• Recent Comments

  • Dudley Leggett on Dick Smith’s idea prize
  • dk.au on Ping’s big flaw
  • Joshua Gans on Ping’s big flaw
  • davidp on Ping’s big flaw
  • Ping’s big flaw : Core Economics on Romanticising books
  • Dylan on Newspapers, aggregators and the ABC
  • c-sez on Newspapers, aggregators and the ABC
  • Professor Robert Pope on Dick Smith’s idea prize
  • Dudley Leggett on Dick Smith’s idea prize
  • Dudley Leggett on Dick Smith’s idea prize

• Recent Posts

  • Apple misses the TV game again
  • What does HDR mean for photos?
  • Ping’s big flaw
  • China’s central bank governor and the USD
  • Newspapers, aggregators and the ABC
  • Toilet explorations
  • Signalling academic immobility
  • Gillard’s future if the coalition forms government
  • The right political career investment
  • A rant about ABC’s copyright policies
  • Tasmania’s 2 extra seats in the Constitutional gerrymander
  • Time to think about voting power
  • Well may we say …
  • The political landscape
  • Media and economics

• Popular Posts

  • Mathtype in Word 2007
  • China’s 2009 GDP growth
  • House price predictions
  • Exchange Rate forecasts
  • Free Insulation
  • Tax multipliers
  • Free insulation, yes pay nothing!
  • What’s “normal” anyway?
  • Bolt on electricity
  • Health insurance changes

• Twitter: Joshua Gans

  • @jodiecongirl Actually, it says more about you that you've heard of them! about 3 hours ago from TweetDeckin reply to jodiecongirl
  • @jodiecongirl I think it says that economists don't just assume rational agents but are attracted by them too. Talk about a value conflict. about 3 hours ago from TweetDeckin reply to jodiecongirl
  • @jodiecongirl Why uninteresting? Think of Alex P. Keaton, Quark , Sheldon and Dogbert. about 5 hours ago from TweetDeckin reply to jodiecongirl
  • RT @freakonomics: Freakonomics Movie is released via iTunes tomorrow: http://bit.ly/9YveA3 [I'm gathering the kids for a Friday night movie] about 6 hours ago from TweetDeck
  • Am I to understand that we are now in the path of a Hurricane? http://bit.ly/daitO9 This aint the tropics. about 6 hours ago from TweetDeck

• Readership

  

The Liberal party commissioned a report from the Centre for International Economics into the Carbon Pollution Reduction Scheme. I have looked at the report. It is basically a summary of lots of concerns that various people (including myself) have had in relation to the Government’s climate change policy. It’s message is that the government can do better and that more modeling might help. It does not provide that modeling.

But here is what the Opposition spokesperson, Andrew Robb said:

The report confirms that the Government is rushing ahead with a scheme that will tax Australia’s largest exporters and employers, damaging their competitiveness and putting jobs at risk, without any analysis of these immediate costs, without any analysis of alternative approaches, without considering the impact of the global financial crisis or without considering the actions or inactions of major competing countries.

Really? I missed that. It said that this hadn’t really been studied enough and the whole GFC thing is not there. Here is what the report said on that:

The 2008 global financial crisis has brought home some stark lessons about setting targets for abatement. While one response has been to say that abatement should be delayed until it is more affordable, the true lesson of the crisis is more subtle.

The CIE then argue that price commitments might be better than quantity ones if we expect such crises to continue to occur. But that is very different from what Robb is claiming was the report’s finding. Can some journalist please quiz him to see if he read it.

Robb then calls for independent analysis. But wasn’t that the Garnaut Review? An appropriate critique would be that the Government didn’t listen enough to that review.

The real issue is that the CIE didn’t consider the targets at all nor issues regarding global agreements. That wasn’t their charge but that is the charged issue. Why didn’t the Opposition want an answer on that? It also needed to consider the need for urgency but only highlighted uncertainties without considering which of those might be resolved by delay. This report is generally a good one but is hardly some sort of new instrument upon which to whip the government with. To use it that way seems to me to be a spurious delaying tactic.

OK so information is depressing; even for an economist.

Those episodes are:

• Giant Pool of Money
• Another Frightening Show about the Economy
• Bad Bank
• Scenes from a Recession

On his blog, Paul Krugman responds to those who think climate change policy is going to be too costly. There is the zinger:

Opponents of a policy change generally believe that market economies are wonderful things, able to adapt to just about anything — anything, that is, except a government policy that puts a price on greenhouse gas emissions. Limits on the world supply of oil, land, water — no problem. Limits on the amount of CO2 we can emit — total disaster.

Ben McNeil researches at the Climate Change Research Centre at the University of NSW. He studies climate change but also has a Masters in Economics. Allen & Unwin have just published his book, The Clean Industrial Revolution: Growing Australian Prosperity in a Greenhouse Age. I haven’t had a chance to read more than a few chapters but I can say it is a breezy read. It looks like an Australianised Inconvenient Truth and if you are policy-maker and want a refresher of what is at stake and what the opportunities are, this is probably worth a look.

Not surprisingly, the answer is yes. But we might also be interested in magnitudes.

A new paper using German data finds a parent-child test score correlation of 0.45, which is bigger than the intergenerational earnings correlation in Germany (about 0.2, I think). So a 10% increase in parents’ income raises children’s income by 2%, but a 10% increase in parents’ test scores raises children’s test scores by 4.5%.

Do Smart Parents Raise Smart Children? The Intergenerational Transmission of Cognitive Abilities
Silke Anger & Guido Heineck
Complementing prior research on income mobility and educational transmission, we provide evidence on the intergenerational transmission of cognitive abilities using data from the German Socio-Economic Panel Study. Our estimates suggest that individuals’ cognitive skills are positively related to the abilities of their parents, even when educational attainment and family background is controlled for. We differentiate between mothers’ and fathers’ IQ transmission and find different effects on the cognition of sons and daughters. We show that cognitive skills which are based on past learning are more strongly transmitted from parents to children than cognitive skills which are related to innate abilities. Our findings are not compatible with a pure genetic model, but rather point to the importance of parental investments for the cognitive outcomes of children.

(xposted @ AndrewLeigh.com)

Something is happening in the eBook market with Amazon today announcing its purchase of the company that owns Stanza, the popular iPhone eBook reader. You might think that the big is taking over the small but, in fact, it may be the reverse. The iPhone as a reader is probably more popular than the Kindle (although the Kindle is also on the iPhone). This is all after Steve Jobs claimed that no one reads any more but then Apple went and promoted the iPhone as an eBook reader with the free, Classics, the highlight.

I’ve read books on both the Kindle and the iPhone and both are superior to the old paper variety and they have a way to go in terms of improvements. Amazon clearly think a diversified strategy is what they need. But I think this signals a new Apple innovation on its way. My guess is that it will be an iPod Macro; an iPod Touch with about double the screen area of the current one (bringing the screen size up to the Kindle) and with a camera in the front for video calls. It will also solve the pdf and graphs reading issues for both the Kindle and iPhone. The big challenge will be battery life and weight but I think they will solve both by giving the new device a flip out stand with the battery in it. We’ll see.

[Update: Maybe not for long. Rumours of a Media Pad.

... a media pad that would let users listen to music, view photos, and watch high-definition videos, the person says. It would place calls over a Wi-Fi connection.

The media pad is smaller than an Amazon (AMZN) Kindle electronic reader, but its touchscreen is bigger than the Kindle's, says the person who has seen it. Carriers such as Verizon and AT&T are keen on striking deals to supply wireless Internet access to these new small computing devices, such as netbooks, which represent revenue growth opportunities. Phone carriers also fear being cut out of their core markets for supplying land-line and wireless voice services.

"The media pad category might go to Verizon," said the person who has seen the device. "We are talking about a device where people will say, 'Damn, why didn't we do this?' Apple is probably going to define the damn category."

Call me Nostradamus!]

Last week, Universities Australia released a commissioned KPMG-Econtech report on funding for Universities. The report’s headline (reported widely) was that an $11b funding boost to high education by 2040 would generated $137.8b in extra GDP. That is quite a rate of return and given that I am in that sector why would I want to question that.

Fortunately, I don’t have to. Two Andrews have done just that. In a blog post, Andrew Norton questions whether it is a forgone conclusion that the government is the only party that can make this investment (e.g., what about the students?). In an ideaCHECK, Andrew Leigh questions the whole modeling exercise even though it is partly based on something the report labels, ‘the Leigh wage premium.’ He wonders if the estimates can really be regarded as ‘conservative’ when the rate of return is nearly twice as high as that promised by Bernie Madoff! Despite that, Andrew found the report somewhat useful.

[By the way, an ideaCHECK is a web publication put out by the Centre for Ideas and the Economy that involves an academic peer reviewing a public report. There are many other ideaCHECKs here.]

The report of the National Innovation Review were released in September last year while Barack Obama was still running for President. We are yet to hear whether, if anything, the Government is going to move on those recommendations. Today, however, the US President made a speech outlining what he was going to do in the area of science and technology. It is far-reaching, bold (lifting spending on R&D to 3% of GDP) and adopts many of the things our National Innovation Review recommended.

Read more

For anyone interested in understanding attitudes about redistribution, a new working paper from Alberto Alesina and Paola Giuliano titled Preferences for Redistribution is a must-read. Some snippets.

We start our analysis by examining the individual determinants of preferences for redistribution in the United States … Results of this type of regression are by now well known, but it is worth briefly reviewing some of the basic facts. First of all, the richer you are, the less you favor redistribution, which is, of course, not surprising. The second striking result from this regression is that, even after controlling for income, marital status, employment status, education and age, race has a very strong effect: blacks are much more favorable to redistribution than whites. …

Women are more pro-redistribution then men, even though the effect of gender is much smaller than that of race. … Even after controlling for income, education enters with a significant and negative coefficient: more educated individuals are more averse to redistribution. Perhaps this captures prospects for upward mobility: people invest more in education, holding income constant, to be upwardly mobile. More left-wing individuals are more pro-redistribution even after controlling for income, which already points in the direction of models highlighted above where an ideological dimension matters. …

In this section, we briefly look at preferences for redistribution using cross-country evidence. … Eastern European countries are the most pro-government redistribution (a not surprising effect of left-wing ideology), followed by Latin America and Northern European countries. Asian countries, the US, Australia and New Zealand are in the bottom part of the distribution.

I’ve created a website for people to discuss gene patenting. It’s at http://genepatents.info. On that site, you will find video podcasts from last week’s public discussion on gene patenting. If you have comments or thoughts to share on this very important issue, please add them to “comments” section at genepatents.info.

I have no problem with fiscal stimulus given the current state of the Australian and global economies. But as I’ve written here in the past, the stimulus needs to maximise the impacts on employment, and raise long run productivity. Spending on infrastructure, education, and health fits the bill. Unfortunately government handouts do not fit the bill – they are too likely to be saved and so have little impact on output and employment, and have no long lasting positive impact on the economy. And depressingly, as reported in the Age today some of the stimulus payments have gone straight back into the governments coffers as additions to gambling revenue. A kind of double fiscal irresponsibility I guess.

Several interesting studies/papers on randomised trials have come out lately. If time permits, I may come back to comment on them, but for now, I’ll just post the links for those who are interested in the topic:

• Critiques of randomised trials from Angus Deaton (also here) and James Heckman (also here)
• A defence of randomised trials from Guido Imbens (also here)
• On the same theme, I posted links in mid-2008 to this article in the Economist, and this conference at the Brookings Institution (older, but relevant to the debate)
• An FT article on how Steven Levitt and John List are using randomised trials in business.

(HT: SO & JG. Crossposted at Andrew Leigh)

Roger Cicala, president of lensrentals.com, has written an interesting analysis of the current camera market. They have the benefit of direct experience with multiple players in the industry, and so observe some of the patterns an individual buyer may not observe. He explains why lens prices have gone up dramatically over the past months, and how the expectation of an impending recession affected both buyers and manufacturers. I think it will be a good “mini case” to include if you teach a Business Strategy course, and might do so myself. See http://www.lensrentals.com/news/view?permalink=state-of-the-slr-industry-2009

This story is actually an ‘old’ one:

While on vacation in Mexico, Alberto downloaded Wall-E over his wireless carrier’s network, only to be slapped with an insane $62,000 bill.

After explaining to the carrier how outrageous that is, he was made an offer: They’d knock the bill down to what it cost them in bandwidth. Unfortunately for Alberto, they claimed their cost was still $17,000.

There are many stories of huge data charges while outside of your home country and accessing data. The only exception is on Blackberries. The issue (I think) is that mobile carriers charge the carriers of international visitors excessive roaming charges. And by excessive I mean clearly above the marginal (or any other cost) of providing such services. How do we know this? Because they don’t charge their local customers those amounts.

It is amazingly universal but also highly damaging to a clear reason to have a data-enabled mobile — being able to get information on the fly while traveling. The ability of RIM to get around this with Blackberries indicates that deals are possible. The question is why haven’t they been done. Why is it so difficult? Moreover, at these prices, it is not like many, other than the occasionally unwitting soul, are actually giving the international carriers any revenue. Could it be that the transaction costs associated with charging are so high that they don’t want the revenue? If that is the case, why not a ton of reciprocal deals that allow the data to be freely used and only kick in when there is excessive use? Something is seriously amiss here.

I have long thought that there is great potential for economising on energy use by providing better information. From writing the actual cost of running appliances on labels to installation of smart meters in homes to demonstrate more clearly what we are doing the generates energy usage, information can help. But I have also thought that this combined with social pressure would yield a double dividend. So don’t install smart meters in a hidden manner, install them near front doors so that everyone who comes by the house can see what your consumption levels are (maybe via a series of lights).

Turns out that economist Ben Ho has similar ideas. This from an article in Seed Magazine:

Residents of a community were shown how their energy use measured up against the communal average. If they consumed more than the average, most reduced energy in the months ahead. If households saw that they consumed less energy than their peers, however, their energy use actually rose, except when the frugal households were given the merest of rewards: a smiley face on their bill.

So it need not be so public as I have imagined in order to exploit peer pressure. There is plenty more in the article.

An interesting interactive map published in todays New York Times shows US unemployment by county. Interestingly shows that the unemployment rate is highest in counties that have suffered the biggest falls in house prices. Obviously tw0-way causality in this relationship, though economists would normally think that rising unemployment would lead to more defaults and falling house prices. Would be interesting to have a look at the timing of the house prices falls and unemployment by county. For the record the rise in US unemployment over the past 12 months to January was 3.1%. I still see Australian unemployment at around 8% at year end, as quoted late last year. This now seems to be close to what most forecasters are predicting, despite being seen as overly pessimistic by the government and others only 4 months ago. Some forecasters are now ratcheting up unemployment forecasts into double digits by early next year, but even at the rates of GDP decline we are currently seeing that seems a little too pessimistic.

Bruce Chapman’s retrospective on the 2020 Summit is funny and extremely accurate. You can read it here. Now, what ever did happen to my Mars mission idea?

The Australian Business Investment Partnership Bill that is currently before Federal Parliament puts the interests of Big4 bank shareholders ahead of the wider public interest.  If it were written by the legal department of one of the banks then it would be hardly less favourable to them.  The Bill in its current form should certainly be rejected by the Parliament if public interest is given primacy.   

What follows is a description of the how the Australian Business Investment Partnership (ABIP or RuddBank) is planned to work.  The details here are taken principally from the ABIP Bill currently before Parliament, the explanatory memorandum and the draft of the shareholders agreement.  The Bill raises many questions which I will address in future posts.  Read more

I’m giving a couple of talks at Melbourne University over the coming weeks. Details below.

• Tue 28 April, 3.15 to 4.30pm, Room 427 Economics and Commerce building, ‘Are Racial and Ethnic Minorities Disadvantaged in Australia? Evidence From Three Field Experiments’ (with Alison Booth and Elena Varganova)
• Fri 8 May, 11am-12.30pm, Melbourne Institute Seminar Room, ‘Crime and Mental Wellbeing’ (with Francesca Cornaglia and Christian Dustmann)

Both papers are still preliminary, so will be presented in ‘please do not quote or cite’ form. When they’re more polished, I’ll post them here.

The government’s response to the 2020 summit went public yesterday. My one idea was that we should have more randomised trials in education. I was chuffed to see that the idea made it into the document, but somewhat perplexed by the response itself.

DEEWR, ACER, ACARA, the ABS, the ARC and NCVER are all splendid bodies doing important work, but so far as I’m aware, there isn’t a single instance in which one of them has decided to “test and trial new ideas for education similar to the clinical trials adopted for disease”.

I would, of course, be quite pleased to be proven wrong on this. If anyone knows of an educational randomised trial afoot in Australia, do let me know.

(Crossposted at andrewleigh.com)

Speaking with a local franchise owner this morning, and he was complaining about the strength of the USD. “If the Nigerian economy was in the situation that the US economy is in no-one would be bidding up the Nigerian naira! The problem is that the US as a brand is too strong, doesn’t matter what is going on in their economy.” Seemed funny, but I decided to take a quick look at the data – make up your own mind which country’s bonds you’d buy! Numbers are not exactly comparable due to Nigerian data availability, but I’ve tried to make them as similar as possible, mostly from the IMF.

Nigeria’s net public debt is 14.4% of GDP, compared with 61.7% in the US. And Nigeria’s Deficit will be about 4.0% of GDP this year compared with about 13% in the US. Nigeria’s current account deficit is very volatile, but averages about 3% of GDP from 2008 to 2010. The US current account deficit over the same period is projected by the IMF to be a little more than 3% of GDP. Inflation is where the US is “beating” the US, with Nigerian inflation still high at around 14%. But of course in the US the risk is deflation, which is arguably as bad (or worse) than 14% inflation. Finally, investment as a share of GDP is 22.4% of GDP in sub-Saharan Africa (I couldn’t get data for Nigeria alone), and the savings rate is 21%. Same numbers for the US are 14.7% and 11.9%. The US as a brand looks a lot like United Airlines…big risk of becoming Untied.

Apparently in the US, newspaper owners have been trying to get immunity from antitrust laws due to the competition from newer technologies. See here for details. I quickly had to check the date on this one. No, it is not April first.

In the US (as here in Australia) the general antitrust laws look at competition, not industries. The newspapers can merge if that does not substantially lessen competition. If the internet is a relevant competitor then the authorities (or the courts) will take that into account. This is made clear for Australia in the ACCC’s media mergers paper.

I assume we wont be getting the same debate here. I don’t think arguing that we need special merger rules to protect Mr Murdoch is going to impress anyone.

I guess it is just like Vanilla Ice sampling from Queen’s Under Pressure. The High Court today affirmed that IceTV was able to build an electronic programming guide based on Nine and other network’s published schedules. I have written about this here, here and here.

This is a good outcome as it potentially opens up what can be republished and scraped from publicly available data (toilet locations anyone?). But I gather that it might be a revolution in copyright law. To my mind, the guide data issue was really one of obligations that ought to come with a broadcast license — that is, what you broadcast and when should be freely available (including with real time updates and guarantees of accuracy).

Preston McAfee is not happy about the approaches by Edward Elgar. Interestingly, he documents the whole story here. The basic issue is the Edward Elgar publish volumes of readers which they charge a large amount for. They are mostly targeting libraries but Preston was not too happy with how they dealt with the authors of the articles.

I can see Preston’s perspective but thought I’d offer a little of my own. Edward Elgar published a book of readings that I edited, Publishing Economics and I dealt with Edward Elgar himself (who regularly visits Melbourne to chat with academics about projects). It wasn’t at $500 but was reasonably priced as it targeted a wider readership than libraries. I have no idea how the book did but it went into paperback but I can’t recall ever receiving any royalties (which only kicked in if enough copies were sold). My problem is that I had to do alot of work formatting the whole thing. But overall it wasn’t a poor experience by publishing standards.

The issue is only partly author compensation but more so why libraries choose to pay this for readers. When most is online do people actually borrow these. Surely a web page with links to JSTOR will do the job.

Greg Mankiw published a piece in the New York Times a few days ago making the case for negative interest rates in the US, which has created a lot of controversy. He admits to the technical difficulties with this, and I think that negative nominal rates won’t be workable. But he does go on to make the point that negative real rates are achievable if the Fed commits to an inflation target and credibly announces a plan to create some inflation. This makes sense, and is consistent with recent Fed moves towards a formal inflation target, something that Bernanke is supportive of (see my blog on 25 Feb for more on this). Makes me wonder even more why people see greenbacks as a safe haven!

Next Page →

• RSS Feed

  • Subscribe to Main Feed

• The CoreEcon iPhone App

  Free! Click to download

• Email

  • Subscribe (Daily Edition)
  • Subscribe (Weekly Edition)
  • Subscribe (Kindle)

• Archive by Author

  • Andrew Leigh
  • Chris Lloyd
  • Christine Neill
  • Guest Contributor
  • Joshua Gans
  • Justin Wolfers
  • Kwanghui Lim
  • Mark Crosby
  • Paul Frijters
  • Sam Wylie
  • Stephen King

• Archive by Date

  April 2009

  M	T	W	T	F	S	S
  « Mar				May »
  		1	2	3	4	5
  6	7	8	9	10	11	12
  13	14	15	16	17	18	19
  20	21	22	23	24	25	26
  27	28	29	30

• Interesting Items

• Ads

• Blogroll

  • Christopher Joye
  • Club Troppo
  • Economist’s View
  • Economix
  • Freakonomics
  • Greg Mankiw
  • John Quiggin
  • Kalimna
  • Marginal Revolution
  • News for Econ Students
  • Paul Krugman
  • Peter Martin
  • The Dilbert Blog
  • Tim Harford

• Sites
• Core Research
• Parentonomics
• GameTheorist Blog
• Aussie Mac
• Centre for Ideas and the Economy