People who smile a lot are usually happier, have more stable personalities, more stable marriages, better cognitive skills and better interpersonal skills, according to research. Science has just uncovered another benefit of a happy face. People who have big smiles live longer.Maybe being happy, having a more stable personality, having a more stable marriage, and better cognitive and interpersonal skills causes one to smile more. When we see a positive correlation between smiling and other measures of happiness, we should be careful not to infer that smiling more will cause improvements in other areas of our lives without evidence that this is the case. Science has not necessarily uncovered the benefit of having a happy face--people are likely happy for a reason.
Wednesday, March 31, 2010
Life span may be as wide as your smile
LA Times article "Life span may be as wide as your smile" (March 29th, 2010) makes the causal connection between smiling and longevity, among other things. Unfortunately the article doesn't note the fact that causality can run both ways, and giving people encouragement that smiling more will improve their lives may be quite misleading.
In E-Book Era, You Can’t Even Judge a Cover
New York Times article "In E-Book Era, You Can’t Even Judge a Cover" (March 30th, 2010) describes how e-books are changing free advertising that book publishers received from third parties seeing a book being read. For example, one brings the distinctive Marx Engels Reader, edited by Robert Tucker onto the bus--others see it, remember it, and purchase it. This does not happens, the Times conjectures, with e-books. Corrections suggests that competition between booksellers makes the effect of this loss of advertising a wash, as book companies will pay readers (through lower prices) to read their books for the advertising.
Among other changes heralded by the e-book era, digital editions are bumping book covers off the subway, the coffee table and the beach. That is a loss for publishers and authors, who enjoy some free advertising for their books in printed form: if you notice the jackets on the books people are reading on a plane or in the park, you might decide to check out “The Girl With the Dragon Tattoo” or “The Help,” too.On the one hand, publishers can no longer advertise on book covers. However, the advertising is by no means free. Let us say I am in competition with another bookseller. An extra person seeing my book cover nets me an expected $0.10, as it does him as well. Then upon this happening, I will be willing to charge $0.10 less for my book, to undercut him on prices, as he will be willing to undercut me. In essence, consumers are being paid to advertise because we compete for advertisers.
Therefore, this switch may have no impact on publisher's bottom lines--competitive book sellers had to pay the consumer the worth of their advertising to begin with. We might note that it may be a loss to consumers, until we recognize that a) the option is still open to be an advertiser and b) marginal cost of e-books is even lower than that of regular books, and they may choose the low-cost bundle to the high-cost-but-advertiser's-fees bundle.
Tuesday, March 30, 2010
Reining in patents
LA Times article "Reining in patents" (March 30th, 2010) complicates a very simple question: without profit based incentives, would firms bother to look for new goods?
Underlying many of these disputes is a fundamental question about what patents should cover. It's easy to articulate the principle that patents should apply only to inventions, not discoveries. It's not so easy to draw that distinction in practice, especially when technology is changing so rapidly. What's more, any decision to rein in patent protection risks reducing the incentives that lead people to invest in research and development. But it also could lead to more knowledge being shared sooner, leading to further innovation.In order to make public any new drug, whether it be "discovered" or "invented," a firm needs profit-based incentives. Without the potential for profits, we can expect drug companies will stop looking for gene-based solutions to disease. Simply put, without a patent, competition ensues and profits are whittled away. Patents give companies the right to set prices and make profits. When so much in the drug industry is patentable, why should we expect any firm to bother looking for cures that are not?
Congress' failure to extend flood insurance program is inexcusable
New Orleans Times-Picayune editorial "Congress' failure to extend flood insurance program is inexcusable" (March 30th, 2010) suggests that the decision of Congress to let the National Flood Insurance Program lapse is poor decision-making. Corrections questions the program itself, suggesting that it has caused, and is causing, moral hazard.
Corrections would suggest that government programs that ensure bailouts for flood-prone regions are the more inexcusable phenomenon. The National Flood Insurance Program was enacted in 1968 to force individuals in flood-prone regions to purchase (often subsidized) insurance because government was bailing them out in the event of a flood anyway. Areas that were given government insurance often had to comply with flood standards; because NFIP was a government program, it was relatively rare for standards to be met--according to the August 1990 GAO Report "Flood Insurance: Information on the Mandatory Purchase Requirement", at the time, about 22 percent of Maine and 79 percent of Texas that was covered under insurance rules did not comply with federal standards. Such government incompetence amounts to subsidized insurance for individuals who live in flood plains.
Corrections, therefore, does not see why NFIP is necessary--it seems inefficient to pay people to live in areas that get flooded, and to build houses that don't have proper protection from flooding due to the moral hazard posed by NFIP.
Members of Congress acted irresponsibly when they let the National Flood Insurance Program lapse for a couple of days early this month. Now they have let the program lapse again and for a much longer period. That's inexcusable.
Corrections would suggest that government programs that ensure bailouts for flood-prone regions are the more inexcusable phenomenon. The National Flood Insurance Program was enacted in 1968 to force individuals in flood-prone regions to purchase (often subsidized) insurance because government was bailing them out in the event of a flood anyway. Areas that were given government insurance often had to comply with flood standards; because NFIP was a government program, it was relatively rare for standards to be met--according to the August 1990 GAO Report "Flood Insurance: Information on the Mandatory Purchase Requirement", at the time, about 22 percent of Maine and 79 percent of Texas that was covered under insurance rules did not comply with federal standards. Such government incompetence amounts to subsidized insurance for individuals who live in flood plains.
Corrections, therefore, does not see why NFIP is necessary--it seems inefficient to pay people to live in areas that get flooded, and to build houses that don't have proper protection from flooding due to the moral hazard posed by NFIP.
The Magic Potion
New York Times editorial "The Magic Potion" (March 29th, 2010) appears to have no factual basis for its claim that poverty and homelessness are rising. Corrections conjectures they are falling, (we lack current data).
Corrections has been unable to discover either current data or news articles on poverty or homelessness in 1Q 2010 (today being the second to last day, this is reasonable). We conjecture that Bob Herbert has made this current trend up, and look forward to posting data on this (just as we hope to do for the IHRSA , which has yet to post new data). We will use HUD's definition of homelessness and the census's definition of poverty, absent a change in how government publishes its statistics. We posit that both will be falling over first quarter 2010, at which Bob Herbert is writing at the tail end.
There is reason to believe we are correct. We graphically display GDP below up to and including the fourth quarter of 2009 (click to enlarge). We conjecture it will continue in much this trend. We will update this figure, along with homelessness and poverty statistics, when available.
Poverty and homelessness are increasing.
Corrections has been unable to discover either current data or news articles on poverty or homelessness in 1Q 2010 (today being the second to last day, this is reasonable). We conjecture that Bob Herbert has made this current trend up, and look forward to posting data on this (just as we hope to do for the IHRSA , which has yet to post new data). We will use HUD's definition of homelessness and the census's definition of poverty, absent a change in how government publishes its statistics. We posit that both will be falling over first quarter 2010, at which Bob Herbert is writing at the tail end.
There is reason to believe we are correct. We graphically display GDP below up to and including the fourth quarter of 2009 (click to enlarge). We conjecture it will continue in much this trend. We will update this figure, along with homelessness and poverty statistics, when available.
Monday, March 29, 2010
No Matter What, We Pay for Others' Bad Habits
New York Times article "No Matter What, We Pay for Others' Bad Habits" (March 29th, 2010) appears to misunderstand either the concept of externalitites or moral hazard.
The author appears to believe that because he engages in activities that have externalities, we should forgo a claim against others engaging in externalities that harm us. The argument appears to be that when we rob Peter to pay for Paul's extra doughnut, but then rob Paul to pay for Peter's cigarettes, things balance out. However, were we to have them each pay for themselves, neither might buy these goods that they don't value enough to spend their own money on.
This is to say that we introduce a moral hazard that causes less efficiency, and that this is not the zero-sum game the author thinks. People choose less efficient outcomes when they don't pay their own costs, and net wealth is destroyed.
I must admit I often feel like my colleagues who grouse about spending all day treating patients who do not seem to care about their health and then demand a quick fix. I do not relish paying more taxes to treat patients who engage in unhealthy habits. But then I remind myself that we all engage in socially irresponsible behavior that others pay for. I try to eat right and get enough exercise. But then I also sometimes send text messages when I drive.
The author appears to believe that because he engages in activities that have externalities, we should forgo a claim against others engaging in externalities that harm us. The argument appears to be that when we rob Peter to pay for Paul's extra doughnut, but then rob Paul to pay for Peter's cigarettes, things balance out. However, were we to have them each pay for themselves, neither might buy these goods that they don't value enough to spend their own money on.
This is to say that we introduce a moral hazard that causes less efficiency, and that this is not the zero-sum game the author thinks. People choose less efficient outcomes when they don't pay their own costs, and net wealth is destroyed.
For Photographers, the Image of a Shrinking Path
New York Times article "For Photographers, the Image of a Shrinking Path" (March 30th, 2010) offers two quotes without rebuttal that deserve economic and statistical comment, and perhaps correction. The article describes how professional photographers have been hurt by declining demand due to the decline of printed material and an increase in supply from amateur photographers. It suggests first that amateur photographers have prices that are "too low," and second offers a comment that is true of any specific amateur but not of the aggregate.
Corrections would suggest that most people are willing to pay to take pictures--pay in both their time and the money they spend on inputs (from the camera to developing film or other camera accessories. It is not beyond reason that some people would be willing to pay to have their pictures used. Were this the case, Corrections doesn't see why this is not a reasonable rate. For example, when the price of aluminium is very low, then one has to pay people (garbage men) to take one's aluminium cans away. When the price of aluminium is very high, individuals (recyclers) are willing to pay to take one's cans away. Corrections conjectures that there is no "reasonable price" for disposal of one's cans, just as there is no "reasonable price" for a picture.
Second, the Times offers a quote that concerns an individual photographer compared to a professional that is a fallacious argument.
This may be true. However, if we have, at any given event, 1000 amateur photographers for one professional, then we might see the professional photographer beating the vast majority of those individuals. It is difficult for an amateur to beat the photographer once out of every hundred. However, because we sample from 1000 amateurs each time, even though any one is beaten by a professional, we expect ten total to have their pictures purchased over the professional's. It is wrong to compare one amateur to one professional--it would be more proper to compare the full alternatives--buy the best professional or the best amateur, and recognize we sample from the "amateur" bin more often.
“People that don’t have to make a living from photography and do it as a hobby don’t feel the need to charge a reasonable rate,” Mr. Eich said.
Corrections would suggest that most people are willing to pay to take pictures--pay in both their time and the money they spend on inputs (from the camera to developing film or other camera accessories. It is not beyond reason that some people would be willing to pay to have their pictures used. Were this the case, Corrections doesn't see why this is not a reasonable rate. For example, when the price of aluminium is very low, then one has to pay people (garbage men) to take one's aluminium cans away. When the price of aluminium is very high, individuals (recyclers) are willing to pay to take one's cans away. Corrections conjectures that there is no "reasonable price" for disposal of one's cans, just as there is no "reasonable price" for a picture.
Second, the Times offers a quote that concerns an individual photographer compared to a professional that is a fallacious argument.
“Can an amateur take a picture as good as a professional? Sure,” Ms. Eismann said. “Can they do it on demand? Can they do it again? Can they do it over and over? Can they do it when a scene isn’t that interesting?”
This may be true. However, if we have, at any given event, 1000 amateur photographers for one professional, then we might see the professional photographer beating the vast majority of those individuals. It is difficult for an amateur to beat the photographer once out of every hundred. However, because we sample from 1000 amateurs each time, even though any one is beaten by a professional, we expect ten total to have their pictures purchased over the professional's. It is wrong to compare one amateur to one professional--it would be more proper to compare the full alternatives--buy the best professional or the best amateur, and recognize we sample from the "amateur" bin more often.
Sunday, March 28, 2010
Obama announces 15 recess appointments, scolds GOP
Reuter's News article "Obama announces 15 recess appointments, scolds GOP" (March 27th, 2010) offers a quotes that deserves further scrutiny. The article quotes Harry Reid on appointments and nominations:
Corrections has a harder time seeing this from the data. On average a confirmed appointee spent 75.78 days waiting until their confirmation vote. On average, the 15 appointed nominees spent 214 days waiting until their confirmation vote. Of the 13 not-appointed nominees who spent 214 or more days waiting until their nomination vote but were confirmed, the average appointee spent 238.5 days waiting. Twenty-two individuals who waited 214 or more days remain unconfirmed.
Examining these twenty-two, none seem to be "key", as Senator Reid claims. As this can be seen as a subjective claim, Corrections offers a list of positions for the purposes of information dissemination and self-evaluation.
The Senate's top Democrat, Harry Reid, welcomed Obama's move. "Regrettably, Senate Republicans have dedicated themselves to a failed strategy to cripple President Obama's economic initiatives by stalling key administration nominees at every turn," said Reid, the majority leader from Nevada.
Corrections has a harder time seeing this from the data. On average a confirmed appointee spent 75.78 days waiting until their confirmation vote. On average, the 15 appointed nominees spent 214 days waiting until their confirmation vote. Of the 13 not-appointed nominees who spent 214 or more days waiting until their nomination vote but were confirmed, the average appointee spent 238.5 days waiting. Twenty-two individuals who waited 214 or more days remain unconfirmed.
Examining these twenty-two, none seem to be "key", as Senator Reid claims. As this can be seen as a subjective claim, Corrections offers a list of positions for the purposes of information dissemination and self-evaluation.
- Four are members of the Commodity Credit Corporation Board of Directors.
- One is the Director of Civilian Radioactive Waste Management.
- There are three Assistant Attorney Generals (of various counsels).
- One is the Deputy Director for State, Local, and Tribal Affairs.
- Another is a Commissioner of the Federal Election Commission.
- Assistant Secretary for Planning and Evaluation
- Five Judges-two local D.C., two Court of Appeals, and a district court judge
- Two board members of the Legal Services Center
- A board member for the national labor relations board
- Chief Counsel of Advocacy
- Under Secretary of International Affairs
Finally, and perhaps most relevantly, we can see that all appointments come after a large expected increase in their expected waiting days for confirmation, examining the conditional expectations (though a Heckman selection model with dubious exclusion restrictions gives an expected average waiting time of between 40 and 88 days, depending on specification). This would perhaps be a more economic explanation of these recess appointments.
Saturday, March 27, 2010
Autistic Teen Picks First Two NCAA Rounds Perfectly
NBC News report "Autistic Teen Picks First Two NCAA Rounds Perfectly" (March 25th, 2010) appears to report a non-event. It notes that an autistic individual picked the first two brackets perfectly. Corrections suggests that is expected to happen about 4 times every year.
According to a survey, about 58 million people will fill out a bracket (more brackets may be filled out, as the average per participant is presumably greater than or equal to one). If the tournament is based purely on chance, we expect a one-in-thirteen-million event to happen four times, on average, each trial of 58 million. Indeed, the NCAA tournament is not composed of random events, and we should likely expect this to happen more than four times, not less.
Finally, while it's easier to win the lottery, according to NBC News, Corrections notes that the winning of the lottery is an everyday event.
In fact, he picked every game through the first two rounds correctly. The odds of anybody doing that? One in 13,460,000, according to BookofOdds.com. It's easier to win the lottery. Twice.
According to a survey, about 58 million people will fill out a bracket (more brackets may be filled out, as the average per participant is presumably greater than or equal to one). If the tournament is based purely on chance, we expect a one-in-thirteen-million event to happen four times, on average, each trial of 58 million. Indeed, the NCAA tournament is not composed of random events, and we should likely expect this to happen more than four times, not less.
Finally, while it's easier to win the lottery, according to NBC News, Corrections notes that the winning of the lottery is an everyday event.
Getting even on crack vs. powder
Boston Globe editorial "Getting even on crack vs. powder" (March 27th, 2010) discusses a possible gap between legal penalties for possession of crack cocaine and possession of powdered cocaine. It discusses the penalties between the two, and how there was a "100-to-1" penalty for holding crack. Corrections sees the matter as slightly more nuanced than the Globe allows.
We noted in a previous post that addictive substances such as crack cocaine were a technological advancement on cocaine. It allowed for small cheap, unobtrusive, mass distribution in a way cocaine did not, a point lifted from Roland Fryer, Paul Heaton, Steven Levitt, and Kevin Murphy’s 2005 NBER working paper “Measuring the Impact of Crack Cocaine.” It is not immediately clear whether or not this phenomenally destructive drug would have been as prevalent as it was were cocaine itself not illegal. On the one hand, cocaine is an input into crack cocaine production. On the other hand, cocaine is a substitute to crack cocaine itself, one whose competitive availability is likely increased much more than crack cocaine’s, in light of crack’s popularity being in part due to cocaine’s inefficient illegal distribution system.
Crack cocaine is a technological advancement on cocaine--distribution is made easier. Therefore, it may make sense to "tax" it at a higher rate, if one catches individuals who deal in it much less often. That is, if one is caught half as often with crack cocaine, then a doubling of the sentence may "equalize" the penalties between the two crimes, an objective the Globe seems to pursue.
Corrections might further add that the law-race discrepancy may have less to do with politician racism than it might have to do with endogenous selection into drug markets. Let us imagine that individuals have three choices: to work for wages in the "above ground" economy (legal), to work selling powdered cocaine (powder), and to work selling crack cocaine (crack). Every job choice has two wages that are taken as a bundle--the average wage per hour and the expected years in prison one receives. A fortiori, assume wages are the same between the two groups.
Finally, imagine that while the wages of both whites and blacks are the same, blacks lose less from prison (as we shall see, a more reasonable assumption is that their outside wages are different). Let us say that a "conversion factor" between years in prison and wage is $2/year for whites and $1/year for blacks.
Then we display our hypothetical wages graphically below (click to enlarge):
In this case, we should see blacks specializing in crack, even though the sentence is higher, while whites split between legal work and powdered cocaine. The law itself caused blacks to enter into crack, rather than attempting to punish them unfairly. It's not clear whether or not sentencing caused racial segregation of this particular crime or discrimination by politicians caused the disparity in sentencing.
Finally and briefly, we might view this slightly differently and come up with an even more interesting result. Imagine that blacks and whites are two agents producing one of three goods--legal work, powdered cocaine, or crack cocaine. Each individual has an endowment of two inputs--money, and sentencing time. In this assumption, blacks have a larger endowment of the input "sentencing time," so they specialize in the good that is relatively more intensive in sentencing time. If we eliminate the disparity, then the rents they were accruing because they held more of a relatively rarer input go away--blacks could be made worse off if we eliminate the disparity by Stolper-Samuelson Theorem (note that eliminating the disparity essentially floods the market with an infinite amount of "sentencing time" and returns to possessing it become zero). Stolper-Samuelson gives the idea behind why an unskilled worker in a country such as the U.S. may have their standard of living harmed by international trade because they are much less rare an input.
The political wheels have begun to turn on correcting the imbalance in sentencing those who possess crack and powder cocaine, but more attention is necessary. Under current law, a person caught with five grams of crack gets the same five-year mandatory prison sentence as someone possessing 500 grams of powder. The 100-to-1 crack-to-powder ratio was enacted at a time that crack was thought to be far more addictive than powder and would spark unprecedented crime waves. Studies long ago disproved both notions, but the law remains on the books, and its burden falls disproportionately on black defendants. More than 80 percent of those incarcerated for possession of crack are black.
We noted in a previous post that addictive substances such as crack cocaine were a technological advancement on cocaine. It allowed for small cheap, unobtrusive, mass distribution in a way cocaine did not, a point lifted from Roland Fryer, Paul Heaton, Steven Levitt, and Kevin Murphy’s 2005 NBER working paper “Measuring the Impact of Crack Cocaine.” It is not immediately clear whether or not this phenomenally destructive drug would have been as prevalent as it was were cocaine itself not illegal. On the one hand, cocaine is an input into crack cocaine production. On the other hand, cocaine is a substitute to crack cocaine itself, one whose competitive availability is likely increased much more than crack cocaine’s, in light of crack’s popularity being in part due to cocaine’s inefficient illegal distribution system.
Crack cocaine is a technological advancement on cocaine--distribution is made easier. Therefore, it may make sense to "tax" it at a higher rate, if one catches individuals who deal in it much less often. That is, if one is caught half as often with crack cocaine, then a doubling of the sentence may "equalize" the penalties between the two crimes, an objective the Globe seems to pursue.
Corrections might further add that the law-race discrepancy may have less to do with politician racism than it might have to do with endogenous selection into drug markets. Let us imagine that individuals have three choices: to work for wages in the "above ground" economy (legal), to work selling powdered cocaine (powder), and to work selling crack cocaine (crack). Every job choice has two wages that are taken as a bundle--the average wage per hour and the expected years in prison one receives. A fortiori, assume wages are the same between the two groups.
Finally, imagine that while the wages of both whites and blacks are the same, blacks lose less from prison (as we shall see, a more reasonable assumption is that their outside wages are different). Let us say that a "conversion factor" between years in prison and wage is $2/year for whites and $1/year for blacks.
Then we display our hypothetical wages graphically below (click to enlarge):
In this case, we should see blacks specializing in crack, even though the sentence is higher, while whites split between legal work and powdered cocaine. The law itself caused blacks to enter into crack, rather than attempting to punish them unfairly. It's not clear whether or not sentencing caused racial segregation of this particular crime or discrimination by politicians caused the disparity in sentencing.
Finally and briefly, we might view this slightly differently and come up with an even more interesting result. Imagine that blacks and whites are two agents producing one of three goods--legal work, powdered cocaine, or crack cocaine. Each individual has an endowment of two inputs--money, and sentencing time. In this assumption, blacks have a larger endowment of the input "sentencing time," so they specialize in the good that is relatively more intensive in sentencing time. If we eliminate the disparity, then the rents they were accruing because they held more of a relatively rarer input go away--blacks could be made worse off if we eliminate the disparity by Stolper-Samuelson Theorem (note that eliminating the disparity essentially floods the market with an infinite amount of "sentencing time" and returns to possessing it become zero). Stolper-Samuelson gives the idea behind why an unskilled worker in a country such as the U.S. may have their standard of living harmed by international trade because they are much less rare an input.
Should Spouses Be Able to Sue Their Mates' Lovers?
Newsweek article "Should Spouses Be Able to Sue Their Mates' Lovers?" (March 26th, 2010) speaks on the demise of laws that allow the spouse of someone who engages in extramarital sex to sue their spouse's partner. It suggests that the ending of these laws could be tied to their ineffectiveness. Corrections suggests that they could be due to their counter-effectiveness.
Corrections suggests that penalizing extramarital intercourse will have two effects. The first is to make people less likely to engage in extramarital intercourse. The second will be to make people less likely to marry. Affairs will become more expensive for married individuals (Corrections conjectures that their elasticity of demand is much lower than the elasticity of supply by their extramarital partners follows from common sense). This, in turn, will make marriage itself a more expensive proposition. This should cause both fewer marriages and more divorces. It would not be ridiculous to postulate that these laws could end due to their unintended consequences of harming marriages.
Back when women were considered property, there was a set of laws on the books called "heart balm" torts. Meant to protect the family unit from interlopers, these Victorian-era statutes gave men the right to sue anyone who seduced their wives. The terms at the time were "criminal conversation," which meant adulterous sex, and "alienation of affection," which could be anything that destroyed the love between husband and wife.
But perhaps recognizing that the threat of public humiliation and financial penalty hasn't ever been all that effective in deterring adultery—just ask John Edwards and Tiger Woods—most of the country got rid of these laws in the 1930s.
Corrections suggests that penalizing extramarital intercourse will have two effects. The first is to make people less likely to engage in extramarital intercourse. The second will be to make people less likely to marry. Affairs will become more expensive for married individuals (Corrections conjectures that their elasticity of demand is much lower than the elasticity of supply by their extramarital partners follows from common sense). This, in turn, will make marriage itself a more expensive proposition. This should cause both fewer marriages and more divorces. It would not be ridiculous to postulate that these laws could end due to their unintended consequences of harming marriages.
Thursday, March 25, 2010
Preexisting conditions for the GOP
Washington Post opinion "Preexisting conditions for the GOP" (March 24th, 2010) utterly misunderstands economics in a dimwitted thought experiment. Matt Miller of the Post does not even consider the possibility that
Miller does not consider the reality that the current malformed health reform changes the very nature of the macroeconomic system of health care. It is as ludicrous as saying "because one does not support the building of the following dam, they shall be free to drink as much as they can downstream, but not benefit from the reservoir". Any thinking half-wit should recognize that the system itself has changed, and such nugatory thought experiments move from failed charlatanry to fraud.
It's time to demand that GOP leaders, candidates and other would-be Obamacare repealers take a pledge. It should be simple. Something like: "Because I believe so strongly that Democratic health-care reform is a calamity for the country, I hereby vow that neither I nor anyone in my family will take advantage of the protections offered by this law." Those pledging would of course voluntarily surrender their current group health coverage and be thrown into the unregulated market for individual health insurance, so as to swim in the same sea of insecurity as their constituents. A quickie law would be passed allowing insurers to treat pledge-taking Republicans and their families under prior rules, exempting them from the reforms just signed into law by the president.
Miller does not consider the reality that the current malformed health reform changes the very nature of the macroeconomic system of health care. It is as ludicrous as saying "because one does not support the building of the following dam, they shall be free to drink as much as they can downstream, but not benefit from the reservoir". Any thinking half-wit should recognize that the system itself has changed, and such nugatory thought experiments move from failed charlatanry to fraud.
Wednesday, March 24, 2010
Antisemitism and This Recession: The Dog That Didn't Bark
Jewish Daily Forward article "Antisemitism and This Recession: The Dog That Didn't Bark" (March 24th, 2010) speaks of how this recession is an exception, in that a connection between individuals who practice Judaism and economic downturns is normally made. Corrections suggests that if anything, the opposite is the case, and that Jewish bankers are mentioned when GDP goes up, but bankers in general are mentioned when GDP goes down.
Corrections used Lexis-Nexis to find any mentions of "Jewish Banker" since 1976 in major global news sources. We used Google's news search to find news articles on "bankers" over the same period. Google's news search was used because Lexis-Nexis had too many results to count for "banker." We expect our results to be robust to this methodology. We then compared the difference in mentions of Jewish bankers to difference in log GDP. If an decrease in U.S. GDP was met with a increase in the mentions of "Jewish Banker" in news sources, we expect there to be a negative correlation between them. To make sure there was a connection between bankers and GDP at all, we also used our Google search. We display the results graphically below.
First, we have U.S. GDP and the number of "Jewish Banker" mentions in Lexis-Nexis over time (click to enlarge).
Second, we have the difference in log GDP against the difference in number of mentions of "Bankers" (click to enlarge).
Finally, we have the difference in log GDP against the difference in number of mentions of "Jewish Bankers" (click to enlarge).
As it turns out, the correlation between difference in log GDP and difference in number of mentions of "Jewish Banker" is .0053. The correlation between difference in log GDP and difference in the number of mentions of "Banker" is -.0328. This would suggest that while "bankers" are mentioned more in times of low GDP, "Jewish Bankers" are mentioned more in times of high GDP.
The Forward claims that this is a recession was a case of "the dog that didn't bark." Corrections would first ask to see the dog; in order for it not to bark, it had to exist in the first place. As the only evidence on the table is weak evidence that there is reverse-discrimination, a Correction appears to be in order.
With unemployment stuck at about 10%, and few expecting this to change anytime soon, we are still suffering the effects of a cataclysmic recession, one that seems to have its origins, in good part, in the nation’s financial institutions. Not surprisingly, Jews have pricked up their ears, waiting for the howls of the antisemitic hounds.
Corrections used Lexis-Nexis to find any mentions of "Jewish Banker" since 1976 in major global news sources. We used Google's news search to find news articles on "bankers" over the same period. Google's news search was used because Lexis-Nexis had too many results to count for "banker." We expect our results to be robust to this methodology. We then compared the difference in mentions of Jewish bankers to difference in log GDP. If an decrease in U.S. GDP was met with a increase in the mentions of "Jewish Banker" in news sources, we expect there to be a negative correlation between them. To make sure there was a connection between bankers and GDP at all, we also used our Google search. We display the results graphically below.
First, we have U.S. GDP and the number of "Jewish Banker" mentions in Lexis-Nexis over time (click to enlarge).
Second, we have the difference in log GDP against the difference in number of mentions of "Bankers" (click to enlarge).
Finally, we have the difference in log GDP against the difference in number of mentions of "Jewish Bankers" (click to enlarge).
As it turns out, the correlation between difference in log GDP and difference in number of mentions of "Jewish Banker" is .0053. The correlation between difference in log GDP and difference in the number of mentions of "Banker" is -.0328. This would suggest that while "bankers" are mentioned more in times of low GDP, "Jewish Bankers" are mentioned more in times of high GDP.
The Forward claims that this is a recession was a case of "the dog that didn't bark." Corrections would first ask to see the dog; in order for it not to bark, it had to exist in the first place. As the only evidence on the table is weak evidence that there is reverse-discrimination, a Correction appears to be in order.
The More, The Better
Wall Street Journal book review "The More, The Better" (March 24th, 2010) discusses the book "The Next Hundred Million", by Joel Kotkin. It gives Kotkin's hypothesis, that come 2050, the U.S. will be vastly better off than its European and Asian counterparts, both of whom are aging or projected to age greatly while the U.S. stays relatively young.
Corrections largely sees Mr. Kotkin as correct about the implications for the welfare states of Europe and a mis-formed age structure in China due to its one-child policy. However, Corrections does not see youth and population as the driver of economic vitality, but only a relatively small portion of it. What matters for international comparisons, Corrections conjectures, is human capital. In the world today, there are relatively few technological state secrets that allow one state to be wealthier than another. Natural resources and human capital, instead, are the drivers of per-capita wealth.
As displayed graphically below, Corrections has used Robert Barro and Jong-Wha Lee's dataset from "International Data on Educational Attainment: Updates and Implications" (WP 2000) to construct a graph of the populations and educational trends of four different regions of the world: Advanced Countries, East Asia/Pacific, South Asia, and Transitional Economies. The data can be found here. Note that a drop in population for Transitional Economies is due to the exit of several countries of the Soviet Union and a move of East Germany from transitional to Advanced after German reunification.
The phenomenon Corrections wishes to point out is the difference between population, (click to enlarge) proportion of population at an educational level (click to enlarge), and total population with a given education (click to enlarge). A discussion of the graphs follows their display.
Corrections suggests that while the population of the West and advanced economies has slowed in growth and has been shrinking, the total population with higher education has been rising. Insofar as population shrinkage hampers specialization, then Corrections can recognize the process through which population shrinkage suggests a declining GDP. However, in the case of advanced economies, we expect per capita GDP to grow dramatically, as institutions (such as Universities) shrink less quickly than population, and human capital per capita rises. Corrections could see Europe as being subjected to these forces positively.
For Mr. Kotkin, population growth translates into economic vitality—the capacity to create wealth, raise the standard of living and meet the burdens of future commitments. Thus a country with a youthful demographic, in relative terms, enjoys a big advantage over its global counterparts. In the next four decades, Mr. Kotkin observes, "most of the developed countries in both Europe and Asia will become veritable old-age homes" because of stagnant population growth. And the economies of these countries, already devoted to a vast welfare-state apparatus, will face crushing pension obligations—but without the young workers to defray the cost.
Corrections largely sees Mr. Kotkin as correct about the implications for the welfare states of Europe and a mis-formed age structure in China due to its one-child policy. However, Corrections does not see youth and population as the driver of economic vitality, but only a relatively small portion of it. What matters for international comparisons, Corrections conjectures, is human capital. In the world today, there are relatively few technological state secrets that allow one state to be wealthier than another. Natural resources and human capital, instead, are the drivers of per-capita wealth.
As displayed graphically below, Corrections has used Robert Barro and Jong-Wha Lee's dataset from "International Data on Educational Attainment: Updates and Implications" (WP 2000) to construct a graph of the populations and educational trends of four different regions of the world: Advanced Countries, East Asia/Pacific, South Asia, and Transitional Economies. The data can be found here. Note that a drop in population for Transitional Economies is due to the exit of several countries of the Soviet Union and a move of East Germany from transitional to Advanced after German reunification.
The phenomenon Corrections wishes to point out is the difference between population, (click to enlarge) proportion of population at an educational level (click to enlarge), and total population with a given education (click to enlarge). A discussion of the graphs follows their display.
Corrections suggests that while the population of the West and advanced economies has slowed in growth and has been shrinking, the total population with higher education has been rising. Insofar as population shrinkage hampers specialization, then Corrections can recognize the process through which population shrinkage suggests a declining GDP. However, in the case of advanced economies, we expect per capita GDP to grow dramatically, as institutions (such as Universities) shrink less quickly than population, and human capital per capita rises. Corrections could see Europe as being subjected to these forces positively.
California's quality-blind layoffs law harms teachers and students
Los Angeles Times article "California's quality-blind layoffs law harms teachers and students" (March 24th, 2010) while making a valid point, misunderstands optimal hiring practices. It suggests schools, rather than retaining teachers who have been employed the longest, should only keep the best teachers.
Corrections agrees that length of tenure is suboptimal. However, only hiring the best is similarly suboptimal. While the problem of optimal hiring given a fixed budget and discretely heterogeneous population can take on the dimensions of a Knapsack Problem requiring a dynamic programming solution, Corrections suggests that the essence of the problem is quite simple: hire the best teachers per dollar, which may or may not be the best teachers.
Imagine there are six types of teachers, as displayed graphically below (click to enlarge). Teachers quality is denoted by number of boxes--teacher price and quality units per dollar are also displayed numerically. Then, let us say that we have $1260 dollars. We could hire 105 Type I Teachers, 140 Type II, 180 Type III, 252 Type IV, 420 Type V, or 1260 Type VI (we could also hire a combination of the teachers--our point is robust to allowing this). We would then get 630, 700, 728, 756, 840, or 1260 units of quality by hiring each type. We can see that we are best hiring the worst teachers, because they are the cheapest teachers per unit of quality. While the Times is correct that firing based on tenure is poor decision making, it is not correct that schools should hire the best teachers if they want the highest quality education possible.
After all, if layoffs are unavoidable, you would think that it would be in the interest of everyone to keep the best teachers and cut those who are least effective.
Corrections agrees that length of tenure is suboptimal. However, only hiring the best is similarly suboptimal. While the problem of optimal hiring given a fixed budget and discretely heterogeneous population can take on the dimensions of a Knapsack Problem requiring a dynamic programming solution, Corrections suggests that the essence of the problem is quite simple: hire the best teachers per dollar, which may or may not be the best teachers.
Imagine there are six types of teachers, as displayed graphically below (click to enlarge). Teachers quality is denoted by number of boxes--teacher price and quality units per dollar are also displayed numerically. Then, let us say that we have $1260 dollars. We could hire 105 Type I Teachers, 140 Type II, 180 Type III, 252 Type IV, 420 Type V, or 1260 Type VI (we could also hire a combination of the teachers--our point is robust to allowing this). We would then get 630, 700, 728, 756, 840, or 1260 units of quality by hiring each type. We can see that we are best hiring the worst teachers, because they are the cheapest teachers per unit of quality. While the Times is correct that firing based on tenure is poor decision making, it is not correct that schools should hire the best teachers if they want the highest quality education possible.
Gridlock May Not Be Constant, but Slow Going Is Here to Stay
New York Times article Gridlock May Not Be Constant, but Slow Going Is Here to Stay (March 23rd, 2010) makes a causal claim it does not have identification for. Relaxed drivers on the weekend due to faster traffic is cointegrated with it being the weekend itself. The Times ignores this.
We expect traffic to be lighter and therefore faster on days when people are less rushed (therefore less stressed). It is unclear whether or not there is a third cause (less weekend responsibility) that confounds the causal conclusion offered by the Times.
Small changes in speeds also seem to have an outsize psychological impact on impatient New Yorkers. On weekdays, when few people expect a trip to go quickly, speeds in east Midtown average about 6.3 m.p.h. in the daytime. On Saturdays, the average speed is about 8.5 m.p.h. — not an enormous difference, even though drivers report feeling more comfortable on weekends.
We expect traffic to be lighter and therefore faster on days when people are less rushed (therefore less stressed). It is unclear whether or not there is a third cause (less weekend responsibility) that confounds the causal conclusion offered by the Times.
Tuesday, March 23, 2010
In Health Bill, Obama Attacks Wealth Inequality
New York Times article "In Health Bill, Obama Attacks Wealth Inequality" (March 23rd, 2010) foregoes any pretense to journalism when it does not allow for the possibility that health costs will rise due to medical reform, as they, in the view of Corrections, surely will.
The Obama adminstration and its fiscal incompetents have banned use of pre-existing conditions while putting a weak mandate on buying insurance. This all but ensures a rise in premiums as individuals duck health care, paying weak fines, until they become sick, and then buy it from insurers who cannot discriminate against them. For the Times to tow the adminstration's murderous follies is revolting as well as requiring Correction.
Much about health reform remains unknown. Maybe it will deliver Congress to the Republicans this fall, or maybe it will help the Democrats keep power. Maybe the bill’s attempts to hold down the recent growth of medical costs will prove a big success, or maybe the results will be modest and inadequate.
The Obama adminstration and its fiscal incompetents have banned use of pre-existing conditions while putting a weak mandate on buying insurance. This all but ensures a rise in premiums as individuals duck health care, paying weak fines, until they become sick, and then buy it from insurers who cannot discriminate against them. For the Times to tow the adminstration's murderous follies is revolting as well as requiring Correction.
Monday, March 22, 2010
Ex-Offenders and the Vote
New York Times editorial "Ex-Offenders and the Vote" (March 21, 2010) displays ignorance of political theory as well. While Corrections attempts to eschew "ought" for "is" at times it becomes necessary to delve into, and correct in, other fields. In this case, the words of John Locke are echoed in an attempt to give force to an argument in the Times.
John Locke, in his Second Treatise of Civil Government (Chapter VIII), wrote "MEN being, as has been said, by nature, all free, equal, and independent, no one can be put out of this estate, and subjected to the political power of another, without his own consent." This was the phrase the Times echoed.
However, Locke had also written (Chapter I), "Political power, then, I take to be a right of making laws with penalties of death, and consequently all less penalties, for the regulating and preserving of property, and of employing the force of the community, in the execution of such laws, and in the defence of the common-wealth from foreign injury; and all this only for the public good." So long as a law is providing for the common good (e.g. not impoverishing everyone, not taking their property, and so forth), it is within the capacity of the legislature.
Yet we might continue further, because our subjects are former criminals. When an individual enters society, in the Lockeian concept, he gives it the power to make laws. When he then breaks those laws, he forfeits his power to manage those same laws by re-entering a state of nature (temporarily, and if he uses force)--by breaking them.
The use of Lockeian phrasing deserves the same. It is unimaginable that an ingenuous mind, reading John Locke, could come to the conclusion that disenfranchisement of someone who broke the social compact was out of the scope of a state's power.
Millions of ex-offenders who have been released from prison are denied the right to vote. That undercuts efforts to reintegrate former prisoners into mainstream society. And it goes against one of democracy’s most fundamental principles: that governments should rule with the consent of the governed. [Emphasis added].
John Locke, in his Second Treatise of Civil Government (Chapter VIII), wrote "MEN being, as has been said, by nature, all free, equal, and independent, no one can be put out of this estate, and subjected to the political power of another, without his own consent." This was the phrase the Times echoed.
However, Locke had also written (Chapter I), "Political power, then, I take to be a right of making laws with penalties of death, and consequently all less penalties, for the regulating and preserving of property, and of employing the force of the community, in the execution of such laws, and in the defence of the common-wealth from foreign injury; and all this only for the public good." So long as a law is providing for the common good (e.g. not impoverishing everyone, not taking their property, and so forth), it is within the capacity of the legislature.
Yet we might continue further, because our subjects are former criminals. When an individual enters society, in the Lockeian concept, he gives it the power to make laws. When he then breaks those laws, he forfeits his power to manage those same laws by re-entering a state of nature (temporarily, and if he uses force)--by breaking them.
The use of Lockeian phrasing deserves the same. It is unimaginable that an ingenuous mind, reading John Locke, could come to the conclusion that disenfranchisement of someone who broke the social compact was out of the scope of a state's power.
Sunday, March 21, 2010
Health care reform bill 101: Who will pay for reform?
Christian Science Monitor article "Health care reform bill 101: Who will pay for reform?" (March 21, 2010) does not offer the full story on who will pay for Health Care Reform. It notes that the wealthy will pay:
Labor supply of the wealthy is elastic. When they are taxed, they work less--their labor supply decreases. When their labor supply decreases, the cost of that labor as an input increases. As the costs of normal inputs increase (which labor is) supply decreases. That decrease reduces consumer surplus as well as producer surplus, depicted graphically below (click to enlarge). The left diagram displays an increase in marginal cost (of labor). The right diagram displays the resultant shift in supply. The light blue box in the right diagram displays the loss to consumers from the taxation of the rich.
The Christian Science Monitor offers discourse on "who pays for reform" without noting how surplus-destroying taxes spread loss of surplus to everyone.
Higher Medicare taxes on rich people
If you are an individual making more than $200,000 a year, or a married couple making more than $250,000 a year, get ready to pay more for your Medicare if health care reform passes.
Labor supply of the wealthy is elastic. When they are taxed, they work less--their labor supply decreases. When their labor supply decreases, the cost of that labor as an input increases. As the costs of normal inputs increase (which labor is) supply decreases. That decrease reduces consumer surplus as well as producer surplus, depicted graphically below (click to enlarge). The left diagram displays an increase in marginal cost (of labor). The right diagram displays the resultant shift in supply. The light blue box in the right diagram displays the loss to consumers from the taxation of the rich.
The Christian Science Monitor offers discourse on "who pays for reform" without noting how surplus-destroying taxes spread loss of surplus to everyone.
Could Obama Be Invincible?
New York Times article "Could Obama Be Invincible?" (March 19th, 2010) by Charles M. Blow offers the latest in absurdities from the Times. If history repeats itself first as tragedy, then as farce, Charles M. Blow is the farce to Jayson Blair's tragedy. Blow argues that Barack Obama's polls have not declined much over time.
According to Gallup, Barack Obama, starting with the 6rd highest approval rating of the 13 comparable presidents since Herbert Hoover, now is has the 9th highest approval rating. He is now below presidents Richard Nixon, and George W. Bush, narrowly beating Jimmy Carter and post-pardon Gerald Ford due to a recent uptick. The approval ratings of these thirteen presidents is displayed graphically below (click to enlarge; note that because the graphics are dense, this link provides a very large display).First, let’s take his job approval rating. Yes, it slid during the summer, but it stabilized around 50 percent in November and has hovered there ever since.
He has the 3rd highest disapproval rating, (recently beating Harry Truman for the worst at that moment in time). He started with the 5th highest. The disapproval ratings of the same thirteen presidents is displayed graphically below (click to enlarge; note that because the graphics are dense, this link provides a very large display).
Barack Obama's meteoric fall in polls is surpassed only by the unctuous and disingenuous bile Charles M. Blow spews.
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