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, October 29, 2005

Spider Stalemate

I realize I don't appear to manage my time as efficiently as others. But given my preferences and abilities, who is to say what is efficient and what isn't?

Anyway, before I became addicted to blogging, I played a lot of Spider solitaire. I played at the medium difficulty level. One question keeps bugging me:

In order to get the game to deal out a new set of cards, each of the columns must have at least one card in it. What happens if you've managed to peel off a whole bunch of runs, and there aren't enough cards left to fill each column? I've never done this, but it looks as if it should be possible.
I wonder if blogging and playing Spider fit the advice cited in the Marginal Revolution, "If you want to improve your well-being, make sure that you allocate your time wisely."

Great pick-up line?

From Overheard at Western. The incident occurred outside a club with a wild reputation:

A guy is standing on a street corner. He has one boot on, one socked foot out in the gutter, and is yelling at girls across the street...

Guy: Hey baby! You have diabetic ketoacidosis! I can save you!

Friday, October 28, 2005

Mystery Dinner Theatre

This weekend, I am performing in another Mystery Weekend at the Forest Golf and Country Club. The show begins after dinner this evening (Friday) and continues through the entire weekend until mid-morning on Sunday.

We actors must stay in character the entire time, which is both challenging and fun. The show is "Circus Murder", and I play Swami, a fortune-teller. As one might readily imagine, there will be considerable forecasting about oil prices and housing prices and anything else I can make up on the spot.

Last spring, when I was in one of these shows, I was able to use the hotel's internet service to keep blogging. I expect to be able to do so this weekend as well.
I have been traveling quite a bit lately. I have been able to keep up with posting to the blog, but just barely, and doing so has meant that I have not had the opportunity to reply to all the comments. Please accept my apologies. I appreciate the comments and next week my life might return to normal.

Another Important Reason to Stop Iran from Developing Nukes

From Yahoo and the Associated Press [h/t to Jack]:

President Mahmoud Ahmadinejad declared Wednesday that Israel is a "disgraceful blot" that should be "wiped off the map" — fiery words that Washington said underscores its concern over Iran's nuclear program.

... Referring to Palestinian suicide bomb attacks in Israel, Ahmadinejad said: "there is no doubt that the new wave in Palestine will soon wipe off this disgraceful blot from the face of the Islamic world."

Ahmadinejad's speech came hours before a Palestinian suicide bomber blew himself up in the Israeli town of Hadera, killing five people. Iran aids several militant Palestinian groups, including Hamas and Islamic Jihad, with support and training through proxies among Lebanese Hezbollah guerrillas.
Does the world really want a guy like this to have his finger on the button? His anti-Semitism is appalling (though expected), but his confirmation that many Muslims want Israel anhilated should serve as a warning to everyone else.

Update: Melanie Phillips has considerable detail in her insightful response.

With its customary hypocrisy, the alleged civilised world has recoiled in horror at the declaration by Iran’s President Mahmoud Ahmadinejad that Israel should be ‘wiped off the map’. So he’s a genocidal, Jew-hating maniac. So what’s new? Iran has never made any secret of its intention to annihilate Israel. It exports demented anti-Jewish and anti-Israel hatred to the Muslim world, it funds terrorists to murder as many Jews as possible (see the most recent victims this week in Hadera) and it is racing to build a nuclear weapon so that it can expeditiously carry out its professed aim to eradicate the Jewish nation state.

All this the world has known; and yet it has sat on its hands, occasionally extricating them to be wrung over Iran’s accelerating nuclear programme before resorting to the tried and tested strategy of maximum uselessness, diplomacy through the United Nations — fresh from that organisation’s triumph in disarming (not) that other threat to the world, Saddam Hussein; for which failure the head of its nuclear watchdog, Mohamed al Baradei, was doubtless awarded the Nobel Prize by a grateful Swedish establishment and wider world for whom America, not Iran, appears to be the greatest enemy of civilisation.

So Iran continues merrily on its diabolical way, murdering Israelis here, murdering Iraqis there, serenely building its apparatus of mass destruction while the alleged civilised world looks at Iraq and looks at President Bush and sucks its teeth and settles down to wait for the new Jewish holocaust wrapped in the mantle of sanctimonious opposition to pre-emptive action.

How Useful Is Game Theory?

from Steven Levitt:

Unfortunately for game theory, the simple ideas that are so alluring were quickly mined. What followed was less interesting. Modern game theory has become extremely mathematical, notation heavy, and removed from everyday life. Many of my colleagues would not agree with me, but I think game theory has failed to deliver on its enormous initial promise. I’m not the only one who feels this way. I was recently speaking with a prominent game theorist. He told me that if he knew what he knew and he were just getting started in the profession today, no way would he be a game theorist.
from John Lott:

If economics isn't testible, you don't have a science. Having a certain richness is nice, but there are simply too many game theory models that end up making similar predictions. When you can't even differentiate monopoly behavior from perfect competition in predation what good is it? Indeed the goal frequently seems to be how many different models can be generated. I also agree that Game theory creates a bias towards thinking about everything in terms of monopoly. What is interesting in Game Theory disappears when you assume that firms are behaving competitively. For whatever it is worth, I wrote a book on all this entitled: "Are Predatory Commitments Credible?" Take a simple example in Predation to show how sensitive the results are. All the models basically look at the information held by the predatory firm. But what if the victim firm can sell short the stock of the predator? Given that the costs to the predator from actually engaging in predation are so large, indeed much greater than the losses imposed on the victim, victim firms that sell short the stock of the predatory might not only hope that the predator enters the industry but the victim firm might now want to stay in the industry just so that they can benefit from the predator's losses. Of course, the very possibility of short selling can make it unnecessary. The whole thing is a mess.
from William Polley (where there is a wonderful summary of the recent discussion by others not cited above):
Game theory, like any model building apparatus, is a way of keeping track of what's going on so that you don't contradict yourself. I certainly understand the frustration of Mandel and others over the non-falsifiability of models with multiple equilibria. (See also the story Roberts relates in his post.) However, I think a number of important real-world situations may be characterized by coordination failures and multiple equilibria. It is worth having a framework that can accommodate that, as long as you don't start seeing multiple equilibria behind every tree. It's not a theory of everything... at least not yet, and it may never be. It's one more tool in the toolbox, useful for identifying the effect of changes in the rules or institutions and making sure you don't violate your own assumptions.
I'm sure Polley is correct, but I really prefer the the overstatements of Levitt and Lott. For a brilliant and very readable introduction to game theory and the prisoners' dilemma, read this.

Thursday, October 27, 2005

Maybe NOW Posner Will Become a Supreme

With the withdrawal of Harriet "I'm a crony" Miers from the nomination to become a Supreme, perhaps now President Bush will nominate Richard Posner.

Verdi Requiem - a Fabulous Performance

If you live anywhere near London, Ontario, go see the Thursday night performance (tonight if you're reading this on October 27, 2005) of the Verdi Requiem by Orchestra London. I saw it Wednesday night, and it was fabulous.
  • The tempos and tempo changes were excellent.
  • The tuning was, for the most part, spot on.
  • The soloists were great.
  • The spectacle was spectacular.

I have seen this piece performed live at least three times and have listened to numerous recordings of it over the past 45 years. Wednesday's performance was absolutely wonderful.

Update: a friend who attended the concert on Wednesday enjoyed it so much, he is planning to attend it again tonight.

Is It Time to Scrap the Food-Aid System?

When we read about famines, our first reaction is to want to send food. Most of us are caring people who are deeply disturbed by the continuing famine in some areas of the world.

At the same time, when famines recur at frequent intervals and when we despair about whether the famines will ever become a thing of the past, it is time to question the way food-aid is delivered.

"The food-aid equation actually hurts Africa more than it helps," says economist James Shikwati, director of the Inter Region Economic Network in Nairobi, Kenya. "If it was helping," he says, "the problem would be solved by now." In fact, he sees it as fundamentally unethical. "You can't say you're helping people if you're not helping them" break the cycle of famine. African politicians use hunger as a tool to gain votes, he says. Western relief agencies use it to fund-raise. This creates a "manna mentality" where Africans wait for bread "to drop from heaven."

And once again, the system faces a major test in southern Africa, where 12 million people are reportedly on the verge of hunger.
How long will it take for people to realize that raising the height of the social safety net affects people's incentives? Why produce food if others will provide it? Why produce food if others are going to undercut and depress the prices I might receive?
[Update: Gary Becker covers this topic as well in his most recent posting.

But shouldn't price controls also be used in poor countries when they experience a catastrophic shortfall in the supply of a food staple, such as rice or potatoes (the Irish potato famine is the best-known example)? The poorest families may be unable to pay the higher prices, and they could face starvation. Still, I do not believe price controls are a good solution, for they discourage greater production and imports of the scarce food, and they encourage farmers to hoard their food crops. Governments of these countries, and richer countries too through humanitarian aid, should instead become active in buying rice or whatever crop is involved, and reselling that to poor families at lower prices. Or these governments should increase income transfers to the poor that would enable them to pay the high market prices.

In the modern world, famines are caused not be high prices, but by bad governmental policies. Famines are virtually unknown in modern democratic societies. Yet famines and large-scale starvation are still sometimes found in dictatorships, such as in China during Mao's Great Leap Forward. The problem there was not high prices, but Mao's foolish policies. He first caused farm output to fall by his misguided attempt to leap forward,. He then forcibly took much of the limited supply of food from farmers, so that many of them starved to death, in order to feed city populations. In addition, he sold some of the reduced crop of grains abroad for hard currencies rather than importing grains to ease the food crisis.
More people need to see this movie:
. . . . . .
[Why is this fabulous, meaningful movie not available on DVD???]
[thanks to Jack for the link]

Ten Principles of Sound Tax Policy

From the Tax Foundation's Tax Policy Blog:
  1. Transparency is a must.
  2. Be neutral.
  3. Maintain a broad base.
  4. Keep it simple.
  5. Stability matters.
  6. No retroactivity.
  7. Keep tax burdens low.
  8. Don't inhibit trade.
  9. Ensure an open process.
  10. State [provincial] and local taxes matter.

Each point is explained in their posting. The points make sense

Wednesday, October 26, 2005

Equality of Opportunity
vs. Equality of Outcome

Phil Miller has an excellent posting at Market Power, contrasting equality of opportunity with equality of outcomes. Much of his discussion reminds me of some issues we dealt with in the UWO economics department many years ago.

On the same topic, I have a friend who teaches economics at a midwestern university. She says that economists are scooping up many of the grants for reduced teaching loads to do research, much to the dismay of the socionomologists and others from similar areas of study.

She wrote:
Well, the chairs of history, women's studies, sociology, etc. are upset because they feel, as I understand it, there is a "bias" in favor of quantitative studies and against qualitative (i.e. feelings-based) research. So, instead of having the teaching-load reductions based on merit between departments, they want them spread more equitably between departments. There are already restrictions placed on who can get them (if you had one in the past three years, your application is given lower priority, etc.). Now some want more restrictions.

In response, I think I will tell my students that I can assign only a limited number of A's each semester, and I am going to spread them around evenly. If a student gets an A on a test, s/he cannot get an A on another test regardless of how well they perform, for the next three tests. Instead, I will give the A to someone else so they don't get their feelings hurt.
Strike another blow against the meritocracy.

Tailor Your Job Application to the Job and the Recruiter

From someone on Craigslist comes a very helpful item with tips on how to apply for a job [h/t Newmark's Door]. The creativity suggested in the item might be good for some potential employers, but not all. As the writer says,
If you're applying to an accounting job with a large corporation, where the HR manager lets dust collect on her bifocals, you may not want to heed all of my advice.
My advice: scope out the potential employer and make sure the opening paragraph in your letter addresses what you think they are looking for.

I, for one, get put off by breezy, colloquial applications. But, then, I wear grimy trifocals.

Reminder: Newmark's Door belongs on everyone's top five must-read list.

Tuesday, October 25, 2005

Is Infant Mortality a Good Measure of the Quality of Health-care Systems?

From Brian Ferguson at Canadian Econoview:
Canadians are used to hearing comparisons between infant mortality rates here and in the US used as an argument for the superiority of our state-run health care system. For example, in 1998, the overall infant mortality rate for the US was 7.2 per thousand live births, compared with 5.4 per thousand in Canada...
Infant mortality comparisons are tricky things. For example, mortality risk is closely linked to birthweight: low birthweight means high mortality risk. With that in mind, let's look at some detailed figures from the same periods as those averages were calculated for. In these figures, "g" is grams, and 2500g and up would be normal birthweight.
Deaths/1000 live births in Canada vs. the U.S.:

1500 - 1999g: 28.7 in Canada, 29.0 in the U.S.
2000 - 2499g: 12.4 in Canada, 12.5 in the U.S.
> 2500g: 2.3 in Canada, 2.6 in the U.S.

The infant mortality rates in the U.S. are slightly higher than those in Canada in these weight ranges, but the difference is VERY slight (what statisticians would call statistically insignificant). The data presented by Brian Ferguson show that the differences go the other way for babies born with very low birth weights: the infant mortality rate is higher in Canada in the U.S. There are many more data available at his site, along with his usual pithy discussion and analysis; please read the whole thing before dashing off a comment here.

While there are many possible explanations for the differences, one conclusion that emerges is that rough comparisons of infant mortality rates are probably not a good indication of the overall quality of medical care.

Causation versus Random Events

I have read too many articles and heard too many people say things in which it was clear to me that luck was at work, but they attributed intent to animate or inanimate objects. BenS sent the latest outstanding example which says a dead goose got revenge on a hunter. I think of "revenge" as a motive, as something involving intent; I do not think of revenge as just deserts that might have occurred as a result of weird, low-probability events.

A Swedish hunter spent two days in bed after being knocked unconscious by a Canada goose that landed on his head moments after his son shot it dead, news reports said Wednesday.

The goose had been flying about 66 feet up in the air when it was shot by Carl Johan Ilback, who was hunting with his father, Ulf, along a stream in eastern Sweden in August.

When the goose dropped from the sky, it hit Ulf Ilback in the head and knocked him out, he said.

''It wanted to extract its revenge, I assume,'' Ulf Ilback told local newspaper Extra Ostergotland. ''If it had gotten a better hit, it could have broken my neck.''
As amusing as the story is, I wish this kind of nonsense were not disseminated by the media. The dead goose did not extract any revenge, at least not in any intentional, vengeful sense. There was no mens rea [loosely: guilty mind] since there is, presumably, no "mens" in a dead goose.

A major problem that many people have in trying to understand the world is that they attribute causation to random events. There is nothing wrong with accepting the fact that there is some randomness in our lives. The important thing is to understand the fundamentals of hypothesis testing and reasonable criteria for rejecting the hypothesis that an event was a random occurrence.

Otherwise maybe we'd all be Calvinists or Presbyterians, believing in predestination.

Monday, October 24, 2005

Is the U.S. on the Cusp of a Depression?

Russ Winter at the Wall-Street Examiner thinks the U.S. might be on the cusp of a Depression:
    • There are a number of non headline economic reports that now suggest the US is on the cusp of a big depression....
    • We are staring at a very big housing slowdown here, for both building and remodeling. ...
    • Just 18% of Americans believe the economy is getting better while 66% say it is getting worse. That's a more pessimistic assessment than a month ago when 23% said the economy was getting better. A year ago today, 37% thought the economy was getting better.
    • High energy prices also feed into reduced demand, which in turn means less trips to the mall, fewer jet flights, reduced industrial demand...
    •'s not just energy and employment compensation. A credit contraction appears to be under way. ...

I'm not as pessimistic as he is.

My simplistic macroeconomic model says that the long-run Phillips Curve and long-run aggregate supply curves are vertical. Whether, to what extent, and how long an economy goes into a depression (vs. a mild recession) depends on how readily prices and expectations can adjust to underlying changes in reality. And,
  • given all the advance warning we have had,
  • given a renewed sense of the importance of self-reliance that I sense is emerging (possibly following the hurricanes), and
  • given the overall price flexibility in the U.S. economy,

I expect the adjustments in the U.S. economy to be smoother and quicker than they were in the late 1970s and early 1980s.

Anti-Semitisim: The Socialism of Fools

In a brilliant editorial, Robert Fulford writes in Canada's National Post [$, unfortunately; thanks to Jack for the link]:

In the most fetid swamplands of leftwing British academe, it is not enough to condemn Bush, Blair and the Iraq war while endorsing all Palestinian claims to the West Bank and Jerusalem. New rules require that you also punish Israeli professors and make them suffer for what you regard as their country’s sins, even if the particular professors are critics of the Israeli government.

This argument, sometimes called the Academic Intifada, looked like a temporary aberration when it surfaced three years ago. Today it’s become a permanent (though by no means triumphant) belief among certain intellectuals.

... The British may disapprove of the Chinese government but no one proposes banning academic relations with China — or even with the U.S., which many British professors regard as the world’s most dangerous nation.

Only Israel has been selected as a target for boycotting.

I posted several items about the AUT and its discriminatory, anti-Semitic, boycott attempt last spring [see here, here, here, and here].

Fortunately, saner members of the academy at large are resisting these anti-Semitic tendencies. One web-site which I recommend, and which Fulford mentions as well, is that of David Hirsch, called "Engage".

Other related valuable websites and blogs include

Can Nurse Practitioners Help Reduce Medical Costs?

That's a pretty silly question, isn't it? Of course they can. There are many aspects of health care that can be provided at lower cost by nurse practitioners than by MDs. [see Phil Miller's take on this, for example]. So why don't we see more nurse practitioners in Canada?

In this lengthy, but insightful and well-informed piece, Brian Ferguson explains the situation. Here is a brief excerpt from his piece:

There is a way to bring NPs into our health care system, and to do it quickly and relatively easily. It won't happen, because it involves letting the market work...

[I]n the real world of Canadian health care policy, all that will happen is that we will continue to fall further and further behind the US in the use of NPs and the like. We'll have endless meetings whose participants do nothing but bicker, and we'll produce lots and lots more glossy reports saying that NPs would be a really valuable addition to our heath care system and that the stakeholders will be getting together to try and figure out how to integrate them into Medicare .....................

And we'll continue to have a shortage of providers of primary care, and those of our nurses who would make really good NPs will go to the US, where the market says they're highly valued. But at least we'll still have a publicly run health care system, and ultimately, that's all that matters, isn't it.
To his credit, my family physician works with a nurse practitioner.

Sunday, October 23, 2005

Should I Podcast My Introductory Economics Lectures?

Several days ago, John Chilton sent me this article about professors who podcast their course lectures. Since I have been involved with several Radioeconomics podcasts in the past few months, that article prompted me to think about whether I, too, should put audio versions of my lectures on-line for students (and others?) to download. I realize this is a fairly lengthy posting, but I would really appreciate some feedback on this question.

When I asked my intro students if they would be interested, over half seemed quite enthusiastic, for what it's worth to judge enthusiasm from a show of hands in a classroom. Here are some thoughts/concerns I have had so far:

  1. Will students cut classes more often? Probably not much in economics. Much of what happens in class involves graphs and equations. These will not transfer easily to pure audio presentation. Rather, most students who download the lectures would do so for review. At the same time, if students miss a class, getting a podcast audio version, along with a classmate's notes, would be better than not being able to hear the audio. And in the end, if providing the lectures on-line helps most students learn more economics, that's what counts for me.
  2. Technology. I have no idea what to do. I expect I do not want to use a voice-activated recorder, that I want one that will produce high quality recordings, and that the lectures must be easily downloadable to my PC and then easily and quickly uploadable to the internet. I am presently considering an Olympus DS 2200 or Olympus WS-310M digital recorder, but I have no idea whether either of those is the right recorder for what I would like to do. I guess whatever I do, the final uploads should be in MP3 format, right?
  3. Who owns the lectures? My instinct is that the intellectual property of my lectures is as much mine as are the notes used by professors who write textbooks for their courses. In that sense, I would have the right to use the audio recordings of my lectures in ways that would suit me. But I am not sure about this.
  4. Related to #3. If the university has the property right to the audio of my lectures, it will surely insist that the lectures be placed on its password-protected course websites, meaning others would not be able to download the lectures.
  5. Protecting intellectual property. I have no reservations about other individuals' listening to my lectures. I would, however, be upset if I learned that other universities were requiring their students to download my lectures. What remedies would I have (remember I'm in Canada) and how might I deal with this potential problem? I am especially concerned that access not be restricted to individuals who might want to listen to them.
  6. As I contemplate recording my intro lectures for others to hear, I realize I really need to tighten up my lecture style and presentation. There are things that I say and do in class [e.g. a discussion of why, in an example, I should set fixed costs at 69 instead of 60] that I might be reluctant to go through if I knew the lectures were being recorded for podcasting. How much spontaneity will I lose, and how much might this loss in spontaneity affect the quality of the lectures (for better or worse)?
  7. Language. Several years ago, in a snit because the university refused to give me an early retirement buy-out, I started swearing in class. A LOT. Friggin' this and farkin' that, only not the euphemisms. I shouldn't have been surprised, but student evaluations of my teaching went up.
    This year I have tried to clean up my language in the lectures. My students tell me the podcasts would be much more popular if I would start cussing again -- Trash-Mouth Economics:
    "Shift the G.D. supply curve upward, not downward!"
    "It's like taking a frickin' derivative, for those who've taken calculus."
    "J. Flippin' C.! You folks aren't sociologists, are you?"
  8. Addendum: I'm not sure where to host the podcasts. Any suggestions for a good host/server would be very welcome.


Collection of Mark Steyn Quotes

What is your favourite quote from Mark Steyn? Odds are that it is listed here [h/t to Jack]. Mine is:

"These days, the Left advances its causes more effectively through the courts than through elections, for the fairly obvious reason that very few people are dumb enough to vote for this stuff."
Or maybe this:

On the West Bank, almost all the humdrum transactions of daily life take place in a culture that glorifies depravity: you walk down a street named after a suicide bomber to drop your child in a school that celebrates suicide-bombing and then pick up some groceries in a corner store whose walls are plastered with portraits of suicide bombers."
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