Sunday, April 25, 2010

Warm, and getting warmer

LA Times editorial "Warm, and getting warmer" April 22nd, 2010 argues that the governments of India and China need to set up regulation against carbon emissions in order to protect their peasant populations who would not be able to migrate if the world temperature significantly increased. However, it is unclear whether regulation against global warming would help or hurt these peasants. The article states:
The peasant farming populations are not rich enough to simply adapt. So the first thing we need to do is to beg the rulers of China and India to understand their nations' long-term interest.
Suppose however that any environmental regulation decreased the value of the peasant's labor. Perhaps even the growth rate of the peasants' wealth would slow, and these citizens would find themselves far poorer in 30, 40, or 50 years (whenever global warming would have caught up to them--if ever) than they would have been had the government allowed them to freely invest in their future, even if that meant taking jobs at carbon emitting plants. The time-invariant image of peasantry that the article conjures belies a fundamental misconception: people, even peasants, tend to invest in their own future. Generally, they can do so better than the government.

Saturday, April 24, 2010

Celebrating the Joys of April 15

New York Times article "Celebrating the Joys of April 15" (April 14th, 2010) offers an incredibly poor analysis of polling data.

According to the Gallup polls, 45 percent of Tea Party supporters have incomes under $50,000. According to a New York Times/CBS News poll, Tea Party activists are virtually the only segment of the population in which a majority feels its tax burden is unfair. Clearly, these are not the kind of folks who would cancel their anti-tax rallies just on account of not being taxed.

This could be a joke, if it weren't from the New York Times editorial page. It is not contradictory for a poll to have 50% of individuals hating the high taxes that they pay, and 50% of individuals paying no taxes. The two 50% would, in order to not be contradictory, have to be different. The author, Gail Collins, appears to assume that these are the same 50%. This is an error of the same magnitude she accuses Tea-Partiers of making. Corrections suggests that the overlap between these distributions is small.

This entire analysis lets alone the possibility that individuals pay taxes other than federal income taxes, which the Collins naturally ignores but provides an additional channel through which an apparent contradiction may be resolved.

The Liberal Democrat eruption is not finished yet

The Guardian article "Liberal Democrat eruption is not finished yet" (April 25th, 2010) offers a corrupted version of the median voter theorem, suggesting that but one in twenty-five marginal voters decides the ruling party in Britain.

Elections are determined by remarkably few voters. These are those voters who choose to vote (in the past two elections only six in 10); who have little party loyalty (about one in five); and who live in marginal seats. As few as one voter in 25 decides who rules the land.

This might appear to be true, and it might appear that the marginal voter is one twenty-fifth of the eligible voting population. However, it's not clear that this is actually the case. For any given election, there may be 75% of the population supporting the candidate that wins. Two-thirds of that 75% have an incentive to free-ride on the other 25% plus one that can win the election for them without having to vote, something that might be considered to be costly.

In such a situation, the defection of every single individual who was going to vote for the winning party would mean nothing--there is a vast resovoir of previously supra-marginal, now-marginal agents willing to vote for the winner. Voting is endogenous to chances of winning, and the Guardian appears to have missed this.

Thoroughly Modern Theodor

Jewish Daily Forward article "Thoroughly Modern Theodor" (April 21st, 2010) makes an untrue claim about women's suffrage in Europe. Specifically, it claims that Theodore Herzl gave women the vote in the First Zionist Conference in 1897, as compared to European countries, none of which, the article claims, gave women the vote in national elections.

Herzl gave women voting rights in 1897, when no European country permitted women’s suffrage in national elections.

First, women did not have the vote in the 1897 First Zionist Conference, but instead were given the right to vote in 1898, in the Second Zionist Conference. Second, in 1881, the Isle of Man gave women the right to vote in parlimentary (national) elections. Beyond comparing apples and oranges, the Forward's statement is twice factually incorrect.

Saturday, April 10, 2010

Media’s mendacity should be news to all

Boston Herald article "Media’s mendacity should be news to all" (April 10th, 2010) by Bill O'Reilly discusses individual American's discovery that United States newspapers are politically biased, and appears surprised. Corrections suggests that far from being surprising, this is a natural occurrence, and we should see media bias in a different way.

While many Americans believe the national press is biased toward the left, a more damning charge is now being debated: Are U.S. media outlets actually corrupt? Those who believe they are point to the cheerleading during Barack Obama’s presidential campaign and to the recent reportage on the Tea Party movement.

As you may know, the Tea Party people have been branded in some media quarters as a bunch of racist, far-right loons. TV commentators on MSNBC and CNN have actually called the Tea Party folks dirty names on the air - all in an attempt to diminish the growing influence of the movement.

But a funny thing happened on the way to the gutter. Regular Americans have apparently opted to decide for themselves about the Tea Party, and the polling is interesting.

Corrections suggests that January 2010 Econometrica article "What Drives Media Slant? Evidence from U.S. Newspapers" by Jessie Shaprio and Matt Gentzkow has a more appropriate manner of examining media bias. In order to understand its relevance, we first note that in Shapiro and Gentzkow's 2006 Journal of Political Economy paper "Media Bias and Reputation", they posit consumers who do not know the quality of a news source with certainty. Their consumers have prior beliefs about the truth, read news articles, and sometimes the truth is revealed to them at a later time (so they can update, finding that the newspaper has deceived them, or not). The article finds that newspapers will optimally slant their news to their consumer bases's biases.

Returning to the original paper Corrections referred to, the authors find that, "consumer demand responds strongly to the fit between a newspaper's slant and the ideology of potential readers, implying an economic incentive for newspapers to tailor their slant to the ideological predispositions of consumers. We document such an effect and show that variation in consumer preferences accounts for roughly one-fifth of the variation in measured slant in our sample."

Corrections suggests that the cycle O'Reilly was referring to makes quite a bit of sense, in this light. First, individuals had some signal about Barack Obama as a Presidental candidate. News sources respond to that bias (and perhaps the two feed one another, though that conjecture is by no means clearly going to happen). Individuals vote for Obama, and perhaps discover, given a relatively monotonic downward trend, that they were deceived by media slant. Corrections offers Gallup Approval Rating Polling data below (click to enlarge). They bayesian update on the slant media stations have, just as the Tea Party, borne out of individual's discovery of deception by the media, occurs.

Corrections suggests that Mr. O'Reilly's article was not necessarily off-base, but was grasping at the model suggested by Shapiro and Gentzkow without explicitly mentioning it. It is in this clarifying manner that Corrections offers a clarification.

Friday, April 9, 2010

Don't Dismiss Michael Steele

Newsweek Magazine article "Don't Dismiss Michael Steele" (April 8th, 2010) offers a claim with no backing or counterfactual at all. Specifically, it suggests that Michael Steele is chairman of the Republican Party in part due to race.

After all, the very fact that Steele is in the job has something to do with race. "He has a symbolic value in the context of an Obama presidency," notes Sharon Collins, a sociologist at the University of Illinois. "So race is front and center." Since race has been so central to his tenure, it inevitably influences how people see him, says Collins, who studies high-ranking black executives. "When [Steele] said that, my first thought was, I know what he means, but he will never be able to explain it to people who haven't experienced it or aren't sensitive to that on some level."

No evidence was given for having his job in part due to race. Corrections sees the statement as quite ludicrous, and fails to see the evidence behind such a bold claim. Indeed, it's hard for us to imagine evidence that would support this claim, save data or evidence on the selection process itself, which was not given. Newsweek lacks identification for their claim that race played a role in Michael Steele's chairmanship.

Scary ‘IRS agents’ claims --- Truth comes out about the ‘16,500 thugs coming with their guns’ to jail insurance cheats

Chicago Tribune article "Scary ‘IRS agents’ claims --- Truth comes out about the ‘16,500 thugs coming with their guns’ to jail insurance cheats" (April 8th, 2010) misses the point in attacking Ron Paul's argument concerning IRS agents. Specifically, Representative Paul suggested that if one fails to pay one's taxes individuals with firearms will come to one's door and put one in jail. The Tribune thinks this is in error.

In an interview on the Fox Business Network, U.S. Rep. Ron Paul, R-Texas, conjured up this specter of "armed bureaucrats," then, in the spirit of vividness, turned them into "16,500 thugs coming with their guns and putting you in jail if you (don't) follow all the rules."

It's hard to know where to begin unpacking this claim.

First, IRS "bureaucrats" — auditors, agents and other enforcement personnel, are seldom armed.

To Corrections, Paul appears quite correct. While auditors, agents, and other enforcement personnel of the IRS may not be armed, failure to comply with their orders will result in armed law enforcement officers coming to one's door. Taxes come from political power, and political power, as Chairman Mao noted in Chapter 5 of his Little Red Book, grows out of the barrel of a gun. This is a fundamental distinction between government and other institutions, and one that Austrian Economists especially are not hesitant to make.

The Tribune's correction is in need of a correction. Paul is quite correct in what he is stating.

Thursday, April 8, 2010

A death penalty record

Los Angeles Times article "A death penalty record" (April 8th, 2010) appears to be in error. It claims that Los Angeles County is a "killer county." While Los Angeles has sentenced individuals to death, none of those individuals have actually been killed.

Los Angeles isn't the only killer county in California; death sentences were also up sharply in Orange and Riverside counties last year.

This is hyperbolic at best. Since 1976, California has executed 13 individuals. One of these individuals, executed in 1996, George Bonin, was given two death sentences (for different sets of victims) for ten separate murders by Orange County independently of his death sentence from Los Angeles County for four other murders. The other execution, taking place in 2005, was of Stanley Williams, convicted of murdering a store clerk laying prone, and separately murdering a family of three.

It does not appear that calling Los Angeles County a "killer county" for executing two men, over the course of the last 31 years that individuals have been executed in Post-Gregg, Post-Proposition 8 California, is appropriate. Given that the two men were responsible for eighteen murders between them, the attack by the Times on Los Angeles County's death penalty cases does not seem to warrant the comment, that in the context of an absence of complete certainty about murderer culpability, Los Angeles County is "inhumane."

Wednesday, April 7, 2010

Facebook's virtual farming lacks actual meaning

Atlanta Journal-Constitution article "Facebook's virtual farming lacks actual meaning" (April 7th, 2010) appears to miss a point when it offers a tirade on how Facebook's application FarmVille is inferior to real farming.

Farmville and the Internet are surely diverting, and they may suggest a desire for community, but the relationships, like the watermelons online, lack the most important and satisfying substance.

Corrections conjectures that FarmVille does, however, offer a relatively complex dynamic programming problem for an individual user. How best to maximize (perhaps discounted) revenue over time with borrowing constraints is a challenging problem. Replicability, lack of continuous time trends that one has in the real world makes the game perhaps more tractable than a regular farmer's problem. Corrections sees this criticism as unwarranted.

The 2010 Census and Latinos: What race are we?

Christian Science Monitor opinion editorial "The 2010 Census and Latinos: What race are we?" (April 6th, 2010) asks a simple question but fails to answer it. The author complains that various latino nationalities are not given their own categories.

It is Question 9 that has confused Hispanics. It asks one’s race, and the possible answers are White, Black, American Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, Native Hawaiian, and Samoan. Responders are allowed to check as many boxes as they like.

Excuse me, but when did nationalities like “Japanese” and “Korean” become a race?

To answer the author's question, "Japanese" has been a racial term in the U.S. Census since 1870. "Korean" was first used in 1930, but has been intermittent. "Chinese" has been on the Census since 1860. "Mexican" was used in 1930. The author's lack of information could have been easily corrected.

Saturday, April 3, 2010

5 Myths about your taxes

Washington Post opinion "5 Myths about your taxes" (April 4th, 2010) offers an ill-concieved dismissal of tax "myths." Among them is a non-sequitur rebuttal to the notion that "Americans are overtaxed." Another suggests that the claim "Most people's tax returns are way too complicated" is erroneous, while giving no support for the argument.

Bottom line: We may hate our taxes, but we pay far less than people in other wealthy countries.

This does not take on the form of an argument to Corrections. Just because Americans pay less taxes than people in other countries does not mean that taxes are too high, or too low. The suggestion that European tax rates at optimal levels would amount to a joke to an economist. The only sensible way to argue optimal taxation is the Ramsey Tax problem or other optimal taxation arguments. Simple comparisons between countries give no insight.

The Post then claims that taxes are not too complicated:

But most Americans have relatively simple tax returns. Nearly two-thirds of us claim the standard deduction and don't have to itemize our deductible expenses.

However, it also gives data that its claim is not true.

Small wonder that three out of five tax filers pay someone to prepare their returns, and another one in five uses software.

When four out of five people need help filling out their returns, and three cannot do it on their own, it seems self-evident that taxes are too complicated for an individual to fill out on their own. If they could, they would not pay others or take up their own time with the frictions of having others fill out their paperwork. Corrections recognizes that it would be in the interests individuals with a very high shadow wage to pay others to fill out their taxes, but suggests that when three fifths of the population meets this criterion, it appears true, by definition, that taxes are too complicated.

Friday, April 2, 2010

College loans, no middleman

LA Times Editorial "College loans, no middleman" (April 2nd, 2010) claims that
The primary obstacle for young adults seeking to complete a college degree isn't that their public schools failed to prepare them or that their colleges somehow alienated them to the point of dropping out. It's money. Even solidly middle-class families can seldom cough up the more than $160,000 that private college will cost over four years.
Virtually all private institutions (certainly those of quality) offer need-based tuition waivers and partial tuition waivers. Many private institutions offer "no-loan" packages to poor families. As a rule, the lower family income, the more generous the funding package. Of course, if any price is too high a price, the author can be guaranteed that truly deserving students are offered merit-based awards.

In addition, colleges, especially private ones, live off of endowments. These institutions understand that funding poor students for four years will likely payoff in terms of future donations to university from these students. In fact, poorer students' lives will have improved relatively more due to their post-secondary education, and we should expect them to be relatively more "grateful" to their undergraduate institution--especially if tuition was free. In this sense, colleges are motivated already to fund lower income students, and certainly are in a better position than the government to select high-quality low income students for need-based aid.

Finally, increasing aid may make schooling less worthwhile for everyone. One purpose of schooling, as Michael Spence has argued in the Quarterly Journal of Economics is to provide a signal to employers. The more bright a student is, the easier school is for them on every level. School becomes not worth the effort for the worst students first, and so the fact that someone achieved a degree provides a valuable quality signal to employers. Certainly taking away the cost component of schooling will differentially impact rich and poor students. Wealthy students will make a drop-out decision based on a far more lucrative outside option, and so we should expect a relatively weaker quality signal from poor students who graduate. Of course, this decreases the very "value" of education on which funding would be based.

Thursday, April 1, 2010

N.J.'s lag in 2010 Census participation should concern residents, officials say

New Jersey Star-Ledger article "N.J.'s lag in 2010 Census participation should concern residents, officials say" (March 31st, 2010) makes a common argument about the Census that strikes Corrections as incorrect. Specifically, it argues that everyone in a state loses out when an individual fails to fill out a Census, as the state may potentially lose a seat in the U.S. House of Representatives (seats are apportioned according to Census results). Concerning unfilled-out Census forms, the Star-Ledger supports its argument:

That’s trouble for us. That’s loss of money. It’s a potential loss of a congressional seat, and make no mistake, that’s a problem for everyone in New Jersey,” said Assemblywoman Linda Stender (D-Union), who chairs the Assembly State Government Committee.

Let us imagine that I am the minority party in a state whose state legislature is controlled by the opposing party. That opposing party will gerrymander any new district to be controlled by the opposing party. If I conjecture that my state is best served by my party being in control at the Federal level, then I might choose to not fill out my Census form rationally, especially if it means my state losing a seat in the House of Representatives.