Tyler Cowen continues his epic reading of six word stories. Here are some of my favorites from Wired:
Computer, did we bring batteries? Computer?
- Eileen Gunnr
Gown removed carelessly. Head, less so.
- Joss Whedon
Kirby had never eaten toes befoe.
- Kevin Smith
We went solar; sun went nova.
- Ken MacLeod
TIME MACHINE REACHES FUTURE!!! … nobody there …
- Harry Harrison
Tick tock tick tock tick tick.
- Neal Stephenson
Heaven falls. Details at eleven.
- Robert Jordan
God to Earth: “Cry more, noobs!”
- Marc Laidlaw
Always a fun time.
Tuesday, October 31, 2006
Only Seven Days Until People Stop Trying to Shame Me Into Voting
I had a conversation with an old friend from high school the other day and naturally, with the elections looming, our conversation turned to politics. This is about when I told him I don't vote.
Why don't I vote? There are three common reasons why people would engage in this democratic ritual: (1) they enjoy partaking in the democratic process; (2) they like expressing their support for a candidate through voting (no doubt because the candidate tells them that is how they like having support be expressed); and (3) they think their vote will make the difference in the election (thus gaining benefits from that outcome).
I gain nothing from (1) or (2) and I know (3) is about as likely as a jellyfish making me dinner. My friend had trouble relating to my position and told me a story that for this election he convinced people in his office to vote his way and brought in absentee ballots for them to fill out.
I have no problem with people voting. There are clear reasons to do so (like to shut up people who want you to vote). I only have a problem when politicians lie, saying people that their vote matters. That's different from being counted--the vast majority of votes are counted. But most don't matter because most don't decide the election. Telling people their vote will matter is like telling people Creationism made life on this planet. It's possible but not really.
In the end I'm tired of this discussion. It's not really a puzzle why some people vote, nor why others don't. It's just a heated debate between those passionate individuals who can't stand that the other side exists. I don't care which you do next Tuesday, just leave me out of it.
Why don't I vote? There are three common reasons why people would engage in this democratic ritual: (1) they enjoy partaking in the democratic process; (2) they like expressing their support for a candidate through voting (no doubt because the candidate tells them that is how they like having support be expressed); and (3) they think their vote will make the difference in the election (thus gaining benefits from that outcome).
I gain nothing from (1) or (2) and I know (3) is about as likely as a jellyfish making me dinner. My friend had trouble relating to my position and told me a story that for this election he convinced people in his office to vote his way and brought in absentee ballots for them to fill out.
I have no problem with people voting. There are clear reasons to do so (like to shut up people who want you to vote). I only have a problem when politicians lie, saying people that their vote matters. That's different from being counted--the vast majority of votes are counted. But most don't matter because most don't decide the election. Telling people their vote will matter is like telling people Creationism made life on this planet. It's possible but not really.
In the end I'm tired of this discussion. It's not really a puzzle why some people vote, nor why others don't. It's just a heated debate between those passionate individuals who can't stand that the other side exists. I don't care which you do next Tuesday, just leave me out of it.
Friday, October 27, 2006
Living In an Immaterial World
A myriad of obligations deny me from watching Real Time with Bill Maher when it airs on Friday night. Additional distractions have prevented me from commenting on last Friday's episode and I feel I should post before the next installment.
The episode featured Congressman Barney Frank, Jason Alexander, Stephen Moore. Bill Maher and two others spent part of the show lamenting that the average wage was going down while the DOW grew. I'll give one guess which two were on Maher's side (and Moore got a masters in economics from Mason). Moore brought up good points but it mostly consisted of pointing out Maher was rich, too. What he should've pointed out is that the data didn't matter in the first place.
Wage data can be immaterial in two basic ways and which way depends on how much time the analysis covers: did wages drop base on last year's wages or last decade's? If it's last year's wages, then it is just a tick in the market. The lastest adjustment does not allow for sweeping conclusions about the nature of the economy. (See earlier post here.) Imagine a great but developing relationship and then your date says something stupid. Do you end it based on that? Of course not; you are still getting to know one another and mistakes will be made. The economy is similarly in a constant state of adaptation. There are rigidities and there are errors. The lastest tick means little.
If the data is last decade's it avoids the minor change problem but it eases to a different, more subtle problem. As people enter the bottom of the work force (immigrants, new adults) and people leave from the top (retiries), there's downward pressure on average wages even if everyone's getting richer. The better measure is income mobility over long spans of time. (See Steve Horwitz's myths page; the third item has an excellent discussion of the topic.)
So even if we set aside other problems with real wage data (inflation's over estimated, there's no inclusion of product quality, there's no inclusion of job quality), the data doesn't matter.
The episode featured Congressman Barney Frank, Jason Alexander, Stephen Moore. Bill Maher and two others spent part of the show lamenting that the average wage was going down while the DOW grew. I'll give one guess which two were on Maher's side (and Moore got a masters in economics from Mason). Moore brought up good points but it mostly consisted of pointing out Maher was rich, too. What he should've pointed out is that the data didn't matter in the first place.
Wage data can be immaterial in two basic ways and which way depends on how much time the analysis covers: did wages drop base on last year's wages or last decade's? If it's last year's wages, then it is just a tick in the market. The lastest adjustment does not allow for sweeping conclusions about the nature of the economy. (See earlier post here.) Imagine a great but developing relationship and then your date says something stupid. Do you end it based on that? Of course not; you are still getting to know one another and mistakes will be made. The economy is similarly in a constant state of adaptation. There are rigidities and there are errors. The lastest tick means little.
If the data is last decade's it avoids the minor change problem but it eases to a different, more subtle problem. As people enter the bottom of the work force (immigrants, new adults) and people leave from the top (retiries), there's downward pressure on average wages even if everyone's getting richer. The better measure is income mobility over long spans of time. (See Steve Horwitz's myths page; the third item has an excellent discussion of the topic.)
So even if we set aside other problems with real wage data (inflation's over estimated, there's no inclusion of product quality, there's no inclusion of job quality), the data doesn't matter.
Wednesday, October 25, 2006
Wikipedia: How to Teach It and What It Can Teach You
I love referencing Wikipedia. Whenever I have a random trivia question, it's the first place I check. It may not be accurate all the time, but for what I use it for, it's accurate enough. And I love editing Wikipedia. Economic topics are far too rare (though becoming more common) and it's fun adding new articles and contributing (or cleaning up) old ones.
For the October 27, 2006 issue, the Chronicle of Higher Education noted many scholars in academia don't feel this way. Wikipedia isn't something to be edited or referenced, it's something students should be warned about. There is logic to this reasoning: an expert has as much authority as a schoolboy, a stark contrast from a classroom or journal. At the same time, that can be good because experts aren't always the clearest, most concise people. I've had many knowledgable professors that couldn't pass on that information to the class.
Scholars argue that Wikipedia lacks control but I see that as a good thing. At worst, it is an option to be ignored. Professors who are frightened of undoing damage caused by fallacies of wikiality should remember that problem has always existed. Most economic professors start each semester not only assuming their students know nothing but that they are also certain of blantantly false things.
But at best, Wikipedia is a tool for professors to teach their students and the public at large. My advice to academics (and the world at large) is to...
-Remember the best way to understand something is to try to explain it to others. Encourage students to edit Wikipedia and they will better understand the material.
-Edit Wikipedia yourself; you'll become that much better at lecturing and your students will thank you for it (and it'll make it easier to see how they edit).
-Talk to others. You'll also have to encounter people that disagree with you and will be forced to talk to them on their level. Another good teaching skill (I think economists could benefit a lot from this; we bemoan the fact that the public doesn't listen to us though at the same time we have a hard time talking to the public.)
-Recall how academic papers work: cite sources and peer review. These things are not requirements on Wikipedia but they are strongly encouraged; pointing out wrongs in the talk page and adding sources will improve the quality of articles that is unlikely to be undone.
-Understand that in practice, it is not as chaotic as you might think. The Wiki cultural is certainly more ungoverned compared to ivied halls but even in this free-for-all, academic credentials hold more authority (call it social capital) than no credentials. For the most part, you will be welcomed and you will be respected, so long as you do the same.
For the October 27, 2006 issue, the Chronicle of Higher Education noted many scholars in academia don't feel this way. Wikipedia isn't something to be edited or referenced, it's something students should be warned about. There is logic to this reasoning: an expert has as much authority as a schoolboy, a stark contrast from a classroom or journal. At the same time, that can be good because experts aren't always the clearest, most concise people. I've had many knowledgable professors that couldn't pass on that information to the class.
Scholars argue that Wikipedia lacks control but I see that as a good thing. At worst, it is an option to be ignored. Professors who are frightened of undoing damage caused by fallacies of wikiality should remember that problem has always existed. Most economic professors start each semester not only assuming their students know nothing but that they are also certain of blantantly false things.
But at best, Wikipedia is a tool for professors to teach their students and the public at large. My advice to academics (and the world at large) is to...
-Remember the best way to understand something is to try to explain it to others. Encourage students to edit Wikipedia and they will better understand the material.
-Edit Wikipedia yourself; you'll become that much better at lecturing and your students will thank you for it (and it'll make it easier to see how they edit).
-Talk to others. You'll also have to encounter people that disagree with you and will be forced to talk to them on their level. Another good teaching skill (I think economists could benefit a lot from this; we bemoan the fact that the public doesn't listen to us though at the same time we have a hard time talking to the public.)
-Recall how academic papers work: cite sources and peer review. These things are not requirements on Wikipedia but they are strongly encouraged; pointing out wrongs in the talk page and adding sources will improve the quality of articles that is unlikely to be undone.
-Understand that in practice, it is not as chaotic as you might think. The Wiki cultural is certainly more ungoverned compared to ivied halls but even in this free-for-all, academic credentials hold more authority (call it social capital) than no credentials. For the most part, you will be welcomed and you will be respected, so long as you do the same.
Sunday, October 22, 2006
The Efficiency of Innocence
When economists talk about efficiency we are usually talking about the costs and benefits for all society. Benefits minus costs are the "social totals" and the most efficient items are those that maximize these totals. Doing this type of analysis can be difficult because one must include all costs and benefits for everyone. It's usually impossible to get an exact figure so an estimation works pretty well. Still, it can be a daunting task.
I've decided that the "innocent until proven guilty" reasoning in US legal courts is efficient so, briefly, I'm going to demonstrate my logic. (If you don't want to go through all the assumptions and logic, skip to the conclusion at the end of the post.) Assume a crime, such as rape or murder, and a trial of an accused, the police's chief suspect. Assume that the police stop investigating the crime when the court finds a guilty party and the police keep investigating otherwise--not completely true but true enough for our analysis. Assume all third parties are treated equal--one family's feelings aren't inherently more valuable than anothers'--and the pain of seeing a family member go to jail is roughly equal to the pain of having a crime against a family member go unsolved. Assume the court is wrong by an even-handed chance (see below).
We have four scenarios to consider based on if the accused is actually innocent or guilty and what the courts find him as:
-declared Innocent if actually Innocent (IiI)
-declared Innocent if actually Guilty (IiG)
-declared Guilty if actually Guilty (GiG)
-declared Guilty if actually Innocent (GiI)
The first two represent the current legal system which favors claiming someone is innocent. The second pair represent an alternative system: "guilty until proven innocent" where guilty is the more likely verdict. Because these will chiefly determine what kind of error is most popular in a given legal system, this divide is how we will make our analysis.
IiI and GiG cancel each other out. In both cases the system did exactly what was most efficient to do. Social totals were maximized. It's the errors that are interesting.
Most of IiG and GiI cancel. The victim's family will suffer and the accused family will celebrate for IiG and the reverse is true for GiI. Similarly, effort needed for the case is on the state for IiG because they have the burden of proof; that effort transfers to the defense in GiI so once again we see a canceling out. The moral pain of sending a good man to prison is roughly balanced by an equal level of pain of letting a killer free. In both cases, the crime can be repeated as the bad guy still roams.
This is where we see the difference. In IiG, the crime is unsolved. Not only are people more alert because that crime could be repeated but police are still investigating the crime. The liklihood of correcting the error is much higher than in GiI where the crime could occur again but people's guards are down and the police aren't on alert. (In fact, in GiI it's more likely the bad guy will get away because everyone will be caught off guard.) Because everything else is a wash, this edge--which is by no means minor--demonstrates "innocent until proven guilty" better serves society.
For those that didn't read the whole post it is better for the law to assume people are innocent because the bad guy getting away is easier to correct than the good guy going to jail. In the former, society knows there's a problem still out there and thus makes it cheaper to correct. In the latter, the problem can occur with greater liklihood (or much longer) without it being stopped. We can see this in immigration policy: society never misses the good people rejected from the US so that drop in social totals would persist for a long time but accepting the bad guys allows us to kick them out when they prove themselves as the bad guys. Alex Tabarrok and Dan Klein make a similar arguement about the FDA: if a bad drug gets passed, society knows it and can remove it before too many people die. If a good drug is rejected, people can be dying for years and no steps taken to correct the problem.
This is ultimately the old distinction between the seen and the unseen. People focus on what they can witness first hand. They tend to ignore the unseen costs because the never were even aware of them. Sending the innocent to jail, rejecting a promising citizen and never benefiting from a great drug are treated as non-losses to society and so they are rarely corrected for even if they are just as damaging as their obvious counterpart.
I've decided that the "innocent until proven guilty" reasoning in US legal courts is efficient so, briefly, I'm going to demonstrate my logic. (If you don't want to go through all the assumptions and logic, skip to the conclusion at the end of the post.) Assume a crime, such as rape or murder, and a trial of an accused, the police's chief suspect. Assume that the police stop investigating the crime when the court finds a guilty party and the police keep investigating otherwise--not completely true but true enough for our analysis. Assume all third parties are treated equal--one family's feelings aren't inherently more valuable than anothers'--and the pain of seeing a family member go to jail is roughly equal to the pain of having a crime against a family member go unsolved. Assume the court is wrong by an even-handed chance (see below).
We have four scenarios to consider based on if the accused is actually innocent or guilty and what the courts find him as:
-declared Innocent if actually Innocent (IiI)
-declared Innocent if actually Guilty (IiG)
-declared Guilty if actually Guilty (GiG)
-declared Guilty if actually Innocent (GiI)
The first two represent the current legal system which favors claiming someone is innocent. The second pair represent an alternative system: "guilty until proven innocent" where guilty is the more likely verdict. Because these will chiefly determine what kind of error is most popular in a given legal system, this divide is how we will make our analysis.
IiI and GiG cancel each other out. In both cases the system did exactly what was most efficient to do. Social totals were maximized. It's the errors that are interesting.
Most of IiG and GiI cancel. The victim's family will suffer and the accused family will celebrate for IiG and the reverse is true for GiI. Similarly, effort needed for the case is on the state for IiG because they have the burden of proof; that effort transfers to the defense in GiI so once again we see a canceling out. The moral pain of sending a good man to prison is roughly balanced by an equal level of pain of letting a killer free. In both cases, the crime can be repeated as the bad guy still roams.
This is where we see the difference. In IiG, the crime is unsolved. Not only are people more alert because that crime could be repeated but police are still investigating the crime. The liklihood of correcting the error is much higher than in GiI where the crime could occur again but people's guards are down and the police aren't on alert. (In fact, in GiI it's more likely the bad guy will get away because everyone will be caught off guard.) Because everything else is a wash, this edge--which is by no means minor--demonstrates "innocent until proven guilty" better serves society.
For those that didn't read the whole post it is better for the law to assume people are innocent because the bad guy getting away is easier to correct than the good guy going to jail. In the former, society knows there's a problem still out there and thus makes it cheaper to correct. In the latter, the problem can occur with greater liklihood (or much longer) without it being stopped. We can see this in immigration policy: society never misses the good people rejected from the US so that drop in social totals would persist for a long time but accepting the bad guys allows us to kick them out when they prove themselves as the bad guys. Alex Tabarrok and Dan Klein make a similar arguement about the FDA: if a bad drug gets passed, society knows it and can remove it before too many people die. If a good drug is rejected, people can be dying for years and no steps taken to correct the problem.
This is ultimately the old distinction between the seen and the unseen. People focus on what they can witness first hand. They tend to ignore the unseen costs because the never were even aware of them. Sending the innocent to jail, rejecting a promising citizen and never benefiting from a great drug are treated as non-losses to society and so they are rarely corrected for even if they are just as damaging as their obvious counterpart.
Friday, October 20, 2006
The Most American of Us
The US was founded and built on the capacity of the individual and the dangers of centralized power. These basic sentiments run counter to the politicians' popular view of the illegal immigrant, claiming they leach off the American people and drag down the economy.
But a Washington Post article notes that the average Mexican immigrant is more like an entrepreneur, working hard, risking much and doing what it takes to get by (even leaving behind family members when they immigrate). They really do pull themselves up by their bootstraps. These tempest-tost stretch their budgets in virtually every dimension allowing them to purchase cars and homes, a testament not only to the wealth created in a free society but their determination to take full opportunity of its advantages.
When I see the average immigrant working as hard as our heroic pioneers and entrepreneurs while native-borns repeat claims of victimhood and accusations of theft, it is clear that this generation's foreign population are our next great citizens. Risking everything so they have a chance to risk everything once more, they are clearly more American than virtually every soul fortunate to be born here.
But a Washington Post article notes that the average Mexican immigrant is more like an entrepreneur, working hard, risking much and doing what it takes to get by (even leaving behind family members when they immigrate). They really do pull themselves up by their bootstraps. These tempest-tost stretch their budgets in virtually every dimension allowing them to purchase cars and homes, a testament not only to the wealth created in a free society but their determination to take full opportunity of its advantages.
When I see the average immigrant working as hard as our heroic pioneers and entrepreneurs while native-borns repeat claims of victimhood and accusations of theft, it is clear that this generation's foreign population are our next great citizens. Risking everything so they have a chance to risk everything once more, they are clearly more American than virtually every soul fortunate to be born here.
Friday, October 13, 2006
Dating for Nerds
Economics is an amazing discipline because it has widespread applications in so many other fields (such as politics, science, history, religion, psychology and sociology). One of my favorites is dating. I have done some field research and while I'm no expert at dating I've learned some things over the years (and in one or two of Bryan Caplan's lectures) that I think could prove useful (or at least interesting) to L3 readers.
At its core, dating is a way to correct for asymmetrical information (you know yourself, but not her and vice versa). Many normal dating activities that some people find worthless or immaterial (holding the door open, paying for dinner, buying flowers) are actually vital. They are what economists call signaling.
Signaling is an activity where its value lies in demonstrating a fact even if the activity itself is immaterial. What you learn in an advanced mathematics course will probably never come up again but doing well in it demonstrates you are an intelligent person. Instead of merely declaring you are smart, you can show it and that is much more convincing. (An actor that doesn't not cry but merely says he is sad is a particularly vivid example.) The lesson is that small stuff matters.
Signaling is a complicated thing because you can do it too much and thus send other, unintended, signals. If you are applying for a job and you agree with those around you all the time, you might appear too eager to please even if you are easy to work with. In dating, asking about a woman's job or family is a signal that he's interested in her as a person. Asking a string of unconnected questions about her life shows he's not really interested in her, he just wants her to think that.
There is generally a clear interaction between firm and candidate where one tries to impress the other and then the roles switch and then they switch again. In all cases, it is clear who should be doing most, if not all, of the signaling. Thus the danger of over-signaling is smaller than it would be. But with dating, transitions between who is "dominate" is continuous and rarely clear. This is particularly common in the initial dates an so are the occurrences of over-signaling. Avoiding questions she asks about him so he can ask her more questions makes him appear overeager; he didn't see that at that point she was now sending signals to him that she was interested. He didn't open up, which can also send signals that are not good.
Signaling is a very hard concept to master (I'm still learning myself) unless you are a person that has an intuitive grasp of it. Though signaling is not all of dating (getting to know people directly without signaling is important, too; that's what all that talking is about) it's still more significant than many people think. While it's important to relax, it's equally important to be aware that you could be sending bad signals. Finding that balance between alertness and being yourself is the essential learning process.
At its core, dating is a way to correct for asymmetrical information (you know yourself, but not her and vice versa). Many normal dating activities that some people find worthless or immaterial (holding the door open, paying for dinner, buying flowers) are actually vital. They are what economists call signaling.
Signaling is an activity where its value lies in demonstrating a fact even if the activity itself is immaterial. What you learn in an advanced mathematics course will probably never come up again but doing well in it demonstrates you are an intelligent person. Instead of merely declaring you are smart, you can show it and that is much more convincing. (An actor that doesn't not cry but merely says he is sad is a particularly vivid example.) The lesson is that small stuff matters.
Signaling is a complicated thing because you can do it too much and thus send other, unintended, signals. If you are applying for a job and you agree with those around you all the time, you might appear too eager to please even if you are easy to work with. In dating, asking about a woman's job or family is a signal that he's interested in her as a person. Asking a string of unconnected questions about her life shows he's not really interested in her, he just wants her to think that.
There is generally a clear interaction between firm and candidate where one tries to impress the other and then the roles switch and then they switch again. In all cases, it is clear who should be doing most, if not all, of the signaling. Thus the danger of over-signaling is smaller than it would be. But with dating, transitions between who is "dominate" is continuous and rarely clear. This is particularly common in the initial dates an so are the occurrences of over-signaling. Avoiding questions she asks about him so he can ask her more questions makes him appear overeager; he didn't see that at that point she was now sending signals to him that she was interested. He didn't open up, which can also send signals that are not good.
Signaling is a very hard concept to master (I'm still learning myself) unless you are a person that has an intuitive grasp of it. Though signaling is not all of dating (getting to know people directly without signaling is important, too; that's what all that talking is about) it's still more significant than many people think. While it's important to relax, it's equally important to be aware that you could be sending bad signals. Finding that balance between alertness and being yourself is the essential learning process.
Word, Word, Word
I subscribe to dictionary.com's word of the day as a fun way to increase my vocabulary. Sadly my memory is not that great so progress is slow but yesterday I was sent a word I'm sure to remember:
What a wonderful way to describe so much of economic activity! Firms adapting to people, organizations dove-tailing with other organizations. The extended order created endogenously. People talk about how economics is all about competition but they fail to realize it is at least as much as about harmony.
Author's note: The title is based on the quote by Shakespeare: "Words, words, words." I never understood the appeal though my high school English teacher always loved it. I guess that's what happens when your last name is Shakespeare: everything you write becomes art.
concinnity (kuhn-SIN-uh-tee): Internal harmony or fitness in the adaptation of parts to a whole or to each other
What a wonderful way to describe so much of economic activity! Firms adapting to people, organizations dove-tailing with other organizations. The extended order created endogenously. People talk about how economics is all about competition but they fail to realize it is at least as much as about harmony.
Author's note: The title is based on the quote by Shakespeare: "Words, words, words." I never understood the appeal though my high school English teacher always loved it. I guess that's what happens when your last name is Shakespeare: everything you write becomes art.
Wednesday, October 11, 2006
Raising Awareness About Raising Awareness
Logging on to Wikipedia, I discovered that today is National Coming Out Day. Like every other National Group Day, NCOD aims to raise awareness of the LGBT community. It's gotten to the point where I'm losing track of what "raising awareness" means and I doubt groups that use it to justify their events have a much better idea.
So I started a Wikipedia article: raising awareness. In the article I suggest some groups become more interested in raising awareness than actually doing something about it simply because the former is easy to do. In undergrad every student organization seemed to be built around this concept and did nothing more. This even extends to our local chapter of the LGBT Alliance which was located on the most liberal campuses in the country. (Those from my old stomping grounds--Beloit College--might point out there were some activities the Alliance did that were not "raising awareness." This might be true, but most of what they did involved parties and papering the campus with fliers about yet another LGBT issue.)
I think the drive to spend so much time raising awareness comes from our democratic system. If we merely "raise awareness," then our representative will change things. We don't have to take action; the how is someone else's problem. Now it's true that getting people to pay attention to something is a critical first step (a lot of economics is in this stage as most people don't know certain laws are tremendous problems). But when we pass the point, the next step is do something about it, even if that doing something is writing to a congressman or proposing a plan of action. The obsession of only pointing out all that is wrong is a tremdenous problem and people need to be made aware of it.
So I started a Wikipedia article: raising awareness. In the article I suggest some groups become more interested in raising awareness than actually doing something about it simply because the former is easy to do. In undergrad every student organization seemed to be built around this concept and did nothing more. This even extends to our local chapter of the LGBT Alliance which was located on the most liberal campuses in the country. (Those from my old stomping grounds--Beloit College--might point out there were some activities the Alliance did that were not "raising awareness." This might be true, but most of what they did involved parties and papering the campus with fliers about yet another LGBT issue.)
I think the drive to spend so much time raising awareness comes from our democratic system. If we merely "raise awareness," then our representative will change things. We don't have to take action; the how is someone else's problem. Now it's true that getting people to pay attention to something is a critical first step (a lot of economics is in this stage as most people don't know certain laws are tremendous problems). But when we pass the point, the next step is do something about it, even if that doing something is writing to a congressman or proposing a plan of action. The obsession of only pointing out all that is wrong is a tremdenous problem and people need to be made aware of it.
Tuesday, October 10, 2006
Yes Logo
It's been a while since I posted and recent discussions and thoughts I've had has led me to the desire to defend on of my favorite captialist institutions: advertising.
Advertising's an amazing invention. It creates an incentive for people to provide a quality service without charging people who use it. It's free. Okay, it's not completely free as I have to watch it (though even here there's a strong pressure to make ads more entertaining) but as a poor grad student, I'd rather have an opportunity to take a bathroom break than open my wallet. Even something as simple as the brand itself offers massive bonuses to the consumer.
A random walk on Wikipedia today reminded me that there exists people like Naomi Klein who think branding creates a harmful consumer culture. Her book (No Logo) mostly focuses on the plight of the worker in developing countries and the evils of when firms concentrate into corporations. But let's not forget that because large companies exist, their brand becomes paramount and they gladly sacrifice short-run profit for long-run gain.
Our consumer culture is awash with examples. Google is my favorite (I use several of their products every day--including Blogger--and I have never paid the company one penny) but we see others. NBC now offers some of its primetime shows for free online. (Yes, there's advertising for these episodes but also note there is much less.) Phillip Morris advertises that they give advice on how to quit smoking on their website. Microsoft gives away some of its software. Nike sponsors athletic teams. When a company becomes very large, its brand becomes much more valuable and the firm will take more care to defend it.
This is not a perfect process and some might complain that the corporations' motivations are merely to help itself. They would be right but so what? Does it matter if they are more concerned about make profit than doing good when both are accomplished at the same time? I doubt the hungry care why Kraft Foods donates meals.
Advertising's an amazing invention. It creates an incentive for people to provide a quality service without charging people who use it. It's free. Okay, it's not completely free as I have to watch it (though even here there's a strong pressure to make ads more entertaining) but as a poor grad student, I'd rather have an opportunity to take a bathroom break than open my wallet. Even something as simple as the brand itself offers massive bonuses to the consumer.
A random walk on Wikipedia today reminded me that there exists people like Naomi Klein who think branding creates a harmful consumer culture. Her book (No Logo) mostly focuses on the plight of the worker in developing countries and the evils of when firms concentrate into corporations. But let's not forget that because large companies exist, their brand becomes paramount and they gladly sacrifice short-run profit for long-run gain.
Our consumer culture is awash with examples. Google is my favorite (I use several of their products every day--including Blogger--and I have never paid the company one penny) but we see others. NBC now offers some of its primetime shows for free online. (Yes, there's advertising for these episodes but also note there is much less.) Phillip Morris advertises that they give advice on how to quit smoking on their website. Microsoft gives away some of its software. Nike sponsors athletic teams. When a company becomes very large, its brand becomes much more valuable and the firm will take more care to defend it.
This is not a perfect process and some might complain that the corporations' motivations are merely to help itself. They would be right but so what? Does it matter if they are more concerned about make profit than doing good when both are accomplished at the same time? I doubt the hungry care why Kraft Foods donates meals.
Friday, October 06, 2006
Contest of Wills
Protests serve two purposes: to generate change and to make the protestors feel good because they think they are generating change. Often there is the latter without the former.
While heading to my car after class last night, I passed one of the campus quads which was crowded with protestors. There was no event in particular they were protesting, except perhaps the protest of another group. (It's hard to tell who was protesting whom.) On one side was a crowd of about thirty student insisting homosexual marriage should be legal (Virginians will vote on this issue in November). On the other side was an equally large crowd of people arguing marriage should only be between a man and a woman. There was one police officer walking between them, though actively restraining no one.
Each side seemed intent on making sure the other side could see their posters, as if pictures and slogans would change the mind of anyone who is already participating in a protest. They seemed far more interested in their opponents than the trickle of passing students who had no clear allegiance. Neither side talked to each other.
There's politics and there's the real world. This is a clear demonstration that the two rarely have anything to do with one another.
While heading to my car after class last night, I passed one of the campus quads which was crowded with protestors. There was no event in particular they were protesting, except perhaps the protest of another group. (It's hard to tell who was protesting whom.) On one side was a crowd of about thirty student insisting homosexual marriage should be legal (Virginians will vote on this issue in November). On the other side was an equally large crowd of people arguing marriage should only be between a man and a woman. There was one police officer walking between them, though actively restraining no one.
Each side seemed intent on making sure the other side could see their posters, as if pictures and slogans would change the mind of anyone who is already participating in a protest. They seemed far more interested in their opponents than the trickle of passing students who had no clear allegiance. Neither side talked to each other.
There's politics and there's the real world. This is a clear demonstration that the two rarely have anything to do with one another.
Tuesday, October 03, 2006
Unintended Consequences
My father recently worked in Afghanistan doing USAID. In Pakistan they drive on the left hand side of the road, like England, but in Afghanistan they drive on the right hand side. The Pakistani cars have the steering wheel on the right side of the car, which the Afghanis import. Due to driving on different sides of the road my dad said that there are accidents and deaths caused by people not being able to see well while driving a car that wasn’t made to be driven on the right side of the road.
Sunday, October 01, 2006
October's Most Random Wikipedia Page Is...
Alternate spellings of "the". I didn't want to have another list for October but come on, "alternate spellings of the word 'the'"? The fact that the first item on the list is "teh" as a common typo is really why this page gets the award this month. The article gives details as to why its a common typo and which programs autocorrect the mistake. It even offers instances where this typo--because it's often a mistake--is actually a "correct" spelling.
Friday, September 29, 2006
Every Move You Make
I've been an economist (or student of economics, depending on how you define "economist") for about five years now and one constant are people asking me about the economy based on the latest changes. Don't get me wrong, I like questions. But sometimes these questions are based on the latest news in some minor adjustment of a commonly reported number. The DOW dropped twenty points. Oil prices slipped. The Fed is rasing interest rates. They don't really matter.
The same thing happens on news shows, especially financial ones. Part of this is neccessary because investors want to know about every tick (which you can't know about but they still want it) and part of this is wanting to fill up airtime. But the conversation is always the same and almost daily: is the economy a bear [doing poorly] or a bull [doing well]?. The latest tick of the market is always at the front of the debate as critical evidence.
Let me tell you a little secret. You cannot determine the quality of the economy by merely looking at the latest adjustment. Rarely does a one time gain or loss matter (it only makes a difference if it is very, very large). The market has error, it has trends, it has noise and it has risk. Each change is an attempt to determine what the price should be; each indicator is subject to the messiness of that discovery process.
Let me close with an example. Copper is probably my favorite economic indicator. When the price rises, it signals people want more copper and because copper is used for many things but people rarely store it these people probably want it for production purposes. But copper just jumped because, in part, of the possibility of a strike. Does that mean the economy is doing even better because the price rose? Not at all. Does that mean the economy will enter a recession because of the strike? Again, no. What matters the trend and what's going on beneath the numbers, not every single adjustment in the value. Prices are like people: you should learn why they are as they are if you want to understand what's going on. Stalking won't help.
The same thing happens on news shows, especially financial ones. Part of this is neccessary because investors want to know about every tick (which you can't know about but they still want it) and part of this is wanting to fill up airtime. But the conversation is always the same and almost daily: is the economy a bear [doing poorly] or a bull [doing well]?. The latest tick of the market is always at the front of the debate as critical evidence.
Let me tell you a little secret. You cannot determine the quality of the economy by merely looking at the latest adjustment. Rarely does a one time gain or loss matter (it only makes a difference if it is very, very large). The market has error, it has trends, it has noise and it has risk. Each change is an attempt to determine what the price should be; each indicator is subject to the messiness of that discovery process.
Let me close with an example. Copper is probably my favorite economic indicator. When the price rises, it signals people want more copper and because copper is used for many things but people rarely store it these people probably want it for production purposes. But copper just jumped because, in part, of the possibility of a strike. Does that mean the economy is doing even better because the price rose? Not at all. Does that mean the economy will enter a recession because of the strike? Again, no. What matters the trend and what's going on beneath the numbers, not every single adjustment in the value. Prices are like people: you should learn why they are as they are if you want to understand what's going on. Stalking won't help.
Wednesday, September 27, 2006
Straddling the Siren Song
Last night during my Austrian economics class I argued that some of the mathematics in neoclassical economics is useful for a few things, a sentiment some (all perhaps?) of my classmates did not share. Jason Briggeman challenged me to note one insight the Cobb-Douglas production function (one example I offered that could be useful to economics) but the conversation went in another direction and I was too tired to backtrack to his inquiry so I could address it. After class I promised to answer his question in a blog post so here it is.
The C-D production function is a pretty uninteresting claim: GDP depends on how much labor and how much capital a country has. However, if we combine it with the Solow growth model we can use it to prove the existence of convergence (poor countries grow faster than rich countries). In the real world, absolute convergence (all countries converge) is a myth however conditional convergence (countries with similar institutions converge) is quite real.
We do not need C-D or Solow to learn this--we can simply look at the data--but it does help explain why this happens in a clean but still useful way. Similarly, we could use pure math to explain or demonstrate conditional convergence but that would be of little use; words are much more appropriate for that. In my defense of math in economics, I ask that Austrians recognize something they've always asserted: people are heterogenous. One person may instantly grasp the intitution of convergence while another may be assisted in the calculus. To dismiss all of mathematics in economics is to deny a potential tool economists can use to demonstrate how the world works. To embrace it completely is also a mistake for it nullifies the most important questions. Mathematics misses the point in some ways, but is appropriate in others.
Math in economics is a siren song. It is beautiful and pure, but also dangerous if we focus too much on it. Yet if we completely avoid the music we will deny ourselves valuable knowledge and drastically limit where we can go (Odysseus had to travel past the sirens' island in order to continue his journey). Economists must learn to straddle this siren song: to hear it but not to succumb to it. If we can force ourselves to stay grounded, like the hero The Odyssey who tied himself to the mast of his ship, we won't miss what can be learned from mathematics nor will we drown in a barren attempt to worship this dirge.
The C-D production function is a pretty uninteresting claim: GDP depends on how much labor and how much capital a country has. However, if we combine it with the Solow growth model we can use it to prove the existence of convergence (poor countries grow faster than rich countries). In the real world, absolute convergence (all countries converge) is a myth however conditional convergence (countries with similar institutions converge) is quite real.
We do not need C-D or Solow to learn this--we can simply look at the data--but it does help explain why this happens in a clean but still useful way. Similarly, we could use pure math to explain or demonstrate conditional convergence but that would be of little use; words are much more appropriate for that. In my defense of math in economics, I ask that Austrians recognize something they've always asserted: people are heterogenous. One person may instantly grasp the intitution of convergence while another may be assisted in the calculus. To dismiss all of mathematics in economics is to deny a potential tool economists can use to demonstrate how the world works. To embrace it completely is also a mistake for it nullifies the most important questions. Mathematics misses the point in some ways, but is appropriate in others.
Math in economics is a siren song. It is beautiful and pure, but also dangerous if we focus too much on it. Yet if we completely avoid the music we will deny ourselves valuable knowledge and drastically limit where we can go (Odysseus had to travel past the sirens' island in order to continue his journey). Economists must learn to straddle this siren song: to hear it but not to succumb to it. If we can force ourselves to stay grounded, like the hero The Odyssey who tied himself to the mast of his ship, we won't miss what can be learned from mathematics nor will we drown in a barren attempt to worship this dirge.
Friday, September 22, 2006
Processor Neutrality
When I hear phrases like "net neutrality," I think of processors. Few people build their computer; most people buy a ready-made one. Any expert will tell you it's better to build your own because it costs less money, you have more customization for what you want the computer to do and you can combine the best parts in a way Dell or Gateway won't. Still, building a computer costs time and requires technical expertise so most people don't do it.
Net neutrality, or legally requiring Internet service providers to treat all data on their networks the same, is much like making a law demanding all computer manufacturers to build the same computer. Dell computers are good for some things but not others; same with Gateways and E-Machines. Similarly, using one provider may make life easy for some websites but not others while another provider will be good for a different mix. Different goods for different people. One could pick and choose all the best parts, like some do with computers, but such a feat is very costly both in time and money.
Yet if government requires net neutrality, they've removed a strong reason to improve their product. There's less profit in the Internet, so there's less incentive to better it. If firms had to use the same item for just one part of their product people would see why the whole good would deterioate. Why few understand this basic idea for net neutrality is beyond me.
AEI has a good article on net neutrality here.
Net neutrality, or legally requiring Internet service providers to treat all data on their networks the same, is much like making a law demanding all computer manufacturers to build the same computer. Dell computers are good for some things but not others; same with Gateways and E-Machines. Similarly, using one provider may make life easy for some websites but not others while another provider will be good for a different mix. Different goods for different people. One could pick and choose all the best parts, like some do with computers, but such a feat is very costly both in time and money.
Yet if government requires net neutrality, they've removed a strong reason to improve their product. There's less profit in the Internet, so there's less incentive to better it. If firms had to use the same item for just one part of their product people would see why the whole good would deterioate. Why few understand this basic idea for net neutrality is beyond me.
AEI has a good article on net neutrality here.
Thursday, September 21, 2006
The Wisdom of Tullock
While on the History of Economic Thought website, I read about my current professor Gordon Tullock. His page on the site linked to an article he wrote, Smith v. Pareto. The abstract, in its entirety, reads:
This paper argues that we do not and cannot actually use Paretian criteria, therefore, I recommend that we stop pretending we do.
Watch Your Language
Leaving for class this morning, I heard Nobel prize winner Joseph Stiglitz on NPR discussing his book, Globalization and Its Discontents. He surprised me because he remarked that globalization could, on average, be bad. Sure, it could be bad for some people (it often is, in fact) but on the aggregate?
As it turns out, Stiglitz was treating legal globalization and real globalization as the same thing. The latter relates to the process of connecting institutions (economics, social, political, etc) across the world over. The former describes how much of that connecting people are allowed to do.
I only realized he was doing this when he explained that the free market could solve most or all of the problems "globalization" creates. For example, legal barriers embodied in "free trade" agreements allow for tariffs on certain crops, harming people in poor countries who want to export their food to the US and other protected countries. Stiglitz correctly noted that a free trade agreement could only be a few pages long; the only reason why the current ones are so massive is because they are stuffed with exceptions and little rules.
By mixing up the legal and the real definitions of globalization, I fear that people will cite this great economist as grounds for diminishing market activity, not expanding it. It reminds me of an incident when a law student claimed firms wouldn't engage in free trade because they wouldn't follow the restrictive rules of a treaty. Just because a law might say the sky is purple, does not make it so.
As it turns out, Stiglitz was treating legal globalization and real globalization as the same thing. The latter relates to the process of connecting institutions (economics, social, political, etc) across the world over. The former describes how much of that connecting people are allowed to do.
I only realized he was doing this when he explained that the free market could solve most or all of the problems "globalization" creates. For example, legal barriers embodied in "free trade" agreements allow for tariffs on certain crops, harming people in poor countries who want to export their food to the US and other protected countries. Stiglitz correctly noted that a free trade agreement could only be a few pages long; the only reason why the current ones are so massive is because they are stuffed with exceptions and little rules.
By mixing up the legal and the real definitions of globalization, I fear that people will cite this great economist as grounds for diminishing market activity, not expanding it. It reminds me of an incident when a law student claimed firms wouldn't engage in free trade because they wouldn't follow the restrictive rules of a treaty. Just because a law might say the sky is purple, does not make it so.
Sunday, September 17, 2006
The Law Is a Tramp
When I see an immoral piece of legislation, one that tells people how to live their lives, and then I hear people get around it with technicality, I smile. Tonight on 60 Minutes there was a segment on online gambling, which is illegal in the US. But companies find ways around that by being located overseas and then advertising the same domain name but with a .net web address instead of a .com. This .net address labels itself as an education site (where people learn to gamble), getting around the law while directing people to the .com address (where people actually gamble). Genius.
For some reason, the reporter had a problem with this and I saw two different answers. One was cracking down on the law, which is clearly worse. The other is to making the gambling illegal, not because that would be the moral thing to do but because then the government could regulate it. Apparently, it needs widespread control.
How did 60 Minutes come to this conclusion? They gave a 16-year-old a credit card and then lamented about how easy it was for him to start gambling. Of course it was easy; that's one of the great things about Internet commerce. It's built to be easy. But the viewers are supposed to conclude that it's the company's job to police someone else's child and someone else's credit card.
In a world where anyone can grab that bit of plastic and use it online with the ease of using a turning on the television, it is clearly the cardholder's responsibility to keep track of their card. If you have a kid in your house, you childproof the stairs, block some TV channels and keep your credit card in your pocket. Just because, on average, you're giving money to casinos does not mean they are your babysitters.
For some reason, the reporter had a problem with this and I saw two different answers. One was cracking down on the law, which is clearly worse. The other is to making the gambling illegal, not because that would be the moral thing to do but because then the government could regulate it. Apparently, it needs widespread control.
How did 60 Minutes come to this conclusion? They gave a 16-year-old a credit card and then lamented about how easy it was for him to start gambling. Of course it was easy; that's one of the great things about Internet commerce. It's built to be easy. But the viewers are supposed to conclude that it's the company's job to police someone else's child and someone else's credit card.
In a world where anyone can grab that bit of plastic and use it online with the ease of using a turning on the television, it is clearly the cardholder's responsibility to keep track of their card. If you have a kid in your house, you childproof the stairs, block some TV channels and keep your credit card in your pocket. Just because, on average, you're giving money to casinos does not mean they are your babysitters.
Tuesday, September 12, 2006
The Rant, the Recount and the Petty Ridicule
Last night, Mike sent me this link containing video of Keith Olbermann's 9/11 commentary. Granted, I thought it was rather long and some parts were a little strange but he makes a critical point: five years later Ground Zero is still empty. No memorial, no construction.
To me this speaks of government bureaucracy, infighting and politics. If Donald Trump was in charge of rebuilding the WTC, we'd be halfway there by now. (Trump World Tower, a 72-story residential building, took only two years to complete.) Sadly Olbermann's focused on the blameful Bush rather than take a stab at government in general but we can only hope for so much. A favorite passage:
Shortly after the video hit the internet, NewsBusters, a self-proclaimed "liberal media" watchdog, posted this article which recounts Olbermann's commentary but never seriously refutes it.
Another NewsBusters article accuses Olbermann of using Ground Zero partisanly while complaining others do just that. Perhaps it was mere politics (though in this case the point was to show everyone that nothing has been done rather than use it as a prop for political grandstanding). Also note that when one side of the aisle legitimately accuses the other of doing something wrong, the other side paradoxically attempts to save themselves by throwing the accusation back. They don't refute it--indeed sometimes they agree they did wrong--they just say others do it too as if that makes it alright. But somehow I doubt "well my neighbor tried to kill someone, too" would hold up in front of a judge. It's sad it works so well in the court of public opinion.
To me this speaks of government bureaucracy, infighting and politics. If Donald Trump was in charge of rebuilding the WTC, we'd be halfway there by now. (Trump World Tower, a 72-story residential building, took only two years to complete.) Sadly Olbermann's focused on the blameful Bush rather than take a stab at government in general but we can only hope for so much. A favorite passage:
Instead they bicker and buck pass. They thwart private efforts and jostle to claim credit for initiatives that go nowhere. They spend the money on irrelevant wars and elaborate self-congratulations, and buying off columnists to write how good a job they're doing instead of doing any job at all.
Shortly after the video hit the internet, NewsBusters, a self-proclaimed "liberal media" watchdog, posted this article which recounts Olbermann's commentary but never seriously refutes it.
Another NewsBusters article accuses Olbermann of using Ground Zero partisanly while complaining others do just that. Perhaps it was mere politics (though in this case the point was to show everyone that nothing has been done rather than use it as a prop for political grandstanding). Also note that when one side of the aisle legitimately accuses the other of doing something wrong, the other side paradoxically attempts to save themselves by throwing the accusation back. They don't refute it--indeed sometimes they agree they did wrong--they just say others do it too as if that makes it alright. But somehow I doubt "well my neighbor tried to kill someone, too" would hold up in front of a judge. It's sad it works so well in the court of public opinion.
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