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Pace of Estimate Changes Exceeds Estimates

The Washington Post published an article today with the headline "Scientists: Pace of Climate Change Exceeds Estimates". From that, you might get the idea that, you know, the actual pace of climate change, say temperature, was exceeding the estimates. You'd be wrong:

CHICAGO, Feb. 14 -- The pace of global warming is likely to be much faster than recent predictions, because industrial greenhouse gas emissions have increased more quickly than expected and higher temperatures are triggering self-reinforcing feedback mechanisms in global ecosystems, scientists said Saturday.

"We are basically looking now at a future climate that's beyond anything we've considered seriously in climate model simulations," Christopher Field, founding director of the Carnegie Institution's Department of Global Ecology at Stanford University, said at the annual meeting of the American Association for the Advancement of Science.

So what they really mean is that the estimates themselves are likely to be low. Now, that may be truly bad news; I don't know much about climate science. But it isn't the case that the actual pace of climate change has exceeded anything, and headlines to the contrary are misleading and annoying.

Immigration as Stimulus

Actual, certified Thinker endorses Arthur B.-Curunir plan on fighting the recession:

Leave it to a brainy Indian to come up with the cheapest and surest way to stimulate our economy: immigration.

“All you need to do is grant visas to two million Indians, Chinese and Koreans,” said Shekhar Gupta, editor of The Indian Express newspaper. “We will buy up all the subprime homes. We will work 18 hours a day to pay for them. We will immediately improve your savings rate — no Indian bank today has more than 2 percent nonperforming loans because not paying your mortgage is considered shameful here. And we will start new companies to create our own jobs and jobs for more Americans.”

Better Cross-country Comparisons Please!

Canadaphile libertarian Will Wilkinson pointed to a piece by Fareed Zakaria arguing Canadian policies have handled the financial crisis better than America. The piece is interesting and worth a read, but I wanted to highlight this part:

Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize.

I don't doubt that the Canadian banking sector is doing better than America's banks. But is the country "thriving"? To my knowledge, they haven't released GDP statistics from the last quarter, but predictions are not optimistic:

In the worst year-over-year performance since August 1991, the economy shrank 0.8 percent compared with November 2007. The Canadian dollar strengthened slightly after the data

Economists, surprised by the swift deterioration from a 0.1 percent decline in October, now expect the fourth-quarter contraction of close to 3 percent. That compares with the Bank of Canada's latest projection of a 2.3 percent decline.

So, roughly a 3% (annualized, I'm assuming) decline in the fourth quarter. The advanced estimates (always subject to revision) are the U.S. declined 3.8%. Now, I'm strongly considered with economic growth, and 1% differences over time matter enormously. But it's absurd to claim that a 3.8% decline is a new Great Depression and a global catastrophe, while a 3% decline is "thriving".

This may seem like needless nitpicking, or defensive nationalism, but it isn't. I'd like nothing better for Canada to really be thriving, as it would not only be good for them, but it would also help pull the U.S. out of recession. But it just doesn't seem to be the case, and it matters. As the U.S. begins tossing aside the failed market economy* and moving towards social democracy, it pays to see just what countries are in fact doing better than others, and why. There will be some great empirical studies that look at what factors help a country prevent or weather banking crises such as the current troubles. Just asserting, sans evidence, that the U.S. is doing terrible compared to other countries isn't sufficient.

[*] Everyone here knows this problem wasn't caused by a free market, but at this point, that fight is almost unwinnable.

A Hidden Benefit of Recessions

The reduction in state tax revenue from the recession might, just might, force the government to consider cutting back on imprisoning non-violent drug offenders, if only to save money. From the Washington Post:

Under the proposal being drafted by Senate leaders from both parties, Virginia would expand its use of home monitoring and make it easier for nonviolent offenders to be released after they complete drug treatment programs.

The state would then close one or two prisons, which would free up at least $50 million to help address a $3 billion budget shortfall.

The Senate plan, which is expected to be finalized this week, expands Gov. Timothy M. Kaine's earlier cost-cutting proposal to allow some prison officials to release nonviolent inmates 90 days before the end of their sentences.

It's a start, although it remains to be seen whether this proposal will pass, since, as David Albo says of the House Republicans, "They want to release drug dealers, and none of us are willing to release drug dealers." David Albo, Virginia residents might recall, is the buffoon who views the traffic code as a way to drum up business for his law firm, so maybe he shouldn't be the go-to guy on law and order issues.

This Blog Post is Brought to You by Walmart

From the New Geography blog, I see that San Francisco is considering corporate sponsorship of the Golden Gate bridge:

Now, I think this is an excellent source of revenue, certainly preferable to taxation. But it raises a question in my mind: Why haven't cities resorted to selling off naming rights to highways and such as a quick source of revenue? I certainly wouldn't care if I drove on the Pepsico Expressway or the Dan Ryan, and if it meant Chicago could build some decent roads for a change or lower the 10%+ sales taxes, who wouldn't be for it?

I proposed this to someone once, and his objection was that companies wouldn't want to be associated with the negatives, with news reports of "Traffic was backed up for two hours after a family of four was killed in an accident on the Walmart Freeway." But I don't buy this explanation. Politicians seem to love having their name adorn roads and don't think of the "negative" associations. I don't see why it should be different for corporations, nor do I see why Chicago should think it wise to tie up a potential "asset", the naming rights to a freeway, worth millions to honor Eisenhower or Kennedy.

So what's the deal? Why are corporate naming rights so accepted for sports facilities (often owned by the city), but not for highways?

Free Markets and Moral Character

The Templeton Foundation recently commissioned a group of thinkers to answer the question, "Does the Free Market Erode Moral Character?" I've read a good number of the entries (some I guessed weren't worth the time), and the series as a whole is pretty interesting. I wanted to highlight Kay Hymowitz's response. She putatively argued that it does, and the front part of her article is a jeremiad against all things modern, from the car to the television. But towards the end, she gets much more interesting:

In the United States, indicators of juvenile moral health, like rates of violence and promiscuity and rebellious attitudes toward adults, have declined in recent decades even as the electronic media have increased the market's reach.
[. . . ]
The relative moral health of the young has also been bolstered, it must be said, by the free market's relentless encouragement of self-discipline. To succeed in today's knowledge economy, young people understand that they must excel at school. Despite the temptations of consumerism, middle-class and aspiring immigrant children grow up knowing that education is crucial to maintaining or improving their status and that competition in the knowledge economy is keen. In an earlier day, children imbued with the Protestant ethic did their chores and minded their p's and q's. Today's kids go to cram schools and carry 40-pound backpacks.

I think this is precisely correct. It's an old (and correct) libertarian argument that markets discourage discrimination through the use of impersonal exchange. What maybe has been understated, though, is the extent to which capitalism builds moral virtues. Deidre McCloskey has written extensively on this (I haven't read it yet myself though), and I think it's absolutely true. Building a society of hard-working, honest citizens is made easier by the market, not harder.

What I wish the article had focused more on is this assertion:

The free market's celebration of hedonism and autonomy has had its predicted effect on those with less cultural capital – the poor and, more recently, the working class. In low-income communities, the assault on norms of self-restraint and fidelity in personal relations has undermined both the extended and the nuclear family.

I'm not so sure I agree, but it's provocative at least. I think it's very arguable that changing "traditional" mores has been a net negative for the lower class. But what I would say is that the poor are also the most insulated from the market economy. If we want to improve the lot of the poor, we need them to be integrated into the market system that she herself argues has done so well to improve the moral character of the middle classes, to say nothing about what it has done for the material standard of living.

Annoyed with Economics Textbooks

Once upon a time, the Carter administration wanted to reduce gasoline usage in the United States. Their plan was to put in place a gasoline tax and rebate the money to the consumer in a lump sum. Would this plan have (1) lessened the U.S.'s use of gasoline, and (2) made consumers better off?

It's pretty easy (especially if you've taken a microeconomics class or two) to see that the answer is (1) yes, and (2) no. Here (on page 3) is the graph (I can't figure out how to upload images) that makes this clear. But intuitively, it makes perfect sense that making a good more expensive will reduce its usage and that the government can't improve on the consumption decision of a consumer by spending and rebating the same money.

Why do I bring this up? This weekend, I was grading the exams from an intermediate micro class I'm TAing. The students are quite good, but a large number of them kept saying that the plan made consumers equally well off. This is clearly not the case: After the tax-and-rebate plan is enacted, the consumer is on a lower indifference curve, and thus worse off. (Some even said the consumer was equally well off while reproducing the correct graph.)

And yet, when I went and looked at the class handout on which the question was based (from a different textbook than we normally use), I can completely see why my students were mislead. The handout (correctly) bashes the critics of the plan who said there would be "no effect", since there is a substitution effect. But here's all it says about welfare:

In the end, the Carter administration's tax-and-rebate proposal was never implemented, largely because of the objections of critics who lacked the economic knowledge to understand it. And as a result, the United States remains dangerously dependent on foreign oil more than 25 years after Carter left office.

That's it. Even leaving aside the issue of whether energy independence makes sense or is as chimerical a goal as my being booze-independent of Binny's Beverage Depot, surely a complete discussion would note the consumer being worse off. Perhaps a rant is necessary in my next section.

Expanding the Draft?

I'm a touch conflicted about the latest from Obama:

Even as the U.S. confronts two long wars, neither Sen. John McCain nor Sen. Barack Obama believes the country should take the politically perilous step of reviving the military draft.

But the two presidential candidates disagree on a key foundation of any future draft: Mr. Obama supports a requirement for both men and women to register with the Selective Service, while Mr. McCain doesn't think women should have to register.

Now, I'm opposed to the draft and to Selective Service registration. But I cannot deny that a part of me has always been perturbed at the injustice of males being required to register while women do not. So in that very limited sense, I admire this, even though it's an expansion of a loathsome program.

The real question is why on Earth Obama would bring this up. I think the answer can be found here:

"And I think that if women are registered for service -- not necessarily in combat roles, and I don't agree with the draft -- I think it will help to send a message to my two daughters that they've got obligations to this great country as well as boys do."

That (like much of political talk) is sufficiently vague as to admit multiple interpretations. I fear, though, that female draft registration is a backdoor way to promote universal service by decoupling the connection between the draft and military service. And that frightens me.

Question for Bailout Opponents

Suppose the bailout doesn't pass, in any form. What information would you need for you to conclude that you were more likely wrong than right in opposing it, at least in the sense of the economy being worse than it otherwise needed to be? (Setting aside purely moral libertarian concerns.) I.e., if GDP declines 25%, are you still sure that it would have been worse with a bailout? 99%? Is your rejection of the bailout falsifiable?

(I'm not supporting the bailout, by the way. But as someone who is continually, and increasingly, awestruck by the degree of certainty people express in their political beliefs, not to mention their predictions about the future state of the economy, I'm genuinely curious about what results would cause them to re-examine their opinions.)

Shout it from the Rooftops

September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.
[. . .]
Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits.
[. . .]
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Who Cares About Shoes?

Will Wilkinson bemoans the United States slipping in the Economic Freedom of the World rankings, with Canada moving ahead of us. He asks

Is it now possible to even half-credibly make the case that the United States, in the age of warrantless wiretaps and the shoeless airport security line, is a freer country than Canadia?

What is it with shoes at the airport that makes people so angry? I admit to hating wearing shoes and so maybe I just like the chance to take them off. But people (not just Will) act like it's the road to totalitarianism to be barefoot for two minutes. Is he really going to say that's a greater imposition on freedom than, say, Canada's Human Rights Commission? Personally, I'll take having to remove my shoes over being dragged in front of tribunals for "hate speech" any day of the week.

And, as for his first point, I don't want to defend warrentless wiretapping. I should point out, though, that the United States is hardly unique in this regard.

But I am reminded of this classic post from Stuart Buck:

Amidst all the civil libertarian furor over the Patriot Act I and II, no one has yet commented on the "citizen reporting" provision. By this provision, every adult in America will be required to file a yearly report on themselves, and send it to a new government office that is charged with tracking every person's whereabouts, living circumstances, etc. The yearly report required from each adult must contain:

* Name
* current address
* name of spouse (if any)
* names of children (if any)
* Social Security numbers for all the above
* title of job
* address of employer
* amount of income
* any significant expenditures during the year
* information about bank accounts or any investments
* information about loans, mortgages, and other obligations
* information about what charities the adult supports with his or her money
* information about medical bills
* Potentially much more.

It's pretty clear to me that having to file this information with the IRS every year is a vastly greater imposition on privacy than the theoretical concern that someday there is a minuscule chance that some government official may listen to my father complaining about the weather during our phone chats. And yet it gets almost zero attention. Why?

There's a $1000 Leaving Town Tax

This isn't really big news, since I seriously doubt even in California such a brainless referendum would ever pass. Nevertheless, here's the latest, craziest initiative proposal. The Taxprof summarizes nicely:

A California activist is trying to gather the 694,354 signatures needed to place a tax initiative on the ballot that would:

* Impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate) -- 17.5% (on all of the taxpayer's income) when income exceeds $150,000 (single)/$250,000 (joint), and an additional 17.5% (again, on all of the taxpayer's income) when income exceeds $350,000 (single)/$500,000 (joint).
* Impose a one-time 55% wealth tax on assets exceeding $20 million held by a California resident or held in California by nonresident.
* Impose an exit tax of between 36.5% to 54.3% on both income and unrealized appreciation in asset values over $5 million when a resident dies or leaves California.

The last part (hilariously named the "Hasta La Vista Tax") is the wackiest provision, promising to take half of of the assets of someone for having the temerity to leave the state.

Or at least I would think this is crazy, but maybe not. After all, onerous exit taxes are official United States policy:

In 1996, Congress tried to address a wave of tax-driven expatriation by the wealthy by requiring former citizens to file tax returns for a decade and forbidding Americans who renounced their passports for tax reasons from visiting the United States.

That's right: Leave the United States, leave behind your citizenship, and you still pay taxes for ten years. Honestly, this makes me madder than just about anything the national government does. Upset about the drug war? You're free to leave (not that many countries are more accommodating, but in principle they could be). But don't want to pay over half your income to the government? Too bad. Not even leaving the country will allow you to escape.

Two Data Points are Probably Better than One

College admissions is not an area about which I have a great deal of knowledge, and I think its importance is probably exaggerated by overanxious parents. One thing I do care about, though, is using statistics properly, and this article, concerning a recent College Board study on the efficacy of the SAT, is thus exasperating:

Barmak Nassirian is associate executive director of the American Association of Collegiate Registrars and Admissions Officers and a noted critic of the SAT. He said he views the report as unsubstantial and contends that the SAT did not change enough to make a difference in its predictive quality.

He cites the validity studies to show that high school GPA is about as predictive as the SAT itself. Using the College Board's scale of minus 1 to 1, he notes that high school GPA alone gets a 0.54 while the full SAT gets a 0.53.

This is very strange statistical practice. Mathematically, you cannot do worse using two data points (in this case, high school GPA and SAT scores) to make predictions than you can with one. It makes no sense to decide that because one correlation coefficient is lower than another, you should just toss out what is presumably useful information. How useful it is, of course, depends on correlations. Looking at the College Board report , it appears that using the SAT and GPA together give a correlation of 0.62. (Actually, this is the "adjusted R-squared". The raw results are similar.)

So even if you have the accumulated high school grades representing dozens (hundreds?) of hours of testing, the SAT still adds substantially to the ability to make accurate predictions about college grades. That doesn't mean the SAT has to be used though. Maybe there are better predictors. Maybe colleges should be looking at things other than first year grades. But saying "X predicts better than Y, so let's forget about Y" is silliness.

Maximize Totals, Not Averages

Over on his personal blog, Patri shared some thoughts about life extension, with which I agree. What I find interesting is this response in his comments:

What does more time give you? In many of your other posts you're talking about living in the now, seizing the moment, and from your seasteading, poker and fitness I would say you're doing a good job of that, but how many people can say the same?

How many people waste their time with soulless activities? And giving them more time helps them how? Creating consumers to an infinite amount or reruns?

This is a fairly common response to the prospect of extending lifespan, and it's completely bizarre to me. The line of argument seems to say that if we were no longer under the clock, as it were, of aging, we'd whittle away our lives on pointless activities and so the average quality of our lives would go down.

First of all, I'm not at all convinced this is true. We're hardwired from billions of years of evolution to act as if we're aging, and I suspect we'd carry on much the same as always, other than developing a stronger risk aversion.

But assume arguendo that it's true that the average quality "per minute of life" would decline with agelessness. The only proper response is "so what". Suppose you found out that you were going to die in exactly three years of a terminal, but painless, disease. Then it is very plausible that your "average quality" of your remaining years might be higher. You'd probably make an effort to spend more time with friends, travel to new places, and so forth. (For sure I wouldn't spend more time reading the Administrative Code of Virginia for my research assistant job.)

But nobody would wish for this diagnosis, and the reason is obvious. What we're after in life is to maximize our total enjoyment, not our average. Sure, if you know you're life will be shorter, you might make more of an effort to compress more activity into your shorter years. But virtually everyone would rather have 30 more years of routine holidays and quiet dinners with the family rather than three glorious years of "maximal living". If everyone understands this when we're talking about cutting life short, why do people suddenly forget it when we're talking about making life longer?

It really is a weird inversion of what Bryan Caplan called the "Woody Allen fallacy"

If a finite quantity of life is worthless, how can an infinite quantity be desirable? [. . .] If an infinite span of days is so great, what's stopping you from enjoying today?

But here we have someone who accepts that the marginal value of life is declining, but thinks it dips negative, the only possible explanation of why shorter lifespans should be preferred. And call me a naive optimist if you must, but I think life is pretty damn good, and I can't imagine the marginal value of another day being negative, at least so long as I'm healthy.

Our Restraint on Trade has Failed to Sufficiently Restrain Trade

Roger Goodell, commissioner of the NFL, today weighed in on the evils of market pay for newly drafted rookies:

NFL commissioner Roger Goodell said it's "ridiculous" to reward untested rookies with lucrative contracts, and wants the issue addressed in contract talks.

"There's something wrong about the system," Goodell said Friday. "The money should go to people who perform."

Goodell referred to Michigan tackle Jake Long's five-year, $57.75 million contract -- with $30 million guaranteed. Long was the first overall draft pick by the Miami Dolphins in April.

"He doesn't have to play a down in the NFL and he already has his money," Goodell said during a question-and-answer period at the end of a weeklong sports symposium at the Chautauqua Institution. "Now, with the economics where they are, the consequences if you don't evaluate that player, you can lose a significant amount of money.

This is, of course, complete nonsense. While it is true that Jake Long hasn't played in the NFL, what matters is the expected value of his future play. Goodell's statement that you lose money if you mis-evaluate a player is laughable. If Tom Brady goes down with a career ending injury tomorrow, then that puts a damper on the Patriots hopes. Sports, like life, are unpredictable. To the extent that this is especially true of rookies (and I'm not actually convinced it is for offensive tackles), then the uncertainty shows up as lower salaries. Problem solved!

If teams don't want to pay for high draft picks, they can choose not to sign them. Remember that fiasco a few years ago when Minnesota failed to get their pick in on time? Other teams were allowed to step right in and take their picks. This shows the ridiculousness of the claims made by some that high draft picks are now something teams want to avoid. If they really did want to not use their picks, they are perfectly free to not do so.

The owners have put in place a system (the reverse order draft) which decimates the bargaining power of potential players and which would be instantly ruled an illegal restraint on trade in any other industry. Having installed this laughably anti-market system, the owners want us to be sympathetic that they just can't stop themselves from paying potential franchise-saving players money, and this is bad because it's "risky".

The owners, as usual, are full of crap, and yet for some reason the sporting public continues to support these taxpayer-money-stealing, cartel-managing, lying billionaires against the athletes they all love. It's a mystery to me.