Tyler Cowen's Blog, page 315

I am sorry, but this is absurd

Charles Manski, a well-known professor of economics at Northwestern, writes:

The anti-tax rhetoric evident in much lay discussion of public policy draws considerable support from the prevalent negative language of professional economic discourse. Economists regularly write about the ‘inefficiency’, ‘deadweight loss’, and ‘distortion’ of income taxation.

In fact he wishes to abolish those concepts for their anti-governmental implications and work only with social welfare functions directly.

That’s one easy way to limit deadweight loss from policies, namely take it out of your analytical framework.  The reality is that it is still the simplest and best way to explain why very high rates of taxation — as noted say by George Harrison or Bjorn Borg — are not such a good idea.

Manski also ignores that a belief in deadweight loss is fully compatible with the view that government spending may bring economic benefits.  In fact you often cannot understand the benefits of (some) government spending without first grasping the deadweight loss concept.

And even if you think Arrow’s theorem is overrated in its importance, as I do, working with social welfare functions isn’t exactly a recipe for wringing normative preconceptions out of your economics.  And any plausible social welfare function is going to pick up some concept of deadweight loss and stick it back into the calculations.  How about a social welfare function which says “minimize deadweight loss”, which is what you often find in Mirrlees?

It’s called microeconomics.  Yet Manski complains that “…prominent applied public economists continue to take the theory quite seriously.”  You’ll even find the notion of deadweight loss in some Principles books, believe it or not.  Must we derive a new social welfare function every time we wish to do partial equilibrium analysis, say of a tax on a single (small) commodity?

And get this example of mood affiliation:

The Feldstein article and similar research on deadweight loss appear predestined to make income taxation look bad. The research aims to measure the social cost of the income tax relative to the utterly implausible alternative of a lump-sum tax. It focuses attention entirely on the social cost of financing government spending, with no regard to the potential social benefits.

Contra Manski, I say it is fine to study the tax side of the equation while leaving the benefits (and costs) of expenditures to other researchers.  (By the way, Manski’s supposed culprit, Martin Feldstein, first made his name studying how to measure the benefits of public expenditure.)  All his point really boils down to is to note that in a second best comparison, optimum deadweight loss generally will be positive, as noted by Lipsey and Lancaster long ago in their 1955-56 ReStud piece, not to mention Frank Ramsey.

Manski wishes to cite the work of James Mirrlees for inspiration, but in fact Mirrlees has been a firm believer in the deadweight loss of taxation concept, and in comparing economies to hypothetical first best situations, as illustrated by for instance by these pieces.

I can thank Manski for reminding me that Tyrone, my evil twin, has been begging me for a chance to blog again at Marginal Revolution…

ZMP workers in Japan, boredom and banishment rooms

We have already covered this topic, but the NYT has a new and interesting article on it.  Excerpt:

Shusaku Tani is employed at the Sony plant here, but he doesn’t really work.

For more than two years, he has come to a small room, taken a seat and then passed the time reading newspapers, browsing the Web and poring over engineering textbooks from his college days. He files a report on his activities at the end of each day.

Sony, Mr. Tani’s employer of 32 years, consigned him to this room because they can’t get rid of him. Sony had eliminated his position at the Sony Sendai Technology Center, which in better times produced magnetic tapes for videos and cassettes. But Mr. Tani, 51, refused to take an early retirement offer from Sony in late 2010 — his prerogative under Japanese labor law.

So there he sits in what is called the “chasing-out room.” He spends his days there, with about 40 other holdouts.

For the pointer I thank Alex.

Glasses that solve colorblindness

…I heard from another company that makes color-enhancing glasses — this time, specifically for red-green colorblind folks. The company’s called EnChroma, and the EnChroma Cx sunglasses are a heartbeat-skipping $600 a pair.

“Our lenses are specifically designed to address color blindness,” the company wrote to me, “and utilize a 100+ layer dielectric coating we engineered for this precise purpose by keeping the physiology of the eyes of colorblind people in mind.”

That is from David Pogue, there is more here.  For the pointer I thank Samir Varma.

Assorted links

1. On Guatemalan market-liberal telecom laws.

2. The gulf in tastes between movie critics and movie audiences.

3. Small business lending isn’t what it used to be.

4. How often do you examine your testicles, Mr. Professor?  Penn State wishes to know, and will fine you if you don’t tell them.

5. Gary Marcus on what AI still cannot do.

6. Emily Oster on pregnancy.

Drone markets in everything?

From Michael Rosenwald:

Drones designed to do the bidding of ordinary people can be bought online for $300 or less. They are often no larger than hubcaps, with tiny propellers that buzz the devices hundreds of feet into the air. But these flying machines are much more sophisticated than your average remote-controlled airplane: They can fly autonomously, find locations via GPS, return home with the push of button, and carry high-definition cameras to record flight.

Besides wedding stunts, personal drones have been used for all kinds of high-minded purposes — helping farmers map their crops, monitoring wildfires in remote areas, locating poachers in Africa. One local drone user is recording his son’s athletic prowess at a bird’s angle, potentially for recruiting videos.

The reference to the wedding stunt is this:

Kevin Good thought there was an 80 percent chance he could successfully deliver his brother’s wedding rings with a tiny drone.

“The other 20 percent is that it could go crashing into the bride’s mother’s face,” the Bethesda cinematographer somewhat jokingly told his brother.

It worked.  One problem is this:

…not every flier is virtuous. There are videos on YouTube of people arming drones with paintball guns. In one video — apparently a well-done hoax to promote a new video game — a man appears to fire a machine gun attached to a small drone and steer the device into an abandoned car to blow it up.

Privacy and civil rights activists worry about neighbors spying on each other and law enforcement agencies’ use of drones for surveillance or, potentially, to pepper-spray protesters.

And the law?:

Right now, drones operate under the same rules as radio-controlled planes. Commercial use is not legal…

I can promise you further updates on this story.

The Effect of Sexual Activity on Wages

Kevin Lewis refers me to the following (pdf), which is the abstract of a paper by Nick Drydakis:

The Effect of Sexual Activity on Wages

The purpose of this study is to estimate whether sexual activity is associated with wages, and also to estimate potential interactions between individuals’ characteristics, wages and sexual activity. The central hypothesis behind this research is that sexual activity, like health indicators and mental well-being, may be thought of as part of an individual’s set of productive traits that affect wages. Using two stage estimations we examine the relationship between adult sexual activity and wages. We estimate that there is a monotonic relationship between the frequency of sexual activity and wage returns, whilst the returns to sexual activity are higher for those between 26 and 50 years of age. In addition, heterosexuals’ sexual activity does not seem to provide higher or lower wage returns than that of homosexuals, but wages are higher for those health-impaired employees who are sexually active. Over-identification tests, robustness checks, falsification tests, as well as, decomposition analysis and sample selection modelling enhance the study’s strength. Contemporary social analysis suggests that health, cognitive and non-cognitive skills and personality are important factors that affect the wage level. Sexual activity may also be of interest to social scientists, since sexual activity is considered to be a barometer for health, quality of life, well-being and happiness. The paper adds to the literature on the importance of unobserved characteristics in determining labour market outcomes.

I wonder what an MRU video devoted to this topic would look like.

Assorted links

1. MIE: bunny cafes.  And the complete guide to getting into an economics Ph.d. program.

2. The hard life of celebrity elephants.

3. To what extent do macro conditions predict health care spending?

4. The psychology of accepting GMO foods.:”…the experimenters discovered that if a product was perceived as more necessary—butter, for instance, as opposed to fish fingers—people were more willing to accept genetically modified alternatives.”

5. Efficiency wages for military contractors are gone, by Charles Stross.

6. Henry on the Nick Turse book on Vietnam.

How meritocratic are white Californians?

Specifically, he [Frank L. Samson] found, in a survey of white California adults, they generally favor admissions policies that place a high priority on high school grade-point averages and standardized test scores. But when these white people are focused on the success of Asian-American students, their views change.

The white adults in the survey were also divided into two groups. Half were simply asked to assign the importance they thought various criteria should have in the admissions system of the University of California. The other half received a different prompt, one that noted that Asian Americans make up more than twice as many undergraduates proportionally in the UC system as they do in the population of the state.

When informed of that fact, the white adults favor a reduced role for grade and test scores in admissions — apparently based on high achievement levels by Asian-American applicants. (Nationally, Asian average total scores on the three parts of the SAT best white average scores by 1,641 to 1,578 this year.)

When asked about leadership as an admissions criterion, white ranking of the measure went up in importance when respondents were informed of the Asian success in University of California admissions.

There is more here.  The jstor link to the research is here.

Computers which magnify our prejudices

As AI spreads, this will become an increasingly important and controversial issue:

For one British university, what began as a time-saving exercise ended in disgrace when a computer model set up to streamline its admissions process exposed – and then exacerbated – gender and racial discrimination.

As detailed here in the British Medical Journal, staff at St George’s Hospital Medical School decided to write an algorithm that would automate the first round of its admissions process. The formulae used historical patterns in the characteristics of candidates whose applications were traditionally rejected to filter out new candidates whose profiles matched those of the least successful applicants.

By 1979 the list of candidates selected by the algorithms was a 90-95% match for those chosen by the selection panel, and in 1982 it was decided that the whole initial stage of the admissions process would be handled by the model. Candidates were assigned a score without their applications having passed a single human pair of eyes, and this score was used to determine whether or not they would be interviewed.

Quite aside from the obvious concerns that a student would have upon finding out a computer was rejecting their application, a more disturbing discovery was made. The admissions data that was used to define the model’s outputs showed bias against females and people with non-European-looking names.

The truth was discovered by two professors at St George’s, and the university co-operated fully with an inquiry by the Commission for Racial Equality, both taking steps to ensure the same would not happen again and contacting applicants who had been unfairly screened out, in some cases even offering them a place.

There is more here, and I thank the excellent Mark Thorson for the pointer.

Is “outside” overrated?

People are going to read this as a kind of #Slatepitch but as I live my life I see that despite all the talk about how great it is to be outside, people don’t really put their money where their mouth is. Property owners are much more likely to build an addition to their house (thereby increasing the inside/outside ratio of their property) when they’re feeling flush than to orchestrate a subtraction in order to get more open space. Even in places like Southern California where there’s really great weather all the time, the landscape is covered with buildings and people spend a very large sum of their income on purchasing or renting inside space in which to live over and above the inside space in which they work.

Here is much more, from Matt Yglesias, who explains why “inside” has “crucial advantages.”  For a useful discussion on this matter I thank also Claire Hill.