Assorted thoughts

1. In what's becoming an annual event, Alberto Contador, the current Tour de France champion, has tested positive for a banned substance. Contador blames tainted meat, which has to be the worst possible excuse out there. If he knew ex ante that the meat could trigger a positive test, it just doesn't make sense to eat it. (From a competition/drug testing perspective, not from a why-would-you-ever-eat-something-described-as-tainted-meat perspective.) If he didn't know ex ante that it could cause a false positive, what in the culinary world has changed over the last months to determine this? I'm being facetious-- nothing that I know of, anyway-- but even if it did, who's to say that it couldn't have been something else he ate? If the answer to that is "It's known that meat can have this impact," we're back to square one.

Cycling and drug scandals are a fantastic example of diminishing returns-- at this point, believe the marginal impact to cycling from additional positive rider are as close to zero as possible.

2. I get the sense that the number of people in a dining party is a function of the quality of the restaurant. I think this because every time I run down to the McDonald's near the office, it's generally pretty busy, but the single diners outnumber the groups by a healthy margin (even comparing the total number of people dining in each). When I go to a restaurant, I rarely see people dining alone. If dependent variable is simply the average/expected group size as a function of restaurant quality, I'd expect it to rise to a point then fall-- you generally don't take consistently larger groups to particularly high quality resturants. (Perhaps I'm mistaken.) If the dependent variable is simply the number of groups vs. the number of single diners, maybe that's increasing over the entire range. I'm not perusing the highest quality eateries, I'll spare you my likely incorrect assumptions.

Maybe it's because there aren't many places to sit that would accomidate a larger party? Possibly, but larger parties could still exists within the current framework at most fast food eateries.

I'm not certain if Tyler Cowen's said anything about this, but this seems right in his wheelhouse.

3. I just made it through Exile on Main Street; I'm still a bit baffled as to the critical acclaim this album continually gets. (I do understand part of that may have been drumming up interest for the recent re-release.) I think part of the reason is that the Rolling Stones is a fantastic band that wasn't particularly adept at making good albums, and people can't seem to handle that disconnect. They have to choose something as a flagship effort, and Exile seems to be it.

Los Angeles Crime Database

The L.A. Times, in conjunction with the Los Angeles Police Department and the Los Angeles County Sheriff, has developed a new real-time crime database. Check it out here. The data itself is useful, of course, but I'm curious what (if any) behavioral response will come from this. Could people make day-of decisions based on the weekly crime in potential neighborhoods they were thinking of going to, say, for dinner? If that happens, do criminals adjust and move their criminal activity so as to counter the avoidance?

When one thinks Los Angeles, one thinks (among many things) traffic. I wonder what traffic rates have to do with crime in the Los Angeles area.

Spatial folks, get after it!

Not from the Onion: Judge from Intercourse (PA) Hands out Acorns with Hidden Condoms Inside

Here is the link, no excerpt due to copyright, but I'm betting you'll click on the link.

Doctoral Programs Rankings

The National Research Council has released their rankings on 5,000 doctoral programs over 59 programs for the first time in 15 years. CHE has a useful online tool to help sort through the data here. Happy scouring!

Addendum: Here's the discipline-by-discipline data.

2010 Gus Rankings: Week 4

Here are this week's Gus Rankings. The SEC (4, including the top 3), Pac 10 (3) and Big 12 (3) are well represented in the Top 10. At the low end, Eastern Michigan has wrested control of the bottom spot.

Lowest ranked BCS team: Purdue (110)
High ranked non-BCS team: TCU (5)

2010 Gus Rankings: Week 3

Here are this week's Gus Rankings, just in time for tonight's game when Miami visits Pittsburgh. (Gus has no opinion; both teams are at #69 this week.) Bob Lawson's Auburn Tigers top the list with Texas, Arizona is third and seven teams claim the fourth sport. Look for the winner of Auburn/South Carolina to make a big jump next week.

And bringing up the rear...Ed Lopez' North Texas Mean Green.

Kill Whitey?

In Wired is a fascinating set of studies on race, politics, and "The Trolley Problem." In a classic psychology experiment, people are asked if they should flip a switch that detours a trolley away from running over five people to another rail that runs over a single person. The intention is to get at whether people are morally utilitarian or consequentialist. Other variations include pushing someone in front of the train.

The article covers research on introducing race and political leanings of the participants, with many fascinating findings. The conclusion (at least suggested by the article here) is that people adopt their moral reasoning ex-post, rather than employ it ex-ante:

So we’ll tell a child on one day, as Pizarro’s parents told him, that ends should never justify means, then explain the next day that while it was horrible to bomb Hiroshima, it was morally acceptable because it shortened the war. We act — and then cite whichever moral system fits best, the relative or the absolute.

2010 Gus Rankings: Week 2

Here are the first Gus Rankings of the 2010 season.

Of note:

- No team has two points, which is the same as last year. I think this is a fairly strong piece of evidence that teams don't want to maximize the quality of opponents early in the season, independent of what coaches or athletic directors may say. Yes, there is a factor out of your control in getting to 2 points through Week 2, but you'd expect that to wash out over multiple teams sitting at 2-0. You'd think someone would get there if enough teams tried to.

-Three teams-- Arizona State, Ball State and Indiana (Hi Justin!)-- have yet to play a FBS opponent.

- Gus has slated Eastern Michigan and UAB as the worst teams through only two weeks of games.

Blockquoting X

X = Fidel Castro, in response to a question on whether Cuba's economic system is still worth exporting to other countries:

The Cuban model doesn't even work for us anymore.

Wow. I used this video in class recently. The saddest thing: the average Cuban could not utter that same phrase without fear of state action.

Boettke links to other communist admissions.

What I'm Writing

Roger Koppl and I are currently working on a book chapter titled "Animal Spirits and Cognition in Macroeconomics." I'll post the full draft shortly. Here's a snippet on rational expectations which (at least I hope) takes aim at the typical presentation of the assumption (you know: the Phillips curve assumes expectations are unchanged; then Friedman and Phelps said that was stupid; and Lucas, building on Muth, discovered rational expectations as the logical conclusion to the argument of Friedman and Phelps--as if no one had thought of it before):

It is historically inaccurate (and, to the extent one knows otherwise, intellectually dishonest) to claim the rational expectations assumption was discovered in the 1960s with Muth. The theoretical power behind the assumption of full and complete expectations had in fact been known for some time. Among others, Hicks (1936, p. 241) had expressed the basic idea in admitting it “unrealistic to assume that an important change in data—say the introduction or extension of a public works policy—will leave expectations unchanged, even immediately.” Rational expectations was not discovered, but rather rediscovered in the 1960s because earlier theorists had explicitly rejected the assumption. In the case of Hicks, it was assumed that “there is a psychological unknown, affecting the magnitude of the impact effect” and, as such, “[w]e must not expect the most elaborate economic analysis to enable us to see very far ahead” (p. 241). Earlier economists were aware of rational expectations and, as Meacci (2009, p. 1) describes, saw the assumption primarily as “a device […] to conceal the link between the disappointment of expectations and the theory of fluctuations.” It was not a lack of knowledge that had left the assumption largely unemployed, but the feeling that it was wholly inappropriate to use in addressing a topic so intimately linked to the process of time.

The comments are open. I'd love to hear what you think.

New Data: Social Assets and Vulnerability Indicators

My fellow data lovers might be interested in this interesting range of data collected by SAVI. It is a "dynamic community information system" hosted by the Polis Center at IUPUI, and it allows you to map, compare, and store data about Central Indiana communities from a wide range of data sources.

The amount of data available is impressive, with geographic information on subsidized housing, air quality, communicable diseases, birth defects, etc. You can find a complete listing here.

IU We're All For You

That's the title of SPEA graduate and rock comedian Brian Smith. He gives a shout-out to SPEA in the video, but in a way that does not flatter our image on campus among the undergraduates. The video is funny, so even if you've never seen IU, you will probably enjoy it.

When Should the Government Exploit the Salience Bias in Taxation?

This paper is provocative enough for it to automatically appear on my reading list for doctoral public finance. By Deborah Schenk, of NYU, and titled "Exploiting the Salience Bias in Designing Taxes" but the theme is closer to the title of this post. Here is the abstract:

In making decisions, individuals rely on certain heuristics or cognitive biases. One of these is salience, which generally refers to visibility or prominence. Individuals are likely to focus on items or information that are prominent or salient and ignore those that are less visible. This paper develops an argument for exploiting this cognitive bias in designing or changing taxes. Most commentary assumes that the intentional use of low-salience taxes by the government is undesirable and that increased salience is always required; to do otherwise is to take advantage of the cognitive bias that causes individuals to ignore taxes that are not prominent or salient. Although increasing salience is often desirable, there is a political economy argument for intentionally exploiting this bias by incorporating low-salience provisions into tax design. In developing the argument that utilizing this bias may be an appropriate fiscal tool, the paper begins by setting out the differences between transparency, complexity, and salience, which are often confused in the literature. The paper then makes a normative case that it is appropriate for legislators to design a tax by intentionally exploiting the cognitive bias that causes individuals to ignore information that is not prominent. The paper differs in two ways from past literature discussing salience. First it considers salience with respect to federal income taxes. Most commentators have explored salience in connection with consumption or commodity taxes. Second it considers the salience of discrete provisions, rather than merely the salience of the tax itself. It concludes with a case study where the use of low-salience tax provisions are justified and effective, i.e. where Congress finds it necessary to minimize the prominence of the tax because politically it cannot increase marginal tax rates.

Bumper Stickers at SPEA

An intelligent group parks here:


And no, I don't know the owner of the car.

Before there was Enron, there was Orange County

That's the title of this article in Public Budgeting & Finance (couldn't find an ungated copy), by David Matkin. I share it primarily because the title is so good:

Recent financial scandals in some of America's largest corporations have prompted popular speculation that a similar crisis may occur within the public sector and, therefore, that government and nonprofit organizations should be required to adopt financial oversight practices similar to those that are mandated of publicly-traded corporations in the Sarbanes-Oxley Act of 2002. One of those mandated practices—the use of financial-oversight committees—is already a common practice in public organizations, though little is known about its effectiveness. This study uses a national sample of local governments to examine whether financial-oversight committees improve financial control and strengthen stakeholder confidence in financial reporting. The findings provide preliminary support for the use of financial-oversight committees as an effective tool to improve financial accountability in local government.

Get ready for some more Gus!

My apologies for the sparse appearances here at TPS-- worry not, the experts still come here first.

I wanted to drop a quick note and let everyone know that, as the college football season gets underway tonight, the Gus Rankings will be in full force again this year! For the uninitiated, the Gus Rankings are TPS's simple method of ranking college football teams-- nothing more than counting wins and losses. Here's the original post that outlines the methodology, and here's everything Gus related on this blog.

Remember, Gus can't generate a ranking until teams play at least two games, so expect to see the first rankings after the weekend of Saturday, September 11. Don't expect to see a large degree of variation in the rankings until 5 or 6 weeks in--then again, it's always fun to see who rises to the top early in the season. (Like Washington at #1 in Week 3 last year.)

An Empirical Test of the Division of Labour

Forthcoming in JUE:

This paper provides supportive evidence to the notion that the division of labour is limited by the extent of the (local) market. We first propose a theoretical model. Its main prediction is that scarce specialists occupations are over-represented in large cities. Using census data for French cities, we find strong empirical support for this prediction.

Haven't read it, but it is on the "when I have the time" pile of papers.

Regulating Away Equality

Tax Notes Today (I think it might be gated, sorry) provides readers with 10 Executive Compensation Mistakes for firms. Most of them are details on how to structure contract details to conform with regulatory and accounting requirements. This one is particularly interesting in the second paragraph:

4. Treating everyone the same. It has long been standard operating procedure at many companies to treat all employees the same, for a host of reasons. Foremost among those reasons is that many companies find it hard to make distinctions among rank-and-file employees or senior executives.

However, current trends and regulatory reforms are forcing companies to distinguish some employees from others. Companies are now required to expense stock option awards, meaning that making option awards available to all is simply not financially feasible. Not everyone can be treated the same; not everyone can get big option or restricted stock grants.

Government mandated accounting standards and disclosure requirements are not the only reason to differentiate among employees. There are the important questions of incentives and retention: A company must provide a reward structure to motivate its employees to perform and to stay with the company. Each company must ask and answer why it cares about retaining a given person and how it plans to do so. Inevitably, employees are clearly going to be treated differently. Companies will have to learn how to manage the process of creating and calibrating an incentive structure.