Capital is not like a bucket of water from which we scoop identical cups. Instead, capital goods, including human capital, have a limited number of specific uses to which they can be put. As Peter Boettke puts it, capital is not like Play-Doh, which can be formed into any shape, but like Legos, the versatility of which is limited by the sizes, shapes, and interconnections of the pieces.
Austrians speak of the need for capital to be “complementary” to other capital in order for it to help create an integrated production plan. A producer must have the “right” capital, that is, capital that “fits together.” An important implication here is that “more” capital isn’t always better. What firms need are pieces that fit, not just duplicates of what they already have.
Thursday, July 22, 2010
Austrian Capital Theory
From Steve Horwitz @ FEE:
Monday, July 19, 2010
Shared Beliefs, Focal Points, and Phone Finding
I lost my phone last Thursday.
Fortunately, I knew exactly where I'd left it. I constantly check the clock on my phone during class to adjust my lecture speed so that I don't spend too much or too little time on any subtopic. Given that I had driven straight home from class, and that I realized I'd left my phone almost immediately upon getting home, I knew it had to be sitting on the podium. But when I returned, it wasn't there.
I figured there were two possibilities:
1. Someone found the phone and decided to keep or sell it.
2. Someone found the phone and attempted to get it back to me.
Obviously, P(1) > 0. There are criminals in the world. However, I reasonably assumed the conditional probability that the person finding my phone was a criminal was quite low. Most likely the person finding my phone would be a college professor, as it was on the podium. There was also a relatively high probability that a student taking summer classes found my phone. Regardless, I'd guess few individuals in these groups are criminals or have access to criminal networks such that reselling the phone would be worth the risk of being caught. There was also a possibility that someone on the cleaning staff located my phone. Now, I'd imagine the probability that cleaners--typically from low-income households--have access to criminal networks would be significantly higher than college professors and students taking summer classes. But the odds that a cleaner found my phone would be low. I teach a morning class and cleaners typically work at night. So scores of people would have to overlook my phone for it to be on the podium when the cleaners arrived in the evening. Hence, I believed P(1) < P(2).
But how would they attempt to get it to me? They did not try to call me. Nor, to my knowledge, did they try to call anyone in my recent calls. Instead, they would likely do what people in our society normally do when the find something that has been lost: drop it off at a lost and found. This is where focal points become important.
Where is the lost and found? As it turns out, there are several options. Here are the most likely:
1. Secretary
2. Campus police
3. Johnson Center Information Desk
4. Student Union Information Desk
A lazy person might just walk over to the secretary in the building where the phone was lost and let her deal with it. But this assumes two things. First, it assumes that the phone finder knows where the secretary is. I am an instructor in that building and (until I actively began looking) I didn't know where her desk was located. Second, it assumes that either (1) I will know to go to the secretary to retrieve my phone or (2) the secretary will know where I'm likely to go and be willing to take the phone there. Note the importance of shared beliefs. The only way this works out is if the phone finder and I or the secretary and I have shared beliefs about what should happen to lost and found phones.
If the secretary option is not particularly salient, perhaps the next option would be the campus police. However, the GMU police station has recently moved from a building relatively close to the class where I lost my phone to the other side of campus. This decreases the likelihood of my phone ending up there for two reasons. First, it requires more effort to get it there than any of the other potentially salient options. Second, given that the change took place recently, it increases the likelihood that either I or the phone finder is not aware of the change and hence decreases the likelihood of a match. Knowing this, even a phone finder aware of the station change might be reluctant to take the phone to the police. Again, note the importance of shared beliefs and knowledge about shared beliefs.
The third option, JC Info desk, has an advantage in that it is right in the center of campus. All the food vendors are located in the JC. Going to any other class or office on campus would likely cause you to walk past the JC. However, the JC is in the opposite direction of the nearest parking lot. So instructors or students showing up for one summer class might have to go out of their way to go to the JC.
The fourth option, the Student Union Info desk, is anything but centrally located and is also off path from the nearest parking lot. While this option might be particularly salient to students, it is not likely to be as salient to instructors. And recall that the phone finder is likely to believe the phone was lost by an instructor since it was on the poduim. Hence, even if it were salient for a student phone finder, the student would have to consider whether it would be salient for me.
So where did the phone finder conclude that I would most likely look for my phone? Well, since I was fortunate enough to retrieve it today, I can tell you. And we can all learn a little something about shared beliefs. Take a guess. The answer is below the fold.
+/-
Fortunately, I knew exactly where I'd left it. I constantly check the clock on my phone during class to adjust my lecture speed so that I don't spend too much or too little time on any subtopic. Given that I had driven straight home from class, and that I realized I'd left my phone almost immediately upon getting home, I knew it had to be sitting on the podium. But when I returned, it wasn't there.
I figured there were two possibilities:
1. Someone found the phone and decided to keep or sell it.
2. Someone found the phone and attempted to get it back to me.
Obviously, P(1) > 0. There are criminals in the world. However, I reasonably assumed the conditional probability that the person finding my phone was a criminal was quite low. Most likely the person finding my phone would be a college professor, as it was on the podium. There was also a relatively high probability that a student taking summer classes found my phone. Regardless, I'd guess few individuals in these groups are criminals or have access to criminal networks such that reselling the phone would be worth the risk of being caught. There was also a possibility that someone on the cleaning staff located my phone. Now, I'd imagine the probability that cleaners--typically from low-income households--have access to criminal networks would be significantly higher than college professors and students taking summer classes. But the odds that a cleaner found my phone would be low. I teach a morning class and cleaners typically work at night. So scores of people would have to overlook my phone for it to be on the podium when the cleaners arrived in the evening. Hence, I believed P(1) < P(2).
But how would they attempt to get it to me? They did not try to call me. Nor, to my knowledge, did they try to call anyone in my recent calls. Instead, they would likely do what people in our society normally do when the find something that has been lost: drop it off at a lost and found. This is where focal points become important.
Where is the lost and found? As it turns out, there are several options. Here are the most likely:
1. Secretary
2. Campus police
3. Johnson Center Information Desk
4. Student Union Information Desk
A lazy person might just walk over to the secretary in the building where the phone was lost and let her deal with it. But this assumes two things. First, it assumes that the phone finder knows where the secretary is. I am an instructor in that building and (until I actively began looking) I didn't know where her desk was located. Second, it assumes that either (1) I will know to go to the secretary to retrieve my phone or (2) the secretary will know where I'm likely to go and be willing to take the phone there. Note the importance of shared beliefs. The only way this works out is if the phone finder and I or the secretary and I have shared beliefs about what should happen to lost and found phones.
If the secretary option is not particularly salient, perhaps the next option would be the campus police. However, the GMU police station has recently moved from a building relatively close to the class where I lost my phone to the other side of campus. This decreases the likelihood of my phone ending up there for two reasons. First, it requires more effort to get it there than any of the other potentially salient options. Second, given that the change took place recently, it increases the likelihood that either I or the phone finder is not aware of the change and hence decreases the likelihood of a match. Knowing this, even a phone finder aware of the station change might be reluctant to take the phone to the police. Again, note the importance of shared beliefs and knowledge about shared beliefs.
The third option, JC Info desk, has an advantage in that it is right in the center of campus. All the food vendors are located in the JC. Going to any other class or office on campus would likely cause you to walk past the JC. However, the JC is in the opposite direction of the nearest parking lot. So instructors or students showing up for one summer class might have to go out of their way to go to the JC.
The fourth option, the Student Union Info desk, is anything but centrally located and is also off path from the nearest parking lot. While this option might be particularly salient to students, it is not likely to be as salient to instructors. And recall that the phone finder is likely to believe the phone was lost by an instructor since it was on the poduim. Hence, even if it were salient for a student phone finder, the student would have to consider whether it would be salient for me.
So where did the phone finder conclude that I would most likely look for my phone? Well, since I was fortunate enough to retrieve it today, I can tell you. And we can all learn a little something about shared beliefs. Take a guess. The answer is below the fold.
+/-
Thursday, July 15, 2010
Ecuminical (and Financial) Incentives
From Slate:
Working with David Yermack of New York University, the two preachers' sons set out to test the Corinthian hypothesis by investigating the economic incentives affecting the United Methodist clergy of Oklahoma, where Hartzell's stepfather had spent his career. In "Is Higher Calling Enough?" a study forthcoming in the Journal of Labor Economics, the researchers show that Oklahoma's ministers are driven not just by spiritual motivations but also by high-powered financial incentives. Working with more than 40 years of church records covering more than 2,000 clergy, the authors find that ministers received about a 3 percent share of revenues generated from boosting membership, comparable to the pay-for-profit sensitivity of Fortune 500 CEOs. They also uncover some unfortunate side-effects of financial incentives for ministers who, motivated by material concerns, may have been encouraged to poach congregants from one another's flocks rather than to bring new believers into the fold.
Wednesday, July 14, 2010
Nerd Alert: Econ T-Shirts
I've designed and ordered a couple shirts at Cafe Press. Understanding that the marginal cost [of the design] falls to zero, I have made these designs available in a "shop" so that--if you are as nerdy as I am--you can order them. Here are a few of the Ts.
The first two shirts are related to Pete Boettke's claim that Austrian economists can decide to emphasize the Austrian or the Economics.
The third shirt allows you to channel your inner Scott Sumner and advocate a nominal income target.
Shirt number four is a little less cryptic, allowing your nerdy econ friends to see you support a constant PQ.
And finally, though I imagine few of our readers are interested, there's a shirt w/ the JEL code for "Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems."
Interested in having your own? It's a little more complicated to order than I would have thought. But details are below the fold. I'm sure there will be more to come, as I really like custom shirts.+/-
The first two shirts are related to Pete Boettke's claim that Austrian economists can decide to emphasize the Austrian or the Economics.
The third shirt allows you to channel your inner Scott Sumner and advocate a nominal income target.
Shirt number four is a little less cryptic, allowing your nerdy econ friends to see you support a constant PQ.
And finally, though I imagine few of our readers are interested, there's a shirt w/ the JEL code for "Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems."
Interested in having your own? It's a little more complicated to order than I would have thought. But details are below the fold. I'm sure there will be more to come, as I really like custom shirts.+/-
For the Teaching Vault: Deadweight Loss
The deadweight loss of Ohio's income tax is LeBron James.*
The deadweight loss of the British Income Tax code is Usain Bolt.
*Incidentally, my first publication was on the state income tax incidence on All Star MLB free agents. Players paid non of the tax.
The deadweight loss of the British Income Tax code is Usain Bolt.
*Incidentally, my first publication was on the state income tax incidence on All Star MLB free agents. Players paid non of the tax.
Thursday, July 08, 2010
New Member of the "Juicing the Mitchell" Club
It is Jason Kuznicki at the League of Ordinary Gentleman (Hat Tip: Zach Wendling). Jason summarizes support for Alvin Irvine's (the improbable SC gubernatorial candidate) proposal to have action figures made of himself to give to children at Christmas:
Compared to endless war, stripping us of our civil liberties, running up giant budget deficits, and all the rest… I have to say I’m all in favor Greene’s proposal. Politicians have limited time. Let’s use it wisely. Or at least use it up.Indeed, welcome to the club Jason!
Thursday, July 01, 2010
InTrade on LeBron James
As a longtime Cleveland Cavs fan, I have been keeping an eye on the LeBron James resigning saga. Right now, the InTrade odds seem to favor the Bulls, but note that the low volume reveals an internal inconsistency (the probabilities don't add up correctly). For Cavs fans, the disappointing bottom line is that the most liquid market puts only a 29% chance at him returning.
Wednesday, June 30, 2010
Artificial States and Anarchy
As part of secession week 2010, I have a guest post at Let A Thousand Nations Bloom on artificial states and anarchy related to African development.
Monday, June 28, 2010
World Cup and Economic Freedom
Art Carden has a entertaining post at DOL on how the World Cup would play out if the outcome were based on the country's economic freedom score (Chile wins over England in the finale).
For what it's worth, if I knew nothing about the quality of the teams in the tournament, but was trying to win a bracket pool, my prior would be to rank teams inversely to their economic freedom score. My reasoning? Soccer requires virtually no accumulation of capital. All you need is a field, a ball, and something that can serve as the goal. Contrast that with (American) football, basketball, track (at least the sprints, any sprinter will tell you the importance of surface practice and block work), swimming, etc.
I would add the spreading worldwide popularity of basketball (which is more capital intensive than soccer, but not incredibly so) as evidence to this phenomenon, while admitting it is largely ex-post story telling.
For what it's worth, if I knew nothing about the quality of the teams in the tournament, but was trying to win a bracket pool, my prior would be to rank teams inversely to their economic freedom score. My reasoning? Soccer requires virtually no accumulation of capital. All you need is a field, a ball, and something that can serve as the goal. Contrast that with (American) football, basketball, track (at least the sprints, any sprinter will tell you the importance of surface practice and block work), swimming, etc.
I would add the spreading worldwide popularity of basketball (which is more capital intensive than soccer, but not incredibly so) as evidence to this phenomenon, while admitting it is largely ex-post story telling.
Monday, June 21, 2010
Soccer Thoughts
I was not a soccer fan growing up, but have over the last three World Cup come to appreciate the competition. This World Cup has been very enjoyable thus far. My thoughts:
1. A first-rate (read: English Premier League, La Liga, Serie A or Bundesliga) soccer league would excel in the United States. Don't let anyone tell you otherwise. Americans embrace the highest-quality version of just about anything. Relegation is something they would buy into whole-heartedly.
2. Epstein offers his changes for the soccer here; this isn't the first time, nor the tenth, nor the last time you'll see articles in this vain. You won't see changes in soccer until you see these sentiments in the places where soccer matters, just like you won't see a growing feeling of salary inequity from Argentinians affect large-scale labor change in Major League Baseball. As best as I can tell, the calls for modifying soccer are uniquely American. (Though please comment about other cultures that want to change the game, I'd love to read it.)
3. Given the success of Twenty20, I wonder if the best way of moving forward with modifying soccer isn't to create a new sub-sport in and of itself. There have been other instances of such attempts-- what comes to my mind is Arena football and the XFL, though I'm sure there are others-- but to me, those seemed to be modifications that tried to keep the part of a sport that people liked (fast/big plays) while adding in gimmicks to attempt to differentiate it (indoors, cameras everywhere, no fair catches, no punting, etc.). Twenty20 kept the sport the same but got rid of what people didn't like (the length of a cricket match). Maybe that's splitting hairs, but to me it's an important difference.
4. Given #3, perhaps a modified game that compliments soccer would be successful-- or rather, if action had to be taken, this would have the best chance of succeeding. Like above, keep the game and get rid of what people here don't seem to enjoy. Per Epstein, find a way for more scoring, less importance for referees but keep the games commercial-free by half.
Ultimately, I think compliment instead of substitute is the way to go.
1. A first-rate (read: English Premier League, La Liga, Serie A or Bundesliga) soccer league would excel in the United States. Don't let anyone tell you otherwise. Americans embrace the highest-quality version of just about anything. Relegation is something they would buy into whole-heartedly.
2. Epstein offers his changes for the soccer here; this isn't the first time, nor the tenth, nor the last time you'll see articles in this vain. You won't see changes in soccer until you see these sentiments in the places where soccer matters, just like you won't see a growing feeling of salary inequity from Argentinians affect large-scale labor change in Major League Baseball. As best as I can tell, the calls for modifying soccer are uniquely American. (Though please comment about other cultures that want to change the game, I'd love to read it.)
3. Given the success of Twenty20, I wonder if the best way of moving forward with modifying soccer isn't to create a new sub-sport in and of itself. There have been other instances of such attempts-- what comes to my mind is Arena football and the XFL, though I'm sure there are others-- but to me, those seemed to be modifications that tried to keep the part of a sport that people liked (fast/big plays) while adding in gimmicks to attempt to differentiate it (indoors, cameras everywhere, no fair catches, no punting, etc.). Twenty20 kept the sport the same but got rid of what people didn't like (the length of a cricket match). Maybe that's splitting hairs, but to me it's an important difference.
4. Given #3, perhaps a modified game that compliments soccer would be successful-- or rather, if action had to be taken, this would have the best chance of succeeding. Like above, keep the game and get rid of what people here don't seem to enjoy. Per Epstein, find a way for more scoring, less importance for referees but keep the games commercial-free by half.
Ultimately, I think compliment instead of substitute is the way to go.
Television Future
The Economist recently had a special report on television; I thought the best pieces were these two, though you can find more of them easily at the Economist's page. They raise an interesting question: Television is looking like it's coming upon some tough times, how will it make it through? But, as the Economist notes, we've heard this story before with television and TV's as strong as ever. I had never really considered the vitality and mutability of television but it's important to note.
On the other end of the spectrum, here's CNN preaching the end of television.
On the other end of the spectrum, here's CNN preaching the end of television.
Friday's Radio Spot
Here is my interview with Pittsburgh Business Radio on Friday, by myself this time. I was there for about an hour and we talked about Zappos, the BP oil spill and the highest altitude by which someone survived a free fall to the ground.
Econ 101: John Glenn Edition
John Glenn, veritable American space hero, gives a nice example of the fallacy of considering sunk costs in marginal decision making:
"The cost of continuing [the space] shuttle is really very tiny compared to the $100 billion investment we've made in the station..."
Friday, June 18, 2010
Bank Runs and Deposit Insurance
Why do bank runs take place? Demand deposits are bank liabilities. When a bank suffers a loss, it becomes less able to meet all its obligations. To ensure that they are among the obligations that are met, individuals queue up at the bank demanding deposits be paid out. No one wants to be at the back of the line, as it is possible you get less than the full value of your debt claim. In fact, you might end up with nothing.
There are a handful of ways of preventing bank runs.
1. Suspension of Payments
If banks can suspend payments when a run becomes evident, they will have more time to figure out whether they can successfully meet all obligations. If they are solvent (i.e. can meet its obligations), there is no benefit to being the first in line when the bank opens back up so no run takes place. If it is insolvent, they will have to liquidate assets and pay each customer a fraction of debt claims. There is no need to run in this situation as there is no fear of ending up in the "back of the line."
2. Unlimited Liability Shareholders
If some shareholders have unlimited liability, there is no need to run. Those at the "back of the line" would be compensated by unlimited liability shareholders. So there is no reason to form a line.
3. Federal Deposit Insurance
The reasoning here is the same as #2 above. The difference is that it encourages shareholders to engage in riskier behavior, as they will not have to foot the bill if the bank fails.
4. Make debt claims equity claims.
The reasoning here is similar to that of suspension of payments by an insolvent bank. Rather than holding debt claims, customers have equity claims. And the price of an equity share fluctuates on the open market. So if the value of the claim falls, it does so across all shares simultaneously. Again, there is no "back of the line" so no one runs.
Money market mutual funds--where individuals hold equity claims--should be run-proof. Why then did the US Treasury Department guarantee MMMFs in September 2008?
There are a handful of ways of preventing bank runs.
1. Suspension of Payments
If banks can suspend payments when a run becomes evident, they will have more time to figure out whether they can successfully meet all obligations. If they are solvent (i.e. can meet its obligations), there is no benefit to being the first in line when the bank opens back up so no run takes place. If it is insolvent, they will have to liquidate assets and pay each customer a fraction of debt claims. There is no need to run in this situation as there is no fear of ending up in the "back of the line."
2. Unlimited Liability Shareholders
If some shareholders have unlimited liability, there is no need to run. Those at the "back of the line" would be compensated by unlimited liability shareholders. So there is no reason to form a line.
3. Federal Deposit Insurance
The reasoning here is the same as #2 above. The difference is that it encourages shareholders to engage in riskier behavior, as they will not have to foot the bill if the bank fails.
4. Make debt claims equity claims.
The reasoning here is similar to that of suspension of payments by an insolvent bank. Rather than holding debt claims, customers have equity claims. And the price of an equity share fluctuates on the open market. So if the value of the claim falls, it does so across all shares simultaneously. Again, there is no "back of the line" so no one runs.
Money market mutual funds--where individuals hold equity claims--should be run-proof. Why then did the US Treasury Department guarantee MMMFs in September 2008?
The temporary guarantee program provides coverage to shareholders for amounts that they held in participating money market funds as of the close of business on September 19, 2008. The guarantee will be triggered if a participating fund's net asset value falls below $0.995, commonly referred to as breaking the buck.In other words, the government provided deposit insurance--which is typically justified as preventing runs--on run-proof deposits. Does anyone know another reason to insure equity claims?
The program is designed to address temporary dislocations in credit markets.
Wednesday, June 16, 2010
Why You Should Study Economics Before Mountain Climbing
Props to the Slate interviewer (bold) of prominent climbing expert Ed Viesturs (italics), on the biggest mistake of his climbing career:
What kept you from acting on your knowledge that it was a mistake?
You know, I was so torn. Part of me was thinking, "Is this really as bad as I think it is?" Here you've spent two and a half months of your life trying to achieve a goal, and you're within 1,000 feet of getting to the top, and it's one of the worst times to have to make these choices. You think, "Arrrrghhhhh, you know, if I turn around right now, we'll have to go home, we've spent all this time and energy, and we won't have made it to the summit." So that's pulling me in one way, and then the other way is going, "Jeez, Ed, it's going to be terrible, just turn around, just go down."But you didn't.
No. I kept saying, "Well, let me go on for another 15 minutes and then I'll decide." And then after 15 minutes I'd say, "Let me go on another 15 minutes and then I'll decide." And I just couldn't make a decision, and I put it off so long that I got to the top.
Economists call that sunk costs—when you've poured so much money or effort into something that it's hard to extricate yourself, even when you should.
Right! I can see that. In fact, I've seen it many times. And I'd always thought, it doesn't matter how long you've been there, how much money you've spent, how much energy you've expended. If the situation isn't good, go down. The mountain's always going to be there. You can always go back.
Tuesday, June 15, 2010
Blockquoting X
X = Laurence J. Kotlikoff, from his new book Jimmy Stewart is Dead:
Is the U.S. Bankrupt? Bankruptcy is always in the eyes of the creditor. And there are clearly people and countries continuing to voluntarily lend the U.S. government money at what appear to be absurdly low rates. But I'm not one of them because my answer to this question is a firm yes. Given the magnitude of our fiscal gap, our country is absolutely and desperately broke. We were broke before the financial crisis hit, and we are now in much worse shape given the vast sums we've spent trying to save Main Street from Wall Street (p. 78).
Notice of Roster Change
Notice at the right of the screen, Emily Schaeffer is now Emily Skarbek.
Congratulations, you two!!!
Congratulations, you two!!!
Monday, June 14, 2010
Property Rights for the Poor: Effects of Land Titling
By Sebastian Galiani and Ernesto Schargrodsky, forthcoming in JPE (ungated):
Secure property rights are considered a key determinant of economic development. The evaluation of the causal effects of property rights, however, is a difficult task as their allocation is typically endogenous. To overcome this identification problem, we exploit a natural experiment in the allocation of land titles. In 1981, squatters occupied a piece of land in a poor suburban area of Buenos Aires. In 1984, a law was passed expropriating the former owners’ land to entitle the occupants. Some original owners accepted the government compensation, while others disputed the compensation payment in the slow Argentine courts. These different decisions by the former owners generated an exogenous allocation of property rights across squatters. Using data from two surveys performed in 2003 and 2007, we find that entitled families substantially increased housing investment, reduced household size, and enhanced the education of their children relative to the control group. These effects, however, did not take place through improvements in access to credit. Our results suggest that land titling can be an important tool for poverty reduction, albeit not through the shortcut of credit access, but through the slow channel of increased physical and human capital investment, which should help to reduce poverty in the future generations.
Thursday, June 10, 2010
Assorted thoughts
1. I noticed this yesterday on ESPN: "NBA gets an 'A' for diversity"
Sounds kinda like Justin's favorite practice-- measuring income inequality! And how do we measure diversity? The underlying idea behind grading diversity comes from The Institute for Diversity and Ethics in Sport's grading scale for all sports (see page 15):
If you feel measuring diversity is important, that seems like a decent way of doing so. I suppose perfect diversity would be equal percentages of all groups, but normalizing it the underlying demographics seems reasonable. But here's their comment on the NBA's player pool (see page 4):
So in sum: The goal is to provide the best grades for those leagues that best match the underlying demographics of the United States. 82 percent of the NBA's players are of color; rough estimates put the underlying U.S. percentage at ten to fifteen percent. Eighteen percent of the NBA's players were white; rough estimates put the underlying U.S. percentage at 65 to 75 percent. Asians are one percent of the NBA and roughly 5% of the U.S. population. Latinos are 3% of the NBA and roughly 15% of the U.S. population.
I wonder which part of that produces an A+ grade.
2. I got through most of Numbers Rule: The Vexing Mathematics of Democracy, from Plato to the Present on a couple of flights recently; it's very accessible and would make a great supplement (pick and choose what you like) for an undergraduate Public Economics class. It gets at the difficulties raised by what I believe to be the overarching issue of public economics: We live in societies and thus need to make some decisions as a group. How should we do that?
There's also a great chapter on the political economy of choosing the appropriate system to distribute seats in the House of Representatives.
Sounds kinda like Justin's favorite practice-- measuring income inequality! And how do we measure diversity? The underlying idea behind grading diversity comes from The Institute for Diversity and Ethics in Sport's grading scale for all sports (see page 15):
"Grades for race are determined in relation to overall American demographics. Federal affirmative action policies state that a workplace should reflect the percentages of people in different racial groups, as found in the general population. Approximately 24 percent of the U.S. population are people of color; therefore, if 24 percent of an organization’s employees are people of color, the group received an employment grade of “A” for race, and so on..."
If you feel measuring diversity is important, that seems like a decent way of doing so. I suppose perfect diversity would be equal percentages of all groups, but normalizing it the underlying demographics seems reasonable. But here's their comment on the NBA's player pool (see page 4):
"In the NBA, 82 percent of the players were people of color, the same as last year, tied for the highest percentage of players of color since the 1994‐95 season. The percentage of African‐American players remained at 77 percent since last year’s Racial and Gender Report Card. This was the highest percentage of African‐American players since the 2001‐02 season.
In the NBA’s 2009‐10 season, 18 percent were white and three percent were Latino. This was again the lowest percentage of white players since the 1994‐95 season. Asians comprised one percent of NBA rosters, and an additional one percent of players are people of color categorized as “other.” The percentage of Latino players remained the same as the last three seasons (three percent) while the percentage of white players decreased from 20 percent in the 2007‐08 season.
Eighteen percent of the players were international, which was the same as the 2008‐09 season.
NBA Grade for Players:
Race: A+"
So in sum: The goal is to provide the best grades for those leagues that best match the underlying demographics of the United States. 82 percent of the NBA's players are of color; rough estimates put the underlying U.S. percentage at ten to fifteen percent. Eighteen percent of the NBA's players were white; rough estimates put the underlying U.S. percentage at 65 to 75 percent. Asians are one percent of the NBA and roughly 5% of the U.S. population. Latinos are 3% of the NBA and roughly 15% of the U.S. population.
I wonder which part of that produces an A+ grade.
2. I got through most of Numbers Rule: The Vexing Mathematics of Democracy, from Plato to the Present on a couple of flights recently; it's very accessible and would make a great supplement (pick and choose what you like) for an undergraduate Public Economics class. It gets at the difficulties raised by what I believe to be the overarching issue of public economics: We live in societies and thus need to make some decisions as a group. How should we do that?
There's also a great chapter on the political economy of choosing the appropriate system to distribute seats in the House of Representatives.
Thursday, June 03, 2010
Juicing the Mitchell: Almost Perfect Games Edition
If you're a baseball fan, chances are you've heard about yesterday's Detroit/Cleveland game. Here's the game's recap; additional commentary is not lacking if you so desire it. While I personally don't think it's terribly hard to understand why he called him safe (while the batter was out, there were three things for the umpire to look at during a closer-than-commentators-want-to-admit play), and moreover, it would be a horrible idea to reverse the call (no logically sound reason would exist for not changing any future play once the precedent of changing outcomes is set), that's not the point of this post.
Longtime TPS stalwart Rob Holub points us to yet another legislative Pareto-improvement-- making sure things like this don't ever happen again! (Emphasis is mine.)
Will, when it comes time to enter the academic job market, there better be a mention of you being the father of "Juicing the Mitchell" somewhere in your job application packet.
Longtime TPS stalwart Rob Holub points us to yet another legislative Pareto-improvement-- making sure things like this don't ever happen again! (Emphasis is mine.)
"Michigan Gov. Jennifer Granholm, a Democrat, issued the proclamation and said on a radio interview that Mr. Galarraga "was robbed." Meanwhile, Michigan Sen. Debbie Stabenow, also a Democrat, urged Mr. Selig to invoke the "Best Interests of the Game" clause to declare Mr. Galarraga's performance perfect, and Democratic Rep. John Dingell says he'd introduce a congressional resolution asking MLB to overturn the call."
Will, when it comes time to enter the academic job market, there better be a mention of you being the father of "Juicing the Mitchell" somewhere in your job application packet.
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