Monday, November 30, 2009

Eco-nomics: GDP is Growing in the East but CO2 Emissions are Growing Faster

Grether and Mathys demonstrate the inconvenient truth of global CO2 emissions: the rapid growth of middle income countries in Asia (particularly China) is very carbon-intensive.

Figure 1. Projection of the world’s polluting centre of gravity on the Earth’s surface

Wednesday, November 25, 2009

Say What? More Tax Silliness

Can we have a honest debate about the tax increases? In last Sunday's Oregonian, Harry Esteve quotes the general manager of Gresham Ford claiming that the company's tax bill will go from $10 to $30,000 if the tax increases are approved. Huh? This makes no sense at all. If this is true it can't have anything really to do with the new taxes for if the company was paying the corporate minimum it should only go up to $150 - the new corporate minimum under the proposed new taxes. She also claims that this will require that the company lay off an employee. Huh again? If this is 'one of the busiest car dealers in the state' how does a $30,000 hit to the profits necessitate a lay off? Companies usually make staffing decisions based on what is optimal for operations, in this case given the volume of cars they sell. As the tax should have not affect demand or supply, this volume should not change. Thus the profit maximizing level of staff should be the same.

In other words this is just ridiculous on both counts and is nothing but a scare tactic. Now I know that this is a quote, but the tax burden stuff makes no sense and I would expect a reporter to think about the motivation and veracity even of a named source. Is good reporting really just getting a couple of quotes?

By all means let's debate the taxes, but let's do it honestly.

Is the US the Home of Big Government?

Well by this metric, from the OECD, our overall tax burden is low by high income country standards. So, no, we have a relatively small government.

And yes, I just can't seem to take a break, the world is too interesting...

Tuesday, November 24, 2009

Portland Home Values: Case-Shiller September Numbers

Okay, so I try to take a week off and something always happens, in this case the Case-Shiller September numbers. So here are two snapshots. The first is the raw data showing an ever so slight increase in the 20 city composite and in Seattle, but a every so slight drop in Portland (12% unemployment anyone?).

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

Thanksgiving Break

I will be taking the week off from blogging. Have a happy Thanksgiving and see you next week.

If I see anything particularly interesting I will Tweet a link. Don't yet follow my Twitter feed? Click on the box in the right hand column and start today!

Thursday, November 19, 2009

Thursday Tidbits

Busy, busy, busy. Here are a couple of nuggets to keep the mind engaged:

Economics: There have been discussions on this blog about whether GDP is a good metric of economic health, now Hugo Chavez wonders as well. Now that his country is experiencing negative GDP growth that is, Chavez: “We simply can’t permit that they continue calculating GDP with the old capitalist method.”

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.

Eco-nomics: Akin to the question of whether everyone driving fuel efficient cars will increase or reduce emmissions, The New York Times has a similar story about carbon offsets for airline travel. Don't assuage the guilt and give people a reason to fly more! Or so some say.

Tuesday, November 17, 2009

The Decline of Manufacturing

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.

This trend will continue in my opinion as what will become particularly valuable in the 21st century economy are technologies that make us more efficient.

Monday, November 16, 2009

Oregon October Unemployment: 11.3%

Oregon's October unemployment rate was unchanged from a revised September level of 11.3%. The best news is that non-farm payroll employment dropped by only 1,900 (September's drop was 6,000). However, manufacturing and construction (along with leisure and hospitality) saw significant job losses. Professional and business services and financial activities saw substantial gains.

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


The Oregon unemployment report will be released. I will be on OPBs Morning Edition discussing the implications of high unemployment and what the Oregon experience portends for the US as a whole with Geoff Norcross (or some fragment of this - or not at all if they decide to cut it all out).

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.

Is Journalism a Public Good?

Yes, says Leonard Downie and thus the government should subsidize newspapers.

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.

Let's All Throw Mud!

Well since I bothered to mention it in the first place, I suppose I should mention that Dubner and Levitt have responded publicly to Kolbert (well, at least Dubner has, but I suspect that these things are done in tandem):

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

Rail Traffic Indicator

Maybe it is because I am a nerd, but this fascinates me.

Look at the collapse in rail traffic in Q4 of 2008. Wow. But 2009 has stabilized and is showing an slightly upward trend in the second half of 2009. Why do we care about this particularly? Well, because this is a real time correlation with agricultural, mineral and industrial production in the US - output measures of economic activity for short.

So the story here is generally consistent with GDP and other measures of industrial output.

Are All Economists Jerks?

After my post yesterday on the ad-homonym attacks directed at Steve Levitt and Steve Dubner by Elizabeth Kolbert in the New Yorker, commentator Chuck reminded me of something that appeared on Greg Mankiw's blog a couple of years ago.

It was interesting to re-read it as I have recently been in a number of situations where other social scientists have been at best weary and at worst openly hostile to economists. Economists tend to be direct. In fact, this is often what attracts people to economics in the first place. I was just talking yesterday to a group of new public policy students and was asked what attracted me to economics originally. I told them of my experience studying as an undergraduate in India. Many fellow students on the trip (all Lewis & Clark College students in one of their numerous exceptional overseas study trips) were, to my mind, too ready to make blanket statements and accept them as truth without any real data. For example, the colonial malfeasance of the British was roundly condemned and accused of being the source of India's then current misery (this was 1988-89). That could be true, I thought, but how would you know? The colonial experience did leave India with a pretty impressive rail system, advanced bureaucracy and the like, so on balance was the colonial experience good or bad?

I got impatient with what I perceived to be lazy thinking and wanted to be able to provide more concrete answers. My personality type was well suited to economics. We are often, and sometime justly, accused to over-formality and over-confidence in our results, but this adherence to formality is also what keeps us precise and allows us to quickly get to the essence of each other's work. So when you see economists banter, something that seems entirely friendly and stimulating to me can seem quite aggressive and impolite to others. And inevitably, when we don't tone down our act to people in other disciplines, we can do quite and efficient job of pissing them off (excuse my language).

Anyway after that preamble here is the provocative Mankiw post that I offer with no further comment except to say that 'we are the smartest' is just stupid and therefore contradicts the proposition from the start:

The Sociology of Economics

A reader sends this interesting letter:

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.

Best regards,
[name withheld]

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.

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

Oh Ouch! Kolbert Smacks Down Levitt and Dubner and All Economists in the Process

Elizabeth Kolbert in her Dubner and Levitt smackdown piece in The New Yorker throws in this haymaker:

"Neither Levitt, an economist, nor Dubner, a journalist, has any training in climate science—or, for that matter, in science of any kind."

This is in reference to the now infamous chapter in their new book about geo-engineering solutions to climate change. I am not about to touch that with a ten-foot pole, go knock yourselves out with a little google search, but this is a low blow.

Okay, so economists like to think of themselves as a type of scientist - we make models, we test them in 'nature,' heck we even do controlled experiments, so we use scientific method - but we are merely social scientists. One presumes that Kolbert considers science to be only of the natural kind (though one could argue that the distinction between human and non-human is not terribly relevant when we look at behaviors influenced by incentives - are dogs and humans much different?). So even though economists have pretty advanced training in math and statistics, apparently in Kolbert's mind, these are 'formal' sciences and are, therefore, inferior.

But Kolbert says "science of any kind," and this is simply untrue. Besides I bet that at least as undergrads Levitt and Dubner had classes in natural science so what do we consider that? Taking this kind of snarky and superior attitude, and resorting to ad-homonym attacks is beneath Kolbert and The New Yorker. But it interests me because this, and the greater outrage over Levitt and Dubner's book chapter, seems to me a symptom of the poisoned debate that human induced climate change has become. Sure, it is true that for years climate scientists had to struggle to be heard and taken seriously, but that has now, finally, changed. The correct thing to do is take the high road and not engage in the same type bad behavior that was directed to them. It is hard to see how progress will be made without it.

For the record, Levitt and Dubner push this 'economists are coldly rational and can therefore see what the rest of you emotional weenies can't' thing way, way too far and in this way are a bit of an embarrassment to economists in general, who are generally pretty nice (really!) but do tend to tell really bad jokes.

And also for the record, I call myself a social scientist - you can make of that whatever you like - but I make no claims to omniscience (except to my kids).

Tuesday, November 10, 2009

Economist's Notebook: Is Portland Really a Safe Walking City?

The Oregonian reports on the Transportation for American and Surface Transportation Policy Partnership's report on the safest walking cities in America. Portland was #9, but is it really a safe walking city?

Perhaps, but the methodology is seriously flawed and clearly designed to make a political point and not provide meaningful data. The way they compiled the ranking was to divide the number of pedestrian deaths divided by the number of people who walk to work. What you would ideally want is some measure of total pedestrians or, better yet, total pedestrian-hours. So proxying this by using walking to work may seem like a good idea, but I doubt that it is. Clearly walking to work is very, very highly correlated with urban density but I don't think it is terribly correlated with the population who walk for any reason at any time. So you skew the statistics and, not surprisingly very dense cities are great, sprawling cities are not. Which is, I imagine, their point.

Now, I hate sprawl as much as the next guy, but it is not necessarily bad for walking safety in general. Yes, you can't walk to get anywhere, but walking around inside of the little cloistered neighborhoods that were the rage before the new urbanism ethos kicked in is probably pretty safe. What it is bad for is walking in general. I don't think conflating the two is helpful.

Steig Larsson

Public radio's The World had a nice bit yesterday on Stieg Larsson, author of a trilogy of crime fiction novels, the first of which is called "The Girl With the Dragon Tattoo" in the US and apparently "Men Who Don't Like Women" in Sweden. Larsson died of a heart attack at the age of 50 before any of the novels, which have become an international sensation with over 20 million copies sold, were published.

As an unabashed addict of crime fiction I can recommend the books highly (or at least the first two, the third has yet to be released in the US), and I am saddened that I cannot look forward to many more. As an aside, many of Larsson's characters share names with characters in Henning Mankell's Wallander series in what I take to be a nod this other Swedish crime writer (apparently Larsson was equally addicted to crime fiction).

A problem has arisen, however, in that at the time of his death Larsson has few assets and a life partner whom he had never married and he left no legal will. So when all of the money came flooding in from the proceeds of the books, it went to his father and brother who have so far not shared any with his partner. Alas.

Monday, November 9, 2009

Economics: Elephants

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

Beeronomics: New Pubs Aplenty

Friday. Beeronomics day. But I am busy and later I shall be making my own beer, so I'll farm this beeronomics post to the Portland Biz Journal.

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.”

Things are Getting Better...Slowly

Despite the dismal US unemployment report, there are signs that the economy is stabilizing and even turning the corner, albeit slowly.

In Oregon, The UO Index of Economic Indicators rose again last month suggesting that the state is, along with the US, gradually coming out of the recession.

So how is the economy in the US overall. Well, there is a lot to be hopeful about, but still a number of cautionary signs which, to me, tell a story of recovery, but slow and 'jobless.'

Here is a look at some recent signs of US economic health:

Productivity growth soared in Q3, increasing at a rate of 9.5%. October retails sales in the US showed healthy growth as well. Initial jobless claims are decreasing and have been for a while, but are still high - suggesting that job losses will continue for some time yet. [And note that productivity soared with a cutback in labor utilization] Vehicle sales and home sales are up after having been spurred by incentive programs, so it is not clear that they will continue, but the programs have succeeded in staunching the bleeding in those sectors.

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.

Some are now arguing that a new round of fiscal stimulus is needed to sustain, and make more robust, the recovery. I disagree. It may be true that more stimulus could be helpful, but I just don't think that we can accomplish it given they way it has been handled up to this point. Frankly, it is hard to spend that much money quickly and effectively. I thought the first round was so necessary that it was worth the tradeoff, I don't think that about the second. Perhaps if we were talking about block grants to the states...but even then I think the marginal positive impact of additional stimulus is now outweighed by the marginal negative impact of the additional debt necessary to fund it.

And, of course, unemployment is going to be the last thing to improve, so as today's unemployment report illustrates, things can be getting better but we can still see the worsening of the unemployment situation.

US Unemployment Rises to 10.2%

The US unemployment rate, as expected, rose to 10.2% in October. The economy lost an additional 190,000 jobs. It would not be surprising to see double digit unemployment persist until spring.

Thursday, November 5, 2009

Education and Democracy

From Ed Glaeser writing in The New York Times:


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

Hooray for the Mainstream Media!

I complained about a "Think Out Loud" show recently, so it behooves me to mention when I think a show is exceptional. And I think today's show on PERS was exceptional. Yes, there were advocates for and against structural changes, but there was the PERS administrator to state the facts and even the opposing sides did a good job explaining the system and their respective takes on the current problems and what, if anything, should be done to address them. If you did not know much about it to begin with, this show was an excellent place to start learning about it. It will be on again tonight and will live on in the internets so I recommend it to anyone interested in PERS.

And I can't help chiming in: though it was mentioned a number of times, PERS benefits are a part of a total compensation package, so it is not at all clear that by reducing benefits you will help the fiscal situation of state agencies out at all. They may just have to increase salary to compensate. I am a tier 3 PERS person, so it is not really any better than what I was offered by other states, by the way, but the salary was significantly worse...

And three cheers for the Oregonian, who have fulfilled their role as the fourth estate in bringing to light potential excesses in the green energy tax credit scheme, immediate changes have resulted from their reporting. Do you really want to live in a state without a major daily where such scrutiny does not happen? I didn't think so.


Poll Results: End of the Recession and Taxes

I realize that polls like this tell me more about my readers than about how the general public will vote, but I am sometime surprised at the results I get.

My readers seem to be pessimistic as the last poll, about the end of the recession, suggests (results in the right hand column). The answer to this question is Q3 given the way I defined it which was simply "return to positive GDP growth." Of course we could turn negative again so the pessimists may yet be proven right.

But reader of this blog appear very willing to support the tax increases enacted by the legislature. By a two to one margin readers responded that they would vote yes on measures 66 & 67. Perhaps many of my readers have children in public schools like I do so they can see firsthand the effects of the budget cuts. Perhaps my readers have had to rely on state provided social services in this downturn and worry about their availability if these measures don't pass. I don't know, but I had guessed about a 50/50 split when I posted the poll so I am surprised at the result.

Anyway, thanks for voting, thanks for reading and thanks for commenting on the blog.

Tuesday, November 3, 2009

Economist's Notebook: Correlation and Causation, MD Version

Yesterday, I caught a kittle bit of NPR's Talk of the Nation. Monday's show featured a doctor, Rahul Parkih, who who doesn't think tort reform will help keep down health care costs. Interesting, thought I and so I lingered around the radio. Then came a statement that got me ranting at the radio. Here is a paraphrase of the statement made by a doctor:

-The Congressional Budget Office has reported that over the last ten years the rate of malpractice suits has not increased but health care costs have. So it is not the threat of lawsuits that is promoting excessive or defensive medicine.

What is wrong with this statement?

The error of logic is that we don't know if lawsuits are a stable threat or if they have remained stable precisely because of excesses in the name of defensive medicine to avoid a lawsuit. I am inclined to draw the opposite conclusion: that with so many doctors claiming that they have become much more defensive and yet lawsuit rates are the same, so it is likely to be a bigger threat today then ten years ago.

Here is the piece he wrote for Slate that got him invited to share his views on Talk of the Nation which expands his argument but begins with this same assertion. Now he may well be absolutely right about tort reform, but this is his first and biggest piece of evidence and to me it says absolutely nothing. This is also true of a study he cites that found most malpractice suits are not frivolous, but this is also consistent with an increase in defensive medicine.

Whether defensive medicine is actually driving up health care costs is an open question and he does not believe they are. In which case the tort reformers argument would lose a lot of its punch.

For the record, I am personally skeptical of tort reform because I am a hopeless believer in markets, but I want to see real data not this kind of sloppy thinking (something he accuses others of filling up the back pages of newspapers with).

Eco-nomics: The Trouble with Picking the Winners

Thomas Boyd/The Oregonian

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.

I am not against all government incentives, but the best investment the state could make if it really wants to promote economic growth in the state, green energy or otherwise, is in education, and if it is serious about a green energy economy, investing in research universities seems about as safe a bet as there is. You get research and technology spillovers that are centered in the state and you educate and train a new generation of entrepreneurs and workers to take those new technologies and run with them.

It seems that in Oregon these days the balance is out of whack...

Monday, November 2, 2009

Beeronomics: Artisanal Products and the 'Novelty Curve'

Busy day today (week actually) so I'll farm this one out to Beervana blogger Jeff Alworth who has a fascinating tidbit about what Karl Ockert of Bridgeport calls the 'novelty curve.'

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.