Research Economist at the Bank of England
Today’s prize for amusing me goes to Megan McArdle for this beauty of a post:
Some freelance socialist not only stole my bike from in front of my house, but left the lock. The deliberate taunting seems highly unnecessary.
Megan, if you read this, I feel your pain.
The overall result may not be in doubt, but spare a thought for Andrew Laming (Liberal, incumbant) and Jason Young (Labor) in the Queensland seat of Bowman.
Before the election, Laming held the seat with an 8.9% margin. It was safe, but not that safe and by the time of the election, the betting markets were leaning towards Labor (thank you, Simon Jackman). Turnout on the day was 85.25%. With those votes counted, the primary count went to Laming (33,833 vs. 32,498), but the two-candidate preferred count is going to Young (36,693 vs. 36,672).
That’s a margin, on current counting, of just 0.014%.
The pre-poll, postal, absent and progressive votes are still being counted, but you’ve got to feel for those guys. If Laming hasn’t worn holes in the carpet then I’m a monkey’s uncle.
Update 29 Nov 2007: With a bit under 2,000 extra votes counted, Young appears to have squeezed a little extra traction from one fingernail. He’s now got a margin of 0.040% (37,690 vs. 37,630).
Via Steven Levitt, here’s an interesting paper by Roy Wada and Erdal Tekin: “Body Composition and Wages”
This paper examines the effect of body composition on wages. We develop measures of body composition – body fat (BF) and fat-free mass (FFM) – using data on bioelectrical impedance analysis (BIA) that are available in the National Health and Nutrition Examination Survey III and estimate wage models for respondents in the National Longitudinal Survey of Youth 1979. Our results indicate that increased body fat is unambiguously associated with decreased wages for both males and females. This result is in contrast to the mixed and sometimes inconsistent results from the previous research using body mass index (BMI). We also find new evidence indicating that a higher level of fat-free body mass is consistently associated with increased hourly wages. We present further evidence that these results are not the artifacts of unobserved heterogeneity. Our findings are robust to numerous specification checks and to a large number of alternative BIA prediction equations from which the body composition measures are derived.
Our work addresses an important limitation of the current literature on the economics of obesity. Previous research relied on body weight or BMI for measuring obesity despite the growing agreement in the medical literature that they represent misleading measures of obesity because of their inability to distinguish between body fat and fat-free body mass. Body composition measures used in this paper represent significant improvements over the previously used measures because they allow for the effects of fat and fat free components of body composition to be separately identified. Our work also contributes to the growing literature on the role of non-cognitive characteristics on wage determination.
Looking very briefly through the paper, they don’t seem to be looking at what I would have thought an important factor: relative obesity. Wada and Tekin don’t seem to postulate a mechanism for how body fat leads to lower wages on average. While I’m happy to accept that it may come about because of lower productivity, it also seems reasonable to ask if it’s also partially because of a selection bias by employers. On that basis, looking at how much fat a person is carrying relative to their community average would seem to be important.
Update: I’m obviously assuming both causality and direction of causality here, but my comment still holds. A strong result on my suggested extra regressor would, to me, seem to provide evidence of that causality.
Well, well. It would appear that Nicolas Sarkozy is threatening China with “carbon tariffs.” It comes as no surprise that:
His idea already has supporters in the European Commission, particularly among officials charged with defending the interests of European industry.
In other words, the criticism of China is not really based on a perceived risk to the global environment, but that by acting first and China not following, the EU feels that European industry suffers unfairly. It’s difficult to see how this would be legal under WTO rules.
The stated justification for the threatened action was:
“We cannot have one response from Europe and one from Asia, one from the north and one from the south,” he said. “China can and must play its full part.”
…
“I will defend the principle of a carbon compensation mechanism at the EU’s borders with regard to countries that don’t put in place rules for reducing greenhouse gas emissions,” Mr Sarkozy said.
This might be morally defensible if (and I really have to stress that ‘if’) the EU were to hand the Chinese government every cent they took in tariffs from Chinese exporters, thus allowing Europe to claim that they really were acting on behalf of the planet and not just their domestic industry.
However, we still have the very large problem of sovereignty. Why should the EU get to dictate policy to China and to impose it arbitrarily if China doesn’t comply? Even if China were to agree that (a) climate change is real and (b) humankind can and ought to do something about it, it does not follow that China and the EU would agree on an acceptable cost to impose on polluters, not least because China is still a developing country.
The point is that for every tonne of CO2-equivalent emitted in the EU, Europe gets more goods for consumption, but for every tonne emitted in China, we get more goods for consumption and another couple of people lifted out of poverty.
This message was driven home Tuesday by an article in a Communist party newspaper that said 95 per cent of carbon dioxide emissions from the era of the Industrial Revolution through the 1950s came from today’s developed countries. Rich nations’ per capita emissions of greenhouse gases are also far above those in the developing world, the overseas edition of the People’s Daily newspaper said.
Now, if the world can agree on some sort of framework for reducing greenhouse gas emissions that also includes some restrictions on China and India, it seems sensible enough to me to allow carbon tariffs as punitive action against non-compliant states, but that’s pretty much the only way I’d support it.
I suppose that you might argue that if one country refused to ratify some treaty and other countries judged that by failing to do so, that country was placing other countries in peril, then taking action against them – in this case, imposing carbon tariffs – might be justified under “self defence.” It’d be a tough sell, since the danger would not be imminent, but you might try it. The problem then would be that if the stand-alone country were one of the UN security council’s permanent members, they could veto any attempt at multilateral action.
While everyone is focused on the HMRC accidentally misplacing CDs with the personal details of 25 million British citizens, I thought I’d relate the following little story. I was in a major bank on Hampstead High Street [*] today. While I was there, I overheard a staff member talking to another (the manager?) about a recent spate of thieves who put card readers on the ATMs (cashpoints). She had just discovered that one of the ATMs outside the branch had been tampered with again. I then had this conversation with the personal banker I was seeing:
Me: Would you take cash out of the teller machine outside?
Personal Banker: Me? No way.
Me: Where would you take cash out?
Personal Banker: I’d use the cashpoint inside the bank, but never outside.
Hmmm …
[*] For those that don’t know, Hampstead is one of the wealthier parts of London.
My wife is American. This has various benefits for me, but one of the best is the opportunity, at this time of year, to gorge myself stupid. Last Thursday was Thanksgiving in the U.S., but we decided to have our little shovel-food-down-your-throat-athon on Sunday night with some of my wife’s friends from university. The turkey was bought on Friday, the giblets removed and discarded (sorry, I just can’t handle them) and we were ready to get started with marinading it.
My wife wanted to follow in her mother’s footsteps by injecting the turkey with red wine. I’d never heard of this technique before, but a good roast is worth a lot in my book and a turkey is famously difficult to keep moist, so I was keen to try it. I raided our travel first-aid kit to look for our syringe, but to no avail. Okay, no worries, it’s off to the chemist we go to get another one. The coversation, at a Boots, as it happens, went like this:
Us: Hi. Do you have any needles? Syringes?
Them: Ummm … maybe. Is it for travelling?
Us: No. It’s for a turkey. We’re going to inject it with wine.
Them: Ahhh, no.
Us: Okay, then. It is for travelling. [Yes, yes, I know. This wasn’t the most subtle of ploys]
Them: We’ll need to order them in. It’ll take two weeks.
Yeah, right. The implication was pretty clear – hovering in the air, as it were. They weren’t going to take the slightest risk of selling needles to drug users. To really slam home the fact that they were looking out for their jobs in a big corporate chain, the conversation finished with:
Us: Well, do you know where we might be able to find one?
Them: Perhaps at an independent pharmacy.
… which is exactly what we did. There’s a wonderful chemist on England’s Lane that just looks Italian (next time you go to Italy, pay attention to the chemists – they’re fantastically unique). It’s certainly run by an Italian lady and she was fascinated by the idea of injecting wine directly into the meat. She insisted on my wife spelling out all the recipe details as she promptly sold us a pack of 10 1ml syringes for £2.90. It was simple, it was easy, it was friendly and it was helpful. She’ll keep our business from now on.
I got really quite angry from the whole affair. My wife and I don’t look particularly shabby (I hope). We were clearly entering the Boots as a couple. We weren’t shifting around on our feet or trying to speak quietly to avoid undue attention. None of these seem consistent with how I imagine a drug abuser would present. It seems perfectly reasonable – to me – to have believed that we were genuine in our request.
But even if we weren’t, I still would have been upset with them. Yes, the UK operates a needle exchange programme, but any kind of restriction on the sale of needles simply raises their implicit price, which can only encourage drug users to share needles. If a chain of Chemists can’t be sold on the idea of harm minimisation, we’re in real trouble.
The turkey turned out great, by the way. We used a Malbec to inject it with, stuffed it with chopped-up apple, prunes and garlic (the bread-based stuffing was being brought by someone else) to sweaten the meat a little, sprinkled quite a lot of rosemary over the skin, roasted it with tin-foil over the top for the first two hours and without the tin-foil for the last hour. Beautiful.
Via Tyler Cowen, I came across a fascinating article at the New York Times: “Western Union Empire Moves Migrant Cash Home.” Tyler is bang on the money when he calls it consistently interesting throughout. What really grabbed my attention was the last few paragraphs:
[Western Union] has an estimated global market share of 14 percent, versus 3 percent for its closest competitor, MoneyGram. Though Western Union has responded to increased competition by cutting its charges, it typically remains the most expensive service.
An Oakland group, the Transnational Institute for Grassroots Research and Action, began a boycott campaign in September, demanding that Western Union lower its prices and increase its corporate giving. But it has gained little traction, in part because of the company’s recent courtship of migrant groups.
One critic who now gives Western Union grudging credit is Donald F. Terry, an official at the Inter-American Development Bank. He has spent years trying to get more migrants to use banks, so they could establish financial histories and qualify for loans.
But banks have not fully welcomed migrants, he said, while Western Union and other money transfer companies have more locations, better hours and agents who know their customers’ language and culture.
“You could say they were ripping people off, or you could also say they’re providing a service that poor people desperately needed and were willing to pay for,” Mr. Terry said. “Any consumer company in the world would like to have the customer loyalty they have. They’re doing something right.”
I’ve always been a bit surprised at the rates that financial intermediaries are able to charge. Whether we’re speaking about “instantaneous” money transfer ala Western Union, money lenders charging 80% (an usurer in the U.S., a life-changing charity in Africa), or the rates charged by bail bondsmen, they’re enormous. Why?
To a large extent it’s surely to do with a lack of competition, but given the profitability of these ventures, why don’t we see new entrants? Why don’t we see country- or even region-specific competitors to Western Union? Where is the all-Spanish-speaking competitor that is staffed entirely with Latinos in the US working off a natural, built-right-into-the-community advertising mechanism? Even with enormous risk premiums, lending money at 80% is much, much more profitable than putting it in a US-based deposit. Why don’t people based in that developing country do it?
Update: Okay, okay, the market isn’t incomplete if there are transactions taking place, but there are real economic profits being made here. What are the barriers to entry that are keeping suppliers away?
Go here to read a wonderful question from Richard Posner. It’s much too long to post here, but here is his topic:
At the same time that sellers forgo much product disclosure that would seem advantageous both to them and to their customers, they make disclosures that have no information value and should not persuade any rational consumer, such as implausible, self-serving, and empty claims that their product is better, or super; and these claims are often wrapped in clever, funny pictures or anecdotes that are designed to seize the attention of the viewer, but that convey no information.
Posner’s question is a simple one: why? In their typical conversational posting style, Gary Becker posted his opinion. It’s again too long to post in it’s entirety, but two paragraphs of note are:
Economists have generally not been friendly toward persuasive advertising since it is much easier with the usual economic analysis to discuss advertisements that provide information or misinformation. Yet tools are also available for considering the persuasive formation of attitudes and preferences with rational consumer behavior – see my book of essays, Accounting for Tastes, 1996. Although such an analysis of preference formation is dependent on some underlying psychological mechanisms that are not well understood, the process appears to be quite rational.
…
That said, challenging puzzles remain in using economic analysis to explain the types of information used and not used in advertisements, whether or not there are comparisons to the products of rivals. However, given all the professional time and thought that goes into advertisements, I am reluctant to claim that advertisers are not rational in what they do, for we do not understand all the relevant considerations that enter into the determination of the types of persuasion and information that are highlighted.
I have been fascinated by this for a while. I think a good example lies in product packaging. A year or two ago I was shopping for a new web-camera. At the time, a major producer of webcams offered a “Webcam Live!” and a “Webcam Live! Pro”, with the latter 20% more expensive, in a noticeably larger box (despite housing a product of the same volume) and with insufficient information printed on either box to allow a potential customer to identify the functional difference between the two.
More than simple vertical product differentiation, this seems to me to also be a form of “information discrimination”. By denying the consumer the details of the differences between the two options and offering only general, suggestive signals of their respective quality, the producer seems to ensure that wealthier consumers will purchase the more expensive option and that poorer individuals will choose the cheaper option, irrespective of their functional or qualitative differences. Armed with complete information, the wealthy consumer might recognise that they only require the functionality of the cheaper option, or the poorer consumer – who cannot afford the more expensive option – might consider the cheaper option insufficient for their needs and so not buy either.
Of course, such a tactic on the part of the manufacturer would necessarily rely on two social norms: (a) that people generally accept the information presented to them and make their decision on that basis without seeking more; and (b) that people generally believe that information presented to them, if not entirely accurate, is at least indicative of the truth.
We can expand this by considering the retail outlet that sells the webcams. The retailer would be capable of circumventing the producer’s packaging strategy by, for example, putting information cards beside the two boxes or employing highly knowledgeable retail staff. However, assuming that the retailer shares in the profit from the product sales and not just the revenue, it is in their best interest to collude with the producer and provide no additional information. Without naming names, I can assure readers that this is exactly the scenario that I encountered (the no extra information, that is, not the collusion).
Of course, the two companies would carry a risk of reputation damage as a result of their discrimination. If, as seems intuitively reasonable to me, there is also a third social norm of tending to allot blame to the most visible perpetrator, the retailer carries the bulk of this risk. How can they offset this? By having an advertising campaign emphasise how helpful and informative their staff are …
Well, the Australian election is getting pretty damn close now. A few random thoughts:
I recently attended my first Jewish wedding (Debbie and Alex, if you’re reading this, congratulations again). It was great fun, the bride was resplendent and I even got to keep my kippah!
While I was there, I went out for some celebatory drinks a couple of nights before The Big Day and one of the fellas, himself an Israeli-American, threw out this question-pair:
Why does everyone hate Israeli backpackers so much? Are they really such jerks?
Never one to let cultural sensitivities or personal ignorance get in the way of a good conversation, and having met the odd Israeli in my backpacking travels [*], I threw myself at this with a level of gusto that some of the more boring people in society might have labelled “ill advised.” Luckily enough for me, I managed an answer that somehow managed to avoid me swallowing my foot or somebody’s fist. Here it is:
Firstly, the vast majority of Israeli backpackers are doing their travels just after finishing their (mandatory) stint in the military and no matter what your views on Middle East politics, that is a tough job. I cannot think of another force where the chances are as high that people will actively try to kill you or that you will be required to actively try to kill other people. You’re going to see death, and not just of an accidental nature. These guys are coming out with a genuine nugget of pain that they need to deal with. I’m only guessing, but I reakon that backpacking for an Israeli is the ultimate combination of soul searching and letting off some steam. They probably want to spend a month or two (or six, or twelve) pretending that the entire Middle East doesn’t exist, or at least doesn’t exist for them.
Secondly, you’ve got the fact that everyone else on the backpacking circuit is curious and debate-prone. Part of the reason for going backpacking is to meet and talk to people from other places, so they keep asking about it. It makes sense. If you meet an Israeli, you want to know what they think about the Palestinians, about the Syrians, about the Iranians, about The Wall, about the settlements, about, about, about … But that’s the last thing the Israeli backpacker wants. They’re happy – eager, even – to talk about anything outside of the Middle East, but nobody will let them. Everyone keeps poking, not realising that they’re pushing and pulling at an emotional scab. Nobody’s doing it to be an arsehole, but that doesn’t matter because even the friendly questions grate. So the Israelis close off, become insular. They only travel with other Israelis. They become defensive and arrogant, while the other backpackers, who just see them acting like jerks, resent them for it.
[*] The first person to mention “sample size” gets a clip ’round the ear.