Monday, November 30, 2009
Wednesday, November 25, 2009
Tuesday, November 24, 2009
The second is the year-over-year change in the monthly numbers, and here we see the trend is still improving but weakening...
This is consistent with what I expect from the unemployment situation and what I talked about on OPB.
Monday, November 23, 2009
Thursday, November 19, 2009
Beeronomics: The old discussion of whether price is a signal of quality in beer has risen again on the Beervana blog, my take in the comments.
Wednesday, November 18, 2009
Tuesday, November 17, 2009
From the New York Times' Economix Blog, this nice picture which shows that the US is not exceptional in the relative decline of manufacturing in employment. Why? A big part of it is that more and more often, manufacturing is happening in developing countries instead of developed. Another reason is that manufacturing itself is becoming relatively less important as a part of GDP as technology has made services more important.
Monday, November 16, 2009
So overall, a picture consistent with the general consensus: the recession is ending by the recovery is still a ways away.
Friday, November 13, 2009
I don't expect unemployment in Oregon to change significantly, but for the other stuff, you'll have to tune in.
Have a good weekend.
No, says Howard Gleckman, no business should be subsidized, apparently never having heard of public goods, externalities, and the like.
Regardless, Gleckman may be right about papers, at least in their current form. Perhaps the answer is not to subsidize newspapers, but journalism itself. How to do so is a challenge that I have no good answer for because journalism is so immediate, competitive grants and the like are not really reasonable.
For a good recent summary of the upsides, downsides, and governance challenges posed by geoengineering, see this report from The Daily Climate.
And for a great illustration of just how repugnant some environmentalists find the very thought of geoengineering, consider this scathing review of our book in The New Yorker. The author, Elizabeth Kolbert, seems to disdain everything we’ve ever written on any topic, and claims we utterly fail to understand climate science (unless of course we don’t). She is a feeling and passionate environmentalist who, seemingly so disturbed by geongineering, is compelled to cast our own horse-dung story right back at us with a splat. Here is my favorite line from the review: “Neither Levitt, an economist, nor Dubner, a journalist, has any training in climate science — or, for that matter, in science of any kind.”
The time has probably come to admit that neither of us were Ku Klux Klan members either, or sumo wrestlers or Realtors or abortion providers or schoolteachers or even pimps. And yet somehow we managed to write about all that without any horse dung (well, not much at least) flying our way. Kolbert, meanwhile, has written widely about the perils of global warming, both in The New Yorker and in book form (see Field Notes From a Catastrophe: Man, Nature, and Climate Change), and seems to be extremely well-regarded in the field of environmental journalism. And yet, if her Wikipedia page is correct, she somehow accomplished all this with a degree from Yale in … literature.
Which kinda gets to a point that I made in the comments: is Superfreakonomics a book of journalism, advocacy, provocation or is it somehow otherwise authoritative? Kolbert is an exceptional journalist but one with an obvious agenda and to me that is fine. She reports on the science and effects of climate change and accepts that the debate about human induced climate change has been settled (as do Dubner and Levitt). She is mad that they report something that Myhrvold says without checking that his science is right.
But if the book is designed to give a forum to the geoengineering types, what is wrong with that? Instead of attacking the messengers, debate the claim, in my ever so humble opinion. Perhaps it is the economist in me, but while I find the geoengineering stuff fanciful, I am fascinated to learn about it and am not threatened by new ideas. I guess I believe in markets even for ideas. After all, the debate about climate change is essentially over, isn't it? The truth will out.
Thursday, November 12, 2009
The Sociology of Economics
These are fascinating questions. I see a lot of truth to the observations described in the letter. I have heard many others note, for example, that economists are generally more aggressive in seminars than other academics. I am not sure how to explain this fact.
Dear Professor Mankiw,
I'm a resident at one of the Harvard hospitals. In the past couple of years I've had the chance to attend a number of inter-disciplinary seminars where you have statisticians, physicians, sociologists, anthropologists, epidemiologists and economists present. I've been impressed with what your discipline has to say: in virtually every seminar the economists are able to say something useful. Without inflating your ego, I've also noticed that the economists present better papers and are less likely to be caught off-guard in a seminar. They are also more likely to discover problems in the work of others. I've been trying to educate myself on the economic way of thinking by reading your blog, Freakonomics, and now, by slowly reading your textbook. But clearly, there's no substitute to being formally trained as one.
My question to you doesn't concern economics, but more its sociology. So feel free to ignore this email. At the seminar that I attend most often, I've noted the following:
1. The economists are the most aggressive people in the room. They have little patience for introductions, motivation, or "being nice". They want to spend the first 10 minutes trying to figure out the -entire- talk. If they're not happy, they tend to disengage. I will note that they're like this with each other also. Why are things this way in economics? There must be pluses and minuses to this way of interacting.
2. The economists are the only social-scientists in the room that are willing to argue with the statisticians. This could be that you are a more argumentative lot in the absence of substance, but also that you know something. I'm not qualified to tell who wins these disputes, but the statisticians seem to regard the economists with a high degree of regard. Why do you think that different disciplines view the importance of statistics differently?
3. There seems to no love lost between the economists and other social-sciences. Some of this has to do with the nature of interferce in the two disciplines: your colleagues are always concerned about confounders. Other disciplines like "to tell a story"; confounders are certainly of concern to them, but the issues of bi-directional causality, and omitted variables seem of second-order importance to them. As a physician, I share your colleagues view of the importance of "selection bias" (nice term, incidentally). Why do you think that different disciplines weight the role of confounders differently?
I posed these questions to one of the economists who regularly attends. His response (that I have permission to send to you) is as follows:
"In general, economists are smarter (we may be better looking too). It's fashionable not to say such things, but I will bet that if you look at the GRE and SAT scores of incoming PhD students at BU, Harvard and MIT, the average economist will sit at a higher percentile than the average (non-economist) social-scientist. Given that all the other disciplines are trying to recruit students with higher scores, I'm not willing to believe the explanation that these disciplines value other attributes that aren't measured in the GRE. Higher salaries in economics will tend to reinforce the "economists are smarter" phenomena. Smart people don't have the time waiting for the less-smart to catch up. If we can finish up the seminar in 10 minutes, then why not do it?
"To this ex ante advantage, add the role of superior and more rigorous training. Economics graduate school is not for slackers. It's like boot-camp in the Army. One example of this is that we are provided a much deeper understanding of statistics than every other social-science. Consequently, economists are able to publish in journals like JASA and the Annals of Statistics. No other social science is able to do this with the same frequency. This superior training, complemented by a generally higher comfort-level with mathematics is the principal reason for why economists will not shy away from statistics. I wish I had concrete evidence for my argument. At present, it's indirect evidence. But this "economics know more stats" argument is another reason for why we are more aggressive; we are able to see the strengths and weaknesses of a study faster than others who're not as fluent in the methods.
"Third, the set of advocates who are economists is quite small (I don't know if this reflects treatment or selection). In general, economists are more likely to make up their minds about whether a particular policy works based on theory or data. They may have priors, but not the the sort of "do-gooder"priors that advocates have. One of the reasons that economists are so aggressive with the non-economists is that we want to expose all the priors immediately. In my view, a lot of non-economics social science is straight advocacy. There is an important role for advocacy. It may influence policy more than science. But the nature of advocacy is to simplify and ignore nuance and confounding. But our (economists) beef with advocacy isn't its lack of nuance. We just get really upset when advocacy masquerades as science.
"Fourth, the economics job-market is just that -- a market. This means that the best people are more likely to be at the best programs. In other disciplines there are more "bad matches" (good people at bad places). What this means is that Harvard and MIT's economics departments are more likely to have the top economists than the Sociology Department is likely to have the top sociologists. This is important because what you're seeing at the Harvard seminars is an exchange between the best economists and not necessarily the best sociologists. The best sociologists may be able to clobber a mediocre economist."
I'm curious if you have some of your own observations to add to the above.
To the hypotheses in the letter, let me add one additional conjecture, which is less charitable to me and my colleagues: Perhaps the skills that make a good economist are, for some reason, negatively correlated with the attributes associated with being an agreeable human being. That is, economics may attract people with a particular set of personality attributes, and perhaps these attributes are not the same set of attributes you might choose for your next dinner party.
This is not entirely conjecture on my part. For example, this study
"explores the relationship between student's personality types, as measured by the Myers-Briggs Personality Type Indicator, and their performance in introductory economics. We find that students with the personality types ENTP, ESTP, and ENFP do significantly worse in Principles of Macroeconomics than identical students with the personality type ISTJ."What is this personality type ISTJ that excels in economics class? Check out this description, which say in part:
The ISTJ is not naturally in tune with their own feelings and the feelings of others.Sounds like any economist you know?
Note the overconfidence the economist has in the economics job market - typically Harvard, where many of the faculty were trained at Harvard in the first place. Most schools don't do this as a matter of policy (inbreeding is bad it is thought) but since all the smartest students go to Harvard for their Ph.D. it is natural that this is whom they should hire... An academic job market is a complicate matching process that clears quickly, a good economist knows that final placement is not a perfect reflection of smarts and talent. Plus affiliation helps a lot in publishing so do the best economists work at the best departments or do the best departments help define who is good?
Wednesday, November 11, 2009
"Neither Levitt, an economist, nor Dubner, a journalist, has any training in climate science—or, for that matter, in science of any kind."
Tuesday, November 10, 2009
Monday, November 9, 2009
The New York Times reports on efforts by Zambia and Tanzania to reclassify elephants to allow the legal sale of government stockpiles of ivory. As you might expect, many conservation groups are not happy about this.
This made me think of a well-known economics paper by Michael Kremer and Charles Morcom entitled, simply, "Elephants." In this paper the authors argue:
Many open-access resources, such as elephants, are used to produce storable goods. Anticipated future scarcity of these resources will increase current prices and poaching. This implies that, for given initial conditions, there may be rational expectations equilibria leading to both extinction and survival. The cheapest way for governments to eliminate extinction equilibria may be to commit to tough antipoaching measures if the population falls below a threshold. For governments without credibility, the cheapest way to eliminate extinction equilibria may be to accumulate a sufficient stockpile of the storable good and threaten to sell it should the population fall. [Emphasis mine]
So, this proposal would allow these governments to sell off the stockpile, which in Kremer and Morcom's analysis is a good thing IF this is part of a government policy of doing so strategically and only as a way to depress world prices when elephant populations are becoming dangerously small.
Just food for thought on a rainy monday...
Friday, November 6, 2009
Here is a teaser:
Even though it won’t open for two months, success could be on tap for Coalition Brewing.
The new brewpub will occupy a neighborhood, near Portland’s East Burnside Street and 28th Avenue, known for innovative restaurants and bars. Coalition’s space is also well known because it formerly housed the popular Noble Rot wine bar.
Coalition will join an industry that, thanks to Oregon’s brewing pedigree, is sizzling. Coalition is one of 15 breweries or brewpubs — which sell beer made on the premises and food — that will have started operating in Portland between summer 2009 and early 2010.
The 2009 openings, which roughly double 2008’s, defy national trends. Just 80 such operations will open across the country this year, down from 112 in 2008.
The openings stretch from Portland, where eight new pubs or breweries have begun or will begin operating, to Joseph in northeast Oregon.
“To see so many opening in one state is highly unusual,” said Paul Gatza, director of the Boulder, Colo.-based Brewers Association. “But Oregon does continue to be fertile ground for craft brewing.”
Credit markets have stabilized, but banks are still hoarding capital and focusing on investments rather then commercial banking so credit is still scarce. Today's Oregonian has a nice graphic showing how SBA backed small business loans have reduced significantly in the state (but, of course, it is not available on line).
Also, consumption spending, which had been recovering, took an unexpected fall in September as did real disposable personal income. Consumer confidence also dropped.
However, factory orders are up and inventories are down which is good news.
Thursday, November 5, 2009
One way to read the graph is that there are basically no countries with very low levels of education that have managed to be democratic over the long term, and almost every country with a high level of education has remained a stable democracy.
Thomas Jefferson wrote that “if a nation expects to be ignorant and free, in a state of civilization, it expects what never was and never will be.” In 1960, 36 nations had less than 1.74 years of schooling (which happens to be the level that Afghanistan has today). Of those 36 countries, only two — India and Botswana — managed to have average democracy scores above 4.2.
Out of the 19 countries in this sample with more than 5.3 years of schooling (the current level in Iran) in 1960, 17 have average democracy scores above 7.9. Fifteen of these have been perfectly democratic, at least by the standards of Polity IV. Only Poland and Hungary were dictatorships, and one can certainly argue that those places would have been democracies in 1960s if it were not for Soviet troops.
But in the middle ranges of education, between two and five years on average, almost anything goes.
Some places, like Costa Rica and Italy, have been extremely democratic, while others, like Kuwait and Paraguay, have not. Iraq falls into this category today, which suggests a fair amount of uncertainty about that country’s political future.
Why do I think that the chain of causality runs from education to democracy rather than the reverse? Democracy in 1960 is essentially uncorrelated with subsequent growth in the levels of education. Education in 1960, on the other hand, does an extremely good job of predicting increases in democracy.
The ability of education to predict the durability of democracy is well illustrated by the paths of former Communist bloc countries. Initially well-educated places, like the Czech Republic and Poland, have managed to transition toward being well-governed republics. Poorly educated places have not.
Why is there a connection between human capital and freedom?
Giacomo Ponzetto, Andrei Shleifer and I have argued that the connection reflects the ability of educated people to organize and fight collaboratively.
Dictators provide strong incentives for the ruling clique; democracies provide more modest benefits for everyone else. For democracy to beat dictatorship, the dispersed population needs to have the skills and motivation to work collaboratively to defeat dictatorial coups and executive aggrandizement.
Education teaches skills, like reading and writing, that enable people to work collaboratively. At younger grades, teachers spend a lot of time teaching children how to get along. In the United States, education is strongly linked to civic engagement and membership in social groups. The ability to work together enables the defense of democracy.
Update, I had a busy morning, so I could not add my own two cents until now, but I am not entirely convinced abut the chain of causality. What interests me is whether countries who are experiencing vast expansions in education are finding their democracies stabilizing. Anecdotally for Glaeser's example, Argentina, the answer appears to be no. The differences between Argentina's and Brazil's democracies are quite stark. Argentina's democracy is, to my mind, immature, while Brazil, after an unfortunate period of dictatorship has developed quite a mature and stable democracy. In these data, Argentina is well above Brazil in 1960 in terms of average years of education and remains so today though both have doubled. So perhaps it has more to do with INSTITUTIONS (of which education is a part) is what is really important. Perhaps good education is just a proxy for good institutions (laws, courts, bureaucracies, etc.)
Wednesday, November 4, 2009
Tuesday, November 3, 2009
This story in The Oregonian on Sunday about how the cost of the green energy tax credits are much higher than have been presented and how millions of dollars have gone to failed companies illustrates something that I have been arguing for a long time now to anyone who will listen: trying to create a green energy economy in Oregon is a mug's game. What will be the best technology: wind, wave, solar, geothermal, something else? Which companies are going to come out as leaders in the future? The answers to these questions are far from clear so trying to read the tea leaves and throwing hundreds of millions of dollars at a wall to see what sticks is not necessarily a good idea.
Monday, November 2, 2009
Here is Jeff's quote from Karl:
"Every beer that comes along goes through a novelty curve, and ours is no different. [Brewery X] is the current big one on the streets. They’re going through a novelty phase where people are out there trying and sampling. All breweries go through that. If I left BridgePort now and went out and started a new brewery, I could do the same thing. I could take tap handles right and left and get a lot of sampling. But it’s that “stayability”—being able to develop loyalty. That’s the tough part."
This is true of lots of industries, especially ones in fashion (Crocs), technology (Palm) and food (restaurants in general). There is always a new trend, fad, technology, chef, whatever that captures the attention of consumers. But artisanal products like beer are particular in my mind. They can be recreated faithfully over time like cheese, bread, etc., but are always subject to new varieties and tastes. So it has always seemed to me a challenge to stay faithful to the core products and yet maintain interest through new creative pursuits. Bridgeport and Deschutes seem to me the exemplars of this strategy at the moment with their core beers and their special offerings (Stumptown Tart, The Abyss).
But overall this says to me that the market for craft beer is exceptionally healthy. From a Schumpeterian point of view this innovation and creativity will leave some breweries behind, but this is all part of a healthy creative destruction process. So it is both a pretty exciting time and a pretty scary to be in the business, bit overall it seems lie a market that has huge potential to keep expanding for a long-long time and the winnowing out of less exceptional and creative breweries will actually help this process.