Saturday, November 07, 2009

The Week in PRE-view

It's Saturday! Time for the Week in Preview. Here is what is going to happen....

1. "Men Who Stare at Goats" tanks, but the program it is based on is real. Interestingly, the hottest toy this xmas season will also be a "mind flex" concept.

Interestingly, the actual program for the Clooney, et al. cine-bomb had this goal (really, I'm not making it up!): "One suggested application is a conception of the 'First Earth Battalion,' made up of 'warrior monks,' who will have mastered almost all the techniques under consideration by the committee, including the use of ESP, leaving their bodies at will, levitating, psychic healing, and walking through walls." YOUR. TAX. DOLLARS. AT. WORK!

2. HR 3962, the revised version of HR 3200, will not be voted on. Again. Even though it has been breathlessly scheduled for a vote every week for the past three. (To be fair, HR3962 itself is only about a week old. Here are the actions taken so far on 3962:

Oct 29th Introduced in House
Oct 29th Referred to House Natural Resources
Oct 29th Referred to House Rules
Oct 29th Referred to House Budget
Oct 29th Referred to House Oversight and Government Reform
Oct 29th Referred to House Judiciary
Oct 29th Referred to House Education and Labor
Oct 29th Referred to House Energy and Commerce
Oct 29th Referred to the Committee on Energy and Commerce, and in addition to the Committees on Education and Labor, Ways and Means, Oversight and Government Reform, the Budget, Rules, Natural Resources, and the Judiciary, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

That's a lot of referring! No one has read it, but they refer it a lot)

(UPDATE: This prediction is ALREADY wrong. They voted, 220-215 to pass it...)

3. The House Ways and Means Committee will continue to sit on its own thumb, instead of voting on the Fair Tax. The form of the Fair Tax being considered in the 111th Congress is HR 25. How do I know it WON'T be voted on? Two words, the name of the chair of Ways and Means: Charles Rangel.

4. Tuesday, the 10th will be a big day in Washington, DC.
-Labor Department releases job openings and labor turnover survey for September, 10 a.m.;
-Senate Budget Committee hearing on bipartisan proposals for long-term fiscal stability;
-Senate Energy and Natural Resources Committee hearing on reducing greenhouse gas emissions;
-Senate Finance Committee hearing on climate change legislation and jobs;
-Senate Health, Education, Labor and Pensions subcommittee hearing on swine flu and paid sick days;
-Senate Banking, Housing and Urban Affairs Committee hearing on bank overdraft fees legislation.

The interesting event will be the Labor Department JOLTS report. Monthly job openings have been stuck at 2.4 million for a couple of months. That is about half, or less, the number you would expect even in bad times. As recently as January 2008 the number was 4.3 million. Nobody is hiring. If the number on the JOLTS report is not up from 2.4 million for September, Wall Street may catch cold.

And remember, you heard it here FIRST! KPC, your source for fabricated news.

Why Are People Opposed to Dem's Health Care Plan?

A. First, and most importantly, not everyone IS opposed. At least 40%, and maybe more, support the Dem plan, with a "public option." So there is quite a bit of support.

B. Second, it could be racism:

Racial Prejudice Predicts Opposition to Obama and his Health Care Reform Plan

Eric Knowles, Brian Lowery & Rebecca Schaumberg, Journal of Experimental Social Psychology, forthcoming

Abstract: The present study examines the relationship between racial prejudice and reactions to President Barack Obama and his policies. Before the 2008 election, participants' levels of implicit and explicit anti-Black prejudice were measured. Over the following days and months, voting behavior, attitudes toward Obama, and attitudes toward Obama's health care reform plan were assessed. Controlling for explicit prejudice, implicit prejudice predicted a reluctance to vote for Obama, opposition to his health care reform plan, and endorsement of specific concerns about the plan. In an experiment, the association between implicit prejudice and opposition to health care reform replicated when the plan was attributed to Obama, but not to Bill Clinton-suggesting that individuals high in anti-Black prejudice tended to oppose Obama at least in part because they dislike him as a Black person. In sum, our data support the notion that racial prejudice is one factor driving opposition to Obama and his policies.

So, to review: Measure people's level of racism. Check back, and find that racists are likely to oppose President Obama, because of his race. (In other words, people who don't like black people, actually don't like black people. Any other finding would have raised pretty serious questions about the construct validity of the first wave of surveys, I think). Then, go on to conclude that since racists don't like President Obama, then anyone who doesn't like President Obama must be a racist. Anyone who doesn't like Nancy Pelosi is a misogynist. Anyone who doesn't like Harry Reid hates Mormons. And anyone who doesn't like VP Biden probably has a valid reason. To conclude: I eat bread. Catfish eat bread. I am therefore a catfish.

C. Third, they could be "morally disengaged." (NOTE: I think "morally disengaged" means that you disagree with me, and I want to call you a poopie-head, but instead I call you "morally disengaged" instead, since no moral person could possibly disagree with me). (Notice that the definition below involves the "withholding of government assistance," not "taking money at gunpoint from people who earned it, and giving it to other people who did NOT earn, but who happen to have powerful political friends." If that be moral disengagement, give me more of it!)

Moral disengagement and tolerance for health care inequality in Texas

Alfred McAlister, Mind & Society, forthcoming

Abstract: Societies vary in their levels of social inequality and in the degree of popular support for policies that reduce disparities within them. Survey research in Texas, where levels of disparity in health and medical care are relatively high, studied how psychological mechanisms of moral disengagement relate to public support for expanding access to government- subsidized health care. Telephone interviews (N = 1,063) measured agreement with statements expressing tendencies to minimize the effects of inequality, blame its victims and morally justify limits on government help. The interviews also assessed support for general and specific policies to reduce inequality, e.g., through state-subsidized health care for lower income groups, as well as political party affiliation, ideological orientation, gender, age, education and income. Agreement with beliefs expressing moral disengagement was associated with opposition to governmental policies to reduce inequality in children's health care. Beliefs that justify the withholding of government assistance, blame the victims of societal inequality, and minimize perceptions of their suffering were strongly related to variation between and within groups in support for governmental action to reduce inequality.

This is a truly amazing frame for a so-called "study," remarkable. The author...well check him out.

D. Finally, people could think that the health care plan is a bad idea, on the merits. Too expensive, too restrictive on basic freedoms, and likely to reduce, rather than increased, the quality of health care delivery for many people. The problem is that most people, more than 2/3, are pretty happy with their existing coverage. They are not convinced that the alternatives presented to them will be both better and cheaper, and in fact may be NEITHER better NOR cheaper.

My own answer is D, bad idea. What's yours?

(Nod to Kevin L, who never withholds assistance)

Friday, November 06, 2009

Chilipunk'd in Honduras

Wow, it appears that Marvelous Mel Zelaya has once again gotten outfoxed by the Micheletti folks (the first time being when they loaded him up on a plane and shipped him out of the country). 

Last Friday, there was a supposed deal between the two sides to form a unity government and have the Congress vote on whether or not Zelaya would be allowed to serve out the rest of his term.

Apparently lost on the Zelaya team was the fact that while there was a deadline for forming the new government (yesterday), there was no deadline for taking the vote and the Congress was not a signatory to the deal.

Plus, it appears that the Obama administration now considers the signing of the agreement to be sufficient for recognizing the winner of the election scheduled for later this month as legitimate, rather than the re-instatement of Zelaya as was previously thought.

If true, that was actually a slick move by the US, allowing them to keep the status quo more or less in place while seeming to be against allowing the status quo to stay in place.

One thing is for sure here; Zelaya is a dope, who is still stuck inside the Brazilian embassy.


Thursday, November 05, 2009

Oklahoma: Where amazing happens!

I swear I am not making any of this up!

Car Sideswipes Elephant In Enid

Enid police are investigating a crash between a car and an elephant.Officers said a couple was driving home from church when it side-swiped a bull elephant near 4200 N. Van Buren Bypass. The elephant had escaped from a circus at the Garfield County Fairgrounds and was roaming along U.S. 81.Investigators said the elephant did not appear to be seriously injured. It did suffer a broken tusk and bruises.The elephant was chained in a field after the crash while workers prepared to tranquilize him and load him up.The couple was not injured and their car was not heavily damaged.

The moral of the story: Never go to church?

We Get Letters: Confidence in Men

I have this friend, a young woman who graduated from Duke years ago, and now works in a large city in the Northeast. She sometimes tells me of her dating disasters, laughing ruefully at the latest apocalypse.

Here is a g-chat exchange we had, some months ago:

A: I'm afraid I go for the arrogant type
like that awful guy I told you about.

me: you think you can TAME them?
A: i dont want to;
at a certain point it's not worth it

me: how's that brilliant plan working out
A: not working out at ALL
me: so, what about the NICE guys, the quiet
A: they love me
and i dont give them a chance
it's bad
lots of them

me: well, yes, exactly.
A: oy.
you sound like my mother
i wish i could be attracted to them
i literally cant
it's a huge problem

me: can't fake it. not worth trying
A: you cant fake attraction
what's the point?
it is or it isn't
it's biological, chemical

Well, anyway, it struck me that there is an obvious explanation for why men are arrogant jerks. Women prefer men who are arrogant jerks. Women say they don't (though A, above, is honest enough to admit that she DOES prefer arrogant jerks), but they do.

So, the reason boys are more confident than girls is that girls want them to be, and choose mating partners based on confidence. Boys do NOT choose girls on this basis.

The point is that, as usual, women are in charge here. Don't blame the boys, we are just trying to please you ladies.

What Explains Boys’ Stronger Confidence in their Intelligence?

Ricarda Steinmayr & Birgit Spinath
Sex Roles, November 2009, Pages 736-749

This study investigated whether boys’ stronger confidence in their intelligence is explained by gender differences in measured intelligence and gender-stereotypical parental perceptions of their children’s intelligence. Verbal, numeric, figural, and reasoning intelligence and corresponding self-ratings were assessed for 496 German 11th and 12th graders (284 girls; age: M = 16.95). Parents also rated their children’s intelligence (339 parents; 205 mothers; age: M  = 46.66). With and without controlling for intelligence, boys rated their numerical, figural, and reasoning abilities higher than girls. The same pattern appeared in parental intelligence perceptions. Boys even judged themselves as more intelligent controlling for both measured intelligence and parental intelligence estimates. Thus, neither intelligence nor gender-stereotypical parental perceptions totally explains boys’ stronger confidence in their intelligence.


The Evolution of Overconfidence

Dominic Johnson & James Fowler
University of California Working Paper, September 2009

Confidence is an essential ingredient of success in a wide range of domains including job performance, mental health, sports, business, and combat. Many authors have suggested that overconfidence -- defined here as believing you are better than you are in reality -- is advantageous because it serves to increase ambition, resolve, morale, persistence, and/or the bluffing of opponents. However, too much overconfidence can cause arrogance, market bubbles, financial collapses, policy failures, disasters, and wars, so it remains a puzzle how such a false belief could evolve or remain stable in a population of competing accurate beliefs. Here, we present an evolutionary model that shows overconfidence actually maximizes individual fitness and populations will tend to become overconfident, as long as the resources at stake during conflicts exceed twice the cost of competition. This is because overconfident individuals make more challenges when there is uncertainty about the strength of opponents (and thus the outcome of conflicts), while less confident individuals shy away from many conflicts they would win. Where the value of a prize is at least twice the cost of trying, overconfidence is the best strategy. The model suggests that the conditions under which humans would have evolved to have a "rational" unbiased view of their own capabilities are exceedingly rare, and it helps to explain why resource-rich environments can paradoxically create more conflict. Moreover, the fact that overconfident populations are evolutionarily stable may be one reason why overconfidence persists today in politics, business, and finance, even if it causes occasional disasters.

(Nod to Kevin L, who is very confident, for the article references)

(I couldn't find a video of Jack Palance saying, "Confidence is very sexy, don't you think?" But I wanted to)

(UPDATE: Commenter Adam Dynes comes up big. He's WAAAAY ahead of me. Check this out....)

Wednesday, November 04, 2009

More on the multiplier

In a new NBER working paper (ungated version here) Valerie Ramey provides some new evidence on the effects of government spending on consumption and the size of the government spending multiplier:

"Do shocks to government spending raise or lower consumption and real wages? Standard VAR identification approaches show a rise in these variables, whereas the Ramey-Shapiro narrative identification approach finds a fall. I show that a key difference in the approaches is the timing. Both professional forecasts and the narrative approach shocks Granger-cause the VAR shocks, implying that the VAR shocks are missing the timing of the news. Simulations from a standard neoclassical model in which government spending is anticipated by several quarters demonstrate that VARs estimated with faulty timing can produce a rise in consumption even when it decreases in the model. Motivated by the importance of measuring anticipations, I construct two new variables that measure anticipations. The first is based on narrative evidence that is much richer than the Ramey-Shapiro military dates and covers 1939 to 2008. The second is from the Survey of Professional Forecasters, and covers the period 1969 to 2008. All news measures suggest that most components of consumption fall after a positive shock to government spending. The implied government spending multipliers range from 0.6 to 1.1. "

Shout it from the rooftops!


Is is just me, or did Mr. Karzai totally chilipunk Obama? He loads up his government with bad guys as part of his re-election strategy, engages in sufficient electoral fraud that the US "forces" him to recant his majority win and agree to a runoff, then his opponent in the runoff drops out, Karzai is President again anyway, and our political masters now seem A-OK with this outcome.

Do y'all think Barack even got the license plate of that bus?

O Minimum Wage, Thy Name is Discrimination!

In my recent podcast with Russ ("DJ Yiddisher Kop" is his rap name) Roberts, we discussed the problems caused by minimum wage. In particular, economic theory would clearly imply that forcing a higher than equilibrium wage would allow, in fact encourage, employers to take it out on employees on other margins. Abuse, discrimination in hiring, overwork, bad scheduling, etc.

And...well, what do you know?

Discrimination in a Low-Wage Labor Market: A Field Experiment

Devah Pager, Bart Bonikowski & Bruce Western
American Sociological Review, October 2009, Pages 777-799

Decades of racial progress have led some researchers and policymakers to doubt that discrimination remains an important cause of economic inequality. To study contemporary discrimination, we conducted a field experiment in the low-wage labor market of New York City, recruiting white, black, and Latino job applicants who were matched on demographic characteristics and interpersonal skills. These applicants were given equivalent résumés and sent to apply in tandem for hundreds of entry-level jobs. Our results show that black applicants were half as likely as equally qualified whites to receive a callback or job offer. In fact, black and Latino applicants with clean backgrounds fared no better than white applicants just released from prison. Additional qualitative evidence from our applicants' experiences further illustrates the multiple points at which employment trajectories can be deflected by various forms of racial bias. These results point to the subtle yet systematic forms of discrimination that continue to shape employment opportunities for low-wage workers.

Now, it's the ASR, so they would never make the connection. But discrimination and abuse is caused by the minimum wage. At the competitive wage, there would be NO economic space for discrimination. But the minimum wage creates a space for discretion.

The usual story is this: sure, MW may cause some unemployment, but the people who have jobs, they are better off, right?

Um, no. Back to school. Back to Econ 101.

Tuesday, November 03, 2009

A journey to the past

My favorite things Canadian are arctic foxes, Neil Young, polar bears, Daniel Negraneau, and sled dogs! Here is a shot of a very cosmopolitan sled dog we met outside of Churchill last week:

Posted by Picasa

I Must Be Just About the Most Handsome Guy Around!

When they are behind, "out" parties choose candidates with higher quality faces.

Mr. De Mille, I am ready for my close up!

Candidate Faces and Election Outcomes: Is the Face-Vote Correlation Caused by Candidate Selection?

Matthew Atkinson, Ryan Enos & Seth Hill
Quarterly Journal of Political Science, October 2009, Pages 229-249

Abstract: We estimate the effect of candidate appearance on vote choice in congressional elections using an original survey instrument. Based on estimates of the facial competence of 972 congressional candidates, we show that in more competitive races the out-party tends to run candidates with higher quality faces. We estimate the direct effect of face on vote choice
when controlling for the competitiveness of the contest and for individual partisanship. Combining survey data with our facial quality scores and a measure of contest comp- etitiveness, we find a face quality effect for Senate challengers of about 4 points for independent voters and 1-3 points for partisans. While we estimate face effects that could potentially matter in close elections, we find that the challenging candidate's face is never the
difference between a challenger and incumbent victory in all 99 Senate elections in our study.

(Nod to Kevin L, who has excellent face quality)

Monday, November 02, 2009

Mother of All Carry Trades....

My friend Roger Congleton at GMU Econ sends the following link:

Nouriel Roubini, "Mother of all carry trades faces an inevitable bust"
(Financial Times, Nov 1 2009)

An excerpt:
...while the US and global economy have begun a modest recovery, asset prices have gone through the roof since March in a major and synchronised rally. While asset prices were falling sharply in 2008, when the dollar was rallying, they have recovered sharply since March while the dollar is tanking. Risky asset prices have risen too much, too soon and too fast compared with macroeconomic fundamentals.

So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates – as low as negative 10 or 20 per cent annualised – as the fall in the US dollar leads to massive capital gains on short dollar positions.

The problem, as Roubini notes, is that at some point the dollar will stop falling. People will actually have to buy dollars, or take it right in their shorts (a finance pun, sorry). And THEN the dollar might even appreciate, and the bubble will burst, and down will come baby, cradle and all.

The LMM and I have a considerable, though hardly huge, position in Euros in an account at Sparkasse in Erlangen. And, through dumb luck, we have made a nice piece of change. Holding Euros is a bet that the dollar depreciates, but in a covered way, because we actually own the cute little buggers. To understand why the above is a problem, consider the following two definitions:

Short Position
: In finance, short selling (also known as shorting or going short) is the practice of selling assets, usually securities, that have been borrowed from a third party (usually a broker) with the intention of buying identical assets back at a later date to return to the lender. The short seller hopes to profit from a decline in the price of the assets between the sale and the repurchase, as he will pay less to buy the assets than he received on selling them. Conversely, the short seller will incur a loss if the price of the assets rises. Other costs of shorting may include a fee for borrowing the assets and payment of any dividends paid on the borrowed assets. Shorting and going short also refer to entering into any derivative or other contract under which the investor profits from a fall in the value of an asset.

Carry Trade: The term carry trade without further modification refers to currency carry trade: investors borrow low-yielding currencies and lend (invest in) high-yielding currencies. It tends to correlate with global financial and exchange rate stability, and retracts in use during global liquidity shortages.
The risk in carry trading is that foreign exchange rates may change to the effect that the investor would have to pay back more expensive currency with less valuable currency. In theory, according to uncovered interest rate parity, carry trades should not yield a predictable profit because the difference in interest rates between two countries should equal the rate at which investors expect the low-interest-rate currency to rise against the high-interest-rate one. However, carry trades weaken the currency that is borrowed, because investors sell the borrowed money by converting it to other currencies.

This Could Be True....But What About Joe Morgan?

Sports Commentators and Source Credibility: Do Those Who Can’t Play...Commentate?

Justin Robert Keene & Glenn Cummins
Journal of Sports Media, Fall 2009, Pages 57-83

Although research has examined how commentators shape perceptions of mediated sports, the area of commentator credibility remains unexplored. Using an experimental design, this study examined the effects of commentators’ previous athletic experience on the perceived credibility of sports broadcasters and viewers’ evaluations of game play. Results showed that experience impacts viewers’ perceptions of credibility such that commentators without experience were viewed as least credible and their games were rated as less exciting and enjoyable.

Sunday, November 01, 2009

Bacon Echoes

I swear this could be Herbert Elmer Munger, speaking from beyond the grave.

Herb and I never got along that well. But towards the end of his life, we got a lot closer. One of my fondest memories, when he was 83 (he died at 85, of congestive heart failure), was the day I broke him out for breakfast at Denny's.

He was nearly blind, but he could smell things. And when his wife would drive him to the doctor's or somewhere, he would smell the bacon at the Denny's.

And then fuss about it for three days. He wanted pancakes, he wanted REAL butter, he wanted 6 or 8 slices of REAL bacon, and he wanted real, caffeinated coffee. He got none of these things at the retirement home (he lived at Meadowood, in Bloomington, a very very very nice place). His wife insisted that he should eat oatmeal, no butter, no sugar.

And, of course, she was right. Except that he was freakin' 83, and he wanted BACON. When you are 48, sure, avoid bacon. When you are 83, go for it.

Well, I was visiting, and he was up early. Like, 5:45 am. I heard him pawing around in the kitchen, I got up, put on my clothes. I said, "Dad, let's go to Denny's."

Him: "Oh....oh, yes."

Me: "We can do this. Get dressed."

Him: "I'll hurry."

We snuck out like we were behind enemy lines. Giggling, actually giggling.

Once we got to Denny's, we got the coffee and water, ordered big stacks o'cakes with bacon (I gave him mine). When the order came, he piled about 3 or 4 tablespoons of whipped butter on his 'cakes. Then, syrup tsunami. Then cut the 'cakes into tiny pieces to maximize surface area. Incredibly, at this point more syrup was required.

He couldn't quite finish the big stack of pancakes, but he did finish all the bacon. And had at least six cups of real coffee.

One of the very best mornings of my life. And Elaine just laughed when we got back to the house; I think she recognized the importance of bacon, every now and then. She even called him "Bacon breath" for about an hour. But he was nappin' in the big chair, a picture of contentment.

Anyway, those twitters, from that guy? Those could be my dad, easy.

(Nod to AH for the Twitter link)

An Obvious Auction Possibility?

Yeon-Koo Che & Terrence Hendershott
Economists’ Voice, October 2009
The NFL Should Auction Possession in Overtime Games

"[NFL] overtimes can ruin great games, because, with all too high probability, whichever team gets the ball first wins. Instead of one of the best, the game might have been remembered as dubious, maybe even ignominious, with many ‘what ifs.’ We propose an auction method to eliminate the coin flip’s randomness by letting the teams bid to determine the initial possession...To minimize the impact of luck, it must be the case that the team that receives the opening possession has no real advantage. To accomplish this: Why not let the teams trade on who receives the opening possession with the starting position used as currency?"

(Nod to Kevin L)