Negativity

PAC spending in the last week:

Committee	Entire Cycle Total	Last Week Total	Last 24 Hours Total	Supported	Opposed	Super PAC
Republican National Cmte (R)	$9,485,456	$9,485,456	$0	$0	$9,485,456
Priorities USA Action (D)	$14,900,294	$1,244,192	$0	$0	$14,900,294	x
Restore America's Voice PAC (R)	$582,952	$111,900	$0	$0	$582,952	x
America's Next Generation(R)	$106,500	$42,500	$0	$0	$106,500	x
Moveon.org (D)	$367,171	$33,552	$0	$5,400	$361,771
National Rifle Assn (R)	$110,952	$31,459	$0	$0	$110,952
National Right to Life Victory Fund (R)	$163,260	$6,786	$0	$0	$163,260	x

Candidate money spent last week:

Candidate	Entire Cycle Total	Last Week Total	Last 24 Hours Total	Supported	Opposed
Obama, Barack (D)	$27,761,536	$9,678,101	$0	$2,852,327	$21,064,674
Romney, Mitt (R)	$32,603,333	$1,277,744	$0	$7,285,760	$25,161,173

I added rough party affiliations for the PACs, but it's worth noting that Moveon.org spent some money in opposition to a democratic candidate for the House of Representatives.
Notice more generally how the money is all piling into the "opposed" column. Source: http://www.opensecrets.org.

Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History (9780521761734): Douglass C. North, John Joseph Wallis, Barry R. Weingast: Books

By Douglas North, John Wallis, and Barry Weingast.
In the middle of this book right now. Makes some interesting arguments about democracy and capitalism, and how countries make the transition from "Natural States", with limited access to modern states, with open access. The discussion of property rights will please the political right; the discussion of the role of government and public goods will please the left. Both groups will walk away from the book equally unhappy with his discussion of special interest groups (spoiler alert: special interests are not all bad!). The argument for how and why democracy is essential for modern capitalism is the only convincing logical case I've seen and is not based on some half-baked liberty argument.

A Couple of Links on Immigration

Migration and Remittances during the Global Economic Crisis and Beyond: Myths and Realities | A blog about migration, remittances, and development:


Children of Immigrants Study More - NYTimes.com:

Outsourcing and the Campaign

I've had a little time to reflect on the Bain-outsourcing-Romney stuff. So here are a couple of observations, which I share with the Free Exchange editors at the Economist.
(1) Outsourcing is good on the net, not just for the country receiving the investment, or even some vague global sense. It is welfare-improving for the US in the aggregate.
(2) Outsourcing can be pareto-improving, meaning that not only does it increase income, wealth and efficiency on average, but it is possible to ensure that no one is worse off.
Point (1) implies that, even if you support President Obama, the criticism of outsourcing by itself is misplaced. That includes this criticism by Paul Krugman. We should be outsourcing when it is profitable to do so.
Point (2) is tougher. Basically, it qualifies the political feasibility of (1) by implying that, in order to bring everyone on board with free trade, outsourcing, etc., you need pretty extensive structural adjustment assistance programs also known as the Welfare State. Here, as the Economist correctly points out, we could learn a little something from the 1997 incarnation of Professor Krugman when he says that voters aren't nuanced enough in their understanding of trade and public policy to grasp this subtlety - or care. They know jobs are gone, and US companies are growing operations in China. They win, I lose.
The Economist article points out that Obama could come out with a more nuanced and correct argument. But really, either candidate could take up this mantle and make it part of their platform without abandoning their core values. Mr. Romney, for his part could say, "yes, I am for free markets and outsourcing, and the fact that it puts some folks out of work only highlights the need to reform existing welfare programs so they help people who really want to work." Mr. Obama, instead of spewing protectionist garbage could say, "see, people are hurt by some aspects of free markets and we need social programs like my health care law to make markets work better for everyone" (he could even throw in some of his "shared prosperity" catchphrases).
But neither candidate is doing this. Obama is pretending to be protectionist (when we all know he won't govern that way); Romney is acting like the attacks are simply unfair, which doesn't seem to help much - do we really want a crybaby for a President? Obama's strategy, sadly, is the politically effective one, and I expect to see much more of it through November.

Some Links on Trade

Trade Policy and R&D.

New Services Trade Database. 

Is Anti-Dumping a Good thing After All? 

More on High-Tech Education

More classes are being offered, by prestigious universities - I'm not talking about your diploma mill online courses from the for-profit sector - online, including some I might be interested in myself. More shockingly, many of these classes are being offered free of charge. The question is, "Is this a threat to my job?"
I think not. These sites are very aware of supply-side factors, but they say little about the demand side. While it's true that information transfer does not need to be as costly or labor intensive as it is, it is exactly what many average students need. Motivated, intellectually-curious students can easily absorb information, but many students are not sufficiently motivated or intellectually curious to do so.
Instead, I still think that technology is an effective complement to labor-intensive instruction at many liberal arts colleges and universities, but perhaps less so at large state flagship universities, and will make personalized (but still labor intensive) instruction more enhanced.

A fourth and hybrid perspective on the future of on-line education — Marginal Revolution

Articles like this one sorta irritate me because they pretend that we haven't been here before. Distance education is not a new thing; the technology has merely changed. If you could get an equivalent value out of your education without contact time in meatspace, why didn't correspondence courses take over the market decades ago? I am surprised that bloggers like Tyler Cowen are not more cognizant of this.

How the Fed Came to Be

An interesting brief history of banking in the US, 1811-1913. More here.

What They Don't Tell You at Graduation - WSJ.com

What They Don't Tell You at Graduation - WSJ.com

Some Links on International Economics

A very interesting post on the political economy of trade policy. Econbrowser: Thirty Years Ago Today: Racial and ethnic animosity play an important role; however, you'd think politicians would try to veil that dimension more than they do here or here.

Also very interesting, new research on the role of industry fragmentation and global supply chains. Unilateral tariff liberalisation | vox.

How big are the gains from trade? « Trade Diversion: Some research has suggested much smaller gains from trade based on some of the classical models. When one takes a more modern approach (especially accounting for "cross-industry variation in trade elasticities") the gains from trade are as big as they ever were (around 25-45 percent of GDP for the US).

The World Bank has published a new book on migration and remittances: Migration and remittances during the crisis and beyond.

Links on institutions

Commodity Prices and Institutions

Property Rights and Growth - some interesting historical perspective. For more on property rights in medieval England, I am currently reading North, Wallis, and Weingast, Violence and Social Orders.

The Value of College

Now for my two cents on the debate in the blogs over what college is for. Is there significant value-added that justifies the cost? Some bloggers (and especially the commenters) have suggested that it is largely signaling your ability and/or your motivation. Others claim that there is revealed value deriving from the large and widening differential in lifetime earnings between high school and college graduates. An interesting discussion and summary can be found here, where Steve Postrel argues that the inflated demand for college education by students and by employers boils down to the fact that college is getting dumbed down, but high school is getting dumbed down by a proportionally greater margin. This implies that the increase in demand (and tuition) is fundamentals-based.
I found the argument about the dual decline in high school and college quality compelling at first, but I always have to remind myself to be skeptical about the perceptions of academics about the quality of the average student "back in my day." For example, Mr. Postrel notes that, " It used to be that everybody could read and understand something like Orwell’s Animal Farm, but the typical college graduates could also understand Milton or Spencer."  But I am a bit skeptical. It may have used to be that more graduates survived Milton or Spencer, but I'm not sure that the typical graduate really grasped deep literature or philosophy as deeply as Postrel suggests. Much of his "evidence" is based on perceptions by professors. This is likely to be biased by the fact that professors tend to be right-tailers.
I'm inclined to believe that at most levels depth of understanding has been sacrificed for breadth of coverage, and perhaps we need to rethink where we are on the margin. Judging from economics curricula, I would say that this is the case. More topics are covered in, say, intermediate microeconomics, but with less mathematical rigor and depth than when I was taking it almost 20 years ago. Additionally, grade inflation has made completing the degree (and doing so with a reasonably high GPA) somewhat less informative than it perhaps once was).
Which brings me to "signaling". Let's suppose it's all about signaling. Many have used this to suggest that college doesn't "do" anything that job market experience or military service or whatever can do just as well, which in turn leads some (like Mark Cuban) to conclude that college education is a bubble. Why? If the signal is valuable for both applicants and firms, then why does this not have value. Which brings me back to Milton. Did kids who learned Milton ever use that knowledge (or the literary analysis they applied in their class) on the job? So, as my students frequently wonder "why did I have to learn that stuff?" Because, for employers, it is useful to know that someone wants to learn new things, or that they can learn new things.
Ninety percent of the folks in my intermediate microeconomics class in college will never solve a Lagrangian optimization problem again, and probably have forgotten how. But having been able to learn the necessary calculus to do it is worthwhile, and signalling that ability is not trivial.

Exponential Economist Meets Finite Physicist | Do the Math

Exponential Economist Meets Finite Physicist | Do the Math:

Interesting piece, but not very mindful of history. The Malthusians have been proven wrong time and again. Physical limits exist, but 400 years is a long time. Plus, geoengineering is already here. A trumped up straw-man "debate" written from one side of the issue does not much convince me.

Paul Romer on Ending Poverty

I'm less bullish on charter cities than some of my other colleagues in institutional economics. It seems like institutional arrangements would be sensitive to the prevailing local relative prices and preexisting distribution of property rights (a la North, 1981).

STEM or LAS?

This article seems to lament the low rankings the US brings in on STEM education. At first blush this seems serious. But, is STEM really the future? Is STEM a comparative advantage worth pursuing (assuming we don't already posess it)? It seems like it would be, but it may only be part of the story. The other part of the story is here (Alex Tabarok, Marginal Revolution) and here (Catherine Rampell, Economix). From Tabarrok:

Law #1: People will get jobs doing things that computers can’t do.

As Tabarrok points out, a lot of jobs in STEM sectors may eventually be replacable by computers. As Rampell Some Liberal Arts disciplines (and certain disciplines in Business) that emphasize problem solving and people skills may be better-positioned for high value-added jobs 20 years from now than purely quantitative disciplines. I think this partially bodes well for economics majors (except maybe for the people skills part).

Some links on teaching Principles of Economics

We're not out to get our students (Art Carden).

Property rights are probably the most important economic concept ignored by most principles courses. An interesting piece on property rights and karaoke (NPR).

Sometimes economists get principles of economics questions wrong (Tabarrok); sometimes economic researchers claiming that economists get principles of economics questions wrong write the question wrong (Cowen); sometimes there's more than one answer (Decker via Depken). Lesson: we have to be thoughtful about writing the questions we ask students.

Finally, a couple of unrelated random hits: Does the Current Account Still Matter? (Mehrling); some facts about Obama's first-term record - the right and left are both wrong (Sullivan).

Selection Bias Chart of the Day

Unobservable individual heterogeneity?

Unmanned Commercial Air?

From Freakonomics. I can explain why I don't like this idea in one sentence: I want the person flying and controlling my plane to have his ass to lose just as much as I have mine - it's called incentive compatibility.

Links

Favorite shows by political persuasion (Entertainment Weekly). A little surprised R's dislike South Park so. It's pretty strongly libertarian, but I guess Jesus trumps liberty.
Job market advice for academics from UW (Econbrowser).
Moneyball (Grantland). Maybe they shouldn't of published all their secrets.
Higher speed limits? Probably not (MR). The first comment is amusing, albeit not very aware of forensic economics.
The video game business (Economist). I suspect gaming has been profitable through the recession because it is an inferior good.
A couple of more serious links on political unrest, recessions and inequality (Economist), and the impacts of offshoring on inequality and education (VoxEU).

Higher Top Tax Rates = Higher Productivity?

From Piketty, Saez, and Stantcheva, via VoxEU:

...while standard economic models assume that pay reflects productivity, ...top earners might be able to partly set their own pay by bargaining harder or influencing compensation committees. Naturally, the incentives for such ‘rent-seeking’ are much stronger when top tax rates are low.... increases in top 1% incomes now come at the expense of the remaining 99%.
...there is no correlation between cuts in top tax rates and average annual real GDP-per-capita growth since the 1970s.

Of course, raising income taxes on the rich might lead to more income being diverted into stock options and capital gains, but would that be a bad thing? Wouldn't that increase total investment and strengthen incentives for managers?