Red White Maize and Blue

Who wants to bet Buffett is buying like crazy?

2011-08-08T12:58:00.000-07:00

At the end of next quarter, Berkshire Hathaway will reveal its new equity holdings. How much would you like to bet that Buffett is investing like crazy right now?

Fun facts on aircraft carriers

2011-03-19T10:47:00.004-07:00

France and the UK are taking the lead on the no-fly zone in Libya. Al Jazeera's Live Blog has a photo of France's Charles de Gaulle aircraft carrier (photo credit to GALLO/GETTY):

I saw that and thought to myself, it looks...small. A quick run to the Charles de Gaulle R91 Wikipedia page reveals her displacement at 35,000 tons. The CdG is France's only aircraft carrier, and the only nuclear-powered aircraft carrier outside of the United States fleet. She is apparently also the second largest European aircraft carrier, after the Admiral Kuznetsov (43,000 tons).

So, I learned two things. One, there is only one other nuclear aircraft carrier in the world capable of rivaling the endurance of our 11 (plus 1 reserve) aircraft carriers. Second, other aircraft carriers are tiny compared to our Enterprise, Nimitz, and Gerald R. Ford class carriers. Each of our aircraft carriers displace 100,000 tons, which puts them in the supercarrier class. Britain has two supercarriers planned, with displacement around 65,000 tons, coming out in 2019 and 2023.

For a comprehensive comparison, take a look at the list of aircraft carriers by country.

The USS Enterprise (who else loves Star Trek for making that name ubiquitous with excellence?) is the likely aircraft carrier to take part in Libya if the US gets involved. Fun facts: it's the oldest active carrier in the U.S. fleet, and it is longer than the Empire State Building is tall. By the time she retires, she'll have served for 51 years (currently at 49 years, with her first voyage in 1962). She is one full football field longer than the Charles de Gaulle currently operating in the gulf. It also carries more than double the number of aircraft. Here is a handy picture comparison:

Hooyah.

2010 Berkshire Hathaway Annual Letter

2011-02-26T13:19:00.003-08:00

Buffett's letter is out. Worth reading the whole thing. My favorite excerpt so far:

Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born. The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.

We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.

America.

Absolute vs. Relative Gains - Another difference between the right and the left?

2011-02-26T12:54:00.003-08:00

Russ Roberts at Cafe Hayek has a good, short post:

Some believe that the American economy was more egalitarian between the end of WWII and the 1970s or that gains were shared more equally. I think there is some truth to this claim. But I disagree with the version that says the middle class has stagnated since the 1970s. But here’s an even stronger claim from Joe Klein:

It is also good to remember that America’s most prosperous time — the period from the 1950s to the ’70s — was also when its trade-union movement and its middle class were strongest.

Uh, no. The average person in America lives much better today than the average person in 1950 on so many dimensions. The 1950s and 1960′s and 1970s were much less prosperous.

I'd wager the right, as a whole, pays more attention to absolute gains and the left, as a whole, pays more attention to relative gains in wealth and income.

The 1970s as America's most prosperous time? No personal computers, price and wage controls, tiny televisions, and no Internet. Tyler Cowen may be right about the "Great Stagnation" that things did not improve since 1970 as fast as things did from, say, 1900-1950. But what about labor participation by females or minorities? The difference between now and then is astronomical. There's just no way.

Peak...Track and Field?

2011-01-24T09:47:00.003-08:00

Cowen's post on peak Track and Field performances seems to reinforce my last post about peak travel, or biological limits on technology and growth.

Cowen notes: "It seems unlikely to me that we have reached a true peak, rather a temporary plateau with slower-than-average growth, until the next breakthrough in training, technique, genetic manipulation, or whatever."

He echos that thought in his new eBook. I'm inclined to agree.

Peak Travel, or biological limits on techonology and growth

2011-01-15T09:28:00.004-08:00

Saw this article at MR a few weeks about peak travel, and then this one at the Freakonomics blog more recently. It turns out (ahem, James) advanced economies seem to be reaching a peak of their per capita annual vehicle miles traveled.

It reminds me of talks with Kraft and Stan I had a while ago about the biological limitations humans place on technology. I pointed out that the human eye cannot tell the difference between anything at 60 frames per second and something higher. High definition 120hz televisions are the end of the line in 2-D visual advances because humans simply *cannot* tell the difference between that and anything better. So instead of upping televisions to 600hz (which is no different from 120hz, for all intensive purposes), televisions will go 3-D, get bigger, and get thinner. That's about it.

Similarly, humans only get to work with 24 hours in a day, and most of us need > 5 hours of sleep a night. We can only travel for so many hours a day, although we can increase the speed at which we travel, affecting the number of miles we travel. But it makes sense to me that people in an advanced economy would eventually achieve a certain number of leisure hours and use them to travel. Fixing the method of travel (or assigning an elasticity of 0 < e < .1 for advances) means the marginal benefit of more leisure time on travel will decrease immensely.

Using John Holland's building blocks theory from complex adaptive systems, I would predict that we haven't reached peak travel yet. We know what our building blocks are, and we've rearranged them into a pretty optimal arrangement. We'll hover where we at number of miles traveled until we introduce something new to the equation that allows us to advance by leaps and bounds. For a humorous example, think flying cars The Jetsons style: It's a new building block that would vastly increase the number of miles people travel.

Here's another limitation, although it has to do with general physical limitations: we keep building better and better computers. I've been reading about people storing immense data in bacteria, or computers being made at the atomic level. My question is, can we go any smaller? Once we master pushing around atoms to do computations, is there anything lower? Quantum computers? What then? Have we hit that limit?

Can we predict any other biological limitations?

Sorry if I've just spammed your RSS feed

2010-11-12T10:23:00.000-08:00

I just imported every post from the blog I've been using since last October. I thought it would be easier when searching through old posts to have them all in one place.

I'm back to using this space as my primary blog, although you'd probably do better to follow me on Google Reader or on Twitter.

Fall Semester

2010-10-07T03:33:00.000-07:00

It's already October. Unbelievable.

Why I blog:

There is a painful non-convexity in academic research. Only really good ideas are worth pursuing but it takes a lot of investment to find out whether any given idea is going to be really good. Usually you spend a lot of time doing some preliminary thinking just to prove to yourself that this idea is not good enough to turn into a full-fledged paper. Knowing that most ideas are unlikely to pan out there is an incentive not to experiment on new projects.

That's from CheapTalk. I started blogging years ago with the understanding that my audience was three of my nerdy friends. For me, blogging is a way to bookmark cool ideas and fix them in my mind by getting them down on paper.

A few articles that caught my eye:

1) Here are two great posts on inequality (Scott Sumner) and (Will Wilkinson). Sumner in particular talks about what inequality statistics fail to measure. Wilkinson's paper "Thinking Clearly about Economic Inequality" is a classic and *must read* you are going to discuss inequality. There have to be measures of inequality out there that take into account the factors Sumner mentions. Does anyone know of any?

2) Should we engage flawed institutions like the UN Human Rights Council? A report highlighted by David Bosco says:

The overall message from the General Assembly is clear: The Obama administration's re-engagement in UN human rights diplomacy has persuaded some non-Western countries to rethink their positions. But, in general, the drift away from the West continues, and core disagreements will continue to split the UN membership in the years ahead.

He notes: "They argue that the emnity that the Bush administration generated masked a broader trend against liberal internationalism at the U.N. and a shift toward a strong defense of sovereignty."

I fear that the costs, in the short term, of sitting on the UNHRC vastly outweigh the eventual benefits from reforming the organization through engagement.

3) The Nobel Prize may highlight China's human rights problems.

4) Bad news in the Ukraine about political liberalization? Alex Brideau says maybe not.

Haven't been blogging much because school started back up, and I've continued doing research from this summer at the Hoover Institution. More on that later.

Catching up

2010-08-12T07:03:00.000-07:00

I've been away from the Internet for a while. Here's what caught my eye while catching up:

1) A talk on complexity and diversity by Scott Page. Professor Page was a terrific professor to have at Michigan - whip smart and very funny. However much you can watch, do it. Make it to his talk ~7:50 on genetic selection, at least. Update: I've watched most of the talk while catching up on my reading. Terrific.

2) Keith Hennessey's very informative post about what White House economic advisors do. Seriously, read this article just to get a feel for how the White House staff operates in relation to one another.

3) P!=NP? I remember James Somers teaching me about the P=NP problem back when we were sophomores in college, but not much else (James is currently offering 3:1 odds that the proof doesn't actually contribute to the P=NP problem).

4) The incredible children of the H-1B visa. We need more of them.

5) Iranian politics is much more complicated than just Ahmadinejad.

Intolerance

2010-07-13T07:22:00.000-07:00

France's lower house of parliament has voted to ban burqas. This article says the vote was 335-1. Incredible. And then the part where they try and make it seem like it has nothing to do with religion:

It refers neither to Islam nor to veils. Officials insist the law against face-covering is not discriminatory because it would apply to everyone, not just Muslims. Yet they cite a host of exceptions, including motorcycle helmets, or masks for health reasons, fencing, skiing or carnivals.

I was unaware that Spain and Belgium are also considering bans.

Does anyone know how many Muslims are in the French parliament? The bill goes to the Senate in September. I imagine it will receive near unanimous support there as well? Hopefully it will be ruled as unconstitutional.

Son of Hamas, the Green Prince

2010-06-30T04:07:00.000-07:00

Mosab Hassan Yousef isn't going to be deported from the United States. Yousef, son of one of Hamas's founders, wrote Son of Hamas, about his time spying for the Shin Bet in Israel on Hamas. Read the book if you've got time. It's a fascinating look into Hamas, Fatah, the Palestinian Authority, and Israel. It's also crazy how long he spied for, what he was able to prevent, and how long he stayed in prison to maintain his cover.

What I cannot believe is that the Department of Homeland Security wanted to deny him asylum. I don't know how the nuts and bolts of asylum work, but couldn't Yousef have appealed to his Shin Bet friends to vouch for him?

One of North Korea's more reasonable actions

2010-06-25T04:04:00.000-07:00

Hilarious. I guess we should take out a big loan?

What could possibly go wrong?

2010-06-06T11:39:00.000-07:00

There is little chance of this ending well.

I've refrained from commenting on the Gaza-Israel blockade/aid convoy situation.

First rule of the Israeli-Palestinian conflict: No one is blameless.

Second rule: There is no level-headed discussion on the Israeli-Palestinian conflict.

Let's just hope that twenty years from now this isn't the point in history we identify as the start of a new war in the Middle East.

Oliver Stone needs to read Lucan Way and Steven Levitsky

2010-05-29T04:10:00.000-07:00

Oliver Stone's new movie is on Huge Chavez. From the article:

Promoting his new documentary "South of the Border" in Caracas, Stone heaped praise on Chavez, saying he is leading a movement for "social transformation" in Latin American.

The director defended his decision not to interview Chavez's opponents, saying that people already hear those complaints and that the movie is not intended as a detailed examination of Chavez's record.

Ugh. I recently came across this paper (PDF) on uneven playing fields in democracies by Lucan Way and Steven Levitsky. It's incredibly important to make the distinction between illiberal and liberal democracies. Venezuela has elections, but that doesn't mean it is a liberal democracy. Opposition candidates face very real punishments for running against Chavez, and radio and television stations who feature anti-Chavez messages often have their broadcasting licenses revoked.

That's not democracy, and Stone shouldn't "deeply admire" Chavez.

You never know who you'll end up calling

2010-05-24T09:19:00.000-07:00

On Saturday I participated in a huge phone banking effort for Meg Whitman's campaign for governor. A friend of mine works on the campaign, and I like Meg, so why not help out?

I'm in the back.

Meeting Meg was fun, but I had another surprise. On my phone bank list was Frank Fiorina. No way, I thought, is this Carly Fiorina's house. So I made the call, got the answering machine ("You've reached Carly and Frank Fiorina..."), and left them a polite message. Lo and behold, I had called Carly Fiorina's house.

Meg told me I won the award for best phone call of the day.

Undergraduate thesis writing

2010-05-18T09:35:00.000-07:00

Say what you will about Elena Kagan, but I've got to agree with this assessment of thesis writing at the undergraduate level:

College thesis writing is a haphazard, often random process (as opposed to a doctoral dissertation, which takes more care). You have a few weeks to find a topic. You settle on one based on a combination of what hasn't been written, availability of sources, and, if you're lucky, a passing interest in the subject. Then you need an argument. You don't really know anything, though, so you end up overcompensating by making a stronger argument than the facts merit. If you aren't overstating your case, you aren't doing it right. You then have a semester to write a 50-page essay—a task that would be difficult even without the added burden of classes, extracurriculars, and the intense hepatic demands of senior spring.

I would love to see some numbers on how many senior theses are produced in their final few weeks, as opposed to steady contribution throughout the year/semester. I imagine there is a healthy correlation between overall quality and steady work, which partly contributes to why graduate level theses tend to be better (there is also a selection bias).

Things I learned today

2010-05-18T08:34:00.000-07:00

1) The definition of the word eponymous. An eponym is the name of the person after which something - a place, building, etc. - is named after. I came across this one while reading up on Eugene Volokh, co-founder of the Volokh Conspiracy blog.

2) I also learned about regression discontinuity design. From the Wiki page:

In the design of experiments, regression discontinuity (RD) designs are designs that evaluate causal effects of interventions, in which assignment to a treatment is determined at least partly by the value of an observed covariate lying on either side of a fixed threshold. The intuition is that data points that lie just above and just below a cutoff (for example, students that score 50 and students that score 49 on a test where the cutoff is 50) are not statistically distinguishable. This means that if a treatment is given to one group based on the cutoff, and withheld from the other group based on the cutoff (for example, if all students scoring 50 go to college, while those scoring 49 do not), the latter group can be treated as a control group and the former as a treatment group (in this case, if we are interested in measuring the effects of college, those scoring 49 would be the control group, and those scoring 50 would be the treatment group--they are statistically indistinguishable from each other, but one receives the treatment and the other does not).

It notes that when done properly, RD yields an unbiased estimator. It was introduced in 1960, but fell out of of favor until recently. I believe the relative frequency of which models are used has been governed to some extent by increasing computing power available, but that doesn't seem to be the case here.

I imagine this type econometric analysis would be useful for means-tested programs in the United States that have an abrupt cut-off point, so long as the government benefit was substantial enough. Example: Two steady jobs, A and B. A's salary is just below the cutoff point, B's salary is just above. Therefore A is eligible for government benefits of some kind but B is not. A's "quality of life" might actually be higher than B's if the benefit is medical. Or, if the benefit was education related, one could test its effect on A and B's future income, or another salient outcome.

I came across regression discontinuity design from Tyler Boar's paper, Controlling the Airwaves: Incumbency Advantage and Community Radio in Brazil (PDF). I'm attending his seminar about that paper on Thursday at the Center on Democracy, Development, and the Rule of Law at Stanford's Freeman Spogli Institute.

3) TILT is a pretty good acronym.

Charlie Munger on everything

2010-05-16T04:24:00.000-07:00

Charlie Munger, Warren Buffett's number two, is brilliant. The week after Berkshire Hathaway's annual shareholder's meeting (I've been twice!), Munger hosts his own shareholder meeting for Wesco. Like the Berkshire meeting, Munger answers any and all questions. Motley Fool has a write-up of this year's meeting. Read it. Then do yourself a favor and order and study his book. Your life will never be the same!

Financial derivatives

2010-05-13T02:22:00.000-07:00

Alex Tabarrok's post on what's wrong with structured finance and its implications for the financial crisis is a must read. I'd wager it explains up to 40% of what went wrong with the financial crisis. Basically people created AAA securities out of mortgages that were not AAA.

There was also this related gem in the comments:

AAA targets a 1 in 10k chance of default, the classic 'act of God'. People who model these things should anticipate temporal volatility in the mean default rate of the underlying collateral that is lognormally distributed. They didn't.

Immigration and America's Welfare System

2010-05-13T02:15:00.000-07:00

Don Boudreaux brings up a point often missing in the immigration argument:

The most important fact overlooked by Friedman -- or, at least, by those who cite Friedman as an authority for keeping immigration strictly limited -- is that the costs of immigrants' freeloading on taxpayers must be weighed against the benefits of immigrants' contributions to the economy and, indeed, to tax revenues themselves.

On his blog, he cites this article by George Borjas for support that immigrants may actually provide slightly positive net financial gains to Americans (I have to think he has low-skilled immigrants in mind).

If you've got a problem with an underground economy, it may be better to make it legal, tax it, and therefore have some control over it (although not always). I've read a few ideas for a "Blue Card" for immigrants that would allow them in the country legally, but prevent them from obtaining welfare benefits. What about having them contribute to the payroll tax but receive limited to no benefits? Some may say it isn't fair, but it would be the price one would pay to be in America. I'm not wholly endorsing the idea, I'm just asking for more debate and information on the subject.

The Third Rail

2010-05-05T06:00:00.000-07:00

Russ Roberts explains why at this point, Social Security is mainly a ponzi scheme. Then he says this:

"Most Americans under the age of 50 don’t expect to get very much from social security. They aren’t counting on it. So “taking it away” isn’t a big deal. Except politically, and the fact that you can’t talk about this solution just shows you how dysfunctional our political system has become."

I would *love* to see a poll to this effect. Looking ahead to the fiscal unsustainability of Social Security and Medicare, our options are: 1) Raise taxes, 2) Lower benefits, or 3) Some combination of both.

Due to the magnitude of the fiscal problem, we're going to see #3. The question is, what will the split be between higher taxes and lower benefits? I don't think I am typical in this regard, but I am simply *not* planning on Social Security or Medicare when I am older. I am willing to forfeit guaranteed Social Security benefits for a lower payroll tax.

At this point I think Social Security is going to be forced to gradually switch to means testing, and payroll taxes will be lowered, but not eliminated (actually, I suspect they'll be held constant, but contributors will see much less of their contribution returned to them). It's the price we're going to have to pay for promising too much and planning too little.

Summer Internship

2010-05-02T05:44:00.000-07:00

Pepperdine's School of Public Policy requires its students to complete a policy-based internship sometime in the two-year program, most frequently in the summer between the first and second year. I've been blessed with the opportunity to spend my summer at the Hoover Institution.

I made the move to Mountain View on Friday afternoon, and I start at Hoover tomorrow. Once I have something to report, I will!

Social Proof

2010-04-12T13:15:00.000-07:00

I just realized two things. One, Facebook allows you to "like" ads. Two, and more importantly, it chooses which ads to display to you based partly on if your friends "liked" them or not.

(Max is a friend of mine.)

This is brilliant from a marketing point of view. I never really click banner ads, but I'm much more likely to do so if I see that my friends approve of them.

Allowing function to guide our actions

2010-04-02T07:24:00.000-07:00

David Frum went on The Colbert Report to talk about the health care bill (he comes on a few minutes into the clip), but the part I want to highlight is at 6:30. It's his explanation of when and why he became a conservative, and I really like it. He says:

"When I got involved with the conservative world in the late 70's and early 80's, it was above all an intellectual movement. It was a diagnosis of where inflation came from and how to stop it, of why growth in the American economy had slowed down and how to reignite it, of why cities were crumbling and order was breaking down and how to save cities and reassert security so people could work and prosper and save and build families."

Reagan's (and Frum's) conservatism was strongly influenced by the problems he faced, just like current conservative policy should be guided by current challenges.

The title of this post refers to the idea that the reason people do things is often a result of function. For example, Twitter allows hash tags on tweets, denoted by a # sign. A tweet about this post might end with #conservatism. Many search clients allow you to go through hash tags. But I'm never surprised when my nerdy friends end texts, Facebook posts, or quick notes with a #message. There is no functionality of doing it outside of Twitter, except to express a simple thought quickly.

The lessons of Reagan may or may not be timeless (I find many more timeless than not), but we should recognize how many are applicable to the problems we currently face. For example, I have a feeling that budding conservatives today are developing a strong anti-budget deficit bias. I certainly am.

Nonfiction versus fiction

2010-03-31T13:20:00.000-07:00

Matt Yglesias links to an interesting point about reading skills in the United States, mainly that "schools teach reading almost exclusively through fiction." The post he links to suggests that the reason why boys fall behind girls in reading is that they are more apt to enjoy reading nonfiction than fiction.

I don't care what people read, fiction or nonfiction. Just find out what each person enjoys reading, and have them read that. I didn't read anything truly substantive until I was a junior in high school. But all of those years of a lot of reading mentally prepared me for more complicated material.

I still enjoy fiction, but my reading list is heavily skewed toward nonfiction. Take a look at my influential book list below!

Update: Here is a link to the Daily Beast article Yglesias linked to. I like this part:

"When you see good readers versus poor readers, what you're looking at is mostly differences in the knowledge that kids bring to the reading. It's easy to read something when you already know something about the topic. And if you don't know about the topic, it's utterly opaque to you."

This is an important point. I read quickly, but mostly because I read a lot, and not much that I read is on something I've never heard about. I tend to zoom through paragraphs when I realize the author is giving background on something I already know a lot about.

Right now, one of the books I'm reading is Bruce Bueno de Mesquita's The Predictioneer's Game. The first chapter is a relatively low-level explanation on game theory, which I am familiar with (thank you Scott Page's game theory class, among other sources). Consequently, I did not need to spend much time on it. I knew that I could skim, reading the first and last parts of paragraphs as well as small parts in the middle, and slow down only when something either didn't click or just seemed inconsistent with my current knowledge on the subject.

Side story: I'll never forget something I remember Charlie Munger saying a while ago. Munger said that everyone wise that he has ever met in his life reads constantly. How much more of an endorsement do you need?

Influential Book List

2010-03-28T13:53:00.000-07:00

Tyler Cowen started a recent round of influential book lists on the blogosphere more than a week ago. This would be a lot easier if I was standing in front of my bookshelf back home. I'm definitely leaving some out, but here is mine using gut instinct, in no particular order, and grouped mostly by subject.:

1. Poor Charlie's Almanack, Charlie Munger. Charlie Munger is one of my idols. He is a brilliant polymath with strong normative values I admire. This book is his collected wisdom. His tenth talk at the end of the book, the Psychology of Human Misjudgment, or what I refer to as Munger Psychology, has had an enormous impact on the way I view the world. Everyone should read and study this book. His emphasis on identifying envy as a societal ill is so, so important, yet overlooked 95% of the time. I think and talk about envy more because of Munger.

2. An Introduction to Models in the Social Sciences, March and Lave. Bill Clark at U of M forced me to read this book before he would even consider working with me on a potential thesis. The thesis never happened, but what I learned from this book remained. It teaches its readers how to construct and evaluate mental models. I've written about the best parts here and here. Every social science major should internalize this book, especially if they are not quantitatively minded. It gives you a major leg up.

3. Development and Democracy, Bueno de Mesquita and Downs / Democracy Derailed in Russia, M. Steven Fish / Polyarchy: Participation and Opposition, Robert Dahl.

The theme of this group is democracy promotion. It is one of my longest-standing interests in public policy. The article by Bueno de Mesquita and Downs is fundamental to how I view democracy promotion efforts, the idea being that higher coordination costs for opposition groups allows authoritarian governments to maintain power.

Fish's book is first a terrific explanation of where democracy efforts went wrong in post-Soviet Russia, and also the book that introduced me to Dahl's seven criteria of democracy, which I maintain is the best overall litmus test of liberal democracies.

Dahl's Polyarchy is a solid book, but what I really took away from it was the simple supply and demand type charts on threshold behavior. When opposition groups face low costs and governments do not repress, opposition groups are more likely to win.

4. The Evolution of Cooperation, Robert Axelrod / Hidden Order: How Adaption Builds Complexity, John Hollland. The Tit-for-Tat model explored in Axelrod's book is an example of what sort of conceptual ideas can result from complex adaptive systems models. The four rules he comes up with - be nice, punish immediately but be forgiving, be clear, and don't be envious - are timeless when thinking about cooperation. I'm surprised it took someone twenty years to apply them to how we treat prisoners like Judge Alm did in Hawaii's HOPE project.

Getting an 'A' in John Holland's Complex Adaptive Systems seminar at the University of Michigan is one of the grades I am most proud of in my life. Holland's claim to fame is the genetic algorithm, which helped make him a MacArthur Fellow. The idea of complex adaptive systems is not widely comprehended. What I mean is that it isn't a mental model many people have, and I wish they would. It would help illustrate Gall's Law.

5. Surely You're Joking Mr. Feynman / The Pleasure of Finding Things Out / Genius: The Life and Science of Richard Feynman, Gleick. The two people I would like to be like when I'm older are Charlie Munger and Richard Feynman. I admire Feynman because he never stopped contributing to the field of science his entire life. Most physicists burn out once they hit 30. I can't remember who came up with this explanation, but someone said the reason Feynman produced his entire life while Einstein got stuck was because Einstein started by trying to make the math work; Feynman visualized everything simply and built upward from there. I've embraced Feynman and Munger's emphasis on first principles.

Feynman also appears truly not to have given a damn about what people thought of him. He did what he wanted and that made him happy. That's quite appealing.

6. Ender's Game & the Shadow Series, Orson Scott Card. The series is extremely entertaining. When I describe the Shadow Series to people, I ask them to imagine if we identified the most brilliant strategic commanders in the world at an early age, trained them, gave them back to their native countries, and then told each one to take over the world. Forget alliances - what happens when Russia fights China who fights India who fights Muslim nations, and so on. I suppose the political and military strategy involved in the books appeals to me.

7. Neal Stephenson - various books: Cryptonomicon, Snow Crash, The Diamond Age. Heck, even Anathem blew my mind (eventually). Neal Stephenson takes a long time - sometimes 3/5 of the book - to develop multiple plots. You spend half the book not knowing where it is even going, yet it is still intelligent and entertaining. The nice thing is that each book has that Go! point where it takes off. Cryptonomicon hammered home the importance of counter-espionage and signal intelligence; Snow Crash speaks to the tech geek in me; and I wish I had an Illustrated Primer from the Diamond Age when I was growing up. The saving grace to Anathem was how Stephenson addressed (solved?) the inherent paradox of time travel.

8. Inside Bureaucracy, Anthony Downs / The Logic of Collective Action, Mancur Olson. Inside Bureaucracy taught me to view systems from the bottom, up. It also taught me that any large organization is simply the sum of and interaction of individual behaviors and motivations.

The Logic of Collective Action's main point is that small groups tend to do better than big groups because there is more accountability and direction. A sub point is that successful big groups are inevitably run by smaller groups within them. I wrote much more about it here.

Public Choice theory is an important mental model to me. It leads me to dismiss claims that start with, "Society makes us..." or "Government wants this and this..." Society is an aggregate of everyone in it, and everyone who has influence. Government is made up of many, many people with competing interests. At the link just above, I wrote "After all, we wouldn't say 'Traffic' caused a traffic jam. We'd say that too many people chose to drive, and they responded to the restraints they faced, whether those were too many other drivers or structural design."

9. Modernization, Culture Change, and Democracy, Inglehart and Welzel. I had Ron Inglehart at the University of Michigan my first year. He heads the World Values Survey, which is the resource for finding out what citizens in most countries think about political, economic, and social issues. (Recently Will Wilkinson linked to the WVS here and here.) The Inglehart-Welzel graph is something everyone should see. States can have an enormous impact on their citizens' values.

10 The Mystery of Capital, Hernando de Soto. I'm a firm believer in de Soto's main points that property rights and the ability to borrow against assets are necessary to develop a nation's economy. A simpler version of the same point: the harder it is to create a business, hire someone, or operate legally, the lower the overall level of economic growth will be.

That's a pretty decent list, heavily skewed toward the non-fiction that influenced my world view. Unfortunately, I no longer posses copies of many of them since I lost some during my move to California. I am definitely missing works of fiction that I enjoyed in my childhood.

Long-term budget solvency is going to require more means testing

2010-03-28T04:42:00.000-07:00

Bryan Caplan turned me onto the idea of means testing. Today, he asks this question:

Right now we already means-test a lot of programs, such as Medicaid, food stamps, and housing vouchers. Question: Should we make the entire population eligible for these programs, regardless of income and wealth? If not, why not? If you don't want to transform existing means-tested programs into universal programs, why don't you want to transform existing universal programs into means-tested programs?

I would love to hear a good answer. I've hitched my wagon to the idea of more means testing, but I've done so without hearing a good explanation from the opposition. This is mostly because I haven't heard *any* explanation from the opposition.

If we had no Social Security system right now and one was proposed, it definitely wouldn't look like what we currently have. Bryan Caplan accurately notes that the system we have now robs Peter to pay Peter. Paying for Social Security in the long run is going to include tax hikes, lower benefits, or a combination of both. I would wager we'll get a combination of both, and benefits will be cut from the rich. I'm not necessarily against doing the latter.

Social Security is a government-mandated savings program that no longer makes sense in the United States. I would like us to make private accounts the norm, get the government off the hook financially, yet have it remain the safety net for those who still need help - using means testing to identify them, of course.

Update: David Henderson responds, but only to say, "Touche."

Venezuela's civil rights are nonexistent

2010-03-23T02:07:00.000-07:00

From this article:

The detention of opposition politician Oswaldo Alvarez Paz on charges of conspiracy, spreading false information and inciting hatred will fuel criticism that Chavez, a leftist, is taking Venezuela down an increasingly dictatorial route.

You can arrest people for "inciting hatred?" Imagine if you could do that in the United States.

With the political atmosphere heating up before legislative elections in September -- they are seen as a curtain-raiser for a 2012 presidential vote -- Chavez says his foes are increasingly breaking the law in their desire to topple him.

I don't doubt Chavez's claim. After all, he has been making illegal what we see as legitimate political opposition. So yeah, his opposition has been breaking the law, according to the twisted notion of what is legal and illegal in politics in Venezuela.

Chavez is doing what any smart authoritarian leader must do to maintain power: increase the costs of coordination and communication among his opposition.

A Stochastic Model for Picking Winners in the NCAA Tournament

2010-03-17T08:44:00.001-07:00

Last year it occurred to me that no one ever picks a perfect bracket. I asked myself what the probability of picking bracket would actually be. Starting in 1985, the NCAA Tournament consisted of 63 games, played by 64 teams (ignoring the play-in round created in 1999). A quick in dirty answer is 1/2^63, or roughly, the probability of correctly predicting what side a coin would land on 63 times in a row. That's roughly 1 in 9 quintillion, or 1 in 9 million trillions. I don't care how many brackets you fill out. We're not going to see that one anytime soon.

But surely that's not right. Every year, someone gets decently close to filling out a perfect bracket. Is there a better way to predict winners? Sure. How about using the seeding system? After all, a number one team is almost unequivocally better than a number sixteen team. How much better? I went and found out. Over a surprisingly short few hours, I was able to record every match-up between ranked teams in NCAA Tournaments since 1985. 20 years of data, 63 games per year, 1260 total games. What resulted is a table of the probabilities of each rank beating every other rank, so long as such match ups occurred.

A few fun facts:

-A #1 seed has beaten the #16 seed every time they played (100 of 100). A #1 seed beats every other seed more often than it loses, except against #11 seeds. In the four times those seeds have matched up, the #1 seed only prevailed half of the time.

-#8 seeds often upset higher ranked teams. In the four match-ups against #2 teams, #8 teams won twice. They have also beaten #4 and #5 seeds more often than they lost to them.

-Surprisingly (to me), #11 teams have beaten #3 teams 29% of the time (8 of 28). That means this model predicts one upset by a #11 team in the first round of every tournament.

Disclaimer about statistics: In real life the probability of one team beating another team is independent of what happened in the past. And the number of observations we have for each seed is limited. But I am not interested in causation, only prediction. And it is surely a better predictor than flipping a coin for each game.

Below are the historical probabilities (click to enlarge). Match up row first and then column to see the probability of the row seed beating the column seed. A "2" in the column and a "One" in the row gives a score of .44, meaning a #2 team beats a #1 team 44% of the time.

I use these probabilities as part of a stochastic process to make my picks for the NCAA Tournament. For example, as mentioned above, #11 teams have historically beaten #3 teams 29% (.29 in decimal form) of the time. What I do is generate a random number between 0 and 1 from a uniform distribution, and if that number is below .29, I choose the #11 seed. If it is above .29, I choose the #3 team. Repeat for each game until you have a complete bracket.

As for my bracket, well, I would not have chosen it if I had not used historical probabilities. My Final Four ended up as #1 Kansas v. #3 Pittsburgh and #8 Texas v. #2 Villanova, with Kansas and Villanova advancing, and Villanova winning the whole thing. I also have #12 Utah State playing #13 Siena in the South region and #11 Washington playing #14 Montana in the East region. Here it is (click to enlarge):

Want to play with the probabilities? Click here for the STATA (.dta) file or click here for the Excel file. The Excel file shows the number of wins and total games played between each seed. The STATA file only shows probabilities. (I have to thank Avinash Vora for hosting them and encouraging me to do this. Thanks also to James Somers for being a sounding board.)

Information on President Obama's bracket is here. We'll see who does better.

Last year I coded this information with C++ and actually ran predictions for a few hours at a time on my computer. I could predict perfect first and second rounds (after several million iterations), but never got a perfect third round. Getting that would have required a generating more than a few billion iterations. This year I put the probabilities into STATA and quickly spit out random numbers based on individual match-ups. There is a more efficient way to do this. In fact, I would be thrilled if someone would take this data and turn it into an easy to use bracket generator. I'll leave that to the sports-minded hackers out there.

There is much more to say about the mechanics of using these probabilities for picking games, but I'll leave that for another time.

Summer Internship

2010-03-17T06:49:00.000-07:00

Pepperdine's School of Public Policy requires each of its students to complete an internship before graduation. I am happy to say that my summer internship is all lined up. I have been awarded a fellowship at the Hoover Institution, which I am extremely thankful and excited for. I start the 3rd of May.

When I know more details about the type of work I'll be working on, I'll post them. It will be my first time to the San Francisco area.

Guest speakers at Pepperdine

2010-03-06T05:46:00.000-08:00

I have been consistently impressed by the guest speakers I have been able to listen to this year at Pepperdine.

On the 26th of February, Deputy Assistant Secretary of State Michael Corbin spoke to us about American policy in Iraq.We were all very impressed. You don't get to where Corbin is without knowing a thing or two.

A few weeks ago in Professor Hawken's class, we had a phone interview with Adam Shepard, author of Scratch Beginnings. It's a quick read. Make sure you pick it up if you've read Barbara Ehrenrich's Nickel and Dimed.

I was also able to sit in on Professor Hawken's Criminal Justice class when Mark Kleiman, author of When Brute Force Fails, came and spoke about their HOPE project. There is a lot to learn from the HOPE project.

James Q. Wilson spoke to a packed auditorium of us about a month ago, totally off the record. Professor Wilson is brilliant, obviously. What was more fascinating is that he strayed from his traditional literature and gave his personal opinion about a range of subjects.

Finally, on the 3rd of February, I was fortunate enough to attend the annual William French Smith Memorial lecture when Supreme Court Justice Anthony Kennedy spoke, moderated by Ken Starr. What phenomenal intellects both of those men command.

Keep them coming Pepperdine!

Blogging

2010-02-28T10:34:00.002-08:00

Just a note, I'm blogging at Red White Waves and Blue for the time being.

I'm missing an extension on Heckscher-Ohlin

2010-02-28T08:00:00.000-08:00

Correct me if I'm wrong (and I'm still a student...I'm allowed to be wrong occasionally), but I see rising wages in China as a pretty decent example of Heckscher-Ohlin and its extension, Stolper-Samuelson.

Heckscher-Ohlin says capital intensive countries (the United States) will export capital and labor intensive countries (China) will export labor. After reading that, it should come as no surprise that the United States is losing manufacturing jobs (although, so is China).

Stolper-Samuelson says within one type of economy (or production, let's say labor intensive), when the price of labor rises (called wages), the price of the good has to rise as well. In the context of the article, higher wages in China will eventually lead to higher prices on goods in the United States.

What I cannot seem to find is the corresponding theorem that says Heckscher-Ohlin type trading inevitably leads to higher wages in the labor-intensive economy. It was developed because critics looked at Heckscher-Ohlin and saw it as a bad thing; labor intensive countries like China would forever be stuck making goods for rich countries like the United States. But clearly that is not true. Eventually China and other labor dominant economies will develop more capital intensive economies. Who remembers what that theorem is called?

On Class Participation

2010-02-23T04:36:00.000-08:00

My good buddy James Somers wrote up a funny sounding essay called "Partici-pants" about encouraging class participation. It's a quick 5 -10 minute read on a subject that James and I, with others, have gone back and forth on for years.

(Quick side note: James puts a lot of care into writing his essays. They're very well written. Some will motivate you, and some will make you chuckle and scratch your head. All of them are fascinating. Click here to read about the bizarre sleep schedule he kept at university. It was a constant source of amusement/incredulity for our group of friends. Both of those posts, by the way, hit the front page of HackerNews.)

Back to the essay. James advocates cold-calling (properly done) by professors as an effective way of getting students to participate. At the heart of this idea is the simple notion that if you cannot explain a topic or subject simply, you do not understand it. Most studying efforts do not include teaching the material to others. That is why a lot of it is ineffective.

Sometimes putting fire to the feet of students works wonders. Other times it can be discouraging. As with most things, context matters. James mentions the "Moore Method" where the professor (1) did not hold class if there were not any students who could explain the material, and (2) worked from the weakest student up, in order to keep everyone motivated. I suspect condition (1) would only work in a class where students truly believe they need to learn the material. In my econometrics class, it would work; some of my undergraduate classes in the softer sciences, not so much.

I would like to focus on the first point James makes in his essay. Oftentimes, the hurdle is speaking for the first time. This is the First Time Bias, or what I call the Inertia Effect. It applies to many things, but in the context of teaching and learning, it means you are much more likely to contribute if you have before. When I taught Kaplan test preparation classes, I wanted my students to email me when they had questions. In order to get them used to the idea and introduce it as an option they would actually use, I required my students to email me about nothing in particular. After that, emailing me with questions was a trivial matter.

You have to get your students past that first-time bias, whether it relates to asking questions in class or coming to your office hours. Professor Kaufman is famous among students at Pepperdine for posing extreme, yes or no questions to every person in the class. ("Regarding the Melian Dialogue: Should we as Athenians slaughter every man and sell the women and children into slavery, or should we sail away as cowards? Well? Kill them? YES or NO!?")

After a few rounds of these questions where one either looks like a barbarian or a wimp, few have trouble talking in his class.

One solution I have been kicking around in my head for a while is to designate a question-asker or two for the day, and tie participation grade to performance in that capacity. If I assign a student the title of designated question-asker, that person is required to pipe up with clarifying questions throughout class. The questions would not even have to be substantive. Does it sound like I mumbled a few words? Speak up and ask me to repeat a point. Did I make an assertion? Ask me for an example. The primary goal is not to make my point get across easier; instead, the point is to get everyone comfortable with stopping class and saying I do not understand what you mean, or let me see if I have this correct. It is only when we fight with material (what James calls Kenjitsu) and put it in our own words that we understand it.

Interesting Policy Posts

2010-02-17T12:43:00.000-08:00

Here are some links that I marked on Google Reader. I've been so busy, I haven't been able to get to them for days!

1) Chile's cabinet is made up of people with some quality graduate degrees. I'm all for it, but I'd caution against groupthink. Hopefully a few of them have significantly different experiences from one another.

2) While this happened a while ago, Iran demonstrates another way to stifle opposition: disrupting communication by turning off the Internet.

3) How many people die from a lack of health insurance? I'd agree with Cowen and McArdle's conclusion: if the effect is not clear, it cannot be that large.

4) New nuclear reactors - I'm for them.

5) Breakdown of where U.S. troops have been deployed over the years.

6) Tyler Cowen breaks down a U.S. VAT.

7) Chris Blattman talks about writing essays.

Charity Events, Justice Kennedy, and Google Reader

2010-02-06T05:22:00.000-08:00

This semester feels like double the workload of last semester, yet I'm still having fun.

Last night the Churchill Society held a charity date-auction at Ca'Brea in North Hollywood. Chris Carr, my roommate, transplanted the idea from his undergraduate experience. It was a huge, huge success. I'm also pretty sure Chris lost his voice for the next two months from taking bids. The man channeled his inner preacher.

On Wednesday, I was able to watch as Dean Starr hosted Justice Kennedy in a discussion about his role in the Supreme Court. It was part of the annual William French Smith Memorial Lecture series. Last year Justice O'Connor spoke. For some reason, Dean Starr has a lot of connections. It was a great event - Justice Kennedy was entertaining and brilliant.

I am also about to write my first Kaufman Paper (it absolutely deserves capital letters). 30+ pages on the intelligence failures that led to Pearl Harbor and 9/11. It is due in six days.

Finally, my Google Reader is piling up again. Here's a snippet of what I found interesting this week.

1) Bryan Caplan on means-testing and forced redistribution. This paragraph made a lot of sense to me:

I understand taxing the rich to help the poor. What I can't understand is taxing everyone to help everyone. Means-tested programs like TANF and Medicaid aren't crazy; they take from Peter to pay Paul. Universal programs Social Security and Medicare are crazy; they take from Peter to pay Peter.

He also has recommendations on how to mitigate tradition distortions on incentives. David Henderson weighs in as well.

2) Quite a few posts on President Obama's proposed budget.

3) China is pushing to build military bases in more foreign countries.

4) Another reason to have faith in U.S. universities.

5) More crackdowns on democracy in Iran and Venezuela.

6) This one ties into my Social Policy class with Professor Hawken. It's about the impact of foreign aid on leader survival. From the abstract: "Donors are more likely to send aid to leaders facing elevatedrisks of losing power, but targets’ ability to benefitfrom this assistance is conditioned by regime type and politicalprocesses."

7) How to painlessly balance the budget. A (modest?) proposal.

Note to Populists

2010-01-29T03:27:00.000-08:00

We're not in a recession anymore. Tentative GDP growth in the fourth quarter of 2009 was at an annualized rate of 5.7%. Third quarter GDP growth was 2.2%.

Note to the optimists (including me): so far we're in a jobless recovery. Everything is not hunky dory. But positive GDP growth is much preferred to negative growth, if only for the expectation effects on investment and hiring plans.

Reducing Poverty

2010-01-21T12:27:00.000-08:00

David Frum recently spoke in Venezuela about what he sees happening in the next ten years. He outlined three problems he sees: trying to keep dual values for a currency, having a budget process without transparency, and having an executive control the legislature.

It's an interesting read, partly because calling out Hugo Chavez in Venezuela makes me chuckle.

On a more serious note, I really liked this idea on reducing poverty:

Since 1990, more people around the planet have emerged from poverty than at any time in the whole previous history of the human race. They did so not under red flags and with clenched fists, but by buying and selling in the international economy.

Go capitalism.

Haiti

2010-01-14T06:16:00.000-08:00

Tyler Cowen on Haiti:

Very rapidly, President Obama needs to come to terms with the idea that the country of Haiti, as we knew it, probably does not exist any more.

That stopped me in my tracks, mainly because Cowen is not prone to exaggeration. Megan McArdle continues that thought:

But in the longer run, what do you do for a country that already had one of the worst-functioning governments in the world? Half the budget was provided by foreign aid before the earthquake. For the next few years, we will effectively hold government power there, whether we want to or not, because we'll probably essentially be providing all of its funding, and can threaten to turn the taps off unless things go as we demand.

What can you do? This GlobalPost article warns against sending anything but cash. Following the tsunami around Indonesia in December of 2004, people sent so much unusable stuff (like medicine with instructions locals couldn't read) that a lot of it had to be burned. The government had to pay for it.

This blog councils following the ELE rule for giving effectively, which I echo:

E - The organization is established in the region.

L - The organization employs local individuals and organizations.

E - The organization has experience and a positive track record.

Chris Blattman, who I turn to first on international aid issues, suggests an organization called Haiti Partners that his brother helped start with several Haitians. If you're willing to help with a small donation, I'm positive it wouldn't go to waist there.

Ah, the good old days

2010-01-08T03:30:00.000-08:00

James Fallows contrasts the lives of Americans to those of the Chinese. Even following the recent recession, which was the worst in decades, the American standard of living is much, much higher.

I really liked this paragraph:

The idea of “finally” going to hell is a modest joke too. Through the entirety of my conscious life, America has been on the brink of ruination, or so we have heard, from the launch of Sputnik through whatever is the latest indication of national falling apart or falling behind. Pick a year over the past half century, and I will supply an indicator of what at the time seemed a major turning point for the worse. The first oil shocks and gas-station lines in peacetime history; the first presidential resignation ever; assassinations and riots; failing schools; failing industries; polarized politics; vulgarized culture; polluted air and water; divisive and inconclusive wars. It all seemed so terrible, during a period defined in retrospect as a time of unquestioned American strength. “Through the 1970s, people seemed ready to conclude that the world was coming to an end at the drop of a hat,” Rick Perlstein, the author of Nixonland, told me. “Thomas Jefferson was probably sure the country was going to hell when John Adams supported the Alien and Sedition Acts,” said Gary Hart, the former Democratic senator and presidential candidate. “And Adams was sure it was going to hell when Thomas Jefferson was elected president.”

People have tremendous capacity. We live in the United States. Ignore those who issue hyperbolic claims of ruin on our horizon.

I don't believe you

2009-12-21T10:15:00.000-08:00

NYTimes article on teaching young minds math, and other things:

“They decide they’re no good at math — ‘I’m not a math person,’ they say — and pretty soon the school agrees, the parents agree,” Dr. Clements said. “Everyone agrees.”

I don't believe individuals tell me "I'm not a math person." Bull. They just refuse to learn. Everyone should be numerically literate.

People also refuse to learn math because they think they'll never use it in the real world. When are people ever going to use statistics or calculus? The answer is in graduate school, and then in whatever profession you do after that. Barring a law degree, it does not matter what kind of graduate school. Analysis of almost anything involves familiarity with math.

Planning on higher education? Good. Go take a few statistics classes.

If you can learn to do everything crazy on your cell phone, if you use your computer for anything more than email, you can learn most math. It takes time and repetition, but it's worth it.

Foreign aid may actually reduce per capita income in the short-term

2009-12-18T04:42:00.000-08:00

Interested in foreign aid? Read Chris Blattman and Bill Easterly.

Blattman points out a neat counter-intuitive point: successful aid my actually reduce per capita income in the short term. That's because successful aid saves the lives of the poorest in a region. Saving people's lives increases the number in the denominator much more than it increases the numerator. Here's what Blattman actually says:

Aid, if it achieves the UN’s goals, is often saving the lives of the poorest. In this respect, we can say aid has been successful. And it is this very success that could explain why we don’t see any effect on growth. In fact, for the first few decades of aid, it’s conceivable that it would appear to reduce per capita income growth.

Next time you read about whether aid is successful or not, keep that in mind. Some aid should focus on population - a different kind should focus on economic growth.

Post-finals flood

2009-12-16T06:09:00.000-08:00

During finals, my Google Reader feed tends to pile up. I check it several times a day, and when I don't have time to read the posts I find intriguing, I save them. Here's a link-farm of the stuff that caught my eye for the past two weeks. It's a lot.

1. Jeb Golinkin on gay marriage and the GOP:

As women, blacks, the handicapped, and many others who have been deprived of equal treatment in the past can attest, getting society to recognize the errors of the status quo is a long, hard struggle which continues to this day. But if history shows one thing, it is that these groups will prevail. The question is not if… but when… and how.

I don't disagree. Putting aside the marriage as an institution argument, I fail to find the slippery slope, "We're paving the way for pedophiles" argument against gay marriage compelling. Our Constitution places limits on people's rights - and most of the time you need to be an adult (~18) in order to exercise them on your own.

2. Ben Casnocha points out a great paragraph:

Just a few centuries ago, the smartest humans alive were dead wrong about damn near everything. They were wrong about gods. Wrong about astronomy. Wrong about disease. Wrong about heredity. Wrong about physics. Wrong about racism, sexism, nationalism, governance, and many other moral issues. Wrong about geology. Wrong about cosmology. Wrong about chemistry. Wrong about evolution. Wrong about nearly every subject imaginable.

Thanks to better use of the scientific method (not peer-reviewed journal articles), I don't see this happening again.

3. Richard Posner writes about Oliver Williamson's contributions to organizational economics:

Oddly, an interest in organizations is a latecomer to economics, even though most economic activity is conducted through organizations. The standard economic model is of trade between individuals, or firms assumed to behave as individuals. For many purposes the model, despite its extreme simplification, is adequate.

Read this post if you need persuading that Posner is brilliant. Gary Becker's companion post is equally impressive. I strongly believe that spending an hour a day on Google Reader for the past five years has contributed to a *significant* part of my education. Those two posts are perfect examples of stuff you learn from reading good blogs.

4. Karl Smith and Russ Roberts call future Social Security benefits "promises that will be broken," not "liabilities."

5. The tax structure of the United States is becoming more and more like the European model.

6. I think David Frum is onto something: "America needs a practical, modern, secular conservatism that delivers results that benefit the ordinary voter."

7. Peter Leeson comes up with very interesting economics, and in the process reminds me why use the term 'ordeal.'

8. Iran is...not doing well.

9. Via Tyler Cowen, upbringing matters.

10. Bryan Caplan's criteria for maturity.

11. Casnocha on writing:

"Barf it out, then clean it up." A friend quoted her journalism teacher as saying this, and I've since adopted it as a pithy reflection of the broader phenomenon that the sole path to non-suckage winds through the treacherous woods of suckage. I must therefore make peace with producing something sucky and then iterate that initial product until it achieves decency. The trick is avoiding discouragement by that first piece of suckiness. As a writing principle, everyone knows this — you pound out the rough draft, then do the real writing, which is rewriting.

12. Ross Douthat's recent column on the GOP and the American prison system. This line stood out to me: "Our prison system tolerates gross abuses, including rape on a disgraceful scale."

13. Chris Blattman is my go to guy on development economics (also Bill Easterly). On foreign aid: "Maybe the 'failure of aid' is really a failure to industrialize, disguised."

14. Will Wilkinson points out a study that finds "no discernible impact on elderly mortality rates" from the first Medicare's first 10 years.

15. Paul Samuelson had a bunch of witty one liners. Case in point: "Like herpes, math is here to stay."

16. Epiphenomenal may be my new favorite word. Will Wilkinson and Dalton Conley on inequality.

Asking the right questions

2009-12-05T03:32:00.000-08:00

Republicans are looking ahead to 2012, attempting to figure out who would put up the best fight against President Obama.

Over at NewMajority, David Frum writes:

Mitt Romney ought to rank atop the Republican candidates for president in 2012. He finished second in votes cast in the primaries of 2008. He is a candidate with immense private-sector economic expertise in a time of urgent economic debate. But Romney has a political problem: his Mormon religious faith. A Gallup survey in December 2007 found that 18 percent of Republicans would not vote for a Mormon for president.

I've got a problem with the Gallup survey. I haven't been able to find it to verify the wording, but I would bet the question was something along the line of: "In a presidential race, would you ever vote for a Mormon candidate?"

This is the wrong question to ask, especially if the results shown above are used to as a way to dismiss Romney's run. Even asking, "Would you ever vote for Mitt Romney?" is the wrong question.

Instead, Republicans should be asked "Would you vote for Mitt Romney instead of Barack Obama?" or "Would you vote for Mitt Romney instead of a Democrat?"

People make their decisions based on their alternatives. I just don't see 'Mormon' as the type of thing that would prevent conservative Republicans from attempting to defeat President Obama.

Exposure Therapy

2009-11-24T10:40:00.003-08:00

Bryan Caplan has mentioned Exposure Therapy a few times in recent weeks.

I find it fascinating, and it makes sense to me in lieu of what I've read about high stress situations. Sometime I'll write up what Charlie Munger has to say about why cults work and how this relates.

Constructing Mental Models

2009-11-22T07:59:00.000-08:00

Arnold Kling at EconLog talks about the type of analysis he likes:

Robert Solow, my thesis adviser, was a big fan of starting with simple numerical examples. The point is that you want to really understand your analysis. The opposite would be somebody who does a computer simulation and says, "We got this really interesting result. We don't know why, but we got it." Or somebody who builds a complex mathematical model and cannot tell you how the assumptions drove the results. To me, finding a result that you do not understand is a waste of time.

First of all, I'm envious that his thesis adviser was Robert Solow. Second, I like his point about understanding your assumptions. I've written elsewhere about the skyhook idea.

Politicians frequently ignore Gall's Law, which roughly states that complex systems cannot be designed from the top down, when talking about major policy initiatives. If the incentives for individual actors don't add up, predictions made about the program are unlikely to come true.

Chavez is going to run Venezuela into the ground

2009-11-12T14:57:00.002-08:00

...or wag the dog by invading Columbia.

Things are so bad in Venezuela that there are electricity shortages. In Venezuela. Which has more oil than God. Something doesn't add up.

Incentives to Work

2009-11-12T07:56:00.000-08:00

Mankiw has been on an implicit marginal tax rates kick recently. I argued here that people would ignore his discussion because they aren't taxes people actually pay, nor are they the simplest concepts to grasp.

He's got another post today that changed my mind and made me see the importance of implicit marginal tax rates. He cites the chart below and says:

Notice that as earned income rises from about $15,000 to $30,000, income after taxes and transfers is roughly flat. Indeed, it could even fall. The bottom line: If you are poor, the government is inadvertently ensuring that you have little incentive to try to improve your condition.

This is a really good point. We want it to be as easy as possible for people to escape poverty, but by offering these programs we decrease incentives to work harder at low levels of income.

Does that mean we should get rid of aid programs? Of course not. We just need to acknowledge that such programs feature some negatives. We tend to talk only about benefits of proposed programs because they're easier to predict and see than the downsides.

Addendum: Here is Arnold Kling with more.

Posner on Productivity

2009-11-09T20:34:00.003-08:00

Posner observes that productivity growth is only good if it is the result of technological innovation:

But it is unlikely that the productivity spurts in the second and third quarters of this year have been due to innovation. More likely they have been due to old-fashioned cost cutting spurred not by technological advances but by economic distress. The only explanations I have seen offered for the productivity surge is cutting wages and working the workers harder. I have found no suggestion of any technological change that might be responsible for such a large, sudden surge in productivity.

Read the rest of his post (4 paragraphs). This is an important insight.

Play with this graph

2009-11-09T13:53:00.000-08:00

Play around with this interactive graph of unemployment based on demographics at the NYTimes.

Check out the difference in unemployment between men and women, whites and blacks, college graduates and high school graduates, and young people and old people. Fascinating.

Talking Public Policy

2009-11-09T11:41:00.000-08:00

I tend to think David Frum makes good points when he writes about politics. On the health debate, he writes:

You've heard the saying: "In war, amateurs talk strategy, professionals talk logistics."

The political equivalent: "Amateurs talk ideology -- professionals talk interest groups."

Small but sophisticated interest groups use big political battles to gain special advantages. Health care reform is, of course, the biggest battle of them all, with trillions of dollars at stake.

I think this is an important point for public policy students. We can use ideology to guide us, but getting stuff done might more often mean doing a lot of seemingly-unimportant micro tasks really well.

The Keynesian Multiplier

2009-11-07T04:01:00.000-08:00

From Arnold Kling writing at The American:

Pump-priming and stimulus policies are a good fit for a manufacturing economy with homogeneous labor affected by temporary layoffs. They are not such a good fit for a post-industrial economy with an educated labor force facing permanent structural changes.

I'm adding this to my list of critiques of the Keynesian Multiplier.

Another problem with the multiplier is that we treat it as a fixed number. Even if we assume that it starts out greater than 1, no one talks about when it falls below 1. When it is above 1, every dollar we spend gets us more than a dollar in economic activity. If we can *actually* do that (and I have doubts in all but extreme cases), we should continue to spend until the multiplier falls to 1. When was the last time you heard about the marginal benefit of the multiplier?

My last problem with the multiplier is that we assume that deficit spending is automatically used for projects that will be effective. That just isn't the case, partially because politicians are in charge of allocating spending and partially because it takes so long for projects to actually get going. For the latter, stimulus spending is sort of like wonder drugs that cure colds - you've got to wonder if the cold would have gone away even if you had just done nothing.

The next time you talk about the multiplier, ask the three following questions:

1) Are we still confident that spending is effective in a post-industrial economy, compared to manufacturing-based economies of half-centuries ago?

2) How much spending can we do before the multiplier falls below 1?

3) How confident are we that spending will actually be effective, meaning both targeted and timely?

Megan McArdle has it right on the Fort Hood shootings

2009-11-06T14:15:00.002-08:00

All great points:

There is absolutely no political lesson to be learned from this. Gun control would not have stopped a commissioned officer from obtaining guns. Barack Obama had no power to stop this. Infectious PTSD is a lousy theory. And nations certainly do not--and should not--shape their foreign policy around the possibility that a random psychopath will start shooting up a crowd. Evil people do evil things. That's all.

She also puts up part of the response from Council on American-Islamic Relations. Take a look.

Problems with Stories

2009-11-06T11:37:00.003-08:00

Tyler Cowen is a smart man. In his TED Atlantic talk about stories, he lists of a few problems with stories. One of the problems with telling stories is that we don't ever tell stories in terms of accidents; instead, there is always a conspiracy. He says:

A story is about intentions, a story is not about spontaneous order or complex human institutions, which are the product of human action but not human design. No, a story is about evil people plotting together.

Few people make such succinct points as Tyler.

Nudge

2009-11-05T14:32:00.002-08:00

I'm currently reading Nudge by Thaler and Sunstein. It's a terrific piece of popular economics.

In the section on incentives in the Choice Architects chapter, they talk about the salience of incentives. It's important to ask if people are actually responding to, or even identifying their incentives. If not, they say good choice architects can direct people's attention to those incentives.

For example, during peak energy use, we would typically like to see people use less energy. To encourage that, power companies can charge more during those peek periods. The problem is that consumers only see that added onto the end of their bill a month later. What if turning the thermostat nob told you how much more money you would save or spend?

People are much more likely to respond to incentives if they are offered clear and immediate feedback.

My prediction for the future: we'll see more and more consumer devices with immediate feedback. I'm pretty sure Nike has several devices for working out that keep track of everything, which tell you how many calories you've burned and other neat tidbits.

Nudge

2009-11-05T08:44:00.000-08:00

I'm currently reading Nudge by Thaler and Sunstein. It's a terrific piece of popular economics with a lot of applications to public policy.

In the Choice Architects chapter, they talk about the salience of incentives. Economists like to talk about using incentives to change or describe people's behavior. However, it's important to ask if people are actually responding to, or even identifying their incentives. If not, good choice architects can direct people's attention to those incentives.

For example, during peak energy use, we would typically like to see people use less energy. To encourage that, power companies can charge more during those peek periods. The problem is that consumers only see that added onto the end of their bill a month later. Not too many people respond to incentives when they're not connected an action. Instead, what if turning the thermostat nob told you how much more money it would cost or save you on your bill?

That section actually reminds me of some research Professor Hawken, our statistics professor, told us about. In Hawaii, she had a parole program changed so that if drug offenders on parole failed a drug test, they immediately went back to jail for a few days; in the old program, violators would instead have a hearing a month or so later. Lo and behold, when consequences were immediate, the number of parole violations dropped drastically.

People are much more likely to respond to incentives if they are offered clear and immediate feedback.

I'm pretty sure Nike has workout gear that keep track of everything, which tell you how many calories you've burned and other neat tidbits. My prediction for the future: we'll see more and more consumer devices with immediate feedback.

Lessons Learned from Last Night

2009-11-04T05:03:00.000-08:00

Yesterday saw the election of the first Democrat to the NY-23 in a hundred years. Republicans won governorships in Virginia and New Jersey.

Orin Kerr at the Volokh Conspiracy comments:

I think there are four obvious lessons to draw from tonight’s election returns:

1. For Conservative Republicans: The America people reject Barack Obama and obviously want true conservative leadership. The Governorships of two states have switched to the “R” category, showing a grassroots conservative movement that is alive and well.

2. For Moderate Republicans: The American people obviously want old-fashioned economic conservatives who are moderate on social issues. McDonnell in Virginia and Christie in New Jersey won by downplaying social issues; Hoffman in New York-23 lost because he was too extreme.

3. For Moderate Democrats: The party out of power usually does well in off-year elections like this, and this year was no exception. But obviously there is no sign of any substantial shift in public opinion from the election of 2008.

4. For Liberal Democrats: NY-23 was the race to watch this year, given that right-wing extremists like Palin and Beck threw all their support behind Hoffman. But the district voters rejected the right-wing candidate, sending a Democrat to Congress for the first time in one hundred years. Obviously this shows that the American people reject right-wing extremism.

My fellow student blogger Ryan Donohue offers his two cents:

Secondly, much of the coverage over the next few days will probably indicate that this was a repudiation of Obama’s policies. However, the polling does not bear them out. In Virginia, 56% of the electorate said that Obama was not a factor in their vote for Governor; and 53% of them voted for McDonnell. In New Jersey, 60% of the electorate said that Obama was not a factor in their decision, and Christie won that group 48% to 44% to 8%. (Strikingly similar to the end results in N.J.) So my message from this is to ignore those who claim that it is a direct repudiation. They don’t have the data to back up their claims.

I think Orin Kerr is pretty much on target; I think Ryan should consider looking past exit polling numbers. It's been a year since President Obama won and 9 months since he started governing. We can quibble about whether or not Republican wins represent a repudiation of Obama's policies. The unequivocal thing to take away from all of this is that the honeymoon period is over.

When he took office, President Obama had a free pass to blame bad things on President Bush, for a time. Correctly or not, that time is over. Voters now associate their current conditions with the incumbent president.

Had the stimulus done what the current administration predicted it would, I think New Jersey would have gone the other way and Virginia would have been a lot closer. If that were the case, I can't help but wonder if Ryan would be making the argument that those wins *were* vindications of President Obama's policies.

Suprising Paragraph of the Day

2009-11-02T09:04:00.002-08:00

From the New Yorker article on Israel and Gaza, the section where Wright interviews an Al Qaeda affiliate:

Abu Mohammed claimed to represent four armed groups that have joined a jihadi coalition. (There is such an alliance, called the Popular Resistance Committees.) “When I speak, I speak for all of them,” he told me. “We consider Osama bin Laden our spiritual father.” His group follows the same ideology as Al Qaeda, but there is no direct connection. “The siege around Gaza has disconnected us from the outside world,” he said. “None of us can travel.” In Gaza, he estimated, there were about four hundred armed fighters in cells like his, down from as many as fifteen hundred before the Hamas takeover. When Fatah ran the Strip, it was easier for subversives to operate, he said, but now “Hamas is in full control, and their power is very tight.” Hamas, he explained, wanted to dictate when violence occurred in Gaza, and tried to keep the Al Qaeda sympathizers penned in.

My emphasis in bold. He says Hamas wants total control of armed struggle.

Implicit Marginal Tax Rates

2009-11-01T13:20:00.002-08:00

Did you fall asleep after reading the title of this post?

Mankiw is one of the few economists focusing on the implicit marginal tax rates of the health care bill. I think most people will ignore such analysis because so few people know what that means, and I'm sure no one is going to use it in an argument with their friends. It's similar to the problem of the bikeshed (HT: James Somers). It's not a dollar amount that people feel like they actually lose because they're not writing a check to the government for that amount.

Take a look below at the paragraph on the elasticity of tax revenue. I haven't seen many actual prediction numbers for how much revenue the government loses when it raises taxes. This is a point worth thinking about. Here's the paragraph:

How much do people respond to tax rates? Economists differ in their answer to this question. The latest thinking on this topic, by my Harvard colleague Raj Chetty, indicates that the elasticity of taxable income with respect to (1-tax rate) is about one half. So, for example, if a person starts with a marginal tax rate t of 0.3 and health reform raises it to 0.5, the percentage change in 1-t, using the midpoint method, is .2/.6, or 33 percent. With an elasticity of one half, his taxable income will fall by 17 percent. Thus, the economic impacts from these implicit tax hikes are sizable.

Debating health care

2009-10-31T03:55:00.000-07:00

On Wednesday the Women in Public Policy group of Pepperdine hosted a debate on health care. The question posed to each side was essentially is government-sponsored health care necessary in America? The two sides argued for the affirmative or the negative. I argued for the negative side.

I'm against the public option for a few reasons, but I think the most reasonable one is that there are much better ways to accomplish the same goals, namely the Wyden-Bennett bill (my thoughts are here at NewMajority.com and an op-ed by Wyden and Bennett is here). It imposes universal coverage, replaces the tax-free treatment of health care benefits with tax credits to individuals, and to my knowledge is the only health care bill that is both revenue neutral and bends the cost curve backward. The latter part isn't an unfounded or partisan claim - the CBO scored it. When you put up the public option against the Wyden-Bennett bill, the choice is clear. I don't think that is campaign rhetoric; I'm still waiting for *anyone* to offer any evidence to the contrary.

Anyway, Ezra Klein and Megan McArdle offer better critiques of the public option than I can muster.

From Megan McArdle:

At this point, I'd say that conservative and liberal health care analysts both know the score. Everyone knows that this bill won't work as advertised: it will not cover as many people as promised, and it will run into budget shortfalls, if for no other reason than because Congress is not going to enact the cuts as written--they will get lobbied into repealing many of them.

Liberals don't care, because they think it's worth it to cover more people. Conservatives care, but their kabuki complaints about what everyone in the wonkosphere knows go mostly unheeded.

I think Megan is right: even if you are for the public option, you don't have much reason to believe optimistic estimates of its costs or results.

Ezra Klein gets into the effect that moving uninsured people into insurance will have on the public option's premiums:

But because the public option is, well, public, it won't want to do the unpopular things that insurers do to save money, like manage care or aggressively review treatments. It also, presumably, won't try to drive out the sick or the unhealthy. That means the public option will spend more, and could, over time, develop a reputation as a good home for bad health risks, which would mean its average premium will increase because its average member will cost more. The public option will be a good deal for these relatively sick people, but the presence of sick people will make it look like a bad deal to everyone else, which could in turn make it a bad deal for everyone else.

This also illuminates one of the more problematic inconsistencies in the health-care debate. Insurers have been blamed for, among other things, doing too much to discriminate against bad health-care risks and refusing to pay for care far too often. They've been blamed, in other words, for saying "no." But they've also been blamed for doing too little to control costs.

But that is how they control costs. We saw this in the late-'90s, when tightly managed care brought cost growth down to the 4 percent range but also triggered a public backlash (it did not, however, appear to hurt health outcomes). Insofar as the public option has been presented as a big part of the answer to our health-care woes, it's been in part because it won't do the things that make insurers unpopular (the saying "no"), and in part because it will control costs. But the only way to make both those things true at once is to give the public option pricing power along the lines of Medicare, which it doesn't have in either the House or Senate bills.

I think it is realistic to say that the public option won't do a good job of controlling costs, based on political pressures and historical examples of government run insurance plans.

Somebody argue with me!

Guest lectures - Two different styles

2009-10-27T11:36:00.000-07:00

One of the nice things about Pepperdine is that there are frequently guest lectures to attend during the week. They usually take place at noon when no one has class and everyone can attend. Today's talk was by Richard Rahn, an economist who worked in the Reagan administration, among many other places. Dr. Rahn's talk was on government spending, and the effect the stimulus has had on the economy.

Dr. Rahn is very much against the stimulus, as well as government spending in general. One sees very clearly the influence that working in the Reagan administration had on him.

Here is what I find interesting. I did my undergraduate work at the University of Michigan, which leans toward the left-wing, as some public universities in the United States do. I got used to four years of talks by scholars and journalists that I disagreed with on two levels - 1) their actual content, and 2) their attitude toward those whom they disagree with. I grew accustomed to listening to questions from audience members who vehemently disagreed with all Republicans.

The difference between Pepperdine and UofM is striking. I've actually got professors I agree with here, and adults who attend talks aren't always far left-wing. I think some of my classmates could find it frustrating simply because for what may be the first time in their academic careers, they are faced with professors who 1) disagree with them, and 2) do so eloquently and intelligently.

The point is Dr. Rahn's talk today was informative, and for the first time in a while I agreed with the speaker's position. I'd be more likely to say that the stimulus was ill-formed, the government had a large (but not total) role in the housing crisis, and that spending is above safe levels. Unfortunately however, I disagreed with him on the second level I mentioned above. I'm pretty sure there is little President Obama could do that would make Dr. Rahn agree with him (I may be committing fundamental attribution error here, but I'm willing to put it out there).

Contrast the overtly political views of Dr. Rahn with last week's speaker Professor Randall Holcombe. Professor Holcombe spoke on what he called the "Obama-Bush Stimulus." He made an effort to stress that he was talking about policies and decisions that started before President Obama, as well as decisions that are being made now. He also stressed that he wasn't pro-Bush or Pro-Obama. I think Dr. Rahn's talk turned off people who support President Obama right at the start; Professor Holcombe's style kept people who disagreed with him engaged throughout, which is fascinating because he put out Austrian / Public Choice style arguments.

Dale Carnegie was right when he said you should always show respect for the other side's opinions, and never come right out and say that they're wrong.

Caplan's guide to writing non-fiction

2009-10-21T08:52:00.000-07:00

Bryan Caplan, author of The Myth of the Rational Voter, is one of the many professors at George Mason University I read. I like the last point of his recent post on guidelines to writing non-fiction:

7. Don't keep your cards close to your chest. Share your sincere probabilities with your readers. Don't just tell them what you can "prove." Tell them anything interesting that you're willing to bet on - and at what odds.

I would add: be hesitant and ask for the argument against your viewpoint. One of my heroes is Charlie Munger, whose gift to earth stressed the idea of anti-confirmation bias. He argues that Darwin wasn't extraordinarily intelligent; instead, Darwin was a successful because he actively sought to destroy his most cherished beliefs.

Professor Hawken, our excellent statistics professor, uses the word suggests when describing relationships she finds in data. By saying the data suggest causation or explanations, you give yourself cover yet still get your point across. Such cautious language also prevents people from being immediately turned off because they detect absolutes they disagree with. You've got to leave room for the possibility that you're wrong.

Mind you, we're in the Public Policy business. When was the last time you heard a politician say he or she was wrong?

Skyhooks versus Cranes

2009-10-20T09:58:00.002-07:00

Most economists think that they are building cranes that suspend important theoretical structures from a base that is firmly grounded in first principles. In fact, they almost always invoke a skyhook, some unexplained result without which the entire structure collapses. Elinor Ostrom won the Nobel Prize in Economics because she works from the ground up, building a crane that can support the full range of economic behavior.

There is much more here. This is a great concept. It's the intuitive reason why I am intrigued by Public Choice and Rational Choice.

It is also the reason why I dislike when people say Media does this, Society made him do that, or Government wants this and this (I'm definitely guilty of this one). "Media" is made up of thousands of individuals responding to incentives and career concerns, "Society" is made up of hundreds of millions of people with myriad desires and preferences that are not necessarily transitive, and "Government" is made up of bureaucrats that operate in similar ways (this one is from Public Choice).

After all, we wouldn't say "Traffic" caused a traffic jam. We'd say that too many people chose to drive, and they responded to the restraints they faced, whether those were too many other drivers or structural design.

Human Rights Watch founder criticizes...the Human Rights Watch

2009-10-20T07:15:00.000-07:00

Robert Bernstein joins Patrick Moore in the league of founders who later criticize their organizations. Bernstein criticizes the Human Rights Watch in today's NYTimes for "issuing reports on the Israeli-Arab conflict that are helping those who wish to turn Israel into a pariah state." Bernstein's point (my emphasis added):

The organization is expressly concerned mainly with how wars are fought, not with motivations. To be sure, even victims of aggression are bound by the laws of war and must do their utmost to minimize civilian casualties. Nevertheless, there is a difference between wrongs committed in self-defense and those perpetrated intentionally.

Compare this with the Financial Times' commentary on the Goldstone Report that just came out:

The attacks on Mr Goldstone should not obscure its message: there can be no warrant or moral right for indiscriminate attacks on civilians.

I think people tend to fall into two categories: those who believe Israel is targeting civilians and those who don't (Third category: those who don't know or don't care). I'll hazard a correlation and say that those who focus on how wars are fought without much focus on motivation tend to fall into the first category.

This is another one of those issues we seem not be able to discuss rationally; the issue inevitably turns political.

Global Warming is (always) political

2009-10-20T04:45:00.000-07:00

Superfreakonomics comes out today. Even before the book released, Levitt and Dubner ran into some trouble. Chapter 5 is about Global Warming and Global Cooling.

Here is a link to correspondence between Brad DeLong and Stephen Dubner. DeLong makes a very intelligent observation:

Over this weekend, people's views are gelling--Paul Krugman's, for example--while your voice isn't being heard, and once people's views are gelled, it takes a huge amount of evidence and the right kinds of psychological pressure to ungell them.

In response to all of the criticism, Dubner wrote up the process that went into writing the chapter. It's long, but fascinating. Krugman responds here.

Scott Sumner pretty much sums up how I feel about a lot of what Krugman's recent writing is like:

I’ve previously complained about how Krugman misrepresented my views, John Cochrane’s views and Milton Friedman’s views. Now we can add Levitt and Dubner to the list. That’ right, the following statement made by Krugman is pure fabrication:

(Krugman): "The chapter opens with the “global cooling” story — the claim that 30 years ago there was a scientific consensus that the planet was cooling, comparable to the current consensus that it’s warming."

Why does Krugman keep doing this? Why does he continually misrepresent what others say? My theory is that he assumes those he disagrees with are either fools or knaves. Instead of doing a sympathetic reading, trying to discern what others are really trying to say, he looks for the “gotcha.” I just read the chapter, and it bears little resemblance to his description.

Sumner takes Krugman to task in the rest of the post.

Yoram Bauman offers a great point by point critique, as well as his correspondence with Levitt (HT: Mankiw).

I find the whole exchange fascinating, but I bring it all up for a different reason: I think it is now officially impossible to talk about global warming, or the merits of cap and trade versus taxation, without also talking about the political perspective. For this issue, we cannot extricate the facts from the political. And that's too bad.

My only question is did Dubner and Levitt anticipate this firestorm and decide the publicity would be good, or did they think it would generate only as much controversy as the Roe chapter from their first book, and that they could handle it with the normal amount of column space?

If they had anticipated the strong negative reaction and wanted to control it, they could have started the debate and controlled the story. As Dubner notes in his letter to DeLong, the reaction spread within a day. Regardless, I'm looking forward to reading the book.

Student Blogger

2009-10-18T12:12:00.002-07:00

I'm starting as a student blogger for Pepperdine University this week. That blog is supposed to be Pepperdine-focused (student life, issues that relate to class, etc.). You can find it at Red White Waves and Blue.

I'll continue to use this one for concepts or political writing.

Micrometrics

2009-10-18T04:56:00.000-07:00

If you're interested in international development, you should be reading Chris Blattman's blog. He is an assistant professor at Yale who blogs about poverty alleviation and public policy in developing nations. Some of his most interesting blogging is during summer months when he conducts field experiments all over the globe.

This recent post about micro-level empirical methods in politics (what he calls 'micrometrics') is excellent. He describes the progression of ways to do field work from innovators all the way to those who jump on the bandwagon, but get left behind. Being the first one in the field means no one knows what to look for.

Where there are big questions with almost no data, you can get away with just about anything.

Blattman also gives props to being a contrarian.

Where there are many assumptions but little theory or data, look for counterintuitive results and try to build a new theory. If you can overturn conventional beliefs, you are in.

You can't blame anyone for not getting things perfect the first time through. But getting the methods right when doing research is essential. March and Lave's costly book An Introduction to Methods in the Social Sciences is one of the most applicable things I have ever read for research in the social sciences. I can't help but think that it would benefit those who do micrometrics.

The Keynesian Multiplier

2009-10-08T10:50:00.002-07:00

First up, Robert Barro and Charles Redlick in the WSJ. The authors use wartime spending periods to estimate the multiplier effect.

Our research also shows that greater weakness in the economy raises the estimated multiplier: It increases by around 0.1 for each two percentage points by which the unemployment rate exceeds its long-run median of 5.6%. Thus the estimated multiplier reaches 1.0 when the unemployment rate gets to about 12%.

And this:

The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.

Next up, Megan McArdle sounds reasonable as hell when she comments:

Obviously, the size of the multiplier is a matter of hot political debate, with the estimates roughly breaking down along ideological lines: conservatives think it is small, liberals believe it is larger. These beliefs are obviously colored by your other opinions on the general wisdom of having the government take taxpayer dollars and spend it on stuff.

and

I've discussed the underlying paper with Barro, and it seems pretty compelling; they've got a hell of a time series. On the other hand, I know that this work fits both his and my political convictions, so there's a good chance we're both missing something. No doubt liberals will jump on the paper with both feet, and we'll get to here [sic] about what that missing something might be.

Expanding on that, Karl Smith does a good job of asking questions that might undermine Barro and Redlick. They're all worth reading, but here is where he starts:

First, doesn’t war, especially WWII radically alter expectations? Indeed, the larger the war the more radical the effect on expectations.

However, I take issue with this one:

Fourth, it seems to me that multipliers should be inversely proportional to the amount of stimulus. First, you employ the people who really have no options. Then the people who have options but don’t like any of them. Eventually, you’re eating into the people who are happy with what they’re doing.

We would hope so, but I think that in practice, stimulus is never designed that well, or close enough to it.

Krugman points to a few other commentaries and offers his own:

The thing is that both the fixed rate and closed multipliers are around 1.5 — which so happens to be just about the number assumed by Christina Romer in her analysis for the Obama administration. Just saying.

Ending with "Just saying" is typical Krugman, ugh.

Tyler Cowen brings up a qualifier that few people mention:

It is frequently suggested that the multiplier today is best estimated at 1.5 or 1.6. My point today is this: if you postulate a potent multiplier you cannot easily also postulate a liquidity trap. The whole point of the multiplier is that if the government buys cement from my company (say for a road) I as the company owner take those cash receipts and spend them elsewhere. Maybe so but that means people are willing to spend cash when they receive it.

Scott Sumner makes me laugh; his related post notes that everyone is talking about the multiplier, which is silly because "indeed much of the debate is total nonsense."

This stands out to me:

Even from a Keynesian perspective, the multiplier is a completely meaningless concept, for two separate reasons. Both problems relate to the “ceteris paribus” assumption. One is definitional, and the other is behavioral. Let’s start with definitions. Generally in economics we use the ceteris paribus assumption, which holds other factors constant. But of course any change in government spending will change other factors; indeed that is the whole point of fiscal stimulus.

If you've got time, read his whole post. David Henderson puts it well when he says you should read his post just to "see how much actual confusion he uncovers in the debate."

I think Scott Sumner is onto something, but not because he says there is no such thing as a multiplier. Recently I've wondered if it really is > 1.0, where the heck does it fall below 1.0? How many papers are there on when the multiplier becomes ineffective?

Making Economics Intuitive

2009-10-04T12:05:00.003-07:00

I love this thread from Bryan Caplan at EconLog.

First, second, third.

It starts like this:

1. Counterintuitive claim: Free trade makes countries richer, even if the other countries have big advantages like cheaper labor or more advanced technology.

Intuitive version: We'd be better off if other countries gave us stuff for free. Isn't "really cheap" the next-best thing?

And from the comments, ends like this:

Joe Cushing writes:
Counterintuitive Claim: Eliminating jobs by increasing productivity is a good thing. Likewise, creating jobs by reducing productivity is a bad thing. --Usually the part about productivity is left out of the political discussion but I wanted to be clear where I was coming from on this.
Intuitive version: Higher productivity means that the same number of people can produce more stuff - and the people who lose their jobs move on with their lives and eventually find something better to do. If we didn't let productivity "destroy jobs," we'd still all be farmers.

I also like this one:

dkite writes:
Counterintuitive: Limits on foreign ownership makes a nation poorer.

Intuitive version: Some owners run businesses better than others. Limits on foreign ownership are affirmative action programs for domestic business owners who couldn't make it on their merits.

David Brooks on Talk Show Hosts

2009-10-04T11:55:00.001-07:00

Brooks on those of the far right:

The rise of Beck, Hannity, Bill O’Reilly and the rest has correlated almost perfectly with the decline of the G.O.P. But it’s not because the talk jocks have real power. It’s because they have illusory power, because Republicans hear the media mythology and fall for it every time.

A good point

2009-09-23T08:47:00.002-07:00

On Honduras, from its current (and I think legitimate) President:

Simply put, coups do not leave civilians in control over the armed forces, as is the case in Honduras today. Neither do they allow the independent functioning of democratic institutions -- the courts, the attorney general's office, the electoral tribunal. Nor do they maintain a respect for the separation of powers. In Honduras, the judicial, legislative and executive branches are all fully functioning and led by civilian authorities. (My emphasis)

Interesting point on measuring inequality

2009-09-22T10:51:00.004-07:00

Tyler Cowen points to this new paper by Robert J. Gordon at Northwestern.

I had never considered this point before:

Third, an emerging literature documents an exaggeration of the rise of inequality due to the use of common price indexes across income groups. Several important recent articles document that prices paid by the rich have been increasing more rapidly than prices paid by the poor. The implication is that almost all studies that use a single common price index across all income groups overstate growth in real income at the top and understate real income growth at the bottom.

People in the upper quintiles don't buy the same kinds of things that people in the lower ones do. A more accurate measure of income inequality might use different price indexes for the poor and the rich.

Gordon also looks at the inequality not for the whole population, but the 1st through 99th percentile. Is excluding the top 1% okay to do? If I have a 100 people in an economy, and one person gets a bump in income but no one else does, does that matter? Aside from people envying that one person, are there harmful effects for what is technically more inequality?

Read the abstract, if not the whole paper.

On manufacturing in the United States, President Obama says one thing but means another

2009-09-21T17:41:00.002-07:00

(This post was published at NewMajority)

I would like to see the numbers the President uses to back up some of his claims. This weekend he told the Toledo Blade and the Pittsburg Post-Gazette that it is going to take decades to rebuild the United States’ declining manufacturing base. That’s misleading because President Obama doesn’t mean total manufacturing output, or output per worker. He means the number of people employed in the manufacturing sector.

It’s true that the number employed is declining. Right now 12 million people are in the manufacturing industry, down from almost 20 million in 1980. The last time that was below 12 million was 1940, when US population was less than half of what it is today. As a percent of the workforce, the number falls every year.

But President Obama is wrong when he says that the manufacturing base is in decline. Total output by the manufacturing industry continues to grow, as does productivity. In this way we manufacture more goods, but require fewer people to do it. It’s a good thing, as long as we can help those who lose their jobs to transition into better ones.

We have a lot to be proud of in American manufacturing. In 2007 we made 1.6 trillion dollars worth of goods, and exported a huge chunk of them. Think about it this way: the amount of goods manufactured in the United States equals the total output of Russia’s economy, and the amount of goods exported equals the total output of India’s economy. We do that with less than a tenth of our labor force. That’s pretty incredible.

We lose manufacturing jobs because we learn how to do them more efficiently or because it's cheaper to do them elsewhere. President Obama wants these jobs back, but we can’t get them back. In fact, we don’t want them back. We want better, higher paying jobs to take their place. Most of the time, those jobs are in service or technology sectors of the economy. We've gone from manufacturing everyday items and simple electronics to figuring out how to make computer chips and airplanes. Instead of looking backward to the jobs Americans used to do, let’s focus on the jobs Americans do better than anyone else.

(Stats come from the BLS and others)

Grad school makes my Reader pile up

2009-09-15T10:49:00.003-07:00

1. Tyler Cowen on conservatism. I don't endorse it, but it's an interesting read.

2. Don Boudreaux wants to know:

Why does there exist a widespread sense that each of us, as individuals, is incapable of — or should not be obliged to — providing for our own health-care needs in the same way that we provide for our own grocery needs, our own household-furniture needs, our own automobile-insurance needs, and many other of our needs?

Because it's a necessity? So is food, so we have food stamps. Maybe the public option is bigger than food stamps. I don't know.

3. Will Wilkinson on Thomas Friedman's recent bonehead NYTimes article.

Why does Friedman say the United States has one-party democracy? Because the Republican Party is effectively opposing the Democratic Party’s agenda! Not even kidding.

Friedman then goes onto say that the system in China isn't too bad. I *dare* a Republican to say the same thing without getting bombarded from the left regarding human rights violations in China.

4. Megan McArdle on teacher pay.

We should pay teachers much more than we do. Right now, they take a substantial portion of their "pay" in the form of near-total job security. People like this benefit. But in most cases, they shouldn't have it, because it has predictible effects on performance--particularly when it is coupled with a pay scale that relies on measurable but not very useful traits like advanced degrees (totally useless) and seniority (the benefits of experience eventually level off). The only thing teachers have a financial incentive to do under this system is keep their butts in the teacher's chair, and acquire useless degrees from programs that mostly teach students how to sit through long and pointless classes.

5. Over at The Next Right, talk about a new Buckley.

People my age (I turned 35 not too long ago) remember Buckley as an older man, and we forget that the leaders we grew up with were our age when they started the modern conservative movement in the 1950's.

6. From Cochrane's response to Krugman (HT: Caplan):

Krugman is trying to say that a cabal of obvious crackpots bedazzled all of macroeconomics with the beauty of their mathematics, to the point of inducing policy paralysis. Alas, that won't stick. The sad fact is that few in Washington pay the slightest attention to modern macroeconomic research, in particular anything with a serious intertemporal dimension. Paul's simple Keynesianism has dominated policy analysis for decades and continues to do so. From the CEA to the Fed to the OMB and CBO, everyone just adds up consumer, investment and government "demand" to forecast output and uses simple Phillips curves to think about inflation. If a failure of ideas caused bad policy, it's a simpleminded Keynesianism that failed. [emphasis Caplan's]

7. I read the title of this article and didn't have to read anymore (American Mid-East Policy: No Israel Lobby, Just Self-Interest).

Shucks

2009-09-08T22:40:00.002-07:00

I moved to California a few weeks ago from Michigan. I flew, so naturally I shipped a few boxes.

In one box I put the non-fiction books that I consider essential, and wish to have with me at any residence I stay at for a decent amount of time. That numbered between 20-25 books. I mailed it to my new address two and a half weeks ago.

Today I received a manila envelope, one of my books, the address label from the package, and a note from the Postal Service. It turns out my package was eaten or something by a machine. My books are likely scattered all over a warehouse.

I've been able to come up with the names of 15 of them off of the top of my head, and I'm sure the rest will come back to me. Some of them I haven't re-read in their entirety in a few years.

And now I'm a poor graduate student. Replacing them is going to take time.

Bummer.

Frank Luntz should be proud of Arianna Huffington

2009-09-06T11:20:00.003-07:00

John Stossel calls out Arianna Huffington for calling school vouchers "single-payer education."

In her own words:

In a single-payer education plan, the federal government, in conjunction with the states, would provide an education allotment for every parent of a K-12 child. Parents would then be free to enroll their child in the school of their choice.

She can't say vouchers, of course, because some Democrats will protest like she's a Whole Foods CEO.

I don't care what you call it, just get more school choice. I cannot wait to see if Arianna comes out against Democrats for not re-authorizing DC's voucher program.

A succinct criticism of current health care proposals

2009-09-03T21:57:00.003-07:00

From the NYTimes' David Brooks:

Instead of true reform we got a series of bills that essentially cement the present system in place. The proposals do not fundamentally challenge the fee-for-service system. They don’t make Americans more accountable for their own health care spending. They don’t reduce costs. They just add more people into the mess we’ve got.

Embrace Universal Health Care via Wyden-Bennett and Elminate the Employer Subsidy

2009-08-22T20:53:00.013-07:00

(This post is in response to David Frum's question at New Majority and was subsequently published.)

Republicans should embrace universal health care by supporting the Wyden-Bennett Healthy Americans Act. There is not another viable way to get rid of the tax-free treatment of employer-provided health care benefits that is severely distorting the health care market. Once you throw in on top of that greater benefits than those currently offered for families and individuals, consumer choice among competing health care plans, portability of health insurance, and (adding in the inevitable under-estimate of total cost) a price tag that costs a trillion dollars less in the next decade than any Democratic plan, you end up with the best bill in either chamber.

Now if only it could gather some momentum - or even get talked about. Prominent Democrats brush off the proposal completely. As far as I can tell Robert Reich, President Clinton's Secretary of Labor, frequent health care blogger, and champion of the public option, has not even mentioned the Wyden-Bennett bill. Neither has the prolific Paul Krugman. It's a plan that is revenue neutral, improves incentives, and offers universal coverage.

So what gives? In Professor Krugman's case, I can think of two possible answers. The first possibility is that it would move so far away from a single-payer system that eventually having such a system would be extremely unlikely, and he would rather not give it any publicity. After all, it is a very attractive sounding bill. The other possibility is that he hasn't come across it. I strongly suspect the former. (Come on Professor, comment on the bill.)

Republicans on the other hand seem to want nothing more than to have President Obama's health care agenda fail. In their eyes, death to health care reform equals victory for Republicans in 2010 and possibly 2012. But encouraging President Obama to fail is only half of the equation to electoral success. Most of American voters see Republicans as bankrupt idea-wise, and many of them think that our system is broken. Republicans would win back an incredible amount of voters by uniting behind a plan that offers universal coverage, no public option (how can it be an option if we mandate it?), and a price tag that doesn't add any red to the budget. Republicans could claim the anti-single payer system. They could demonstrate to American voters that Republicans have workable ideas, and that President Obama does not.

Links I Liked

2009-08-20T09:19:00.002-07:00

1. The Five Whys, courtesy of Chris Krese. By the time you get to the fifth why, you're likely to be at the root cause.

2. Tim Kane calls the Wyden-Bennett bill the "obvious centrist solution" for health care.

3. I might stop criticizing the public option and just point you to Matt Rognlie here and here. The second link is terrific. Read it.

4. Read Arnold Kling on the "output gap." Hydraulic macroeconomics is still my favorite term I've heard in a while.

5. The Toyota Way (@avinashv).

If you're only going to read one, read

Nitpicking - The Lucas Critique

2009-08-14T14:18:00.005-07:00

Professor Krugman (again) talking about the correlation between deficits and interest rates. His point is that when deficits are high, interest rates are low, and vice versa. Without affirming or negating his point, I'd just like to point out the Lucas Critique. It's the first thing that popped into my head when I read his post. (Thanks to Sharon Traiberman for pointing out the Lucas Critique to me months ago.)

From the Wikipedia page:

The Lucas critique, named for Robert Lucas' work on macroeconomic policymaking, says that it is naïve to try to predict the effects of a change in economic policy entirely on the basis of relationships observed in historical data, especially highly aggregated historical data.

Those who make the mistake the Lucas Critique describes often fail to incorporate a sense of process in their argument.

Krugman has process, but I think he gets the causation part wrong. The point I'm nitpicking is this statement:

On reflection, it’s obvious why: a weak economy both drives up deficits and drives down the demand for funds, while a strong economy does the reverse.

Deficits are only high in a weak economy because we have tended to try to spend our way out. Thre is nothing stopping us from having low deficits, no deficits, or even surpluses in a weak economy. We are in control of our deficits; that decision is not made by an overlord economy.

Saying a weak economy drives up deficits is sloppy analysis.

Another nitpick:

Overall, Brad’s point is exactly right: the US government is borrowing huge sums, but interest rates remain low by historical standards — which is exactly what you’d expect given what we learned from John Hicks, 72 years ago.

What if interest rates are low because we're where everyone else goes for safety? It isn't a remote possibility that China and Japan, our biggest foreign lenders, could have had other opportunities for investment over this same period, leading to higher interest rates for our bonds.

Does Professor Krugman's statement apply as a generality to every country, or just the United States? We are after all different from most countries in that we have typically been the safest bet for buying bonds.

Addendum: Krugman put up a wonkish post to go into his argument further.

Fundamental Attribution Error

2009-08-14T11:29:00.002-07:00

Krugman's post is titled "Yes, Bush tried to destroy Social Security."

No he didn't. You can argue that it would have destroyed Social Security (a position which I disagree with), but you cannot say he attempted to destroy it. That's a simple case of fundamental attribution error.

Health care, protestors, signaling, and a touchy subject

2009-08-13T07:29:00.004-07:00

1. I'm with Mark Perry, unless "pre-existing conditions" means something else. I'm pretty sure it doesn't.

If insurance companies didn't discriminate for pre-existing conditions, I imagine people wouldn't sign up for much insurance. Why buy a plan covering medical conditions that insurance normally covers, when you could wait for such conditions to arise and then sign up for coverage?

That cannot possibly be what Democrats are asking for. I want to know, what do they actually mean about pre-existing conditions?

2. On the absurdity of comprehensive health care coverage. I imagine comprehensive coverage in health care is more common in health care markets than in auto markets (absent the actual path of how we got here) because the expenses are so much larger. Chalk it up to the tendency to discount the present incorrectly.

3. Protestors at town halls. The Democrats' strategy of calling protestors "astroturf" was solid in the beginning. Now that the reaction has been sustained, that tactic is losing ground. It turns out actual people really don't want the public option.

Regarding the people calling President Obama a Nazi - he's not. They're ignorant. However, I do seem to recall more than one comparison of President Bush to Hitler.

4. Cowen on signaling:

The "signaling revolution" in economics can subvert established tradition. For instance it overturns some notions of the relevance of opportunity cost. People with low opportunity costs are often the same people with low expected benefits from signaling.

5. Oy, this is always a touchy subject. That post is titled "New Evidence in Favor of a Gender Math Gap." Excerpt below, click through to find out who wrote it. You may be surprised. Only Nixon could go to China...

Girls are losing ground in math in every region of the country, every racial group, all levels of the socio-economic distribution, every family structure, and in both public and private schools. By the end of the sample, girls do significantly worse than boys on every math skill tested. Underperformance by girls is evident not just in mean test scores, but also in the upper tail of the math distribution. On entry to kindergarten, girls make up 45% of the top five-percentiles in math test scores; by the end of fifth grade just 28% of the top five percent are female. Girls are underrepresented in the bottom tail of the math distribution in kindergarten, but overrepresented in the bottom tail by fifth grade.

We explore a wide range of possible explanations in the U.S. data, including less investment by girls in math, low parental expectations, and biased tests, but find little support for any of these theories. Our evidence suggests that the gender math gap is especially large among children who attend private schools, have highly-educated mothers, and have mothers working in math-related occupations -- all factors that one might think under some theories would be conducive to girls’ success in math.

Health Care, Economics, and More!

2009-08-12T08:23:00.004-07:00

1. Matt Yglesias on libertarianism:

I think libertarianism is best understood as a kind of esoteric doctrine. There’s strong evidence to believe that people who overestimate their own efficacy in life wind up doing better than those with more accurate perceptions. It follows that it’s strongly desirable for society to be organized so as to bolster myths of meritocracy. This will lead to individual instances of injustice and to a lot of apparently preventable suffering, but over the long-term the aggregate impact of growth (which, of course, compounds) on human welfare will swamp this as long as we can maintain the spirit of capitalism.

2. Here's an eye-opener. Wait times for specialty medicine in Boston (with mandated insurance) are 140% longer than the national average, and 84% longer than those of the second-longest metropolitan market.

3. What a great term, from Arnold Kling. He calls mainstream macroeconomics "hydraulic" because according to this school, "there is something called "aggregate demand" which you adjust by pumping in fiscal and monetary expansion."

I've never liked the various terms we use to describe the economy. We "pump" money into an economy that is "sinking." We "shock" an economy in "free fall." I especially dislike the terms equating the economy with a sick person. The economy is "sick," "unhealthy," or "dying" - we've got to "save" it! These terms frequently obfuscate whatever problem we're facing. We don't have antibiotics for the economy.

4. Here's Arnold Kling giving his most generous interpretation of progressivism. It's split up into two parts: what he thinks progressives believe and what he thinks of progressivism. Worth a quick read.

5. Two sides of the same coin. WSJ v Krugman.

6. Megan McArdle is prescient, as per usual. On the government denying (or not) care to elderly under a public option:

The Obama administration's point, which is well taken, is that it's problematic to give doctors financial incentives to bias their advice towards treatment. The problem is, it's also problematic to give them, or their employers, incentives to bias their advice towards undertreatment.

7. I have to agree with Stossel - Krugman knows how to frame arguments.

8. I'm instinctively disagreeing with this article in Foreign Policy. It tells us that authoritarian regimes should not fear Twitter. I think more generally, authoritarian regimes should fear anything that lowers the cost of communication and organization among its opposition. Twitter is included in that set.

9. Post hoc ergo propter hoc (21 lawyers in the room and no one knows what post hoc ergo propter hoc means?).

10. I want to know if the interm-Honduran government actually owes it to Zelaya to let him back in the country. If only they hadn't used the military to oust him?

11. John Mackey, the CEO of Whole Foods, has an op-ed in the WSJ. It's solid, a lot of what I've covered, but I read four blog posts about it and decided to post it. It's very much worth reading.

12. Walter Williams's article titled Politics and Blacks:

The bottom line is there is very little evidence anywhere on the planet that political power is a necessary condition for economic power.

I want the Wyden-Bennett Bill for health care reform

2009-08-05T08:11:00.002-07:00

Read this op-ed from Wyden and Bennett in the Washington Post.

Eliminate tax-free employer-sponsored coverage + mandate everyone have insurance + big tax credits = Better than all other proposals

A Handful of Links

2009-08-03T08:29:00.003-07:00

1. Lots to like in this article. Among other things:

On outcomes, the oft-cited statistics on infant mortality and life expectancy are, to say the least, unfair. America has significant minority populations (which Japan, Canada, and much of Western Europe do not) and these groups have a variety of socioeconomic and historical issues that compromise health outcomes (poverty, drugs, gun violence, out-of-wedlock births, distrust of doctors and non-adherence with medication, follow-up, and diet regimens,). Further, on infant mortality, Western European societies have a lot more abortion and make much less effort to save preterm infants born under 28 or 30 weeks of gestation (such births there are often recorded as stillbirths), whereas in the US, NICUs routinely take care of preemies born at 24 weeks or even younger.

I've never read this guy before, but I've added him to my Reader feeds. Meticulous article. HT: Megan McArdle.

2. More Megan McArdle, and you've got to admire her for this gem:

I know, most of you have already figured out why I oppose national health care. In a nutshell, I hate the poor and want them to die so that all my rich friends can use their bodies as mulch for their diamond ranches. But y'all keep asking, so here goes the longer explanation.

3. I think Karl Smith's intuitive way of wrapping your head around supply and demand is without rival.

On race relations, Cowen gets it right

2009-07-24T07:39:00.003-07:00

One of Tyler Cowen's readers asked him:

You rarely write about race, yet I can't help but wonder--as a fellow prof and a social scientist--what your thoughts are about the Henry Louis Gates flap in Boston and what, if anything, you think it says about the larger questions of race relations and psychology of authority.

Cowen's perfect answer:

My view is simple: everyone involved will come out of the "flap" looking worse.

I don't really know what happened at Professor Gates's home in Cambridge, and neither does almost everyone else. Read only this article, and you'll think he got what he deserved. Read only this article, and you'll think the cop is a racist pig.

The correct answer to What do you think about this situation? is: I don't know!

Another link-post

2009-07-22T06:52:00.006-07:00

1. From an AP report:

Asked by Senate Budget Committee Chairman Kent Conrad, D-N.D., if the evolving legislation would bend the cost curve, the budget director responded that — as things stand now — "the curve is being raised."

A public option will not change incentives in a way that will lower costs. (HT: Mankiw)

2. Take a look at Keith Hennessey's health care reform proposal. It's very solid.

3. Scott Sumner has a must read post on the aesthetics of inequality in the US. There's too much to quote. A fair comment about Krugman:

Wilkinson starts off with some comments on Krugman. Readers of this blog may assume that I am as obsessed with Krugman as Ahab was by the white whale. But I’ll use a different animal metaphor—for anyone on the right, Krugman is like a big elephant standing in the middle of the road. He is the most articulate spokesman on the left, and unless you can get past his arguments you won’t get anywhere.

It’s generally agreed that the income distribution in the US has become significantly more unequal since 1970. Wilkinson points out that if we are interested in living standards, however, the relevant variable is consumption, not income. Income is distorted by fluctuations in realized capital gains, and all sorts of other factors. Nominal consumption inequality shows much less little change. In addition, he provides evidence that the cost of living for low income Americans has probably risen much more slowly than for wealthy Americans. Low income Americans have benefited from the Walmart effect, whereas richer Americans have been penalized for wanting to live in areas with a rapidly rising cost of living, such as Manhattan and West LA.

And a zinger:

The best way of discovering what Krugman really believes is to read Keynes.

Read the rest.

4. I'm really enjoying John Stossel's blog. From his post about unions in public schools:

To jeer: The front page story headlined: "Parent-Paid Aides Ordered Out of Public Schools" demonstrates again how:

1. Unions put union power ahead of kids.
2. Government bureaucracies cave in to public-sector unions.

5. How come people oppose taxes on the top 1-2%, even if they don't make that much?

My answer: this is America. We all think we're going to get there eventually. I know I am.

6. Nerd alert. Click through to read the ACTUAL source code for Apollo 11. Wow.

Links of the day skewed toward health care again

2009-07-16T07:56:00.003-07:00

1. The chart of how the government run plan would work makes me laugh. I'm not sure how much of it was simply meant to confuse, or if it reflects the reality of the situation. Regardless, it got good play on Drudge.

2. Are we missing some crucial information about Honduras? All 27 European Union countries have withdrawn their ambassadors. And yet when I read about what happened, I'm squarely against Zelaya.

3. We focus on details too much when discussing the stimulus plan or health care reform. Think about the fundamentals; proposed health care reform will raise the cost of labor for American companies. Increased labor costs => less hiring, slower growth, etc.

4. I can't help but comment that if Republicans put out a 1018 page bill that significantly affects everyday life and tried to ram it through Congress, Democrats would be vilifying them mercilessly. Wait, that happened with the prescription drug bill. Except I'm pretty sure that Republicans let the CBO score it, not just comment on preliminary outlines.

5. Does the proposed health care bill make individual private medical insurance illegal? The IBD says so. Any bets as to whether the 1018 page bill is entirely consistent? There have to be conflicting parts with something that complex.

Payroll Cuts, the Gold Standard, the Topple Rate, and Frum Conservatives

2009-07-15T09:12:00.004-07:00

1. Karl Smith's second stimulus would look like what I wanted the first stimulus to look like. A payroll holiday (where the government actually pays, not just suspends it) would immediately lower the cost of labor and slow down layoffs.

Even though it's what I wanted, I don't want a second round of "stimulus." The first one was a sham (and is only starting to get spent), and deficit spending of 15% of our GDP for two years is almost certainly going to do much more harm than good.

2. Scott Sumner gives what I think is a good retort to calls to return to the gold standard in his FAQ, which Bryan Caplan recommends:

18. Isn’t the only solution to get rid of central banking?
And then what? A gold standard does not stabilize the price level, as the real value of gold fluctuates like any other commodity. We had depressions under the gold standard.

3. Contrary (maybe?) to popular belief, it's a good thing that companies at the top in the US tend not to be there decades later. It's called the Topple Rate.

4. Consider me lumped.

Mankiw on Krugman and the Wyden-Bennett bill

2009-06-30T09:22:00.002-07:00

Greg Mankiw says what everyone suspects about Paul Krugman:

On the issue of tone, I again think I understand Paul's point of view. He likely believes that civility is overrated. He seems to think that in the blogosphere, and perhaps in the public debate more generally, you score points simply by insulting your intellectual adversaries. Sadly, I am afraid he may be right.

He also points out the Wyden-Bennett bill, which they call the Healthy Americans Act. If we're going to have universal coverage, couldn't we at least make it revenue neutral, like their bill does. It will even alter incentives (and thus costs) by exchanging tax benefits to employers for tax credits (huge ones) for individuals and families.

Paragraphs of the Day

2009-06-23T06:56:00.001-07:00

David Brooks on health care:

The problem with the committee plans is that they don’t do much to change the underlying incentives, and consequently don’t do much to control costs.

But there is almost nothing that gets to the core of the problem. Under the leading approaches, health care providers would still have powerful incentives to provide more and more services and use more expensive technology.

Lots to catch up on

2009-06-19T07:36:00.002-07:00

1. My congressman Dave Camp introduced the Republican alternative to health care reform. I have strong doubts about the ability of the government to lower costs. Other than that, I've very much in favor of moving away from our employer-based system with tax credits.

Congressman Camp also went on CNN to talk about the Republican plan. He started out by saying that Republicans want an "American plan." When asked about it, he implied that he meant bipartisan. I think he should have seized on it to define the Democratic plan as a shift toward European/Canadian health care. He has the opportunity when he first responded with, "we want a solution that Americans are used to, which means you get treatment immediately." I'm surprised the Republicans haven't emphasized long wait times in Canada and elsewhere while opposing the Democratic solution.

2. David Henderson talks about the uninsured.

But then Baker himself makes an important error, claiming incorrectly that the number of people in the United States who go without health insurance for a whole year is 45 million. It's actually substantially lower than that. Baker does cite a source for his statistics. But although the source he cites refers to a Census Bureau estimate of this 45 million figure, this very source states (in Table 2, page 6) that in 2002, 92.1 percent of people had health insurance coverage at some time in the year. That leaves 7.9 percent of people with no coverage for the whole year. 7.9 percent of a 2002 population of 281 million is 22 million. If the same percent applies to 2008 (and these percentages vary little year to year), that makes 7.9% of 304 million, or 24 million, only a little over half of the number Dean Baker claims.

I linked to a Keith Hennessey piece a while ago on the number of uninsured in America.

3. Nick Gillespie makes a great point about health care. Read that whole link. Do you think health care is more important than owning a cell phone or watching TV? If so, and you're uninsured, why in the hell do you have a cell phone or cable?

4. The WSJ on American competitiveness as a reason for health care reform.

5. Must read - personal accounts from Tehran.

6. Mark Perry has more on the uninsured in America - apparently, 4 out of 10 uninsured households make over 50 thousand dollars a year (Avi, that's 2.4 million rupees a year!)

7. I can't wait for Tyler Cowen's new book, out July 9th.

8. Tim Kane is right - The American government isn't helping the people of Iran; American people are helping the people of Iran. Fascinating stuff.

9. Megan McArdle on the reality of the Obama presidency:

But two things are also clear: the Democrats overestimated the boost they'd get from both the crisis and Obama's popularity. And they dissipated a hell of a lot of the money and political capital they'd now like to spend on the stimulus and the GM bailout. They got very carried away with visions of 1932.

But this is not 1932, and Obama is not FDR. FDR came into office with 20+% unemployment and a banking crisis that was wiping out peoples' life savings every day. FDR also came into office with a trivial national debt, and a Federal government that consumed less than 4% of GDP. He had a lot of run room.

10. I'm giving John Stossel's blog a chance. His latest post: - Stimulus Not Working: Why is Vice President Biden Surprised?

11. When I think of the fundamental attribution error (also called correspondence bias), I think of attributing the wrong motivations to actions by individuals, usually because we dislike or disagree with them. Caplan summarizes it as the "strong tendency to overestimate the importance of individual differences and underestimate the importance of circumstances."

The Iranian Presidential Election of 2009

2009-06-16T08:43:00.004-07:00

The WSJ reports today that Iran is going to recount some ballots. The "official," state-run media announcement said Ahmadinejad had 63% of the vote, compared to Mousavi's 34%. (By the way, the Guardian Council allowed only four people to run for President out of the 500 who wanted to.) There are reports that turnout was around 80%.

A few thoughts. One, the first round of the 2005 presidential elections had a turnout of 63%. The next round run-off between Ahmadinejad and Rafsanjani saw a turnout of 48%. If turnout really was 80% in this year's first round, there is no way the massive increase in voters turned out to vote for the incumbent. Out of the 50 million eligible voters, it seems incredibly unlikely that 9 million more people showed up this year to demand the status quo.

Two, I think it's bold of Khamenei to recount some votes after declaring the election results. Isn't what he says supposed to be final? He said Ahmadinejad's win was by "divine assessment." Allowing some recounts acknowledges error, opens up the possibility of his falibility, and emboldens the opposition. I hope he's feeling the heat of the protests. Really though, there is almost no chance that they will come out and say, oops, we miscounted, ah, 5 million votes? Sorry about that...

Three, there is no doubt that there was wide-spread voter fraud. Results for many precincts were announced mere hours after polls closed. The speed with which 39 million votes was counted is astounding (Read: it didn't happen). Mousavi and others reported millions of people being unable to vote. Facebook was blocked for the day, and there was widespread jamming of cell phones throughout the country. Does anyone think that wasn't planned?

Four, President Obama needs to step up and make this a huge issue. Many bloggers posted about how little coverage the MSM was giving to the protests. Megan McArdle speculated that it is a function of having so few people over there, as well as any footage to accompany it. I don't think the MSM thinks it isn't important, I think it's simply of function of what is available. Still, op-ed boards should be focusing heavily on Iran. This is a huge issue.

When it comes down to it, there isn't a better opportunity around to help support democratic reforms in the Middle East. This should be shifted to be priority number one. Otherwise, I fear a crackdown in Iran much like that of Tiananmen Square, with the resulting de-emphasis on democratic reforms in the country.

Five, Iranian elections shouldn't be mistaken for evidence of Iran as a democracy. Take a look at Dahl's seven criteria for democracy one more time. Iran satisfies, number 1 and maybe number 3. But it fails 5 of the 7 criteria. That isn't democracy; that's a mostly-closed polity.

Reading Catch-Up

2009-06-16T07:50:00.003-07:00

1. Russell Roberts takes issue with Justin Wolfers' graph on inequality here and here. His best two paragraphs:

It is easy to confuse inequality and absolute well-being.
If the income of poor people is growing at 3% a year and that of rich people 5% year, then inequality will grow. But the poor will be doing much better. In fact, in roughly a generation—25 years—if that trend continues, the poor will double their material well-being.

The question is, should the income of the rich be allowed to grow faster than that of the poor? Keep in mind that over 25 years, there is an incredible amount of income mobility.

More on income inequality from Mark Perry.

One more from Russell Roberts.

2. I'd have to agree with Tyler Cowen's guess about health care spending:

The most likely possibility is that the government will spend more on health care today, promise to realize savings tomorrow and never succeed in lowering costs. It is rare that governments successfully cut costs by first spending more money.

3. American students go to school far less than foreign students. For how low we rank against foreign students, we sure do a decent job considering our shorter school schedule.

4. Arnold Kling writes about health care and what to do about it. His best point is that health care "insurance" doesn't function like normal insurance:

What is called "reform" is really an attempt to entrench the existing, unsustainable system of third-party fee-for-service reimbursement for service providers. This third-party reimbursement in turn is know as "insurance," even though it does not serve that function.

5. Must read: Andrew Sullivan's blog, covering live tweets about the Iranian election. Awesome. Go Green.

6. Demetrius Minor writes at New Majority about GOP outreach to African-Americans.

7. I like David Brooks's approach to describing the problems involved with reforming health care. It allows one to focus on what to do in the future, as opposed to focusing on who screwed it up in the past:

Let’s say that you are President Obama. You’ve inherited a health care system that is the insane spawn of a team of evil geniuses from an alien power. Pay is divorced from performance. Users are separated from costs. Rising costs threaten to destroy your nation and everything you hold dear.

8. Michigan, and Democrats, need to get over manufacturing. The United States will continue to lose low-end manufacturing jobs for years. It's comparative advantage. The WSJ op-ed board quotes Lou Glazer, who puts it well:

While the reliance on manufacturing made sense in the 20th century, the sooner we recognize that manufacturing is no longer the key to a prosperous middle class, the better off Michigan will be in the 21st.

Manufacturing in the United States is no longer the back-bone of the middle class. Get used to it.

Reading for the Day - Skewed toward health care

2009-06-11T08:57:00.006-07:00

1. This post by Tyler Cowen made me cock my head to the side; it's called "Should banks be allowed to repay TARP funds?" Really? That's even being debated?

2. Megan McArdle is skeptical of the government's ability to save huge sums over private plans by offering a public option.

3. Megan McArdle again, this time on the budget deficit. Worth reading the whole thing. She notes:

Economically, much of the talk about deficits is hysteria. A budget deficit of less than 4% of GDP is not a good thing, but it rarely results in catastrophe either, because inflation and GDP growth steadily erode the value of past debt. As long as the deficit is less than inflation + GDP growth, the government is unlikely to get into much trouble. It's possible that this borrowing may crowd out private borrowing, but at least over the last decade, this has obviously not been the case.

I'd ask, what about deficits of >10% of GDP? Surely there is a limit to how far we can go.

One more excerpt:

But what about all the debt he racked up? Net public debt rose less than 4% of GDP during Bush's presidency. Net interest (aka Cash Interest We Pay Bondholders) went from $223 billion in 2000 to $244 billion in 2008; adjusted for inflation, and as a percentage of GDP, it actually fell. If we are entitled to expect Bush to close the budget deficit with those kinds of numbers, then we ought to be able to expect it from Barack Obama. Bush's deficits are not holding him back.

4. Robert Reich asks why people are worried all of the sudden about debt. I agree with him that people are worried; I disagree with about everything else he says, most notably that we shouldn't worry about it because soon we'll have universal health care.

5. There is worry that providing universal health care will make American waiting times similar to those in Canada. That would be a bummer.

6. The Atlantic lists the top 6 Republicans that President Obama listens to.

Reading for the Day

2009-06-08T09:16:00.003-07:00

1. Stephen Colbert is taping a week of the Colbert Report in Iraq. They even gave him a haircut! John McCain had a pre-taped message for the troops, reminding the troops to "take time to clean your muskets." What a good sport.

2. Now onto some political repression: "China plans to require that all personal computers sold in the country as of July 1 be shipped with software that blocks access to certain Web sites."

You've got to be kidding me. If there was such an uproar over Microsoft shipping Windows with Internet Explorer and Windows Media Player, there had better be some backlash for this.

3. It looks like the Western-backed coalition in Lebanon is going to retain its parliamentary majority. The Hezbollah-led opposition captured 57 of the 128 seats.

4. Iranian presidential elections are coming up. The article makes it seem like the country wants to open up a little bit more politically. Let's hope Ahmadinejad loses.

5. Shelby Steele writes about the Sotomayor nomination.

6. Keith Hennessey takes apart the upcoming Kennedy-Dodd health care bill. It's a doosy. It's...not something I like. He's got fifteen points about it. Read the whole post.

Reading for the Night

2009-06-07T23:07:00.004-07:00

1. and 2. Becker and Posner take on Health Care in America. There are so many good points and quotes throughout their articles; spend 10 minutes and read them closely.

3. The Television Critics Association made a list of the best of television for the past decade. Mary McDonnell from BSG and Allison Janney from West Wing absolutely deserve their praise.

4. Time Magazine asks are stocks still good for the long run? The more precise question to ask is, are companies going to continue to make more and more money in the long run? The answer: yes. Think like Buffett: don't talk about stocks, talk about companies.

5. Matthew Rognlie writes about abortion and torture debates:

Of course, our major political ideologies occupy both sides of this argumentative divide, depending on the issue -- the left is pro-choice but anti-torture, while the American right is pro-life but vaguely supportive of torture. These positions aren't logically inconsistent, but their rhetorical incoherence should lead the overconfident among us to question our judgment. If you make dramatic pronouncements about how one issue involves Incontrovertible Moral Principles and the Fate of Civilization, but are aghast at a lack of pragmatism and nuance on the other, you ought to at least notice the irony.

6. Russell Roberts calls most macroeconomics "ex-post storytelling." He's probably right.

7. Bill Easterly on the UN's record on human rights:

But let’s talk about rights at the UN. The UN publicizes such positive rights as “right to water,” “right to housing,” “right to health”, etc. These rights sound wonderful, while not imposing any specific obligation whatsoever on any specific actor to do any specific thing for any specific poor person. It is impossible for the UN or any other body to allocate responsibilities for observing the “right to water,” and also decide who will be first in line among the 884 million people now without clean water. So even if the UN creates international pressure to observe these “rights,” the pressure is diffused across so many potential actors with unclear responsibility that it has no effect, accomplishing nothing for poor people.

What about the UN’s record on the more traditionally defined “negative” human rights, like freedom from state killings and torture? These human rights are a lot easier to specifically address – the UN could denounce human rights violations, identifying the violator and the victim each time.

Then comes the zinger:

So here’s the scorecard on UN human rights. On something like “the right to water,” where it is impossible to identify who is violating such “rights,” the UN talks big. On human rights violations like killings and torture, where the UN knows precisely who is the violator, the UN sometimes shows up on the violator's side.

I'm with Easterly on this one.

Reading for the Day

2009-06-07T09:47:00.003-07:00

1. Amnesty International responds to Easterly assertion that poverty isn't a human rights violation:

But poverty is about a lot more than just income. As Easterly knows, those who live on less than a dollar a day are poor not just because they lack income; the lack of income implies lack of access to services, clean drinking water, adequate education, housing, employment and so on. All of these are violations of the Universal Declaration of Human Rights and the International Covenant on Economic, Social and Cultural rights.

I was going to spend some time writing up a response about negative versus positive, but I found two perfectly adequate responses in the comments by "Matt" and "happyjuggler0" (HJ0):

Matt: This [sic] main issue in this discussion is negative vs. positive rights. A negative right disallows oppressors taking away things that the oppressed would otherwise have. A positive right disallows oppressors from not giving the oppressed things they would not otherwise have.

Rights are traditionally thought of as negative rights. We all have the ability to speak out, to go from place to place or to worship whom we please. However, none of us innately have the ability to possess clean drinking water or access to life-saving medicine and indeed most of the people throughout human history did not have access to such things.

In fact, the only universal positive rights that come to mind are the defendant's right to have an attorney paid for by the state or to a speedy trial. Even in those cases, the bill of rights assumed a state could always readily provide these provisions to a defendant.

Saying a kid in a war-torn African country, a country with little if any infrastructure, has a right to clean water, food and health care belittles the term of right. Rights become mere wishes rather than cornerstones of a functioning society.

Worse, these "rights" hide the more valid rights which could provide sustenance. Efforts to provide rights to freedom from violence or coercion are subverted to ineffective aid programs which do not address the underlying issues.

HJ0: ThomasL and Matt are absolutely correct. Nobody is entitled to positive rights, because in order to have positive rights you have to violate negative rights.

Desiring something that someone else has does not mean that taking it away from him somehow becomes a "human right". Far from it.

The basic argument is there. Violating negative rights is generally quite different from violating positive rights. I'd prefer to not have any violated, but when considering what a country needs more, I'd lean toward negative rights over positive rights.

2. Tyler Cowen on human capital endowments:

I am amazed (but not surprised) by how frequently people think of egalitarianism in terms of social markers of status rather than actual forward-looking endowments.

From the comments: "Let us say you are a twenty three year old immigrant living in New York. Would you want to trade places with Warren Buffett?

My answer is this- you couldn't pay me enough to make the trade."

In other words, when thinking about egalitarianism, define status as a person's future opportunities. Buffett is old, and while some of us (me) think he'll live forever, he won't. The 23 year-old immigrant is in America in 2009. He's got another 60 years and a lot of opportunity ahead of him.

Cowen says American health care is especially egalitarian because the government focuses on providing health care to the elderly through Medicare. We provide help to those with low endowments (the elderly and the sick), but not to those with relatively high endowments (younger people). Interesting point.

3. Arnold Kling comments on Tyler Cowen's tentative predictions for the economy:

I agree with Tyler that the outlook for inflation is bad. That in turn will cause a lot of distortions in people's behavior and slow the recovery. The "stimulus" will turn out to be a permanent increase in government spending. It will have its maximum effect on reducing unemployment in 2011.

4. Making predictions about the recession is hard. Take a good look at the graph Russell Roberts has up from Innocent Bystanders. It makes me reiterate my earlier thought - I'd be less frustrated with the stimulus bill if the authors had been honest and framed it as something longer-term.

5. Finally, reading Chris Blattman's blog is a lot of fun. From what I gather, Blattman spends every summer in Africa working on field projects to further understand and reduce poverty in third-world countries. One project he is working on is evaluating a micro-enterprise program for ultra-poor Ugandan women:

Since the project just wasn't complex enough, last month we decided to add behavioral games to the mix. A colleague from Yale and I are running a day of risk, time preference, public goods, and group cooperation games at baseline. The idea is to link these survey and behavioral experiments to actual business performance and poverty dynamics over time (not to mention the collective action).

I started out a game skeptic, but am finding myself converted. What seemed contrived and absurd is actually the most popular part of our survey.

We always knew the 60-minute baseline survey was tedious. Turns out that playing games for real money is absurdly popular; our experiments team is like a roving casino, the most popular people in northern Uganda.

Reading for the Day

2009-06-05T12:24:00.002-07:00

1. Chris Blattman and Bill Easterly call out Amnesty International for including poverty in a list of human rights violations. I'm with them. It's a terrible thing, but there is no clear violator.

Easterly: Poverty does not fit this definition of rights. Who is depriving the poor of their right to an adequate income? There are many theories of poverty, but few of them lead to a clear identification of the Violator of this right. Moreover, human rights are a clear dichotomy – someone violates your rights or they do not. But the line between poor and not-poor is arbitrary – it is different in different countries, and on a global scale, many still argue what is the right dividing line that constitutes poverty. So calling poverty a “human rights violation” does not point to any concrete actions that the “violator” must stop in order to restore rights to the “violated.”

Blattman: To me, the "rights-based approach" to humanitarian aid has looks more like a good ideology than a good idea. It does all the things an ideology should do: it inspires the mind, it seizes the moral high ground, it mobilizes the ground troops, and (most importantly) it provides a supreme unifying framework--the ulimate coordination mechanism.

2. Mankiw's bottom line on offering a public option to compete with private plans: "If the goal is honest competition in the provision of health insurance, the public option cannot do much good but can potentially do much harm."

According to Mankiw the question that needs to be answered is, would the public option have access to taxpayer funds unavailable to private plans? The distortion effects are much greater if they would.

3. Parliamentary elections in Lebanon occur on the 7th of June; Iran is contributing major amounts of cash:

Observers of the Lebanese scene tell me hundreds of millions of election-related dollars are sloshing through the economy. While rival regional powers such as Saudi Arabia are involved, a former Lebanese army officer, speaking on condition of anonymity, says the Khomeinist regime in Tehran has emerged as the "big spender," supplying its various agents, clients and allies with "more money than they could use."

4. Saved the best for last. Yesterday Matt Yglesias brought up a salient point in economics: do macroeconomic models need to have a microeconomic foundation? Yglesias brings up a point that I've mentioned before, but ultimately leads him to the wrong conclusion:

As a general principle for investigating the world, we normally deem it desirable, but not at all necessary, that researchers exploring a particular field of inquiry find ways to “reduce” what they’re doing to a lower level.

In other words, reduce complexity to general principles. Usually I'd agree with Yglesias on this point. The proper refutation, made in his comments section by a 20 year old, has to do with the Lucas critique. You can't predict the effects of changes in policy (or economic models) by only using historical data. There has to be some sense of process!

Finally, Yglesias misses the most important point:

The models are, rather, judged by whether or not they produce fruitful insights about economics. Trying to enhance models with better information about psychology isn’t against the rules, but it’s not required either. What’s required is that the models do useful work.

Admittedly, he's pretty close. Replace "do useful work" with offer useful predictions about future behavior.

The Stimulus Bill is a All About 2010

2009-06-04T08:27:00.009-07:00

Karl Rove criticizes the President in today's WSJ for citing a specific number of jobs "saved," especially in light of how little of the stimulus bill has been spent. He then brings up a much more important point:

If the Obama administration were more serious about growing the economy than just growing government, the stimulus would have been front-loaded into this fiscal year.

Rove's logic is standard Republican thinking - Democrats want big government! What other motivation could they have for spending money?

Even Keith Hennessey thinks the explanation for the time-lag between the stimulus bill and the actual effect is ignorance, or even just distaste for any Republican solutions, regardless of how quick or efficient they may be.

By focusing on typical talking points or assuming ignorance, Rove and Hennessey ignore the political explanation. Take a look at that line again: "If the Obama administration were more serious about growing the economy..."

I'd argue the Obama administration isn't serious about growing it this year. It's serious about growing it next year, when Democrats face elections at a national level. And history strongly suggests that when the economy does well, the incumbent party wins.

Think about it. Does anyone actually think there was a problem with finding programs to spend money on?

If the Obama administration really wanted to spend hundreds of billions of dollars this year to "jump-start the economy," it would simply ask the Senate, the House, and state governments for requests for projects. There would be trillions of dollars of proposals.

It's incredible that this hasn't been brought up. Perhaps Republicans don't think Democrats are that crafty. Democrats succeeded in making the issue about the merits of tax cuts versus spending when attempting to get the bill passed, not about when the spending would affect the economy. It's quite ironic that they argued that tax cuts are longer-term and go toward saving, while spending affects the here and now (the national savings rate has shot up from 0% to 5%).

The need to be re-elected informs most decisions politicians make. President Obama started out with a lot of political cover on the economy. For a few more months, the country will continue to allow him to blame everything on President Bush. And for a few more months, very little of the stimulus bill will be spent. Then popular opinion will change and President Obama will finally be assigned credit (or blame) for how things are going. And that's when most of the spending will occur.