Thursday, December 31, 2015

KPC year in review

Here's a wrap up of the 6 most popular posts this year on KPC.

Our most viewed post was America the Beautiful, which chronicled the amazing Texas Law Hawk and his talons of justice.

Second was my screed against the typical use of IV and over identification tests with special invective against dynamic panel methods called Friends don't let Friends use IV.

Third place went to our post documenting the phallic fetishes common to Oklahoma TV weather people.

Coming in fourth was one of my frequent attempts to fix the internet in general and Paul Krugman in particular titled, A tale of two Krugmans.

Then we got silly again pointing out that mass murderer Anders Breivik was now majoring in Political Science.

Finally, coming in at #6 was my post, The powerful negative theorems of economics, detailing why it really is the dismal science!

So there you have KPC in a nutshell, 50% economics, 50% snarky foolishness.

Long may we reign.

UPDATE BY MUNGOWITZ:  Unsurprisingly, all six of the top posts were Angus joints.  He's like Mr. Ed:  He only speaks when he's got something to say!

Wednesday, December 30, 2015

I'm sure that Brendan Nyhan already knows this paper. But it's not very good news for those of us who hope political debate can be improved by more accurate political information. The message seems to be "Lie often, and go negative early." Reminds of the Christmas card I saw from Jason Reifler

Belief Echoes: The Persistent Effects of Corrected Misinformation

Emily Thorson 
Political Communication, forthcoming 

Abstract: Across three separate experiments, I find that exposure to negative political information continues to shape attitudes even after the information has been effectively discredited. I call these effects “belief echoes.” Results suggest that belief echoes can be created through an automatic or deliberative process. Belief echoes occur even when the misinformation is corrected immediately, the “gold standard” of journalistic fact-checking. The existence of belief echoes raises ethical concerns about journalists’ and fact-checking organizations’ efforts to publicly correct false claims.

Tuesday, December 29, 2015

Monday, December 28, 2015

Comparative Advantage: An Idea Whose Time Has Passed?

Art Carden is living in the past.   Here, for example. Notice that he really just means "division of labor," because DoL is limited by the extent of the market, so "more trading partners" is just "more extent for the market.)

The truth is that "comparative advantage" is nearly useless, except as a pedagogical tool to amaze people innocent of economic knowledge.  My Freeman article, at FEE.

Now, "living in the past" may not be a bad thing.  When I say that about Jacob Levy, I mean that as a compliment, because Dr. Levy is actually studying ancient texts. 

But Dr. Carden (the DubMOE) is living in the past in a bad way, because he is ignoring an important feature of modern markets.  Here is a good summary of the view that I think we ought to jettison.  Not because it is wrong, but because it makes economics seem deterministic.  Very few of the factors that determine productivity are fixed.  So "opportunity cost" and "division of labor" are all we need.

To make the argument really work, of course, one must also resort to Buchanan's notion of returns to hard work and "increasing returns." 

Saturday, December 26, 2015

Bruce made Tapes!*

and, right underneath my nose, Gerhart made tapestries!

In 2009, in editions of 8. Each one enlarging a detail from one of his epic paintings.

I just became aware of these from a friend's photo from Art Basel Miami (I am not making that title up).

They are titled, Musa, Yusef, Ibian, and Abdu.

Looks like they run just a bit north of $1,500,000 per rug (not too bad for a 9x12 carpet, eh?).

Needless to say, my house is available to display any/all of these bad boys.

* Not Jenner. THIS Bruce

Friday, December 25, 2015

All That Experiments Is Not Science...

All that glitters is not gold.  Not all who wander are lost.  And some people who do experiments are not scientists, but just hacks pursuing an overtly ideological agenda.

Invisibility Cloaks and Knapsacks: How the Advantaged Work to Conceal Privilege 

Taylor Phillips & Brian Lowery 
Stanford Working Paper, January 2016 

Abstract: We suggest the experience of unfair advantage pits two critical motives: the merit motive and the maintenance motive. Together, these motives lead people to mobilize their advantage in order to secure desired outcomes, but to conceal these advantages under the cloak of merit as they do so. In Experiments 1a and 1b, we find that when their advantages are exposed, the wealthy (but not the non-wealthy) claim increased effort at work. In Experiment 2, we show that the social elite claim their social advantages (family connections) were the result of effort, but suggest others’ social advantages were not. In Experiment 3, we find that the wealthy not only claim, but commit greater effort when their class advantages are exposed. Finally, in Experiment 4, we show that the educational elite claim that advantage resources are not useful, but then continue to take these resources and use them to their benefit anyway. 

Lest you think this is an isolated incident, there's more.  A remarkable piece of work.

Wednesday, December 23, 2015

Average is so over

People, I once had a department chair who denied that, if we had a policy of giving above average (in percentage terms) raises to the lower paid faculty, in the long run everyone would be paid the same. Just flat out denied the math.

This same chair, upon the occasion of me complaining that my evaluation was above the departmental average while my raise was below, told me not to worry, that everyone had gotten a below average raise.

I am not making this up.

But I guess you can see where all this is leading.

Yes HRH HRC has proclaimed that she would close any school that was below average. Like it was obvious and I guess just be a few. Sadly, no one asked her how, in the long run, we were gonna fit all the kids in the US into one school (barring ties of course).

Mrs. Angus has suggested to me that maybe HRC was thinking globally, closing any US school below the global average.

I think Mrs. Angus has a bright future in politics.

ps. this same chair, in a public seminar, vehemently denied that (PQ)/Q = P. Vehemently.

Monday, December 21, 2015

You only need it as long as you don't use it....

Terry Pratchett's book, Making Money, has a passage on gold that I found pretty insightful.
It is in Chapter 5 of the book, starting on page 136.

Moist grinned as the discussion wobbled back and forth. Whole new theories of money were growing here like mushrooms, in the dark and based on bullshit. But these were men who counted every half-farthing and slept at night with the cash box under their bed. They'd weight out flour and raisins and rainbow sprinkles with their eyes ferociously focused on the scale's pointer, because they were men who lived in the margins.

If he could get the idea of paper money past them then he was home and, if not dry, then at least merely Moist. "So you think these might catch on?" he said, during a lull. The consensus was, yes, they could, but should look "fancier," in the words of Natty Poleforth--

"You know, with more fancy lettering and similar." Moist agreed, and handed a note to every man, as a souvenir. It was worth it. "And if it all goes wahoonie-shaped," said Mr. Proust, "you've still got the gold, right? Locked up down there in the cellar?"

"Oh yes, you've got to have the gold," said Mr. Drayman. There was a general murmur of agreement, and Moist felt his spirits slump.

"But I thought we'd all agreed that you don't need the gold?" he said. In fact, they hadn't, but it was worth a try. "Ah, yes, but it's got to be there somewhere," said Mr. Drayman.

"It keeps banks honest," said Mr. Poleforth, in the tone of plonking certainty that is the hallmark of that most knowledgeable of beings, The Man In The Pub.

"But I thought you understood," said Moist. "You don't need the gold!"

"Right, sir, right," said Mr. Poleforth soothingly. "Just so as it's there."

"Er . . . do you happen to know why it has to be there?" said Moist.

"Keeps banks honest," said Mr. Poleforth, on the basis that truth is achieved by repetition.

America the Beautiful

Having sat on top of Texas for like 17 years now, I can tell you this is the most Texas thing ever!

This video makes me want to move to Texas and drive in a way that gets me stopped for DUI (while actually being totally sober of course), just so I can call this bro to represent me.

big hat tip to @texasinafrica

Sunday, December 20, 2015

Libertarian Doctrine in "Attack of the Clones"

Star Wars 2 has an interesting passage, one that fully comprehends politics.  Surprisingly insightful, for a George Lucas script....

OBI-WAN You look tired.

ANAKIN I don't sleep well, anymore.

OBI-WAN Because of your mother?

ANAKIN I don't know why I keep dreaming About her now. I haven't seen her since I was little.

OBI-WAN Dreams pass in time.

ANAKIN I'd rather dream of Padmé. Just Being around her again is... intoxicating.

OBI-WAN Mind your thoughts, Anakin, they betray you. You've made a commitment to the Jedi order... a commitment not easily broken... and don't forget she's a politician. They're not to be trusted.

ANAKIN She's not like the others in the Senate, Master.

OBI-WAN It's been my experience that Senators are only focused on pleasing those who fund their campaigns... and they are more than willing to forget the niceties of democracy to get those funds.

ANAKIN Not another lecture, Master. Not on the economics of politics.... It's too early in the morning... and besides, you're generalising. The Chancellor doesn't appear to be corrupt.

OBI-WAN Palpatine's a politician, I've observed that he is very clever at following the passions and prejudices of the Senators.

Friday, December 18, 2015

The Thing Itself: An Utterly Corrupt System

The level of corruption of our government is nothing short of remarkable.  Look, a dark-skinned man.  Let's steal all his money.  Because we have guns.  Oh, and badges.  But mostly, because we have guns.

"In April of this year, two Drug Enforcement Administration task force members stopped a man named Issa Serieh at Los Angeles International Airport, asked him some questions, and seized $30,750 in cash off of him. They sent him on his way without charging him with a crime...The complaint states they identified him as Issa Serieh later, during their questioning. The only reasons they give for initial suspicion are the backpack, and the flight from Chicago to L.A."  (Source:  The right-wing WaPo)

Tuesday, December 15, 2015

Compared to what?

One of the problems economists have is that we always ask obnoxious questions.

When I was in grad school, Angus will attest that my obnoxious question was usually, "Hey, bud:  you gonna eat that?"

But my current obnoxious question -- and it's the same one that everyone else should be asking -- is "compared to what?"

So, when people say that "You shouldn't eat bacon, meat is bad for the environment!" then you should say, "Well, compared to what?"

Some Carnegie-Mellon U folks did that, and the results are perhaps a bit surprising to the sanctimonious and the environmentally conscious.

The fact is that human beings, just being human beings, are "harmful to the environment."

Friday, December 04, 2015

Isomorphic Mimicry run Amok: John Cochrane Edition

People, I am a big JC fan. But this time he's really way way way off.

He appears to be arguing that feasible deregulation in the US would create 20 years of 5.4% growth.

Even worse, he is basing in on a single graph.


And here it is:

The graph shows the correlation between the base10 log of income per capita and a country's ease of doing business score.

But there are few things that should make us pretty nervous here. The first of course is causal identification, which John mentions.

But there are more basic problems.

First, according to his analysis, China is done growing. That is a pretty bold prediction.

Second, and this is really my main point, the scale of the vertical axis is disguising the incredible heterogeneity of outcomes associated with any value of the doing business score.

For example, at China's score of 63, they have a PC GDP of $7000. But Nepal has a very similar score and a PC GDP of well under $1000! Ghana has a similar score and a PC GDP less than half of China's value.

Where is the growth boom in those countries and the dozens of others with similar scores than China's but notably lower GDP.

Again, the graph makes them look close. But they are not. It's the scaling.

The same is true on the other side. There are countries with similar scores to China who are more than twice as rich, and not all of them are oil countries.

From 50 to 75  in the doing business scores there is incredible heterogeneity in outcomes in terms of the associated PC income levels.

This of course is what we know all too well in development economics. Simply adopting a set of laws or regulations is no guarantee of getting a particular economic outcome.

Growth accelerations are by and large unpredictable. Here is the money quote from Hausman, Pritchett and Rodrik's classic paper:

"Finally, and perhaps most importantly, we find that growth accelerations tend to be highly unpredictable: the vast majority of growth accelerations are unrelated to standard determinants such as political change and economic reform, and most instances of economic reform do not produce growth accelerations."

John. it's not mechanical. if it was we would have sorted this all out in development decades ago.  Heck if it was as mechanical as you are suggesting, the World Bank's advice would have actually worked and we would have solved global poverty decades ago!

Thursday, December 03, 2015

Cavalcade of Endogeneity: The Market Monetarist does Micro Edition

So on the Market Monetarist blog, I recently saw one of the worst examples of the correlation implies causality fallacy ever by a supposed professional economist.

There is a graph presented of a raw correlation between an index of property right protection in a country and an index of "environmental performance"

Look for yourself, here's the graph:

and then the hammer drops:

"So there you go. The one graph version of Free Market Environmentalism – if you are concerned about the environment you should really primarily concern yourself about the protection of property rights"

That is just a stunning leap from the graph.

Might we dare to think there is a third factor, I dunno, maybe income, that is causing both of these indices?

Or try it this way, if I presented a graph that showed government spending was positively correlated with environmental performance, would the Market Monetarist then conclude that big government was the way to protect the environment?

If not, why not? Why would my analysis be any worse than this?