In Alex Tabarrok's book review of Jenny Uglow's spellbinding biography, he learns not only about the lives of Erasmus Darwin, Matthew Boulton, James Watt, Josiah Wedgwood, Joseph Priestly, and others, but also delves into intriguing discussions on private road and canal building, private coinage, and the early foundations of industrial health and sickness insurance plans. With appearances from luminaries such as Rousseau and Benjamin Franklin, this absorbing account will transport you to the revolutionary days of the 1770s.

I highly recommend Jenny Uglow’s The Lunar Men. In the 1770s, Erasmus Darwin, Matthew Boulton, James Watt, Josiah Wedgwood, Joseph Priestly and others met regularly under the light of the full moon to talk science. The Lunar Men is their biography. It’s the sort of biography where you learn much about other things. I found interesting discussions of private road and canal building (Wedgwood was a big supporter because some 30% of his pottery would break on the public roads), private coinage (Boulton ran a mint using the steam engines he and Watt had developed to press the coins), and the first industrial health and sickness insurance plans. Rousseau had an important influence on the group and makes an appearance as does Benjamin Franklin and many other figures of the day.

Erasmus Darwin was an especially colorful genius who wrote what were in essence biology textbooks set to verse! In this stanza (from The Temple of Nature) he discusses evolution long before his grandson was born:

Organic Life beneath the shoreless waves

Was born and nurs’d in Ocean’s pearly caves;

First forms minute, unseen by spheric glass,

Move on the mud, or pierce the watery mass;

These, as successive generations bloom,

New powers acquire, and larger limbs assume;

Whence countless groups of vegetation spring

And breathing realms of fin, and feet, and wing.

The Lunar Men

Tyler Cowen introduces William Watson's book, "Globalization and the Meaning of Canadian Life," which challenges the notion that globalization prevents countries from increasing the size of their governments. Cowen highlights fascinating facts from the book, including surprising statistics on welfare benefits in the U.S. and Canada. As Cowen points out, this essay explores the similarities and differences between the two countries and questions the commonly held belief that Canadians are vastly different from Americans. 

I’ve been enjoying Globalization and the Meaning of Canadian Life, by William Watson. His main point is that globalization does not prevent countries from increasing the size of their governments, if they choose to.

As late as 1958, the U.S. and Canada had similar percentages for government spending and taxes. Canada then increased its size of government, although the two countries moved economically much closer over the same period of time.

The book is full of interesting facts, although they do not always fit together into the same picture. What are the ten most generous states or provinces in terms of welfare benefits, in the U.S. or Canada (p.146, note that the book is from 1997)? Surprise, all ten are in the U.S. They include New York and California, hardly small parts of the country. If you are curious, Quebec comes in at number 38 on the entire list. The author argues that Canadians are not always as different from Americans as they like to think.

How different is Canada?

Tyler Cowen brings you an intriguing article on Larry Summers, the former president of Harvard University. Discover how his bracing manner and commitment to open debate made him both popular with students and unpopular among faculty. Dive into his vision for a world where scientific ignorance is as embarrassing as not knowing a Shakespeare play. Explore his thoughts on the importance of literature and his contemplation of affirmative action. The article also delves into the shifting dynamics at Harvard and how Summers' willingness to make enemies shaped his leadership style.

The New York Times Magazine from today (registration required) has a good article on Larry Summers as President of Harvard. His bracing manner, and willingness to engage in frank debate, is more popular with students than with faculty. He wants a world where an ignorance of scientific knowledge is as embarrassing as ignorance of a Shakespeare play. He thinks knowledge of literature is more important than a knowledge of the latest in literary theory. He is still thinking about whether affirmative action is a good idea, he would like to see more facts. Some parts of Harvard, including some of the sciences, appear to be moving to Allston and out of Cambridge. Most of all, he is willing to make enemies to be an effective leader.

The Harvard Crimson discusses whether Larry is a secret conservative. Slate gives a useful and analytical biography. And here is a piece on how Summers likes to ask tough questions of his faculty.

Larry Summers in The New York Times


Four percent of gdp…

Tyler Cowen dives into the complex and often misunderstood topic of China's trade deficit. Exploring the paradox of China's trade surplus with the US and deficit with the rest of the world, Cowen challenges common misconceptions and sheds light on the role of currency valuation in achieving a more balanced global economy. A must-read for anyone interested in the intricacies of international trade and the impact of economic policies.

While China is running a large ($100 bn in 2002) bilateral trade surplus with the US, its trade balance with the rest of the world is in deficit, at $75 bn.” From today’s Financial Times (registration required), Morris Goldstein and Nicholas Lardy argue that only a modest revaluation of the renminbi [yuan] is needed.

Japan is the biggest source of China’s trade deficit, so clearly a high-wage country can have a trade surplus with China, are you listening trade protectionists?

China's Trade Deficit

Alex Tabarrok delves into the divisive interpretations of the Ten Commandments, as highlighted by a controversial monument in Alabama. Tabarrok uncovers the underlying tensions between different Christian denominations, shedding light on the complexities of religious interpretation and the implications it has on societal debates. This thought-provoking essay challenges preconceived notions about the First Amendment and explores the intricate relationship between religion and government. Dive into this captivating exploration of faith, diversity, and the intricacies of religious freedom.

Lew Rockwell complains that the version of the Ten Commandments that Alabama Judge Moore chose for his 5,300 pound monument is “a sectarian one promoted by Calvinist and fundamentalist Protestants, but rejected by Catholics, Lutherans, and Episcopalians. (The difference has to do with whether the first commandment should be split into two parts to seem to justify iconoclasm.)”

The Right argues that the first amendment is all about defending atheism when, as Rockwell’s comment illustrates, it’s really about defending the religionists from themselves.

Even the Christians Can't Agree

Dive into the fascinating world of virtual economies with Alex Tabarrok in this captivating article. Exploring the concept of property rights and prices within computer games, Tabarrok uncovers the surprising realities of buying and selling virtual items, from "virtual swords" to gender discrepancies in avatar prices. Discover the complexities and contradictions of virtual economies as Tabarrok provides unique insights into this rapidly evolving arena. Don't miss out on this thought-provoking read that sheds light on a whole new dimension of our modern world.

What does it mean to have property rights and prices in the virtual world of computer games? Did you know that you can buy a “virtual sword” on ebay? Did you know that the male avatars sell for more than the female avatars, despite having the same capabilities? What are virtual economies all about? Read this article, fascinating but sometimes incoherent as well, for a take on these new developments.

Virtual economies


Alex Tabarrok questions whether Alan Greenspan, the former Chairman of the Federal Reserve, is being adequately compensated for his role in shaping the American economy. With a salary much lower than that of his international counterparts, Tabarrok delves into the broader issue of whether American central bankers should be paid more. He examines the correlation between salary and fame/power in this thought-provoking essay, challenging readers to consider the value and recognition that comes with such a pivotal position in the financial world.

If you look at what different central bankers earn, Alan Greenspan is way down on the list with his $172,000 a year. Is the Finnish central banker really worth more money?

The deeper question is whether we need to pay American central bankers more. How many of you have heard of Matti Vanhala? Well, he is the Finnish central banker. Greenspan earns a greater fame (and power) return. The head of the Hong Kong central bank makes over a million dollars a year. High public sector salaries are useful for limiting corruption, but this is not an obvious danger in the case of the American Fed. The head of the New York Fed makes $315,000, almost twice what Greenspan does, but how many of you could produce the name of Bill McDonough at the drop of a hat?

Is Alan Greenspan underpaid?

In this eye-opening essay, Alex Tabarrok introduces a valuable resource for cross-sectional data across nations. Explore www.nationmaster.com, a comprehensive platform that offers data on a wide range of topics. Tabarrok also highlights a thought-provoking list from www.crookedtimber.org, revealing the countries with the highest mortality rates before the age of forty. Prepare to be enlightened about global disparities and gain a fresh perspective on international development.

Go to www.nationmaster.com, an excellent source of data across the nations, on many different topics. The pointer is from www.crookedtimber.org, which also pulls out a list of countries where you are most likely to die before reaching forty years of age. The first thirty-four are all in Africa, then comes Haiti, then Madagascar.

A good source of cross-sectional data across nations


Alex Tabarrok delves into the controversial issue of African countries, such as Zambia and Ethiopia, refusing food shipments from America due to their fear of genetically-modified foods. With millions in dire need of food aid, this article sheds light on the consequences of this opposition, including the potential impact on future agricultural trade between Africa and Europe. Moreover, Tabarrok references Greenpeace's stance on the matter, providing a comprehensive overview of the ongoing debates surrounding genetically-modified foodstuffs. Brace yourself for a thought-provoking exploration of global agriculture and its implications.

Zambia, Lesotho, Malawi, Ethiopia, Mozambique, and Zimbabwe — not exactly marvels of good nutrition — have been destroying food shipments from America. Why? This will sound like a sick joke, but they are afraid of genetically-modified foods. These countries have now expressed official opposition to American food entering their country, at a time when almost 3 million Zambians, to cite just one example, desperately need food aid.

There is another villain in the story, namely some of the European nations. The Africans fear that if they accept genetically-modified foods, the seeds will mix with their current crops. Europe will then be reluctant to import African foodstuffs. By the way, Greenpeace opposes the food shipments as well.

Peter Pringle offers a good survey of the debates on genetically-modified foodstuffs.

African food scandal


Marginal Revolution

I learned the following today:
1. Most sales of body organs involve kidneys.
2. Patients who receive a kidney from a living donor have a much better chance of surviving.
3. In the developing world the going rate for a kidney is between $1000 and $2000.
4. In the Philippines there is essentially a free market in bodily organs.  The “grey market” is growing rapidly in many countries.
5. Two different studies suggest that kidney sellers do not benefit in the long run.  Most sellers pay off debts with the money, and end up back in debt, their acts of desperation do not succeed.  Many end up with long-run health problems, or can no longer perform heavy labor.
From this week’s New York Review of Books (electronic subscription required), “The Organ Market,” by Sheila and David Rothman.  The authors are involved with an “organ watch” movement, which seeks to stop organ sales abuses.
My take: I can believe the “behavioral irrationality” argument that most kidney sellers do not benefit very much, if at all.  But the Rothman piece never tries to estimate how many lives are saved by the practice.  Furthermore, many of the selling “victims” might have performed some other desperate act instead.  So the organ selling idea, although repugnant to many people, in my mind remains in the running as a serious policy proposal.
There is a moral hazard problem, namely hospitals and doctors may take kidneys from people when they shouldn’t.  Or a hospital or doctor may let a patient die, to harvest the kidneys.  Are more lives lost through the moral hazard problem than are saved through the kidney sales?  I doubt it.  Do the kidney buyers benefit more than the kidney sellers lose?  Probably.  
Utilitarian calculations are not the only value at stake here, but so far they point toward allowing organ sales.  The best argument against is to cite the likelihood of accompanying rights violations, which are real, and claim that such a factor outweighs the utilitarian benefits of the practice.
Addendum: On point number two, the authors write: “patients who receive an organ from a living donor have far better prospects than those who receive an organ from a cadaver.”  Co-blogger Alex sends me the following link, which shows a correlation of about ten percentage points more of survival, if you receive an organ from a living donor, the causal relationship may be weaker, given the differing ages of various recipients.  Alex wonders if allowing kidney demanders to “buy from the dead” would reduce the problems of sale from the living.  This is a good point, but I am not sure it eliminates the basic problem.  First, sales from the dead may not displace sales from the living; I cannot determine whether the Philippines (not to mention other locales) restricts sales from the dead but it is not obvious that such differential restrictions exist.  Second, many of the buyers are relatively wealthy.  If a “live kidney” raises the chance of survival by only a single percentage point, they may still pay for that, which would continue to prop up the market in kidneys from the living.  Kidney middlemen may find it easier, and more profitable, to buy from the living for a thousand or two, rather than pursue cadavers, where the quality of the kidney is presumably harder to determine.

Organ trafficking

Click here, here (scroll through, their archives aren’t working), and here to read some responses to my earlier post on why we do not see more price gouging.
I agree gouging should not be illegal, the question is why the refusal to gouge persists when gouging is legal.  Here are some possibilities:
1. People are just irrational, gouging would be an improvement over shortages.
2. Gouging would violate fairness constraints, break down our trust in business, and lower the overall gains from trade.
The above links discuss these options.  Last night I was pondering another hypothesis, to be sure it has some holes, but since the absence of gouging is often a puzzle, let us look more closely.
3. Non-gouging is a form of price discrimination that raises long-term profits, for reasons that have nothing to do with fairness constraints.
I was first pondering the case of airlines.  It is sometimes argued that airlines keep coach quality low deliberately, to raise the demand for business and first class tickets.  I don’t know if this is true, but an analogous argument can be made in the intertemporal context.  If flashlights are scarce when a storm comes, the pre-storm demand for flashlights will rise.  Conversely, if the flashlight market clears when a storm comes, fewer people will stock up on flashlights in the first place.  
Assume that right now flashlights cost $5 (laugh at this number if you want, I haven’t bought a flashlight in ages).  If prices cleared the market every period, flashlights might cost $20 when there is a storm, and $4 otherwise.  Both the wealthy and the careless might hold off on flashlight purchases, knowing they can always get one at the last minute, if they need to.  So fewer flashlights are sold up front.  By keeping flashlights scarce during a storm,  the store forces people to invest in a flashlight now as a form of insurance against not being able to get one later.  This might raise the overall demand for flashlights.  In similar fashion, perhaps sports arenas (another classic venue for non-market-clearing prices) may not wish to give everyone the option of showing up at the last moment to purchase tickets.
What are some of the holes in this argument?  First, the store must have some market power (but note that most plausible explanations of sales and coupons require this same assumption).  Second, the numbers need not work out in favor of keeping the price steady.  Third, why would this effect hold for flashlights and not for all commodities?  Fourth, I can think of gouging cases where this argument would not apply.  I recall a peanut butter shortage about twenty years ago, and the market did not clear, it is hard to imagine that this encouraged people to stock up on peanut butter.
Still, the absence of price gouging is a puzzle, and we need to look at all available explanations.  Intertemporal considerations might be part of a broader understanding of the phenomenon.  Perhaps market-clearing prices don’t boost profits as much as we would otherwise expect.   
Addendum: Gary Leff offers an instructive post on the pricing of airline seats, more generally check out his excellent travel blog.

More on price gouging

Crypto anarchists and cyber-libertarians  promised a new world of privacy and liberty built on the foundations of the internet and public key cryptography.   As David Friedman memorably put it public key cryptograpy allows “anonymity with reputation” thus it becomes possible in theory to evade the taxman while still maintaining a public presence.  
All of this now looks somewhat naive.  Consider, for example, how internet gambling has been quashed.  First, the credit card companies caved into government pressure and refused to process gambling related transactions.  Initially, gamblers shrugged this off and routed their transactions through PayPal but a U.S District Attorney accused PayPal of violating the USA Patriot Act and to avoid charges PayPal was forced to pony up 10 million dollars.  (Why am I not surprised that a law intended to go after terrorists has been used to most affect against peaceful gamblers?).  Entrepreneurs have taken their online gambling sites to places where it is legal like Antigua and Costa Rica but don’t try coming home again.  When Jay Cohen, founder of the World Sport Exchange, did that he was tried, convicted and jailed in a Federal prison.  
The cyber-anarchists and libertarians were correct about the technology – public key cryptography can do what they say it can do – so where did the argument go wrong?  In part, the cyber anarchists forgot that most of the value of cyberspace comes from its overlap with real space.  I don’t blog anonymously because I want to be rewarded for my blogging with something that I can use to buy a car (ok, maybe a toaster is more realistic).  Even if privacy is perfect in cyberspace the many margins of overlap with real space leave plenty of room for authority to insert its hooks especially when authority itself is technologically adept.  Moreover, as Richard Posner has noted, the demand for privacy is more often than not a demand for control over the public presentation of self and cryptography does nothing to help and may even impede that demand.
The cyber-anarchist world works in a thought-experiment when everyone demands privacy and as a result the technology for getting privacy is built into all of our communications structures and used as a matter of routine.  But that’s a description of an equilibrium and not a description of how to get there from here.  At present, most people are not that bothered with privacy and so do not, for example, encrypt their email.  As a result, privacy is not convenient even for those who want it.  Indeed, someone who encrypts their email or phone conversations is probably calling more attention to themselves than they otherwise would.
      The cyber anarchists may yet be proven right but today David Brin’s forecast of a Transparent Society in which no one has privacy, including authority, is looking far more realistic.  Need I mention this as proof of Brin’s thesis?

The Demise of Crypto Anarchy

“Portugal scrapped its initial estimate of 1,300 deaths and lowered it to just four,” from today’s cnn.com.  Germany claims 40 heat-related deaths this summer.
The British claim 907 extra deaths across the span of a very hot week.  Here are the Italians: “The Health Ministry said on Thursday 34,071 people over the age of 65 died between July 16 and August 15, compared with 29,896 in 2002 — a 14 percent increase.”  French estimates range between 10,000 and 15,000 deaths.  
How much of this was avoidable and how much was random movement in the numbers?  In net terms, how many people actually died prematurely? 
Consider the stability of mortality statistics.  I checked the UK Office of National Statistics tables, for England and Wales, and was surprised how much death rates bounce around (at the link you need to go through some work to create the file in readable form, follow the instructions).
Take deaths over the time period 1985-2001.  Rounding off the figures to the thousands, the median change in death numbers, from one year to the next, is 9,000 (the totals run from 530,000 to 590,000 deaths per year).  The biggest change we see across a year is about 25,000.  We shouldn’t expect those changes to be distributed perfectly evenly across the months.  But if we divide by 12 “naively,” it would be very common for death tallies, on a monthly basis, to change by 700 to 800 people, when comparing one year’s August to the previous year’s August.    
Now let us go back to the British figure.  If the number of deaths jumps in a single week by 907, compared to an average change, this is out of the ordinary but not unthinkable.  On the other hand, random noise plays a very small relative role when the monthly death rate jumps from 10,000 to 15,000.  
These people all would have died anyway, the next question is when.  Twelve months from now, will the yearly death rate stand above its average or will we now see fewer deaths for a while?  To what extent did the heat redistribute deaths from September and October to August?  (Eli Lehrer raises the further interesting question of whether some of these people died through a psychological effect, given that the media were reporting that a “heat death time” was upon us.)  
Note that the richer and more technologically advanced a society, the fewer heat wave deaths we should expect, read here and here.  For one thing, richer people are more likely to buy air conditioners.  Everyone points the finger at negligent children, or the French hospital systems or August vacations.  We can also blame the sluggish economic growth rates of the Continent.  Social welfare states can be quite inhumane, once we examine secondary consequences.
The bottom line: something very bad did happen in France and Italy.  
Something less bad happened in Britain.  But we still have not gotten to the bottom of how bad or why.

How many heat deaths?

I survived hurricane Isabel, but couldn’t buy a flashlight or the right size batteries, the night before the storm was to come.  Merchants let supply run out rather than raise the prices.  C.C. Kraemer at TechCentralStation.com tells us that half of all states have anti-gouging laws.  More significantly, merchants fear that customers will resent price increases during times of trouble.  The testable prediction is that wandering “umbrella merchants,” as I have encountered in Manhattan, will raise their prices when it is raining.  They have little reason to fear long-run negative effects on their reputation.  I have found this to be true but can cite only two data points in its favor.  Twice, when it was raining, I bought umbrellas for $10 rather than for the usual price of $5.
Kraemer suggests that we should allow price gouging in times of emergencies.  This policy conclusion need not follow.  Since supply is constant in the short-run, higher prices won’t give more flashlights to more people, although in the long run the economy will stand readier with emergency flashlights.  Higher prices will allocate flashlights to those people most willing to bid for them, but at the cost of all buyers feeling gouged.  After all, not wanting to be gouged is a preference too. And the subsequent decline in trust will eliminate other potential gains from trade. 
Arguments by N. Gregory Mankiw and George Akerlof suggest that small costs of changing prices can have large macroeconomic effects.  They focus on cases where prices remain too high and output is restricted as a consequence.  In contrast, if a firm refuses to raise its prices, presumably it feels that the resulting “resentment costs” are higher than the extra revenue it would reap.  First, the price changing costs are not small.  Second, if the firm had initial monopoly power, as the Mankiw argument requires, keeping prices lower will not in general lower consumer welfare.  (It is a tricky intertemporal problem, there can be cases where contrived ex post shortages pump up ex ante demand for the good, to the benefit of the monopolist and to the detriment of social welfare.)
I would repeal the anti-gouging laws, on libertarian freedom grounds, but I don’t welcome more price gouging as a means of making us better off.  Markets are quite willing to gouge us in a wide variety of instances, just try hearing a good jazz show on New Year’s Eve.  We should take it seriously when markets are not willing to gouge us.  We can also ask whether people would be better off if they had weaker fairness norms, or better fairness norms, that is the next relevant question for assessing the costs and benefits of price stickiness.  Just keep in mind that our current norms help keep our suppliers in line and limit their ability to defraud us.
Addendum: I’ve made some slight re-edits in the interests of clarity.

Why don’t we see more price gouging?

Accusations of media bias are common but are typically based upon nothing more than subjective standards and anecdote.  A brilliant new paper by Tim Groseclose (GSB Stanford, currently visiting GMU) and Jeff Milyo (U. Chicago, Harris School) pioneers a more promising approach.  Since 1947, the interest group Americans for Democratic Action (ADA) has tracked how Senators and Represenatives vote on key issues and they have used these votes to rank politicians according to their liberalism.  In the 2002 session, for example Ted Kennedy received an ADA score of 100 and Phil Gramm a score of 0.  Political scientists are familiar with ADA scores and have come to rely on them as a measure of ideology.
    Groseclose and Milyo have found a way to compute ADA scores for media outlets as if they were politicians.  What they did was to examine the Congressional Record for every instance in which a politician cited a think tank.  They then did the same thing for newspapers, network news shows and other media outlets.  By matching newspapers with politicians who had similar citation records they can impute an ADA score for the media outlet.  Joe Lieberman, for example, has an ADA score of 66.3.  Suppose that in his speeches he cites the Brookings Institution twice as much as the Heritage Institute.  If the New York Times has a similar citation style then the New York Times is assigned an ADA score of 66.3.  (The method is slightly more complicated than this but this gives the right idea.)  Note that Groseclose and Milyo do not have to determine whether the Brookings Institution is more liberal than the Heritage Institute all they need to know is that the Times has a similar citation style to Lieberman.
Ok, what were the results?  It turns out that all of the major media outlets, with the exception of Fox News: Special Report are considerably more liberal than the median member of the House over the 1993-1999 period. Moreover, although Fox News: Special Report was to the right of the median house member it was closer to the median member than were most of the other media outlets.    (Interestingly, all of the liberal media outlets were less liberal than the average Democrat and Fox News is less conservative than the average Republican – thus there is a sense in which all media outlets are less biased than is the typical politician.) Here are the ADA scores of various media outlets along with some comparable politicians.
Joe Lieberman (D-Ct.) 66.3
New York Times 64.6
CBS Evening News 64.5
USA Today 62.6
NBC Nightly News 62.5
Los Angeles Times 58.4
Ernst Hollings (D-SC) 56.1
ABC World News Tonight 54.8
Drudge Report 44.1
Arlen Spector (R-PA) 44.0
House Median 39.0
Senate Median 36.9
Olympia Snowe (R-Me) 36.0
Charlie Stenholm (D-Tex) 29.3
Fox News Special Report 26.4

Surprise! Fox News is Fair and Balanced!

Steve Levitt, recenty profiled in the NYT Magazine has written another amazing and sure to be controversial paper.  Levitt and co-author Roland Fryer begin The Causes and Consequences of Black Names with some startling statistics on the racial divide in names.  For example, “more than forty percent of Black girls born in California in recent years received a name that not one of the roughly 100,000 white girls born in California in that year was given.”  Blacks are more segregated by name than are other races – the majority of Asians, for example, choose from the same name-pool as do whites.  Segregation by naming has also increased over time.  Prior to the late 1960s, for example, blacks and whites chose from the same name-pool to much greater degree than they do today.
Other studies have shown that when sent resumes identical but for name, employers more frequently ask for follow-up interviews with applicants who have stereotypical white names.  Levitt and Fryer respond to these studies in two ways.  The first response I find unconvincing.  They argue that it is unlikely that a black name could have a big impact on earnings because “Once an employer has met a candidate in person, race is directly observable.  A person’s manner of speaking, dress, interview responses and on-the-job performance no doubt provide far better signals of productivity than a name.”  No doubt – but this is a rather facile interpretation of the audit studies.  The point of these studies was not the literal one that employers discriminate on the basis of a person’s name!  The point is that if employers use names to discriminate on race at the resume stage then they probably discriminate on race at every other stage in ways that are harder to identify.
Levitt and Fry have a more convincing but sure to be controversial response to this larger issue.  They find that black names signal a variety of other characteristics that could plausibly be connected with lower labor productivity. Here is a key quote:
a woman with a BNI equal to one (implying a name that no Whites have) is 10 percentage points more likely to have been born to a teenage mother and 9 percentage points more likely to have been born out-of-wedlock than a Black woman living in the same zip code with the same age and education, but carrying a name that is equally common among White and Blacks.  The woman with a Black name is also more likely to have been born in a Black neighborhood and to herself be unmarried.
In other words, names carry information even after the typical information available on a resume has been taken into account and the information that especially black names carry plausibly suggests lower productivity.  It’s papers like this that explain why professors need tenure.

If Shemekia were Sally would she earn more?

The margin is decisive, so far it looks like 56 percent against, 42 percent for, read here for one early account of the voting.
It is a tough call, but I think the Swedes did the right thing.  Mostly the Swedes feared that the fiscal discipline of the EU will curtail their welfare state, but I don’t think this should have been the main issue.  The Netherlands, another small country, has created a generous welfare state (albeit with some spending cuts), prosperity, and relative fiscal responsibility, all under the rubric of the EU.  In the long run it is hard to see the EU curtailing Swedish spending more than international capital markets and other competitive pressures would.  And it remains to be seen how binding the EU fiscal requirements will prove, after France is violating them.
What is really the advantage if Sweden had adopted the EU?  Price competition would have become more intense, as buyers would have an easier time comparing prices across countries with only a single currency unit (admittedly this violates various economic theories, which suggest people “see through” the monetary unit, but it nonetheless seems to be true, noting that in the short run prices get bumped up before later falling).  That counts as a real gain, but on the other side the Swedes would have given up the ability to control their own monetary policy.
The Swedes have a history of pursuing a monetary policy independently of Western Europe.  The Swedish depression of the 1930s was milder than for the rest of Europe, in part because Sweden broke with gold, devalued, and avoided a disastrous deflation, for one treatment read here.
Supposedly the Swedes don’t now have the “proverbial seat at the table,” but as more countries adopt the Euro, how much is this worth anyway?  They decided to keep a whole table of their own, albeit a much smaller one.  Does anyone really know how the European Central Bank will operate over time, as more members join, or if a crisis hits?  Some critics charge that foreign investors will now stay away from Sweden, due to exchange rate volatility, that would be one factor on the side of Euro adoption.
Perhaps it will prove most important that the Swedish government supported the change, and voters didn’t cooperate.  Swedes usually have great trust in their government, more than we are accustomed to seeing in the United States.  This may signal a break between Swedish elites, who often have closer ties to Europe, and many Swedish voters.  The consequences of today’s vote will likely include more than just macroeconomic policy.

Sweden rejects the Euro

$10.5 billion in small change sits around people’s homes.
The average U.S. transaction produces 4.7 coins in change.
Eliminating the penny would lower this figure to 2.7 coins.
The average Canadian transaction produces 5.9 coins in change (Canada has a dollar coin), this would be 3.9 coins in a pennyless world.
A mathematical technique known as Diophantine equations can be used to calculate the coin denominations that would produce the least amount of expected change per transaction.  If we replaced the dime with an 18-cent coin, the average number of coins per transaction would fall from 4.7  to 3.89.  If we must keep the dime, adding a 32-cent coin would give us a figure of 3.46.  The best solution of all would be to combine an 18-cent piece, and actually use the half-dollar coin, for a figure of 3.18 coins per transaction.  N.B.: These calculations do not consider the limited ability of Americans to do math in their heads.
These facts are taken from the October issue of Discover magazine, although only a small fragment of the article is available on-line.
Thomas Sargent’s excellent The Big Problem of Small Change (co-author Francois Velde) provides a fascinating historical look at how our denominations evolved, and why we use fixed denominations rather than monies with floating exchange rates against each other, as in medieval times.  Imagine having a daily rate for how much a dime is worth, vis-a-vis a quarter.  Sargent and Velde claim that fixed rates, combined with a willingness of the central bank to trade at those rates, offers the best possible mix of denominations.  They stress that this solution requires good safeguards against counterfeiting.
According to one poll, seven percent of Americans use coins to stabilize table legs, seventy-three percent to scratch off lottery tickets.
One individual wisecracked: “Actually the United States does have an 18-cent coin…It’s called the Canadian quarter.”
Addendum: About $600 worth of coins pass through the hands of a typical American each year.  Using pennies may make an average cash transaction three seconds longer.
Second addendum: Professor Bainbridge tells us that the penny will never be abolished, and that sales tax is the reason why.  He also cites this link on why abolishing the penny would raise government expenditures by more than a billion dollars, due to CPI effects.

Penny facts and optimal denominations

Today’s Financial Times runs a feature article on neuroeconomics, an offshoot of experimental economics.
Why do people cooperate in experimental games?
…during the games, Prof Smith’s team scanned players’ brains using functional magnetic resonance imaging. The FMRI scan showed that players who co-operated were using parts of their brain called Brodman’s areas 8 and 10. These areas had previously been associated with thinking about the mental activities and the motivations of others, and of delaying gratification to receive higher rewards later. Non-cooperative players did not use these parts of the brain, and neither did those who knew they were playing against computers instead of human opponents.
This, argues Prof Smith, is consistent with the reciprocity explanation: players are thinking about the likely responses of other players and deciding to trust them.
Brain scans are not the only tool of neuro-economists. Other approaches include measuring pulse rates, skin conductivity and hormone levels. And as a result of such experiments, neuroeconomics boasts an eclectic collection of findings – one of them being that ovulating women are less trustworthy than the rest of us…
Would you like to hear more about ovulating women?
Prof [Paul] Zak has also found that women who take part in the trust game while they are ovulating send back substantially less money to their fellow player than other women or than men – crudely, they are less trustworthy. He explains: “The physiological reason is that progesterone suppresses the effect of oxytocin. The evolutionary biological reason is that is that if you’re about to get pregnant, you should be very careful about overreacting to the social signals you receive. In addition, you don’t want to be giving away resources.” Prof Zak points out that since trust is fundamental to economic development, a better understanding of the oxytocin and the physiology of trust could be fundamental for promoting development. The Bangkok Post has already picked up on his work: the newspaper says that since the oxytocin stimulants massage, food and sex are much beloved of Thais, Thailand’s economic development is assured.
For those interested, GMU researcher Kevin McCabe has started a fledgling neuroeconomics blog.

Read Marginal Revolution

Choose Your Reading Path

Full Backlog

Best Hits

You'll start with:

The Lunar Men

How different is Canada?

Larry Summers in The New York Times

About Marginal Revolution