Wednesday, October 31, 2007

A Matter of Time

While kids are prowling the streets tonight, the inflation bogeyman is prowling Bernanke. A rate cut, a falling dollar, and 3.9% growth?

This can't last forever.

Note that the US dollar is really doing wonders for American exports, up 12.7% year over year, which was about 1 percentage point of growth. Does anyone seriously believe as was stated in the linked report that it's all the free-trade agreements that the US has signed over the last year? I don't think so; the biggest of those was perhaps South Korea? Korea didn't suck up over a hundred billion in US exports.

Of course, maybe we've just conditioned everyone out of ever worrying about inflation.

From the Comments

A reader asks:
would you elaborate on why you think it's a mistake to say that the demand for gambling services generally exceeds the supply? The supply of gambling services is constrained by law in most of the world...

Well, because in a well-functioning market, supply can never exceed demand, or vice versa. Both supply and demand are simply concepts that represent how much a group of people are willing to spend on a certain good or service at any given price, and how much a different group of people are willing to produce at a certain price.

Demand cannot "exceed" supply any more than people can buy goods that were never produced: we can only observe a higher price at which the market clears. An increase in demand - more people willing to buy at any or all prices - that is not matched by a similar movement in supply only results in a higher price, not excess demand.

There are of course times when this technically does happen, e.g. government imposes a binding price ceiling on some good (rental housing is a common one), but gambling is not one of these situations: government only limits where casinos can be built, not how many people can come through their doors, or what the house's margin on the games is going to be.

Deadweight

Since it's Halloween (a celebration I've loathed since kindergarten), I'd like to make a brief comment on the social cost associated with it. We all are likely familiar with Waldfogel's 'The Deadweight Loss of Christmas' paper, but Halloween seems like an even worse offender.

Seriously folks, how much of the junk you buy for Halloween do you actually value, and how much of it is so the neighbourhood association doesn't come after you on November 1 for turning off the lights at 5:30? At least among people I know, the answer is 'very little'.

Sure, there's a large variance among different people, but I can't help but think if Christmas has a ton of deadweight - when you're buying for people close to you, and trying to impress your relations (barring things like decorating the house) - Halloween must be even more, since we're buying for an unknown number of people, whom we don't know anything about.

ANECDOTE: After I post this, half the blogosphere does related posts. And somehow Mankiw is ahead of me 2500 to 1?

Saturday, October 27, 2007

Anomaly

The Economist regularly publishes economic statistics, as it is wont to do, and a cursory glace stumbled across something interesting. Namely, that Greece has a current account deficit of 10.5% of GDP. Iceland was at 16.7%. For comparison, the States is only at 5.6%, while Canada stands with a surplus of 1.8%.

I understand the deficits of post-Soviet countries, like Estonia, but these two stand out. If you search google news, you can find stories (recent ones, too), but no proposed explanations. I wonder.

Econ 101

How often do we see a mistake like this?
"For virtually all of history, there's been more demand than supply [for gambling]," notes Eugene Christiansen.

Story here, answer is 'way, way too much'.

GAAR

This is something I did not know:
The GAAR [General Anti-Avoidance Rule] (not GAR) is an overarching rule in the Tax Act that can attack a legitimate tax plan for being a "misuse or abuse" of the rules.

The story revolves around the idea that the interest fees on monies borrowed to invest is tax-deductible, so one could theoretically take out a loan, invest it in a family corporation, and use said corporation to purchase the mortgage - basically an interest-free mortgage.

This does seem like a good loophole to tidy up, but I'd like to make a few points. One, the people the CRA are challenging in court should have their legal fees paid for by the CRA, regardless of outcome. As of right now, they're not doing anything illegal.

More interestingly from an economic point of view, is this sort of 'creative destruction' in the tax system a good thing? Suppose we paid out money to people who came forward with holes in the tax system. I have a strong feeling this would pay for itself several times over. Full disclosure: I have never taken a course in public finance.

Wednesday, October 24, 2007

A Softball

Greg Mankiw muses about a possible solution to global warming: dumping sulfate particles into the air. These would reflect sunlight away from the planet with the accompanying cooling effects. You can visibly see this if you look at the world temperature record and note when major volcanic explosions occured. He does point out the possibility of unintended consequences, some of which I will elaborate on.

1) Breathing air contaminated with sulfur compounds will cause said compounds to bind to the surfaces of your respiratory system, increasing chances of asthma and death in general.
2) Sulfur in the atmosphere is the cause of acid rain.

However, he is not an environmentalist, he is an economist. But, he should still be familiar with this issue, because the cap-and-trade scheme devised for sulfur dioxide emissions in the United States under George HW Bush is one of the world's most successful market-based environmental initiatives.

Monday, October 22, 2007

Grade Inflation

I desperately wish that there was a comprehensive survey of the difficulty of the curricula across Canadian and American schools. Desperately. This would be of enormous use to an almost infinite number of people if only such an index could be constructed without an equally large number of allegations of bias, errors, etc.

I discuss this topic because I was today convinced that grade inflation is a more than a very rare problem at Memorial. I would trust that at every school there's a few professors that lob softballs - a certain per-course instructor at MUN once taught a summer Money & Banking class, awarding a class average of 92%, thinking that good course evaluations from students were a way to tenure - but these incidents were always rare, and not something I'd ever been involved in.

It certainly wasn't a problem going through the ranks. Introductory English gives 6% of the class an A, every year, to within .2%. That is a mean, unjustifiable curve. But there's a standard enforced. What I have larger issues with is things like take-home midterms for statistics courses, marking schemes that involve 'best two out of three' midterm tests, and the dropping of marks when the class does poorly.

As I've progressed through the ranks, I'm beginning to see these instances proliferate. Maybe it doesn't matter, since the good students are motivated to learn anyway, and the poor students will never use the stuff they putatively learned. But seriously? It's a problem.

It's a problem when introductory texts (Perloff's Microeconomics) are being used for the third course in a microeconomics sequence. It's a problem when a mathematical statistics tests has five questions, three of which I could have done in Grade 10, two of which were actually testing the material we covered. (Class average: 90% on the first midterm, accompanied with the professor's exhortations that we should be able to do better on the final.)

But, alas, there's no real way to stop it. I want to be pushed. But as long as the majority don't, and that the quality of education remains not directly observable, it's something we have to live with.

NOTE: I think Memorial still does better, at times much better, than many/most universities, especially in certain subjects. I would argue that the economics department is not characterized by grade inflation, just a number of courses that aren't up to scratch, curriculum-wise, resulting in higher grades.

EDIT: Obviously, I'm biased here.

The 'Big Lottery Fund'

Those of you reading the Globe today may have remarked upon the p.3 article concerning the decline of Sherwood Forest. You may not have remarked on how it is eligible for roughly $100m of funding through a British program known as the 'Big Lottery Fund'.

This fund hosts a contest called 'The People's Millions', in which the public votes for which project ought to recieve the cash. See a sample article here.

The question is whether this is a legitimate means of carrying out public policy. I will admit to being torn. It's got the advantages of direct conversation with the public and fighting democratic apathy (which is much worse in the UK than in Canada).

However, we elect people to make decisions, not to pass the decisions back to us while getting paid for it. Further, the people likely to vote in the contest are probably those with a peculiar affinity for lotteries or who place a low value on their time. Is this the section of the population who's preferences we should be weighting heavily?

In sum, I'd support the idea in Canada, but only if we sell off the CBC to fund it.

POSTSCRIPT: Do the people who support prediction markets for public policy support these kinds of initiatives? They must, right?

Sunday, October 21, 2007

Ethanol and Energy Independence

I hope that everyone reading this has long been convinced that biofuel - especially corn ethanol - is not going to replace our energy needs. It may well supplement traditional hydrocarbons and newer alternatives, but talking 'energy independence' from Iowa's cornfields is garbage.

Slate makes this point, as innumberable commentators have done previously:
And to raise a crop [of ethanol] sufficient to meet our gasoline thirst, we'd have to plant the entire continental United States with maize, leaving only a small corner of Delaware for bedrooms and a den.

Having been to Delaware, it's probably preferable to plant that first. It seems like better land than much of the country.

Saturday, October 20, 2007

Flaherty's Pricing Statements

You may have heard that our Finance Minister has made some noise about how Canadian retailers should be passing on the effects of the dollar's rise.

I would argue that the market is the only mechanism that is going to channel the effective savings of the strong CAD into lower prices in local stores, but let us remember that moral suasion is indeed a valid policy instrument.

Generally it's discussed of in terms of banking, but such suasion - more correctly known as 'leaning on someone', or perhaps even 'blackmail' - might well have a small effect.

The problem is that it's not a credible threat. What's Flaherty going to do if Wal-Mart doesn't cut prices sufficiently to his tastes? Create some sort of behemoth legislation? Don't think so.

In sum, competition is going to lower prices, not politicians.

Blog Update

I added labels to the blog - there's so many it's hard to miss. To a certain extent, it's an asthetic pain, but it's more convenient than heading over to google and searching the website in the hopes I posted something about a particular topic.

I'm still undecided if they'll stay or not - the sheer volume of labels is pretty ugly. I'll give them a chance, anyhow.

Friday, October 19, 2007

Economics of Telephone Voices

If you live in a house like mine (I'll let you decide if that's fortunate or unfortunate), you have to put up with a lot of phone calls. Inevitably, one comes to notice that people markedly change their voices when talking on the phone. Obviously, we ourselves are not wont to notice this, but other people notice. Ask someone.

Anyway, can we explain this through economics? Like most things, yes. Assume that when we interact socially our body language is partially instinct: one's likely to be frightened on top of a roller coaster; but also partially controlled to impress: we're at lot less likely to scream at the top of said coaster if we're trying to impress someone.

When talking face-to-face, we have all sorts of weapons at our disposal to influence someone beyond our words: eye contact, body language, voice, physical positioning, etc, etc. Let's assume the law of diminishing marginal returns holds: you're likely to spread out your effort over these multiple avenues to optimize your chance to convey what you want. Thus, major changes - like a different voice - are unlikely, because they're "costly", in terms of social effort, compared to doing a few small things, like eye contact and a good handshake.

However, on the phone, we're reduced only to our voice. So, it's only logical that more effort is concentrated on the voice, even subconsciously, to produce the desired social result. Even if we're willing to "spend" less on phone interaction, some of the effort spend on other forms of body language gets shifted to the voice, resulting in a 'telephone voice'.

Blog Update

Hrmm. The reader count increased by over 100 in the last 24 hours, which is roughly five times faster than my normal pace; I can't pinpoint the cause.

Anyway, we're well past the 1000 visitors mark, according to sitemeter. ClustrMaps has recorded about 30 more visitors, and AdSense another 40 more again, which has now earned $0.73. At that rate, MR has cleared roughly $8000, so I guess I can understand the value for high-traffic locales.

Of course, since at least 219 of those visits are me showing up to post a entry, it's not quite as impressive as one would like. Regardless.

Thursday, October 18, 2007

I'm Not Crazy

Persuant to a recent post about the utility I derive from anticipation, a much more well-read member of the blogosphere has picked up the torch and pointed me towards a literature on this topic. Allow me to quote:
There’s actually quite a lot of work that’s been done on utility gained from anticipation. George Loewenstein’s 1987 paper reports a study in which people were willing to pay more for a kiss they received in three days than they would be willing to pay for the same kiss today. They gained pleasure simply from thinking about the kiss and anticipating how good it would be. I don’t think the students in the study ever actually got the kiss so he doesn’t mention whether it lived up to expectations. Interestingly, this idea of utility from anticipation only seems to hold over non-monetary items. Nobody values receiving $1000 in three days more than $1000 today: monetary gains are discounted as one would normally expect.

See the whole post for links to papers and more comment.

Crucial Statistics

Statscan reports:
Stocks of frozen poultry meat in cold storage on October 1 totalled 65,090 metric tonnes, down 2.1% from a year ago.

I really hope there's little money spent on this survey. I am very unsure what value this has.

Wednesday, October 17, 2007

Oil Misconceptions

Free Exchange (recently demoted) discusses the price of oil and completely ignores how the US dollar falling relative to practically every currency in the world over the period in question might be related.

I previously posted a tidbit on this here.

Local Housing Prices

From the CBC:
St. John's is expected to see house price growth of 12 per cent next year, followed by Regina and Kelowna, B.C., acccording to Re/Max.

Basically, the housing market out here is driven by oil development. When the Hebron deal fell through back in April 2006, house prices did the same within a week. Now that Hebron's back, so are home values.

Negative Discount Rates

Is anyone else out there in possession of a negative discount rate? I'm fairly sure I am, at least for some goods. Now, I'm not willing to give $100 today for $95 next year, but I find there are several areas where I would pay to delay my consumption of something that is unambiguously a good.

For example, I derive substantial utility from plotting how to purchase video games. I conduct research, visit stores, etc, even when the end result of the purchase is often leaving it on the shelf. Similarly, I think I derive more utility from plotting what to do with my free time than I actually get from utilizing that free time.

Basically, my anticipation, or more correctly, planning, of consumption often outweighs the utility derived from consumption, even in the context of perfect information about what is to be consumed.

I'm unsure how compatible this is in terms of welfare economics, but that's not my field.

On Inflation

A quickie before I return to tangling with the proof of the main existence theorem for Riemann-Stieltjes integrals:
One cannot fight inflation.

Taken from the in-game help function of Civilization 4, a game in which your empire's inflation rate increases purely as a function of time.

Monday, October 15, 2007

Nobel

Bloomberg tells us what any news source would today: Hurwicz, Maskin, and Myerson for the Nobel.

I have not read a paper by any of these people, so I'm not qualified to comment. The blogosphere seems to be focusing on Maskin, though, from a cursory glance.

Either way, Dixit will have to wait. The only real point I want to make is that I think the trend of awarding Nobels to multiple people is getting out of hand. Pick an individual and be done with it, barring very substantial and relevant coauthorship.

ANECDOTE: The article says that only one economics laureate is from Canada. Wikipedia disagrees. I'd resolve this conflict if I didn't have class.

The Tragedy of Choice

The very fact that making a choice requires a certain expenditure of cognitive power implies that at some point at possibility exists where one might be overwhelmed by the sheer volume of choices. For me, this point was digital television. Something that was willingly purchased (albeit not by me, perhaps the person with the money has different tastes.) 200 odd channels is simply too much; I'd be better off if many (most?) of them simply disappeared.

The problem is, of course, that rigging each individual's television to work perfectly with their preferences is an impossibility, and the choice between no choice and lots of choice is an easy choice. Second best solutions, second best world, etc, to quote the Rodrik mantra.

Either way, such unusual outcomes (at least from the standpoint of traditional micro theory) are worth keeping track of.

ANECDOTE: Some ambitious third-years (American readers would know them as juniors, I believe) have tied together the initiative to restart the economics society, which, like the phoenix, dies and is ressurected on a periodic basis. Ah, the optimism of youth!

Friday, October 12, 2007

Did You Know This?

SIR – A “saffron revolution” in Myanmar sounds romantic, but Burmese monks don't dye their robes with saffron (“The saffron revolution”, September 29th). Thai monks do, which gives their robes that beautiful golden colour. Burmese monks achieve their deeper brown with different kinds of bark, ficus and jackfruit, though I suppose the “jackfruit revolution” doesn't have quite the same ring to it.

Taken from letters to the editor of today's Economist, here.

ANECDOTE: This is the final list of schools I'm applying to: Berkeley, Princeton, Yale, Minnesota, Rochester, Brown, British Columbia, Toronto, Queens.

Wednesday, October 10, 2007

Wealth and Gender

I would like someone to issue a cogent explanation of how the two richest people in China are both women. See here.

Now, China is a society which oppresses women more than the Western world. This is not up for debate. I have been told firsthand by someone from China on how girls are often abandonded at birth because only males are suitable for continuing the family. The press is right.

Yet, the wealthiest woman in the Western world comes in at #12 on the billionaire list. A far cry from #1. Liliane Bettencourt.

The richest self-made woman in China? The number two overall, Zhang Yin, who started Nine Dragons Paper. Also the richest self-made woman in the world. Worth about $10 billion.

So, explain again how Western society is oppressing women from becoming rich? Their counterparts in poorer countries, where the hurdles are much bigger, aren't having problems.

Can we write this off to coincidence? Are there really bigger hurdles in Canada et al? (I find this unplausible.) My most tempting explanation is that the developed world is already picked over for wealth-generating ideas, and the lush ones were taken long ago, when men really did control everything. This argument basically boils down to that Western women had fewer leeway to exercise economic power when we were industrializing compared to the economic powers Chinese women have now, when their country is industrializing.

Slate on Canada

Well, I felt this was worthy:
During his first answer, Thompson ran into trouble when he paused to think, and it seemed like he might never return. The dead air was longer than some of his lines of movie dialogue. He got more comfortable over the two hours, though, and by the end of the debate, he was relaxed enough to answer the pop-quiz question about the prime minister of Canada, a piece of trivia that would have been devastating had he botched it.

Let's zoom in:
the prime minister of Canada, a piece of trivia

Gee, makes us up here in the frozen north feel good, eh? I would hope that wouldn't trip up any federally elected official in the US, but I know better.

Article here.
See also: Talking to Americans.

InTrade

So, I signed up for inTrade to lay down a dollar on my pick for the Nobel, and ran into a wall when trying to deposit money through credit card. Apparently, one needs to fax (or scan/email) the following before they accept a credit card:
(i) driver's license.
(ii) utility bill.
(iii) credit card and credit card statement.

Let's see. I don't have a utility bill, and neither do most students in residence - the university is paying for that directly, and we remit the university. I don't have a credit card statement; all my banking is done electronically, though I suppose I could print something off.

However, not very many people are going to feel comfortable faxing all that information off to Ireland, myself among them. As such, I may be an inTrade member, but I will not be participating in the market.

This kinda scrutiny is somewhat unprecented. Ebay/paypal, amazon, chapters, etc, etc - none of these people require nearly this much. And all are willing to give credit card refunds, lest one point out that the ability to remove money from inTrade makes a difference.

The alternative to inTrade, the Iowa Electronic Market, is much too simple. There's simply not enough selection. You're basically confined to presidential candidates and the Fed.

Conclusion: I now place much less faith in prediction markets, which with these barriers cannot accurately represent a good sample of the population.

Monday, October 8, 2007

Zimbabwe

Blogging about Zimbabwe is a guilty pleasure, kinda like watching Lucky Star or shooting fish in a barrel. However, as this is Thanksgiving, this seems particularly apt:
My wife and I decided to spoil ourselves on our 25th wedding anniversary and delighted that some restaurants had food available, we set off for the CBD and began to relax in a comfortable establishment (it would not be wise to mention the name of the restaurant due to the current persecution of business people).

The manager on duty was aware of the reason for our celebration and disappeared into the kitchen to return to our table and whisper that he had some pieces of meat for us.

We gleefully accepted his offer and he personally served a sizzling steak but completely covered with lettuce.

He softly told us none of the other guests must see what you are eating.

I once again recommend Sokwanele for news about Zimbabwe.

Bilateral Trade Deficits

...are normal. As econbrowser has repeatedly done a much better job of pointing out than I will ever do, it doesn't matter what the trade deficit or surplus is in any one particular sector or with any one particular country, be that in footwear or with Japan. The very fact that bilateral trade deficits exist in a country with a positive current account balance (such as Canada) is effectively proof that there's something behind the notion of comparative advantage.

Yet, for reasons unknown to this student, half of the financial reporters in the country have disrupted their respective Thanksgivings to report on the fact that Canada imports more cars than we sell abroad. See, for example, here, here, here, and here.

Seriously. Does anyone care that I have a bilateral trade deficit with Hershey, Pennsylvania? Or that Newfoundland has a bilateral trade deficit with Saskatchewan in grains and cereals? I hope not. Similarly, nobody should care that Canada has a trade deficit in cars.
While Canada's automotive trade deficit with Japan is the largest, exceeding $6 billion, the most unbalanced relationship is with Korea. The report says Canada buys 183 times as much automotive value as it sells in Korea.
...
As a result, the CAW is calling on the federal government to stop trade negotiations with Korea."

Let's hope Ottawa has more sense than to listen.

The Dangers Of Newfoundland Politics

The election campaign for Tuesday's vote, which has only been about three weeks long, if that - nothing compared to the Ontario marathon - has proved particularly worrisome for the liberal party.

From a slate of 47 liberal candidates, one has died and two have been hospitalized during the campaign.

Given that the Williams-led PC's are going to accomplish a near-total sweep of the province anyway, I'm not sure what the incentive is for these people to fight a losing fight, while apparently risking life and limb.

All the moreso after the shutting down of the constituency allowance freebies. Seriously, I don't see any rents here.

Internet Ad Revenues

The CBC informs us that internet ad revenues were worth approximately $10 billion in the first half of the year, of which Google captures about 40%.

For those keeping track, this site has captured approximately 0.00000000007%.

I continue to wonder which companies are stupid enough to collectively fork over this kind of cash. Personally, I can't recall ever making a purchasing decision on the basis of an internet ad.

Sunday, October 7, 2007

Not in China

One cannot read this blog in China.

HT: A Stitch In Haste.

Sadly, this is probably due to the entirety of blogger being blocked, not me in particular. Does anyone have a counterexample? (i.e. a blogger blog that does pass this test?)

NOTE: My ClustrMap seems to confirm this blockage.

UPDATE: Sadly, all of blogger is blocked in China. I'm not special. ;_;

Nobel Speculation

It seems that Greg Mankiw has inaugurated the prediction season for the upcoming Nobel prize in economics.

I don't even know when it's awarded, but that won't stop me from hazarding my guesses.

1. Avinash Dixit.
2. Paul Romer and Robert Barro.

Friday, October 5, 2007

Alternatives

You know, as much as we collectively hear from manufacturers about how bad the rising dollar is (and that's hard to sympathize with as anything but a special interest when we get jobs reports like this), a low dollar would be worse.

There would be riots in the streets. After all, let's remember that Joe Clark's government fell on a motion to introduce a gas tax of 4 cents on the litre.

Suppose that the Canadian dollar was pegged to the US, or had depreciated alongside, or that Canada had adopted the greenback; something like that. If anyone remembers the CAD being at 62 cents, they probably also remember such calls for reform.

If we take the numbers provided by the department of Finance, who assert that the price of gas is 48% derived from crude oil prices, and assume a 70 cent dollar, instead of one at par, with oil at $80, some quick (and dirty) calculations yield the following:

Current gas price in St. John's at the station one block away from my humble abode: $1.108 per litre.
Hypothetical gas price: $1.273.

That is, for those not proficient at subtraction, an extra 16.5 cents on every litre. Adjusting for inflation from 1979, that's about 7 cents a litre extra. 4 < 7.

Okay, I'm not seriously suggesting that we'd get riots over this (this is, after all, Canada), but right now the strong loonie is saving you ten bucks (in today's money) every time you fill up. As my grandmother would say, "Better than a kick in the pants."

Thursday, October 4, 2007

Academic Economists

A quick snippet, taken from a comment to this post in Greg Mankiw's realm:
Just a testimony-

On Christmas day of 2006 (yes, Dec 25th!) - a cold boston winter day -I saw Prof Daron Acemoglu wrapped in scarf, holding a briefcase, entered the MIT economics department.

I assume that people who work on Christmas day must be very, very productive...

As much as I want to be an academic economist, this is not who I want to be. (Adcoms, please don't read this!)

Acemoglu has written a ton of great stuff, at an unbelievable pace, and I would be seriously surprised if he doesn't end up with a Nobel. But - right now anyway - I don't want economics to have my whole life.

...Though I probably would work Christmas, just because it'd be easy to get around, and I wouldn't have anything else to do - my family hasn't exchanged gifts in years.

Update

Stackelberg Follower will shamelessly waste the recent publicity boost from The Worthwhile Canadian Iniative, as I am hoping to make myself scarcer on the internet following a second, quite disappointing, assignment mark in Analysis III. This mark actually holds the distinction for 'worst mark ever recieved on evaluation worth more than 0.5% of a course'. I won't be gone, just don't expect three posts a day.

As an economist, it gets harder every day to keep up with the mathematicians.

ANECDOTE: Since we're being personal today, I am astounded by just how educated the people I went to high school with are today. From the forty-ish people that went through French Immersion and/or AP Math with me, I count two people applying to doctoral programs, three people applying to medical programs, two applying to law programs, another couple of pharmacists, a journalist who already has a succesful career, plus all sorts of master's candidates. I haven't even kept in touch with most of these people. Not bad for Newfoundland.

Wednesday, October 3, 2007

Watch This

This. Right now. It's worth every minute.

Shamlessly stolen from Dani Rodrik.

EDIT: The presentation tool used is available, free, here: The Gapminder.

Intellectual Imbalance

This is moreso an odd tidbit, but as an individual, I am full of policy ideas for the nation as a whole. Dozens of them.

But as a Newfoundlander - even with an election this week - I still can't muster up more than a few drabbles about what needs doing here at home.

I'm not sure whether this reflects the good times in the capital - the unemployment rate, after all, is less than that of Toronto - or the hopelessness of doing anything about rural Newfoundland.

I have yet to hear a cognet argument that any substantial part of rural Newfoundland can be saved. The only reason that anyone went out there in the first place is because there were fish. In some cases, a few prime trees were cut. That's it. There's nothing else.

The fish are all gone, and half the province has been hanging on to a dream that's passed. I seriously don't know if a technical solution exists.

The Price of Oil

A substantial part of the runup in oil prices over the last few years is a function of the falling American dollar.

That sentence was spurred by a friend wondering why gas is cheaper now than it was last year, despite an increased price of oil - when stated in USD. Well, because the CAD has appreciated, just as most currencies have, relative to the USD.

Conclusion: Someone needs to index the oil price so that is abstracted from currency movements. Sadly, I do not have a reliable method to do this. Does such an index exist?

Tuesday, October 2, 2007

The Econoblogosphere

Yes, this is apparently a word. Coined by these people, who have conveniently provided an interactive guide to navigating the world of economics blogs.

I have as yet failed to show up on their radar, but Dani Rodrik didn't make it either, so I am in distinguished company. (HT: Distributed Intelligence.)

ANECDOTE: I had thought this was my 200th post, until I realized that blogger actually counted unpublished drafts. In actuality, this is #194.

The Anticommons?

Reason magazine (oh no! my libertarian tendencies are outed!) has a worthwhile article examining whether the mass of patents in the medical field, such as patents on certain gene tests, are actually proving detrimental to innovation.

Typically, we think of intellectual property protection as encouraging innovation: such legal protection generally allows rents to accrue to the person making the breakthrough, and whether they are modeled through a lower marginal cost, temporary monopoly profits, or whatever, is irrelevant to this dicussion. If you can't protect your invention, everyone else takes it for free, so why would you invest in R&D in the first place.

The concern in medicine (though Reason doesn't make this point perfectly clear) is that there's so much research being done outside of the corporate machine that the private sector's patents are preventing more research in hospitals, universities, and the like, than they are stimulating in the private sector.

Reason argues that the patents have had little detrimental impact:
"Overall, the number of projects abandoned or delayed as a result of technology access difficulties is extremely small (emphasis theirs), as is the number of occasions in which investigators revise their protocols to avoid intellectual property issues or pay high costs to obtain one. Thus, it appears that for the time being, access to patents or information inputs into biomedical research rarely imposes a significant burden for academic biomedical researchers."

They are quoting an NAS report. The problem is not in the projects that were abandoned, but in the projects that were never started. Very few people qualified to do medical research (full disclosure: I am not one of them) are stupid to actually start a project that requires use of a patended, and hence costly or unavailable, lab test, or whatever.

Thus, I think Reason might be understating the depth of the problem. But there's no practical solution I see: decreasing intellectual property protection in the medical sector would lead to ills much, much more severe than this 'anticommons'.

Anthropological Conceptions of Economics

So, at breakfast, I was idly turning the pages of an introductory anthropology text being utilized by my brother this term. In a house populated by three university students, a professor, and a teacher, books are a common find. During term, I don't so much read books as browse through various ones.

Regardless, this anthropology textbook was, shall we say, quite poor. I think our profession has often wondered where the rest of the world obtains their economic insight. Sadly, for some reason, their anthropology texts are for some reason sneaking into the dismal science as early as p.50.

Let's examine some of the assertions made by this book. (Which, bizarrely, is not to be found on amazon.com or amazon.ca. You're going to have to trust me on this. Cultural Anthropology, 3rd Canadian Edition, Miller/Van Esterik/Van Esterik.)

1) Industrial society was a big mistake. It's apparently not sustainable in the long run. Agriculture gets upgraded to a "terrible mistake". "Non-intensive pastoralism" is a more sustainable - and get this - more efficient and productive!

Yes, I yearn for the days in Newfoundland when getting fruit during the winter was like Christmas and Easter balled together. Sounds super. (This was less than fifty years ago.) Anyone who thinks that society is too rich and needs to regress has mental issues.

2) Property rights detract from long-term sustainability. Groups use encourage communable property, or more formally, confer 'use rights' on everyone in the town/village/etc. This prevents the resource being destroyed from short-term profit-minded exploitation.

I'm pretty sure very few economists would agree with this. I believe it was even addressed in The Wealth of Nations. Nobody who owns their fields will run them to the ground - it just doesn't make economic sense. Common fields, however, are very prone to the so-called 'tragedy of the commons'.

3) Earlier modes of life, which the authors label 'horticulturalism, pastoralism, and foraging societies' - "have long term sustainability when not affected by encroachments from economic systems".

I am not aware that anyone suggests village life is somehow not an economic system. You cannot separate production of goods from economics. Period. Further, the only reason that we have traditionally seen long-term sustainability among older lifestyles is that most people died under those systems, and so the population never increased sufficiently to having to think about sustainability.

You know, I could keep going. There's a diatribe against free trade. There's complaints about income inequality, which are legitimate, but not when you argue they exist because of a deliberate conspiracy by richer nations against poorer ones. Etc. Etc, etc, etc, etc.

Perhaps most tellingly, the references to the chapter do not contain a single book that deals with economics as economists know it.

Monday, October 1, 2007

Quebec's Carbon Tax

I'll admit that this story had flown under my radar. I heard about the legislation previously, but I didn't realize it had actually passed and was being implemented.

I'd almost care if the tax was big enough to do anything. Less than a cent on a litre of fuel isn't going to faze anyone. It's not even substantial enough to be sufficiently distinct from white noise (according to my gut, at least at 'conventional levels of significance') and thus serve as a basis for research.

But it's a good idea, and a small step, even if it should be more directly applied to consumers, and not assessed to companies based on how much fuel they import, which is perhaps one of the most distortionary things I've ever heard of.

Outrage Spreads

Even Penny Arcade has picked up on the current pricing disequilibria between Canada and our southern neighbours:
I will tell you this much: Canadian Gamers as a whole are pretty much getting boned at the moment, and boned thoroughly, by the exchange rate. The bone may need to be surgically removed. Canadian Dollars (called "poutines") are at par with US currency, but their games cost ten dollars more. Ten whole Goddamned dollars. The reason I make a point of it is that when I put a mere sixty dollars down on a game, I already feel as though I've been robbed at gunpoint. I have no idea how the gentle Canadian must feel about this state of affairs, where the dark analogies might travel from there. I assume they run their hands slowly along their, slowly looking for the tell-tale signs of organ removal.

I figured that one may not have made it onto your content aggregator.

On a different topic, my personal outrage has subsided now that the Ontario conservatives have backed down on funding all religious schools from public money. This is little progress, however, since it was unpopular (thankfully), and more importantly, Catholic schools are already funded by government.

Mr. Tory had something right when he said the government should level the religious playing field. But that means no funding to any religion, not funding them all.

Finally, I am disappointed (but perhaps not outraged) at the turnout to Memorial's graduate fair. Queen's was the eminent attendee. I was sad that UBC or Toronto didn't put in an appearance.