Marginal Revolution

Is Sarah Palin the female Ross Perot?

Palin is being compared to Dan Quayle and Clarence Thomas but I think Ross Perot may be the more apt citation (the rest goes under the fold)... 

Palin has an outside, straight talker, pro-reform, true blooded American, take no prisoners image much as Perot did.  (A second point of comparison is Arnold Schwarznegger, with some obvious differences.)  And she has only begun to cultivate that image.  Do you recall how much impact Perot had on the American people? 

Of course if Perot actually had had the chance to be President, the results probably would not have been pretty.  He would have been forced to act like "just another politician," as has been the case with Arnold because in fact the job revolves around knowing how to govern. 

There is one biographical fact about Palin's life that the critics (Drum, DeLong, Yglesias, Klein, Sullivan and Kleiman are among the ones I read) are hardly touching upon.  I mean her decision to have a Downs child instead of an abortion.  This is the fact about her life and it will be viewed as such from now through November and perhaps beyond. 

If only for this reason, she will be seen as a candidate who stands on principle.  I don't think the critics are sufficiently appreciating how tired the American people are of candidates who say one thing and do another and who abandon their principles at the first provocation.  This is a deep and very strong current and it runs through virtually every group of American political voters.  Because of her decision to have a Downs child, many voters will not view Sarah Palin in a cynical light, no matter what the critics say.  No story about firing a state trooper will break that seal.

In my jaded view, "politicians who break their word, violate their ideals, and do not follow through on their promises" is not one of the major problems in American politics.  In fact it's often good that political promises are forgotten in the light of the realities.  So the American obsession with political promise-keeping does not resonate with me.  But the American people have been hungry for a "promise keeper, ideals believer" for decades and when was the last time they actually got one?

By the way, my mom's first reaction to the nomination (hi mom!) was that other mothers of "different" children (what exactly is the right word here?) would very much identify with Palin and view her life as validating theirs and thus support her.

Go away and watch a Frank Capra movie and think about Palin again.  Larry Ribstein gets it.

I do recognize and indeed emphasize that this analysis requires that she is good on TV.  I give that p = 0.63.  I'll also give p = 0.13 that she ends up off the ticket, but most of that chance comes from her deciding she needs to spend the time with her kids.

Addendum: The best argument against the pick is this, although it does not much revise my priors.

Powerful Women: Does Exposure Reduce Bias?

We exploit random assignment of gender quotas across Indian village councils to investigate whether having a female chief councillor affects public opinion towards female leaders. Villagers who have never been required to have a female leader prefer male leaders and perceive hypothetical female leaders as less effective than their male counterparts, when stated performance is identical. Exposure to a female leader does not alter villagers' taste preference for male leaders. However, it weakens stereotypes about gender roles in the public and domestic spheres and eliminates the negative bias in how female leaders' effectiveness is perceived among male villagers. Female villagers exhibit less prior bias, but are also less likely to know about or participate in local politics; as a result, their attitudes are largely unaffected. Consistent with our experimental findings, villagers rate their women leaders as less effective when exposed to them for the first, but not second, time. These changes in attitude are electorally meaningful: after 10 years of the quota policy, women are more likely to stand for and win free seats in villages that have been continuously required to have a female chief councillor.

Full paper here and here.

Are climate models like economics models?

Here's another reader request:

You've spent a lot of time studying economic models.  You probably have an opinion about their overall reliability.

How should that opinion influence your view of the issue of environmental change, given that many of the inferences about such change come from general climate models that are, in some ways, very similar to economic models?

I would prefer betting markets, but I don't think they would suggest something much different from the current scientific consensus.  Economic models aside, economic empirics give us every reason to believe that (apart perhaps from environmental issues) today's mixed economies with democratic capitalism have produced, and will continue to produce, entirely satisfactory outcomes.  Make of climate models what you may, there is lots of evidence that a) biodiversity is being hammered, and b) climate change will bring desertification, drought, and possibly coastal flooding to many parts of the world, among other dilemmas.  I don't have a lot of faith in the exact predictive powers of climate models, or for that matter economic models, but uncertainty about outcomes should make us worry more not less.  Uncertainty usually has two tails, not just one.

The intergenerational transmission of IQ

Here are some recent results, from Sandra Black, Paul Devereux, and Kjell Salvanes.

More able parents tend to have more able children. While few would question the validity of this statement, there is little large-scale evidence on the intergenerational transmission of IQ scores. Using a larger and more comprehensive dataset than previous work, we are able to estimate the intergenerational correlation in IQ scores, examining not just average correlations but also how this relationship varies for different subpopulations. We find that there is substantial intergenerational transmission of IQ scores; an increase in father's IQ at age 18 of 10% is associated with a 3.2% increase in son's IQ at the same age. This relationship holds true no matter how we break the data. This effect is much larger than our estimated elasticity of intergenerational transmission of income of approximately .2.

Here are ungated versions, or here.  Note that a) this is based on Norwegian data, b) income elasticity declines with birth order, c) intergenerational IQ elasticities are broadly the same across different levels of education for the father, d) the sample size is much larger than usual, and e) the author caution against assuming this is entirely a genetic effect; in another study large family size lowers IQ for instance, adjusting for parental IQ.

The experience trap

Around the blogosphere you will see many left-wing writers criticizing Palin for lack of experience.  Maybe this criticism is correct, but these commentators are falling into The Trap.  Most American voters do not themselves know much detail about foreign affairs and their vision of an experienced leader does not require such knowledge.  Was it demanded from Reagan?  Doesn't everyone agree that Cheney and Rumsfeld knew plenty?  Rightly or wrongly, many American voters will view Palin's stint as mayor of small town, her background in sports, her role in a beauty contest (yes), her trials raising teenage children, and her decision to stick with her priinciples and have a Downs Syndrome baby as all very valuable and relevant forms of experience.  The more the word "experience" is repeated, no matter what the context, the more it will hurt Obama.  Palin needs to appear confident and capable on TV and in the debates, but her ticket is not going to lose votes if she cannot properly spell Kyrgyzstan or for that matter place it on a map.

Addendum: Here is early response over at The Clinton Forum.

Voters trust good-looking extremists

Trying to appear moderate is not always the best strategy for capturing votes during an election, reveals a new study. Extreme positions can build trust among an electorate, who value ideological commitment in times of uncertainty.

Here is the full story, with a hat tip to Eduardo Pegurier.  And here's Robin Hanson:

In a TV game show, pretty contestants were not better or more cooperative players, but other contestants seemed to act as if they were.

I don't know much about the substance or qualifications of Sarah Palin, but I believe that Democrats should be a little worried right now.  The otherwise-expected Romney and Pawlenty gifts have been taken off the table.

Addendum: Here's Palin talking economics with Larry Kudlow.

Cowen-Hanson Bloggingheads topics

To paraphrase my good friend: Robin Hanson and I, good friends who sometimes blog-spar, will tape a bloggingheads TV show this Monday.  What would folks like us to talk about? 

Here are the answers from Robin's readers.

Sarah Palin

Now over 80 percent in the betting markets.  And here is the gossip behind that.  Electorally this is a very effective pick I think (if indeed it is true), though it is hard for me to imagine a President with five (young) kids.

Addendum: No, that wording isn't quite right.  How should I put this...?

Second addendum: Her stock in the market is now plummeting, now down to about 35, as there is a report she is still in Alaska.  I am told that last night Pawlenty was up to about 85 but then fell dramatically as well.  It has been a wild ride in this market.  And now Palin is back up again, etc.  Whatever.  Now it's at 96.  Now confirmed.

More: Credible signals, in one link or less.

What is your dream book?

I want you to tell me.  It's a book that doesn't currently exist.  It is a work of non-fiction.  The author must be living.  It must be a work the author could plausibly write.  It doesn't have to be a close cousin of a book the author has already written.

So you could request "Jared Diamond on sexual selection" but not "Joseph Stiglitz on the early history of Ghenghis Khan."

Do please tell us your pick.  Comments are open...

Mean and Lowly Things

The two Pygmies persuaded to work for me have reputations as the worst guides in the village.  Their cooking often includes rotting fish, which they serve cold for breakfast if I don't finish it at dinner.  They are supposed to do my laundry, but they find women's underwear too embarrassing to contemplate.  They won't go out after dark, and they consider wading in the swamp to be absolute folly.  So I'm almost late one night when I fall over a log and scrape my left leg, on my way back from the swamp with a bag of treefrogs.

I think nothing of the scrape until 5 days later, when my temperature shoots to 104F and my leg swells and turns red.  Some microbe from the swamp has entered through the scrape and spread to infect my whole body.  Perhaps the Pygmies had some sense in refusing to wade in the swamp.

That is from Kate Jackson's Mean and Lowly Things: Snakes, Science and Survival in the Congo.  It is an excellent and very fun book on fieldwork and on the topics mentioned in its subtitle.  I think of this as "a Chris Blattman book" and yes you should be reading Chris's blog.

The roots of Beatlemania -- egomania?

The Beatles even cultivated this sort of personal connection to their audience.  In their early songs, Paul McCartney says, he and John intentionally -- somewhat calculatingly -- tried to inject personal pronouns into as many of the early lyrics as they could.  They took seriously the task of forging a relationship with their fans in a very personal way.  "She Loves You," "I Want to Hold Your Hand," "P.S. I Love You," "Love Me Do," "Please Please Me," "From Me to You."

Don't forget "And I Love Her," among a bunch of others.  And by egomania I am referring to the audience not (only) the performers.  This passage is from Daniel J. Levitin's new and quite interesting The World in Six Songs: How the Musical Brain Created Human Nature.

What is worth its weight in gold?

Here is a list of stuff worth more than its weight in gold, expressed in terms of price per pound:

Platinum	$20,679
Fifty Dollar Bills	$22,680
Cocaine	$22,680
Hundred Dollar Bills	$45,359
Rhodium	$77,292
Good-quality, one-carat diamonds	$11.4 M
LSD	$55 M
Antimatter	$26 Quadrillion

Here is the link, with much more information.  Here is a short article on the market for rhodium.  Here is an earlier post on the economics of antimatter.  Thanks to Jen Smith for the pointer

Eating local

Will Wilkinson serves up his wisdom:

How far your food travels matters a lot less than what kind of food it is, or how it was produced. According to a recent study out of Carnegie Mellon University, the distance traveled by the average American's dinner rose about 25 percent from 1997 to 2004, due to increasing global trade. But carbon emissions from food transport saw only a 5 percent bump, thanks to the efficiencies of vast cargo container ships.  [TC: do note that precedes the rapid run-up of oil prices.]

A tomato raised in a heated greenhouse next door can be more carbon-intensive than one shipped halfway across the globe. And cows spew a lot more greenhouse gas than hens, or kumquats, so eating just a bit less beef can do more carbon-wise than going completely local. It's complicated.

Addressing the cool folks, Will adds:

Should we minimize our “music miles” and boycott bands on tour? Thankfully, our next-door neighbors have a band, Dead Larry. We don’t have to go anywhere to hear them.

Here is the full CMU study cited by Will on food miles.  In my view we do have duties to behave more responsibly at the dinner table but the simple admonition "eat less meat" will do.  Maybe you don't like tofu but sardines are delicious, or use Goya small red beans with shredded Mexican cheese (even the Kraft package is decent) and ground chile on a corn tortilla.  Don't forget the lime on top.

Lowering the drinking age

Here is another reader request:

There's been recent talk about what would happen if the legal drinking age were lowered to 18. Would there be a net increase or decrease in risky binge drinking, accidents, etc?

New Zealand lowered its drinking age to 18 in 1999 and bad consequences followed, including a higher rate of drinking-related car crashes.  Illegality, even when it can be circumvented, really does raise the price of an activity in many instances. 

Nonetheless I still think that 20-year-olds -- legal adults in just about every other way -- have the right to drink alcohol.  Sometimes I call myself a "two-thirds utilitarian."  I am a pluralist who thinks that utility is often but not always the primary consideration behind policy choice.

There's always another paternalist intervention to save children's lives but no one is for all of them.  We could ban swimming pools and buckets for instance.  We could ban high school football.  We could raise the drinking age to 25.  How about a drinking age of 50?  How about a driving age of 21?

I see at least two major analytical questions.  First, how much normative force should "extra death" have in a policy argument?  Second, what is special about the number 18?  Consistent with the latter question, I think that 15-year-olds should be able to drink in a restaurant when clear parental permission is present.

The Case for Big Government

That's the title of the forthcoming Jeff Madrick book.  "Don't we already have big government?" was my first reaction.  This book is a good summary of one point of view, but if you're already familiar with the basic arguments it won't extend your understanding of the debates.  There's not much on the public choice arguments (e.g., self-serving special interests and irrational and underinformed voters) against growing state power, only a general sense that we "should" do good things with government.  Nor is there much realization that Americans are skeptical about government, in large part, because of their daily experiences with it.  We're also told that many of the proposed progressive measures will nearly pay for themselves.

Yana's reaction was: "Why didn't he publish it with a government press?"

Kay Bailey Hutchison on economics

Here are some of her votes.  Her ACU voting lifetime record is 91 percent.  She is strong on free trade and seems to be a relatively conservative and corporatist Republican on economic issues.  She's way up in the betting markets for the Republican VP spot, about 30 percent last I looked.  Note that she is not pro-life according to conservatives.  She has been very pro-drilling and very active on energy issues.  Since picking Mitt Romney would violate all known economic models of rational choice, and picking a woman would pop the Democrats' post-convention bounce, I suppose this is a rumor to be taken seriously.  Here is her Wikipedia page.

Markets in everything

Or will there be?

Robert Burns's poetry might have been dismissed as "sentimental doggerel" by Jeremy Paxman but that hasn't stopped diminutive I'm A Celebrity contestant David Gest and pop legend Michael Jackson from recording an album of the much-loved Scottish poet's work. Gest's spokesman said the album is a modern musical take on some of Burns' classic poems, and had been a long cherished project.

Here is the full story.  Here is the evolution of earnings on some of MJ's other albums.  Here is a man who just died.

My IO reading list

This is for my Ph.d. class and I've put it beneath the fold.  Can you guess who teaches IO, Part II?  Hint: it is someone I find it easy to coordinate with and he will be covering price discrimination, among other topics.  Click here to get to the list...

Industrial Organization I, Tyler Cowen (x2312, 4910), tcowen@gmu.edu

BOOKS:

Gordon, John Steele – An Empire of Wealth: An Epic History of American Economic Power

Lowenstein, Roger – When Genius Failed: The Rise and Fall of Long-Term Capital Management

METHODS OF EVALUATION:

There will be weekly quizzes, a midterm, and a final exam.

READINGS:

I. The Firm

Holmstrom, Bengt and Tirole, Jean.  “The Theory of the Firm,” in Handbook of Industrial Economics, vol.I.

Rotemberg, Julio. “A Theory of Inefficient Intrafirm Transactions.” American Economic Review (March 1991).

Holmstrom, Bengt and Roberts, John.  “The Boundaries of the Firm Revisisted.” Journal of Economic Perspectives 12, 4 (Fall 1998): 73-94.

Demsetz, Harold and Lehn, Kenneth.  “The Structure of Corporate Ownership: Causes and Consequences.”  Journal of Political Economy  93 (December 1985): 1155-1177.

Gibbons, Robert. “Incentives in Organizations.” Journal of Economic Perspectives (Fall 1998): 115-132.

Chapters from Discover Your Inner Economist, by Tyler Cowen.

Montgomery, Cynthia.  “Corporate Diversification,” Journal of Economic Perspectives (Summer 1994): 163-178.

Rasmusen, Eric.  “Mutual Banks and Stock Banks.”  Journal of Law and Economics 31 (1988): 395-422.

Hansemann, Henry.  “Ownership of the Firm,” Journal of Law, Economics and Organization (Fall 1988).

Hansemann, Henry.  “The Role of Non-Profit Enterprise.” Yale Law Journal (1980): 835-901.

Cowen, Tyler. “Response to David Friedman,” Economics and Philosophy, at http://www.gmu.edu/jbc/Tyler/TYLER.doc.

Xavier Gabaix and David Laibson, “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=728545.

Glenn Ellison, “Bounded rationality in Industrial Organization,” http://cemmap.ifs.org.uk/papers/vol2_chap5.pdf

II. Capital structure and control

Miller, Merton, and commentators.  “The Modigliani-Miller Propositions After Thirty Years,” and comments, Journal of Economic Perspectives (Fall 1988): 99-158.

Myers, Stewart. “Capital Structure.” Journal of Economic Perspectives (Spring 2001): 81-102.

Hart, Oliver.  “Financial Contracting.”  Journal of Economic Literature (December 2001): 1079-1100.

Easterbrook, Frank H. “Two Agency-Cost Explanations of Dividends.”  American Economic Review (September 1984).

Fudenberg, Drew and Tirole, Jean. “A Theory of Income and Dividend Smoothing.”  Journal of Political Economy (February 1995): 75-93.

Baker, Malcolm and Wurgler, Jeffrey. “A Catering Theory of Dividends,” Journal of Finance (2004), available at http://pages.stern.nyu.edu/~jwurgler/.

Baker, Malcolm and Ruback, Richard. “Behavioral Corporate Finance: A Survey,” found at http://www.wcfia.harvard.edu/seminars/pegroup/BakerRubackWurgler.pdf

MacKinlay, A.C. (1997), “Event Studies in Economics and Finance”, Journal of

Economic Literature 35(1), 13-39.

“Symposium on Takeovers,” edited by Hal Varian, Journal of Economic Perspectives (Winter 1988): 1-82.

Andrade, Gregor, et. al. “New Evidence and Perspective on Mergers.” Journal of Economic Perspectives (Spring 2001): 103-120.

Holmstrom, Bengt and Kaplan, Steven. “Corporate Governance and Merger Activity in the United States,” Journal of Economic Perspectives (Spring 2001): 121-149.

Gompers, Paul and Lerner, Josh.  “The Venture Capital Revolution.” Journal of Economic Perspectives (Spring 2001): 145-168.

Stein, Jeremy C. “Efficient Capital Markets, Inefficient Firms: A Model of Myopic Corporate Behavior.”  Quarterly Journal of Economics 104 (November 1989): 655-670.

Stein, Jeremy C.  “Takeover Threats and Managerial Myopia.”  Journal of Political Economy (1988): 61-80.

Scharfstein, David S. and Stein, Jeremy C.  “Herd Behavior and Investment.”  American Economic Review 80 (June 1990): 465-479.

Hall, Brian and Murphy, Kevin J, “The Trouble with Stock Options,” Journal of Economic Perspectives, Summer 2003, also at http://www-rcf.usc.edu/~kjmurphy/HMTrouble.pdf.

Murphy, Kevin J. and Zaboznik, Jan. “CEO Pay and Appointments,” American Economic Review, May 2004, also at http://www-rcf.usc.edu/~kjmurphy/CEOTrends.pdf

Jensen, Michael, Murphy, Kevin J., and Eric Wruck. “Remuneration: Where We've Been, How We Got to Here, What are the Problems, and How to Fix Them,” available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=561305#PaperDownload.

Robert J. Gordon and Ian Dew-Becker, “Unresolved Issues in the Rise of American Inequality,” http://www.people.fas.harvard.edu/~idew/papers/BPEA_final_ineq.pdf

III. Vertical control, antitrust, and related issues.

Tirole, Jean. “Vertical Control.” In Theory of Industrial Organization, Chapter 4.

Klein, Benjamin and Leffler, Keith.  “The Role of Market Forces in Assuring Contractual Performance.”  Journal of Political Economy 89 (1981): 615-641.

Klein, Benjamin and Murphy, Kevin. “Vertical Restraints as Contract Enforcement Mechanisms,” Journal of Law and Economics (October 1988).

Breit, William. “Resale Price Maintenance: What do Economists Know and When Did they Know It?” Journal of Institutional and Theoretical Economics (1991).

Bernheim, R. Doug and Whinston, Michael.  “Exclusive Dealing.” Journal of Political Economy (February 1998): 64-103.

Rasmusen, Ramseyer and Wiley, 1991, “Naked Exclusion,” American Economic Review, 1137-45.      

Bittlingmayer, George.  “Decreasing Average Cost and Competition: A New Look at the Addyston Pipe Case,” Journal of Law and Economics (October 1982).

Klein, Benjamin, and Kenney, Roy. “The Economics of Block Booking,” Journal of Law and Economics, (1983), 27, 3, 497-540.

Tirole, Jean.  “Information and Strategic Behavior: Reputation, Limit Pricing, and Predation.”  In Theory of Industrial Organization, Chapter 9.

Timothy Bresnahan, “Empirical Studies of Industries with Concentrated Power,” Handbook of Industrial Organization, vol.II.

Pakes, Ariel. “Theory and Empirical Work on Imperfectly Competitive Markets,” NBER Working Paper 14117, June 2008.

Sproul, Michael.  “Antitrust and Prices.”  Journal of Political Economy (August 1993): 741-754.

McCutcheon, Barbara.  “Do Meetings in Smoke-Filled Rooms Facilitate Collusion?”  Journal of Political Economy (April 1997): 336-350.

Hazlett, Thomas W. “Is Antitrust Anticompetitive?” Harvard Journal of Law and Public Policy, (Spring 1986).

Crandall, Robert and Whinston, Clifford, “Does Antitrust Improve Consumer Welfare?: Assessing the Evidence,”  Journal of Economic Perspectives (Fall 2003 ), 3-26, available at http://www.brookings.org/views/articles/2003crandallwinston.htm.

IV. Theory and Regulation of Natural Monopolies

Sanford Berg and John Tschirhart, Natural Monopoly Regulation, Cambridge University Press.

pp. 21-275. 

Demsetz, Harold.  “Why Regulate Utilities?”  Journal of Law and Economics (April 1968): 347-359.

Williamson, Oliver.  “Franchise Bidding for Natural Monopolies - in General and with Respect to CATV.” Bell Journal of Economics (Spring 1976): 73-104.

Crandall, Robert W. “An End to Economic Regulation?” available at http://www.brookings.org/views/papers/crandall/20030721.pdf.

Parente, Stephen L. and Prescott, Edward.  “Monopoly Rights: A Barrier to Riches.”  American Economic Review 89, 5 (December 1999): 1216-1233.

Shleifer, Andrei.  “State vs. Private Ownership.” Journal of Economic Perspectives (Fall 1998): 133-151.

Berg and Tschirhart, pp. 480-522.

Associated other topics in regulation, depending on your interests; reading suggestions will follow later in the semester.

Assorted links

1. Deep Glamour, a new Virginia Postrel blog, linked to a forthcoming Virginia Postrel book

2. Videos of Nobel Laureates, recent talks

3. Beware what ye do not know, namely peanut butter 

4. Robert Solow takes down Kevin Phillips

5. Smash of Paul Theroux

Which body parts are sung about the most?

The eyes.  Other results vary across genre, for instance gospel and blues sing more about hands than eyes.  And get this:

As for the genre that talks about body parts the most, hip hop takes the honors with more references than any other genre. Meanwhile, gospel refers to the body the least. There are plenty of other data points to peruse. It's nice to know that 23.64 percent of hip hop songs refer to the behind, while 11.83 percent of rock songs talk about eyes.

Here is a summary of the results:

Moral luck and Rawlsian biography

As Thomas Pogge has noted in his recent biography John Rawls: His Life and Theory of Justice, Rawls was especially sensitive to issues of luck because of a sad occurrence in his own life. Two of his brothers died in childhood because they had contracted fatal illnesses from him. Pogge calls the loss of the brothers the “most important events in Jack’s childhood.” In 1928, the 7-year-old Rawls contracted diphtheria. His brother Bobby, younger by 20 months, visited him in his room and was fatally infected. The next winter, Rawls contracted pneumonia. Another younger brother, Tommy, caught the illness from him and died.

That's from libertarian David Gordon, whom I suspect has never infected anybody.  The hat tip goes to Will Wilkinson, who in his post describes himself as a "neo-sentimentalist."  I can just imagine Kerry (his girlfriend) saying to Will on their third date: "Oh, Will, you're such a neo-sentimentalist!" 

The return of physiognomy

It has been found, for example, that women can predict a man’s interest in infant children from his face. Trustworthiness also shows up, as does social dominance. The latest example comes from a paper just published in the Proceedings of the Royal Society by Justin Carré and Cheryl McCormick, of Brock University in Ontario, Canada.

The thesis developed by Mr Carré and Dr McCormick is that aggressiveness is predictable from the ratio between the width of a person’s face and its height. Their reason for suspecting this is that this ratio differs systematically between men and women (men have wider faces) and that the difference arises during puberty, when sex hormones are reshaping people’s bodies. The cause seems to be exposure to testosterone, which is also known to make people aggressive. It seems reasonable, therefore, to predict a correlation between aggression and face shape.

The bottom line is that a wide face predicts male aggression.  The study is based on photos of hockey players and measures of their combativeness.  Here is the full story.  Here is an Oprah magazine article on how women can camouflage a wide face with the right haircut.

The best two paragraphs I read today

Ezra wins:

...the campaign against Obama has metastasized into a variant of class warfare. It's the resentment of the meritocracy. What the GOP realized was that Obama did come across different than the average American, but not so much because he was black as because he was effortless. The very set of supercharged talents and qualities that allowed Obama to levitate past the boundaries of race and class make him different than those who haven't rocketed upward on the strength of their intelligence and charisma and charm. After all, if you're a fumbling, struggling individual out in suburban Ohio, how can you believe that this guy who doesn't look to have struggled a day in his life cares about your pathetic problems? Obama, in other words, is elite. As in "A group or class of persons enjoying superior intellectual, social, or economic status." Obama isn't an economic elite, but he is a social and intellectual elite. And it's that creeping sense that he's different, that he's better and knows it, that McCain is trying to exploit.

The Obama campaign, similarly, has realized that McCain is an elite, and that voters won't believe that a guy who has so many houses that he can't keep track of them will care if they lose the small condo they call home. This election, in other words, is becoming a contest to decide which type of elite voters hate -- or fear, or mistrust -- more: A social elite or an economic elite?

Here is the first Google Images entry for "mediocre."

Zero-price Markets in everything: "Fake following"

Jason Kottke reports:

This is a little bit genius. One of the new features of FriendFeed (a Twitter-like thingie) is "fake following". That means you can friend someone but you don't see their updates. That way, it appears that you're paying attention to them when you're really not. Just like everyone does all the time in real life to maintain their sanity. Rex calls it "most important feature in the history of social networks" and I'm inclined to agree. It's one of the few new social features I've seen that makes being online buddies with someone manageable and doesn't just make being social a game or competition.

The Myth in Paperback

Just in time for the conventions you can now buy Caplan's The Myth of the Rational Voter in paperback.   If McCain wins I predict Caplan will be in high demand as half the population dazedly asks what went wrong?  If Obama wins the great and the good will sigh with relief and the Bush years will be written off as an aberration of democracy since righted.

Very good sentences

The first lesson in economics is: things are often not what they seem.

That's a sentence in the first edition of Samuelson's Principles.  Justin Wolfers discusses the book here.  Part of chapter one is on-line here.  Use the search function.  Here (search for "communism") Samuelson says that economics cannot pass judgment on whether American society will go the "revolutionary" path (toward communism) or the "evolutionary" path, or whether Russia indicates the "folly" or the "wisdom" of communism.  Indeed things are not always what they seem.  You can have lots of fun with the search service.

Economic Philately

Which stamp predicts development and which stamp dissension?

For the answer, Chris Blattman points us to Michael Kevane's paper on stamps and development.

An analysis of the imagery on postage stamps suggests that regimes in Sudan and Burkina Faso have pursued very different strategies in representing the nation. Sudan’s stamps focus on the political center and dominant elite (current regime, Khartoum politicians, and Arab and Islamic identity) while Burkina Faso’s stamps focus on society (artists, multiple ethnic groups, and development). Sudan’s stamps build an image of the nation as being about the northern-dominated regime in Khartoum (whether military or parliamentary); Burkina Faso’s stamps project an image of the nation as multi-ethnic and development-oriented.

The new "Chicago Boys"

The number of Chileans who studied Ph.d. economics at the University of Chicago in the 1990s: 4

The number of Chileans studying there since 2001: 10

According to this interesting article, studying at Chicago no longer bears the stigma of association with the Pinochet regime.  Nor do those who study at Chicago aspire to be hard-core market reformers.  This is a sign of how "normal" Chile has become, and also a sign of how "normal" the University of Chicago has become, but most of all the former.

Another example of randomized Nash equilibrium

From an interview with Vladimir Kramnik.  Note that Kramnik is playing in a regular chess tournament, shortly before with world championship match with Anand:

Is it difficult for you, because of course you cannot show your preparations, your openings for the match, so you have to choose, let us say, not your real openings...

Yes, sometimes. But it is nor really about this, it is about that fact that sometimes it would be too simple if you don't show anything. That also gives a lot of information to your opponent. Then he knows that what you played you will for sure not play in the match. That is why you need to mix. Some things. I have to show, some things I don't show. So I am trying to confuse as much as possible my opponent. And this is a bit difficult. Before each game I start to think if he plays this should I play this or should I play that, or even during the game I start to think maybe I should play this or maybe I shouldn't play it. It is a little bit confusing I would say. It is easier to play when you don't have such an event in front of you.

Kramnik has been playing indifferently lately, yet when times demand he can be the world's strongest match player.  Anand is the current world champion, noting that he won the title through a tournament structure.  Match chess is all about adjustments and stamina and defense and preparation and strength of will.  Winning tournaments requires that you beat the weaker players consistently and that has never been Kramnik's strength.

Anand, by the way, can play speed chess almost as well as he plays classical slow chess.  He is an amazing tactician and a brilliant defender.  But does he have a deep enough strategic style to prevail in a longer and tougher setting?  I'll let you know how the match goes.

Markets in Everything: Panhandling

In Memphis, a local FOX News reporter, Jason Carter, donned old clothes and hit the streets earlier this year, earning about $10 an hour. “Just the quasi-appearance of being homeless filled my cup,” Carter observed. That all the money is beyond the tax man’s clutches adds to the allure of professional panhandling.

Carter prepared for his stint on the street by surfing the Internet, where a variety of websites dispense panhandling advice. NeedCom, for example—subtitled “Market Research for Panhandlers”—offers tips from Baker and other pros on how to hustle. The website’s developer, Cathy Davies, wants it to get people “thinking about panhandling as a realistic economic activity, rather than thinking that panhandlers are lazy or don’t work very hard.”

More here, overly sensationalistic but interesting in parts.

Thanks to Tim Groseclose for the pointer.

Does grandpa matter?

Even fathers with only one wife provided no [longevity] benefit to their grandchildren, a finding supported by previous research.

That is based on a study of Finnish church data from the 18th and 19th centuries.  The thrust of the entire piece is the claim that polygamous men will live longer than monogamous men.  But note, all you Lotharios out there, this result is correlated with actual [multiple] marriage, not running around in bars and the like.

If I Believed in Austrian Business Cycle Theory, part II

Karl, a loyal man, has a request:

In your post from a few years ago, "If I believed in Austrian business cycle theory," you made some of the most apt predictions you have made on this blog. Nearly everything has come true. Obviously though you are not touting these predictions because being associated with the "intransigent" Austrians will damage your credibility as a hip, quirky thinker. So instead, can you just give me a socio-economic cost-benefit analysis of breast implants.

Here is my original post.  Two points:

1. What happened is best thought of as a bubble where loose monetary policy was one of several triggers but the market response was more at fault than was government.

2. Second, one important false market signal was that people thought rising asset prices could substitute for savings out of disposable income.  That is not the Misesian or Hayekian scenario.

My "predictions in the subjunctive" were largely correct -- more correct than I knew at the time -- but that doesn't mean Austrian business cycle theory is largely correct.  I would, however, endorse a modified version of the theory which goes beyond the "blame the government inflation" for everything interpretation.

On Karl's other question, it's not just a zero-sum game, socially speaking, but my personal preference would be for Q = 0.

Addendum: Walter Block wrote a 58-page critique of my earlier writings on ABC.  He has sent it to me twice and I am happy to link to it.  Update: Here is the correct Block link.

The Return of the Zombie

The Congressional Budget Office estimates that there is only a 7% probability that someone born in 2000 will receive their Social Security benefits as promised today. The better news is that with a probability of 58% the cut in benefits will be 20% or less.

Since the CBO isn't trying to predict future policy, these "probabilities" should be taken with more than a grain of salt.  Sill these numbers are an arresting way of presenting the basic data on projected Social Security revenues and scheduled payments. 

Hat tip to Paul Krugman.

Are there reasons to be dogmatic?

That's another request; the exact wording was "The five best reasons to think you should be more dogmatic about the economic beliefs you are not dogmatic about." 

I'll give one reason, namely that, somewhat counterintuitively, dogmatism can further the generation of new ideas.  Yes, this does require a special meaning of the word dogmatic.  I'm not talking about a grouchy guy who goes "harumph" whenever he counters a new idea.  I'm talking about the person who generates the new idea!  In strict Bayesian terms, most innovators are not justified in thinking that their new ideas are in fact correct.  Most new ideas are wrong and the creator's "gut feeling" that he is "onto something" is sometimes as epistemologically dubious as is the opinion of the previous scientific consensus.  Yet we still want that they promote these new ideas, even if most of them turn out to be wrong. 

In this view, the so-called "reasonable" people are selfishly building up their personal reputations at the expense of scientific progress.  They are too reasonable to generate new ideas.

To put it another way, there are two kinds of truth-seeking behavior:

1. Hold and promote the view which leads to society most likely settling upon truth in the future, or

2. Hold and promote the view which is most likely to be correct.

These two strategies coincide less than many people think.  Which do you prefer and why?

Addendum: Here is a recent NYT article.  Excerpt:

Voters who insist that they are undecided about a contentious issue are sometimes fooling themselves, having already made a choice at a subconscious level, a new study suggests.  Scientists have long known that subtle biases can skew evaluations of an issue or candidate in ways people are not aware of. But the new study, appearing Thursday in the journal Science, suggests that professed neutrality — sitting on the fence — leaves people more vulnerable to their own inherent biases than choosing sides early.

Will Bryan Caplan endorse this?

Ways that sheep can die

Getting stuck on their backs and dying of suffocation Attacked by flies Eaten by maggots Being attacked by dogs or any other living creature Being frightened into a heart attack by imagining the dog is going to attack, even though it is not Drowning (Are we surprised sheep cannot swim?) Suffocating in snow (surprisingly common) Hoof infections that poison the blood Almost exploding with grass because they have eaten too much and are unable to pass wind If they get too hot If they get too cold

That's from Marti Leimbach and I wonder how many sheep die of old age.  With that, it is time to leave Santiago and return home.

Why this recession might last a while

The column is entitled: "Finding the Mess Behind the Mess."  The key line is:

The fundamental [macroeconomic] problem in the American economy is that, for years, people treated rising asset prices as a substitute for personal savings.

After discussing some adjustment problems, here are comments on policy:

One path that is likely to prove counterproductive is further fiscal stimulus in the form of tax rebates. Such stimulus can raise consumer spending and bolster the economy in the short run, but it works — if it works at all — only by pushing consumers to spend rather than to save. It merely postpones needed adjustments by providing a grab bag of goodies at exactly the wrong time.

Here is the conclusion:

Have you ever tried to undo a bunch of tangled wires or cords? If you don’t pull on the right wires in the right order, the mess becomes worse. If you pull too hard, the whole thing can break. But if your first pulls are good ones, the untangling becomes easier with each move.

That’s like our economy’s situation today. If we expect too much too quickly, we’ll make matters worse. But there is a way out of the mess, and it lies in our hands.

Be careful, and start pulling.

I've become increasingly interested in how an economy can be "tangled up," a notion I first learned from Axel Leijonhufvud.  The literature on self-organizing critical systems considers this idea, but I don't think it has been expressed in simple, intuitive form and in a manner that can be integrated with other macroeconomic ideas.

Top Chef

This one is a request from a long time ago.  Wintercow20, a loyal MR reader, asked:

What do you think of Top Chef? I am an addict!

I am a fan of reality TV but mostly I have chosen blogging instead.  I've seen about a dozen Top Chef episodes, mostly through the urging of darling Yana.  Mark of excellence: the drama is so good that the commentary makes sense even though you can't taste the food.  It's a show about learning, excellence, and motivation.  The voice-over narratives are an object lesson in behavioral economics and self-deception.

Here is a wonderful post by Grant McCracken on reality TV; excerpt:

Reality programming is not just cheap TV, it is responsive TV. Surely, one of the most sensible way for the programming executive to get back in touch with contemporary culture is to turn the show offer to untrained actors who have no choice but to live on screen, in the process importing aspects of contemporary culture that would otherwise have to be bagged and tagged and brought kicking and screaming into the studio and prime time.  Reality programming is contemporary culture on tap.  It is by no means a "raw feed."  That is YouTube's job.  But it is fresher than anything many executives could hope to manage by their own efforts.  In effect, reality programming is "stealing signals" from an ambient culture, helping TV remain in orbit.  (Mixed metaphor alert.  Darn it, too late.)

Grant adds: "Reality programming also serves as a way for a divergent culture to stay in touch."

Addendum: I don't see why she married Salman Rushdie; books are reproducible after all.

Second addendum: Here is Matt Yglesias, on the new form of reality TV...markets indeed in truly everything.