Thursday, December 9, 2010

Lectures from the 2010 Nobel Prize in Economic Sciences

From Mark Thoma at Economist's View, here are links to the Nobel lectures by Peter Diamond, Dale Mortenson, and Christopher Pissarides.

Taxation for Cultural Change

Now that the month of Movember is over, I thought I would post some interesting evidence on the use of taxation to achieve cultural change.

In 1705, Peter I of Russia implemented a tax on beards: Individuals who wore beards were required to pay a levy and, as evidence of having paid the tax, had to wear
a copper or silver token with a Russian Eagle on one side and on the other, the lower part of a face with nose, mouth, whiskers, and beard. It was inscribed with two phrases: "the beard tax has been taken" and "the beard is a superfluous burden".
Whatever you may think of beards and mustaches as aesthetic facial hair, Peter had his reasons. He was particularly interested in increasing trade and political interactions with the rest of Europe, much of whom viewed Russia as archaic. To try and change this perception:

Peter ordered his noblemen to wear fashionable Western clothes instead of their archaic long costumes. To add insult to injury, Peter personally cut off the beards of his noblemen. All men except the peasants and priests had to pay Peter's yearly beard tax and wear a medal proclaiming, "Beards are a ridiculous ornament."

E-Commerce in Africa

CBC's radio show Spark had a recent discussion of African E-Commerce (episode 130). Basically, individuals are increasingly using cel phones to conduct business transactions using texting services whereby they are able to communicate their inventories of goods, their demands for goods, and transfer funds between banks and individuals. Without cel phones, these transactions involved individuals traveling from village to village with their goods, incurring significant time costs while traveling between. These can be particularly high given that traveling to purchase some goods may require an individual to miss a day's wages. As such, cel phones serve the role of infrastructure in reducing the opportunity costs of engaging in transactions.

There are a lot of digital conveniences we take for granted in the Western world. Ok, let’s be honest and say we take most of them for granted. If we want something –anything– it is available at our fingertips. So what’s it like in places where the infrastructure still doesn’t exist to make those digital conveniences viable? Femi Akinde is the founder and CEO of Slimtrader, a company that is looking to change the way people in sub-Saharan Africa do business…all through their cell phones.

Tuesday, November 2, 2010

Keynesian versus Kenyan

Today is (mid-term) election day in the U.S.

Monday, November 1, 2010

Today, we have a guest post from UofC Economics PhD student Kent Fellows:

My Dad recently forwarded this link from the Globe and Mail. The article discusses a working paper by Anindya Sen, Marcel Voia and Frances Woolley in which data from is used to estimate the returns to physical attractiveness or "Hotness" among professors. Their conclusion is that more attractive professors not only earn more, but that their attractiveness is also highly correlated with their teaching productivity, and not their research productivity.

Dad is a recently retired professor emeritus, so I am not exactly sure of his interest in this topic. I have yet to ask him weather he feels that the family genes with respect to appearance improved his earnings or not.

From the Abstract:
"Although a relatively small proportion of our sample is rated “hot” by students, hotness generates, for some, a significant earnings premium, even with comprehensive controls for productivity. We find a strong relationship between hotness and teaching productivity, but a much weaker relationship between hotness and research productivity. The unique contribution of this paper is the use of data on actual productivity, which is generally unavailable in papers assessing the returns to appearance."

The main results suggest that for economics professors, being male and attractive is the best combination to improve earnings. Does this suggest that professional development resources in the department could be better spent on trips to the tropics to get a better tan and in house image consultants?

Wednesday, October 27, 2010

Economics and Art History

I'm currently reading Sassoon's Becoming Mona Lisa, a book about how Leonado Da Vinci's most famous painting became... well... his most famous painting, and likely the most famous painting in the world. Aside from the art history component of the Mona Lisa's story, there's a fair amount on the economics of art, production, and re-production:

The unique work of art is, by definition, in a position of monopoly. There is after all, only one Mona Lisa; there will never be another one. In a world dominated by reproducible commodities whose value plummet as technology lowers production costs and makes them available to an ever expanding mass of consumers, to be the “one and only” becomes a major selling point. For this to happen, it is necessary that the producer should be exceptional; better still, a certified artistic genius. A painting by an unaccredited artists, an amateur, someone not previously authenticated, is of little or no met value. Past masters have the advantage over their contemporary rivals of having had their fame repeatedly endorsed by a succession of arbiters of taste. ...

It is, of course, a tautological circle. A museum masterpiece can only have been painted by an established master; an established master is ones whose works are to be found in a major museum. (p. 78)

Monday, October 25, 2010

Do Incentives Affect Fertility? The Case of Quebec

Quebec has been experiencing lower-than-average birthrates for some time. Going back to 1997, the porvincial government has attempted to increase birthrates, the number of monthers returning to the labor force and fathers' involvement in child rearing through a set of policies grouped under the rubric of "Family Policy." A recent episode of the Current discusses these policies and their effects. From the episode:
The Quebec Government is pulling out all the stops for parents these days. If you're a working couple with two children in Ottawa, you'll probably pay 80 to 100 dollars-a-day for childcare. Across the river in Gatineau, Quebec ... you'd pay 14-dollars-a-day. You'd get better parental leave too. There's even a special leave just for Dads. And as of last month, if you're infertile, the Quebec Government will cover the cost of In Vitro Fertilization.

The Quebec Government has spent 13 years overhauling its Family Policy. The goal has been to boost two demographics ... new births and working women. As part of our project Shift, our Quebec Producer Susan McKenzie decided to take a look at whether the program has worked and whether it's sustainable. We aired her documentary, Baby Bump.

Wednesday, October 20, 2010

Joe Siglitz on a foreclosure moratorium

Here's an interview with Columbia University economics professor and Nobel Laureate Joesph Stiglitz on, among other things, creating a moratorium on housing foreclosures in the U.S. While I found the whole interview interesting, I was particularly intrigued by his arguments regarding the role of fairness in policy. It's one of the few times I've seen direct incorporation of "social preferences" directly into policy discussions (outside of purely academic circles).

Tuesday, October 19, 2010

Countersignalling and the genius of John Cage

There's a paper by Kim-Sau Chung and Peter Eso on signaling when an individual has career concerns. This paper has been around for a couple of years, but this is the first time I saw it applied to music and particularly John Cage's 4'33". From Jeff Ely's Cheap Talk blog on economics and more:

Which type of artist debuts with obscure experimental work, the genius or the fraud? Kim-Sau Chung and Peter Eso have a new paper which answers the question: it’s both of these types.

Suppose that a new composer is choosing a debut project and he can try a composition in a conventional style or he can write 4’33″, the infamous John Cage composition consisting of three movements of total silence. Critics understand the conventional style well enough to assess the talent of a composer who goes that route. Nobody understands 4’33″ and so the experimental composer generates no public information about his talent.

There are three types of composer. Those that know they are talented enough to have a long career, those that know they are not talented enough and will soon drop out, and then the middle type: those that don’t know yet whether they are talented enough and will learn more from the success of their debut. In the Chung-Eso model, the first two types go the experimental route and only the middle type debuts with a conventional work.

The reason is intuitive. First, the average talent of experimental artists must be higher than conventional artists. Because if it were the other way around, i.e. conventional debuts signaled talent then all types would choose a conventional debut, making it not a signal at all. The middle types would because they want that positive signal and they want the more informative project. The high and low types would because the positive signal is all they care about.

Then, once we see that the experimental project signals higher than average talent, we can infer that it’s the high types and the low types that go experimental. Both of these types are willing to take the positive signal from the style of work in exchange for generating less information by the actual composition. The middle types on the other hand are willing to forego the buzz they would generate by going experimental in return for the chance to learn about their talent. So they debut conventionally.

Now, as the economics PhD job market approaches, which fields in economics are the experimental ones (generates buzz but nobody understands it, populated by the geniuses as well as the frauds) and which ones are conventional (easy to assess, but generally dull and signals a middling type) ?

If you're not familiar with John cage's famous piece, here's a rendition of it:

If you haven't read the Cheap Talk blog before, its worth checking out. Also, Jeff Ely's web page has a great version of the classic Asteroids game.

Monday, October 18, 2010

University funding through industry contracts

Lately, I've found myself in conversations with various people here at the University regarding providing university funding via contracts/agreements with industry partners wherein some of the projects are directed by industry interests and questions.

Today, there is an interview with Jennifer Washburn on Democracy Now on just this topic. From the interview:

Nine of the ten agreements allow the industry sponsor to basically control the overall governance of the research alliance on campus. The reason that’s important is because these alliances are long-term alliances that last anywhere from five to eight to ten years. So they really institutionalize the relationship between the outside oil company sponsors and the university. In eight of the ten agreements, the industry sponsors control the evaluation and selection of research proposals. None of the agreements that I looked at require any kind of independent expert peer review of faculty research.

Thursday, September 23, 2010

Haskayne prof revolutionizes economy

I was delighted to read today that a professor at the Haskayne School, Dr Piers Steel, has developed a "conceptual framework" to match workers to jobs better. He is proposing a system called "synthetic validity." You will understand why I am so excited about this when you learn, as I did with astonishment, that "This new selection tool would also be incredibly valuable, generating worldwide benefits worth trillions of dollars per year—more than $100 billion to the Canadian economy alone—says Steel." Wow!!! Canada's GDP is around $1500 billion, so Steel's conceptual framework, for which a working system apparently still needs to be built, will boost our GDP by 7% on a perpetual basis!!! Not to mention the global effects!!! This is the single most important finding of the last hundred years, at least. While I haven't had time to read the materials in detail, I am really pleased to know that a simple tool in which the precise demands of each job are fully described, matched up with workers who systematically describe their true traits, can achieve such great efficiencies. This will blow the whole recession thing out of the water, globally! And I like that the name of the system is synthetic validity.

Friday, September 17, 2010

Economics Society of Calgary to host Mayoral Debate

For the first time since 2000, the City of Calgary will elect a new mayor and there are many candidates, both incumbent alderman and newcomers vying for the job. With the end of the Bronconnier era, these candidates will present divergent views on where to take the city moving forward from social, economic and other perspectives.

The Economics Society of Calgary is kicking off its 2010-2011 season with a candidates’ debate on September 24, 2010 that will focus on three key issues:

· Balancing Urban Development
· Diversifying Calgary’s Economy
· Combating Homelessness

The debate will be moderated by Todd Hirsch, Senior Economist for Alberta Treasury Branches (ATB). Event details are as follows:

· Registration opens at 7:00 am
· Candidate Debate: 8:00-9:30 am
· Questions from the Audience: 9:30-10:00 am

The cost of the event is $30.00 for non-members and $25.00 for members, and includes the Chamber's buffet breakfast. Proceeds from this event will be put towards the ESC scholarship programs at the University of Calgary.

Please RSVP by September 20, 2010 by clicking on the following link:

Members: $25 ~ Non-members: $30 ~ Student Members: $25
To register click here.
To purchase/renew your membership click here.

The ESC is now on LinkedIn and on Facebook. Please join us!

About Todd Hirsch
Todd Hirsch received his BA Honors in Economics from the University of Alberta, and an MA in Economics from the University of Calgary.

Since completing his education in 2003, he has held a series of economist positions at a variety of for-profit and public sector organizations, including the Canada West Foundation, the Canadian Pacific Railway, and the Bank of Canada. He has also served as a two-term President of the Economics Society of Calgary.

Todd joined ATB Financial in May 2007 as Senior Economist where he provides economic information and intelligence to the various lines of business at ATB. He also tracks current developments in Alberta’s and North America's economy and delivers presentations to both internal and external audiences.

Thursday, September 9, 2010

Behavioral Economics iPhone App

Duke University Professor Dan Ariely (personal page, TED lecture) runs the Center for Behavioral Economics at Duke. I recently came across one of their iPhone Apps called "At a Boy". The general idea of the app is to give you a compliment when you need one. In that way, it gives you something to smile about or boost your self-esteem. I added this to my phone and indeed it gives you something to smile about: aside from getting a nice (albeit vacuous) compliment, some of the compliments (which users can submit) are hilarious. I just tried it and got the following:

You know, on anyone else that hat would look ridiculous. Somehow, you can pull it off.

Yes, I'm currently wearing a hat.

Thursday, August 26, 2010

Matt Ridley and the "Sex of Ideas"

Matt Ridley combines Ricardo's theory of Comparative Advantage with Romer's theory of Endogenous Growth

You-Tube Video (16 minutes)

Marshmallows and kid's will power

Some cool video of kids, marshmallows, and a test of the time rate of preference!



Saturday, March 20, 2010

Sleep and Recessions... at least in Canada

The abstract from a working paper a friend of mine forwarded me:

Using Canadian time use data, we exploit exogenous variation in local unemployment rates to investigate the cyclical nature of sleep time and show that for both men and women, sleep time decreases when the economy is doing relatively better. Our results suggest that in a recession Canadians sleep an average of 2 hours and 34 minutes more per week, or 22 minutes more per day. Given the importance of even small changes in sleep time on measures of cognitive functioning such as reaction time and concentration, our findings may help explain the countercyclical nature of mortality. Further, as we find that sleep is affected by the same economic variables (notably the unemployment rate) that affect market work time, our results also contribute to the limited literature that shows that sleep time should not be treated as exogenously determined, but, like any other resource, determined by its relative cost.
The friend who forwarded me this has been telling me I'm not sleeping enough for the last 20 years. I tell him I'll sleep when I'm dead. Plus, I point out the evidence on excess sleep and mortality.

Wednesday, February 24, 2010

Is a preference for equality hardwired?

In my classes (particularly Economics 349) I've talked about inequality and, to a small extent, concerns over fairness. Now, there is new neuroeconomics research out showing that individuals may have an innate preference for equality:

Caltech scientists find first physiological evidence of brain's response to inequality: Brain images during money-transfer experiments show "rich" participants prefer to see others get financial windfall

PASADENA, Calif.—The human brain is a big believer in equality—and a team of scientists from the California Institute of Technology (Caltech) and Trinity College in Dublin, Ireland, has become the first to gather the images to prove it.

Specifically, the team found that the reward centers in the human brain respond more strongly when a poor person receives a financial reward than when a rich person does. The surprising thing? This activity pattern holds true even if the brain being looked at is in the rich person's head, rather than the poor person's.

These conclusions, and the functional magnetic resonance imaging (fMRI) studies that led to them, are described in the February 25 issue of the journal Nature.

"This is the latest picture in our gallery of human nature," says Colin Camerer, the Robert Kirby Professor of Behavioral Economics at Caltech and one of the paper's coauthors. "It's an exciting area of research; we now have so many tools with which to study how the brain is reacting."

It's long been known that we humans don't like inequality, especially when it comes to money. Tell two people working the same job that their salaries are different, and there's going to be trouble, notes John O'Doherty, professor of psychology at Caltech, Thomas N. Mitchell Professor of Cognitive Neuroscience at the Trinity College Institute of Neuroscience, and the principal investigator on the Nature paper.

But what was unknown was just how hardwired that dislike really is. "In this study, we're starting to get an idea of where this inequality aversion comes from," he says. "It's not just the application of a social rule or convention; there's really something about the basic processing of rewards in the brain that reflects these considerations."

The brain processes "rewards"—things like food, money, and even pleasant music, which create positive responses in the body—in areas such as the ventromedial prefrontal cortex (VMPFC) and ventral striatum.

In a series of experiments, former Caltech postdoctoral scholar Elizabeth Tricomi (now an assistant professor of psychology at Rutgers University)—along with O'Doherty, Camerer, and Antonio Rangel, associate professor of economics at Caltech—watched how the VMPFC and ventral striatum reacted in 40 volunteers who were presented with a series of potential money-transfer scenarios while lying in an fMRI machine.

For instance, a participant might be told that he could be given $50 while another person could be given $20; in a second scenario, the student might have a potential gain of only $5 and the other person, $50. The fMRI images allowed the researchers to see how each volunteer's brain responded to each proposed money allocation.

But there was a twist. Before the imaging began, each participant in a pair was randomly assigned to one of two conditions: One participant was given what the researchers called "a large monetary endowment" ($50) at the beginning of the experiment; the other participant started from scratch, with no money in his or her pocket.

As it turned out, the way the volunteers—or, to be more precise, the reward centers in the volunteers' brains—reacted to the various scenarios depended strongly upon whether they started the experiment with a financial advantage over their peers.

"People who started out poor had a stronger brain reaction to things that gave them money, and essentially no reaction to money going to another person," Camerer says. "By itself, that wasn't too surprising."

What was surprising was the other side of the coin. "In the experiment, people who started out rich had a stronger reaction to other people getting money than to themselves getting money," Camerer explains. "In other words, their brains liked it when others got money more than they liked it when they themselves got money."

"We now know that these areas are not just self-interested," adds O'Doherty. "They don't exclusively respond to the rewards that one gets as an individual, but also respond to the prospect of other individuals obtaining a reward."

What was especially interesting about the finding, he says, is that the brain responds "very differently to rewards obtained by others under conditions of disadvantageous inequality versus advantageous inequality. It shows that the basic reward structures in the human brain are sensitive to even subtle differences in social context."

This, O'Doherty notes, is somewhat contrary to the prevailing views about human nature. "As a psychologist and cognitive neuroscientist who works on reward and motivation, I very much view the brain as a device designed to maximize one's own self interest," says O'Doherty. "The fact that these basic brain structures appear to be so readily modulated in response to rewards obtained by others highlights the idea that even the basic reward structures in the human brain are not purely self-oriented."

Camerer, too, found the results thought provoking. "We economists have a widespread view that most people are basically self-interested, and won't try to help other people," he says. "But if that were true, you wouldn't see these sort of reactions to other people getting money."

Still, he says, it's likely that the reactions of the "rich" participants were at least partly motivated by self-interest—or a reduction of their own discomfort. "We think that, for the people who start out rich, seeing another person get money reduces their guilt over having more than the others."

Having watched the brain react to inequality, O'Doherty says, the next step is to "try to understand how these changes in valuation actually translate into changes in behavior. For example, the person who finds out they're being paid less than someone else for doing the same job might end up working less hard and being less motivated as a consequence. It will be interesting to try to understand the brain mechanisms that underlie such changes."

Joseph Stiglitz on CBC's The Current

As part of the promotions for his new book, Joseph Stiglitz appeared on CBC's The Current.

Nobel-Prize-winning economist Joseph Stiglitz argues in his new book, "Free Fall: America, Free Markets and The Sinking of The World Economy", that the global economic crisis the world is still recovering from could happen again.
Well worth the 15 minutes of listening time. (This is only part 1 of the interview.)

Thursday, February 18, 2010

Stiglitz on Democracy Now

Nobel prize winning economist Joseph Stiglitz appeared on Democracy Now this morning. Among other things, he discusses his new book his views of the U.S.economy on the one-year anniversary of the stimulus package. I was particularly intrigued by his views on "ersatz capitalism" that have resulted in the privatization of gains and socialization of losses (via the stimulus).

Friday, February 5, 2010

Tyler Cowen on Temple Grandin

In a recent blog post, Tyler Cowen (GMU website) discusses his interview with Temple Grandin and his thoughts on autism. I have a vested interest in autism therapies and research and liked the post. I particularly agree with Tyler's ideas on therapy:
Grandin supports some varieties of intensive behavioral therapy for autistics. Many research papers support those same therapies but those papers do not generally conduct an RCT (randomized controlled trial) and furthermore many of the said researchers have a commercial stake in what they are studying and promoting. In my view we don't know "what works" but my (non-RCT-tested) opinion is that giving autistic children a lot of fun things to do -- fun by their standards -- and a lot of information to study and manipulate, gives the best chance of good outcomes. (In any case "spontaneous improvement" is considerable, so anecdotally many therapies will appear to work when they do not; nor is there a common control for placebos.) Many of the behavioral therapies seem quite oppressive to me and if we don't know they work I am worried that they are being overpromoted. Grandin has in some ways the intellectual temperament of an engineer and I am worried that she has not absorbed the lessons of Hayek's The Counterrevolution of Science.
There is an HBO movie coming out on Temple Grandin later this week.

Picture This Film Festival

The Picture This Film Festival is taking place in Calgary February 8-10.

Picture this…film festival is an international disability film festival. It is a non-profit annual event initiated by the Community Development department of Calgary Scope Society, a registered non-profit society.

The Calgary Scope Society provides services to adults with disabilities and is one of the charities recently in the news regarding the budget cuts to service providers for people with disabilities.

Wednesday, February 3, 2010

Oscar Nomination for Daniel Ellsberg

A documentary film about Daniel Ellsberg (the Most Dangerous Man in America) has been nominated for an academy award in the documentary category. Ellsberg is best known to economists for his work in decision theory and the Ellsberg Paradox.

Canada's Growth Rate

Last week, Statistics Canada reported the Canadian GDP growth rate for November 2009:

Real gross domestic product advanced 0.4% in November, a third consecutive monthly increase. As was the case in September and October, most major industrial sectors increased their production.
This rate falls significantly below that of the US for the same period.

I haven't seen the numbers by region, but the following suggests that things in Alberta are improving ahead of other provinces:

The mining sector increased 1.8% in November, largely on the strength of oil and gas extraction. Natural gas production rose as prices, while remaining low compared with a year ago, increased recently. Oil extraction went up as foreign demand increased. Support activities for mining, oil and gas extraction advanced for a fourth month in a row.

Tuesday, January 26, 2010

Keynes-Hayek Smackdown

Here's a new video from Russ Roberts explaining the differences between the ideas of J.M. Keynes and F.A. Hayek... in a manner the kids can understand.

Thursday, January 21, 2010

Copyright law and the most famous 6 seconds of contemporary music

I'm working on some research regarding copyright laws in the music industry, with a focus on genres when they are emerging (i.e., considered underground). Copyright laws are all about providing incentives for creative development and productive research. One of the big questions about copyright laws, particularly in the arts, is whether they have any retroactive power regarding things created (and not copyrighted) in the past that are being currently adopted and used (often without remuneration).

One of the people I'm working with on this sent me the video below regarding what is likely the most famous 6 second drum break in contemporary music. Its originally by a band called the Winstons and was written in 1969. This 6 seconds made its way through rap and hip-hop, helped found drum & bass and jungle music, and has made its way into advertising.

Tuesday, January 19, 2010

Health Codes Violations, Single Motherhood, and the Breakfast I had Last Week

I'm currently teaching Economics 349: the Economics of Social Problems. I thought I'd use our department blog to help raise some examples of the types of issues that arise in the Calgary area which relate (even tangentially) to the course. (To those students in the course, some of this stuff may serve as fodder for term papers.)

Last week, some friends and I had breakfast at Nellie's Cosmic Cafe on 17th Ave SW in Calgary. We were pretty shocked to learn a day or so later that the restaurant chain had been fined $60,000 for health code violations. We all had the same thoughts: Eww! This was one of our favorite restaurants. (Note: In the sense of fairness, I want to mention that according to news reports nobody reported getting sick from the food at Nellie's and no personal claims were filed. The fines were based on the findings of health inspectors.)

Among my friends we talked quite a bit about this case (waiting a requisite 48 hours before making any jokes about it). When we thought about the problem, there are a number of things that struck us.

Basically, the health code protects "the public" from the externalities associated with poor workplace practices in a restaurant. However, we had a couple of questions about the chain of events. I'm sure there are others, but these jump to mind as worthy of discussion.

First, the restaurant had apparently been warned for over a decade. Why did it take so long for investigators to act? It raises the issue as to whether the law is being equally applied to all. A local eatery in my neighborhood received a fine after one visit by an inspector last year, and for something more innocuous than what Nellie's was apparently fined for. What does this say about the application of these laws?

Second, in her statement the owner of Nellie's mentioned "she was devastated by the charges and that it was difficult for her, a single mother, to keep proper monitoring of all the locations." I know of several single-mothers who were somewhat insulted by this statement. At the risk of sounding like a real jerk (which I probably am), it suggests that single mothers are less able to, in this case, manage a business than other individuals i different circumstances (e.g., married mothers). We often see examples of certain groups (here, single mothers) being stereotyped by more salient and visible examples of individuals of their "type" (e.g., the single-mother owner of Nellie's). In making this statement, what information is communicated and what inferences might others make about single mothers writ large?