Marginal Revolution

The theory of interstellar trade

By Paul Krugman, circa 1978.  He considers the arbitrage conditions for interstellar trade, given that not all traders will inhabit the same frame of temporal reference.  There is much humor in this piece. 

My own puzzling focuses on the determinants of real interest rates, given how time dilation changes the meaning of time preference.  As you approach the speed of light you move into the future relative to more stationary observers.  So can you not leave a penny in a savings account, take a very rapid spaceflight, and come back to earth "many years later" as a billionaire?  Hardly any time has passed for you.  In essence we are abolishing time preference, or at least allowing people to lower their time preference by spending money on fuel.  I believe that in such worlds the real interest rate cannot exceed the costs at which more fuel can "propel you into the future through time dilation."   

Whether the individual arbitrage conditions translate into economy-wide arbitrage conditions is a difficult puzzle.  What if everyone gets into a fast spaceship?  Do the savings accounts still bear positive interest?  How does the price of robots enter into this equation?

Is monetary policy neutral in such a world, with time travelers arbitraging against any attempt by the Fed to shift real interest rates?  Does the Fed have to subsidize the price of fuel to stimulate the economy?  Does everyone just end up in the future?

Those who do not know history...

But wait, surely these people do know history.  Marco, a loyal MR reader, writes to me:

Over here in the Netherlands, court proceedings are starting this week on the "biggest speculation fraud ever in the Netherlands", according to a national newspaper that ran a big story about it today. Investors have lost tens of millions of euros in what turned out to be a big pyramid scheme.

Now for the ultimate irony. Any idea what these people were investing in? Tulip bulbs. Really.

Here is one link in Dutch, here is another.  I can't find anything in English but these articles do seem to reflect Marco's summary.  I can understand sentences like: "Ook volgens De Greve was er sprake van een piramidefonds," and "November 2006 ging Novacap falliet," if not: "De Greve: „Er is geen spatje bewijs voor dat de groep die Novacap heeft gedaagd, de boel heeft opgelicht. Dat is flauwekul.”

Bad Incentives?

The Center for Union Facts will ask parents, students and other teachers Tuesday to nominate the "worst unionized teacher in America." The center says it will choose 10 and offer each $10,000 to quit; "winners" must allow the center to write about them on its website.

More here. 

Thanks to Lee Spector for the link.

A Boy Named Sue

“Researchers have studied men with cross-gender names like Leslie,” Dr. Evans explained. “They haven’t found anything negative — no psychological or social problems — or any correlations with either masculinity or effeminacy. But they have found one major positive factor: a better sense of self-control. It’s not that you fight more, but that you learn how to let stuff roll off your back.”

Here is much more, interesting throughout.  I liked this part:

“In the past, there was more of a sense of humor, probably because fathers had more say in the names.” He said the waning influence of fathers might explain why there are no longer so many names like Nice Deal, Butcher Baker, Lotta Beers and Good Bye, although some dads still try.

As I've told you before, my dad had wanted to name me Tyrone.  It could have been worse:

...why would any parent christen an infant Ogre? Mr. Sherrod found several of them, along with children named Ghoul, Gorgon, Medusa, Hades, Lucifer and every deadly sin except Gluttony (his favorite was Wrath Gordon).

Department of unpalatable results

This new NBER working paper (ungated here) argues that media criticism of the U.S. war effort in Iraq leads to more U.S. troops being killed:

Are insurgents affected by information on US casualty sensitivity? Using data on attacks and variation in access to international news across Iraqi provinces, we identify an "emboldenment" effect by comparing the rate of insurgent attacks in areas with higher and lower access to information about U.S news after public statements critical of the war. We find in periods after a spike in war-critical statements, insurgent attacks increases by 5-10 percent. The results suggest that insurgent groups respond rationally to expected probability of US withdrawal. As such counterinsurgency should consider deterrence and incapacitation rather than simply search and destroy missions.

Might Fox News be right after all?  Still I am not yet convinced.  First, I fear that the measurement of satellite TV access of different Iraqi districts is a proxy for some other measure of district quality and that the TV programs have no causal role in driving killings.  Is news access across Iraq really so different?  Can't one district simply send an email to another district: "now is time to kill some more of them?"  Second, I worry that the authors decided not to include Baghdad in the results.  Still, if you want a jolt to your system, right now this paper is the place to go.

How to respond to Hillary Clinton

Read this, the headline is "Obama: I'm no V.P.".  That's not just the biased framing of the journalist, it captures Obama's words.  My unsolicited advice is this: if you are a political candidate, proclaiming "I am not X" is not much better than admitting "I am X."  Either way it frames the debate.  And avoid phrases like "If I'm not ready [for the Presidency]..."  Why not punch back with: "A President needs to do at least two things.  First, read the will of the voters.  Second, figure out which country in a region is winning the race for influence and which country is coming in second.  This kind of talk is a sign that Hillary Clinton can do neither.  I'm running for President, while she is busy failing arithmetic."

I know I promised, way back when, no candidate blogging, but alas every now and then some things just bug me.