable blog would require no reading glasses.

...I feel like Andy Rooney.

Who Should Pay?

2009-07-14T15:11:00.000-07:00

Yesterday, a website set up to defray the extra city costs associated with Michael Jackson's memorial was shut down by Los Angeles Mayor Antonio Villaraigosa. It appears LA is too classy to accept donations. Said the mayor, "This is a world-class city, and we provide fire and police protection, period."

Admittedly, the memorial's public costs ($1.4 million, including $1.1 million in police overtime) pale in comparison to city's budget ($7 billion for FY09-10) and donations from the website ($35,000 at the time it was shut down) would not likely have covered them in full. But why keep citizens from paying?

Those who enjoy the benefit of something should also bear its cost-- otherwise there is an incentive to over consume at the expense of others. City funds spent on extra police protection benefited those who attended the memorial, but others in Los Angeles will have to bear that cost in fewer future public services or increased taxes. It is difficult to separate those who benefited from the Jackson memorial from those who did not, but the donation website allowed a few of those who benefited to identify themselves and voluntarily contribute to the cost of the event. This is far superior to compulsory taxation.

So who should pay? I say allow people to donate as much as they like, and tax cable news for the rest.

"How Dysfunction Helps the GOP"

2009-07-09T11:47:00.001-07:00

I read this article last week but chose to skip blogging about it - the more I think about, though, the more I enjoy the fundamental idea.

It's stupid to elect Republicans because, well, their incentives are for government to fail. In order to get elected, they want government to not work; therefore, even while in office, they should be expected to purport a certain amount of failure. Then they can point to their own mistakes and say they should be elected because government is evil.

Just when I thought I was getting away from dull libertarianism, I realize it's an infection I may never be able to cure.

I Thought I Was Good at Jeopardy

2009-07-09T08:57:00.001-07:00

IBM is making a computer that will put me to shame. Department of WOW!

iPhone Jailbreak

2009-07-08T15:35:00.000-07:00

The Wall Street Journal has a profile on hacker "Arix", iPhone jailbreaker-- jailbreak enables users to install software onto their iPhones (particularly software unapproved by Apple). "Arix", also known as 15 year old Ari Weinstein, began hacking Apple code to download free games for the iPod touch he received at his bar mitzvah. The story of his early exposure to computers is highly entertaining:

Ari became interested in technology as a preschooler, when he would flip through the manual for a cable set-top box and change the settings on the family computer. "I remember it being a big relief when he went to kindergarten," says his mother, Judy Weinstein, 43, a social worker.

At age 7, Ari teamed up with two other boys to create playing cards, decorated with hand-drawn characters, to sell online. The business never took off. But Ari says he learned to build Web sites, among other things: The site he created wasn't on the child-approved list of his AOL Internet service, he says, so to access it, he had to figure out how to get around AOL's parental controls.

"That's when we knew we should start teaching him ethics," says his dad, Ken Weinstein, 45, a real-estate developer.

Jailbreaking an iPhone violates the terms of use, and voids the warranty. Apple is trying to take legal action by filing a claim with the US copyright office that modifying phones is a violation of the Digital Millennium Copyright Act. Is this claim outrageous in that the physical equivalent would be buying a book and gluing or ripping select pages, or does it have merit as ad revenue and app sales are part of the iPhone's pricing model? The ruling is scheduled for the fall.

Watch the video after you read the article, it is a great illustration of how medium impacts the perception of its subject.

Sent from my iPhone

Econometrics at University of Oregon

2009-07-07T18:28:00.000-07:00

I found out University of Oregon professor and Economist's View blogger Mark Thoma posts his class lectures on Youtube. He says that these videos should be used as complements instead of substitutes to attending his class. As sitting in isn't an option for me, I'll be forced to go the substitute route. I do not plan on watching the eighteen lectures consecutively, as Thoma says a few habitually truant students have tried, but hopefully I'll learn a little. It'll be interested to see how lectures at the University of Oregon compare to lectures at George Mason University. Why aren't any Mason professors recording and posting their lectures?

The Fascination with Causation

2009-07-07T11:44:00.000-07:00

Steven Pinker, in The Stuff of Thought, offers up a very interesting insight on causality.

"The more you scrutinize causality, the less sense it makes, and some philosophers have suggested that science should just kiss it goodbye."

Fascination with cause-and-effect began with David Hume's Treatise on Human Nature and has only increased since the 18th century. In my far-too-close reading of Hayek over the past 24 hours, I've pulled a couple more nuggets on causality:

"It does not matter for him why..." and "causes... are of no interest to him". Both quotes are taken from The Use of Knowledge in Society. "Him" is the agent responding to prices. Basically, according to Hayek, the price system makes causes irrelevant for human beings; it allows us to respond to changing circumstances without ever knowing the root causes of a change in price.

With all of this in mind, why are we so fascinated with causality in our lives? How would science - especially social science - be different without it?

Hayek on China

2009-07-07T10:09:00.000-07:00

From Competition as a Discovery Procedure:

"A high growth rate is more a sign of of bad policies in the past than of good policies in the present."

Top Ten!

2009-07-06T23:26:00.000-07:00

Pittsburgh has two of the Top Ten in ESPN's Ultimate Team Rankings! They are the only city with two franchises in the top ten, though it is worth noting that Ducks are number 11 and the LA Angels are number 1. The reality is that both of these teams belong to Anaheim and are great franchises.

Being from Pittsburgh means that I have the Steelers in my bloodstream, and winning the Lombardi trophy this year was awesome. Still, as an avid hockey fan and part-time player, I count the recent Stanley Cup victory among the greatest thrills of my lifetime. It is quite gratifying to see the Penguins represented eighth on this list; the Steelers have been perennially among the top ten, but the Pens have not (until now) gained that sort of respect.

Aside: Please ignore number 94, if you are perusing the list from top to bottom. Apparently they are including minor league baseball franchises, as well; the Pirates are an embarrassment to all that is black and gold.

Myers-Briggs Tests Actually Work!

2009-07-06T20:21:00.000-07:00

I've been feeling awfully Socratic lately - it's a phase I go through every so often, where I have learned a lot in a short period of time and become somewhat forlorn over the fact that I seem to know less than when I started.

It seems the older I get, the less sure I am about what I want to do when I grow up. This is the opposite of the way it is supposed to work. I was expressing this frustration to a friend, who asked what my M-B personality type was. I guessed it was ENTJ (didn't really remember but that seemed right) and I'll be damned if the first page turned up in a Google search isn't my biography.

University professor is still a possibility, but it looks like I am destined for the corporate wasteland.

The Unthinkable

2009-07-06T15:16:00.000-07:00

Today, I discovered The Unthinkable: Who Survives When Disaster Strikes—And Why, by Amanda Ripley as well as her related blog. I found her analysis of the recent DC Metro crash enlightening, and am adding The Unthinkable to my summer reading list. This real-time map of emergencies and disasters is also interesting.

Is The American Empire Bankrupt?

2009-07-05T16:46:00.000-07:00

Kyle Murphy asked for my thoughts on Chris Hedges' column, The American Empire is Bankrupt. The article morns the dollar's passing as the world's reserve currency, and predicts increasing inflation as foreign central banks divest themselves of the dollar. Alarmist would be a good description, it closes:

The cost of daily living, from buying food to getting medical care, will become difficult for all but a few as the dollar plunges. States and cities will see their pension funds drained and finally shut down. The government will be forced to sell off infrastructure, including roads and transport, to private corporations. We will be increasingly charged by privatized utilities—think Enron—for what was once regulated and subsidized. Commercial and private real estate will be worth less than half its current value ... America will be composed of a large dispossessed underclass and a tiny empowered oligarchy that will run a ruthless and brutal system of neo-feudalism from secure compounds. Those who resist will be silenced, many by force. We will pay a terrible price, and we will pay this price soon, for the gross malfeasance of our power elite.

I think US fiscal policy gives cause for concern, but I don't believe the situation is as dire as Hedges forecasts. I'd like to take HIST 302, GMU's only class on ancient Rome, to better understand America in the context of an overextended empire. On a lighter note, today's Dilbert could also be a response to Chris Hedges' essay.

Better Reading in Bed

2009-07-05T14:51:00.000-07:00

I like reading in bed. It's comfortable. The only problem is that if I lay on my side (as I prefer to) it is impossible to hold a book open so that both pages are readable. You must either rotate your book, or (my solution) rotate your body from shoulder to shoulder in a stationary shrimp. Neither solution is completely satisfactory, and one aspect of the Kindle that intrigues me is odd and even pages appear in the same place, making it easier to read in bed.

It was with great interest, therefore, that I read about Randall Munroe's attempts to use his Kindle in bed. The XKCD author found it was difficult to prop the Kindle up while keeping a finger on the next button. Undaunted, he took a steel coat hanger and twisted it to create a Kindle stand for reading in bed.

This is a great Kindle accessory, and knowing how to make it I am more likely to purchase a Kindle. Some people commented that Munroe should mass produce his invention. It is truly a niche product, and I wonder how large the "kindle owners who want a better way to read in bed but are too lazy to bend their own coat hanger" niche is.

The only other Kindle accessories on sale seem to be cases and memory cards. Are there other accessories being overlooked? I think a Kindle case with a small light built in for reading in the dark might be marketable.

Americans Spend Too Much on Medical Care

2009-07-04T19:17:00.000-07:00

How can you tell? Time-series and cross-sectional data. Milton Friedman's How to Cure Health Care offers an insightful diagnosis and prescription of the current Health Care situation. I plan to write more about it in the future, but for now I found it satisfying to recognize the econometric techniques used in the analysis.

Cross-sectional data:
Time-series data:

Environmental Philosophy

2009-07-04T14:02:00.000-07:00

Bloggingheads has a diavlog today between Jay Odenbaugh and Craig Callender on Environmental Philosophy. A couple excerpts:

(6:30) How much consideration do animals deserve? Using a thought experiment, where you are the last human on earth and about to die, would there be something wrong with using all the world's nukes to blow up the planet? Assuming the answer is no because there are other living things on the planet, should non-humans be given moral standing?

IMHO, destroying the world would be unacceptable because it would be impossible to know for certain that you were the last living human. The world is too big. I find nothing objectionable to launching one nuke just for the explosion, as you could be certain no people would be harmed and the property would have no value (happy 4th of July).

Also, I think the experiment may show other sentient beings have value, but it leaves room for humans to be absolutely more valuable. In that case, animal rights would be irrelevant so long as human welfare was at stake. A more revealing experiment would be a man and his spouse in a bunker, who need to launch a nuclear arsenal to eradicate an infectious disease which has killed the rest of the human race but has not affected some other animals. Other humans may or may not be in other radiation proof bunkers. Is it ethical to launch the bombs?

(44:04)There is also a good discussion of what we owe future generations. Should there be a discount rate like we use with bank loans and credit card payments? If so, what should that rate be? Or should we use a Rawlsian veil of ignorance to claim that we have no right to leave the environment any worse than it was when we were born.

55 Fiction

2009-07-03T13:45:00.000-07:00

My local, independent paper, New Times, sponsors an annual 55 fiction competition. 55 fiction is the art of crafting a story in 55 words or less. It is a terrific writing exercise, particularly in editing and brevity (more information here).

Here is a story I've been building the last few days and plan on entering:

Child’s Play

He followed as the bubble whimsically floated up, settling carelessly next to a butterfly and some flowers. Little Alan squinted at the fragile orb: imagining. A door, a window, a chimney, he developed a rainbow-glass house for the butterfly.

What opulence!

The child laughed. The bug fluttered away. The housing bubble burst.

Muslim Students Want Religious Holidays

2009-07-03T10:58:00.001-07:00

Wish I had a shorter headline - here is the article in the New York Times. My question - which isn't raised in the article - is why we cling so closely to the three-month summer schedule. Students in New York city, as well as those in the suburban sprawl, clearly aren't spending those three months plowing the fields; the historical grounding for such an arrangement has disappeared. Mayor Bloomberg is concerned that students will no longer be spending time in the classroom but he could easily increase class time by shortening summer to one month off instead of three. Oh, and wouldn't having time off for religious holidays be an educational experience in itself? Promoting tolerance is as important as ever in modern America (sometimes it seems so few nations are doing it elsewhere).

Shortening summer vacation is a sensible reform that has yet to gain any traction. Another sensible reform being ignored is having high schools start their days later. Why is the educational system to static and resistant to change?

Credit Card Companies Foil Congress

2009-07-02T22:59:00.000-07:00

From the Washington Post:

Credit card companies are raising interest rates and fees seven months before new rules go into effect that will limit their ability to do so, much to the irritation of Congress and consumer advocates.

Regulation: meet Rational Expectations.

Blogging: A History Lesson

2009-07-02T20:19:00.000-07:00

11D offers a very well-written history lesson on blogging as she enters her sixth year in the blogosphere. I can attest to the feeling of burn-out and the time spent, not because I've been busy the past month, but because of the previous year I spent with Zach at RotoNomics, blogging about fantasy baseball. It was a rewarding experience, to be sure, but required a fantastic daily time commitment and provided little external reward.

She also offers some advice on how to make it in the modern blogosphere: "Use your blogs to target particular audiences and have a clear mission, and you'll get a following."

I can only hope to live up to that. So far, this has been an experiment in trying to blog again, only with a much broader framework than "daily fantasy baseball updates and analysis." I'm still trying to find my focus.

In a related post on the future of the blogosphere, Tyler asks how you can combine blogs and Twitter to make your daily intake of information more efficient.

(Wanted to leave this as a comment to your post, Josh, but it was a little too long. Sorry)

But It's Value Can Only Go Up!

2009-07-02T13:02:00.000-07:00

It's no secret that California is at a low point, and Governor Schwarzenegger has his share of critics.

One critic claims that the state is in the current mess because the governor is lockstep with his big business campaign donors and is refusing to consider budget alternatives:

This column and others have detailed how merely changing the rules under which some real estate is not reassessed to current market values on changing hands would provide between $3 billion and $12 billion in new state money each year. All that would take is a majority vote of lawmakers and a Schwarzenegger signature.

This solution seems a little disingenuous. First, if it were so obvious and easy, what has prevented a simple majority of congressmen from getting behind it? Are they all in the pockets of the real estate lobby? And second, wouldn't reassessing property values only increase revenues if property values went up? The article itself acknowledges it has been a tough year for real estate, but only to claim, "Competitive pressures in today's miserable real estate market make it doubtful most owners of properties that have long enjoyed the no-reassessment loophole could pass their expense on to tenants or customers." I thought housing prices dropped in miserable real estate markets.

I am intrigued by Bill Lockyer's solution to the budget stalemate, though I doubt it will garner popular support.

Learning from Bits

2009-07-02T11:30:00.000-07:00

Cleverly titled RSSted Development, Ben Casnocha has an essay in The American about the blogosphere, attention spans, and Tyler Cowen's new book. The essay discusses how ideas are acquired and processed in the information age, especially how we weave pieces from information streams (like blogs and social networks) together to form our own personal narratives. It considers the effects of receiving our information in bit form on our learning and focus.

A couple quotes I liked:

Self-education has gone from being like a loner sitting in a bar sparsely populated with hazily attractive women to being in the center of a packed, rocking night club where the women are wearing mini-skirts and the guys’ shirts open up several buttons down.

The glorification of “focus” is the second problem with the criticisms of bit-consumption and technology use in general. While some amount of focus is necessary, it is not the case that sitting alone in a quiet white walled room with no beeps or buzzes is the ultimate day-to-day environment for deep, creative thinking. Sam Anderson in New York Magazine summarized research that says un-focus is actually an important part of creativity—random meanderings and conversations can trigger important creative insights.

I enjoyed the review and look forward to reading Create Your Own Economy. Interestingly, it took me two sittings to read the whole article and I found myself repeatedly scrolling to the bottom to see how much was left.

Oh yeah, it also had this line:

I had not read any books or taken any classes on the subject [libertarianism]. Names like Hayek and Nozick were as foreign to me as the concept “moral hazard” is to President Obama.

Grief-a-Thon

2009-07-02T10:25:00.000-07:00

Owen Good reports some Xbox Live news:

The Michael Jackson Grief-a-Thon rolls into its fourth big moneymaking day. Except that "Thriller" is being offered free for the rest of the weekend on Xbox Live Marketplace. Ordinarily it goes for 160 Microsoft points.

"Beat It," "Smooth Criminal" and "Billie Jean" join Thriller in the top 10 of the Most Popular in XBLM's Marketplace right now. The former three videos are the standard 160-point price. They're all in standard def.

With all respect to this week's events, grief-a-thon seems a strangely appropriate word for the current news coverage. I think of children getting donations and walking in circles to raise money for their schools, and then I think of the media pundits running in circles and giving up-to-the-second reports on departed celebrities to raise money for their networks.

Note: Most of Michael Jackson's music videos are accessible for free in slightly less than standard definition.

Italian Economy is a Joke

2009-07-02T09:42:00.000-07:00

I'm back from Rome but can't give up reading about the Italian economy quite yet. Found the Doing Business Project and it ranks Italy as, well, not that bad as a place to do business. So even though I spent my time in Italy getting progressively more depressed about the business climate there - and looking at the OECD region, they definitely still have plenty of room for improvement - it seems like things just aren't as bad as Aldo made them out to be.

How to Fix the Auto Industry, Part II

2009-07-02T08:31:00.001-07:00

As I find these, I am going to continue to link to them. I'm sure President Obama doesn't have me in his RSS, but he needs to get the message that his plans for the auto industry are doomed to fail. Some highlights:

"Politicians are addicted to CAFE standards because they create an illusion of doing something sometime in the future without voters experiencing the slightest inconvenience in the present."

"If consumers keep refusing to buy enough small cars from GM and Chrysler to allow them to meet the CAFE rules, how are those companies expected to pay the fines?"

Well-written summary of the many pitfalls of CAFE standards. Definitely worth reading even if you know them already.

What's Wal-Mart's Angle?

2009-07-01T13:27:00.000-07:00

Neil Trautwein, of the National Retail Federation, is "flabbergasted" by Wal-Mart's recent letter to President Obama, voicing support for mandated employer health care. (interview here) How could Wal-Mart, leader in low prices, do such a thing?

A few suggestions:
1) (interviewer) Wal-Mart is in cahoots with SEIU and the Obama Administration. Quid pro quo is that if Wal-Mart helps health care reform, the others will soften on unionization.

2) (Neil Trautwein) Wal-Mart could use supply chain to get competitive advantage in health care costs, but if not, the move at least improves public relations.

3) (The Distributed Republic) Wal-Mart is obviously signing onto this because a mandated health care regulation would stifle small businesses.

4) (The Hill) The only sentence in the letter that actually mentions the mandate states: “We are for a mandate that is fair and broad in its coverage, but any alternative to an employer mandate should not create barriers to hiring entry level employees,” The Senate Finance Committee is considering a policy requiring companies to pay for a portion of their workers’ Medicaid costs. Wal-Mart would be particularly affected by such a requirement because its workforce consists largely of low-wage employees, therefore it is attempting to present a more favorable alternative.

Four seems most convincing to me, though I'm sure knowing the good publicity that would follow (everywhere except Fox News) didn't hurt the decision. Three is a little disappointing to me because it is such a knee-jerk libertarian reaction, stated with such complete confidence, and with such a small grasp of the facts. It doesn't appear the commenter even looked at the letter. Besides, as I understand it, employer mandated health care would only affect large firms, giving smaller firms an advantage.

"The American Rome is Burning"

2009-07-01T09:24:00.001-07:00

I'm more interested in the title than the article itself. In my time in Italy, I heard plenty about ancient Rome, and it seems like the Roman Empire and modern America have a whole lot in common. Both stole many of the interesting aspects of their life from other cultures (see: Greek mythology and architecture in Rome, cuisines from every nation in the US), though in many ways their role as an aggregator made life there as interesting as anywhere in the world. If I remember correctly, the Romans were great conquerors but terrible at governance... America did pretty well on the offensive in World War II, but hasn't done so well at "keeping the peace" in Korea, Vietnam, Iraq, etc. since.

I think there's a lot to learn about the direction America *could* be heading from a good history of Rome - anyone able to recommend one?

America's Got Ripped Off

2009-06-30T22:24:00.000-07:00

Summer is in full swing, meaning another season of America's Got Talent. Once again talent scouts Piers Morgan, Sharon Osbourne, and David Hasselhoff scavenge the country searching out the nation's most entertaining acts (read acts filled with emotionally gratifying backstories). Grand Prize: 1 million dollars. Despite the hyper-dramatization of the show, some of the acts are quite good, and AGT has been a guilty pleasure of mine for the past few years. However, I found a couple of disclaimers at the end of the most recent episode a little disturbing. One, the "Chicago" audition was actually filmed in Los Angeles (How does that work?). And 2) The winning act will not get a million dollar check, but rather a 40 year million dollar annuity "or its present value".

What a rip off! That means that if you are one of five clogging sisters, who are all now married with kids and living in different states, winning the "million dollar contest" means getting annual five thousand dollar checks until 2049. And who knows what the value of the dollar will be at that time?

What if you are an unemployed farmer from Kentucky, with a gift for Country music, and you choose the annuity's present value when you win? How much would you take home?Well, assuming five percent interest, we can use our simple present value formula (right): if i=.05, n=40, and C=1,000,000 then our present value is $428,977.16. Deduct federal income tax (my unemployed friend, you are now a high earner and get to pay 35% like the rest of the fat cats) and state income tax (6% in Kentucky) and you are left with $253,096 a mear quarter of the purported prize.

I don't have a favorite yet, but I'm hoping some more high quality acts will be found in the next cities' auditions for the Las Vegas showdown (read hoping David Hasselhoff will say something insane to praise a mediocre act). Regardless, I hope whoever wins isn't too disappointed by the real value of their prize. Shame on NBC for being so stingy!

A History of Bailouts

2009-06-30T19:57:00.000-07:00

Reading about the legacy of Reagan, I was surprised by the size if the Savings & Loan bailout: Dallek places the amount at $500 billion. I decided to look into the number. Wikipedia, my first source, claims the bailout involved $125 billion in government assistance. Delving deeper, Propublica has a fantastic History of U.S. Government Bailouts. Propublica states that, adjusted to inflation, S&L Bailout cost $293.3 Billion (in 2008 US dollars).

EU: Airline Regulator

2009-06-30T09:59:00.001-07:00

According to blogger Clive Irving, you should be paying more attention to the European Union when deciding which airline to fly in light of the recent spell of air accidents.

"The European Union has the toughest screening process of airlines in the world: More than 160 are on its current black list, meaning that they are not allowed to fly into or out of EU countries."

Notably absent from his post is any mention of the Air France disaster, the largest plane crash in 2009 in terms of fatalities. I'm reasonably certain that Air France is not blacklisted by the European Union.

Twitter

2009-06-28T08:30:00.000-07:00

I am now on Twitter. I'm not sure why and I'm not sure if it will be interesting, but if anyone has suggestions of people to follow I think that's the only way to make it a worthy investment of my time! Let me know who you follow.

Not a Twitter Revolution...

2009-06-28T08:02:00.000-07:00

But something better! I enjoyed this perspective on the goings-on in Iran in recent weeks. This was certainly not the point of the article, but it was my favorite line:

"I didn’t meet any Iranians calling for U.S. intervention; that’s strictly a debate inside the Washington beltway."

I feel that my role as an American is to simply watch this conflict unfold. I don't think we can do anything to equalize the playing field in Iranian politics - this is an unfortunate fact but a fact nonetheless. There's nothing we should do but watch, though you can count on Interventionist America to do much more.