Wednesday, February 25, 2009

The Economics of Alien Conquest

My cousin, Brendon, and his girlfriend, Jenna, were in town this weekend. Both of them read my blog and Jenna told me I'm clearly knowledgeable about what I'm talking about, but still wrong. That response in itself deserves a post, which I may or may not get around to. Still, it would be fun to deviate a bit away from controversial topics and I thought of alien invasion. If aliens invaded, what would be their motivation?

Natural resources is a favorite Hollywood staple. Aliens will destroy our planet to take our stuff, likely minerals (Independence Day comes to mind but the physical land might be valuable, too (in The Day the Earth Stood Still, alien invaders attempted to terraformed our planet).

This is quite possibly the least likely reason aliens would go through the trouble of global conquest. The universe is filled with minerals and other resources that no one's using and are much easier to get to than stuff on an occupied planet. Maybe other extraterrestrials make harvesting Vega asteroids difficult, but even in the boundaries of our solar system there's still quite a lot to draw on.

Unless aliens are after biomass (i.e. living things). Perhaps there's some technology or feeding requirement that requires biomass (or they just want us as slaves), and Earth is the best place to get it. Lots of biomass with little ability to defend it. In that case, the best strategy probably wouldn't be a messy mass attack on the resource you're trying to harvest. Aliens would likely be much more insidious with probably a pathogen--killing everyone or knocking us all out while leaving the bodies around for collection later.

Racism is a likely motivation. This pops up in a lot of Sci-Fi television shows (Star Trek, Stargate, Babylon 5). A similar train of thought is a concern for humanity and a fear of what will happen if we're allowed to continue to live. Given many humans mistakenly fall into one of these two categories, I'd like it's a reasonable motivation for aliens to kill us.

Technology is a justification that's rarely explored. This is understandable but not for the reasons you probably think. Most assume that if aliens know how to travel faster than light, they are clearly more advanced than us on all other levels. That is far from certain, especially since an alien brain will probably not be wired the same way as a human one. As Richard Dawkins suggests, it is entirely possible there's a group of extraterrestrial life who intuitively understand the theory of relativity but have difficulties grasping principles of air resistance and other "slow" speed phenomena.

But it would be rather clear that the easiest way to get technology is to trade for it, not to take it by force. If such aliens were interested in our technology, they would more likely be peaceful. The one exception to this rule is if they discover it's easier to kill us than to learn a single human language. That would certainly be a sad state of affairs for us.

Then there's the possibility that aliens need to build a intergalactic superhighway along a path that intersects with Earth's orbit. That's a bit unlikely given how big space is ("Really big," according to Douglas Adams) but it could still be true. And if galactic eminent domain is as potent as our terrestrial version, then considered us conquered.

Wednesday, February 18, 2009

Politics As Usual

Alex Tabarrok ran some numbers, breaking the stimulus plan down by state. Below is the relation of infrastructure spending per person versus the unemployment rate. The red line is the best fit line for all the data points. Note it's sloping down.

The basic logic of a stimulus package is that government will create jobs, people spend the money, which creates more jobs, which allow people to spend the money again, etc, increasing money's "velocity." But here we see the states with the least unemployment get the most money and with the most unemployment get the least money (with some outliers). I can think of three explanations. Here they are in decreasing likelihood.

Shut up. This relationship is because congress members are using the package to send money to their home district/state. Those with the most political clout/understanding get the most money. This package really isn't about helping the whole economy but about boasting one region at the expense of another in order to get re-elected.

Oops. The government made a mistake. Some numbers got mixed up and checks are being sent to the wrong states. Granted, it's a pretty big mistake and one must wonder how an institution which make such mistakes will rationally plan us out of this mess.

Holier Than Thou. We missed something and the U.S. government knows what's going on but this graph doesn't capture all we need to know. If it did, everything will fit together very logically. This is possible, but no where near as likely as the other two.

Tuesday, February 17, 2009

Most Interesting Sentence I Read Today

From this week's Economist:
Indeed, some say the Few learnt [Irving] Fisher too well: from 2001 to 2004, to contain the deflationary shock waves of the tech-stock collapse, it kept interest rates low and thus helped to inflate a new bubble, in property.
A concise reminder that artificially fixing one sector one sector of the economy has unintended consequences in other sectors. One must wonder where the new holes will appear in the aftermath of the $787 billion stimulus package.

Wednesday, February 11, 2009

Krugman on the Virtues of Protectionism

When I read Paul Krugman, I first think "that's crazy! He's insane." Then I read it again and that usually (but not always) becomes "that's interesting, but it still wrong." Reading Krugman's February 1st article (spawning a nifty debate here, then here, then here) led me to the typical reaction.

I'm still reading through the responses, but Krugman's basic argument is that fiscal stimulus benefits other countries in addition to the one doing the stimulating (for now, let us assume Keynesian economics works the way Keynesian insist it does). The country being directly stimulated imports from other countries, which help their economy. But these economies share none of the debt generated by the stimulus package. Thus the funding country gets a smaller benefit than they should and we have too few economic recovery acts. Short term protectionism internalizes the benefits to those that are paying for it, thus we get more such packages when we need them.

It's a clear argument but to see why it doesn't work, let's follow the money. Suppose the exporting foreign country is Japan. They now have (say) American dollars. What do they do with this crazy American money? They can't spend it in their country. There are two things they can do with it.

(1) They can import from America. This means that money Keynesians want to stay in the US will come back. It's just adding another step. Instead of Government to Domestic Market, it's Government to Foreign Market to Domestic Market.

(2) They can invest in America. Instead of buying goods, they buy companies (or just capital). Again, the money comes back into the economy, but now there are two steps before it enters domestic consumption (Foreign market to Domestic Company to Domestic Market). Again, it's a wash.

You could argue time is an issue but money moves pretty quickly, especially in the era of Internet and telecommunication satellites. And, because the government's buying international, it's going to get a better deal which will help in the long run (when this huge debt will have to pay off). It's hard to imagine that extra delay is really such a huge problem.

An implicit assumption of Krugman's argument is that exports are inherently good for an economy and imports are not. But that's completely wrong. While Krugman might paint my argument as grounded in theology and not economics, the case for free trade is so strong, and for protectionism so weak, such interpretations are closer to being grounded in laws of economics as irrefutable as gravity or motion.

Saturday, February 07, 2009

Economics, the Law, and Treasure Hunting

Last week, deep-sea explorers announced they found the shipwreck of the original HMS Victory which sank in 1744. This is certainly a victory for the decedents of her captain (as the location of the ship demonstrates it sank due to a storm, not mistakes on the captain's part). But that is not the interesting part of the rest of us: it's the treasure.

Well, the legal battle for the treasure is what's interesting as the treasure is mostly large bronze cannons of historic significance. There also might be as much as four tons of gold, but that's just a theory. Due to the decay of the site, we're a long way off from a good estimation of value.

But that hasn't stopped the British government from claiming "dibs," though the site's in international waters. Lost for over 250 years, the government argues they never explicitly gave up sovereignty of the ship and its contents.
If it really is the HMS Victory, "her remains are sovereign immune," the British Ministry of Defense (MOD) said in a statement on its blog Monday.

"The wreck remains the property of the Crown. We have not waived our rights to it. This means that no intrusive action may be taken without the express consent of the United Kingdom."
They also want a cut of what's found, though the exact size is under negotiation (but you can bet it'll be a sizable one).

Safe to say, it creates a mess for the people who found the ship to sort out. It also cuts on their profit margin. This is where law and economics can help. The boringly named field of law and economics uses economics to better form the law so it encourages efficiency.

In this case, the law allowing a country to claim sovereignty on a wreck someone else found makes it less profitable for other people to find and recover wrecks. Thus more ships sit at the bottom of the ocean, slowly decaying into nothing. There are few examples so illustrative of waste as that one. Granted, there's a good argument for claiming sovereignty on a ship that sank last week. It takes time to find wrecks and if somebody just stumbles upon it in the meantime and gets to claim it all, that would have its own unintended consequences on how willing people are to use ships (or even build them in the first place). But that argument doesn't spill over to a quarter of a millennium. This looks a lot more like theft then maintaining sovereignty. I hope the British government aren't looking for any other important ships, of their own sake.

Stimulus Package May Prove Flaccid

A friend showed me this video:


HT: Mike Mills

Monday, February 02, 2009

The Illusion of the Pay Gap

The first homework of the semester informs my students that one of the reasons men get paid more than women is because women can get pregnant. Because contracts promising to not get pregnant are illegal, hiring women is riskier for employers. An employee could take several months leave with relatively little warning. What a coincidence that President Obama's first bill addresses the same issue, but ignores the explanation.

Insisting that employers pay women less for malevolent reasons, Mr. Obama made it easier to make pay discrimination suits. Notes CNN,
companies will need to meticulously document pay decisions and retain detailed employment records, legal experts say. In this, small companies may be at a disadvantage - few have access to the attorneys and human-resources professionals that will help larger businesses comply with the newly expanded law.
A strange thing to do in rough economic times.

Risk of pregnancy isn't the only reasons for pay gap. Women tend to enter less technical jobs. Part of that is a natural tendency; for whatever reason, women are less likely to enter the sciences and, save economics, more likely to enter the social sciences. Go to any college math class and I bet you'll see mostly men (no going to an all-women school; that's cheating).

The other reason for the draw to the less technical is, you guessed it, pregnancy. Technical jobs have a high degree of obsolescence, meaning you have to stay on top of the latest developments to keep pace. But when you leave the job market for months at a time to care for a newborn, this is really hard to do. Hence women become secretaries, not engineers.

Biology's a sneaky thing and even seeps in after the children are born. Women also tend to work part-time, since women are still the gender that tends to take of kids. Being restricted to part-time adds additional restrictions to where they can work; again, these places that accept part-time employment tend to be paid less. Fringe benefits are usually off the table as well.

The nice thing about this story is it's easily testable. Simply look at groups where the biology issue isn't relevant and control for education. Thomas Sowell from Economic Facts and Fallacies:
Among college-educated, never-married individuals with no children who worked full-time and were from 40 to 64 years old--that is, beyond the child-bearing years--men averaged $40,000 a year in income, while women averaged $47,000. (p70)
Women are paid 17.5% more than men! Maybe we'll see that new legislation end the tyranny of male bosses upon his fellow man.