Chicago daze

Chicago economics first year graduate student Evan Miller idolizes Kevin Murphy and makes fun of the stimulus bill.

Kevin is indeed wicked smart, but he is one among several at Chicago who spend their time out in the far tail of the ability distribution. And there is something about this sort of adulatory praise that seems not quite in the spirit of Chicago.

Hat tip: Lones Smith

IES experimental evaluation of mentoring

Hot off the (virtual) presses is this new experimental evaluation of mentoring sponsored by the Institute for Education Sciences and undertaken by Abt Associates. I was on the technical working group for this one.

At the risk of spoiling your reading enjoyment, I will note that the impacts of mentoring do not exactly scream out from the data.

How to be a great conference participant

A humorous take on the question from Art Carden of Rhodes College.

He is a bit obsessed with heteroskedasticity-consistent standard errors. Bed rest helps with this.

Applied relativity (or, what to call your cousin)

My old friend Don answers the question in my post from yesterday about the naming of cousins:

"Imagine the family as a tree (computer science, not biology), with the common ancestor as the root and only two branches of interest, one leading to each cousin. Assume the two branches have depths X and Y, where X <= Y. The two people are (X-1)th cousins, (Y-X) times removed. For you and Captain Thom X=2 (the distance from you to your grandmother) and Y=3 (he's a generation farther down). You're first (2-1) cousins, once (3-2) removed.

That is good to know, and now that it is on the blog I will always know where to find it.

Reference letters

Andrew Gelman offers some thoughts on how long to spend writing letters of reference.

I would add four bits to this:

1. First, it is important in economics to distinguish between letters to employers, operators of summer internship programs or graduate schools on behalf of undergraduates and job market letters for graduate students. Job market letters consume more time in part because the norm is to describe the student's research in some detail, in part because you usually know graduate students much better than undergraduates and so have more useful information to provide, and in part because you know that your colleagues are really going to pay attention to those letters, and you will hear about it if they interview or fly out someone based in part on your letter and the person crashes and burns.

2. Most students do not appreciate that letters are essentially all fixed cost. Once you write one, the rest are easy.

3. Many undergrads do not appreciate that if you have never interacted with them, there is not much you can say in the letter that is not obvious from the transcript and their resume. In these cases, I encourage the student to get a letter from someone who knows them better. If there is no such person (and may undergraduates never really interact with any faculty in a meaningful way outside of class, so this is often the case) then I try in the letter to give a sense of what goes on in my class, of how students select into my class, and of what the grade distribution is, so that they can better interpret the transcript (what does an "A-" mean) and the resume (how much Stata does this person really know).

4. To me, the costly part of writing letters has to do with the fact that the equilibrium is that everyone lies. All letters oversell. So one faces both a moral cost and a cost associated with trying to get the level of overselling just right, which is more difficult than just being honest. As Gelman notes, the latter issue is partially mitigated by the development of a reputation. My sense is that I have a reputation for writing informative and relatively honest letters. Once the reputation is there my student bear no cost from my relative honesty, but I suspect that some early students may have paid a price for my establishing this reputation.

Afghanistan

Captain Thom, who appears in the latter part of the video, is my mother's sister's son's son. I am never quite sure if that makes him a second cousin or a first cousin once removed. In any case, I have a picture from when I was in college of me holding him when he was about two. Neither of us looks very happy about the arrangement.

Funny books

Abe books offers up a list of the 10 funniest books, as rated by its UK customers.

I've read only Wilt (highly recommended, along with the Throwback, also by Tom Sharpe) and Lucky Jim (which I liked but did not really, really like).

More things to add to the Amazon cart!

Grad school advice

Someone called Penelope, the brazen careerist, offers up some advice about grad school in recession times. She is against it.

The post is funny at points, and worth reading as an antidote to the sort of "the future is in plastics" type of career advice one sometimes hears, in which one particular career or set of careers is posited as a sure thing, regardless of the talents or interests of the advisee.

At the same time, some of the advice seems quite misguided. The health care sector seems likely to experience changes in its industrial organization whether or not they come from the government, but that fact does not change the crude demographics of an aging population, which suggests increases in demand in future years.

Sure, science jobs have relatively low money wages, and yet there are still queues for them, as there are to be, say, an English professor. This suggests that the non-money aspects of their compensation are viewed as valuable. In notation, what matters is U and not Y and for most people, Y is not the only argument in the U function. [For non-economist readers, U is the utility function and Y is earnings in this example.]

I will agree with a couple of points. Going to a low-rated but expensive business school is likely not worth the trouble. And some fields are risky. If you want to be an English professor and not a writer of technical manuals, getting a doctorate in English is a necessary but hardly a sufficient condition. On the other hand, some graduate degrees are pretty low risk - anything in statistics, computer science or economics comes to mind.

Hat tip: reason.com

Stimulating counterfactuals

Greg Mankiw, with whom I usually find myself in agreement, cites the transcript of a recent news conference with President Obama and then crabs about his proposed treatment effect estimator:

Question: The American people have seen hundreds of billions of dollars spent already, and still the economy continues to free-fall. Beyond avoiding the national catastrophe that you've warned about, once all the legs of your stool are in place, how can the American people gauge whether or not your programs are working? Can they — should they be looking at the metric of the stock market, home foreclosures, unemployment? What metric should they use? When? And how will they know if it's working, or whether or not we need to go to a plan B?

Answer: I think my initial measure of success is creating or saving 4 million jobs. That's bottom line No. 1, because if people are working, then they've got enough confidence to make purchases, to make investments. Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers. So step No. 1, job creation.

The expression "create or save," which has been used regularly by the President and his economic team, is an act of political genius. You can measure how many jobs are created between two points in time. But there is no way to measure how many jobs are saved. Even if things get much, much worse, the President can say that there would have been 4 million fewer jobs without the stimulus.

So, let's suppose that Obama had just said "create 4 million jobs" without the "save" bit. Under Greg's proposed estimator we measure the number of people employed on the day of the press conference and the number employed on some future day and if the difference is more than 4 million, we say the stimulus plan worked.

I hate to be a party pooper, and maybe this sort of estimation strategy is all the rage in macro, but in addition to the obvious problem of choosing just when to measure employment in the future (i.e. picking the "after" period in the before-after estimator) is the additional problem that the assumption underlying this estimator is that without the stimulus package, the expected value of employment in the "after" period is what it was on the day of the press conference. I am certain that Greg does not really believe this identifying assumption, even though his proposed estimator relies on it. I don't believe it either.

The first lesson here is that measuring the impact of the stimulus relative to a counterfactual, which could be no stimulus or some different stimulus, is pretty hard whether the claim has to do with job creation and retention or just plain old job creation. Maybe one of those models in Greg's textbook could help out with this task?

The other lesson is that Obama, whatever his other sins, is not sinning that much worse than any other politician on this one. One thing not in short supply during the financial crisis is bold claims about difficult-to-estimate causal effects.

Too nice to Nadeau?

Chris Auld defends yours truly against attacks from across the sea.

And, yes, I do know that the labor theory of value does not hold. The remark in my post was not meant to imply that one could not study economics for a long time without understanding it. Certainly, that has been done. What was meant was the Mr. Nadeau, busy learning about English, must of necessity bear the brunt of the temporal budget constraint, and so could not have possibly spent much time learning about economics, whether profitably or not.

Hat tip: Lars Skipper

Subsidized job training for former investment bankers

Common sense and, apparently, the idea that it is good to redistribute down rather than up the income scale, are truly out the window, at least for the duration of the recession. The NYT reports that NYC is spending money on retraining programs for former investment bankers. News flash to Mayor Bloomberg: they can afford to pay for community college with their severance checks and their assets.

Just take those tax dollars and flush!

Hat tip: Ken Troske

Ann Arbor food blogs

Feeling hungry? In need of some food porn (or is that food art, or food erotica)? Or perhaps a recipe or a local restaurant review? Then try out Kitchen Chick or Tammy's Tastings, to A2 food blogs that come highly recommended by the resident chef at my house.

Hat tip: Lisa Smith

What to do when you miss the flight ...

From Gulliver, the Economist's travel blog, a video lesson on responding to bad shocks.

Liberalism, libertarianism and liberaltariansim

There is a lot of discussion going on right now in the blogosphere in regard to a libertarian reconciliation with the soft left. I will probably do a long post about this at some point but wanted to put up some links while the broader discussion is ongoing.

Here is a post from Brad DeLong, here is one from the Boston Review, here is former Reason editor Virginia Postrel, and here is Ross Douthat of the Atlantic. There is also a lot on this theme on Will Wilkinson's blog.

My take is that there is much common ground between thoughtful classical liberals and democrats who know some economics. I am less sure about hard-core libertarians or about the sort of democrats who think that cost-benefit analysis is a plot against Mother Gaia or that higher minimum wages cause growth.

Checks and pills

A disturbing NY Review of Books piece on corruption in medical academia by a long-time editor of the Journal of the American medical association.

The article leaves out the small-scale, low-level corruption associated with the drug reps who travel around to doctor's offices buying them (and their staff) lunches and sweets.

Hat tip: Dan Black

Borders humor

As Glen Reynolds would say, heh.

Body Counts 101

My colleague Lones Smith circulated an email to the economics students and faculty today advertising a fellowship program at the World Bank. I thought at first it was a joke, as Lones' emails are usually about either something humorous, but it turns out that there really is a Robert S. McNamara Fellowship Program at the World Bank.

I suppose that given there are policy schools named after JFK, Woodrow Wilson (even worse!) and LBJ (really, really worse!) old McNamara is not so out of place, especially with only a fellowship program, but still.

Is behavioral economics your friend?

The NYT reports on a couple of interesting papers from the American Economic Association meetings last month in SF.

I am of several minds (pun fully intended) about behavioral economics. First, the name irritates me; all economics is properly about behavior. Second, I think some of theoretical work that transpires under the heading of behavioral economics, such as the development of new choice axioms, is largely wheel-spinning. Third, I think that in some quarters behavioral economics has induced a sort of looseness of thought. Instead of thinking very hard about a phenomenon in order to come up with a non-obvious rational choice explanation, someone simply blurts out "framing" or "hyperbolic discounting" and the thinking stops there. Fourth, it irritates me when people equate rational behavior with an assumption of costless information processing. It seems to me that the correct way to proceed is to incorporate a cognitive budget constraint into the optimization problem. It is hardly rational to spend huge amounts of costly cognitive resources to solve some problem when a quick, cheap but slightly wrong heuristic is available Our models should reflect this and, more broadly, we should not treat clearly irrational behavior as the benchmark of rationality. This requires learning a bit of psychology and/or neuroscience in order to get the budget constraint right. Fifth, I think that people who dismiss the entire behavioral economic enterprise ("wackonomics") based on the failings of some of its practitioners are being careless and making a serious mistake. There is important, policy relevant behavior to be explained that does not fit will with traditional models that assume costless information processing. I think economists have much to add in coming up with new and useful explanations of these behaviors.

Without blaming him for my current views in any way, I should note my major intellectual debt in this area to my graduate school colleague Nat Wilcox, now at the University of Houston, who introduced me to the literature on the boundary of psychology and economics long before it became fashionable.

Oh, and I must point out the glaring error by the NYT reporter:

Lotteries, for example, are the bane of many economists’ existence. People exhibit totally irrational behavior when it comes to such gambling, generally overvaluing the likelihood of winning. For example, let’s say you give a person two options: 1) a one-in-10 chance of receiving $100, or 2) a guaranteed payout of $10. He is much more likely to choose the first option, even though the two options have the exact same expected value (10 percent of $100 = $10). To economists, this makes little sense — both options should be equally appealing.

The two options are equally appealing only if the individual is risk neutral. Economists generally assume that individuals are risk averse, in which case the certain payment should be preferred. This is probably a very reasonable assumption in general but does poorly, as this example suggests, at explaining gambling.

Hat tip: Sarah Turner

Another new frontier in public finance

An intrepid Seattle Times reporter investigates the price effects of a proposed (by a democrat!) porn tax in Washington State by going to the Deja Vu store at 9 AM.

Too bad Nicole did not call one of my public finance colleagues, who could have explained to her that optimal taxation is all about elasticities of demand. Putting aside taxes whose point is to change behavior rather than raise revenue, such as cigarette taxes, you want to tax things with inelastic (not responsive to price) demand so that you do not change behavior. This minimizes the tax-induced distortions to individual choice.

I have no idea what the elasticity of demand might be for the products sold at the Deja Vu store (or the neighboring Deja Vu "club").

The stimulus package as child's play

I think this proposal is almost certainly superior to the bill that will actually be passed.

I suppose that's not surprising given where the author did his graduate work.

Update: ungated link here.

New directions in public finance

Denmark considers blazing a new trail in revenue generation and greenhouse gas reduction by taxing emissions of methane by farm animals.

Hat tip: Lars Skipper

A Lada fun here.

Feeling badly about Detroit and the big three automakers? It could be worse!

Enjoy this British video on the great automobiles produced under communism. It even includes Spanish (or are they Portuguese?) subtitles.

In graduate school, I knew a sociology graduate student who had a Yugo, and even rode in the Yugo a few times. As I recall, one day one of the doors just fell off of its own accord.

Hat tip: Lars Skipper

One Detroit is enough!

Thomas Friedman on a pork-free stimulus plan that I would be happy to support.

I wonder, is it really necessary to pander to the nativist types? Do they have that many votes?

Congress. What a sorry lot indeed. Isn't leadership all about not catering to the worst instincts of the least thoughtful voter?

Sitting in the back

Gulliver, the Economist's travel blog, opines on what to do when the financial crisis - or just not being a jet setting corporate type - lands you in coach.

I was puzzled the suggestion about taking daytime flights. To me, there are five main differences between the front and the back: (1) the food; (2) the entertainment; (3) drink prices; (4) work space and (5) comfort level. The first four of these are irrelevant if you are sleeping. I do not find it any easier to sleep in the front than in the back - you are still on a plane in a chair with people making noise and stupid announcements about duty free shopping at inopportune times - so to me you want to be in front on flights when you won't be sleeping, rather than when you will be sleeping.

Seatguru, which is linked to in the article, is pretty cool.

WSJ on the job market for economists

The WSJ has it as "dismal" in their piece.

I say yes and no. All seven people I wrote letters for have received offers already and two have cleared, one to Kent State and one to Holy Cross. My sense is that some but not all of the students are going to places a bit lower in the pecking order than I would have expected had they gone on the market, say, two years ago. So, not great but not quite a disaster either.

Hat tip: Lones Smith (no relation other than that we both went to Chicago around the same time)

Mostly Harmless Econometrics

The new Angrist and Pischke applied econometrics text Mostly Harmless Econometrics is now published.

Here is a review from statistican Andrew Gelman, which is insightful both regarding the book itself and indirectly about differences between economics and statistics. In particular, his review highlights the relative importance of identification in economics and of getting the functional form right in statistics. Is there some reason we cannot have both? Note too the very different use of the word "model" in statistics than in economics. In some ways interdisciplinary communication might be easier if the different languages we speak did not share the same words.

I am a bit surprised by Gelman's call for more on hierarchical models; I think economists are right to treat these as a combination of useful pedagogical tool for education research design and an unnecessarily functional-form dependent way to get the standard errors right when then the unit of treatment differs from the units available in the data.

Gelman's point about treatment interactions is well-taken and their apparent omission in the Angrist and Pischke text is surprising. Also worth noting is Gelman's implicit assumption that matching is, as Gary King and his co-authors put it in a recent paper, a pre-processor that is followed by some more parametric procedure.

This book will be required for Economics 675 next year along with the Wooldridge graduate text and the Cameron and Trivedi text. Fortunately, the Angrist and Pischke book is priced very reasonably at $35 so that it does not add a huge amount to the cost of the other two budget busters.

I used the book in draft form a bit this year in preparing a couple of lectures and found it very helpful. All books reflect their authors, this one does so in a very big way, both via the nerdy humor and the choice of emphases and approach, but I think it makes a fine complement to the other books already available.

Hat tip: Chris Blattman (who is now on my "check every day" list)

Washington 75 Stanford 68

I could get use to this "winning" business and hope that Washington's football team will give it a try in the fall. Seattle times coverage here; this is the first win for Washington men's b-ball at Stanford since 1993.

What if facebook were real life?

This is really excellent, and the British accents (the guy at the door sounds just like my friend Alex) only make it better.

The music of the stocks

From Germany comes the financial crisis put to music:



Things get a bit political towards the end. I think the authors real hidden message is that you should by stock in (1) the porn industry and (2) German arms makers, but I could be wrong.

Also, the time period covered by the porn industry time series is different from all the others in a way that serves the political point. Darrell Huff would not approve.

Hat tip: Elizabeth Bruch

Movie: Taken

[spoilers]

So, here is the deal on Taken. A bunch of nasty characters from Albania kidnap rich white young female tourists in Paris and sell them to rich guys (most particularly Arabs) to use as their personal playthings. By giving the French police a few hundred Euros, they somehow avoid any interest on their part, as well as the 24-hour coverage on CNN, CNBC and Fox News that normally results when perky white girls go missing overseas. As a result, the ex-CIA (or something) father of one of such girl has to fly to France and kill all the bad Albanian (and some bad non-Albanians) guys and blow up lots of stuff so that he can recapture his airhead daughter, with whom he is keen to build emotional bridges, just before she loses her virginity (yeah, right!) to a sheik on a riverboat.

Heard enough? If you are into such things, grab some freedom fries (the movie is none too kind to the French) and enjoy 90 minutes of violent Hollywood fluff.

Daschle

Here is an old ad for Tom Daschle:



I guess it was all those years in a junker that made the chauffeur thing look so good.

Hat tip: Jon Lanning

Retaking the GRE

This fun story from the Chronicle of Higher Education - I nearly typed Insider Higher Ed by mistake so it is a good thing I checked - tells the story of an English professor who retakes the English subject area GRE.

There is also a subject area test in economics, though my sense is that the top departments do not use it. When I took it, I remember thinking how little of it was very familiar to me. Much of it was textbook old style hydraulic Keynesianism, which I have never really had an intuitive understanding of and which I had very little exposure to as an undergraduate because our honors macroeconomics course used photocopies from the just-about-to-be-released text by Robert Barro, which, at least then, was almost entirely new classical in its presentation. That stuff I understood, as it is largely "micro with summation signs", but it was not on the subject exam at that point. My recollection is that I did pretty poorily on the subject exam, maybe the 60th percentile or something like that.

I tend to agree with the Chronicle writer in the sense that I think the GRE math test is much more useful for economics admissions than the subject area test. These days, given the relative size and quality of the applicant pool and of the top programs, a GRE math score of 750 (if not 780 or 800) is almost a necessary condition for admission. This is both good and bad. It is good because it allows a low-cost pre-screening and so reduces the time cost of admissions for faculty. It is bad because for some students the difference between 740 and 780 may be whether they got laid the night before or had a noisy person sitting next to them.

Hat tip: marginalrevolution.com

Structural papers in seminars

As part of our job search process - yes, Michigan is hiring in economics - we have had several speakers through presenting "structural" papers in various sub-fields such as labor, industrial organization and international macro. Sitting through these job talks has crystallized some thoughts I have been having about good ways, and less good ways, to answer seminar questions about such papers.

For non-economist readers, a "structural" paper in economics lays out a complete, formal mathematical model of some aspect of economic behavior (or, in the case of macro, perhaps of the entire economy). These models typically then get estimated or calibrated (don't ask - that is a topic for another day) and their implications for our understanding of individual behavior and/or of potential policy reform are discussed.

The key issue is that structural models are quite complex, both to write down and to estimate. As a result, much of the game in writing such a paper lies in figuring out which aspects of the phenomenon under study to explicitly include in the model and which to assume away or at least grossly simplify. For example, in some particular area of behavior there might to 30 factors that theory, the existing empirical literature and casual introspection suggest might be important. Intellectual and computational factors may, however, mean that the model that gets written down can include only, say, 10 of these. So the trick for the researcher, then, is to pick the "correct" 10 out of 30, where this choice will be guided both by considerations of relative importance in some absolute sense and by which aspects the behavior being studied the researcher most wants to emphasize (which might depend on, for example, a particular policy proposal of interest).

In seminar presentations of such papers, many questions from the audience will be of the form "why did you leave out factor #16" from your model?" A common response to such questions from presenters can be paraphrased as "I had already included 10 factors and so my model was full." In my view, audiences should not tolerate this type of answer. The answer you want, and which seminar audiences should demand, would take the form "The reason I did not include #16 is that it is less important than #8, which was the marginal factor that I did include. It is less important than #8 because of X, Y and Z," where X, Y and Z are reasons based on the existing theoretical and empirical literature or that have to do with point that the author is trying to make with the model. Such answers do a much better job of showing that the researcher has thought seriously about what to include and what not to include in his or her model.

Foreigners are people too!

Here is Clive Crook from the Atlantic on the "Buy American" provisions of the stimulus package.

I thought that part of change we can believe in was getting our friends abroad to like us again?

The comments are priceless in their ignorance. Here is a tasty bit:

I would like to know that when I pay my substantial tax bills every year, that my neighbor is the direct beneficiary rather than someone I have never seen and will never meet.

Yes, the moral status of people depends on whether or not they live in your neighborhood. Of course. Didn't Jesus say that? Or was that Moses? Or the Dalai Lama?

Stimulus humor

Movie: Frost / Nixon

I had pretty low expectations for this; to be honest I expected a political hatchet job. Instead, I got one of the best movies I have seen in a while.

The film is remarkably sympathetic to Nixon and surprisingly tough on Frost, who is portrayed essentially as an enterprising and ambitious intellectual lightweight who gets lucky because he hired good research assistants.

I think as time passes it becomes easier, if not to forgive Nixon for Watergate (and for wage and price controls, which arguably are much worse), then to at least put a bit more weight in evaluating his time in office on his positive accomplishments in foreign policy and to compare him more thoughtfully with the other members of the rogue's gallery of post-WWII presidents.

Partly I think this is simply because Nixon is such a fascinating character - so much deeper and more troubled than, say, Clinton or Bush II. In addition, more has come out since the 1970s about misbehavior by Kennedy and Johnson, and we got to watch Clinton follow Nixon's lead by using the IRS as a weapon against his political enemies at the American Spectator. Plus Vietnam looks a bit less demented (though perhaps even more unnecessary) in hindsight given the liberal victory over communism in the Cold War. Finally, though the movie underplays this, I think Nixon gets points for being a very good ex-president. He did not go around scolding people like Jimmy Carter; instead he wrote a series of thoughtful, well-regarded books.

I can see why the movie got nominated for best picture. Highly recommended.

Michael Phelps: pothead

It turns out that like the majority of Americans, Michael Phelps has used marijuana.

National Review Online draws the lessons.

Hat tip: instapundit

Has Obama killed irony?

If you did not know it already from the pledge video I linked to a couple days ago, LAT columnist James Rainey performs the autopsy.

When will our short national nightmare of earnestness be over?

Hat tip: instapundit

More on Red Hot Lovers

The Michigan Daily has an update on the story.

Opportunity knocks

It doesn't get more liberal than free trade. Protectionist moves in the "stimulus" bill by house democrats provide an opportunity for some real change we can believe in, but it will require standing up to a powerful interest group that surely thinks it is "owed" something after the election. Is Obama up to it?

Bathtub test - viral humor

During a visit to the mental asylum, I asked the director "How do you determine whether or not a patient should be institutionalized?"

"Well," said the director, "we fill up a bathtub, then we offer a teaspoon, a teacup and a bucket to the patient and ask him or her to empty the bathtub."

"Oh, I understand," I said. "A normal person would use the bucket because it's bigger than the spoon or the teacup."

"No." said the director, "A normal person would pull the plug. Do you want a bed near the window?"

IES TWGs in DC

I was in DC last week for two days to attend meetings of two Technical Working Groups for evaluations being funded by the Department of Education's Institute for Education Sciences (IES). These techincal working groups include staff from the evaluation contractor and IES as well as outside experts on methods (that is my usual role) and on the subject area. The outside experiments are usually mostly academics, though they are sometimes program operators or, in the case of IES evaluations, school district or teacher union officials.

On Wednesday, I went to the TWG for the evaluation of mandatory random drug testing being done by RMC Research in cooperation with Mathematica. This evaluation is at the stage of having preliminary results (which I am sworn to secrecy about) so we discussed various statistical issues related to the analysis as well as issues of presentation and focus and some secondary analyses that it would be worthwhile to undertake. The IES page on this evaluation is here.

A very interesting issue here, which we discussed at some length, is whether the key dependent variable is any drug use or frequency of drug use. This issue might seem minor, but in fact it hinges importantly on what one sees as the point of the drug testing program. If the point is to get students down to zero use, then a dummy variable for zero use is the appropriate dependent variable to highlight. In contrast, if the point is to discourage frequent use, say by moving daily or almost daily users down to occasional weekend users, then a categorical variable measuring frequency of use becomes the primary object of interest. A dummy variable for zero use versus non-zero use completely misses changes in intensity that do not lead to abstinence.

This panel was great fun, in part because I was the only economist among the experts in attendance (some of the IES folks and the consultants are also economists). We established at the last meeting that I was the only person in the room who knew what "420" meant, which I thought was kind of amusing. In any case, the other experts on the TWG are a particularly bright and outspoken lot of psychologists and such, so the discussion was great fun and very stimulating.

On Thursday I attended the TWG for the evaluation of a treatment designed to move high performing (as measured by value added in test scores) teachers to low-performing (as measured by test score levels) schools. This evaluation is earlier in the game, as the research team is just completing a pilot study of the program in a single district, and just beginning the broader evaluation in multiple districts. Though the basic design is largely set, there was lots to talk about here as well, including how likely one thinks spillovers are from high performing teachers and how long it might take any such spillovers to show up in the data on test scores in other classrooms. This has implications for what you measure and how you measure it and also for broader issues of power.

Nice things to read in the morning

A former undergraduate of mine from Western Ontario days offers some kind words here.

I don't think Mike did quite as badly in my class as he remembers!

One of the really rewarding things about being a professor is watching your students progress as they go out in the world, whether they pursue an academic career or not. I do not do as well at keeping up with all of my former students as I would like but I am always glad when they get in touch with an update. The next big milestone, which should happen in the next couple of years, will be the first of my Ph.D. students to get tenure.

I had a delightful dinner last week with three former Michigan undergraduates working in DC. My only complaint is that too many of my former students (both graduate and undergraduate)work in DC relative to the number of days I am there each year, so I don't get to see any of them as often as I would like.

Stimulus package

I have not written about the stimulus package here because I have not been following it in detail. My sense is that I agree with Alice Rivlin of the Brookings Institution, who is also President Clinton's former budget director, that it would be better to move quickly on the actual stimulus part of the stimulus bill while leaving the other parts to be dealt with more thoughtfully. In things like health care reform initial choices matter a lot. For example, the truly wretched design of the Medicare prescription drug plan passed under Bush II will be with us for a long time. Social security, another poorly designed program, has proven impossible to reform other than minor tinkering at the margins. Rivlin's views, and some other interesting thoughts, appear in this WaPo article.

I am heartened, also, to read about Larry Summers pushing for spending that will happen now. Whatever your views on the value of a stimulus package in the larger sense, all economists agree that a necessary condition for the package to have any value is for the spending to happen fast. There is also pretty general agreement that this has not been a characteristic of past spending packages in similar circumstances, where the bulk of the spending would typically arrive once a recovery was already underway. Larry is right on target here, even if the spending in the bill is often not.

This article also illustrates a general complaint of mine, which is the description of the package as containing tax cuts. It contains no such thing. By increasing spending, the package increases the discounted expected value of future tax payments. What the package does is to redistribute tax collection over time, by borrowing now to finance current expenditures while cutting current tax rates. It also redistributes the expected tax burden across individuals by changing the rates of certain types of taxes but not others in the short run. To actually cut discounted expected future taxes you have to cut spending, and that is certainly not what this bill is about. The press could do everyone a favor, and fulfill the lofty role that it imagines itself as filling, by adopting language that made this clear, rather than doing what they currently do, which is using misleading language about tax cuts.

I pledge ... not to be a self-righteous airhead celebrity

"I pledge to be a servant to our president"

Can anyone not get what it means to be a free and independent person (or an American or even just an adult) more deeply than is required to sincerely utter this statement?

One more time: the president is the elected manager of a large firm that produces certain public goods using money taken from people by force. In the course of doing so, a great deal of the money is spent on private goods and transfers for politically favored individuals, firms and groups. The president is not your mom. He is not your dad. He is not Buddha. He is not Jesus (and he is not the Antichrist either). He is not your best friend or even your dog. He is just a smart, well-spoken guy who would otherwise be a law professor without many publications.

Have a bag nearby while you watch.

If your dinner remains with you after the video, try this song by Garrison Keiler.

Hat tips: Chris Blattman, who also points to this fine takedown (from a somewhat different angle) by Marbury.

More on prostitution in Ann Arbor

Nothing sells a local newspaper like stories about the sex industry. When I taught at Western Ontario, the London Free Press would cover every detail about then-mayor Diane Haskett's fascination with strip clubs and massage parlors, things that clearly interested her much more than, say, local economic development.

In the past few days the Ann Arbor News has had two more stories about prostitution in our fair city, one detailing the arrest of a former U-M undergraduate who was finding customers on Craig's List and one general story about prostitution and the internet.

As an Ann Arbor taxpayer (and taxes are not low in Ann Arbor), I was particularly struck by the claim in the second story that

"We are not actively scouring Craigslist," said Ann Arbor Deputy Chief Greg Bazick. "It is a prioritization of resources."

Despite the claimed lack of "prioritization" for on-line prostitution, in response to the complaint that generated the first story, the A2 police organized a sting operation at a local hotel, something that, between the staff time involved, the payment for the room and the rest, surely cost the city a couple of thousand dollars. Add in the costs generated in the remainder of the legal system as the case plays out and you likely reach $5000 or more.

To help the A2 police next time they receive a complaint that some current or former UM student is trying to make some quick money, I offer the following alternative suggestion as to how to respond:

Send the person making the complaint an email suggesting that if they do not like prostitution, perhaps the "erotic services" section on Craig's List is a place they should avoid.

I expect that this response would cost the city less than $10.

New foreign aid blog

William Easterly started a new blog about foreign aid a few days ago. You can find it here.

So far it is lively and right on target on important issues.