Audio Resources on the Econ of Car Dealerships

The economics of car dealerships is interesting.  Some time ago, RR and I did this podcast on the subject, and found a bunch of questions we really couldn't answer.

NPR Planet Money just did a piece, where we hear from the car dealers themselves.  The central question is, "Why do we have a system of pricing and bargaining that consumers hate?  I mean, actually hate?"

Nod to Kyle R.

Put more pudding on my platter

People, it's no mystery why we are fat. We are fat because the costs of being fat have fallen.

We don't have to be in shape to do our jobs and live our lives.

Calories have never been cheaper.

It has never been harder to die from a heart attack.

If you clog up your arteries they give you a pill, or router out the clogs, or just put in replacements. Hell, they'll even just give you a new heart if you destroy the one you have.

As a wise man once said, "solve for the equilibrium". All the Cass Sunstein's and Miguel Bloombitos, and Sarah Conly's of the world don't stand a chance.

Fat is the new skinny.

PS: should the opposite should be true for drugs and alcohol? Discuss

Most Excellent Musical / Econ Site

This is nothing short of amazing, fantastic, wonderful.

Do you need some terrible 70's or 80's music to illustrate  a point in econ class?  (Answer:  yes.  Yes, you do.  You ALWAYS do).

Then here is the reference site for you!

And the best thing (and this goes out to YOU, Steve Horwitz!) there is not one shred of that awful sound abortion, RUSH, anywhere on the site.  Because the only principle Rush illustrates is that even functionally deaf people will apparently still buy music.  For proof, check this:  it is NOT intended ironically.

Please to calm down about the minimum wage

As we all know, President O has called for raising the Federal minimum wage to $9.00 an hour. This has caused many of my friends to get fairly upset and argue that this is a bad policy that will raise unemployment.

But....

(1) In truth, we don't really know what the minimum wage does to unemployment. Studies are mixed at best on that issue. It's just not that easy to isolate causal effects here.

(2) We just don't live in a principles of micro world where markets are perfectly competitive and firms have no market power / economic profits, so any wage above an individual's marginal product is impossible to sustain.  Besides the difficulty of identification, this is probably the main reason why it's so hard to find employment effects of minimum wage changes.

(3) A better reason to object to the minimum wage increase is that there are much more efficient ways to help the working poor. It doesn't seem to be well appreciated, but a substantial fraction of workers earning the minimum wage do NOT live in poor households. They are teenagers living at home or second workers in a household. If we wish to aid the working poor, increasing the earned income tax credit (EITC) is a much more effective approach.

(4) It is also good to remember that there are still a lot of jobs out there where the minimum wage does not apply (some classes of young worker, workers who earn tips).

(5)  This is a bit of a stretch but if the higher minimum wage did price someone out of the labor market, perhaps it would propel them into upgrading their human capital, with a GED or some vocational training or community college.

Finally, I'd like to ask my conservative friends to stop making the "if a higher minimum wage is good why stop at $9, why not make it $90 and everyone would be rich" argument.

It's just silly.

Obviously, we could find a minimum wage that would have serious employment effects. But it's not in the $9.00 neighborhood, and no one is proposing even a doubling of the current minimum wage.

If Reid & Pelosi (in 2014 after the Dems take back the House) propose a $20 minimum wage, then I'll join y'all on the ramparts.

Otherwise, let's consider giving it a rest. There are far far far worse policies that are actually in effect which deserve our attention and effort.

Do Guns Prevent Suicide?

Wow.  Talk about a moving target.  We hate guns because the level of violence is rising sharply.  (No, it isn't, it's falling sharply).  Oh....okay, we hate guns because they cause (CAUSE!) suicides.

My good friend Prof. Greene at NC State has a piece where he calls several remarkably illogical arguments "nice."

The problem is that the facts are these:

The total level of gun violence has fallen dramatically since 1980.  DRA.MA.TIC.ALLY.

If you remove suicides and drug crimes, in fact, the danger of gun violence is negligible.

A few highly over-sensationalized incidents have shoved the lefty elite into a hissy fit, with their little private high school boxers in tight knots.  So they shriek and yelp that "we" have to "do" "something" (yup, three different scare quote words).

To his credit, Prof. Greene does at least focus on suicides, where the data don't directly contradict his argument.

Except, wait...the data comparing national suicide rates DO directly contradict his argument.  If guns cause suicides, then one would expect the nations with the most guns to have the highest suicide rates, right?

Not so much.  In fact, the correlation between suicide rate and gun ownership is weakly INVERSE.  That's right, guns CURE suicide!  The US, with high gun ownership, has fewer suicides than the gun control icons of Austria, France, New Zealand, Belgium, Japan, and of course FAR below those happy gunless states of Russia and China. 

Now, I'll admit that naive correlations like that don't mean much, and I'm not serious.   Guns do NOT cure suicide. But surely that one means at least as much as the equally naive correlations being whooped up by the good Prof. Greene:  guns also do not CAUSE suicide, though it may be that a person contemplating suicide might use a gun if he has one.  Clearly it is NOT true that in South Korea people say, "I want to commit suicide, but I can't, because I don't have a gun!"

Claiming that taking guns away reduces suicides is at best a within-country measure, and there is no reason to believe the effect would be significant.

You Say "Profit" Like It's a BAD Thing

Profit:  I don't think that word means what you think it means.

Here is what LvM thought it meant.  Pretty interesting.

But now kids think it's a bad word, a bad thing, and that making profits makes you a bad person. 

Jesus said it best:  Profits are not without honor, but in your own country, and among your own kin, and in your own house,  Or something like that.

Guy Tries to Explain Government to Alien

It's pretty long, and (intentionally) painfully slow.  But parts of it are (intentionally) excruciating.




If you want to hear the 18th century version of this conversation, here it is.  In particular, Burke really nailed it one rockin' passage:

Parties in Religion and Politics make sufficient Discoveries concerning each other, to give a sober Man a proper Caution against them all…

In vain you tell me that Artificial Government is good, but that I fall out only with the Abuse. The Thing! the Thing itself is the Abuse! Observe, my Lord, I pray you, that grand Error upon which all artificial legislative Power is founded.

It was observed, that Men had ungovernable Passions, which made it necessary to guard against the Violence they might offer to each other. They appointed Governors over them for this Reason; but a worse and more perplexing Difficulty arises, how to be defended against the Governors? Quis custodiet ipsos custodes?

In vain they change from a single Person to a few. These few have the Passions of the one, and they unite to strengthen themselves, and to secure the Gratification of their lawless Passions at the Expence of the general Good. In vain do we fly to the Many.

The Case is worse; their Passions are less under the Government of Reason, they are augmented by the Contagion, and defended against all Attacks by their Multitude.

That's amazingly close to the alien's final summary, actually.

H-V-D

(clic the pic for an even more pandalicous image)

Why China Must Urbanize: Strange mushroom object found in China

Okay, it was buried 80 meters down.  And it has a strange, fleshy feel, and an "eye" on each end.  The video is okay, but the English captioning doesn't really work.  Still, you get an idea.  The reportrix is quite young, and (apparently) naive.  Not really a city lass. She plays it very, very, VERY straight.



Okay, but then you read the description of the video:

(Below the jump, and NSFW, or the easily offended)

Zombie Apocalypse: The Warning

A solid prank.  Problem:  You will want pancakes.

The video:

Nod to Angry Alex

T. Oatley on "Ditch the Job Talk"

One of the thing that frustrates me is the centrality of the "job talk" for professional hiring in academics.

It's an artificial situation, and has almost nothing to do with whether the person will be a success.  Not surprisingly, "good" job talks turn out to have almost no predictive value in judging tenure chances, and "bad" talks don't tell you much, either. 

(Full disclosure:  I was notoriously a "bad" job talk giver.  Neanderbill had to save me at UNC, after I totally stunk up the joint.  And my talk at U Minn and U Md were epically, apocalyptically bad, still spoken of in awe a decade after the sorry debacles were over.  People--I in particular--were still waking up screaming at the horrors they had suffered through. So perhaps this is just sour grapes, I'll admit that).

And for senior people...even dumber.  Why in the world would you look at the job talk for a senior person? If you have read their work, and think it's not good, or not good enough, that's fair.  But a job talk?  Seriously?

Anyway, Dr. T. Oatley has some thoughts. And as always, the thoughts of Dr. T. Oatley are worth reading.

On the rebound?

Over at Slate, Matt asks if the "manufacturing rebound" actually happening. He shows a graph of manufacturing employment, reproduced here:

(click the pic for an even more Perk-esque image).

However if we look at output instead of employment, the picture is quite different:

(clic the pic for an even more Chamberlin-ian image)

The amount of stuff we manufacture has recovered in a V like pattern, without adding very many employees. Since the end of the recession, it looks like around a 17% increase in output but only around a 4% increase in employment. Notice that in the last downturn both series fell substantially (17% fall in employment, 19% fall in output) so it's probably not a labor hoarding story that explains the jobless recovery in manufacturing).

So what is manufacturing? The products or the jobs?

THe Nature of Science, or the Science of Nature

So, a study shows that research on mice is nearly useless, in some areas, for understanding effects on humans.  Or, worse than useless, actually misleading.  Science and Nature are two places to publish big, important, but perhaps speculative papers.

Excerpt:

The study’s investigators tried for more than a year to publish their paper, which showed that there was no relationship between the genetic responses of mice and those of humans. They submitted it to the publications Science and Nature, hoping to reach a wide audience. It was rejected from both.


Science and Nature said it was their policy not to comment on the fate of a rejected paper, or whether it had even been submitted to them. But, Ginger Pinholster of Science said, the journal accepts only about 7 percent of the nearly 13,000 papers submitted each year, so it is not uncommon for a paper to make the rounds.

Still, Dr. Davis said, reviewers did not point out scientific errors. Instead, he said, “the most common response was, ‘It has to be wrong. I don’t know why it is wrong, but it has to be wrong.’ ”   Um....it has to be wrong because otherwise we have wasted billions of dollars as a result of forcing people to do studies on mice, when those studies are actively misleading about effects on humans?  Because we know THAT's not right.  Right?

Spreadsheets Cause Financial Panics?

This is pretty great.

Now, they CAN'T be serious.  Of course, there are some arguments that are not entirely nonsensical.

But still.

Crisis Management

Bruce Yandle is one of my favorite people.

And he comes up big with this nice essay in Freeman.  Excerpt:

The more serious the crisis, the greater the media outcry; and the tighter the calendar for resolving it, the better the chances that members of Congress could attach special interest promises to a final bill that would be passed at the very last minute. In fact, forcing any resolution to the last minute made it possible to hang even more meat on the hooks, since few critics would have the time or interest to look for it, much less take it out. Remember: At the zero hour, all eyes are focused elsewhere.


So when the fiscal fix train left the station, how much pork stood packed in the last car? According to a Wall Street Journal analysis, there was $12 billion in benefits for producers of windmill energy, $222 million in tax rebates for liquor makers, some $78 million in writeoffs for NASCAR track owners, a special $62 million tax credit that will keep StarKist operating the only meaningful industrial plant in American Samoa, and—best of all—a $410 million special tax treatment gift to Hollywood movie studios. But even as these porcine free riders sat front and center in the fiscal train’s caboose, there was an even bigger political goodie hidden among the bill’s baggage.

According to the New York Times, drug maker Amgen may have won the blue ribbon for rent-seeking. The fiscal cliff legislation contained language that delayed limits on drug prices that had been a part of previous legislation intended to bring down Medicare costs. When politicians regulate prices, all kinds of things can happen. That goodie is worth $500 million over the next 10 years, we are told. Without mentioning the word "Amgen," the last-minute legislation exempted one of the firm’s major products from previously mandated price controls. It is reported that Amgen had 74 lobbyists working on the deal. You read that right. That’s 74 people working the halls of Congress while the fiscal cliff battle was being fought. So, do the math: 74 people produced $500 million in future net revenues. That’s $6.75 million per worker. With gains that big, the Amgen government affairs office must surely be counted as a major profit center along with other Amgen divisions.

Separated at Birth

Clic the pic for an even more doppelganger-y image.

By the way, it's NOT Bernanke who needs to be credibly irresponsible

Krugman and others have been optimistic that newly elected Shinzo Abe can spring Japan out of its near-deflationary lethargy and get it growing again by, as Paul says over and over,"credibly promising to be irresponsible". Abe's threatened the BOJ, let it leak that the government is targeting the stock market, proposed fiscal expansion, and just kind of given the impression that he's an "anything it takes" kind of guy.

Current central bankers can't credibly promise to be irresponsible. The whole thrust of the Central Bank Independence movement was to install and insulate conservative central bankers. Sure, Bernanke can say he's going to be irresponsible, but he can't get you to believe it. Perhaps this is why the Fed can sit with $3 trillion on its balance sheet and core inflation (and expectations) remains under 2%.

It's the politician who can run on a platform of "irresponsibility" and then perhaps be credible when they implement it.  The last President we had like that? FDR, I'd say. He took us off gold, he packed the Supreme Court, he ran massive direct jobs programs. In short, he was a bit of a wild man and Shinzo Abe role model.

BHO is no FDR.

Credibly promising to be irresponsible

I don't think it's entirely crazy to say that if Krugman was Fed chair, the US would have a significantly higher rate of inflation expectations. Whether that would "end this depression", I am not so sure.


 BTW Mungo, what about "Credibly promising to be irresponsible since 2007" as the new tagline for KPC?

preciousssssssssss

Hot Links

1. Did Quantitative Easing work in Japan? This paper says yes.

2. Big Data = Big Trouble, from Nassim Taleb

3. Nice piece on KPC fave John Prine in the Telegraph

4. Andrew Solomon is on the hot seat in Ghana!

We Know with Great Certainty We Have the WRONG Policiies

There are some problems with economists.  They don't often know the right thing to do.

But we are actually pretty good about recognizing the wrong thing to do.  The problem is that policy makers are driven, in part by their own overconfidence and in part by their need to be seen as "doing SOMETHING," to do things that are clearly wrong.

Great video.  Check out John Cochrane, just after 3:45 mark.  Nicely done, Dr. Cochrane.




Nod to WH.

Markets in Everything: Hangover Heaven

Wouldn't it be great if you could pay someone a nominal fee to come to your hotel room in Vegas, hook you up to an IV to rehydrate you quickly, and give you some meds while you have coffee and watch Sportscenter?

Well, no, actually, because I'd pay $1000 to avoid visiting a hellhole like Vegas in the first place.  So I'm not really the target market.

But if the above appeals to you, there is an company for that.  Markets in everything.

Not sure I'd want to be one of those room service workers, though.  Having to kick aside the dead animals and empty Southern Comfort bottles to get to the inert figure on the floor beside the bed would be unsavory.

Nod to Kevin Lewis.

Alvin Plantinga wins Rescher

Interesting.

Philosopher Alvin Plantinga Receives Prestigious Rescher Prize

That's quite an important prize.

Rootless Cosmopolitans

Nice article by N. Gregory in the NY Times about immigration and the economics profession. He uses his own department (Harvard) to show just how open academic economics is to foreign talent. But it's not just Harvard.

Take my own department in the middle of nowhere. I've already written about its cosmopolitan composition here.

This year, we are hiring an assistant professor. The three finalists are Canadian, Portuguese, and Korean.

The only real barrier to entry in the academic economic market is ability to speak English.

I once worked in a university in Mexico. The Econ department had professors from the US, Guatemala, Spain, & Peru.

The barrier there was the ability to speak Spanish (though when they first hired me, I really was a terrible Spanish speaker).

Politics of Gaydar

The Politics of Gaydar: Ideological Differences in the Use of Gendered Cues in Categorizing Sexual Orientation
Chadly Stern et al.
Journal of Personality and Social Psychology, forthcoming

Abstract:
In the present research, we investigated whether, because of differences in cognitive style, liberals and conservatives would differ in the process of categorizing individuals into a perceptually ambiguous group. In 3 studies, we examined whether conservatives were more likely than liberals to rely on gender inversion cues (e.g., feminine = gay) when categorizing male faces as gay vs. straight, and the accuracy implications of differential cue usage. In Study 1, perceivers made dichotomous sexual orientation judgments (gay-straight). We found that perceivers who reported being more liberal were less likely than perceivers who reported being more conservative to use gender inversion cues in their deliberative judgments. In addition, liberals took longer to categorize targets, suggesting that they may have been thinking more about their judgments. Consistent with a stereotype correction model of social categorization, in Study 2 we demonstrated that differences between liberals and conservatives were eliminated by a cognitive load manipulation that disrupted perceivers' abilities to engage in effortful processing. Under cognitive load, liberals failed to adjust their initial judgments and, like conservatives, consistently relied on gender inversion cues to make judgments. In Study 3, we provided more direct evidence that differences in cognitive style underlie ideological differences in judgments of sexual orientation. Specifically, liberals were less likely than conservatives to endorse stereotypes about gender inversion and sexual orientation, and this difference in stereotype endorsement was partially explained by liberals' greater need for cognition. Implications for the accuracy of ambiguous category judgments made with the use of stereotypical cues in naturalistic settings are discussed.

Nod to Kevin Lewis