Tuesday, May 25, 2010

There's a lot to work through as oil still flows into the Gulf of Mexico.

David Friedman opines that Obama missed an opportunity to energize the country similar to Bush's reaction to 9/11. Aside from the rather obvious observation that this hasn't been nearly as seismic an event on the psyche of the country as 9/11 was, I do appreciate the oft-read columnist endorsing the pigouvian gas tax.

Ready to be terrified? Think about what happens when hurricaine season hits the Gulf of Mexico. Firstly, the darker surface of the water has the effect of absorbing sunlight, creating more heat in the gulf and thus more intense storms. Aside from that, I'd merely worry that storms could theoretically throw oil onto the usually-hit coastal cities. Maybe THAT could be the seismic event Friedman was hoping for.

Ed Glaeser laments that the existing climate bill (The American Power Act) isn't as simple, aesthetic, and efficient as a carbon tax. Of course, the bill is designed to pass (and the word "tax" is anathema), not to be ideally effective. He concludes that "it is hard to relish either this ornate piece of legislation or the prospect of inaction on global emissions."

It is also worth reading about whether the tea party's agenda – and their newly anointed libertarian leader – is mired in racism.

Friday, May 21, 2010

Misplaced priorities, again

Terrorism was a name based on people's psychological reactions to a set of events, and if they're concerned about terrorism, they might ask what causes terror, and how can we stop people from being terrified...

In raw numbers, these are very tiny accidents. We already know, for example, that in the United States more people have died as a result of not taking airplanes because they're scared and driving on highways than were killed in 9/11.

Not the least interesting thing to be found in this TED talk (this quote at about minute 24).

Dan Gilbert asks later, "which problem would you solve, terrorism or poverty?" And though the host (and, as it generally appears, the audience) agrees that poverty would be a more productive thing to solve, there seems to be no particular recognition that poverty could be a causing factor of terrorism, making it of course even a more productive solution than originally intended.

Also, one questioner near the end challenges the rather unsympathetic presentation of those who buy lottery tickets, indicating that from his interviewing of lottery ticket buyers, they buy it not because they think they're going to win, they buy it because it makes them feel good, and they get a serotonin release. My response, perhaps a little more direct than Gilbert (since I have the freedom of not confronting the person directly), is that: if the person really believed they weren't going to win, they wouldn't get the serotonin response. The serotonin response is an indication that they still believe they could win.

Thursday, May 20, 2010

Some interesting charts at Sociological Images question whether Americans truly are more individualistic than other nations. Their findings are that, when you define individualism as "giving priority to personal liberty," you find that many other unexpected countries are more individualistic.

Some possible explanations are provided by the researcher, Claude Fischer:
(1) Americans aren’t really individualistic (anymore).

(2) Americans means something else by individualism (like freedom from government or pulling yourself up by your bootstraps). Fischer thinks that these are different values, though: anti-statism and laissez-faire, pro-business economics.

(3) Americans are individualistic, but they are also religious and sometimes religion outweighs individualism. If that’s so, Fischer argues, then maybe it is true that we’re not that individualistic.

(4) American individualism is found not in people’s opinions, but in how we organize our society. Fischer calls this “undemocratic libertarianism.”

Finally, (5) maybe what is meant by individualism is really voluntarism, the right to leave and join groups as we see fit.

I might be curious if her findings were the same if, when she asked questions such as “In general, would you say that people should obey the law without exception, or are there exceptional occasions on which people should follow their consciences even if it means breaking the law?” she were to replace the word "people" with "you" whenever it occurs, i.e., "would you say that you should obey the law without exception...?" There's a chance that we might find, when asking those questions, more of what we mean by American individualism (i.e., inherent cognitive biases).

I'd also be curious if there was a way to control for priming. Were the people who were asked the question “People should support their country even if the country is in the wrong,” most recently reminded of the Iraq invasion, the TARP bailout, or the Health Care Bill? I imagine, too, that if we were able to control for such priming, you'd find that the responses might split down demographic or party lines.

Wednesday, May 19, 2010

Fred Foldvary evaluates who is liable – and who should be liable – for the Deepwater Horizon accident.

It is not a puzzle why the planet is being plundered and ruined. The plunder is being subsidized by governments worldwide. These giant corporations have the political clout to obtain tremendous subsidies, and democracy is not stopping it. Something is terribly wrong as the world is falling apart, and governments are causing this by their failure to protect the property rights of the people.

Tuesday, May 18, 2010

Who gets the revenue of auctioned carbon permits?

The Kerry-Lieberman "American Power Act," also known as the cap and trade climate bill, would initially auction only 24.8% of the carbon allowances.

The Brookings Institution has broken down who would get that revenue. Summarized:

None of the auction revenue is used to reduce high marginal tax rates on income or capital, although some revenue is used for “consumer relief,” which includes a tax credit for households above 150 percent of the poverty line, which is phased out starting at 250 percent of the poverty line. Some of the auction revenue is also used for a “universal refund,” which is a lump-sum payment made to all eligible taxpayers, adjusted for family size.

Only a small percentage of the allowance value is used for deficit reduction.

Monday, May 17, 2010

Probably time to stop driving.

Once your company starts selling stock on a publicly traded market, your company's chief end becomes "make money for shareholders." Your shareholders can sue you if you don't. If you, as a CEO, decide to place the sanctity of nature above your profit, you are likely to be in hot water with your shareholders unless you can make a convincing case that the good PR will eventually reap rewards in future profits. If lawmakers are considering regulating measures that would cost your corporation money, it is your legal duty to your shareholders to fight it.

Clearly, the word for this sort of social structure is "horrible," but it is the existing structure of corporations that we tolerate today. Keeping that in mind, how can we possibly react to BP when they have a record of fighting regulation and as they seem to be preparing for only as much cleanup is required to maintain their business's image? If you were a legislator with the opportunity to speak with BP's CEO in a committee hearing, what would you say?

I might ask Tony Hayward if he recalls the assumptions of perfect markets, those that he must have learned in introductory economics. Surely he has fully internalized the theories of markets that rely on these assumptions, if he does not keep in mind their requisite assumptions. I might ask if he recalls the meaning of the assumption of 'perfect information,' that people deciding which products to buy understand fully the products they have available to buy, the processes used to create them, and the businesses that supply them. I would then ask about BP's advertising, in that they purport to be an environmentally friendly oil company, and whether or not it represents their actual practices. I would ask how they could be trusted with free market capitalism when they can use advertising to so easily undermine its requirements.

I'd also tell him that it's probably not the time to mix up gulfs and oceans in public statements.

Image is from Andy Singer.

Bernanke on... Happiness Science

Lo and behold, the US Federal Reserve Chairman has given a commencement address to the University of South Carolina, and his chosen subject was: Happiness.

He covers some important points, such as how after a certain income level, wealth and happiness become dissociated:
First, he [economist Richard Easterlin] found that as countries get richer, beyond the level where basic needs such as food and shelter are met, people don't report being any happier. For example, although today most Americans surveyed will tell you they are happy with their lives, the fraction of those who say that they are happy is not any higher than it was 40 years ago, when average incomes in the United States were considerably lower and few could even imagine developments like mobile phones or the Internet. Second, he found that--again, once you get above a basic sustenance level--on average, people in rich countries don't report being all that much happier than people in lower-income countries.

And that the little happiness disparity that there is once you're above the basic sustenance level is because of the effect you might call "keeping up with the Joneses":
...though, in any given country, the rich say they are happier than the poor do...

If I live in a country in which most people have only one cow, and I have three cows, then I will have lots of social status and self-esteem and will thus feel happy. But if everyone around me has a luxury car, and I am hung up on status, I won't feel very special unless I have both a luxury car and an SUV. This relative-wealth hypothesis can explain why rich people are happier than poor people in the same country, but also why people in richer countries are not on average much happier than people in poorer countries. It's the big fish in a little pond phenomenon.

All of this is an important distinction that policymakers should take into account far more than they ever do. Here's where Bernanke loses me:
Another thing that most people value is a clean environment. Air and water quality are not included in the broadest measure of economic activity emphasized in government statistics, the gross domestic product (GDP), although some economists have worked on ways to do so. But again, rich countries have more resources to devote to maintaining a clean environment and do tend to have better air and water quality than poor and middle-income countries, notwithstanding the fact that rich countries by definition produce more goods and services. Rich countries also generally provide people more leisure time, less physically exhausting and more interesting work, higher education levels, greater ability to travel, and more funding for arts and culture. Again, these linkages, together with the benefits of enjoying a wide variety of goods and services, are the reason that economic policymakers--at the behest of the public--usually put heavy emphasis on job creation and growth.

Emphasis mine to illustrate the non-sequitur. Maybe it's my mistake to interpret them as part of the same idea because they're in the same paragraph. Maybe it's his mistake to place the segment about the environment before the concluding segment about job creation and growth, so that the environment could be more clearly depicted as an exception. When policymakers place an emphasis on job creation and growth, it is most often with ambivalence toward the environment (though there are ways to promote job creation while keeping nature sacrosanct). It's a little misleading.

But the speech altogether is quite worth reading.

Thursday, May 13, 2010

The Overtime/Heart Disease Relationship

The BBC reports that working overtime increases the risk of heart disease. That's a shame, because all that time-and-a-half on the paychecks was doing wonders for GDP.

As a brief departure before coming back: the trouble with Galtism is that taxing higher income brackets actually increases upward mobility of the population. The reason for this is that as your income rises, so does your labor elasticity: you are free to take or leave additional work based on how much it pays. If higher taxes cut into your payment for this marginal labor, you'll be less likely to take the additional hours, leaving more work to be done by others, who will then move up the income ladder.

The overall effect is that people wind up working at higher-paying jobs for fewer hours each week, leaving you with both more leisure time and – returning now – less of a risk for heart disease. GDP suffers, but the people flourish.

Wednesday, May 12, 2010

Entering the Job Market in a Recession

The OMB has released some numbers that pertain to some previous posts here on the subject of starting your career in a recession. The key chart appears here:

So, if cohort X enters the job market under conditions of just 1% higher unemployment than cohort Y, even 15 years later, cohort X's wages are still 2.5% lower.

Quoth the OMB:
The long-term effect isn’t just a residual of low first-year wages: the author suggests that poor job match, lower prestige placements, and fewer opportunities for training and promotion also play a role.

I'd be curious, too, what effect could be developmental: does understanding of employment and adulthood tend to form through the start of one's career, and then stick with the individual, leaving less motivation or ambition? Perhaps a way to test this would be to displace people who began their career in locations with chronic unemployment/recession (such as, um, my hometown) and see if the wage effect still exists compared to those whose entire career has been built in the new location.

Friday, May 7, 2010

Tim Wise

It is well worth reading in full Tim Wise's recent article asking us to imagine if the tea partiers were black. Unlike the blog post that has been circulating lately, Wise's original post contains annotations for all his quotes and anecdotes.

Wednesday, May 5, 2010

Chickens and Private Health Care

From Paul Krugman:
Conservatives don’t like this; if few of them propose paying in chickens, there is nonetheless a constant refrain of calls for making the market for health care more like the market for bread, with consumers paying out of medical accounts and engaging in comparison shopping. There is, for example, vast romanticizing of things like Lasik and cosmetic surgery, which are held up as models for health care as a whole — even though they’re actually very poor models. (They’re discretionary and fairly cheap — not at all like the procedures that dominate health costs in the real world.)

Fighting Terrorism

One of my favorite new sources of information is a site called "Barking up the wrong tree," which appears to be written by someone who spends all his time looking through recently published research and abstracts to report to us, as he says, "just the interesting stuff." He recently reported from the Copenhagen Census on the subject of whether it is worth it to combat terrorism with anti-terrorism measures:

Three of the five “solutions” proposed here – business-as-usual, increased proactive responses, and enhanced defensive measures – have very adverse benefit-cost ratios under a wide range of scenarios, even when the most promising assumptions are invoked. The most effective solutions are the cheapest, but they must overcome the greatest obstacles that require either greater international cooperation or more sensitive and farsighted policymaking. Such qualities seldom characterize rich countries’ actions.

It's been my suspicion that the best way to react to acts of terrorism is to treat it like a natural disaster (and no, oil rig explosions don't count as "natural"). We should react quickly and maturely to help those in need and repair any damage done, but any large-scale response demonstrating fear of terrorists tends to justify that method of getting one's point across – and is also about as effective as attempting to stop all earthquakes or hurricanes.

It's possible the metaphor could extend further – that, much like we could look at global climate issues that could elevate the frequency and severity of hurricanes, if we are serious about reducing terrorism, we should look at global economic (and religious?) issues that could lead people to consider drastic methods to change their lot in life.

Some pretty imporant information regarding the disaster in the gulf

The WSJ reports that the flow of oil could have been cut off via the use of an acoustic trigger system that the rig in question lacked. The cost of the trigger would have been merely $500k (which you can compare to the rig's replacement cost at 560 million, or the billions that would be required for clean up of the disaster (which will probably not include billions more in undocumented externalized costs)).

William Galston of the New Republic documents some of the reasons why the rig might have lacked it. It wasn't required, and the Minerals Management Service (a division of the Interior Department) had experienced a shift in their policy recommendations between 2000 and 2003 regarding whether it should be required for every rig. If the insinuation is unclear or unpresumed, they previously advocated the requirement for each rig to be a regulation, later they thought they maybe the cost was a little too much.

I found the following particularly revelatory:

After the Bush administration took office, the MMS became a cesspool of corruption and conflicts of interest. In September 2008, Earl Devaney, Interior’s Inspector General, delivered a report to Secretary Dirk Kempthorne that has to be read to be believed. One section, headlined “A Culture of Ethical Failure,” documented the belief among numerous MMS staff that they were “exempt from the rules that govern all other employees of the Federal Government.” They adopted a “private sector approach to essentially everything they did.” This included “opting themselves out of the Ethics in Government Act.” On at least 135 occasions, they accepted gifts and gratuities from oil and gas companies with whom they worked. One of the employees even had a lucrative consulting arrangement with a firm doing business with the government. And in a laconic sentence that speaks volumes, the IG reported: “When confronted by our investigators, none of the employees involved displayed remorse.”

Galston conjectures the administration's role, "What we do know is that unfettered oil drilling was to Dick Cheney’s domestic concerns what the invasion of Iraq was to his foreign policy – a core objective, implacably pursued regardless of the risks."

Thanks, guys.