Wednesday, March 31, 2010
I understand that such things are of interest to the beltway insider types more concerned with keeping score - our talking points beat your talking points! - than with substance but otherwise who cares? Did anyone really not know about this stuff?
Inquisitive readers may, of course, want to know more about the club featured in the story. You can find its (comically pretentious) mission statement here and its floorplan here.
Oh, yes, there is alcohol. That means policy discussions must be conducted with brains off.
We only overlapped only a little bit here at Michigan so we did not interact very much, but he had a very large influence on the place, particularly the labor group.
Addendum: some nice thoughts from the Hammer at the Freakonomics blog.
Tuesday, March 30, 2010
I have two quibbles. First, I think the article overstates the idea that Christians no longer think of the Bible as the literal word of God. I suspect that, globally at least, a majority still do, and certainly a large minority do in the United States. This, of course, does not solve the problem of differing interpretations, as the large number of different denominations that hold to this view attests. Second, I think the article underestimates the potential for rapid change within Islam away from the view that the Koranic text is literally the word of God. Several Islamic countries are quite well educated, such as Iran. When the Iranian government finally changes, as I expect it will soon, it would seem ripe for theological change as well.
Hat tip: marginal revolution
Iceland provides some evidence against this theory, as they have just banned strip clubs, despite being in a fairly dire economic situation. Matt Yglesias has some comments, with which I largely agree.
I still find it odd that anyone would think it feminist to either deny female sexuality or to put women out of work. This is just good old fashioned puritanism, dressed up in secular clothes. In my view, a serious feminism aims to empower women, not treat them as metaphorical little girls who need the protection of the state.
The ending bits:
Hat tip: marginal revolution
My last question involves a little story. Not long before Milton Friedman's death in 2006, I tell Mr. Becker, I had a conversation with Friedman. He had just reviewed the growth of spending that was then taking place under the Bush administration, and he was not happy. After a pause during the Reagan years, Friedman had explained, government spending had once again begun to rise. "The challenge for my generation," Friedman had told me, "was to provide an intellectual defense of liberty." Then Friedman had looked at me. "The challenge for your generation is to keep it."
What was the prospect, I asked Mr. Becker, that this generation would indeed keep its liberty? "It could go either way," he replies. "Milton was right about that."
Mr. Becker recites some figures. For years, federal spending remained level at about 20% of GDP. Now federal spending has risen to 25% of GDP. On current projections, federal spending would soon rise to 28%. "That concerns me," Mr. Becker says. "It concerns me a great deal.
"But when Milton was starting out," he continues, "people really believed a state-run economy was the most efficient way of promoting growth. Today nobody believes that, except maybe in North Korea. You go to China, India, Brazil, Argentina, Mexico, even Western Europe. Most of the economists under 50 have a free-market orientation. Now, there are differences of emphasis and opinion among them. But they're oriented toward the markets. That's a very, very important intellectual victory. Will this victory have an effect on policy? Yes. It already has. And in years to come, I believe it will have an even greater impact."
The sky outside his window has begun to darken. Mr. Becker stands, places some papers into his briefcase, then puts on a tweed jacket and cap. "When I think of my children and grandchildren," he says, "yes, they'll have to fight. Liberty can't be had on the cheap. But it's not a hopeless fight. It's not a hopeless fight by any means. I remain basically an optimist."
Monday, March 29, 2010
Some of the material is in German but much is not. My sense is that the debate is much livelier in Germany, where it includes a separate but related competition between an older generation that still includes a lot of institutional and heterodox economists who see the local profession slipping away from their control and a younger generation of economists who want to be part of the broader international profession and to use the formal methods, both theoretical and econometric, in which they have been trained.
And I am pretty impressed that Rudi can cite Feyerabend.
Addendum 1: This post has been acting up, so I have cut out the embed and just left the link.
Addendum 2: The BBC version pointed to by commenter Jessica is at least as funny as the Onion video.
Tuesday, March 23, 2010
The big change in the former has been the rise of economics departments around the world in virtually all developed countries (though not Italy). It's now quite easy to encounter a place you have heard of -- yet never really thought of -- and find they have a bunch of young faculty with articles in tier one journals. In essence the standards are now so high in terms of skills and data sets and thoroughness that it is mainly the young and ambitious who publish in tier one journals. Those people are found around the world.
The 44-year-old tenured Princeton economist isn't so much in the AER as in times past. The incentive, relative to the required work, has changed dramatically. Note also that consulting returns, or public intellectual returns, are more lucrative today than they were twenty or thirty years ago.
I completely agree with the first claim. It has been a lot of fun to watch the growth and transformation of economics in places like Germany and Spain just in the time that I have been a professional economist.
In regard to the second point, I would add one more bit. Publication serves different purposes for those with and without tenure. Essentially, the top five journals represent the tenure gatekeepers at the top departments. Once you have tenure, you just want people to read and cite your papers. If you have built up enough of a reputation, they will read them and cite them wherever you put them, as long as they are good, even if where you put them is just in the NBER Working Paper series. I think in the future we will see more journals offering the option of taking papers "as is" in order to attract papers by established scholars who do not want the hassle of going multiple rounds with referees and editors. A desire to avoid hassle explains the placement of some of my own papers in special issues edited by my friends, even when those papers - e.g. Smith and Todd (2005) - could probably have gotten into better journals. I don't think that the citation count for Smith and Todd (2005) has suffered much, if at all, from its placement in the Journal of Econometrics rather than a top five journal but it would have if I was not already known (and, also, if I had not presented it at lots of seminars and conferences the invitations to which, of course, depend on already being known).
A commenter at MR suggests that
The supply of world class candidates far outstrips the number of jobs available at the traditionally top departments. That's good news for all the other schools. The problem is not limited to Econ departments either.This is, I am sorry to say, complete rubbish. Every year I was at UWO, most years I was at Maryland and every year I have been at Michigan we ran out of economists we wanted to hire and thought we had a chance of attracting before we ran out of slots. This is particularly true in high demand fields like theoretical econometrics.
Oh, and I thought all the 44-year old tenured Princeton economists were in DC?
One can think about this in two ways:
The first is just that Canadians value politeness relatively much more than Americans do. This is absolutely true and has nothing in particular to do with politics. It applies to every area of life. Recall the (hilarious because it rings true) scene in the movie Canadian Bacon in which John Candy pushes through a crowd of Canadians, each of whom apologizes to him after being pushed.
More darkly, the soft left in Canada, when it has the power to do so, does sometimes use the speech rules as a tool of control over what passes for conservatism in Canada.
The letter to Ann Coulter combines both ways of thinking about Canadian speech restrictions. It would be interesting to get a student group at Ottawa to invite some relatively incendiary speaker from the left to campus and then observe whether he or she receives the same letter. I expect not, but you never know, as the siren calls of bureaucratic consistency and legal ass-covering typically resonate loudly in the minds of academic functionaries.
Hat tip: reason
I do not see much coming out of this. The court is not going to overturn Wickard v. Filburn, the New Deal era decision in which it ruled that growing food on your own land for your own use constitutes interstate commerce. Put differently, in substance it ruled that the interstate commerce clause gives the federal government unlimited power to regulate economic activity, subject only to the minor limits imposed by the Court's favorites among the Bill of Rights. Find that in the Federalist Papers! There have been some tiny retreats in recent years but I suspect the court is still smarting enough from Bush v. Gore that it would not touch anything as controversial as this.
Monday, March 22, 2010
Doug Holtz-Eakin in the NYT on the budgetary misrepresentation underlying the health legislation. Doug deserves a lot of credit for doing policy work rather than cashing in on his Rolodex (for the young ones, a device for holding phone numbers written on paper and business cards). The opportunity cost he is paying is a large one.
Finally, Jay Cost on the potential political vulnerabilities of the legislation. A lot could change between now and the time the real spending kicks in, but I suspect that the Republicans and their Blue Dog friends will not be able to accomplish much in the way of rolling back the legislation. Most of what needs to be done the Republicans have spent months opposing, though there could be progress on the minor issue of tort reform. The bottom line is that once people have their subsidies, they are very hard to really ever take away, particularly when the recipients are well organized and politically powerful, as with hospitals, drug companies and doctors. Just look at the farmers, the great welfare queens of the hills and prairies.
One good bit:
Davidson added that she wanted the experience to be as interactive as possible. Parents will be given a recording of the music — as well as a large feather — so they can re-enact the experience at home.And of course you already had guessed this:
The arts organisation, which receives an annual government grant of £8m, ...Hat tip: Freakonomics blog
David Warsh compares the health care bill to the creation of the Fed. I do not see this at all. The bill we got is a tax and spend bill, not an evidence and efficiency bill.
Sunday, March 21, 2010
It might surprise some readers that I actually support (inexpensive) universal coverage. We have already made a decision that we will not let people, or rather US citizens, go without certain types of health care. Such uncompensated care is paid for by the government or is socialized via the higher private insurance premiums that result from some people going bankrupt or otherwise not paying. Given that we have made this decision, one which I do not, at a general level, disagree with, we should do so in a thoughtful, organized and evidence-based way, rather than in the current dishonest, piecemeal and silly way. Requiring people to buy health insurance makes sense for the same reason that requiring them to buy auto insurance does: if you do not, some people will not buy it but will get into accidents anyway. For reasons beyond the scope of this post I think it makes more sense to require the purchase of a minimal private health insurance plan, with a subsidy for those who cannot afford to do so, than to institute a single payer or a completely government run system. Indeed, a serious reform would have replaced both Medicare and Medicaid with exactly this. I would then have the government define the minimal insurance package by setting an affordable dollar value and having a panel of health care experts and economists figure out what to buy with it. If people wanted more insurance, they could of course buy policies that provided more coverage than the government minimum with their own funds. Simple and easy. And there is no need for it to add, on net, to the deficit, if accompanied by, for example, the removal of the part of the Medicare Part D donut that (insanely) provides first dollar coverage of prescriptions, by the ending of the tax subsidy for health insurance and/or by setting the dollar value of the basic plan below current Medicare levels.
What is in the process of being passed now is very much not a thoughtful, or reasonable or evidence-based way to obtain universal coverage without busting the budget. If reform means making things better then it is not reform, and it is certainly not any sort of great progressive victory. It is an insurance purchase requirement, which may not even last through the courts, a whole bunch of spending, a whole bunch of unfunded mandates to the states, a whole bunch of changes to what insurance companies can do that will raise premiums, some implicit transfers from the young to the relatively old via the design of the subsidies, and some other assorted bits. It is not about cost-control nor about using evidence to guide what gets paid for nor about fixing the welfare reducing inefficiencies in the present system, such as the tax subsidy to health insurance. The only positive thing one can say is that it probably will not directly reduce innovation in the health sector, which some of the proposals on the table at various points likely would have. It may, of course, reduce economic growth via tax increases at the state and federal levels and thus reduce innovation indirectly. On the other hand, because the scheme essentially represents a subsidy to health care demand, it could even increase innovation.
Moreover, the whole process leading up to the vote today has been rife with lies by those advocating for the policy. Those lies include the fake future Medicare cuts included in the legislation to make the budget scoring look good and, more generally, pretty much all claims about cost-cutting. There was also a lot of lying about Americans without health care, when in fact what there are is Americans without health insurance. In most cases, though not all, these are not the same. There were also a lot of ridiculous claims about the likely effects of the reform on health outcomes and on bankruptcies. Americans are sick because they smoke, eat both too much and the wrong things and rarely exercise, not, in the main, because they lack health insurance. Similarly, Americans, again in the main, go bankrupt because they are irresponsible with credit, not because they get sick.
At the same time, the Republicans performed completely disreputably as well. The three aspects of the proposal they went after: the requirement to purchase insurance, the "death panels" designed to bring some evidence to bear on what gets covered and the cuts to medicare, are or were, before they were cut out, the good bits, not the bad ones. And, really, prating on about socialism while defending Medicare in its present form and after passing Medicare Part D under Bush II, let alone after starting two voluntary wars, is pretty rich, and pretty ridiculous.
The whole lot of them, Democrats and Republicans, ought to resign in shame. This is a debacle on the order of the Iraq War or Medicare Part D or, going back into the distant past, on the order of Prohibition or of setting up Social Security as a pay-as-you-go system rather than a forced savings system. The public will continue to bear this burden long after the current crop of congressional ideologues, hucksters, morons and sleazebags is gone from the scene.
Some related thoughts from Megan McArdle at the Atlantic.
Saturday, March 20, 2010
Very nice indeed. Now back to reading ECON 490 papers.
Addendum: Seattle Times coverage.
My favorite bit:
"In Denmark there are no seditions, mutinies, or libels against the government, but all people are, or appear to be, lovers of their king, notwithstanding their ill-treatment, and the hardships they groan under. And I suppose one principal reason of this to be the equality of the taxes, and the manner of taxing. It is not to be imagined by those that see it not, what a comfort it is to the sufferers to be ill-used alike."Denmark, like Sweden and Norway, remains remarkably homogeneous on many dimensions, including the politics. Or, at least, I perceive them as such in juxtaposition to the wildly heterogeneous US.
I can report, though, based on personal experience that the food has gotten better in the intervening centuries!
Hat tip: Lars Skipper
Friday, March 19, 2010
Average hits on the five days prior to the link: 150 or so
Hits on the day of the link: 1100
Hits the day after the link (so far): 800
Fame, of a sort.
I'm glad I put a fair amount of thought into the list, even pulling out my old paper file of the lists of all the books I have read in each year since 1978.
It will be interesting to see if these visits generate any additional long term readers.
Thursday, March 18, 2010
Creation was better than I expected and, I would say, better than the NY Times review suggests. I was expecting a triumphalist manifesto, and received, as the NYT mocks, a melodrama instead. What I do not know is how historically accurate it is; a Darwin biography will therefore be added to the Amazon cart.
Wednesday, March 17, 2010
Tuesday, March 16, 2010
1. Friedrich Hayek, Constitution of Liberty. I read this as an independent study course with Paul Heyne in around my third year of college. It started the process of changing my politics from Rockefeller Republican to classical liberal and also clarified for me, via the chapter helpfully entitled "Why I Am Not a Conservative" the differences among European and American conservatism and classical liberalism.
2. Richard Epstein, Takings. Had a very large impact on my thinking about US constitutional law. It also helped me see the ways in which lawyers think about things differently than economists. Around the same time I audited a constitutional law class at Chicago taught by Michael McConnell. Reading parts of the Wickard v. Filburn decision in that class disabused me of whatever reverence I had for the Supreme Court.
3. Douglas North and Roger Leroy Miller, Abortion, Baseball and Weed. I read this for a book report in my high school civics class. It is the book that started me on the road to being an economist. It is nothing more than chapters giving, in 10 or 15 pages, how economists think about various public policy issues. For me, it was, to borrow a phrase, drano for a clogged mind.
4. James Buchanan and Gordon Tullock, The Calculus of Consent. I read this early on in graduate school, probably for Jim Snyder's class or at least around that time. It broadened my view regarding the scope for alternative institutions for social choice.
5. John T. Flynn, As We Go Marching. Perhaps the book that first opened my eyes to the fact that popular historical narratives are often wholly false. More narrowly, it completely changed my view of FDR's administration.
6. Colin Howson and Peter Urbach, Scientific Reasoning: The Bayesian Approach. Heckman recommended this to me and it had a big influence on how I think about econometrics and empirical work.
7. Scott Davis, The World of Patience Gromes. This book influenced my thinking about the 1960s and about the nature of the welfare state in America. Two other books that pushed me in somewhat similar directions are Drylongso, by Jonathan Langston Gwaltney and All My Kin by Carol Stack.
8. James Q. Wilson, Bureaucracy. This book was one of the things (becoming more empirically minded as a result of working with Jim Heckman being another) that softened the radical libertarianism of my late undergraduate days. Some problems are hard for any organization to solve, public or private. It also led to my interest in performance standards and others tools, including program evaluation, that try, in part, to substitute for markets.
9. Thomas Kuhn, The Structure of Scientific Revolutions. One can usefully think about science as a social enterprise, which it surely is, without becoming completely unmoored. This book disabused me of the methodological silliness offered up in high school science (and even, to some extent, in my college physics and astronomy courses).
10. Robert Nozick, Anarchy, State and Utopia. Presents the case for the minimal state, as against both anarchy and larger states. In the end I ended up as more a combination of Smith, Locke and Hayek, but this book shaped my thinking nonetheless.
I would argue, though, that the citation count is a bit beside the point, at least if the question is what should be covered in a high school economics course as opposed to, say, an undergraduate history of thought course or in a first year graduate course in macro. Another way to see this is to look at the REPEC author ratings, which are (heavily) weighted toward recent work. There is theoretical econometrician Peter Phillips right near the top. How much of his work should go into a high school economics course? How about Robert Lucas? Should the Lucas critique loom large in high school economics? In short, I think citation counts and related measures answer a different question than the Texas folks were trying to answer.
Two other quick bits:
First, I would also disagree in part with Justin's comparison of Hayek and Friedman. Friedman is certainly more influential in academic economics. In society and politics more broadly, I think the question is far less clear, as Hayek matters a lot more in Europe than Friedman does.
Second, I would note that this whole discussion highlights one of the downsides to government run primary and secondary schools, which is their tendency to impose a stringent curricular uniformity in the service of ideas that happen to be popular in a given time and place. Wouldn't it be better to let educational diversity flower?
Hat tip: Scott Wood
Monday, March 15, 2010
Saturday, March 13, 2010
At my mustache has recently gone gray, it continues to perform the function of making me look older, but now that function is perhaps less desired!
Tuesday, March 9, 2010
For me, the most interesting bit is in the appendix. The study authors would like to estimate the volume of cigarettes consumed in the US on which tax has not been paid. One reasonable way to do this starts with using administrative data to determine the number of cigarettes on which federal taxes are paid. Administrative data works well here because federal taxes are paid at the production site and careful records are kept. The number of cigarettes consumed, in contrast, can be estimated using data from a nationally representative survey, in this case the National Health Interview Survey (NHIS), a data set widely used in research in health economics.
The problem is that when you do this, you discover that the number of cigarettes consumed lies well below the number on which taxes are paid - see Table 4. Given that cigarettes degrade in quality when stored reasonably rapidly, which indicates that the excess cigarettes are not being stored by consumers, this finding suggests that the NHIS measure of cigarette consumption has a downward bias, presumably due to "non-classical" measurement error in smoking incidence and/or (probably and) in number of cigarettes smoked conditional on reported incidence. The study does about the only thing one can do in this situation, which is to present estimates - see Table 5 - of the lost tax revenue as a function of assumptions about the downward bias in the NHIS consumption measure. One obvious recommendation here is to improve our knowledge of the degree of downward bias in smoking consumption measures by doing some sort of validation study. More generally, this study provides a nice example of how research on measurement, which might seem rather arcane, actually has a real world payoff.
The other bit of the study that stands out to me is this:
Recommendation 3: Allow enforcement officials to pay investigative expenses with proceeds gained through undercover operations.I disagree with this bit for the same reason I dislike asset forfeiture laws. I do not think that law enforcement should be a profit center for the government. Making it such strongly enhances the incentives for misbehavior by law enforcement officials.
Problem: Currently, tobacco tax enforcement programs are funded principally through agency appropriations or from forfeiture proceeds arising from asset forfeitures in concluded criminal cases. Additional funding through the use of proceeds gained through undercover investigations would expand investigative resources without the use of additional appropriated funds.
Recommendation: Existing law should be amended to authorize TTB to use proceeds gained from undercover tobacco tax enforcement operations to fund its investigations.
Slip Sliding Away: Further Union Decline in Germany and BritainPersonally, I've always tried to avoid large German dummies.
This paper presents the first comparative analysis of the decline in collective bargaining in two European countries where that decline has been most pronounced. Using workplace-level data and a common model, we present decompositions of changes in collective bargaining and worker representation in the private sector in Germany and Britain over the period 1998-2004. In both countries within-effects dominate compositional changes as the source of the recent decline in unionism. Overall, the decline in collective bargaining is more pronounced in Britain than in Germany, thus continuing a trend apparent since the 1980s. Although workplace characteristics differ markedly across the two countries, assuming counterfactual values of these characteristics makes little difference to unionization levels. Expressed differently, the German dummy looms large.
Sunday, March 7, 2010
It is a mixture of universities wanting publicity, news outlets wanting to generate excitement and fear, and ignorance of how science works on the part of journalists and the public. The only thing the comic leaves out is the wild over-representation of counter-intuitive findings in the media, because of course they are news, and confirmation of existing views is not.
Hat tip: the agitator
Hat tip: Glenn Simon on FB
Friday, March 5, 2010
Thursday, March 4, 2010
I have not had a chance to read over this carefully but the results are pretty important. The study has three key design elements: (1) random assignment of access to Head Start; (2) the study sites are a random sample of Head Start sites around the country, which suggests strong external validity; and (3) a large amount of substitution into other types of center-based childcare and also a surprisingly large amount of control group cross-over into Head Start. There is also a non-trivial amount of treatment group dropout.
Factor (3) is important in interpreting the rather lackluster findings. The study is comparing the offer of Head Start access to the best alternative (which in some cases turns out to be a different Head Start center not in the experiment). The study is consistent with Head Start having a positive effect relative to the child staying home with the parents, but not much in the way of effects relative to the alternatives chosen by the parents in the absence of access to Head Start.
This study should slow the rush to spend large sums on these programs and hopefully will encourage a systematic program of research aimed at learning what types of early education programs have persistent impacts that cover their costs for this age group.
We interviewed Arthur when he was first on the job market back when I was an assistant professor at Western Ontario. Yes, I feel old!
Hat tip: Rebecca Warburton
Wednesday, March 3, 2010
I learned this lesson myself back in the 1990s. I inherited about 20K from my grandmother when I was in college. I put the money in an asset management account at Merrill Lynch; at the time, such accounts were exciting and new. In those days, the account came with an actual personal broker, my broker was a gorgeous young women, only a few years older than I was, with a habit of wearing smart business suits with very short skirts. I would drive or take the bus to downtown Seattle every few months to meet with her. She was actually a good broker in the sense that the REIT she had me put about half the money into has continued to pay a very nice dividend year after year through ups and downs. I still have it. She also did me the favor (as I learned later this is very much a discretionary favor) of letting me in on the Costco IPO. I made several thousand dollars on that in less than a week.
Sadly, she moved on to better things and was replace by someone I remember only as the frat boy broker. He was the sort of broker that the Atlantic piece is all about. He had me invest in something called Merrill Lynch's "emerging growth fund". During a several year period in the 80s when the market roughly tripled, the "emerging growth fund" grew by exactly zero. I suppose I should be happy that it did not go down! I got smart and learned my lesson at some point in the 90s and sold it and resolved never to deal with brokers again. I suppose I should be glad that this lesson cost me only (in opportunity cost) a few thousand dollars.
Economists worry about markets with information asymmetries for good reasons!
The question then becomes, how best to bring this object lesson in public management to a close? There will be lots of upset as small communities lose their heavily subsidized postal outlets and still more as postal workers lose jobs that pay far better than other jobs requiring similar skill sets (and provide generous pensions and job security).
My thought is that it is time to repeal the laws giving the postal service a monopoly on mail delivery and that this represents a better alternative than trying to privatize the current institution, either with or without its legal monopoly intact. You want the end result to be a vibrant, competitive postal delivery industry, not the postal equivalent of GM, and I think privatization at this point would yield the latter.
Consider for example the story I have heard attributed to a famous senior faculty member at Princeton who responded to a student's less than brilliant question by walking to the student's seat in the lecture hall, giving the student a quarter and saying "Go call your mother and tell her you are not going to be an economist."
That is a serious slam. The email I linked to is a warm cozy blanket by comparison.
In any case, good advice.
Hat tip: the agitator