Tyler Cowen's Blog, page 371

How anti-gun is Hollywood and the entertainment industry?

Here is from today’s news:

The sweeping gun control measure signed by Gov. Andrew M. Cuomo and hailed by Democratic leaders has a surprising critic: Hollywood.

Officials in the movie and television industry say the new laws could prevent them from using the lifelike assault weapons and high-capacity magazines that they have employed in shows like “Law & Order: Special Victims Unit” and films like “The Dark Knight Rises.”

Twenty-seven pilots, television and feature projects, including programs like “Blue Bloods” and “Person of Interest,” are now in production in New York State using assault weapons and high-capacity magazines, according to the Motion Picture Association of America. Industry workers say that they need to use real weapons for verisimilitude, that it would be impractical to try to manufacture fake weapons that could fire blanks, and that the entertainment industry should not be penalized accidentally by a law intended as a response to mass shootings.

One source added:

“Weapons are part of our history as a culture as humans,” said Ryder Washburn, vice president of the Specialists, a leading supplier of firearms for productions that is based in Manhattan. “To tell stories, you need them.”

The follow-up study on Medicaid coverage in Oregon

Here is some overview coverage from Annie Lowrey, an important issue of course with some striking results.  Here is coverage from Sarah Kliff.  Here is commentary from Justin Wolfers, and here.  After the R&R saga, I say it’s time for someone to stand up and admit “We have some egg on our face with this one.”

Addendum: Reading more carefully through the quotations from Finkelstein and Holahan in the Lowrey piece, I find it amazing, and I suppose even embarrassing, what those commentators are claiming as a positive result.  Of course it is worth comparing the program to simply giving people the cash.

Why the housing market imploded

In a recent paper, Christopher L. Foote, Kristopher S. Gerardi, and Paul S. Willen report (pdf):

This paper presents 12 facts about the mortgage market. The authors argue that the facts refute the popular story that the crisis resulted from financial industry insiders deceiving uninformed mortgage borrowers and investors. Instead, they argue that borrowers and investors made decisions that were rational and logical given their ex post overly optimistic beliefs about house prices. The authors then show that neither institutional features of the mortgage market nor financial innovations are any more likely to explain those distorted beliefs than they are to explain the Dutch tulip bubble 400 years ago. Economists should acknowledge the limits of our understanding of asset price bubbles and design policies accordingly.

Scott Sumner summarizes the twelve points here:

Fact 1:  Resets of adjustable rate mortgages did not cause the foreclosure crisis.

Fact 2:  No mortgage was “designed to fail.”

Fact 3:  There was little innovation in mortgage markets in the 2000s.

Fact 4:  Government policy toward the mortgage market did not change much from 1990 to 2005.

Fact 5:  The originate-to-distribute model was not new.

Fact 6:  MBSs, CDOs, and other “complex financial products” had been widely used for decades.

Fact 7:  Mortgage investors had lots of information.

Fact 8:  Investors understood the risks.

Fact 9:  Investors were optimistic about home prices.

Fact 10:  Mortgage market insiders were the biggest losers.

Fact 11:  Mortgage market outsiders were the biggest winners.

Fact 12:  Top-rated bonds backed by mortgages did not turn out to be “toxic.” Top-rated bonds in collateralized debt obligations (CDOs) did.

Addendum: There was earlier Boston Globe coverage here.

Assorted links

1. Another look at the STEM job market.

2. What’s it like to live in the middle of nowhere?

3. In China the license plates can cost more than the car.

4. Markets in everything (or does this defeat the whole purpose of cross-dressing?)

5. What is the Philadelphia accent, and how is it evolving?

6. Travel brochure graphics.

What is the most perfectly average place in the United States and why?

That is a question from Annie Lowrey, who recognizes its (supposed) “extreme folly.”

I’ve thought about this for years, and always Knoxville, Tennessee comes to mind.  Knoxville is big enough to be something, but not a truly large metropolis, being only the third largest city in Tennessee.  It is educated enough to avoid some of the more stereotypical features of the South and indeed it was recently named the #2 “reading city” in America.  It has elements of the South and of Appalachia, two major regions of the country.  Eleven percent of Knox County adults are “binge drinkers.”  It is not one of “12 American boomtowns.”

What else in America might be typical?

Here are nominations of Muncie, Indiana and Kansas City, MO.

Ethnically speaking, Wichita Falls is close to the national norm.

According to this article, high poverty and unemployment are wrecking the averageness of Peoria, Illinois.

Louisville is not a bad pick.

Obviously we must rule out NY, CA, TX, and probably any coastal state as well.  I can see the virtues of selecting a Kansas City suburb, which picks up elements of both the South and the Midwest, but I fear that is in a way too typical.  The most  average place in the United States is in fact just a bit off and has some flavor of its own and choosing Knoxville picks up that too.

Addendum: Matt Yglesias selects Jacksonville, Florida.  Kevin Drum cites marketers in favor of Albany, NY.

The Value of a Community College

Technical degree holders from [a] state’s community colleges often earn more their first year out than those who studied the same field at a four-year university.

Take graduates in health professions from Dyersburg State Community College. They not only finish two years earlier than their counterparts at the University of Tennessee at Knoxville, but they also earn $5,300 more, on average, in their first year after graduation.

In Virginia, graduates with technical degrees from community colleges make $20,000 more in the first year after college than do graduates in several fields who get bachelor’s degrees. Yet high-school seniors are regularly told that community colleges are for students who can’t hack it on a four-year campus.

…Colleges don’t like being measured by the earnings of their graduates. Defining value in such a narrow way, they argue, obscures the broader benefits of higher education. They point out that first-year salaries often have no bearing on earnings later in life. It’s true that those with bachelor’s degrees typically earn more over a lifetime than those with a two-year degree, but that’s little consolation to those who are discouraged from going to community colleges and end up dropping out of a four-year school without a degree.

… As the researchers themselves admit, the data would be more useful if they included more than the first-year salaries of those graduates who remain in state to work. But improving these tools has been slow going, largely because the higher-education lobby has fought federal efforts to create a “unit-record” system that could work across state lines to link students’ educational and employment histories.

From Jay Selingo writing at the WSJ, he has a book coming out, College Unbound, that looks promising.

Hat tip: Daniel Lippman.

“Men’s suit that turns transparent when wearer is lying”

Solve for the pooling and separating equilibria.

How many women would want their male dates to wear such a suit?  Or could the raw truth be a mix of too boring, too unimpressive, and too offensive?

As for future plans:

Now the studio hopes to apply similar technology to create a business suit for men that monitors their vitals to discern whether they are lying.

For the pointer I thank Michael Rosenwald.

*My Struggle*, volume two

It arrives at my house today, by Karl O. Knausgaard.  Last year I read volume one and found it to be the equal of the great continental novels of the early part of the 20th century.  Here is Rachel Cusk at The Guardian on volume two; “…this deserves to be called perhaps the most significant literary enterprise of our times.”  That is not an exaggeration.  Here is related coverage from Literary Saloon.

Assorted links

1. Fast foods you can’t eat in America.

2. “Find what you love and let it kill you” (not an endorsement, by the way).

3. Why is Medicare shutting down a successful pilot program?

4. The wildlife that is Fairfax (and why I don’t want to move to Brooklyn).

5. “How game theory will stop Iranian nukes,” by Ariel Rubinstein.

6. Buchanan on Frank Knight.

7. Scott Sumner on British stagnation.

Why so little demand for protectionism?

Paul Krugman asks a very good question, namely why the political pressures for protectionism in the midst of recessions and depressions have been so weak.  While I do not disagree with his points (which cite institutions such as the WTO and EU), I am surprised by what he leaves out.  Here is a summary of Spence and Hlatshwayo on U.S. labor markets:

Looking back on the period from 1990 to 2008, the co-authors found that 97 percent of the 27.3 million U.S. jobs created were in the non-tradable sector. (The five largest non-tradable sectors, mentioned above, contributed 65 percent of the 1990-2008 jobs growth.) “The employment creation occurred mostly in non-tradable sectors — where we don’t have international competition,” Spence said.

In other words, with more jobs in the service sector, we are practicing increased “protectionism by any other name,” often with the law and with regulation but in many cases cultural barriers and lack of trade networks will suffice.  Trade costs for many services are in any case high and thus the constituency for protectionism or further protectionism is not quite there.  The workers who might have supported tariff-based or quota-based protectionism thirty-five years ago already have lost their jobs to foreign trade and they or their descendents have moved to more heavily protected service sectors.  As we should recall from the literature on the gravity equation, explicit tariffs are only a small part of the actual barriers to trade.

A second issue is the where the actual burden of foreign competition is falling, given a much higher degree of globalization.  The Mexicans are worried about Chinese competition, but they are not mainly worried about Chinese competition pulling Mexican consumers away from Mexican products (chili peppers are one exception here).  Mostly they are worried that Chinese competition has taken away many of Mexico’s export markets elsewhere, and putting tariffs on Chinese goods coming into Mexico won’t stop that.