Thursday, December 22, 2005

Global Design and Intelligent Warming

Regular vistors of L3 would probably have noticed my reservations when it comes to accepting the theory of global warming, or more specifically, that humans are the cause. With the recent decision about intelligent design, it might seem odd that I side with the scientists on this one.

Consider the similarities. Both theories are nearly universally accepted in scientific circles. Both ideas are seeped in politics. Both relate to dynamic systems. Both have huge bodies of evidence but neither can be "proven" in the lab.

But there are solid differences.

1) Politics played against evolution when the theory first appeared. Global warming scares are modern tools of politicians. The consistency lies in disbelieving what the government tells you.

2) Evolution describes a dynamic system. GW makes causal claims of a dynamic system.

3) Evolutionary theory became more sophisticated as technology developed (using DNA to demonstrate how species are connected, for example). GW theory has certainly become more complicated as computer technology improved, but its reliance on modeling the unknown does not make it more sophisticated in any useful sense.

4) The most important difference is that evolution is the best scientific theory we have that explains the origin of life. But there are far better origins of causation for changing climate (ie that it's natural and the virtue of this theory is, like evolution, it has historic evidence).

The judge was absolutely correct when he said ID is nothing more than creationism with a scientific-sounding name. When opponents perversly argued that evolution is its own dogma, they were equally, absolutely wrong. By definition science cannot be dogma. But that doesn't mean scientists are never dogmatic.

Saturday, December 17, 2005

Thinkin' About Your Deficit

I've often mentioned that the only times I trackback to CF is when I disagree with her and today is no expection. She wrote yesterday that there's no such thing as a "trade deficit." This is wrong. The trade deficit exists; it's just a dumb name.

I'll agree that when people talk of the trade deficit, they're speaking of a vacuous concept. The trade deficit is an arbitary distinction between net exports and capital flow. It exists, however, because people make that very real distinction.

It would be (slightly) more accurate to say that there is no trade "deficit" because a deficit implies we have to pay it back. We aren't running up a debt because we import more than we export. CF is correct that we should ignore the media scares. At the same time, remember the English language is clunkly and silly and people call things stuff that doesn't make sense. I drive in a parkway but I park in a driveway and so on. Sementics. Technically true, but there are bigger battles to fight.

While the trade deficit exists, the real lesson is that it doesn't matter. Two reasons for this: CF's point (we can afford these imports; isn't that a good sign?) and the accounting identity. Dollars that go abroad have to end up in the US (okay they could end up in Palau or East Timor or whatever but they're too small to really mean anything). Now you could say that net exporters (like China) are putting those dollars back in the US buy purchasing government bonds, thus funding inefficient spending. That's true; that's a problem. But that's really a problem with the budget deficit, not the trade deficit, because that's something we really do have to pay back.

Wednesday, December 07, 2005

Smoke Freely

The Broadside had an opinion piece this week that advocated more non-smoking zones on campus. I sent the editor a reply:

Dear Editor,

I do not smoke. Like Lindsay Wolcott who wrote to you on December 5th, I find it disgusting. There is also no doubt that cigarettes are harmful to your health. Everyone knows this; most anti-smoking ads are pointless because they merely repeat this well-known fact.

Yet teens continue to smoke. Why? Imagine James Dean, the ultimate cool guy. He’s a rebel and when you’re young, being a rebel is cool. Dean smoked because authoritarian figures didn’t want him to just as such figures don’t want teenagers to smoke today. That makes smoking cool.

Not enough people understand this concept so pro-banners cite passive smoking health risks to push their cause. It would surprise few that second-hand smoking is dangerous, but there is a real difference between a child living with a pack-a-day mom and a person passing a few smokers on the street. The first could do real harm, the second likely wouldn’t do anything.

It is already shameful that we treat smokers as second-class citizens by telling them to leave large open spaces (like the JC dining area) and stand out in the cold. Pushing that boundary further so you don’t have to walk through “clouds of smoke” is inconsiderate laziness. If Ms. Wolcott is truly so concerned about her health, she can hold her breathe for the few seconds it takes to pass smokers. If, as she implies, this is truly not an option then I strongly recommend she gets her lungs checked.

David Youngberg
First Year Graduate Student, Economics

Making rules about how people should live their lives a free society does not make.

The Wealth of Christmas

Economics is hard, so we shouldn't be surprised if even CF gets it wrong every once in a while.

Yesterday she posted about how Buy Nothing Day is silly and that eliminating Christmas would be irrelevant. I agree with her that BND is absurd but for a fundamentally different reason. She says that buying nothing for a day is very common. I said in an earlier post that it's actually impossible. Clearly CF does not read my blog as often as I read hers. Shame on her.

I also disagree with her on Christmas though her logic is at first sound. People have X amount of money to spend every year: eliminating Christmas won't cause people to have less money or want fewer things. But it assumes there are no benefits to crowding production. Schleifer argues that the role of implementation theory (sectors of the economy work best when they are all working together) means Christmas makes the economy more efficient. In other words by lumping our consumption and production, our efficiency is higher on average for the year than if both were smooth over the seasons.

This idea should come as no surprise to either CF or myself because we practice implementation theory as students all the time. Finals are coming up and to prepare for math, we are going through about a chapter a day. We did not study so intensely a week ago. We are crowding our production just as most students do.

If we think about it more, we can complicate it more. There are problems with Christmas. There's inefficiency with buying stuff for other people, but there's also utility asscoiated with giving and receiving. People get utility from the holiday itself while others get disutility. My gut tells me that the benefits outweigh the costs, which I think says a lot because I'm not a fan of Christmas.

But to call the holiday irrelevant based solely on an accounting identity is very incomplete.

Have A Merry Holiday

People get upset about the stupidest things. Consider the annual uproar from conservatives because Bush sends out a "holiday" card instead of a Christmas one. There is no Jesus in this card, odd for a self-proclaimed born again.

The White House reasonably responds that they send out cards to all faiths, hence they aim for a wide-appeal. That makes sense but frankly, it doesn't matter. They could send out Happy Kwanzaa cards and it wouldn't matter (but it would be funny).

This is where it gets really absurd because some find the card to be a crime against humanity. "This clearly demonstrates that the Bush administration has suffered a loss of will and that they have capitulated to the worst elements in our culture," said William Donohue, president of the Catholic League for Religious and Civil Rights.

The worst elements of our culture? That's pretty impressive for one card. One card which apparently cancels out all of Bush's references to Jesus and God, all his trips to church and all quotes from the Bible. I know if I could undo an entire culture with a folded piece of paper, I'd do it just for the thrill.

Tuesday, December 06, 2005

Cato the Unbounded

Cato recently launched its online monthly, Cato Unbound. There's some smart people at Cato and I promised Steve Slivinski my legions will check it out. Don't make a liar out of me!

Thursday, December 01, 2005

Pondering Walter Williams: The Art of the Deal

The other day in class WW tried to convince us that the phrase "bargaining power" (especially as it pertains to wages and labor) is a vacuous statement. The argument is reminiscent of economic thought's early days, when a great debate raged over if it was supply or demand that determined price.

It's both, of course, and Williams used a similar argument. While one could demand a low wage, the other could respond with a low quantity of working hours. Price and quantity go hand in hand, just like supply and demand. Thus claims of having superior bargaining power is the same as claiming superior demand. It's meaningless.

I disagree. The bargaining process is not a one-time negotiation where a wage is presented, a quantity of labor is responded with and there's nothing beyond that except agreement or rejection. Bargaining is a process of give and take where new offers are made for a single unit. It is a process that describes how supply and demand discover price and quantity.

Bargaining power is really a comment about elasticity. As different wages are offered, different hours (explicitly or implicitly) are offered to match with it. Each negotiator has a range of prices and a range of quantities they would be willing to put on the table but without the other party giving up and walking away. The wider those ranges, the greater the bargaining power.

Suppose I seek out employment at the Cato Institute. Being a first year grad student, I know I have a small range of p's and q's to offer them because my human capital is relatively low (but still pretty good). Now fast forward about five years. I've publish a few papers and got my PhD; my ranges of p's and q's has increased. I have more bargaining power. Bargaining power describes how sensitive the size of sets of p's and q's are to changes in human capital (just as elasticity describes how sensitive Q is to changes in P). Like elasticity, bargaining power is influenced by similar determinants, most notably the number of substitutes.

It's difficult to measure human capital so it's difficult to come up with an absolute value of bargaining power. We can estimate the ranks of such power, if someone has more or less or roughly equal ranges of offers. Thus we can say if someone has superior (greater) bargaining power, just as we can say if some goods are more or less elastic than others. (We can use the word "superior" because more bargaining power is always preferred by any agent while more elasticity may be preferred or not depending on if one is on the demand or supply side.)