Tuesday, November 30, 2004

Great Moments in Law and Economics

With the growing importance of economic reasoning at top law schools, perhaps the future will bring fewer exchanges like this one between Justice Stevens and law professor Randy Barnett from the oral arguments of the Raich case at the Supreme Court yesterday:
Stevens: What is your view on the effect [of allowing medical marijuana users to grow their own drugs for personal use] on the interstate market [for marijuana]? Increase prices, no effect on prices, or decrease in prices?

Barnett: Can I choose trivial reduction of price?

Stevens: If you reduce demand, then you will reduce prices? Wouldn't it increase prices?

Barnett: No, if you reduce demand, you reduce price.

Stevens: Are you sure?

Barnett: Yes.

(From Lawrence Solum's detailed account of oral arguments, which is very interesting. Also see this piece by Slate's Dahlia Lathwick. And Barnett himself will likely be blogging on the case soon at the Volokh Conspiracy.)

Monday, November 22, 2004

War is hell

If you want to cut through all the spin and counter-spin about the Marine shooting of an unarmed Iraqui in Fallujah, go straight to the source and check out this blog entry from the reporter who shot the video. He comes across both as sympathetic to the difficult situation faced by the Marines, yet shocked at what occurred.
Through my viewfinder I can see him raise the muzzle of his rifle in the direction of the wounded Iraqi. There are no sudden movements, no reaching or lunging.

However, the Marine could legitimately believe the man poses some kind of danger. Maybe he's going to cover him while another Marine searches for weapons.

Instead, he pulls the trigger. There is a small splatter against the back wall and the man's leg slumps down.....

For a moment, I'm paralyzed still taping with the old man in the foreground. I get up after a beat and tell the Marines again, what I had told the lieutenant -- that this man -- all of these wounded men -- were the same ones from yesterday. That they had been disarmed treated and left here.

At that point the Marine who fired the shot became aware that I was in the room. He came up to me and said, "I didn't know sir-I didn't know." The anger that seemed present just moments before turned to fear and dread.

Thursday, November 18, 2004

Easy as pi?

Newspapers today are reporting on a Brookings study written by Tom Loveless, claiming that the National Assessment of Educational Progress (NAEP) math assessment tests for 8th graders are too easy. I haven't read the report carefully, but I can't really see what the fuss is about.

According to the press release, there are two problems: the questions are too easy, and many of the students still can't answer them. To me, testing students on mastery of basic skills seems an entirely sensible and appropriate goal of this kind of testing. It would be a problem if the questions had gotten easier over time, making it difficult to measure improvements, but this doesn't seem to be the case.

Quoting from the study:

Recall that NAEP scores offer a ballpark estimate that today’s eighth graders know about as much mathematics as tenth graders in 1990. If this were true—and if the scores represent real gains in knowledge of mathematics—then a positive impact would be expected in enrollment figures for higher level math courses. That is, the courses that eighth graders are taking today should be relatively similar to the courses taken by tenth graders in 1990.

The two cohorts are not even close. There have been gains in Algebra I enrollments of eighth graders, from 16% in 1990 to 28% in 2003. Still, twice as many tenth graders had completed Algebra I in 1990 as there were eighth graders enrolled in the course in 2003. Almost half of all tenth graders (45%) had completed geometry in 1990, compared to a paltry 3% of eighth graders enrolled in geometry in 2003.

I don't think this follows at all. Even if students are taking the same courses (or at least courses with the same names) as before, but learning more, that is real progress. It is likely that poorly prepared students are often passed along from class to class without having mastered the material. Furthermore, even with better prepared students, schools will not always offer more advanced classes because of a lack of qualified teachers. When I was in 8th grade, I had to travel to the high school every day to take Algebra I. In 12th grade, my large high school had no math teachers on staff who could teach calculus, so someone had to be brought in from outside. (You can find a sample of NAEP questions here.)

More on welfare

Jane Galt has a good post on welfare reform. She praises to the heavens the new book American Dream by Jason DeParle, the same book that was discussed and praised in the "Slate" dialogue that I mentioned yesterday. I guess I'm going to need to read that book. She also gives some of her own thoughts on the problems of welfare:
it's clear to me from the research I've done to write about poverty, and from reading books like DeParle's, that the poor suffer from three main problems: their own poor impulse control or decision making; a culture that encourages poor decision making; and limited means, which give them no buffer against the results of their poor decision making.....

But it's not enough to say to these women "Get married" or "Ignore your friends and pay attention to school". Some extraordinary people do, of course, but we all tend to overestimate how easy it is to be that extraordinary. Most of us reading this blog, after all, went to college and/or got nice steady jobs because we had enormous social and familial pressure on us to do so. How many of us were strong enough to overcome our environment, drop out of high school, and sell drugs?

Wednesday, November 17, 2004

Welfare reform

There's a good dialogue about welfare reform going on this week on Slate...check it out.

Monday, November 15, 2004

Debt swap?

Lots of smart people like Arnold Kling have been pointing out that the transition costs of moving social security to private accounts are an illusion. We can finance the transition by issuing bonds, and in exchange we don't have to pay out as many social security benefits. So it's just a debt swap...we exchange our implicit obligation to pay retirees with an explicit obligation to pay bond holders.

It's a good point, but I don't think it's quite right. Here's a thought experiment: suppose that tomorrow congress votes to either (A) phase in a higher social security retirement age, or (B) default on a portion of the debt, only paying (say) .98 on the dollar on the face value of all existing government bonds. How will the financial markets react to each of these announcements? (Hint: quite differently.)

Implicit debt is different than explicit debt, because it's implicit. That means we can alter the social security obligations, effectively "defaulting" on part of this implicit "debt," without destroying the economy. Andrew Samwick seems to agree with my point when he writes:

None of us are sure what would happen to interest rates if an implicit debt (unfunded obligations of an entitlement program) of $10.4 trillion were eliminated but explicit debt (Treasury bonds held by the public) were increased by a few trillion before being repaid.
To me the most sensible take on the topic is coming from the reliable Tyler Cowen.

Sunday, November 14, 2004

One State Two States Red States Blue States

Kevin Drum has an interesting post on the origins of the "red states-blue states" meme. The usage only goes back to the 2000 election--in prior presidential elections, democrats were usually denoted by red in election maps. Matthew Yglesias laments this, wishing to retain the link between red and the left. I admit it's a bit strange that the party that not-too-long ago was "better red than dead" is now red. But since the end of the cold war, I'd say that the color most associated with the left is green. Anyway, there's no going back, and it makes sense that "red," "right," and "republican" all start with R. Plus you can think about rednecks.

(I originally titled this post "The Red and the Blue," but then I noted that Yglesias already used that title, so I had to resort to a more juvenile literary reference.)

Friday, November 12, 2004

Prescott disappoints

Ed Prescott is a very smart economist who deserved his recent Nobel prize, but he doesn't seem so smart in today's WSJ:
Some politicians have vilified the idea of giving investment freedom to citizens, arguing that those citizens will be exposed to risks inherent in the market. But this is political scaremongering. U.S. citizens already utilize IRAs, 401Ks, PCOs, Keoghs, SEPs and other investment options just fine, thank you....Consumers already know how to invest their money -- why does the government feel the need to patronize them when it comes to Social Security?

So just because consumers are now exposed to some risk it makes sense to expose them to more risk.

It would be one thing if the government's Social Security system paid a decent return, but as the President's Commission reported, for a single male worker born in 2000 with average earnings, the real annual return on his currently-scheduled contributions to Social Security will be just 0.86%. ... A bank would have to offer a pretty fancy toaster to get depositors at those rates of return.
You'd think Prescott would know what he's talking about, since he co-authored, with Rajnish Mehra, the a paper on the equity premium puzzle that is one of the most famous papers in economics. But according to a recent paper by Mehra on the topic, the mean real return from 1947-2000 on a "relatively riskless security" was 0.6%. And this is for T-bills and the like, your average bank will do even worse. Prescott seems to be trying to win his point with naive readers by ignoring the distinction between real and nominal interest rates.

There may be some good arguments for adding private accounts to social security, but these aren't them. (via Alex Tabarrok, who liked the piece a lot more than I did.)

Thursday, November 11, 2004

A thousand points of light

Check out this very cool map from the International Dark-Sky Association, showing where cities light up the night sky. I love stuff like this. (Here's a smaller version.)

(I found it via this page, which has some very cool election-result maps.)

Tuesday, November 09, 2004

Weapons of Misleading Designation

I do not like the term "Weapons of Mass Destruction." It lumps together things that are vastly different: nuclear and biological weapons (which are a big threat but very different) and chemical weapons (which are less threatening than conventional weapons.) This kind of lumping-together just makes for sloppy thinking.

Then tonight I was watching the Nova Program "America's Stone Age Explorers" on PBS, and they called the stone spearpoints of the Clovis people "weapons of mass destruction," I guess because they apparently were used to wipe out mammoths and giant sloths.

By these standards, I guess Saddam had WMD's after all!

Always look on the bright side of life

The election is over, and the candidate I voted against did not lose. So now it's time to look on the bright side. One thing that I believe is less likely to happen with Bush in the white house than with Kerry is price regulation of prescription drugs.

Treating the drug companies as villains is one of my pet peeves. Yes, I wish the drug companies would spend more resources developing vaccines, and less on slick marketing campaigns for doctors, and I'm all in favor of designing a system to give them right incentives in these areas. But I don't begrudge drug companies their profits...I hope they're profitable enough to attract lots of new investment into that business! Drug research has huge benefits, and I would like to see more investment in this area, not less.

It is also annoying when people talk about how drugs are getting more expensive. What is happening is that there are lots of new drugs that people want. The drugs we have today will only get cheaper and cheaper as patents expire and new competing drugs emerge.

Monday, November 08, 2004

I was wrong

My prediction that Bush would again lose the popular vote but win the election was way off...in fact, it almost went the other way 'round. Where did I go wrong? I thought that Bush was hated in the blue states and would lose by an even bigger margin than before. Instead, Bush significantly increased his share of the two-party vote in most blue states, most especially in New York, New Jersey, and Connecticut. Could this be a "world trade center" effect?