Marginal Revolution

How to give directions

...there are two ways to give directions. One is using a so-called "route perspective", as in the example above. This adopts a first-person spatial perspective and is characterised by references to turns and landmarks. The other is a so-called "survey perspective", which gives directions as if looking down upon a map. This type of direction giving is characterised by references to cardinal directions (North, South, East and West) and precise distances.

And which is better?

When Hund's team used a fictitious model town made of plywood to test the ability of undergraduates to follow directions, they uncovered a curious anomaly. The students reported finding route perspective directions easier to follow and yet they steered a toy car to a destination more quickly and effectively when they were following cardinal directions.

Here is further analysis.  I prefer the survey perspective.  Maybe it is a language issue, but I find it very difficult when most Europeans give directions.  Too often they cite concepts such as "up," "down," "over," "beyond," and the like.  Is it really necessary to say "hoch fahren"?  NESW, please.  Which method do you prefer or perhaps some other?

Spin-Free Economics

The subtitle is "A No-Nonsense, Nonpartisan Guide to Today's Global Economic Debates" and it is by Nariman Behravesh.

I was shocked by how much I liked this book.  I think of it as a kind of contemporary Capitalism and Freedom, although it comes across as less partisan and the coverage is much more global.  I agreed with almost everything the author said and I thought the framing was effective and spot on just about all the time.

Many MR readers already know too much to be the appropriate audience here, but if you wish to give someone an economics book as a gift, or as an introduction to thinking about economic policy, here you go.  I'm still astonished at how remarkably good this book is and yes I did read it all the way through.  Greg Mankiw wrote a very nice blurb for it.

You can buy it here.  Here is the book's home page.  I haven't seen any serious reviews yet, nor has Google.

A simple theory of which economists cultivate Ph.d. students

If your contribution as an economist is very fundamental, other people will use that contribution whether or not they were your students.  Lots of people use, or critique, the assumption of rational expectations.  So the inventors of RE don't need students to propagate their fame.  Alfred Marshall's fame today is mostly independent of the students he had (or did not have).

Having fundamental contributions is correlated with quality but within the top tier of quality there is considerable variation.  Arrow and Lucas had relatively fundamental contributions but in contrast Milton Friedman, Larry Summers, Robert Barro, and Olivier Blanchard are all more applied.  Their demand for students should be higher.  If you are an empirical economist, but invented an econometric technique which is fundamental, your demand for students should be relatively low.  Students might also prefer advisors who are less "fundamental," for fear of being overshadowed or from wanting to avoid the winner-take-all tier of the market.

Since at top schools the percentage of "fundamental" economists is declining over time, we would expect the distribution of doctoral students, across faculty, to become more even.

I thank Amanda Agan and some of her friends for a useful conversation on this topic.

Robin Hanson tonic of the day

We feel a deep pleasure from realizing that we believe something in common with our friends, and different from most people.  We feel an even deeper pleasure letting everyone know of this fact.  This feeling is EVIL.  Learn to see it in yourself, and then learn to be horrified by how thoroughly it can poison your mind.  Yes evidence may at times force you to disagree with a majority, and your friends may have correlated exposure to that evidence, but take no pleasure when you and your associates disagree with others; that is the road to rationality ruin.

Here is the link.  I like that phrase, "rationality ruin."  I am, of course, more of a pragmatist and less of a Platonist than is Robin.  But still, Robin is the daily tonic I wish to take.

True or false?

If there has been a conspiracy among liberal faculty members to influence students, “they’ve done a pretty bad job,” said A. Lee Fritschler, a professor of public policy at George Mason University and an author of the new book “Closed Minds? Politics and Ideology in American Universities” (Brookings Institution Press).

The notion that students are induced to move leftward “is a fantasy,” said Jeremy D. Mayer, another of the book’s authors. When it comes to shaping a young person’s political views, “it is really hard to change the mind of anyone over 15,” said Mr. Mayer, who did extensive research on faculty and students.

Here is the story.

Avoiding winner's curse

Ben Casnocha has some suggestions for making good personal and career contacts:

How to find a hidden gem? Hints from my post on de-emphasizing popular filters: seek out introverts. Seek out people under age 30. Seek out people who are bad at marketing.

Recognize and discount the celebrity effect. Spend time with people who also have time to spend with you. My bet is you'll have a more rewarding relationship.

This is the same Ben who went to a talk of mine in Zurich and introduced himself to me.  I'm not under 30.  In any case, I agree with his bottom line:

The only reason to try to meet with Mr. Busy and Rich for 10 minutes is if you have a very specific request or need. If you're just trying to "network" or build a relationship, don't waste your time.

John Smith hasn't made up his mind yet

John Smith reports:

I am ready to move on – perhaps for a career where deadlines are honored, ideas are exchanged and gimmicks and fads are routinely avoided because they distract from advancing the mission of gaining and sharing knowledge. Yes, it is time to find another line of work, where I can enjoy the fruits of my labor, even if I realize that the grass is grayer, if not greener, elsewhere.

John Smith is the pseudonym of a professor at a liberal arts college. He asked to remain anonymous because he is continuing to teach while he is job-hunting and doesn’t want his comments to reflect on his institution.

Read the whole thing, from InsideHigherEd.  The guy swears he is quitting.  He is a tenured English professor in his mid-40s, highly employable in many sectors of our declining economy, especially those sectors where gimmicks and fads are routinely avoided.  I observe that a) John Smith seems to be quite a good professor, and b) John Smith needs one of Robin Hanson's lectures on self-deception.

Abstinence pledges

It seems to boil down to Larry Iannaccone's model of religion:

Bearman and Brückner have also identified a peculiar dilemma: in some schools, if too many teens pledge, the effort basically collapses. Pledgers apparently gather strength from the sense that they are an embattled minority; once their numbers exceed thirty per cent, and proclaimed chastity becomes the norm, that special identity is lost. With such a fragile formula, it’s hard to imagine how educators can ever get it right: once the self-proclaimed virgin clique hits the thirty-one-per-cent mark, suddenly it’s Sodom and Gomorrah.

Here is much more, on the general question of why the teenage children of evangelicals get pregnant so often.  The first question is whether they do, adjusting for all the proper demographics.  Second, I wonder if there isn't also a combined lifecycle/genetic effect.  Maybe if you're rowdy when you're young, you're religious when you're old, but the kids that pop out are on average rowdy too.

Econ bloggers gain clout in financial crisis

Here is the article, there is lots from me and from Mark Thoma, among others.

On a more casual note, I've enjoyed blogging the same topic week after week after week.  I wonder at what point I will feel like cracking?

Against multiple choice exams

All of the reasons I am opposed to multiple choice exams are predicated on the assumption that I understand the material and that multiple choice exams hinder me from demonstrating what I know. If, however, I didn't know the material, or didn't know it well, then I might be led to believe that I'd be better off with a multiple choice exam. After all, with multiple choice exams, at least there would be a chance I could "recognize" something and at least I have something to pick from. On a short answer exam, if I don't know the material I'll end up sitting there staring at blank sheets of paper for the entire exam period. Psychologically I think being able to pick an answer to a bunch of questions (even if the answers are wrong) is more comforting than having a bunch a bunch of blank spaces. A 50% is a 50%, regardless of whether you filled in all the bubbles and missed half or if you had a bunch of blank space on a short answer test. But while taking the test, the student will feel more confident filling in the bubbles than anything else.

Here is much more, from this blog, via Andrew Sullivan.  The piece could use a longer discussion of the law of large numbers, but it makes many points of interest.

What econ majors think of their major

David Colander and co. give us a whole paper on this topic:

This data suggests that the presence of an unrestricted-entry business program has a positive impact on the satisfaction levels of economics majors. When such programs exist, the economics major is not forced to balance both the goals of students who would rather be in business programs with the goals of students who would study economics either way; therefore the economics major can more easily suit all of its students’ demands.

There are many more tidbits, including the following:

Students generally considered the majors more difficult at liberal arts schools than at state schools. The difference is most pronounced in economics, considered hard by 25.4% of state school students compared to 40.2% of students at liberal arts schools. At research liberal arts school, the major was considered even harder; 44.2% of students considered the economics major hard.

p.7 warmed my heart and p.11 gives the main reason for becoming an economics major: "I did well in early courses, and found it interesting."  That Smithian explanation is more important than the quest for job opportunities.  The paper is here.  Hat tip to Pluralist Economics Review.

Markets in everything?: Mexico edition

Tens of thousands of teachers are blocking highways and seizing government buildings across Mexico to protest a federal education reform ending their longtime practice of selling their jobs or giving them to their children.

...At the heart of the conflict is the "Alliance for Quality Education," a national plan to professionalize teachers and hold them accountable for their students' performances. The plan was ratified in May by Mexican President Felipe Calderon and Elba Esther Gordillo, the leader of the country's 1.6 million-member National Education Workers Union, and sent to Mexico's 31 state governments and Federal District for approval.

To buy a good teaching job costs at least $6,000.  Here is the article.  This issue is very important for the future of Mexico.  I thank John Thacker for the pointer.

Jokes about the financial crisis

The most popular game for Icelandic families in 2009?

Go Fish!

What's the capital of Iceland?

About $20

Iceland was a currency posing as a bank.

I went to an ATM today, and it asked to borrow a twenty till next week.

Quote of the day (from a trader): "This is worse than a divorce. I've lost half my net worth and I still have a wife."

In Soviet America, banks rob people because that is where the money is!

Those are from this comments section.  Do you know any such jokes?

The best parenthetical statement I read today

(The fictional 18th century heroine, Moll Flanders, recognized that a high self-regard can be dangerous, arguing that women who believe themselves beautiful are easier to seduce: “If a young woman once thinks herself handsome, she never doubts the truth of any man that tells her he is in love with her; for she believes herself charming enough to captivate him, ’tis natural to expect the effects of it.”)

Here is the link.

Public libraries for tools?

Noah writes to me:

Big fan of the blog.  I was wondering whether there's a reason other than historical accident why the public library model only exists for media like books and music.  I understand the argument that books produce a social benefit that the government should be in the business of subsidizing, but surely there must be other goods with that kind of benefit that can be similarly lent out.  Take the example of tools, most of which are rarely used.  Is there a public good in having a mechanically-fluent citizenry that would justify a system of public tool libraries?  Or is there anything else you think it would make sense to build libraries around?

Reserves, it would seem, and maybe they will waive the overdue fines as well and perhaps even the lost reserves fines.  Mark Thoma ponders an AIG bail-out.

A theory of question supply

Somebody who knew President Bush well once remarked to me. "You'll notice he never asks questions."

"Why not?" I said.

"Because he doesn't know what it's okay for him not to know."

I am interested in the principle, not in discussion of President Bush.  Hat tip to Ross Douthat.

Response to my Mother

My wonderful mother is upset, like pretty much everyone else, at the price of gas.  "Well, the hurricane has knocked out a lot of production on the gulf coast," I say.  "Yes but there's plenty of gas in the pipes that was produced before the hurricane - the suppliers are gouging." she responds.  Arrghhh....must resist, must resist, must be ....nice.  "mmm," I say.  You and my Econ 101 students (103 actually), however, are not so lucky.

Many people think that price is determined by historical cost.  Price is never, ever, determined by historical cost. Price is determined by supply and demand.  If supply or demand change then the price changes regardless of historical cost.  Last year's fashions?  The price falls regardless of cost.  Chopped up dead sharks?  If demand is high, the price is high regardless of historical cost.  If the demand for gas were to suddenly fall, the price of gas would fall too, regardless of cost.  In the present situation the supply of gas has been reduced and the price has gone up.  Historical cost is always irrelevant.

Is the high price due to supplier gouging?  Not at all.  If you want to blame anyone for the high price blame your fellow buyers not the suppliers.  A high price means that some other buyer is outbidding you to obtain the limited supply.  It's buyers who push up prices in a competitive market and it's suppliers who push prices down!

It's true that some suppliers are making big profits but people have the cause and effect backward.  It's not the high profits which are causing the high price.  It's the high price which is causing the high profits.  If you were to tax the high profits, for example, you wouldn't reduce the price.  Indeed, quite the opposite because the high profits motivate suppliers to increase the quantity of gasoline as quickly as possible.

The last point brings us full circle because as the situation stabilizes suppliers increase the quantity supplied until price is pushed down towards long-run costs (which are also historical costs).  Thus, in the usual situation it appears that price is determined by historical cost.  It's only in the brief time period when a shock shifts (short-run) supply away from historical cost that we can see the truth.  Price is determined by supply and demand.

Addendum: Is it just me or did Ken Arrow ever feel the need to correct his Mom on economic matters?  Did Adam Smith?  "Look Mom, I know you're upset about the price of mutton but let me tell you about this new theory I've been working on..."    

Sentence of the Day

It is through exchange that difference becomes a blessing, not a curse.

Chief Rabbi of Great Britain, Jonathan Sacks quoted in McCloskey's The Bourgeois Virtues.

Hat tip to Steve Horowitz at The Austrian Economists who rightly says "Have the benefits of specialization and exchange ever been presented more concisely and beautifully than in that one sentence?"  Maybe this should be sentence of the year.

China incentive of the day

A handsome teacher in China is offering pupils autographed photos of himself to encourage them to work harder.

Ji Feng, also vice principal of Zhiyuan Foreign Language Elementary School, is so popular among students that a lot of them were asking him for pictures.

"I came up with the idea of giving them my signed pictures as a reward," he told the Nanjing Morning Post.

Students who put in exemplary work can now pose for a picture with Ji who then signs the printed photograph.

Ji added: "It absolutely is not narcissism, but a way of encouragement. And only the students who perform the best can get such a reward."

Here is the story, the pointer is from Allison Kasic.

Magnus #1?

17 year old Magnus Carlsen won a chess game today and is probably now, unofficially, ranked #1 in the world.  (World champion Anand lost and fell behind in rating points.)  Here is an illuminating recent profile of Magnus.  I believe Paul Samuelson is the closest to an economics prodigy we have had.  He was thirty-two when his Foundations of Economic Analysis was published but I have heard that he wrote the book at a much earlier age (does anyone know the exact age?).  He was probably one of the best economists in the world when he received his undergraduate degree at Chicago at the age of 20.  Frank Ramsey is another example of an economics prodigy although he didn't even think of himself as an economist per se.  Can you think of other prodigies in mathematical economics?  I attribute their scarcity to the relative aesthetic poverty of mathematical economics (for most people it's not that fun or beautiful) rather than the need for complementary experience-acquired wisdom.  Do you agree?

Addendum: Andrew Gelman considers statistics.

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.

What are the best games?

I loved this post by Bryan Caplan, even if I don't quite agree with it.  Here's his bottom line:

The best games are inter-disciplinary, combining economics and psychology. Games of pure strategic reasoning like chess are dry. Games of pure social interaction are a little silly. But games that bring together strategic reasoning and social interaction are a joy for heart and mind.

I do believe that Bryan's claim is true for smart people with no managerial or administrative responsibilities but not for those who experience such joys in the course of daily life and thus do not need the game.  Similarly, I believe that people with highly analytical day jobs do not usually go to chess clubs at night, even if they in principle enjoy the game of chess.

A simple one variable theory is that the qualities of the games you play reflect the qualities which are missing in your regular life.

There are a number of obvious exceptions to this theory.  For instance highly social people may play highly social games because their marginal utility for sociable activities does not decline very rapidly if at all.  Or you might play a particular game just because your wife makes you.  Still, my one variable theory is a starting point for understanding which people enjoy which games.

If you're wondering, I don't play any games at all.  I'm not saying I'm so wonderfully complete, but overall I prefer stories to games, at least at my current margins in life.

How much is a professor subsidized?

On average, full-time faculty members at the University of New Mexico’s Gallup campus were being subsidized to the tune of $10,554 apiece.

The word subsidization, in this context, refers to the subsidy from the university and not from government per se.  That's the difference between the cost of the professor minus the revenue he or she brings in from tuition.  Here is the full article, with further links.  I am not sure how this estimate allocates various fixed costs (does a professor have to "pay for" the lawn care service?), but for the time being does that matter?  The important truth is that while universities think in these terms all the time, they are rarely if ever willing to make their implicit estimates public or see how those estimates might be improved.

Ramsey Rules

...the numbers reflect is a situation I've heard is fairly common: in the College of Business & Economics, the 26 full professors' listed salaries have a median of $86,155; the 15 assistant professors' listed salaries have a median of $86,802. One of the assistant professors has a reported salary higher than any of the full professors. Another assistant professor has a reported salary higher than all but one of the full professors.

That's for the University of Wisconsin-Whitewater; it's not true for the University of Michigan or for that matter Harvard.

John Cochrane on the Milton Friedman protest letter

Read John's response here (the original letter is here).  In my view the damning bit is this one:

...it is to me sadder still how atrociously written this letter is. These people devote their lives to writing on social issues, and teaching freshmen (including mine) how to think and write clearly.  Yet it’s awful.

Recommended for those who like polemic and mutual recrimination.

I thank a loyal MR reader for the pointer.

David R. Henderson asks

This is from the comments and in the context of the financial market bailouts:

"Why aren't you free-marketeer crusaders screaming your heads off?!"

My answer is that I have been. Reporters have interviewed me about it and sometimes they report my "screams" and sometimes they don't. Re Tyler's blase response, I'm reluctantly coming to the conclusion, after having read his site almost daily for over a year, that Tyler is not a free-market crusader. He's a first-rate economist, but his passion seems to be almost solely about the analytics rather than the policies.

Am I wrong, Tyler?

I would note a few points:

1. I have very much favored the "bailouts" to date.  I don't favor that they were necessary but of course that latter attitude may or may not be libertarian in its derivation.

2. My tone stems from my personality, namely that I rarely get mad.  And in any policy debate, I don't assume that the people on my side intellectually are somehow morally superior or more honest.  In any particular case I usually give that 50-50.  It's also worth noting that perhaps we shouldn't judge partisanship from tone, just as we shouldn't judge linguistic fluency from the quality of a person's accent (which we tend to do).

3. A good blog should be subversive and help you see the faults in the author's own positions.  Ask whether the blogs you are reading in fact provide that service.  Self-subversion ought also, in the long run, to benefit liberty and other important values.

4. I think very often in international terms, so I see even most left-wing Americans (e.g., Ezra Klein) as having a relatively similar world view to my own.  Why focus on the local political conflict when so many presuppositions are shared?  When it comes to all-important questions about "how should we live?" it may well be that Ezra and I are pretty close together.  We should attach greater value to those commonalities of perspective.

5. I am very libertarian compared to the American center but moderate compared to most libertarians.

I am not sure I have answered David's question.

Markets in everything, Japanese edition

The DVD is called Miteiru dake (Just Looking), and it features various talent/models just staring straight ahead. That’s right, the models on the DVD do very little other than stare straight at the camera. According to the website, the idea is to get young males who aren’t used to socializing with women to become more accustomed to making eye contact and/or handle the fact that a sentient being sits across from them and awaits interaction. The DVD hopes to cure those afflicted with shyness so that they may rejoin society.

Here is more information, with an embedded video at the link.  Thanks to Justin Mancinelli for the pointer.  Of course the market offers real variety:

The result, from what one can see on the website, is strangely disconcerting. A girl will stare back at you for an extended period of time, expressionless and periodically blinking (the blinks are eerily profound). Once in a while the model will utter a phrase like "ohayoo" (good morning) or make a move to say something, but for the most part there is just an uncomfortable silence. Most of the women on the DVD are jimusho-based talento (most have blogs on Ameba and other DVDs of their own to sell), but there are also foreign women, young girls, and older women thrown in the mix to give the viewer experience in handling long, uncomfortable silences with those of different races and ages.

Which disciplines are the most and least politically correct?

Here are the data, based on one study; I am surprised that psychology is "tops," with a 58.7% rate of political correctness.  The other "winners" are not hard to predict, though "art" comes in at a surprisingly low 14.6%.  Economics is rated at 4.7%, noting that beneath us lie Marketing, Accounting, Computer Science, Biology, and now into the zero percent category, Finance, Management Information, and Mechanical and Electrical Engineering.  OK, wise guys, give the best single sentence (you are allowed one comma) account of these numbers that you can.

Very good sentences

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

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

Should donors give to students rather than schools?

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

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

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

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

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

Hail Joseph Lancaster!

And for that matter hail Seth Weidman:

It was a classic case of supply and demand.

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

So he decided to supply one.

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

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

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

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

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

What is mystery ingredient X?

Arnold Kling writes:

I don't think we have a recipe that says, "Take a child of two non-college educated parents, add primary education ingredient X, bake, and out comes a college-capable high school graduate." The mystery ingredient X has yet to be discovered.

Some Asian cultures or immigrant groups come close to finding this ingredient.  It involves total parental commitment to the educational ideal and a willingness to enforce the notion that a non-educated child is shaming the entire family, not just the child.  That said, I'm not sure that college education per se is the key here (and probably Arnold would agree; read his phrasing carefully).  If you can bake up some low rates of time preference, you're coming pretty close to the real mystery ingredient. 

The young and super-wealthy go to therapy

Not long ago, a young titan of New York real estate sat in his psychotherapist’s office. An art collector, he was thinking of bidding about $8 million for a painting, and something about the deal made him uneasy.

The therapist thought the patient was merely trying to impress him. This happened whenever the man felt unsure of himself, which was most of the time.

But instead of trying to explore the patient’s anxiety, the therapist encouraged him to buy the artwork: “This is what you want; you should go get it.”

The therapy fees can range from $400 to $600 an hour and the therapists are often too impressed by their patients.  The whole article is interesting.

The male and female privilege checklists

Here is the male privilege checklist.  Here is the female privilege checklist.  Robin Hanson, scientist, continues: "The next obvious step is to assign point values to such privileges, so we can add them up and compare totals."  You can imagine how much fun we had at lunch on this topic and yes a woman was there too.   

The power of "because"

Behavioral scientist Ellen Langer and her colleagues decided to put the persuasive power of this word to the test.  In one study, Langer arranged for a stranger to approach someone waiting in line to use a photocopier and simply ask, "Excuse me, I have five pages.  May I use the Xerox machine?"  Faced with the direct request to cut ahead in this line, 60 percent of the people were willing to agree to allow the stranger to go ahead of them.  However, when the stranger made the request with a reason ("May I use the Xerox machine, because I'm in a rush?"), almost everyone (94 percent) complied...

Here's where the study gets really interesting...This time, the stranger also used the word because but followed it with a completely meaningless reason.  Specifically, the stranger said "May I use the Xerox machine, because I have to make copies?"

The rate of compliance was 93 percent.

That is from Bob Cialdini's Yes! 50 Scientifically Proven Ways to be Persuasive; here is my previous post on the book.  And here is why motivational posters don't work.

The Price of Everything

Here is Ezra Pound's Usura Canto, here is a link to Russell Roberts's The Price of Everything: A Parable of Possibility and Prosperity, available for pre-order.  Can you guess which one has the better economics?  In fact Russ's book is the best attempt to teach economics through fiction that the world has seen to date.

Here is Russ's summary of the book.  Here is Arnold Kling on the book.

The one hundred item challenge

Could you live with no more than one hundred possessions?  A group of Americans have accepted this challenge.  I found this passage insightful:

Walsh isn't surprised that decluttering is so popular these days. Between worrying about gas prices and the faltering economy, people's first reaction, he says, "is often, 'I need to get some control over my life, even if it is just a tidy kitchen counter.'"

And of course there are cheaters:

One of the trickier questions is what counts as an item. Bruno considers a pair of shoes to be a single entity, which seems sensible but still pretty hard-core when you're trying to jettison all but 100 personal possessions. Cait Simmons, 27, a waitress in Chicago, takes a different approach. Although she has pared down her footwear collection from 35 to 20 pairs, she says, "All my shoes count as one item."

The pointer is to Jason Kottke.

The decay of gratitude

[Francis] Flynn asserts that immediately after one person performs a favor for another, the recipient of the favor places more value on the favor than does the favor-doer.  However, as time passes, the value of the favor decreases in the recipient's eyes, whereas for the favor-doer, it actually increases.  Although there are several potential reasons for this discrepancy, one possibility is that, as time goes by, the memory of the favor-doing event gets distorted, and since people have the desire to see themselves in the best possible light, receivers may think they didn't need all that much help at the time, while givers may think they really went out of their way for the receiver.

That is from Robert B. Cialdini's fascinating Yes! 50 Scientifically Proven Ways to be Persuasive.  Cialdini's earlier Influence remains one of my favorite social science books.  Here is a link to Flynn's paper and related work.

Teaching

Roland, a loyal MR reader, sends me this quotation from Max Weber:

The primary task of a useful teacher is to teach his students to recognize ‘inconvenient’ facts - I mean facts that are inconvenient for their party opinions. And for every party opinion there are facts that are extremely inconvenient, for my own opinion no less than for others. I believe the teacher accomplishes more than a mere intellectual task if he compels his audience to accustom itself to the existence of such facts. I would be so immodest as even to apply the expression ‘moral achievement’, though perhaps that may sound too grandiose for something that should go without saying.

How long should you wait for an elevator?

Jason, a loyal MR reader, asks:

Google wasn't able to help me here.

I figure that the longer you wait, the shorter the expected remaining waiting time.

However, in the worse case, if the lift has broken down, the waiting time could be infinite.

For an individual lift, one could, I suppose, collect some stats on average wait times, but I'm interested in the best strategy for an arbitrary lift.

The technical approach is to model the arrival of the elevator as a mathematical process, set up the problem, and solve it.  The seat of the pants approach is to ask about your psychological biases.  Are you, in the first place, more likely to spend too much or too little time waiting for elevators?  In my view standing and waiting isn't so bad, provided you have something to do or think about.  So my advice is this: once you start waiting for an elevator, begin to think through some interesting problem you face.  The ideal is that when the elevator arrives, you will be disappointed and of course that means you have hedged your risk in the first place.  The question that people screw up is not how long they should wait but what they should do in the meantime.

If you've finished thinking about your problem and the elevator still isn't there, take the stairs.

Readers, what do you advise?  Is there a second best case to be made for "elevator waiting indecisiveness," or should you just have a simple time rule and stick with it?  Is there a formula based upon the number of shafts and number of floors in the building?  The frustrated look of the person standing next to you?

Should Harvard continue to accumulate an endowment?

Matt writes:

A university that rich [Harvard] ought to either embark on some kind of ambitious expansion program and start educating substantially more students, or else decide that it would unduly alter the character of the place to expand that much and just close up the development department and enjoy the luxury of being able to focus single-mindedly on the university's core teaching and research functions.

Taking this as personal advice, I agree: don't donate your money to Harvard.  But as a matter of public policy I would not disturb the current arrangement.  First, a donation to Harvard is an act of conspicuous consumption by the rich, a bit like buying the watch that doesn't tell time.  In other words, the donors benefit, either through a warm glow or perhaps they receive networking opportunities.  Like Bob Frank, you might think we need a new consumption tax on the rich (not my view) but even if so we shouldn't single out Harvard as a starting target.

Second, the Harvard endowment earns a high rate of return, relative to the cost of raising the funds.  Let's say the fund nets 10 percent a year.  There is some trickle down and furthermore even if you wish to confiscate those resources it is always better to do so later rather than sooner.  The wise guy point here is to suggest that everyone give all their money to Harvard and arrange for some ex post compensating transfer.  (I've heard by the way that Yale faculty sometimes demand that Yale money managers take care of their personal portfolios.)  Obviously that's not realistic but the point remains that ten percent is a very good return on investment.  Let's say Harvard earned forty percent a year: should this make us more or less likely to leave the current arrangement in place?

Public vs. private schools

No, this is not a policy question.  Rather Jenny, a loyal MR reader, asks for advice:

As an economist, I was wondering if you could provide any insights to us parents evaluating public versus private elementary schools for our kids...By comparison [with the good private school], my public school education seems shoddy. But at $21,000 for kindergarten and a younger sister that would be joining him, this is a huge financial commitment, and takes away our flexibility to do anything but grind away for the next 15  years. My son is bright and curious - how do I know that he will get that much of an incremental improvement being in private school? And despite my very non-inspiring, and at times dreadful, public education, I can't say that I'm any worse off for it today...I've been really struggling with how to evaluate this. Can economics shed any light?

I faced this same choice myself as a kid and I ended up telling my mother I was happy to remain in the public school.  If nothing else I feared the commuting costs and not having friends' homes be nearby.  Furthermore at public school I met Randall Kroszner and Daniel Klein, among other notables.  Natasha and I faced this choice again with Yana and she ended up in public high school.  I can't really cite economics here but if your public school is halfway decent that is the side I come down on.

Readers?

The Education Transformation of China

University education in China is skyrocketing.  In 1996 China had less than 1 million freshmen, in 2006 there were over 5 million freshmen.  The freshman class is continuing to grow and university graduates, of course, are just 4 years behind.  About half of the entering students are in a hard science or engineering program.  As a result, China today produces 3 times more engineers than the United States and will quickly overtake the U.S. in total graduates.

Many people worry about what the Chinese education explosion means for the United States but I am optimistic.  First, as China and other countries grow wealthy the incentive to invest in R&D is increasing.  If China and India were as wealthy as the U.S. the market for cancer drugs, for example, would be eight times larger than it is today - and a larger market means more new drugs for everyone.

Second, the growth in Chinese education is increasing the supply of new ideas and that too is a benefit to people around the world.

Surprisingly, China's education system is being transformed to a considerable degree by private forces.  As late as 1999 the Chinese government paid for most university education but from 2001 onwards tuition and fees account for more than half of total educational expenditures.

I have drawn much of the data in this post from a fascinating new paper, The Higher Educational Transformation of China and its Global Implications by Li, Whalley, Zhang and Zhao.  The paper has much else of interest.

I will be traveling to China to give a talk at Yunnan University in late June and will report on the transformation as it looks on the ground.

How to read a vita

Ugo, a loyal MR reader, asks:

If you were in a tenure committee how would you evaluate an assistant professor who, among other things, has two papers in a top journal with the second paper showing that the result of his/her previous paper is wrong.

(a) Consider this situation has having two publications in a top journal (the rationale for this is that you want to give incentives to seek the truth and the two papers contributed to our understanding of the problem, moreover the author showed to be able to publish in top JNLs)

(b) Consider this situation as having one publication in a top journal (same as above, but you recognize that the contribution is less than two papers with a true result).

(c) Give zero value to the two papers (because the results cancel each other).

(d) Give negative value to the two papers (because people wasted time on a wrong result).

The best way to read a vita is to think of it in terms of a portfolio.  If all a person had on his vita was a single paper and then its repudiation, I would not think much of the combination.  If the person is producing a stream of papers, as a whole pointing toward greater knowledge and fleshing out a coherent research program, I would view the revisions and repudiations as a sign of intellectual strength.

Most questions about how to read vitas can be clarified by this portfolio approach.  For instance I am often asked how much a piece in Journal X is worth.  The correct response is to ask whether that publication complements a broader research program or not and then to ask how valuable that research program will be. 

Not From the Onion

FTC Wants to Know What Big Brother Knows About You

That's the headline for a story in today's Washington Post (about government regulation of internet advertising).  I suspect the irony was lost on the editors or perhaps this is an Orwellian attempt to twist language.

Addendum: The irony was not lost on the ever-wise Arnold Kling.

Measuring Up

The subtitle of this excellent book, by Daniel Koretz, is What Educational Testing Really Tells Us.  Here is one excerpt:

The distressingly large achievement differences among racial/ethnic groups and socioeconomic groups in the United States lead many people to assume that American students must vary more in educational performance than others.  Some observers have even said that the horse race -- simple comparisons of mean scores among countries -- is misleading for this reason.  The international studies address this question, albeit with one caveat: the estimation of variability in the international surveys is much weaker than the estimation of averages.

...We are limited to more general conclusions, along the lines of "the standard deviations in the United States and Japan are quite similar."  Which they are.  In fact, the variability of student performance is fairly similar across most countries, regardless of size, culture, economic development, and average student performance.

I was shocked to read this but the book is highly reputable and persuasive.

Economicwoman.com

That is the site address for a new blog on feminism and economics.  Allison, the blogger, points us to a YouTube channel on feminist economics.

Here is Allison's advice for economics undergraduates; feel free to add to it in our comments section.

I loved this question, and answer

Question for the day: what do libertarianism and the Many-Worlds Interpretation of quantum mechanics have in common? Interest in the two worldviews seems to be positively correlated: think of quantum computing pioneer David Deutsch, or several prominent posters over at Overcoming Bias, or … oh, alright, my sample size is admittedly pretty small.

...My own hypothesis has to do with bullet-dodgers versus bullet-swallowers.

And it ends with this:

So who’s right: the bullet-swallowing libertarian Many-Worlders, or the bullet-dodging intellectual kibitzers?  Well, that depends on whether the function is sin(x) or log(x).

Read more here and can you guess who the pointer is from?

The Storm

The storm ravaged the city’s architecture and infrastructure, took hundreds of lives, exiled hundreds of thousands of residents. But it also destroyed, or enabled the destruction of, the city’s public-school system—an outcome many New Orleanians saw as deliverance....The floodwaters, so the talk went, had washed this befouled slate clean—had offered, in a state official’s words, a “once-in-a-lifetime opportunity to reinvent public education.” In due course, that opportunity was taken:...Stripped of most of its domain and financing, the Orleans Parish School Board fired all 7,500 of its teachers and support staff, effectively breaking the teachers’ union. And the Bush administration stepped in with millions of dollars for the expansion of charter schools—publicly financed but independently run schools that answer to their own boards. The result was the fastest makeover of an urban school system in American history.

That's from The Atlantic just over a year ago.  Guess what?  It's working. The storm is coming.

Why aren't more people going to college?

Brad DeLong writes:

Altonji, Bharadwaj, and Lange do not know.

The whole post is interesting, but from this I can only conclude that Altonji, Bharadwaj, and Lange have never taught Introduction to Composition to a large group of freshman in a public university in the United States.  Anyone who has taught such a class -- or for that matter talked to anyone who has -- will have some inkling why more people are not going to college.  Herein lie the roots of growing inequality -- on the bottom side at least -- and don't let anyone induce you to take your eye off the ball by playing switcheroo and bringing up the (separate) topic of the growing wealth of the top one percent.

True beyond the shores of Harvard

Blog post of the day, from Brad DeLong, excerpt:

Somebody last week--was it Jan de Vries? John Ellwood? Somebody else? I forget who, but it is not original to me--said that the right model for Harvard over the past century is Yugoslavia. Remember the story of the Yugoslavian socialist worker-managed firm? If you add another worker to the firm, that worker gets a pro-rata share of the firm's value added. The firm's value added has a component attributable to the firm's capital stock, a component attributable to the ideas embedded in the firm, a component attributable to the firm's market position, and a component attributable to the workers. Hire another worker, and only the last of these goes up: the first three do not, and so average compensation falls.

This means that a worker-managed firm is likely to shrink whenever it gets good news that makes it more productive--the larger is the value added due to ideas, capital, or market position, the more expensive does it become for the existing workers to replace workers who leave, let alone hire enough workers to expand. While a competitive market capitalist firm responds to good news about its productivity and value to society by increasing employment, a Yugoslavian-model market socialist firm responds to good news about its productivity and value to society by shrinking. On this analysis, the very success of Harvard over the past two generations together with its degree of worker management has created enormous internal pressures not to expand, the better to share out the surplus among the existing stakeholders.

How to behave when you're old

Bryan Caplan presents us with his dilemma:

When I'm old, I want to be the octogenarian that the Young Turks come to with their crazy new ideas. I don't want to be the senior professor that the whippersnapper assistant profs avoid. Above all else, I never want to be a lunch tax - I like lunch too much.

Unfortunately, by the time I'm 80 I'll probably be too befuddled to figure out how to do any of this. So I want to figure it out now, tape it on my office wall, and refer to it when the time is ripe.

...Not mentioning any names, what are the biggest social mistakes elderly faculty make? What are some simple strategies for them to ingratiate themselves to the next generation? If you've got some good advice, I'll thank you when I'm 80. If I remember!

I remain a fan of Richard Posner's book on old age, one of his best.  I ask Bryan: would he still take the advice that his 12-year-old self might have taped to a door?  Neurological changes aside, the elderly simply have less incentive to be deferential and to court their younger colleagues; Aristotle knew this too.

Bryan's best lunchtime bet is that, when he is eighty, I am still around at ninety.

An alternative strategy is to find -- today -- the eighty-year olds who are still fascinating and run your new ideas by them.  Most of them will gladly receive you.  I used to fly out to Ann Arbor occasionally to meet with the great Marvin Becker, but in general I haven't done much of this in my life.  Call that my failing but it's another reason why so many eighty-year-olds don't bother to appeal to Young Turks as a constituency.

Overall I am struck by how little beneficial trade there is between the generations.  I find this one of the most striking stylized facts of the social sciences; one simple model is that people don't want to leave groups that produce fun and high relative status for them, and that is what switching across the generations usually entails.

Do you all have any other advice for Bryan?

Collected advice for young economists

Lots of links, mostly excellent.  The Lucas research memoir was new to me.

Hat tip is to Craig Newmark.

How to choose an apartment

Omkar, a loyal MR reader, asks:

I'm looking for an apartment (Fremont), and it's my first one. Do you think that most people over or underinvest in the quality of their accommodations? On one hand, it's where you spend the most time (especially if you're like me and have in-house hobbies). On the other, I think it's probably easy to overestimate the impact an additional unit of luxury housing will have on everyday life.

The standard results from the happiness literature are that people grow accustomed to lots of living space but that we undervalue the hassle of a lengthy or stressful commute.  Kahneman's work also suggests you should spend more time with your friends, so maybe that means living near them as well.  I don't know if these results are true at all margins.  Moving from a mid-sized mansion to a large mansion probably doesn't make you happier, but the switch from a one- to two-bedroom apartment might.

Personally, I'll stress the benefits of rooming with someone who is both compatible and intelligent, but that isn't exactly the question that was asked.  Your apartment should also be a gateway to new experiences, so perhaps you should live near the highway. or other effective modes of transport.

So, readers, when we are looking for an apartment, what is the bias we are most likely to have?

Rating RateMyProfessors.com

You’ve heard the reasons why professors don’t trust RateMyProfessors.com, the Web site to which students flock. Students who don’t do the work have equal say with those who do. The best way to get good ratings is to be relatively easy on grades, good looking or both, and so forth. But what if the much derided Web site’s rankings have a high correlation with markers that are more widely accepted as measures of faculty performance? Last year, a scholarly study found a high correlation between RateMyProfessors.com and a university’s own system of student evaluations. Now, a new study is finding a high correlation between RateMyProfessors and a student evaluation system used nationally.

Strike another victory for Web 2.0.  Here is more.

Graduate school advice

A loyal MR reader asks:

I am now beginning the process of choosing classes for next year. I thought your advice might again be useful. I am in the unusual position of finding nearly all fields potentially interesting. I also feel relatively capable of pursuing most of them, with the exception of pure theory or pure econometrics...I am tempted to do economic history + something else. If I do history, perhaps I ought to do finance, micro, or metrics in order to signal technical capability?

If you were in my place, what fields would you choose? Are their particular people...at XXXX...whom you would absolutely want to take a course with/work with? Is it possible to be a macroeconomist without doing extremely technical work? Are some fields more tolerant of heterodox views than others? You told us [once] that you thought econ. grad. school should be Micro 1 - Micro 16. Does this mean I ought to take more micro next year? Given my limited ability to know where my interests will lie in the future, how should I think about this decision?

My advice here is simple: 

1. To potential academic employers you are defined by your job market paper, your letters of recommendation, and by your publications, if you have any.  Your formal "fields" aren't that important, nor are your classes per se.

2. Pick classes to learn skills and choose your classes on the quality of the professor, not on the topic per se. A quick classroom visit often reveals this quality within thirty seconds.

3. Pick a mentor that you, on a personal basis, relate to very well.  This is of extreme importance.  If he or she doesn't like you, all is lost.

By the way, here is Ben Casnocha's advice on how to be a good mentee.  What other advice would you all give this person?   

The $10 billion Saudi university

A picture is here and yes they claim the finished version will have both male and female students and Western faculty.  A question we've been asking over lunch lately is the following: how much would it really cost to set up a first-rate university -- and not just a technical school -- in Asia?  Let's say an Asian businessman were willing to put up $10 billion in endowment: how good would the school be?  I see three major problems:

1. Many Asian governments cannot precommit to respecting academic free speech; nor for that matter can the Saudis.

2. An excellent university must be part of an intellectual network near other excellent universities.  Arguably with the internet this effect is weakening over time.  Still, if they tripled my salary I wouldn't move to Saudi Arabia or for that matter Japan and that is for reasons related to network effects.

3. Such universities could not precommit to the governance systems (please don't laugh) that have been so effective in bringing American schools to dominate the world rankings.  In fact the more money that one person or government gave, the greater the commitment problem might be.  By these governance systems I mean faculty control of appointments, with academic-based monitoring by the Dean and Provost, independent boards, and Presidents willing and able to raise enough money to maintain financial independence for the future.  That's a pretty tall order but you'll find all those qualities in the successful American colleges and universities.  Long-run financial independence also requires a more general culture of philanthropy which is found only in the United States.

Technical schools aside, I do not expect American colleges and universities to lose their leadership role in the immediate future.  And if they do, the real competitors will prove to be Europe, the UK, and Canada, not Asia.

Education isn't mainly about signalling

We find that employer learning about productivity occurs fairly quickly after labor market entry, implying that the signaling effects of schooling are small.

Here is much more.  And here is more yet; this second paper estimates the speed of employer learning and uses that estimate to bound the value of the signal at no more than 28 percent of the value of education.  I consider this devastating to the signaling hypothesis.  How can ?? years of schooling be needed to signal your quality, if your employer often knows your quality within months? 

In my view education is mainly about indoctrination to give you more productive habits.  So yes it is learning, but not in the way they might have told you, and that is why it so often does not feel like learning.

I can't imagine doing this

I find it really useful to write and draw while talking with someone, composing conversation summaries on pieces of paper or pages of notepads. I often use plenty of color annotation to highlight salient points. At the end of the conversation, I digitally photograph the piece of paper so that I capture the entire flow of the conversation and the thoughts that emerged. The person I've conversed with usually gets to keep the original piece of paper, and the digital photograph is uploaded to my computer for keyword tagging and archiving. This way I can call up all the images, sketches, ideas, references, and action items from a brief note that I took during a five-minute meeting at a coffee shop years ago--at a touch, on my laptop. With 10-megapixel cameras costing just over $100, you can easily capture a dozen full pages in a single shot, in just a second.

I prefer to simply remember what was said.  Here is much more, on "How to Think," via Kottke.

Black markets in everything

With candy sales banned on school campuses, sugar pushers are the latest trend at local schools. Backpacks are filled with Snickers and Twinkees for all sweet tooths willing to pay the price.  "It’s created a little underground economy, with businessmen selling everything from a pack of skittles to an energy drink,” said Jim Nason, principal at Hook Junior High School in Victorville.

Here is more, with a thanks to Eric Nielsen for the link.  I would put it this way: school kids are more economically advanced than astronauts.

The citation death tax

Dying is not always good for your citations:

The information content of academic citations is subject to debate. This paper views premature death as a tragic "natural experiment," outlining a methodology identifying the "citation death tax" -- the impact of death of productive economists on the patterns of their citations. We rely on a sample of 428 papers written by 16 well known economists who died well before retirement, during the period of 1975-97. The news is mixed: for half of the sample, we identify a large and significant "citation death tax" for the average paper written by these scholars. For these authors, the estimated average missing citations per paper attributed to premature death ranges from 40% to 140% (the overall average is about 90%), and the annual costs of lost citations per paper are in the range 3% and 14%. Hence, a paper written ten years before the author’s death avoids a citation cost that varies between 30% and 140%. For the other half of the sample, there is no citation death tax; and for two Nobel Prize-caliber scholars in this second group, Black and Tversky, citations took off overtime, reflecting the growing recognitions of their seminal works.

Here is the paper.  As I interpret it, some people are trading (usually barter) for many of their citations and death hinders those trades.  These people are overrated to begin with.  Black and Tversky, on the other hand, are still underrated.  Bet on those scholars whose citations rise with their deaths.

Cooked books

If I had to guess whether Wikipedia or the median refereed journal article on economics was more likely to be true, after a not so long think I would opt for Wikipedia. This comparison should give us pause.

That's me, writing for The New Republic.  But what does this all mean?  ("Sadly, the final lessons here are brutal.")  I consider the recent spate of fake biographies and memoirs and arrive at some conservative and traditionalist answers.

Department of Hmmm...

...the federal statistics provide evidence for another shift, in which the majority of full-time professional employees in higher education are in administrative rather than faculty jobs.

Here is more.

Bad Incentives?

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

More here. 

Thanks to Lee Spector for the link.

Mad Men

Thomas Schelling showed that it could sometimes pay to be irrational, or at least to appear to be irrational.  If they think you're crazy then in a game of chicken it's your opponent who will backdown.

It's known that Nixon understood the theory but in an frightening article in Wired we learn the insane extent to which the theory was practiced.

Frustrated at the state of affairs in Vietnam, Nixon resolved to:

...threaten the Soviet Union with a massive nuclear strike and make its leaders think he was crazy enough to go through with it. His hope was that the Soviets would be so frightened of events spinning out of control that they would strong-arm Hanoi, telling the North Vietnamese to start making concessions at the negotiating table or risk losing Soviet military support.

Much more was involved than words, at one point nuclear bombers were sent directly towards Soviet airspace where they triggered the Soviet defense systems.

On the morning of October 27, 1969, a squadron of 18 B-52s — massive bombers with eight turbo engines and 185-foot wingspans — began racing from the western US toward the eastern border of the Soviet Union. The pilots flew for 18 hours without rest, hurtling toward their targets at more than 500 miles per hour. Each plane was loaded with nuclear weapons hundreds of times more powerful than the ones that had obliterated Hiroshima and Nagasaki.

The Soviets went nuts but following Nixon's orders Kissinger told the Soviet ambassador that the President was out of control.

Apparently neither Nixon or Kissinger had absorbed another Schelling insight - if you want to credibly pretend you are out of control then you have to push things so far that sometimes you will be out of control.  The number of ways such a plan could have resulted in a nuclear war is truly frightening.  After all, Nixon was gambling millions of lives on the Soviets being the rational players in this game.

Next time you are told how a madman threatens the world remember the greatest threats have come from our own mad men.

An educational experiment with higher salaries

A New York City charter school set to open in 2009 in Washington Heights will test one of the most fundamental questions in education: Whether significantly higher pay for teachers is the key to improving sc