November 2005 Archives

Washington D.C. Housing


David Berstein over at The Volokh Conspiracy has a post about the decline in housing prices in Washington D.C. area. It would appear that a decline has already begun and looks to conitnue further. He mentions a fact from one of the articles:

Meanwhile, new construction is inflating the housing supply, as condominium developers rush projects to market. According to a recent report by Delta Associates, 47,000 units in dozens of projects are hitting the local market in the next three years, which is about five times as many condo units as were sold last year.

The real estate market has a number of inefficiencies. For an excellent discussion of these, I recommend this paper which I ran across when researching credit expansion issues. Also, read the case studies of the various real estate booms and resulting busts. Investment decisions are made when the funamentals look good and demand outstrips supply, but projects can be completed when the fundamentals are poor because of the long lag times due to planning and construction. I would imagine that in a city like Washinton, these issues would be even more important.

I wrote that Murtha in his USAtoday column used incorrect facts to substantiate his claim that the US is loosing the war in Iraq and should retreat. For example. He warned that attacks have increased from 150-700 per week, not mentioning that the deadliness has decreased by the same proportion.

Murhta also stated as a matter of fact (with no source) that unemployment in Iraq is 60%. I wrote that the Iraqi-Index by the Brookings institute estimates unemployment at 27-40%, and reports a decline since 2003 (from estimated 50-60%).

In the comment section an observant reader found a recent speech by Murtha where he does provide a source for the same claims:

Last May 2005, as part of the Emergency Supplemental Spending Bill, the House included the Moran Amendment, which was accepted in Conference, and which required the Secretary of Defense to submit quarterly reports to Congress in order to more accurately measure stability and security in Iraq. We have now received two reports. I am disturbed by the findings in key indicator areas. Oil production and energy production are below pre-war levels. Our reconstruction efforts have been crippled by the security situation. Only $9 billion of the $18 billion appropriated for reconstruction has been spent. Unemployment remains at about 60 percent. Clean water is scarce. Only $500 million of the $2.2 billion appropriated for water projects has been spent. And most importantly, insurgent incidents have increased from about 150 per week to over 700 in the last year. Instead of attacks going down over time and with the addition of more troops, attacks have grown dramatically. Since the revelations at Abu Ghraib, American casualties have doubled.”

If am not mistaken, he is refering to is the “Report to Congress Measuring Stability and Security in Iraq” by the DoD, one due every 90-days.

Indeed there have been two such reports, so called Iraq Metric Reports, in July and October. (to the credit of Brookings, the DoD is really just doing what Brookings has been doing since the beginning of the year, gathering all quantifiable data about Iraq in the same document)

What is striking is that figures Murtha attributes to the DoD are not here! For example unemployment is stated at 28% and 21% (in Baghdad), the 60% number is nowhere in the report.

It is reasonable for Murtha to accuse the Department of Defense of exaggerating, if he has some reliable figures that show unemployment to be 60%. But he does no such thing, in his speech he gives the impression the unemployment and 1-4 dead per day claims are Department of Defence figures. Is it possible he is getting completely different data than the DoD report?

Maybe not. In his USAtoday written 3 days after the speech he writes “Average monthly death rates of U.S. servicemembers have grown since the Abu Ghraib prison scandal from one per day to almost four.”

So which is it, doubled or almost quadrupled? Did it really change so much in 3 days? Or is it that Murtha is just playing around with the figures as he pleases?

Murtha is reckless with an extreamly important subject, the deaths of American soldiers, selfless people who volunteered to defend their country for little reward. Murtha is a decorated veteran and was once one of those heros. Why is he now politically manipulating morbid statistics? So concerned about national securety and saving lifes he thinks it is OK to exagerate and twist data? Isn't that what they accuse Bush of doing?

There is no question he is giving incorrect data about casualties, intentionally or due to sloppyness. I still want to give him the benefit of doubt for the incorrectly cited unemployment figures. Is there any reliable source to substantiate the 60% unemployment figure?


The actual figures do show a slight increase, from the beginning of the war to mid April 2004 (Abu Gharib story seems to have been spread in late April) 1.9 Americans were killed. The rest of 2004 the figure was 2.55 per day, whereas the average in 2005 so far has been 2.3. I don’t know if you can attribute the 20% increase to Abu Gharib (casualty figures seem to fluctuate with American offensives). It would require Herculian acts of data-mining to show a quadropling for average figures.

More Refining Capacity Coming

Quick nod to an interesting article in the CS Monitor: Refinery bottleneck to ease. Oil capacity is something we've talked about before around T&B.

Oddly (or not, depending on your view of the thoughtfullness of the media), the article doesn't mention that the addition of capacity might well have a lot to do with the recent high prices of gasoline. Refineries were at the limits of their capacities and were, for a few years in the 90s, actually net losses to operate. The increase in the price of a barrel of oil and the sudden interest in/ability to increase refining capacity isn't just coincidence. The article does, however, wish to suggest that some of the new interest in expanding refining capacity are due to potential changes in regulation.

Given the numerous articles and public debate about "windfall" oil company profits, I can't help but mention that it seems like either profound ignorance or a deliberate dodge to not explicitly discuss a link between high prices for oil and gas and the ability to invest in expansion to meet future demand. In other words, am I stretching things by suggesting that the CSM is trying to avoid saying that profits from high gas prices may not go right into the pockets of oil company executives?

Via Newmark the Elder, I found this list of "disturbing" facts about Google. It focuses primarily on the privacy issues that arise from all the of the data that Google collects on, well, everyone.

A good portion of the list is unconvincing (to me) whinging about Google not being, essentially, open-source (they hire NSA people! their search algorithm is semi-secret! they use long-lasting cookies!), there is one that I do find particually bothersome:

7. Google's cache copy is illegal: Judging from Ninth Circuit precedent on the application of U.S. copyright laws to the Internet, Google's cache copy appears to be illegal. The only way a webmaster can avoid having his site cached on Google is to put a "noarchive" meta in the header of every page on his site. Surfers like the cache, but webmasters don't. Many webmasters have deleted questionable material from their sites, only to discover later that the problem pages live merrily on in Google's cache. The cache copy should be "opt-in" for webmasters, not "opt-out."

I have no idea about the charge of "illegal" (nor about the ability of the author to claim that this is a "fact", disturbing or otherwise), but it strikes me as a bad practice in general. As the article notes, people who maintain websites often have to edit the content to remove objectionable content, content that violates company practice, or any of a host of other reasons. The persistance of the material in the Google cache defeats this perfectly legal, and usually largely justifiable activity. That material might still be accessable even when a webmaster/company has explicitly attempted to remove it circumvents the efforts while still leaving the site open to whatever sort of result may occur from having the offending material up to begin with. (i.e. The company cannot protect itself by editing its own website when it needs to if the information is not in their hands.)

In general this seems to go along with a basic belief at Google that, after having worked for several years in the web sector, I find particularly problematic: assume everyone wants to be included, and then give the chance to "opt-out". Google took the same tack with Google Print. This is functionally the same business model as spam. Send mail to everyone, but make it possible to ask to not be included in the future. Google just seems to be much, much better at saying why a particular service is a good thing, or not telling them it's going on. ("Oh, hey, by the way we saved a version of your website that everyone can see but that you can't change. That's cool, right?")

Right now, the benefit to being included in Google's services -- by playing along with the company leading the way in the web's second largest online activity -- appears to be greater than missing out, but unchecked, and if it spreads to those consumers in a way that they don't like (imagine a combination of Google Video and Google's newest property, Riya -- suddenly you can be indentified and found online if you happen to have appeared in any photo or video that makes its way to the web, including the appearance of your home, your children, your relatives, etc., all without having chosen to be part of the process), there's always a chance for considerable backlash.

The next time you round a corner to take shots a demon, an alien race, or one of the people you swore to serve and protect, you might come face-to-face with a billboard for soda, snacks, ammo, or something else.

"It is simply impossible to offset a 50% rise in development costs via retail sales. It just can't be done," Longano said. "Publishers are going to HAVE to have a secondary revenue source. It varies game-to-game depending on the specific ad implementation, but in-game ads can increase publisher revenue an additional 20-30% above the amount generated by the title's retail sales."

I'm actually surprised it's taken this long to become a "big idea". With the success of pro-football and racing games, -- two real sports almost deluged with corporate sponsorship -- the inclusion of branded cars, billboards, or even full digital commercials for actual brands would seem natural to me.

Of course, with the increasing interactivity of video-game environments, such ads may turn into favorite targets of abuse.

The top Democrat on the House Defense Appropriations subcommittee, and decorated war veteran, John Murtha is demanding US withdraw from Iraq within 6 months.

Murtha voted for the war, but quickly turned defeatist. Already in midd 2004 he described the Iraq war as “unwinnable”. Certainly he is entitled to his view. What is unacceptable is giving the public a false impression about the millitaries situation in Iraq war by biased or incurrect data. He writes in USAToday:

unemployment remains at 60% and insurgent incidents have increased from 150 to more than 700 per week. Average monthly death rates of U.S. servicemembers have grown since the Abu Ghraib prison scandal from one per day to almost four.”

Looking at center-left Brookings Iinstitutes Iraq Index we can see that most of Murthas statements about Iraq are grossly misleading.

Brookings has estimates of Iraqi unemployment at 27-40%, hardly 60%. Their data indicates a drop on unemployment from the earliest stated figure of 50-60% in June 2003, stabilizing at 27-40% in 2005.

GDP growth has been revised downward from previous estimates, but Iraq per capita GDP has increased from 518 $ in 2003 to 1051 $ in 2005, by amazing 103%. The increase from 2002 is 31% (it should be noted that Iraq had negative economic growth even before the invasion, although most of the fall 2002-2003 was caused by war). The projections are real GDP growth well above 10% the coming years. While Murtha is right that oil production is still below pre-war levels, oil revenue is higher, 23 billion last 12 months vs. 18 billion in 2002.

The economic situation is the exact opposite of the image he is paiting, progress, not decline. As simple examples the number of registered cars is doubled per-war figures (3.1 million vs. 1.5 million). Telephone subscriptions continue to rise, from pre-war 0.83 million to 4.59 million this august.

He is not an economist, and all of his credibility is in military matters. Yet the congressman's most misleading figures are about casualties and attacks. While the number of attacks indeed has increased somewhat, this is an irrelevant , since the type and efficiency of attacks has changed. A mortar attack or a coordinated suicide attack are not the same thing. It is much more relevant to look at the results of the attacks.

Murtha write that “Average monthly death rates of U.S. servicemembers have grown since the Abu Ghraib prison scandal from one per day to almost four.”

This is blatantly false, as the number of killed Americans fluctuates widely. In April it was 4.9 (Abu Gharib story broke in late April, with higher casualties before than after that month). In March 2004 it was 1.7 per day. In April it was 4.9. In June 2004 again 1.5. In 2005 we have 1.6 in September and 3.1 in October. So far this month the figure has been 2.66.

So when Murtha gives the impression the casualty rates accelerate he is not telling the truth. In fact death figures in 2005 are slightly lower than 2004, 2.3 per day compared to 2.45.. By comparing extremes he is giving the impression of increase, where we have seen the same average for two years.

Murtha refers to poll figures to give the impression that the US presence is causing terrorist attacks. He cites a recent poll where “45% believe attacks against Americans are justified”. (soon after the war the figure was 36%). But Murtha neglects to mention that polls taken in 2004 showed similar and higher figures, for example a 2004 Gallop poll where 51% stated that attacks were justified, and only 25% "never justified". Again the defeatist vision of ever worsening situation is in Murtha’s mind, not in reality.

An even stronger trend can be seen in polls measuring support for insurgent attacks on Iraqis. Unlike the figures above the same polling agencies is used. While in 2004 in Baghdad 9% supported “the use of violence [against Iraqis] towards political ends?” the figure was down to 4% in 2005. Support for attacks against Iraqi security forces went down from 6% to only 2%. Clearly the insurgency is loosing support by murdering civilian Iraqis, something Iraqis can understand but apparently not Murtha, who only blames US military presence.

I am sure Murtha is privately a brave and decent person. But that is irrelevant here. He is (either by being grossly misinformed himself or purposefully) giving a false image of an ever worsening military and political situation in Iraq. This hysterical image conveided to the public has no basis in reality.

We can respect Murthas long and brave service to his country, but not his misinformation about the military situation. The soldiers are fighting hard and winning the war in Iraq, while a veteran and leader is trying to cause Ameriacan defeat by distoring data.

Virtual Debt on Marketplace

For those who don't catch Marketplace on their local NPR station, you might have missed this interesting piece economics and debt in online worlds.

(And Thanks for the Pen)

That is how Stephen Dubner signed my copy of Freakonomics:

For Bryan -
All best, (and thanks for the pen)
Stephen Dubner
Steven Levitt

Dubner was getting a hand cramp after signing the first 50 or so books with a skinny little pen, so I gave him one of my favorites, a Sanford uni-ball Jetstream, black.

Silly, that I would make such a big deal out of Dubner accepting my pen... so on with my event notes.

Levitt and Dubner were introduced as among other things, the authors of, "the most readable economics blog in the universe." I do enjoy reading the Freakonomics Blog, but I felt a twinge of competition when I heard that. But Dubner quickly won over the crowd with a quick "O H" - "I O" cheer (it's a Buckeye thing.) Levitt won the young crowd over with a quick story about Sudhir Venkatesh, and a university pre-approved, "F#@& You," from chapter three.

Beyond the entertainment value, Levitt gave some insight into his personal life. He revealed that in high school his AP Calculus test score was a meager two out of five, he admittedly did not excel in mathematics. However, he was fascinated by the television show "COPS" and he believes he was wired as a economist, something he discovered during his first college economics course. Levitt said that he, "thinks in terms of average and marginal cost..." and he looks for research everywhere he goes in everyday things.

Levitt also admitted to considering his own research when naming his youngest daughter, Sophie. He put a list together of names, from his list of "Freakonomics approved" baby names and he allowed his unwitting wife to choose.

Stephen Dubner shared the story of Keith Chen's monkeys who learned to use currency, express preferences, establish a budget, rationally respond to price shocks and wealth shocks, and even discovered monkey prostitution.

Levitt answered a select few audience questions. He came down with the rest of respectable economists against any price gouging legislation to punish oil companies for the natural price fluctuations in the oil industry. Levitt quickly responded, "I think they are doing exactly what you would expect. Oil companies are not wildly profitable to begin with." He further compared the oil companies to drug companies and declared that patent protection and high priced drugs are necessary to encourage the R&D necessary to further the industry, though the length of patent protection may be adjusted one way or another.

In response to a question from a political science student, who asked how Levitt would research suicide bombers and terrorists. Levitt reluctantly revealed that he is currently working on some research, though we will probably never hear about it if he is highly successful, as the government will likely keep it confidential. He claimed that tonight's taping by ABC prevented his sharing anything further, but he has determined that the occupation of another's homeland is the highest predictor for terrorism.

One of the most interesting responses, that addresses some of Ian's concerns about Levitt's work, came when a student asked, "How do you define the boundaries of social sciences?"
Levitt responded, "methods." He admits that the math and the topics overlap 100%, but the tools that we have at our disposal, as economists, are unique to our particular field. Levitt humbly admitted, "I can't even master all the tools of economics. To think that I could master the tools of other social sciences is crazy." Levitt would like to see increased cooperation between economists and other social scientists who can each contribute a unique set of tools, ways to ask questions and perspectives on a given issue.

Overall, I think Levitt does the industry a great service bringing the light of economics to the far reaches of the general public, because economics is powerful and "You know the market has the power to change the way we think; to change what we want." And if you spot Dubner at a book signing using a uni-ball Jetstream, let me know; maybe they'll send me free pens for the referral. :)

Update: Dubner mentions his visit here.

A Timeline of Failure

Perhaps this is a stretch, but stories like this make me think of the general problems with central planning.

History's Worst Software Bugs

With that recall, the Prius joined the ranks of the buggy computer -- a club that began in 1945 when engineers found a moth in Panel F, Relay #70 of the Harvard Mark II system.1The computer was running a test of its multiplier and adder when the engineers noticed something was wrong. The moth was trapped, removed and taped into the computer's logbook with the words: "first actual case of a bug being found."

Waxing philosophical for a moment: writing code isn't easy. Writing flawless code is just about impossible. And that's when you pretty much know how everything is supposed to function, or it functions in a very limited set of ways. Now imagine trying to design systems that include something as uncertain -- and ingenious in finding ways around the system -- as people.

Why, then, do people not entirely expect centrally-planned programs to be flawed in direct relationship with their complexity? And seeing this, why would anyone believe that the answer is to more fully centralize the entire system for providing health care?

Google Makes Analytics Free

Google has announced the launch of Google Analytics, a newly-free visitor tracking system to better understand the way people interact with a website.

Looks like a decent system, especially since it's linked to the Google AdWords system. This being Google, though, if you use their tracker you have to expect that they are going to be watching you as much as you're watching you. Though, such privacy concerns did little or nothing to slow the interest in Gmail.

Over the weekend the Financial Times ran a piececovering an event that occured in the popular online game Everquest II.

In short: a player in Everyquest II found a way (allegedly, anyway) to sell an item, yet retain it at the same time, effectively duplicating the item. Since it's possible to sell popular virtual items for real money, this would allow the player to reap real cash for a virtual "glitch". Mildly amusing, to a certain extent.

Of greater interest to me, however, are the questions this issue raises for virtual worlds. Are online goods the sole property of the company that provided them, or does some consideration have to be given to the creative process that goes into making unique expressions with those tools? (A piece of art isn't the province of the maker of the canvas, the paints, or the brushes, despite it not having been possible to make the art specifically as it exists without those things.) Are these things covered by intellectual or traditional property rights? (Knowledge is, to some extent, non-excludable. But after selling a character or item for real cash, it's no longer usable by anyone else.)

Or, how about issues of eminent domain? What effect would it have on the level of play (and thus revenue for the company) if Sony Online Entertainment regularly employed this tactic:

"We have the right to take [gold] away if necessary," [Chris Kramer of Sony Online] says. "We allow people to come in and play in the world but they don't own the world. Our games are entertainment; we provide an entertainment service to our subscribers."

The online market Sony has devised could easily be read as an outgrowth of the company realizing that the employment of tactics similar to the declaration of eminent domain would seriously dampen involvement. Is it unreasonable to link game playing to economic activity in areas where the government regularly seizes property?

The Freaks are coming to town.

I meant to post this earlier in the weekend, but better late than never.

Tomorrow afternoon, Steven Levitt and Stephen Dubner are coming to The Ohio State University to discuss their book, that you have surely all read, Freakonomics. Do you have any questions for them? I do not know what opportunities I will have, but if you post questions I will try to get answers from the authors. Either way I will post a review of their visit tomorrow night.

Here are the previous T&B posts about Freakonomics:
Recommended Reading
LAPD gets...well...Freaky
The Secrets of Gary Becker

Update: Full recount here.

Today, Mountain View. Tomorrow...?

Looks like our Google overloards are "unwiring" their base camp in Mountain View, CA.

Unlike my distaste for municipal wifi, this I welcome openly. Also, I've recently been travelling more regularly out to Sunnyvale, CA; I should be near enough to take advantage of the service.

This, however, I find to be entirely laughable:

"Google has no plans at this time to expand our Wi-Fi efforts beyond the Bay Area," [Chris Sacca of Google's new business development unit] said.

Riiiight. The line for the Brooklyn Bridge sales start over here to my left....

The Next Real Estate Bubble

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The guy who paid £13,700 (real money) for a virtual island is apparently doing quite well as a real-estate investor. So well, in fact, that he's already made his money back. And he's not the only one looking to set up a regular cash flow from land:

Last month, another of Entropia's virtual properties - a virtual space station - sold at auction for £57,000.


While the real housing market may be somewhat static, the one in the virtual world is booming, said the space station auction winner, gamer Jon Jacobs, AKA Neverdie.

He said the virtual real estate market was "on fire" as gamers increasingly realised that virtual worlds could start to compete with real worlds at an economic level.

Well, I don't know about that last statement. After all, online real estate doesn't face the constratint problems offline real estate does. Scarcity and distance from desireable neighborhood properties, namely. In fact, I don't even think it's the real estate thing that's of real importance here. Instead, what the players have done who buy the islands and space stations is to get around a variation of a problem mentioned by the folks at Terra Nova.

The lack of a strong service economy in the online world is in part due to the lack of player-based contract enforcement. (Hassling other players online when not in specific "player-vs.-player" areas is known as "griefing", and is usually an offense that can get you suspended by the game operators.) However, the ability for individuals to get mutual gain is often enforcement enough (weak thought it might be), and it appears that the real strength of the real-estate purchases is not that the "land" has some instrinsic value derived from scarcity, but rather its ability to facilitate player-to-player service transactions such as hunting and mining rights.

Quote of the day


"If you can't put it in your wallet, it is not part of the money supply."
Said by Dr. Mona Makhija, yesterday in an interntional business class at The Ohio State Univeristy.

Dr. Mona is under the mistaken belief that only printed or coined currency is out in the money supply. Even after her mistake was pointed out, she declared that she was correct and she would talk to me after class. I didn't stick around to find out how she was going to justify this statement. It was not the first time she has used misleading or false economic theory. Almost every day this class chills me to the bone thinking about the 300 students who are going out into the world with her misconceptions bouncing around their grey matter.

Mona was not even willing to entertain the thought that she might be wrong. I undestand it is embarrasing, but I am not above being pointed out as wrong. Am I wrong? Surely if any audience can point out my error, the Truck & Barter audience will call me out. With regard to foreign exchange rates, is there any reason to discount almost 90% of the money supply and solely count printed currency?

It saddens me to think that these are the economics lessons that Fisher College of Business students are graduating with. Hopefully most students will be able to sort truth from fiction and take their economics lessons from the three lonely economics classes that are required for graduation.

West Wing Economics

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If you didn't catch the live presidential debate on the West Wing last night, the you missed a once in a lifetime opportunity to see an open debate with no ground rules, except the script of course. Actually, except for a couple of scripted pauses and audience interruptions, the debate was lively and believable. It would be interesting to experience an honest and open debate between two modern day candidates, but it is unlikely.

Although scripted, the debate included a terrific pro-free market response from Alan Alda's character (a lifelong Democrat playing a Republican character); a response to proposed alternative energy plans to reduce dependence on foreign oil and nuclear power.

I don't trust politicians to choose the right new energy sources. I believe in the free market. You know the government didn't switch us from whale oil to the oil found under the ground, the market did that.The government did not make the Prius the hotest selling car in Hollywood, that was the market that did that. You know, in LA now, the coolest thing you can drive is a hybrid. Well, if the free market can do that in the most car crazed culture on earth, then I trust the free market to solve our energy problems. You know the market has the power to change the way we think; to change what we want. The government can't do that. That is why the market has always been a better problem solver than the government, and it always will be.
View Clip (WMV, 204K, 70 secs.)

Wether you agree or disagree with the politics, it is good to see sound economic theory making its way into television scripts.

[KB adds: Neither T&B or its members are receiving advertising revenue from the image -- or the link -- at left. And yes, I find a Republican Alan Alda very, very amusing.]

The Immigrant Riot in Sweden


As a middle eastern immigrant to Sweden, I would like to give my perspectives to the issue, raised by the massive riots in France and smaller riots in Denmark.

While nothing on the French scale has ever happened in Sweden (and probably never will), we also have similar problem with lawlessness and unrest in immigrant ghettos.

The most recent incident was in Ronna, about 1 hour from the capital of Stockholm. This September Ronna experienced unrest, involving clashed with the police, rock throwing and a subsequent machine gun attack on the police station (no one was hit).

The population of Ronna is almost 100% immigrant, few hold jobs and the majority live of various forms of welfare or social transfer. Many, perhaps most of the older generation, do not speak Swedish.

At it’s core Ronna (and Rosengard, and other Swedish ghettos) face the same situation as Paris, albeit milder: The resentment towards the host country is so large that the areas have become almost impossible to police. A large proportion of the inhabitants simply hate Swedes, not the least the police. They also know due to mild laws they can do pretty much what they want and get away with it.

The events in Ronna may be intresting for Americans, go get an image. This is what seems to have happened:

1. It’s 8 in the evening. A street gang of boys sees a young Swedish girl walk by to her job in a store, and yells sexists and racist remarks at her. I suppose the literal translation is “Swedish whore” (this is quite common, middle eastern gender roles have merged nicely with US Rap influence). The boys also throw a object at her neck. The girls responds by calling them a racial slur.

2. The girls cries and calls her father, who drives there and threatens to inform the police. The young men laugh at this, given their experience with the lax Swedish law enforcement and penal system. The father has had enough however and does call the cops. The police do arrive, at first trying to handle the situation peacefully. Here one of the boys attacks psychically attacks the girl and her friend with the police watching (!).

3. Finally the police try to apprehend the young men. Here all hell brakes loose. A large crowd of relatives, friends and neighbors have gathered, including many more young men. With our primate tribal mentality, they take the boys side, attacking the police with rocks.

4. The Police ask for large reinforcements, but are ultimately pushed out by the riot, involving a few hundred people. The police arrest 3 of the rioters (and none of the young boys, they were rational to laugh it would seem) and retreat out. Later that night, with the girl and her father giving testimony, a car drives by and fires at the police station.

The immediate aftermath is also illuminating. Predictably the media take the rioters side, with most of the news events focusing on accusations of “police brutality” and the police “provoking” the riot. The first few days nothing is mentioned in the news about the details, for example the nationality of the girl…

This time the leftwing media overplayed their hand. Once the 17 year old girl went public it was much harder to make the immigrants the victims. Furthermore, one prominent community leaders make things worse. He put the blame on the police, and referred to the harassment, rock throwing and attempts at physical violence against the girl and her friend as “unsuccessful flirtation”.

There is nothing physically wrong with Ronna, the standard of living is reasonable. You are close to economically successful cities with low unemployment. What strikes you is the cultural difference. The problems are social norms and social capital. I lived in Ronna for a few months. The first thing I saw when stepping out of the bus was a woman with a 150 pund large black pig on a leash. In some ways, the segregation is so extreme that you might as well be in another continent.

The I-word

From an American perspective, you are naturally asking whether the unrest in France is caused by Islamic extremism. I don’t know that, but I can guarantee you the unrest in Ronna was not. The population are overwhelmingly Christian Assyrian.

My guess would be that the same underlying cause that leads to the popularity of Islamic extremism is causing the social problems. Tribal mentality, lack of westerns ideals of enlightenment ideals, pure nationalism are some guesses. Islam is at the least a contributing factor, but not the only one.

The economical environment plays a crucial role, interacting with misdirected social politics of “tolerance”. In the US the same immigrants respond to the economic incentives and opportunities. They get jobs, work hard and often succeed. This has two results: they automatically absorb the language and cultural rules, and they do not confuse the results of bad labor market policies with discrimination.

One question I heard Americans ask about France is why the immigrants are so ungrateful. After all, they are getting billions of euros in subsidies from the French taxpayers, and enjow a higher standard of living than in their country of origin? I have a simple theory of this. It is the same mechanism that explains why Frenchmen, Germans, South Koreans and other countries that have objectively received most help from the US are also most anti-American.

Many people do not like to feel gratitude against others. Now imagine that you know that you should be grateful to someone that you hate or dislike! If given a coherent set of beliefs that reduced the need to feel gratitude you might prefer this to the rational explanation. Frenchmen choice Chomskyite history revisionism, attributing selfishness and malice to the US role during WWII. Swedish (and French) immigrants readily accept progressive theories of society which make them victims and give them claim to entitlement. By not having any demands society reinforced bad beliefs and bad behaviour.

Carnival of the Podcasts

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Podcasting has now become a phenomenon. Here I’ll try to list some of my favorite podcasts that I’ve come across recently. Please note that the file sizes are very large.

Benjamin Friedman talks about his book ‘The Moral Consequences of Economic Growth’

Interview with Tim Harford, author of ‘The Undercover Economist’, and former speechwriter for Stanley Fischer at Radioeconomics

Russia’s judicial system; when Putin came to power he said he wanted a dictatorship of law. Be a regular visitor to BBC documentaries podcasts

Australia’s Radio National has a great series of podcasts - the best of any radio station I would say. But the podcasts are not permanent- it is removed after a couple of weeks. See Freakonomics [) and Galbraith

The South Within Islam - celebrated British Muslim writer Ziauddin Sardar travels to five leading Muslim countries to reveal how heads of government, intellectuals and opinion formers are seeking a new interpretation of Islam

Moises Naim, editor of Foreign Policy magazine talks about Illegal Trade: The Consequences for the Global Economy

Development, Democracy and American Foreign Policy by Francis Fukuyama

A very heated debate between Hitchens and Galloway at Democracy Now

Why we shouldn't aid Katrina's victims explains Steven E. Landsburg

World Bank and Avian Flu

Global Warming and Tsunamis

Harold Pinter : Nobel Laureate in Literature

Desperate House Wives, Madam Bovary & Steven Jay Gould

Podacasting and Blue Law - Today's podcast is hosted by an economist; a good place to familiarize with interesting words or quotes whose meanings you are not familiar

Iraq 101: The British role in Iraqi History

Alexander the Great - Alexander Hamilton and the making of modern America

Who Needs the United Nations?

Austrian Economics - and philosophical distinctions between theory and reality by referencing Tyler Cowen's work on economic biography. Podcasts of discussions on Austrian economics by students

The economic consequences of chronic disease are huge. We estimate over the next 10 years that in China the national economy will lose about $558-billion, Russian Federation, $300-billion; India, $236-billion’- a discussion of a recent report by WHO on chronic diseases – or non-communicable diseases

Great search tool of podcasts

Is more better?

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Tuesday, November 1, 2005 - ORONO, ME

Dan Rather asks, "You need to ask yourself: Is more better..." It seems that Dan may have slept through economics 101 at Sam Houston State. Dan's complete argument became more clear when he said, "News is something people need to know which someone, somewhere, doesn't want them to know. All the rest is advertising."

As economists, we can all agree that more IS better, for all normal goods, and in general truthful (Dan are reading this?) information is a normal good.

So what are the market solutions to solve Dan Rather's request to improve the quality of the news? More competition? Remove barriers to entry? Do Blogs do both of these things?

Prejudice Doesn't Pay

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With all the recent hubub about "excess profits" at oil companies, discussion is turning once again to the moral component of making money. Somehow profit gets equated with usury, and excessive amounts of revenue becomes akin to armed theft. Thomas Sowell's latest (via Newmark the Younger) does a nice job on confronting the belief that companies acting purely out of self-interest must, of necessity, be restrained from foul and dehumanizing tactics.

Always one for concrete examples, I point you towards this article from the American International Automobile Dealers Association: Gay Buying Power: Economics Trumps Prejudice

The result of the poll that should be strongly considered by all marketers was that 72% of GLBT consumers were more likely to buy from a company that specifically reached out to the community via advertising. Volkswagen, Subaru, Volvo and BMW are] perceived as the top brands that extend the greatest outreach to the GLBT community.

This phenomenon is not new. Indeed it is parallel to what has happened with the African-American and Hispanic communities -- when companies want their dollars, they create products, policies and messaging to win them over. In reality, this is how civil rights actually moves from politics to everyday reality -- via economics.

[I grant that it's an industry association, and thus more than a little biased in its position. The poll, however, was not conducted by the organization.]

Apparently, it's also not from the benevolence of the car designers, manufacturers, or dealers, that we get stylish and fuel-efficient cars, but from their regard to their own interest...

Color Me Unconvinced


I do this at great caution, but I'm not certain I agree with the line of argument starting with Kevin Drum and echoed by Cowen at Marginal Revolution: Health Savings Accounts don't work because they "appeal more to healthy people", and that the "whole point of healthcare is to take care of sick people".

I was under the -- perhaps naive -- impression that preventive care is one of the most important aspects of health care, as well as being among the most cost-effective. Engaging in better habits, visiting doctors more often, and including check-ups in your routine means identifying problems early, when they are generally more treatable with less expensive measures.

From a CDC report:

"Approximately 95% of the $1.4 trillion that we spend as a nation on health goes to direct medical services, while approximately 5% is allocated to preventing disease and promoting health. This approach is equivalent to waiting for your car to break down before you take it in for maintenance. By changing the way we view our health, the Steps initiative helps move us from a disease care system to a true health care system."

If this is true, then couldn't it be considered an improvement over the current system to incentivize the more routine use of less-expensive preventive care? Also at issue, then, is the fact that the poor might well have worse general health outcomes because of a lack of attention to preventive care. (By only seeing doctors when insurance is certain to cover the visit -- acute problems, emergencies, etc -- poor people may be opting away from spending on preventive options.) I'm not sold on HSAs either, but I'm not at all convinced that the reasons Drum cites (and Cowen points favorably towards) are strong knocks against them. Health care isn't really only about "taking care of sick people". That turns the profession into some sort of trauma-response system.

Drum notes that "adverse selection is a bitch" when citing an article that talks about more healthy than sick people opting into HSAs. But one can't ignore the fact that healthcare insurance carries its own massive adverse selection issues as well; insurance also includes massive moral hazard problems. I've never found a good refutation of the argument that people, knowing they have insurance to cover problems, engage in riskier behavior. Indeed, returning to the possibility that the poor don't spend time or money on preventive measures at the same level as the better-off, the insurace system seems to promote only the use of the most expensive kinds of health treatments, driving up the cost (premiums) for everyone. If HSAs shift some of the incentives into finding ways to not spend health dollars, i.e. opting for cheaper preventive care, I'm not clear how this could be viewed as a failure, or even really a step down from the current system.

The article the Drum post cites, is troublingly slipshod in its entirety. That people are rational is used as an argument to limit their access to self-governance in health care provisions; one paragraph later, it's our lack of rationality that requires governmental intervention. Adverse selection is, at one point, a major flaw in HSAs. But when it occurs in health insurance usage, it's a symbol of tried-and-true US ideology since sharing burdens of cost among people -- and having those who don't use the service pay for those who do, including shouldering increases as the entirely predictable result occurs and expensive trauma or old-age care makes up the vast majority of spending -- is unquestionably the right thing to do. However, I will leave it to you to read the whole article and decide for yourself.


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