Re: Dickens in WSJ
{Blush} The WSJ got the main point of the article wrong. Those who want to see an
author approved summary can check out:
http://www.brook.edu/views/papers/dickens/2602.htm
-- Bill
>>> [EMAIL PROTECTED] 06/28/00 10:57AM >>>
There's a write-up on list member Bill Dickens on p.2 of today's Wall
St. Journal. Check it out.
--
Prof. Bryan Caplan [EMAIL PROTECTED]
http://www.gmu.edu/departments/economics/bcaplan
"What a lot of trouble to prove in political economy that two and
two make four; and if you succeed in doing so, people cry, 'It is
so clear that it is boring.' Then they vote as if you had never
proved anything at all."
--Frederic Bastiat, "What Is Seen and What is Not Seen"
Re: Counting Frowns?
Two thoughts on this. First, there is a lot of interest in this topic these days. I've been at two conferences in the last 6 months and attended two seminars here at Brookings on this issue. The National Institute on Ageing is considering funding (may already have done it) a major project to develop and validate happiness measures. Second, the sorts of pencil and paper retrospective questions that Oswald and others have used give very different results from two other methods of measuring happiness that seem to be less subject to subjective bias. The first is moment based sampling in which people are given some sort of device that beeps at random points at which point they are supposed tow note how good or bad they are feeling at that instant. An interesting finding using this approach is that while people asked retrospectively how happy they were on each day of the week will nearly always say they were happiest on the weekend and least happy on Monday, when you look at what they record at the time it turns out they are _most_ happy on Monday and the least happy on the weekend. The study authors conclude that most people really like their work and don't like doing house work or being around family members. The second method that is being offered as an alternative to questionnaires is the study of particular patterns of brain activity that correlate very highly with self reported instantaneous measures of happiness. Interesting finding here is that the happiest people in the world (or at least those with the most profoundly asymmetric frontal lobe activity levels (the pattern that correlates with reported happiness if I remember correctly)) are Tibetan Monks. An interesting research question is whether the brain activity based measures will give the same result as questionnaires that increasing income isn't correlated with happiness. One hypothesis is that that result is an artifact of everyone defining their happiness relative to those around them rather than on any absolute scale. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
The Indeterminacy of Individual Economic Actions
I have not read this paper, but I find the conclusions described in the abstract completely plausible. What does this say about the economists model of human behavior? -- Bill Dickens "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior" BY: BRIGITTE C. MADRIAN University of Chicago DENNIS F. SHEA United Health Group Document: Available from the SSRN Electronic Paper Collection: http://papers.ssrn.com/paper.taf?abstract_id=228155 Paper ID: NBER Working Paper No. W7682 Date: May 2000 Contact: BRIGITTE C. MADRIAN Email: Mailto:[EMAIL PROTECTED] Postal: University of Chicago Graduate School of Business 1101 East 58th Street Chicago, IL 60637 USA Phone: 773-702-8079 Fax: 773-702-0458 Co-Auth: DENNIS F. SHEA Email: not available Postal: United Health Group 9900 Bren Road East Minnetonka, MN 55343 USA Paper Requests: Full-Text downloads are available from SSRN Online for $5. ABSTRACT: In this paper, we analyze the 401(k) savings behavior of employees in a large U.S. corporation before and after an interesting change in the company 401(k) plan. Before the plan change, employees were required to affirmatively elect participation in the 401(k) plan. After the plan change, employees were automatically and immediately enrolled in the 401(k) plan unless they made a negative election to opt out of the plan. Although none of the economic features of the plan changed, this switch to automatic enrollment dramatically changed the savings behavior of employees. We have two key findings. First, 401(k) participation is significantly higher under automatic enrollment. Second, the default contribution rate and investment allocation chosen by the company under automatic enrollment has a strong influence on the savings behavior of 401(k) participants. A substantial fraction of 401(k) participants hired under automatic enrollment exhibit what we call 'default' behavior--sticking to both the default contribution rate and the default fund allocation even though very few employees hired before automatic enrollment picked this particular outcome. This 'default' behavior appears to result both from participant inertia and from many employees taking the default as investment advice on the part of the company. Overall, these results are consistent with the notion that large changes in savings behavior can be motivated simply by the 'power of suggestion.' These findings have important implications for the optimal design of 401(k) savings plans as well as for any type of Social Security reform that includes personal accounts over which individuals have some amount of control. They also shed light more generally on the importance of both economic and non-economic factors in the determination of individual savings behavior.
Re: Robert Frost on Econometrics
Nahhh. We just don't suppose we can ever know the secret so we treat it _as if_ it were a random variable. Saying that truth doesn't exist is a fight no good Bayesian would want to start. >>> [EMAIL PROTECTED] 08/07/00 05:03AM >>> "We dance round in a ring and suppose, But the Secret sits in the middle and knows." Of course, if Robert Frost was a Bayesian then the Secret is a random variable. Seiji ___ Seiji Steimetz Office: Social Science Tower 305 University of California, Irvine Email: [EMAIL PROTECTED] Department of Economics Web:http://zotnet.net/~steimetz 3151 Social Science PlazaOffice: (949) 824-1372 Irvine, CA 92697-5100 "Every time a calf is born, the per capita GDP of a nation rises. Every time a human baby is born, the per capita GDP falls." -- Julian Simon ___
RE: Xerox machines and book prices
>p.s. the Xerox Corp isn't happy about its name being used casually. Even >though this puzzles me, because I always figured any advertising is good >advertising. If everyone calls photocopies "xeroxes," or nosewipes >"kleenex," doesn't that help boost brand awareness? Long-long ago I worked for Xerox. Back then all employees were encouraged to correct anyone who was heard using the term "Xeroxing" to mean photocopying. The reason we were given for the company wanting us to do this was fear that common use of the term Xeroxing to mean photocopying would cause Xerox to lose exclusive rights to its trademark name. They were quite insistent about this so I imagine their lawyers had given them good reason to worry about this. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Reading Recommendation with a Comment
>*The Nurture Assumption* by Judith Rich Harris is very good. I second Bryan's recommendation. TNA is an under appreciated book. It blows the field of child development apart. I have some minor quibbles with what Harris says about the power of peer groups, but JRH has a very hard nosed view of the evidence that economists will find refreshing. >However, Harris goes on to say that there are appreciable "neighborhood >effects." It doesn't matter if your dad stays around, but if all kids >in a peer group lack dads, this makes them all (environmentally) worse >off. I don't think JRH would agree with this. She thinks there are neighborhood effects, but they don't come from parent to child. They are transmitted child to child. I suspect she would say that keeping fathers with families wouldn't do anything to improve children's neighborhood culture. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Reading Recommendation with a Comment
>I don't have the book with me, but in elaborating her model, she >repeatedly concedes that in many cases we have: > >all parents --> all kids I don't remember this. >That's why immigrant kids speak English mostly with the accent of their >friends' American-born *parents*. If kids were a closed system, they >would be developing much more distinct kid-only dialects on their own. She makes a big point of the fact that when kids parents don't share the same language they do end up inventing their own languages. >And she does favorably cite this study showing that it is bad for kids >to grow up in fatherless neighborhoods, even though it isn't bad for >them to grow up in fatherless homes. Yes, but I suspect that her interpretation would be that the concentration of bad genes is the cause of this, not the absence of fathers per se. >If there's a textual dispute I can confirm this at home tonight. I'm not sure if we disagree on the text or the interpretation, but if you can point me to page numbers I'd be happy to look again. — Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Harris
Hi Bryan, Perhaps I misread these passages, but I interpret them to mean that the culture resides in the kids' peer groups and is transmitted from parents (when they were kids) to current kids via the link of ongoing peer culture. Note the use of the wording "passed down" which implies inherited -- not imposed from above (as in "passed down from generation to generation"). Also, she says that cultures are "self-perpetuating" not that parent group cultures change child group cultures. -- Bill >>> [EMAIL PROTECTED] 09/14/00 12:22AM >>> Two of many quotes supporting my interpretation of Harris: "Neighborhoods have different cultures and the cultures tend to be self-perpetuating; they are passed down from the parents' peer group to the children's peer group... It's the neighborhood, not the family..." (Nurture Assumption, p.304) "What has happened is that you've mistaken parents'-group-to-children's-group effects for parent-to-child effects." (NA, p.215) I admit she does talk about autonomous child-to-child transmission of e.g. games, but when she's trying to explain why cultures persist, it's the "parents'-group-to-children's-group" model. -- Prof. Bryan Caplan [EMAIL PROTECTED] http://www.gmu.edu/departments/economics/bcaplan "[W]hen we attempt to prove by direct argument, what is really self-evident, the reasoning will always be inconclusive; for it will either take for granted the thing to be proved, or something not more evident; and so, instead of giving strength to the conclusion, will rather tempt those to doubt of it, who never did so before." -- Thomas Reid, _Essays on the Active Powers of the Human Mind_
Re: Reading Recommendation with a Comment
>All three of the other admitted readers of the Harris book - Bill, >Robin, and Alex - are parents. Has this in any way affected your >"parental investment" or anything like that? Simply put, no. Let me make an analogy. Suppose that you could show that variation in the time spent in class in law school had very little relation to how well students do in their careers. Would you conclude the time in class was wasted? Probably not. The experiment you would like to perform would be to compare the career trajectory of randomly selected people who tried to be lawyers with and without training in the law. The fact that variation in how parents treat children has little effect on measurable aspects of their personality and performance as adults doesn't prove that parenting isn't important. Judith Harris understands this perfectly well (though I think she does a less than great job of making this clear). Clearly a lot of socialization is done by parents. Nearly all children learn their language from their parents. It probably is true, as JH claims, that what decides what language and culture a child adopts is the child's peers, but that doesn't mean that i! n most situations it isn't the parents that do most of the work of transmitting the cultural knowledge. I took on an obligation when I decided to have a child to do a lot of the work of socializing that child. The behavioral genetics literature suggests that if I don't do it, for the most part someone else will. But I don't free ride in lots of other areas of my life so why should I free ride here? Also, the fraction of variance of adult outcomes explained by between family effects is not zero for everything. Further, there is some very strong evidence that restrictions on who is sampled and dominance effects lead BG studies to understate the true amount of environmental variance. In particular, between family effects are not zero for income. Very small fractions of variance explained can still mean big effects on lifetime income. If some behavior of parents correlates .01 with a child's annual income (ie. it explains only .0001 of the variance of annual income) the NPV of a parents actions for the child could still be thousands of dollars. Judith Harris correctly notes that between family effects could be between peer group effects and points out that it is still possible that parenting doesn't matter at all. Maybe, but maybe it does. Since there is some significant chance that what I do does affect my kid I'll give him the benefit of the doubt (and therefore, hopefully, the benefit of my effort). What I did take from the book was confirmation of something that I had guessed at long ago. Variations in parenting styles make almost no difference for child outcomes. You've got to be a very bad parent to really hurt your child, and nobody really knows very much about what being a bad parent is beyond the fact that you shouldn't lock your kid in a closet by him/herself. I was already much more relaxed than my wife about doing exactly what this or that "expert" said. Now when we argue about how exactly the kid should be raised I haul out Judith Harris and suggest she read it and that ends the argument. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Harris
Hi Alex, First, it is my contention that this is JH's view -- not mine. I've been involved in an E-mail conversation with Judy for a couple of months now about the differences in our views (I have not pulled rank in the debate with Bryan because my conversation with Judy hasn't really touched on this specific point so I can't say for sure that I've got her view on this issue right, but its getting to the point where I should probably ask her...). However, there is a very definite link between child culture and adult culture that ensures a link between them and continuity. One thing I know for certain about JH's views from our correspondence is that she is convinced that roles you adopt for yourself as a child carry over to your behavior as an adult. So if I understand Judy correctly she is saying that cultural transmission is from child's peer group to child's peer group and the link to adult culture flows from children to adults not adults to children. This is the interpretation I have been suggesting in the previous e-mails. The best evidence for her view is what happens when you throw populations from different cultures together. The parents keep separate cultures while the kids develop a unique "pidgin" culture that ultimately develops into a creole culture as they become adults (with common languages and customs evolving from disparate roots). This is certainly a better description of what happens when cultures collide than the notion that adults transmit culture to kids. Also, this fits my experience pretty well. My social culture looks a lot more like the social culture that was established by my peers during the late 60s and the early 70s than it looks like the social culture of my parents. I focus my social life around informal visits with friends where my parents socialized mainly with relatives. When my parents weren't socializing with relatives they were socializing with members of social organizations they belonged to. I don't belong to the Elks or the KoC or any organizations associated with my sons school. These are differences that were established in our youth. From what I got from talking to my parents their friends when they were young were also either relatives or were members of clubs to which they belonged. Norms about topics of discussion, use of profanity, drug and alcohol use, etc. all seemed to be established in youth and persist through adulthood. This would seem to fit Judy's view. Note that JH would reject out of hand any criticism of her point of view on the grounds that it doesn't fit well with "contemporary views" since her whole point is that contemporary views are based on extremely naive interpretations of correlational evidence that seems to evaporate when you control for genetic factors. Note also that if you can affect your kids peer groups and this can affect the rest of their lives then you have to find some way of explaining why this doesn't show up in the behavioral genetics results which suggest small effects (often vanishingly small) of family background on almost any measurable outcome as people age. I think JH would say that the only way you can affect your kids peer group is to move to a different neighborhood or send him/her to boarding school. Otherwise your kid will find his/her "peers" no matter what you do about it. At this point I think there are three differences between my views and JH's (though we are still in the process of clarifying that). Two are a matter of emphasis, but one is substantive. 1) I think that she doesn't give enough credit to parents for the work of socialization. My kid may speak the language of his peers, and if I don't teach him that language he will learn it on his own. However, in most circumstances kids learn their language (and a whole host of other cultural knowledge) from their parents. She emphasizes the determinative roll of peer culture even though the main burden of socialization is carried by parents. 2) I suspect that "small effects" may not really be that small. Evidence that differences between families only explain a small fraction of variance between adults doesn't mean that there can't be important effects of differences between families. I don't think economists need much explanation of this point -- R2 isn't a very good measure of costs an! d benefits. 3) I think that she is right about childhood culture getting carried over to adult culture, but I think she is wrong that the effects of peer group on personality are any more permanent than the effects of family. I think the best interpretation of the evidence is that most environmental variance in personality is due to contemporaneous or recent effects of environment. Thus I tend to think that there are large effects of many different aspects of environment on at least some measures of personality (IQ for example), but that they all fade over time so that what happe
Re: Harris
>Hmm. The quotes seem clear enough to me, but perhaps you need the >context too. I read the quotes in context. I have the book in front of me now. >How would you interpret this finding that she talks about >- that it is bad for kids to be in fatherless neighborhoods, but not >fatherless homes? Again, it is my understanding that her view is that you don't want to grow up in a fatherless neighborhood because of what that signals about the genes of your peers and the culture of your peers, not because your peers fathers are missing per se. -- Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Harris
Hi Alex, >my point was that big theories demand big >evidence - if the "best evidence" for her theory that children's culture >is transmitted down the generations through children (rather than >through adults) is what happens to adult and child culture "when you >throw populations from different cultures together" than that is not >going to cut it. Why not? What's the evidence that children's culture reflects adult culture? JH would argue that if you make no effect of parents on children the null hypothesis its pretty hard to come up with evidence against that null. I have actually argued this point with her. I've said that she has no more right to claim the high ground of the null hypothesis than her opponents. In fact, I've suggested that conventional wisdom, at least rhetorically, deserves to be disproved rather than having to prove itself. Of course her whole book is full not only of evidence against the mainstream view. One point in her favor is (she claims) that US culture is almost unique in the degree to which kids are concerns of adults. Most other cultures they are much more in their own world. > Just a couple of questions about this evidence - how often has this >happened?, how closely has the process been observed?, and, most >importantly, isn't a more plausible explanation not that children create >their "own" culture but that they adopt parts of the *total* adult >culture they see around them. This becomes a semantic argument. JH points to Hawaii and argues that the Asian and European kids thrown together there developed their own language and their own culture which was quite distinct from the cultures of their parents. The language wasn't an entirely new language. For the most part it borrowed words from the parents languages, but there were new words in the language. So did the kids learn the culture from the adults or did they make their own culture? I think its interesting that the kids learned to speak the pidgin but the parents never did. The kids continued to use it when they grew up (though I imagine that English became the dominant language even for the kids). I seem to remember that JH cited this as one of many examples and that there were footnotes, but I can't remember for sure and I never looked up those footnotes. William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: reading recommendation
>This provides concrete >evidence that the pronounced cognitive biases emphasized in behavioral >economics are to a large extent artifacts of unrealistic experimental >conditions. Hi Bryan, Of course! That was the point of the theory all along. It would be useless for people to develop decision heuristics that weren't useful in most situations. What I would take exception to is your characterization of the experimental situations as "unrealistic." "Uncommon" might be a better description. But, no matter how uncommon the situations might be that doesn't mean that there aren't important real world situations where decision anomalies bias judgement in ways that can be anticipated. -- Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: AIDS/POLIO-Not Much Econ
> The article did grant that there >remains the strange puzzle of the coincidence in timing of the various >strands of AIDS all being transmitted from primates to humans within a >close period, which I suppose that Hooper will emphasize when backed >into a corner. The article suggests theories of population increases >or the introduction of cheap syringes, both of which might explain why >infection didn't happen earlier. I'm probably way in over my head here, but I thought that there was still a lot of controversy over exactly when and where AIDS first emerged in the human population. I seem to remember hearing it claimed that there were confirmed cases in humans before the polio vaccination campaign. I thought I've also heard it claimed that the wave of reports around the time of the vaccine could be explained by a reporting anomaly -- that there was a buzz in the medical community that caused people to recognize what they were seeing as a single disease whereas before that time the pattern of symptoms might not have been seen as a unique disease. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: reading recommendation
>Sure, some important real world applications exist. But why is that >interesting? I would think that the interesting question is: what's the >*expected value* of the loss, averaging over situations of all >importance levels? So would you argue that the interesting question about government policies is whether averaging over all of them net welfare effects are positive? Wouldn't you want to know something about particular policies with an eye towards identifying which ones are better or worse. Even if you thought that on average they were bad you probably couldn't convince most people that they shouldn't be considered on a case by case basis. Similarly, if you can identify even one situation in which judgement can be shown to fail and design an intervention to minimize the cost of that failure isn't that interesting? -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Economist Olympics?
>Can such games model reality well enough to give interesting results? Interesting to whom? To game players yes. For certain purposes there are useful models that can help people understand how systems operate and predict outcomes. >Would economists agree on the meta-rules enough to agree to participate? Absolutely not. If you can agree on a model you can almost always agree on the policy prescription. Most disagreements between economists are over what the right model is, not what policy should be pursued given the model. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Teacher's income
>So, are professors really underpaid? A few thoughts. When people say that teachers are underpaid I don't think that they are mainly referring to professors. I think its K-12 where unfavorable comparisons are often made between the salaries paid to BA teachers and HS grad semi-skilled manual laborers. In fact, in a minute I will argue that there sense in which an economist would say that these people may be thought of as underpaid (as may nurses). In general I think that when one hears complaints about people being underpaid it is because their earnings are low compared to what other people with similar credentials are being paid. In my experience most people don't think in terms of markets setting salaries. They think in terms of employers deciding what to pay and they think that employers can pretty much pay whatever they want. Pay is viewed as unfair if it doesn't reward the things that are supposed to be rewarded according to norms (talent, education, and experience). Economists have very different views of the reasons why people are paid for these things having to do with their scarcity and the cost of acquiring the characteristic. Our view would have little to do with fairness. However, I think that there is one place where the economists' view of what's "fair" and the common person's view leads to similar conclusions. I would argue that in both K-12 teaching and in hospital nursing the dominance of large institutions (often government run) have led to a situation where monopsony is common. In the classic monopsony, wages are set too low and the individual monopsonists are always complaining about under supply. Evidence: 1) You are always hearing about teacher and nursing shortages. 2) Public schools do seem to set wages in a way which is typical of a price leader (quality adjusted pay is lower than the private sector unless there is a union). 3) There is an interesting study from a couple of years ago showing that market concentration in an MSA in the hospital industry is negatively associated with nurses wages and 4) I've had the personnel director for a large hospital in a major metropolitan area brag to me that she was personally responsible for saving millions of dollars in health care costs by coordinating the local cartel of hospitals to keep down nurses wages. Two minutes later she was complaining bitterly about how hard it was to hire competent nurses. When I asked her why she wouldn't think of raising wages I got the classic collusive monopolist's answer. She said that in the short run they might get a few more nurses, but that all the other hospitals would raise their wag! es and in the end they would all be paying a lot more and overall they wouldn't get that many new nurses. So here I would think that both the common person and an economist would agree that in a very real sense these jobs are underpaid. Are professors underpaid? If one thinks that there is chronic excess supply this hardly seems arguable. The argument against this view is that there is also an oversupply of aspiring NBA players, but that doesn't mean that current NBA players aren't being paid the value of their marginal revenue product. Those who aspire may not be able to perform at the level of the incumbents. One piece of evidence that might suggest that low paid professors are indeed the victims of monopsony is that the usual explanation for why economists, engineers, MDs and lawyers are paid more than classics profs etc. is that there is a market for their services outside of academia. Why should this matter (its obvious why if Universities exercise monopoly power)? It costs the individual more to get a degree in classics than in economics (fewer opportunities for relevant employment in grad school and fewer scholarships and grants) and if anything economists have it easier than classicists (in terms of ! perqs), so why should they earn less in equilibrium unless there is monopsony? Is being a classics professor that much more fun than being an economist? Or is it that the skills to be an economist are in relatively short supply? I won't push this very far mind you. The market for nurses and teachers is largely local because of career co-location decisions while the market for Profs is national. The local nature of the nurse and teacher markets makes monopsonistic coordination possible (the Personnel director I talked to didn't take seriously the notion that high wages for nurses in her city would attract more nurses "They're all married and they can't move." even while she was willing to allow that there would be an increase in supply from "burnt out" nurses reentering the field). -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Harris again
OK, Bryan is right (as was Alex) and I'm wrong. This from the horses mouth (a note I got today from Judith Harris): === My theory is definitely not an excuse for people to throw up their hands and say "We give up -- there's nothing we can do!" Because (as you said) children are socialized first at home, any aspect of socialization that is common to the majority of the children in a given group is likely to be effective. If the majority of the parents in a given neighborhood decided to teach their children to nod their heads three times whenever someone gave them something, then that custom would probably become standard behavior in their neighborhood; children who were new to the neighborhood would quickly pick it up. That's how cultures are passed on. That's why it matters where you raise your kids and where they go to school. When people choose a neighborhood in which to raise their kids, what they're doing is trying to find a place where the other parents have attitudes and customs that are similar to their own. By doing that, they maximize the chances that their children will retain the attitudes and customs they acquired at home. = and = Thanks for enclosing the note from Bryan Caplan (actually, N = 2). Yes, Caplan is right, and Dan Quayle had a point. When you're looking for a neighborhood in which to raise your kids, it's a good idea to look for one in which most of the kids have fathers. The reference to a sample size of 2 comes from earlier in the note in which she had said that she had concluded that economists were very smart but that that was based on a small sample (N=1). So I guess that Bryan impressed her. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: reading recommendation
Bryan wrote: === This is almost orthogonal to my original point, but not quite. It wouldn't be interesting if the expected cost of bad judgment was $100/year, would it? So even taking a policy perspective, expected value of error matters. Agreed, but I think the evidence here is that cognitive anomalies can cause big losses. Sure the vast majority of the time confusing .01 with .1 doesn't make much difference in ones life, but if people consistently confuse the two when making decisions about (for example) occupational safety and health, that can have big effects in the aggregate the might be addressed by policy. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Top 10 Economic Puzzles
>> >What are the big unsolved puzzles of economic empirical research? >> 1) Why do people live so much longer today than they used to? > >Granted technological change and increased wealth, why is this such >a mystery? Robin could do a better job of explaining than I can, but the question is one of proximate cause. Having money doesn't make you healthier. Medical technology has improved, but the measurable effects are minor compared to the huge gains in life expectancy (or so I'm told). >> 2) Why are some nations rich and others poor? > >Are you claiming that we have little or no knowledge about this topic? No matter how much knowledge we have it is still a big mystery. I would put it a little differently. There are lots of good explanations for why countries developing in isolation from each other wouldn't have the same level of GDP per capita, but it is hard to understand why GDP per capita hasn't converged more (at all?) in the last century. That would be my first choice for the biggest mystery in economics. Four others would be: 2) Why doesn't trade equalize the returns to factors in different countries? 3) Why are wages for apparently similar workers in different firms so different? 4) Why are exchange rate movements so unrelated to movements in fundamentals? 5) Why do people vote (or engage in other socially useful but individually wasteful behavior)? William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Murray/Hernstein
>>> [EMAIL PROTECTED] 10/28/00 06:01PM >>> >> In spite of all >> of his reservations about TBC, Bill Dickens felt pretty comfortable with >> their omission. > >Perhaps Bill can explain why? Hi all, It has been enormously frustrating having to sit this one out. I have spent a large fraction of the last five years thinking and writing about issues raised by the Bell Curve. I have a paper coming out in Psychological Review which addresses what I feel to be the main issue raised by The Bell Curve (To what extent is the genetic portion of IQ individual and social destiny?). My own view of the Bell Curve falls somewhere between Chris and Bryan's. Unfortunately, in my other life as a macro-labor economist I've been invited to give a series of presentations at the European Central Bank this week and next. I'm still not fully prepared and don't expect to be until moments before I get on the plane (if then). If people are still interested I promise to weigh in on this and other issues when I get back a week from Wednesday. -- Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Buchanan Palm Beach Statistics
It isn't just that Palm beach is large. Palm Beach had an enormous number of Buchanan votes even for its size and particularly when you take into account that places that voted more heavily democratic also tended to be less likely to vote for Buchanan. See the attached. buchanan.doc Word for Windows 97
Re: Buchanan Palm Beach Statistics
Dan wrote:
>First, the first document ("buchanan.doc") states that Gore was listed
>under the Reform slate while Buchanan was listed under the Dems. That's
>just not true; see
>.
I am very ashamed of myself. I have been privately complaining about what I consider
to be the large number of misleading things that are being bandied about on the
internet and by representatives of certain candidates and then I go and send this out
without looking carefully at it. As far as I know there is NO evidence that any of the
ballots in Palm beach mixed the parties up. When I read this quickly I probably
thought the claim was that voters had been mixed up about what party they were voting
for. I sent this out because of the numbers it contained which I thought were
important to consider in light of the implication I took from Alex's piece that the
Buchanan vote was not surprising given the size of the county. I apologize to people
on the list for circulating erroneous information. Many thanks to Dan for taking the
time to provide such a good correction and my apology again for making it necessary.
A number of people have written about why the Buchanan vote might have been higher in
Palm Beach and all the reasons suggested sound good to me. However, unlike Alex I'm
not convinced that there is no way to sort it out. If the double punched ballots are
disproportionately Buchanan-Gore, or if the large Buchanan vote in the primary does
turn out to have been mainly a function of the size of the county then there could
still be something important going on there. But since this is not obviously on the
topic of the list let me leave it there. -- Bill
William T. Dickens
The Brookings Institution
1775 Massachusetts Avenue, NW
Washington, DC 20036
Phone: (202) 797-6113
FAX: (202) 797-6181
E-MAIL: [EMAIL PROTECTED]
AOL IM: wtdickens
Re: Buchanan Palm Beach Statistics
Alex Wrote: > remember there are two issues of concern, the supposedly large number of Buchanan >votes and >the double-punched ballot - the latter has nothing to do with the former (i.e. the >double-punched >ballots are spoiled and do not contribute to Buchanan's total). Maybe, maybe not. The claim is that many people who intended to vote for Gore punched the Buchanan hole when they were going down the left column of the ballot and then realized their mistake when they read down the right column. At that point many say they punched Gore as well. Although the claim that there were an inordinately high number of double punches has been called into question (and I don't claim to know that there are more than would be expected), if there are an unusually high number of double punches for Gore and Buchanan that would be evidence of the sort of confusion that people are claiming has marred the vote. Now for the economics (or at least econometrics). It certainly looks like Florida law is very favorable to the notion that if the election doesn't represent 'the will of the electorate' that the election can be overturned by the Florida courts. Whatever one may think of this precedent (and I'm dubious about whether its a good idea myself) it is more than just possible that some judge will have to make a ruling on whether the Palm Beach election represents the 'will of the electorate' and he won't be able to throw his hands up in the air and say "I don't know." (He might not if Gore wins the recount or concedes after losing the recount.) Obviously he will consider lots of anecdotal evidence -- grandmas and others who claim to have accidently voted for the wrong candidate etc. He will probably also be confronted with claims that Buchanan had a strong organization in Palm Beach. My guess from what I've heard is that the anecdotal evidence will give him basis to conclude that the! ballot may have mislead a substantial number of people into voting for the wrong candidate, but there may be a role for statistical analysis as well. No doubt at least one side will attempt to proffer such analysis. If you were the judge, what would you want to see in such an analysis? Presumably the answer to this question could be important since at least one news report I heard suggested that there was precedent in FL for throwing out election results in a few precincts were fraud was demonstrated and replacing them with a statistical analysis of voting. -- Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: More Election Statistics
WRT: >http://www.lasvegassun.com/sunbin/stories/archives/2000/nov/10/511018638.html I'm surprised that the LV Sun doesn't get this issue. There is no surprise in the fact that the errors are non-random. The recounts were in heavily democratic counties where punch ballots were used. A small (but large in the context of this election) fraction of punch card ballots don't get punchced all the way through. When these are run through the machines some of the incomplete punches fall out. Thus the statistically significant trend towards Gore. Wouldn't a recount of the entire state including Republican counties equalize the benefits of the hanging chads? From what I have been told -- and the most likely reason why Mr Bush turned down Mr. Gore's offer last night -- the punch card ballots were used disproportionately in Democratic counties so a full hand recount of all the votes will probably pick up a lot more Gore than bush ballots with partial punches. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: More Election Statistics
>>> [EMAIL PROTECTED] 11/16/00 11:51AM >>> Bill, I thought the recount that had been done so far was a machine recount in all of the counties - thus only yesterday was the last of the 67 counties reported. My understanding is that the hand recount in the four counties you mention has yet to be done and may not ever be done if Harris has her way. >>> Hi Alex, This is my understanding as well. I just went back and read my note and realized that I had left a couple of my thoughts incomplete. It is my understanding that the counties in which Gore made big pick-ups of votes were strongly democratic counties where the punch card machines were used. I'm sorry if I gave the impression that these were the only counties that were counted. Also when I was referring to a full count of the entire state I meant a full hand count of the entire state as has been proposed now by Gore. That is what is now at issue and what is likely to produce a significant increase in the Gore count for the reason I described. Since I wrote my post early this morning I've talked with someone at Brookings who is doing his own analysis of the Florida vote. He tells me that _within_ counties there was a tendency for unpunched Presidential ballots to be more frequent when Gore had a larger share of the vote. He was using this to argue that it wasn't just the type of machinery in use that was responsible for the Gore bias in the recount, but that Gore voters were more likely to have trouble punching the ballot. I'm not sure I buy this since unpunched ballots are not mostly errors. Most people who don't punch a candidate did not intend to vote. So it could be that in counties where there are more Gore voters there are also more people who were dissatisfied with the choices they had for President and didn't vote. William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Another Lister in the Economist
Thanks Alex, The conference at the ECB that that article discusses is the one I was off at two weeks ago. Which reminds me I still need to look back over the Bell Curve exchange and add my 2 cents. -- Bill >>> [EMAIL PROTECTED] 11/16/00 05:52PM >>> This week's Economic Focus in the Economist (Nov. 11-17) discusses "a classic study," "The Macroeconomics of low inflation" by Akerlof, our very own Bill Dickens and George Perry (in Brookings Papers on Economic Activity 1, 1996). Congratulations! Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: Query on Media
>Has anyone seen more of this analysis or any of the data? > > >Unfortunately, more than a few Florida votes were also affected. An >examination of past Republican presidential votes by county in Florida from >1988 to 2000 shows that while total votes declined, the Republican voting >rate in the western panhandle was significantly suppressed relative to the >non-Republican vote. The 4 percent greater reduction in Republican votes >averages about 1,000 votes per county, 10,000 Republican votes for all 10 >counties in the western Panhandle. This holds true even after accounting for >the average differences in voting rates across counties as well as the >changes in voting rates from one election to another. > >This conservative estimate of 10,000 votes is more than the any additional >votes that Gore might pick up from the manual recounts in counties like Palm >Beach, Boward, and Dade. I brought this up at lunch at Brookings today and the response from Tom Mann was incredulity. He claims that the polls were only open for another 10 minutes after the early call and wants to know how Lott thinks that it could have had that big an effect. -- Bill Dickens
Lott's column
For what its worth, I sent Lott's column to Tom Mann here at Brookings who has followed the election pretty carefully. He claims that reform party membership in Palm Beach is only 400 and that the rest of the people who are being called Reform Party members are independents who have no party affiliation. He also claims that Lott's numbers on spoiled ballots are badly off. William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Landsburg Column
RE: http://slate.msn.com/economics/00-02-09/economics.asp I read the Landsburg column, but I haven't read the original study he is commenting on. Given that, Landsburg's account of the idea seems totally nutz to me. Why would we assume that the relative price of quality vs quantity should remain the same over time (that has to be the underlying assumption that makes sense of the analysis that is being done). Doesn't it seem obvious that the manufacturing revolution of the early to mid 20th century reduced the relative cost of quantity (look at how the use of craft work in buildings dropped in favor of simple machine honed moldings for example and how mass produced plastic ticky-tacky replaced crafted pottery and dishes) while the information revolution seems to be reversing that trend and decreasing the relative cost of quality (by making more customization possible)? If I'm right that would mean that the method that Landsburg wants to use would grossly overstate productivity growth for the first 70 years of the 20th century (where ! the price of quality is underestimated and the trend is ignored). Its hard to say whether its under estimated or over estimated since then. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Landsburg Column
Hi Alex, We agree. If I'm right that the changes in the price of quality are profound then the five year measures should show big changes. Particularly between 1945 and 1970 I would bet they would be enormous. -- Bill >>> [EMAIL PROTECTED] 11/27/00 12:03PM >>> Bill, As I read Landsburg the Klenow-Bils idea is that if at time 1 the rich own 100% more microwaves than the poor at a 25% higher price then at time 2 when the poor own 100% more microwaves than at time 1 the quality-adjusted price (unobserved) has fallen 25%. What they need to assume is that the quantity/quality price that poor and rich consumers face at time 1 continues to hold between time 1 and 2. My guess is that the assumption requires some sort of uniform technological improvement across the span of microwaves from low to high quality. (Probably also some homotheticity type assumptions about preferences). The examples you mention show that technological improvement is not uniform across quality types but does the tradeoff change so fast that the cross-sectional results are uniformative? Suppose, for example, that you reestimate the cross sectional quantity/quality price every five years - this is easy as there is plenty of data - then all you need is more or less uniform technological improvement over any five year span, which seems reasonable enough to me. Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: Why Are Courting Signals Ambiguous?
So far everyone's response to Robin's very interesting question has assumed that flirting is entirely instrumental. Although I have no doubt that nearly every explanation for subtlety and ambiguity that has been proposed is correct to some degree I think there is another explanation as well and I suspect it is the most important. First let me introduce the observation that I see a lot of people flirting who have absolutely no intention of mating. I know lots of men and women who flirt in their relationships with each other where both have an understanding that they are just playing a game. Why would they do this if it wasn't fun? I strongly suspect that a lot of flirting is like dancing (which is itself a form of courtship) -- it is pursued for the fun of it and not exclusively as a means to an end. If I'm right then the question of why it is subtle and ambiguous has an obvious answer. Dancers don't try to get from one side of the floor to the other as fast as they can with th! e minimum of effort. People who are flirting don't always want to get into bed as quickly as they possibly can for very similar reasons. Subtlety (which I think necessitates ambiguity) is normally part of the aesthetic. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Why Are Courting Signals Ambiguous?
I wrote: >> it is >>pursued for the fun of it and not exclusively as a means to an end. ... Robin wrote: >>OK, but the urge to do certain things "for fun" likely evolved for >>instrumental reasons. I tend to take an evolutionary psychology perspective, >>which insists that most behavior is instrumental at some level. Young animals >>"play" in ways that seem instrumental practice at skills that will be >>required as adults, such as chasing, hiding, etc. Similarly much of the play >>of young humans can be understood as practicing for adult roles. I'll grant that flirting can have instrumental value as practice even if you aren't currently in the market for a mate, but the question was "Why are courting signals ambiguous?" My response was (in part) aesthetics. Now if you want to propose an evolutionary theory of aesthetics I think you have your hands full (if it hasn't already been done it would be interesting to take a crack at it), but I think most of the answer to the original question would have to come through that channel rather than any instrumental reason. I also think there are sex differences on this one. I suspect more women than men enjoy flirting and that more men than women view it as purely instrumental. I'm certainly willing to buy evolutionary explanations for that. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Airline firms
Since deregulation, start-ups come and go. Big airlines seem to survive on the basis of the monopoly power they derive from their terminal slots at major airports. Otherwise airlines might be the classic case of a declining cost industry with few barriers to entry making it impossible for anyone to stay in business for long since competition will tend to drive prices down to marginal cost < total cost ... -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 01/16/01 08:52PM >>> Why do airline firms exist? Seriously, given the unpredictable nature of the airline industry such as disasters, bad weather, labor strikes and regulation you would think almost no one could survive in such a wacky business environment. I know that some firms tend to make profits (like Southwest) but even in booming times, most airlines seem to live on indefinite credit lines. any insight by people in the know? -fabio
RE: Airline firms
I'm not sure how the slots are allocated, but I believe it is done when the airport is built or expanded by the airport authorities which are local government entities. -- Bill Dickens >>> [EMAIL PROTECTED] 01/17/01 09:30AM >>> This is interesting. What is the source of the monopoly power over the slots? How are the slots allocated? Second, absent that monopoly power and given the effects of competition, wouldn't we expect to see re-regulation of the industry to end the "anarchy" of the market? Perhaps even a Department of Aviation to go with the Department of Agriculture? John Samples Cato Institute -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of William Dickens Sent: Wednesday, January 17, 2001 8:36 AM To: [EMAIL PROTECTED] Subject: Re: Airline firms Since deregulation, start-ups come and go. Big airlines seem to survive on the basis of the monopoly power they derive from their terminal slots at major airports. Otherwise airlines might be the classic case of a declining cost industry with few barriers to entry making it impossible for anyone to stay in business for long since competition will tend to drive prices down to marginal cost < total cost ... -- Bill Dickens
Re: Airline firms
>This doesn't seem consistent with the usual story that big airlines want >slots allocated by competitive bidding, while small airlines don't. If >the slots are the source of the monopoly power, competitive bidding >would lead to full dissipation of the rents, no? Not at all. The network economies mean that the slots are a lot more valuable to an established airline, and the differences in the extent to which airlines depend on existing cities as hubs means that the value to one airline is going to be greater than any of the others and so it will not lose all its rents to bidding. But that misses the main point. Big airlines want competitive bidding for _new_ slots, not existing ones. This will allow them to maintain the value of their existing slots by strategically out-bidding potential competitors. At least that is my understanding of their motivations. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Airline firms
>Fair enough, though in the long-run your story is pretty superficial. >The possibility of earning rents if an airport becomes another hub just >intensifies competition at the "competition *for* the hub" stage of the >game. True, but the first round of the game was played before deregulation so before the value of the hubs was fully realized. Also, being a hub is to some extent a natural monopoly (big city in the center of the country) and Denver's successful attempt to enter that market illustrates just how high the barriers to entry are. It took a long time to work out all the bugs at the new airport there and Denver was already something of a hub for United even before the large expansion of capacity there. Thus the explanation may be "superficial," but may be valid for quite some time. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Airline firms
>And what do you say on the predation thing? I'm not sure. I wouldn't be surprised if it was true, but I don't think you need any predation to explain why new entrants would be very unstable and have low survival rates in a market with significant economies of scale but no effective barriers to entry. Simple competition between the new entrants could be enough to explain their failure. But I don't know the facts well enough to know that that is the explanation. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: More Guns, Less Crime?
I happen to agree with you and to find the international evidence on gun ownership convincing, so let me be the one to point out why lots of people don't accept it as definitive and want better evidence. It is my understanding that it has been established in the literature that more liberal gun laws -- at least in the US -- are often a response to higher crime rates. If that's true then causation could run in the opposite direction in the international correlations. The story would be that something about Americans make us more violent and that leads us to want to have hand guns for protection so we have more liberal laws and more handguns than anyone else. Mind you, I don't believe this. A battle rages over whether there really is any evidence that American society is more violent other than having more gun violence. I find the evidence that gun violence is disproportionate convincing, but others might not. BTW it is my understanding that the correlation of gun laws and crime is one of the reasons critics find fault with the guns => reduced crime piece. That piece uses the reduction in crime after the passage of concealed carry laws as evidence that guns reduce crime. One argument against this analysis is that if laws are passed when crime is abnormally high, and there is a tendency for crime to ebb and flow, then a negative correlation between concealed carry laws and subsequent changes in crime rates would be possible even if the laws increased crime. I recommend Cook and Ludwig's book on gun laws. Even though they are advocates of more gun regulation they were honest enough to report an analysis they did of the Brady bill that showed that it had no effect on gun crime. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 01/19/01 04:14AM >>> Why not look at the statistics? Here are some : Percent of households with a handgun: United States 29% Finland 7 Germany 7 Canada 5 Norway 4 Europe 4 Netherlands 2 United Kingdom 1 Murders committed with handguns annually: United States 8,915 Switzerland53 Sweden 19 Canada 8 United Kingdom 7 Murder rate (per 100,000 people): United States 8.40 Canada 5.45 Denmark 5.17 Germany 4.20 Norway 1.99 United Kingdom 1.97 Sweden 1.73 Japan 1.20 Finland 0.70 Who needs long dissertations to prove that guns kill? [EMAIL PROTECTED] a *crit : > > I hope I'm not starting a flame war here, but I just read an article in _The > Economist_ that mentions the now-famous Lott and Mustard study of concealed > carry laws and two subsequent studies whose conclusions disagree with it. After > searching on the web, I was able to read the Lott and Mustard article and the > Derzhbakhsh (?) and Rubin article. (The third one is a working paper that > hasn't been published yet, so I could only find its abstract.) > > I'm having trouble deciphering the competing claims, and I was wondering if > anyone on this list who doesn't have too strong an ideological or emotional > investment in the debate (a naive hope?) might be able to enlighten me further > on this issue. > > Many thanks, > James
Re: More Guns, Less Crime?
> Krugman, for example, pointed out that a place like Cato is >never going to publish calls for government expansion. Fair enough; but >is a place like Brookings (no offense, Bill) going to publish vocal >cries for the abolition of popular programs? Why wouldn't we? Depending on what you mean by popular programs Brookings scholars have always been in the business of advocating against poorly conceived programs. For example, Joe Peckman's often repeated mantra of "broaden the base and lower the rates," was meant to apply to all sorts of popular tax deductions including the mortgage interest deduction. Brookings is unique in having a large fraction of its budget come from income from its endowment. We are truly beholden to no one. Although we receive government contracts, corporate and individual donations, and foundation money, no source is essential. A far more valuable asset to us than any funding source is our reputation for independent research. Another thing. Although Brookings is sometimes called a "liberal" think tank, that label ignores a fair amount of diversity in our make-up. The last two presidents appointed at Brookings were Republicans, and the head of the foreign policy program now is a Republican. There are several Republican Senior Fellows including a former Republican congressman. Several members of the staff who have Democratic leanings have, none the less, served in Republican administrations (heck, I was invited to serve as a Senior Economist to Bush's (the last one) CEA twice). Further, the Brookings charter gives a very minimum of ideological guidance. Some people on this list might consider the institution's purpose of improving the operation of government ideological, but that's pretty broad guidance compared to the much narrower and less inclusive guidance in the charters of organizations like Cato, Heritage and AEI. There is no ideological test for work done at Brookings period. If anything,there is a bit of premium for coming up with a good idea which bucks the orthodoxy -- no matter which one. How many other institutions can honestly make that claim? I wouldn't have left a tenured job at U.C. Berkeley for this place if it was any other way. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Think Tank Bias' (formerly More Guns, Less Crime?)
Bryan Caplan Wrote: >I don't think we really disagree here. Less than I thought when I misinterpreted what you were saying. I thought you were implying that we were government funded and wouldn't bite the hand that feeds us. If that is not what you are saying then we are closer to agreement than I realized. >Sure, Brookings people are happy >to make marginal criticisms of the status quo. What you view as marginal a lot of people would view as fundamental and sweeping. That was why I added the qualification about "some people on this list..." ;-} >What I think is very >unlikely is that they would publish something saying things like: > >1. Let's quit worrying about "fighting poverty" >2. Let's get rid of discrimination laws >3. Let's get rid of immigration laws You are right that I can't think of anyone at Brookings who would write anything like this. Though there have been some pretty serious questions raised about some other regulatory regimes. >To take another of my favorite examples, do you recall the "Looking >Before We Leap" project you were involved in a few years ago. The basic >premise, which sounds sensible enough, is that welfare reform programs >should be based on the best available social science information, which, >it turns out, is highly inconclusive. Hence, proceed with extreme >caution. > >When I read this, I suggested that when e.g. Medicare was >first proposed, Brookings didn't publish a parallel work emphasizing the >risk that the program might get out of control. I think you agreed that >the asymmetry was real. I don't agree with your characterization of the conclusions of this project. They were much more specific (concerning potential problems with funding etc.) then your characterizations and not very different from the sorts of criticisms and comments made by Brookings folks about the Clinton health care bill (I wasn't around during the Medicare debate). However, ... >I don't think the Brookings brand of scholarship is a product of >financial incentives so much as self-selection of personnel. Moderates >of all types feel comfortable at Brookings. Others probably wouldn't. >The same is true of other think tanks for the most part. I can't argue with this. The same operates to one degree or another in nearly every organization I'm familiar with. However as John Samples has acknowledged, there is a fair amount of diversity in points of view represented on the Brookings staff. It is my impression that we have a much broader representation of views than AEI, Herritage, Cato, PPI, or EPI. Let me turn now to Johns note. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
RE: More Guns, Less Crime?
John Samples wrote: >Krugman's underlying assumption (which, I think, Bill Dickens shares >to some extent) was that there are two kinds of intellectuals writing about >policy: objective scientists and biased ideologues. I'm glad you say "to some extent." I don't agree that there are just two categories in any meaningful sense. Nobody is completely objective and even the worst ideologues always act as if they felt that facts place some constraints on the arguments they can make. Whether or not we like to admit it, at least in Economics, an awful lot of progress comes from ideological adversaries dukeing it out over the analysis and the facts. Far more important to me than someone's ideology is their honesty and the general quality of their work. I've often said that I typically learn more from reading one of Arthur Jensen's writings than reading ten articles written by his critics. Those who know me know that a large ideological gap separates us. So good scientists vs. bad ideologues simply is not the issue at all. >Brookings may be independent, but endowment income is not the cause. >Consider three examples of institutions that have independent incomes and >are heavily partisan: the Century Foundation, the Rockefeller Foundation, >and the Ford Foundation. There are many more throughout the political >spectrum. (As an aside, it makes sense that endowment income produces >shirking, not independence. Not true in Brookings's case but otherwise >robust, I think). (Thanks for the last comment John.) I think endowment income is neither a necessary nor sufficient condition for independence. The NBER is pretty independent despite the fact that it exists largely off corporate and government largess. John's point about Ford and Rockefeller are telling. However, it does make a difference to me that I never have to worry about getting some important funder angry by saying something that he/she doesn't want to hear. When I first arrived at Brookings I was invited to comment on a proposal for a huge jobs program for inner city youth that the Rockefeller Foundation was pushing. I flew up to New York and told them in no uncertain terms that I thought the idea was a political non-starter and that even if it wasn't that it was a very bad idea. This is something that I don't think I would have had the courage to do if I had been working somewhere where my job depended on my ability to raise outside money for my projects. >However, I happen to think Dickens is partially correct here. The fact that >Bob Crandall and Pietro Nivola have neither been punished nor fired for >their views suggests that Brookings does tolerate a degree of diversity. (I think "tolerate" is a bit weak. I would say "seeks out and thrives on." I believe both Pietro and Bob are quite happy here. Pietro and I are personal friends as well as colleagues sharing a common interest in soccer. We read and comment on each others work.) >Jim >Reichley also worked at Brookings for years, and Jim is about as >conservative as anyone I know. Still, Brookings has heavy partisans like >E.J. Dionne on board now. We also have Diane Ravitch (a strong Republican partisan) running our education program. I would prefer the organization try to be non-partisan as opposed to bi-partisan, but we have moved more towards the latter in recent years. >Brookings was also quite liberal more or less up and down the line back in >the days when the country was quite left. Why have they become more >moderate? This is not the history of the institution the way I know it. I entered graduate school shortly after the end of the Vietnam war. Most of my compatriots in graduate school viewed Brookings as moderate defenders of the status quo. Pretty much the same position on the political spectrum it occupies now. Joe Peckman was writing about fundamental tax reform in a way that would have warmed the heart of most conservative public finance people a long time ago. >... In Brookings's case, the lessons >learned were translated through the economics profession. Or at least that >is my theory. If what you are saying is that Brookings moved right with the profession I would agree to a limited extent. Again, I think you overstate how far left Brookings was in the past. >"Further, the Brookings charter gives a very minimum of ideological >guidance. Some people on this list might consider the institution's purpose >of improving the operation of government ideological, but that's pretty >broad guidance compared to the much narrower and less inclusive guidance in >the charters of organizations like Cato, Heritage and AEI." > >On this point, see above: objective scientists versus biased ideologues. >Funny how only organizations on the right are "much narrower and less >inclusive." 1) I normally include PPI and EPI on my list of ideologically constrained institutions because they certainly operate that way. I didn't here because I'm not familiar with the
Re: More Guns, Less Crime?
>>There is no ideological test for work done at Brookings period. If >>anything,there is a bit of premium for coming up with a good idea >>which bucks the orthodoxy -- no matter which one. How many other >>institutions can honestly make that claim? > > >The University of Chicago. Agreed. I meant outside of academia. I should have been more specific. -- Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Homelessness message dated
If someone knows of a study showing that homelessness is voluntary I would love to see it. I've never heard that claimed before for the obvious reason -- how would you ask about it? I can't imagine that a majority of homeless would say that they would prefer living on the street no matter what their resources were or if free safe shelter were available. I do know that many homeless people will only go to a shelter when it is necessary due to the weather (and sometimes not then) because shelters are evidently dangerous places where things get stolen and people get knifed. I can imagine this being the source of the notion that homeless choose homelessness. A few years ago I read the literature on homelessness. As I remember: 1) Mental illness is a problem for only about 1/4th of the homeless. A majority did have drug or alcohol problems. 2) Deinstitutionalization has very little to do with the rise in homelessness as most deinstitutionalization took place a decade before the rise in homelessness (which those of us who lived through it will recall as taking place in the early 1980s). 3) The rise in homelessness correlated with a large cut back in support for low income housing, but the mechanism by which this would have produced the rise in homelessness is hard to describe since the people who were showing up as homeless were not the type who would have been in public housing and public housing never covered more than a fourth of those eligible anyway. 4) Four things which are thought to have contributed to the rise in homelessness: a) Building codes that made SRO hotels untenable, b) a steep rise in housing costs due mainly to ! a steep rise in real interest rates and a change in the tax treatment of rental housing, c) the elimination or sharp reduction of state general assistance programs, d) the 1980/82 recessions. If these are the factors then to the extent its a-c in some sense the rise is voluntary since a) and b) mean that the price is going up and c) means that income is going down. Simple supply and demand says that fewer people will buy housing in those circumstances. But that doesn't mean that any individual feels that s/he (almost entirely he in this case) chose to be homeless. Lots were living with other people and for one reason or other were kicked out. Some, but not many, were kicked out of a house or apartment for non-payment after a job loss. These people tend to have very short spells of homelessness, but it can then be very hard for an individual to get off the streets once they are there. Lots of employers won't hire someone without an address and lots of places won't rent to someone without a job. This impresses me as one area where private charity and even government assistance are reasonably in order. Particularly if the government is going to insist on putting quali! ty restrictions in place that put housing out of the reach of many people who otherwise could afford it. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Game Theory
>On a tangential note, as someone who isn't as familiar >with game theory as most here (and whose math >background in math is likewise limited), I was curious >if any on the list might have any recommendations for >an introductory text on the subject. I will second the recommendation of Gibbons' _Game Theory for Applied Economists_and I would love to hear why no one has recommended Binmore's _Fun and Games_ which I found very accessible. >... two things going against it. One is the presence of Ron Howard as director. How can you say this! Apollo 13 is one of the best movies ever made (IMHO)! -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Years of education and job performance
>The report also contains a number of other fascinating statistics. For >example, according to (Schmidt and Hunter, 1998) years of education and >years of job experience correlate poorly with measures of actual >on-the-job performance: 0.10 and 0.18, respectively. Be wary of numbers like this. As you might expect, they vary considerably from job to job. There are big problems with restriction of range in most studies since, for example, you don't see many highschool dropouts applying for jobs that require a PhD. Also, is a correlation of .18 such a poor correlation? Relative to what? If performance variance is high enough choosing only the top 10% of your applicants by education can make a big difference in your bottom line. Schmidt and Hunter are famous advocates of the use of IQ tests, and IQ generally is a better predictor of job performance than just about any other single factor. But IQ isn't costless to observe and for some jobs has a correlation with measures of performance that is as low as the numbers cited above for years of education. Personnel Psychologists aren't economists and a lot of the stuff they do would make an economist choke. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Years of education and job performance
>Thanks for the heads up. If you have a moment, can you point me to one or two >book/review >articles (by someone whose methodology you respect) that covers predictors of long >term on-the- >job performance ? I don't know of any studies of long-term job performance though I wouldn't be surprised if there were some out there. As you might imagine measuring job performance is a tricky business. What you can measure well is almost always a relatively narrow measure of only some part of the job while the best you can do for total job performance is something vague and unreliable like supervisor assessments. I imagine that some of the studies that use supervisor assessments might involve impressions formed over long periods of time, but I've been mainly interested in the more objective measures since I got into this literature to understand the relative efficacy of IQ tests for predicting the performance of blacks and whites. One of these days I _will_ write up something on my views on The Bell Curve which is no small task because they are relatively highly nuanced. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: returns to higher education
There are a number of previous studies which suggest that returns are higher to attending schools where students have higher SAT scores, but none of these do a very good job of controlling for the unobserved characteristics of the persons attending the schools. Krueger does this in a recent study by controlling for the quality of the schools you were accepted to (not everyone goes to the best school that accepts them) and finds that average SAT scores don't matter but tuition does. I am not convinced that the identification is bullet proof nor that the result might not be sensitive to specification. Particularly since average SAT score at schools is always badly mismeasured (either because the schools misreport them or because of the limited samples used to estimate them). -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Traffic Jam paradox..
>What happend on the A10-West was that the authorities increased the >price for using the road (by lowering the speed limit), and reduced its >utility (by the closing of ramps), and as a result demand for the road >was lowered. For six weeks many people used other routes, or other means >of transportation. The amazing thing is that demand dropped far enough >that traffic delays disappeared. If you are right that it was always jammed up before then the actual speed of travel had to be less than the new speed limit so that couldn't have been a factor increasing the "price." However, its very easy for me to imagine that if you closed the entrance to the Washington DC beltway by my house that I would decrease my usage of the beltway by a lot more than 25%. I think that is the obvious explanation for the drop in usage. -- Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Posts on Stock Market
First, on Monday I gaurantee you that if the market functions, there will be a buyer for every seller. Every transaction has two sides. Whenever you hear commentators saying "there were more sellers than buyers today so the market went down" you should wince. Second, you don't have to be a "patriot" to think that the market will go down, but that you won't sell. The market could open down -- prices significantly lower than last Monday's close. That is typically what happens when there is bad news between the close and the open. If that is the case there is no point in selling even if you know for certain that the market is going down because there is no opportunity to get out before the prices go down. Sometimes it seems that the market is dropping over time. That's because the indicies that are reported in the media are calculated on the basis of the last transaction. When the market opens in the morning after bad news it can take some time before all stocks are trading. During that time the indicies are being calculated using a mixture of the new prices and the last closing price. Thus the appearance of stock prices dropping over time after the open even though prices are simnply opening lower. Third, world stock prices were somewhat lower on Friday than on Monday when US exchanges were last open. So we probably should expect that the market will open down. Fourth, as horrible as the events of last week were I don't think they have much economic significance. a) For all the talk of consumer confidence, empirical analysis suggests that it is a very minor factor in consumption demand (comparable to interest rates) and is dwarfed by the importance of income. Further, we don't know how this is going to affect consumer confidence or purchasing decisions. If people fear ratioing or shortages they might spend like crazy. Or people may be feeling better about themselves and their country as a result of the burst of patriotism. b) This isn't going to be much of a war. We probably don't have much of an enemy. Unless we can link Iraq pretty tightly to the attack (which seems unlikely) our only enemy is going to be a handful of terrorist training camps which have probably already been emptied out and the government of Afganistan. Its not clear what our objective in a war against Afganistan would be, but assuming we don't try to go in and occ! upy territory we won't need to spend a whole heck of a lot more money to fight this war so no big fiscal effects (unless we use this is an excuse to build up our military, build a missle defense, etc.) c) Rebuilding will take place over time and will be a tiny tiny drop in the bucket when measured on the same scale as GDP. No fiscal effect there. (But Fabio, do you really think that Keynsianism is so dead that an exogenous shock to demand won't affect the economy? Your joking right? Even the most hard core RBC people are building sticky prices into their economic models these days and a negative shock will have effects on output in such a model.) d) So that leaves impacts on financial markets as one more way that this could have an effect. But world financial markets have been mostly open. Only US equity markets have been closed. I don't see any reason to expect anything more than a decline at the open of the magnitude we've seen in world markets over the last week. Finally, despite all these relatively optomistic thoughts I'm considerably more pessimistic about the state of the economy today than a week ago. But this is mainly because of several statistics that came out last week reporting data from before the bombing that suggest that what looked like a turn around in the late Summer hasn't materialized. I had thought we might be seeing growth pick up in the third and fourth quarter. I don't see that happening now. -- Bill Dickens
Re: Micro Incentives -- real case question
>My top management would like an incentive/accounting system which satisfies >both teams, and gets both >teams to cooperate more fully, and to use the advantages of each more fully. > >Is there any micro- / game-theory analysis on such internal business >organization? Lots! But you would have to be more specific about the nature of the product, how output is evaluated, how contracts are secured, what the nature of cooperation between the two groups is etc. before anyone would know how to apply it. Also, some people get paid for doing this sort of thing and you might keep in mind the old line "you get what you pay for." - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Rent to Own
Fabio, I just realized that I don't know what the typical rent-to-own contract looks like. Presumably the original owner retains title, but what if there is a dispute over the maintenance of the property during the rental period? What does the contract specify and how are disputes resolved? What protects owners from tenants who do not take good care of their property and then exercise their option not to buy it and what protects renters from owners evicting them and stealing their equity stake? — Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 09/20/01 12:48PM >>> Why does Rent to Own exist? Isn't rent to own just a way of lending money to the customer (like many auto firms)? One friend said it was a way of selling to people whose religion precludes the paying or charging of interest. Any comments? Fabio
Re: Handicapping the 2001 Noble Prize in Economics
I will happlily give 5 to 1 that George beats out Janet in getting the Nobel. - Bill Dickens (the DC one) >>> [EMAIL PROTECTED] 09/20/01 18:44 PM >>> Of course, Bill, the right thing to do would be to state some odds and place a bet. Fabio On Thu, 20 Sep 2001, Bill Dickens wrote: > As Fall approaches one of the interesting rituals involves the selection of > Nobel Laureates. While I'm not a legitimate bookie, I do engage in some > innocuous speculation about who will receive the Nobel Prize in Economics. > I did however correctly "forecast" Robert Mundell several years ago but for > the most part my track record is not impressive. Paul Romer is a sure > "lock" as a future recipient. This year I submit the following three (3) > names: > > 1. William Baumol > > 2. Albert Hirshman > > 3. Janet Yellen [sorry Prof. Ackerlof but your wife will be the first family > member recognized :-)] > > > So, who are your deserving entries? > > Bill Dickens >
RE: # buyers = # sellers ?
I never said that # buyers always and everywhere # of sellers. I specifically said "if the market is operating" there is a buyer for every seller. It is certainly true that specialists on the floor of the NYSE often suspend trading in a stock when there is an imbalance of orders and that bids on the NASDAQ are for specific quantities of stock. However, has there ever been a case where orders to sell at the market in the NASDAQ were not executed for extended periods of time on a stock that was officially still trading? If not, I stand by my statement. It is actually quite remarkable that security markets so regularly clear completely even in the most tumultuous times. However, I would be the last person to claim that this means that asset markets aren't prone to a wide range of anomalous behavior. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 09/21/01 06:12AM >>> Economists (and I am one) can smirk at commentators saying 'that there are more buyers than sellers', but from a market practioners point of view, that is certainly how it feels at times. Financial markets have traders who maintain large stocks of whatever they are trading. When a piece of highly adverse news is reported, traders 'mark down' their holdings, that is they give a considered guess as to the fall in value of their holding due to the news and adjust prices accordingly. Thus prices traders are willing to bid have fallen, but there has been no market input. For instance, if you were holding a lot of airline stocks on 11 Sept, how much had their value declined by the time markets reopened? Yes, such stocks would have lots of offers to sell, but there would be comparatively wide spread and few bids to buy, moreover if you tried to take a trader up on the bid, they would only be wiling to buy a small amount. The rules and regulations of the market may well say, traders must make a market, but it is often the case that the bid is only open to good customers or for very small amounts of stock. Two more examples. The dot com bubble had many companies valued at absurd amounts, why? One reason, it was often the case that only a small amount of the companies stock had been released for sale, the vast majority still being held by the founders, who were locked into maintaining their holdings. Yet the whole company was valued at the price which a small portion of the stock was trading. Many people were willing to buy, but few would or could sell. The price went up, but the bids went unfulfilled. Or a downside case. My old firm, Bankers Trust, was sold to Deutsche Bank when its stock of high yield bonds became worthless in the rush to safety that followed the collapse of the Russian bond markets. These high yield bonds, all in US companies, were valued at zero if you look at the bid price, there was no one in the market willing to buy. There were of course many offers to sell, but the holders of the stock were not willing to go all the way down to the offer price (which was in this case zero). Yet within a couple of months (and after our Chairman had sold the company and pocketed over $80 million in doing so) the market regained its composure and the bonds were again in demand. The price went down, but the offers were not taken up. I can fully understand the theory of making a market, and it does work over the medium term, but significant anomalies, sometimes months long, can and have been seen. James -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of Alex Tabarrok Sent: 20 September 2001 17:40 To: [EMAIL PROTECTED] Subject: # buyers = # sellers ? When the stock market goes up or down and some pundit says there were more sellers than buyers (or vice-versa) it's common for economists to point out that for every buyer there is a seller. (Bill made this argument recently and I have said this before also). Of course the argument is correct in the sense that someone must buy what others sell. The argument is generally incorrect, however, if taken to mean that the number of buyers equals the number of sellers because it could be the case that many buy and few sell but each seller sells more than each buyer buys. Which leads me to my question. Does the number of buyers and sellers vary with the direction of stock movements? For example, during a crash is it the case that a few buyers are buying a lot and many sellers are selling a little? Does anyone know of work done on this question? Cheers Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: Airlines
The argument would have to be that the problem isn't a permanent but a temporary reduction in demand. That that temporary reduction may make otherwise viable businesses insolvent and lead to their dissolution and that that will result in the inefficient destruction of their fixed assets that will have to be reconstructed once demand rebounds. Such arguments raise the usual questions of why private capital markets can't provide the bailouts in terms of loans or why chapter 11 bankruptcy isn't an adequate solution to the problem of preserving the business' assets. It also raises the question of how to decide when governments should do this sort of thing and when they shouldn't and how to avoid the moral hazard problems involved with bailouts. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 09/26/01 12:15PM >>> The President has authorized some 15 billion dollars to bail out the airlines and now travel agents and a host of others are asking for help also. Question: Is there any economic defense for this sort of action? After all, if the demand for air travel has fallen then isn't the optimal response to reallocate resources from the airline and related travel industries into other industries? Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
RE: Airlines
Hi John, Is this all there was to the bailout? At least at one point there was talk of loan guarantees. Did they not make it into the final package? - - Bill >>> [EMAIL PROTECTED] 09/26/01 02:37PM >>> As I understand it, the government intervened to provide insurance for the airlines. Prior to September 11, each plane was insured for $1.5 billion. After September 11, insurance companies were willing to offer only about one-third of that sum for each plane. The market for risk would have shut down the airlines had the government not provided the insurance. Some part of the $15 billion bailout is that insurance (which the government is still providing for next couple of weeks or so). The insurance companies now say annual premiums for airlines will go up in the range of $1.5 to 3 billion. Leaders of some of the companies are now arguing that the federal government should pay part of those premiums. Just after September 11, airline executives estimated that the government shutdown of airports cost them $300 million each day for four days. They initially requested $24 billion in public assistance and settled for $15 billion. The National Journal reported that even K Street types were astonished by their chutzpah. John Samples Cato Institute
Re: Disaster Raises Happiness, Trust
Well that (if the LA Times got it right) is a very odd fact. Why would we be programmed to make babies when we are under stress as opposed to when we are fat and content? The standard evolutionary psychology line says that any innate response such as this has to have conferred some advantage on our pre-human ancestors. The only thing that I can think of is that stress might be caused by competition from some other tribe or another species and it might be advantageous in such situations to increase the number of "soldiers." However, given how long it takes humans to grow to the point that they are useful for such purposes, and given how significant a drain young are on resources, it really seems that such an impulse would be counter productive. Now if this was a grief response this might be more understandable. It would make sense that you might want to replace lost population, but stress seems awfully non-specific. Perhaps our emotional/behavioral systems simply aren't sophis! ticated enough to parse out different types of arousal, but if that is true that should throw a lot of suspicion on the whole enterprise of evolutionary psychology since the mechanisms that are being posited concerning sexuality and social interaction are usually much more highly nuanced than this. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/01/01 12:21PM >>> An article in the LA Times discusses how high levels of stress change hormonal balances in the body causing, ahem, sexual arousal during times of stress. I can easily imagine a similar effect for just plain happiness. Fabio On Mon, 1 Oct 2001, Robin Hanson wrote: > The Washington Post had two interesting articles yesterday about the > recent disaster changed public opinion, on happiness and on trust. > > On happiness, when asked last weekend to rate the overall quality of > their lives on a seven point scale, more than 44% picked the highest > rating. In June that was 30%, and in December 1999 it was 31%. This > seems to me to be an enormous problem for those who want to measure > economic policies by how much they increase reported happiness. Was > this disaster good for the nation because it made people happier?! > > On trust, when asked Sept 25-27, 64% of Americans now trust the > federal government nearly always or most of the time to do what is > right, more than double the percentage who said so in April 2000, and > the highest it has been for three decades. If we interpret this to > be a factual estimate by those questioned, rather than a statement > of values, this seems very hard to square with rationality. What > evidence of federal behavior in the last two weeks could possibly > be the basis for this huge change in opinion? The big info has to > be that the disaster was allowed to occur, and most federal action > since then has been a promises to do useful things, rather than > doing anything demonstrably useful. This seems to me a clear case > of wishful thinking, where people believe what they want to be true. > > > Robin Hanson [EMAIL PROTECTED] http://hanson.gmu.edu > Asst. Prof. Economics, George Mason University > MSN 1D3, Carow Hall, Fairfax VA 22030- > 703-993-2326 FAX: 703-993-2323 >
Re: Disaster Raises Happiness, Trust
I think this is a good EP explanation for men, but there is a problem with it as an explanation for women. I have to admit that I don't know if women are aroused by stress as well, but from the woman's perspective it would seem that her offspring would be most likely to succeed if she waited for the guys to come back and then picked from that bunch. They would presumably be a more fit sub-sample of the original population and would be more likely to be around to help provide for the children. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/01/01 10:19PM >>> With regard to Mr. Dickens' comment regarding whether stress should cause sexual arousal, I am tempted to think that evolutionary psychology can certainly explain this phenomenon. Early societies, according to most models of human development, used the males as hunters and warriors; females were gatherers. With this division of labor, males certainly incurred the more perilous part of the community's job. Before an important hunt or major battle, it is manifestly in the male's evolutionary favor to become sexually aroused; after all, this may be his genome's last chance to reproduce itself! Even if he dies in battle, his sex partners -- still safely at home -- will be able to bear his young.
Re: Disaster Raises Happiness, Trust
The usual argument is that the energy cost of raising a human child is so great, and gestation and birth sufficiently disabling, that an important criteria in mate selection for human females is the reliability of the mate as a provider. EP people claim to have evidence to support this. It is true that, they also claim evidence that there is some biological programming of cheating behavior and that females use very different criteria in choosing mates to cheat with than to live with. But, from what I've seen of the theory and evidence, the suggestion that women would want to mate with a men who are about to go off to war would seem to run contrary to most thinking on the issue. Further, as I noted in my original post, those coming back would likely be a more select bunch than those who went off so that from the woman's perspective it is better to wait. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/03/01 11:12AM >>> Possibly. In many species of birds, the female will mate with high quality males who are often not around b/c high quality males have many mating opportunities. The female then nests with a lower quality male who raises the young. I don't actually know if humans do this, b/c humans don't always fit the models. Mitch Mitchell - Original Message - From: "William Dickens" <[EMAIL PROTECTED]> Date: Wednesday, October 3, 2001 7:17 am Subject: Re: Disaster Raises Happiness, Trust > I think this is a good EP explanation for men, but there is a > problem with it as an explanation for women. I have to admit that > I don't know if women are aroused by stress as well, but from the > woman's perspective it would seem that her offspring would be most > likely to succeed if she waited for the guys to come back and then > picked from that bunch. They would presumably be a more fit sub- > sample of the original population and would be more likely to be > around to help provide for the children. - - Bill Dickens > > > William T. Dickens > The Brookings Institution > 1775 Massachusetts Avenue, NW > Washington, DC 20036 > Phone: (202) 797-6113 > FAX: (202) 797-6181 > E-MAIL: [EMAIL PROTECTED] > AOL IM: wtdickens > > >>> [EMAIL PROTECTED] 10/01/01 10:19PM >>> >With regard to Mr. Dickens' comment regarding whether stress > should cause > sexual arousal, I am tempted to think that evolutionary psychology > can > certainly explain this phenomenon. Early societies, according to > most models > of human development, used the males as hunters and warriors; > females were > gatherers. With this division of labor, males certainly incurred > the more > perilous part of the community's job. Before an important hunt or > major > battle, it is manifestly in the male's evolutionary favor to > become sexually > aroused; after all, this may be his genome's last chance to > reproduce itself! > Even if he dies in battle, his sex partners -- still safely at > home -- will > be able to bear his young. > >
ATTN VIRUS
According to our mail screener, this msg had an attached virus. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/29/01 01:11PM >>> Economics is a way of framing questions, it is not the answer to those qu= estions. III. The Future and Its Enemies Embracing Change; Change as =91Good=92 Remember from lecture #1 the distinction between appreciative and formal = theory. Most economic analysis is not about change, but instead about wh= at happens when all that changing circumstances require have worked thems= elves out. But the process of adjustment to changing circumstances is wh= ere economic life is actually being lived out. So it makes sense that ou= r economics should be about change and the adjustment and adaptations tha= t change invokes. ___ ATTENTION!! _ A Virus Has Been Detected in the file attachment(s). The file attachment(s) have been removed by the Brookings Institution Internet E-mail Antivirus Scanner. > You may wish to notify the sender! _ .
RE: Disaster Raises Happiness, Trust
Since Darwin we normally think that it is women who choose which males to mate with since males want to mate indiscriminately. Thus you would expect it would be the male who would have to adapt to the woman and not the other way around. However, if we are talking about males supporting women and/or forming lifetime bonds then we have an evolutionary game and it isn't clear what the outcome is. However, that just puts us back in the dilemma that I proposed earlier. We can see that it might be in men's interest to want to mate when threatened but not women. I don't deny the empirical fact, I just don't buy the explanations that have been given. - - Bill Dickens >>> [EMAIL PROTECTED] 10/03/01 12:12PM >>> I think the popularity of "Nightmare on Elm Street", etc., including with many young women, is fairly relevant, and supportive of "stress arousal". I'd suspect a strong second order effect in women: the men are "more than usually" aroused; which leads to "more than usual" arousal in the women. I'd suspect women who are NOT more than usually aroused with such men to be at a doubly severe evolutionary disadvantage: a) fewer children overall, and b) less likely to keep a father around to help with the kids she does have. Tom Grey -Original Message- From: William Dickens [mailto:[EMAIL PROTECTED]] Sent: Wednesday, October 03, 2001 4:17 PM To: [EMAIL PROTECTED] Subject: Re: Disaster Raises Happiness, Trust I think this is a good EP explanation for men, but there is a problem with it as an explanation for women. I have to admit that I don't know if women are aroused by stress as well, but from the woman's perspective it would seem that her offspring would be most likely to succeed if she waited for the guys to come back and then picked from that bunch. They would presumably be a more fit sub-sample of the original population and would be more likely to be around to help provide for the children. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/01/01 10:19PM >>> With regard to Mr. Dickens' comment regarding whether stress should cause sexual arousal, I am tempted to think that evolutionary psychology can certainly explain this phenomenon. Early societies, according to most models of human development, used the males as hunters and warriors; females were gatherers. With this division of labor, males certainly incurred the more perilous part of the community's job. Before an important hunt or major battle, it is manifestly in the male's evolutionary favor to become sexually aroused; after all, this may be his genome's last chance to reproduce itself! Even if he dies in battle, his sex partners -- still safely at home -- will be able to bear his young.
Re: Disaster Raises Happiness, Trust
> Indeed, the ease with >which the clever people on this list are able to generate explanations >that go either way seems to me to be a bad sign for evolutionary >psychology. Hi Alex, It was a bad sign for EP 25 years ago when that was virtually all there was to EP (then called socio-biology) but EP these days does a lot more than generate interesting explanations. Today's EP practitioners use their explanations to generate predictions for laboratory behavior of humans today and then test those predictions. They are sometimes quite startling. Perhaps the best example is the many many experiments that show that an elementary logic problem can be posed in dozens of different more and less familiar ways and most people will get it wrong. But pose the problem in a form in which it involves identifying cheating on social exchange, even if the setting is very unfamiliar, and almost everybody gets it right. This pattern was a prediction of EP theory of social exchange. In other examples, women have been asked in laboratories to select the pictures of men they find most appealing for short affairs and for long term relationships. There is a very strong tendency for them to choose men with physical characteristics typical of those with higher testosterone levels for affairs than for long term relationships. Also, the tendency to choose higher testosterone goes up when women are ovulating. (Both EP predictions.) There are some examples where predictions have been less spectacularly successful. For example, attempts to establish an evolutionary explanation for aesthetics have been less than fully successful (I'm being generous). Still, there can be no doubt that EP is a real science which is making real progress in understanding human behavior. This from someone who only 7 years ago was about as die hard an environmentalist as there could be. The more I've learned the more I've been won over to the view that there are important insights to be had by studying the genetic origins of behavior. - - Bill Dickens (DC based) William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/09/01 06:31PM >>> Why not deny the empirical fact - given all we have for data is a second-hand report about a newspaper column! Alex -- Dr. Alexander Tabarrok Vice President and Director of Research The Independent Institute 100 Swan Way Oakland, CA, 94621-1428 Tel. 510-632-1366, FAX: 510-568-6040 Email: [EMAIL PROTECTED]
Re: 2001 Economic Nobelists
Bryan, U. A Nobel prize is a slap in the face? I'd certainly turn the other cheek! - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/10/01 03:03PM >>> In a way, isn't dividing the prize 3 ways a slap in the face to Akerlof and Stiglitz? Stiglitz in particular, I suspect, would have preferred not to have won this year in the hope of getting an unshared prize. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "Familiar as the voice of the mind is to each, the highest merit we ascribe to Moses, Plato, and Milton is, that they set at naught books and traditions, and spoke not what men but what *they* thought. A man should learn to detect and watch that gleam of light which flashes across his mind from within, more than the lustre of the firmament of bards and sages." --Ralph Waldo Emerson, "Self-Reliance"
Re: Disaster Raises Happiness, Trust
But how would their lack of motivation explain a consistent pattern in their choices and how that pattern would change depending on their susceptibility to pregnancy. I don't understand your objection. - - Bill Dickens >>> [EMAIL PROTECTED] 10/10/01 02:05PM >>> The EP experiments don't seem that convincing. Can't you make the same arguments against the EP experiments that many economists make against the work of Kahneman/Tversky --that there isn't enough at stake for the individual to make a "good" decision. It seems silly to show people pictures and ask them who'd they'd like to spend their life with or have a fling with. Would the test subject care about putting any effort into making their decesion in such an artificial setting? Daljit Dhadwal William Dickens wrote: >Today's EP practitioners use their explanations to generate predictions for laboratory behavior of humans today and then test those predictions. They are sometimes quite startling. > Perhaps the best example is the many many experiments that show that an elementary logic problem can be posed in dozens of different more and less familiar ways and most people will get it wrong. But pose the problem in a form in which it involves identifying cheating on social exchange, even if the setting is very unfamiliar, and almost everybody gets it right. This pattern was a prediction of EP theory of social exchange. > In other examples, women have been asked in laboratories to select the pictures of men they find most appealing for short affairs and for long term relationships. There is a very strong tendency for them to choose men with physical characteristics typical of those with higher testosterone levels for affairs than for long term relationships. Also, the tendency to choose higher testosterone goes up when women are ovulating. (Both EP predictions.) > - - Bill Dickens (DC based) > > William T. Dickens > The Brookings Institution > 1775 Massachusetts Avenue, NW > Washington, DC 20036 > Phone: (202) 797-6113 > FAX: (202) 797-6181 > E-MAIL: [EMAIL PROTECTED] > AOL IM: wtdickens >
Re: Silly business regulations
Wisconsin used to regulate the color of margarine. The dairy industry wanted to reduce the demand for it. From what I've been told there was a time when you bought white margarine, but it came with yellow food coloring that you could mix into it if you wanted to make your margarine look like butter. - - Bill Dickens >>> [EMAIL PROTECTED] 03/31/02 17:00 PM >>> Armchairs, This is from the latest economist issue: Margarine is regulated to be whit color in Quebec Can you think of an American example that can top this? Quebec's silly business regulations Low-fat spat Mar 28th 2002 | MONTREAL >From The Economist print edition Margarine of any colour, as long as it's white EUROPE is famous for its plethora of consumer-coddling business regulations. Silly rules have also taken hold in that little piece of Europe in North America, French-speaking Quebec. One local law, for instance, limits large supermarkets to four employees on Sunday, the idea being to promote small stores (whose prices are higher than the supermarkets'). But that looks positively sensible compared with Quebec's rules concerning what you spread on your toast. Margarine is yellow in every Canadian province except Quebec, where it is its natural colour, white. It is against the law to sell yellow margarine because, says the Quebec government, people might be fooled into thinking it is butter. Who could be behind such a thoughtful rule? Step forward Quebec's dairy industry, which is out to protect butter from the, er, spread of margarine. While Quebec has only 24% of Canada's people, it is home to 38% of its dairy cows. Among those who find the law unpalatable is Unilever, a consumer-goods giant that has 60% of the local margarine market. In 1997, it challengedthe ruling by importing some of the illegal yellow stuff to a supermarket in Alma, a remote town north of Quebec City and home to the then premier, Lucien Bouchard. The yellow margarine was seized. Unilever sued, arguing that the ban violates international laws, including the North American Free-Trade Agreement, which is popular in Quebec. This week, the case went before the Court of Appeal, but a ruling could be months away. Unilever says the ban is costly, and points out that the dairy industry dyes butter to give it the same colour all year round. But Quebec's government is standing by its colour discrimination. Even the name suggests white, not yellow, say officials: margarine, invented by Hippolyte Mège-Mouriès in France in 1869, is named after the Greek word for pearl.
Re: re : securities analysis
> But the real question is whether there were any clustering in the >attributes of the minority who consistently beat the market. If there is a >strong clustering of attributes (they ate the same brand of corn flakes for >many many years or went to the same school or followed the principles of >the same Guru of investing or whatever ...) obviously then there is some >causal variable that may explain the phenomenon and it would not be >scientific to dismiss this clustering by taking the argument that majority >under performs the market anyway. There is strong evidence against clustering. Clustering would imply that there should be a fairly strong correlation between who outperforms the market in one year and who outperforms the market in the next. A study done a few years ago (NBER working paper - - I don't recall the authors) showed that there was a statistically significant, but vanishingly small, correlation in the performance of publicly traded funds from one year to the next. So you can increase your expected return a tiny bit above the average for all mutual funds by picking a fund that performed well in the previous year, but from what I remember it wasn't enough of a gain in expected performance to overcome the under-performance due to over-management [*whew*]. So then what should we make of the fact that several people who follow a particular strategy have all done well? Nothing at all. Suppose that I profess to the world that the thing to do today is to own gold and drug stocks. Suppose that I happen to get lucky and those two assets do particularly well over the next five years. Would anyone be surprised if dozens of people from the "golden-drugs" school also did well? In the example cited above one would need to look deeper. Have all these people done well picking different stocks using the same principles or does the fact that they ascribe to the same principles mean that they have all picked mostly the same stocks and therefore had highly correlated returns? If the latter then there is no more of an insult to efficient market theory than if one person had done very well for the same length of time. And in a market with lots of participants that will happen frequently. All that aside, there is evidence that value investing works and that is an anomaly. However, as I recall, the increase in expected returns that one gets by following such a strategy are measured in basis points, not percentage points as some advocates of this approach would suggest. One other thing. I very much liked Alex's thoughtful commentary on this. As he noted, there are lots of anomalies that can mean that stocks are badly mispriced, but that doesn't necessarily mean that there are guaranteed excess returns out there. This was the point of Summers' old noise trading model. You can have market equilibrium with irrational traders dominating the market, but the additional risk that their behavior induces in the market exactly offsets the increase in expected return that is created by the mispricing that they cause. This possibility was made all too clear to me when I took a $20,000 short position in Amazon.com - - a year too early. I haven't met anyone who will argue that Amazon wasn't over priced at that time, and if I hadn't been forced to abandon the position or face bankruptcy I would have made money. However, I couldn't afford the margin calls and ended up losing a lot of money on the deal. Insult was added to injury when a year after I was forced to abandon my position I had to sit at a dinner table listening to someone brag about how much money he had just made shorting Amazon.com, and about how stupid participants in the stock market obviously are. When I asked him how he had decided when to take his short position he cited an argument with another person over market efficiency as the precipitating incident - - in other words dumb luck. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: re : securities analysis
>But those who bought long-term put options (LEAPs) on Amazon could lose no >more than than their financial investment, and the put options could be held >or others bought until the downturn, with no margin calls. The Longest term option that was availale wouldn't have gotten me far enough to have made money and the premium was _huge_. - - Bill
Re: re : securities analysis
> >So Bill, are you willing to stick your neck out regarding the January >effect? Thaler says average ROR in January is 3.5%, versus an average >of .5% for all other months. Is this another case of basis points being >exagerated into percentage points? So if you invest in stocks in January and bonds the rest of the year and the bonds earn 80% of the average annual return of stocks you get ~10.5% return vs. 9.3% from stocks vs 7.2 from bonds. If most of the volatility in stocks is in January as well you don't save much on risk premium. Not hard to imagine that the tax cost of getting in and out of stocks every year could dominate an extra 1.2% return. That plus I thought I remembered that Thaler's January effect has been more subdued since he wrote his article. Thaler advises a fund and I haven't heard that it is head and shoulders above other funds. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Grade Inflation
This discussion has been assuming that employers look at grade averages. Last time I looked into this, very very few employers requested university or high school transcripts or even asked people to report their grade averages on their applications. Asking for GREs would probably get them into trouble with the EEOC and the courts since using tests in hiring is very difficult if blacks and whites score differently on them. I believe the law still requires employers to show that using the test is a business necessity. Does anybody have any evidence that employers are requesting grade averages frequently today? That would be a very interesting result given all the discussion of upgrading of required skills. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 04/10/02 01:13PM >>> > --- "Robert A. Book" <[EMAIL PROTECTED]> wrote: > > Isn't this what the GRE, MCAT, etc., are for? Granted, they don't > > apply to all post-graduate plans, but it's a start. Fred Foldvary ([EMAIL PROTECTED]) responded: > How many employers require applicants having a BA/BS to have taken the GRE > etc. before they are considered for hiring? > If few do, then it shows the degree and grades are still a sufficient > criterion. Good point. I'm sure few if any do, which raises an perhaps even more interesting question: Most graduate schools are part of universities which also have undergraduate programs, and most graduate schools require some standardized tests. Does that mean they put less confidence in the degrees and grades they themselves give, than the employers do? There are two caveats to taking that question the way I'd like to. First, I suspect employers use personal interviews much more than graduate schools do; perhaps interviews produce more, or more relevant information than a standardized test. Second, I wonder how the standardized testing "community" would react to employers wanting to use existing tests for hiring purposes. Surely there is nothing to stop job applicants from taking the GRE, but I don't believe there is any existing mechanism for employers to receive score reports directly from ETS. (Schools seem to want scores from ETS, not from the applicant, probably to prevent forgery.) The absense of such a mechanism may mean there is no demand for the service from employers, or it could mean the suppliers refuse to supply for some reason. --Robert
Re: Grade Inflation
I posted a note to this list a couple of days ago about this, I'm not sure it went through. Its been a while since I looked at this, but when I did the information that I found suggested that employers not only don't get transcripts, but they don't even ask grade average information on job applications. Does anyone know of any information to the contrary? It may be changing given some of the other things that are going on in the labor market, but a recent study by Ron Ferguson that surveyed employers about what third of the HS class their workers were drawn from had to be reworded to get the employers to guess when they didn't know because many (most) had no concrete knowledge. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 04/13/02 04:55AM >>> Has anyone done a study on this: Which matters more for employers? Someone who's got high grades and studies in a so-so school or above-median (but not so high) and studies in an ivy league? At 07:17 AM 4/10/2002 -0700, you wrote: >--- "Robert A. Book" <[EMAIL PROTECTED]> wrote: > > Isn't this what the GRE, MCAT, etc., are for? Granted, they don't > > apply to all post-graduate plans, but it's a start. > >How many employers require applicants having a BA/BS to have taken the GRE >etc. before they are considered for hiring? >If few do, then it shows the degree and grades are still a sufficient >criterion. > >Fred Foldvary > >= >[EMAIL PROTECTED] > >__ >Do You Yahoo!? >Yahoo! Tax Center - online filing with TurboTax >http://taxes.yahoo.com/ > > >--- >Incoming mail is certified Virus Free. >Checked by AVG anti-virus system (http://www.grisoft.com). >Version: 6.0.295 / Virus Database: 159 - Release Date: 11/1/2001
Re: misc - ignore!
>>> [EMAIL PROTECTED] 04/25/02 12:54AM >>> I am a dunce and I have inadvertently given Bryan's secret away. I promise, however, not to reveal the names of the other participants (especially if they send me large wads of cash - you know who you are.) My apologies to all. Alex Alex, I never thought you would stoop to blackmail! How much do you want to keep my secret safe? . . . . . . . . Oooops. I guess that won't be necessary. (hehe) - - Bill Dickens
RE: Consumer Reports on Deregulation
>Also relevant is quality and availability of service. Previously prices >may have been cheap/falling but the range of offering, customer >treatment or availability may have constrained enjoyment of the service >to a sub optimal level. Deregulation could/should change this. (I think >it has in my limited experience) Exactly the opposite of what happened in the formerly regulated markets I'm familiar with. With prices fixed at a level that gave most good companies very good rates of return they competed by increasing quality. Quality has declined most noticeably in air travel and the brokerage industry, but arguably in trucking and banking as well. >I'm also not sure to what extent the prices charged were also controlled >by governments as a macroeconomic tool to reduce measures of inflation? >Any thoughts? Since the regulatory agencies tended to be captured by the regulated industry (or at least sympathetic) prices tended to be too high (thus the price declines) rather than too low. As someone else said, the counterfactual is everything. CR is comparing the price declines during the 50s, 60s and early 70s with the price declines in the late 70s, and 80s. Productivity growth was notably faster in the earlier period than the later period. Would prices have declined as much in the 80s in trucking airlines, and phone service if there hadn't been deregulation? From the studies I've seen I seriously doubt it. Of course not everybody's prices decline. Regulation did tend to set prices too low for many low volume markets. In those places prices have skyrocketed. I suspect that some of this is just price rising to meet marginal cost, but because these are also markets with substantial fixed costs (maintaining terminals, ticket agents etc.) there is probably also some element of natural monopoly pushing prices in these markets up above long-run marginal cost. I would guess that there are three factors that account for CR's anguish about deregulation: 1) Their sense of fairness is offended by the big price increases experienced in difficult to serve markets, 2) Coming from the upper middle class as they do, they put more value on quality and are less concerned about price than the marginal air traveler/bank customer/brokerage customer so they experience the change from high q high p to low q low p less favorably than the new people attracted to the market by the change, and 3) deregulating a monopoly may cause an increase in price and to some extent that is what deregulation did (perhaps most notably in the cable industry, small air markets, and certain types of phone service). With respect to 3) don't think I'm not aware of the competition that cable faces from satellite or how contestable air markets are. Imperfect competition and limit pricing still leave plenty of room for monopolistic distortion. I don't think that _the_ definitive study on the costs and benefits of deregulation has been done and I very much doubt that CR's study is it. After all, CR used to (still does?) insist that economists have to be wrong about the predictability of capital markets because there are numerous mutual funds that have had 5 or more years of ROR above the market average - - without asking how many would be expected on the basis of chance alone. Thus they used to endorse mutual funds with exceptional records which, of course, tend to be the ones with the riskiest strategies (and by the studies I've seen only infinitesimally better expected returns). Sigh... - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
RE: Consumer Reports on Deregulation
Huh? Why would the _nature_ of quality competition be affected by deregulation? I suspect that it is true that competition was on the basis of both quality of service and attractiveness of flight attendants back in the 60s and 70s, but it was the women's movement, the Civil Rights act (particularly its application to age discrimination) and the flight attendants' union that changed this. Not deregulation. But there is a lot more to quality competition than flight attendants. In flight meals were more substantial and more frequent. Ticket lines were shorter for coach passengers. Major airline employees were more polite. There were lots of give always (decks of cards, airline pins, etc.) Flight attendants with time on their hands would strike up conversations with passengers. I don't know that anyone has tried to quantify this, but I don't know anyone who flew much before deregulation who doesn't think that the quality of service with the major airlines declined before and after deregulation. Given that deregulation seems to have caused fairs to drop in the major markets this is exactly what an economist would expect. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 06/12/02 09:45PM >>> On Bill's pint about quality competition. I've heard that during the days of regulated air travel, airlines apparently competed on the beauty of the stewardesses. I've been told by numerous sourcces (but have no real evidence) that some business magazines would rate the quality of the stewardesses in each airline. If you favor hiring people based on their ability to serve coffee and tea instead of their looks, you might favor deregulation. mitch mitchell - Original Message - From: "William Dickens" <[EMAIL PROTECTED]> Date: Monday, June 10, 2002 5:08 pm Subject: RE: Consumer Reports on Deregulation > >Also relevant is quality and availability of service. Previously > prices>may have been cheap/falling but the range of offering, customer > >treatment or availability may have constrained enjoyment of the > service>to a sub optimal level. Deregulation could/should change > this. (I think > >it has in my limited experience) > > Exactly the opposite of what happened in the formerly regulated > markets I'm familiar with. With prices fixed at a level that gave > most good companies very good rates of return they competed by > increasing quality. Quality has declined most noticeably in air > travel and the brokerage industry, but arguably in trucking and > banking as well. > > >I'm also not sure to what extent the prices charged were also > controlled>by governments as a macroeconomic tool to reduce > measures of inflation? > >Any thoughts? > > Since the regulatory agencies tended to be captured by the > regulated industry (or at least sympathetic) prices tended to be > too high (thus the price declines) rather than too low. > > As someone else said, the counterfactual is everything. CR is > comparing the price declines during the 50s, 60s and early 70s > with the price declines in the late 70s, and 80s. Productivity > growth was notably faster in the earlier period than the later > period. Would prices have declined as much in the 80s in trucking > airlines, and phone service if there hadn't been deregulation? > From the studies I've seen I seriously doubt it. > > Of course not everybody's prices decline. Regulation did tend to > set prices too low for many low volume markets. In those places > prices have skyrocketed. I suspect that some of this is just price > rising to meet marginal cost, but because these are also markets > with substantial fixed costs (maintaining terminals, ticket agents > etc.) there is probably also some element of natural monopoly > pushing prices in these markets up above long-run marginal cost. > > I would guess that there are three factors that account for CR's > anguish about deregulation: 1) Their sense of fairness is offended > by the big price increases experienced in difficult to serve > markets, 2) Coming from the upper middle class as they do, they > put more value on quality and are less concerned about price than > the marginal air traveler/bank customer/brokerage customer so they > experience the change from high q high p to low q low p less > favorably than the new people attracted to the market by the > change, and 3) deregulating a monopoly may cause an increase in > price and to some extent that is what deregulation did (perhaps > most notably in the cable industry,
Re: double vs. single entry
Does anyone answering here know any accounting or are people just guessing? I pulled out an accounting text I keep as a reference and looked up double entry and single entry and they weren't there. My understanding is that the "the invention of double entry accounting" refers to the invention of the balance sheet. My vague memory on this is that prior to that invention all people had in the way of accounting was ledgers showing transactions and rather haphazard listings of firm's assets and liabilities. If my memory serves me here the invention of the balance sheet allowed quick and easy insight into the book value of the firm which was not a well defined concept before this. Those who are familiar with accounting principles will recognize this as a big change. You could say that the invention of the balance sheet is the beginning of modern accounting. You could go further and say that there is virtually no useful accounting without the balance sheet and that nearly every other modern accounting concept (income statements and cash flow) are linked to the balance sheet. - - Bill
Re: Autism, brain damage and cooperation
>Come on, Fab - pointing out examples of brain >differences explaining >behavioral differences is hardly convincing evidence >that brain >differences are the right explanation in this case. Hey Bryan, don't you know the plural of anecdote is data? Seriously, there is plenty of evidence (and it is widely accepted) that injuries to different parts of the brain consistently produce particular changes in behavior. Not even Jensen would argue that g is the only aspect of neurology that matters for behavior (assuming g has a neurological basis which is not established). What is wrong with the notion that there are parts of the brain that specialize in controling social behavior and that they develop late? We know that there are some profoundly specialized cognitive abilities having to do precisely with regulating trading behavior. Maybe they develop more slowly than other aspects of personality. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Why do people pick stocks?
>Ie, why do people accept lower returns just for the >privilige of >picking the stocks themselves? Mostly because they believe they are smarter or more knowledgable than average and will outperform the market. I know some very sophisticated people who believe this (and at least some of them have portfolios that do outperform the market on a regular basis (note that this could be endogenous)). There is another reason howevr. Even the lowest cost index mutual funds have more overhead then you are going to have if you use a discount broker and buy and hold (and they hide these costs - - I'm not talking about the loads or transactions costs you pay for some mutual funds, but the management and trading fees that get deducted form your investment each year). If your portfolio is large enough to allow sufficient diversification you can do somewhat better on your own - - particularly if you want to diversify beyond the S&P500. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Why do people pick stocks?
There is another reason howevr. Even the lowest cost index mutual funds have more overhead then you are going to have if you use a discount broker and buy and hold (and they hide these costs Who is the "they" - mutual funds or discount brokers? And how are they being hidden? >>>I've been told by a Law Professor who works on security regulation that the >management fees reported by index funds do not fully reflect the costs they incur for >reballencing their portfolio's to match market shares and that the actual costs are a >multiple of the reported management fees. It was claimed that if one compared the >return on the S&P500 to the return on holding the mutual fund the difference in basis >points would be larger than the reported management fees. I told this to a stock >broker who insisted that that was wrong or that I had misunderstood and that perhaps >what the law professor meant was that because the fund incurs capital gains in the >process of dealing with fluctuations in invested funds and these have to be paid out >and taxed that that would account for the difference between the afrter tax return >from holding the market yourself and holding the mutual fund. Take your pick. I don't >have first hand knowledge to judge. Discount brokers can really beat a .2% annual fee with no loads on either end? >>>For sure. Most brokerage houses don't have any fees other than fees for trading. >Even if you have a round-trip cost of $100 for $10,000 worth of stock (you can do >much better than this - - $14 is not out of the question) if you hold it for 20 years >you are way ahead of a .2% annual fee. But again, according to my sources the actual >difference in performance between holding yourself and holding in the lowest cost >mutual fund is a lot more than .2% per year. - - Bill Dickens
Re: Index mutual funds
>>> [EMAIL PROTECTED] 07/14/02 14:19 PM >>> If I want to buy shares in the 500 or so companies on the S&P 500, I'll be looking at commissions of at least $3000, right >>>That would be very low. I would guess that most people would pay roundtrip costs >with a presnet value of about $15 for holding 20 years with a cheap discounter. So >say $7,500 (unless I have a commissionless trading account, which requires a minimum balance of $500,000 or so)? If I hold those stocks for 20 years without ever rebalancing, that's $150/year. $150 divided by .2% is $75,000. >>> Assuming your portfolio is growing at about your discount rate that should be >about right. Except... What if I don't happen to have $75,000? Should I not invest in stocks at all until I've raised that much money just so I can save on commissions and fees? >>> You can get very close to the diversification of the S&P500 with a lot fewer than >500 stocks. Off hand I would guess that you can get over 95% of the variance >reduction with just 20 stocks. That would get the break even down below $5,000. If I buy 10 stocks and hold them for 20 years, I might pay less in commissions and management fees, but I'm much less diversified, right? >>> Not that much. Assuming constant variance and correlation the variance fraction of >the possible reduction you can get is inversely proportional to the number of stocks >you hold (you get half the reduction relative to holding one stock by holding 2 90% >by holding 10 etc). If correlation isn't constant then you should be able to do >better than that by choosing less correlated stocks. There is definitely a point at which mutual funds become less cost-effective than buying individual stocks, but I'm pretty certain you need to have at least $1 million dollars lying around in your stock portfolio for that to be true. >>>I very seriously doubt it is that much. - - Bill Dickens
Re: Index mutual funds
>>> [EMAIL PROTECTED] 07/14/02 14:19 PM >>> If I want to buy shares in the 500 or so companies on the S&P 500, I'll be looking at commissions of at least $3000, right (unless I have a commissionless trading account, which requires a minimum balance of $500,000 or so)? If I hold those stocks for 20 years without ever rebalancing, that's $150/year. $150 divided by .2% is $75,000. What if I don't happen to have $75,000? Should I not invest in stocks at all until I've raised that much money just so I can save on commissions and fees? If I buy 10 stocks and hold them for 20 years, I might pay less in commissions and management fees, but I'm much less diversified, right? There is definitely a point at which mutual funds become less cost-effective than buying individual stocks, but I'm pretty certain you need to have at least $1 million dollars lying around in your stock portfolio for that to be true. I've read in the Wall Street Journal that exchange-traded funds are a better deal than index mutual funds if you have $30,000. If you are able to accumulate $30,000 in cash every month, then mutual funds don't make sense. (That implies a disposable income of at least $360,000 a year). At lower amounts, mutual funds are by far the best choice for convenience, cost, and diversification. Are there any flaws in my reasoning here? James
Re: Why do people pick stocks?
>> - - $14 is not out of the question) if you hold it for 20 years you are way >>ahead of a .2% annual fee. >For $10,000 worth of a single stock? Or $10,000 of any desired bundle >of widely-held stocks? Single stock, but for an analysis of what this means for diversification see my post on how big a portfolio you have to have to get the benefits of diversification. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Index mutual funds
Bryan wrote: Right, but if you want to reduce the SD of your return, you've got to square those numbers - you need 100 stocks to get the SD down by 90%. And isn't that the measure of risk most people vaguely have in mind? >>>Well what I suppose we should be using isn't either the SD or the Var, but the % of >the maximum increase in utility that is possible with increasing diversification. >Playing around with a few examples it looked to me that the gain in utility was >inversely proportional to the decline in variance - - not the SD. However, more >surprising than that was the incredibly small utility gain that one obtains by >reducing the standard deviation of your income from say 20% of the mean to 10% of the >mean. In all the examples I worked out a .1 or .2% increase in the rate of return >completely dominated that. In any case, I'd like to thank Bill for the only useful investment information I've learned since the JEL piece on international diversification. >>>Your welcome. Just note that this was never intended as investment advice, your >milage may vary, not doing exactly what someone else told you to do will certainly >cost you your life fortune and leave you broke and starving, its not my fault, repeat >PLEASE DON'T SUE ME! So Bill, if you had to guess, roughly what expected return reduction would you get from (a) standard stock-picking and active trading, (b) managed mutual funds, (c) index funds, and (d) buy and hold with discount brokers? I would still guess that (c) closes 90% of the distance between (a) and (d), but I'd like to hear your guesstimate. >>>Depends on the size of your portfolio. If its $2,000 you might very well be better >off with the mutual fund. With a million dollars or more I expect that 90% is almost >exactly right (figure zero percentage costs vs. annual costs of .5% of your current >net worth in present value terms for 20 years). I use the .5% figure rather than the >.17% or .2% figures for the reasons I mentioned in a previous post plus one more I've >thought of since then. If you buy individual stocks you are likely to have some >losers. You can sell those to take capital losses that you can use to reduce your tax >liability for your unavoidable investment income (dividends and interest on fixed >income assets). Can't do that if you diversify in a mutual fund. - - Bill Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it." Leo Tolstoy, *The Cossacks*
Re: Index mutual funds
>Do you seriously find this exercise helpful? Couldn't you just as >easily back out the (von Neumann-Morgenstern, I presume) utility >function you need to get an introspectively plausible answer? In other >words, if you feel nervous with a SD of 20% of the mean, could looking >at utility functions really make you feel better about it? Well this is a tad embarrassing. I thought I was using "standard" values for the coefficient of relative risk aversion, but had messed up its definition so that I was actually using values that were very very low. Using a CRRA of 3, a reduction in the standard deviation of income from 20% to 10% gives an increase in utility equivalent to about a 7.5% increase in income (RV is a normal truncated and + or - 3). Sound more reasonable? However, this does drop off rapidly as you decrease the CRRA. For example, with a value of 1 (the commonly used log utility) it only takes a 1.7% increase in your income to compensate you for an increase in the standard deviation from 10 to 20% of your income. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Public Opinion On Spending
>> Isn't it "folk wisdom" that many gov't programs start with promises >> they'll stay small (income tax, social security, medicaid) but once >> they exist, they become popular? I'm not sure this is right. If you look at what the public say they would like in a government health care program it is huge and very expensive (in contrast I suspect if you asked how much they would like to spend on it the amount would be too small to pay for what they would like to see in the package). As I understand it, the cost of the medicare program turned out to be much greater than expected, but not because congress kept changing the legislation to add more goodies. Rather treatment became increasingly more expensive. I suspect that popular opinion would have preferred to see an even bigger medicare program at the start. Of the examples you mention I suspect that only the income tax was sold on the basis of its limited size. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Public Opinion On Spending
>> As I understand it, the cost of the medicare program turned out to be much >greater than expected, but not because congress kept changing the legislation >to add more goodies. Rather treatment became increasingly more expensive. >Bryan Caplan: >In an email discussion with me circa 1995, you mainly attributed the >low-ball estimate to wishful thinking (presumably mixed in with >deception?), not unforeseen technology shocks. I don't remember this. I would imagine that favorable assumptions explain some of the error, but can't account for a very large fraction of the forecasting error. I'm nearly certain that if you are comparing the forecasted costs from back then with today's costs the vast majority of the difference would be the change in the typical per person cost of medical care. This change isn't only due to innovative treatment, but also due to the growth of demand caused by the availability of insurance (as another poster suggested). >David Levenstam: >All my books remain packed in boxes, so I can't look up the figures, but I >seem to recall that the Congressional proponents of Medicare projected an >ten-year federal outlay of some $8 billion, as opposed to the annual outlay >of $110+ billion now. I can't conceive of the vast majority of Americans >supporting a program that would have cost two orders of magnitude greater >than projected. Of course you have to discount the latter figure for inflation and population growth, but no one is disputing that the costs were significantly understated. However, would American's have opposed Medicare if they had known how much it would cost (and what they would get for it)? I very seriously doubt it. Of course there is no way to know for sure, but polling results I saw during the Clinton administration suggested that cost was not a major concern for voters considering different health care plans. In fact, if the polling results I saw were right a majority of Americans would have voted for Clinton's plan knowing what it did and how much it cost as long as it wasn't labeled "Clinton's plan." (By then Harry and Louise had done a good job of convincing people that the plan was something that it was not.) Of course, voters also thought that the fact that firms were supposed to pay most of the costs of the plan meant that they would not have to pay for it (ultimately). Its not! clear if people would have been willing to pay for it if they thought they would have to pay the full price themselves. >Typically one of the selling points of federal programs is >that "they won't cost too much." Selling points to who for what? I suspect that this matters a lot more to congress than it does to the typical voter. As has been noted several times in this discussion, the typical voter has nothing close to an accurate conception of the magnitude or the allocation of the Federal budget and therefore no basis for judging whether a program is cheap or too costly. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Savings Rates
Hi Bryan, There are at least two official government savings rates. My guess is that you are referring to the individual savings rate from the National Income and Product Accounts. For a very good description of how it is computed and its advantages and shortcomings see Gale and Sabelhaus in the 1999:1 BPEA. Whatever you may think about NIPA savings measures they are not "silly." They do a pretty good job of measuring the national income concept of savings which is not identical with change in wealth. It is a useful concept since in NIPA savings flows equal investment and if household savings is negative it has to be offset by government saving or international savings if there is to be any investment. Gale and Sabelhaus do not answer the question that you ask but they do look at the question of whether savings rates are low if we define savings as change in wealth rather than income minus consumption. They conclude that were (at least at the time of the article) extremely high. I wouldn't be surprised if some of the same problems that Gale and Sabelhaus address wouldn't be behind some of the results you mention from the literature on individual savings rates. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 08/08/02 02:25PM >>> Bill Dickens wrote: > > Bryan: > Which "official definition of savings" are you referring? NBER or > Palgrave's Dictionary of Economics? Both emphasize looking at savings as > abstinence of consumption. Do you reject the Wicksell-Fisher tradition that > savings is a reflection about how individuals discount the future? I am thinking about officially-reported "savings rates," which in recent years have sparked puzzlement by actually turning negative. I'm not sure whose imprimatur is on these numbers. But the savings experts I've had the chance to ask have told me that official numbers don't count stock purchases, capital gains, etc. But maybe I'm just confused. If anyone knows better... -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it." Leo Tolstoy, *The Cossacks*
Re: Savings Rates
You can check the article but that is my memory (I'm at home now and can't check the article myself). When they added capital gains in real estate and equities to the flow of savings to get change in wealth they got high savings rates. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 08/12/02 15:38 PM >>> William Dickens wrote: > Gale and Sabelhaus do not answer the question that you ask but they do look at >the question of whether savings rates are low if we define savings as change in >wealth rather than income minus consumption. They conclude that were (at least at the >time of the article) extremely high. They conclude that savings rates were extremely high? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it." Leo Tolstoy, *The Cossacks*
Re: Savings Rates
>Economic income is consumption plus the change in >net worth (c.n.w.), Not in national income and product accounts. It is current income minus consumption. Current income does not include appreciation of assets. Further, if you want savings to be equal to the flow of investment in the NIPA then you can't include change in asset value in your income calculation. NIPA attempts to describte the disposition of current production. There are no ballance sheet concepts (other than depreciation in net national income, but depreciation is thought of as real depreciation of physical assets and does not attempt to include declines in market value due to changes in valuation). In contrast, when one adds to net worth by not spending what one earns, and this savings is loaned for investment in more capital goods, this is a positive rather than zero-sum game for society. So one could differentiate zero-sum from positive-sum savings. >>>I'm not sure what the point of all this is. If you look at the Gale and Sabelhaus >article it should be clear how the NIPA concept of savings differs from change in >wealth, why both are useful concepts, and why it is inappropriate to proclaim >household savings behavior as anomalous if there are large positive _aggregate_ >changes in the value of wealth. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Nations as Corporations
>I have no idea how share holders keep faith in firms based in dodgy >Third World nations. Probably some kind of trust, where paying out >dividends and respecting voting rights signals that future investors >will be treated well. But how often does this occur? Are these >multinationals not based in 3rd world not trying to avoid shareholder >rights? No doubt a major reason for the lack of equity markets and equity financing in most third world countries. The US is almost unique in the prominent role played by equity markets in providing capital for business. Banks and other more hands on intermediaries play a much larger role even in Europe and Japan than in the US. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Partisan fiscal policy
> (does anyone in econ still >talk about the old concept of aggregate supply and demand?), Judging by the best selling textbooks yes. Most certainly. I haven't looked in the last couple of years, but the last time I did there still wasn't a really good text book that presented undergraduate macro entirely in terms of OLG or RBC models that still dealt with standard concerns about stabilization policy. Most undergraduate instructors still think stabilization policy is important (and since it is a very large part of the discussion of economic events in the press they are probably right) and want to teach it. The IS-LM-AD-AS model is still the best way to explain those concepts. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Why does tenure exist?
Obviously the supply side of the academic labor market values this and is willing to forgo some money compensation to get it. Evidently the cost of producing this amenity for academic employers is generally less than the value to the employees so there are very few schools that don't promise tenure. You might ask why people value tenure so much or why it is cheap for schools to provide it, but again I don't think that is too surprising. Academics value their freedom and tenure guarantees a reasonable minimum income if you decide to think unconventional thoughts for a while or pursue a high risk long term project. On the other hand, academic employers still have a fair amount of power over their employees short of firing them. Three percent inflation a year for a decade takes a nasty gouge out of ones real earnings, and of course tenure doesn't protect you if you seriously misbehave. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 09/18/02 01:13AM >>> Seriously, why does tenure exist at all? I know the motivations for tenure, but why isn't it competed away somehow? I would like to know what economic process ensures its continued existence. Fabio
Re: Nobels
I think Harsanyi is still at Berkeley. Also, I think Friedman is now at Stanford. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/10/02 09:27AM >>> This is a rough look at which schools currently have Nobel prize winners on faculty. Do I have any of these wrong? Any additions that need to be made? If this is right, then GMU ties for the 5th highest number of Nobel winners. Eric -- Chicago: 6 Friedman, Coase, Becker, Fogel, Lucas, Heckman Berkeley: 3 Debreu, McFadden, Akerlof MIT: 3 Samuelson, Modigliani, Solow Stanford: 3 Scholes, Spence, Arrow George Mason: 2 Buchanan, Smith Princeton: 2Nash, Kahneman Cambridge:2 Sen, Mirrlees Columbia: 2 Mundell, Stiglitz Baruch, CUNY: 1 Markowitz Harvard Business School: 1 Merton Washington, St. Louis: 1 North Penn: 1 Klein
Re: Unions and Bankruptcy
Freedman and Medoff looked at effects on profits (and concluded that the profit effects almost exactly offset the productivity differences), but I don't know of any study of bankruptcy. I've seen a study that showed that union firms have higher debt-equity ratios. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/11/02 11:45AM >>> I didn't know the answer to this. Does anyone else? -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it." Leo Tolstoy, *The Cossacks*
Re: patent paper and bepress
Hi Alex, Congratulations and thanks for a very useful report on your experience with BE. I have never read any articles in BE. I hadn't even gone to their website before this. However, I'm a technological dinosaur who still gets hard copies of journals. My RAs barely know what the inside of a library looks like as the first place they turn for any research need is the web. Thus I suspect that e-journals are the wave of the future. I wonder how many people on this list have read an article in a BE journal and how many people have submitted articles. I also have noted a tendency for print journals to both formally and informally move towards the use of e-mail in the refereeing process. This should speed things up, but a lot of the problem is simply conventions. It is my impression that most other disciplines require much faster turn around. I've been dealing with psychology journals a lot recently (submitting and refereeing) and they typically want 1month turn around on referee reports and they consider it scandalous when a report takes more than three months. It happened to me but I suspect I was taxing the methodological acumen of at least some of my referees - - the editor of the journal sent me a profusely apologetic letter because it took them almost 6 months to turn my paper around. As you can imagine I laughed myself silly given the norm in economics. Anyone have any idea why the norm in economics allows referees so much time to do a report? Why its so different from other fields? Is this one of those "soft" vs. "hard" field things? Its my impression that the physical science journals all want fast turn around on their referee reports. Anybody know what its like with Anthropology, Sociology, or Political Science? - - Bill Dickens [The DC area one - - not the one with the expert Nobel picks...] William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/12/02 01:40PM >>> Warning: Some shameless self-promotion as well as promotion of bepress.com My most recent paper, Patent Theory versus Patent Law, has just been published by the B.E. journal, Contributions to Economic Analysis & Policy. You can find the article and abstract here (abstract is also below) http://www.bepress.com/bejeap/contributions/vol1/iss1/art9/ Contributions is a BE press electronic journal. Here is a report on my experience publishing with them. Like many people I think it is an outrage that referee reports typically take 6 months or even longer. It also drives me nuts when I have to make revisions to a paper that I haven't worked on for a year and need to waste my time refreshing my memory about where the data and code are kept. So I gave the B.E. journals in Economic Analysis and Policy a try and was very impressed. I submitted this paper to them and had two referee reports within 6 weeks and after my revisions were complete had the paper published within a day. Amazingly, *most* of the time from submission to publication was on my clock not on theirs. I also got excellent editorial comments and was able to use their refereeing technology to good advantage. The way the journals work is that with one submission you get simultaneous consideration at four journals ranging in quality and interest. The referee reports come electronically. A very useful feature is that you can anonymously email the referees to clarify any points. I couldn't understand one of my referee's comments, for example, and with a brief email was able to establish that the referee had not realized that a footnote was continued on the next page (either that or it had not printed correctly). I was thus able to solve the problem and easily reassure the editor that I knew what I was talking about - almost impossible to do otherwise. Submitting to the journal can be expensive (when submitting to the journal you agree to write some referee reports for them - also you pay when submitting a revision) on the order of $150 as I recall but was well worth it in my judgment. Key remaining question is whether the journals will be cited by others. The quality of the articles published to date is high and the editors in my experience are very good. Also, they are working hard to promote the journals. My one nagging doubt is whether people may really want a hardcopy. My hope, however, is that these journals take off as they are offering a superior product. Alex AUTHOR: Alexander Tabarrok TITLE: Patent Theory versus Patent Law SUGGESTED CITATION: Tabarrok, Alexander (2002) "Patent Theory versus Patent Law", Contributions to Economic Analysis & Policy: Vol. 1: No. 1, Article 9. http://ww
RE: Journal response times
I wouldn't if I were you. My submission to Psych Review with a revision took 14 months from submission till it appeared in print. I've never made it into print in a refereed economics journal in less than 18 months and more typical times are 2 to 3 year. Oh yes. And the editor of Psych Review was profusely apologetic for the refereeing taking so long! - - Bill >Hmmm... seems like the data is censored. Need to sample rejected >papers too. Ok, then. I feel better about my original statement. William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
RE: Journal response times
OK, but I've never had a paper turned around in less than 6 months (and often it has taken up to a year) at any journal except the QJE. Also, you can't divide time to publish by 3 since most of the time there is only 1 revise and resubmit and in my experience more papers are accepted on the first submission than go for two revise and resubmits. Also in my experience (and that of my friends) the top journal s are the worst for turn around. Econometrica kept one paper of mine for 14 months. A friend had a paper go three rounds at AER and that took 3 years. I wouldn't be surprised if a lot of bad papers get rejected quickly and that would bring down the average turn around time a lot. But that is irrelevant if you are submitting a good paper that is eventually going to be published. Then you care about the time to publish and its disgraceful at nearly all economics journals. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/15/02 12:00AM >>> My original statement was not about about time to publication, but "turn around" time - ie, the time it takes to return a manuscript to author with referee comments. I opined that "turn around" time for well staffed journals was in the 3-6 month range for the faster social sciences, but much longer for other fields. As another poster noted, if you assume that accepted papers need at least 1 revision, you should multiply that by 3 and then you get the numbers cited in an earlier post - minimum 18 months. This was my estimate for the top journals, which get money for staff. Smaller journals have less money, which translates into a tired editor with grad student assistant, resulting in longer turn around times. Your experience of 14 months for a psych journal is in fact normal, and much better than fields like history, math or literary studies. Perhaps the absolute fastest is experimental physics, where claims of first discovery matter, and stuff is rushed to print in a month or two. Once you work in journal publishing, you soon realize how friggin' hard it is to get stuff reviewed and then 14 months to publication (or even two years) starts to seem reasonable. Fabio > I wouldn't if I were you. My submission to Psych Review with a revision > took 14 months from submission till it appeared in print. I've never > made it into print in a refereed economics journal in less than 18 > months and more typical times are 2 to 3 year. Oh yes. And the editor of > Psych Review was profusely apologetic for the refereeing taking so long! > - - Bill
Re: Return to Education and IV
As I remember the standard neo-classical answer to this is that the main source of endogenaity isn't ability bias but discount rate bias - - that people with below average discount rates get more schooling. So if the question you want to know is the effect of attending high school vs. only going through the 11th grade for the average person the return appears lower if you don't take into account that the average discount rate of people who drop out at 11 is much higher than the average discount rate of those who finish high school. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/16/02 02:13PM >>> I've occasionally heard that instrumental variables (IV) estimators of the return to education yield markedly higher estimates than OLS. Is this true? And how can this make any intuitive sense? If IV is correcting for endogeneity, you would expect things to go the other way. Why? With a medical treatment, you would expect endogeneity to understate the benefit, because sicker people are more likely to voluntarily seek treatment. But with education, you would expect endogeneity to overstate the benefit, because able people are more likely to voluntarily enroll. -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it." Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
But "controling for IQ" isn't warranted if years of schooling is endogenous. Kevin Lang has written extensively about these issues. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens >>> [EMAIL PROTECTED] 10/17/02 19:46 PM >>> Alex T Tabarrok wrote: > Bryan's question, however, can be rephrased as not how do you explain > the data (low ability bias and high discount rate bias) but why is it > that ability bias appears low? Ability bias isn't really low. Using the NLSY data, for example, controlling for AFQT scores reduces the naive estimate of the return to education from 12.6% to 7.5%. Ability bias *after* controlling for intelligence might be low, though. > In other words aren't there good grounds > for thinking that ability bias is large? And if so how is it that this > doesn't show up in the data? > > Alex > > -- > Alexander Tabarrok > Department of Economics, MSN 1D3 > George Mason University > Fairfax, VA, 22030 > Tel. 703-993-2314 > > and > > Director of Research > The Independent Institute > 100 Swan Way > Oakland, CA, 94621 > Tel. 510-632-1366 -- Prof. Bryan Caplan Department of Economics George Mason University http://www.bcaplan.com [EMAIL PROTECTED] "He wrote a letter, but did not post it because he felt that no one would have understood what he wanted to say, and besides it was not necessary that anyone but himself should understand it." Leo Tolstoy, *The Cossacks*
Re: Return to Education and IV
>> But "controling for IQ" isn't warranted if years of schooling is >> endogenous. Kevin Lang has written extensively about these issues. - - > >Could you enlighten us? Honestly no. I've tried to find Kevin's 1993 paper on this and to reproduce his arguments, both to no avail. He has a neat little system that makes sense of the standard human capital wage equation and allows one to make simple sense of both discount rate and ability bias, but I can't remember how it works. Never paid too much attention to it because I strongly suspect that 1) people have almost no idea how much it will be worth for them to continue in school, 2) most people's decisions about schooling have to do with how much they like it vs. how much they like whatever the alternative is (and are therefore fairly short sighted), 3) 2) is heavily influenced by whether mom and dad are willing to pay for you to go to school (or someone else is), and 4) whether mom and dad are willing to pay depends on their own views about the return to education and their bequest motive and has nothing to do with any discount rate. - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Return to Education and IV
> because > I strongly suspect that 1) people have almost no idea how much it will > be worth for them to continue in school, Gee, now you're sounding Austrian! "No idea"? Come on. Just look at how parents groan when their kids talk about the low-earning majors like sociology, and rejoice when they do CS and the like. There's certainly some plausible guesstimating going on, though I agree it could be improved if people knew the PDV formula and used Excel (as I make my labor undergrads do). >>>Note its the _parents_ in your story who are groaning, not the kids. OK, I'll admit that the "no idea" was based on what I know it was like when I was going to college in the 70s. However, it is still my impression after 13 years of teaching college that the vast majority of college students not only have never done a present value computation about their decision to go to school, but have never seriously considered the alternative of not going to school - - what they could do, how much they could make, what their lives would be like etc. > 2) most people's decisions > about schooling have to do with how much they like it vs. how much they > like whatever the alternative is (and are therefore fairly short > sighted), How much they like it is in turn heavily influenced by how good they are at school - an indirect channel for ability bias. >>>Fine. I'm happy to acknowledge that ability affects decisions to go to school, but my contention is that the decision is more of a present trade-off decision than a future vs. present trade-off as the standard economic analysis maintains. At least my experience with school is that most college kids are looking forward to $$$. They almost never compare current fun of school with current fun of work. >>>Are you thinking only of economics majors? Business and economics majors (some) think this way. Do you think the average lit major is? Psych? Pol. Sci? 3) 2) is heavily influenced by whether mom and dad are willing > to pay for you to go to school (or someone else is), and True, though it's not clear what the relevance is. >>>Standard economic model assumes that most of the costs are forgone earnings. Mom and Dad paying for school should be small potatoes (since you can always go to a state school at low cost). My impression is that this factor ways in people's decisions way out of proportion to its economic value. > 4) whether mom > and dad are willing to pay depends on their own views about the return > to education and their bequest motive and has nothing to do with any > discount rate. ??? Isn't their "view of the return to education" a view about the discount rate? >>>Well I suppose if you believe in perfect capital and education markets with completely rational and identical consumers it would have to be, but otherwise why would you think that the return to education would have anything to do with an individual's discount rate? But more to the point, I doubt that parents are making any sort of intertemporal comparison in paying for kids school. How many do you think have thought "Well, if I invest the money I'm paying for the kids school in corporate AAAs at 6.5% his income from my bequest will be $XX, in 20XX whereas if I pay for his school it will be..." No way. What they think is "better to teach a man to fish than to buy him fish..." or something like that and they fork over the bucks to U. Not the economic model at all. - - Bill William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
Re: Return to Education and IV
>The history majors knew they'd make less with a >history degree, on average, but placed a higher value on doing something they >enjoyed then on having a higher income. Yes, but did they know how much of a difference it would make? I once did a survey of students in one of my undergraduate economics classes about their knowledge of gains from additional years of education. What I found was that: 1. They thought the average HS graduate made about 30% more than that person actually makes, 2. They thought the average family income was 50% above what it actually was at the time, 3. They thought that going to college would double their income (and would do the same for anyone - - this was early 80s before the big gains so it wasn't anywhere near close) 4. The standard deviation of their estimates of the _average_ return to attending college was over 15 percentage points. Of course I'm sure that they actually knew the answers perfectly well, but couldn't be bothered to answer my questions accurately being the profoundly rational optomizers that they are... ;-} - - Bill Dickens William T. Dickens The Brookings Institution 1775 Massachusetts Avenue, NW Washington, DC 20036 Phone: (202) 797-6113 FAX: (202) 797-6181 E-MAIL: [EMAIL PROTECTED] AOL IM: wtdickens
