Fossil Fuel Subsidies

This graph from David Roberts is somewhat misleading (for example, it's hard to tell if magnitude is measured as radius from the origin or total area and I'd like to see a breakdown per BTU or something), but it has a powerful point: We subsidize "dirty energy" more than we subsidize "clean energy" in the aggregate. Why not, before getting into a big brew-ha-ha over cap-and-trade, remove the implicit and explicit subsidies for making the environment worse-off?

Incentive to Die?

I remember a humorous story from Parentonomics about a policy in
Australia (which had been facing unusually low population growth) that
awarded new parents a couple thousand bucks to have a kid during a
specified period (let's say ending June 30 because I can't remember the
exact dates). Well, the story went, there were an unusually large
number of births on during the last week of June that year, and
especially on June 30 (along with a correspondingly low number during
the first few days of July). There were lots of theories about this,
including: (1) fraud, getting doctors to put June 30 for a baby born on
July 1; and (2) inducements and/or cesarian sections scheduled before
the deadline.
Bush (W, not HW) put through a law that would
decrease and eliminate the estate tax by 2010, but with a rebound to
pre-Bush levels in 2011. How did no one accuse Bush of creating a death
panel?!? Wouldn't this promote some combination of fraud or worse,
euthanasia? Part of me says, "Let's leave it that way and see what
happens - it would be a neat experiment on the limits of tax
evasiveness," but that wouldn't be ethical. Instead, something needs to
be done to either make sure it is slowly phased back in, or not
reintroduced depending on your political fancy.

Sleep in the Age of Rational Expectations

From MR:
Lately I've developed a new theory as to when I sleep especially well (in general I sleep well so the variance is not so large).  I believe that I sleep especially well when I end up going to bed at exactly the same time I expect to be going to bed.  On the unusual occasions when I don't sleep well, it is because I have been winding down my body and mind before I actually have the opportunity to fall asleep.  Somehow when the later chance to sleep comes, it is too late for that sleep to be deep.  Or so it seems to my mental econometrics; it would be interesting to measure it.
Interesting, yes. Testable? Hmmm.

Thank you Captain Obvious (Ron Jaworski)

"They [the Dolphins] don't want any negative plays under Coach
Speranno." As opposed to all those previous coaches who were
strategically trying to lose yardage?

Faith-Based Uncertainty?

From Regent University's graduate course catalog (p. 226):

GOV 601 Quantitative Analysis (3) Skills for quantitative data gathering, measurement, policy analysis and program evaluation. Research and sampling design, surveys, data collection and data reduction and display. Review of basic statistics through multivariate analysis, z-scores, regression through the use of statistical computer package (SPSS), and a Judeo-Christian perspective on the use of statistics.

What? HT: AG.

Just a Boring Note on Sampling....

From Nate Silver at 538.com:

...[T]he Investors' Business Daily poll purporting to show widespread opposition to health care reform among doctors is simply not credible. There are five reasons why:
1. The survey was conducted by mail, which is unusual.
2. At least one of the questions is blatantly biased: "Do you believe the government can cover 47 million more people and it will cost less money and the quality of care will be better?"
3. ...The IBD/TIPP polling operation has literally no idea what they're doing. ... For example, I don't trust IBD/TIPP to have ... selected ... a random panel, which is harder to do than you'd think.
4. They say, somewhat ambiguously: "Responses are still coming in." ... Professional pollsters generally do not report results before the survey period is compete.
5. There is virtually no disclosure about methodology.

A Brander & Spencer Style Strategic Trade Prisoner's Dilemma

From the Economist:

Elsewhere, the story points out that not a single manufacturer of any
significant size has gone under during the recession. There is a serious problem
here. No government wants its national champion (or champions) to be the one
that goes under, and so governments provide such support as is needed to pull
companies through tough periods.

Oligopoly, subsidies and trade. I question, however whether subsidies are the best strategic policy. If the nature of competition is Bertrand-style price competition, then export subsidies can improve domestic welfare (assuming no retaliation - heroic!). If the nature of competition is Cournot-style quantity competition, then tariffs and/or export taxes are appropriate in the absence of retaliation. Export taxes have the same proportional impact on relative prices as import tariffs; subsidies do the opposite, and worsen the terms of trade (price ratio of exports to imports) of the country offering them.

Does this Recession Make the World Look Fat?

In 2005 Thomas Friedman declared the world flat, but I always liked Ed Leamer's review in JEL, which points out the fact that it's a strange, and perhaps inapt analogy (he also makes pokes fun with some very esoteric "jokes" about different notions of what "flat" might mean, but that's besides the point). A new historical view by David Jacks (HT: Economix) shows us how the late 20th century decline in trade costs (and increases in trade) pales in comparison to those of the late 19th century (something I've observed in my undergrad classes already by the way!). Anyway, trade is down by greater proportions than those observed during the Great Depression and everyone has their culprit of choice. Some talk about oil prices (although I'm not sure that in real terms oil and fuel is all that much more expensive now than it was in the late 1990s); some blame a general downturn (although I'm pretty sure the downturn in the G.D. was much greater, without even checking the data); and others put it on governments and protectionism (although this too has been tame compared with the Depression Era).
The answer to me is twofold: (1) 1990s globalization centered on growth in components; and (2) trade is not a value-added concept like output is. For the first, the basic idea is that instead of countries specializing and producing all of certain finished goods that are consumed by end users, the recent explosion in trade was in components - countries specialized in a particular part of the finished good. Since trade is not a value-added concept, so within this integrated supply chain, you can have the value-added of a 20,000 dollar auto counted many times - the steel ($5,000) gets shipped from China to 3 other countries where components are made (at, say, $2,000 of value added in GDP per country), then to Mexico for assembly (another $4,000), then managerial, transportation marketing services by the US (for about another $3,000), and sold in Canada for $20,000 (the retailer's value-added is $1,000). If this car disappears from world trade, it amounts to a reduction of world GDP of exactly $20,000 because GDP only counts value-added. However, trade (imports plus exports is a common measure) is reduced by $(5,000 + 11,000 + 15,000 + 19,000)x2 = $80,000 due to the multiple counting of the total value at each stage of shipping instead of only counting each country's value-added.
So, the world is not getting fat (it's approximately as flat as it was last year) and I'm neither shocked nor alarmed at the decline in trade (at least, no more shocked or alarmed than I am about the decline in output generally).

Grad School?

So, why did I go through all that again? Oh yeah. The "job satisfaction."

Do Deficits Matter

Today, Becker writes:

To the extent that the source of the rise in a deficit is increased government
spending, then whether that rise is justified depends on how socially valuable
are these government expenditures. By that I mean the social rates of return on
these expenditures, such as longer lives for the elderly, relative to the
interest cost of raising the required funds, and relative to the returns on
other investments in the economy.

So, on this principle, if you have a trillion dollars to spend, would you spend it on 5 years of war in Iraq or 10 years of universal health care?

Economists' Views

Things Economists Agree on according to this article:

	Agree Strongly Agree	Neutral	Disagree Strongly Disagree	Hetero-geneity Index
The U.S. should allow payments to organ donors	15.60%	14.10%	70.30%	0.5384
A Wal-Mart store generates more benefits than costs.	14.60%	13.10%	72.30%	0.5612
Employers should be rq'd to provide all employees health insurance	71.70%	7.90%	20.40%	0.5619
The U.S. should ban genetically modified crops.	82.10%	10.90%	7.00%	0.6908
The U.S. should eliminate remaining barriers to trade.	9.80%	6.80%	83.30%	0.7081
Economic growth in developed countries increases well-being	2.30%	9.80%	87.80%	0.7810

What they don't agree on:

Sarbanes-Oxley should be repealed.	47.40%	27.60%	25.00%	0.3634
U.S. should eliminate the mortgage interest deduction.	38.00%	16.30%	45.70%	0.3798
U.S. should increase benefits to workers who lose jobs due to int'l comp.	27.70%	20.80%	51.50%	0.3852
Health insurance benefits should be taxed the same as income.	44.50%	13.50%	42.10%	0.3935
The U.S. should place more stringent caps on medical malpractice awards.	32.10%	16.40%	51.60%	0.3962
States should eliminate mandates about what health insurance must cover.	45.60%	12.00%	42.40%	0.4021

On the Probability of Acceptance

There was a certain professor at Illinois (who is no longer there) who once claimed, "Adding an integral sign to a paper will unambiguously increase the probability of acceptance." This confession of an economist offers more proof. The author revised a clear and simple paper (which, by the way, had been rejected) into an incomprehensible mathematical maze of equations and proofs (which, of course, was accepted by the very same journal that had rejected the clearer, simpler version). Sad, but true.

Overbetting Longshots

HT: Andrew Gelman (link to the ref here)

we find evidence in favor of the view that misperceptions of probability drive the favorite-longshot bias, as suggested by Prospect Theory

I.e. it's not a love of risk in the utility functions of gamblers, it's statistical illiteracy. They can't figure out that a 29:1 longshot has at best a 1/30 probability of winning (if the odds are "fair").
One problem I have is that, to Gelman and others this research contradicts theories of rational choice. Not so. It suggests that people are either (a) poorly informed; or (b) process information poorly. To quote a Larry Summers finance paper, “THERE ARE IDIOTS. Look around.”
Go Chiefs!

Line of the day

From a story in the Post on the decline of grass-fed cattle in
Argentina and the rise of feedlots. One argument against feedlots is
that it is unnatural. The other side:

"What's natural is for a cow to grow, to reproduce and to die."

Fun stuff.

Stumbling Blocks or Building Blocks

While bilateral trade deals are increasing trade amongst countries in regions with lots of bilateral deals has not. Furthermore,

Countries may worry that a multilateral deal would erode the preferential terms they got through bilateral ones. If so, the flurry of bilateral deals may have come at the expense of a world trade agreement. Gary Hufbauer of the Peterson Institute of International Economics in Washington, DC, thinks that China and India have decided they would “rather pursue bilateral FTAs than make the necessary concessions to push Doha across the finish line.”

This is more disturbing than any specific national protectionist policies because it undermines the WTO, the MFN principle, and multilateralism.

Links

Teacher Pay in the US vs. Elsewhere
Choosing Checkout Lines
Failing Colleges, and Responses

NFL Rankings

by Me.

1. 1.Titans
2. 2.Vikings
3. 3.Steelers
4. 4.Saints
5. 5.Giants
6. 6.Chargers
7. 7.Patriots
8. 8.Colts
9. 9.Falcons
10. 10.Texans
11. 11.Bears
12. 12.Eagles
13. 13.Dolphins
14. 14.Packers
15. 15.Buccaneers
16. 16.Jaguars
17. 17.Cardinals
18. 18.Panthers
19. 19.Cowboys
20. 20.Redskins
21. 21.49ers
22. 22.Ravens
23. 23.Bills
24. 24.Seahawks
25. 25.Bengals
26. 26.Broncos
27. 27.Jets
28. 28.Rams
29. 29.Chiefs
30. 30.Browns
31. 31.Lions
32. 32.Raiders

Don't hold me to this. I figure if I set the bar low for the Chiefs, they are unlikely to disappoint.

The office kid

Markets in everything via MR: The office kid. It's an idea sprung by office workers thinking they were getting screwed into more work by people with kids (who were always having to leave for kid-related problems). The idea was to have a fake kid so you could get your share of paid time out of the office.

I have a better idea. Instead of cooking up a scam, organize the market so the single workers get paid to "take their turn" getting "time off" for dealing with their coworkers' kid-related problems.

Our Portfolio of Imperfect Institutions

Markets, nonmarket institutions, and governments. From Economix:

First, a large share of our economic output is now produced by large companies whose sales exceed the gross domestic product of many countries of the world. The vertically integrated supply chains of these large, often bureaucratic institutions seldom involve markets....

Second, market output represents a subset of total economic output. ...time and energy to caring for ourselves, our families and our friends ... activities that improve our own living standards ... men now devote more time to housework and child care than they once did. As we move toward more equitable sharing of unpaid work, policies designed to help wage earners meet their family responsibilities ... seem expensive to us in part because we have taken women’s unpaid work for granted in the past.

Third, the present and future costs of environmental degradation are on the rise.

Markets aren’t the only imperfect institutions in our world. Governments, families and Mother Nature are also susceptible to failure.

The point is, like it or not, we rely on a portfolio of imperfect institutions — a mixed economy.

Silly Anti-Reagan Conservative Health Care Protesters

From MR via The Beacon. Just say no.