July 2005 Archives

Sacra Blue

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The unemployment level in France is 10%, and has not dipped below 8% in two decades. Both youth and foreign born unemployment are twice that, at 20%. Ethnic tensions and anti-Semitism are high, with 34% of the French having unfavorable views of Muslims and 16% unfavorable view of Jews. (US figures 22% and 7%). Americans already have a one third higher income per capita than the French, and yet France only managed to grow at half the US rate last year, with slow growth expected in 05 and 06.

But Hold on! Not incidentally, France shares Paul Krugmans brand of socialism. Therefore he has now decided that France is really doing just marvelously! You see,

�We're talking about two highly productive societies that have made a different tradeoff between work and family time. And there's a lot to be said for the French choice�

The first warning is to use the productivity per hour worked as his �proof�. Taxes and regulations have forced out the low productive workers and prohibited the last two hours worked per day for the remaining. The policies have destroyed much wealth, but �per hour� things look OK, simply because all the zeros are not included in the average. It's just a statistical trick.

Furthermore, there is no �choice� about what is happening in France, unless "choice" is Newspeak for forced regulations. If it really was a choice the politicians wouldn�t need to legislate the 35 hour workweek, people would simply work fewer hours. Krugman also suggest the choice is making Europeans happier. Now here it realy starts getting amusing.

The evidence he refers to is from the Eurobarometer, a survey that among other ask life satisfaction from Eu-members. As it happens, Harris Poll asks the exact same question to Americans. Only a dismal 18% of the French describe themselves as �Very Satisfied with their lives� in this, compared to 44% of Swedes and a solid 58% of Americans. It seems that Americans are much happier than the French.

But what of the great Family Life Krugman was telling us aboubt? Actually it seems the hard working capitalists of Europe - the British and the Irish - score higher in Family life satisfaction, with 52% and 53% very satisfied, compared to 41% for the French (page 25).

The survey sadly doesn�t ask Americans. But according to the 2002 Pew Global survey, 67% of Americans were very satisfied with their family lives, compared to 43% of the French! Given Krugmans article, the only eplanation is false consciousness among the gullible Americans.

Joking aside, the terrible economic performance of the Europeans Welfare system is becoming harder and harder to deny, even for the NYT. Suggesting that the French mix of mass unemployment and involuntarily underemployment is a good �choice�, because it promotes �family life�, seems to me as a sign of desperation.

More Language of Economics

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Today's PoliSci lecture on international relations included a wonderful quote on the language of economics. While examining the alternatives to those darn dirty realists (my apologies to any classical realists) we examined the following pairings.

A follower of Realism is called a realist.
A follower of Marxism is called a Marxist.
A follower of Liberalism is called... well it's not a liberalist.

So my OSU PhD candidate instructor says, "Liberalist always sounded like something a communist might call a liberal."

More bizarre, he went on to say it was okay for the class to use the term "liberalist", but they would have to deal with snickering and dirty looks.

Here in America we could use a new term to differentiate between left-leaning liberals and generic freedom loving, free-market thinkers. Though I doubt liberalist would catch on.

Friday Diversion

It's Friday, the blog is quiet, and I'm in a sporting mood after watching the decent Chelsea-DC match last night. Thus, two interesting links on soccer football.

The science and game theory of kicking.

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(Click link to see animation.)

Why I hate them

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Mark Yost, writer for St. Paul Pioneer Press recently critized media coverage of Iraq as slanted and overly negative. He was viciously attacked by his peers. One Co-worker wrote an angry piece ending with �I am embarrassed to call you my colleague.�. Steve Lovelady, managing editor of the Columbia Journalism Review Daily, accused him of having "tur[ed] on his Knight Ridder colleagues" And Clark Hoyt, the Washington Editor of the same paper wrote:

�Yost asks why you don't read about progress being made in the power grid... Maybe it's because there is no progress. Iraqis currently have electricity for an average of nine hours a day. A year ago, they averaged 10 hours of electricity.�

Well, today while aimlessly googling I discovered poor Mark Yost was in fact right about the progress on electricity. Accourding the Brookings Institutes Iraq Index the hours of electricity this month are estimated at 13.3 hours, well above the 10 hours last year. The Average of mega watt hours (MWH) was 111,400, the highest number recorded and 17% above prewar figures.

There is more in this, having to do economic illitracy of people like Clark Hoyt. In Iraq electricity is heavily subsidized. The reason they have blackouts is not only insufficient production, but that prices aren't allowed to adjust demand. While the supply of electricity has increased from 80.000 MWH in the beginning of 2004 to 110.000 today, demand has exploded from slightly over 100.000 MWH to 160.000 MWH. To me an increase in demand of this magnitude is a sign of progress, not stagnation or decline as presented by much of the media.

Hoyt also writes that �The unemployment rate is between 30 percent and 40 percent�. Oddly, he neglects to mention that the unemployment level was some 50-60% in late 2003, and has declined steadily since. While it is true that oil exports have not yet reached their pre-war peak, even here there has been solid progress, with exports at 1.7 million barrels per day in July (Brookings states the pre-war level at 1.7-2.5). He also uses the raise in Hepatitis B as a general indicator of the situation in Iraq, without mentioning that most of the increase was from 2002-2003, before the war (rational expectation among the virus?)

Clark Hoyts is a defeatist, and has therefore been hailed by his colleges as someone who 'actually know[s] what's going on in Iraq', unlike Mark Yost who sees progress. The title of Hoyts article is �Sadly, there is little good news to report from Iraq" Uh huh. Let me state a few figures from the Brookings report, a click away for anyone who is truly curious about the situation in Iraq.

Much has been written about failure to disburse the 20 billion dollars in American aid to Iraq. Well, I am happy to report that 9.5 billion $ have now been disbursed, compared to only 3.9 billion $ in January 2005. Perhaps this deserves a mention in page 14 after the pet-adoption adds? Meanwhile, the number Iraqi police have increased by 59% from January 2005, while total Iraqi security forces have increased by 37% (125.000 to 172.000).

Car traffic is up by +400% compared to prewar levels. The number of free TV-stations have tripled since January 2005, from 10 to 29. Independent newspapers and magazines have gone from 100 in January to 170 in July, and commercial radio stations from 51 in January to 80 in May. Of course, before the war the number was 0, 0, 0 (but as we know during Saddam everyone who wanted a job was given one, and there was no such thing as torture in Abu Ghraib).

Iraq had 0.8 million Telephone subscribers before the war, 2.4 million by January 2005 and 3.8 million today. A modest increase of +356%, I am sure not newsworthy according to the high standards of Knight Rider Newspaper. Meanwhile, the number of Internet subscribers (not including use of internet cafes) has exploded from prewar 4.500 to 147.000 by March of 2005.

This year Iraqs economy is growing faster than Chinas, with expected 10-12% GDP growth in 2005. Economic growth is not an abstraction, but the sum of individual progress. The impressive growth mean that proves you have progress �on the ground� (as illustrated above). Instead of reporting on this and the journalists attacking Mark Yost make it sound like people cannot walk outside their home without being blown to pieces.

Mr Hoyt, The Washington editor of a large newspaper, has a compleatly bizarre explanation for the skewed reporting. You see, Mark Yost got his information from the US military, who were too afraid to go outside and see the reality in Iraq. Unlike the brave journalists that is (not a joke)

�The "unfiltered news" Yost gets from his military friends is in fact filtered by their isolation in the Green Zone and on American military bases from the Iraqi population, an isolation made necessary by the ferocity of the insurgency.�

Are the Iraqis themselves also �shielded from reality� in his view? Again, the figures contradict the subjective perception of these journalists. In fact, the already respectable �Right Direction� figure for Iraq is increasing, from 49% in January to 67% in April. Even (actually especially) among Sunnis the right direction figure has gone from only 15% in January to 49% in April.

Let me give you a simple test of media bias. Ask the Iraqi �right track-wrong track� question from American reporters, the Military and the general population. The Iraqis themselves are of course the norm, any deviation from their answers is indication of bias. What results would you expect?


Uppdate:

I incorrectly wrote that "Jeff Jarvis accused him of having �turned on his colleagues�". He did no such thing, he only qouted a letter from Lovelady on his homepage. My mistake, and sincere apologize to Mr. Jarvis.

Buy Japanese, So Canadians Work

let me start by saying that I know little about the auto industry in canada. What I do know, I learned from the Canadian Government's advertisements about it.

Toyota is moving Rav4 production from Japan to Canada; in Japan, costs are much higher, and the plant currently building the Rav4 otherwise builds most of the Lexus line. The Rav4 was out of place.


But why would Toyota not build a major plant if Canada were such a buy? Because of transportation costs:

Jim Wiseman, a Toyota spokesman, said the main attraction of the Woodstock site was its proximity to an existing Toyota plant, 40km away. The two factories will be managed as a single entity and will use many of the same suppliers....

Toyota is also currently building a truck assembly plant in San Antonio, Texas, and expanding its Camry sedan plant in Georgetown, Kentucky.

A plant in Tijuana, Mexico, opened late last year.

The $125 million is assistance did't hurt either.


Experts who follow this issue think healthcare expenses are just a minor issue.

Frankly, if I were a Toyota executive, I'd be concerned, not with the average worker, but with the workers I'll actually be competing for. I'd be comparing the marginal productivity of available workers for their total compensation. And I'd take advantage of areas with a high level of out-of-work semi-skilled manufacturing employees, especially when the government agrees to pay their training for me.

What kind of place looks good under those conditions? Well, Ontario!

Unemployment in Ontario is now at 6.7%, but it's 5.1% in Texas and 4.4% in Alabama.

And KPMG has a study comparing costs of automotive manufacturing, basically shows that

The latest article I've seen on the alleged cheating in the UVa economics department still doesn't get to what I think is the heart of the matter: were the students instructed to use no outside materials in answering their problem set?

The article mentions that students are presumed, almost expected, to work together in groups:

"It may be that structure of assignments for some of the courses will change," [Department Chair] Mills said. "I don't think this episode should prevent us from giving out assignments that students work together on."

Here's a hypothetical: Say a professor takes some problems from an old text that she believes the students don't have or haven't seen and assigns it for homework ("problem set" in the parlance of grad school). If a student happens have that book and recognize the problem , would going to the book to see what was done constitute cheating? Would there have to be explicit admonitions against looking at other texts?

I don't see where working in groups is different than searching the internet for help. A professor of mine used problem set questions to have us work on slightly altered versions of actual results, key "problems", and more. The contents of the problem were rewritten (simplified in some cases, made more abstract in others), but the basic concept was discussed openly once the work was turned in, as was the notion that people might well have looked to other sources for hints.

The counter, I suppose, would be that in other fields of study it is simply understood that one does not download work from the internet and pass it off as original. Handing in a Cliff's Notes essay on Pynchon is clearly inappropriate, whether or not the syllabus mentions "internet essays" or not.

Until I hear more specifics about the alleged cheating, I'll reserve judgement.

LAPD gets...well...Freaky

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The popularity of Freakonomics has done two bad things, in my estimation. First, it cast the work of economics that looks at things other than say income, GDP, or currency markets as aberrant. And second, the focus on "economics" downplays what I think is the real power behind Levitt's work: statistics. Sure, sure, econ is concerned with incentives and all that; so are a vast number of other social sciences. But almost without fail, the tidbits in Freakonomics are the result of assiduous and often inventive efforts at working with data. (Even, in my estimation, the Sumo examples -- I know of no place in statistics classes where students are told not think about why certain patterns or correlations are occuring; there is nothing unique to the economics profession that resulted in thinking about the win/loss record for on-the-bubble wrestlers.)

I quote the inestimable Will Wilkinson's "Caesar's Bath" contribution:

Levittolotry. Yes. He's smart and interesting, but his work isn't that unusual, and he doesn't walk on water. He's a super-clever, McGyver-esque technician, able to conjure up a useful empirical study out of a paper clip, a length of string, and a stick of gum. It's sweet, but not filling. I want theory.

Far from the dry work of people "who are good with numbers but lack the personality to be accountants" (as the old joke goes), the work of a well trained statistician could be every bit as "freaky" as that of an economist.

To wit:

LOS ANGELES -- Dogged by scandal, the Los Angeles Police Department is looking beyond human judgment to technology to identify bad cops.

And what is this magical machine doing, one might wonder, to ferret out bad cops?

Statistics.

The system, developed by Sierra Systems Group and Bearing Point, mines databases of complaints, pursuits, lawsuits, uses of force and other records to detect patterns that human eyes might miss or choose to ignore.

In other words, there are correlations between certain kinds of "flags" and the tendency for a cop to be a problem. The resorting to some mechinized process seems to be more a political decision -- "Hey, man. I didn't say you were bad. The computer just spit your name out. No one working for the Rat Squad here, boyo." -- than anything else. Statisticians could very well be saving lives and making the police force a better group all around.

Please note that the tetchy sound of this is not meant in any way to castigate the economist himself--the credit and rewards are his due, and the heavy-weather is not of his own making (aside from going along with the terrible title). Reading his actual papers is gripping, even when some of the technical details fly over my head. But of course, as even he is wont to say, I must consider the economics of the situation. If this is what people think all economists do -- and is a skill or field of work available only to those trained in economics -- then there could well be a surge in the number of people appling to econ programs. And the last thing I need is more competition.

For continually interesting talk about modeling and stats, I refer you to the Statistical Modeling, Causal Inference, and Social Science weblog.

Math(s) Education

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As I'm certain plenty of people do, when I take up a new subject, I tend to seek out as much information on it as possible. It's a bit obsessive, I understand, but at this point in my life, I'm not going to fight it. That said, along with books, classes, journals, and more, I've spent more than a little time scrounging around the web for decent math-centric weblogs. Like all subjects, the range of quality differs dramatically. (And, like the AEA says about T&B, there are a number that are almost on mathematics.) In my travels, I ran across the enjoyable site Tall, Dark, and Mysterious. (Bravo on using the serial comma, by the way.)

I note it here as an ongoing evidence to support my argument that there are good reasons not everyone should go to college. (And, more explicitly, see this from Kevin.)

Just one sample:

A supply/demand problem had a number (not zero) of students finding that the equilibrium occurred when widgets were sold for negative thirty bucks a pop. No one appeared to bat an eye over this one; they just stated their conclusion and moved onto the next problem. On a question about finding the dimensions of a structure with given area and given amount of fencing, a plurality of students faithfully parrotted the formula that perimeter=2*length+2*width, apparently not noticing (or caring) that the fencing of the figure in question (I provided a diagram) did not surround a rectangle. Nor did it surround a triangle, but many students seemed eager to show off their knowledge of the Pythagorean Theorem.

My advice to her would be to simply teach the class she expects to teach and let those who sink, sink. But I can only begin to imagine the right terror parents and administration would become if half her classes started failing outright. Of course, there is the other side of the coin: my current math teacher is a former high-school instructor whose pedagogical process consists of reading from the book, then yelling "What? Why don't you get this?"

Most importantly, however, the main result from my current readings has been developing a preference for the plural "maths" over "math".

Are RPGs Getting More Complex?

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There's some evidence that television is complex than it used to be. But to me, TV is still so passive; a more important question is whether any strand of gaming is becoming more complex, i.e. more intellectually challenging and absorbing. (Although I'm personally interested in the evolution of RPGs, if fighting games have become brain fodder, then that would be interesting too.)

I wanted to write a detailed post about this, but I stopped playing RPGs when my Commodore 64 broke, and I have little to no experience or information about the complexity of RPGs after the mid 1990s. Hence, I figure I'd ask you all if you've read or heard talk about this.

Old-time T&B readers know that, until late in high school, I was a happy underachiever in academics. Both the sophisticated culture of high society and the cutthroat barbarism of politics simply did not exist. Education was what you tried to minimize at school, and if necessary, you brought it home. My parents didn't pressure me at all, never presented me with a book, and basically left me alone to do as I please. And what I did was play video games, specifically Role Playing Games. All I needed to know, I learned from "Legacy of the Ancients". (Not quite).

Question: Has the time, individual mental effort, and/or social organization required to successfully play a computer-based RPG changed considerably since the early 1980s? Has it changed more or less than the complexity of TV?

Please help out the ignorant!

Everything in a Market: Hurricanes

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With apologies to Marginal Revolution's "Markets in Everything" series.

The Associated Press is reporting that The University of Miami has taken a new approach to hurricane landing prediction. Miami is bringing MAHEM to the world in an effort to reduce the mayhem brought by a hurricane landing in a populated coastal region.

MAHEM is the Miami Hurricane Event Market, a futures trading market for hurricane landing sites. Meterologists, students, and Joe Public are all allowed to create an account and purchase up to $500 worth of securities with a payoff tied to a specific hurricane behavior.

Their concept is very interesting in that it ties a monetary incentive to the accuracy of a prediction. Hopefully this encourages more accurate forecasting. Fortunately the $500 limit prevents people from using the market to hedge their bets against actual hurricane damage.

More interesting, perhaps is the inclusion of the general public. Locals with 50 years experience who lived through a dozen hurricanes can influence the market based on their experience and intuition. I will search through my library for the reference, but I recall, I think Malcom Gladwell, referencing a study that compared the accuracy of answers from those educated in the art and the answer most commonly chosen by a group of uneducated public. I believe there was a signficant finding in the study that suggested some number of people with no education on an issue can arrive at an accurate answer.

The question becomes who will the public trust: a government agency, the National Hurricane Center or a small group of experts combined with storm chasers and gambling addicts?

Economics in the Movies: Wedding Crashers

Loosely following up on Ian's Movie Economics post, I am going just going to pretend that the last 3 months or so that I was absent didn't happen.

Sunday I did my part to boost the sluggish Hollywood movie market and I paid to see Wedding Crashers. I will not bore you with my review of this fantastic piece of comedy.

What does this have to do with economics other than my $25 contribution to GDP? The premise of the movie actually revolves around the main characters falling in love with the daughters of the Treasury Secretary, an economist, played by Christopher Walken. Walken offers some advice to his daughter helping her to choose between two beaus. As only an economist could; Secretary Cleary tells Claire, "We never know what the future holds. We can only choose based on all of the information we have available."

Brilliant! However, Claire finds that she is on the losing end of a transaction suffering from the moral hazard of information asymmetry. Claire's suitor, Owen Wilson, is using a false name, false career & false invitation to the wedding.

Computer and social scientists in Europe are building an entirely virtual world from the group up to examine the development of society and culture. The programs will operate agents (independent of human control) in a massive system that features the development of language, building structures, eating, and mating.

The experiment will see about 1000 agents live together in a simulated world hosted on a network of 50 computers based at the various institutions involved. Each agent will be capable of various simple tasks, like moving around and building simple structures, but will also have the ability to communicate and cooperate with its cohabitants. Though simple interaction, the researchers hope to watch these characters create their very own society from scratch. Every character in the simulated world will need to eat to survive, and will be able to learn from their environment through trial and error - learning, for example, how to cultivate edible plants with water and sunlight. In addition, characters will be able to reproduce by mating with members the opposite sex and their offspring will inherited a random collection of their parents "genetic" traits.
Read more here at the NEW-TIES home page. It doesn't appear to have any economists listed among the "consortium", though I imagine them all to be diligent data gatherers. The biggest question, to me, however, isn't answered in either the article or on the website: do the agents have the ability to trade?

A Choice of Aircraft Options

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Re: A new system for passenger aircraft to thwart shoulder-fired missles:

�Yes, it will cost money, but it's the same cost as an aircraft entertainment system,� Kubricky says.
Is it worth the cost?
A RAND Corp. study this year recommended postponing installation of anti-missile systems. The study assumed, however, that it would cost $11 billion � not the $6 billion Northrop now cites � to equip all U.S. aircraft with anti-missile technology.
Does $5 billion less really change the buy decision?

UN To Ghettoize the Internet

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As we've mentioned before here at T&B, the UN is frustrated at their lack of control over the functioning of the internet.

While the formal proposal from a U.N. working group will be released July 18, it's already clear what it will contain. A preliminary summary of governmental views claims there's a "convergence of views" supporting a new organization to oversee crucial Internet functions, most likely under the aegis of the United Nations or the International Telecommunications Union.

At issue is who decides key questions like adding new top-level domains, assigning chunks of numeric Internet addresses, and operating the root servers that keep the Net humming. Other suggested responsibilities for this new organization include Internet surveillance, "consumer protection," and perhaps even the power to tax domain names to pay for "universal access."

Aside from the sheer horror I feel at giving the UN any ability to have even the remotest say whatsoever in "consumer protection", it drained the blood from my face to think that the UN could be in control of domain functionality.

If you consider, as I most often do, the UN in the form of a negotiating-cost-reduction system for what can be viewed as international lobbyists for a multitude of special interests, the potential to subject the internet to every political whim of 190+ nations is staggering. As the article mentions, China would have considerable weight in deciding how domains are structured and allocated. China's current attempts to filter the internet would be a cute side project in comparison to being able to fragment the system to the point where the only sites Chinese people could see were the ones on approve top-level-domains, awarded to those whose content has been approved by the ruling body.

The article linked to above likes the word "Balkanized", but I think the more appropriate term would have to be "ghettoized". The issue goes beyond subdivision, and into isolation. Balkanization would be problem enough, creating small fiefdoms through a fragmented root structure. The true potential (for places like China, Saudi Arabia, Syria, Iran, etc.) is complete separation from the rest of the world at the whim of the government.

Are bigger planes more deadly?

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I have no idea, really, but in the course of some work I ran across the following chart and was instantly fascinated:

Airline Accident Trends 1945-2004
Picture1.gif

(Source: PDF) Note that these numbers exclude non-accident occurances such as bombing and hijacking.

The left hand ordinate is the number of fatalities, and the right-hand ordinate is the number of accidents. While the trend indicates that the number of accidents has been on quite a descent, what I find more interesting is that the ratio of accidents:fatalities converges, but doesn't (on average) reverse, 1985 and 1997. After an increase in the number of fatalities through to the mid 70s, the number has returned to numbers just below the 40s. But the number of accidents is almost a third of what it was during the same time.

Not being overly familiar with the aviation industry, the only trends I'm familiar with are the growth in plane size, and the alternating shift to, and now more recently from, hub-based route architecture. With larger planes, each accident will claim more lives. (Which is similar to my retort about people who talk incessantly about flying being safer than driving -- I've spent a good portion of my life on a plane and have never had a fear of flying, but when you have a car crash, you don't often lose 280 people at once. In the event of an accident, I'd much rather take my chances in an automobile. I don't think I have the luck to come out this well.) Any ideas?

No Escaping "Us and Them"

Your a good person, and want to do good by others. People are fundamentally the same the world-over, and deserve a shot to get the quality of economic life that you have. You recognize the current smallness of the world, and find it hard to understand how life south of the Rio Grande can be so much less appealing.

Yet, Us and Them is real. Don't believe me, ask Them!

Tou recognize that policies and institutional frameworks that work for us in the developed world should work for those in the developing world. Health, infrastructure, local governance, protection of property, constituional law is so much better where you are.

But we are just pretending that we can make them like us if we thrust down our social systems upon them:

"The only way to end poverty is to build viable systems on the ground that can deliver services to the poor in ways that are sustainable," she said.
Not quite. They only way to end poverty is to have the poor capable enough to build and run their own systems. We run our own systems - they've been organically grown. Our acculturation is a big part of what makes capitalism work much better in the US than in the EU.

International capital markets and investment are critical for transferring hard capital, human knowledge, and social institutions to the undeveloped world. But it is they who must adopt and stick to successful solutions. It is they who must change their cultures and ways of existence, if they don't want to be poor.

Our imposition of institutions as ties to loans or relief could work, but only if these become the norm. As long as Lee Coppock can't embarrass Liberian border guards, and ..., capitalism cannot take hold.

Marginal Revolution writes about Yale Economist R. Mendelsohn, estimating the effect of global warming on the US economy. Not surprising, the effect is expected to be a net benefit. I have never understood why people think a few degrees warming is inherently bad. The last wasming had beneficial effects. Within the US there are large climate differences, without the warmer areas being worse of.

It is not only the US who will handle global warming with ease. Even the worse hit region (India, due to the monsoons) will only loose 4.9% of GDP for 2.5 degree warming, most likely an overestimation given the moderate rises of temperature we seen so far. For the world as a whole the cost is expected to be 1.5% of GDP by 2115.

Remember Kyoto alone is expected to costs 2% of GDP by 2050, and is just a first start. To reverse global warming you need many Kyoto�s. Most American estimates are higher. But people do not see global warming as an mondane event, instead getting their vision from hollywood movies such as Waterworld and Day after Tomorrow. This is the result of the unscientific image of doom the ideologis in the enviremental movement have spread.

You doubt they are ideologists rather than science-driven? Carl Pope, Executive Director, of the The Sierra Club had a debate with Lomborg In the latest issue of Foreign Policy. Instead of environmentalism he started attacking the US for �bullying Chavez�(!) and wrote gibrish aobut how capitalism exploited workers in 19th century Britain (common myth among socialists, the standard of living of workers of course increased during that period).

Hugu Chavez is semi-dictators who is rapidly destroying Venezuelans democracy. His best friend and idol is Cubas Fidel Castro�s. Why are there no eyebrows raised among the readers of FP?!?

The biggest hysteria over global warming among ordinary people is the rising sea levels. Many educated people are actually convinced global warming poses a �threat to our survival�. In fact, the extreme case scenario is a raise of 88 cm (expected rise is 40 cm). It would be laughable to call this a threat to humanity if the belief was not so common.

Sea levels have risen through the twentieth century by 10-25 centimeters without anyone noticing. Even the worst-case scenario is easily neutralized by spending some money on construction. The IPCC themselfs estimate a loss of 0.1% GDP by 2100.

The nation often used to motivate all this is the Maldives. But the Maldives sea levels have actually been falling along with global warming. Even if M�rner is wrong, the costs if razing the Maldives one meter is negligible compared to the trillions Kyoto and Kyoto II, III and IV etc will costs. (any thoughts Paul?)

One often hears people accusing us Global Warming realists of being ignorant or anti-science, for opposing Kyoto. But in fact it is those people who are unscientific. Global warming and how to handle it is a question for two types of scientists, Climatologists and Economists. Ignoring the latter part is no less scintific than ignoring (or exagerating) the former.

Reinsdorf the Benevolent

Of course this is not benevolence:

"I voted 25 times for [Podsednik]," said Jerry Reinsdorf, chairman of the White Sox. "Well, you know, this is Chicago, where the slogan is, 'Vote early and vote often.' And it would cost me money. He's got a clause in the contract that if he makes the All-Star team he gets a $100,000 bonus. But it's worth it."
How much was it worth to the White Sox for Podsednik to make the All-Star team?

Movie Economics: Quote of the Day

"Shot on budgets ranging from $1 million to $2 million, Sci Fi's movies are made in money-saving locales like Bulgaria, Romania and Missouri."

-B Movies Invade Your TV!

This article asserts that liars, cheats, frauds, boasters, and numbskulls definitely shouldn't blog, basically because they'll give themselves away...

However, it also seems to suggest that honest, patient, thoughtful, decent, careful, and smart people shouldn't be blogging either, since academics on hiring committees believe that "Past good behavior is no guarantee against future lapses of professional decorum."

Well, that doesn't strike me as persuasive at all. The Chronicle's anti-blogging tale doesn't help me understand how committees fill a professorial job, but it does provide me with a further reason to avoid academia: to avoid a petty "democratic" culture of faux-objectivity.

Hard America

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HedgeFundGuy at Mahalanobis makes some comments about Hard America/Soft America. Actually, he refers to why we produce mediocre 18 year olds and highly productive 30 year olds. What happens in those intervening years? This reminds of some comments I ran across years ago on a website of an Indian student attending a U.S. institution as a graduate student. He was slightly perturbed that his fellow American students were just interest in what was going to be on the test and not more intellectually curious. I think this goes a long way in explaning why people in this country become enourmously productive.

People in this country are interested in learning only what they need to get the job done and not necessarily in peripheral knowledge. How often have I heard a comment from a kid that math isn't needed? A lot. I was once trapped next to a teacher on a flight to London who wanted to explain to me that it was more important that a student feel good than about actually learning. It was an 11 hour flight so I was polite, my reaction would have been much different otherwise. I worked with many people who simply couldn't do basic fractions. I think to a certain extent, education people or as Barone calls it, Soft America is fairly ignorant of what is needed in a competitive economy. Lord knows they do all they can to prevent competitive forces from entering the education field.

The point I'm getting at is that kids are ignorant of what skills are needed. So, we have the ignorant teaching the ignorant. It isn't enough to say that you get out of an education what you put into it if you don't know what you should know and neither does your teacher. We need a system that transmits market signals to kids at a younger age, higher standards will go a long way since kids will learn only what they need to pass a class.

Caeca invidia est

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Cornell economist Robert Frank gets the labor data wrong, confuses Keynesianism with supply side economics and proudly demonstrates his lack of understanding of about small-business economics. On the other hand he fills the usual NYT quotas, attacking the rich, erroneously calling Bush ignorant and substituting analyses with namedropping.

First the Kerry prediction that Bush would be the first president since Hoover to see net job loss during his term, often repeated by the media. In fact the prediction turned out to be wrong, after which the media killed the story. Frank however doesn�t seem to have updated his figures (perhaps preferring to still live in November 7th 2004?):

�experience has proved [Tax cut critics] right. Total private employment was actually lower in January 2005 than in January 2001, the first time since the Great Depression that employment has fallen during a president's term of office.�

In fact, the Bureau of Labor statistics reports that Nonfarm employment was 344.000 higher in January 2005 than January 2001, which would have taken some 50 seconds to check.

He also creates a straw man by misrepresenting Bushes case for the tax cuts as Keynesian rather than supply side. This is why Frank thinks the US cut taxes:

�The president's defenders might respond that business owners often need money up front to cover the hiring and training costs incurred before new workers can effectively contribute to extra production. The tax cuts put that money in their pockets.�

Pathetic. In the liberal world without elasticity�s the only effect of tax cuts is redistribution, and the only stimulating effect could thus be to give money to those who spend more. But in real life taxes make it less profitable to work, hire or invest, so cutting them stimulate the economy by expanding work, hirings and investments. How hard is that to understand?

�the president's claim that tax cuts to the owners of small businesses will stimulate them to hire more workers flies in the face of bedrock principles outlined in every introductory economics textbook.�

A completely false, as there is plenty of established theory that shows what common sense would suggest: small business taxes can influence hiring decisions. Some would ascribe Robert Franks gibberish above to the overemphasis on neoclassical economics, a field where the entrepreneurs is conspicuously absent. Perhaps. But I think even a pure (but competent) neoclassical could easily understand why lower taxes for entrepreneurs would lead to stimulating more hires.

The entrepreneur and her workers are complements. As lower taxes stimulate me take the risk/effort and start a new firm or to make it more profitable to expand my existing firm I am likely to also need new workers.

Furthermore, economic decisions are made infra-marginally as well as marginally. The personal income tax takes a huge bite out of any profit I make by hiring additional workers. If there is any costs associated to me from with hiring them (risk, effort) the taxes will distort my choice. Essentially what Luskin is suggesting with his example.

Why not look at some empirics? Princeton professor and Bush advisor Harvey Rosen has worked extensively with estimating the effects of small firm taxation after the Tax Reform Act of 1986. With Carroll, Holtz-Eakin and Rider he has written a host of influential papers on this, showing that entrepreneurs' personal income taxes significantly effect investment, labor supply and hiring decisions.

For example, they find that lowering the personal marginal tax rate of the entrepreneur by 10 percent �raises the mean probability of hiring workers by about 12 percent�. This was published in the Journal of Labor Economics already in 1999!

There is more modern research that shows that high income earners and the self-employed have large supply elasticity of labor. MIT and Berkley economist Grueber and Saez estimate that the supply elasticity of high earners is 0.57, three times that of low income earners.

Instead of discussing these and other results Frank tries to bully his readers into believing him �[the taxcuts] prompted a large group of Nobel laureates in economics to issue a statement last year condemning the administration� The Paper of Record neglects to mention that another large group of Noble laureates came out in support of the Tax cuts.


Bush is often seenas an unintelligent buffoon by those who consider themselves intellectuals. Certainly he doesn�t go around quoting Virgil or Livius, if that's your criteria. But his intuitive understanding of the role on economic incentives on the behavior of entrepreneurs and workers is quite impressive, extremely rare among politicians and sadly also among some economists (as illustrated above).

The President at least seems to understand two central economic aspects much of the educated left lacks in their mental world models: elasticities and incidence. Maybe they should read a couple of those introductory textbooks.

Hurricane Watch

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A large hurricane is exepcted to hit the U.S. coastline sometime Sunday night. We here at T&B hope that everybody there is safe and makes it through with minimal impact. However, the "watch" doesn't have to do with looking out for a possible hurricane hitting the Gulf Coast, but rather some inane economic comment that this will boost the economy. The only people who are happy about this and who probably benefit are construction workers. Of course, Home Depot sells a lot of plywood and Wal-Mart a lot beer.

This barbaric attack will not the scare British into submission or retreat, it will just solidify their resolve. These are the same heroic people who took 43.000 civilians dead during the Blitz without any dent to their willpower. Do the Islamist scum really think a few bombs will do what Hitler couldn�t do with 13 kiloton of explosives and over a million incendiary bombs? This British response still applies:

"What kind of a people do they think we are? Is it possible they do not realize that we shall never cease to persevere against them until they have been taught a lesson which they and the world will never forget?" -- Winston Churchill

Some seem to think patriotism or rallying around our leaders during times of war are signs of irrationality, an unsophisticated response from the masses to frown upon. Many also make fun of the mindset of �let�s not do X because it's what the terrorists want�, viewing it as jingoism or meaningless platitudes. I completely disagree. This is in fact the exact correct response in the game-theoretical situation we are faced with. As often the common people are more rational in their beliefs than many intellectuals:

The terrorist have their strategy clear. They know they cannot win militarily, instead they expect the west to give in due to political sensitiveness to small casualties, something they can actually achieve despite their limited resources. This is the lesson Beirut and Mogadishu taught them.

To quote Bin Laden�s declaration of war on America in 1996:

��when the explosion in Beirut took place on 1983. You were turned into scattered pits and pieces at that time; 241 mainly marines solders were killed. And where was this courage of yours when two explosions made you to leave Aden in less than 24 hours!"

"your most disgraceful case was in Somalia; hereafter vigorous propaganda about the power of the USA... [you moved]twenty eight thousands American solders into Somalia. However, when tens of your solders were killed in minor battles and one American Pilot was dragged in the streets of Mogadishu you left the area carrying disappointment, humiliation, defeat and your dead with you.� �You have been disgraced by Allah and you withdrew; the extent of your impotence and weaknesses became very clear.�

If they did not believe small casualties had large political effects on US and UK there would be no point for them to purpose the attacks. This is why Kerry exploiting the Zarqai car-bombs during the 2004 election was so horribly misguided. The bombings in themselves were costly to the terrorist and had no inherent payoff. They only had a political payoff, and that only if we chose to give them one. But this is exactly what Kerry did, I believe causing him the election. I don�t think this was on purpose, but to misunderstanding the situation. By his dovishness he made the election about signaling resolve to the world and to the terrorists.

Noble prize winner James M. Buchanan stated this perfectly:

"I support President Bush for a simple reason. A victory for Kerry would be taken as a victory for the terrorists, by both the terrorists and the rest of the world. Economic issues pale in comparison with this overriding fact."

The west also has it�s share of Bribed Traitors, spineless appeasers, and the mentally insane, all practically begging to submit to Al-Quaida. Nevertheless, the continued determination of the Australian, American and British have gone a long way showing the right stuff the Anglo-American world is made of. Again the only man worth quoting on this at this tragic moment is Churchill:

"We have not journeyed across the centuries, across the oceans, across the mountains, across the prairies, because we are made of sugar candy."

Don't Mess with Smith

Don't mess with Adam Smith's writings or reputation, don't take his words out of context, and don't even think about claiming that Adam Smith was "cynical" about the abolition of slavery during the late 18th century, because Gavin Kennedy will smack you down real hard, but in a gentlemanly fashion:

John Hari reports on Adam Smith�s views as if the gentlemen who founded the Anti-Slavery movement in 1787 �did not listen� to Smith. I presume he does not know that Wilberforce used to quote favourably from �Wealth of Nations� to support the anti-slavery campaign in his debates with the supporters of slavery in Britain and the Americas. Far from not listening, the Anti-Slavery campaign used Smith�s analysis of the political economy of slavery against its practitioners. It is therefore a travesty of the truth for John Hari to report what he does not understand. Isolated quotations make for poor journalism.
The article Mr. Kennedy criticizes is here. And to Palgrave-MacMillian, publishers of Adam Smith's Lost Legacy, this is the type of book that would be good to send to econ bloggers (cough). Also, I like the UK cover better than the US cover.

Collaborative Cheaters?

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Apparently, a number of econ grad sudents at UVa are being investigated for cheating.

An “alarmingly large fraction” of the first-year class of economics graduate students at the University of Virginia were involved in a cheating incident that came to light this month, according to the department chair.

Department officials said that some problem sets from textbooks used in introductory graduate economics courses have answer keys online. At least one student found answers for a course taken by all first-year students, and apparently shared the information with classmates. Though the solutions were apparently available, David Mills, chair of the economics department, said students should have “known it was off-limits,” but that they instead “used it without the professor being aware.”

My initial reaction was "is finding the answers online strictly cheating"? Sure, it would be better if everyone were motivated by the rush one might feel at getting through a particularly tough problem on their own, but let's be honest here. If the problem sets said "no outside materials can be referenced", then I can see where the online search was a violation. But I'm betting it was a lot less clear than that. No truly devious methods were used to find the answers, and I believe the professor should have had some expectation that, if he were using problem sets taken straight from a text, answers might be available (much like the beloved tradition of providing answers for the odd-numbered questions in the backs of math textbooks)from the same source. Again, if warning against it was given, then the case for cheating would be clearer.

That aside, however, in re-reading the lede, I was struck bu the first three words encapsulated in quotes above: "alarmingly large fraction". Two options here: one person found it, and the information spread; multiple people had the same idea and each spread the word, though to a smaller group each. Either way, I find it fascinating that in the competitively-driven world of grad school economics there was still an individual propensity to reduce the advantage held by the person or persons who originally found the solutions.

Supposing that the line was clear and that using the solutions should be considered cheating was obvious to all involved, what aside from some sense of altruism could account for the original discoverer increasing the level of information in others, considering that the marginal person added to the "group in the know" increases the chance for being discovered? And what about the loss suffered from a reduction in class standing by not being the only person to score, say, in the top 1% (providing that the person is smart enough to make a few errors to reduce suspicion)?

broadband.google.com?

Google is putting money into the potential of broadband-over-powerlines. Along with Goldman-Sachs, they are sinking about US$100M into the BPL efforts of the Current Communications Group.

E-Voting Issues At Wired

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There are a couple of good articles on issues surrounding e-voting up now at Wired:

An Introduction to E-Voting
E-Vote Guidelines Need Work

The Introduction covers a number of things that have been brought up around these parts before.

One of the most alarming things from the "Guidelines Need Work" story is this bit:

"One problem with the Diebold code was that it had large, complex multi-logic statements with no comments (from the designers)," Rubin said. "That wouldn't pass this standard."

I know of few professional programmers that would ever let a serious piece of software out of development without proper commenting. The lack of it indicates sloppy work that was likely done by third-rate teams with more interest in getting out the door than getting it to work. Which means there is more than one significant problem. First off, that the code was allowed into use uncommented means that the writers of the original guidelines were beyond incompetent. Secondly, that Diebold allowed such shoddy work out its door indicates that the committee that is purchasing Diebold's services has chosen the worst example possible of "the lowest bidder". The question of whether or not the code was usable is entirely beside the point. More important is the fact that guidelines are being desigend by woefully uninformed political agents with little incentive to do anything other than "looking like they're doing something".

This strikes me as a political-committee created problem being addressed by yet another political committee. By adding paper-trails to electronic voting machines, you now add in the need to stock paper, reload machines, and, most importantly, require that the printout be easily verifiable by the voter. The original problem was that the ballots -- in a design approved by political agents unrepresentative of the entire population -- were often confusing (the troubles with lining up names and boxes in "butterfly ballots", for example). If the new design has to make both the machine and the new paper easily verifiable to someone for whom the paper ballots were confusing, then you've simply added a new level of useless complexity. Why not spend the money on making better paper ballots? The paper trail would exist, less money would be spent, less staff would be required at polling stations, and the question of hacking computers would be eliminated.

Meanwhile, the continued distrust of computer voting that results will certainly undermine voter confidence the only real leap I can see as worth the effort: the choice to vote online. (N.B.Yes, this is rife with problems, but the reduction in transaction costs, the spread of "voting places" to every library with a modem, while retaining paper ballots for those without access to a computer would achieve, I believe, enhancements in turnout that would be worth the cost of supplying something like unique bar-code printouts for each voter so that a quick recount could be achieved in the case of hacking/fraud. I still think the turnout we have now gives us a very good estimate of the true population, but there is certainly nothing wrong with more people voting.)

I'm thinking of starting a new category: Interesting conversations I can't join because of my work.

The first entry would be the recent essay by Edward Fulbrook entitled "The RAND Portcullis and PAE" in the Post-Autistic Economics Newsletter. Snip below the fold:

Finally, A Complimentary Book!

After years of persistent blogging, I received my first book compliments of a publisher. I've been waiting for my free copy of Freakonomics and was hoping for a deluge of anti-WalMart books, so what do you think the book sent to me is about? Take a guess:

A) Business
B) Economnics
C) Wal-Mart
D) Libertarianism
E) None of the above

Correct Answer: E. Of course!

It's about being a professional in the U.S. Army, a topic I've never really studied or published on. Still, I'd like to heartily thank the account manager at McGraw Hill for kindly sending me a copy of The Future of the Army Profession, 2nd. edition.

Now, I have never been an Army professional, nor will I ever be, as long as selective service remains dormant. And due to conflicts of interest with my RAND affiliation, I cannot review this book, except to say the few of the 33 essays I've skimmed make for excellent, balanced reading -- although more historical-cultural-sociological-institutional and less data-driven than I prefer...

Also, please note that any views of military matters I might accidentally express here are not those of RAND, DoD, or Donald Rumsfeld.

Much of the US and the European intellectuals elites are still infected by the mental disease that is anti-Americanism, constantly beating their drum of pessimism regarding the future of America. Today seems appropriate to take a look at what the figures say.


1. First in Knowledge

America has only some 4.5% of world population but almost 40% of world spending on R & D, 50% of world industrial patents and over 60% of scientific Nobel prizes every year. In the two central fields of as Biotech and Computer technology the US is holding it's lead, and in future fields such as Nanotechnology is taking the lead. America is the world leader in Nanotech, alone standing for one third of R&D and over 50% of top rated journal articles.


2. First in Economics

The US economy is a 12 Trillion $ juggernaut, dwarfing any and all competitors. Last year the US economy grew by 4.4%, this year it will grow by another 3.8%. This means that America added not one but two Saudi-Arabias to its economy last year alone! Every three years the US is adding an entire France to its economy.

For all the fuss, the public debt as a share of GDP only increased by 0.7% in 2004, from 37.5% to 38.2%. This year it will not increase at all, and by next year debt/GDP is actually going to start decreasing. Of the worlds 20 largest companies, 11 are American, including numbers 1, 2, 3, 4 and 6. And of the world 20 richest people, again 11 are American. More than one third of all billionaires in the world are American citizens, most of them self-made entrepreneurs.

American households now have some 49 Trillion $ in net assets, enough to buy a brand new 2005 Ferrari 612 for every man woman and child in Italy, France and Germany! Or buy the Frankfurt and Paris Stock exchanges 16 times over. Again, despite all the hype last year Americas households added to their net worth.


3. First in defense

The US spends some 3.7% GDP on defense, but what is little for America is great for the world. America stands for 48% of world defense spending. The budget of the US coastguard is alone larger than the total defense budget of 171 of the worlds 191 nations!

Some 1.4 million men and women (15% are women) are in active duty, of which about 500.000 are combat troops of the Army and Marines. 138.000 of this force are fighting bravely every day to bring liberty to Iraq, and some 180.000 American soldiers are still stationed in Europe and East Asia on the request of those countries.

Of the US armies 37 active combat brigades, 10 are serving in Iraq, in addition to 3 brigaded from the National Guard and 25.000 of 175.000 US Marines. So much for all the armchair generals declaring you �overreached�.

In June 2005 the US army exceeded its recruiting goals, and is expected to finish the year with only an 8000 shortfall. The Marines, Navy and Air force have all exceeded their recruiting goals. They may not write for the NY-Times, but there are clearly still many people left in the heartland who believe something�s are worth fighting for.


4. First in Aid

In Official Development Aid, the US gave 19 billion dollars in 2004, 25% of world total. This is a doubling since Bush came into office. The US gives 60% of all world food aid, saving million from hunger every day.

Unlike most nations, the ODA is only a small part of American Aid. In total, Americans (mostly the private sector) give some 60 billion $ each year, again dwarfing any other nation. Scholarships given by American Universities to poor students from the thirds world amount to 1.3 billion dollars, the same as the entire foreign aid given each year by Switzerland!


5. First, as always, in Freedom

No year in modern history has seen more success for Americans role in the world than the period between last 4th of July 2005 and today. Since than we have had historical free elections in Afghanistan, Iraq, Ukraine and Lebanon, all with American support and each with pro-western candidates winning.

A poll taken in March of 2004 of some 2000 Iraqis shows that 62% believe their country is heading in the right direction, and only 23% in the wrong direction. Another poll by Mansoor Moaddel shows that 75% of Iraqis believe Iraq is better of after the US removed Saddam Hussein. The world banks figures for Iraqi GDP growth in 2004 were, 51.7%, the highest by far in the world. If this is not the impression the media has given perhaps it is because enlightened intellectuals do not think in quantities, only in anecdotes.

Elevating the Representativeness Bias into an art form, a burning car a day matters more than the collective progress of a nation of 25 million. A good word for the those who do not understand the opinions of common Iraqis and the aggregate state of Iraqs economy would perhaps be �disconnected from the reality�. The IMF estimate for 2005 is a GDP growth rate of 17%, twice the rate of China.


6. Wishfull Pessemism

The same people predicted (and hoped) that Socialism would defeat capitalism, that the Soviet Union would outlast America, that the Japanese and European mixed economies would surpass America, and that Democracy would never come to Iraq and Afghanistan. The same politicians, academics and journalist in America and Europe are now predicting (and hoping) defeat and decline for America. They have always been wrong in the past and will be wrong again this time.

Figures are important, and they are supporting our case. But they cannot measure everything. There is no suitable metric for the love and admiration I and many others in Sweden and all over the world feel for America. As America fights for freedom we will fight with you.

Of Sweden�s population of 9 million, some 12% are born in another country. These are higher numbers than even the USA, at least for legal immigrants. Of these some 300-350.000 are Muslims, although of course many - such as I - are only nominally Muslims.

Sweden�s greatest failure in immigration policy has been massive unemployment. Last year 75% of native Swedes were employed compared toonly 59% of immigrants. An additional 5-7% of each group was in hidden unemployment such as sick-leave or government programs.

Of the immigrants from Asia and Africa, only 47% were employed even according to the exaggerated official data. Generously adjusting for education, total unemployment of immigrants in Sweden is in the range of 30-40%, and more than 50% for some groups.

While 3% of native Swedes received welfare at least once during the year, the figure for all immigrants is 17%. In the US the corresponding figures were 1.6% for native households and 2.3% for immigrants. To be clear, while this is Sweden�s largest social ill; the economical problem cannot be blamed on the immigrants. Four fifth of those outside the labor market are native born Swedes.


1. Natural experiment

In America unemployment among immigrants is lower than the native population. Until the mid 1970s the same was true for Sweden.
The Iranian group illustrates the contrasts. There are many in both countries. It is hard to know how important the selection difference was, but I doubt it very significant.

In Sweden Iranians has one of the highest unemployment figures, above 50% if you include welfare, sickleave and early retirement. The unemployment figure is the US is 3%, well bellow national average.

The average labor income in the years was 12.500 $ per adult Iranian and 20.500 for a native Swede. Average income for adult Iranians in the US is 47.000 $. While 37% of Iranian received some or part of their income from Welfare in Sweden, the corresponding US figure for public assistance was 4.3%.


2. Explanations: Taxes and benefits

One clue is to observe that for those who have jobs there are relatively small labor income differences, only 7% higher for natives. While you might see this as something good, it is likely to be a symptom of the problem.

There are in practice no jobs in Sweden that pay below 17000 $ per year (13.000 kr/month). including employers fees this is 23.000 $ in labor costs, well above what many newcomers can produce for. After taxes you get to keep half, same or less than you would get from welfare or early retirement.

The wage structure is artificially compressed, by a combination of the powerful unions and the welfare system. The high �floor� given by welfare may seem nice, but leads many less skilled workers permanently out of work. No one is willing to pay them before tax to wrok what the state pays them after tax not to work. Instead of the market adjusting with price it adjusts with quantity, in another words you get mass unemployment. This would explain why unemployment among immigrants with academic education is lower.

3. Dilemma Indeed

Most who come to America initially start of with relatively low incomes. By doing this they can quickly accumulating country specific skills (language, culture, market information). The growth in income is rapid the first few years, often surpassing natives after some time.

Immigrants into Sweden face a different situation. Somewhat similar to the Ljungqvist and Sargent story, the incentives of workers who just had a large shock to their human capital (by moving to another country) to re-enter the labor market and build up new human capital is artificially reduced.

4. What Thomas Friedman gets and most Swedes don�t

In addition, the rigid labor regulations create disincentive to hire worker new to the market. In Sweden the employer is by law forbidden to fire workers they do not want to keep. Instead, you have to follow the list by time of entry. This hurts all newcomers, and has the added effect of making employers especially risk averse to hire immigrants whose skills and suitability may be harder to judge to employers.

5. Norms, Living segregation and Dynamic effects

Many midd-easterners and africans live in large concrete ghettos similar to (but not as bad as) US inner cities. This combines with the high unemployment above can lead to permanent problems though the effects on social capital effects. When everyone around you is unemployed the norms can change. Kids do not learn work ethics, and no one considers it a stigma to not work, marketknowlege is not transmittet naturally etc.

To the degree that the quality of school is dependent on the peers segregation creates bad schools (immigrants in ghettos are 3-4 times more likely to drop out of high school). No one has yet done this in Sweden, but the same memechanism is likely at work.

6. Blame the Capitalist

The resentment in these communities is understandably large. Our ruling elite are busy politically exploiting the underclass their own economic policies has created. By presenting the current problems as result of racism by the �Market� the rage is directed against the private sector. After all, you are bound to be grateful to the party that is giving you welfare handouts, and the alternative, a real market job, is quite abstract.

By instilling the identity of oppressed victim dependent on government handouts, the socialists hope to bind the immigrants to them. Recently the Swedish government appointed an unknown Marxists with 1 academic publication as Professors of Sociology. They also gave him the task to investigate integration. Surprisingly enough, he found that the lack of integrating was due to �structural racism�, inherent as we know to capitalism.

Any decent person who is accepted by Sweden as an immigrant should be very grateful. Swedes did not have any obligation to accept us, and yet they have. But this moral gratitude is not to be directed at the Ruling party, but the Swedish nation as a whole. When the interests of the two do not coincide the choice should be clear.

Calculus of Faith

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Tino�s post about death caused me to ponder a little about spirituality. I think only the spiritually hollow people feel that death makes life meaningless. Jeffrey Lang, a mathematics professor at University of Texas, in his book �Even Angel�s Ask: A Journey to Islam in America� attempts to develop a conceptual model for the one who wants to improve his faith:

�If one were able to plot a person�s spiritual growth against time, a Muslim would envision it as a continuous curve that, at any point, is either ascending, descending, or at a critical turning point. According to this perspective, faith is not a steady state. A believer must be on guard against unwittingly slipping into a downward slope,��

calc_of_faith.gifIt follows from the model that we must always continuously review the current state of one�s religiosity. Some diagnostic checks that could be used might include asking questions: �how�s your faith?�; �Do I feel closer or farther from God in my daily prayers lately?�; �Am I giving more or less in charity these days?�; �Was I at greater or lesser peace with myself and with others in the past?�

Most religious rituals enable people to develop discipline over the course of their lives. Muslims fast during one month of the year from sunrise to sunset; I try to use this �Ramadan button� during times of hardship in life (for those familiar with Stephen Covey's work might understand it as the �pause button�).

I agree with the advice of Bryan Caplan that �immortality through your work is better than nothing�. It was memorably put by Justice Oliver Wendell Holmes:

"If I could think that I had sent a spark to those who come after I should be ready to say Goodbye." (cited by Thomas Sowell at the end of his biography A Personal Odyssey)

My advice to Tino for his unlucky attempt at making himself religious is read some spiritual autobiographies. My favourite is Mohamed Asad�s Road to Mecca. Across the economics blogosphere the most religious blogger seems to be Rasmusen. John Palmer had also noted that one day he would like to post on the econometrics of God; I think this book will be of some help, Frank Tipler�s The Physics of Immortality.

It was ironic that while writing this the TV was showing the Hindi film, Kal Ho Na Ho (Tomorrow May Never Come).

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