Tuesday, April 30, 2013


Back in 1997, writing in Discover Magazine, Jared Diamond repeated a story he heard somewhere;

When the U.S. Navy faced a shortage of trained typists in World War II, it experimented with retraining QWERTY typists to use Dvorak. The retraining quickly enabled the Navy’s test typists to increase their typing accuracy by 68 percent and their speed by 74 percent. Faced with these convincing results, the Navy ordered thousands of Dvorak typewriters.
They never got them. The Treasury Department vetoed the Navy purchase order, probably for the same reason that has blocked acceptance of all improved, non-QWERTY keyboards for the last 80 years: the commitment to QWERTY of tens of millions of typists, teachers, salespeople, office managers, and manufacturers. 
Pardon our skepticism, but the above World War II era training video made by the   US Navy seems to show some interest in typing efficiencies.  Almost obsessive in detail.  Diamond gives no source for his claim that the Treasury, 'vetoed the Navy purchase order', but it strains credulity to think that the Navy would be denied the opportunity to implement the claimed productivity improvement.

It's hard to think of an organization that was better situated to overcome settled ways of doing things than the wartime US military.  The Navy, among other things, had adapted the non-written Navajo language into a code used quite effectively by Marines at Guadacanal, Tarawa, Iwo Jima, Okinawa and several other island campaigns.

In Europe General Omar Bradley famously had suggestion boxes placed with every army unit which he collected and read, always on the alert for ways to improve the ability of his men to kill Germans.

All the branches of the military had been on crash training courses since December 7, 1941 to convert civilians to soldiers, sailors and airmen.  Why would 'the Treasury' draw the line at typist training?

Monday, April 29, 2013

Paul, Robin, Barcelona

Be there or be square, in less than two months for Neil Kay's presentation;
This paper reviews the emergence of the QWERTY standard which in turn has lent its name to what Krugman and Wells (2006) describe as the “QWERTY problem: an inferior industry standard that has prevailed possibly because of historical accident”.  QWERTY was neither inefficient nor an accident, it was engineered by Christopher Latham Sholes in 1873 to be as near-optimal as possible given the technology and user needs of his day.  To achieve this, Sholes used a simple meta-rule that is obvious once articulated but which has not been publicly recognised until recently.  Despite its general adoption as “paradigm case” in the literature on path dependence, the analysis here finds the evidence is not consistent with QWERTY being a path dependent phenomenon, nor does QWERTY provide any basis for policy prescriptions based on common interpretations of what constitutes “the QWERTY problem”.  
Too bad thousands of impressionable economics students have already read the opposite in the Krugmans' textbook. As Kay puts it;
Krugman and Wells (2006), who in the glossary of their introductory economics textbook define; “QWERTY problem: an inferior industry standard that has prevailed possibly because of historical accident” (p. G-12)”. The QWERTY problem has as its basis “in the world of QWERTY one cannot trust markets to get it right” (Krugman, 1994, p.235).  Krugman and Wells’ (2006) advise their beginning economics students; “Government can play a useful role both in helping an industry establish a standard and helping it avoid getting trapped in an inferior standard known as the QWERTY problem” (p.536) and also “in principle government intervention might be useful in moving an industry to a superior standard” (p.534) .  
The Krugmans' confidence being in inverse proportion to the evidence they offer for the actual existence of the 'QWERTY problem'.

Brave New Marketing World

From McKinsey & Co, Peter Dahlström and David Edelman predict we haven't seen anything yet;
Digital marketing is about to enter more challenging territory. Building on the vast increase in consumer power brought on by the digital age, marketing is headed toward being on demand—not just always “on,” but also always relevant, responsive to the consumer’s desire for marketing that cuts through the noise with pinpoint delivery.
For instance;
Consider Commonwealth Bank of Australia’s new smartphone app, which changes the house-hunting experience. A prospective home buyer begins by taking a picture of a house he or she likes. Using image-recognition software and location-based technologies, the app identifies the house and provides the list price, taxes, and other information. It then connects with the buyer’s personal financial data and (with further links to lender databases) determines whether the buyer can be preapproved for a mortgage (and, if so, in what amount). This nearly instantaneous series of interactions cuts through the hassle of searching real-estate agents’ sites for houses and then connecting with the agents or with mortgage brokers for financing, which might take a week.
The mortgage app shows how the digital environment is now integrating disparate sources of information, at low cost and at scale, for many new domains. The challenge for companies is to look beyond today’s interfaces and interactions and to see that moving past compromises will require a rethinking of aspects of packaging, pricing, delivery, and products. 
More power to the consumer.

Sunday, April 28, 2013

Vee haff vays of making you essen

Not even a vegetarian's delight, but they also served der Führer who only sat and ate;

"He was a vegetarian. He never ate any meat during the entire time I was there," [Margot] Woelk said of the Nazi leader. "And Hitler was so paranoid that the British would poison him — that's why he had 15 girls taste the food before he ate it himself."
With many Germans contending with food shortages and a bland diet as the war dragged on, sampling Hitler's food had its advantages.
"The food was delicious, only the best vegetables, asparagus, bell peppers, everything you can imagine. And always with a side of rice or pasta," she recalled. "But this constant fear — we knew of all those poisoning rumors and could never enjoy the food. Every day we feared it was going to be our last meal."
The petite widow's story is a tale of the horror, pain and dislocation endured by people of all sides who survived World War II.
Only now in the sunset of her life has she been willing to relate her experiences, which she had buried because of shame and the fear of prosecution for having worked with the Nazis, although she insists she was never a party member.
'I wasn't political, I had no idea why anyone would want to poison the guy.'

Saturday, April 27, 2013

Think the Laws of Supply and Demand don't matter?

Think again, as this paper from Mary C. Daly and Bart Hobijn of the San Francisco Fed makes obvious;
...three things stand out. First, the fraction of workers with no wage change increased substantially in 2011 relative to 2006.  In 2006 about 12 percent of workers reported zero wage change; in 2011 the share had risen to about 16 percent. This 16 percent is the highest level of the spike at zero for all the 32 years for which we have CPS data. 
Second, the fraction of workers getting a wage increase declined noticeably over the period and the size of wage increases, conditional on getting one, was  substantially lower in 2011 than in 2006.  Thus,  there is notable compression of wage gains near zero, suggesting that the inability to adjust nominal wages downward may influence the magnitude of wage increases.  This is a point made by Elsby (2009). 
Finally and surprisingly, there is little difference in the fraction of workers that get wage cuts between 2006 and 2011.
[Bold in the above courtesy HSIB]

What all that means is that when wages aren't free to fluctuate in response to changes in the demand for labor, surplus (of workers without jobs) and shortage (of  job opportunities) will result.  Pretty much as Adam Smith drew it up 237 years ago.

Now, why isn't that a bigger factor in political discourse during this latest period of economic travail?  Is it that powerful people don't want to hear the old wisdom, because they might find themselves in the embarrassing position of having to explain why they passed laws that ended up increasing such wage rigidities?

Things like collective bargaining, minimum wages, 99 weeks of unemployment compensation, occupational licensing....

[Thanks to Scott Sumner]

Thursday, April 25, 2013

Ought to be a SNAP

But, can you keep a secret, the Detroit News can't;

Lansing — A secret work group that includes top aides to Gov. Rick Snyder has been meeting since December to develop a lower-cost model for K-12 public education with a funding mechanism that resembles school vouchers.
The education reform advisory team has dubbed itself a "skunk works" project working outside of the government bureaucracy and education establishment with a goal of creating a "value school" that costs $5,000 per child annually to operate, according to meeting minutes and reports obtained by The Detroit News.
Skunk, as in stinking up the garden party of the MEA?

...records distributed to group members indicate they want to explore using fewer teachers and more instruction through long-distance video conferencing. Each "value school" student would receive a "Michigan Education Card" to pay for their "tuition" — similar to the electronic benefits transfer used to distribute food stamps and cash assistance for the poor.
Students could use leftover money on the "EduCard" for high school Advanced Placement courses, music lessons, sport team fees, remedial education or cyber courses, according to an outline of the advisory team's agenda.
Yes, the economy is complex, all right.

Wednesday, April 24, 2013

The Use of Knowledge in Santa Fe

Or at least at the Institute (should it be institution?), has not apparently kept up with the economics profession since 1945, if the latest paper by W. Brian Arthur is any guide;
Complexity economics holds that the economy is not....something given and existing but forms from a constantly developing set of institutions, arrangements, and technological innovations. The approach got its start largely at the Santa Fe Institute in the late 1980s...
Not exactly, Herr Doktor.  Here's what F.A. Hayek  said back in 1945--and not in some obscure journal, but in the American Economic Review;
The economic problem of society is thus not merely a problem of how to allocate "given" resources—if "given" is taken to mean given to a single mind which deliberately solves the problem set by these "data." It is rather a problem of how to secure the best use of resources known to any of the members of society, for ends whose relative importance only these individuals know. Or, to put it briefly, it is a problem of the utilization of knowledge which is not given to anyone in its totality.
Emphases in the above (and also below) by HSIB.  Back to Brian Arthur;
What does this different way of thinking about the economy offer? ....I will argue that this new approach is not just an extension of standard economics,  nor does it consist of adding agent-based behavior to standard models. It is a  different way of seeing the economy.  It gives  a different view, one where actions and strategies constantly evolve, where time becomes important, where structures constantly form and re-form, where phenomena appear that are not visible to standard equilibrium analysis, and where a meso-layer between the micro and the macro becomes important. This view, in other words, gives us a world closer to that of political economy than to neoclassical theory, a world that is organic, evolutionary, and historically-contingent.
There's that claim of complexity economics being new again, but Fritz knew all this (and more, trust me);
...if detailed economic plans could be laid down for fairly long periods in advance and then closely adhered to, so that no further economic decisions of importance would be required, the task of drawing up a comprehensive plan governing all economic activity would be much less formidable.
It is, perhaps, worth stressing that economic problems arise always and only in consequence of change. ....
The continuous flow of goods and services is maintained by constant deliberate adjustments, by new dispositions made every day in the light of circumstances not known the day before, by B stepping in at once when A fails to deliver. Even the large and highly mechanized plant keeps going largely because of an environment upon which it can draw for all sorts of unexpected needs; tiles for its roof, stationery for its forms, and all the thousand and one kinds of equipment in which it cannot be self-contained and which the plans for the operation of the plant require to be readily available in the market. ....
If we can agree that the economic problem of society is mainly one of rapid adaptation to changes in the particular circumstances of time and place, it would seem to follow that the ultimate decisions must be left to the people who are familiar with these circumstances, who know directly of the relevant changes and of the resources immediately available to meet them.
(more to come)

Tuesday, April 23, 2013

A Marxist walks into a Bureau

In 1960, at the Dept. of Labor, his name is Thomas Sowell, and he thinks he has a great idea. As he tells it;
So you were a lefty once.
Through the decade of my 20s, I was a Marxist.
What made you turn around?
What began to change my mind was working in the summer of 1960 as an intern in the federal government, studying minimum-wage laws in Puerto Rico. It was painfully clear that as they pushed up minimum wage levels, which they did at that time industry by industry, the employment levels were falling. I was studying the sugar industry. There were two explanations of what was happening. One was the conventional economic explanation: that as you pushed up the minimum-wage level, you were pricing people out of their jobs. The other one was that there were a series of hurricanes that had come through Puerto Rico, destroying sugar cane in the field, and therefore employment was lower. The unions preferred that explanation, and some of the liberals did, too.
Did you discover something that surprised you?
I spent the summer trying to figure out how to tell empirically which explanation was true. And one day I figured it out. I came to the office and announced that what we needed was data on the amount of sugar cane standing in the field before the hurricane moved through. I expected to be congratulated. And I saw these looks of shock on people’s faces. As if, “This idiot has stumbled on something that’s going to blow the whole game!” To me the question was: Is this law making poor people better off or worse off?
That was the not the question the labor department was looking at. About one-third of their budget at that time came from administering the wages and hours laws. They may have chosen to believe that the law was benign, but they certainly weren’t going to engage in any scrutiny of the law.
What that said to me was that the incentives of government agencies are different than what the laws they were set up to administer were intended to accomplish. That may not sound very original in the James Buchanan era, when we know about “Public Choice” theory. But it was a revelation for me.
When the above story was related to the commenters at Baseline Scenario, a somewhat different conclusion was reached;
Thomas Sowell’s story suggests that he was in the wrong department, not that the incentives of any government agency are inherently flawed. It’s the same issue within any large organization; power is guarded jealously, and maintenance of the status quo takes precedence over evaluating its effectiveness.
The solution is not to abolish all efforts at societal change by government, but to set up laws intelligently such that separate organizations are responsible for administration versus evaluation. In theory the legislative branch should be evaluating the results of its laws as administered by the executive, and tweaking them as appropriate. 
Yes, that certainly is the theory. But, as Owen Glendower said heard when he claimed to be able to call spirits from the vasty deep: Does it come when you call it?  We eagerly await the evidence of what the right department would have been.

He COULD quit his day job, and make it as a writer for Leno

Steve Margolis, co-author with Stan Liebowitz of The Troubled Path of the Lock-In Movement (and numerous other scholarly papers bearing on the 'new' economics of path dependence) appears to find as much amusement as we do in W. Brian Arthur's latest contribution to the genre, Complexity Economics:
A Different Framework for Economic Thought.  Which concludes with

Complexity economics  is still in its early days and many economists  are  pushing its boundaries outward.  It shows us an economy perpetually inventing itself, perpetually creating possibilities for exploitation, perpetually open to response. An economy that is not dead, static, timeless, and perfect, but one that is  alive,  ever-changing,  organic,  and full of messy vitality.
Steve e-mails us; Hey, with all this stuff about the economy being living, messy, etc, maybe he's on his way to becoming an Austrian. 


They hemlocked Socrates, didn't they

For corrupting Athens' youth.  In the comments section of The Money Illusion we read (from one Ashok Rao);
I’m an intern there [the Santa Fe Institute] – which is why I’m particularly interested. I’ll be in college next year, and my degree program is very similar to some of the complexity science stuff.
Who has fallen under the spell of the Pied Piper of Path Dependence, Brian Arthur;
If this sort of thing interests you, I’ll direct you to this new paper by W Brian Arthur, a stalwart of the field....
Of course, it turns out that Brian Arthur seems to be unaware of what Joseph Schumpeter wrote in the 1940s, in Capitalism, Socialism and Democracy, about equilibrium (i.e. that the economy is never in equilibrium, but is always moving toward it);
...complexity economics accords with political economy. In the “computation” that is the economy, large and small probabilistic events at particular non-repeatable moments determine the attractors  fallen into, the temporal structures that form and die away, the technologies that  are brought to life, the  economic structures and institutions that result from these, the technologies and structures that in turn build upon  these; indeed the future shape of the  economy—the future path taken.  The economy at all levels and at all times is path dependent. History again becomes important. And time reappears.
A natural question is whether this new approach has policy implications.  Certainly, complexity teaches us that  markets left to themselves possess a tendency to bubbles and crashes, induce a multiplicity of local attractor states,  propagate events through financial networks, and generate a sequence of technological solutions and challenges, and this opens a role for policies of regulating excess, nudging towards favored outcomes, and judiciously fostering conditions for innovation. 
Arthur--and his Stanford pal Paul David, and their acolytes Paul Krugman and Robin Wells--has been challenged to produce some evidence for his theories.  Every time he does, they're exposed as either mistaken or fraudulent.

Stakes are driven through the heart of QWERTYcula, but he never dies.  He keeps coming back to corrupt the economics profession (and, now, its impressionable youth).

Monday, April 22, 2013

You ain't just whistlin' Dixie, Bro

Paul Krugman decries Very Sensitive People, with something like a complete lack of self awareness;
When it comes to inflicting pain on the citizens of debtor nations, austerians are all steely determination – hey, it’s a tough world, and hard choices have to be made. But when they or their friends come under criticism, suddenly it’s all empathy and hurt feelings.
Later comes;
This is a curious thing for him [Anders Aslund] to say, because it’s an outright lie; as anyone who has been reading me, Martin Wolf, Brad DeLong, Simon Wren-Lewis, etc. knows, our case has always been that fiscal stimulus is justified only when you’re up against the zero lower bound on interest rates. I can’t believe that Aslund doesn’t know this; why, then, would he discredit himself by repeating an easily refuted falsehood?
Not that our feelings are hurt, mind you.
But then, why would he describe Herndon et al as “vicious”? Their paper was a calm, reasoned analysis of how R-R came up with the famous 90 percent threshold; it came as a body blow only because of the contrast between the acclaim R-R received and the indefensible nature of their analysis.
Maybe he's been reading Conscience of a Liberal (especially the comments section)!

Sunday, April 21, 2013


No, not a label on cognac, but maybe one that should be affixed to a glass house from which the first economist without sin is allowed to cast stones.
So how is it that economists look so bad? The answer is that too many prominent economists chose, for one reason or another, to reject the existing model. Maybe they were just trying to score points by being different; maybe they were sucked in by the approbation of the VSPs, the rewards that came from telling important people what they wanted to hear. 
But, Very Serious Other People not only make errors telling important people what they wanted to hear (about purported market failures) that have had serious negative consequences, but don't exactly respond graciously when corrected.  In this case, the very same Paul Krugman who has been lecturing (hectoring?) other economists on his blog for several days.  Back to the future;
We  have  all  seen the way that  a good  story  that  happens  not to  be true can  take  on  a  life  of its  own, and I  realize  that they  [Stan Liebowitz and Steve Margolis] are  frustrated with  the  way that  an overstated version  of the  QWERTY  story  has spread  despite their efforts  to  stop it.  That  frustration  does not,  however, justify  the  hectoring  and unprofessional  tone  of their  piece or the  way  it  misrepresents  what those of  us  who  take  path  dependence seriously have said.
Well here's what Krugman did say about it in his best selling Peddling Prosperity;
What  conservatives believe in,  above all, is the effectiveness of  free markets as ways  to  organize economic  activity.... But what if the  collective result of  those  free  choices is  to lock  in  a bad  result?  What if we end  up  stuck with an  inferior technology....And what  if another  country  manages,  with  a little timely  government intervention,  to  "lock  in"  an  advantage  in  some major  industry-and thereby  lock  us out? No,  the  story  of the  QWERTY  keyboard  is  not just  a cute  piece of  trivia ... it is  a parable that opens  our eyes  to a whole different way of thinking  about economics  It  asserts that the  outcome  of ....market  competition  often depends crucially  on  historical  accident....And  this  conclusion  is  fraught  with political  implications,  because  a sophisticated government may  try to make sure that the accidents of history  run  the way  it  wants.
Well, what if the path dependencists favorite example of being stuck with an inferior technology--the QWERTY keyboard--turns out to be a false story?  And what if they also can't provide any other examples, when challenged to do so, for their claims that there are plenty of 'QWERTY worlds' out there?

One thing they don't do is admit error.  We know that because, when QWERTY was shown not to be inferior--i.e. one couldn't retrain on the Dvorak Simplified Keyboard for two weeks and increase one's typing speed by between 20-40%, as asserted by Paul David, Brian Arthur et al--they didn't admit they were wrong.  And they still won't.

Even after almost three decades of evidence has piled up, and continues to do so, as a new paper by the Scotsman Neil Kay, Rerun the tape of history and QWERTY always wins (sorry, but it'll cost $36 to read) shows.  Kay makes innovative uses of probability theory to show just how well designed Christopher Scholes invention actually was.  And, contrary to its critics, not because it slowed typists down.

Addendum:  Neil Kay, in his answer to three comments on his paper shows that this not ancient history, by quoting from Krugman and Wells textbook, which several thousands of economics students read;
 “Government can play a useful role both in helping an industry establish a standard and helping it avoid getting trapped in an inferior standard known as the QWERTY problem” (p.536) and they define this in their glossary as;
QWERTY problem: an inferior industry standard that has prevailed possibly because of historical accident” (p. G-12)” 

Saturday, April 20, 2013

Paul tries his hand at, 'Nevermind'

But the liberal's conscience doesn't seem to have wholeheartedly endorsed it;
For my vague, unquantifiable sense is that the debacle is changing the conversation quite a lot, even among the guys in suits.  And it was the coding error that did it.  Now, the truth is that the coding error isn't the biggest story; in terms of the economics, the real point is that R-R's results were never at all robust....
The 'coding error' being a mistake in an Excel spreadsheet used by Reinhart and Rogoff--and just admitted to--in a famous paper arguing that a government debt to GDP ratio over 90% has negative consequences for that country's economic growth.

What Krugman is admitting to (sorta) is that that coding error didn't make a whit of difference to their argument, but it did give their critics another excuse to hammer their logic (and about which the critics may be correct).  But, the comments section of Krugman's blog is filled with self righteous denunciations of the dishonesty of Rogoff and Reinhart by people one suspects couldn't use Excel to find the correct discounted present value of their children's allowances.

Entirely lacking is any sense of perspective, which Krugman isn't in any hurry to correct.  Nor is there any shortage of embarrassing errors by supposedly competent economists, published by supposedly reputable sources, over the years that DID have enormous consequences. Say, the one that got the housing bubble started back in the 1990s (we're still suffering from that) from the Boston Fed;
This paper examines mortgage lending and concludes that studies based on data created by the BostonFed should be reevaluated. A detailed examination of these data indicates that irregularities in these data, when combined with the most commonly used research methodology, appear to have biased previous research toward a finding of discrimination against minority applicants. When the most severe data irregularities are eliminated, evidence to support a hypothesis of discrimination disappears. The currently fashionable "flexible' underwriting  standards of mortgage lenders may have the unintended consequences of increasing defaults for the 'beneficiaries' of these policies.   
The reference is to a study supervised by Boston College's Alicia Munnell that was riddled with errors (such as, home loans made with negative interest rates!), but nonetheless was used by housing activists and politicians like Barney Frank to justify the most irresponsible government policies imaginable.

Note how prescient Liebowitz and Day were back in 1998, in that last sentence from their abstract; ...may have the unintended consequences of increasing defaults for the 'beneficiaries' of these policies.

Friday, April 19, 2013


If it's Russian and old, it's hot in the London antique market;
Faberge expert Geza Von Habsburg predicted that the Russian antique market had reached its summit in 2009. Yet in 2012, more record-breaking sales took place, and a $20.2 million turnover was made during the Russian Art Week in London that year.
These spring months promise to be another interesting season for the Russian antique market.
April in Moscow kicked off with "The Russian Salon," following the success of The European Art Fair (TEFAF) in March.  On April 19, the Russian Fine Arts and Antiques Fair (RAFAF) will begin, followed by Christie's 20th spring exhibition from April 24 to 26. After that, the countdown until Christie's Russian Art Week in London on June 3 begins.
Which is only a recent phenomenon;
Because of the low prices, very few people were interested in Russian art for a long time. Curiosity about Russian antiques remained nearly non-existent until the Gorbachev era.
"There were a very small number of collectors. It was not valuable. After perestroika the prices rose suddenly," said Alexis de Tiesenhausen, head of the Russian art department at Christie's. This is when the market rose.
And since there were numerous pieces that had left Russia after 1917--taken out by diplomats and fleeing aristocrats--there is supply to meet the demand.  Even from Oklahoma;
In Oklahoma, Randy Buttram, 66, and his brother had been figuring out which of their late parents belongings might be worthy of auction, when they stumbled upon the vases. They turned out to date back to 1832, the reign of Nicholas I, and had been produced at the Imperial Porcelain Factory.
"The vases were part of the decor in an entryway so grand, complete with twin staircases, that they didn't particularly stand out," Buttram told The Associated Press. "To me as a child, they were just there and that's all." There, they remained unnoticed for almost a hundred year until the auction earlier this month.
Sold for $2.7 million.

On 23 Euros a Day

21st Century European travel is still Frommeresque...if you want to visit formerly Communist places like Warsaw, Krakow, Belgrade, Budapest, Sophia, Riga;
Most travellers overlook Zagreb for Croatia’s more popular beach resort towns. But Croatia’s capital city is a dynamic destination of its own, with Eastern European charm and Western European modernity. And at 222 Croatian kuna per day, tourists to Zagreb can easily enjoy its ancient cathedrals, open-air markets, 19th-century palaces and medieval architecture. Standout attractions include the Cathedral of the Assumption of Saint Mary (pictured), a Gothic cathedral whose famous twin spires were continuously rebuilt after invasions and natural disasters, and theMuzej Mimara, an art museum notable for its 19th-century edifice, with works from the likes of Renoir, Degas, Delacroix and Rubens.
Paris, Rome...not so much.

Thursday, April 18, 2013

We regret the error

But we're still right, say Carmen Reinhart and Ken Rogoff (contrary to the spin of Joe Weisenthal at Business Insider).  R&R first show their critics--most notably Paul Krugman--the proper way to respond when caught in an error;
We are grateful to Herndon et al. for the careful attention to our original Growth in a Time of Debt AER paper and for pointing out an important correction to Figure 2 of that paper.   It is sobering that such an error slipped into one of our papers despite our best efforts to be consistently careful.  We will redouble our efforts to avoid such errors in the future.  We do not, however, believe this regrettable slip affects in any significant way the central message of the paper or that in our subsequent work. But first let us consider the specific points raised by Herndon Ash and Pollin (HAP) in their comment that we were sent yesterday.
They then summarize the issues affected and conclude;

So do where does this leave matters on debt and growth?  Do Herndon et al. get dramatically different results on the relatively short post war sample they focus on?  Not really.  They, too, find lower growth associated with periods when debt is over 90% (they find 0-30 debt/GDP , 4.2% growth;   30-60, 3.1 %;  60-90, 3.2%,;  over 90, 2.2%.  Put differently, growth at high debt levels is a little more than half of the growth rate at the lowest levels of debt. They ignore the fact that these results are close to what we get in our Table 1 of our AER paper they critique, and not far from the median results in Figure 2 despite its coding error.  And they are not very different from what we report in our 2012 Journal of Economic Perspectives paper with Vincent Reinhart—where the average is 2.4% for high debt versus 3.5% for below 90%.
Which matters because;
There is also the question of whether these growth effects can be economically large.  Here it is very misleading to think of 1% growth differences without recognizing that the typical high debt episode lasts well over a decade (23 years on average in the full sample.)  
It is utterly misleading to speak of a 1% growth differential that lasts 10-25 years as small.  If a country grows at 1% below trend for 23 years, output will be roughly 25% below trend at the end of the period, with massive cumulative effects. 
Hardly supporting the Business Insider characterization of, 'The statement isn't a full cave.'  It's more like, 'Much ado about nothing'

Wednesday, April 17, 2013

When assault pressure cookers are outlawed...

Only Spanish terrorists will have them;

A pressure cooker allegedly used for bombs during Sunday’s Boston Marathon were made in Spain, according to US investigators.
At a news conference on Wednesday, authorities said that they had found destroyed parts of a Fagor-made pressure cooker along with a detonator and cables they believed were used to set off the explosive devices during the race, taking the lives of three people and injuring close to 180.
....Pressure cookers have been used by terrorists to fabricate bombs in Afghanistan, Iraq, India and Nepal. According to a Spanish government terrorism report, these improvised artifacts have been used more than 200 plots and actual terrorist attacks in the United States from 2001 to 2011.

The View at Lenin's Tomb

Anyone noticed if the embalmed body has rotated lately?
Since President Vladimir Putin returned to the Kremlin last year, the government has adopted a new fiscal rule that bases spending plans on the long-term average oil price and caps the budget deficit at 1 percent of GDP.
"This rule is very important in the period when in other countries ... there is recession and ultimately it may happen to us at a time when there is a risk of commodity prices falling," [Prime Minister Dmitry] Medvedev said.
Future opportunities to increase budget revenues would be very limited, he said.
Though not impossible;
The government is also considering speeding up sales of state assets to raise funds, including the possible sale of a 19.5 percent stake in state oil major Rosneft.

The Lady's Not for Spurning

The Telegraph reports on Margaret's Thatcher's funeral;

At Ludgate Circus, protesters began to boo and jeer – only to find the rest of the crowd applauding all the more loudly to drown them out.
Ever since the news of her death last Monday, we have been told one thing above all else about Baroness Thatcher: that she was divisive.
But not today, not along the route of her funeral procession. From Westminster to St Paul’s, mourners crammed the pavements, in places 12 deep. In the build-up there’d been rumours of violent protests: lumps of coal or milk bottles would be thrown at her coffin.
In the event, all that was thrown was flowers.

Tuesday, April 16, 2013

Caught in the middle with EU

More median mischief, this time in Europe, where a new study found Germany to be poorer than Greece!
...it appears that not only the median German household has the lowest wealth, but also that the differences within the Eurozone are enormous. The median households in countries like Belgium, Spain and Italy appear to be three to four times wealthier than the median German household. Even the median Greek household is twice as wealthy as the German one.
Economists Paul De Grauwe and Yuemei Ji aren't buying it;
In Germany the mean household wealth is almost four times larger than the median. In most other countries this ratio is between 1.5 and 2. Thus household wealth in Germany is concentrated in the richest households more so than in the other Eurozone countries. Put differently, there is a lot of household wealth in Germany but this is to be found mostly in the top of the wealth distribution.
Forgotten by the two is that the median household may not be of the same composition in  Mediterranean countries as in the richer northern ones.  Probably as they rush to justify taxing Germans to help out the struggling southerners.  Still, the uses of the median are strange.

Puntualidad no al lado de la diplomacia

Time was not on his side, no, no;

Spain’s Foreign Affairs Ministry on Tuesday sacked its consul in Boston, Pablo Sánchez-Terán, for “failure to meet his consular obligations.” The decision was made after the diplomat closed the Spanish consulate office at the usual time on Monday, despite the bomb attacks at the city’s marathon having taken place just a few hours earlier.
Diplomatic sources told Europa Press that the decision was verbally communicated to the diplomat on Tuesday, who told Spanish channel Marca TV on Monday night that the consulate had been closed after the attacks because “it was the usual time to do so.”
During that interview, Sánchez-Terán did not give out a telephone number for families of Spaniards at the marathon to call, and instead advised concerned viewers to phone the hospitals in Boston should they be unable to locate their loved ones.
Though the Foreign Ministry may have had their eyes on the guy for previous impolitic remarks;
In 2004, when he was the consul in the Argentinean city of Córdoba, statements he made during Columbus Day drew criticism. “We would be a lot worse under Inca, Aztec, Mapuche, Sioux or Apache civilizations,” he said at the time. “They have been romanticized by historians and anthropologists when it is well known that they were divided into casts and had an imperialist and bloodthirsty character.” 

Monday, April 15, 2013

Greeks bearing grudges

We've heard of fighting the last war, but paying for it after over six decades?
Greece is deliberating whether Germany still owes war reparations stemming from the Nazi occupation in World War II.
Surprise, an academic is on board;
Greek demands are quite justified, argues Hagen Fleischer, a historian and professor emeritus at the University of Athens. 
The bidding has begun at around $200 billion.  Which would help alleviate the Greek government's current troubles--they're being forced to fire 4,000 public employees, with more to come later.

Sunday, April 14, 2013

Where little cable cars/ climb...

Expect accidents, followed by lawsuits;

Two months ago, five passengers and two workers were injured after the bolt caused their cable car to slam to a sudden stop, tossing them violently inside the vehicle. The conductor had facial and tongue injuries and the driver suffered internal injuries and cracked ribs, transit officials said.
Legal claims are expected, as they always are after a cable car accident.
The city has been settling lawsuits almost since the cable cars began operation in 1893. One woman won a 1970 jury verdict of $50,000 after she claimed that a minor accident on a cable car she was riding turned her into a nymphomaniac.
"The 19th Century technology of the cable cars does pose some challenges," said Paul Rose, a spokesman for the city agency that oversees San Francisco mass transit.

19th century technology also describes what today is known as 'light rail'; the transit technology of choice of self-described progressives!

Rails were put down in city streets to make it easier for the horses to pull the cars.  Once balloon tires, diesel engines and modern transmissions were invented that became unnecessary.  Leading to the demise of the streetcars that were seen in most large American cities up to the 1930s.

But try telling that to the Great Streetcar Conspiracists. Though CBS News has now seen the light--contrary to an old 60 Minutes piece;
Back in the dawn of the Automobile Age, General Motors began systematically buying streetcar lines and then shutting them down, leaving millions of Americans without viable public transportation options. Its motive? To ensure a market for its still-novel personal transportation technology. Rather than walk, the idea was, people would buy Buicks.
If you've seen "Who Framed Roger Rabbit?" you know this story in broad outline. If you have happened to catch one of the airings of a 1996 public television show called "Taken for a Ride," these details are just a few of the ones assembled into a convincing portrait of a high-level, backroom industrial conspiracy to cheat Americans out of cheap, convenient, sustainable transportation. If so, what you know is not what happened. 
Emphasis by HSIB.

Saturday, April 13, 2013

Isn't easy being icky, gooey, green

But, the Norwegians say they can do it (in Canada, anyway) when they try;

"In 2012 we increased oil sands production by more than 60% and reduced CO2 intensity by almost 24%. We reduced water usage, improved our steam-oil ratio and planted 267,000 trees to reclaim land. We are proud of the results we have achieved and are encouraged to continue our efforts to reach our ambitious targets," says Statoil's senior vice president in Canada, Ståle Tungesvik.
Statoil is majority owned by the Norwegian government, and has had a few run ins with its citizens of the Green persuasion over their evil oil-doings.  So, they say, Ta det!
Production at Leismer [project in northern Alberta] began in January 2011 and is a steam assisted gravity drainage (SAGD) facility. In 2012 Statoil produced 16,333 barrels per day on average and achieved a steam-oil ratio of 2.5 at Leismer, improved from 2.7 in 2011, and almost 17% better than expected when the facility was designed.
Statoil's ambition is to reduce carbon dioxide intensity in its production process by 25% by 2020 and 40% by 2025. Average CO2 emissions per barrel in 2012 were 55.6 kilograms, down from 72.7 kilograms in 2011.
Statoil says it is committed to the environment and communities in which it operates. The 2012 Oil Sands Report will form the foundation for the company's continued effort to communicate openly with stakeholders about environmental and socio-economic impacts, and contributions from its oil sands activity.

Beard me up, Shariq

As this Deutche Welle video shows, there's a big boom in the business of beard enhancement in Istanbul.  Facially (hair) challenged Muslims come from all over to make men of themselves, by having hair from the backs of their heads transplanted to their rosy cheeks.

All to overcome the discrimination against the beardless in places like Kuwait and Qatar.

Wait til' the ObamaCare-crats get wind of this.

Friday, April 12, 2013

When even the Marxists can't deny it...

Student of Samuel Bowles and co-founder of the Union for Radical Political Economists, Herb Gintis, is honest enough to report his research findings;
My colleagues and I found dramatic evidence of this positive relationship between markets and morality in our study of fairness in simple societies—hunter-gatherers, horticulturalists, nomadic herders, and small-scale sedentary farmers—in Africa, Latin America, and Asia. Twelve professional anthropologists and economists visited these societies and played standard ultimatum, public goods, and trust games with the locals. As in advanced industrial societies, members of all of these societies exhibited a considerable degree of moral motivation and a willingness to sacrifice monetary gain to achieve fairness and reciprocity, even in anonymous one-shot situations. More interesting for our purposes, we measured the degree of market exposure and cooperation in production for each society, and we found that the ones that regularly engage in market exchange with larger surrounding groups have more pronounced fairness motivations. The notion that the market economy makes people greedy, selfish, and amoral is simply fallacious.
That means that capitalism (a free market) is nice.

Thursday, April 11, 2013

Stream of coiniousness

As Penelope Cruz's character said to Javier Bardem's in Vicky Cristina Barcelona when he had to remind her that she'd once stabbed him, 'That.'

The Central Bank of Ireland has said it regrets an error on a new commemorative coin that misquotes James Joyce.
The 10 euro coin features an image of the writer and a quote from his groundbreaking novel, Ulysses, which contains an extra word.
Joyce, one of Ireland's most famous writers, wrote: "Ineluctable modality of the visible: at least that if no more, thought through my eyes. Signatures of all things I am here to read."
However, the coin contains a surplus "that" in the second sentence.
Why bother apologizing for only one surplus word?

There are guys who'd pay for the privilege

Malawi doesn't seem to get the point;

Malawi has accused US singer Madonna of "bullying state officials" after she reportedly complained about her treatment on a visit to the country.
She probably thought they'd like it.

Wednesday, April 10, 2013

Peer Review

The economists (Xiadong Liu, Eleonora Patacchini and Yves Zenou, at least) are catching up with the world's parents);
Data has been collected on US students in grades 7-12 from a nationally representative sample of roughly 130 private and public schools in years 1994-95. The most interesting aspect of the data is the friendship information, which is based upon actual friend nominations. It is collected when individuals were at school where students were asked to identify their best friends from a school roster (up to five males and five females). As a result, one can reconstruct the whole geometric structure of the friendship networks.
We find that:
  • For juvenile delinquency, students are mostly influenced by the aggregate activity of their friends (local-aggregate model).
This indicates important social-multiplier peer effects in delinquent activities.
  • For education, both the social-multiplier and social-norm effects matter, even though the magnitude is higher for the social norm effect.
This indicates that students tend to conform to the social norm of their friends in terms of effort in education (local-average model).
As Thomas Sowell finds himself repeating in his numerous books, This may seem obvious, but...it is amazing how often the obvious is disregarded in public policy. The three economists spell it out;
The idea is to remove the criminal that reduces total crime in a network the most ....the removal of the key player can have large effects on crime because of the feedback effects or ‘social multipliers’ at work. As the fraction of individuals participating in a criminal behaviour increases, the impact on others is multiplied through social networks.
Keep away from bad companions, kids!
For education policy, our results show that the local-average model is at work. This suggests that one should change the social norm in the school or the classroom. One should try to implement the idea that it is ‘cool’ to work hard at school.
An example of a policy that has tried to change the social norm of students in terms of education is the charter-school policy. The charter schools are very good in screening teachers and at selecting the best ones. In particular, the ‘No Excuses policy’ (Angrist et al. 2010, 2012) is a highly standardised and widely replicated charter model that features a long school day, an extended school year, selective teacher hiring, strict behaviour norms, and emphasises traditional reading and math skills.
The main objective of these policies is to change the social norms of disadvantage kids by being very strict on discipline. This is a typical policy that is in accordance with the local-average model since its aim is to change the social norm of students in terms of education. 
Another way to do that is to allow parents to easily remove their children from dysfunctional schools and deny those schools taxpayer funds.

As William of Occam knew, the best ideas are usually the simplest ideas.

Tuesday, April 9, 2013

El último sueño

Sara Montiel, the Spanish actress who starred opposite Gary Cooper and Burt Lancaster in Vera Cruz, won't be needing to wake up early anymore;

One of the country’s most gossiped-about actresses, she was an unmistakable metaphor of the real Spain of the 1950s, 1960s and 1970s.
After the success of El último cuplé she began to star in a series of musical melodramas – and to name her price: “A million dollars a movie.” She also chose all her own songs, costumes and even her timetable: “Because I refused to get up early again. In Mexico and the US I had to get up at 5.30 and six in the morning. Never again!”
Si.  No más.

Oh, you noticed too

A Brit remembers how it was back then;

...when Margaret Thatcher won power in May 1979, it was against the backdrop of perhaps the gloomiest decade in modern British history.
Shorn of its empire, Britain now cut a very miserable figure on the world stage. For at least two decades we had been falling behind our rivals, and now the contrast was painful to see.
Britain's average inflation rate for the 1970s was 13%. West Germany's was just 5%. Our unemployment rate was 4%. Theirs was only 2%. Our major cities seemed shabby and seedy, our newspapers were full of strikes and walkouts, almost every week seemed to bring some new atrocity in Northern Ireland.
Over the course of the 1970s, two Prime Ministers, Edward Heath and James Callaghan, had been broken by the trade unions, while a third, Harold Wilson, descended into paranoia. Foreign papers talked of Britain as the Sick Man of Europe. Callaghan himself told his Labour colleagues: "If I were a young man, I would emigrate."
Which Thatcher reversed almost as an act of will. After her, taxes were lower, productivity higher and foreign capital flocked to Britain.

And, oh yeah, she helped Ronald Reagan defeat the Soviet Union.