Tyler Cowen's Blog, page 440

How to think about makers and takers

Here is my latest NYT column, on how we ought to be thinking about the issue of makers vs. takers.  Excerpt:

EVERYONE FEELS ENTITLED People tend to think that they have justice on their side, whether it comes to making or taking.

For example, millions of homeowners have spent hundreds of thousands of dollars on the premise that the tax deduction for mortgages will be continued. If they support a continuation of that deduction they hardly feel like brigands, even though a bipartisan consensus of economists doubts the efficiency of this tax break.

As years and decades pass, recipients of this deduction and other benefits start to see them as deeply and richly deserved. Furthermore, almost all of us reap one or more of these benefits, so few individuals are consistently opposed to all government transfers.

It becomes difficult for a politician to articulate exactly what is wrong with this arrangement when the audience itself is in on the game and perhaps does not want to hear about its own takings.

Mark Thoma comments.

You also should read the new (short) book out by Nicholas Eberstadt, A Nation of Takers: America’s Entitlement Epidemic, which came to my attention quite recently.

Long profile of Glenn Hubbard

From the NYT, you can read it here.  Excerpt:

 “Did you know, for instance, that he has a brother who is a country music star?” asked Kevin A. Hassett, a friend and scholar at the conservative American Enterprise Institute.

Hubbard’s younger brother, Gregg — known to fans as Hobie — is a member of Sawyer Brown, a country rock band that gained fame via “Star Search,” a sort of precursor to “American Idol.”

“He’s always had a great sense of humor,” says Gregg Hubbard, speaking by telephone before a flight to a concert. He recounts celebrating his 40th birthday in New York City and sharing a gift he had just been given, a Razor scooter, with his brother. “We were with my older nephew,” he says, “and we took turns, the three of us, riding up and down Broadway on a scooter.”

Stock bubbles, Gangnam style?

Matt Yglesias reports:

Why is South Korean semiconductor manufacturer DI seeing its share prices surge? Is it a key supplier for the forthcoming iPad Mini? An integral element of Samsung’s next great smartphone? Nope. It’s surging because its chairman and main shareholder is Park Won-ho, father of Park Jae-sang, a.k.a. PSY, a.k.a. the “Gangnam Style” guy.

Why a family link to a viral video sensation should help this company is difficult to say, but apparently this kind of theme stock surge is a not-uncommon phenomenon in the Korean equity markets. South Korea, I would note, is one of the most recently affluent countries around so it’s simply possible that the Koreans markets haven’t had enough “learning” to avoid fast-rising momentum bubbles.

Assorted links

1. The bra of the future?  (safe for work)

2. Findings about paper rejections, or why you should love your critics.

3. Good post on the Dunning-Krueger effect.

4. How penicillin reshaped sexuality.

5. Sabina Knight on Mo Yan (short podcast).

6. How Google lobbies for self-driving cars.

Small knaps to a better scraper: the economics of stone sharpening in Neanderthals

That title is suggested to me by Sam Penrose, who sends this article along:

“A fundamental assumption is that the most important factor in lithic techno-economics is the amount of cutting edge you can extract from your raw material. So making thinner flakes with more edge overall is a more economic use of stone resources. Dibble took a very large scale approach to the archaeological record, and suggests an overarching pattern of increasing economy through time. Early Stone Age flakes from the African Oldowan are variable in size, but have average levels of economy, measured by edge : mass. By the Middle Palaeolithic, techno-economics have become improved, but interestingly through two approaches. Prepared core technology, or the Levallois technique, permits control over the flakes produced, and, depending on the style used, can result in either wide/long and thin flakes.”

Seoul notes

It is remarkable how well everything works here, even relative to expectations.  The economic ascendancy of South Korea has been more rapid than that of Japan, and for a larger group of people than Hong Kong or Singapore.  The initial level of education was much lower than in Japan.  The Korean social miracle is no less impressive than the Korean economic miracle.

By the way, can you explain the South and North in a single unified theory of culture and regimes?

French-Korean bakeries are extremely common here.

The Samsung Museum is of higher quality than the National Museum, including for patrimony pieces not just Warhol and Koons.

My hotel toilet is complicated and I am afraid to press the one button which simply says “Enema.”

I saw the two main Korean presidential candidates “debate,” both of them using communitarian redistributionist rhetoric with a rather flat delivery, preceded by and followed by a bow.  Toward the end one of them endorsed the work of Malcolm Gladwell, in front of Gladwell.

I am pleased to have spent one minute inside North Korea, with Alex, guarded by five South Korean martial arts experts and one U.S. soldier.

The question I hear most often is what I think of Gangnam style and the video.  The second is whether I am a Christian.

There are so many coffee shops here.  But why?

South Koreans have now dominated the game of Go for about fifteen years.

Sentences to ponder (the IMF on fiscal policy and multipliers)

For the countries where the full data is available on the IMF website, the results lose statistical significance if Greece and Germany are excluded.

Moreover, the IMF results are presented as general but are limited to the specific time period chosen. The 2010 forecasts of deficits are not good predictors of errors in growth forecasts for 2010 or 2011 when the years are analysed individually. Its 2011 forecasts are not good predictors of anything.

Economists contacted by the FT worried about the robustness of the techniques used. Jonathan Portes, director of the UK’s National Institute of Economic and Social Research, worried that cross-country studies with small samples never prove anything, even though he strongly believes multipliers are large.

I suspect that FT blog post is not one which will be shouted by many from the rooftops.  Multiple hat tips are expressed here.

Good sentences

From Matt Yglesias:

…it’s simply not the case that contracting out lets you do away with the unelected panel of experts that Obama needs to make his price controls work. The premium support model of Medicare has at its heart a panel of experts determining the value of each person’s voucher since absent demographic and health status adjustment the whole system will be ruined by adverse selection.

Here are some related points from Ezra Klein, including a discussion of Paul Ryan.

Assorted links

1. Mises on the sustainability of monetary expansion, and Brink Lindsey on the parent gap.

2. How Dirk Nowitzki was trained by his mentor, and can a shooter be too open?  Please note that links are not endorsements.

3. Problems of water policy in Haiti.

4. Barry Eichengreen on Korea.

5. Finally a new critique of Ayn Rand, and interview with Jennifer Roback Morse.

Handicapping the 2012 Nobel

This article mentions Alvin Roth, Bob Shiller, Richard Thaler, Robert Barro, Lars Hansen, Anthony Atkinson, Angus Deaton, Jean Tirole, Stephen Ross, and William Nordhaus.

I’ll predict a triple prize to Shiller, Thaler, and Eugene Fama.  Fama clearly deserves it, can’t win it solo (too strongly EMH in an age of financial crisis), but can be bundled with two people from behavioral finance and irrational exuberance theories.

Barro will get it, but not in an election year.  Hansen and Ross are good picks but I don’t see them getting it before Fama does.  Paul Romer deserves mention but this is probably not his year because of politics in Honduras.

William Baumol cannot be ruled out.  A neat idea — but unlikely — is Martin Feldstein and Joseph Newhouse for their pioneering work in health care economics, plus for Feldstein there is public finance too.

Tirole and Nordhaus are deserving perennials, with various bundlings (e.g., Oliver Hart, or for Nordhaus other names in environmental).  I hope the Krueger-Tullock idea is not dead but I would bet against it, same with Armen Alchian and Albert Hirschman.  Dale Jorgensen has a shot.

I believe Duflo and Banerjee (and possibly Michael Kremer too, maybe even Robert Townsend) will get it sooner than people are expecting, though not this year as they just presented in Stockholm.  Next year I think.

Not once in the past have I been right about this.

Addendum: Here is the talk from Northwestern.