Marginal Revolution

NFL Player IQ by Position Played

Alex Tabarrok

"The closer you are to the ball, the higher your score."

Details here and here.  Hat tip to Kottke.

Very good sentences

Tyler Cowen

...it's been a revelation and confirmation of an intuition: in some ways, gay men may benefit from marriage more than any other group.

That's Andrew Sullivan, responding to the spot-on Megan McArdle, who also believes that men benefit more from marriage than do women.

Beer prices vs. wine prices

Tyler Cowen

Josh writes to me:

This might not be normal, but last night I started wondering why beer prices are not listed on menus, while wine prices are.  My next thought was "Tyler Cowen would know the exact answer to that".  I know you are busy and it is a rather trivial question, but I was wondering if you could explain the differences in wine and beer that lead restaurants to include the price of one and not the price of the other on their menus.

Only sentence two is foolish but at least on this I am meta-rational and I appeal to you for help.  One possibility is that wine prices don't have such a tight upper bound so you had better get the customer's buy-in for a relatively expensive bottle.  Or if fine bottles are being sold relatively cheaply that is worth screaming about but how much can you discount a quality beer?

Tyrone on the fall in housing and asset prices

Tyler Cowen

I was sitting here peacefully, weeping, when I received the strangest email from Tyrone:

Tyler, cheer up!  The decline in housing prices is a godsend.  Isn't it a standard line -- from both left and right -- that we are spending too much on the elderly and not enough on the young?  Isn't lack of upward mobility, for the generation on its way into the world, the new problem?  Aren't the American poor to expect an even greater squeeze in the future?  There's a simple remedy for all of these problems at once -- lower housing prices!  Lower stock prices too!  You don't even have to get a bill passed through Congress, or overcome AARP, and we all know how hard that is these days.  The housing stock is still there, the relatively established homeowners are a bit poorer, and those poor strugglers on the way up can now buy their dreams at lower prices.  Even better, lots of the laid-off construction workers are Mexican immigrants, who for years have been keeping wages down for low-skilled American workers.  This is an economic nationalist's wish list, no?

Poor, poor, deranged Tyrone.  Isn't this what you would expect from an abject failure who has never managed to buy a home?  Tyrone isn't even subprime.

Trivial but neglected points

Tyler Cowen

If there is one message writ large within the annals of anthropology, it is to beware the solid truths of one's own culture.  If we contrast our views with those of others, we find that what we take to be "reliable knowledge" is more properly considered a form of folklore.

That is from Kenneth J. Gergen's often quite interesting The Saturated Self: Dilemmas of Identity in Contemporary Life.

Where should you cast your vote?

Tyler Cowen

Jonah Berger, Assistant Professor of Marketing at the Wharton School of Business, conducted a terrific study where he demonstrates that where people vote affects how they vote. Essentially, people whose voting booth is located in a church are more likely to put more weight into social issues, people voting in fire houses care more about safety, and people voting in a school tend to put more weight on things like education.

Admittedly there is a problem here of isolating causation.  Perhaps you go to the polls whose location you know, and if you have kids you know how to find the school, if you are religious you know how to find the church, and so on. 

Auren Hoffman, whom I will see next week in Quebec City, concludes:

Your gut might be much better at telling you what not to do than giving you good direction on what to do. If your gut tells you something is wrong with someone, than you probably do not want to entrust your kid with her. But a positive gut-check often does little good (at least for me).

In Defense of Short-Selling

Alex Tabarrok

Props to Dean Baker. 

Short-selling can play a very important role in the market. If informed investors recognize that a stock is over-valued they perform a valuable service by selling it short and pushing down its stock price. This can both deprive the company of capital and be a signal to other actors in the market that the company might not be as healthy as is generally believed.

The economy would have benefited enormously if large numbers of traders had shorted Fannie and Freddie 4 years ago when they were buying up hundreds of billions of mortgages issued to buyers who bought homes at bubble-inflated prices. This would have stopped the bubble years ago. Similarly, we could have prevented the financial chaos at Merrill Lynch, Citigroup, Bear Stearns and the rest, if traders had recognized their financial shenanigans and aggressively shorted their stock. In the same vein, heavy shorting by informed investors could have prevented the boom and bust of the tech bubble.

The decision to intervene against short-selling is completely inconsistent with the belief in the wisdom of the markets. Of course short-sellers can be wrong and depress stock prices more than is justified by fundamentals, but so what? The government doesn't intervene when it thinks investors have exaggerated the true value of a stock. The public has no more reason to fear under-valued stock prices than over-valued stock prices. This one-sided intervention by SEC is hard to justify on any grounds.

Assorted links

Tyler Cowen

1. Fifty outstanding translations, via Bookslut.

2. The cost of being Batman, via www.geekpress.com

3. More on the file-sharing controversy

4. The new "Big Mac" index, so to speak

5. An economic theory of excess defensiveness

Risk Free No Longer

Alex Tabarrok

Wow, we usually think about U.S. bonds as being the "risk-free" asset but with a credit default swap you can buy insurance on a US default and the price of such insurance is way up.

The change in price is a shock but to put things in perspective do note that the price for insuring US debt is now higher than for German debt but similar to that for Japanese and British debt.  We are still far from Argentinian levels.

Hat tip to at, in the comments to my post on the peso problem.

Spend More Today

Alex Tabarrok

In Nudge Thaler and Sunstein motivate their Save More Tomorrow plan with the following unfortunate illustration:

Consider, for example, the case of Tony Snow, the former White House press secretary, who resigned at age fifty-two in 2007 to return to the private sector.  He said his motivation for leaving was financial.  "I ran out of money," he told reporters...Before serving as press secretary, Snow worked a much more lucrative gig as a Fox News Channel anchor.  But he arrived at the White House not having learned Retirement 101 lessons.  "Snow conceded: 'As a matter of fact, I was even too dopey to get in on a 401(k).'

Sadly, Snow's choices now look optimal.  Ok, I know that may be in poor taste but let's try to rescue this observation with some theorizing.  Are we more likely to commit the error of saving too much or too little?

There are people who don't save much because they have very low incomes, their behavior does not seem to be in error, especially when we take into consideration the various welfare programs that will cover people in their old age.

So let's focus on people with moderate to high incomes.  Thaler and Sunstein say that we are more likely to make errors when the benefits are upfront and the costs are delayed.  Eating too much chocolate being a classic example.  Ok, that suggests we may save too little.

T. and S. also argue that the less frequent a decision the more likely are errors.  Frequency, however, cuts both ways - we only die once - so that's a wash.

Over confidence and in particular the idea that we are special and will live a long life suggests the error is saving too much.  Note that we also tend to think that our partner will be alive as well.  My wife once asked me whether we were saving enough for "our" retirement.  "Sure," I said, "don't forget one of us will probably die before the other and I'm not saving for your future husband."  "Why," she replied with a sigh, "can't economists be more human?"   

Availability bias probably also suggests we save too much - we see people who saved too little in the street but the ones who saved too much are dead and gone. 

In theory, optimal saving equalizes the marginal utility of income across one's lifetime - some programs like Kotlikoff's ESPlanner attempt to calculate such an eqi-marginal utility flow and Kotlikoff's finding is that a large fraction of Americans, some 40%, are saving too much.  Kotlikoff's program takes into account that we may need less wealth when we are old and retired (e.g. less transportation for work related reasons) but not that the marginal utility of wealth may be lower when we are old.  (e.g. Money's not so valuable if you don't need it to or can't use it to attract a mate.)  Thus over-saving may be even more common than Kotlikoff suggests.

I do not know which error is more prevalent but if we are to be neither spendthrift nor miser we need to recognize both types of error.

How can the price of oil move so much in one day?

Tyler Cowen

Over the two previous days oil fell $10.50 a barrel.  By definition this is driven by news about supply and demand but has so much news come out so quickly?

Here are two ways to think about the mechanisms at work.  First, some producers could supply more but they figure that China will be buying more tomorrow so maybe it is better to wait.  If they see a signal that future global demand will be lower, they are less likely to let oil sit in the ground.  In other words the market develops the expectation -- true or not -- that oil supply will rise more rapidly than had been thought (or "decline less rapidly" may in some cases be a more accurate phrase but the net direction of the effect is the same).  Lower expected demand is thus paired with greater expected supply and that tends to make price volatile.  Higher expected demand is paired with lower expected supply in similar fashion. noting in either case that you can make lots of different assumptions about the relative timing of the expected changes.

Second, any new information leads to more trading and to more trading at different ranges of price and quantity.  This trading reveals more information about the elasticities of market supply and demand curves and that information in turn feeds back into the market price.  In a nutshell, some initial price and quantity movements lead to further price and quantity movements.

Neither of these phenomenon are correctly called "bubbles" but neither do they fit the story where the price of oil is determined by fundamentals alone.  "Expectations" is a central word here, noting that only time will tell whether or not the expectations are rooted in reality or not.

Do not buy art on cruise ships

Tyler Cowen

In case you did not know.  Here is one example of a fool:

It was only after Mr. Maldonado landed back in California that he did some research on his purchases. Including the buyer’s premium, he had paid $24,265 for a 1964 “Clown” print by Picasso. He found that Sotheby’s had sold the exact same print (also numbered 132 of 200) in London for about $6,150 in 2004.

Of course the corruption and foolishness runs deeper than the article lets on.  If you shop for contemporary prints in entirely "reputable" Georgetown galleries, they will charge about twice the going auction rate for the prints.  They might tell you that the prints are "hard to find" when in fact usually they are not.  A good New York dealer, used to dealing with well-informed customers, might charge only 10-15 percent above auction (full price including buyer's premium).  The bottom line is that you should never spend more than $1500 on art unless you know at least roughly what it is worth at auction.  One of life's good rules of thumb.

Larry Summers on the agencies

Tyler Cowen

He always had a talent for the bottom line.  On the mortgage agencies he writes:

What went wrong? The illusion that the companies were doing virtuous work made it impossible to build a political case for serious regulation. When there were social failures the companies always blamed their need to perform for the shareholders. When there were business failures it was always the result of their social obligations. Government budget discipline was not appropriate because it was always emphasized that they were "private companies.” But market discipline was nearly nonexistent given the general perception -- now validated -- that their debt was government backed. Little wonder with gains privatized and losses socialized that the enterprises have gambled their way into financial catastrophe.

I wonder how general the lesson here might be. My fear is fairly general. Inherent in the multiple objectives urged for creative capitalists is a loss of accountability with respect to performance. The sense that the mission is virtuous is always a great club for beating down skeptics. When institutions have special responsibilities it is necessary that they be supported in competition to the detriment of market efficiency.

It is hard in this world to do well. It is hard to do good. When I hear a claim that an institution is going to do both, I reach for my wallet. You should too.

Here is more.  Larry Summers was my professor for Macro II and every lecture was a joy.  "Lecture" isn't even the right word, it was more like turning on a faucet.

Short essays by Angus Deaton

Tyler Cowen

Find them here, hat tip to Tim Harford.

I want you to ponder sentences about vengeance

Tyler Cowen

Females, older people, working people, people who live in high-crime areas of their country and people who are at the bottom 50% of their country's income distribution are more vengeful.

Here's a more traditional result:

The findings suggest that vengeful feelings of people are subdued as a country develops economically and becomes more stable politically and socially and that both country characteristics and personal attributes are important determinants of vengeance.

Here is the paper, here is the author's home page.

Robin Hanson on the belief in religion and government

Tyler Cowen

A stunning hypothesis from the latest Journal of Personality and Social Psychology:

High levels of support often observed for governmental and religious systems can be explained, in part, as a means of coping with the threat posed by chronically or situationally fluctuating levels of perceived personal control. Three experiments demonstrated a causal relation between lowered perceptions of personal control and ... increased beliefs in the existence of a controlling God and defense of the overarching socio-political system.  A 4th experiment showed ... a challenge to the usefulness of external systems of control led to increased illusory perceptions of personal control. ... A cross-national data set demonstrated that lower levels of personal control are associated with higher support for governmental control.

It seems we hope a stronger and more benevolent God or State will protect us when feel less able to protect ourselves.  I'd guess similar effects hold for medicine and media - we believe in doc effectiveness more when we fear out of control of our health, and we believe in media accuracy more when we rely more on their info to protect us.  Can we find data on which beliefs tend to be more biased: confidence in authorities when we feel out of control, or less confidence in authorities when we feel more in control?

I would say "read the whole thing" except that is the whole thing.  Here is evidence from California that voters are more likely to prefer conservative candidates (not exactly what the above study is testing) when economic times are good.

What should government do to stimulate the economy?

Tyler Cowen

Let's see what New York Times readers think.  Right now there's only one comment and it's not totally encouraging:

Triple the minimum wage.

That would bring it more in line with increases in efficiency and rates in the late 70s. People make more, they spend more. All the money is just tied up in investments now, like bonds in Fannie and Freddie.

But surely the quality of the answers will improve as the day passes, no?  No?  No?

Help!

Should donors give to students rather than schools?

Tyler Cowen

Jonathan Bydlak seeks to match donors directly with students, rather than matching donors to universities.  Here is his group.  One advantage of the idea is greater competition:

...the current system ties the amount of accessible financial aid to the schools that students attend, giving schools with more resources a distinct advantage...students accepted to a Princeton or Harvard face virtually no quality vs. price trade-off.

What this means for higher education as a whole is that the current financial aid system, whereby alumni and other prominent donors contribute to schools, rather than individuals, reinforces the perceived status of those schools that are considered “top-tier.”

While demand for high quality higher education continues to increase massively,
the supply of top-tier higher education has not changed much at all (one need only look at the lack of variability in the U.S. News rankings for proof of this point).  And as any Econ 101 student can tell you, when demand far outstrips supply, costs are inevitably pushed upward.

I like the idea but fear that institutions of higher learning can offer donors greater perks than can intermediaries that match donors to students.  Might it be possible to, say, offer donors the chance to support students through the Metropolitan Museum of Art, with the Met taking a lower cut than Harvard does, yet still handing out donor perks?

Why might Israel attack Iran

Tyler Cowen

According to this line of thinking, which has adherents...focusing on the tactical questions surrounding such an operation -- how much of Iran's nuclear program can Israel destroy?  how many years can a bombing campaign set the program back? -- is a mistake.  The main goal of a hit would not be to destroy the program completely, but rather to awaken the international community from its slumber and force it to finally engineer a solution to the crisis...any attack on Iran's reactors -- as long as it is not perceived as a military failure -- can serve as a means of "stirring the pot" of international geopolitics.  Israel, in other words, wouldn't be resorting to military action because it is convinced that diplomacy by the international community cannot stop Iran; it would be resorting to military action because only diplomacy by the international community can stop Iran.

That is Shmuel Rosner in the 30 July The New Republic.  Personally I do not think that Israel will attack Iran, but since I had never heard this argument before I thought I would pass it on.

Assorted links

Tyler Cowen

1. Megan Non-McArdle is blogging again, at rhubarbpie.  Here is her post on which are the lovable women.

2. Markets in everything: a restaurant with a menu for dogs (but how can they afford it?)

3. Star Wars according to a three year old, a short YouTube video via Yana

4. The water shortage myth

Don't attack the shareholders

Tyler Cowen

So says Ricardo Caballero, here is more:

First, a private sector solution to the current crisis requires fresh capital injections into financial institutions. However, in an environment of widespread uncertainty where the instinctive reaction is to run away from risk-taking, private capital is likely to remain on the side for much too long. Thus, the optimal policy response is to encourage and leverage private risk-taking, not to discourage it with a pending threat of exemplary punishment were a fragile situation turn worse, regardless of cause. Economic policy risk is compounding the private sector’s reluctance to capitalize financial institutions...

Second, during periods of high uncertainty and the potential for runs, large or coordinated shortsellers are more likely to succeed in triggering socially inefficient panic-selling. Rumor-mongering and persistent selling pressure eventually weaken wary investors and depositors. Unfortunately, by choosing to punish shareholders, Secretary Paulson has rewarded shortsellers and raised their ammunition to cause further financial instability.  Again, while shortselling plays a very useful role during normal times, it can turn into a source of instability during periods of high uncertainty.

Two points: first, if we are going to nationalize this argument implies we should do it quickly to avoid further hemorrhaging.  Yet the mortgage agencies are not quite proven to be unsalvageable failures (much as I opposed their initial creation that does not imply immediate obliteration as the proper current response).  Second, even if nationalization is the right response this time, it might not be the next time a financial institution gets into fiscal trouble.  Yet in that subsequent case nationalization will be that much harder to avoid, given the understandable fears of private capital if nationalization happens this time.  Every time you nationalize and wipe out shareholders, you create a dangerous precedent and scare away private capital for a long time.

You are probably reading lots of absolutist recommendations around the blogosphere but these are truly difficult issues and the correct policy responses are not obvious.

Fannie Mae, Freddie Mac and the Peso Problem

Alex Tabarrok

A government bailout of the GSEs should not be a surprise.   After all, for a long time the markets have been predicting that sooner or later there will be a very expensive bailout.  What do I mean?  According to Freddie Mac (quoting the OMB)  "mortgage rates are 25 – 50 basis points lower because Fannie Mae and Freddie Mac exist in the form and size they do."  Now, that is almost certainly an exaggeration but to the extent that interest rates are lower due to the GSEs some significant part of that is due to the market valuing the government's implicit guarantee.  In other words, interest rates are lower because the market is valuing the implied insurance.  Now, the whole point of insurance is that sometimes the insurer must pay.  Thus the market has been telling us all along that sooner or later the taxpayer was going to pay.

Maybe the taxpayers will have to pay today or maybe in some future tomorrow but the benefits of the GSEs are intimately tied to the costs - there is no such thing as a free lunch.  The lunch may look free for a long time - as in the classic peso problem - but what that means is that when the bill comes due it will be big. 

Some simple Ricardian thoughts on the Helmsley bequest for dogs

Tyler Cowen

Here is Posner on the topic, here is Becker.  As I understand the terms, it is about $12 million for her dog and $5 billion to $8 billion for dogs in general.

It's only the $12 million for her dog that is objectionable; surely one million would have sufficed and in the language of the philosophic literature on inequality, the other dogs can rightfully hold a complaint against the recipient of Helmsley's largesse. 

$5 billion to $8 billion for dogs in general is not too much for our wealthy society to spend or to regard as a legitimate welfare objective, worthy of the standard tax deduction, at least provided it is distributed equitably.  Here's a list of possible ways to spend the money to help dogs.  Here's an estimate that there are more than 70 million dogs in the United States, so that is on average only $100 per dog.  Do note that while not every dog needs help, helping even a single dog requires considerable infrastructure.  If you think that's too much aid, well, let crowding out operate and cut back on your transfers to dogs.  There's plenty of room for give there, believe me, since more than 40 million households own dogs and thus have their finger on this trigger, maybe yours too (not mine).  It is we who control the net transfer from humans to dogs, not the dear departed Ms. Helmsley.

Arthur Brooks selected to be president of AEI

Tyler Cowen

From an email:

Arthur C. Brooks--who is Louis A. Bantle Professor of Business and Government Policy at Syracuse University and a visiting scholar at the American Enterprise Institute--has been chosen by the AEI Board of Trustees to be the Institute’s next president. He will succeed Christopher DeMuth on January 1, 2009.

Here is Arthur's home page.  Here are previous MR mentions of Arthur Brooks, all favorable I believe.  I thank...Alex...for the pointer.  Bryan Caplan and Will Wilkinson have blogged his research as well.

Hit songs are getting wordier

Tyler Cowen

Average word count of top-ten songs during the 1960s: 176

Average last year: 436

That is from Harper's Index, August issue.  I don't think it can be a pure length of song effect.

Contrarian thinking about the mortgage agencies

Tyler Cowen

The irony of the "subprime" situation, it seems to me, is that we probably all would have been better off if the GSEs had gotten into it in a big way. If the GSEs had been able to create a market in "vanilla" subprime--fixed rates, no prepayment penalties, careful documentation requirements, competitive pricing--and forced their seller/servicers into a "subprime box," the subprime loan market would have been a lot better off. The "pseudo-Maes and Macs" have never really been very good at providing the kind of market discipline within their purview that the real Mae and Mac have. But we wanted "innovation" and "choice" and "flexibility," not domesticated subprime and "alt" financing with low margins, uniform loan terms, and front and side airbags.

Here is much more, very interesting throughout.  You can add Matt Yglesias, Atrios, and now Tanta at calculatedrisk.blogspot.com to the list of bloggers calling for nationalization.

"Whatever is Needed"

Tyler Cowen

Tim Hanrahan, at WSJ.com, collates opinion and summarizes where we are at with the mortgage agencies.

Taliban v. Coase

Alex Tabarrok

Sadly, the Taliban are succeeding where Coase (and the Pakistan government) have failed.

The mountain of white marble shines with such brilliance in the sun it looks like snow. For four years, the quarry beneath it lay dormant, its riches captive to tribal squabbles and government ineptitude in this corner of Pakistan’s tribal areas.

But in April, the Taliban appeared and imposed a firm hand. They settled the feud between the tribes, demanded a fat fee up front and a tax on every truck that ferried the treasure from the quarry. Since then, Mir Zaman, a contractor from the Masaud subtribe, which was picked by the Taliban to run the quarry, has watched contentedly as his trucks roll out of the quarry with colossal boulders bound for refining in nearby towns.

Who wants cryonics?

Tyler Cowen

Arnold Kling reports:

[Robin] Hanson says that the expected return from being cryonically frozen is positive. If it works, the benefits are high, and the probability of it working is greater than zero. Yet few people sign up for it. I think that we are afraid of looking weird if we sign up for it.

I wonder if people who already look weird, for whatever reason, sign up at disproportionate rates.  I suspect not and that only some very particular preexisting unusual traits predict an interest in cryonics.  Is the best predictor of signing up is interest in science fiction?  If so, does this mean that the non-signers are simply people who are not able to imagine the potential benefits?  Or does an interest in science fiction already label the person in some way where the marginal image cost of signing up is then especially low?  Both cryonics and science fiction of course have very high rates of male participation, some exceptions aside.  I predict that the reading of fantasy novels does not so well correlate with interest in cryonics, once you adjust for any prior interest in science fiction.

Parsing Paulson

Tyler Cowen

Felix Salmon does the heavy lifting.  Here's one tidbit from Felix's interpretation:

We can't afford for Fannie and Freddie to go bust, and we're Republicans, so there's no way we're going to nationalize them. And no one could conceivably afford to buy them. Which leaves only one option: somehow maintaining the status quo. Which is not going to be easy, seeing as how their trillions of dollars in assets are imploding daily in the biggest US housing crunch since the Great Depression.

Mark Thoma offers more links.  James Hamilton likes the plan; I am not sure why though it is easy enough to see that many of the alternatives are worse.  Paul Krugman says the share price collapse of the mortgage agencies may not be such a big deal.  You also could read through the hundreds of comments at calculatedrisk.blogspot.com; they give a good sense of what people are thinking.  Angry Bear wants to punish the CEOs.

The worst case scenario is that the market regards Paulson's statement as cheap talk and ups the ante sometime this week.  I've yet to figure out what the best case scenario looks like.

Addendum: Here is an early MR post on Fannie Mae, read this one too.

Second addemdum: Arnold Kling makes many interesting points.  Read Sebastian Mallaby too, who calls for "Nationalize -- and then dismantle."  Here is my earlier post on the N Word.

The best books with the worst titles

Tyler Cowen

Richard Squire writes to me:

Some friends and I last night came up with a parlor game, Best Books with Worst Titles.  Here were our finalists:

Freakonomics

The Audacity of Hope

The Beautiful and Damned

The Heart is a Lonely Hunter

Moby Dick (winner)

I agree with the middle three picks but think that Freakonomics and Moby Dick are both very good titles.  I've never actually liked the title Ulysses, as used by James Joyce.  I know all about the structural parallels with Homer's Odyssey but to me they are superfluous to enjoying the work.  The title stresses those parallels and so it irritates me.  What nominations do you all have?

Hail Joseph Lancaster!

Tyler Cowen

And for that matter hail Seth Weidman:

It was a classic case of supply and demand.

Entering his senior year at Pittsburgh Allderdice High School, Seth Weidman felt there was demand for an Advanced Placement economics class.

So he decided to supply one.

At least one night a week for nine months, Seth taught college-level economics to a group of his fellow Allderdice students, traveling from living room to living room with his dry-erase board in tow.

Fueled by Doritos, pretzels and the occasional homemade tiramisu, Seth's students in the "Weidman School of Economics" numbered 18, with nine of them eventually taking at least one of the two AP economics tests offered.

Thus far, the results have been spectacular. The students took 12 total tests, and of the eight scores that have come in this month, six are 5's -- the highest possible on a scale of 1 to 5 -- and two are 4's.

Greg Mankiw and Aplia appear in the story as well.  Seth loves Hayek's Road to Serfdom: ""It made me see that economics isn't just about a bunch of guys sitting on CNBC," he said. "It's more about incentives. It gives you a cool perspective to understand the world."

Here is the full story.  Seth will be attending the University of Chicago next year.  Here is material on Joseph Lancaster and I thank Eric Crampton for the pointer.

Mr Fantastic

Alex Tabarrok

From the Ten Thousand Buddhas Monastery in Hong Kong.  Dr. Strange is in the extension.

Continue reading "Mr Fantastic"

What if the candidates pandered to economists?

Tyler Cowen

Do read Greg Mankiw on this topic.  The list of policies favored by economists includes support free trade, oppose farm subsidies, leave oil companies and speculators alone, tax the use of energy [does he mean carbon-based energy?], raise the retirement age, invite more skilled immigrants, liberalize drug policy, and raise funds for economic research.

I don't disagree that there is a consensus on retirement age but it was news to me to read that.  My informal impression had been that many economists on the left felt this would place undue burdens on people with physically demanding jobs.  And personally I would sooner subsidize hard science than economics; I don't think we've earned our keep lately!

Or maybe Greg is just saying that it would win economists' votes.  Like Alex, I wonder if economists vote on a more rational basis than do other people.  If I meet a French economist, I suppose that his views are more shaped by his being a Frenchman than by his being an economist.  I'd like to see a poll of Canadian economists on health care reform.

Sebastian Flyte rules

Tyler Cowen

Re XII  ‘there is a groupie for every male endeavour’

THIS IS SO MONEY. It is one of the great triumphs of modern capitalism: let a thousand status hierarchies bloom! Unlike in hunter gatherer days, there isn’t one status hierarchy to climb and that’s that, there are endless hierarchies to climb, endless things to specialise in. Roissy’s good buddy, the economist Tyler Cowen, has been pushing this idea for a while now, and the effect this has on human happiness and potential is mind-boggling. Guys can rise to the top of whatever work/hobby hierarchies there are, or at least portray to women that yes, he is in THE PROCESS of climbing to the top. There are obvious caveats: females aren’t impressed by computer game related status, even though leading 30 guys from around the globe in World of Warcraft to quickly and efficiently take down an enemy is actually an impressive accomplishment - I think this will change in the future. But for now, I’ll bet the college ultimate frisbee champ gets some pretty good action.

Here is Sebastian's blog.

Markets which only look like an infinite regress

Tyler Cowen

The risk that a claim won’t be paid—a potential downside that every buyer of insurance faces—was an uninsured exposure until recently, according to the developers of a new policy to provide coverage so that risk managers can contest such rejections...

The new coverage, available to businesses of all sizes, will pay up to $250,000 in legal expenses associated with contesting the denial of an insurance claim under a commercial policy.

Here is the economic rationale:      

Mr. Surdyk said that during the course of his work with insureds, he found that while many clients had legitimate disputes with their insurers, the underlying claims being denied were small-dollar amounts relative to the legal costs of coverage disputes.  “It wasn’t worth it for a client to hire us to file a lawsuit against an insurance company over $50,000—and insurance companies know that,” he said.

Here is the full story, and thanks to Travis for the pointer.

Questions which are rarely asked

Tyler Cowen

Who has stolen the most picture with the smallest part?

Grant McCracken offers up some nominations:

Holly Hunter in Time Code
Steve Zahn in Out of Sight
Selma Blair in Cruel Intentions
Siobhan Fallon in Men in Black

Jason Kottke points us to this list.  Can I cite Andre the Giant in The Princess Bride?