ATTENTION: Szasz Prize Change of Venue
I was just notified that the Szasz Prize ceremony has been moved from the Cato Institute in D.C. to the Harper Library at the GMU Law School in Arlington. The day and time remain the same: September 21, 6 PM. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] http://econlog.econlib.org [M]uch of the advice from the parenting experts is flapdoodle. But surely the advice is grounded in research on children's development? Yes, from the many useless studies that show a correlation between the behavior of parents and the behavior of their biological children and conclude that parenting shapes the child, as if there were no such thing as heredity. --Steven Pinker, *The Blank Slate*
Szasz prize
I must gleefully report that I am one of the winners of the 2005 Thomas S. Szasz Award for Outstanding Contributions to the Cause of Civil Liberties, largely for my article The Economics of Szasz: Preferences, Constraints, and Mental Illness. The other prize-winner is individualist feminist Joan Kennedy Taylor. There will be an award ceremony at the Cato Institute on September 21, 6:00-7:30 P.M. The event is open to the public, and a lot of my friends will be coming - probably including some of your favorite bloggers. If you live in the D.C. area, it would be great chance to meet in person. Hope to see you there! -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] http://econlog.econlib.org [M]uch of the advice from the parenting experts is flapdoodle. But surely the advice is grounded in research on children's development? Yes, from the many useless studies that show a correlation between the behavior of parents and the behavior of their biological children and conclude that parenting shapes the child, as if there were no such thing as heredity. --Steven Pinker, *The Blank Slate*
Re: Dickens on the Laffer Curve
Yes. It suffers a bit from the historians' If you don't have a document, it didn't happen bias, but it's good. Anton Sherwood wrote: Speaking of Communism, is The Black Book worth having? I saw several copies yesterday at a secondhand store in San Leandro, marked about $8 if memory serves. -- Anton Sherwood, http://www.ogre.nu/ -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] http://econlog.econlib.org [M]uch of the advice from the parenting experts is flapdoodle. But surely the advice is grounded in research on children's development? Yes, from the many useless studies that show a correlation between the behavior of parents and the behavior of their biological children and conclude that parenting shapes the child, as if there were no such thing as heredity. --Steven Pinker, *The Blank Slate*
Dickens on the Laffer Curve
I think Bill accidentally sent this to me privately instead of the list. Subject: Re: Laffer Curve From: William Dickens [EMAIL PROTECTED] Date: Wed, 20 Apr 2005 16:31:33 -0400 To: [EMAIL PROTECTED] I'll bite. I completely agree with Bill in the short-term. Higher taxes raise revenue. But I also have a sneaking suspicion that higher tax rates in the long run may hurt growth so much that the present value of taxes would be higher if rates were lower. And I have a sneaking suspicion that more equitable distributions of income lead to less social conflict and rent seeking and lead to higher growth. Unlike you I can point to some theoretical and empirical studies that back my suspicion up (though I wouldn't bet my life on it being true). My point is that any of us can have sneaking suspicions. Dueling sneaking suspicions aren't going to bring us any closer to agreement. Just talking to people who grew up in Scandinavia, they frequently tell me that high taxes had no effect on the older generation. But (combined with the welfare state) they raised a generation of shiftless, no-ambition slackers. If the U.S. had Swedish-level taxes during the 80's, I suspect it would have been a far less entrepreneurial and innovative economy in the 90's. Two thoughts. First, the empirical studies on the effects of distribution of income on growth suggest no such effect. But I have no idea how robust those results are and wouldn't be at all surprised if they allowed for some range of results if properly done. Personally I have little doubt that the various forms of welfare (not progressive taxation) do tend to destroy initiative among some parts of the population. I've had too much personal experience with smart, talented people getting caught up in welfare programs and not going anywhere not to suspect that this is a serious draw back of such programs. That's why I very much like to tightly time limit any generous welfare program. However, I have to admit that I don't know that there just aren't slackers in the world (some talented and bright) who would find parents, friends or some other less desirable way to support themselves if there weren't welfare programs. I don't know of any cross national study of long term welfare participation (OECD might have some aggregate study of this). The European Community Household Panel could be combined with the GSOP and the PSID or SIPP to good end to do such a study. Any graduate students out there looking for a thesis topic? - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] http://econlog.econlib.org [M]uch of the advice from the parenting experts is flapdoodle. But surely the advice is grounded in research on children's development? Yes, from the many useless studies that show a correlation between the behavior of parents and the behavior of their biological children and conclude that parenting shapes the child, as if there were no such thing as heredity. --Steven Pinker, *The Blank Slate*
Re: Laffer Curve
There are lots of reasonable objections to raising taxes. You can decide that you don't think that tax revenue is put to good uses. You can believe that ethically taxation is theft. But there is no reasonable argument (at least none that I've seen) that tax increases in any range we've seen in this country don't raise revenue. - - Bill Dickens I'll bite. I completely agree with Bill in the short-term. Higher taxes raise revenue. But I also have a sneaking suspicion that higher tax rates in the long run may hurt growth so much that the present value of taxes would be higher if rates were lower. Just talking to people who grew up in Scandinavia, they frequently tell me that high taxes had no effect on the older generation. But (combined with the welfare state) they raised a generation of shiftless, no-ambition slackers. If the U.S. had Swedish-level taxes during the 80's, I suspect it would have been a far less entrepreneurial and innovative economy in the 90's. Econometric evidence? As far as I know, there's none either way, and for obvious reasons. But it makes sense to me. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] http://econlog.econlib.org [M]uch of the advice from the parenting experts is flapdoodle. But surely the advice is grounded in research on children's development? Yes, from the many useless studies that show a correlation between the behavior of parents and the behavior of their biological children and conclude that parenting shapes the child, as if there were no such thing as heredity. --Steven Pinker, *The Blank Slate*
blogging
FYI: I'm going to be a regular blogger on Econlib http://econlog.econlib.org/ for at least a year. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] [M]uch of the advice from the parenting experts is flapdoodle. But surely the advice is grounded in research on children's development? Yes, from the many useless studies that show a correlation between the behavior of parents and the behavior of their biological children and conclude that parenting shapes the child, as if there were no such thing as heredity. --Steven Pinker, *The Blank Slate*
blogging
For the next month, I am going to be guest blogging at Econlog, the Liberty Fund website's blog. Expect to see me post three times per week. The URL is: http://econlog.econlib.org -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But we must deplore and, so far as possible, overcome the evils of habitual newspaper reading. These evils are, chiefly, three: first, the waste of much time and mental energy in reading unimportant news and opinions, and premature, untrue, or imperfect accounts of important matters; second, the awakening of prejudices and the enkindling of passions through the partisan bias or commercial greed of newspaper managers; third, the loading of the mind with cheap literature and the development of an aversion for books and sustained thought. --Delos Wilcox, The American Newspaper (1900)
the answer is...
The correlation between per-capita state income and Kerry vote percentage is +.70. That makes Bill by far the most accurate of our guessers. If you do a bivariate regression, every +$1000 of per cap income is associated with +1.48 percentage points of Kerry share. Scatter plot with regression line is attached. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But we must deplore and, so far as possible, overcome the evils of habitual newspaper reading. These evils are, chiefly, three: first, the waste of much time and mental energy in reading unimportant news and opinions, and premature, untrue, or imperfect accounts of important matters; second, the awakening of prejudices and the enkindling of passions through the partisan bias or commercial greed of newspaper managers; third, the loading of the mind with cheap literature and the development of an aversion for books and sustained thought. --Delos Wilcox, The American Newspaper (1900) inline: kervote.jpg
personal finances survey
There is a press release about high school students' low scores on this survey of personal finances, but I'm impressed by how well they did. Unlike beliefs about the economy, at least the modal answer on this survey is usually right! -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But we must deplore and, so far as possible, overcome the evils of habitual newspaper reading. These evils are, chiefly, three: first, the waste of much time and mental energy in reading unimportant news and opinions, and premature, untrue, or imperfect accounts of important matters; second, the awakening of prejudices and the enkindling of passions through the partisan bias or commercial greed of newspaper managers; third, the loading of the mind with cheap literature and the development of an aversion for books and sustained thought. --Delos Wilcox, The American Newspaper (1900)
more on personal finances
The modal answer (given four choices) was right on the 31 substantive questions 74% of the time. The first or second most common answer was right 97% of the time. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But we must deplore and, so far as possible, overcome the evils of habitual newspaper reading. These evils are, chiefly, three: first, the waste of much time and mental energy in reading unimportant news and opinions, and premature, untrue, or imperfect accounts of important matters; second, the awakening of prejudices and the enkindling of passions through the partisan bias or commercial greed of newspaper managers; third, the loading of the mind with cheap literature and the development of an aversion for books and sustained thought. --Delos Wilcox, The American Newspaper (1900)
Re: personal finances survey
Robert A. Book wrote: What's up with question 32? 52% male and 52% female? I think you have to look at the second column of numbers, the ones not in bold. Those add up, though I am confused about the first column. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But we must deplore and, so far as possible, overcome the evils of habitual newspaper reading. These evils are, chiefly, three: first, the waste of much time and mental energy in reading unimportant news and opinions, and premature, untrue, or imperfect accounts of important matters; second, the awakening of prejudices and the enkindling of passions through the partisan bias or commercial greed of newspaper managers; third, the loading of the mind with cheap literature and the development of an aversion for books and sustained thought. --Delos Wilcox, The American Newspaper (1900)
piece debunking growth-education link
Tyler Cowen at www.marginalrevolution.com alerted me to the following very interesting piece debunking the supposed causal connection between education and growth: http://www.spiked-online.com/Printable/000CA640.htm -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
Re: Siberia and Canada
Can any Canada experts weigh in? That includes all Canadians. Eric? fabio guillermo rojas wrote: Yes - evidence: the population of Canada is highly clustered around the border. I have hunch they would bolt the second the border was opened. Fabio On Thu, 8 Apr 2004, Bryan Caplan wrote: Question: If there were free migration between the U.S. and Canada, would Canada lose a lot of population to California, Florida, and other more desirable locations? Prof. Bryan Caplan -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
new paper
My new paper on the economics of mental illness, entitled The Economics of Szasz can now be downloaded from my webpage at: http://www.gmu.edu/departments/economics/bcaplan/szaszjhe.doc -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
farm subsidies
I vaguely remember an earlier debate about farm subsidies and public opinion. A new study just came out finding that farm subsidies are equally popular in farm and non-farm states: A striking finding is that the public in farm states was not significantly different in their attitudes about farm subsidies. The poll included an oversample of the 17 states that receive the largest amounts of farm subsidies, excluding the metropolitan areas of California, Illinois and Texas. For more details: http://www.pipa.org/OnlineReports/Economics/FarmPress_01_04.pdf http://www.pipa.org/OnlineReports/Economics/FarmQnnaire_01_04.pdf -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
divided government
Many smart libertarians I've talked to lately have embraced the view that divided government (especially Dem president and Rep Congress) yields the least un-libertarian outcome. Are they right, and if so, what's the theoretical explanation? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
Excite Poll
I'm not the least surprised by these results: http://poll.excite.com/poll/home.jsp?cat_id=1 -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
Women Don't Ask
I just read the well-reviewed *Women Don't Ask* by Babcock and Laschever. Main thesis: Women should bargain harder. It is frankly kind of silly. The whole book makes it sound like aggressive bargaining is a strictly dominant strategy, so women will definitely be better off if they do more of it. It never considers the obvious possibility that women will price themselves out of a job. Nor does it explore the interesting possibility that one reason female employees are doing so well in spite of obvious child-related drawbacks is precisely that employers know that they are less likely to demand more money. The book also tries to get women to bargain more aggressively in relationships. I think this is another case where feminist norms are likely to function as a price control - some women will get a better deal, but a lot of others will be unable to get married because their standards are too high. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
Re: Oscar Political Business Cycle
But this wouldn't explain the clustering of *plausible prize-winners* (many of which are not big grossers) around Xmas. - Original Message - From: William Dickens [EMAIL PROTECTED] Date: Saturday, January 3, 2004 9:55 am Subject: Re: Oscar Political Business Cycle I thought the explanation for the grouping of releases around holidays was that that was when the box office was biggest. Why release movies at any other time? If you have a movie that isn't that great you release it at another time when the competition won't be as strong for first run box office. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens Bryan Caplan [EMAIL PROTECTED] 12/31/03 02:07AM The Political Business Cycle story has not fared well empirically in recent years (though Kevin Grier has done interesting work on Mexico's PBC). But it seems overwhelming in the Oscars. It seems like roughly half of the big nominees get released in December. What gives? Is there any way to explain this other than Academy voters' amnesia? I guess there is a small intertemporal benefit - if you could win Best Picture of 2004 with a January 2004 release, or Best Picture of 2003 with a December 2003 release, the present value of the latter prize would presumably be higher. But can that one year's interest (presumably adjusted for a lower probability of winning due to tighter deadlines) explain the December lump?
Me at the AEAs
Shameless self-promotion: I'll be subbing in for none other than Gary Becker this Saturday at the AEA meetings in San Diego. It will be at the 10:15 1/3 session on Competition chaired by Andrei Shleifer. Hope to see you there. Topic: Systematically Biased Beliefs About Cultural Competition, co-authored with Tyler Cowen. --Bryan
Oscar Political Business Cycle
The Political Business Cycle story has not fared well empirically in recent years (though Kevin Grier has done interesting work on Mexico's PBC). But it seems overwhelming in the Oscars. It seems like roughly half of the big nominees get released in December. What gives? Is there any way to explain this other than Academy voters' amnesia? I guess there is a small intertemporal benefit - if you could win Best Picture of 2004 with a January 2004 release, or Best Picture of 2003 with a December 2003 release, the present value of the latter prize would presumably be higher. But can that one year's interest (presumably adjusted for a lower probability of winning due to tighter deadlines) explain the December lump?
Re: Economist IQ?
Do you have a cite for that, Zach? [EMAIL PROTECTED] wrote: A far cry from perfect, but if you use the GRE as a test of intelligence, economics PhD students are the fourth most intelligent behind physicists, mathematicians, and computer scientists - according to the ETS in 2002. Mean scores for engineering (in some forms) are not much lower - but anthropology, archaeology, history, political science, theology, sociology, and communications are all fields with significantly lower scores. I suspect intuitively, due to a number of reasons - mostly the analytical nature of the field and the mathematical rigor - that economists are significantly more intelligent than PhDs in many other fields. But probably not all fields, and maybe not even most. - Zac Gochenour [EMAIL PROTECTED] - Original Message - From: Stephen Miller [EMAIL PROTECTED] Date: Monday, December 15, 2003 10:40 am Subject: Economist IQ? I doubt anyone has hard data on this, but I'm wondering what people on this list would guess is the average IQ of Ph.D. economists? Would it be much different from the average IQ of Ph.D.s in general? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] I hope this has taught you kids a lesson: kids never learn. --Chief Wiggum, *The Simpsons*
Re: Real wages constant since 1964?!
Really? Every undergraduate class I can remember listed the failure to adjust for quality as one of the main problems with the CPI. And I don't think they just said it was inadequate. William Dickens wrote: This is completely wrong. The CPI-u is, and the CPI-x was, adjusted for quality changes (see http://www.bls.gov/cpi/home.htm ). The CPI-X doesn't exist anymore. So what price statistic wasn't adjusted for quality changes? They all are. No one (who knew what he was talking about) has ever claimed that they are not adjusted. The common claim is that the adjustments (which are quite complex and differ across different types of goods) are inadequate. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Infancy conforms to nobody: all conform to it, so that one babe commonly makes four or five out of the adults who prattle and play to it. --Ralph Waldo Emerson, Self-Reliance
Re: MVT and policy portfolios
alypius skinner wrote: Related to this is the question of whether there really is a median voter. Let's take 10 issues--abortion, gun control, gay rights, trade policy, tax rates, immigration, middle east policy, racial preferences, CO2/global warming policy, and SDI/star wars missile defense. What percentage of the electorate is in the middle quintile (if we could quantify these issues) on all 10? The General Social Survey is online and has a lot of information on public opinion, though not all of these exact topics. At least on a crude measure of do you want more/less/the same level of spending or regulation, the median position is usually the same. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But being alone he had begun to conceive thoughts of his own unlike those of his brethren. --J.R.R. Tolkien, *The Silmarillion*
list changes
As I announced earlier, the GMU listserv system is changing. Starting August 15th, [EMAIL PROTECTED] will be renamed: [EMAIL PROTECTED] Yes, I know the longer name sucks, but what can you do? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Infancy conforms to nobody: all conform to it, so that one babe commonly makes four or five out of the adults who prattle and play to it. --Ralph Waldo Emerson, Self-Reliance
Re: Greider
Robert A. Book wrote: Greider also has interesting material on the Democrats' connection to the SL industry. I'd never heard about any of this, but he seems to have his facts straight on this point. Wrong hasn't been so much fun in years! -- Bryan, if he's wrong about the material you know a lot about, what makes you think he has his facts straight on the subjects you know less about? Shouldn't his obvious errors on cost/benefit, risk analysis, and corporate accountability reduce the prior probability (to you) that he's right on anything? Good question. Sure, errors in one area raise the probability of errors in other areas. But he's a journalist. I expect him to be weak on analytics. The 5 W's of who-what-when-where-why are what he's trained to get right. --Robert Book -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Infancy conforms to nobody: all conform to it, so that one babe commonly makes four or five out of the adults who prattle and play to it. --Ralph Waldo Emerson, Self-Reliance
[Fwd: A story of the Fed in Wonderland as Greenspan puts emphasis ongr owth - Economic View by Anatole Kaletsky]
the rule was winners and losers, all must have prizes. When US economic recovery becomes self-sustaining, Greenspan will suddenly blow the whistle - and the losers will be the Bigger Fools still holding long bonds. -- This message is intended only for the personal and confidential use of the designated recipient(s) named above. If you are not the intended recipient of this message you are hereby notified that any review, dissemination, distribution or copying of this message is strictly prohibited. This communication is for information purposes only and should not be regarded as an offer to sell or as a solicitation of an offer to buy any financial product, an official confirmation of any transaction, or as an official statement of Lehman Brothers. Email transmission cannot be guaranteed to be secure or error-free. Therefore, we do not represent that this information is complete or accurate and it should not be relied upon as such. All information is subject to change without notice. -- --- The information contained in this transmission and any attached documents is privileged, confidential and intended only for the use of the individual or entity named above. If the reader of this message is not the intended recipient, you are hereby directed not to read the contents of this transmission, and are hereby notified that any disclosure, copying, distribution, dissemination or use of the contents of this transmission, including any attachments, or the taking of any action in reliance thereon, is strictly prohibited. If you have received this communication in error, please notify the sender and/or Citadel Investment Group (Europe) Ltd immediately by telephone at +44 (0) 20 7645 9700 and destroy any copy of this transmission. Citadel Investment Group (Europe) Ltd is authorised and regulated by the Financial Services Authority (FSA Firm Ref No 190260). Registered in England. Registration No. 3666898. Registered Office: 10th Floor, 2 George Yard, Lombard Street, London EC3V 9DH _ This message has been checked for all known viruses by UUNET delivered through the MessageLabs Virus Control Centre. ** This e-mail, together with any attachments, is confidential to the addressee(s). If you are not the intented recipient of this e-mail you should not copy it or use it for any purpose or disclose its contents to any person: to do so maybe unlawful. Please notify the sender immediately by e-mail if you have received this e-mail by mistake and delete this e-mail and any attachments from your system without making any copies. Framlington Group Limited gives no warranty as to the security, accuracy or completeness of this e-mail, together with any attachments, after it is sent nor does it accept responsibility for any errors or omissions in the contents of this message which arise as a result of e-mail transmission. Any liability for viruses is excluded to the fullest extent permitted by law. ** -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Infancy conforms to nobody: all conform to it, so that one babe commonly makes four or five out of the adults who prattle and play to it. --Ralph Waldo Emerson, Self-Reliance
Re: Health insurance for kids
Jeffrey Rous wrote: When I was in grad school, my wife's health insurance policy through work allowed an employee to add a spouse for $1000 per year (I cannot remember the exact numbers, but these are close) or add a spouse and children for $2000 per year. And it didn't matter whether you had 1 child or 10. Since she worked for UNC, I figured it was a political decision. I'm pretty sure that it's not. My wife's private insurance works the same way. Unless regulations make the private sector copy the public sector. How can this be rational? At least for male employees, it's plausible that those with more children are both older and therefore more experienced, and more responsible/stable holding age constant. A guy with five kids is going to be very concerned about remaining employed. -Jeffrey Rous -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] The game of just supposing Is the sweetest game I know... And if the things we dream about Don't happen to be so, That's just an unimportant technicality. Jerome Kern and Oscar Hammerstein, *Showboat*
Kolko 40 Years Later
strongly suspect is accurate, like his revisionist account of the hysteria surrounding Upton Sinclair's *The Jungle*. But overall, it has all of the flaws you would expect in a work of economic history by an economically semi-literate socialist. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] The game of just supposing Is the sweetest game I know... And if the things we dream about Don't happen to be so, That's just an unimportant technicality. Jerome Kern and Oscar Hammerstein, *Showboat*
The Vote-Cost of Scandal
The Lewinsky scandal, according to most public opinion scholars, actually increased Clinton's popularity. But even after Lewinsky, politicians have continued to resign or drop out of races in the face of similar scandals, and of course they did it for a long time before. What is going on? 1. The usual rules do not apply to Clinton - the public will punish other politicians for comparable actions. 2. Politicians systematically overestimate voters' reactions. 3. Public opinion has changed. Pre-Clinton, scandals mattered. Now they don't. Politicians are still learning about this regime change. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] The game of just supposing Is the sweetest game I know... And if the things we dream about Don't happen to be so, That's just an unimportant technicality. Jerome Kern and Oscar Hammerstein, *Showboat*
Re: The Vote-Cost of Scandal
Steve Miller wrote: Maybe what angers voters is not the scandal, but hypocrisy. Someone who is perceived as liberal on social issues is less of a hypocrite for having an affair than is someone who runs on a family values platform. Gary Hart was a liberal in good standing, but he is the textbook case of a politician ruined by a scandal. Clinton is probably a bigger hypocrite given his effort to co-opt the family values stuff. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] But being alone he had begun to conceive thoughts of his own unlike those of his brethren. --J.R.R. Tolkien, *The Silmarillion*
Re: Personal vs. Political Culture: The Other Box
fabio guillermo rojas wrote: Now Pete Boettke asked me if there are any peoples with the opposite combination: bad personal culture, good political culture. The best Prof. Bryan Caplan Note that insistence on free markets, limited gov't, democracy, etc. is a pretty recent phenomena - so one should find few examples of *any* group that has good political culture. Fabio Absolutely speaking, sure. But e.g. the U.S. and U.K. have been *relatively* more sympathetic to these ideas for centuries. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] It is a talent of the weak to persuade themselves that they suffer for something when they suffer from something; that they are showing the way when they are running away; that they see the light when they feel the heat; that they are chosen when they are shunned. Eric Hoffer, *The Passionate State of Mind*
Re: Cost benefit analysis
If I were teaching intermediate micro, I think I would begin by asking students why they consume less of x when its price rises. Presumably most would say that they would switch to other products. Then I would ask them to consider a world with only ONE good. Obviously with only one good, price does not work via substitution. Why then does consumption decline in the latter case? Because higher prices make you poorer, making you tend to buy less overall. Then I'd explain that as the number of goods rises, the latter income effect tends to matter less and less. I probably wouldn't go through the whole textbook discussion (unless the students were largely going to grad school), but I think the point is worth half a class. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: trend grading policies
[EMAIL PROTECTED] wrote: I hope the particular economics course, industrial organization, is of the second type. If so, trend grading would be worthwhile. By trend grading I mean weighting assignments late in the semester heavier or bumping up grades if students are improving. Furthermore, my unsupported assertion is that all classes that are both worthwhile and interesting are of the second type. Patrick McCann p.s. this is less of an attempt to change the policy than to defend the policies of other professors who were criticized so harshly. This is a good point. But it can be handled by giving the midterm less weight to begin with. You have an argument for giving a midterm a lower weight, but not a variable weight. And I do give the midterm lower weight. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Bubblemania
William Dickens wrote: I have to agree with Alex Bryan. Here is a graph of the SP 500 http://finance.yahoo.com/q?s=^SPXd=ct=5yl=onz=bq=l About a third of the drop occurred before 9/11, a third occurred immediately after 9/11, and the other 2/3rds occurred in the first half of last year. Why 4/3rds? Because most of the drop after 9/11 was recovered over the next few months. But this is silly anyway. That's a good point about the post-9/11 recovery. But I still suspect the indirect consequences of 9/11 played a role. From the graph, it looks like the post 9/11 recovery coincided with the surprisingly easy victory over the Taliban. And it's plausible that part of the subsequent decline stems from the growing realization that further military action would continue after the Taliban's defeat. 1) I challenge anyone to explain what 9/11 told us that we didn't already know that would explain something on the order of a 40% drop in the rational valuation of the US capital stock! 2) For that matter, what combination of events could have provided information that would lead one to conclude that the PV of future income streams would be 40% lower in July of last year than it was thought to be in July of 2000? It was a bubble. Financial markets aren't fully efficient. Live with it. This is a straw man. I was arguing that the size of the bubble is being over-stated, and the importance of standard unforeseeable random shocks understated. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: News Coverage and bad economics
Please take these discussions of personalities off-list. Thanks! -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: EU
William Sjostrom wrote: I don't know the evidence on the point, but you are proposing the expected utility model with risk neutrality. No, that's not it. I'm not saying people maximize expected earnings. The functional form I'm proposing is the much weaker one that they prefer higher expected earnings to lower expected earnings. The variance of gamble 1 is p(1-p)X^2, which means that the variance is low for low and high values of p, and high for middle values of p. So if p is low, as p is increased, both the mean and variance rise. From my brief foray into the finance literature (I sat on a Ph.D. committee in finance a few years back), my recollection is that risk neutrality works badly. Bill Sjostrom + William Sjostrom Senior Lecturer Department of Economics National University of Ireland, Cork Cork, Ireland +353-21-490-2091 (work) +353-21-427-3920 (fax) +353-21-463-4056 (home) [EMAIL PROTECTED] [EMAIL PROTECTED] www.ucc.ie/~sjostrom/ - Original Message - From: Bryan Caplan [EMAIL PROTECTED] To: [EMAIL PROTECTED]; [EMAIL PROTECTED] Sent: Monday, November 11, 2002 8:35 PM Subject: EU It's well-known that expected utility theory has a lot of problems. A number of alternative theories of choice under uncertainty haven't worked out too well either. Has anyone ever proposed a bare-bones theory of choice under uncertainty, basically saying only that all else equal, you become more likely to choose an option as it's expected value increases (without saying how much)? Suppose, for example, that you get to choose between two gambles: Gamble 1: $X with probability p. Gamble 2: $Y with probability q. Indicate preference with or , and probability as P(.). My bare bones theory says: 1. P(12) increases in p. 2. P(12) decreases in q. 3. P(12) increases in X. 4. P(12) decreases in Y. and nothing more specific. Is this inconsistent with any experimental evidence? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Self-assesment vs. Rationality
Fred Foldvary wrote: It seems to me that the concept of rationality makes sense when it is applied to human action, but it is not meaningful when applied to beliefs. Action is rational or not, based on the actor's knowledge. This whole idea is forty years out of date. Economists have been theorizing about and testing the rationality of beliefs for years. When people have false beliefs, why is this not just bad data? It's possible. But that's an empirical claim: All false beliefs can be explained by bad data or lack of data. And this claim is often falsified. One person can have bad data indicating that they are a better driver than average, even though they aren't. But how could 80% of people have bad data that all points in this direction? Clearly, emotions play a major role both in our beliefs and in our ends. Vanity may make one think one is smarter, more beautiful, and more humane than one really is. Again, why not just label these false? Because vanity isn't data. In fact, if you know you are vain then rationally speaking you should adjust your beliefs in a more self- critical direction to compensate. If false beliefs are irrational, then almost everything we do is irrational, and there is no economics. No one says false beliefs are always irrational. The claim is that some false beliefs are irrational - essentially the beliefs that are false not from lack of data, but because the available data has been improperly processed. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Self-assesment vs. Rationality
[EMAIL PROTECTED] wrote: In a message dated 11/10/02 8:41:23 PM, [EMAIL PROTECTED] writes: There is a difference between ignorance and irrationality - that is the central point of this literature really. Yes. Somewhere along the line someone--either the most ardents adherents or the most disingenuous opponents--has defined rational expectations as meaning that people are perfect prognosticators, omnicient not only about past conditions, but about future conditons as well. Under the definition nobody has rational expectations. This is pure caricature. RE does not say that people are perfect or omniscient. It just says that they are right on average, that their over-estimates balance out their under-estimates. RE is often empirically false, but not in the trivial way you're saying. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Self-assessment vs. Rationality
William Dickens wrote: Rational expectations does require that ones forecast have minimum variance and not just that it is unbiased. In defense of Eric, he didn't say anything false. He said RE is consistent with high variance. It is, as long as that high variance is also the minimum variance you can get with available info. Ummm...not quite. Rational expectations just means that a person's expectations are unbiased. There can be high variance, but the variance is around a true mean. Check Sargent's short piece on rational expectations for a primer: http://www.econlib.org/library/Enc/RationalExpectations.html Eric Crampton -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
EU
It's well-known that expected utility theory has a lot of problems. A number of alternative theories of choice under uncertainty haven't worked out too well either. Has anyone ever proposed a bare-bones theory of choice under uncertainty, basically saying only that all else equal, you become more likely to choose an option as it's expected value increases (without saying how much)? Suppose, for example, that you get to choose between two gambles: Gamble 1: $X with probability p. Gamble 2: $Y with probability q. Indicate preference with or , and probability as P(.). My bare bones theory says: 1. P(12) increases in p. 2. P(12) decreases in q. 3. P(12) increases in X. 4. P(12) decreases in Y. and nothing more specific. Is this inconsistent with any experimental evidence? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Self-assesment vs. Rationality
Fred Foldvary wrote: They have been theorizing and testing about cognition, but it is not clear why it is labelled rationality. Their usage is consistent with any dictionary. ... In fact, if you know you are vain then rationally speaking you should adjust your beliefs in a more self- critical direction to compensate. But many persons do not realize the extent of their vanity, and thus they suffer from bad data. And what about the people who DO realize the extent of their vanity, but don't adjust their beliefs? Are they irrational or not? ... essentially the beliefs that are false not from lack of data, but because the available data has been improperly processed. What does improperly processed mean? Failing to follow Bayesian rules of inference, for starters. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
Robin Hanson wrote: Now maybe you accept this, and think yourself part of, or advisor to, an elite empowered to make ordinary people do things that are good for them, whether they like it or not. I think that what Bill might say is that even though people under-invest in their own education, they are in fact quite willing to vote for education spending. He might even suggest that qua voters, people recognize and adjust for their failings as consumers. Akerlof and Dickens make a similar argument about retirement savings in *An Economist's Book of Tales*. But here's the crucial question: how sure are you that you and your fellow advisors, and the elites you advise, are substantially less irrational in this process of making ordinary people do things that are good for them? Can't elite advisors be irrational too? I think Bill would say that he's pretty sure. He's seen the data, crunched the numbers, read the literature, etc. If you feel comfortable failing people on their exams, why shouldn't you feel comfortable giving them a failing grade on their decision-making outside of the classroom? But perhaps I'm making Bill sound a little too much like me! -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
I have a lot to say in response to Bill on this topic. In fact, I was too fascinated with the topic to sleep well last night. I'm going to begin by answering a few specific points, then give one longer post. William Dickens wrote: If the decision is literally a no-brainer, then failing to consider alternatives is rational. ??!!! Not if they make the wrong choice! OK, I suppose you are going to argue that all the people who didn't have a clue what the return to continuing their education was are the ones for whom it was a no brainer and the ones who were about to drop out all answered my questions correctly. I can't prove that wrong but do you really believe that was what was going on? I doubt that the marginal students were more accurate on *average* returns. But I strongly suspect that the marginal students would have been more pessimistic about *their own* returns. The students who drop out are precisely the ones who say and think I don't know if I'm really getting much out of college. That thought rarely occurs to stronger students. The only evidence I have on this (my survey of Berkeley undergrads taking intermediate macro) suggests that they over estimate the percentage return as well. However, I don't think people act on this information. It is my strong impression that people tremendously overweight their current feelings of happiness or unhappiness about being in school so that on net people don't get as much schooling as they should if they were truly utility maximizes. So what is the behavioral deviation you're talking about? It doesn't seem to be a judgmental bias problem - that cuts in the opposite direction. Is it a self-control problem? I think you're conflating behavioral anomalies with high discount rates and/or high disutility of school. The latter two are perfectly consistent with utility maximization. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
William Dickens wrote: I see Bill already answered my question. Not the way you think. See my response to yours. I should also add that the social costs of tuition are much higher than the private costs for public universities, making it even more likely that the social return is quite low. I happen to believe the public good argument for education, but even if I didn't, you know as well as I do that you can't attribute the entire cost of the university to its educational product. A big chunk is paying for research. Take that out and I doubt the costs would be so high. After all, no reason why a college education would have to cost that much more than HS unless you want all Profs to be researchers. - - 1. Budget/students is an overestimate. Much less clear that unsubsidized tuition is an overestimate. So what cost are you willing to assign to teaching? In-state tuition? Out of state tuition? If students would have lived at home otherwise, you should also count room and board, minus parental grocery savings. 2. You can think of a lot of research as consumption for faculty. If you have to give them that consumption to make them teach, then you should count the costs of research when you calculate the return to education. There is a bit of a granularity problem (one more student may not require any more research), but if you encourage 1% more kids to go to college, you're going to have to pay for roughly 1% more research. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
A belated reply to Bill. William Dickens wrote: Note its the _parents_ in your story who are groaning, not the kids. OK, I'll admit that the no idea was based on what I know it was like when I was going to college in the 70s. However, it is still my impression after 13 years of teaching college that the vast majority of college students not only have never done a present value computation about their decision to go to school, but have never seriously considered the alternative of not going to school - - what they could do, how much they could make, what their lives would be like etc. If the decision is literally a no-brainer, then failing to consider alternatives is rational. Marginal students frequently weigh continuing vs. dropping out (just like they weigh attending vs. not attending!). Are you thinking only of economics majors? Business and economics majors (some) think this way. Do you think the average lit major is? Psych? Pol. Sci? Yes. In fact, right after a lit major tells you his major, he frequently comments on his low expected earnings. I'm a lit major. Not much money in that, but I like it. Standard economic model assumes that most of the costs are forgone earnings. Mom and Dad paying for school should be small potatoes (since you can always go to a state school at low cost). My impression is that this factor ways in people's decisions way out of proportion to its economic value. Maybe back in the '70's. Now in-state tuition is significant. At Mason it's $4400. If you add in housing (as you should if you would have lived at home otherwise), it's up to about $10,000. About the annual pay of a minimum wage job before taxes. But more to the point, I doubt that parents are making any sort of intertemporal comparison in paying for kids school. How many do you think have thought Well, if I invest the money I'm paying for the kids school in corporate AAAs at 6.5% his income from my bequest will be $XX, in 20XX whereas if I pay for his school it will be... No way. What they think is better to teach a man to fish than to buy him fish... or something like that and they fork over the bucks to U. Not the economic model at all. I grant that few open Excel and punch in the numbers. You could improve their decision-making by teaching them to do so. But if college grads earned only 10% more than non-college grads, parents would be a lot less quick to parrot old cliches about fishing. Incidentally, most of your arguments (here and later in this discussion) suggest that people over-estimate the return to education. Is that your real view? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
Eric Crampton wrote: On Fri, 25 Oct 2002, William Dickens wrote: continue schooling largely under weights the future benefits. Nearly everyone should get more schooling than they do. This is only one of I see Bill already answered my question. Blunt reaction: Come on! If you really think most students are failing to considering foregone earnings, and these are the big cost of school, then the problem goes in the other direction. I should also add that the social costs of tuition are much higher than the private costs for public universities, making it even more likely that the social return is quite low. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
William Dickens wrote: But controling for IQ isn't warranted if years of schooling is endogenous. Kevin Lang has written extensively about these issues. - - Could you enlighten us? Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens [EMAIL PROTECTED] 10/17/02 19:46 PM Alex T Tabarrok wrote: Bryan's question, however, can be rephrased as not how do you explain the data (low ability bias and high discount rate bias) but why is it that ability bias appears low? Ability bias isn't really low. Using the NLSY data, for example, controlling for AFQT scores reduces the naive estimate of the return to education from 12.6% to 7.5%. Ability bias *after* controlling for intelligence might be low, though. In other words aren't there good grounds for thinking that ability bias is large? And if so how is it that this doesn't show up in the data? Alex -- Alexander Tabarrok Department of Economics, MSN 1D3 George Mason University Fairfax, VA, 22030 Tel. 703-993-2314 and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621 Tel. 510-632-1366 -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
William Dickens wrote: As I remember the standard neo-classical answer to this is that the main source of endogenaity isn't ability bias but discount rate bias - - that people with below average discount rates get more schooling. I hadn't thought of that (or heard it). Is there actually any evidence on discount rates and educational attainment? We both know there is a lot of evidence on ability (IQ) and educational attainment. High estimated returns to education are usually claimed to be evidence of credit market imperfections. It seems that the welfare implications are quite different if the real problem is high discount rates. So if the question you want to know is the effect of attending high school vs. only going through the 11th grade for the average person the return appears lower if you don't take into account that the average discount rate of people who drop out at 11 is much higher than the average discount rate of those who finish high school. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens [EMAIL PROTECTED] 10/16/02 02:13PM I've occasionally heard that instrumental variables (IV) estimators of the return to education yield markedly higher estimates than OLS. Is this true? And how can this make any intuitive sense? If IV is correcting for endogeneity, you would expect things to go the other way. Why? With a medical treatment, you would expect endogeneity to understate the benefit, because sicker people are more likely to voluntarily seek treatment. But with education, you would expect endogeneity to overstate the benefit, because able people are more likely to voluntarily enroll. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
Rodney F Weiher wrote: Just a note on discount rates. The late sociologist Ed Banfield had an entire theory of poverty, education, crime, and in general, class distinction based not on income but on discount rates, e.g. higher rates, less education, more crime, lower-class behavior. Yes, it is a great book that I cite in my recent working paper with Scott Beaulier. It was very intuitive in terms of a lot of observed behavior but I don't believe he explained well how how you empirically measure individual discount rates Seems the name of the book was The Unheavenly City. He was influential early on in the Nixon administration. Rodney Weiher Bryan Caplan wrote: William Dickens wrote: As I remember the standard neo-classical answer to this is that the main source of endogenaity isn't ability bias but discount rate bias - - that people with below average discount rates get more schooling. I hadn't thought of that (or heard it). Is there actually any evidence on discount rates and educational attainment? We both know there is a lot of evidence on ability (IQ) and educational attainment. High estimated returns to education are usually claimed to be evidence of credit market imperfections. It seems that the welfare implications are quite different if the real problem is high discount rates. So if the question you want to know is the effect of attending high school vs. only going through the 11th grade for the average person the return appears lower if you don't take into account that the average discount rate of people who drop out at 11 is much higher than the average discount rate of those who finish high school. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens [EMAIL PROTECTED] 10/16/02 02:13PM I've occasionally heard that instrumental variables (IV) estimators of the return to education yield markedly higher estimates than OLS. Is this true? And how can this make any intuitive sense? If IV is correcting for endogeneity, you would expect things to go the other way. Why? With a medical treatment, you would expect endogeneity to understate the benefit, because sicker people are more likely to voluntarily seek treatment. But with education, you would expect endogeneity to overstate the benefit, because able people are more likely to voluntarily enroll. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
Alex T Tabarrok wrote: Bryan's question, however, can be rephrased as not how do you explain the data (low ability bias and high discount rate bias) but why is it that ability bias appears low? Ability bias isn't really low. Using the NLSY data, for example, controlling for AFQT scores reduces the naive estimate of the return to education from 12.6% to 7.5%. Ability bias *after* controlling for intelligence might be low, though. In other words aren't there good grounds for thinking that ability bias is large? And if so how is it that this doesn't show up in the data? Alex -- Alexander Tabarrok Department of Economics, MSN 1D3 George Mason University Fairfax, VA, 22030 Tel. 703-993-2314 and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621 Tel. 510-632-1366 -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Unions and Bankruptcy
I didn't know the answer to this. Does anyone else? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* ---BeginMessage--- Hello Bryan, Has anyone compared whether or not highly unionized firms are more likely to go bankrupt? Jim ---End Message---
Re: Nobels
Princeton econ really has 0. Kahneman is in the psych department, and Nash is a senior research mathematician. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Webpage Update
Shameless self-promotion: I've updated my Academic Economics webpage to include my new paper with Scott Beaulier, Behavioral Economics and Perverse Effects of the Welfare State. Check it out at: http://www.gmu.edu/departments/economics/bcaplan/econ.html -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
shameless self-promotion
I'm very pleased to tell you that there is a nice comment on my Economic Journal piece, Systematically Biased Beliefs, in the July issue of the Royal Economic Society Newsletter. Though they get my name wrong (George Caplan?!) I still can't complain. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Why does tenure exist?
William Dickens wrote: Obviously the supply side of the academic labor market values this and is willing to forgo some money compensation to get it. Evidently the cost of producing this amenity for academic employers is generally less than the value to the employees so there are very few schools that don't promise tenure. You might ask why people value tenure so much or why it is cheap for schools to provide it, but again I don't think that is too surprising. Academics value their freedom and tenure guarantees a reasonable minimum income if you decide to think unconventional thoughts for a while or pursue a high risk long term project. I have a lot of doubts about this functionalist account of tenure. We generally see that civil servants have a lot of job security, and their jobs don't have a lot of creativity associated with them. Does the near-impossibility of firing high school teachers have anything to do with their creative freedom? While the factors you cite may have some marginal importance, I think the main reason is that people who run non-profits usually want to avoid rocking the boat rather than excel. If they tried to improve faculty incentives, they would suffer a lot of headaches without getting a big raise. Government subsidies and private charity give universities the cushion they need to avoid being put out of competition by performance-oriented for-profits. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Median Voter and Sampling
fabio guillermo rojas wrote: I think that applications of MVT are very, very sloppy. Four criticisms: 1. You seem to assume that policy responds quite well to public opinion. You assume that if opinion shifts, policy will quickly follow. I believe that policy is very sticky with respect to public opinion. To make it econo-talk, I think policy is not very elastic with respect to changes in the median voter. Elasticity and stickiness are different concepts. But in any case, there is little evidence that policy preferences shift rapidly. When they do markedly shift, we usually see that politicians change a lot by the next election. Very often the existing politician preemptively changes his position to avoid giving his opponents' the opportunity to attack him for being out of touch. 2. Institutions are designed to prevent policy from being overly sensitive to public opinion. Ie, we don't have elections every day. We create rules that allow policy makers to resist every whim of opinion. Examples: rules for changing the constitution, judicial dependence on precedents, etc. In a sense, institutions play the role that contracts do in the labor market - set practices over some time period (ie, you've bought labor at price X and the employee can't leave just because the price is now more than X). Sure, there is a little of this. But again, I doubt this matters much. The Supreme Court held off New Deal legislation a little bit for a couple of years, but after 4 years it caved in completely. In theory, I don't deny that this could matter. In practice, though, I see little evidence. Again, if you can't name the unpopular policies, what reason do we have to think that institutional constraints are binding? They mostly constrain us from doing stuff that the median voter doesn't want anyway. 3. When people (ahem, Mr. B.C.) say look - puzzle - people want X but we get Y - the poll that measures opinion is probably a random sample of adults, or maybe voters. But as I've argued before, this might not be the relevant group. Maybe it's party activists, or party-rank and file. Policies may have select audiences and there is no puzzle until you show that the relevant audience does in fact strongly oppose a policy. Curiouser and curiouser. Re-read this point. Out of context, it sounds like a *defense* of the MVT! You seem to be saying There is no puzzle for the MVT if the electorate is not the relevant group politicians must appeal to. Fine. I am saying that There is no puzzle if existing politician match the median preference. Also true. In other words, you seem to be giving the MVT an extra line of defense. Since I don't think that's your intent, I need clarification. 4. Cognitive limitations: I'm no expert, but my hunch is that many people are only willing to get worked up over a small # of issues - taxes, abortion, immigration, defense... and the dedicated might add their favorites like gun control or affirmative action. Therefore, it's no risk to screw the voter on an issue as long as you don't do it on certain big issues. Therefore it's easy to get a list of dozens of issues and find a descrepancy - what's so puzzling about that? My point, again, is that there are few such discrepancies! It's NOT easy to make a list of issues and find deviations. I will agree that it is safer for politicians to deviate from the MVT on small issues that few people care about. But this does not mean that big deviations on small issues are frequent. So far, there is still a scarcity of examples. It is also worth mentioning that under $1 B is spent on campaign contributions, suggesting that special interests haven't been able to buy much of value. Of course, if the median voter is *indifferent* on an issue, all observed policies satisfy the MVT. So my beef isn't the MVT per se, but the knee jerk use of it. Knee jerk use is appropriate in this case. The theoretical objections are weak, and the empirical evidence in favor is strong. Fabio -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: how to eliminate unemployement
Kevin Carson wrote: For an occupant, the incentive to build on one's own land would be the same as always. Since there would be no restriction on the right of the actual occupier of a piece of land to charge a price before quitting it Does quitting have to mean selling full title? It sounds like it rules out leaving but renting to the next occupant. The upshot is that only people who can afford to buy property outright in full can use it. Capital markets can partly solve that problem, but a big problem remains. Or do I misunderstand your remarks about slum occupants taking over their buildings, etc? , it would be possible to recoup the value of improvements. The only difference would be, that one could not fence off land he was not occupying or using himself, and charge others for access to it. From: Bryan Caplan [EMAIL PROTECTED] What about the effect of this on the incentive to develop and build in the first place? Not to mention the incentive to relocate? A nice way to eliminate unearned benefits is to eliminate the existence of benefits. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks* _ Send and receive Hotmail on your mobile device: http://mobile.msn.com -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Median Voter vs. The Sub-optimal Equilibria
fabio guillermo rojas wrote: screwed-up institution. The outcome of democracy depends on the overall rationality of public opinion, but whatever outcome you get can be equally enjoyed by the rational and irrational alike. My question isn't about the quality of policy, but the difference between what the institution produces and what the median voter wants. It's easy for me to believe that voters are irrational, but it's harder for me to believe that every policy closely matches the MV. Why? What are the biggest unpopular policies that persist? Let me elaborate my question: isn't is possible than when voters put faith in some set of rules for generating policy that the outputs may be far from the MV? Fabio If I understand you, my paper talked about this too. If voters put an irrationally high level of trust in their leaders, this might give their leaders the slack to pursue their own agenda. The doctrine of papal infallibility is the extreme case - if your clientele considers you infallible, you obviously have a lot of slack! But it is plausible to see this as a special case of the MV. The only twist is that the median voter implicitly says My preference is whatever his preference is, within some limits. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Median Voter vs. The Sub-optimal Equilibria
Fred Foldvary wrote: --- Bryan D Caplan [EMAIL PROTECTED] wrote: The outcome of democracy depends on the overall rationality of public opinion, but whatever outcome you get can be equally enjoyed by the rational and irrational alike. Does this not depend on the structure and method of voting? For example, would not the demand revelation method remedy the problem? It makes those who change the outcome pay the social cost. If I remember correctly, demand revelation mechanisms are useless if the probability of decisiveness is low and voters get some direct utility from expressive voting or holding irrational beliefs. Thus, suppose I get a $10 direct expressive benefit from voting for tons of useless health care spending, and the probability of decisiveness is 1-in-a-million. I don't see how any demand revelation mechanism is going to help. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Interesting Survey
Another fascinating study from the Kaiser Family Foundation: http://www.kff.org/content/archive/1383/gender.pdf I especially like the contrast between answers to question 3 and 4. Most people think changing gender roles are worse for most people, but most people think these changes have benefited themselves! There is a great section on behavioral changes to sexual harassment laws. People admit a surprisingly high degree of elasticity. Question 19 reveals a large belief gap on the biological basis of gender differences. Most men still go with upbringing, but males are much more willing to go with biology. Questions 13 and 14 uncover a nice self-interest component in attitudes to sexual harassment laws. 60% of males don't want stronger laws; 60% of women do. This nicely fits my simple theory of self-interest effects: Namely, that they mostly appear on issues like smoking and other things that get in your personal space. It's not the dollar value of the issue so much as its immediacy and intrusiveness. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Inter-racial Adoption
In a post a while back, I maintained that restrictions on inter-racial adoption seemed like a pretty clear violation of the Median Voter theorem. I found some data at: http://www.kff.org/content/2001/3143/RacialBiracialToplines.pdf Question 36 reveals that 79%+ respondents of ALL races say that race should NOT be a factor. Blacks are even less against inter-racial adoption than other races - 84% say race should not be a factor. (I'm pretty sure that black leaders would poll very differently, though). You could say people are too scared/ashamed to say what they really think, but could that really flip 80% for to 51% against? Highly implausible. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: how to eliminate unemployement
Kevin Carson wrote: I think the absentee ownership of land seriously exacerbates economic rent in urban areas. If the tenants (not only apartment dwellers, but small business people) of slumlords, real estate speculators, etc., ceased to pay rent, and if vacant lots could be homesteaded by the first occupier, that would be a massive change for the better, even if occupants were able to draw unearned benefits from advantage of site. What about the effect of this on the incentive to develop and build in the first place? Not to mention the incentive to relocate? A nice way to eliminate unearned benefits is to eliminate the existence of benefits. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Median Voter vs. The Sub-optimal Equilibria
Fred Foldvary wrote: Thus, suppose I get a $10 direct expressive benefit from voting for tons of useless health care spending, and the probability of decisiveness is 1-in-a-million. I don't see how any demand revelation mechanism is going to help. Prof. Bryan Caplan If someone states a value of $10 not because he wants the health care spending but because he enjoys stating that value, then it seems to me that the person is willing to pay that amount even if for that odd reason, and so his statement of value would be just as significant as one who actually values the health care. No, the point is that might *really* get a $10 benefit from SAYING you get a $1 M benefit. If your probability of decisiveness is under 1-in-100,000, it would pay to do so. But the social cost of this behavior could drastically exceed the private benefit. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Median Voter and Sampling
fabio guillermo rojas wrote: Any decent treatment of the MV states that it is the median *actual* voter who matters, not the median *potential* voter. It's the Median VOTER theorem, not the Median CITIZEN theorem, or the Median SENTIENT BEING theorem. I still think this is true but still misleading. Consider how American politicians succeed - first, they must fund raise and win the favor of party big wigs; then they must must survive a round of primaries; then they must survive the general election. We have at least three successive rounds of MVT. This suggests that policies are probably tailored to one of these three audiences. Thus, I find that arguments of the form survey X says people hate policy Y really miss the point. For there to be a real puzzle, you have to show how policy Y is not preferred by party activists, primary voters and general voters. Ie, you have to understand how institutions partition voters into specific groups. There are several levels of puzzlement. Puzzle #1: The median voter disapproves of existing policy. Puzzle #2: The median voter, primary voters, and party activists ALL disapprove of existing policy. I don't think there are many good examples of #1. There are even fewer good examples of #2. Can you think of any? So what are you getting at? Since there is a series of elections, each with a different median voter, the MVT doesn't actually predict that the median general voter gets his way? Or what? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Environmental and economic effects of Speed Limits
Eric Crampton wrote: They offer a program encouraging people to fight traffic tickets. Members who challenge their speeding tickets in court and lose are compensated for the cost of their ticket by the Association. While one might expect adverse selection to bankrupt the organization (or to make them change their policy), it's still going strong I suppose they don't pay the higher insurance premiums - probably 80-90% of the full amount you pay for a traffic offense. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Public Opinion On Spending
Those who think the public's wishes are being grossly defied will find support in this general question (1996): 758. Here are some things the government might do for the economy. Circle one number for each action to show whether you are in favor of it or against it. C. Cuts in government spending. Strongly in favor of1258 In favor of 1290* Neither in favor nor against393 Against 146 Strongly against54 [Medians indicated with *] BUT - what if you ask about the three biggest areas of the budget - defense, pensions, and health? 759. Listed below are various areas of government spending. Please indicate whether you would like to see more or less government spending in each area. Remember that if you say much more, it might require a tax increase to pay for it. E. The military and defense. (1996) Spend much more 61 Spend more 211 Spend the same as now 585* Spend less 315 Spend much less 106 F. Retirement benefits. (1996) Spend much more 166 Spend more 474* Spend the same as now 496 Spend less 99 Spend much less 26 B. Health. (1996) Spend much more 229 Spend more 634* Spend the same as now 329 Spend less 65 Spend much less 20 In other words, all of the main items in the budget are popular and indeed if anything the public wants them to be larger. (Presumably views about defense spending have become much more pro-military lately). Support for spending cuts is largely predicated on delusional views of what the budget looks like to begin with - such as the popular views that foreign aid and welfare are the two biggest categories. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Public support for farm subsidies
Bryan Caplan wrote: You can check your public opinion guesses about various kinds of spending at: http://www.icpsr.umich.edu/GSS/ Click S for spending. But first click Subject on the left-hand menu! Sorry. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Silent Takeover
Kevin Carson wrote: From: Bryan Caplan [EMAIL PROTECTED] First, the roads and airports are already here, so there would not be much of a decentralizing effect of cutting off subsidies and eminent domain now. But because of the effect of subsidies in distorting the market price link between quantity supplied and quantity demanded, the system will always tend to be overwhelmed with demand beyond its capacity. You're conflating subsidies with lack of congestion pricing. They're separate issues. If you take away the sugar tit, and build or expand airports and highways only on land that is willingly sold, with building and maintenance costs obtained entirely from weight-based user fees, the costs of shipping will continue to rise dramatically, and the system will continue to become more congested until it reaches the breaking point. Ongoing maintenance costs are an important issue in their own right, BTW--the highway beds weren't designed to handle the abuse caused by 18-wheelers. I agree that lack of user fees is a problem. But what lack of user fees and concentration have to do with each other remains mysterious. Second, at least part of the subsidies have been to sustain small communities that can't carry their own weight. That was one of the main pro-airline regulation arguments - cross-subsidizing small unviable airports with monopoly pricing in big cities. How small a community are we talking about here? Economists who specialize in issues of economy of scale--Walter Adams and Barry Stein, for example--argue that production in large-scale manufacturing industry takes place at many times peak economy of scale. This is the standard argument of fervent antitrusters, but it does not strike me as remotely convincing. There are all sorts of fixed costs - harder to measure but just as real - that their estimates ignore. And intuitively, why would firms keep expanding well beyond their efficient scale? If you want to blame legal persecution of smaller firms, you would have an internally consistent story, though it is hard to see what this persecution consists in. But there's no inherent barrier to such a diversified local economy that couldn't be solved by intensive education in (the 1970s version of) Karl Hess, Colin Ward, and the *Appropriate Technology Sourcebook*. I'd say they're just crackpots. 1. What Tucker calls the money monopoly in fact leads to a much higher rate of monetary growth than free banking would. But how much *availability*, to what groups, and at what interest cost? Banking, historically weighed down with draconian pro-smallness regulations (branch banking laws) seems like a particularly bad example for you. In any case, what do you think banks are doing now? No bank is big enough to have much effect on depositor or borrower interest rates. They lend to people who can repay at interest rates that adjust for default, etc. Why would small banks be any different? But at least as important is the ongoing restriction of access to land, by enforcing absenee landlord rights over tenants and over unoccupied land. It is by this ongoing restriction of access that occupier and user has to pay a monopoly price to the landlord. How is vacant land different from vacant rental cars? Are we paying a monopoly price for rental cars? Owning stuff you aren't currently using is ubiquitous, and getting rid of it would be a disaster. 3. Tariffs, as I said, are globally deconcentrating. Without them, inefficient national industries would be driven out of business by the world's best. Historically, though, tariffs also first helped to build up concentrated industry on a national scale *within* this country. Fine. That's the way a lot of pro-smallness regulation works. But this is just the flip side of my original point about globalization: Yes, it is increasing concentration in *some sense of the word*, and yes, this increased concentration is a good thing. First Britain, then the U.S., industrialized under the protection of tariffs, and then adopted free trade as an ideology when it was safe to do so. So would U.S. and U.K. have been worse off if they had never had tariffs? Or what? During the 1990's, we were able to see the California military high-tech sector switch significantly into civilian production. The latter may have been less concentrated in some ways, but it is not a clear call either, even in the areas where copyright doesn't matter. Nevertheless, the high tech industry is the collective beneficiary of past state capitalism or military Keynesianism, and its ability to make such strategic changes is heavily influenced by a privileged position resulting from previous state aid to accumulation. Hard to see how previous government contracts improve your ability to make strategy changes. The reality looked quite different - tough years for defense firms. I've heard this whole story many
The Public Believes in Mean Reversion
A kind of funny result from Excite's informal poll: 48% surveyed think that the Dow will rise over the next month, vs. 32% who think it will fall. http://poll.excite.com/poll/results.jsp?cat_id=1 -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
take-in/eat out
Is it just me, or does the discount for take-out dining seem way too low? You avoid paying a tip, yes. But you save the restaurant the cost of waiters, tables, space, etc. You might say that space is not really scarce except at peak times, but still, most dining is down during those peak times, no? The same goes for mail order vs. brick-and-mortar stores. The Internet crash makes it seem like mail order can't afford to discount 40% below brick-and-mortar. But why not? It sure seems like a website must be vastly cheaper to run than a physical store, especially when one website can do the work of thousands of local stores. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: from whence, belief? Better society comparisons
I think this topic is getting too far afield for armchair. Take it off the list, if you please. :-) -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Republican Reversal
Kevin Carson wrote: Voter attitudes generally reflect a conventional wisdom that is shaped by the corporate media and statist educational system. A whole series of buzzwords comes to mind--ideological hegemony, the sociology of knowledge, reproduction of human capital--but they all boil down to the fact that a fairly centralized cultural apparatus is effective at creating the kinds of public opinion the existing system of power needs to survive. Once again, why do you focus on the centralized cultural apparatus? Would decentralizing things really do much to change people's political views? There used to be many more newspapers in the 1930s, for example. But then you just had thousands of newspapers arguing for intervention instead of ten or twenty. What's the difference? Concerning the real issues involved in our politics, and the contending groups that are actually represented in the state's decision-making, I'd say Thomas Ferguson and William Domhoff were closer to the mark than the interest group pluralists are. I'd say it's closest to the mark to say that most voters genuinely but stupidly want government to do what it actually does. The interest groups just take care of the details. From: Fred Foldvary [EMAIL PROTECTED] Reply-To: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: Re: Republican Reversal Date: Tue, 16 Jul 2002 17:31:43 -0700 (PDT) These are all good comments on the Republican reversal. Thus, I take it that the list agrees that democracy works pretty well in reflecting the wishes of the voters. Alex I don't agree. What about the large literature on voter ignorance and rent seeking? Does the typical American agree, for example, that it is good policy to spend billions on farm subsidies, or are they just ignorant and apathetic? Fred Foldvary = [EMAIL PROTECTED] __ Do You Yahoo!? Yahoo! Autos - Get free new car price quotes http://autos.yahoo.com _ MSN Photos is the easiest way to share and print your photos: http://photos.msn.com/support/worldwide.aspx -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Why do people pick stocks?
William Dickens wrote: Discount brokers can really beat a .2% annual fee with no loads on either end? For sure. Most brokerage houses don't have any fees other than fees for trading. Even if you have a round-trip cost of $100 for $10,000 worth of stock (you can do much better than this - - $14 is not out of the question) if you hold it for 20 years you are way ahead of a .2% annual fee. For $10,000 worth of a single stock? Or $10,000 of any desired bundle of widely-held stocks? But again, according to my sources the actual difference in performance between holding yourself and holding in the lowest cost mutual fund is a lot more than .2% per year. - - Bill Dickens -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Index mutual funds
William Dickens wrote: Not that much. Assuming constant variance and correlation the variance fraction of the possible reduction you can get is inversely proportional to the number of stocks you hold (you get half the reduction relative to holding one stock by holding 2 90% by holding 10 etc). If correlation isn't constant then you should be able to do better than that by choosing less correlated stocks. Right, but if you want to reduce the SD of your return, you've got to square those numbers - you need 100 stocks to get the SD down by 90%. And isn't that the measure of risk most people vaguely have in mind? In any case, I'd like to thank Bill for the only useful investment information I've learned since the JEL piece on international diversification. So Bill, if you had to guess, roughly what expected return reduction would you get from (a) standard stock-picking and active trading, (b) managed mutual funds, (c) index funds, and (d) buy and hold with discount brokers? I would still guess that (c) closes 90% of the distance between (a) and (d), but I'd like to hear your guesstimate. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: Silent Takeover
Kevin Carson wrote: I would argue that the rise of transnational corporations is a bad thing because they are products of state capitalism. Giant corporations, from the late 19th century on, have been statist institutions, and the plutocrats associated with them have been rent-seekers. Do away with state capitalist subsidies, legal privilege, and other forms of intervention in the free market, and the giant corporations would cease to exist, for the most part. Frankly, this strikes me as quite unlikely. There are lots of big government policies that encourage firms to be smaller than they would be in a free market. Double taxation of corporate income is the most obvious. Antitrust laws tend to be used against large market leaders. A lot of regulations only kick in if you have more than 50 or 100 employees. And once you are talking multinational corporations, there are other government policies discouraging cross-national integration. Protectionism, most obviously, tends to preserve the firms in each nation that aren't efficient enough to compete with the world's market leaders. You're right that there are some government policies pushing in the other way (any time regulations impose a fixed cost, firms' minimum efficient scale mathematically shifts to the right), but on balance I think you're wrong. Under laissez-faire, big corporations would be bigger than they are now. But to quote Seinfeld, Not that there's anything wrong with that. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
children and cooperation
Why are adults so much more cooperative than children? A contrarian might dispute this, but I'd say it's pretty obvious. Kids resort to violence very quickly, adults very slowly. Kids go out of their way to hurt other kids' feelings; adults try to avoid saying anything that might get back to someone they don't like. Kids steal stuff from other kids much more readily than adults would. Etc. A few explanations: 1. Adults have a much higher absolute IQ than kids (i.e., kids' IQs are age-adjusted, adults' IQs are not), so they are smart enough to recognize the indirect effects of their behavior. 2. Adults have lower time preference than kids. 3. Adults have had more time to learn about indirect consequences. 4. Adults are just less spiteful. 5. Adults face harsher punishment. 6. The child and adult worlds are in two very different coordination equilibria. Notice how drastically the 12th-grade high school culture differs from the 1st-year college culture. Other ideas? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: children and cooperation
fabio guillermo rojas wrote: I'm sure that all of what you says applies to some degree (lower IQ, less punishment, etc), but it really comes down to biological development. Child brains simply aren't developed enough to (a) remember past behavior correctly, (b) connect behavior to punishment, (c) calculate risks. But children in fact do all of the above. They do them to a lesser and worse extent, but that is a different matter. In any case, all of the deficiencies in children's brains you point out more or less sound like extensions of their low absolute IQ. So when a child has a desire, they simply don't have the biological capacity to think about consequences very well. Biological capacity? Or biological inclination? I'd also add that maybe children become socialized well by misbehaving. It's a weird idea, but it's a common observation that children are always pushing the boundary. For example, children will test the keep your hands to yourself rule by moving their finger very close to your face and say I'm not touching you! Although it's annoying, this behavior will teach kids (via punishment) that people don't want to be touched and they need some personal space as well. Without the misbehavior, they never really learn the improtance of personal space. I'm sure that much of the unspoken rules of personal interaction are learned in this fashion (misbehavior-punishment cycles). So this is basically my time to learn story, I guess? Fabio -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
double vs. single entry
What exactly is the advantage of double-entry accounting over single-entry accounting? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: double vs. single entry
fabio guillermo rojas wrote: Double entry means that you have one column for money going out of an account and one column for money going into an account. Thus, it very easy to keep track of cash inflow and outflow (just add up the columns). With single entry, there is more error because you mistakenly count a debit as a credit. The advantage is huge when you have to do things by hand. It also helps you track errors more quickly. What's wrong with negative numbers?! -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it. Leo Tolstoy, *The Cossacks*
Re: re : securities analysis
William Dickens wrote: However, as I recall, the increase in expected returns that one gets by following such a strategy are measured in basis points, not percentage points as some advocates of this approach would suggest. So Bill, are you willing to stick your neck out regarding the January effect? Thaler says average ROR in January is 3.5%, versus an average of .5% for all other months. Is this another case of basis points being exagerated into percentage points? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Smerdyakov suddenly raised his eyes and smiled. 'Why I smile you must understand, if you are a clever man,' he seemed to say. Fyodor Dostoyevsky, *The Brothers Karamozov*
Re: re : securities analysis
William Dickens wrote: This possibility was made all too clear to me when I took a $20,000 short position in Amazon.com - - a year too early. Why didn't you take a series of smaller short positions instead? You could have held a $1000 short position for twenty times as long, no? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Smerdyakov suddenly raised his eyes and smiled. 'Why I smile you must understand, if you are a clever man,' he seemed to say. Fyodor Dostoyevsky, *The Brothers Karamozov*
Panic Room
David Fincher's new movie *Panic Room* may be the finest artistic expression of game theory around. Beautiful illustrations of commitment problems, subgame perfection, focal points, backwards induction... And its pure entertainment. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Smerdyakov suddenly raised his eyes and smiled. 'Why I smile you must understand, if you are a clever man,' he seemed to say. Fyodor Dostoyevsky, *The Brothers Karamozov*
Median Voter and Welfare
Surveys consistently find welfare spending to be one of the least popular major activities of government. The 1996 welfare reform probably changed this a bit, but I bet the basic pattern is still there. It seems like this is one area where government does more than the median voter wants. But: When you probe voter preferences a little further, it seems to me that you find something quite different, and this gem of a question from the National Survey of Public Knowledge of Welfare Reform and the Federal Budget (http://www.kff.org/content/archive/1001/welftbl.html) shows. Table 19: The Principal Goal Of Welfare Reform Views of American Adults By Political Affiliation Total Dem.Rep. Get people off welfare, but only if we can get them decent jobs by providing job training and education 63% 66% 60% Get people off welfare even if it means they27% 22% 33% have to take a low-paying job Get people off welfare regardless of the6% 7% 5% consequences Provide people on welfare with more money so2% 5% 2% that they have a higher standard of living Other (vol.)2% 1% 1% In other words, most Americans are unwilling to accept the only feasible way of drastically scaling back the system, which is expecting welfare recipients to take low-paying jobs. Frankly, this hesitance boggles my mind - if former welfare recipients shouldn't take low-paying jobs, who should? In any case, this strongly suggests to me that the lack of radical change is basically what the median voter wants. They only support radical reforms conditional on things that are sure to never happen. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
Life Expectancy and Immigration
Life expectancy varies widely between countries. When someone moves to a new country, what best predicts their lifespan? Country of origin? Or country of destination? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
Re: Life Expectancy and Immigration
Gray, Lynn wrote: It would seem to depend on the age of the person at the time of the move. Maybe so, maybe not. We can imagine that if a 70-year-old person from Congo shows up in the U.S., they can immediately tap into the wonders of the U.S. medical system, nutrition, etc. Do you know of any data? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
[Fwd: Photographers]
From Mark Steckbeck: -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace* ---BeginMessage--- Bryan, I am not at home where I have access to my email account related to the Armchair list. Can you post this for me. Thanks, Mark Alex's question does not pertain to individuals taking film from their own personal cameras to be developed. What his question pertains to is the hiring of a professional photographer who, for example, comes to your business (or home) to photograph scenes for an annual report (or a family portrait). It is customary for photographers to provide you with a set number of copies of specific prints and to retain the negatives. Alex poses two questions: Is a two-part tariff efficient and, if not, 2) why doesn't entry into the market change it. First, I presume that the two-part pricing scheme is efficient from a price discrimination point of view. There is little probability that the median consumer of photography services will purchase reprints from existing negatives. Those who do obviously have a more inelastic demand curve. (I once did a shoot for the Metropolitan Washington, DC Baptist Church. I provided them with however many copies they requested and kept the negatives. Only one person contacted me later for reprints and, considering the desperation in her voice, I believe I could easily have charged her say $20 or $30 per reprint). Second, I do know of photographers who will sell the rights to the negatives (i.e., their rights, property rights to negatives belong the the photographer) but they are generally either newcomers to the profession or failing photographers with high time preferences relative to better photographers (i.e., they need cash now). I presume therefore, that either Alex's search costs are too high to find one of them, or his demand for quality precludes him from considering hiring their services. Similarly, anyone seeking to purchase rights to the negatives signals to a prospective photographer their expected future demand curve for reprints. Mark Steckbeck ---End Message---
Re: Photographers
And of course normal developers always include the negatives. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
Re: Photographers
Alex Tabarrok wrote: Sure, if you take your own pictures you get the negatives. But if you hire a profesional photographer for say a wedding or if you have a portrait done they are insistent on keeping the negatives. What's wrong with a simple adverse selection story here? The only people who try to buy the negatives from you are precisely the people who would be willing to pay a lot for extra copies. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
Re: The Median Voter Theorem and Adoption Law
Fred Foldvary wrote: --- Bryan Caplan [EMAIL PROTECTED] wrote: I'm highly dissatisfied with interest group explanations. Simple reason: Most of the policies traditionally blamed on interest groups are in fact *popular*. Adoption laws seem like a case where existing policies are not popular, though perhaps I'm wrong on that count. Cato's Policy Analysis 420 (Dec 12, 2001) studied voter initiatives and found that tax-and-expediture limitations passed by voters are more restrictive than such legislation by representatives, and they cause per-capita state spending to decrease. At least in this respect, the interests of the voters do not seem to coincide with the legislation by the reps. There is a huge and probably higher quality academic literature on this point. John Matsusaka for example finds that the effect of initiatives is pro-government before 1950 and anti-government after, or something to that effect. Also, it does not seem to me that if they knew about it, most voters would approve of agriculture subsidies and price supports. Why would the median voter want a higher price for sugar and subsidies for the owners of sugar beet farms? When I was a kid I remember my mom explaining why farm programs were a good idea while she was buying produce. I haven't seen polls on this exact point, but I strongly suspect a majority wants what we have. Why? They're interventionists across the board, why would they be any different here? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
Re: The Median Voter Theorem and Adoption Law
Fred Foldvary wrote: The median voter theroem is not supposed to explain all legislation, since public choice theory also states that there will be rent seeking and privelege seeking by concentrated interests at the expense of the general public. I'm highly dissatisfied with interest group explanations. Simple reason: Most of the policies traditionally blamed on interest groups are in fact *popular*. Adoption laws seem like a case where existing policies are not popular, though perhaps I'm wrong on that count. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
Re: The Median Voter Theorem and Adoption Law
Robin Hanson wrote: Yes, I think: people are basically afraid of someone taking their kids, and people are not in fact very comfortable with trans-racial adoption. But when people hear about kids being sent back to abusive natural parents, do they really say/think It's unfortunate, but on average it's better? I doubt many people have that reaction. As for trans-racial adoption, many people wouldn't want to do it themselves, but how many actually want to prevent other people from doing it? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] He was thinking that Prince Andrei was in error and did not see the true light, and that he, Pierre, ought to come to his aid, to enlighten and uplift him. But no sooner had he thought out what he should say and how to say it than he foresaw that Prince Andrei, with one word, a single argument, would discredit all his teachings, and he was afraid to begin, afraid to expose to possible ridicule what he cherished and held sacred. Leo Tolstoy, *War and Peace*
The beta of education
Does anyone know education's beta, that is, the correlation between the return to education and the average market rate of return? How much of a risk-premium should education have compared to, say, bonds or stocks? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Familiar as the voice of the mind is to each, the highest merit we ascribe to Moses, Plato, and Milton is, that they set at naught books and traditions, and spoke not what men but what *they* thought. A man should learn to detect and watch that gleam of light which flashes across his mind from within, more than the lustre of the firmament of bards and sages. --Ralph Waldo Emerson, Self-Reliance
Re: Disaster Raises Happiness, Trust
A lot of Soviet citizens, similarly, (retrospectively) claimed they were happiest during World War II, when something like 1-out-of-8 perished! -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Familiar as the voice of the mind is to each, the highest merit we ascribe to Moses, Plato, and Milton is, that they set at naught books and traditions, and spoke not what men but what *they* thought. A man should learn to detect and watch that gleam of light which flashes across his mind from within, more than the lustre of the firmament of bards and sages. --Ralph Waldo Emerson, Self-Reliance
Re: Handicapping the 2001 Noble Prize in Economics
My wish (not prediction): Joint prize for Anne Krueger and Gordon Tullock for rent-seeking. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Familiar as the voice of the mind is to each, the highest merit we ascribe to Moses, Plato, and Milton is, that they set at naught books and traditions, and spoke not what men but what *they* thought. A man should learn to detect and watch that gleam of light which flashes across his mind from within, more than the lustre of the firmament of bards and sages. --Ralph Waldo Emerson, Self-Reliance
[Fwd: Krugman should read Bastiat]
Here it is, Pierre. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Familiar as the voice of the mind is to each, the highest merit we ascribe to Moses, Plato, and Milton is, that they set at naught books and traditions, and spoke not what men but what *they* thought. A man should learn to detect and watch that gleam of light which flashes across his mind from within, more than the lustre of the firmament of bards and sages. --Ralph Waldo Emerson, Self-Reliance Bryan, Just as you think Paul Krugman can't get worse, he does. In today's (Friday's) NY Times, he commits the broken-window fallacy, magnified 220-fold. Don SEP 14, 2001 After the Horror By PAUL KRUGMAN It seems almost in bad taste to talk about dollars and cents after an act of mass murder. Nonetheless, we must ask about the economic aftershocks from Tuesday's horror. These aftershocks need not be major. Ghastly as it may seem to say this, the terror attack - like the original day of infamy, which brought an end to the Great Depression - could even do some economic good. But there are already ominous indications that some will see this tragedy not as an occasion for true national unity, but as an opportunity for political profiteering. About the direct economic impact: The nation's productive base has not been seriously damaged. Our economy is so huge that the scenes of destruction, awesome as they are, are only a pinprick. The World Trade Center contained 12 million square feet of office space; that's out of 375 million square feet in Manhattan alone, and 3.5 billion in the United States as a whole. Nobody has a dollar figure for the damage yet, but I would be surprised if the loss is more than 0.1 percent of U.S. wealth - comparable to the material effects of a major earthquake or hurricane. The wild card here is confidence. But the confidence that matters in this case has little to do with general peace of mind. If people rush out to buy bottled water and canned goods, that will actually boost the economy. For a few weeks horrified Americans may be in no mood to buy anything but necessities. But once the shock has passed it's hard to believe that consumer spending will be much affected. Will investors flee stocks and corporate bonds for safer assets? Such a reaction wouldn't make much sense - after all, terrorists are not going to blow up the S.P. 500. True, markets do sometimes react irrationally, and some foreign markets plunged after the attack. Since then, however, they have stabilized. On the whole it's just as well that our own markets have stayed closed for a few days, giving investors time to calm down; the administration was wrong to put pressure on stock markets to reopen right away. By the time the markets do reopen, the worst panic will probably be behind us. So the direct economic impact of the attacks will probably not be that bad. And there will, potentially, be two favorable effects. First, the driving force behind the economic slowdown has been a plunge in business investment. Now, all of a sudden, we need some new office buildings. As I've already indicated, the destruction isn't big compared with the economy, but rebuilding will generate at least some increase in business spending. Second, the attack opens the door to some sensible recession-fighting measures. For the last few weeks there has been a heated debate among liberals over whether to advocate the classic Keynesian response to economic slowdown, a temporary burst of public spending. There were plausible economic arguments in favor of such a move, but it was questionable whether Congress could agree on how to spend the money in time to be of any use - and there was also the certainty that conservatives would refuse to accept any such move unless it were tied to another round of irresponsible long- term tax cuts. Now it seems that we will indeed get a quick burst of public spending, however tragic the reasons. Now for the bad news. After the attacks, I found myself wondering whether some politicians would try to exploit the horror to push their usual partisan agendas. Then I chided myself for such an uncharitable thought. But it seems you can't be too cynical; sure enough, the push is already on to sell tax breaks for corporations and a cut in the capital gains tax as a response to terrorism. One hopes that the White House will distance itself from this disgraceful opportunism, that it will deliver the bipartisanship it originally promised. But initial indications are not good: the administration developed its request for emergency funding in consultation with Congressional Republicans - full stop. A Democratic contact says that his party received no consultation, no collaboration, virtually no information. I didn't want to mention this, but now is the time to draw the line
spending and states
As is well-known, the U.S. House represents by population, while the Senate gives two seats per state. If senators aimed to advance their constituents' narrow self-interest, you would expect that *per-capita*, low-population states would get more federal money. After all, low- population states have the same number of House members per capita as anyway else (rounding aside), and far more Senators per capita. I just came across a table showing winner and donor states, comparing federal taxes paid by a state with federal benefits received. On the surface, it does seem like low-population states are over-represented in the winner states, and vice versa. Does anyone know of more systematic evidence on this point? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] Philosophical problems can be compared to locks on safes, which can be opened by dialing a certain word or number, so that no force can open the door until just this word has been hit upon, and once hit upon any child can open it. --Ludwig Wittgenstein, *Philosophical Occasions*
Growth, Wealth, and Race
Sachs has popularized a strong finding: Distance from the equator explains a great deal of the variation in income *levels* between countries. The further from the equator, the richer countries are. There are also some parallel findings for growth - controlling for other factors, growth is slower in the tropics than in temperate zones. Question: What would controlling for racial composition do to these results? Clearly there is high collinearity between race and latitude, though modern transportation is weakening the connection. If you do both latitude and racial composition, what would happen? Does anyone have hard evidence on this? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "Philosophical problems can be compared to locks on safes, which can be opened by dialing a certain word or number, so that no force can open the door until just this word has been hit upon, and once hit upon any child can open it." --Ludwig Wittgenstein, *Philosophical Occasions*
Voluntary Pollution Control
Suppose 50% of all people voluntarily buy low-pollution cars to "do their part" for clean air. Can anyone think up plausible mechanisms whereby their choice would induce other people to pollute *more*? The main mechanism I can think of is just crowding out of altruism. The more people contribute to solve a problem, the smaller the problem gets, and the less other altruists want to contribute. But let's keep the logic of collective action in mind here - If selfish people are already polluting to the point where the MB are approximately 0, where is the elasticity, if any? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "[T]he power of instruction is seldom of much efficacy, except in those happy dispositions where it is almost superfluous." -- Edward Gibbon, *The Decline and Fall of the Roman Empire*
Re: More Guns, Less Crime?
This discussion of research incentives and bias is pretty interesting, reminding me of some of Paul Krugman's recent disparaging remarks about e.g. the Cato Institute versus Brookings. Consider a organization that gets 100% of its funding from the conservative Coors brothers. People would expect a strong bias. Now compare that to an organization that gets 50% Coors, 50% Kennedy money. Would we expect that to lead to unbiased research? What would it not instead lead to *biased* research with *different* weights. We would expect 100% Coors financing to lead to conservative answers, regardless of the facts. So why wouldn't we expect 50/50 financing to lead to moderate answers, *also* regardless of the facts? In other words, there is a big equivocation between being unbiased and being committed to an ideology of moderation. And most of the organizations that purport to be unbiased are in reality moderate ideologues. Krugman, for example, pointed out that a place like Cato is never going to publish calls for government expansion. Fair enough; but is a place like Brookings (no offense, Bill) going to publish vocal cries for the abolition of popular programs? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "A man should be sincere, and nobly shrink From saying anything he does not think." -- Moliere, _The Misanthrope_
