One good sentence on subsidies

From Free Exchange:

The upside to cash-benefits is that it forces policymakers to confront the trade-offs involved in delivering a certain subsidy and evaluate whether it makes sense.

Three good sentences

Liberal arts education has taken a beating lately from a wide range of critics (for examples on the economics department side of things see hereor here, and for a general critique see here or here). Tyler Cowen makes a good (and concise!) defense here. Here's the good stuff:

A liberal arts education helps us think with greater subtlety, even if it does not improve our performance on subsequent standardized tests. I see an impact here even on the lesser students in state universities. It also helps explain how the U.S. so suddenly leaps from having so-so high schools to outstanding graduate schools; how many other countries emphasize liberal arts education in between?

I wonder how Tyler (a libertarian, Austrian-leaning economist) feels about the fact that a significant portion of that liberal arts education is heavily subsidized?

Chart of the Day

A rare good use of a pie chart.

A little economic knowledge can do quite a bit of harm

From Free Exchange:

I've certainly met my share of Econ 101 robots, who can't talk beyond the "markets are always right" models one gets in early economics classes.

I know some Ph.D. trained economist robots, who also can't talk beyond the "markets are always right" mantra. Some economic problems, as it turns out, are more complex than the "X marks the spot" pirate logic (AAARRGH!) of simple supply and demand.

Big, bad government

If the government's intrusiveness in the real economy can be at all proxied by public sector employment, then the Tea Party should take note of what's happened in the last two years.

GDP vs. Welfare

A new measure of economic well-being?

Risk in the NFL

Probably for something to get started in class tomorrow...

Trivia vs. Statistics

From Advanced NFL Stats:

Who has the longest interception return ever? Which running back ran for
the most yards in a single game? What team scored the most fourth
quarter touchdowns in a season?


Answer: I don't care.


That's trivia, not statistics. What I'm interested in is analysis. What
makes a winning team? Is it better to go for it or punt on 4th and short
at the 50 yard line? Which teams are most likely to make the playoffs?
How much does luck play a part in any game?

Yup.

Crap!

The sting in the tail is that by paying less attention, we are less able to counter-argue what the ad is communicating. In effect we let our guard down and leave ourselves more open to the advertiser's message.

Interesting.

One Awesome Sentence

From Reuters:

Older people like reading negative news stories about their younger counterparts because it boosts their own self-esteem, according to a new study.

Two good sentences

From Economix (Was the Alaska Purchase a Good Deal?)

The West, that is from Oklahoma on up to Alaska, was settled with a large and expensive boost from the federal government, subsidies that often continue to this day. All of which complicates the Western (and Alaskan) self-idealization of themselves as craggy and libertarian individualists.

Graph of the day

Is it any wonder middle class folks have so much displaced anger?

An interesting analysis of MPCs

Krugman's take on how the MPC might be higher in a recession (and a liquidity trap) as opposed to "normal" times.

So whereas someone who can borrow and lend freely will spend very little of a temporary rise in income, someone who is liquidity-constrained — wanting to spend more right now, but unable to borrow — will spend all of that temporary rise.

The graphs in the link help illustrate why this can be true. Also note that he is using a dynamic model - usually the tool of the neoclassicals - and not some trumped-up "in the long run we're all dead" argument. It also says a thing or two about why tax cuts (or, equivalently, transfers) to the lower segments of the income distribution might have a greater macroeconomic impact.

A thing or two on the Bush tax cuts here.

One good sentence

It seems feasible that a strategy of ignoring debt and focusing on growth could be as effective as ignoring growth and focusing on debt in breaking the debt-growth relationship.

From Free Exchange.

Participation Constraints, Incentive Constraints, and Weaning

As with most Monday nights, last night I was home with the kid while Jane had an evening group meeting. This meant I was in charge of dinner (no big deal), but this week was different because we are trying to wean our son off the bottle, so, instead of a bottle after dinner, he had to drink milk out of a cup. Things went fine to start - cheering him on seemed to work just fine (as it had the couple of previous nights we had done this). But then, things changed, and the crying began.
OK, so most of you know where things are going here, but indulge me; there's some interesting economics behind the strategy. If any more milk was to be drunk, I needed an incentive scheme. What I came up with had two parts:
(1) About a half a handful of Cheerios (kids like the Cheerios!) to start with to get him back on-board; and
(2) A few Cheerios after every 2-3 drinks of milk.
In Mechanism Design (a branch of economic game theory) (1) is intended to overcome the Participation Constraint (get the kid to stop crying and play ball); (2) is intended to overcome the Incentive-Compatibility Constraint (keep the kid drinking the milk after the first offering is eaten). I'm surprised how well it worked, and I'm thinking that I may have overpaid on the participation constraint. By the time we got into it, all I really had to do to get a second or third drink was open my hand and show him the reward (as long as I remained credible with my payouts!).

Some Links: The Census, Online Gambling, and College Consumerism

The census: Not just enabling taxation anymore (Economist)
Online gambling: End prohibition, begin regulating it... and taxing it (Economist)
Trade: (1) Freight costs on the decline (Economist); (2) should we fear offshoring? (Economist) A couple of good sentences (in response to a claim that the US will have "little left in the comparative advantage department"):

The idea underlying comparative advantage is that a country always has one. The brilliance of the theory is that even when one nation is better at every last type of economic activity than another, it will still be advantageous for both nations to produce and trade. China isn't going to do everything.

Supersize me, Wal-Mart (Working paper)
Taxing "capital" - the devil is in the details (Economix)
Climate Change Reform (Economist)
The old joke is true: Colleges are becoming bars with a $100,000 cover charge - the country-clubification of colleges. (NY Times)

Fiscal Localism and Inflation Taxes

Heard this on the way back from the pediatrician today...


(Link here for the script-impaired.)

One interesting part is how the published exchange rate for these local currencies is 1:1 with the Euro, but that they depreciate at a fixed rate. Then, you can purchase stamps from the local government to "re-charge" the value of the notes. This is quite literally an inflation tax, although it is somehow seen as a positive thing for the local residents because they can see and connect with the public goods and services those taxes purchase.

The Deficit Effect of a Tax Cut

Neat Picture via Krugman:

Making the right conlusion with the wrong data

I think there's good reason to extend unemployment benefits (but not make them more generous per week), but this was the wrong data to use.








Here's an interesting discussion on NPR with Ken Rogoff.

Some more trade & migration links

Mobile phones and remittances (Economist, here; DNAIndia, here)
Migration the crisis (People Move)
Remittances vs. private capital flows (People Move)
Protectionism: Deadly but Tasty, especially during depressed times (Free Exchange)
    Also: Did trade restrictions lead to the depression (as Hayek asserted) or vice versa? (Paul Krugman)
Ruminations by Menzie Chinn