Monthly Archive

Calibrated probability assessment training sounds quite useful

Calibration training improves subjective probabilities because most people are either “overconfident” or “under-confident” (usually the former). By practicing with a series of trivia questions, it is possible for subjects to fine-tune their ability to assess probabilities.

From what I gather, you are given many trivia questions and asked to answer the question and to estimate your confidence in your answer. After answering many such questions, you get feedback on how well you estimated your confidences so that you can self correct.

I have tried to find an online applet that conducts such training, but I have found nothing.

 Dani Rodrik points us to The Comparative Constitutions Project, and it looks awesome:

The constitutions project involves the systematic collection, translation, digitization and coding of every constitution in the world since 1789.  It provides a wide array of comparative data on the formal institutional designs adopted by nations at different points in time.  It also provides valuable data on national contexts.

I’ve been reading the Federalist Papers to learn what different institutional structures have been suggested over the age, but this is even better.

It’s election time in Washington State, and apparently local environmental activists are split on whether Proposition-1, which would allocate a lot of money for roads and transit systems, will reduce global warming (link). My primary question is: Why on earth is this sort of thing being referred to voters? Isn’t this the sort of thing we pay our representatives for? Voters in general, myself included, are not in a position to intelligently evaluate this sort of complex proposition.

A huge surplus of propositions, referenda and initiatives seems to be a perennial problem for Washington State. I’m with State Sen. Ken Jacobsen in wanting to get rid of the referendum and initiative process. Unfortunately, I doubt our state will get rid of the process any time soon, because the amendment to the state constitution to eliminate the processes would itself have to be passed by voters, and the emotional arguments against such an amendment are far easier to make than the arguments for one. Arguing that such an amendment would be “a rather draconian effort to insulate politicians from the people” is simpler and more emotionally appealing than arguing that voters are hardly ever in a position to intelligently evaluate complex policy options.

Jim Dew thinks term limits are one of the better institutions related to the presidency. He argues that power ‘corrupts,’ and therefore high turnover for elected officials is a good idea.

I disagree with this assessment. Term limits have few benefits. While I agree that political ‘corrupts,’ there is no reason to believe that ‘corruption’ increases the longer a person stays in power. If the amount of power a person holds we should expect the level of ‘corruption’ to remain the same, so there is little reason to suppose that high turnover for elected officials will decrease undesirable behavior from them. Term limits are not costless either.

In the final term of service, term limits eliminate the incentive for officials to be competent, non-corrupt and non-ideological that elections create. The instant a sitting president is re-elected, he is free from having to consider whether the public approves of him. Barry Weingast discusses this argument and gives examples in his recent EconTalk podcast.

Term limits do not have informed support. People who observe term limits in action are apparently much more likely to oppose term limits than those who do not have an opportunity to observe them in action (link).

Hanah Volokh discusses the way that statutory qualifications can violate the separation of powers:

Both of the two appointments procedures are set up on a straightforward separation of powers principle: I’ll cut the cake, and you choose which piece you want. That is, Congress creates the office, but someone else gets to choose who fills it.

[...]

This leaves us with an important line-drawing question. Just what counts as “creating the office,” and what counts as “hiring someone to fill it”? The gray area here is job qualifications.

Clearly if congress said “the office will be filled by Harry Reid” when creating a new executive office, that would violate the separation of power, but surely Congress should have some authority to create limits to help prevent cronyism, corruption etc., so there is a need for a balance.

What Ms. Volokh has not mentioned yet is that the constitution has a good structural mechanism for creating a good balance in the Supreme Court. The legislative branch and the executive branch jointly appoint Supreme Court judges, and as a result, those judges represent the interests of both the legislative branch and the executive branch (though biased towards interests of the executive branch). Perhaps it would be better then if the Supreme Court did not consider constitutional questions when reviewing this issue, but instead made a judgment call based on ‘reasonableness’. The Supreme Court does not have any incentives to favor either branch or too much interest bias toward either branch, so it is in a good position to decide which statutory qualifications for executive branch offices are appropriate and which are not.

I have previously discussed a political system where political parties in proportionally representative system are allowed to set up their own rules for deciding their vote (link). This is unlike traditional closed or open list systems where the decision rule is fixed by the political system. I have been wondering about the risks posed by letting political parties define their own rules for determining how to vote, as I have suggested before. The major risk that I see is to the various separations of power. The risk is that parties could figure out ways to have voting abilities in multiple political institutions which are not independent on each other. If parties in different government institutions had agreements with each other to collude in making decisions, the separation of powers would begin to be worn away.

Would it do to simply add a constitutional clause that parties are not allowed to legally associate with parties in different government institutions? I am not sure if this would just be a ‘parchment barrier’ (though some parchment barriers seem to have been remarkably effective) or a real, enforceable institutional rule. My concern is with enforcement; enforcement would ultimately have to come from the courts, but I am not sure if a Supreme Court would have the appropriate incentives to enforce such a rule; after all, the courts are appointed jointly by legislative and executive bodies, which are composed of political parties. Perhaps this is something that separation of powers actually combats because of ‘ambition counteracting ambition,’ so that as long as the parties in the executive and legislative branches are strongly separated, they will appoint judges who will maintain that separation.

I’m starting to read the Federalist and Anti-federalist papers, and in the introduction to the anthology I am using, I learn that the federalists believed that “in modern political systems,  it is the power of the legislature, not the executive, that is the greatest threat to the liberty and security of individuals.” I am a embarrassed to admit that I didn’t pay too much attention in my high school history classes (until quite recently, I thought the social sciences were pretty much bunk), so I am ignorant of what the historical reasons for this view are. Could someone enlighten me? Why did the framers have this view?

I had gotten snippets of this view before, but I had never seen it stated explicitly before. The view seems strange today.  I am not sure if there is any reason to believe either one is naturally a greater threat to liberty, so making the legislature and the executive branch roughly equal seems the most reasonable to me.

I am curious why Anthony Down’s An Economic Theory of Democracy sells for $45 used, while other famous public choice books sell for much less. For example, The Calculus of Consent sells for $10, and others sell for even less. Perhaps the book has reached some sort of “classic” status in many circles, that allows the publisher to restrict supply extract some monopoly rents.

UPDATE: The Amazon reviews for Down’s book (in the link above) suggest that part of the answer is that the book appears to be regularly assigned to political science majors for class.

I just finished reading Ralph Rossum’s Federalism, the Supreme Court, and the Seventeenth Amendment, which I enjoyed a great deal. The book discusses how the framer’s intended to protect the federal balance structurally by allowing the state legislatures to elect the Senate, and how the 17th Amendment, which provided for the direct election of Senators, largely eliminated federalism, which I have discussed briefly before. The book also covers the Supreme Court’s efforts to maintain federalism. I am baffled why Public Choice theory has not picked up on this line of reasoning, the reasoning is very economic.

I will probably give a full review of the book later on.

UPDATE: Instead, I decided to immediately prove myself wrong: Todd Zywicki has a Public Choice analysis of the 17th Amendment, via the Repeal the 17th Amendment blog. I am still unsure why this topic is not more widely covered in Public Choice; for example, Government Failure: A Primer in Public Choice, fails to mention the 17th Amendment in its discussion of Federalism.

As I have become more serious about reading, I have become much meaner to my books. My books suffer all sorts off abuse; they get written in, tossed in my backpack, tabbed, eaten over and generally abused. Most of my soft covers have mushed corners, and even my hardcovers have scratches and dirt on the edges.

My dad has the opposite attitude toward his books. He covers all his books in heavy paper wrappings before he reads them and is generally very careful with them, and he has always admonished me to be gentle with my books.

My father and I are very similar in many other respects, so I am not sure what could account for the difference between our attitudes towards books. Perhaps the difference is simply generational, but I asked him if books used to be a lot more expensive and he claims they’re actually more expensive now. He claims that the difference is that he sees that books are meant to be treated well so that you can have a library, but I already have a bookshelf of which I am proud, despite their condition. Sometimes I even buy books that I have already borrowed from the library and read, just so I can show them off on my bookshelf.

I have noticed that I am somewhat embarrassed to lend out my books because I have written in them, and I am afraid that others will think less of me after reading the silly or arrogant things I have written. My dad thinks my embarrassment means I will learn to be respectful of my books, and I suppose that is possible.

David Reevely has an interesting post describing the funny way in which Alberta tries exploit it’s oil rents by renting out the extraction rights. Currently, the Premier decides on the fraction of profits that must go to the province, which seems somewhat clumsy. Reevely points out that an auction would be a much better way for Alberta to capture all the rents, especially because information (surveying) costs are low relative to the potential profits. Oil extraction rights seem very similar to EM spectrum usage rights, where auctions have been very successful in generating revenue.

Addendum: Vernon Smith suggested auctioning Alaskan oil extraction rights back in 2004.

FactCheck.org has an interesting post about campaign ads which are “99% Fact-Free”:

In this article we examine two examples of what we call “fact-free” advertising, which we see in abundance. These ads seek to associate the candidate with a string of positive words and images but are void of specifics. Voters should beware.

I think this generally supports the ‘Vision’ theory of campaign advertising. As the article explains, however, these ads do serve a useful purpose:

Even hot air has its uses. “These ads do have a lot of meaningless rhetoric but are not completely empty,” says Kathleen Hall Jamieson, a professor who teaches courses in political communication at the University of Pennsylvania. “Actually these two ads signal two different sets of priorities. Ask how you would react if Edwards spoke of a ’strong military’ or Romney said he’d ‘lift families out of poverty.’ Romney uses traditional Republican language to signal that he would spend more on defense. Edwards speaks of ‘the middle class’ to signal that although his policies will address poverty he will focus on middle class needs as well.”

This is what democracy does well. Democracy is good at distilling voters’ altruistic values, but democracy is not good at selecting representatives who would choose intelligent ways of promoting those values. It is possible that it is actually lucky that these ads don’t contain policy details, because voters have poor incentives to evaluate policy well. If voters were really interested in deciding on public policy relatively directly, it could actually make policy worse if voters have bad biases.

This brings up a side point. I have heard several people attribute declining voting rates to opportunity cost; meaning that you can now do a lot of cool things with your time that you couldn’t before, but because voting has not become more attractive, people have substituted away from voting. Substitution takes two forms; either fewer people can vote (voter turnout has declined significantly in the last 40 years) or people can spend less time on voting activities, such as becoming informed about proposed policies, which I suspect is the case. If the second effect actually improves governance, as a country becomes richer, government should actually become more effective.

Both these points rely on the assumption that “a little knowledge is a dangerous thing;” is this a realistic assumption? I’m not sure.

My initial anti-redistribution reaction to Hillary’s proposal for a ‘baby bond’, a $5,000 bond given to all newborns which matures when they graduate high school, was that it is pretty dumb, but now I think the proposal deserves some consideration. The baby bond is clearly meant as a redistributive measure, so we should ask whether the baby bond would be a better redistributive program than existing programs.

As I have noted before, I like redistributive programs that hand out cash instead of providing free or low cost services because I think that poor folks are able to decide how to use their assets better than outside observers. The ETIC also gives out cash as do food stamps to some extent, so the cash aspect not unique to the baby bond. The most important difference is that the baby bond would pay out only once and in a lump sum, whereas the ETIC pays out continuously and pays out more, the more the recipient works. One advantage to the baby bond could be that it acts as a substitute to credit. I have heard people suggest that the poor lack access to credit because it is difficult for them to prove they are credit worthy, even if they are, which is why many have lauded the emergence of the ’subprime’ credit market and payday loan companies (the New Economist showcased an interesting paper on that). If this is the logic though, perhaps it would be better to have a program which guarentee’s a portion of loans to the poor.

I do think that $5,000 is a piddling amount, and that if we wanted the baby bond to be a serious redistributive measure, it should be much larger. Does anyone have any other pros or cons?

Sheikh Muszaphar Shukor just became the first Malaysian in space. I was a little amused at how daily Muslim rituals had to be adapted for space travel.

“At the speed the space station travels, orbiting the Earth 16 times every 24 hours, Sheikh Muszaphar would have been obliged to pray more than 80 times a day. . .The guidelines allow the astronaut to pray only five times a day and that the times should follow the location of the spacecraft’s launch.”

It’s a little ridiculous how religion, which is supposedly of universal scope, is so embedded in the narrow context of human experience.

Crooked Timber has a great post on utility functions:

But any competent economist knows that utility isn’t an explanation of observed choices, it’s a way of representing them. The representation is simpler if choices satisfy some minimal consistency requirements, like transitivity (if you prefer A to B and B to C then you should prefer A to C).

Utility functions aren’t ‘real.’ Even economists forget this sometimes. For example, this post by Greg Mankiw notes a paper where the authors us a social utility function. The notion of a social utility function is clearly silly if we remember that utility functions are just a way for thinking about “preferences,” which are, arguably, only a way for thinking about how people act.

Money is clearly important in politics, but I haven’t seen a good theory for why it is important. One of the biggest campaign expenditures is political advertising, and that is what I want to discuss right now. It is important to realize why and how people vote. Economists have long noted that it is not materially rational to vote; therefore, people vote because there are psychological benefits to doing so; doing your ‘civic duty’ feels good. Additionally, as I have discussed here before, people vote mostly altruistically, again, because voting altruistically feels good. This feeling does not, however, depend on whether a vote really did (or would) improve the world, so voters have essentially no incentive to make good political decisions.

This logic clearly restricts theories of political advertising to those which do not require voters to expend significant time or mental resources. For example, advertising cannot be meant as an argumentative device because voters are rationally uninterested in using time and mental resources to evaluate complex arguments.

I briefly discussed this subject with John M, and his major theory was that political advertising is primarily done to increase candidate-name recognition. Candidate names that are heard by voters often enough stick in their minds and voters are more likely to vote for candidates whom they have heard of before. The problem I see with this explanation for major races is that people who are indifferent enough to the election to vote based on which name they have heard most often, would be unlikely to be voting in the first place.

I will suggest two other explanations. First, political advertising could simply serve to signal popularity. People know that advertising is costly, so advertising signals that other people donated money or other resources to a candidate that advertises. The major problem with this theory is voters are certainly aware that politicians can get money from non-benign sources.

Another theory is that politicians use advertising to create a product which is “sold” to voters for their vote. Politicians use advertising to create an appealing ‘vision’ for public policy. This ‘vision’ would include ideology, emotional appeals, and candidate character and history traits. Voters vote for the candidate with the most appealing ‘vision’ because it gives voters the satisfying sense of leading the country in the direction of the candidate’s ‘vision’ or at least not towards the less appealing ‘visions’ of other candidates.

I think the ‘vision’ theory probably explains the bulk of political advertising in major races where voters are well aware of candidates. I think name recognition theory and/or the popularity signaling theory probably explain a lot of minor race political advertising. Consider campaign yard signs; yard signs do not have any content besides a candidate or issue name and sometimes a party identification. Both the name recognition theory and the popularity signaling theory can explain political yard signs, but the ‘vision’ theory cannot. It is my impression that yard signs play a much larger role in minor race campaigns than in major race campaigns.

It may be that this issue has already been well explored, but I have had trouble finding literature on the issue. What’s your theory for political advertising?

Responding to Dani Rodrik’s praise Costa Rica’s CAFTA referendum, Brad DeLong aptly summarizes the argument for representative government over directly democratic government:

Here in California we have referendums. LOTS of referendums. It is not an inspiring sight. It is much better for voters to elect representatives who share their values, and for the representative to then study and think and so develop informed opinions on the issues.

This idea–”the representation of the people in the legislature by deputies of their own election”–is, as Alexander Hamilton wrote 220 years ago, a great innovation in the

science of politics… [which] like most other sciences, has received great improvement. The efficacy of various principles is now well understood, which were either not known at all, or imperfectly known to the ancients…. [W]holly new discoveries… [and ideas that] have made their principal progress towards perfection in modern times… are means, and powerful means, by which the excellences of republican government may be retained and its imperfections lessened or avoided…”

Referendums have advantages as symbolic actions raising the issue decided to a higher place as far as the consent of the governed is concerned. But for making good decisions? Very doubtful.

This is just the simple  principle that you should be able to outsource your political decisions.

I laughed a little when I read this article because it reminded me of my prof from my first econ class, who used the example of ticket scalping to teach about supply and demand. It’s just such perfect fodder for a curmudgeonly old econ prof.

The folly of the outraged parents is that they think scalpers somehow make people pay high prices. Of course, the scalpers (unless they have decided to become armed robbers) have not forced anyone to pay them anything. The trouble arose because the quantity of Hannah Montana tickets demanded at the the price set by promoters exceeded the quantity of tickets available for purchase. There was a shortage. Scalpers apparently anticipated this shortage very well, scooping up a large proportion of tickets moments after they became available. They are now eliminating the shortage by reselling the tickets at higher prices. Read the rest of this entry »

From The Free For All I learn that Washington state had campaign speech censor called the “Public Disclosure Commission” which could impose financial sanctions.

The official truth squad was something called the “Public Disclosure Commission.” Who would get to serve on this powerful commission? The majority stressed that PDC members “are appointed by the governor, a political officer. This group of unelected officials is empowered not only to review alleged false statements made in political campaigns but also to impose sanctions.” The possibility (or perhaps probability) that the commission’s notion of truth would reflect its political biases as well as ordinary human fallibility, seem clear, yet the statute did not require that the PDC’s decision be subjected to independent judicial review.

I am pretty shocked that I had never heard of this, and I am appalled that the state Supreme Court struck down the ruling by only 5-4. I have pretty a low opinion of voter’s ability to pick up on campaign lies, but it is impossible to see the commission working in any legitimate way. Here’s a Seattle PI article on the ruling.

New Economist points to a cool primer on the workings and effects of the ETIC as well as possible reforms to the program. I like the ETIC because it is a cash transfer to the poor instead of a transfer in the form of services, so the poor can decide how to spend their own money, and because the phase out range for benefits are much higher up on the income scale and much wider. I don’t care very much about the work inducing effects of the ETIC. I might change my thoughts on the ETIC (especially my indifference to the work inducing effects) if it were shown that a lot of poverty is due to high time-preference, which some people have suggested, because a high time-preference could arguably be called “bad” or “stupid,” although my individualist, subjectivist tendencies make me want to withhold judgment on high-time preference.

Justin Wolfers points to the new book, The Tyranny of the Market by Joel Waldfogel, about “the ways in which markets can fail us”. In a recent Slate article, Waldfogel summarizes his argument:

After all, free-market economists have told us for decades that we should rely on market decisions, not the government, to meet our needs, because it’s the market that satisfies everyone’s every desire.

[...]

Two simple conditions that prevail in many markets mean that individual taste alone doesn’t determine individual satisfaction. These conditions are 1) big setup costs and 2) preferences that differ across groups; when they’re present, an individual’s satisfaction is a function of how many people share his or her tastes. In other words, in these cases, markets share some of the objectionable features of government. They give bigger groups more and better options.

Perhaps I am missing something, but, while what Waldfogel discusses could be described as a market disappointment, I don’t think it can be called a “market failure.” Fixed  certainly do stop some markets from emerging, but this is actually efficient; those fixed costs are real, and if we (government) decided to somehow force society to pay those fixed costs in order to serve those markets it would have a real, negative effect on welfare. There are some niche markets for which it doesn’t make economic sense (in a social sense) to serve. If Native Americans greatly valued specially designed Nike shoes, they would have been willing to pay a high premium for them, and Nike probably would have invested in the Native American shoe market earlier. If they are not willing to pay premium for them, it is and indication that it  does not make economic sense (in a non-distributional sense) to serve that market.
Waldfogel’s point seems so obviously wrong, that I feel as though I must have missed something, so perhaps I will read his book.

It is also possible that I simply misunderstand the origin of Waldfogel’s concerns. Perhaps Waldfogel means that people in general have a strong preference for seeing niche markets served. Then there would a positive externality created by serving a niche market and that could certainly be described as a market failure (though not one very high on my list of market failures to fix). This seems like a very contestable empirical question. I certainly haven’t seen any data, but I doubt this feeling is type of preference is widespread. It is also possible that Waldfogel is concerned about the distributional effect of these fixed cost, perhaps more poor people have out-of-the-mainstream needs and desire, but I don’t think this is what he is talking about.

Hillary doesn’t like it:

“With the stroke of a pen, President Bush has robbed nearly four million uninsured children of the chance for a healthy start in life and the health coverage they need but can’t afford.”

According to the California Nurses Association,

“it sounds like it’s the president, not Congress, who is playing politics with our children’s health.”

Most of the results on Google News highlighted criticisms of the president’s veto. The Christian Science Monitor gave the other side some coverage. The Taxpayer’s Union says that “the sincerity of this effort will be judged by the number of vetoes,” referring to Bush’s pledge to control spending. Apparently, he may veto a number of bills this year.

One point that I would like to see his critics address is where the income cutoff should be for social programs. From what I’ve read, their claim is basically that he doesn’t care about children, but they do. However, it seems to me that Bush is raising a substantive issue. Suppose we all agree that the poor “need” help. Is the same true for the middle class? For the well-off? For the very rich? I can’t imagine many people supporting social programs for the wealthy, but I suppose as a matter of ideological simplicity one might flatly state that all people should be guaranteed health insurance. One might claim that there is a right to healtcare. Getting more specific, though, isn’t it hard to justify subsidies to a household with an income of $83,000 (here)? Maybe that figure is wrong, but if the children of a family with a comfortable income don’t have coverage, where is the compelling moral tale in that?

Of course, my view is that any discussion of a program like this should not start from alleged “needs” but rather from the presence of a market failure. I have heard that such a failure may be present in the health insurance market. Tim Hartford mentioned it in his book. I remain suspicious of the claim that anyone needs anything, in the sense used in political rhetoric.

So, this quarter looks like it may be a lot of work. Blogging (by me) will probably be light (I know, you’re crushed). Stay tuned while I try to figure out how to fit school, homework, socializing, reading and blogging all into my life at once.

I also appear to have acquired way too many blog feeds in my reader during the summer; I had about 100 entries today.