Wednesday, March 07, 2012

The Culture that is Pakistan

In a written submission, the Ministry of Law and Justice said that under Sharia law, children become adults at the onset of puberty which varied under a range of factors making it impossible to increase the age for criminal responsibility:

 "It can be well understood that attainment of maturity of understanding depends on social, economic, climatic, dietary and environmental factors, that's why a child in our subcontinent starts understanding nature and consequences of his/her conduct much earlier than a child in the west specially because of general poverty, hot climate, exotic and spicy food which contribute towards speedy physical and mental growth of the child," it said. 

This remarkable statement was issued to explain why the ministry was against raising the age of criminal responsibility in the country from 7 (where it currently stands) to 12.

 The source article is here and the hat tip goes to Roving Bandit.

Now I know whats wrong with the youth of America. Not enough hot sauce!!


Maybe Bosses WILL Wear Bunny Slippers?

A while ago I wrote this article, about the nature of the firm. A boss decides it would be cheaper to "fire everybody" and just run the firm from home, in his bunny slippers.

Well...no.

But with reduced transactions costs, one would predict that the optimal size of the firm should shrink. Here is an interesting discussion of just that phenomenon.

Coase himself was agnostic. As he put it:

“A firm will tend to expand until the costs of organising an extra transaction within the firm become equal to the costs of carrying out the same transaction by means of an exchange on the open market or the costs of organising in another firm” (Coase, 1937, p.395).

All you have to do is add "or contract" and you've got it. If transactions costs of buying ptp fall, firm size should fall, cet. par., because there are other costs of organizing within the firm.

(Nod to Robert Eaton, for finding the AVC example)

Tuesday, March 06, 2012

Okay, Now I'm Some Lefty Nutjob?

When I'm reading THE NATION, and thinking, "Yup, yup, that's right, yup," then something is messed up.

And what is messed up is...the police state we are becoming. I have claimed that the strange thing is the left won't face this.

Well, that article in the Nation faced it. Well done.

Two things need to happen.

1. The left needs to admit that the state=coercion, which can metastasize into violence, and does so metastasize.
2. Libertarians need to admit that Karl Marx was right about concentrated corporate power. It's every bit as dangerous, and in fact in most important ways it's no different from, the worst aspects of the state. So, ipso facto, concentrated corporate power=coercion (see above about metastasis).

We have all been complicit. It's tempting to want to support something. But the two state sponsored parties have hoodwinked us. The third term of the Bush Presidency going on under Mr. Obama is just a continuation of the same ghastly trends. Gitmo. Patrio Act abuses. Unlimited detention. State murder of American citizens without any kind of due process. Oi. All of a sudden I want to see if Alexander Cockburn wants to have lunch.

When cannons are outlawed....

From the LA Times:

"Authorities said the cannonball that struck and killed a 33-year-old woman in San Diego County was homemade and that alcohol was involved in the incident.


 The woman's husband and another man were working on a cannon shortly after midnight outside the couple's mobile home when it exploded, according to a Cal-Fire spokesman. One of the two men was sent to the hospital with minor injuries.


The incident is being investigated by the San Diego County Sheriff's Department.


Few details were immediately available, and it's unclear exactly what killed the woman. The incident occurred in a mobile home park in Potrero on the Mexican border."

Here I go people, I just can't help myself:

1. A "homemade cannonball"? Really?

2. I don't think alcohol was the only problem.

3. There is a really severe contradiction in the first and last 'grafs of the article: "cannonball struck and killed" vs. "unclear exactly what killed". Get a grip, LA Times

4. This incident reminded me of one of my favorite songs and videos of all time:






Hat tip to RKG

Public Choice Papers

My two papers for Public Choice. What a long strange trip it's been. We submitted the papers to the PC Society, but they just disappeared. At last check, after submitting the paper more than three weeks ago, they STILL have not been put up on the PCS web site. So, here they are:

William Keech, Michael Munger, and Carl Simon: Market Failure and Government Failure

Abstract: We distinguish two settings for market processes: The first is the "invisible hand" world of private goods, decreasing returns, and full information where general equilibrium and the fundamental theorems of welfare economics are well defined. The second is the "pin factory" world of increasing returns and creative destruction arising from innovation, technological change, and entrepreneurship. Then we note the differences in the application of "market failure" in these two settings. Building on the well-known "anatomy" of market failure in welfare economics, we develop an anatomy of government failure, confronting government with the more realistic and dynamic world of pin-factory type market processes. This anatomy distinguishes passive and active government failure, and it links market and government failure with the core functions of aggregation, incentives, and information, and with problems of agency, rent-seeking and time consistency.

John Aldrich, Michael Munger, and Jason Reifler: Institutions, Information, and Faction: An Experimental Test of Riker’s Federalism Thesis for Political Parties

Prepared for Special Issue of Public Choice, “Empirical Issues in Public Choice,” edited by Peter Kurrild-Klitgaard. In this thirtieth anniversary year of the publication of LAP, we are glad to take the opportunity to look back at some of the questions and insights that had shaped Prof. Riker’s interests in institutions. In particular, we will examine some of Riker’s earlier work on federalism, and the political bargaining that resulted in a federal system for the U.S. This bargain still has important implications today, especially for party organizations, which operate at the national, state, and local levels with goals that sometimes coincide and sometimes conflict. We then test a Rikerian thesis about an implication of the “federal bargain.” Having power shared by states and federal governments also means that party organizations are obliged to serve multiple masters with conflicting goals. To put it differently, federalism is a bargain between national and local interests. Any party system must likewise constantly negotiate conflicts between national and local interests. In a number of his early writings (Riker, 1955; Riker and Schaps, 1957; Riker, 1964), William Riker explored the stresses and cracks in partisan institutional structures. Focusing on the American system, and to a greater extent under the Constitution than under the Articles, Riker concluded that the decentralization of the party system effectively blocks presidents from being able to control partisans, using either ideology or organizational tools.

Lord, He Was Born a Travelling Man!

Apparently, if your dad coaches in the NBA, you get to play under the nearly nonexistent NBA traveling rules.



Some of these are close, could see a no call. But some of them are just feet shuffling embarrassments. Karl Hess may have been too busy looking for NC State fans in the stands, hoping to throw them out.

Lord Volt A More

Chevy Volt - Building a Better Tomorrow from Ben Howe on Vimeo.


(Nod to John-O Donato)

Say Cheese



That pretty much says it all right there, no?

For a less concise, but no less heartfelt, critique, click here.


The Cotton Club

India, the second largest cotton producer in the world has banned all exports of cotton "until further notice".

Why?

Because China, the largest cotton producer in the world is importing and hoarding a lot of cotton, and because Indian cotton exports had already "exceeded government targets".

I am not making any of this up.


These are two huge countries that just seem to have no clue when it comes to trade. Casual arrogant protectionism and the enshrinement of inefficiency seem to be policy goals.




Monday, March 05, 2012

Words of wisdom

"The righter we do the wrong thing, the wronger we become. When we make a mistake doing the wrong thing and correct it, we become wronger. When we make a mistake doing the right thing and correct it, we become righter. Therefore, it is better to do the right thing wrong than the wrong thing right. This is very significant because almost every problem confronting our society is a result of the fact that our public policy makers are doing the wrong things and are trying to do them righter."

~Russell Ackoff

Hat tip to Ben Ramalingam

Angus impossibility theorem

Here it is:

There is no such thing as a purely micro-founded macro model that is actually useful for forecasting.

The original RBC models were, more or less, purely micro-founded models. But, they didn't track anything. They could match some unconditional moments, but couldn't replicate realistic dynamics.

People, we don't even have very good micro foundations for money! We just put it in the utility function or arbitrarily assume a "cash in advance" constraint. That's one reason why the original RBC models didn't even contain money.

Amazingly to me, Central Banks in the Western world have spent a lot of money and economist-hours trying to construct dynamic stochastic general equilibrium (DSGE) models that are actually useful for forecasting.

This effort has largely led to the de facto abandonment of micro-foundations. In the quest to make the models "work" we often either choose whatever micro-foundation that gives the best forecast regardless of micro evidence about whether or not it is accurate, or we just add ad hoc, non-micro-founded "frictions" to create more inertia. Or we just add more and more "shocks" to the model and say things like, "much of the variation in X is caused by shocks to the markup".

So macro has to live in this weird world where, to correctly evaluate policy changes and welfare, we need to use fully micro-founded models that we know do not track reality, and to track reality, we need to come perilously close to giving up on micro-foundations altogether.

No wonder we are so often in a bad mood!




Sunday, March 04, 2012

The most dangerous name

LeBron's rumination on middle initials got me to thinking about triple named murderers. Lee Harvey Oswald, John Wilkes Booth, John Wayne Gacy, James Earl Ray....

First I wondered why people like Sirhan Sirhan and Jeffrey Dahmer got short shrift.

Maybe Sirhan Sirhan was distinctive enough that using Bishara in the middle was gilding the lily?

 But why not Jeffrey Lionel Dahmer?

Maybe it's only mellifluous if the middle name is a single syllable?

But see Lee Harvey above.

Then I wondered if there was a specific middle name particularly associated with mayhem and found this amazing article.

If your middle name is Wayne and you live in Texas, you probably are a murderer!


Saturday, March 03, 2012

Welcome to the woodshed

They do the work, so I don't have to!

 Let's start off this new KPC feature with a double-header.

 First, Clive Crook takes Jon Chait to the woodshed.

Then, in the mother of all beatdowns, Bob Kuttner takes Tim Geithner to the woodshed and just wails away on him.



Friday, March 02, 2012

People Aren't Smart Enough for Democracy

It is interesting that progressives think citizens are much too stupid to make their own choices in the grocery store.  But somehow, people get a lot smarter when they enter the voting booth.    Um....no, they don't, actually. 
The problem, as I argued in a recent paper about "self interest," is that people have pretty good incentives to learn about which apples taste good. But Santorum vs Perry? Ooooh, I like his tie. Here is an excerpt from my paper:

There are three parts to the Public Choice Theory “citizen as private actor” story. First, the citizen is motivated to seek his own self-interest. Second, the citizen has limited information. Third, political elites know this, and use advertising and simple slogans to attract votes.

The evidence that Lewin (1991) offers bears only on the first step. But if we change the motivational assumption to its most extreme form, “Citizens only want to act in the public interest,” the cost of information and the value of simple political messages as persuasion are unchanged. From Marx to Downs to Buchanan and Tullock, the costliness of information and of collective action has been a constant theme. Motivational assumptions are nearly inconsequential for the PCTist. What matters is the aggregate consequences of individual action.

Do voters have the information they need to make accurate decisions? The very literature to which Lewin refers provides a resounding “no” answer. Very few citizens are aware of even the most basic political facts, and they have only cursory knowledge of how government works (Page and Shapiro 1992, Table 1.2; Somin 1998). Less than half can name their congressional representative, much less identify her voting record or issue positions. Even fewer can give a coherent attribution of their own political ideology in terms of its specific policy implications (Converse 1964; Feldman and Conover 1986, 1984, 1982, and 1982). The rationally ignorant public-interest voter is essentially indistinguishable from the rationally ignorant self-interest voter. Rationality need not imply self-interest, but it clearly does, as an empirical matter, imply that voters have very little idea of how policy works and what candidates will do once they are in office.

For reasons I cannot understand, Lewin (1991, 107) denies this in terms that can only be called naïve:

While proponents of the self-interest hypothesis centre their hopes on setting satisfactory prices through market mechanisms, the representatives of the public-interest hypothesis believe in cooperation as a method to escape the “prisoner’s dilemma.” Both camps maintain that their particular world—the market and politics, respectively—is the more transparent, i.e. the one characterized by a minimum of unintended consequences. Although this may be true of the way the market functions ideally as a model, however, faulty information, limits on competition, and other imperfections are quite evident in real-life economies. Politics, by contrast, because of its combination of collective organizations and public debate, is probably easier to predict even in reality.
Yet Public Choice scholars have never claimed that politics is unpredictable. In fact, it is all too predictable, precisely because people can be counted upon to act in their self-interest. A legislative séance of the sort Prof. Lewin envisions for the public sector, groping toward some seraphic group wisdom, would indeed be unpredictable, and (by his lights) not transparent. But the Public Choice argument is that one can project the decisions of a group with high precision if one knows the goals of each individual and the decision rule that will be used by the group.

Lewin argues for the superior competitiveness and informational abundance of the public sector. The information problem I have already discussed: buying a car is a private good, and I have solid reasons to learn about cars. Voting for a candidate is a public good, and information about it will be underprovided by private action. The fact that voters have public-interest intentions at the first stage, the motivation stage, is essentially irrelevant, since they have private interest reasons to free ride and can thus be influenced by operatives whom Downs called “persuaders,” who have their own reasons to distort information. 


As always, happy to send a PDF if you are interested. Just contact me at munger at duke dot edu

Can you smell what the Angus is cookin'?

Over at MR, LeBron asks for your most surprising prediction.

Here's mine:

Within the next 10 years we will (at least de facto if not de jure) have very close to open borders in the USA.

Restated in English: within the next 10 years immigration into the USA will rise dramatically.


Thursday, March 01, 2012

The WMOE, On CVs and Job Interviews

The Dub-MOE, for all you grad students out there.

What Should You Include On Your CV? from Kosmos on Vimeo.


It would have been better if they could have taken the bucket off from atop the microphone. But good advice.

j'accuse!

Wow, these two dogs turn on their buddy right away. Who did this?

J'accuse!

Sentences are for sissies

As part of his plan to conquer the universe, LeBron has been writing a "very short reviews" sidebar for the NY Times Sunday magazine, where he reviews a book in one sentence.

But a sentence is just so prolix!

I propose reviewing a book with a song title!

Some examples:

The Glass Castle: Ain't that America, 

Coming Apart: The Bi*ch is Back, 

Poor Economics: Love the One You're With

The Steve Jobs Bio: Yonder Stands the Sinner

The Great Stagnation: Eve of Destruction

White Man's Burden: Whippin' Post

The Rent is too Damn High: Wishing Well

Biggest Environmental Heretic Gets Pounds!

From KPC friend Matt Ridley.

Read all about it.

Thanks to Tommy the Tenured Brit