Tyler Cowen's Blog, page 357

*Borgen*, season one

He is a market-oriented professor of economics who talks about Milton Friedman to his young Danish students.  She is — suddenly — Prime Minister of Denmark and leader of a moderate left party, but not actually prepared to wield power.  The regime is proportional representation and maintenance of the fragile coalition is all-important.  Her younger child wets his pants while watching TV and they schedule Tuesdays and Saturdays for sex, in vain.  Some media outlets maximize profit, whereas others pursue personal and political agendas.  People who have slept together in the past cannot escape each other’s presence in the elite circles of Copenhagen.  The median voter occasionally surfaces too.

If you are looking for a new “intelligent TV show” to watch, this is my nomination.  I don’t like this as much as my all-time favorite shows, but if you are only going to watch twenty good TV shows in your lifetime, this should be one of them.  You don’t have to care about politics, much less Danish politics, but if you do that will make it all the more intriguing.

You can buy Season one here, and season two is coming out soon.

Assorted links

1. The fate of published articles, when resubmitted to the same journals.

2. New results on how cattle align.

3. The Chinese are building a city in Belarus.

4. Where the atheists are.

5. Congestion on Everest, including dead bodies.

6. Pranab Bardhan reviews recent books on development economics.

7. A yet much cheaper version of a driverless car.

Kidney Conscription in Iran

Al Roth points us to this story in Farsi about Iran’s plan to exempt kidney donors from military service. Google Translate reports:

 Donate one of your kidneys to be exempted from military service

Acting Human Resources department Stadkl Armed Forces exemptions from military service the soldiers announced the donor organ. According to ISNA, General Moussa Kamali on donor exemption from military service, said the donor organ to make it happen efficiency, We’ll exempt him from military service. According to him, for example, people who donate one of his kidneys has been the inclusion of medical waivers are exempt from military service. Stadkl Armed Forces Acting Human Resources department stating Srfdashtn donation card member, was not the reason for exemption from military service, said those who donate their organ, even during military service are exempt from military service.

No doubt some people will find this unjust. Indeed it is but certainly less unjust than conscription without such an option.

Toward a model of the therapist

In working with neurotics, the therapist must always express a desire for patients to continue, even if he or she feels that these patients have completed their work.  Such patients will break off when their own desire to move on has become strong enough and determined enough.

…This obviously implies that the analyst is an actor or actress who plays a part which does not necessarily convey his or her “true feelings.”…The analyst may find a patient unpleasant and annoying, but of what use is it to let the patient know this?  The patient may very well react to an expression of the analyst’s antipathy by leaving analysis altogether, or by trying to make him- or herself pleasant and interesting to the analyst, censoring certain thoughts and feelings which he or she thinks might annoy the analyst, instead of getting down to true analytic work.  Counterproductive reactions to say the least!  The analyst must maintain a position of desire — desire for the patient to talk, dream, fantasize, associate, and interpret — regardless of any dislike he or she may have for the patient.

That is from Bruce Fink’s often quite interesting A Clinical Introduction to Lacanian Psychoanalysis Theory and Technique, which I suppose also doubles as management advice.

By the way, here is today’s (closely related) David Brooks column.  Alex passes along this link.

The GMU/UVa wage disparity and the signalling model of education

It’s a well-known fact — well-known around GMU that is — that GMU graduates earn higher average salaries than do UVA grads (direct link here), that is for four year undergrads in their first year of employment.

It’s not just that UVa is in decline, or that some of them end up richer later in life.  Or others may use their wealthier parents to live in Williamsburg, Brooklyn and avoid direct employment.  A major reason for the wage discrepancy is simply that a disproportionate chunk of GMU students are likely to get jobs in the relatively high-paying Washington, D.C. area.

OK, so how does this relate to the broader ongoing debate over the signaling theory of education and wages?

It is widely accepted that UVa is a more exclusive school than GMU by the usual standards.  Yet here we see labor markets “seeing through” those credentials, and paying more to the GMU graduates.  In other words, labor markets are seeing that GMU students are, on average, “less exclusive by origin but will have a higher marginal product very quickly.”

The signaling model, in its simplest, most stripped down form, assumes that employers cannot judge the marginal products of individual new hires but instead pay them according to their credentials.  Yet here we have a case where employers seem quite willing to make a judgment about marginal product and indeed that is a judgment which contradicts data on exclusivity of academic origins.  Once you postulate that employers are willing to make estimates of individual marginal products which differ from the rankings that might be given by “raw ability,” the signaling model is  less applicable.  I don’t want to claim that the wages converge exactly on marginal products, but the credentials clearly are just one factor of many.  Employer judgments of expected marginal products are not dominated by credentials, and you can imagine that after having a worker for a year or two the credentials are even less important as a means of judging prospective marginal product.

Another way to put this point is that the speed of employer learning is in fact fairly rapid, and some of it happens before the job even starts.

The virtual therapist

The virtual therapist sits in a big armchair, shuffling slightly and blinking naturally, apparently waiting for me to get comfortable in front of the screen.

“Hi, I’m Ellie,” she says. “Thanks for coming in today.”

She laughs when I say I find her a little bit creepy, and then goes straight into questions about where I’m from and where I studied.

“I’m not a therapist, but I’m here to learn about people and would love to learn about you,” she asks. “Is that OK?”

Ellie’s voice is soft and calming, and as her questions grow more and more personal I quickly slip into answering as if there were a real person in the room rather than a computer-generated image.

…With every answer I’m being watched and studied in minute detail by a simple gaming sensor and a webcam.

How I smile, which direction I look, the tone of my voice, and my body language are all being precisely recorded and analysed by the computer system, which then tells Ellie how best to interact with me.

Right now there are two assistants guiding the avatar, in essence standing behind a screen, but that will not always be the case:

Real people come in to answer Ellie’s questions every day as part of the research, and the computer is gradually learning how to react in every situation.

It is being taught how to be human, and to respond as a doctor would to the patients’ cues.

Soon Ellie will be able to go it alone.

The full article is here, and for the pointer I thank Michelle Dawson.

Assorted links

1. The growing importance of mall kiosks.

2. MIE: ugly Christmas sweaters.

3. David Warsh on all the recent hullaballoo.

4. Will the Chinese experiment with full convertibility into the New Zealand dollar?

5. Noted law professor leaves academic to do acupuncture, and profile of David Graeber and his anarchism.

6. A note on self-defeating austerity.  I say if you engage in “austerity” today and your fiscal situation responds fine in the short run, the austerity was probably, fiscally speaking, an OK thing to do.  If you have some festering problems seventeen years from now, I would consider blaming the decisions, or lack of decisions, which get made in the interim.  If anything the utter OKness of the short run effects means a government has slack to deal with the longer run; this is an ongoing decision tree.  By relying so heavily on an difficult to observe, difficult to causally trace yet somehow carved in stone long run, this argument is looking more and more like the old Laffer Curve.

Titling of Property

The NYTimes has an excellent piece on Greece’s broken property system:

In this age of satellite imagery, digital records and the instantaneous exchange of information, most of Greece’s land transaction records are still handwritten in ledgers, logged in by last names. No lot numbers. No clarity on boundaries or zoning. No obvious way to tell whether two people, or 10, have registered ownership of the same property.

As Greece tries to claw its way out of an economic crisis of historic proportions, one that has left 60 percent of young people without jobs, many experts cite the lack of a proper land registry as one of the biggest impediments to progress. It scares off foreign investors; makes it hard for the state to privatize its assets, as it has promised to do in exchange for bailout money; and makes it virtually impossible to collect property taxes.

… less than 7 percent of the country has been properly mapped, officials say. Experts say that even the Balkan states, recovering from years of Communism and civil war, are far ahead of Greece when it comes to land registries attached to zoning maps — an approach developed by the Romans and in wide use in much of the developed world since the 1800s.

Here from our course on development economics at MRUniversity is our video which covers the theory and empirical research on titling from Peru to Palau:

The lobbyists themselves state the “Tullock paradox”

According to statistics United Republic assembled, the prescription drug industry spent $116 million lobbying for legislation to prevent Medicare from bargaining down drug prices — legislation that enabled drug companies to make an additional $90 billion annually. That amounts to an extraordinary 77,500 percent return on investment. Oil companies, in turn, had a return on investment of 5,900 percent, and multinational companies, 22,000 percent….

For example, the Carmen Group, a Washington lobbying firm, boasted on its Web site that for every dollar it collected in fees, clients got $100 in benefits.

I enjoyed the ROI visual presented here.  Of course the Carmen Group needs to explain why it is not raising its prices and the companies need to explain why they do not spend more.  Presumably the rate of return on additional lobbying expenditure is relatively low.

One part of the Tullock puzzle of high upfront but low marginal returns to lobbying may be answered by the article:

I asked a prominent Democratic lobbyist with just over $3 million in annual billings — who requested anonymity to avoid alienating his clients — about the difference between trying to win legislation and trying to block it.

“It’s significantly easier to block and impede,” he said.

Once you have blocked, you have blocked, and “more blocked” doesn’t necessarily make you better off, so you can end up at a discontinuity point.  This also may explain why the forces seeking to push new laws do not spend more.  Spending more, to try to get your way, may induce more offsetting investment from the “blockers,” who have access to a cheaper technology, so to speak.  Still, if they have a fixed cost for getting the blocking activity up and running at all, you may spend some small amount in the first place, enough to have influence but again with the knowledge that their blocking abilities put a discontinuity in the returns function.

The article, with much more useful information, is here, by Thomas Edsall.  Here are a few earlier MR posts on the Tullock paradox.

Addendum: Karl Smith comments.

Very good sentences

There is simply no tradition of radical bank resolution in Europe. European bank supervisors are national operators by temperament, not international referees. They see their job as colluding with their national banking sectors to protect them against foreign competition. When a crisis occurs, they let the next economic recovery take care of the problem, rather than resolving it by reducing banking capacity. While I do believe that a banking union constitutes an important reform in the long run, it is very naive to think that the newly appointed bank supervisors are going to resolve the European banking sector with a determination they never displayed in their capacity as national supervisors.

This leaves us with a bank resolution strategy – if you want to call it that – that begins with an inadequate bank recapitalisation, on the basis of dubious stress tests and asset quality reviews, and is followed by further piecemeal steps in later years as the shortcomings of the strategy become more evident. All this will be accompanied by regulatory forbearance. We are already seeing this process at work in Spain.

Leaving it to the next recovery to take care of the problem will not work this time because the credit crunch and debt deflation prevent the recovery. Resolution is a precondition for growth…

That is from Wolfgang Münchau at the FT.