EclectEcon

Richard Posner deserves the next Nobel Prize in Economics

Please consider using these links if you are ordering from Amazon:    Amazon.com,   Amazon.ca,   Amazon.uk

Signs of Alcohol Poisoning

For those of you who might be concerned over the holidays (or any other time, for that matter, h/t JJ), here is a list that might help determine whether a person is "merry" or dangerously drunk.

Typical signs of alcohol poisoning include:

• Confusion
• Can't be woken from sleep
• Cold, clammy or blue skin
• Vomiting
• Convulsions
• Slow breathing and/or irregular breathing (less than eight breaths a minute)
• Having a low body temperature (hypothermia)

The list of "do's" and "don'ts" might be especially helpful.

Do:

• Try to keep them awake
• Try to keep them in a sitting or standing position if vomiting
• Put them into the recovery position with their head to the side if they insist on lying down
• Keep them warm to prevent hypothermia
• Give them water if they can drink it
• Stay with them. Even if they were initially responsive, the alcohol levels in their blood may be so high they will continue to get drunk whilst asleep, and may become unconscious.

Do not:

• Give them coffee to sober them up. It doesn't work and will cause more dehydration
• Leave them to sleep it off. They could inhale their own vomit and die
• Allow them to lie on their back. They may vomit. Put them on their side, and use pillows or cushions to stop them rolling back
• Walk them up and down to try to sober them up
• Put them under a cold shower
• Allow them to drink any more alcohol

Some Interesting Comparisons between China and the US

A few of my favourites from this list:

• China's economy grew 7 times as fast as America's over the past decade (316% growth vs. 43%) [and yet:]
• China's GDP per capita is the 91st-lowest in the world, below Bosnia & Herzegovina.
• The world's biggest mall is in China... but it has been 99% empty since 2005.

A Weird Exam Answer Asking for a Math Proof

At The University of Regina, students from several different courses are often administered exams at the same time in large gymnasia. I was monitoring one of these exams and happened to notice this answer on a math exam from a student who finished quite early:

If I Had to Choose Which to Keep, the Penny or OISE,...

If I had to choose whether to keep the penny or OISE, I would vote to keep the penny and get rid of OISE. Here's just one reason. From the introduction to that item:

The following is an analysis of all of the 36 currently internet-available theses completed at the SESE department of OISE, University of Toronto.

In half the cases, these theses appear to be so marred by political jargon and political preconceptions that they should never have been accepted into the corpus in which they are in fact found, viz. a collection of putative contributions to knowledge -- theses officially certified by the University of Toronto.

 

 

On Mathematics in Economics

Even though I have made considerable use of mathematics in some of my work, for the most part I share Bryan Caplan's views on the overuse of mathematics in economics:

[C]ritics' complaints about excessive math are justified, and not reducible to opposition to "bringing models face to face with empirical evidence."  Especially in economic theory, math rarely "brings clarity."  Math more often leads to neglect of important facts and confusion about irrelevant mathematical issues.  ...  Almost all of the advances of the last thirty years that [Coyle] hails are empirical, and almost none of these empirics even hinge on technical econometrics.  Yet during these decades, economist theorists enjoyed great status and published vast numbers of "top" papers that Coyle damns with faint praise.  Even worse, these theorists have emotionally taxed more empirically-minded economists with soul-crushing coursework and faux incredulity (e.g. "I can't take your claim seriously without a formal model").

... I have no principled objection to mathematical econ.  I just think that we should evaluate mathematical econ empirically - and admit that in hindsight, the vast majority of it fails the cost-benefit test. [emphasis added]. While many complaints about econ are unjustified, this one is, and it's time to clean house.

I think the blogosphere is helping to move the profession in the direction favoured by Professor Caplan. Increasingly, some of the best economics is being done for more general audiences in economics blogs. Not many institutions (universities, econ grad schools) will have the required moxie to move in this direction, too. But over time, people will be evaluating econ grad schools by additional criteria beyond just the number of publications in top math-theory journals. This type of competition in the field will work slowly, but it will be better for future generations.

Eliminate the Penny: Appearances on CBC Radio Wednesday morning

It looks as if the Senate Finance Committee of Canada will accept my recommendation (among others) and urge the gubmnt to eliminate the penny. As news of the Senate's recommendation has hit the newswires, I have, of course, been swamped with calls from the media given that I was once referred to as "the godfather of the ban-the-penny movement."

As a result, tomorrow (Wednesday) morning I will be interviewed by at least ten different CBC radio stations between 5am and 8am Central Standard Time. Unfortunately, I don't know which ones will be interviewing me at which times.

WikiLeaks and the Economics of Property and Information

Let's get one thing clear: WikiLeaks is not entirely about freedom of expression. It is also about publishing stolen information. It does, however, raise an interesting question about who should have what legal entitlements to do what with intercepted or stolen diplomatic communications. This point is made quite forcefully by Janet Daley in The Telegraph.

In its self-contradictory maintenance of its own untraceable operations, it [WikiLeaks] effectively declares itself to be the only agency in the world that is entitled to secrecy. Its insistence that it is somehow a voice of open and transparent “freedom of expression” is simply absurd: there is no issue here of any individual or group openly expressing an opinion that would otherwise have been suppressed. The only opinion that is implicitly conveyed by WikiLeaks’ exposures is the boringly prosaic anti-Americanism of the average Guardian comment writer.

All that WikiLeaks has done, as its name suggests, is to publish stolen documents that were purloined by a malcontent within the US defence network. As it happens, the leaked material has been almost entirely unsurprising, apart from one rather spectacular own goal in WikiLeaks terms: it turns out that a number of Gulf states have been urging the US to strike at Iran before it succeeds in producing nuclear weapons, and that the US has been resisting this pressure. This tends to undermine both the image of America as trigger-happy warmonger and the idea that the entire Muslim world is united in hatred and distrust of the Great Satan.

 There are, of course, at least two parties involved in the WikiLeaks: those who "stole" the documents and provided them to WikiLeaks; and WikiLeaks itself. WikiLeaks is probably more like a publisher than anything else and will quite possibly be protected under freedom of the press. At the same time, I'm not sure that freedom of the press protects disclosure of "official secrets"; my recollection from The Pentagon Papers escapade of 1971 is that it does in at least some instances (for example, see this); but even if it doesn't, if the only relief is injunctive, it's too late now -- the cat's already out of the bag.

Update: George Friedman of Stratfor has pretty similar views.

Macadamia Nuts: a shortage at current prices

A year or two ago I could buy good-sized packs of macadamia nuts at the local Walmart for about $5. Then I noticed last spring that the snack displays there no longer contained macadamia nut packs. I began to wonder what had happened, but didn't give it much thought. 

Now I can't find macadamia nuts anywhere in the city where I live. Finally, on the weekend, I remembered to look into what might be happening. It turns out that drought on the Big Island in Hawaii (where macadamias are grown in Hawaii) and serious drought in Australia substantially reduced the world supply of macadamia nuts. For example,

Marketing manager for Alstonville-based Agrimac Macadamias, Darren Burton, said 20 to 30 per cent of last year’s crop was lost because of bad weather. ...

“We had storms and floods. A lot was lost. The quality of the product was affected negatively by the weather, so there have been some severe financial impacts.

“We started the season with a low carry-over of kernels from the previous year. Combined with a short year, there’s now a real shortage of macadamias in the marketplace. That’s not good for our customers. It has also put upward pressure on pricing.”

A reduction in supply led to an increase in the price (as expected). What confuses me a bit, though, is why the reduction in supply means that stores in the towns where I've been living simply no longer carry macadamia nuts. I can understand that some stores might be reluctant to carry the nuts if prices were to increase up to $10/package, but I would have thought someone would opt to carry the product at a higher price. 

Gee, I guess this means there are some frictions in the price system. Who'da thunk it?

Ricardian Equivalence, Debt, and Taxes

In its purest form, Ricardian Equivalence suggests that neither tax cuts nor gubmnt spending designed to stimulate the economy will work because people will tend to save more in anticipation of having to paying higher taxes in the future. From Wikipaedia, 

In its simplest terms: governments can raise money either through taxes or by issuing bonds. Since bonds are loans, they must eventually be repaid—presumably by raising taxes in the future. The choice is therefore "tax now or tax later."

Suppose that the government finances some extra spending through deficits; i.e. it chooses to tax later. This action might suggest to taxpayers that they will have to pay higher tax in future. Taxpayers would put aside savings to pay the future tax rise; i.e. they would willingly buy the bonds issued by the government, and would reduce their current consumption to do so. The effect on aggregate demand would be the same as if the government had chosen to tax now.

Or maybe it is easier to see with this [h/t Jack]:

Polygamy? in Canada?

John Chilton (The Emirates Economist) has a recent posting about polygamy in Canada.

 These are societies that close themselves off from the world and construct codes and practices that perpetuate polygyny. Like teenage boys being exiled from the community. Child brides. Denying girls an education that would make leaving more attractive. Parents, particularly fathers, determining who their daughters will marry. A system of institutions, values, brainwashing and beliefs is created to keep women in check. Add to this that men are physically stronger. It's curious of course that women in these cult societies very often defend them. I won't pretend to understand that, but we do know that many of us have a tendency to defend what we have lived especially if we have been taught that there is evil outside your community and your community is under siege.

For my own musings on the topic several years ago, see this, where I added

As a male who would likely have risked being left without a partner in a society that permitted polygamy, I am understandably opposed to polygamy out of pure self-interest. It strikes me that in a society of free choice, permitting polygamy only increases the demand for women as potential marriage partners, thus making women better off relative to men, in comparison with the situation under monogamy [a point also discussed by John Chilton]. ...

For more on the economics of polygamy, see this chapter in David Friedman's Price Theory text, especially the first portion of the chapter. 

Bribes and Efficiency

It has at times been argued by various people that bribes actually make economies work more efficiently. For example, I once met a person in Chicago (admittedly, back in the late 1960s) who claimed that it cost less per square foot to build a building there than in any other major city (implying that bribes greased the bureaucratic gears). 

I've never been convinced by the argument. Bribes involve uncertainty and risk and hence dramatically increase transaction costs. And these higher transaction costs impede efficient exchange and economic growth. 

Here is some indicative evidence supporting this proposition (from The Economist).

It isn't just the corruption and the bribes that are a problem, however. It is the unholy alliance between a bribe-based system and a rigid and complex bureaucracy that impedes growth and development. The only reason (okay, an important reason) bribery is deemed efficient and useful by so many people is that bureaus have been created that erect numerous roadblocks to efficient exchange, and bribes are useful for circumventing these roadblocks.

If so, then one way to promote economic growth is to reduce the size and obstructiveness (if that's a word) of the bureaus that create the incentives for bribery in the first place. But, of course, that is easier said than done. The bureaucrats in these agencies have likely paid for the right to extract bribes from other people; these bureaucrats have a very strong vested interest in maintaining a bribe-based economy. Breaking down these vested interests will not be easy.

Apparently India and Mexico are moving in the direction of reducing the importance of paying bribes in their economies, and it will be interesting to see if they can persist in these developments. At the same time, I will be quite surprised if the incidence of bribe-paying doesn't increase in Venezuela. After all gubmnt price controls are another major reason for the use of bribes.

How LONG Will It Be Until Canada Eliminates the Penny?

What's the hold-up, folks? I have not seen a single article that talks about wanting to save the penny. And yet, there seems to be some sort of hold up [h/t Scoop]. My guess is that the delay comes from bureaucrats at the Royal Mint.

Canada’s upper chamber has decided whether the penny should be scrapped or saved.

But Senator Joseph Day, who chairs the finance committee, won't reveal their recommendation until it has been tabled in the Senate.

Ultimately, the Senate's recommendation on whether to kill the one-cent coin or not will go to Finance Minister Jim Flaherty, who asked senators to study its fate.

Flaherty said Wednesday he "appreciated" the senators' "in-depth" study and looks forward "to reviewing the Committee’s findings shortly."

Day said their recommendation will be made public within a week or so, "definitely" before the Christmas break.

"We thought this would take no time at all, but there are a lot of very complicated issues in this and a lot of different interest groups," Day said about why it's taking so long. [emphasis added]

"I never like doing anything where we don't consider all the factors and we have. We've done that."

What's so complicated? Just announce that as of a month from now the mint will no longer produce any one-cent coins. 

For more, follow the links here.

Tell Us What You REALLY Think about the Evolution of Macroeconomics, Arnold

One of my favourite economics bloggers/writers is Arnold Kling. In a recent piece about rational expectations and macroeconomics, he writes,

I have never believed in modeling the business cycle as determined by expectation errors in forecasting overall inflation. Hence, I never thought that it mattered so much whether inflation forecasts were rational or not. Hence, I never thought that rational expectations macro modeling was an avenue worth pursuing.

The academic market made a different decision. In fact, I would argue that the market emerged from in-breeding of fewer than a dozen economists in the late 1970's. Folks like Dornbusch and Fischer at MIT, Lucas at Chicago, Sargent and Wallace at Minnesota. The in-breeding created a line of deformed, intellectually stunted macroeconomists. They could think in terms of Euler equations, but they could not begin to understand an actual economy. [emphasis added]

Recall my .sig line from the early 1990s.

The new macroeconomics: Rationalized expectorations and overlapping generalizations.

Interestingly, Stanley Fischer as head of Israel's central bank, has seemed to understand an actual economy pretty well. It wasn't so much the leaders of this wave in macro but their disciples who had the problems. Not all that unlike 1950s Keynesian macro.

 

Two Distressing Items about Israel

From the Daily alert, news that mainstream arab news media claim the forest fires in northern Israel are God's wrath; and reports that many in Egypt have claimed the shark attacks in Gaza were part of a Mossad plot.

• Hamas Leader: Allah Is Scourging Israelis with Fire
  The fires ravaging northern Israel are God's expression of anger towards Israelis, Hamas Prime Minister Ismail Haniyeh told Reuters on Sunday. "These are plagues from God," said Haniyeh. "Allah is punishing them."  (Jerusalem Post)
      See also Arabs Rejoiced over Israeli Forest Fire - Khaled Abu Toameh
  It is sad and abhorrent to see how many Arabs rejoiced over the big forest fire in northern Israel, calling it a "divine punishment" for Israelis and wishing that the blaze would spread to destroy all Jews. The messages of hate are the result of decades of incitement against Israel and Jews in the Arab media and mosques throughout the Arab and Islamic world. The comments serve as a reminder that many people in the Arab and Islamic countries still have not come to terms with Israel's right to exist.
      What is troubling is that these repugnant comments were posted on Web sites of major Arab media outlets that are not necessarily associated with radical Islam. Al-Arabiya and Asharq Al-Awsat are owned by members of the Saudi royal family which has been frequently targeted by Muslim fundamentalist groups like al-Qaeda. (Hudson Institute-New York)
• Egyptian Expert Shoots Down Conspiracy Theory Blaming Israel for Shark Attacks - Yasmine Fathi
  Mahmoud Hanafy, a professor of marine biology at the Suez Canal University, said it is "sad" that Egyptian national TV helped perpetuate the theory that last week's shark attacks at Sharm el-Sheikh were part of an Israeli conspiracy. On Sunday, Gen. Abdel-Fadeel Shosha, the governor of South Sinai, phoned a TV program to say that it is possible that Israeli intelligence was behind the incidents.
      Hanafy said the Oceanic White Tip shark, blamed for the attacks, does indeed exist in Egypt's waters. He added, "It is sad that they made a person whose only knowledge of sharks comes from the movie "Jaws" go on national TV to propagate this mumbo-jumbo."  (Al-Ahram-Egypt) 

I can imagine that some of our local conspiracy theorists would believe the sharks were trained by Mossad.

Macro Policy Confusions

Let's see (based on this; also see John Lott's take, and Phil Miller's posting):

• cut taxes and increase transfer payments to increase aggregate demand and reduce unemployment (to move the economy up and leftward along a given short-run Phillips curve). Both John Lott and Phil are skeptical about the efficacy of this policy.
• at the same time keep in place policies that encourage unemployed persons to search longer, thus shifting the long-run Phillips curve to the right. 

This combination is same as the one we experienced in the late 1960s and early 1970s. If the policy trends continue, I'm guessing the US could very well be in for another bout of Stagflation in the next year or two.

Christmas Card from EclectEcon

Regular readers of EclectEcon eagrely await the annual posting of my rude Christmas card (language warning), a posting that has become a cherished tradition. It has reached the point where I would not want to let anyone down, so here it is once more.

Holiday Eating Tips

Jack sent this around, with a note that it goes around every year. Nevertheless here it is, along with my comments.

1.  Avoid carrot sticks. Anyone who puts carrots on a holiday buffet table knows nothing of the Holiday  spirit. In fact, if you see carrots, leave immediately.. Go next door, where they're serving rum balls. [EE: I'm delighted to see veggie trays when I go to holiday parties, and I especially like carrot sticks. Last weekend, when I was in Edmonton for the Grey Cup festivities, I bought a veggie tray with carrots and celery to keep on hand.]

2. Drink as much eggnog as you can. And quickly. It's rare.. You cannot find it any other time of year but now. So drink up! Who cares that it has 10,000 calories in every sip? It's not as if you're going to turn into an eggnog-alcoholic or something. It's a treat.. Enjoy it. Have one for me. Have two. It's later than you think. It's Christmas! [EE: I love eggnog, but generally it is too thick and too sweet for my tastes. I mix it half-and-half, not with rum, but with 1% milk].

3. If something comes with gravy, use it. That's the whole point of gravy. Gravy does not stand alone. Pour it on. Make a volcano out of your mashed potatoes. Fill it with gravy. Eat the volcano. Repeat. [EE: I'm not a big gravy fanatic, but I like it when the meat might otherwise be pretty dry.]

4. As for mashed potatoes, always ask if they're made with skim milk or whole milk. If it's skim, pass. Why bother? It's like buying a sports car with an automatic transmission. [EE: This seems like a poor analogy to me. If I ever bought a sports car, I'd want it to have automatic transmission. Also, I like slightly lumpy mashed potatoes.]

5. Do not have a snack before going to a party in an effort to control your eating. The whole point of going to a  Holiday  party is to eat other people's food for free. Lots of it. Hello? [EE: I agree with this advice but for a different reason. I don't want to insult the host/hostess by not eating and loving whatever they serve].

6. Under no circumstances should you exercise between now and New Year's. You can do that in January when you have nothing else to do. This is the time for long naps, which you'll need after circling the buffet table while carrying a 10-pound plate of food and that vat of eggnog. [EE: this is just plain dumb. You should exercise more so you have less guilt (and more capacity) when loading up on all those calories. Better to do it contemporaneously than after you outgrow your clothes in January.]

7. If you come across something really good at a buffet table, like frosted Christmas cookies in the shape and size of Santa, position yourself near them and don't budge. Have as many as you can before becoming the center of attention. They're like a beautiful pair of shoes. If you leave them behind, you're never going to see them again. [EE: someone must have been watching me hover over the cookie plate.]

8. Same for pies. Apple, Pumpkin, Mincemeat. Have a slice of each. Or if you don't like mincemeat, have two apples and one pumpkin. Always have three. When else do you get to have more than one dessert? Labor Day? [EE: ditto here. And let me add that it is okay to take one of each dessert, sample it, and leave it unfinished if you would rather double up on others].

9. Did someone mention fruitcake? Granted, it's loaded with the mandatory celebratory calories, but avoid it at all cost. I mean, have some standards. [EE: I completely agree. I have never had fruitcake that was even tolerable.]

10. One final tip: If you don't feel terrible when you leave the party or get up from the table, you haven't been paying attention. Re-read tips; start over, but hurry, January is just around the corner. [EE: this point is just plain stupid. I see no reason to continue eating if the expected marginal utility (I hope you saw THAT coming) is negative. And we've had enough eating experience that surely our expectations should be reasonably realistic. Also, eating too much at one party can seriously affect your ability to enjoy the next one, so the goal is to maximize the net present value of expected future utility --- i.e. don't be a short-term maximizer!]

US Liquidity and China's Accumulation of Dollars

As the Fed creates more money, the Chinese gubmnt seems to be soaking up the extra liquidity by holding more US dollars. This phenomenon is a far cry from the liquidity trap that Keynes, Hicks, Hanson, Ackley, et al used to describe. As John Lott points out, the US is trying to cause a bit of inflation to stimulate their economy, but China has been thwarting these attempts by simultaneously increasing its demand for US dollars (to hold).

It may seem like a pretty good deal for Americans. We give the Chinese pieces of paper (or their equivalent) and they give us goods. But no one, not even the Chinese, are [sic] going to be willing to do this forever. It would be great for us if they would let this go on, but at some point just piling up dollars and giving us products is going to be too costly for them. And when they dump all those dollars, the real problem starts. All that pent up inflation is going to be released. 

 Indeed, the process may be starting. Just this last Wednesday, the Chinese and Russians announced that they would quit using the dollar for trade between their two countries.

 The U.S. is playing a high stakes game of chicken. Will the Chinese want to hoard more dollars as the U.S. government prints up nearly a trillion more dollars? Money that will just sit around and not even earn interest? The irony is that despite the Federal Reserve and the Obama administration attacking the Chinese propping up the value of the dollar, we must hope that they continue doing just that. If the Chinese start dumping dollars, not only will the $880 billion come back, but so might all the other money that the Chinese have been absorbing over the years.

Short the US dollar. And I certainly would not want to hold any long-term bonds denominated in US dollars. What astounds me is that more people don't have similar expectations. If they did, US interest rates would be creeping upward. 

 

University Admissions and Discrimination

Fortunately, Canada pretty much has merit-based admissions for university. Sure, they are flawed in many ways, but there is less reliance on family or other connections, ethnic background, etc. when admission decisions are made. As a result, there is a tendency for the brightest students to be the ones who attend university, especially the upper-tier universities. 

It turns out that a "disproportionate" number of the university students are Asian. This fact, reported earlier by Maclean's magazine, means little-to-nothing to me. But I guess lots of people in Canada took Maclean's to task for pointing out this fact, arguing that Maclean's was being racist. I don't see it that way.

Neither does Tony Keller: 

A 2005 Statistics Canada study found that 54% of visible minority Canadians aged 24 to 26 reported having attended university, versus just 38% of the non-visible minority population.

Two weeks ago, Maclean’s magazine published an article headlined, “Too Asian?” about the racial makeup of Canada’s university campuses. U of T was singled out as a campus that has become very Asian. The article was universally panned, the favored reaction being accusing Maclean’s of racism.

Ah, racism: once you pull out that card, the discussion is over. And that’s too bad because the Maclean’s article, for all its faults, actually contained some new information, on a topic that anyone who spends five minutes on a Canadian university campus notices: the rapidly changing racial makeup of the student body. Everybody notices but nobody notices, because if you do, you risk being called a racist. Maclean’s, to it’s credit, took notice.

Unfortunately, it drew exactly the wrong conclusions. It discovered a success story — a uniquely Canadian success story — and described it as a problem.

A large proportion of immigrants are motivated and smart and industrious enough that they attend university (more than w.a.s.p. Canadians). As Keller says, this sounds like a success story for the immigrants, not a problem. The only question is why fewer non-immigrants attend university.

Disclosure: one of my relatives is an immigrant from Asia.

Marching in the Grey Cup Parade on Saturday, November 27th

I gather that I'll be playing drums in the Grey Cup parade (Global national tv, noon Edmonton time). From what I can tell, the parade route isn't all that long, but the drum carriages are fairly heavy and who knows how my toe will be tomorrow:

I must say, I did this at 7am on Friday. We'd awakened at 4:45am for an appearance on Canada AM at 6am. Then we did another gig at the same venue. And then I stubbed my toe on the way up the stairs.

This will be fun .... or at least interesting.

Update: I'm glad the parade route wasn't any longer than it was (maybe 2 miles or so), but it was satisfying, as someone who is clearly an over-the-hill senior citizen, to be one of the drummers who lasted the entire parade route and played most of the time. I was pretty crappy on the drum cadence used by the Roughrider pep band, but I made up for that by being loud.

After just two blocks, my arms were already sore. I'd forgotten about those muscles, and I'd forgotten what it's like to play drums really loud with fat sticks. And by the time we reached the end of the route, my back was killing me.  And THEN we had to walk another 6-7 blocks to get to our bus. Whew! 

I was exhausted, and I slept on the bus between gigs the rest of the afternoon. And now, 24 hours later, my arms are still sore.