Neglect of the Important Issues, Is the Opportunity Cost of Pursuing the Cutely Clever

 

The Wall Street Journal summarizes an April 2, 2007 article by Noam Scheiber in The New Republic:

 

A new generation of economists has become so addicted to cleverness that dull but genuinely useful research is under threat.

"Freakonomics," the 2005 best seller that sought to explain the mysteries of everyday life through economics, is only partly to blame, writes Noam Scheiber. The deeper roots lie in a 1980s crisis of faith over economists’ ability to reliably crunch numbers. Influential economist H. Gregg Lewis kicked it off by demonstrating that a host of broad, worthwhile empirical surveys of unions’ impact on wages came to opposite conclusions, mostly thanks to the differing original assumptions by the studies’ authors.

As a result, some economists retrenched, opting to focus on finding "solid answers to modest questions."

 

For the full summary, see:

"Informed Reader; Economics; How ‘Freakonomics’ Quashes Real Debates." The Wall Street Journal (Weds., March 28, 2007):  B11.

 

Obama Advised By Economists Cutler, Liebman, and Goolsbee

 

  Source of graphic:  online version of the WSJ article cited below.

 

In a previous entry, I expressed guarded optimism in response to an article that identified Austan Goolsbee as an advisor to Obama.  The article excerpted below, casts Goolsbee in a less central role, thus giving reason to guard the optimism even more.

 

While Mr. Obama’s economic platform is still in its formative stages, interviews with his aides and a review of his congressional record and speeches suggest that Obamanomics may place him somewhat to the left of New York Sen. Hillary Rodham Clinton, but to the right of former North Carolina Sen. John Edwards, another rival for the 2008 nomination. Mrs. Clinton seems to be cultivating the centrist mantle her husband won during his presidency, while Mr. Edwards is courting the party’s labor and grassroots activist base.

. . .

As Mr. Obama prepares for his first series of domestic-policy speeches in the coming weeks, he appears to be still shopping for a place on the political spectrum.

One top economic adviser is Jeffrey Liebman, a Harvard economist and former adviser to President Clinton who is focused heavily on the earned income tax credit and its role in moving people from welfare to work.

The candidate is also consulting with University of Chicago economics professor Austan Goolsbee, a taxation expert and centrist Democrat who has advised Mr. Obama since his 2004 Senate campaign.

David Cutler, a Harvard economist specializing in health policy who served in the Clinton administration, is also among Mr. Obama’s advisers.

 

For the full story, see: 

DEBORAH SOLOMON.  "Seeking Clues to Obamanomics; Democratic Candidate Is Just Beginning To Fill In the Blanks."   The Wall Street Journal  (Tues., April 24, 2007):  A4. 

(Note:  ellipsis added.)

 

Environmental “Horror-Movie Scenarios Are Looking Less and Less Plausible”

 

(p. D2)  . . . most of the horror-movie scenarios are looking less and less plausible. Climate change will probably occur not with a bang but with a long, slow whimper, as you can see in the new report from the Intergovernmental Panel on Climate Change.

The report concludes that it’s ”very likely” that humans are now the main factor warming the climate. But even as the panel’s scientists are becoming surer of the problem, and warning of grim consequences this century and beyond, they’re eschewing crowd-thrilling catastrophes. Since the last I.P.C.C. report, six years ago, they haven’t raised the estimates of future temperatures and sea levels.

While Mr. Gore’s movie shows coastlines flooded by a 20-foot rise in sea level, the report’s projections for the rise this century range from 7 inches to 23 inches. The panel says Greenland’s ice sheet will shrink and might eventually disappear, but the process could take ”millennia.” The Antarctic ice sheet is projected to grow, not shrink, because of increased snowfall.

The scientists acknowledge uncertainties and worrisome new signs, like the sudden acceleration in the flow of Greenland’s glaciers several years ago. But the panel, unlike Mr. Gore, didn’t extrapolate a short-term trend into a disaster, and its caution is vindicated by a report in the current issue of Science that the flow of two of the largest glaciers abruptly decelerated last year to near the old rate.

The panel does consider it ”likely” that future typhoons and hurricanes will be stronger than today’s. But it also expects fewer of these storms (albeit with ”less confidence” in that projection).

As for the Gulf Stream, it is ”very unlikely” to undergo ”a large abrupt transition during the 21st century,” according to the new report. The current is expected to slow slightly, meaning a little less heat from the tropics would reach the North Atlantic, which could be good news for Europe and North America, since that would temper some of the impact of global warming in the north.

Whatever happens, you can stop fretting about the Gulf Stream scenario in Mr. Gore’s movie and that full-fledged Hollywood disaster film ”The Day After Tomorrow.” Mr. Gore’s companion book has a fold-out diagram of the Gulf Stream and warns that ”some scientists are now seriously worried” about it shutting down and sending Europe into an ice age, but he must have been talking to the wrong scientists.

There wouldn’t be glaciers in the English shires even if the Gulf Stream did shut down. To understand why, you need to disregard not only the horror movies but also what you learned in grade school: that the Gulf Stream is responsible for keeping London so much warmer than New York even though England is farther north than Newfoundland.

This theory, originated by a 19th-century oceanographer, is ”the earth-science equivalent of an urban legend,” in the words of Richard Seager, a climate modeler at the Lamont-Doherty Earth Observatory of Columbia University. He and other researchers have calculated that the Gulf Stream’s influence typically raises land temperatures in the north by only five degrees Fahrenheit, hardly enough to explain England’s mild winters, much less its lack of glaciers.

Moreover, as the Gulf Stream meanders northward, it delivers just about as much heat to the eastern United States and Canada as to Europe, so it can’t account for the difference between New York and London. Dr. Seager gives the credit to the prevailing westerly winds — and the Rocky Mountains.

When these winds out of the west hit the Rockies, they’re diverted south, bringing air from the Arctic down on New York (as in last week’s cold spell). After their southern detour, the westerlies swing back north, carrying subtropical heat toward London. This Rocky Mountain detour accounts for about half the difference between New York and London weather, according to Dr. Seager.

The other half is caused by to the simple fact that London sits on the east side of an ocean — just like Seattle, which has a much milder climate than Siberia, the parallel land across the Pacific. Since ocean water doesn’t cool as quickly as land in winter, or heat up as much in summer, the westerly winds blowing over the ocean moderate the winter and summer temperatures in both Seattle and London.  

 

For the full story, see: 

John Tierney. "FINDINGS; A Cool $25 Million For a Climate Backup Plan."  The New York Times (Tues., February 13, 2007):  D1-D2.

(Note:  ellipsis added.)

 

Burned Up Over Gas Rationing in Iran

 

   "Protesters burned at least two gas stations in Tehran after the Oil Ministry announced gas rationing would begin Wednesday just after midnight."  Source of caption and photo:  online version of the NYT article cited below.

 

TEHRAN, June 27 — Angry drivers set fire to at least two gas stations overnight in Tehran after the government announced that gasoline rationing would begin Wednesday just after midnight.

The state television news said Wednesday that “several gas stations and public places had been attacked by vandals.” While there were some reports that a large number of gas stations had been set on fire, only two fires were confirmed.

. . .

Under the new regulations announced by the Oil Ministry on Tuesday evening, private cars will be able to buy a maximum of 26 gallons of gasoline a month at the subsidized price of 34 cents per gallon. Taxis will be allowed 211 gallons a month. Parliament would have to determine whether individuals would be allowed to buy more at market rates.

There were long lines at gas stations in Tehran on Wednesday, causing traffic jams, and the police moved in to control the lines.

Iran is OPEC’s second-largest exporter of oil. But it needs to import half of its gasoline — at a cost of $5 billion a year — because of high consumption and low refining capabilities.

Inflation in Iran had already been high, as a result of a combination of economic factors and government decisions. The price of dairy products like milk, butter and yogurt increased this week by at least 20 percent.

 

For the full story, see: 

NAZILA FATHI.  "2 Iranian Gas Stations Burned Over Rationing."  The New York Times   (Thurs., June 28, 2007):  A8. 

(Note:  ellipsis added.)

 

“Not that Everyone Has Been Intimidated”

 

It is common to ridicule economists–sometimes with some good reason.  But the 50 brave economists in Iran who refused to be intimidated, have made us proud.

 

(p. 1)  Iran is in the throes of one of its most ferocious crackdowns on dissent in years, with the government focusing on labor leaders, universities, the press, women’s rights advocates, a former nuclear negotiator and Iranian-Americans, three of whom have been in prison for more than six weeks.

The shift is occurring against the backdrop of an economy so stressed that although Iran is the world’s second-largest oil exporter, it is on the verge of rationing gasoline. At the same time, the nuclear standoff with the West threatens to bring new sanctions.

The hard-line administration of President Mahmoud Ahmadinejad, analysts say, faces rising pressure for failing to deliver on promises of greater prosperity from soaring oil revenue. It has been using American support for a change in government as well as a possible military attack as a pretext to hound his opposition and its sympathizers.

. . .

(p. 9)  Not that everyone has been intimidated. More than 50 leading economists published a harshly worded, open letter to the president saying his policies were bringing economic ruin. High unemployment persists, there has been little foreign investment and inflation is galloping, with gasoline alone jumping 25 percent this spring.

Gasoline rationing is expected within a month, with consumers so anxious about it, reported the Web site Ruz, financed by the Dutch government, that skirmishes broke out in long lines at some pumps on June 17.

 

For the full story, see; 

NEIL MacFARQUHAR.  "Iran Cracks Down on Dissent, Parading Examples in Streets."  The New York Times, Section 1   (Sun., June 24, 2007):  1 & 9. 

(Note:  the online version of the article is entitled "Iran Cracks Down on Dissent," and is accompanied by a disclaimer that the latest evidence is ambiguous on the original claim in the print article that dissenters were being paraded in the streets.)

(Note:  ellipsis added.)

 

Sometimes “A Strongly Worded Letter” Is in Order

 

   The Titanic sinks.  Source of drawing:  http://commons.wikimedia.org/wiki/Image:St%C3%B6wer_Titanic.jpg

 

Here is one of my favorite lines from the "Titanic" movie.  It is spoken by the hero, as the Titanic sinks:

 

Jack Dawson: I don’t know about you, but I intend to go write a strongly worded letter to the White Star Line about all this.

 

Source:

"Titanic" movie (1997), as recorded in:  http://en.wikiquote.org/wiki/Titanic

 

Obama Advised by Market-Oriented Chicago Economist Goolsbee

 

(p. C1)  The Democrats, besides talking about a broader range of subjects, also have the freshest face among the top campaign advisers — Barack Obama’s lead economist, Austan Goolsbee, a 37-year-old star professor at the University of Chicago (who writes a monthly column for The New York Times). The two men met when Mr. Obama was teaching at the law school there, and they both seem to favor achieving Democratic goals through market-oriented policies. As Mr. Goolsbee has written: “Moral (p. C9) exhortation doesn’t change people’s behavior. Prices do.” Given their respective professions, the two are also more irreverent than you may expect: Mr. Goolsbee was once a member of an improvisational comedy group.

. . .

Both the Clinton and Obama campaigns are now playing catch-up on policy ideas. John Edwards, who’s running third in fund-raising and the early polls, has tried to grab attention by releasing a series of specific proposals. Rather than bringing economists into his campaign, he is relying on a network of former aides from Capitol Hill to help him sort through ideas. (One Edwards proposal — on tax simplification — was originally Mr. Goolsbee’s, in fact.) 

 

For the full commentary, see: 

DAVID LEONHARDT.  "ECONOMIX; The Advisers Are Writing Our Future."  The New York Times (Weds., April 18, 2007):  C1 & C9.

(Note:  ellipsis added.)

 

I have never met Goolsbee, or heard him speak, but I have read a couple of his articles on the economics of the internet, and other subjects, and regularly read his economics articles in the New York Times.  He often writes interesting, creative stuff that is fun to read.

I had assumed that Obama was a standard big-government Democrat, although I liked what I read about what he was reported to be saying in Africa.  Maybe his economic policies would be more promising than I assumed.

On the other hand, I am convinced that the fight against terrorism is the crucial issue of our time, and I haven’t heard much from Senator Obama on that, besides hopping on the bandwagon of Bush-bashers.  What would he constructively do to protect us from the bad guys?

 

“Roosevelt Warned us of Fearing Fear Itself; Now We Fear Life Itself”

 

   Source of book image:  http://ec1.images-amazon.com/images/P/159523005X.01._SCLZZZZZZZ_V46468787_SS500_.jpg

 

I saw Todd Buchholz on C-Span and on CNBC, and I enjoyed hearing his views, so I decided to buy his Bringing the Jobs Home.  I don’t like the title, because it sort of implies that the job market is a zero-sum-game, in which one country’s gain implies another country’s loss.  Us true-blue free marketers believe that the market is a non-zero-sum game in which everyone everywhere can have jobs, and have better ones over time.

But Buchholz’s little book is fun to read, and says much that is plausible about how the government hurts the worker and reduces the efficiency of the labor market. 

Read the following excerpt for part of his rousing conclusion to the book.

(And, Aaron, I agree with you that Buchholz is wrong to say the American spirit is "innate.") 

 

(p. 177)  . . . :  Since the 1960s, each year we’ve lost a little nerve, gained another bureaucrat, another lawyer, another layer of protection against life’s uncertainties.  We have gotten used to a government that aims to coddle us but ends up both preventing us from growing and dampening the innate American spirit.  The spirit still stirs but gets buried under the weight of the nanny state.

. . .

(p. 178)  American government officials today cannot put our standard of living in a lockbox to preserve, protect and defend us.  Franklin D. Roosevelt warned us of fearing fear itself; now we fear life itself. 

. . .

(p. 179)  To paraphrase Churchill, Americans did not sail the perilous Atlantic, scale the Appalachians and struggle past the Rockies because we were made of cotton candy.

 

Source: 

Buchholz, Todd G. Bringing the Jobs Home: How the Left Created the Outsourcing Crisis–and How We Can Fix It. New York: Sentinel, 2004.

 

Investor Wally Weitz Defends Wal-Mart

 

(p. 1D)  Weitz was able to deliver good news to about 200 shareholders in his investment company, Wallace R. Weitz & Co., at the firm’s annual meeting at the Scott Conference Center in Omaha.

The flagship Value Fund grew 18.3 percent in the fiscal year ended March 31, compared with the Standard & Poor’s 500’s 11.8 percent. The Value Fund accounts for more than $3 billion of Weitz & Co.’s $6.5 billion in assets.

. . .

(p. 2D)  Wal-Mart Stores Inc. is among the companies Weitz has invested in, and one investor asked about controversy that company has faced in recent years. Weitz said a lot of negative publicity has resulted from Wal-Mart’s huge scale, its ability to obtain less expensive products overseas, its efficient use of technology and its low prices driving competitors out of business.

Low prices that discount stores offered years ago brought them similar criticism, he said.

"It’s one of those progress things," Weitz said.

 

For the full story, see: 

Joe Ruff.  "Weitz not interested in Buffett position."  Omaha World-Herald  (Wednesday, May 23, 2007):  1D-2D.

(Note:  ellipsis added.)

 

The Mexicans Are Not What Is Wrong with Mexico

Gerardo on the left; me in the middle; and Jenny in the right lower corner.  Photo by Jeanette (who you can just barely see in the mirror over Gerardo’s shoulder).

 

In downtown Cancun we dined at a wonderful restaurant called Labná.  The food was authentic, varied, and delicious.  The service, from Gerardo (above) was attentive and replete with gracious good-will. 

The restaurant itself was an oasis of order in a milieu of disorder and decay.

As one tours Mexico, one has the sense of an enormous waste of human time and talent.  The incentive to act and the ability to get things done, is sucked away by an enormous cadre of parasitical rent-seeking hangers-on, who are either part of the government or who are privileged by government rules and regulations.

When the roof of our home in Nebraska was damaged by hail several years ago, it was replaced by a crew of Mexican workers. 

Our retired neighbor Howard had the habit of carefully monitoring all of our outdoor contractors.  Old, reliable, helpful, curmudgeony Howard (may he rest in peace) was much more likely to offer complaint than praise.  But Howard told me, with genuine respect and admiration in his voice, how impressed he was with how hard the Mexican crew had worked, especially through the oppressive heat of the summer days. 

The Mexicans are not what is wrong with Mexico.  What is wrong with Mexico is the Mexican government. 

In most areas of government activity, the Mexicans would benefit from a lot more of what Edmund Burke called "salutary neglect."

 

(Note:  Leonard Liggio reminded me of the wonderful phrase "salutary neglect" at the April 2007 meetings of the Association of Private Enterprise Education in Cancun.)

(Another note: The address of the Labná restaurant is Margaritas 29.  It is near a run-down park, where I purchased an OK cup of flan from a vendor for 10 pesos–the best flan I ever had for less than a dollar!)


Bjorn Lomborg’s Copenhagen Consensus Against Kyoto

 

(p. 8) Bjorn Lomborg, a Danish statistician who recently led the Copenhagen Consensus, an economic analysis of global environment and development issues , said that while global warming was a serious problem, Kyoto-style limits would have little impact and would divert resources better spent on alleviating poverty.

He said one element missing from most climate discussions was the need for a more vigorous effort to improve climate-friendly energy technologies like solar power and carbon capture, in which greenhouse emissions are trapped and pumped underground before they can escape into the atmosphere.

While many advocates have proposed an emissions tax, Dr. Lomborg said a much smaller investment in research and development on such technologies would be more likely to help in the long run.

 

For the full story, see: 

ANDREW C. REVKIN.  "Talks to Start On Climate Amid Split On Warming."  The New York Times, Section 1  (Sun., November 5, 2006):  8.