Sunday, December 25, 2005

Travelling

On this day it is appropriate that I set off for the Holy Land. To return circa January 7th. While the Holy Land surely has internet, it may not have internet (or time) for me. Perhaps no posting.

Damn it...

I thought that writing a paper on the new game show Deal or No Deal might be a good idea, but it's definitely not original.

Saturday, December 24, 2005

The Right

Something even more important than ideology holds the Right together: culture. The coalition is more sociologically coherent than one might imagine. Gun ownership is much more common among Evangelical Christians than it is, say, among university professors. Nearly half of small business owners consider themselves born-again Christians. Antitax advocates and members of the Christian Coalition are both enthusiastic listeners to talk radio. Back in the 1960s, Jewish urban intellectuals and Southern moralists had little in common. They may still be odd bedfellows but, over time, they have discovered things to talk about: the tragedy of family breakdown, the evils of Yasser Arafat and Hillary Clinton.
--John Micklethwait and Adrian Wooldridge, "Right Nation" 196.

Friday, December 23, 2005

Off Center

Off Center is an excellent how-to guide for exercising political power. How you, as head of a political party in power, could be more effective at getting passed the legislation that you want. The problem is that it has aspirations to being more: to showing how this is unprecedented and violates the will of voters -- that Republicans are governing from the Right while the voters are centrist. On that score it fails.

Hacker and Pierson cannot show that what Republicans currently do is unprecendented for they never make a case for what is the precedent. They hint darkly that various Republican tactics have no precedent and I, as a nice partisan, am perfectly willing to believe them, but they never actually provide comparative (historical) evidence for this claim.

Their use of polling data to prove voter preferences is equally flawed. They provide lots of polling data showing that a given policy was un/popular at a given moment, or that compared to other worries the policy proposal was relatively low on the list (tax cuts: only 5% of voters had taxes at the top of their lists of worries, yet Bush went ahead...). There are two problems. First, what does polling data actually mean. Second, how are people's responses to polls translated into action (votes).

I'm generally skeptical of survey data on political preferences because it always makes me so happy (yay universal health care!) and then I'm disappointed in how people actually vote. This is because of all the peripheral issues that determine how people respond to polls: what are the alternatives and the trade-offs that people are forced to consider, who are they trying to impress...And the way that Hacker and Pierson report some poll results is quasi-misleading: Even a poll that shows that only 5% of people consider tax cuts a top priority might show that it is among the top 5 for a vast majority.

Just because someone claims in a poll that tax cuts aren't important to them doesn't mean that they won't vote for the guy who gave them tax cuts. Hacker and Pierson would need to present some kind of theory -- however crude -- linking poll results on individual policy questions to how people actually vote. There is a big difference between a prospective question on a poll and a vote in a polling booth for someone who actually delivered.

This all comes back to my quasi-belief in revealed preference: if people vote a certain way, then they must want it. There was also an odd way in which voters in Off Center swung wildly from rather intelligent people (we're supposed to believe what they tell pollsters and believe that people are consistent in what they tell pollsters and what they want from politicians) to rather stupid people (voters can't figure out what is going on in Washington because the media isn't quite straightforward and Republicans mislead). Someone (Bryan Caplan, say) could probably say something more interesting about this inconsistent view of the voter.

If you want to understand how to weild power (or how Republicans wield power), this is an excellent book. If you want to generate moral outrage because this is unprecedented or goes against what American's really want, well, there is work to be done. Plus, it is written in that annoying chatty and inelegant style (with short, crude sentences and contractions) that academics adopt when they write for the masses.

Thursday, December 22, 2005

Dude

Paul Soglin has a blog where he talks about Sacha Baron Cohen and more timely topics. For those lacking in Madison political trivia, Soglin was elected mayor in 1973 as a nice radical and then was re-incarnated in the 1990s as an almost DLC-type mayor. His many daughters include Rachael, the spelling of which confused me for many years on how to spell Rachel (the daughter is named after a Michael).

Tuesday, December 20, 2005

Charlie And The Chocolate Factory

Is a stunning movie. The creepiness of Willy Wonka goes along with the general creepiness of Roald Dahl's fiction. If anything, the movie reduces the creepiness (we see that the other four children survive). Though the back-story on Wonka serves to make him more creepy and odd -- as it should. Really rather marvelous.

Tax Incentives

Suppose that the political process in each town is perfect such that the maximum amount of tax incentives the town will offer max's out at exactly equal to the increased utility to the town. How does a company decide to locate? Given that there are multiple communities bidding, it will pick a location based on the maximum of tax breaks plus profit to be derived. Without tax breaks it would maximize profit (efficiency) in choosing location; with tax breaks it maximizes efficiency + tax breaks, so it may not maximize efficiency. This has happened because the company internalizes some of the positive externalities of its being located in a given town.

We can say a few other things about company location decisions given that it maximizes profit and tax breaks:
  • A place that is more profitable will, ceteris paribus, win;
  • A place that is able to offer more tax breaks will, ceteris paribus, win;
  • If tax breaks are sufficient, a location that is less profitable might win.
This last is the interesting case. I'm pretty sure that this is still total welfare maximizing, but the distributional issues are rather interesting.
  • Within the town: the tax breaks increase everyone's taxes (or decrease everyone's services) but benefit largely those employed by the firm (though there may be spill-overs). So this is a redistribution to people who work for the firm from the other townies.
  • Between firm and town: we have stipulated that this town is a less efficient place to be. The town, because it is competing against lots of other towns, will have to bid a large portion of the benefits of having the firm located their. Hence, most of the within town benefits will go to the firm. So money is redistributed from town to the firm (given that the firm was there before).
So tax incentives serve largely to increase profit at the firm, and then redistribute money from other towns-people to the workers (unless the spill-overs are greater than the tax breaks).

This looks a lot less malicious if spill-overs are very large. Also, if the company does not stay, then the town might die; whereas if it does not come it just might not grow. So the endowment effect is at work, I'd suspect. I'm sure there is much more to say. Henry?

Sunday, December 18, 2005

The Two Sides of Monsieur Porter

Eduardo Porter has two articles in today's Times. One is quite intelligent, pointing out that the tax breaks employers receive for providing health insurance would be almost sufficient to fund health care for the poor. As policy this would run into the old adverse selection problem in that employers would no longer buy health insurance for employees and so employees would have to get insurance on their own. This is potentially rather difficult, though the article hints that people would be forced to pool in order to buy health insurance which may or may not make any sense. But the basic analytic point is sound and interesting.

The other is a rather foolish attempt to be counterintuitive on the "trade and not aid" argument. Porter points out that countries which import food would be hurt by lifting food subsidies in the West because it would raise the prices of imported food. If you are a net importer, this obviously has detrimental welfare effects. But the "trade and not aid" is not about short-term redistribution, but about changing the long-run incentives in poor countries. If food prices rise, then you get more farming and hopefully more capital accumulation in a distributed fashion. Now "trade not aid" has problems: not least, the estimated rise in food prices may well not be sufficient to do much. But at least take the argument seriously, and don't argue against a mis-reading of it.

Saturday, December 17, 2005

Heathrow (again)

Ten hours to go in Heathrow.

Why aren't airports fully functional all night? Specifically, why aren't international airports with long-haul flights open all night? I can't change money, buy food, go to my terminal or do much of anything except sit here and read. (Frank Conroy's Body & Soul, which is very nice.) But why not run flights to, say, Chicago or Hong Kong throughout the night? When you are traveling more than 5-6 time zones, time becomes somewhat meaningless anyway. I suppose that flight crews based in London would not be happy about 4:00 A.M. flights. But if they were based in Chicago, it would make more sense.

The entire economy is a game...

If you have time and you want to hear brilliant people talk about game theory and its applications, listen to Robert Aumann and Thomas Schelling's Nobel Prize lectures.

Friday, December 16, 2005

Wow

Via Brad Plumer, the U.S. will spend nine percent of GDP, about $1 trillion, on advertising in 2005. Health care is at fifteen percent of GDP. Plenty of people wonder if we can "afford" to spend fifteen percent of GDP on health care, yet you won't hear anyone questioning whether we can "afford" to spend nine percent of GDP on advertising.

Finals are finished

Yay. If last year is any indication, expect this blog to go on a four month hiatus. I suspect, though, that this year will be different (for many reasons I hope these next four months are very different from my last December - April, blogging is but a minor one).

Thursday, December 15, 2005

Romney won't run for reelection

Another step closer to my 2008 dream match-up between Mitt Romney and Mark Warner.

Iraqis like to vote

See here

If Iraq does in fact become a functioning American-style democracy, will it all have been worth it? I would venture to say yes.

Some last observations of Budapest

When I was in Spain for a weekend, there were huge crowds gathered around a troupe of Native Americans in traditional Native American garb and playing traditional Native American music. (Since I go to Swarthmore I am compelled to point out that none of this may in face be traditional. But it seemed that way.) Today, I walked by the same thing at a market by my apartment. It seems odd to me that this is so popular in Europe, but I guess it's not much different than, say, non-Irish celebrating St. Patrick's Day.

I frequent a Chinese buffet down the street. From what I can tell it is run by a mother and her two children, they are the only people I ever see working there. And they are there daily: the buffet is open for 10 hours and there must be another 3-4 involved in food preparation and cleaning. So each works perhaps 14 hours a day, every day of the week. Such is the cost of building capital, it requires total commitment and a little ambition. Where do you see the same sort of thing in the United States? Is it solely a feature of developing economies?

Two finals down, two to go. Out of Hungary on Saturday, into America on Sunday (with 12 hours in London in between. Ugh.)

Monday, December 12, 2005

The National Review Is Fun

The 50th Anniversary issue especially has some real gems. Like Ramnesh Ponnuru arguing for the coherency of conservatives in that....wait for it....conservatives take the American Founders seriously. Not that there is any particular piece of wisdom we can learn from the past, but that conservatives engage in a conversation with the Founders. Sure they may emphasize different things, but what's important is that they respect the Founders. Now this has the slight problem that suddenly American conservatism has been defined to be entirely distinct from conservatism in every other country -- and in fact has nothing in common with conservatism in any other country, which is odd, to say the least. And trying to differentiate this from liberals is rather strained. Plus it is just odd: I've always understood conservatism to either be a statement about human nature or a respect for tradition. Tradition not in terms of what some random dead dudes wrote down, but as in what has worked in society before -- and what is perceived to make it work today. Anyway.
It would be foolish, because futile, to seek to impose an artificial conceptual unity on the Right. Whatever holds the conservative coalition together, it is clearly not any of the most intense passions that immediately motivate its factions. Conservatives are not held together by the Christianity of the social Right or the free-market faith of the libertarians or the aggressive nationalism of the hawks.

Yet I think that most American conservatives, of whatever stripe, cna reasonably be described as engaged in a common enterprise, even if the fact that it engages them in common sometimes eludes them. That enterprise is the conservation of the political inheritance of the American Founders.

It is also an enterprise that divides them. Different types of conservatives have different understandings of what that inheritance is, emphasize different aspects of it, and reach different conclusions about what conservation practically entails. This may be a paradox but it is not a contradiciton. The enterprise consists in important part of a continuing conversation about what it means to conserve that inheritance.

Sunday, December 11, 2005

Having a plush office

Matt Yglesias launches into the whole should-college-athletes-get-paid question, and in comments people get caught up on the question whether college athletic programs make money. Sometimes that is relevant sometimes it is not. When it is claimed that college athletics is useful because it brings in donations or makes money it is useful to point out that this is not empirically accurate. When someone wonders whether college athletes could be paid and it is pointed out that athletic programs don't make money hence it is not affordable, this is not useful because big time athletic programs are not run as profit-maximizing enterprises (is anything run to maximize profits?). Rather, they maximize the luxury of coaches and players and the excitement surrounding it. This is not the same as maximizing profit. Because administrators have no reason to make money -- it would just go back to the univeristy -- they spend it by making their lives, and the lives of their athletes, more pleasant. Entirely rational behavior. But you cannot infer anything about what the actual money spending capabilies are from the profit-loss statement because you are working with a "business" that works with a soft budget constraint and has a major principle-agent problem with respect to maximizing profit.

Friday, December 09, 2005

An odd statement...

From this essay that attempts to link economics with evangelical Christianity (emphasis mine):
The best of a rising generation were revolting against their training, and because of this the press and public paid attention. Orthodox economists counterattacked, first in France and then internationally. Right-wing globalist Robert Solow wrote a savage editorial in Le Monde defending standard economic theory. The debate became so protracted that the French minister of education launched an inquiry.
But Solow is practically a socialist...

Tuesday, December 06, 2005

Progressive pricing for knowledge

Attempting to see this paper, I find:
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html.
Luckily, my .hu TLD gets me in for free. (Though I do have one and maybe two other ways to access it.)

Just wanted to point out...

...that Mitt Romney's health care plan for Massachusetts is really smart. Basically, he intends to make health insurance mandatory. Those with the means will have to pay for it themselves and the poor will receive subsidized (or free) insurance. Everyone in Massachusetts will have some sort of policy.

Why is this smart? Because the main problem in the health insurance market is adverse selection. A fair insurance policy (one that costs what is paid out in benefits to the average insuree) is not viable. Those that are less likely to get sick will not purchase the policy, while those that are more likely to get sick will buy it. The result is that insurance prices are pushed up and many are left uninsured.

Romney's plan forces everyone to purchase insurance. In this case, insurance companies can charge the fair price without fear of adverse selection. Result: everyone is insured at a lower price.

Isaac, what do you think?

Wow

Daniel Drezner's blog is often rather disappointing, more news summary than analysis and when there is analysis, well, it's uninteresting or predictable. But this is really interesting and really smart. Not that I necessarily agree with it.

Monday, December 05, 2005

I'm indecisive...

Henry wonders about my foxiness. He's probably right: economics has given me more of a hedgehog view of things, but I still resent simplicity in viewing the world. For reasons of biography I have to like and respect Isaiah Berlin, but for reasons of being a wishy-washy pluralist his essay "John Stuart Mill and the Ends of Life" has to be one of the more inspiring things I've ever read. Some random quotes (understand the "he" is J.S. Mill, but I highly doubt it is an accurate reading of Mill, rather, this has to be understood as speaking of oneself in the third person):
What he hated and feared was narrowness, uniformity the crippling effect of persecution, the crushing of individuals by the weight of authority or of custom or of public opinion; he set himself against the worship of order or tidiness, or even peace, if they were bought at the price of obliterating the variety and colour of untamed human beings with unextinguished passions and untrammelled imaginations.
-- 221, "Liberty," (also in Four Essays on Liberty)
He was committed to the answer that we can never tell (until we have tried) where greater truth or happiness (or any other form of experience) may lie. Finality is therefore in principle impossible: all solutions must be tentative and provisional.
--227
To understand is not necessarily to forgive. We may argue, attack, reject, condemn with passion and hatred. But we may not suppress or stifle: for that is to destroy the bad and the good, and is tantamount for collective moral and intellectual suicide. Skeptical respect for the opinions of our opponents seems to him preferable to indifference or cynicism.
-- 229
Without infallibility how can truth emerge save in discussion? There is no a priori road towards it; a new experience, a new argument, can in principle always alter our views, no matter how strongly held. To shut doors is to blind yourself to the truth deliberately, to condemn yourself to incorrigible error.
-- 232
the conviction..that there exists a basic knowable human nature, one and the same, at all times, in all places, in all men -- a static, unchanging substance underneath the altering appearances, with permanent needs, dictated by a single discoverable goal, or pattern of goals, the same for all mankind -- is mistaken.
-- 233
Man is spontaneous, that he has freedom of choice, that he molds his own character, that as a result of interplay of men with nature and with other men something novel continually arises, and that this novelty is precisely what is most characteristic and most human in men.
-- 234
Fallibility, the right to err, as a corollary of the capacity for self-improvement; distrust of symmetry and finality as enemies of freedom...
-- 237
Many-sidedness of the truth and of the irreducible complexity of life, which rules out the very possibility of any simple solution, or the idea of a final answer to any concrete problem.
-- 237

Turns out...

...that finals are bad for blogging. And, also, that discussing Bayesian updating of subjective probabilities without resort to any mathematical notation is mildly difficult, though kind of cool. This in the context of Pauly's 1980 book "Doctors and Their Workshops" where, in chapter 4, consumers put more or less weight on physicians' advice depending on their past history with the physicians' advice. The model is a bit goofy (you assume a constant marginal product of medical care given a level of health and you assume that consumers know their level of health, but you assume that the table matching a level of health to marginal product of medical care is not widely known). Yet it is ever so inventive to make the demand side smarter than most models would have it be.

Sunday, December 04, 2005

Sonic?

Via Dan Drezner, this review by Louis Menand of Philip Tetlock's new Expert Political Judgement: How Good Is It? How Can We Know?. He divides "experts" into two categories. Menand writes:
Tetlock uses Isaiah Berlin’s metaphor from Archilochus, from his essay on Tolstoy, “The Hedgehog and the Fox,” to illustrate the difference. He says:
Low scorers look like hedgehogs: thinkers who “know one big thing,” aggressively extend the explanatory reach of that one big thing into new domains, display bristly impatience with those who “do not get it,” and express considerable confidence that they are already pretty proficient forecasters, at least in the long term. High scorers look like foxes: thinkers who know many small things (tricks of their trade), are skeptical of grand schemes, see explanation and prediction not as deductive exercises but rather as exercises in flexible “ad hocery” that require stitching together diverse sources of information, and are rather diffident about their own forecasting prowess.
A hedgehog is a person who sees international affairs to be ultimately determined by a single bottom-line force: balance-of-power considerations, or the clash of civilizations, or globalization and the spread of free markets. A hedgehog is the kind of person who holds a great-man theory of history, according to which the Cold War does not end if there is no Ronald Reagan. Or he or she might adhere to the “actor-dispensability thesis,” according to which Soviet Communism was doomed no matter what. Whatever it is, the big idea, and that idea alone, dictates the probable outcome of events. For the hedgehog, therefore, predictions that fail are only “off on timing,” or are “almost right,” derailed by an unforeseeable accident. There are always little swerves in the short run, but the long run irons them out.

Foxes, on the other hand, don’t see a single determining explanation in history. They tend, Tetlock says, “to see the world as a shifting mixture of self-fulfilling and self-negating prophecies: self-fulfilling ones in which success breeds success, and failure, failure but only up to a point, and then self-negating prophecies kick in as people recognize that things have gone too far.”
I think I'm a hedgehog, by virtue of personality alone. (Isaac can speak for himself but I would venture to say that he is a fox.) I also think that in the past year I've tried to become more of a fox. But it's fun being a hedgehog, you don't have to think about subtleties or nuance, just get out your intellectual nuclear weapon and go crazy. Unfortunately, it's easy to become irrelevant.

Saturday, December 03, 2005

Thank you

Finally, someone has recognized the absolute banality of the popular anti-Bush movement. Via Matt Yglesias, this piece in TNR by Jason Zengerle makes a sacrificial lamb out of Bright Eyes' Colin Oberst. But a worthy lamb he is; writes Zengerle:
So, without further ado, here are the opening lines of the protest song of the century: "When the president talks to God, are the conversations brief or long? Does he ask to rape our women's rights? And send poor farm kids off to die? Does God suggest an oil hike when the president talks to God?" Yes, the lyrics are that bad, and the instrumentation--provided by a lone, off-putting acoustic guitar--isn't much better.

[...]

The only thing that's provocative about Oberst's celebrated protest song is its insults. "When the president talks to God, do they drink near beer and go play golf?" Oberst sings. "When he kneels next to the presidential bed, does he ever smell his own bullshit?"
Is this helpful? Will this convince anyone that isn't already convinced? Will this cause people to take to the streets? No: no more than the "Bush is stupid" jokes that drop into my inbox regularly; no more than the equally awful Green Day lyrics that are all the rage these days; no more than "Fahrenheit 9/11".

Bush is obviously an utter incompetent. Please, just try and keep the discourse civil, intelligent and maybe even hopeful.

Friday, December 02, 2005

Odd examples

A large part of medical care is concerned with the receipt of comfort, reassurance and sympathy, and it is difficult to receive from someone who is being treated in the way a second-hand car dealer might be treated by Ralph Nader.
--J. Richardson. 1981. "The Inducement Hypothesis" in Health, Economics, and Health Economics at pg. 205.

Thursday, December 01, 2005

Economics is cool

Via Michael Mandel, the schedule for the 2006 AEA meeting. Some seminar titles:
The Economics of Paying Too Much
Economics of Marriage and Dating Markets
Multiple-Father Families
The Family, Institutions, and Economic Growth
Inattention and Consumption Behavior
Kyoto and Beyond: Alternative Approaches to Global Warming
Exposing Cheating and Corruption
Skin Tone Discrimination and Economic Outcomes
Endogenous Information Acquisition
Behavioral Political Economy
Not only is economics cool, it's hardly the rationality-worshipping caricature some make it out to be.

With headlines like this:

U.S. Is Said to Pay to Plant Articles in Iraq Papers , do you really imagine the U.S. government is half-competent? What does Iraq need for long-run stability? A stable and functioning civil society. Doing things that allow people to dismiss any and all newspapers and news reports as fabrications cooked up by the U.S. government and thus rely on rumor and gossip for their politics is not a useful base for functioning democratic politics.

Plus, any positive news people read in the papers is suspect despite the fact that some may well be accurate. And any supporter of the U.S. in print will be accused of being paid-off despite the fact that some supporters may well be genuine. This is one of those utterly short-sighted and narrow-minded policies that has so many ridiculously obvious bad consequences that it boggles the mind how somebody could think it was a good idea. The goal of the policy is clearly to shift opinion in favor of the U.S. government positions. But lying and planting propoganda probably isn't the ideal way of improving people's opinion of you, isn't it? Ironically, what led to this was a perceived need to improve credibility!
Citing a "fundamental problem of credibility" and foreign opposition to American policies, a Pentagon advisory panel last year called for the government to reinvent and expand its information programs.
Talk about counter-productive. Something like this is bound to leak out at one point or another. Shouldn't whoever came up with this wake up the next day and think wow, that was a dumb idea and move on to more intelligent plans?