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 31, 2005

Nobel-Prize Winning Research Rejected

Thanks to BenS, here is a link to a paper that chronicles all the research that was rejected by journals but which later, when published elsewhere, led to Nobel Prizes for the scholars.

Sadly, the author seems to see this as some deviation from the ideal.
[M]ost of [the] instances discussed above deal with genuine resistance to scientific discovery and it is illuminating to ascertain some of the reasons why such a resistance exists in the first place.

A possible explanation that could motivate peer resistance to scientific discovery lies in the fact that new theories or discoveries often clash with the orthodox viewpoints held by the referees.

... In other instances the problem is that referees did not appreciated the potential or the interest of the new discoveries. ... Something is wrong with the peer review system when an expert consider[s] that a manuscript is not of enough interest to be published and later the work reported in such rejected paper earn[s] the Nobel Prize to their authors.
A more positive interpretation is to see these errors of commission and of omission as part of a normal, evolutionary process.

I see them as something to be expected, given scarcity. More importantly, I see the results as evidence that the system works! It is a ringing endorsement of competition among academic journals: if one journal rejects a brilliant, path-breaking article, another has an incentive to publish and move up in the citation rankings. Without that competition, some of the break-throughs might never be published.
For what it is worth, I noticed that the author had no instances of early journal rejection of Nobel-Prize winning work in economics.

Thursday, December 29, 2005

The Three-Inch Conspiracy, Inflation, and Money Illusion

What is the average difference between the true height of a basketball player and the height listed in the programme?

I had friends 40 years ago who used to laugh about being listed at 6'2" when they were really only 5'10" or maybe 5'11" with shoes on. This deception has been going on for decades; everyone knows it and everyone adjusts.

Here is more, buried in the comments section of this posting about Yao Ming. [h/t to Tyler Cowen's piece on Yao Ming for leading me there]. The consensus there seems to be that the average amount of over-statement of basketball players' heights is about 3".

Is the Three-Inch Conspiracy like simple inflation? Not quite, since inflation is usually represented as a rate of increase, not a specific amount of an increase. For the conspiracy to be be like inflation, it would have to be a 5% conspiracy or something like that.

Is the Three-Inch Conspiracy like money illusion? In some ways it is. While "everyone knows" the heights of basketball players are over-stated in the programmes, no one knows for sure how much each player's height is over-stated. And some people rely on official height data, even though the data are inaccurate. That seems a bit like money illusion to me.

Mutual Funds and MERs

Recently, I attended a social gathering where there were several fund managers for a firm that sells mutual funds. I commented with some question about the high management expense ratios [MERs] for their product and expressed a preference for passive, index-based funds with very low MERs (as I recall, this was after one of my acting gigs, and they knew me as an actor, not as an economist).

Their response was,

What does the "M" in MER stand for?
Management! We manage the fund so it does better.
I don't believe them. On average, especially in well-developed markets like the US markets, index funds tend to outperform managed funds, especially once all the fees are taken into account.

Now there is a calculator/analyzer available to help assess the fees and expenses involved with mutual funds. According to the Washington Post [reg. req'd]:
The online tool now contains up-to-date fee and expense information on practically all of the more than 18,000 mutual funds and 160 Exchange Traded Funds (ETFs)...

More than 50 million American households have money in mutual funds. What NASD has done is to go beyond just telling investors they need to scrutinize fees and expenses before investing in mutual funds. The regulator has provided a much-needed tool to help people put that advice to action.
Although Jeff Cosford has sent me some evidence that counters the theory, I still, in my blissful and rational ignorance, subscribe fairly strongly to the Efficient Markets Hypothesis.

Wednesday, December 28, 2005

France: The Ted Bundy of European Nations

From Vile France, by Dennis Boyles (h/t to BenS) [I quoted the first part of this material earlier] :
In very large numbers, the French don’t like us…What we mistakenly see as a craven, anti-Semitic, insecure, hypocritical, hysterically anti-American, selfish, overtaxed, culturally exhausted country, berefit of ideas, fearful of its own capitualation to Islam, headed for a democraphic cul de sac, corrupted by lame ideologies, clinging to unsupportable entitlements, crippled by a spirit-stomping social elite and up to its neck in a cheesy soufflé of multilayered bureaucracy is actually worse than all that. It’s vile.

… In just the last half-century or so, France has been guilty of eagerly abetting the Holocaust; perpetrating more postwar anti-Semitic acts than any other country in Europe; enabling and supporting state-sponsored genocide and slaughter in Africa and Asia; attacking unarmed civilians on foreign territory; arming enemies of Western democracies; treating its young with disain and its elderly with a neglect that is often fatal; suppressing conventional human rights, especially the right to free speech; protecting murderers and war criminals from justice; pursuing a foreign policy in which mendacity is a strategy used against both friends and enemies; polluting the earth while rhetorically demanding planetary hygiene from others; pursing illegal trade activities; engaging in massive, systematic corruption and greed; worshiping self-seriousness; and undermining American foreign policy wherever possible, no matter how many lives that costs. France looks great and seems swell but it acts hideously. It’s the Ted Bundy of European nations. (Denis Boyles, Encounter Books, 2005, p.5).

I don't know whether the London Public Library has ordered the book, yet [here is my earlier post on the subject].

Co-mingled Recycling at UWO

Several (many?) years ago, The University of Western Ontario embarked on a massive recycling programme. There were
  • Blue boxes for fine paper only
  • Blue swing-top cans for glass bottles
  • Blue swing-top cans for aluminum cans
  • Blue swing-top cans for plastic bottles
  • Blue swing-top cans for newspapers, and
  • White cans for other waste

That is a lot of receptacles! The hallways in some places seemed completely lined with recycling containers for different types of waste.

Something has changed. Maybe people at the university were not sorting properly, thus making the recycling more expensive (are literacy levels of incoming students deteriorating that badly?); or perhaps the sorting was not very beneficial relative to its costs. At any rate, most of the blue cans now have big, supremely and pretentiously redundant labels:

Beverage Containers
Glass, Plastic, Tin

Co-mingled? C0-mingled???

Why didn't they omit that unnecessary word and use "aluminum" instead of "tin"?

When is the last time you saw a tin beverage container, even a tin-coated one?

And when was the last time you used the self-redundancy, "co-mingled"?

Here is a piece I wrote about recycling many years ago.

Tuesday, December 27, 2005

How Much of a Worry is Global Warming?

Not much, if you accept the research reported by Joseph Bast in a report put out by The Heartland Institute. (also see Taken by Storm).

Here is a summary of just a few of the points made by Bast in his commentary on Michael Crichton's State of Fear:
... [T]he message of State of Fear has serious public policy consequences:

Most of the environment and health protection regulations in the U.S. ought to be reformed so they address real rather than imaginary risks, and concentrate on what works instead of the liberal orthodoxy of big government solutions to every problem.

The U.S. is quite right to stay out of the Kyoto Protocol--the global warming treaty--and ought to be doing more to persuade other countries of the world that the protocol is unnecessary, premature, and unworkable.
For more on global warming, in addition to the books shown below, I recommend this recent post at Cafe Hayek and this one by the ever-vigilant group at London Fog.

Monday, December 26, 2005

Self-Serve Check-outs

I had never seen or heard of "self-serve" check-outs until I visited my son in Houston a couple of years ago. To use one, you scan your own merchandise, scan your credit or debit card, bag your own groceries, and away you go.

My first reaction was, "Geez, I wonder what the inventory shrinkage (shop-lifting) is with this system."

Don Boudreaux of Cafe Hayek wondered the same thing. He attributes their success to trust and honesty.
The fact that the number of self-checkout lanes is increasing tells me that these lanes are proving to be successful — proving to be worth their costs. In turn, this fact tells me that the people who shop in these stores are generally honest. The number of cheaters, although surely positive, is not great enough to make the provision of self-checkout lanes a losing proposition for retailers.

Phil Miller has additional intriguing insight: Employee theft is generally a much more serious problem than shop-lifting.

While I was working on my Master's degree, I worked as an assistant manager for a well-known pharmacy chain and in terms of theft prevention, our number one focus was employee theft, not customer theft. My fellow managers and I went to seminars where we watched surveillance camera films showing various employees stealing from their stores. We also heard stories about employee theft. The cameras that were installed to identify theft were installed over the cash registers.

Employee theft takes lots of forms. Employees can steal cash, merchandise, credit card numbers etc. They can also help their friends steal stuff by placing unscanned merchandise into bags with paid-for merchandise.

By substituting capital for labor at the checkout stands, retail stores can help combat employee theft. With the self-service stations, I'd argue that since there are fewer employees handling transactions, many stores are actually preventing theft from occuring.
At least two questions linger for me:
  1. How do the stores deal with merchandise that has the electronic theft protection embedded when it goes through the self-serve checkout?
  2. We don't have them in Canada, yet. Why not? Is the relative price of labour (compared to capital) lower in Canada than in the U.S.? If so, not much. Or is Canadian retailing irrationally and inefficiently behind the times?

Sunday, December 25, 2005

A Terrific Gadget,
bordering on being a necessity

Last week, I bought one of these: an iRiver AFT-100 FM transmitter.
I use it to listen to podcasts through my car's sound system from my MP3 player while commuting to and from the university. It works really well, is easy to figure out, and has considerable flexibility (including three different, user-selectable, FM pre-sets, which come in handy if you have several different places on the dial that are clear at different parts of a long commute). Playing back music or interviews from an MP3 player through the car's stereo system works much better than driving with headphones (and is safer, too)!

I know there are many different devices on the market that do the same thing, but this one does the job really well for me.

Spider Stalemate

Some time ago, I posted a question about what happens in Spider solitaire when you run out of cards in the piles across the top, and the game won't let you deal any new cards because each column or slot must have at least one card in it. Some of the commenters did not understand what I was asking, but Chris (one of my brighter intro students) did. Furthermore, he sent me this graphic to show that, indeed, the game does essentially lock up or stalemate:

Those of you who are familiar with the game will see that in this play, Chris used the single-suit version and played nearly all of the cards from the piles across the top, leaving him with only nine cards plus an empty slot. The box in the middle says, "You are not allowed to deal a new row while there are any empty slots." But he doesn't have enough cards left in the piles to fill all the slots.

I'd call that a stalemate, not a loss.

Thanks, Chris!
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