Tyler Cowen's Blog, page 229

Gabriel Axel, RIP

He was the director of Babette’s Feast and he just passed away at age 95.  What stuck with me most from that movie, and what is one of my favorite sentences ever, Axel himself cited upon receiving an Oscar:

Mr. Axel was a week shy of his 70th birthday when he took the podium in Los Angeles in April 1988 to accept the award. After saying his thank-yous, he quoted a line from his film: “Because of this evening, I have learned, my dear, that in this beautiful world of ours, all things are possible.”

The obituary is here.

How to hack the subway using fare arbitrage

Could you save swapping tickets with another commuter during your journey so that the total you both pay is less? This kind of riskless profit-taking, or arbitrage, is common in capital markets where traders aggressively seek out and exploit these inefficiencies in the market. Could commuters also benefit?

Today we get an answer thanks to the work of Asif Haque, a data scientist at Twitter, who has analysed the possibility of fare arbitrage on the San Francisco metro system, known as BART (Bay Area Rapid Transit). Haque says that not only are opportunities for fare arbitrage possible on BART, they occur on more than 13 per cent of all pair-wise combinations of journeys offering considerable potential for savings.

Spotting fare-arbitrage opportunities is relatively straightforward in principle. Armed with an up-to-date fare guide, it’s simple to find out whether a particular pair of trips allows for arbitrage.

People what are you waiting for?  This sounds almost as good as arbitrage using the Forever Stamp:

Haque says that 60,334 of these pairs or 13.5 per cent, have an arbitrage opportunity of at least 5 cents. And 4,666 of these pairs of trips could save commuters at least $1. Haque has generously posted the full list of these 4,666 fares here.

There is further discussion, with examples, here.  For the pointer I thank Tom Fowler.

Improving GDP

Under EU rules Britain will add illegal drug sales and prostitution to its calculations of GDP:

HPost: Britain makes £10 billion a year thanks to drug dealers and prostitutes, the government’s statistics watchdog is set to confirm.

The Office for National Statistics is expected to comply with new EU rules by revealing its first estimates for the size of the illegal industries and how it has reached these calculations as soon as March or April.

Prostitution in Britain is set to be valued at around £3 billion a year while the drug dealing sector is set to be valued at £7 billion, with both of them factored into the UK’s £1.6 trillion gross domestic product, according to the Times.

Assorted links

1. Signaling, part I, and signaling part II.  And reminiscences of former heroin users.

2. Arthur Chu on the science of winning Jeopardy.

3. Janet Yellen’s best paper.

4. Predicting medals at the Winter Olympics.

5. Which out of print books do people search for the most?

6. You, Sir, are a fish face.  And some species of crocodiles can climb trees.  And my instinct is always to side with Robert Trivers.

How does teaching work in Singapore?

Importantly, teachers also broadly share an authoritative vernacular or “folk pedagogy” that shapes understandings across the system regarding the nature of teaching and learning. These include that “teaching is talking and learning is listening”, authority is “hierarchical and bureaucratic”, assessment is “summative”, knowledge is “factual and procedural,” and classroom talk is teacher-dominated and “performative”.

Clearly, Singapore’s unique configuration of historical experience, instruction, institutional arrangements and cultural beliefs has produced an exceptionally effective and successful system. But its uniqueness also renders its portability limited.

And:

…teachers only make limited use of checking a student’s prior knowledge or communicating learning goals and achievement standards. In addition, while teachers monitor student learning and provide feedback and learning support to students, they largely do so in ways that focus on whether or not students know the right answer, rather than on their level of understanding.

The article, by David Hogan, is interesting throughout.

Are natural scientists smarter?

Social science professors at elite institutions are more likely to be religious and politically extreme than their counterparts in the natural sciences, argues a new paper in the Interdisciplinary Journal on Research and Religion. The reason? Natural scientists are just smarter, it says.

“There is sound evidence of a negative correlation between intelligence and religiosity and between intelligence and political extremism,” reads the paper, which examines existing data on academic scientists’ IQs by field, and on religious beliefs and political extremism among science professors in the U.S. and Britain. (An abstract of the paper is available here.) “Therefore the most probable reason behind elite social scientists being more religious than are elite physical scientists is that social scientists are less intelligent.”

The paper, written by Edward Dutton, adjunct professor of cultural anthropology at the University of Oulu, in Finland, and Richard Lynn, a retired professor of psychology from the University of Ulster, in Northern Ireland, who is known for his work on race and IQ, continues: “Intelligence is also a factor in interdisciplinary differences in political extremism, [with] physicists, who have high IQs, being among the least extreme and lower-IQ scholars being among the most extreme.”

There is more here, though I will note, without wishing to offend anyone in particular, that just about all of us are capable of being spectacularly dense, natural scientists included and these authors too.  I believe these correlations, to the extent they are true, are better explained by sociological factors than by IQ.  In the United States for instance various brands of humanities professors are in fact remarkably secular and I take this to be a stamp of a particular kind of affiliation to (and against) other social groups, not a sign of IQ in either direction.  Note also that political extremism has to select against low IQ at some margins, if only because the extreme doctrine involves a complicated ideological apparatus of some sort rather than just “folk morality.”

By the way, here is Dutton’s earlier 2010 piece “Why did Jesus Go To Oxford University?” (pdf), which suggests the smarter and more creative students are more likely to have evangelical religious experience.

What I’ve been reading

1. Larry Siedentop, Inventing the Individual: The Origins of Western Liberalism.  The author argues that Christianity is a fundamental moral revolution which later made liberalism possible.  Maybe so, and this book is an OK enough introduction to that idea, but I did not myself learn much new from it.  It is out now in the UK, but it is not clear when it is being published in the U.S.

2. Richard Marshall, Philosophy at 3 a.m.: Questions and Answers with 25 Top Philosophers.  They are all smart, most of the interviews are fun, and pretty early on in this book you realize they are not going to get anywhere at all.

3. Scott Phillips, University of America: A Non-Linear Blueprint for Higher Education in the 21st Century.  A new and interesting short eBook on reforming higher education:

The University of America is a conceptual model that dramatically reduces the barriers to entry for a college education for adult Americans. It proposes three structural changes to increase access to and significantly reduce the cost of getting a degree. They are:

• Create a ubiquitous, low-cost national testing infrastructure that is far more pervasive and accessible than what is available today;

• Divide content into fact-based vs. content-based modules with 75 percent of a standard 4-year degree being comprised of fact-based modules available for entirely independent learning and accreditation; and

• Require intensive residences for undergraduate degree completion.

4. Lila Abu-Lughod, Do Muslim Women Need Saving?  Parts of this book were interesting, but I think if I were a Muslim women I would have found it offensive, including the title.  What if someone wrote a book “Does Tyler Cowen Need Saving?” and decided “no.”  But then multiply by more than 500 million.  I can think of better questions to ask.  The author means well but the provocative title is a representation of what is in essence a re-colonialising the object of study.  Here is another, very different review of the work, indicative of how far we stand from having a good discourse on such matters.

And arrived in my pile:

5. Alen Mattich, Killing Pilgrim, Euro noir, but written by a financial journalist.

“If Obamacare reduces labor supply, will it raise wages?”

That is Greg Mankiw’s post title, Greg writes:

In a couple of recent articles written by smart economists, I have read the following claim: CBO says the incentives in the Affordable Care Act will reduce labor supply. If it does, then real wages will increase.

That sounds like reasonable, textbook economics. But I don’t think it is true. The problem is that the logic is entirely partial equilibrium. It is holding everything else constant. But that is surely not right in the long run. Lower wages mean lower income, which means lower saving, which means lower investment, which means a lower capital stock, which means lower productivity, which means lower labor demand.

Perhaps the easiest way to think about this issue is in the context of a Solow growth model. In the Solow model, the steady-state real wage is a function of technology, the saving rate, and the population growth rate. If labor supply per person suddenly falls by, say, 2 percent and stays there, the real wage will rise initially, but it will eventually return to its former level. Steady-state income per person falls by the full 2 percent.

One effect that might occur is a change in the composition of labor income. If the Act reduces labor supply primarily among the low-skilled, while not having that effect among the highly-skilled, then we might get a change in the relative wages of skilled and unskilled. But an overall increase in real wages seems unlikely.

In an increasing returns to scale model, of course, this problem becomes worse.

Swiss immigration controls are directed against those who are like the Swiss

There is in Switzerland the issue of low-skilled immigration.  But arguably more problematic — from a Swiss point of view — is precisely the immigration which feels most Swiss, such as the professionals who come from Germany.  Note that since the late 1990s Germans are the single largest group of immigrants coming to CH (pdf).  The Swiss, of course, fear the European Union juggernaut as a mechanism for taking away their sovereignty.  Having more Kosovars or more Sri Lankans in the country doesn’t strengthen the hand of the EU much.  Those are not EU groups anyway, non-EU migration into Switzerland has been falling for a long time, and besides those groups can be excluded from mainstream Swiss society with relative ease, if need be.  But German arrivals?  Many would gladly see Switzerland join the EU and at the very least it feels like the decision is no longer under the control of the Swiss themselves.  Furthermore they are not so different from German-speaking Swiss and they (sometimes) eat similar kinds of cheese.  And because they are so often highly skilled, and can fit in so well, they cannot easily be excluded (pdf) from positions of influence in Swiss society.

In other words, sometimes it is the skilled arrivals the domestic citizenry wishes to limit in numbers.  And you can see that the share of skilled immigrants has been increasing in Switzerland for years.  Here are some recent percentages.

This study by Sandro Favre (pdf) shows that a major wage impact of EU migration into Switzerland has been to cut down high wages at the top of the Swiss wage distribution.  So there is an economic motive too, and it is not the same story that is sometimes told about say southern California and Mexican competition with low-skilled American workers.

I, too, am a small country of sorts and I am glad I do not have thirty identical twins running around out there, competing against me or speaking on my behalf at meetings.  I would wish to exile them to other planets.

Persian Gulf fact of the day

Roughly one in five people has diabetes in the Persian Gulf region, according to doctors and the International Diabetes Federation, or IDF, and three countries—Kuwait, Saudi Arabia and Qatar—are in the top 10 nations globally for the highest prevalence of the disease. The other seven places are all taken by tiny islands in the Pacific Ocean, while Bahrain sits at position 12, the United Arab Emirates is 15 and Egypt is at 17.

There is more here.