Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, December 04, 2004

Rude Christmas Card

I've sent some variation of this card to friends and relatives nearly every year for over a decade. I'm sure they don't all appreciate it, but it has become such a tradition that they feel lost and left out if I don't send it out.

Change in Demand vs. Change in Quantity Demanded

Here is yet another journalist who doesn't understand the difference between a shift of the demand curve and a movement along the demand curve, (Quoted from WSJ OpinionJournal; tip provided by John C.)

Kelly Zito, Economic Illiterate
From an article by Kelly Zito, a staff writer for the San Francisco Chronicle:
'Some economists have warned for several years that housing markets in expensive cities like San Francisco could become victims of their own success. That is, sky-high home prices could drive consumers from the market, forcing property values lower.'
Uh, yeah, Kelly, that's what's called "the law of supply and demand." Seriously, you can look it up.
This one belongs on the end-of-term exam!

If this writer really talked to "some economists", I would love to know who those "some economists" are. And, no, the writer is not speculating about the adjustment paths of prices over the long run. The full article is here, and it displays pure economic ignorance.

The Arabian Gulf?

A witty response to an ongoing controversy (free registration required) about the National Geographic's Atlas. It's editors decided to list "Arabian Gulf" in parentheses as an alternative name for the Persian Gulf. Not everyone is thrilled with the decision, especially not Iranians of Persian descent. To see a well-planned response, Google "Arabian Gulf", and then click on the first entry,
Also, check out the reviews of the Atlas at
(Thanks to John C. for the pointer)

Is Curling "Sweeping the Nation"?

Some years ago, I saw a survey showing that out of 104 sports, curling ranked 101st in popularity.

Since that time, the rules have changed a bit, with the effect that the games are no longer boring 2-1 or 1-0 defensive games. By instituting a time clock and the "free guard" rule, whereby curlers are not allowed to knock opponents rocks off the ice for the first few throws, the game has more offense now and is more interesting to television viewers. [further evidence that "people respond to incentives"]

I've been watching curling, off and on, for about twenty years. It's an interesting mix of strategy and skill. But until last week, I had never tried curling. It isn't easy, and all that sweeping is pretty good exercise. For those who'd like to know more about the sport, here's a good primer.

Friday, December 03, 2004

"I Wasted 12 yrs of My Life" - Dutch communist

In 1969, Dutch intelligence set up a sham communist group, run by Pieter Boevé, and very well, it seems. He traveled with and hobnobbed with leading Chinese/Maoist communists for decades. When all was revealed, one of the faithful followers of Boevé was pretty upset:

"I totally wasted 12 years of my life," says Paul Wartena, an ex-MLPN member who was so dedicated to the cause he used to donate 20% of his salary to the fake party. He says he "had some doubts now and then" about the MLPN but stayed loyal because "I was very naive and Mr. Boevé was such a good actor." Now a researcher at a university in Utrecht, Mr. Wartena wants Dutch intelligence to pay him back for all his donations.

Mr. Boevé, now 74, scoffs at his acolyte: "He was an idiot."
What he said. Knaves and fools.

[quote from The Wall Street Journal ($subscription required), thanks to John C. for the tip]

Bank of Canada Policy and the Rising Loonie

Bill Robson of Canada's C.D. Howe Institute is a superb, level-headed analyst. He recently had very nice piece in The National Post ($ subscription required; thanks to Jack for the pointer) about the rising U.S. price of the Canuck Buck and the appropriate response from The Bank of Canada. Quoting from the column,

The effects on the Canadian economy of the world’s changing appetite for natural resources are not something monetary policy can offset. While Bank of Canada governor David Dodge remains vigilant for signs that the exchange rate’s movements might affect Canadian growth enough to make the bank miss its inflation targets, responses to concerns about competitiveness or Canada’s economic structure arising from the loonie’s flight are not his responsibility.
Talk about perceiving money as neutral! (as indeed it is in the long run).

Now let's wait for politicians to start putting pressure on the Bank to reduce interest rates in order to help out Canadian exporters. Steve Poloz, Chief Economist for Export Development Canada, in his weekly newletter, identifies these industries as most vulnerable:

(1) clothing, leather and textiles;
(2) furniture;
(3) fabricated metals;
(4) electrical appliances; and
(5) services, especially tourism.
I expect these are industries in which, for the most part, Canada does not have much, if any, comparative advantage. Many of the firms in these industries were surviving primarily because the Canadian dollar was undervalued relative to purchasing power parity.

The D.C. Stadium Saga

Both Skip Sauer at The Sports Economist and Phil Miller at Market Power have had several interesting recent postings on the economics of sports.

Sauer and Miller both write about the D.C. stadium on-going saga. It appears that Washington Times columnist Loverro disagrees with economists who find that the economic benefits of have a major league sports team are very small, calling one a "pencil-necked geek". I guess he wouldn't like this piece put out by the C.D. Howe Institute, in which I argued that the local multiplier might even be negative for major league sports teams. It looks to me as if most journalists and politicians who get this wrong ignore two important phenomena:
  1. The diversion effect. Much of the new spending attributed to the presence of the sports team is diverted from elsewhere in the local economy. It isn't net new spending in the local economy, but the diversions are often wide-spread and not so easily identifiable.
  2. The marginal propensity to import. Even if people come into the area and spend a lot of money, much of what they spend just leaks back out of the local economy; it doesn't stick around to increase local demand for goods and services. This is especially true of incomes earned by players and owners.

The sizes of these two effects depend on the specification of the geographic size of the local economy, but they work in opposite directions: if the area is small, the diversion effect is small but the import effect is very large. If, though, the geographic area of the local economy is defined to be larger and more inclusive, the import effect gets smaller, while the diversion effect gets larger.

David Frum on Canadian Media Bias

David Frum pulls no punches ($subscription required, but you can sign up for a 6-day trial):
It's hard to figure out which bias is stronger in the Canadian press: its hatred of Stockwell Day or its enthusiasm for the late Yasser Arafat. Combine the two and you get quite an explosion -- as The Canadian Press proved with an almost heroically biased hit piece on Mr. Day last week.
Not that Stockwell Day was a very good leader of the opposition, and not that
media bias is new, but Frum's criticism of the mainline media is choice.
[Thanks to Ben and Jack for the pointer.]

Thursday, December 02, 2004

Resume Help for Students

According to this recruiter from Microsoft, make sure you present yourself as a human being, not just a list of jobs. If I were actively looking for a job, my equivalent of "Monkey Boy" might be my very brief appearance in the Finger Eleven video; who cares about a long list of publications and citations, anyway? (link courtesy of Newmark's Door)

Avocados? Will beef and lumber be next?

While George Bush is in Canada, hearing how Canadian producers would like the U.S. to halt its protectionist stances toward Canadian beef and softwood lumber, we learn that the U.S. is opening its border (in stages) to more imports of avocados that compete directly with those raised in California (link via Drudge). This is just another example of producer/landowners seeking to protect their rents at the expense of consumers. And given the recent history of protectionism in the U.S., I'm surprised the consumers won out in this case. I wonder if it had anything to do with how California voted in the last election...

Keeping Current onThe Ukraine

If you want to keep current with what is happening in the Ukraine (you should -- it's a potentially very rich country and serious global economic force, if they ever gain economic stability and solid legal entitlements), I strongly recommend the blog of Professor Banaian. He has been there, studied there, and written about their monetary system, and he has a deep passion about the country and its people.

Walkerton, E-Coli, and Incentives

In May of 2000, there was an e-coli outbreak in the water supply of Walkerton, Ontario, a small town about an hour north of where I live. In its early stages, as people were becoming ill, the quality of the water supply was questioned, but the water managers assured the public the water was safe.

It wasn't. In the end, 7 people died as a direct result of the outbreak, and over 2000 were made ill, some with permanent damage.

It turns out that the brothers who were charged with monitoring and managing the town's water supply, Stan and Frank Koebel, had been intentionally falsifying water safety records; and to cover their tracks, they lied even when pressed by others about the condition of the water supply. For their actions, they have copped a plea to "common nuisance". No charges of murder, manslaughter or negligent homicide. Not even forgery.

One reason the crown settled for such mamby-pamby punishment is that many people in Ontario, including a commission that reviewed the situation in Walkerton, are trying to blame the former conservative provincial gubmnt for having cut back on funds to monitor water supplies. This is mostly political grandstanding; but it also reeks of requiring higher levels of gubmnt to bail out the lower levels.

Why should the provincial gubmnt be held responsible at all for the actions of these two men who knowingly falsified documents and who lied about it? Holding the provincial gubmnt even partially responsible has the effect of letting these guys (and others) off the hook. It also absolves the town that hired them of all responsibility. We should not be creating incentives like this.

My take on this matter is that these guys took actions which they knew would cause serious harm. They deserve much more punishment than the maximum two-year jail sentence. And if they don't get much jail time, I wish they could be nailed in civil court. The trouble is, these guys don't have anywhere near enough wealth to compensate the victims. And that's why we need criminal law as an additional deterrent against this type of behaviour.

Update: Read what this blog has to say on the topic -- superb!

Wednesday, December 01, 2004

How Unimportant is Canada to the U.S. (Media)?

I have Slate's Today's Papers sent to me daily. It provides a summary of the front pages and other items of five major newspapers in the U.S.

Even though U.S. President Bush is visiting Canada, Today's Papers contains not one mention of Canada, of the talks between George Bush and Paul Martin (Canada's Prime Minister), nor of the on-going trade disputes between the countries.

At 8am this morning, I checked, and sure enough, there was no mention of Canada in the front pages of the on-line versions of today's NYTimes, the LATimes, the Wall Street Journal, or the Washington Post. However, the USA Today does mention the President's visit to Halifax, as well as his press conference in Ottawa.

Anti-Americanism in Canada

I was born and raised in the U.S. I moved to Canada in 1971, delighted that the best job offer I received was from a school in a country I was considering fleeing to if drafted. In short, I was very happy to move to Canada.

However, I have always felt there was a... je ne sais qua... an edge in my relationships with many Canadians, as if my being American made my views less worthwhile. Well, Nora Jacobson nails it pretty well:

For me, it's been one of almost daily confrontation with a powerful anti-Americanism that pervades many aspects of life. When I've mentioned this phenomenon to Canadian friends, they've furrowed their brows sympathetically and said, "Yes, Canadian anti-Americanism can be very subtle." My response is, there's nothing subtle about it.

In general I hear attacks on Americanism as attacks on policies designed to require that people take more responsibility for the results of their decisions. Canadians seem to want to have a higher social safety net than Americans do. An hour or two listening to CBC gives a sharp edge to this divergence in views.

And so, as Jacobson says, (thanks to Jason for the pointer)

The anti-Americanism I experience generally takes this form: Canadians bring up "the States" or "Americans" to make comparisons or evaluations that mix a kind of smug contempt with a wariness that alternates between the paranoid and the absurd.

Of course, that's in Toronto. In the west (and in most of Canada, it turns out, according to a poll done for Global Television), Canadians are more upset with the U.S. because of its trade restrictions on beef and soft-wood lumber.

BSE and cattle futures

(1)The most recently tested cow turned out not to have mad-cow disease. (2)We keep hearing rumblings that maybe the U.S. will start allowing more shipments of more beef from Canada to the U.S. These two news items should have an impact on the futures markets, if traders believe the public policy pronouncements of the bureaucrats and politicians.

Even though herds are smaller now, it looks as if the U.S. futures markets might be anticipating there will be an increase in supply (or further reduction in demand) over the next year. But not much. Shows how much traders believe things are going to change.

Tuesday, November 30, 2004

Stress and Aging

I have always looked a lot older than I am. I guess that's due, in part, to stress (Washington Post, free registration required):

If the findings are confirmed, they could provide the first explanation on a cellular level for the well-documented association between psychological stress and increased risk of physical disease, as well as the common perception that unrelenting emotional pressure accelerates the aging process.

I guess I need to learn to chill out. Alcohol? Drugs? Less caffeine? Well.... here's a quote from a recent piece in Slate:
While diet and intake of antioxidant vitamins appears to have had little effect on longevity, moderate wine drinking and daily consumption of caffeinated coffee were both linked to living longer.
So the existential question for today is, "Should I or should I not drink coffee?" 8-)

Nature vs. Nurture and Adoption

As a parent of both biological and adopted children, I found this posting at The Marginal Revolution fascinating. Before we adopted our daughter, I did quite a bit of reading about adoption. One source said that parents of adopted children believe that genes are much more important in influencing how children turn out than do parents who have no adopted children.

Another piece that was published long ago by the Child Welfare League indicated that the best predictor of how well an adoption would turn out was how well the child matched up with the adopting parents pre-adoption image of the child (i.e. did the parents get what they wanted or were they forced to accept second or third choice because of the shortage of adoptable infants?). In fact, when that study was conducted, one couldn't reject the hypothesis that the effective marginal product of social workers placing adoptable infants was zero or negative.

I have more on that topic in my piece, "the Social Costs of Adoption Agencies" that appeared in International Review of Law and Economics 6 (1986): 189-203. I also have a short piece (available here) on "adoption" in the New Palgrave Dictionary of Law and Economics (1998).

Students, Studying, and More Lies

A little over 80 years ago, when I was an undergraduate, several respectable folks told me that I should expect to study two hours outside of class for every hour of lecture time. I figured that wasn't too bad. I had about 16 hours of classes each week; so if I studied 32 hours, that would leave me with plenty of time for my part-time job and lots of leisure. Hah!

I attended Carleton College in Minnesota. Students there were called "bookers" because they studied so much; the most popular date was to invite someone to go to the library to study together. At the end of my first year, someone did a survey, asking how much we studied. As I recall, I exaggerated a wee bit and reported that I had studied an average of 35 hrs/wk during that year. I was shocked to see the final results of the survey: on average, students at Carleton reported that they studied about 50 hrs/wk! Either they were better liars than I was, or they worked harder. Either way, no wonder I was in the bottom half of my class.

This fall, following what had been said to me back then, I informed my intro students that I expect them to study about two hours out of class for every hour of lecture. Judging from some things that even the good students have said (or posted to their personal blogs), not many are studying this much. And the students here are no different from others all across North America, or so it seems from this article in the Chronicle of Higher Education (Thanks to Professor Banaian for the link)

One puzzling thing about the article:
About 40 percent of students say they earn mostly A's, with 41 percent reporting that they earn mostly B's.

Really??? 81% of students, on average, receive (I can't imagine they "earn" them) As and Bs? How is that? Are they all taking sociology courses? Or are they lying about how well they're doing? Or has there been tremendous grade inflation in most schools? Or are today's students just really really smart? Or what?

And if students receive As and Bs with so little work, what on earth are they doing with their spare time? Are more of them working longer hours at part-time or full-time jobs so they can afford to attend college or university? Are they watching more television? Socializing? Web-surfing?

Monday, November 29, 2004

They Call This Good Baseball Coaching???

An article in the NYTimes magazine profiles several sports academies for young athletes. Most of the article highlights the phenomenally high cost of such programmes. The high costs seem quite consistent with tournament theory in economics: if you hold out a very big prize for the winners (in this case, making it to the big leagues in any major sport), people will be more likely to put forth an extra effort (and pay extra money) to win that prize. It should not be surprising that people respond to incentives.

I wonder how successful at least one of these academies is going to be, though. Its coaches are teaching their young baseball students not only that it is good to make outs, but also how to do it!

Out at the ball field, I watched a four-hour practice devoted to ''situations.'' ''Runner on third base, one out, infield drawn in -- what do you do?'' Bolek asked. Tommy was the first to answer. ''You hit a fly ball.'' ''Right,'' the coach said. For the next 30 minutes, hitters stood in against pitching from an assistant coach and practiced taking the kind of swing that would produce an outfield fly ball. When the infielders moved back, they practiced hitting ground balls to score the runner. They worked on sacrifice bunts and on hitting ground balls to the right side of second base to move runners from second base to third base. .... The coaching at IMG is also, undeniably, first rate.

Any general manager who has an inkling of the content of Moneyball will not want to sign kids who think it is good to make outs. Young players should be taught to get hits and take walks and avoid making outs! Sabremetrics has a long way to go, I guess, before it affects many of the people still doing the training and coaching. Too bad.
(thanks to John H. for the pointer)

A Climate of Hate

So far as I can tell, most professors try to have an impact on students' ideas and thinking processes; that's one of the reasons we do these jobs. Sometimes, though, as we try to have an impact on our students, professors can be overwhelming, overbearing, and overpowering. Sometimes it is explicit and the result of being control freaks; sometimes it is just because professors operate from a position of authority, controlling the students' grades.

But we should draw the line before we get to the climate of fear and hate that has been created in some classrooms at Columbia University:
"Professorial power is being abused," said Ariel Beery, a senior who is student president in the School of General Studies, but stresses he's speaking only for himself. "Students are being bullied because of their identities, ideologies, religions and national origins," Beery said.

When polemics begin to dominate scholarly inquiry, we have good cause to worry about the quality of education the students receive at such institutions.
Link from Ben and Clive (President of SAFS, the Society for Academic Freedom and Scholarship).
Also see

Sunday, November 28, 2004

The Budget of the Governess General

When Adrienne Clarkson became Canada's Governess General in 1999, she had an annual budget of $11 million to run a chiefly ceremonial office. Her current budget is $19 million per year. Her office has been under attack for quite some time because of its overspending, including a $5 million circumpolar junket to Moscow last year. Now it looks as if her annual budget will be cut by about $417K. That'll really cut down on her profligacy!

To see a picture of the Governess General being greeted by the Esquire Bedel (guess who) at The University of Western Ontario, click here.

Upon reflection, I think I could do her job for about $4 million/year.

Drive-Throughs, Anti-Intellectuals, & the Environment

Lake Tahoe, California, has banned drive-throughs at fast-food restaurants since 1987, believing that drive-throughs contribute to air pollution. In Canada, Toronto (pronounced TRAH-nah) and Windsor have banned drive-throughs in residential areas, arguing drive-throughs lower air quality in the neighbourhood. Kitchener, Ontario, is considering the same policy, as are some municipalities in British Columbia.

The stated reason for these bans (air quality) is simply incorrect. It turns out that parking your car, going in to get your food, and then restarting your car uses more fuel and causes more pollution than idling your car while you wait in a drive-through queue. The results of a study done by RDWI showing this result are summarized in the National Post ($ subscription required, thanks for the tip, Jack). Furthermore, banning a drive-through in one area can induce some people at the margin to drive farther to a different area where they can use a drive-through, thus further contributing to pollution.

I expect that some people favour the ban on drive-throughs because they don't want the extra traffic in their residential neighbourhood. Others, however, see drive-throughs as a hated symbol of our North American consumerism. This nefarious group happily asserts that drive-throughs contribute to air pollution, even though the evidence is that using drive-throughs reduces pollution! What a bunch of feel-good anti-intellectuals.

Maybe overall air quality would be improved if we left our engines running while we go into the doughnut shop to get our coffee and bagel?

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