Economize This!

We've reached a new low...

Just when you thought the creationists couldn't get any more creative...this. How can these people be so deluded?

Also, why do I always find out about these things from British newspapers?

Marriage and income

Good article on the Washington Post today about affluence, marriage, co-habitation and having kids.  From the article:

As marriage with children becomes an exception rather than the norm, social scientists say it is also becoming the self-selected province of the college-educated and the affluent. The working class and the poor, meanwhile, increasingly steer away from marriage, while living together and bearing children out of wedlock.

"The culture is shifting, and marriage has almost become a luxury item, one that only the well educated and well paid are interested in," said Isabel V. Sawhill, an expert on marriage and a senior fellow at the Brookings Institution.

Marriage has declined across all income groups, but it has declined far less among couples who make the most money and have the best education. These couples are also less likely to divorce. Many demographers peg the rise of a class-based marriage gap to the erosion since 1970 of the broad-based economic prosperity that followed World War II.

"We seem to be reverting to a much older pattern, when elites marry and a great many others live together and have kids," said Peter Francese, demographic trends analyst for Ogilvy & Mather, an advertising firm.

There are some testable claims in the 2nd, 3rd and 4th paragraphs that would probably make a good research paper, or maybe three research papers.  I'm sure there are economists that have been looking at this, but the experts in the article are all from the sociology side.

WorkingPaper.net - from the people that brought you Econgrads.com

Chris Silvey has a post over on his blog about a new tool from John Morrow of econgrads.com.  It's called WorkingPaper.net.  This is a networking site to facilitate the exchange of referee reports on early stage working papers.  This has the potential to be really cool.  Thanks to Chris for the heads up.

The Home Market Effect

A well-known result in international trade theory is the home market effect.  It's the idea that exporters will prefer to use a large home market as an export platform.  An effect that can be amplified by both high trade barriers.  It can also work contrary to traditional notions of comparative advantage in factor endowments or productivity.  So what happens when border security is stepped up along the US-Mexico border after September 11th?  Domestic marijuana production goes up according to this article.  Sounds like a home market effect to me.  I wonder what will happen after we build that wall?

Are you a US citizen?

Then answer these questions....

Why does the United States have three branches of government?

Name two rights that are only for US citizens?

Name two cabinet-level positions?

Name one important idea found in the Declaration of  Independence?

What does the Constitution do?
Who is the speaker of the House of Representatives now?

Those are all new draft questions on a potential revised test for citizenship.  More info is here and here.

Here some questions with answers???? from the LA Times:

Prospective civics questions

  • What does the Constitution do?
    (It sets up the government. It protects basic rights of Americans.)

  • Who was president during World War I? (Woodrow Wilson).

  • Why do we have three branches of government? (So that no branch is too powerful).

  • Name one example of checks and balances.
    (The president vetoes a bill. Congress can confirm or not confirm a president's
    nomination. Congress approves the president's budget. The Supreme Court strikes
    down a law.)

  • Why do we have 13 stripes on the flag? (There were 13 original colonies)

  • Name one thing only the federal government can do.
    (Print money. Declare war. Create an army. Make treaties.)

  • What is one thing only a state government can do?
    (Provide education, police protection, fire protection; grant a driver's license,
    or approve zoning and land use.)

  • What is the current minimum wage in the U.S.? ($5.15)

  • When must all males register for the Selective Service? (At age 18)

  • Name one responsibility that is only for U.S. citizens. (Vote. Serve on a jury.)


Can natural born Americans answer these questions correctly?  I doubt many of them could.  In fact, I find many of the questions and answers ambiguous.  What does the Constiution do?  It sits in the National Archives.  Nothing, it's an inanimate object.  It lies flat.  Probably a difficult question semantically for people that speak native English, let alone as a second language. 

Apparently, "they" don't want people to just memorize historical facts.  I guess "they" haven't been to a high school government class.  I just find all this a rather annoying waste of government time and resources and I thought I would blog about it.

How do you solve the negative externality caused by 4x4s?

With a tax, of course.  London's Mayor Ken Livingstone unveiled plans to charge the heaviest C02 emitters GBP25 per day to enter central London's congestion charge zone.  That's about $48 a day to drive your SUV into central London.  The congestion charge has been around for a while.  Smaller duty vehicles only pay GBP8 and hybrids get in for free.

Is driving an SUV causing a negative externality?  According to Mayor Ken in this Guardian piece:

"One in five vehicles is a Band G," he said. "It is the heaviest concentration in the country and one has to ask why people need four wheel drives in the most densely populated part of the UK. People are waking up to the fact we are bequeathing our children and our grandchildren appalling consequences if we don't act."

I tend to agree with this case.  I think some US cities might have to start doing this in the future.  But public transport networks will have to get better and congestion will have to get worse before it can be a political reality.  Some progressive mayor will give it shot though.

If Robert Metcalfe is still reading, maybe he'll have something to say. UPDATE:  Actually, he already did have a post about week back about Richmond's plan to charge higher prices for parking permits here.  A similar objective, but different policy prescription than that above.  And now he's got something about this specific policy too.

Big Princeton Univ. Press Sale

There is a big sale on at the PUP.  Visit this link for all the economics titles.  A number of textbooks are on offer and some good field works too.  (e.g. Debraj Ray's Development Economics and Feenstra's Adv. International Trade, Hayashi's Econometrics, etc.).  Some of these may be cheaper on Amazon, but some not.  US and Canada only.

Elections

I was going to write a post about the elections, but I am a bit short on time this week.  Thankfully, the Guardian found the words for me with it's leader for Nov. 9, "Thank you, America"

"...the results change the political landscape in Washington for the final two years of this now thankfully diminished presidency. They also reassert a different and better United States that can again offer hope instead of despair to the world. Donald Rumsfeld's resignation last night was a fitting climax to the voters' verdict. Thank you, America.

In US domestic terms, the 2006 midterms bring to an end the 12 intensely divisive years of Republican House rule that began under Newt Gingrich in 1994. These have been years of zealously and confrontational conservative politics that have shocked the world and, under Mr Bush, have sent America's global standing plummeting. That long political hurricane has now at last blown itself out for a while, but not before leaving America with a terrible legacy that includes climate-change denial, the end of biological stem-cell research, an aid programme tied to abortion bans, a shockingly permissive gun culture, an embrace of capital punishment equalled only by some of the world's worst tyrannies, the impeachment of Bill Clinton and his replacement by a president who does not believe in Darwin's theory of evolution. The approval by voters in at least five more states of same-sex marriage bans - on top of 13 similar votes in 2004 - shows that culture-war politics are far from over."

I could not have said it better.  Thank you, Guardian.  The whole story is here.

I can't give you the intuition

Definition* Intuition:
in·tu·i·tion (nt-shn, -ty-)
n.

1. 1. The act or faculty of knowing or sensing without the use of rational processes; immediate cognition. See Synonyms at reason.
   2. Knowledge gained by the use of this faculty; a perceptive insight.
2. A sense of something not evident or deducible; an impression.

Proposition: If understanding a certain economic outcome requires intuition, this intuition cannot be "given" to a student or formally stated by an instructor with the expectation that it will be absorbed and understood by the student.  To think otherwise, is to misuse the word.

Proof:  Assume Not.  Then for any outcome X of a process Y, one can state the following (say, by writing on the blackboard):

Intuition: Due to some underlying characteristics of the state space Y, X is the natural occurring result.

This implies the understanding required to know result X can be written down as a the result of some rational, logical process of argumentation (mathematical or otherwise).  But this contradicts the definition of intuition.  Therefore, X is not actually an intuitive idea.  Q.E.D
__________________

My hope is that this formal "proof" of what intuition is and is not will help instructors, including me for the sake of the poor students in my Micro discussion, stop trying to "give" students intuition.  I firmly believe you can't do this.  You have to develop intuition on your own.  You have to get economics to click in your brain in such a way that you see the answer to a problem and then proceed to formulate the economic arguments to prove it.  So far, Ariel Rubinstein is only one person I have seen that uses the word intuition correctly when writing economics** (surely thee are others, but they are few). 

Alternatively, I suggest using the terms interpretation, fundamentals, or economic rationale as appropriate.  The word intuition is very tired and it can't continue to shoulder all this responsibility.

Corrections and comments on my proof are welcome.

References:
*intuition. (n.d.). The American Heritage® Dictionary of the English Language, Fourth Edition.  Retrieved October 15, 2006,  from Dictionary.com website: http://dictionary.reference.com/browse/intuition

**Rubinstein, A.  2005. Lectures in Microeconomics.  http://arielrubinstein.tau.ac.il/Rubinstein2005.pdf  (Note: This is also a really good book)

My first lecture from a Nobel Laureate

On Friday of last week, the Public Policy School and the Econ Dept here at UMD hosted a symposium in honor of Thomas Schelling.  It's been just about a year since Schelling won the Nobel prize.  I have never been in the room with so many game theorists and esteemed economists at the same time.  I was lucky enough to hear talks from Richard Thaler, Peyton Young, Josh Epstein, Robert Frank, Roger Myerson and Ken Binmore among several others. 

For those of you reading from London, I highly recommend attending any talks that Ken Binmore of UCL might be giving over the next year (even if you aren't into game theory).  I have been to hear him speak twice now and he has some truly original ideas in terms of game theory applications.  The paper for his talk on conventions can be found here.  It combines game theory, econ experiments and the philosophy of Hume and Rawls.

Myerson's talk was also very good.  He developed the ideas in his talk using a simple rival claimants game.  He asked the question "Why might rational citizens prefer leaders who are committed to costly military actions?"   This framing is very interesting because it supposes that militarism and  islamic radicalism and it supporters are perhaps a rational policy response to perceived threats. 

There are two reasons: to profitably attack others (not feasible) or to decrease the chances of being attacked.  Myerson argued that Schelling's Strategy of Conflict showed how important it is to communicate your strategy of conflict to adversaries (like the communications line between Russia and the US during the Cold War).  This line of argument suggests that US foreign policy that admits no limitations to our use of military force "would seem to be a dangerous repudiation of strategic limits, which is likely to inspire counterforces."  If you like this kind of thing, the slides are worth reading through.  If you make it the end, you'll find he Myerson is one game theorist that doesn't take his abstract game theoretic trade too seriously.

Finally, it was fun to hear some of the best agent-based modelers in the business discuss what they do and how they do it (Epstein and Young).  Someday, hopefully not too far off, I hope to have the programming savvy to tackle an agent-based model of my own making.  For now, I am only good at the most basic of numerical analysis.

The closing event were a few words from Schelling himself.  He is really going strong for someone in his mid-80s.  He said it was the best symposium he had ever attended.  I guess I was lucky to be there, but I have no reference point to judge from.  I guess I'll take Tom's word for it.