A company in Atlanta provides the opportunity to join the mile high club, and even let's you keep the sheet as a memento! [One suspects that the sheet would otherwise be thrown out ....]
Of course, if this were (most of) Europe, they would also provide a companion if you wanted one.
Hat tip: Marginal Revolution
Tuesday, March 31, 2009
Monday, March 30, 2009
More on Danica
Reader David DeRemer provides a pointer to this blog post that discusses her mathematical contributions and her book in some detail.
What are they doing now?
I always like finding out what happens to people after they disappear from my life. I suppose that this is part of the attraction of high school reunions - look, I still have hair! - as well as Facebook.
In this case, the people are sitcom starts from the 70s and 80s (or, put differently for younger readers, sitcom starts from Nick at Nite and TVLand), whose more recent exploits are detailed by Cracked.com. Back when I was an avid reader of Mad magazine (you are surely not surprised) in my youth, Cracked was the edgier but somehow not-quite-as-good alter ego to Mad.
The best story out of the seven? Danica McKellar, the on-and-off girlfriend in the Wonder Years:
In this case, the people are sitcom starts from the 70s and 80s (or, put differently for younger readers, sitcom starts from Nick at Nite and TVLand), whose more recent exploits are detailed by Cracked.com. Back when I was an avid reader of Mad magazine (you are surely not surprised) in my youth, Cracked was the edgier but somehow not-quite-as-good alter ego to Mad.
The best story out of the seven? Danica McKellar, the on-and-off girlfriend in the Wonder Years:
She' a math genius. She helped develop what's come be known as the "Chayes-Mckellar-Winn-Theorem" while she was a mathematics major at UCLA. And, she has an Erdos—Bacon number of 6. A team of five were sent to investigate what the f*** either of those things are. Results are still pending.Warms my heart and beats the heck out of Kristy McNichol.
Advice related to tenure
Leslie Phinney offers some useful advice around tenure at Inside Higher Education.
I agree with almost all of Phinney's post but, of course, have a few remarks.
I would say that it is almost never optimal to fight a negative tenure decision; even if one wins one does not want to stay and the financial and mental health costs can be large.
In terms of work/life balance my own choice was to basically put things like marriage and having a kid off until after tenure. This worked for me and it had the side benefit of making me more mobile early in my career, which can (and in this case did) have a large financial return in academic economics. I also greatly reduced my cultural consumption during my assistant professor years (and the last couple of years in graduate school) - going from 25 books a year when I was in college to two or three and from 35 movies a year down to almost zero. I am really glad that period is over!
The nice thing for economists is that the alternatives to academia often still involve research and sometimes pay more rather than less than what professors make. More broadly, but along the same lines, it is important to always keep in mind that the model we write down is utility maximization, not income maximization or department ranking maximization or vita length maximization. The point is to be happy! I was always amazed as a graduate student at how unhappy some of the faculty at Chicago seemed despite a lot of career success. Had they somehow failed to optimize?
Hat tip: Chris Blattman
I agree with almost all of Phinney's post but, of course, have a few remarks.
I would say that it is almost never optimal to fight a negative tenure decision; even if one wins one does not want to stay and the financial and mental health costs can be large.
In terms of work/life balance my own choice was to basically put things like marriage and having a kid off until after tenure. This worked for me and it had the side benefit of making me more mobile early in my career, which can (and in this case did) have a large financial return in academic economics. I also greatly reduced my cultural consumption during my assistant professor years (and the last couple of years in graduate school) - going from 25 books a year when I was in college to two or three and from 35 movies a year down to almost zero. I am really glad that period is over!
The nice thing for economists is that the alternatives to academia often still involve research and sometimes pay more rather than less than what professors make. More broadly, but along the same lines, it is important to always keep in mind that the model we write down is utility maximization, not income maximization or department ranking maximization or vita length maximization. The point is to be happy! I was always amazed as a graduate student at how unhappy some of the faculty at Chicago seemed despite a lot of career success. Had they somehow failed to optimize?
Hat tip: Chris Blattman
Sunday, March 29, 2009
Frontiers of active labor market policy
The Europeans like to talk about "activation" of the unemployed, by which they mean moving them from passive receipt of benefit to active participation in job search or training.
The Danes, apparently, have decided that in some cases deactivation is useful too. Key bit:
Hat tip: Lars Skipper (but you probably already guessed that)
The Danes, apparently, have decided that in some cases deactivation is useful too. Key bit:
“A job counsellor at a state-operated jobcentre […] attempted to get a teenage jobseeker to take four sedatives prior to an interview. […] the jobcentre’s manager confirmed the incident and added that he was taking full responsibility for the mistake. ‘This case will definitely result in serious internal discussions about ethics and case handling that oversteps the line.’ “
Hat tip: Lars Skipper (but you probably already guessed that)
Movie: Automorphosis
Our only dip into the pool that is the Ann Arbor Film Festival this year was a trip yesterday afternoon to the Michigan Theater to see Automorphosis. I is a documentary about art cars and the amazing people who make them. I got turned onto art cars by my graduate school friend Nat Wilcox at Houston, who took me to Houston's art car parade one year when I was down that way to give a seminar. It was great fun - and this movie is too. It is all about pursuing happiness in the wonderfully individual way that makes America what it is.
Highly recommended.
Highly recommended.
Monday, March 23, 2009
Ann Arbor News calls it quits
Wow! They are ceasing publication of the paper edition in July.
I suppose it is appropriate that I learned about this on Facebook.
I suppose it is appropriate that I learned about this on Facebook.
Goldilocks chooses a major
In the Chronicle of Higher Education, David Colander makes the case that economics is a popular major because it is "just right" - tougher than the other social sciences but not as tough as the hard sciences.
This is a thoughtful piece and well worth reading. The popularity of economics is a real problem for university administrators because economists cost a lot more than sociologists or even than physicists.
I, of course, have a few thoughts of my own:
The introductory bits are a bit silly. Economists never saw the market as the solution to everything in the past and they certainly do not now. There was never a time when economists modeled individuals as solely motivated by "greed"; agents have been maximizing utility, broadly conceived, since the birth of modern economics. Finally, behavioral economics does not somehow favor governments over markets. People in government exhibit the same "behavioral" tics as actors in markets; so while the research program to integrate more empirically grounded insights from psychology into economics is a promising one in my view, it is not one with an obvious political cast.
Turning now to the heart of the argument, a more careful distinction could be made between the difficulty of the material presented in a given discipline and the toughness of the grading in a given discipline. Economists are notable for resisting grade inflation relative to other disciplines (though we have not resisted it very well here at Michigan). That is a separate issue from whether or not we present more quantitative material, either theoretically or empirically. I suspect that grade inflation is important in and of itself as employers likely guess that a transcript full of A grades in the softer social sciences does not provide much information about ability or effort. Grade inflation is, of course, solved pretty easily by administrative action to set limits on the fraction of students receiving each letter grade in courses of various levels, as was done at Western Ontario (within economics) when I was teaching there.
Colander leaves out three other factors that also, I think, account for the popularity of economics.
1. Economics is sexy. This has two dimensions: the popularity of pop economics books like Freakonomics and the predominance of economists in the power hierarchy of Washington DC.
2. Economics has become more interesting to more students as it has broadened its reach to include topics, like the family and sports, that were previously treated only by other disciplines.
3. Economics is by far the most politically balanced of the social sciences. Students can speak freely in economics classes even if they are white males from middle class families. Students will find, at most schools, economics faculty who are democrats, republicans and, often, libertarians. This poltical balance makes economics stronger as a discipline and makes a broad range of students feel welcome to choose our major and intellectually engage the field.
I think the third of these factors is probably the most important but it would be interesting to investigate the question empricially.
Hat tip: Greg Mankiw via Dan Black
This is a thoughtful piece and well worth reading. The popularity of economics is a real problem for university administrators because economists cost a lot more than sociologists or even than physicists.
I, of course, have a few thoughts of my own:
The introductory bits are a bit silly. Economists never saw the market as the solution to everything in the past and they certainly do not now. There was never a time when economists modeled individuals as solely motivated by "greed"; agents have been maximizing utility, broadly conceived, since the birth of modern economics. Finally, behavioral economics does not somehow favor governments over markets. People in government exhibit the same "behavioral" tics as actors in markets; so while the research program to integrate more empirically grounded insights from psychology into economics is a promising one in my view, it is not one with an obvious political cast.
Turning now to the heart of the argument, a more careful distinction could be made between the difficulty of the material presented in a given discipline and the toughness of the grading in a given discipline. Economists are notable for resisting grade inflation relative to other disciplines (though we have not resisted it very well here at Michigan). That is a separate issue from whether or not we present more quantitative material, either theoretically or empirically. I suspect that grade inflation is important in and of itself as employers likely guess that a transcript full of A grades in the softer social sciences does not provide much information about ability or effort. Grade inflation is, of course, solved pretty easily by administrative action to set limits on the fraction of students receiving each letter grade in courses of various levels, as was done at Western Ontario (within economics) when I was teaching there.
Colander leaves out three other factors that also, I think, account for the popularity of economics.
1. Economics is sexy. This has two dimensions: the popularity of pop economics books like Freakonomics and the predominance of economists in the power hierarchy of Washington DC.
2. Economics has become more interesting to more students as it has broadened its reach to include topics, like the family and sports, that were previously treated only by other disciplines.
3. Economics is by far the most politically balanced of the social sciences. Students can speak freely in economics classes even if they are white males from middle class families. Students will find, at most schools, economics faculty who are democrats, republicans and, often, libertarians. This poltical balance makes economics stronger as a discipline and makes a broad range of students feel welcome to choose our major and intellectually engage the field.
I think the third of these factors is probably the most important but it would be interesting to investigate the question empricially.
Hat tip: Greg Mankiw via Dan Black
Book: Targeting in Social Programs
A lawyer and an economist get together to write a book on how to make social programs work better. The book, called Targeting in Social Programs: Avoiding Bad Bets, Removing Bad Apples, is published by Brookings and includes blurbs on the back from Larry Summers, William Kristol, Robert Reischauer and Chrstopher Jencks. That's a lot for a book that only policy wonks can love, but it is a fine book for that group indeed. It is a book aimed at both intelligent non-specialists and at academics interested in a low-tech overview and introduction to ideas about how to better target social programs. One can think of this book as an economics book, a law book or a public administration book as it reflects influences from all three literatures.
As the second part of the title suggests, much of the focus is on avoiding bad bets, which means directing services at individuals likely to have large positive benefits at relatively low cost, rather than at other groups. Put differently, avoiding bad bets means choosing to treat those in the upper part of the net impact distribution. Of course, locating such people is not trivial as the literature on job training programs - see e.g. Heckman, Heinrich and Smith (2002) Journal of Human Resources or Bell and Orr (2002) Labour Economics - amply demonstrates. This is the goal that is treated in much of the scholarly literature on statistical treatment rules.
The other focus of the book is on bad apples, which the authors define as participants who impose negative externalities on other participants - think of the bomb-building public housing resident. This aspectof the problem looms larger in the legal literature than the economics one, though it is reminiscent of Ed Lazear's model of class size effects wherein smaller classes are better because they are less likely to contain a disruptive student and thereby limit the range of destruction brought about by such students. The authors make the case that even lefties should want to weed out the bad apples, subject of course to reasonable procedural safeguards and the provision in most cases of some sort of bad-apple-specific alternative treatment.
The one truly odd thing about the book is that the leading current examples of sophisticated statistical targeting systems - namely the Worker Profiling and Reemployment Services (WPRS) system embedded in the U.S. Unemployment Insurance system and various related systems used in a criminal justice context to help make prison versus probation decisions and also parole decisions - are nowhere mentioned in the book. Also missing are any references to the broader scholarly literature on targeting in active labor market programs by Manski and others (including yours truly), to the decades-0ld literature on "selective incapacitation" in criminology and to related literatures in education (on targeted curricula) and in mental health (on targeted treatment regimes).
Highly recommended, nonetheless.
As the second part of the title suggests, much of the focus is on avoiding bad bets, which means directing services at individuals likely to have large positive benefits at relatively low cost, rather than at other groups. Put differently, avoiding bad bets means choosing to treat those in the upper part of the net impact distribution. Of course, locating such people is not trivial as the literature on job training programs - see e.g. Heckman, Heinrich and Smith (2002) Journal of Human Resources or Bell and Orr (2002) Labour Economics - amply demonstrates. This is the goal that is treated in much of the scholarly literature on statistical treatment rules.
The other focus of the book is on bad apples, which the authors define as participants who impose negative externalities on other participants - think of the bomb-building public housing resident. This aspectof the problem looms larger in the legal literature than the economics one, though it is reminiscent of Ed Lazear's model of class size effects wherein smaller classes are better because they are less likely to contain a disruptive student and thereby limit the range of destruction brought about by such students. The authors make the case that even lefties should want to weed out the bad apples, subject of course to reasonable procedural safeguards and the provision in most cases of some sort of bad-apple-specific alternative treatment.
The one truly odd thing about the book is that the leading current examples of sophisticated statistical targeting systems - namely the Worker Profiling and Reemployment Services (WPRS) system embedded in the U.S. Unemployment Insurance system and various related systems used in a criminal justice context to help make prison versus probation decisions and also parole decisions - are nowhere mentioned in the book. Also missing are any references to the broader scholarly literature on targeting in active labor market programs by Manski and others (including yours truly), to the decades-0ld literature on "selective incapacitation" in criminology and to related literatures in education (on targeted curricula) and in mental health (on targeted treatment regimes).
Highly recommended, nonetheless.
How to cheat at everything
Intelligent Life interviews con man turned magician Simon Lovell.
I suspect that the skills associated with being a successful con man are closely related to the skills associated with being a successful politician.
I suspect that the skills associated with being a successful con man are closely related to the skills associated with being a successful politician.
What do women want?
The NYT provides a fascinating discussion of current research on female sexual desire and its links to biology and culture.
Hat tip: Anya Chung
Hat tip: Anya Chung
Movies
We've seen three in the last couple of weeks:
The Class
This film chronicles life in a French classroom in a documentary style, though it is not in fact a documentary. It really captures the feel of this sort of teaching (and the role of teacher as entertainer) though I found it unrealistic in the sense that there are no truly bad kids in the classroom as even the troublemakers have hearts of gold. That was not my experience in a suburban junior high in the US; it seems most unlikely in an urban school in an immigrant neighborhood in Paris. Recommended nonetheless.
Watchmen
This was a lot more fun than I expected and I can see it becoming a cult classic of sorts among 17-year-old boys. It is dark and moody with interesting characters and some delightfully obtuse humor - like having a world where Nixon has been re-elected five times. Recommended - especially for 17-year-old boys.
Duplicity
Big fluffy fun! I am not a frequent watcher of romantic comedies, but the writing in this one is excellent, there is lots of beautiful cinematography to watch, fine character actors in supporting roles - especially Paul Giamatti - and Julia Roberts and Clive Owen are having a great time. The movie includes a couple of truly priceless scenes, including the corporate battle on the tarmac at a small airport that plays under the opening credits and the scene where the travel agent who has been duped and seduced by Clive Owen explains why she succumbed. Rotten Tomatoes says "more cerebral than visceral", to which I say "not that there is anything wrong with that!" Recommended - a great date movie.
The Class
This film chronicles life in a French classroom in a documentary style, though it is not in fact a documentary. It really captures the feel of this sort of teaching (and the role of teacher as entertainer) though I found it unrealistic in the sense that there are no truly bad kids in the classroom as even the troublemakers have hearts of gold. That was not my experience in a suburban junior high in the US; it seems most unlikely in an urban school in an immigrant neighborhood in Paris. Recommended nonetheless.
Watchmen
This was a lot more fun than I expected and I can see it becoming a cult classic of sorts among 17-year-old boys. It is dark and moody with interesting characters and some delightfully obtuse humor - like having a world where Nixon has been re-elected five times. Recommended - especially for 17-year-old boys.
Duplicity
Big fluffy fun! I am not a frequent watcher of romantic comedies, but the writing in this one is excellent, there is lots of beautiful cinematography to watch, fine character actors in supporting roles - especially Paul Giamatti - and Julia Roberts and Clive Owen are having a great time. The movie includes a couple of truly priceless scenes, including the corporate battle on the tarmac at a small airport that plays under the opening credits and the scene where the travel agent who has been duped and seduced by Clive Owen explains why she succumbed. Rotten Tomatoes says "more cerebral than visceral", to which I say "not that there is anything wrong with that!" Recommended - a great date movie.
Hookernomics
The Economist's new lifestyle magazine Intelligent Life interviews a high-end escort (not really a hooker despite the title) and opines on the economics of the industry. I think they actually get the economics wrong by underestimating the amount of quality information that is available via internet reviews but the piece is interesting nonetheless.
Hat tip: marginal revolution
Hat tip: marginal revolution
Obama at Eight Weeks
It has been a lively eight weeks indeed!
Newsweek has the establishment circling in the water while the NYT columnists are pushing Obama en masse; Frank Rich provides an example.
Certainly it has not been a triumphant eight weeks, nor has there been much in the way of change, believable or not, other than in the deficit and, by implication, in future taxes.
Here is my accounting:
Good - limitations on stem cell research lifted
Good - no more raids on medical marijuana stores or distributors (more could be done here)
Good - backing off a tiny bit on Cuba (lots more could be done here)
Good - Summers on the team plus other reasonable economist types
Good - Not Linda Darling-Hammond at the Department of Education
Not good - more transparency than under Bush but no more than typical of recent presidents
Not good - the stimulus, like all such things before it, is mostly pork and mostly too late
Not good - total cave-in on earmarks on the continuing resolution - chance for change missed
Not good - Labor Secretary is a congressperson you never heard of and a shill for unions
Not good - doing nothing to combat idiot populism from both sides of the aisle
Overall the Obama administration is still exceeding my (admittedly low) expectations. I suspect that is not the case for most people who voted for him. That, of course, is the danger of setting expectations too high.
Newsweek has the establishment circling in the water while the NYT columnists are pushing Obama en masse; Frank Rich provides an example.
Certainly it has not been a triumphant eight weeks, nor has there been much in the way of change, believable or not, other than in the deficit and, by implication, in future taxes.
Here is my accounting:
Good - limitations on stem cell research lifted
Good - no more raids on medical marijuana stores or distributors (more could be done here)
Good - backing off a tiny bit on Cuba (lots more could be done here)
Good - Summers on the team plus other reasonable economist types
Good - Not Linda Darling-Hammond at the Department of Education
Not good - more transparency than under Bush but no more than typical of recent presidents
Not good - the stimulus, like all such things before it, is mostly pork and mostly too late
Not good - total cave-in on earmarks on the continuing resolution - chance for change missed
Not good - Labor Secretary is a congressperson you never heard of and a shill for unions
Not good - doing nothing to combat idiot populism from both sides of the aisle
Overall the Obama administration is still exceeding my (admittedly low) expectations. I suspect that is not the case for most people who voted for him. That, of course, is the danger of setting expectations too high.
Saturday, March 21, 2009
Colbert and O'Reilly
I am not quite sure what to make of this - it may be just too, too postmodern even for me.
Hat tip: Lars Skipper
The best commercial ever made?
That is what Techcrunch calls a Danish commercial for Siemens washing machines. I would not go that far but it is quite something. Techcrunch notes:
Hat tip: Lars Skipper, who confirms that the commercial is indeed shown on Danish television
Only the Danish could get away with something like this ...Advisory for the faint of heart: the commercial is R-rated (all the fault of those exposed breasts) and not particularly PC!I think it would be just as good without the exposed breasts, though. If you don’t watch it, the highlight is that dozens of topless Danish women link hands during a skydive to advertise a Siemens washing machine for 4,999.00 DKK, or about $900.
Hat tip: Lars Skipper, who confirms that the commercial is indeed shown on Danish television
Statistics humor
Some statistics humor that you can find at: http://xkcd.com/552/.
Hat tip: Narendra Vempati
Unhappy hour indeed
The Ann Arbor city government has been cracking down on establishments that offer a free drink along with some other service. This includes Salon Vox (noted in the article) where the charming Jenna styles (almost said "cuts", which would clearly be wrong) my hair these days. In the past, I could have a bit of wine or a martini with my haircut, which made it seem ever so much more civilized (as does the fact that Salon Vox is located next to one of A2's best used bookstores, where I always make a stop after I am done) and enjoyable than an ordinary haircut.
I am told that some of downtown A2's licensed alcholol sellers are behind this city crackdown. They fear competition from hairstylists and art galleries, which is both rather sad and pathetic in and of itself and perhaps even a bit odd. Salon Vox does a lot of business styling the hair of young women right before they go out for a night on the town. Do you think those young women will spend more or less on alcohol at the restaurant or bar or club at which they spend their evening if they start the evening just a bit tipsy from their Salon Vox Appletini or if they start it stone cold sober?
More broadly, I am puzzled as to how it can possibly improve public welfare to limit the number of liquor licenses in Ann Arbor. I do not have much problem with having a system of licenses per se but it seems to me that they should be available to all legitimate businesses that demonstrate knowledge of the rules and have procedures in place to avoid distribution to minors. The current system simply passes out monopoly rents to favored businesses. That is good for them and for the politicians to whose campaigns they contribute, but not good for the A2 drinking public at large.
Perhaps the Ann Arbor News can do a story that follows the trail of campaign dollars?
I am told that some of downtown A2's licensed alcholol sellers are behind this city crackdown. They fear competition from hairstylists and art galleries, which is both rather sad and pathetic in and of itself and perhaps even a bit odd. Salon Vox does a lot of business styling the hair of young women right before they go out for a night on the town. Do you think those young women will spend more or less on alcohol at the restaurant or bar or club at which they spend their evening if they start the evening just a bit tipsy from their Salon Vox Appletini or if they start it stone cold sober?
More broadly, I am puzzled as to how it can possibly improve public welfare to limit the number of liquor licenses in Ann Arbor. I do not have much problem with having a system of licenses per se but it seems to me that they should be available to all legitimate businesses that demonstrate knowledge of the rules and have procedures in place to avoid distribution to minors. The current system simply passes out monopoly rents to favored businesses. That is good for them and for the politicians to whose campaigns they contribute, but not good for the A2 drinking public at large.
Perhaps the Ann Arbor News can do a story that follows the trail of campaign dollars?
AIG bonuses
I agree with both Tyler Cowen at Marginal Revolution, that this is receiving way too much attention and with David Boaz at CATO that the special tax recently passed by the house represents a very sad example of both creeping tyranny and lack of political leadership. There is also plenty of shame to spread around to the media outlets, like Fox News, and various bloggers, who have been stoking the fire and to the truly despicable people that have been tracking down AIG employees and making death threats.
Some thoughts on varous aspects of the discussion:
1. Person-specific taxes, which is essentialy what these taxes are, are a really, really bad idea. Can you think of a better way to stifle dissent?
2. The bonus tax obviously conflicts with the plain language of the constitution in two ways. It represents an ex post facto law and it is the very opposite of equal protection under the law.
3. If AIG is contracturally obligated to pay the bonuses (and if it was not it seems like this whole thing would have blown over long ago) then it should do so. Indeed, it is even in the interest of AIG's taxpayer owners that it do so because otherwise they will eventually get stuck paying the bonuses anyway, along with interest and legal fees, after the employees who did not receive bonuses they were legally entitled to sue the firm.
4. The real culprits here, it seems to me, are the government officials who did not sort this out when setting up the bailout of AIG and who then tried to cover up their error. It is not AIG's responsibility to help the government do a good job of setting up the bailout. In a sense, the bonus tax is the government's attempt to obtain a unilateral "do over" of the original bailout.
5. This whole thing reminds me of the occasional bursts of outrage about Congressional salary increases. As with those, the amount of money at stake with the AIG bonuses is deeply trivial in the context of a government that has spent well over one trillion dollars in the last eight weeks. In the end the populist frenzy about the bonuses functions to distract attention from larger and more serious issues involving the stimulus package and general response to the financial crisis.
6. There are important general issues in regard to the principal agent problem between shareholders of large public companies and the compensation that their top employees receive. Those issues are not solved by taxing AIG bonus recipients nor is the serious discussion regarding how best to address these broader issues furthered in any way.
Some thoughts on varous aspects of the discussion:
1. Person-specific taxes, which is essentialy what these taxes are, are a really, really bad idea. Can you think of a better way to stifle dissent?
2. The bonus tax obviously conflicts with the plain language of the constitution in two ways. It represents an ex post facto law and it is the very opposite of equal protection under the law.
3. If AIG is contracturally obligated to pay the bonuses (and if it was not it seems like this whole thing would have blown over long ago) then it should do so. Indeed, it is even in the interest of AIG's taxpayer owners that it do so because otherwise they will eventually get stuck paying the bonuses anyway, along with interest and legal fees, after the employees who did not receive bonuses they were legally entitled to sue the firm.
4. The real culprits here, it seems to me, are the government officials who did not sort this out when setting up the bailout of AIG and who then tried to cover up their error. It is not AIG's responsibility to help the government do a good job of setting up the bailout. In a sense, the bonus tax is the government's attempt to obtain a unilateral "do over" of the original bailout.
5. This whole thing reminds me of the occasional bursts of outrage about Congressional salary increases. As with those, the amount of money at stake with the AIG bonuses is deeply trivial in the context of a government that has spent well over one trillion dollars in the last eight weeks. In the end the populist frenzy about the bonuses functions to distract attention from larger and more serious issues involving the stimulus package and general response to the financial crisis.
6. There are important general issues in regard to the principal agent problem between shareholders of large public companies and the compensation that their top employees receive. Those issues are not solved by taxing AIG bonus recipients nor is the serious discussion regarding how best to address these broader issues furthered in any way.
Stocks and flows
Megan McArdle, in a post on tax brackets, says the following:
However, Megan also repeats the common mistake of conflating wealth (a stock) and income (a flow). Even one of my esteemed economics colleagues (who shall remain nameless to protect the guilty) did this in a paper he presented at Michigan the other day. One can have a high income and not be rich (either because one spends all of it or because it is transitory) and one can (with somewhat more difficulty and/or incompetent financial helpers) be rich but not have a high income. For example, a retired person on a modest pension who owns a nice home could be in this category, as could some farmers.
It seems to me that this is not an innocent mistake. If you say "tax the rich" people think of Bill Gates and Warren Buffet or maybe a pro athlete or pop star. If you say, "tax high earning professional people" then people might thing of, well, people a lot like themselves. And that, I suspect, would make raising the top rate a much tougher sell politically.
Aren't journalists supposed to be good at the whole using-the-words-correctly thing?
Hat tip (on the McArdle post): instapundit
I also note, just as an aside, that the definition of "very rich" seems increasingly to be set at "just above the level a top-notch journalist in a two-earner couple could be expected to pull down".I agree with the sentiment, though I probably would have used "two-earner couples who live on the red line" which is insider DC talk for all the bureaucrats, lawyers, and various other sorts of governmental hangers-on and courtiers who live in NW DC, Chevy Chase and Bethesda.
However, Megan also repeats the common mistake of conflating wealth (a stock) and income (a flow). Even one of my esteemed economics colleagues (who shall remain nameless to protect the guilty) did this in a paper he presented at Michigan the other day. One can have a high income and not be rich (either because one spends all of it or because it is transitory) and one can (with somewhat more difficulty and/or incompetent financial helpers) be rich but not have a high income. For example, a retired person on a modest pension who owns a nice home could be in this category, as could some farmers.
It seems to me that this is not an innocent mistake. If you say "tax the rich" people think of Bill Gates and Warren Buffet or maybe a pro athlete or pop star. If you say, "tax high earning professional people" then people might thing of, well, people a lot like themselves. And that, I suspect, would make raising the top rate a much tougher sell politically.
Aren't journalists supposed to be good at the whole using-the-words-correctly thing?
Hat tip (on the McArdle post): instapundit
Tuesday, March 17, 2009
Larry, Larry, Larry
TNR profiles Larry Summers, with comments from Michigan's own (for the moment at least, and hopefully longer) Jim Hines. A teaser:
During his senior year of college, Summers was considering graduate school in both theoretical physics and economics. For weeks, he anguished over whether to pursue his passion (physics) or the family business (in addition to his economist parents, Summers has two uncles--Paul Samuelson and Kenneth Arrow--who won Nobel prizes in the field). After he finally decided on the latter, he explained his thinking to Rollins: "What does a bad theoretical physicist do for a living? He walks into an office, sits at a desk, and stares at a plain white sheet of paper." "But," Summers added, "there's a lot of work in the world for a bad economist."Hat tip: marginal revolution
Sunday, March 15, 2009
Single payer health care and "competitiveness"
Greg Mankiw has written the post I've been meaning to write on the odd view that one often hears in the media and from politicians that moving to a single-payer health care system, like that in Canada, would make US firms that provide health insurance more "competitive". This view implicitly assumes that workers care about pre-tax compensation rather than post-tax compensation, which seems unlikely.
Greg's care in distinguishing between the short-run and the long-run is well-taken, particularly given that many of the firms pushing this idea are unionized legacy firms like the "Big Three" automakers. I can understand why the long run might not be really salient at GM and Chrysler just now.
The real puzzle to me, though, is why unions (such as the UAW) also advance this idea. Unlike the firms, which gain in the short run if it takes wages time to re-equilibrate, the unions stand to lose in the short run as the quality of their health care would decline immediately upon the government taking over the payments, and their taxes would increase as well. Wage increases to compensate and return their net compensation to market-clearing levels would come only slowly thereafter.
Greg's care in distinguishing between the short-run and the long-run is well-taken, particularly given that many of the firms pushing this idea are unionized legacy firms like the "Big Three" automakers. I can understand why the long run might not be really salient at GM and Chrysler just now.
The real puzzle to me, though, is why unions (such as the UAW) also advance this idea. Unlike the firms, which gain in the short run if it takes wages time to re-equilibrate, the unions stand to lose in the short run as the quality of their health care would decline immediately upon the government taking over the payments, and their taxes would increase as well. Wage increases to compensate and return their net compensation to market-clearing levels would come only slowly thereafter.
Saturday, March 14, 2009
Markets in everything: death online
A report on what happens online when individuals die offline.
Teaser:
Teaser:
With online social networks becoming ever more important in our lives, they're also becoming an important element in our deaths. ... There's even a tiny industry that has sprung up to help people wrap up their online contacts after their deaths.One suspects there is already a facebook add-on for this as well.
UMMA to reopen
The University of Michigan Museum of Art (UMMA) is going to reopen soon with a beautiful new addition attached to the original building which has now been completely remodeled. Slide show here.
Thought question: is it all relative?
Should a graduate program in economics admit the first cousin of a faculty member? If they do, should the faculty member be allowed to serve on his or her first cousin's dissertation committee?
I think I would answer "maybe" and "definitely no" but at least one top ten program (to remain nameless as this is a "nice" blog but it is not Michigan) answers yes to both.
On the other hand, how different is this than serving on the dissertation committee of the child of a friend in the profession?
Something to ponder.
I think I would answer "maybe" and "definitely no" but at least one top ten program (to remain nameless as this is a "nice" blog but it is not Michigan) answers yes to both.
On the other hand, how different is this than serving on the dissertation committee of the child of a friend in the profession?
Something to ponder.
Thursday, March 12, 2009
BOB at Michigan
My colleague Joel Slemrod has started an informal campaign to nickname the luxurious new building (next door to our less luxurious old building) constructed by the Ross School of business that opened earlier this year.
In particular, he wants to call it BOB, for "Big Orange Building". I like this plan; part of the point of this post is to help advance Joel's campaign.
A variant has BOB standing for "Bright Orange Building". I like this one less because the color is more of a rust orange than a clown hair orange.
Addendum: A reader from another university suggests:
In particular, he wants to call it BOB, for "Big Orange Building". I like this plan; part of the point of this post is to help advance Joel's campaign.
A variant has BOB standing for "Bright Orange Building". I like this one less because the color is more of a rust orange than a clown hair orange.
Addendum: A reader from another university suggests:
How about Butt-ugly Orange Building? May be that would [be] BUOB? Looks like a Hyatt and has the character of it. ... I guess the idea is to get the students ready for their future career of slogging around the country staying in charmless hotels.
Wednesday, March 11, 2009
Non-parametrics in economics
Marginal Revolution wanders far from its usual selection of topics with a post that wonders why non-parametric statistics are not used more in economics.
The comments are remarkably good and cover most of the ground. One even mentions me by name! I will thus offer just a couple of quick remarks:
1. It is important to distinguish between what is popular in the theoretical econometrics world and what is popular in the applied world. It is also important to distinguish between what is going on in applied work in the top departments and what is going on elsewhere. Methods innovations tend to trickle down from the theoretical econometricians to the applied people at top departments to the applied people at other departments (though some ideas never break out of the theoretical econometrics world). There is also variation across subfields in the speed with which methodological innovation plays out; labor economics tends to move first among the applied micro fields, I think largely because the general availability of larger and better data sets makes them more useful there (and serves to attract more technical types to the subfield). The course that Guido Imbens and Jeff Wooldridge have put on at the NBER, the ASSA metings and elsewhere (as well as related but less ambitious courses in Europe including mine with Michael Lechner) aim to speed the second part of this process. Non- and semi-parametric methods are quite popular at present in both the theoretical econometrics world and among applied people at top departments.
2. The "treatment effects" literature is broader than one might gather from the discussion at marginal revolution. In a loose sense, it encompasses most empirical work in applied micro. This literature now features a lot of work using matching / weighting methods, which are either non-parametric or semi-parametric depending on the particular implementation, as well as smaller but growing literatures that apply non- and semi-parametric methods in contexts with selection on unobserved variables, such as regression discontinuity designs and the local IV methods developed by Heckman and his students. The difference-in-differences version of matching laid out in Heckman, Ichimura, Smith and Todd (1998) Econometrica can also be considered a semi-parametric method, and has seen a fair amount of use in the literature.
3. The asymptotics for non- and semi-parametric methods are quite complicated but actually applying them in practice tends not to be, though the point made by one commenter at MR about their relative absence in standard packages like Stata is well taken. The fact that Abadie and Imbens have just released a new NBER working paper providing serious distribution theory for single nearest neighbor matching without replacement, a method that has been routinely used in the applied statistics literature for decades, is testament to the first point. In regard to the second, what could be simpler than means, weighted means, histograms and the like?
4. My favorite fact about non-parametrics is that a standard parametric linear regression becomes a non-parametric estimator if you just promise to add more terms on the right hand side as the sample size gets larger. Of course, you have to promise to add them at the correct rate, so that the hard part is making the correct promise. The fuzzy boundary between parametric and non-parametric methods is also quite apparent in the recent (very fine) survey / best practices regression discontinuity paper by Guido Imbens and Thomas Lemieux. They suggest running a linear regression in a neighborhood of the disconinuity. Is this a parametric linear regression with a caliper or is it a local linear regression with a uniform kernel? As in the (very) old SNL commercial, it is a floor was and a dessert topping.
The comments are remarkably good and cover most of the ground. One even mentions me by name! I will thus offer just a couple of quick remarks:
1. It is important to distinguish between what is popular in the theoretical econometrics world and what is popular in the applied world. It is also important to distinguish between what is going on in applied work in the top departments and what is going on elsewhere. Methods innovations tend to trickle down from the theoretical econometricians to the applied people at top departments to the applied people at other departments (though some ideas never break out of the theoretical econometrics world). There is also variation across subfields in the speed with which methodological innovation plays out; labor economics tends to move first among the applied micro fields, I think largely because the general availability of larger and better data sets makes them more useful there (and serves to attract more technical types to the subfield). The course that Guido Imbens and Jeff Wooldridge have put on at the NBER, the ASSA metings and elsewhere (as well as related but less ambitious courses in Europe including mine with Michael Lechner) aim to speed the second part of this process. Non- and semi-parametric methods are quite popular at present in both the theoretical econometrics world and among applied people at top departments.
2. The "treatment effects" literature is broader than one might gather from the discussion at marginal revolution. In a loose sense, it encompasses most empirical work in applied micro. This literature now features a lot of work using matching / weighting methods, which are either non-parametric or semi-parametric depending on the particular implementation, as well as smaller but growing literatures that apply non- and semi-parametric methods in contexts with selection on unobserved variables, such as regression discontinuity designs and the local IV methods developed by Heckman and his students. The difference-in-differences version of matching laid out in Heckman, Ichimura, Smith and Todd (1998) Econometrica can also be considered a semi-parametric method, and has seen a fair amount of use in the literature.
3. The asymptotics for non- and semi-parametric methods are quite complicated but actually applying them in practice tends not to be, though the point made by one commenter at MR about their relative absence in standard packages like Stata is well taken. The fact that Abadie and Imbens have just released a new NBER working paper providing serious distribution theory for single nearest neighbor matching without replacement, a method that has been routinely used in the applied statistics literature for decades, is testament to the first point. In regard to the second, what could be simpler than means, weighted means, histograms and the like?
4. My favorite fact about non-parametrics is that a standard parametric linear regression becomes a non-parametric estimator if you just promise to add more terms on the right hand side as the sample size gets larger. Of course, you have to promise to add them at the correct rate, so that the hard part is making the correct promise. The fuzzy boundary between parametric and non-parametric methods is also quite apparent in the recent (very fine) survey / best practices regression discontinuity paper by Guido Imbens and Thomas Lemieux. They suggest running a linear regression in a neighborhood of the disconinuity. Is this a parametric linear regression with a caliper or is it a local linear regression with a uniform kernel? As in the (very) old SNL commercial, it is a floor was and a dessert topping.
Tuesday, March 10, 2009
Hayak and inflation
I would not have pictured (Nobel prize-winning economist Friedrich von) Hayek doing this but it is funny that he did.
Hat tip: marginal revolution
Hat tip: marginal revolution
Monday, March 9, 2009
Where do you go to buy Obama?
At the Obama store of course! The store is located in the lower level of Union Station in DC.
I suspect that the people who gawked at me while I was taking the picture mistook the nature of my interest.
Sunday, March 8, 2009
The Case of Dickens v. Wicked Love
Porn drove the internet and apparently romance porn (sans pictures) is driving ebooks. Kind of warms an economist's heart (yes, we do have them).
Surely we should be subsidizing this industry as part of the "stimulus" package (if not based on an argument that lots of secretly stimulated readers are a public good)?
Hat tip: marginal revolution
Surely we should be subsidizing this industry as part of the "stimulus" package (if not based on an argument that lots of secretly stimulated readers are a public good)?
Hat tip: marginal revolution
Saturday, March 7, 2009
Washington 67 WSU 60
Washington wins the PAC-10 championship outright for the first time since 1953!
Here is the Seattle Times story.
1953 was shortly after my father graduated from Washington. The Huskies last shared championship was my last year as an undergrad at Washington.
Here is the Seattle Times story.
1953 was shortly after my father graduated from Washington. The Huskies last shared championship was my last year as an undergrad at Washington.
Smart and hot, hot, hot!
Advice from McSweeney's on how to obtain the highly coveted chili pepper of hotness on ratemyprofessor.com.
Hat tips: two separate guilty colleagues who I suspect would prefer to remain anonymous.
Hat tips: two separate guilty colleagues who I suspect would prefer to remain anonymous.
Obama on Education
Is education
(a) a right;
(b) a duty;
(c) both (a) and (b);
(d) none of the above?
I would go with (d), but recent remarks by President Obama quoted on the blog at reason.com take a lean towards (b). I suspect he would sign on with (a) as well and thus give (c) as his answer.
Modern "liberalism" is often characterized by the idea that government should aim to provide individuals with opportunities to realize their "full potential". I am not unsympathetic to this version of "liberalism" but I am with the Reason blogger that going beyond opportunities to mandates is an illiberal move in either the modern or classical sense.
I think the issue, though, is less clear-cut than Jacob Sullum, the reason blogger, makes it out to be. From a classical liberal perspective, or simply from an economic perspective, there is a countervailing issue. Given that we have a well-developed transfer system, and given that high school dropouts differently take advantage of that transfer system and so impose a net tax burden on the rest of the citizenry, pushing them to at least finish high school, and more generally pushing people to obtain enough of the right kind of human capital to at least be self-supporting, becomes optimal in a second best sense. One distortion, namely the moral hazard implicit by the transfer system, gets mitigated in part by another.
Trade-offs everywhere. That's what makes it interesting.
Hat tip: Lars Skipper
(a) a right;
(b) a duty;
(c) both (a) and (b);
(d) none of the above?
I would go with (d), but recent remarks by President Obama quoted on the blog at reason.com take a lean towards (b). I suspect he would sign on with (a) as well and thus give (c) as his answer.
Modern "liberalism" is often characterized by the idea that government should aim to provide individuals with opportunities to realize their "full potential". I am not unsympathetic to this version of "liberalism" but I am with the Reason blogger that going beyond opportunities to mandates is an illiberal move in either the modern or classical sense.
I think the issue, though, is less clear-cut than Jacob Sullum, the reason blogger, makes it out to be. From a classical liberal perspective, or simply from an economic perspective, there is a countervailing issue. Given that we have a well-developed transfer system, and given that high school dropouts differently take advantage of that transfer system and so impose a net tax burden on the rest of the citizenry, pushing them to at least finish high school, and more generally pushing people to obtain enough of the right kind of human capital to at least be self-supporting, becomes optimal in a second best sense. One distortion, namely the moral hazard implicit by the transfer system, gets mitigated in part by another.
Trade-offs everywhere. That's what makes it interesting.
Hat tip: Lars Skipper
IHS Summer Seminars
I did one of these seminars run by the Institute for Humane Studies back in my college days and really enjoyed it. The lectures are "classical liberal" types but the discussion is open and engaged. It is sort of a week-long dorm room bull session and so great fun for all concerned.
My recollection is that I most enjoyed the discussions of foreign policy which was what I knew the least about at the time. There was also lots of discussion of the anarchist versus minarchist positions and of the relative virtues of rights-based versus rule-utilitarian views.
Maybe someday IHS will ask me to lecture. More worrisome is the potential that they may ask me to review applications (as they would be quite justified in doing, having given me fellowships back in my gradual student days).
My recollection is that I most enjoyed the discussions of foreign policy which was what I knew the least about at the time. There was also lots of discussion of the anarchist versus minarchist positions and of the relative virtues of rights-based versus rule-utilitarian views.
Maybe someday IHS will ask me to lecture. More worrisome is the potential that they may ask me to review applications (as they would be quite justified in doing, having given me fellowships back in my gradual student days).
Journal etiquette
Here is an odd fact that I am unclear how to interpret: In my recent life as a journal editor, I have received three thank-you emails from authors of papers I have rejected who appreciated the comments and zero thank-you emails from authors of papers I have accepted. Indeed, the most troublesome of all authors I have dealt with was the author of the first paper I accepted at JOLE.