Stupid Eggheaded PhD's!

From the Curious Mercantilist Capitalist:

This is not, yet, a unanimously held opinion. There is even still some debate over whether this even is a recession. But I'm thinking that's going to fade away soon. "All my cousins already know we’re in a recession," says Bob Barbera, chief economist at ITG and, coincidentally, a former Lehman chief economist. "You need a Ph.D in economics to have a debate about it." Barbera thinks that, "in the fullness of time," it will be apparent that the recession began in autumn 2007.

Of course, Barbera is likely just looking for an external villain like the recession to blame for his company's failure, but a more correct statement would have been:

You need to avoid watching the news and election campaign to have a debate about it.

How to panhandle a degree

Now, usually the Time category is reserved for Justin and his surliness, but today we've got an interesting bit-- about a high school graduate emailing strangers for tuition money so he can attend NYU. Asking for a lot of small donations instead of a few big ones is generally not the way to raise a lot of money, but with costless solicitation and a tug on the heart strings...I think this is his best strategy.

I am a bit curious as to why the loan market didn't cover the full amount; are capital markets that hesitant to take on risky loans? Is funding a student through NYU a risky loan?

I'm reminded of the recent hubbub over internet sites offering panhandling tips; like panhandling, I think this student was very wise in asking for an exact amount to contribute.

Socialism According To Raul Castro

Very interesting statement, source is the Verbatim section of the July 28, 2008 TIME:

"Socialism means social justice and equality, but equality of rights, of opportunities, not of income."
Raul Castro, Cuban President, warning citizens to prepare for a reduction in
government subsidies.

I have a hard time knowing what to say about this. Obviously this is not what socialism is, or at least it is by no means unique to socialism. Despite reservations on the ambiguity of the statement, by and large I take it as a positive sign about Cuba's future (Note: I am not an expert on Cuban Political Economy).

Time gives us the low-down on high gas prices!

I think I'm starting to get Justin's zest for Time.

Here they tell us about 10 good things about gas being $4 per gallon.

#1 - Cost of production goes up. How is it good that, due to increased transportation costs, firms are forced to use higher cost suppliers? This is a plus?

#2 - Urban sprawl slows. Why does urban sprawl get everyone so upset? If you don't like it, go live in West Virginia. No good jobs there? Concindence, maybe? Further, why do we need to stop urban sprawl right now, or five years ago, or ten years ago? Why is that level of sprawl the ideal level? You could make the same argument when people talk about the Americanization of foreign countries.

#3 - Four day work weeks. Not sure you can completely attribute this phenomenon to gas prices, but why is four better than five? Is three even better? Two? Zero?

#4 - Less pollution. If higher gas substitutes people into modes of transportation that produce less pollution, then this could be seen as a positive. Externalities are the problem, and increased prices reduces consumption of the good producing the negative externality-- again, so long as they don't substitute into something else equally or more polluting (which doesn't seem to be the case). Don't mistake this as a similar outcome to a carbon tax, though.

#5 - More frugality. Is this some virtue we all need to strive for? It's good that drivers are incurring the costs of checking tires twice a day now as compared to before? "We're all wasting less." Wasting less of what? It's not a waste to check tires twice a day? If it's so waste minimizing, why not check them every 30 minutes?

#6 - Fewer Traffic Deaths. True, assuming people drive less, less people will die while driving. Of course, less people are getting to where they would like to go, too, in a manner they would prefer.

#7 - Cheaper Insurance. True, if you're driving less, ceteris paribus, you should be paying less in insurance. Though if you're just driving less than before due to cost, this is a negative to be counted, and if you're substituting to public transit, go ahead and ratchet up the tax bill.

#8 - Less Traffic. If less people drive, there will be less traffic. Though, as that page notes, there are effects elsewhere in the transportation realm.

#9 - More cops on the beat. They actually mean less cops driving around, not a change in the number of cops-- but then they imply that they'll be walking more and we'd have "slimmer police." Ha! That was my favorite one. Higher gas prices: Less Pollution, Less Traffic Deaths, Less Fat Cops. Keep it up, Time!

#10 - Less Obesity. What if higher gas prices substitute more people into unhealthier food? Would that cut down obesity?

Is Time familiar with the concepts of substitution or secondary effects?

Higher gas prices are neither good nor bad; they are what they are. Relative prices and endowments change frequently. I'll say what I say anytime a student or anyone else asks if gas prices are too high: Everyone wants gas prices to be lower. Everyone wants all prices lower. That's a demand curve. Is there anything in your life that you wouldn't prefer to cost less?

Lunch with Buffett

Here's a fun piece on Warren Buffett, the author had won an auction to have lunch with him for the tidy sum of $650,100. I didn't realize he was the sole owner of Geico. Maybe he can fix their insufferable commercials.

By the way, the last line in the article confuses me immensely. I'm of the opinion that any time someone tries to convince you that they got a bargain, they're only trying to convince themselves.

Sexual Preference and Brain Makeup

There's an interesting piece from Time about physical differences between the heterosexual and homosexual brain. It seems that those after women-- heterosexual males and homosexual women-- had brains that were mildly asymmetrical. Those after men-- homosexual males and heterosexual females-- had brains that were more symmetrical. The impact here, though the biology types here may have something more of substance to say, is that it's not just regions of the brain devoted to reproduction and sexuality that seem to play a role.

Taken at face value, this study strikes me as something that could then be a predictor of sexual preference, possibly before birth. Again, I'm not a biology expert, but I'd suspect brain asymmetries would exist from a very young age. Insofar that people have preferences about these things-- and I think it's a fair assumption to say that some people do-- then this could well lead further down the path of gene selection and choosing for yourself a child with characteristics you prefer. Without starting a holy war, I'm tentatively for gene selection, though could well be swayed with a convincing argument. I think you'd make the same arguments for gene selection of children that you'd make for coercing them to eat their vegetables, though part of your gene selection decision helps form the preference set by which you are supposed to be acting on their behalf. Yikes. Would you then have to play by some overarching set of preferences above both you and your child? This gets messy very quickly.

Interesting, too, was the part at the end concerning tendencies of men for younger partners, regardless of sexual orientation, and the opposite in women, again regardless of sexual preference. Once more, taken at face value, doesn't this lend towards a stable (unstable) equilibrium for heterosexual (homosexual) relationships?

The Curious Merchantilist

I sent the following letter to TIME today attacking this column by "The Curious Capitalist" Justin Fox:

What’s curious about “capitalist” Justin Fox in “A Port that Exports” (June 9, 2008) is the mercantilist message that exports and imports should balance. He does this by confusing a good business model in the shipping industry, that it is more profitable to ship in both directions rather than just one, with what is a good model for the economy. America runs a trade deficit because foreigners use the money they earn selling their goods to invest in American assets. These makes it cheaper for Americans to borrow to pay for college, purchase a home, build offices, and a host of other activities that make our country richer. In short, the trade deficit represents foreigners trying to get rich by making Americans even richer.

Economists have written billions of pages for over 230 years attacking merchantilist theory. I tried to do it in a few words, but obviously much more could have been written. By the way, Fox's last article "How the Next President Can Fix the Economy" was a tour de force in manipulating statistics, bad economics, and normative dribble.

More Support for Caplan's Irrational Voter

In a commentary in TIME Magazine, Samantha Power rails against these kids today that don't get their news from paper media and inadvertently gives support for Caplan's book:

When I'm abroad these days and have to go without my newspaper, I often turn to the most e-mailed stories on news websites, which are generally opinion pieces (rather than news stories), from which I cherry-pick arguments or facts that comport with my pre-existing views. Reading this way, I rarely stray from the familiar and soothing.

The more commentaries I read, the more I think Caplan is right. By the way, TIME most definitely does not get the TPS Seal of Approval. If you are wondering why I keep reading a magazine I find so poorly written...a subscription was a gift from my Mother-In-Law for XMas.