tag:blogger.com,1999:blog-90839593906914753562024-03-05T06:34:10.334-08:00Greg Heslop's BlogReflections on Economics, Society, Philosophy, and Whatever Else I Feel Like DiscussingAnonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.comBlogger118125tag:blogger.com,1999:blog-9083959390691475356.post-27468241925895417102015-02-01T08:49:00.004-08:002015-02-01T09:01:59.042-08:00Amazing New Tool<div style="text-align: justify;">
Thanks to Justin Wolfers' recent <a href="http://www.nytimes.com/2015/01/24/upshot/how-economists-came-to-dominate-the-conversation.html?smid=pl-share&_r=0" target="_blank">column</a> in the New York Times on the dominance of economists, I see <a href="http://chronicle.nytlabs.com/" target="_blank">this</a> amazing new data tool which gives you the number of times, or the fraction of articles in which, any word has been used in the Times since the mid 19th century. Check it out.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI0YAQhddhfnKpH4XdLw_YAioOkkxJfnkYy7Uuk5sYSFhu3zqC_F9Zh_92VxJd_9M4HuDq8JfkrH_g-6SiWCitPUitZHTUxnz72QINuroto6QB6L8V9EV8VRAYtEsvPjAOkyowNvayNQQn/s1600/nigger.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjI0YAQhddhfnKpH4XdLw_YAioOkkxJfnkYy7Uuk5sYSFhu3zqC_F9Zh_92VxJd_9M4HuDq8JfkrH_g-6SiWCitPUitZHTUxnz72QINuroto6QB6L8V9EV8VRAYtEsvPjAOkyowNvayNQQn/s1600/nigger.png" height="140" width="320" /></a></div>
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Above is some of its output (click to enlarge). I thought it interesting that the number of times the word <em>nigger</em> has occurred in the Grey Lady's articles has remained fairly constant since the time before the civil war, even though it was frequently used in fiction less than a hundred years ago (William Faulkner's <em>Absalom, Absalom!</em> comes to mind, as does, of course, Joseph Conrad's <em>The Nigger on the Narcissus</em>). Those of us who believe the word's negative power today would be greatly reduced if decent folks were socially allowed to use the word at will should be pleased to see no negative trend in mentions, though this word has always been very rare.<br />
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With regard to the race issue, here are some trends in words used to refer to the Black Man. It is interesting to note that <em>negro</em> fell out of favour around 1870, then came back, possibly with the Civil Rights movement, only to decline again. Around this time, <em>black</em> really picks up. <em>African-American</em> has never been too common:<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO83FALTjR1Ov6FQGF8dM2sd5dxzYv9HujYtdR7yjvF7gfNlXhBSIZPdTHXJ0D6rk6Ht9mOO4nU7Ki151O_KGVeFY_wagfB7dUyiy8e53APJ_m7nDuUt-ev7Cnti3q7Y2slajEvp-Uy_cs/s1600/blacks.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO83FALTjR1Ov6FQGF8dM2sd5dxzYv9HujYtdR7yjvF7gfNlXhBSIZPdTHXJ0D6rk6Ht9mOO4nU7Ki151O_KGVeFY_wagfB7dUyiy8e53APJ_m7nDuUt-ev7Cnti3q7Y2slajEvp-Uy_cs/s1600/blacks.png" height="139" width="320" /></a></div>
Here's a spelling reform which took hold quickly: writing <em>per cent</em> as one word (although I and many non-Americans do not do that). This pretty much must be the result of official NYT policy as it is inconceivable that nearly everyone should adapt to a new way of spelling so fast without central direction.</div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8bh9ucH9hk4X0_eiXbGaM9tbCwIAW0lFMiOQNhHWryQRmZZkjtdswRkG6PP8CQGr32SfAjUilJUWMZ4NY-K6Q6SW3erBJoWY3C-k5FordorsvNdqNK4SwhoVMVrZJotFqPTw8YexhV3Md/s1600/per+cent+and+percent.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg8bh9ucH9hk4X0_eiXbGaM9tbCwIAW0lFMiOQNhHWryQRmZZkjtdswRkG6PP8CQGr32SfAjUilJUWMZ4NY-K6Q6SW3erBJoWY3C-k5FordorsvNdqNK4SwhoVMVrZJotFqPTw8YexhV3Md/s1600/per+cent+and+percent.png" height="138" width="320" /></a></div>
<span id="goog_80745377"></span><span id="goog_80745378">Lastly, I thought it might be interesting to see if the growth of government is reflected in the mentions of POTUSes in the New York Times. There indeed does seem to be an upwards trend as judged by the fraction of articles in which the word <em>President</em> appears, though this trend ended around 1980. It is noteworthy that individual names have become more frequently used over time. Ulysses S. Grant is one of very few exceptions of pre-1960 presidents who could compete with post-1960 ones in terms of fraction of articles mentioning the name of the office-holder. But what happened to Obama in 2013? His name was only mentioned in 2.99 per cent of NYT articles.</span><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjO83FALTjR1Ov6FQGF8dM2sd5dxzYv9HujYtdR7yjvF7gfNlXhBSIZPdTHXJ0D6rk6Ht9mOO4nU7Ki151O_KGVeFY_wagfB7dUyiy8e53APJ_m7nDuUt-ev7Cnti3q7Y2slajEvp-Uy_cs/s1600/blacks.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"></a> </div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjY3Nmw5HKYDCZ_ampOOKWuYCXan1uvCUYjZBpfU4Ykkw7v_hpvqCm0H_JzxFobKZFqG7zWgJaHIzy8ZdRDz2y7dCpETGc2RJNYGAnnn05Ecciv449VCEhj9sFXXuTJqVXhkGpGQpcUsyHo/s1600/presidents.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjY3Nmw5HKYDCZ_ampOOKWuYCXan1uvCUYjZBpfU4Ykkw7v_hpvqCm0H_JzxFobKZFqG7zWgJaHIzy8ZdRDz2y7dCpETGc2RJNYGAnnn05Ecciv449VCEhj9sFXXuTJqVXhkGpGQpcUsyHo/s1600/presidents.png" height="139" width="320" /></a></div>
Anyway, this is a fun tool that I suspect will amuse many, many people and lead to numerous interesting speculations.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-89571537777887915382015-01-25T09:43:00.000-08:002015-01-25T09:43:24.072-08:00How Much Toilet Paper Does the Average Person Consume in a Day?<div style="text-align: justify;">
Over on MarginalRevolution, Tyler Cowen had an amusing remark the other day on a figure for <a href="http://marginalrevolution.com/marginalrevolution/2015/01/a-tale-of-two-false-estimates.html" target="_blank">average daily toilet paper consumption in the USA</a>. The article he cites has it that the average American uses 46 sheets of toilet paper in a day and Cowen thinks that is excessive. In hindsight it's hard to know what would have been my guess had I not read the article, but I believe I would have though 46 sheets a fairly good one for reasons which I will come to below.</div>
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I believe estimates of these things comes from knowing how many sheets there are on a roll and counting how many rolls are sold during a suitable time period. This become an understatement since not all Americans buy all the toilet paper they use in the US throughout the year (some travel abroad on holiday and don't take any toilet paper with them), and it is an overstatement since some of the usage is due to tourists, but if this is the way they estimate things it seems very reasonable to me.</div>
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So why might 46 sheets a day be a good estimate? I believe women and so-called "germophobes" in particular will appreciate the fact that public bathrooms are disgusting though one cannot always tell without the aid of a microscope. This necessitates the use of paper covers for persons who need to go and sit down while doing so. I counted the number of sheets required for a decent paper cover in the shared bathroom at my department and reached the figure 17. If somebody goes at the office or on public bathrooms three times in a day, that is 51 sheets that are not really used in the expected way. Not everyone works and not every day is a workday, and of course not everyone has the respect that they should have for germs, but this little calculation might go some way towards explaining the 46-a-day figure.</div>
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Toilet paper also acts as a substitute for kitchen towels or similar products, though I am not sure to what extent this drives up the average daily usage estimate since by the same token kitchen towels can substitute for toilet paper.</div>
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Anyway, this is an interesting issue because the fact that people like Tyler Cowen question the 46-a-day estimate indicates that not everyone can be equally efficient users of toilet paper. Many people would of course like to be more efficient but the nature of the issue makes it difficult to try to learn from others how to reach peak efficiency.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-46315261788324592672015-01-19T10:36:00.000-08:002015-01-19T10:36:25.180-08:00Put Yourself in Someone Else's Shoes<div style="text-align: justify;">
I have always suspected Oxfam of being more than just a little bit out of it and today's <a href="http://www.bbc.com/news/business-30875633" target="_blank">news story</a> from the BBC offers a case in point. Here's the <a href="http://policy-practice.oxfam.org.uk/publications/wealth-having-it-all-and-wanting-more-338125" target="_blank">abstract</a> from the so-called "anti-poverty" organization's report:</div>
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"Global wealth is increasingly concentrated in the hands of a small wealthy elite. These wealthy individuals have generated and sustained their vast riches through their interests and activities in a few important economic sectors, including finance and insurance, and pharmaceuticals and healthcare. Companies from these sectors spend millions of dollars every year on lobbying to create a policy environment that protects and enhances their interests further. The most prolific lobbying activities in the US are on budget and tax issues; public resources that should be directed to benefit the whole population, rather than reflect the interests of powerful lobbyists."</div>
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The BBC article notes certain flaws in the report, but there is a lot more to be said about it than that. According to the Oxfam study, the eighty richest people in the world have as much wealth as do the least wealthy half of the world's population (p. 3). The abstract claims that they get to this point by lobbying, but then that does not explain the trend that they are trying to establish; surely these people were as keen (or un-keen) on lobbying in 2010 as they are today. I could be wrong, but I don't believe Warren Buffett (who sits atop the list) or Carl Icahn (number three) have ever been active campaigners in Washington for the purposes of increasing their own wealth. What I believe Oxfam mean is that many of the wealthy individuals own shares in companies which belong to sectors that lobby a lot. But if you're very wealthy, you're apt to own shares in companies in a vast array of sectors.</div>
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I would like for Oxfam to put themselves in the shoes of some of the wealthy people whom they appear to target in this report. If an individual gets rich (through the stock market, industry, or whatever) by means of voluntary trade, all his business interactions are ones of mutual acceptability. Oxfam do a terrible job at explaining what is wrong with an individual amassing $1,000 or $1,000,000 or even $1,000,000,000 in this fashion. If Oxfam put themselves in the shoes of someone wealthy, knowing that the wealth was due to honest trading, I hope they would feel ashamed for singling out eighty individuals and contrasting their success with the misery of thousands of millions. Because it is not the fault of the successful ones that others are poor. If I happen to do things for which others pay well and I save my money, am I to be considered a problem and perhaps even a menace to the common good? It would seem to me that this report makes Oxfam look like an anti-rich organization, rather than an anti-poverty one.</div>
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Indeed, Oxfam have it backwards, because <em>the richer a person can get by voluntary transactions, the better it is for humanity</em>. This is true for two reasons: (1) to get rich means to save and to get really rich, all else equal, means to save for a long time, so having a huge pile of money is an indicator that a person can live longer, and if one person can we all can and a long life is better than a short one (Warren Buffet is way past the life expectancy of 100 years ago); (2) to get really rich means that one must have some sort of income and a higher one is better for the purposes of getting rich. To have a high income, one must do stuff that others will pay for, but for others to pay for stuff they need to appreciate it. That someone has made billions and billions must mean, then, that others have benefitted by at least that amount, otherwise they would not have given it away. And that a person can have that good an impact on others really is a triumphant achievement which should be an inspiration to all man kind.</div>
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I don't know if it is a trend or not, but I have sensed rather many "anti-rich" feelings around the Inter-Web lately and I don't like it. To the extent that somebody can get extremely wealthy by special favours from the government, that is nothing to applaud, but at least several of the wealthy individuals singled out by Oxfam do not appear to me to be well-known lobbyists. Still, if it were the case that riches are obtained through unsavoury political favours, that would be an argument for a weaker government. Instead, Oxfam appear to want governments to be more powerful. That they do not realize such basic things makes the report a travesty of research and a reason for the involved individuals at Oxfam to feel deep contrition. For shame.</div>
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PS. The BBC article mentions some reasons why inequality (i.e. not just poverty) might be a problem. The Beeb's Economics editor Robert Peston notes:</div>
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"There are all sorts of reasons why such increases in inequality are
troubling, and not just for those at the bottom of the income and wealth
pyramid. </div>
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"One is that aspirational people on lower incomes have massive incentives to
take on too-great debts to support their living standards - which exacerbates
the propensity of the economy to swing from boom to financial-crisis bust. </div>
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"Another is that the poor in aggregate spend more than the rich (there are
only so many motor cars and yachts a billionaire can own, so much of the
super-rich's wealth sits idle. as it were), and therefore growth tends to be
faster when income is more evenly distributed."</div>
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This is nonsense and Robert Peston should know it. The first reason is pure speculation coupled with the notion that interest rates inherently fail to price risk. Inequality could just as easily spur the less wealthy on <em>work</em> more. I don't see why this incentive is any worse than what Peston suggests. Peston's "mechanism" (if one may call it that) also has the disadvantage of implying that people foolishly take on debt they cannot repay. Not likely.</div>
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I don't know of any evidence to support Peston's other assertion either, that wealth inequality makes growth sluggish, though it could be that I am ignorant. It would seem to me that "idle" wealth ought to be invested or lent against interest. Still, even if the assertion is true, it does not speak against income inequality because if everyone got a lot richer, there would still be no point in buying more than X yachts or motor cars. By Peston's logic, inequality of wealth only means that we're approaching a GDP plateau a little less quickly.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-16518847159207710722015-01-18T05:59:00.002-08:002015-01-18T22:53:56.709-08:00Some Notable Quotables<div style="text-align: justify;">
Willaim Somerset Maugham once said that "the ability to quote is a very serviceable substitute for wit". Here, in no particular order, are few quotations from some of my recent and not-so-recent readings.</div>
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"What is called the existing distribution of income is simply a set of retrospective data at a given point in time. These data are generated by an ongoing process in which buyers choose among alternative products available at varying prices, and the sum total of these prices paid during some time span become various people's incomes. The question is not what to decide, as to whether specific retrospective data are justified, but rather who shall decide what prospective transactions are justified on what terms in an on-going process."</div>
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From Thomas Sowell's <em>Knowledge and Decisions</em> (p. 77). People respond to incentives and tinkering with income distributions means changing those incentives. Economists mainly know this, but among non-Economists there is need for constant reminders. He goes on to make the Hayekian point that those who wish to change the distribution by imposing different prices are unlikely to appreciate the information which the former prices transmitted. This is a great book for laymen who wish to gain an understanding of Economics, but it's a nice read also for professional Economists.<br />
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Here's an unrelated quotation:</div>
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"Unfortunate is the king who has only one head! In guarding it with all his power he only shows the first upstart where to strike."</div>
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From Montesquieu's <em>Persian Letters</em> (Letter CIV). This is a remarkable book, though some of the exchanges between the Persian travellers in Europe and their many mistresses get a tad lewd. The problem of marginalism and punishment is lucidly described, too:</div>
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"A Persian who, imprudently or by mischance, draws upon himself the displeasure of his prince, is sure to die; the slightest fault or the slightest caprice reduces him to that necessity. But if he had attempted the life of his sovereign, if he had intended to betray his towns to the enemy, he would have atoned as before by losing his life; he runs no greater risk in the latter case than in the former.</div>
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"And so, under the least disgrace, death being certain and nothing worse to fear, he naturally applies himself to disturb the state, and to conspire against the sovereign - his only remaining resource."</div>
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This is from the previous letter of the very same book. I cannot vouch for the historical accuracy as I am too ignorant on the subject, but Economists are sure to appreciate this titbit, as well as many others.<br />
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Back to Economists for the last quotation in this instalment:</div>
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"In everyday usage, unfortunately, competition is used in a very personalized sense. One football team competes with another; one brand of cigarettes attempts to gain the customers of another. Competition can be 'cut-throat' - a contradiction in terms to the economist. Perhaps the best single warning to the student with regard to the use competition is this: economic relationships are never perfectly competitive is they involve any personal relationships between economic units."</div>
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George J. Stigler, <em>The Theory of Price</em>, p. 24.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-28940116986028539982015-01-15T09:10:00.000-08:002015-01-19T10:36:40.450-08:00Dopey Popey<div style="text-align: justify;">
Pope Francis I has <a href="http://abcnews.go.com/Health/wireStory/pope-concern-poor-gospel-communism-28145888" target="_blank">reacted</a> to accusations of Marxism in a book of interviews entitled <em>This Economy Kills</em>. Pope Francis has lamented the "unjust" and "evil" economic system before, notably in the <a href="http://w2.vatican.va/content/francesco/en/apost_exhortations/documents/papa-francesco_esortazione-ap_20131124_evangelii-gaudium.html" target="_blank">Evangelii Gaudium</a> (in Chapter 2, Section 1), a veritable deluge of vituperation directed at a "system" he does not even name. (So maybe it is the socialist aspects of the mixed economy he dislikes, although the common impression seems to be that it is the free market.) It would help if he outlined some arguments rather than an array of assertions (because that is exactly what he does, read for yourselves and see), but I guess job security obviates the requirement to think (or maybe that's actually a requirement in the business of organized religion).<br />
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To counter the Pope's vapid and vacuous assertions, here's some actual substance on the benefits of trading freely:</div>
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Your appendix is about to burst, but trade is restricted so your best substitute for a doctor is your local butcher. Or, you need a spanner to fix your shower, but because free trade is bad, you should not get one made in China but have to pay a lot more for a domestic one - and why stop there? Why not force you to make the spanner yourself? Is free trade conducive or not to life and prosperity in these instances?</div>
</li>
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You live in Haiti and it is truck by a magnitude-7 earthquake. But free movement is restricted so you cannot go to the US (say) but have to suffer <a href="http://en.wikipedia.org/wiki/2010_Haiti_earthquake" target="_blank">cholera and homelessness</a> instead. If this is an instance of "this economy" killing, it surely can't be the free market part of it.</div>
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You work for a penny a day in some Bangladeshi factory. Your employer is a Western multinational, but is thrown out of the country because "this economy" apparently "kills". What happens to your job and wages? Do you go to the domestic firm which pays $25 an hour plus benefits? I bet there is no such firm, because if there were then that's where you'd have been working in the first place.</div>
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For sure, free markets are not perfect, but these are some thought experiments which at least make the <em>argument</em> that a free economy is far better than the Dopey Popey makes it out to be. He, on the other hand, seems to think that a litany can replace reason if only expressed forcefully enough. If he listened to me, I would challenge His Holiness to name a single country that has gone from misery to prosperity without a large measure of economic freedom.<br />
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The Pope today <a href="http://edition.cnn.com/2015/01/14/asia/philippines-pope-francis-visit/index.html?eref=edition" target="_blank">decried</a> the mockery of belief, saying that "one cannot provoke, one cannot insult other people's faith, one cannot make fun of faith" (then what have Charlie Hebdo's readers been laughing at?). Notice that again he offers no argument. Notice also that he himself insults when he laments economic freedom without argument. What the Pope insults in these instances is the faith in reason, which is really the only sacred faith.</div>
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Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-52526823216805866252015-01-11T09:45:00.000-08:002015-01-11T09:45:06.414-08:00Abysmal<div style="text-align: justify;">
A recent <a href="http://qz.com/321618/how-big-is-economics-sexism-problem-this-articles-co-author-is-anonymous-because-of-it/" target="_blank">Quartz article</a> by Miles Kimball and an anonymous woman economist asks how big the sexism problem is in economics. The answer the authors give is that it is pretty big indeed, yet their solutions do not include the <a href="http://www.amazon.com/Economics-Discrimination-Economic-Research-Studies/dp/0226041166/ref=sr_1_1?ie=UTF8&qid=1420971193&sr=8-1&keywords=The+Economics+of+Discrimination" target="_blank">obvious one</a> (obvious, that is, thanks to the late Professor Gary Becker, before whom it was not obvious at all) of exposing the profession to more competition. After all, in the absence of competition, inefficient (i.e. sexist) organizations can repercussionlessly remain inefficient (sexist). Competition would not solve everything, because maybe "tastes" for sexism are strong enough, etc., but it is one "remedy" (if there is a problem) which should be immediately obvious to an economist and yet is not even discussed in this very poor article.<br />
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The authors are responsible for many additional shortcomings. An introduction is supposed to be eye-catching, but theirs mentions a recent list of influential economists made by <em>The Economist</em> Magazine which apparently does not include a single woman. Yawn. I would personally not want to be on a list dominated by folks active in making policy as is the case with this list. But the absence of women is pretty poor evidence that there is a sexism problem in the profession. Blacks dominate basketball, Jews dominate Nobel prizes, and shorter-than-average persons dominate Hollywood, yet to infer that these sectors suffer from discrimination would surely be a great error.<br />
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If proportionate representation is not to be expected in general, why should the Economics profession be any different? The authors say that very many little things can jointly create very important difficulties for women, which is true (of course, very many little things can jointly create big differences anywhere), but the examples of little things they cite are incredibly poor. Here's their first one:</div>
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"New female economics PhD's have to worry about what to wear during the job market: skirt too low vs. skirt too long, vs. just right"</div>
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This is apparently written in all seriousness. I guess trousers are also an option, and I guess this problem mars female careers in every profession, because every profession has job interviews, though they are probably more important than average in Economics. Still, nobody really is too incompetent to dress. If the authors differ, why do they not also mention the worry that a woman (or a man, why not?) might forget to dress at all and show up naked. This would not make their point more absurd because nothing can make their point more absurd. Can anyone really imagine that such an idiot exists who, having just obtained her PhD in Economics, somehow has not learnt what skirt length is appropriate for professional occasions and cannot wear trousers.<br />
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The authors have six more points, all better than the one above (which is not saying much), but none of which pertains to economics in particular, so why are they seemingly trying to make a point that <em>economics </em>in particular suffers from a sexism problem? They conclude the list with an uneconomical recommendation:</div>
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"<span class="anno-span">Fostering awareness of issues like these, and a hundred others of the same ilk, is one of the biggest things that can be done to improve women’s lot in economics."</span></div>
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Fostering "awareness" (by mandating classes or what?) would necessarily eat away at the time economists can devote to research or teaching (because "fostering awareness" takes time and time, after all, is scarce). This tax on time is especially pernicious if the problem is not all that great to begin with, an issue on which the authors thoroughly fail to convince. Kimball and anonymous also say that sexists often do not realize that they are sexists, so my insistence that I am no part of the "problem" would hardly help me avoid the unnecessary "fostering".<br />
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They continue by demanding "equal pay for equal work". One might infer from their discussion that they are not keen on bargaining between labour-market parties:</div>
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"It is typical in academia that a tenured professor who receives a competing job offer and can credibly threaten to leave gets a big raise. By comparison, professors who seem unlikely to jump ship end up underpaid. But given gender inequality on the home front (and the male-female wage differential for spouses), it is a lot more credible that a male professor can convince his wife to move to another city than that a female professor can convince her husband to move."</div>
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(What does "underpaid" mean here? Unwillingness to offer your labour elsewhere means that you must accept lower compensation; that is appropriate market payment.) The authors stress greater gender equality across society as a "remedy", apparently taking for granted that men and women are somehow "naturally" equal (contrary to what physical inspection suggests). There are actually certain biological facts which indicate (though do not prove) that this is false. For instance, women bear children and men do not. This could potentially create significant differences between male and female attitudes to their offspring, as well as in general behaviours pertinent to successful mating.<br />
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For instance, it would be in a man's evolutionary interest to have many kids with many different women, but it would not be in his interest to take care of any of them. Women have it in their interest to (<a href="http://en.wikipedia.org/wiki/Sexy_son_hypothesis" target="_blank">sometimes</a>) screen out such men, but to the extent that everyone makes mistakes it would seem natural for women to have somewhat stronger bonds with their offspring (on average), since they, unlike men, cannot physically abandon their children until birth, which may well manifest itself in household production.<br />
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I do not mean to say that these forces are necessarily strong enough to create these tendencies. I only wish to highlight the possibility that men and women are not "natural equals" (which Kimball and anonymous fail to do). I also do not mean to say that there is no sexism in the Economics profession (or elsewhere). Maybe there is or maybe there isn't. But if the authors want to establish that there is a problem that is particularly pernicious in economics, they do a very bad job at it, as well as at finding good solutions, which should include exposing universities to more competition (say, by reducing government funding of them).</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-7712450618332422122015-01-07T09:39:00.001-08:002015-01-07T09:39:19.511-08:00A Simple Model of Free Speech<div style="text-align: justify;">
In light of the very tragic and gruesome attack on <a href="http://www.bbc.com/news/world-europe-30710883" target="_blank">Charlie Hebdo Magazine</a> today, in which at least twelve people are dead because a few others have taken offence at drawings, I wonder how great the expenses are, which the government will incur in protecting cartoonists and others from people who prefer to kill rather than talk, before free speech begins to be restricted. Here is a simple model:<br />
<ul>
<li>Protection is costly, so <em>ceteris paribus</em>, the more protection is needed, the more appealing prohibitions on free speech become.</li>
<li>People will tend to speak more freely when they do not pay the full cost associated with the protection which they want when peevish murderers are out to take their lives.</li>
<li>So, governments limit the freedom of speech in order to economize on protection costs.</li>
</ul>
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I am not aware of any outright limitations on free speech which have coincided with greater protection costs, but hints of that come from the barring of <a href="http://en.wikipedia.org/wiki/Robert_Spencer_(author)" target="_blank">Robert Bruce Spencer</a> and <a href="http://en.wikipedia.org/wiki/Pamela_Geller" target="_blank">Pamela Geller</a> from travelling to the United Kingdom. Mr. Spencer and Mrs. Geller are essentially unwelcome in Britain because of what they say. This model is upsetting because it hints that free speech is only possible while the nitwits are sufficiently mild-mannered.<br />
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Here is how free speech might be made to last even among plenty of world-record holders in cantankerous behaviour: Privatize security and law. Under a system of private law, individuals would pay providers of legislation a fee and if they desire legislation which is costlier to enforce that fee would be higher than if they desire cheap-to-enforce legislation. Other individuals might desire different legislation. The providers would work out agreements amongst themselves which outline how disputes between their clients should be settled, etc. This is all in David D. Friedman's valuable book <em><a href="http://www.amazon.com/Machinery-Freedom-Guide-Radical-Capitalism-ebook/dp/B00LNDWWMW/ref=sr_1_1?ie=UTF8&qid=1420651066&sr=8-1&keywords=The+Machinery+of+Freedom" target="_blank">The Machinery of Freedom</a></em>, the first edition of which is available for free from his <a href="http://www.daviddfriedman.com/The_Machinery_of_Freedom_.pdf" target="_blank">website</a>.<br />
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Under this system, if an individual behaves in a way which others decide to find sufficiently annoying to want to kill him, he would demand additional protection services and because his protection agency has to agree with other protection agencies on terms to be upheld in times of conflict (since conflict is a lot more costly than peaceful bargaining), the threatened individual will tend to pay the full social cost of being annoying (or funny, really).<br />
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Sure, some individuals may decide to keep their mouths shut (and thereby not be so funny anymore) rather than pay more. If the sentiments among the humourless nitwits are strong enough, it might be that speech is highly restricted. However, speech remains free in the sense that it is accessible, albeit at a price. Of course, the more popular is one's humour, the likelier it is that one will pay that price. I can't imagine that the humourless murderers would really force up the price of free speech for a long time, though. If one take a look at the world and compares to how it was hundreds of years ago, one gets the impression that the murderers in Paris today are getting increasingly rare. This of course proves nothing, but one may hope the long-run trend continues.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-29188100825252129912015-01-06T10:38:00.003-08:002015-01-06T10:38:53.513-08:00Suspiciously Many New Year's Resolutions Remain Unbroken<div style="text-align: justify;">
This is the time of the year when many new year's resolutions have already been broken, but I wonder what makes so many of them remain <em>un</em>broken. According to the FiveThirtyEight website (<a href="http://fivethirtyeight.com/datalab/how-fast-youll-abandon-your-new-years-resolutions/" target="_blank">link</a>), "nearly half" of the resolvers are apt to fail. Still, any success rate in the double digits I would view as really high.</div>
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There are 365 days in a year and many important decisions have to be made on some of them, but there is no natural and evident tendency for these decisions to be concentrated on 31st December. So if you want to lose weight (say), you take measures to do that rather than wait until the first day of the next year to do it. Because if the decision is important to you, it would be completely foolish to wait. Indeed, waiting would signal lack of commitment.</div>
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This means that the really important resolutions are made throughout the year, without regard for what day it is. It follows that the vast majority of New Year's resolutions are balderdash. Some of them are not, specifically, the number which is roughly one 365th of the real resolutions made during a year. But this ought to be rather a small fraction of them.</div>
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So why might it be that a double-digit success rate is actually true of New Year resolutions? Maybe part of the reason it a kind of intertemporal substitution. Some resolutions can wait a little bit, and since there is somehow some symbolic value of making one for the start of a new year, there are more real resolutions made on New Year's Eve than one might otherwise expect.</div>
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Perhaps another part of the story is that many resolutions are hokum whose success is unverifiable, such as "enjoying life", "being a better person", or "getting closer to God", all fairly popular resolutions listed in the FiveThirtyEight post.</div>
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A third explanation may be the festive season. Late December contains Christmas, New Year's Eve, Hanukkah (usually), Kwanzaa, and of course <a href="http://en.wikipedia.org/wiki/Festivus" target="_blank">Festivus</a>. There are some others in addition. Say a person puts on two or three pounds during these weeks, a New Year's resolution to shed them immediately gains credibility, because shedding them at any other time of the year (i.e. before the holiday season) would have meant shedding them before they were put on.</div>
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Anyway, I hope everyone had a happy Festivus.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-34185598450178040132015-01-04T07:36:00.000-08:002015-01-04T07:36:04.969-08:00The So-called Traffickers, Again<div style="text-align: justify;">
EU Commissioner for Migration, Dimitris Avramopoulos, has referred to the smugglers of people, topical in Italy during the past week or so, as "<a href="http://www.bbc.com/news/world-europe-30669136" target="_blank">employing new methods in order to exploit desperate people</a>" (BBC article). I don't know this fellow, but I am willing to bet the much-maligned "traffickers" have done far more for truly desperate people than Mr Avramopoulos is likely to ever do.</div>
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Remarkable statement? Not at all. Apply some economic thinking and it will be clear that Avramopoulos is quite the troublemaker compared to the smugglers. According to the same BBC article, Avramopoulos has called for "decisive and co-ordinated EU-wide action" against his moral betters. But if they face greater risks when doing what they do, they must charge a higher price from the refugees or their business is no longer profitable (according to the same BBC article again, the Italian Police calculate that the smugglers "made $3 million from the recent 359 illegal immigrants", but that is counting only revenues and not expenses and risk and the statement is probably made with a view to whip up opinion against the smugglers).</div>
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Has Mr Avramopoulos ever brought individuals fleeing war into comparative safety? If he has, the number saved will probably fade in comparison to just one ship full of refugees, and there are of course many ships. Made Avramopoulos objects to the high fares charged, but then he should advocate indecisive, rather than decisive, and uncoordinated, rather than co-ordinated, action so as to reduce the risks faced by the smugglers. The smugglers will still want to make a profit, but competition will force down the price they charge, just like no-one pays hundreds of dollars for a loaf of bread though any baker would want that kind of payment.</div>
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Maybe Mr Avramopoulos objects to the rough circumstances the immigrants face during their journey to the EU? But if he does, then he should advocate the same things as are listed above. Then smugglers are likelier to compete on comfort as well as on price. Compare again to other market situations, where one pays less for flying "no-frills" airlines, more for first-class train tickets, etc.</div>
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What does Mr Avramopoulos imagine is the best alternative for these illegal immigrants? Where are the shipping companies, airlines, buses, trains, etc., that take them to Europe for less money and with more comfort? If I were in the immigrants' position, I would probably wish to be "exploited" by the smugglers, too. And Mr Avramopoulos would condemn my saviours.<br />
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These things are not hard to figure out. So, unless Mr Avramopoulos be either ignorant or just plain stupid, what he <em>really</em> objects to is immigrants. I wish he would just say so, but I don't expect him to, because that would leave the door open for accusations of xenophobia and a lack of compassion with the unfortunate people who flee war-torn countries, characteristics which are true mainly of Bad Men.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-76343068702161589602014-12-31T09:01:00.000-08:002014-12-31T09:01:08.733-08:00The Migrants in the Port of Gallipoli<div style="text-align: justify;">
The news recently has contained reports from two distressed ships in the Adriatic and Ionian Seas. The burning one, and the one containing refugees, illegal immigrants, that was tugged to the port of Gallipoli in Southern Italy early on New Year's Eve (<a href="http://www.newsweek.com/cargo-ship-found-adrift-carrying-hundreds-migrants-docks-italy-295795" target="_blank">Newsweek's report</a>). Apparently, smugglers of people often abandon ship if they fear an inspection by the authorities will cause them to be found out.</div>
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I would imagine that events such as these cause other "human traffickers" to be reminded of the risks involved in their trade and therefore to think twice before trying to carry more immigrants to Europe (or anywhere), and that is too bad. The people being smuggled evidently desire to come to Europe. The smugglers, at a price, are willing to take the legal risk to get them there. The evidence as far as I can judge suggests that the people of the recipient countries are mostly better off by the influx of others. What stands in the way for immigrants is typically nothing more than some silly legislation.</div>
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The reports from this particular incident mention a spokesman for the Italian Coastguard saying that a "disaster" was averted as the abandoned cargo ship could be safely tugged into port. While I am not clear on exactly why the ship was abandoned, it would seem that, in similar episodes, disaster could also be averted if the authorities simply stopped inspecting cargo ships in the first place. Then the people smugglers would lack one reason to abandon ship and smuggling would be safer. This would cause the prices which illegal immigrants have to pay to fall, and more people to get what they want.</div>
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The <a href="http://en.wikipedia.org/wiki/Yad_Vashem" target="_blank">Yad Vashem Holocaust Memorial</a> in Jerusalem intends to list the many individuals who helped the Jews escape the terrible fate which the Nazis wanted for them. The so-called "human traffickers" who carry illegal immigrants to better places are not in general nearly as righteous as the ones listed in Jerusalem; they resist legislation preventing free movement of people rather than the outright killing or enslavement of them, and their motives are pecuniary (morally neutral) rather than humanitarian, but in terms of what their actions ultimately accomplish they deserve far more honour than do the ones wishing to put a stop to their trade and prevent people from peacefully crossing borders.<br />
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No news report I have seen mentions what will happen to the individuals whose risky journey to Europe is now at an end, though I guess it will be some kind of lengthy internment at first, followed by the granting of asylum at best or deportation at worst. I hope they can somehow have a better new year than that.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-39622960418889948042014-12-25T11:40:00.000-08:002014-12-25T11:40:06.489-08:00Mortality in a Multiverse<div style="text-align: justify;">
This is more speculative than usual, even for me, but when I was little, I remember thinking at one point that one's consciousness could not handle death at all, with the result that one does not experience death but instead lives on, if only in one's mind (I don't remember, but I think this happened after the death of my grand-mother when I was about six years old - I most likely have cleaned up my thinking a bit). Sort of like what happens in William Golding's wonderful book <a href="http://www.amazon.com/Pincher-Martin-Two-Deaths-Christopher/dp/015602781X/ref=sr_1_1?s=books&ie=UTF8&qid=1419533593&sr=1-1&keywords=William+Golding+Pincher+Martin" target="_blank"><em>Pincher Martin</em></a>.</div>
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Anyway, I believe it was Richard Feynman who expressed the thought that the universe bifurcates whenever something can go more than one way (a decision or a quantum event, say). A multiverse might then contain all the potential bifurcations. Combine this with the above, and the result is that people die in some universes but not in others. The interesting but apparently unfalsifiable thing about this is the potential that no-one really dies in the sense of ceasing to experience things, since one's consciousness lives on in a different universe.<br />
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I don't believe this is true, though I suppose I could believe it. The thing that makes it unbelievable to me is that the idea is beyond the ordinary and that there seems to be no really good reason to believe it. But many things beyond the ordinary may turn out to be true, or have turned out to be true, and even though there is no good reason to believe in it, there may also be no good reason to doubt it. So it would not take much prodding for me to believe in the out-there idea expressed above. Only, prodding in the realm of metaphysics is not something that happens a lot, so I will likely continue not to believe in the above.<br />
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If one is suffering from some incurable disease or commits suicide, it may be hard to imagine that one will live on in one of many universes, though maybe that problem could be solved somehow (cures could be discovered in some universes, perhaps, or someone could walk in on the person about to kill himself just in time?). Others could die, of course, just not oneself.<br />
<br />
So, how far could this idea be stretched? Could it be that no-one ever really dies? This would be a big stretch. Although hardly anyone lives much beyond a hundred years, there would basically have to be one person (oneself) who is as old as humanity, which seems completely absurd (though not disprovable!). But maybe everyone gets to be really old. If so, healthy living is pretty good, because there are more universes in which one stays alive and remains healthy, in contrast to what happens if one leads the opposite kind of life, though great risk would have a built-in insurance against the worst kinds of risk. <br />
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These are just some silly thoughts, but on the subject of death one can perhaps afford to be more speculative than usual. With that said, I wish to say sorry for my infrequent blogging, which has been due to academic work, travelling, and Christmas. It may take me some time to get back on track. Have a Merry Christmas in the meantime!</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-2711389162155668712014-12-02T09:43:00.001-08:002014-12-02T09:43:15.807-08:00Still Sorely Missed<div style="text-align: justify;">
Today would have been the 84th birthday of Professor Gary Becker, possibly the greatest social scientist who ever lived. He passed away in May, but still I cannot quite believe it. When I was at Chicago, I think only Ronald Coase and Robert Fogel were older than he, yet he was in many ways among the youngest of the participants in the many seminars in which I saw him, always curious and excited to learn new things and making pertinent comments and asking important questions.</div>
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Anyway, I talk about this because I notice the Becker-Friedman Institute at Chicago have <a href="http://bfi.uchicago.edu/events/becker-memorial-conference" target="_blank">released</a> a number of videos from <span style="font-family: inherit;">their recent conference in honour of my favourite teacher. There are also tributes of the written variety; </span><a href="http://bfi.uchicago.edu/news/gary-becker-put-people-heart-economics" target="_blank"><span style="font-family: inherit;">this one</span></a><span style="font-family: inherit;"> really captures his love for his family, something I often heard of but that is frequently forgotten amidst his magnificent professional contributions. I also like the bit where his daughter said “He taught us how important it is to love your work. He showed what it is to work 16-hour days but but say, ‘I never worked a day in my life.’” My own very best "work" days are exactly like that. Professor Becker was an example for the rest of us to follow in so very many ways. Do give the links a gander.</span></div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-6152639933031880842014-11-15T09:26:00.003-08:002014-11-16T13:06:04.569-08:00How to Circumvent the Minimum Wage (Maybe)<div style="text-align: justify;">
Would it make a difference if the government were to command employers to pay nothing or more to their employees, as compared to a situation when the government did not order anyone about? The former might be annoying; akin to someone telling you over lunch not to stick your fork in the eye and turn (and threatening punishment if you do anyway), but aside from the nuisance of useless advice, maybe there would be no effect?<br />
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Perhaps somebody were prepared to pay for the "privilege" of working for someone else. Then the government's command would destroy a valuable opportunity. But the fact that a person is willing to pay to work somewhere indicates to me that it is really the "employer" who provides the service. Thus, the roles are reversed: employer is now employee and employee is employer, as "the present now will later be past, for the times they are a-changin'". Problem solved.<br />
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Which leads me to wonder, why do not prospective employees who would like to be working for the minimum wage but cannot because their work is not valuable enough simply hire their employers? The employers would do some sinecure such as guarding a wristwatch. This is easily done, since they might just carry it around, looking at it occasionally, say when wondering what time it is. The wage would be the minimum one and the wage paid to the previously unemployed fellow would be the minimum wage plus what little money his labour is worth. He is paid on net an amount less than the minimum wage.<br />
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A concrete example: suppose the minimum wage is $5.00. The worker's labour is valued at $3.50, so he hires his boss at the minimum wage to carry a watch around. The boss hires the worker at a wage of $8.50 to do some proper work. On net, the boss pays the worker $3.50 and it is all legal (and perfectly morally acceptable - if not why not?).<br />
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I am ignorant, but I hope to better myself by asking questions. So, is there a law against this or what is the reason these relationships do not exist? Maybe there are fixed costs to hiring someone, or maybe the additional income to the employer working for the minimum wage would be taxed fairly steeply, but then the otherwise unemployed could settle for less instead. If the transaction costs are too great, why not outsource the matching process to a third party that hires the employers on behalf of the workers, paying them the minimum wage ($5.00), and hires the workers on behalf of the employers, paying them $8.50. Such a middle-man could charge $5.01 and $8.51, respectively, for its services.<br />
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As far as I can tell, the data on who makes minimum wages show no wristwatch-carrying employers, so I am pretty sure this way of circumventing minimum wage legislation is not legion. But if even I can think of ways to get around idiotic price floors, then others should have developed much more sophisticated techniques. Maybe this is part of the reason why researchers ever and anon fail to find disemployment effects of increases in the minimum wage.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-75334095458421987312014-11-13T09:07:00.002-08:002014-11-13T09:07:32.960-08:00The Problem with Deserts<div style="text-align: justify;">
Many parents are sometimes heard to tell their children how great they are and how they are worthy of the world. If there are many such children, and if their parents are correct in their estimation, the total quantity of things that are deserved is surely greater than the total quantity of things that exist.<br />
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On the other hand, some people like to speculate on how many things we do have root causes in stuff others have done before, which in turn have root causes in still more distant deeds, and so on. On this view, perhaps nobody really deserves anything? If so, there is too much stuff to go round in this world.<br />
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How do desert-based theories of distribution deal with this issue? Surely it would be a remarkable coincidence if at any instance the quantity of stuff in the world exactly equalled the quantity of stuff that was deserved by its inhabitants. Ill-gotten things may (should?) be burnt, and if people do not get what they deserve it seems that adherents of desert-based theories should be really anxious to figure out how to get stuff to those who ought to have more.<br />
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If one thinks desert is morally important, it seems that one should do all one can to get it aligned with outcomes. One should support policies of constant fine-tuning and privately do what one can to accomplish the same agenda. If one deserves a lot, this may involve stealing from those who deserve less. Of course, one must also find out just what a just desert is.<br />
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One way out of some of these problems for desert-based theories of distribution is to argue that what one deserves is a fraction of total stuff. But then one's moral worth would be raised as that of everyone else falls, even if one doesn't do anything. So if one happened to live among Hinckleys, Dillingers and Sons of Sam rather than among saints and angels, one should get more of all the stuff there is. Surely that cannot be.<br />
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Another way out of the problem, of course, is to abandon theories of just deserts. Given the problems with it, this would probably be for the best.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-59924707816480857832014-11-12T10:02:00.001-08:002014-11-12T10:02:14.657-08:00Gordon Tullock on the Economics of Slavery<div style="text-align: justify;">
Gordon Tullock was a phenomenally precise and well-articulated economist. Since his untimely passing I have spent a few idle hours perusing some of his lesser-known works. A review of two books entitles <a href="https://www.mises.org/journals/lar/pdfs/3_2/3_2_1.pdf" target="_blank">'The Economics of Slavery'</a> is a true gem and showcases his excellent grasp of history. Tullock offers commentary on the phenomenon known as <em>manumission</em>, which should strike any slave-based society as the slaves themselves are apt to know better how to take care of themselves and how to work productively than are the slaveholders. Thus, slaves should rent themselves and work where their talents are used best, paying some fraction of their wages to the slaveholder and keeping the rest. Eventually, they might be able to buy themselves. Why was this not common practice?</div>
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Quoth Tullock (p. 11):</div>
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<span style="font-family: Times New Roman; font-size: large;"><span style="font-family: Times New Roman; font-size: large;"><span style="font-family: inherit; font-size: small;">"The basic reason for the failure of this type of “sale” </span></span></span><span style="font-family: Times New Roman; font-size: large;"><span style="font-family: Times New Roman; font-size: large;"><span style="font-family: inherit; font-size: small;">of the slave to himself in the guise of manumission to </span></span></span><span style="font-family: inherit;">develop in the ante-bellum South would appear to be the </span><span style="font-family: inherit;">stringent and steadily growing legal restrictions on manumission. </span><span style="font-family: inherit;">There was also considerable social pressure </span><span style="font-family: inherit;">against manumission, and in the last years before the </span><span style="font-family: inherit;">Civil War a reaction to abolitionist propaganda developed </span><span style="font-family: inherit;">into strong arguments that slavery was somehow a superior </span><span style="font-family: inherit;">form of civilization. The explanation for these developments </span><span style="font-family: inherit;">is fairly simple. The individual slaveholder would </span><span style="font-family: inherit;">have been better off if he could have made a deal with his </span><span style="font-family: inherit;">slaves to sell them their freedom, Large numbers of free </span><span style="font-family: inherit;">negroes, however, would have endangered the “property </span><span style="font-family: inherit;">rights” of the slaveholders in those that were still fully </span><span style="font-family: inherit;">or partially owned. Thus the slaveholders had a motive c</span><span style="font-family: inherit;">ollectively to favor laws against manumission in spite of </span><span style="font-family: inherit;">the fact that each one would have benefitedfrom permission </span><span style="font-family: inherit;">to manumit his own slave if he were the only one given such </span><span style="font-family: inherit;">permission. The long run outcome of this tension between </span><span style="font-family: inherit;">the individual and collective interests of the slave owners </span><span style="font-family: inherit;">cannot now be known. From 1806 when importation of slaves </span><span style="font-family: inherit;">was forbidden to 1860 was only 54<strong> </strong>years, or considerably </span><span style="font-family: inherit;">less than the threescore years and ten which the Bible </span><span style="font-family: inherit;">gives as a normal life span. In economic terms this was </span><span style="font-family: inherit;">not long enough to bring the system even near to full </span><span style="font-family: inherit;">equilibrium. If we add on the numerous sociological factors, </span><span style="font-family: inherit;">adjustment would have been even more delayed. Thus the </span><span style="font-family: inherit;">possibility that slavery would have eliminated itself remains </span><span style="font-family: Times New Roman; font-size: large;"><span style="font-family: Times New Roman; font-size: large;"><span style="font-family: inherit; font-size: small;">an open one."</span></span></span></div>
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As they say, "read the whole thing". In fact, why not read all of his things.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-79885451145495569942014-11-08T09:57:00.001-08:002014-11-08T09:57:24.911-08:00Carl Sagan at 80<div style="text-align: justify;">
Tomorrow, on the 9th of November, Carl Sagan would have celebrated his birthday were he still alive. This year would have marked the 80th anniversary of his birth. 80 is not the ripe old age it used to be anymore, so it is really sad that a rare disease took him away about 18 years ago.<br />
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He and I would have disagreed on many social policies (but not all of them; I am also in favour of the legalization of drugs as well as of cutting the amount of money spent on the military). In his otherwise truly wonderful book <em><a href="http://www.amazon.com/Cosmos-Sagan-published-Random-Hardcover/dp/B008P7YNLM/ref=sr_1_3?ie=UTF8&qid=1414515129&sr=8-3&keywords=Carl+Sagan+Cosmos" target="_blank">Cosmos</a></em>, he states his opinion that a nation is more advanced the higher the fraction of its GDP is spent on public libraries. Upon the realization that the government could tax to the maximum and spend all the proceeds on public libraries, this seems like a pretty bizarre view (although it has the advantage of radically downsizing the many wasteful government programmes!).<br />
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But disagreement is no reason to hold another person in any less high regard. Besides, Carl Sagan had many - one might say "billions and billions", which, unlike popular belief, was not an expression he was in the habit of using - other terrific qualities, many of which he used to convey science and the scientific method to those of us not working in Departments of Astrophysics. Certainly a part of my appreciation of our astonishing universe I owe Carl Sagan. One of my favourite remembrances from <em>Cosmos</em> the TV series is when he discusses the people of "Flatland", where everything extends forwards and backwards, left and right, but not up and down; where everything is absolutely flat.<br />
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Imagine the things the Flatlanders would see were one to pick them up away from their quotidian plane. I find it a wonderful depiction of both what it might be like to experience an additional dimension and of how one might observe a two-dimensional world without them looking back. The people of Flatland ought to be a lot more self-conscious - and perhaps we too, in case of watchers from higher dimensions that we cannot perceive!<br />
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Carl Sagan had a great knack for finding the right words for just about anything he wished to say. One might even say that much of his work is poetic, although one must take care not to let this imply that it lacks other qualities. He had this knack because he really knew his subject; for so many others, possessing less engaging personalities and less varied vocabularies and all-round educations, his phrasings would have made them seem like they were aiming too high: But for Sagan they were apposite. His use of similes is impressive in its ability to inspire - who can forget that "we live on the shores of the cosmic ocean"?<br />
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Another thing which contributed to his ability to inspire is his genuine sense of wonder at the world around us. I reckon this, coupled with a keen perception of its structure and mechanics, probably made his sole attempt at fiction, the book <em><a href="http://www.amazon.com/Contact-Carl-Sagan/dp/0671004107/ref=sr_1_1?ie=UTF8&qid=1415468833&sr=8-1&keywords=Carl+Sagan+Contact" target="_blank">Contact</a></em> (dealing with signals being received from the skies), such a great achievement. The fiction here plays second fiddle to the facts, but where the facts are unknown, the fiction, centring on what might be possible, fills in to convey what I suppose must be some of his passion for science. A romantic view, surely, but a real one nonetheless.<br />
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The best way of celebrating the life of Carl Sagan on this 80th anniversary of his birth would be to, say, gather some evidence to inform an idea or learn something one did not know before; celebrate the triumph of the physical world, our vicinity of which is the product of stars which burnt out thousand of millions of years ago, by finding out still more about it. I am one of those people supposed to be dedicated to science and the discovery of Truth (and I guess I really am), so for me, finding any specific way of celebrating his life is not so easy. Maybe I will have to settle for (re-)reading one of his books. At any rate, Carl Sagan's was a life well lived. He continues to be missed.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-77914398805057907032014-11-05T10:15:00.000-08:002014-11-05T10:15:28.263-08:00Gordon Tullock<div style="text-align: justify;">
Today I was reached by the incredibly sad news that Gordon Tullock passed away on Monday, 3rd November, at age 92. These past few years have seen the demise of many of my great heroes, among whom Alchian, Becker, Coase, and now Tullock, stand out. What a dismal endeavour to go through the list in any detail. I never got to meet him, but the stories I hear all tell of an amazing character. Case in point: visited by what may have been the Governor of Virginia (if I recall the story correctly), then GMU Professor Tullock, always forthright, said to him: "So you're from the government? Very good. Then maybe you can do something about the leak in my ceiling". Actually these were also among the last words spoken between them.</div>
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Gordon Tullock is of course best known for his work on Public Choice and he was the founding editor of the eponymous journal, but his interests and articles showcase an astonishing breadth and depth of thought. He even had a <a href="http://www.sciencedirect.com/science/article/pii/002251937190097X" target="_blank">publication</a> in the <em>Journal of Theoretical Biology</em>. He wrote extensively on history and it is a great understatement to say that he was very well read. One article of his is <a href="http://www.sciencedirect.com/science/article/pii/0167268182900191" target="_blank">'An Economic Theory of Military Tactics'</a>, joint work with Geoffrey Brennan, in which they analyse the general's problem of getting the soldiers not to run away from battle. I have blogged about that article <a href="http://gregheslop.blogspot.fi/2014/06/tolstoy-on-conflict-and-individual.html" target="_blank">before</a>, and several times about the late legend.</div>
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Tullock had a few paradoxes to his name. One, a wee note called 'The Purchase of Politicians' in the <em>Western Economic Journal</em> (now <em>Economic Inquiry</em>), says that political favours are bought for much less money than they reward, a phenomenon known as the Tullock Paradox which as far as I can tell lacks a satisfactory explanation. A better-known paradox of his is, of course, that of revolution: The individual faces great risk from participating in a protest against a tyrant, who might order the firing squads on the protestors, and the benefit he receives from doing so are hardly greater than what he would have got if he hadn't taken part in the protests.</div>
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With Tullock's passing, the world also loses a refreshing observation on the lack of necessity of formal training to be educated. Tullock never obtained a PhD in Economics even though he was surely among the two or three greatest economists to have been alive for over 40 years of Nobel Prize announcements and never received one - and a far greater recipient than many a Laureate. Tullock held a JD from the University of Chicago and only took one economics course for that degree. His works are rigorous without the formulae, which he would refer to as "ornamental mathematics". It is a tremendous loss to economic science that his example is no longer among us.</div>
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Of the tributes which I have seen, I particularly like the <a href="http://daviddfriedman.blogspot.fi/2014/11/memories-of-gordon-tullock.html" target="_blank">one</a> by Professor David Friedman. Mine cannot compete, but I humbly add it to the pile, along with a piece of evidence as to how much Gordon Tullock has influenced my own thinking: I still do not know how yesterday's American election turned out. That will change soon enough with the number of interactions I have with others, but if it were not for them, I probably would not find out until I accidentally saw the headline on the news or maybe encountered it as part of some data crunching for a project.</div>
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We have lost a great economist and a remarkable character.</div>
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Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-84264510600641537172014-10-30T12:10:00.003-07:002014-10-30T12:10:38.261-07:00Is Fighting Our Only Recourse?<div style="text-align: justify;">
Milton Friedman and many others have expressed the belief that if all the facts are known, the economist's recommendation (for particular policy or other course of action) is beyond dispute by other economists. I believe Friedman made this statement in a footnote in his highly influential essay on Positive Economics from 1953, and I know he has made similar statements on other occasions. It expresses the Popperian view that empirical observation has the power to reject any scientific theory and Friedman also used this idea to criticize, for instance, the Austrian fixation (most prominently defended by Ludwig von Mises) that economics is an <em>à priori</em> science and that economic facts are reachable only through logic and not through observation.</div>
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If neither Austrian (or other disbeliever in the power of observation) party to an intellectual dispute abandons his logic in favour of that of the other fellow, Friedman says that they can only fight (he used this word a number of times). By contrast, if people who believe in the power of observation argue with one another, one can say to the other: "tell me which phenomena you expect not to observe if you are right and I will do likewise". Certainly the latter scenario is more appealing.</div>
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I am a great fan of Milton Friedman and he is one of my very favourite economists ever. On this issue, I am sceptical that he was right, however. Now I do not believe he actually meant a proper fight (as in fist fight or other nasty business) in case of disagreement. That belief would have been absurd, since metaphysical questions are not resolved by observation and philosophers engaged in metaphysics do not - to the best of my knowledge - normally engage in fights. Rather, what Friedman must have meant was a "fight" as in an unproductive dispute in which one cannot really gain any ground.</div>
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But I do not believe this is really true. Take the issue of free will, for instance. This is a metaphysical issue and believers such as myself can only offer very far-fetched scenarios in which empirical observation would inform the issue, but thinking about it can advance the argument and has done so in the past. I believe it was C. S. Lewis who made the argument that determinism (lack of free will) implies skepticism (and must therefore be false), since if I have no free will, any views I hold are mere products of chemicals interacting in my brain, which epistemically offer no support for my belief in anything. Certainly the case for free will would be weaker today were it not from this contribution, due entirely to logic.</div>
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Now Milton Friedman would have been right to argue that this has not settled the argument on free will, but I think it is fair to say that the fact that we can at least advance the debate through means of pure logic does indicate that empirical observation is not absolutely required, though it does of course help a great deal. One could also, of course, ask what empirical evidence there is to support the view that theories falsifiable on grounds of observation are better than are theories which are not falsifiable on empirical grounds. In other words, what observation would reject the idea that observation is epistemically sound basis for rejecting ideas?</div>
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The idea that there are moral facts is another reason to be sceptical of the idea that disagreements vanish as empirical facts become known. For instance, if it were made quite clear that immigration restrictions are absolutely required to maximize (let's say global) welfare, I still would not be a fan of them because I believe they infringe upon moral rights. Alternatively, if it were made quite clear to me that I should sentence an innocent Negro to death because otherwise the bigoted people of some town will rebel and cause death and destruction, I still would not kill the Negro. I take moral rights seriously because I believe there are moral facts, of which moral rights form an integral part. Can I prove this? No, but I can offer reasons to think that there are moral facts out there which depend on things other than well-being. If moral facts are facts of the same epistemic status as empirical facts, then maybe they ought to take precedence as guides for action?</div>
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I don't want to sound like I reject the power of observation. I absolutely do not. My point in this blog post is merely to defend facts not readily observed empirically, and to highlight the possibility of using logic to advance one's understanding of them.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-66227099168222127932014-10-21T09:40:00.000-07:002014-10-22T09:38:58.467-07:00What Is Equality of Opportunity?<div style="text-align: justify;">
I have asked <a href="http://www.gregheslop.blogspot.com/2014/04/what-is-wrong-with-inequality.html" target="_blank">before</a> what reasons there are to be worried about economic inequality, highlighting some plausible candidates and rejecting them all. Now Fed Chair Janet Yellen <a href="http://www.federalreserve.gov/newsevents/speech/yellen20141017a.htm" target="_blank">disappoints</a> by lamenting growing inequality while apparently offering no shred of argument for why it would be a deplorable thing. Consider in which society you would rather live if societies consisted of five groups with income levels as follows:</div>
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Group 1: £1,000 in Society A; £1,000 in Society B;</div>
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Group 2: £1,100 in Society A; £2,000 in Society B;</div>
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Group 3: £1,250 in Society A; £3,000 in Society B;</div>
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Group 4: £1,350 in Society A; £4,500 in Society B;</div>
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Group 5: £1,400 in Society A; £8,000 in Society B.</div>
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Purchasing power is the same for every pound across societies. Inequality is palpably greater in society B, but who would not want to live there? I believe this sufficiently proves that inequality is a non-issue to sensible individuals (except to Yellen, Stiglitz, Krugman, Piketty, and other sensible individuals, whose repeated 'warnings' that it is a scourge of our times I cannot fathom). If high incomes were earned by crooks, that would be a problem with crime, not inequality; if low incomes were "too" low, that would be a problem with poverty, not inequality. I am bound to record my impression that a great deal of the concern with inequality is really a begrudging of high incomes going to top talent.<br />
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Professor Yellen says:</div>
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"It is no secret that the past few decades of widening inequality can be summed up as significant income and wealth gains for those at the very top and stagnant living standards for the majority. I think it is appropriate to ask whether this trend is compatible with values rooted in our nation's history, among them the high value Americans have traditionally placed on equality of opportunity."</div>
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If those at the top are not getting richer at the expense of those not at the top, I fail to see the problem. To her credit, Professor Yellen continues by discussing the issue of change at "the top"; the fact that members of, say, the "one per cent" come and go and are apt not to be the same every year. She is dissatisfied with the rate of change between generations, however, and highlights the now famous 'Great Gatsby Curve', the finding that:</div>
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"...among advanced economies, greater income inequality is associated with diminished intergenerational mobility. In such circumstances, society faces difficult questions of how best to fairly and justly promote equal opportunity."</div>
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Forget for the moment the fact that "society" cannot "face" any questions, easy or difficult (only individuals can do that), and ask what intergenerational turnover would be compatible with equality of opportunity.<br />
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If one in ten (or a hundred, or whatever) children from the bottom percentile of families climbed to the top percentile over the course of a lifetime, would that be evidence in favour of, or against, equality of opportunity? Suppose turnover were complete, so that every child would be in every percentile at some stage of his life. Would that, on the other hand, be evidence in favour of, or against, equality of opportunity?<br />
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As far as I know, the common measure of equality of opportunity is the intergenerational elasticity of income, obtained, for instance, by looking at covariation between the natural logarithm of an individual's permanent income and that of his parent(s). If the correlation is zero, there is no statistically consistent relationship between incomes at different generations of the same family. Negative values mean higher (lower) family earnings depress (increase) those of offspring, and positive values mean that family and offspring earnings move in the same direction.<br />
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I submit the proposition that this is a pretty bad measure of intergenerational mobility. Why? Because it looks at average outcomes rather than choice sets. Who cares if rich (poor) families remain rich (poor) generation after generation as long as everyone has the opportunity to do things differently than did mum and dad? The fact that some fraction of family income influences adult income says something about the choices made by individuals as the grow up, but we cannot really say anything about what choices were available during that selfsame time.<br />
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Everything intergenerational is also a two-way street. There is what the children do and then there is what the parents do. If wealthy parents buy annuities for their children, that will influence the intergenerational elasticity of income in a positive direction. If parents run a business that is passed on to their children, that does the same thing. A zero elasticity of income between generations would indicate to me that something is blocking parents from doing what they want. A high intergenerational elasticity of income would suggest to me that mobility is possible but does not happen as often as it would if the measure were lower. It is, of course, possible that even an elasticity of one is "just" in the sense that it violates nobody's rights. I find it very difficult to say at which point between zero and "high" one might find the "ideal".<br />
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Alan B. Krueger, who coined the term 'the Great Gatsby Curve' (incidentally an odd name, given that Jay Gatsby was initially but a poor bootlegger in F. Scott Fitzgerald's great novel, though I suppose Professor Krueger's term is not too bad if one thinks of some of the novel's other characters), said in a concomitant <a href="http://www.whitehouse.gov/sites/default/files/krueger_cap_speech_final_remarks.pdf" target="_blank">talk</a> that "equality of opportunity should be a nonpartisan issue", but if one gets to define equality of opportunity as always rising with intergenerational mobility, one has in fact made rather a partisan definition. There is probably too much focus on intergenerational mobility. Perhaps it would be better if one simply noted that the progress at the top has not come at the expense of those at the bottom and contented oneself with the justice of a procedure that violates nobody's rights.<br />
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PS. This was my 100th blog post. As Groucho Marx Said, "Time flies like an arrow. Fruit flies like a banana".</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-68186693597831591682014-10-19T09:24:00.000-07:002014-10-19T09:24:01.473-07:00What to Do if Enemies Are Mapping out a Country for Conquest?<div style="text-align: justify;">
Recent <a href="http://www.bbc.com/news/world-europe-29679661" target="_blank">activities</a> in the Stockholm archipelago, coupled with prior infringements of Finnish air space and of course the unruliness in the Ukraine, have sent people wondering what the best response is if Russia might be aggressive towards its neighbours. The best response for leaders may well be to spruce up their countries' militaries, because if they are taken over these people will lose their positions of power.</div>
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I am not saying there is any risk of a Russian invasion of any parts of Scandinavia. These activities were observed during the Cold War as well and of course no invasion took place then. Rather, entering the waters and air spaces of other countries might serve to extract benefits by bullying other countries into concessions. Still, the political leadership in Scandinavia may well benefit from increased military preparedness, so as not to appear too weak while making such concessions.</div>
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For the citizens, however, the best response depends, as I have said <a href="http://gregheslop.blogspot.com/2014/10/national-defence-as-public-bad.html" target="_blank">before</a>, on the likely changes in policy which come from a more aggressive Russia, and in the limit on the likely policy changes which come from Moscow Rule. It is not obvious to me that these changes are big enough to justify increased outlays on weapons and on training people to commit murder. It might be that the bulk of the citizenry actually favour more of this kind, but the bulk of the citizenry lack incentives to make informed judgements, so that would not be strong evidence in any direction.</div>
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Case in point: Finland used to be a part of Russia from its war with Sweden of 1808-1809 until 1917. For over a century, it would seem to me that Finland was not very "russified". Finland held autonomous status as a Grand Duchy during all of this time and as far as I know, most of, if not the only Russian spoken in Finland today is by the numerous Russian tourists coming in to see Helsinki or other pleasant places. I also believe that Finland could set its own rules regarding a great deal of foreign trade as well as taxation and many regulations, but I am no expert so don't quote me here. At least culturally, Finland today is Scandinavian and apart from the beautiful Uspenski Cathedral and some other buildings not Russian in the slightest, so the status as a Grand Duchy must have meant something substantial.</div>
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The situation with a more aggressive Russia is very unfortunate, but my impression is that it would be far less unfortunate if the outside world responded as one does when stumbling upon an angry wasp: Do not move, especially not suddenly. Alas, this is not what has happened with sanctions and condemnations taking up much space in the newspapers. Neither Finland nor Sweden is a member of NATO, but it would not surprise me if this were to change given how things are going.</div>
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I don't know, but I reckon it would be a lot harder for anyone to kill another person knowing he was committed to non-resistance. It seems to me that nonviolence has its appeal from the fact that it is rare indeed for it to lead to the death of its practitioners by slaughter of their adversaries, so maybe there would be less death and destruction if countries gave this strategy a try?</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-29826028490567807392014-10-15T09:25:00.000-07:002014-10-16T02:28:16.104-07:00National Defence as a Public Bad<div style="text-align: justify;">
In textbook treatments of price theory and of public economics, one invariably sees national defence cited as an example of a public good. But how useful national defence is surely depends upon the expected change in policy if a foreign power took over. If this change is for the better, then clearly national defence is only an impediment to amelioration; if the change is for the worse, the utility of national defence would depend upon how much worse and compare that magnitude to the costs. If the change is neutral, national defence is again a public <em>bad</em>.</div>
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One could argue that citizens want a national defence and so their preference for it makes it a public <em>good</em>. But why should citizens <em>qua</em> citizens know what is good for them? Facing virtually no chance of their opinion being pivotal to any national decision, they can indulge in whatever idiocy they want. I do not normally like the distinction behavioural economists make between decision utility and experienced utility, but it seems serviceable in this case. If citizens want national defence, that is just their decision utility talking, but in actual fact it could be that they are throwing money away. Maybe it is a purely normative issue, but it seems to me to be just as normative to refer to something with such ambiguous effects as a public <em>good.</em></div>
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If one goes along and takes the right name to depend upon whether national defence safeguards against changes for the worse or just keep things bad, it would seem to me that national defence is to be referred to as a public bad in the countries which pursue the most horrendous policies (certainly it would seem a normative point to give a name like "public <em>good</em>" to racist polcies such as the nuking of areas containing people of a certain skin colour, wanted by racists). I have made the case before that policy may not actually improve from outsiders invading such countries, but of course if policy is about the same the war was wasteful and so national defence was a bad idea.</div>
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With no spending on the military in the countries pursuing the worst policies, the countries pursuing the second-worst policies face no threat of invasion from countries with worse policies anymore. Again, maybe invasions by countries with better policies would not actually result in improvements, but if things do not change appreciably it would seem that these countries also waste resources now by spending them on national defence.</div>
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In this way, we regress to a situation in which no country spends anything on national defence. This is an equilibrium because no country now has any incentive to spend money on protection, though the people in the countries pursuing the most horrendous policy arguably still have an incentive to change things somehow - just not by getting invaded. The operative assumption here is that countries which are invaded suffer only if policy is changed for the worse (otherwise why resist?) and that the risk that this happens goes away if the invading country is one pursuing better policy.</div>
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In equilibrium, national defence is a public bad. Outwith equilibrium there may be a point to it in countries with good policies at risk of invasion by countries with bad policies (<a href="http://gregheslop.blogspot.fi/2014/03/public-choice-and-annexations-of.html" target="_blank">though there are problems with this view, too</a>), but still many countries today do not face any serious risk of that happening (e.g. Switzerland, New Zealand, Canada). If the language of economics textbooks took steps to approach value neutrality by calling national defence, say, a "public-bad-or-good(-but-probably-bad)", my guess is there would be no less national defence anywhere. It would be better language, though, and reflect better thinking. That's something.</div>
<br />Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-18152675753613080392014-10-14T10:10:00.000-07:002014-10-14T10:11:11.267-07:00Charles Tiebout at 90<div style="text-align: justify;">
It escaped my notice that the man behind the <a href="http://www.jstor.org/stable/1826343" target="_blank">Tiebout Model</a> (short for "feet voting"), <a href="http://www.dartmouth.edu/~wfischel/Papers/00-03.pdf" target="_blank">Charles M. Tiebout</a>, would have turned 90 on Sunday last week had he had as long a life as his insights deserved. Alas, he died suddenly, in his 40's, in 1968, but I belatedly celebrate his memory with a blog post on the Tiebout Model, his most famous brain-child.<br />
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The Tiebout model says that perfect competition between local political jurisdictions ensures an efficient supply of public goods. Perfect competition here means that there are no costs of migration, so that if Town A has better street lights but a higher sales tax than Town B, those who do not mind paying more for their purchases while having more ample light on the streets move to Town A and the rest move to Town B.<br />
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Obviously perfect competition is unlikely to hold, but the essence of the Tiebout Model is hard to escape when looking around oneself. If a local community decides to tax high-income earners at a higher rate than low-income earners, it will quickly lose most of the former. This is not necessarily so if this is done at the country level where movement costs are greater (compare moving abroad to moving to the neighbouring municipality). This implication of the Tiebout Model is evident in the fact that the world looks pretty much like what Tiebout predicted. Local governments have little to offer high-income persons by way of services, so cannot really tax them as much as can nations.<br />
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Chances are that most readers of this blog post, if they have ever moved house, have based some part of their decision on the tax-services bundles available in their destinations under consideration. If so, they act according to the Tiebout Model, works in several other ways, too, including if local governments engage in the production of private goods, such as schooling: In a celebrated <a href="http://www.jstor.org/stable/2677848" target="_blank">paper</a> (gated) from the year 2000, Stanford Economist Caroline Hoxby shows that competition among public schools benefit school quality as judged by available measures and Professor Hoxby's ingenuity. This adds a great deal of relevance to the Tiebout Model since pure public goods are few and far between.</div>
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There are ways of attacking the Tiebout Model, of course. For instance, one could belabour its assumption of perfect mobility, which does not hold for land and buildings. However, this critique is only partially successful, because the value of such stationary objects depends on the quality of human genius that tries to make something out of it. If land is taxed a lot by one local government, it is apt not to be as well developed as the land in the neighbouring jurisdiction in which it is lightly taxed.<br />
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EconLog blogger and GMU Economics Professor Bryan Caplan, whose judgement I respect immensely, has <a href="http://econlog.econlib.org/archives/2012/12/where_tiebout_g.html" target="_blank">challenged</a> the Tiebout Model on the grounds that it really deals with non-profit competition, which fails to provide the necessary incentives for the Tiebout Model to hold:</div>
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"If a business owner figures out how to produce the same good at a lower cost, he pockets <i>all</i> of the savings. If the CEO of a publicly-held corporation figures out how to produce the same good at a lower cost, he pockets <i>a lot</i> of the savings. But if the mayor of a city figures out how to deliver the same government services for lower taxes, he pockets <i>none</i> of the savings. That's how non-profits "work.""</div>
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I find his critique unconvincing. Armen Alchian <a href="http://www.jstor.org/stable/1827159" target="_blank">pointed out</a> in his classic paper 'Uncertainty, Evolution, and Economic Theory', that whatever an actor does will result in an enhancement or a reduction in his capacity to survive. Thus, if firms choose strategies randomly, those that come closest to maximizing profits survive and the others are successively eliminated, so that it looks like firms maximize profits in the end. Similarly, local governments may behave randomly and those who offer "good" tax-services packages will gain population at the expense of others.<br />
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There would have to be different incentives to behave "badly" for Tiebout competition not to work, but I don't see them. Probably failing local governments would attempt to learn from thriving ones. I am also unsure whether non-profit competition really is applicable to this case since politicians could be crooked (and probably frequently are) and thereby extract some tax theft from the population, which seems to give them an incentive to increase the tax base.<br />
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So to me, the Tiebout Model looks like it is holding up very well. Tiebout thought of it as a graduate student and had it published in 1956, so his brain-child would be 58 years old this year. Every parent should live to see his children, including brain-children, reach that age. It is a tragedy that Tiebout did not. I hope it gave him great satisfaction to imagine how economists and otherwise interested individuals might continue to experience many hours of deep spiritual joy from his work long after his demise which proved so untimely. I know he would not have been wrong.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-23680022894918011172014-10-12T10:57:00.004-07:002014-10-12T10:57:57.244-07:00Another Nobel Post<div style="text-align: justify;">
If the Peace Prize has gone rather <a href="http://gregheslop.blogspot.fi/2014/10/good-intentions-are-overrated.html" target="_blank">awry</a>, my impression is that the other prizes hold up pretty well to the standards which say that excellence in their respective fields should be rewarded. There are, of course, a number of economists to whom I would not have given the Prize, and others who have died without winning what would have been a well-deserved one (e.g. Armen Alchian and Albert O. Hirschman), but no winner as far as I can recall has a really bad case and certainly no-one has caused the field to regress in the way some winners of the Peace Prize have.<br />
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Tomorrow the Economics Prize is awarded. I have never made an accurate prediction, but if I keep making them maybe some day I'll be lucky. In years in which so-called "microeconomics" may be rewarded, I usually stick to a team of maybe five economists and pick one or a few of them. Prominent members of this team have been the aforementioned Alchian and Hirschman, and otherwise Gordon Tullock, Richard Posner, Anne Krueger and Sam Peltzman. Consequently, for my prediction to be accurate, the prize this year must reward applications of economic science to Political Economy and rent-seeking. The prize cannot, I believe, be shared by more than three people, so my guess would be that either Tullock, alone or with Peltzman, will be the winner(s), or that Tullock shares it with both Posner and Krueger.<br />
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Tullock, of course, ought to have won the prize already in the 1980's with James Buchanan but that was not to be. I am not sure of this is accurate or not, but several people have told me that Tullock vomited when finding out about his exclusion from the prize. And why not? A great deal of Buchanan's best work was joint with Tullock. Anyway, now my prediction is official. If accurate, my foresight will be remarked upon. If inaccurate, everyone will forget the prediction very quickly.<br />
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There are of course many other deserving candidates. Tomorrow we'll whom the Riksbank pick.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-31343115470639683012014-10-10T09:58:00.000-07:002014-10-10T09:58:36.036-07:00Good Intentions Are Overrated<div style="text-align: justify;">
There is a lot of talk about <a href="http://www.bbc.com/news/world-europe-29564935" target="_blank">this year's joint winner of the Nobel Peace Prize</a>, Ms. Malala Yousafzai, but amidst all of it, I cannot find any information about what she has actually done. My ignorance is as deep and vast as the ocean, so maybe she actually has real accomplishments, but what appears to be normally mentioned as her main feats are talks and writings which advocate more education for girls in Pakistan and elsewhere. Now there is nothing wrong with any of this (maybe education is overrated and so she proposes bad policy, but she has the right to do that as far as I'm concerned), but I do not see why it should be worth £860,000 or $1.4 million (then again, the error-prone gentlemen in Oslo have, as far as I know, not violated anyone's rights by awarding the Prize to a great many feeble choices, so I guess that would make it OK).</div>
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Yet, awards like this devalue peace. Ms. Yousafzai wants to be a politician. If my impression is correct that she has never actually accomplished anything, never achieved any of the change she frequently talks about (which is OK for a seventeen-year-old), then her career choice means she will continue doing that forever. Remarkable statement? Not at all! If politicians were all about changing the world (for the better or for the worse), we would see a lot of policy changes whenever a new party comes into power. We quite palpably see extremely little of that sort (gated example <a href="http://www.jstor.org/stable/3217387" target="_blank">here</a>), meaning that politicians probably do what popular opinion, or some function of it, tells them to do, rather than influence it. That is why Ronald Reagan said that politicians have a great deal in common with workers in the world's oldest profession.</div>
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Ms. Yousafzai has spoken in favour of education for girls which is about as platitudinous as it gets unless one gets into the messy details about the ethics of craving positive rights, or about the economics of third-world education for girls, which I believe, suggests that it reduces domestic violence, but fails to impact policy views or voting intentions (some evidence <a href="http://www.nber.org/papers/w16939" target="_blank">here</a>). But the yokelry and even most of the <em>gelehrten</em> do not go this deep and tend to think in simplified terms such as "education-good". Not that they are mentally defective; they very likely only lack incentives to think more deeply. So Ms. Yousafzai's campaign for girls' education hardly needs to influence anyone. Things are different in Pakistan, of course, and her very brave outspoken style would not always be platitudinous there, but she is rewarded and seems to be best liked where her words offend no-one and are met with disagreement by rather few (though possibly by many who are well-versed on the issues, I don't know). Would she have received the peace prize if she had campaigned against, say, agricultural subsidies or the minimum wage? Their abolition would surely benefit the world while avoiding the issues of positive rights and difficult cost-benefit analyses, but unlike education they do not enjoy widespread support.</div>
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Consequently, if Mr. Jagland and the other members of the Peace Prize Committee are really serious about peace, they should award the price to people or organizations who are likely to bring about more of it in this world. They have got some choices right, like Norman Borlaug and possibly the one to Muhammad Yunus (the evidence on the impact of microcredit is mixed, though I believe theoretically their case is a good one), but this one, the one to the EU (for preserving peace in Western Europe since the end of WWII - have they ever heard of the <em>post hoc, ergo propter hoc fallacy</em>?), the one to POTUS, to Jimmy Carter, Mikhail Gorbachev and a vast array of others, can do absolutely nothing for peace. Professor David R Henderson of EconLog has remarked that some of these prizes could actually promote war, since for a politician to be a peace dove it helps if he has first got himself into a violent conflict.</div>
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Again, I don't mean to say that Ms. Yousafzai has not accomplished anything and she is clearly a brave young woman for being outspoken in the face of threats; I merely say that I have not heard of anything she has done. I have looked, but I could have missed it. What seems to be a much more defensible proposition than that she has accomplished great things is that she means well. But given their beliefs, everybody means well. The real trick is to actually do something good. Certainly my own accomplishments are very few, but if my impression of Ms. Yousafzai is correct, maybe mine are more numerous than are hers. If the prize money is taxed, I'm hoping to receive a quiet ceremony next year so that it will be easier to hide the income from the tax authorities.</div>
Anonymoushttp://www.blogger.com/profile/13110223521821385261noreply@blogger.com0tag:blogger.com,1999:blog-9083959390691475356.post-78578865637371826842014-10-07T10:28:00.001-07:002014-10-07T12:59:35.540-07:00The Poverty Trap<div style="text-align: justify;">
Some people argue that poor countries stay poor because they are in a poverty trap of health and nutrition. According to this idea, labour capacity increases more than proportionately in income at the absolute bottom where one dies if not fed, then less than proportionately during a stage of living just above the minimum, and then more than proportionately again as "good health" is reached. In the graph below, nutritional intake is captured by the red line. If income (the "S-shaped" curve) is below point B, corresponding capacity to work leads to a nutritional intake which lowers capacity to work (and income) the next day (or whichever period one considers), eventually leading the individual to Point A ("the bad equilibrium", or poverty trap). This is because the point on the red line which corresponds to the capacity to work for an income below point B is associated with a reduced income (one may draw lines on the graph to see this). Above point B, capacity to work is increased by more income, leading to a stable point at C ("the good equilibrium").<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEii6o4aRJmlwAytD6CEUa9LxiRN2ql8GjvvZdN09oKUyaM5WRO7c-R9LUGYMY1VxSgG0ptAyGMSCIyafg0X5eIyElOgSsAsTDRbwVZa2End_VWIPINabAPwMlKciVV97qr6nt5lfHvJFZI_/s1600/Nutrition.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEii6o4aRJmlwAytD6CEUa9LxiRN2ql8GjvvZdN09oKUyaM5WRO7c-R9LUGYMY1VxSgG0ptAyGMSCIyafg0X5eIyElOgSsAsTDRbwVZa2End_VWIPINabAPwMlKciVV97qr6nt5lfHvJFZI_/s1600/Nutrition.gif" height="272" width="320" /></a></div>
However, this relationship suggests that most of the truly poor around the world spend the vast majority of their income on victuals. However, this is false; many studies show that the highest fraction spent on food by the very poor typically does not exceed 70 per cent, and that they could get a great deal more nutrition out of the money spent by rearranging their food outlays, akin to how richer people would eat more on the same money if they buy chicken and vegetables rather than caviar and smoked salmon. Why the world's poor do not consume more food is still up for debate. It may be that they would benefit, in which case the above curve could be very useful, but it may also be that they are spending their money rationally and that something else is preventing them from getting rich.<br />
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That something else may not be a poverty trap and it could not be one based on nutrition, but it may be one based on something other than victuals. Here is one example: When Westerners go to very poor countries like Haïti or India, they may be surrounded by indigents asking for alms. Maybe natives living amidst these people - including potentially every indigent individual - correctly deduce that they would face a similar situation if they did something to improve their productive capacity and thereby raise their income. Unlike Westerners, natives have ties to other indigents and may find it prohibitively expensive to refuse to help them.<br />
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If they know how to increase production, there would be no problem, because everyone could just do it and even if the destitute neighbours "tax" away all the surplus with cries for help, learning from the successful ones means that this "tax" will shrink over time. However, if the poor do not know precisely how to be more productive, they will face a choice between the status quo or experimentation. Experimentation could result in great success or abject failure, but any success will be greeted by clamour for donations by the hapless neighbours who experimented differently or not at all, while failure may mean death.<br />
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Maybe the deep poverty that still persists is simply a result of this sort of coordination failure?</div>
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