Friday, October 16, 2009

Should OPEC be Compensated?

Economically, there is no argument for giving oil exporters a handout to compensate for our ability to reduce our own demand, thus driving down the price. Remember, they don't give us a kickback for all of their supply-reducing behavior that drives up the price. But, there might be some political reasons to make such a side-payment.

Carbon Tariffs

From Matt Yglesias a few days ago:
The EU, Canada, and Japan are in the aggregate much more significant trade
partners than China/Mexico/Brazil. And the case for them charging us carbon
tariffs seems about as good as the case for us charging the Chinese.
I think we're missing the bigger issue: Why a carbon tariff? Why not just a tax on carbon content for domestically and foreign produced goods? Why give domestic producers a "carbon subsidy?"

Thursday, October 15, 2009

Sad Commentary

This post is not related to VMI per se, just a small part of the article revealing a sad fact about society:
Last year, the U.S. Justice Department began investigating whether VMI's environment is especially hostile to women. Allegations of sexual assault have become a fact of VMI life, occurring about once a year, typical for a school of this size, according to college officials. The first case to result in a criminal charge ended Tuesday.

In that case, a female cadet alleged that Stephen J. Lloyd, then a senior from Mason Neck, Va., pulled her into a storage room the night of March 27 and raped her. Lloyd no longer attends VMI. On Tuesday, he entered an Alford plea, which means he did not admit guilt but acknowledged that there is enough evidence to convict him. The plea is tantamount to a conviction of misdemeanor sexual battery.

The sentence: a year in jail and a $2,500 fine, suspended.

That means they guy could have easily been convicted, but instead got a suspended sentence, meaning he will not serve a day for rape. Probably happens all the time all across the country, and that is a sad commentary on our society.

Wednesday, October 14, 2009


The dow closed over 10,000 today. What does it mean? Nothing, really, but maybe it helps psychologically.

Tuesday, October 13, 2009

Lurking Variables and Statistical Literacy

People are squealing about pork and the payrolls for federal employees. Fact: Federal employees make more on average than private-sector employees. Fact: They are not overpaid.
Economix explains why:
In 2008, only 14 percent of federal workers were on part-time schedules, compared to 26 percent in the private sector. Federal workers were far older on average: 55 percent were between the ages of 45 and 64, compared to 36 percent of private-sector workers. Furthermore, 45 percent of federal workers held a college degree or higher educational credential, compared to 29 percent of private-sector workers.
analysis of the impact of individual education and experience on earnings in the United States by the Harvard economist George Borjas showed that federal employees are paid considerably less than comparable private workers at the top end.
Basically, people looking at the simple averages are not accounting for several important ("lurking") variables that more than explain the average differentials between federal employees and the average private-sector employee.  Andrew Gelman calls this a lack of "statistical literacy"; some call it "lying with statistics". These statistical liars include Chris Edwards at Cato (who by the way should probably know better but is advancing a deliberate agenda), The Free Enterprise Nation, Ilana Mercer of World Net Daily, and Jeff Jacoby of The Boston Globe.

Monday, October 12, 2009

The Prize

The prize in economics went to Ostrom and Williamson for institutional economics.
“In reading [Professor Ostrom's and Williamson's] work, you are
impressed that economics is not really fundamentally about markets, but
about resource allocation and distribution problems
. Markets appear
because they operate effectively to handle a subset of these resource allocation
” - Michael Spence, senior fellow, the Hoover Institution.

A timely reminder to those who are following the current crisis.

Sunday, October 11, 2009

Protons, Prostate Cancer, and Bad Incentives in Health Care

Here, and here. If you have 3 options of equal impact, one that is free, one that is $50,000, and one that is $100,000, why is it that our current system picks the third one? Answer: it's hard to convince most people that more health care is not equivalent to better health care. Most people think "proton radiation therapy" sounds like it will do more good than "wait and watch." It doesn't.
I'm still puzzled by the blind faith we put in doctors when it comes to their motives in recommending treatment. Doctors, like mechanics, have an incentive to "run up the bill" even to the point of making s--- up or recommending treatments (repairs) that may or may not be necessary. We should WANT a bureaucrat that knows something about the effectiveness of treatments between us and our doctors, whether it's a government bureaucrat or a private sector one! Problem now is that the private sector bureaucrat has perverse incentives, too. A little regulation in these cases (or a public provider) could go a long way.