I know I've said THIS before...

Check THIS out. I've said it for several years, citing a mid-nineties Foreign Affairs Article by Krugman (The Myth of the East Asian Miracle...):

China can grow at a rapid rate with a collectivist spirit because it
has so many resources (ie, so much labour) to put towards fuelling
its growth. We saw in previous decades other Asian economies quickly
accumulate capital and labour, and it also resulted in impressive
growth rates. However, long-term growth can only be achieved through
innovation and entrepreneurship.

Pure capital accumulation peters out once relative returns start to even out across sectors and across countries, and pure labor mobilization peters out when the marginal return for "collective" labor is matches that in the market sector. So, kudos to China, but don't be shocked when they hit a "wall" with their ability to grow: Property rights don't incentivize innovation or entrepreneurship, and markets aren't fully in place to weed out those entrepreneurs who take bad risks.

Penn and Teller Bullshit - Mad Cow

Marriage & Insurance

There are a handful of economics articles relating marriage to a type of insurance contract, with an emphasis on countries where arranged marriages are common. This idea is as old as the earth. In fact until about the last 50 years most marriages were a form of diversification and specialization in household production. Now they are more consumption-based in the sense that experiences that make us happy are enhanced by a partner we like. But health care is a new dimension and has turned marriage back to the old model in the US. Couples are marrying because they need their partner's health insurance, but paradoxically, some are considering divorce so that ailing partners can qualify for subsidized insurance. Crazy, but two comments:

1. is marrying for health insurance all that different from the incentives folks are trying to reinforce into the tax code to incentivize marriage?
2. I'm always a little troubled by people who say things like "“Nobody should have to make a choice like that,” Ms. Moulton said. “What happened to our country? I don’t remember growing up like this.”"

I feel for Ms. Moulton, but people like Ms. Moulton (who considered divorce to qualify for subsidies for her kidney transplant) faced even greater difficulties in the past. As bleak as the current system may be for some it was in fact always been difficult for many people like her who were poor and in need of transplants or other very costly procedures. People too often look on the past with rose-tinted glasses. We usually see this type of reactionary response dressed in conservative morality, but Lou Dobbs has bred a new strain of it among progressives. Instead of romanticizing the past that never was let's work together for a better future.

Wither, Reform (Math)?

I received info on a new study on remedial math and studying economics by an acquaintance of mine, Andrew Selzer. Summarizing, they find:

• overall high school performance and performance in high school math positively affect performance in college economics courses.

• taking remedial mathematics after arriving has a statistically insignificant effect on college performance, performance in economics core courses, or other long-term outcomes (i.e. these outcomes have more to do with "ability" and pre-college performance).
  

I guess that leaves more questions than answers, though. We know that students who are deficient when they arrive will struggle, but what do we do about it? Essentially, this tells us that if our goal is getting the econ curricula to stick, then remedial "catch-up" math courses are basically a waste of University resources, but why?

I would suggest that the weak link for deficient students is not math per se, but those types of analytical and critical thinking skills that are developed with a longer-term exposure to mathematical reasoning (Atin, we've talked about this in fact). There is also some selection bias in which students are more or less attuned to acquiring these critical skills. Some students (namely non majors forced to take economics courses) have deliberately avoided those types courses as much as possible, taking just the bare minimum. At the same time, this choice may reflect those students' rational awareness of her or his own abilities. Therefore a "D is for degree" approach to their econ courses may be optimal for obtaining the degree credential. Similar selection bias has been show to be exhibited in the fertility choices and educational outcomes of women.

Two neat maps

Interesting parallels.

More Flatulence over Gas

Hopefully the hot air over gasoline prices will wane soon and things will turn again towards emissions. Gas prices are down about $0.30 from their peak and the sheep are starting to jump on the bandwagon for predicting more of a fall. Here's todays fuelgaugereport from AAA (similar info can be gotten from the Department of Energy):

National
Unleaded Average

Regular

Mid

Premium

Diesel

E85

**E85 MPG/BTU adjusted price

Current Avg.	$3.799	$3.962	$4.082	$4.517	$3.070	$4.040
Yesterday Avg.	$3.810	$3.974	$4.093	$4.537	$3.090	$4.066
Month Ago Avg.	$4.104	$4.357	$4.514	$4.817	$3.299	$4.342
Year Ago Avg.	$2.770	$2.941	$3.048	$2.934	NA	NA

*Prices
are in US dollars per gallon

Highest
Recorded Average Price:

Regular Unl.	$4.114	7/17/2008
DSL.	$4.845	7/17/2008

Gasoline hit $3.73 from its $4.19 peak in Lexington. It was rumored to have been $3.47 as close as Roanoke.

Favre... Traded

I guess I miscalcluated, and I still think Favre made a poor choice. Why would someone wanting to contend and play 1 or 2 more great years agree to a trade to the Jets?

Life Could Be Worse

At least students at the US Universities aren't forming fraternity gangs that intimidate, assault, and harrass faculty.

Subtle Racism: Can Repulicans be Proud?

I've respected John McCain for a long time. I said as late as June that I could see myself voting for him, depending on what the alternatives are. But it saddens me to hear the subtle influence of the Karl Rove "How Racist Can We Be Without Putting too Many White People Off?" campaign strategy. The warmup, Joe Lieberman:



Not too bad, now Mitt Romney:



Now, Chris Rock recycling some of his comedy for the topic:



McCain supporters and doners: Tell your candidate this not the honorable campaign we expect and that this insults our intelligence.

Mission Accomplished, Part Duh

The Murdoch Street Journal published and article that once again declares victory: "The War in Iraq is Over. We've Won," reports Bret Stephens. Bold. What does that mean John McCain will do for the next hundred years?

My if it takes more than 100 words to prove victory, then you probably ain't won yet, but he bases the decision on the fact that Francis Fukuyama conceded a bet about whether Iraq would still be "a mess" five years after the war started in 2003. In my book, a country that can't stand on it's own without 100,000+ foreign troops occupying it as peacekeepers qualifies as a mess, and few would argue that it wasn't a mess in March at the date of the 5-year anniversary.

But that's neither here nor there. This is the key point Mr. Fukuyama points out that trumps the current conditions on the ground: "We've spent a trillion or so dollars, 30,000 dead or wounded, a large loss in international influence and prestige, all for the sake of disarming a country with no WMDs." Where is the margin indeed? Few dispute the tangential benefits that have been realized by giving Saddam the boot, but those benefits weren't the main reason for entering. I, along with others including Mr. Fukuyama, have said from the start that regardless of your personal views about the war, it was never giving the American Taxpayer the most bang for it's military spending buck in the socalled "war on terror."

Gains from Trade and why Favre won't get Traded

Gains from trade occur when one side has different endowments or preferences that make exchanges mutually beneficial. For a Brett Favre trade to happen 3 parties have to all be satisfied: GB has to get talent without helping its division and conference rivals, Farve wants to find a team with a legit shot, and the team he goes to has to have QB needs. Most trades only satisfy 2 of these parties, and that's why economics gets so difficult when there are more than two parties have veto power to a transaction.

Which contenders need a QB? The Giants, Pats, Cowboys, Chargers, Seahawks, Colts and Steelers all have stars in the position. The Jags are solid, leaving the Bucs and Skins as the only possibilities from last year's playoff teams. The Titans, Saints, Rams, and Panthers don't seem to be itching to make a QB change either. Bears fans would rather go 0-16 than see "Number Four" wearing GSH on his sleeve. Would the Pack really help the Vikes or Bucs to fill their biggest holes? The only teams left are a handful of AFC teams with little or no chance of making the Playoffs let alone the big piece of dinnerware at the end (I include my beloved Chefs in that lot). So sit back and enjoy the drama, NFL fans.

Gots to Get Paid

I knew the man was stickin it to me!

Or, maybe writers (like people with "real" writing jobs for mags & papers) get something out of blogging. Blogs aren't necessarily as scrutinized for length or content, so writers can say more and be more blunt in blogs than they would in their more formal editorial and analytical writing.

CFL - Inferior version of US Football, or "Bright" Idea?

I wish understanding the environment were easier. Apparently, so does Stephen Colbert, who interviewed one of Slate's the "Green Lantern" writers, Brendan Koerner, and discussed Compact Fluorescent Lightbulbs (CFL).



Anyway, the main issue with CFLs is alleged to be mercury. It's true that CFLs use less energy, and compensate for their higher cost over their lifetime in savings on energy bills. The question was whether this cost was worth it given concerns over the fact that the bulb itself contains a small amount of mercury (less than 1/100 of the mercury in a mercury thermometer).

This report, outlines some of the mercury issues. Basically, on average much more mercury is emitted as vapor from the coal-burning electrical plants that supply extra energy needed for incandescent bulbs than the combined mercury in a CFL plus their emissions. The report, however reveals a small concern: some of the mercury from a CFL is sent to the place it goes after it is burnt out. If you have access to a place that can recycle the bulb, do that. If you don't, I worry about the nature of liquid mercury piling up in landfills if everyone switches over to CFBs. Vapor emissions are less of a big deal because they become a bit more diffuse in the atmosphere, although they eventually find their way into water sources. Liquid mercury doesn't become diffuse: That's why Bush's bright idea to auction mercury pollutants like we had begun to do with SO2 and other atmosphereic pollutions was quickly shot down.

I'm trying not to advocate a position on this. However, I would like a bit more careful thought and study to be done, preferably by someone who is not me.

Big Bang in the Small Town News

Several of my own comments were published this week in the Lexington News-Gazette. While the New York Times makes its online content available mostly for free, the Lexington paper requires online readers to pay for access. Some of my dear friends would probably think this is wholly appropriate based on their own perceptions of quality (see my post from earlier today on media bias). Here is a link to my full thoughts that I sent the author via email.

I have to say he did a great job of pulling together my thoughts and the thoughts of a colleague at W&L and (surprise!) two independently-interviewed economists mostly agreed on the basic issues. When I spoke to the journalist over the phone, I got tricked into saying something about the Bush Tax Cuts, which I commented on in the context of the need to more budgetary discipline - if you want to spend money to fight wars you've got to ask the public to make a sacrifice to pay for it.

Liberal Media Bias

Apparently it's true, according to Tim Groseclose and Jeffrey Milyo (2005, Quarterly Journal of Economics). I just came across the article on a random troll of the internet. Here's a quotation:

Our results show a strong liberal bias: all of the news outlets we examine, except Fox News’ Special Report and the Washington Times, received scores to the left of the average member of Congress. Consistent with claims made by conservative critics, CBS Evening News and the New York Times received scores far to the left of center. The most centrist media outlets were PBS NewsHour, CNN’s Newsnight, and ABC’s Good Morning America; among print outlets, USA Today was closest to the center.

One thing I found puzzling about the study is that it ranked the WSJ almost as far to the LEFT as Ted Kennedy and farther to the left than the NY times (by a significant margin), based on the groups and studies they cite. I'm not sure I buy that part of it, but interesting read nonetheless.

Blog Roundup

Busch League Promotions by Division of Labor
Falling Prices (link to list) and No Free Lunch by Freakonomics
Economist Misquotes and Economic Cycles by Heavy Lifting
Doha DOA by Krugman
Playboy in Braille? by Marginal Revolution
Trade Costs, Academic Salary Differentials and Doha by World Bank Private Sector Development

What about Paper?

Recycling paper uses less energy, in principle, but what about the net environmental impact? Tough call, says Slate. I've also heard some mumbo-jumbo about paper and how most paper comes from tree farms. Thus, even though a "farmed" tree does not live very long, the carbon-absorption that it contributes kind of tips the scale, although it does not mean we should just zip through paper with reckless abandon.

Does it pay to recycle? Reconsidered

Recent figures for New York peg the cost of Recycling a ton (US) of waste at $284, compared with $267 for dumping it. This may not completely account for the costs households incur due to mandated recycling, but let's suppose that if you count all the happy vibes people get from doing "good" against the time they spend rinsing cans, bottles, and glass, it's a wash.

A reader points out that glass recycling saves 315 kg per ton (US) of glass recycled compared with making the same ton of glass from scratch. The UN suggests a carbon tax of about $30 per tonne (metric), so the conversion is simple: The added environmental cost of the new glass is about $9.50 per tonne (metric). A metric tonne is about 1.10231 US tons, so divide $9.50 by that equals about an $8.60 per US ton tax on virgin glass. That means the margin for comparison for dumping vs. recycling is about $7.40. In other words, if it were $7.40 per ton cheaper to recycle or $7.40 more costly to dump, recyclying would not only be the warm fuzzy thing to do, it would be the profitable thing to do.

Interval estimates of the harm done by 1 tonne of CO2 is about $20-$50, so if we take the high end of the interval, we get an environmental cost of $15.75 per tonne, divided by 1.10231 is about $14.30 per US ton, and that makes the margin about $2.70 per ton of glass before unsubsidized recycling would be economically profitable (with a high-end carbon tax).

One problem of course is that households aren't benefitting for the effort they put in. You cannot force people to want to recycle. If they could benefit, say be receiving a rebate on their trash removal for the amounts they recycle that might incentivize the whole thing a little better. What irks me most though is the mandating the effort without more careful consideration of other costs. I bike to work, I take short showers, I try to conserve energy used to heat and cool my home, so I'm not trying to advocate for the senseless raping and pillaging of the earth. But, when people say stuff like "we could recycle almost everything we throw out" my first instinct is to think, "sure we could, but at what cost?"

Environmental Dogmatists

This is silly. You don't win the environmental crisis by saying "we gotta recycle everything" or making it a war of convictions. Those of us who don't share Andy Posner's convictions are left to deal with the tradeoffs of the real world and really do live the environmental crisis on the margin.

Oh, and by the way, things like recycling and environmental regulations aren't free lunches. Recycling glass for example, uses more energy than just manufacturing it, and is therefore less of an impact on the atmosphere and resource use. [CORRECTION: RECYCLING GLASS DOES USE MUCH LESS ENERGY AND IS A HELP TO THE ATMOSPHERE. THE TOTAL ECONOMIC COST (INCLUDING LABOR COSTS) IS STILL GREATER THAN PITCHING THE GLASS. I ALSO APOLOGIZE FOR NOT DOING BETTER CHECKING.] And environmental regulations and trying to impose sanctions on poor countries who don't yet see the environment as much of an immediate concern as, say, eating today is paternalistic and unethical. Maybe instead of preaching "the margin" I should make my point in more drastic and judgemental terms (like the lunatic fringe does):

ENVIRONMENTALISTS WANT THE POOR OF AFRICA AND ASIA TO DIE OF STARVATION.

Less (and less) bad is good because it is progress, and before long the inverted environmental "U-curve" will eventually begin to let environmental damage wane.

Can they Crap Petrol, Too?

Environmentalists want to ban plastic bags. Maybe there's a smarter way to solve the problem than a knee jerk response that inconveniences the entire population.