Marginal Revolution

Project Tuva

Bill Gates has bought the rights to Richard Feynman's lectures, The Character of Physical Law, and has put them on the web with lots of annotations.  Nicely done.

I liked Feynman's point about Newton's law of gravity being used by astrologers, "That's the strange world we live in, that all the advances and understanding are used only to continue the nonsense which has existed for 2,000 years."

Hat tip to Tierney Lab.

The Increased Competitiveness of the US Economy

Deloitte has just released The Shift Index, a study of long-term trends in the U.S. economy.   Two interesting graphs follow which put some numbers on conventional wisdom.  The US economy has become much more competitive over time. We can see this in the economy wide Herfindahl-Hirschman Index, a measure of market concentration, which has halved in the latest forty years (click to enlarge) and also in the topple rate.

The topple rate is a measure of how the rank of large firms on return of assets changes over time.  The topple rate has increased by about 60% over the past forty years (ignoring the recent blip up).  What this means is that the firms on top are less likely to stay on top today than in the past - the recent blip up indicates the upheaval in firm rankings during the current recession.  Notice also that an increased topple rate implies an increase in stock market volatility which we have also seen over the long-run (not just in recent years).

As a result of increased competition and also, I believe, greater wealth and reduced interest rates, the economy wide return on assets has decreased by 75% (see the report).

If the return on assets has decreased but productivity and wealth are up then where has the wealth gone?  To consumers and the creative class.  Thus, increased competition in the economy has driven down the return to capital and at the same time has increased the return to the complementary input which is in greatest fixed supply, creative labor.  More data in the full report.

Zotero

Zotero is a free program for citations management and bibliography generation designed to be competitive with Endnote and similar products.  I've been using it for a couple of weeks.  Zotero lives as a Firefox extension and it's best feature is the ease with which you can import citations from the web.  If you are looking at a paper on JSTOR, for example, you can "one-click import" the citation.  One-click import is also available from Amazon, Cite-Seer, ABI-Inform, the Library of Congress, many university library catalogs, Medline, Google books and many others.

Thus it's very easy to generate a citations list in Zotero by visiting a handful of large databases - this is especially easy for books and not too hard for recent articles but it's more difficult to find older articles in online databases.  Zotero's interface is somewhat clunky so entering citations by hand is not as convenient as I would like.  In addition to grabbing the citation, Zotero can grab entire PDFs so you can keep articles and citations in one database.  Exporting of the citations in a variety of bibliographic format is clean and well done.

Zotero is only available as a Firefox extension (the developers take a perverse pride in this fact).  The developers are at GMU, although I don't know the team at all.  Zotero will import citations from another citations management program so switching is low cost.  Worth checking out.

The Singularity is Near

Tom Vanderbilt, author of the excellent Traffic, has a very good piece in the latest NYTimes Magazine on data centers.   

The specter of infinitesimal delay is why, when the Philadelphia Stock Exchange, the nation’s oldest, upgraded its trading platform in 2006, it decided to locate the bulk of its trading engines 80 miles — and three milliseconds — from Philadelphia, and into NJ2, where, as Thomas notes, the time to communicate between servers is down to a millionth of a second. (Latency concerns are not limited to Wall Street; it is estimated that a 100-millisecond delay reduces Amazon’s sales by 1 percent.)

...It seemed heretical to think of Karl Marx. But looking at the roomful of computers running automated trading models that themselves scan custom-formatted machine-readable financial news stories to help make decisions, you didn’t have to be a Marxist to appreciate his observation that industry will strive to “produce machines by means of machines” — as well as his prediction that the “more developed the capital,” the more it would seek the “annihilation of space by time.”

I like the quote but doubt that Marx is the best guide to this new world. try Charlie Stross instead.

Apportioning Blame for the Deficit

David Leonhardt's column breaking down the "causes" of the budget deficit has been widely reported and the bottom line repeated many times: 

President Obama’s agenda, ambitious as it may be, is responsible for only a sliver of the deficits, despite what many of his Republican critics are saying.

I have two problems with the analysis.  First, the NYTimes' excellent graphics department this time goes overboard with a big and difficult to read chart.  Matt Yglesias does much better summarizing the point with that old standby, the pie chart:

Second, although not "wrong" the Leonhardt's analysis doesn't reveal the arbitrariness of this way of apportioning deficit blame.  

The reason why the hundreds of billions of dollars of spending in Obama's agenda is said to be responsible for only a "sliver" of the deficit is that the agenda also includes taxes, thus the net effect is low.

Now Obama deserves kudos for a more honest budget process.  Indeed, if the only choices are the tax and spend party and the no-tax and spend party then I prefer the former for both economic and political reasons.  Thus as political accounting Leonhardt's conclusion is reasonable.

I suspect, however, that many people will not see that the economic accounting is arbitrary and potentially misleading.  To see why, imagine that President Bush increased taxes in the last days of his administration and Obama increased spending in the first days of his administration.  We would then be in exactly the same economic position as we are now but everyone would be writing about how "Obama's ambitious agenda is responsible for a large portion of the deficit."  In other words, if it were not for Obama's spending, the deficit would be hundreds of billions of dollars lower. 

Washington is all about political accounting but we should not be misled into thinking that because Obama's agenda accounts for only a "sliver" of the deficit that this makes it a modest or cheap agenda.  The agenda is big and expensive and every dollar of spending is a dollar that adds to the deficit.  

Marginal product?

Australian Navy submarine cooks may make more money ($160k) than some admirals.

That's from www.geekpress.com.  Alternatively, what would Adam Smith say?

The Black Swine

High-tech models developed by quants have, once again, greatly underestimated risk.  What will be the consequences?

In the waning days of April, as federal officials were declaring a public health emergency and the world seemed gripped by swine flu panic, two rival supercomputer teams made projections about the epidemic that were surprisingly similar — and surprisingly reassuring. By the end of May, they said, there would be only 2,000 to 2,500 cases in the United States.

May’s over. They were a bit off.

On May 15, the Centers for Disease Control and Prevention estimated that there were “upwards of 100,000” cases in the country,..

Divorce and Crime Victimization

While paging through the statistical tables of Criminal Victimization in the United States I found some interesting data on victimization, marriage and divorce.  The rate of victimization for violent crimes (per 1,000 persons aged 12 and over) for never married and married males is as follows:

Never Married Males: 45.0
Married Males: 12.3

Clearly, married males are older and they have settled down, usually in places away from crime hot spots.  Thus the fact that the rate of victimization for married males is much lower than for never married males is no surprise.  What did surprise me is that divorced males have rates of victimization about as high as for never married males:

Divorced or Separated Males: 44.2

The same pattern is even stronger for females:

Never Married Females: 38.4
Married Females: 10.3
Divorced or Separated Females: 49.4

The patterns are suggestive of how large a difference one's choices can make for criminal victimization.  That is, one hypothesis to explain the data is that singles congregate in urban, high crime areas and they go out at night to bars and other high crime locations.  Married individuals move to low crime suburbs and stay home with popcorn and Netflix.  The divorced, however, move back to the cities where the singles are and they head out at night to try to mate again.

An alternative hypothesis is that the individuals who tend to get divorced have personalities or behaviors which make them more likely to get divorced and more likely to be victims of crime: a drug user, for example, is likely to have a higher probability of divorce and a higher probability of being a victim of crime than a non drug-user.    

How many other hypotheses can you think of to explain the data?  What tests would you suggest to distinguish hypotheses?

Paraguay fact of the day

This was from an English-language version of El Pais, tucked into my IHT; I don´t see the story on-line:

Official estimates state that seven out of 10 children in Paraguay are only registered with their mother´s last name -- in Mexico the rate is one out of six.

A bit of googling turns up a second and related estimate, namely that in Paraguay 6.5 children out of ten are not registered to receive social services.

Hennessey on CAFE

Excellent post, filled with detail, by Keith Hennessey on CAFE.  Some highlights:

The NHTSA analyses look at a range of benefits to society, including economic and national security benefits from using less oil, health and environmental benefits from less pollution, and environmental benefits from fewer greeenhouse gas emissions (this is new).  They also consider the costs, primarily from requiring more fuel-saving technologies to be included by manufacturers....

Rather than maximizing net societal benefits, [the Obama] proposal raises the standard until (total societal benefits = total societal costs), meaning the net benefits to society are roughly zero...

The Obama plan will increase costs enough to further suppress demand for new cars and trucks. This will cause significant job loss, and probably in the 150K 50K range over 5-ish years, with a fairly wide error band....[updated to reflect an error in calculation, AT]

The Obama option would reduce the global temperature by seven thousandths of a degree Celsius by the end of this century....[and] would reduce the sea-level rise by six hundredths of a centimeter.  That’s 0.6 millimeters.

Note that these points are all drawn from NHTSA work (see Hennessey's post for details) not from a "think tank" study.  Finally, Hennessey is concerned about the future:

...As early as this fall, greenhouse gases could become “regulated pollutants” under the Clean Air Act. Once something becomes a “regulated pollutant,” a whole bunch of other parts of the Clean Air Act kick in, and EPA is off to the races in regulating greenhouse gases from a much (much) wider range of sources, including power plants, hospitals, schools, manufacturers, and big stores.

One of the scariest elements of this is called the “Prevention of Significant Deterioration” permitting system. In effect, EPA could insert itself (or your State environmental agency) into most local planning and zoning processes. I will write more about this in the future. It terrifies me.