Marginal Revolution

I want you to ponder sentences about vengeance

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.

Supply or demand?

Prices are here and the pointer is from Elizabeth Pisani.  Comments are closed!

China fact of the day

There are already more Chinese living in Nigeria than there were Britons during the height of the empire.

Here is the link, which includes more.

Detroit fact of the day

Among cities with more than 500,000 residents, Detroit has the safest drivers, with accident rates that are 20 percent below the national average.

For cities with more than 1 million residents, Phoenix has the safest big-city commuters, with accident rates about equal to the national average.

Here is much more, Philadelphia is a disaster and L.A. isn't so safe either.  I wonder to what extent these rankings simply proxy for traffic density.  Here are some charts.  Overall Sioux Falls, Tucson, and El Paso seem to be relatively safe cities for driving.

Saudi Arabia fact of the day

Saudi Arabia accounted for 28 per cent of all global amphetamine seizures in 2006, the latest year for which data are available...

Yes there are enforcement differentials and various measurement biases, but that still sounds like a lot of amphetamines, especially for a country of only about 27 million people.  Here is the full story.

Who are the aggressive drivers?

Watch out for cars with bumper stickers.

That's the surprising conclusion of a recent study by Colorado State University social psychologist William Szlemko. Drivers of cars with bumper stickers, window decals, personalized license plates and other "territorial markers" not only get mad when someone cuts in their lane or is slow to respond to a changed traffic light, but they are far more likely than those who do not personalize their cars to use their vehicles to express rage -- by honking, tailgating and other aggressive behavior.

It does not seem to matter whether the messages on the stickers are about peace and love -- "Visualize World Peace," "My Kid Is an Honor Student" -- or angry and in your face -- "Don't Mess With Texas," "My Kid Beat Up Your Honor Student."

...Drivers who do not personalize their cars get angry, too, Szlemko and his colleagues concluded in a paper they recently published in the Journal of Applied Social Psychology, but they don't act out their anger. They fume, mentally call the other driver a jerk, and move on.

"The more markers a car has, the more aggressively the person tends to drive when provoked," Szlemko said. "Just the presence of territory markers predicts the tendency to be an aggressive driver."

Here is much more, with some interesting theory in the article as well.  Apparently bumper stickers indicate that the driver has a particular, and potentially dangerous, sense of territoriality.

Popcorn fact of the day

[Richard] McKenzie did a fair amount of real-world research on the popcorn front, and his most important finding (as far as I'm concerned) is that if you're in a cinema which gives you a choice between buying a medium bag of popcorn and a large tub of popcorn, there's a greater-than-50% chance that the medium bag will actually contain more popcorn than the large tub.

That's from Felix Salmon.

Japanese retailing is more efficient than most people think

Kyoji Fukao, professor at Hitotsubashi University's Economic Research Institute, thinks so too. The team he heads provides much of the Japanese data that go into international comparisons. He argues that the usual measures of service sector efficiency - value added per man hour and total factor productivity, which incorporates capital and labour inputs - are crude and hard to compare across borders.

He cites Japan's retail sector, regularly branded as inefficient. The basic measure of retail-sector productivity is how much of a product an employee can shift in an hour. On this measure, Germany does well. That turns out to be because of restricted opening hours, which oblige customers to make hefty purchases in one go. Japan does badly. Cavernous US superstores do better than cramped noodle or tofu shops. Japan also has a dense network of convenience stores on almost every city block, open 24 hours, allowing people to shop whenever they want. This makes them inefficient, since purchases are less concentrated.

No allowance is made, either, for the fact that Japanese shops tend to be within walking or, at most, cycling distance. Figures do not capture the inconvenience of having to travel, or the externalities associated with long shopping expeditions: traffic accidents, pollution, road maintenance.

Here is the full article, interesting throughout.  The quality of Japanese service, by the way, is miles ahead of anywhere else (though stores don't like to take returns) and those subjective pleasures of the shopping experience don't get picked up by the numbers either.  I can't imagine how a Japanese would feel moving to Germany or Austria.

Does the CPI understate inflation?

You're hearing this a lot these days, most of all from Kevin Phillips.  David Leonhardt sets the record straight.  Here is one excerpt:

During the 1980s and 1990s, though, did you ever stop and marvel at what a small share of your paycheck you were spending at the supermarket? I didn’t. I also didn’t really notice that gas cost less in the late 1990s than it had in the 1980s. Yet lately, every time my wife or I pass a new benchmark for filling up our tank — $40, $50 and now $60 — we have a conversation about it.

Price increases are simply more noticeable — more salient, as psychologists would say — than price decreases. Part of this comes from the notion of loss aversion: human beings dislike a loss more than they like a gain of equivalent size. If you have to sell your house for less than you bought it for, you’re really unhappy. You hate that ground chuck now costs $2.83 a pound, but you didn’t notice that oranges are 31 percent cheaper than they were a year ago.

...The price of major appliances has been flat over the last year. Furniture is 1 percent less expensive. A decade ago, a basic four-door Toyota Corolla LE cost $16,018, according to the company. The 2009 basic model costs $16,650, and it’s a safer, more powerful, more fuel-efficient car than its predecessor.

To top it all off, most people don’t buy any of these items very often. “People tend to remember things they do frequently,” says Stephen Cecchetti, an economist at Brandeis University who studies inflation. “And what do you buy more frequently than gas and food?”

Why are gun owners so happy?

Arthur Brooks reports:

Who are all these gun owners? Are they the uneducated poor, left behind? It turns out they have the same level of formal education as nongun owners, on average. Furthermore, they earn 32% more per year than nonowners. Americans with guns are neither a small nor downtrodden group.

Nor are they "bitter." In 2006, 36% of gun owners said they were "very happy," while 9% were "not too happy." Meanwhile, only 30% of people without guns were very happy, and 16% were not too happy.

In 1996, gun owners spent about 15% less of their time than nonowners feeling "outraged at something somebody had done." It's easy enough in certain precincts to caricature armed Americans as an angry and miserable fringe group. But it just isn't true. The data say that the people in the approximately 40 million American households with guns are generally happier than those people in households that don't have guns.

The gun-owning happiness gap exists on both sides of the political aisle. Gun-owning Republicans are more likely than nonowning Republicans to be very happy (46% to 37%). Democrats with guns are slightly likelier than Democrats without guns to be very happy as well (32% to 29%). Similarly, holding income constant, one still finds that gun owners are happiest.

By the way, if you are curious, I have never even touched a gun.

Addendum: Arthur has a new (and very good) book out, Gross National Happiness.

The safety of elevators

Nonetheless, elevators are extraordinarily safe—far safer than cars, to say nothing of other forms of vertical transport. Escalators are scary. Statistics are elusive...but the claim, routinely advanced by elevator professionals, that elevators are ten times as safe as escalators seems to arise from fifteen-year-old numbers showing that, while there are roughly twenty times as many elevators as escalators, there are only a third more elevator accidents. An average of twenty-six people die in (or on) elevators in the United States every year, but most of these are people being paid to work on them. That may still seem like a lot, until you consider that that many die in automobiles every five hours. In New York City, home to fifty-eight thousand elevators, there are eleven billion elevator trips a year—thirty million every day—and yet hardly more than two dozen passengers get banged up enough to seek medical attention. The Otis Elevator Company, the world’s oldest and biggest elevator manufacturer, claims that its products carry the equivalent of the world’s population every five days.

And I like this passage:

Two things make tall buildings possible: the steel frame and the safety elevator. The elevator, underrated and overlooked, is to the city what paper is to reading and gunpowder is to war. Without the elevator, there would be no verticality, no density, and, without these, none of the urban advantages of energy efficiency, economic productivity, and cultural ferment.

Here is the article, interesting throughout.

The pointer is from Chris Masse

The link, which has further explanation, is here.  Chris's prediction markets blog is here.

Average starting salaries by major

Economics comes in 4th, with an average of $43,419.

Part of the Problem

1. Given that Bear held trading contracts with an outstanding value of $2.5 trillion with firms around the world, "we were talking about the possibility of a global run on the bank."

2. Bear had a hand in a whopping $10 trillion worth of transactions, by some estimates.

3. Bear Stearns had total positions of $13.4 trillion.

Income per natural

It is easy to learn the average income of a resident of El Salvador or Albania. But there is no systematic source of information on the average income of a Salvadoran or Albanian. In this new working paper, research fellow Michael Clemens and non-resident fellow Lant Pritchett create a new statistic: income per natural — the mean annual income of persons born in a given country, regardless of where that person now resides...Almost 43 million people live in a group of countries whose income per natural collectively is 50 percent higher than GDP per resident. For 1.1 billion people the difference exceeds 10 percent.

The pointer is from Will Wilkinson, here is the paper itself.  By the way, can you guess the country with the highest income per natural?  It's the United States (ahem), with Norway and Luxembourg close behind.  Scroll to pp.34-35 of the paper for a full list.  Bermuda does surprisingly well.  Guyana has the biggest difference between income per capita and income per natural, at over 100%.

It's OK to live together before marriage

The latest word is here, namely that the previously established relationship between cohabitation and marriage failure seems to have gone away.  I hope I have made a few of you happy today.

gdp vs. gdp per capita

Using growth in GDP per head rather than crude GDP growth reveals a strikingly different picture of other countries' economic health. For example, Australian politicians often boast that their economy has had one of the fastest growth rates among the major developed nations—an average of 3.3% over the past five years. But Australia has also had one of the biggest increases in population; its GDP per head has grown no faster than Japan's over this period. Likewise, Spain has been one of the euro area's star performers in terms of GDP growth, but over the past three years output per person has grown more slowly than in Germany, which like Japan, has a shrinking population.

Some emerging economies also look less impressive when growth is compared on a per-person basis. One of the supposedly booming BRIC countries, Brazil, has seen its GDP per head increase by only 2.3% per year since 2003, barely any faster than Japan's. Russia, by contrast, enjoyed annual average growth in GDP per head of 7.4% because the population is falling faster than in any other large country (by 0.5% a year). Indians love to boast that their economy's growth rate has almost caught up with China's, but its population is also expanding much faster. Over the past five years, the 10.2% average increase in China's income per head dwarfed India's 6.8% gain.

Here is more.  Of course it is wrong to think that one measure is necessarily better than the other.  And immigration and more births both raise absolute gdp though you may not view the gdp gains in each case as having the same moral status.  One simple adjustment that could be made is to subtract the income an immigrant would have earned, had he or she not moved to a new country.

Suicide fact of the day

Glen Whitman reports:

I went back to the original data source (imagine that!) and found that the stereotype is dead wrong: suicide rates are notably lower for teenagers than adults...Suicide rates do rise throughout the teen years, but they plateau at about age 20 and remain flat throughout the years 20 to 65. Then they jump again for the 65+ demographic.

In case you're wondering, teen suicide rates have not been rising, either. They've been in decline since the late 1980s.

Yet these teens still take the most risks.

New roots for the Irish miracle?

By the turn of the century [2000], according to some reckonings, 70 percent of Irish manufactured exports were by US-owned firms...

This was, of course, encouraged by tax breaks and a form of industrial policy.  But part of this process was a shift away from English investment:

Between 1960 and 1970 British-owned companies represented 22 percent of new industrial enterprises in Ireland.  But by 1980 they accounted for less than 2 percent.  Significantly, the proportion of exports to Britain from Ireland halved between 1956 and 1981.

In other words, Ireland found a more complementary economic partner, namely the United States.  The Irish economic miracle is in part the American economic miracle.

That is from the often interesting Luck & the Irish: A Brief History of Change from 1970, by R.F. Foster.  Here is a previous MR post on the Irish economic miracle.

How high is the U.S. poverty rate?

Here is some wisdom, from the non-libertarian, non-right-wing,  never-asked-to-contribute-to-the-WSJ-Op-Ed-page Lane Kenworthy:

Poverty comparisons across affluent nations typically use a “relative” measure of poverty. For each country the poverty line — the amount of income below which a household is defined as poor — is set at 50% (sometimes 60%) of that country’s median income. In a country with a high median, such as the United States, the poverty line thus will be comparatively high, making a high poverty rate more likely...

Using a relative measure, the U.S. poverty rate is higher than Romania’s and only slightly lower than Mexico’s (see here). Similarly, Mississippi’s relative poverty rate is the same as Connecticut’s.

So when you hear that the U.S. poverty rate is about 20 percent, keep this in mind.  Here is more, including links to research.  Here is a response from Paul Krugman.  Note that Krugman's initial Op-Ed stresses how the measured rate has not fallen over (some periods of) time, but his response simply cites a ranking of the U.S. among other wealthy nations, based on an absolute poverty rate.  Have the time series comparisons been jettisoned or should we stand by them?

Here is more useful information.  It's also worth noting that poverty rate numbers do not take into account food stamps, housing subsidies, the Earned Income Tax Credit, and Medicaid, among other benefits.  Not to mention black market income and underreported income (often for EITC reasons); yes it is worth referring back to consumption data which show that the poor do quite a bit better than income data alone would indicate.  That said, a very good case can be made that we overinvest in fighting the poverty of the elderly and underinvest in fighting the poverty of children.

The bottom line: Be very suspicious when you hear talk about the poverty rate.  The real question, as stressed by James Heckman, is what rate of return we can hope to achieve from feasible interventions in favor of poor, young children.  That's a much harder question to argue.  Heckman of course finds a high rate of return, so I suspect the key question centers around what is "feasible" given the imperfections of politics.  It's worth noting that many federal anti-poverty programs have in fact failed, or so changed that we don't even call them anti-poverty programs any more.  At the end of the day that calls for "better action" rather than inaction, but softening people up with overly pessimistic and uncritically presented numbers will probably make a good program less rather than more likely. 

China fact of the day

It's not quite a fact, but here goes:

According to China Mobile, there were already 400,000 cracked iPhones using its cellular network by the end of 2007. That number, if accurate, is astonishing. It would mean that there are more unauthorized iPhones in China than there are authorized iPhones in Europe. It would account for the largest part of the so-called “missing” iPhones.

It's a fact if you believe China Mobile, which I do.

What makes an entrepreneur?

A Brazilian entrepreneur, that is.  First and foremost, entrepreneurship is predicted by family characteristics, most of all having other entrepreneurs in the family and coming from a large family.  What predicts finding a successful entrepreneur?: "the individual's smartness and higher education in the family."  Entrepreneurs are not more self-confident than non-entrepreneurs and overconfidence is a big danger.  Social networks predict who becomes an entrepreneur but not who becomes a successful entrepreneur.  Entrepreneurs in Brazil exhibit more trust but this result does not seem to generalize across countries.

Here is the paper, from the World Bank.  I thank Russ Roberts for the pointer.

What influences your social interactions?

Work doesn't seem to limit socializing.  My favorite result was that the better-educated people seem to fear visiting relatives:

Over time, increases in hours of work per capita have created the intuitively plausible notion that there is less time available to pursue social interactions. The specific question addressed in this paper is the effect of hours of work on social interaction. This is a difficult empirical question since omitted factors could increase both hours of work and social interaction. The approach taken in this paper utilizes an exogenous decline in hours of work in France due to a new employment law. The results clearly show that the employment law reduced hours of work but there is no evidence that the extra hours went to increased social interactions. Although hours of work are not an important determinant of social interaction, human capital is found to be important. The effect of human capital, as measured by education and age, is positive for membership groups but negative for visiting relatives and friends. Also, contrary to expectations, there are no important differences in the determinants of social interaction by gender, marital status or parent status. Finally, a comparison between France and the US show that the response to human capital and other variables are much the same in both nations.

Here is the paper, I don't yet see a non-gated version on-line.

Where is the world's largest swimming pool?

No Googling.  Guess in the comments section.  If you are desperate, the answer is here.  Here is a close-up photo.  Here are more good photos, with giveaways as to the location.

China fact of the day

...the annual expansion in China’s trade has been larger than India’s total annual trade during last several years.

Here is more, interesting points throughout.  And here is the upshot:

The most important factor that still holds back large [Indian] firms from entering these products is a set of draconian labour laws in India. Under these laws, it is virtually impossible for a firm with 100 or more employees to fire the workers even in the face of bankruptcy. It is equally difficult for the firms to reassign the workers from one task to another. These provisions impose very low worker productivity or a high real cost of labour. Large-scale capital-intensive sectors such as automobiles, where labour costs are a tiny proportion of the total costs, can profitably operate in such an environment. But the same is not true of large-scale labour-intensive sectors labour. Few foreign manufacturers are willing to enter India outside of a small subset of capital- and skilled-labour intensive sectors.

Updated numbers on violent deaths in Iraq

I've cited the Lancet numbers myself (in qualified fashion), but maybe the estimate of a million Iraqi deaths is far too high:

A new survey estimates that 151,000 Iraqis died from violence in the three years following the U.S.-led invasion of the country...For the new study, however, surveyors visited 23 times as many places and interviewed five times as many households. Surveyors also got more outside supervision in the recent study; that wasn't possible in the spring of 2006 when the Johns Hopkins survey was conducted..."Overall, this is a very good study," said Paul Spiegel, a medical epidemiologist at the United Nations High Commission on Refugees in Geneva. "What they have done that other studies have not is try to compensate for the inaccuracies and difficulties of these surveys, triangulating to get information from other sources."

Here is more, here is the study itself.  This new estimate is probably not the final word, but you will recall that anyone who questioned the older Lancet estimate was pilloried at length; there is a lesson here  - Thy Shall Not Use Thy Blog to Squelch Heretics -- and I am curious to see who will offer mea culpa and who will not.  "The two estimates aren't as different as they look" is one way of spinning it; "I was wrong" is another.

Update: Here, and here.

Foreclosures, by county

Here is the accompanying article by Matt Yglesias.

What I think I am nearly certain about

My apologies if this list sounds dogmatic or polemic.  I'm not trying to persuade you (now), I'm simply listing the inner contents of my mind, so you may compare this with my post on what I am uncertain about.  Here is an incomplete and desultory list of what I (think I) am nearly certain about:

1. Polarizing America won't make interest group politics go away, no matter how hard either the right-wingers or progressives wish it so.  It may even make interest group politics worse, and in the meantime the polarizer is simply demonstrating a lack of meta-rationality on the part of the polarizer.

2. We cannot do economic policy as we might arrange pieces on a chessboard.  What you ask for is rarely what you get, and your recommendations had better be prepared for this discrepancy.

3. Government-dominated health systems, insofar as they work well (a number of them do), succeed simply by lowering costs.  Health care has a murky relationship to human health, pharmaceuticals and broken limbs aside.  A version of the single-payer system, as might be adopted in the United States, would not lower costs.  We would be raising taxes and lowering medical innovation to give poor people a good deal more financial security and a slight bit more health; that is the relevant trade-off.

4. Overall, despite its many flaws, America is a force for liberty in the greater global community.

5. We are programmed to respond to the "us vs. them" mentality and highly intelligent people are no less captive to this framing.  We should try very hard to get away from this framing.

6. America is a beacon of innovation for the world, and it is critically important that we allow the preconditions for American innovation to continue.

7. It would be a disaster if American taxation ever reached 55 percent of gdp.

8. Which institutions work well is often country-specific. 

9. The West European way of life is a marvel, unprecedented in human history.  That said, I am not sure that the degree of economic security to date can persist in a more mobile and more diverse future (this second sentence retreats to what I am uncertain about).

10. No one has a good idea what the equilibrium looks like for nuclear proliferation.  This is very worrying.

11. The possibility of pandemics receives insufficient attention.  The world sleepwalked through AIDS for a long time, mostly because "it doesn't affect people like you and me."  The next time around could be much worse.

12. It is a big mistake -- even in rhetoric -- to conflate concern for the poor with comparative egalitarian intuitions.  The left ought to turn its back on this mistake, although it would mean losing one of their most effective rhetorical tools.

13. Most people are sincere in their views (even if wrong), and polemic attacks on them signal a weakness of the attacker, not the attackee.

14. The chance that a protectionism will be an economically rational form of protectionism is very low.

Los Angeles fact of the day

With less than two weeks left in the year, Los Angeles is on track to record its lowest homicide rate since 1970.    

That year, 394 people were killed in the city as the war in Vietnam raged on and the Beatles called it quits.    

As of Dec. 15, 379 people had been killed in Los Angeles this year, with about 200 of those incidents gang-related. The overall homicide rate is down 17 percent from last year.

One of the sharpest declines is in gang-related killings.  Here is the link, hat tip to Angus, and no, this is not a pre-timed post.

Subprime fact of the day

Even with about a tenth of all subprime mortgages now in foreclosure, only a small share of all American families -- about 0.3 percent -- own a home in foreclosure...

Here is the link, from Mark Thoma.  This is one big reason why I'm not yet convinced by the economic pessimists.  The article also notes how many estimates of the S&L crisis of the 1980s were exaggerated, and suggests the same tendency may be happening today.

Addendum: This piece is a good statement of the case for pessimism.

The latest evidence on racial discrimination and wages

I haven't read through this closely, but it seems to be a very important paper:

...we show that, relative to white wages, black wages: (a) vary negatively with a measure of the prejudice of the "marginal" white in a state; (b) vary negatively with the prejudice in the lower tail of the prejudice distribution, but are unaffected by the prejudice of the most prejudiced persons in a state; and (c) vary negatively with the fraction of a state that is black. We show that these results are robust to a variety of extensions, including directly controlling for racial skill quality differences and instrumental variables estimates. We present some initial evidence to show that racial wage gaps are larger the more racially integrated is a state’s workforce, also as Becker's model predicts.

Here is the paper.  This version is $5 cheaper.

The sources of fuel efficiency: a counterintuitive result

Matt Yglesias writes:

Via Andrew Sullivan, Eric dePlace notes that "You save more fuel switching from a 15 to 18 mpg car than switching from a 50 to 100 mpg car." And so you do. A 15 MPG car would require 1,000 gallons of gas to drive 15,000 miles while an 18MPG car could get it done in just 833 gallons. That saves 167 gallons of gasoline. By contrast, since a 50 MPG only uses 300 gallons to go 15,000 miles, upgrading to 100 MPG can't save that much gas -- the super-efficient car uses 150 gallons.

It is tricky, because the consumption basket and number of miles driven will not stay constant across alternatives, but this logic is worth keeping in mind nonetheless.

The scope of mortgage fraud

BasePoint Analytics LLC, a recognized fraud analytics and consulting firm, analyzed over 3 million loans originated between 1997 and 2006 (the majority being 2005-2006 vintage), including 16,000 examples of non-performing loans that had evidence of fraudulent misrepresentation in the original applications.  Their research found that as much as 70% of early payment default loans contained fraud misrepresentations on the application.

That is from a Fitch Ratings report (summary here, with an eventual link to buy it), the rest makes for very gory reading as well.  Thanks to a loyal MR reader for the copy of this report.

In which countries do kids respect their parents the most?

Here was my earlier post on the topic, now Ban Chuan Cheah is kind enough to send me questionnaire data from the World Values Survey.  The question is:

With which of these two statements do you tend to agree? (CODE ONE ANSWER ONLY)
A. Regardless of what the qualities and faults of one's parents are, one must always love and respect them.
B. One does not have the duty to respect and love parents who have not earned it by their behaviour and attitudes.

1. Always
2. Earned
3. Neither

Some rates of answering "Always" are:

Netherlands: 31.9 percent, Denmark: 35.9, Germany: 59.2, Belarus: 70.9, Japan: 71.6, France: 74.7, United States: 77.2, Canada: 77.6, India: 88.8, China: 94.5, Puerto Rico: 97.5, Vietnam: 99.3.

Based on these and other numbers, I tentatively conclude that wealth breeds parental disrespect, being Asian brings greater respect for parents, and having a strong welfare state is correlated with disrespect for parents.  Being a former East Bloc totalitarian state doesn't have nearly the oomph I would have expected; many East European countries fall into the 70-80 percent range.

Is there a "marriage premium" for gay men?

Data on cohabitation suggest that the answer is no, whether for gay men or cohabiting heterosexuals.  The standard selection story is that women are more likely to choose the high earning men and marry them.  But why don't women live with these men too?  Does living together not transfer enough resources?  Could it be that real legal marriage is proxying for the ability to commit, which is positively correlated which other determinants of job success?

Which are the most obese American cities?

Memphis wins the competition, but:

Had we included every area on the list, the smaller cities of Huntington, W.V., and Ashland, Ohio, on the West Virginia, Kentucky and Ohio state borders would have far outpaced every city on the list with obesity rates of 45%. Of the 50 cities we did rank, Boston entered last, with only 19%.

Here is the full story.  Residents of San Antonio are the most likely to patronize fast food restaurants, with an average (or is it median?) of 20 fast food days a month.  I'll note that Latino fast food is better than average and it involves a smaller health penalty, relative to the non-fast food.  Here are photos of the most obese American cities, though oddly they show the buildings far more than the people.  Would an article about tall or wide buildings show only the people?  Could they not find heavy people?  Or do they think we simply don't want to look at them?

Chinese movie piracy is overestimated

The three countries in which the [movie piracy] losses to U.S. studios were highest were not East Asian countries, and two of them were not developing countries: Mexico, the United Kingdom, and France accounted for over $1.2 billion in lost revenues, or 25% of the non-U.S. total – and slightly less than the U.S. total of $1.3 billion.

You will notice that China is not mentioned in that summary.  Go to p.13 of the paper: Russia has a per capita piracy rate lower than that of Germany and about equal to that of Japan.  And, out of the first eleven nations studied, China comes in sixth in absolute terms for movie piracy losses and eleventh in per capita terms.  In per capita terms, nation #10, Russia, has almost ten times the piracy losses as does China.  Per capita piracy losses are about twenty times higher in the United States than in China.  If eleven more nations are added to the rankings (see p.15), only two (Korea and India) have lower per capita piracy losses than China.  Overall that puts China at 20th out of 22 sampled countries when it comes to per capita piracy losses on movies. 

Hungary, however, is a major, major offender.  Chinese piracy is highly visible to those who visit major Chinese cities, because it takes the form of DVD sales in the streets.  But the real grabbers are countries where everyone has a VCR or DVD player, and where the domestic film industry is relatively weak.

These numbers may not be highly accurate, but they do put things in perspective.  Hat tip to China Law Blog.

Subprime fact of the day

The entire market in subprime debt is just 1.4% of the size of global equity markets. Or, to put it another way, a 1.4% downward fluctuation in stocks erases the same amount of value as if all subprime-backed bonds were collectively marked to $0.

Here is the link.

China re-estimate of the day -- whoops!

The Asian Development Bank presented official survey results indicating China's economy is smaller and poorer than established estimates say. The announcement cited the first authoritative measure of China's size using purchasing power parity methods. The results tell us that when the World Bank announces its expected PPP data revisions later this year, China's economy will turn out to be 40 per cent smaller than previously stated......The number of people in China living below the World Bank's dollar-a-day poverty line is 300m - three times larger than currently estimated.

Here is more.

China fact of the day

When next summer's Olympics roll around, the Beijing Weather Modification Office will be poised to intercept incoming clouds, draining them before they get to the festivities.  No fewer than 32,000 people nationwide are employed by the Weather Modification Office -- "some of them farmers, who are paid $100 a month to handle anti-aircraft guns and rocket launchers" loaded with cloud-seeding compounds.

Here is the story.

China fact of the day

Or is it Europe fact of the day?  Switzerland fact of the day?

Beijing is now Europe's largest source of manufactured imports, but the 27-nation bloc, with a population of about 470 million people, exports less to China than it does to Switzerland.

Here is the article. 

Remember, remember the 5th of November

Ron Paul has now passed Fred Thompson in the probability of winning the Republican nomination.  According to Intrade, Paul has a probability of winning the nomination of 8.8%. (Guiliani (42.0%) and Romney (27.6%) are first and second.)

In closely related news, Paul raised $4.2 million yesterday.  V.

Thanks to Barry Klein and Tim Groseclose for the tips.

China fact of the day

...there are 100 gigawatts of "illegal" electric power plants in China, meaning plants not approved by the central government. (The entire nation of France uses 80 gigawatts of power. China uses 650 gigawatts.)

China sentence of the day is also a citation from Arnold Kling:

China's central government has difficulty getting its constituencies to change, and it is "outsourcing" some forms of regulation and governance to the U.S. and international organizations.

China essay of the day is here.

Assorted Links

• The Impact of Milton Friedman on Modern Monetary Economics.  A nice review by Edward Nelson and Anna Schwartz of Friedman's thought and influence over monetary policy that also, in the author's words, sets the record straight on Paul Krugman's 'Who was Milton Friedman.'

• The world may be getting smaller but big Americans are sinking the boats at Disney's It's a Small World.

• The Ayn Rand Lexicon is now online.

Carmen Laforet

Nada, her book, is even better, a true case of a rediscovered classic, now out in a first-rate English translation.

RAND Hits Back

Joseph Newhouse and the other RAND researchers have responded to Nyman's paper arguing that attrition bias biased their results.  The RAND researchers were aware of these issues and in fact designed the experiment to avoid incentives for non-random attrition.   Most importantly, the basic RAND findings have now been replicated in many other studies (smaller and not always experiments but the results are solid).  I call it a knockout for RAND.

It's a credit to the many insightful commentators on Marginal Revolution that many of these points were made already in the comments on my original post.

Thanks to Jason Furman for the pointer.

How much is America taxing its rich?

Lots, at least for some:

It might be fair to have the rich pay half their income . . . but when you factor in other taxes, many of them do. My old colleagues moving to New York City from London were frequently heard to say "What is this rubbish we've been talking about America having low taxes? My taxes are higher here!" That's because New York State and New York City together levy an additional income tax of 10% once your income is over $100K, which pushed two-income families above Britain's 40% top tax bracket. A 50% tax rate on top incomes would result, for New Yorkers, in a 60% effective total income tax rate total, with their incomes further eroded by the city's 10% sales tax. Since pretty much the entire increase in inequality in the last few decades seems to have come from a few zip codes in the high tax zones around New York and San Francisco, this matters.

There are broader lessons.  First, tax incidence is tricky.  If location is such an enormous source of economic value, will local income tax rates, and also sales tax, in fact fall on landowners in those cities?

Second, not all of these people can convert their labor income into capital gains income, which is taxed at a much lower rate.  In other words, high-earning Manhattan journalists face exorbitant rates of taxation, as do doctors without their own practices.  That's one reason why it is becoming a city of equity holders.

Third, those who can opt for capital gains, for tax reasons, end up with more exposure to income risk than they ideally want.  Boo-hoo for the billionaires you might say, but the added risk raises income inequality for the winners who constitute the top one percent, relative to other income classes.  That doesn't bother me much, but the policy is helping create a result it was designed to counteract.

Fourth, if you're planning on raising marginal tax rates on the wealthy, there may be less "give" in the system than you might have thought.  This of course depends on tax incidence, but if behavioral considerations matter, many people resent nominal marginal rates of 60 percent, even if they are earning some of it back in the form of higher wages.

Perceptions of Corruption

Transparency International produces a much cited index of corruption, the Corruption Perceptions Index (CPI).  But here is something, shall we say... interesting.

"Transparency International commissions the CPI from Johann Graf Lambsdorff." Lambsdorff, who likes to be called the "father" of the CPI, has another kid on the side, a firm called Anti-Corruption Training and Consulting.  And what does this firm do?  Well I will let them speak for themselves:

Following an invitation of the Chinese Ministry of Supervsion Prof. Graf Lambsdorff and Mathias Nell went to China from July 22 to July 29 2007. The trip encompassed anti-corruption consultations in Beijing, Nanjing and Chengdu as well as the release ceremony at Tsinghua University of the Chinese version of Prof. Graf Lambsdorff’s new book “The Institutional Economics of Corruption and Reform: Theory, Evidence and Policy”.

China, let us recall, scores a 3.5 out of 10 on TI's Corruption Index where the most corrupt country in the world, Somalia, has a score of 1.4.  Pretty corrupt, eh?  Here is a picture, from the ACTC website illustrating some of ACTC's consulting:

Hat tip to CPI-Watch.

The best news I've heard in ages

What's an old person anyway?  Does it depend on how many years are behind you, or how many years you still can expect to live?  Here is John Shoven:

The current practice of measuring age as years-since-birth, both in common practice and in the law, rather than alternative measures reflecting a person's stage in the lifecycle distorts important behavior such as retirement, saving, and the discussion of dependency ratios.  Two alternative measures of age are explored: mortality risk and remaining life expectancy.  With these alternative measures, the huge wave of elderly forecast for the first half of this century doesn't look like a huge wave at all.  By conventional 65+ standards, the fraction of the population that is elderly will grow by about 66 percent.  However, the fraction of the population that is above a mortality rate that corresponds to 65+ today will grow by only 20 percent.  Needless to say, the aging of the society is a lot less dramatic with the alternative mortality-based age measures.  In a separate application of age measurement...GDP would be between seven and ten percent higher by 2050 if retirement lengths stabilize.

Here is the paper (I can't find a non-gated version).  Note that the entire increase of life expectancy of the twentieth century has been taken in the form of retirement, rather than extra work.  Of course our social security and Medicare policies have encouraged early retirement, and we have not adjusted age eligibilities for longer life spans and better health.  For fiscal reasons, we will likely have to increase eligibility ages; not only will we spend less money but it will encourage more work.

If you have been thinking that a demographically-based American economic collapse is virtually inevitable, this paper gives some grounds for hope.  Here is further commentary.

United States fact of the day

In today’s America, there are more World of Warcraft players than farmers.

Hat tip to Paul Krugman.

Passing down temptation to the next generation

We find that the elasticity between mothers' and children's BMI has increased since the 1970s, suggesting that shared genetic-environmental factors have become more important in determining obesity.

Here is more.

How special is American inequality?

Will Wilkinson writes:

I was surprised to discover that U.S. market income (i.e., pre-tax) inequality is lower than the U.K.’s, the same as Germany’s, and only slightly higher than Sweden’s...

Check the graph at the link.  Will continues:

This is from Brandolini and Smeeding’s 2007 “Inequality Patterns in Western-Type Democracies: Cross-Country Differences and Time Changes” [pdf].  While the U.S. pre-tax Gini is still on the high side of the median of these 16 OECD countries, it is remarkable how much differences in tax and transfer policies push the U.S. to the top in inequality in disposable income.  This is striking to me because, at a glance, it suggests that the U.S. is not all that distinctive in the way the basic structure of the economy affects the distribution of market income.  Unions in Germany and the U.K. are rather more powerful than in the U.S., but (again, at a glance) appear to do nothing to reduce inequality relative to the U.S.  Of course, eyeball empiricism isn’t dispositive.  But it seems to me to fit pretty well with the weak effect of the relationship between declining unions and rising inequality found in other research, and suggests that the structure of basic American political-economic institutions is not especially conducive to inegalitarian outcomes.

My take: This is all well worth knowing, and it does help counter the view that growing inequality of income is a poliical conspiracy.  But oddly both the critics and the defenders here are missing one major inequality-related difference between Germany and the United States, namely social norms.  We have weaker families, weaker social pressures to conform, deeper bayous, and as a result more flat out lunatics, losers, and violent psychopaths.  (Did I mention we also have more innovation?)  That's inequality too, though the usual political recipes aren't likely to provide the cure.

Addendum: One very eminent source emailed me and he wishes to stress that the (relatively) high level of the European Gini stems from higher levels of unemployment, whereas the relatively high level of the American Gini stems from the rich being very rich.  He points out that although the final Ginis may be similar, the underlying patterns are very different and it would be misleading to conclude that America and Germany have ended up at the same pre-tax point.  This is absolutely correct, my apologies if the post created a misleading impression.

Angola fact of the day

The International Monetary Fund projects a  24 percent economic growth this year — one of the fastest rates in the world.

Wow.  Here is fact number two:

...the Catholic University of Angola’s research center say two in three Angolans still live on $2 or less a day, the same percentage as in 2002...no one disputes that most Angolans face appalling living conditions, sky-high infant mortality rates, dirty water, illiteracy and a host of other ills.

If you hadn't guessed: it's oil money: "The government is taking in two and a half times as much money as it did three years ago."

How to Cite a Blog

Here's a sign of the times, the NIH provides a style guide on how to cite a blog.  Bizarrely, however, they include a space for "Place of Publication."  It's annoying enough that book citations require a location for the publisher - does anyone use this?  Ever?  We should not carry wasteful practices to the web.

Still, the idea that blogs can and should be cited is nice to see.  The bottom line?  Two r's in Tabarrok.

Hat tip to Boing Boing Blog.

The Divorce Myth: What is Really Happening?

I began my week guest blogging by noting a widely under-appreciated point: that divorce is falling (here, continued here).  Those posts led a bunch of folks, in the comments and elsewhere, to ask about recent trends, to question the possible confounding influence of changes in marriage rates, and for requests to actually show, rather than summarize the data.

Good news: Despite blogging all week, Betsey Stevenson and I have managed to put together a shortish paper describing the trends in marital stability over recent decades, drawing on most available data sources.  Read away here.  The paper is largely pictures and tables, so should provide useful grist for discussion.  And of course, we are open to any useful suggestions.

How to sound smart around the water cooler

The baseball playoffs begin today. (Go Red Sox!)  But if you haven't been following the 162-game season, you may risk sounding foolish around the water cooler.

Here's how to sound like an expert: Research tells us that prediction markets yield accurate forecasts.  Indeed, a prediction market forecast is likely smarter than any expert.  Simply point your browser to your favorite prediction market, and make the following observations confidently around the water cooler:

1. Note that the American League looks much stronger than the National League.  (HT: Mike Giberson at Midas Oracle.)
2. Sigh, while you say that "Once again the American League race looks like being the Red Sox or the Yankees."
3. State emphatically that "the National League is anyone's race.  Heck, even the come-from-behind Phillies are a chance."  (Say this as though you didn't already know they were the betting favorites)

That's it.  You are now an expert.  (How else do you think an Aussie can keep up a conversation about U.S. sports? I've been faking it for years... but shhh, don't tell David Stern.)

The Real Significance of Changes in the Gender Happiness Gap

In an earlier post, I promised to return to trying to understand whether The Paradox of Declining Female Happiness is quantitatively important.  As Deidre McCloskey has argued, we shouldn't be in the business of "asterisk econometrics", but instead, figuring out what effects have "oomph".  Given that we are analyzing changes in happiness - a qualitative variable - this is no easy task.  I want to provide both a fun way of explaining these difficulties, and a response to some critical commentary about "The Happiness Gap and the Rhetoric of Statistics", arguing that:

these effects, whatever they are, are quite small, requiring clever statistical analysis over very large amounts to [sic] data to be seen at all.

This sentence is for the Stata-philiacs: Our ordered probit regression suggests that between 1972 and 2006, the relative wellbeing of women, relative to men, declined by ΔβΔt=0.399*(2006-1972)=0.13 points. (See Table 1 of the paper.)

Our task now is to understand what this means.  And for the non-gearheads, you can now tune back in.  Her are a few ways of thinking about the magnitude or "oomph" of the change we document:

1. Effect Sizes: The coefficient in an ordered probit can be thought of as an "effect size", and hence the relative decline in the happiness of women is roughly one-eight of one standard deviation of the distribution of happiness in the population.  If you think there is a lot of variation in happiness in the population, this is big; if not, it is small.
2. Changing Positions: Let's think of lining up all the men in 1972, in order of their happiness.  In 1972, the median woman ranked between the 53rd and 54th man, happier than a slight majority of men.  By 2006, the median woman is somewhat less happy, ranking between the 48th and 49th man.  (A point of comparison: Moving from the 53rd to the 48th percentile of the household income distribution involves a difference of about $6,000 per year.)
3. Compared to Other Shifters of Happiness: We know from prior studies that unemployment lowers average levels of happiness.  Comparing estimates across studies, we can say that the relative declien in women's happiness that we document is equivalent to the decline in average happiness that would occur in a state if its unemployment rate rose by 8-1/2 percentage points (from, say, today's 4-1/2% to 13%).  Alternatively, there are data linking happiness to the level of economic development.  Over the period we examine, real GDP per capita nearly doubled, and by this metric, such an increase should have led to an average increase in happiness of about one-eighth of the cross-sectional standard deviation of happiness.  Thus, our finding is that the relative decline in women's happiness is as large as if women had enjoyed none of the accumulated gains due to economic growth.
4. Compared to Other Changes in the Gender Happiness Gap: Our estimates are aggregate, or on-average effects.  What do we know about other aggregate shocks to the gender happiness gap?  We estimated the gender happiness gap year-by-year, and found that its long-run reversal is 1-1/2 times as large as the year-to-year standard deviation of the measured happiness gap.  (We would guess that sampling errors lead us to overstate the standard deviation of the gap, and hence this metric likely understates the relevant magnitudes.)

A qualifier: None of these comparisons are entirely satisfactory.  For instance, if you believe that there is very little variation in happiness across people, time, or states of the economy, then you would interpret the above comparisons as suggesting that the change in the female happiness gap is big, only when compared with small things.

Another qualifier: We only document changes in the measured gender happiness gap.

Any other ideas on how to describe the "oomph" (or economic significance) of changes in qualitative variables like happiness?

[Thanks to Betsey Stevenson for coauthoring this post.]

UPDATE 1: Steve Levitt chimes in.

UPDATE 2: Jezebel adds some perspective.

The Significance of Changes in the Gender Happiness Gap

Last week, Betsey Stevenson and I finished a paper highlighting “The Paradox of Declining Female Happiness”. In short, we show that women have become less happy, relative to men. You can read the paper here (and subsequent discussion by Alex Tabarrok, Steve Levitt, or the NY Times). The paper is about documenting the trends. Interpretation is for you, dear reader. And from the 700 comments generated at the NY Times, it appears that there is plenty of interpreting to do.

Additionally, we have upset the linguists. From Language Log:

OK, everybody, take a deep breath and listen: THERE IS NO HAPPINESS GAP!

Every year since 1972, the General Social Survey has been asking a big demographically-balanced sample of American men and women "Taken all together, how would you say things are these days? Are you a) very happy, b) pretty happy, c) not too happy."

Neither in 1972 nor in 2006 was there any statistically significant difference between men and women in the distribution of their responses! And in both 1972 and 2006, the proportion of women who said "very happy" was a little bit higher than the proportion of men who gave that response (though again, in neither year was the difference distinguishable from chance fluctuations).

So what is everyone talking about? Well, some economists fit a complicated statistical model (called an "ordered probit") to the whole sequence of survey results from 1972 to 2006, and this analysis suggests that women have become a little tiny bit less happy relative to men over that whole time period. But the effect is so small that you can't actually see it in the statistical analysis for any one year; the effect is much smaller than the amount of year-to-year jiggle. That's true even through the General Social Survey involves a huge sample, much bigger than is normally used for opinion polls: 4,500 people in 2006.

Read more of this criticism here, here and here. (Thanks to Mark Thoma and Steve Levitt for a heads-up.)

So what is going on here?

• A misunderstanding. I suspect that the claim that happiness did not significantly change from 1972-2006 comes from the fact that we did not include stars when reporting the implied gender gaps in Table 1 of our paper. Thus, the claim that

the ordered probit analysis found that the "Gender happiness gap" was not statistically significant, either in 1972 or in 2006, even at the 0.10 level

is simply untrue. Here’s the relevant part of Table 1, which is an ordered probit regression, of happiness on time trends by gender:

The right way to test for whether women were, on average, happier at the start of the sample is to look at the “Female dummy”, which is clearly significant. The right way to ask whether this gender gap has changed is to look at the difference in trends, which is also clearly significant. The last two rows are regression-based predicted values, so we didn’t think we should put stars next to these numbers.

•  Statistical mischief: When you want to make a result go away, throw away enough data, and a result will become insignificant. For instance pooling all of the data gives us a useful 46,303 observations. Analyze any specific year, and you are left with only 1,500-3,000 data points. Even so, let’s analyze only data from 1972 and 2006:
  • %Very happy = 28.7 + 3.1*Female +1.6*(Year2006) – 2.4*(Female in 2006)
  • %Not too happy = 18.1 -3.2*Female – 5.5*(Year2006) + 4.1*(Female in 2006)

In the first case, no coefficients are statistically significant, and in the latter, all are. In both cases, the estimates say that women were once a fair bit happier than men, and this is no longer true. Comparing this regression with those in our paper, we simply learn that a smaller sample yields similar estimates, but they are less likely to be statistically significant.

• Looking for a masterpiece, when we are doing collage. Sometimes studying social phenomena is hard, and one draws on many data sources to put together a collage of evidence. Our paper finds declining happiness among women relative to men in: the General Social Survey (n=46,303 from 1972-2006); the Virginia Slims Poll (n=26,701 from 1972-2000); among U.S. 12^th graders (Monitoring the Future; n=433,906 from 1976-2005); in the United Kingdom (British Household Panel Study data from 1991-2004; n=121,135); in Europe (the Eurobarometer analysis has n=636,400 from 1973-2002, covering 15 countries), and across developed countries (the International Social Survey Program contains surveys 35 countries from 1991-2001 yielding n=97,462). The only dataset that does not yield clear results of a decline in women’s happiness relative to men’s is the World Values Survey, and even there, the data do not speak clearly.

Let me try to give a particularly transparent description of the data, simply splitting the GSS data into two periods, 1972-1989 v. 1990-2006. There was a clear gender happiness gap in the earlier period (34.3% of women were very happy v. 31.8% of men). This difference is clearly statistically significant (t=4.1). In the later period, 30.9% of women were very happy, compared with 31.1% of men. This recent gender happiness gap is insignificant (t=-0.3). The decline in the share of women who were very happy (34.3% v. 30.9%) is clearly significant (t=5.9), while the corresponding changes for men were not (t=-1.1). The decline in the share of women who were very happy relative to men is also significant (t=-3.1). Analyzing the share who are “not too happy” yields a roughly similar pattern (but in reverse): an insignificant “unhappiness gap” in the earlier period, but a significant gap emerged in the latter period. Interestingly, the “unhappiness gap” emerged because as men became less likely to be unhappy, as women’s unhappiness remained largely stable. The ordered probit is a regression technique that allows one to make these happiness and unhappiness comparisons all at the same time; these regressions tell us that there was a gender happiness gap favoring women in the earlier period, and it now favors men. For the regression-heads, if your library subscribes can download the GSS data from the ICPSR here. I’ll post some stata code in the comments.

This post only deals with whether the effects we describe in the paper are statistically significant. The other complaint is that our results are too small to matter. Later today, I’ll turn to how we think about whether these are large or small effects.

[Written jointly with my coauthor Betsey Stevenson]

UPDATE: See discussion of "economic significance" here.

Intriguing numbers on conscientious objectors

The GAO reports only 425 applications for conscientious objector status from 2002-2006, compared with 2.3 million servicemembers (including Reserves).  Just over half were approved.  Read more here.

Hat Tip, Zubin Jelveh, who also notes:

 For reference, the Vietnam war had about 200,000 such applications.

(Of course, Vietnam did have a draft.)

Facts and True Facts: More on Divorce

My initial guest post noted that recent divorce statistics were misinterpreted widely in both the media, and by the academics interviewed by the press. The question is what went wrong with the latest data?

First, some necessary background. This table was published by the Census Bureau counting the proportion of those who had wed in each year who subsequently celebrated various anniversaries. Here’s a quick test: Look at the data, and decide for yourself what is happening to marital stability. Or if you are lazier, let me help with an example: the Census reported that 76.4% of men whose first wedding occurred in 1985-89 had celebrated a tenth anniversary; this declined rather dramatically to 70.0% among those who marrying in 1990-94. By jingo, it looks like recent marriages have become much less stable!

Not so fast. The marital history data were collected from July-September 2004, and hence those who had married in, say, October 1994, simply could not have reached their tenth anniversary by the survey date. Because this affected around one-in-ten of those wed from 1990-94, this statistical factor alone explains what looked like a decline in marital stability.

How do we interpret what happened?

1. The Census Bureau reported true and useful facts: The data are interesting, and the table includes a small footnote, noting “Approximately 10 percent of the cohort has not reached the stated age by the end of the latest specified time period. Because of this, estimates for this group for the highest anniversary are low.”  With this qualification, one should not conclude that divorce is rising. (But what should one conclude? No guidance is given.)
2. The Census Bureau reported true, but useless facts: The tables measure exactly what it says it measures. The Census Bureau is like