Re: Self-assesment vs. Rationality
In a message dated 11/10/02 8:41:23 PM, [EMAIL PROTECTED] writes: << There is a difference between ignorance and irrationality - that is the central point of this literature really. >> Yes. Somewhere along the line someone--either the most ardents adherents or the most disingenuous opponents--has defined "rational expectations" as meaning that people are perfect prognosticators, omnicient not only about past conditions, but about future conditons as well. Under the definition nobody has "rational expectations."
Fw: True costs of oil and gas (3 articles)
"Higher energy prices are needed now to signal the real > scarcity to come. Without higher prices we will not invest in the > alternative energy technologies needed for a smooth transition to the > post-petroleum age. Without higher prices we will not conserve the > fossil energy needed to manufacture those alternative technologies. > Without higher prices, argues petroleum analyst Richard Duncan, the > remaining life expectancy of industrial society may well be less than > 40 years!" > > http://biz.yahoo.com/rf/981117/bbm.html > > Tuesday November 17, 3:23 pm Eastern Time, 1998 > > Real cost of U.S. gasoline is $15.14 per gallon, report says > > By Tom Doggett > > WASHINGTON, Nov 17 (Reuters) - So you think you're getting a good > deal on a tank of gasoline these days? Not so, if all the oil > industry tax subsidies received from the federal and state > governments and other costs that went into producing that gallon of > gasoline were included in the pump price. > > Such external costs push the price of gasoline as high as $15.14 a > gallon, according to a new report released Tuesday by the > International Center for Technology Assessment. > > ``In reality, the external costs of using our cars are much more > higher than we may realize,'' the Washington-based research group > said in its report. > > The report examined more than 40 separate cost factors the group said > it associated with gasoline production but aren't reflected by the > price of gasoline at the pump. > > These external costs total up to $1.69 trillion per year, according > to the report. > > The group points out that the federal government provides the oil > industry with tax breaks to help U.S. companies compete with > international producers, so gasoline remains cheap for American > consumers. > > The Department of Energy is forecasting that the national price for > regular unleaded gasoline will average $1.02 during the current > quarter, the lowest price on record for any three-month period when > adjusted for inflation. > > Tax subsidies don't end at the federal level, as the group said most > state income taxes are based on oil firms' lower federal tax bills, > which result in companies paying $123 million to $323 million less in > state taxes. > > In addition to tax breaks, the federal government provides up to > $114.6 billion in subsidies annually that support the extraction, > production and use of petroleum, such as research and development and > export financing. > > The federal government also spends up to $1.6 billion yearly on > regulatory oversight, pollution cleanup and liability costs connected > to the oil industry, the group said. > > In addition, U.S. Defense Department spending allocated to safeguard > the world's petroleum resources totals $55 billion to $96 billion a > year, according to the group. > > > Copyright © 1998 Reuters Limited. All rights reserved. Republication > or redistribution of Reuters content is expressly prohibited without > the prior written consent of Reuters. Reuters shall not be liable for > any errors or delays in the content, or for any actions taken in > reliance thereon. See our Important Disclaimers and Legal > Information. Questions or Comments? > > -- > > http://www.icta.org/projects/trans/rlprexsm.htm > > The International Center for Technology Assessment > > The Real Price Of Gas > > Executive Summary > > This report by the International Center for Technology Assessment > (CTA) identifies and quantifies the many external costs of using > motor vehicles and the internal combustion engine that are not > reflected in the retail price Americans pay for gasoline. These > are costs that consumers pay indirectly by way of increased taxes, > insurance costs, and retail prices in other sectors. > > The report divides the external costs of gasoline usage into five > primary areas: (1) Tax Subsidization of the Oil Industry; (2) > Government Program Subsidies; (3) Protection Costs Involved in Oil > Shipment and Motor Vehicle Services; (4) Environmental, Health, > and Social Costs of Gasoline Usage; and (5) Other Important > Externalities of Motor Vehicle Use. Together, these external costs > total $558.7 billion to $1.69 trillion per year, which, when added > to the retail price of gasoline, result in a per gallon price of > $5.60 to $15.14. > > TAX SUBSIDIES > > The federal government provides the oil industry with numerous tax > breaks designed to ensure that domestic companies can compete with > international producers and that gasoline remains cheap for > American consumers. Federal tax breaks that directly benefit oil > companies include: the Percentage Depletion Allowance (a subsidy > of $784 million to $1 billion per year), the Nonconventional Fuel > Production Credit ($769 to $900 million), immediate expensing of > exploration and development costs ($200 to $255 million), the > Enhanced Oil Recovery Credit ($26.3 to $100
Re: Self-assesment vs. Rationality
Fred Foldvary wrote: --- Robin Hanson <[EMAIL PROTECTED]> wrote: irrationaly optimistic self-assesment? It is true that many investors are overconfident of their abilities and wrongly think they can beat the averages. But why call this "irrational"? It seems to me that the concept of rationality makes sense when it is applied to human action, but it is not meaningful when applied to beliefs. Action is rational or not, based on the actor's knowledge. But we are talking about a context where beliefs get translated into actions in a pretty straightforward way. People buy and sell stuff when they believe doing so will raise their expected (risk-corrected) return of their portfolio. ... If false beliefs are irrational, then almost everything we do is irrational, and there is no economics. For example, most folks don't have a correct knowledge of nutrition; their food choices are thus based on ignorance. There is a difference between ignorance and irrationality - that is the central point of this literature really.
Re: Self-assesment vs. Rationality
> A key free market principle is that investors better know how to spend > money than the gov't. > Fabio That is not a free-market principle. The free-market principle is that a person should have control over his property. There is an economic principle that a large centralized government lacks the knowledge of how to best spend money for all, due to the decentralized and dynamic nature of knowledge and preferences. Another principle is that a government with much power will be beset with groups seeking to turn that power into their favor. That implies that free-market policies would work better for spending, but it does not guarantee it. Fred Foldvary = [EMAIL PROTECTED]
Re: Self-assesment vs. Rationality
--- Robin Hanson <[EMAIL PROTECTED]> wrote: > irrationaly optimistic self-assesment? It is true that many investors are overconfident of their abilities and wrongly think they can beat the averages. But why call this "irrational"? It seems to me that the concept of rationality makes sense when it is applied to human action, but it is not meaningful when applied to beliefs. Action is rational or not, based on the actor's knowledge. When people have false beliefs, why is this not just bad data? Clearly, emotions play a major role both in our beliefs and in our ends. Vanity may make one think one is smarter, more beautiful, and more humane than one really is. Again, why not just label these "false"? If false beliefs are irrational, then almost everything we do is irrational, and there is no economics. For example, most folks don't have a correct knowledge of nutrition; their food choices are thus based on ignorance. So do we throw out the theory of consumer behavior because it is mostly irrational? Fred Foldvary = [EMAIL PROTECTED]
Re: Self-assesment vs. Rationality
fabio guillermo rojas wrote: I presume you mean irrationaly optimistic self-assesment? I'd say quite a lot. But then comes the hard question: what policy implications follow from this conclusion? Yes, irrat self-assesment is a good word for it. Robin, I know you are a fan of taxing people for not using their abilities. Me?! You must be thinking of someone else. How would you tax people here to make them more efficiently invest or make them have more rational self-assesments? A key free market principle is that investors better know how to spend money than the gov't. Should we be in the business of judging who is irrational? Here are two things that might go wrong as a result if irrational investor self-assessment. 1) Prices may be wrong, distorting allocation choices made by companies, farms, etc. 2) There might be too much churning and trading, resulting in excess transaction costs. On 1), imagine that a government agency was given a trillion dollars of assets to invest, and charged with the task of fixing any prices that they thought were off. If this agency can in fact tell when prices are wrong and act on this info, it should on average make money on its investments, probably enough to cover its operating expenses in addition to preserving its capital. So it wouldn't really cost the rest of us anything in this case. Those who believe that government agencies have this level of insight and ability to resist rent-seeking pressure should advocate this new agency. Those who believe otherwise should predict that such an agency would squander its endowment, and should argue that it be given no new capital to work with once it does. On 2), there are net positive externalities from "excess" transactions, in that it induces information aggegration that help inform important allocation decisions. Given such an externality, do we really know that we have too much trading?
Re: Economics of Vet Med
On Friday 08 November 2002 01:08 pm, [EMAIL PROTECTED] wrote: > I'd been under the impression that the federal government didn't regulate > veterinary medicine as strictly as it regulates human medicine, but today > my vet insisted that veterinary drugs have to go through the exact same > process for FDA approval. Does anyone know anything about the truth of the > matter? http://www.fda.gov/cvm/index/other/nadaappr.htm has some info. I didn't read enough to discern if there is a big difference between pet animals and food animals, but that may be part of the FDA's justification for meddling (as if it needed one). Wait - it includes both apparently: http://www.fda.gov/cvm/index/memos/cvmm43.html It also makes sense as there is so much overlap and people would simply shift to using veterinary drugs unless they were burdened with the same restrictions placed upon human drugs. Is this your sly way of introducing your new kitten? :-) - Susan
Re: Self-assesment vs. Rationality
> I presume you mean irrationaly optimistic self-assesment? I'd say quite > a lot. But then comes the > hard question: what policy implications follow from this conclusion? Yes, irrat self-assesment is a good word for it. Robin, I know you are a fan of taxing people for not using their abilities. How would you tax people here to make them more efficiently invest or make them have more rational self-assesments? A key free market principle is that investors better know how to spend money than the gov't. Should we be in the business of judging who is irrational? Fabio
Re: Self-assesment vs. Rationality
--- fabio guillermo rojas wrote: "how much of investing behavior is based on self-assesment vs. rational expectations?" It seems like the difference between the return on self-managed investments vs. the market, let's say, should measure something meaningful like the value of being an executive monkey vs. being a yoked monkey (salmon.psy.plym.ac.uk/year1/stresbeh.htm and www.betteryou.com/feature.htm, for example). -jsh __ Do you Yahoo!? U2 on LAUNCH - Exclusive greatest hits videos http://launch.yahoo.com/u2
