Eric Rasmusen’s Weblog

I have thought we should not expect housing to have capital gains, since it yields a service flow, unless there is a demographic shift such as an increase in population, which would increase the return to land and to durables. But today I thought of something new. Shouldn’t the value of housing rise because of the general increase in wealth due to technical change? If real wages rise 2% per year, shouldn’t housing rise some?

I haven’t been able to figure out the answer. Monetary policy complicates it, because with more than one good, defining a neutral monetary policy gets tricky. A model might go like this. We have 1000 hours of labor, which is constant over time, and everybody is infinitely lived. Each hour of labor produces 1 widget, initially, but labor productivity rises 2% every year. We have 200 houses, which we will keep constant. We have 1000 dollars in money initially, but the Federal Reserve will increase or decrease it over time to try to keep “an inflation rate of zero”. The term in quotes is ambiguous, so let us suppose the Fed increases the money supply by 2% each year, so there is always one dollar for each widget in the economy. What happens? Here, I must stop and attend to my class preparation and my work on the salaries of Japanese CEO’s.

IU used to have good course software, Oncourse, but every semester it gets worse, as they spend more money on it. Some problems:

1. The professor can’t see the student view, as he used to be able to do. So I don’t know whether what I put up works for them or not, or what they know.

2. Students cannot see the names of the other students. This is probably one of those weird hypersensitive interpretations of the Buckley Act, a fear of impinging on student privacy. Nameplates will be Out, next.

3. I cannot add anyone to the class list who does not have an Indiana University username. That excludes students whose computer accounts are late getting started, and interested profs at other universities.

The New Orleans metro area had 1.3 million people in 2004, the Stat. Abstract says. Aid is about $120 billion. That comes to about $100,000 per person in aid. That’s per person, remember, so a welfare mother with 3 children would get $300,000 to buy new furniture. I’ve never seen a good explanation for why a few days of flooding would wreck a house, and sampling this map I don’t see any area with more than 11 feet of flooding, and many with less than a foot, so there wouldn’t be any flood damage to furnishings in a second floor. The mainstream media has heavily exaggerated the problem in an attempt to smear Bush, and Bush had incentive to respond by spending taxpayer money even if it was wasteful, so there is ample reason to suspect scandalous overspending. In fact, without a watchful press, the politicians love to take advantage of taxpayer sentimentality and pity to spend tax money on profits for contractors and gifts to particular voters. And for the press, the best story is the one with the most disaster damage. So I suppose we must resign ourselves to this kind of wasteful spending.

In The Blind Watchmaker, Dawkins gives a theoretical support
for slow-
increment evolution (against creationism, intelligent design,
punctuationism, Lamarck, and all comers). At one point, he makes fun of
an English bishop who uses what Dawkins calls the weak Argument from
Personal Incredulity. “It seems implausible to me…. I cannot believe
that… Could it possibly happen that…” Dawkins does a good job of
making fun of it.

My first thought was that the Argument is nonetheless okay. What we
often do is to describe a situation and then say, “I don’t think that’s
plausible.” It, of course, can’t really be just an argument from
Personal incredulity. Rather, we are trying to share our doubts. And
this is a rational argument, that can be refuted. The opposing view can
try to present explanations or evidence that will overcome the
doubts.

My second thought, though, was that Dawkins relies on a very similar
argument, but one that sounds even worse. What he relies on is the
Argument from Personal Credulity. His answer to the bishop is “It seems
plausible to me, … I believe that,… It could easily happen that… ”
And, of course, that is an equally legitimate argument. It can be
refuted by evidence or explanation that undermines Dawkins’s beliefs.

I will here talk about three topics in econometrics: 1. Why OLS is biased when Y cannot exceed 10. 2. Why the Heckman correction corrects for that. 3. Why OLS is biased when Y cannot exceed X. This complements my earlier post on topic 1. (more…)

I had a couple of comments on my post about the idolatry of worshipping bread as God. I got distracted in reading up on what the Church Fathers had to say about Communion, so I’ll have to come back to this, because it opens up lots of topics, i.e.

1. The Real Presence. Does something supernatural happen during Communion? Is God present then in a way He is not always present? (See Calvin’s Institutes.)

2. Transubstantiation. Is the bread literally the flesh of Jesus, turned into such by the priest and independent of anything the person taking the Communion thinks? (See Calvin’s Institutes.)

3. The Communion Sacrifice. Is Communion a propitiatory sacrifice of Jesus for our sins, or a thank-offering of bread and selves, or neither of these? (See Three Hierarchies on this.)

4. The infallibility of the Church. Can the Church, appropriately defined, be wrong on doctrine? (requiring discussion of degrees of importance of doctrines, definition of the Church, and the length of time the Church is in error)

5. The usefulness of Tradition. If we find that Christians of the 2nd and 3rd centuries believed something, is that useful to determining whether a belief is correct? Is it useful as mere evidence of what Jesus taught, or would it be relevant even if it were not taught by Jesus, but was thought up (carefully and sincerely) by the early believers? (See Calvin’s Institutes and Philip Schaff’s history, section 69, William Webster (Protestant), The Catholic Encyclopedia, the Real Presence Association, (Roman Catholic) and Sola Scriptura, which argues that the apostolic fathers argued for transubstantion from the Bible, not from oral tradition. ) (more…)

I’ve written up some notes on how to interpret “marginal effects” in tobit regressions when the variable is a dummy, so the change is discrete (something one gets out of the STATA 6-and-later “mfx” command). I resorted to empiricism. I ran a test regression on some data I have on Japanese executives— the meaning of the variables doesn’t matter for present purposes. The mean of lntax04tb, the log of tax04tb, is 9.43 for nonpresidents and 9.57 for presidents. (more…)

The WSJ Best of the Web quotes a news story about a Prime Minister’s interview in which he says that violence won’t achieve Israel’s objectives immediately after saying that violence had achieved Israel’s objective:

The Lebanese PM also told the newspaper he does not expect Hizbullah to drag Lebanon into a war again.

“I don’t believe it can happen again,” he said. “I don’t think Hizbullah is in the same position where it was before the war, and won’t be able to repeat what it did. It learned the lesson from what happened.”

Turning his attention to Israel, Siniora said he hoped a peace deal between the two countries can be reached.

“I think that Israel learned from the war that violence isn’t the way to ensure its wellbeing,” he said. “The only way to achieve peace is through negotiations. The belligerent statements made by the Israeli government, even if they’re meant to quiet internal criticism, do not assist the negotiation track.”

There’s a web debate on whether government policy is responsible for increasing inequality in the US, and if so, why. See Mankiw and Cowen. I’ll lay out a couple of ideas, one on unions and are more interesting one on taxation. (more…)

Mark Steyn’s latest:

The Jews are … now bemoaned in the salons of London and Paris as an outrageous imposition of an alien European population on the Middle East. Which would have given Aaron Lazarus a laugh. The Jews spent millennia on the Continent without ever being accepted as European. But no sooner are the Continent’s Jewry all but extinct than suddenly every Jew left on the planet is a European.

I recommend the NIVA, Inc. Writer’s Block site, HREF="http://www.writersblock.ca/tips/index.htm"> “Writing Tips,”
http://www.writersblock.ca/tips/index.htm. It has a page on the HREF="http://www.writersblock.ca/tips/monthtip/tipsep96.htm">
“Subjunctives” and another on HREF="http://www.writersblock.ca/tips/monthtip/tipmar98.htm">“Capitalization in Titles”. Here are some of my thoughts on the subject, and a convenient summary. (I had an old post on this, but I’m repeating it because I want my new search engine to include it.) (more…)

Both are acceptable spellings, I find from the OED online. Improvable is more common, and shorter, but I like Improveable better, as being closer to the pronunciation.

1712 ADDISON Spect. No. 549 {page}3, I have got a fine spread of improveable lands.

I’ve run into a censoring problem in econometrics (”censoring” in a technical math sense, not in a political or moral sense, so this post will be uninteresting for most people). Suppose you are regressing a person’s consumption C in a year on his income Y for that year, trying to find the marginal propensity to consume, and you have data on 1,000 people for one year. Can you use OLS? I’m not thinking of measurement error or the permanent income hypothesis or heteroskedasticity or serial correlation, but of a different problem: consumption cannot exceed income (we’ll define income as including gifts, government handouts, etc.). (more…)

A curious coincidence happened to me recently. One old UCLA friend emailed me to say that after 5 years he’d just found in his desk the note I wrote him saying I had taken one of his extra copies of a book he’d written and left him some money for it. Another wrote me to say how much he liked Paul Johnson’s Modern Times, which I’d given him about 20 years before, and how he was now reading whatever Paul Johnson he could get his hands on. When you’re in middle age, the years rush past— but we’re still young enough that a five or twenty year delay isn’t critical.

I heard a good sermon on Michal’s criticism of David’s lack of dignity at Assiniboia-Charleswood Community Church in Winnipeg. This story is usually cited to justify undignified behavior by important people. But now I think it doesn’t justify that at all. Here’s the story from II Samuel: (more…)

Steve Sailer quotes a NY Times obituary of Gen. Stroessner of Paraguay:

One former American ambassador to Paraguay, Robert E. White, remembered General Stroessner as darkly brilliant at profiting from others’ mistakes. Once, Mr. White recalled, the Paraguayan ambassador to Argentina had gambled away the embassy’s entire budget. The ambassador was immediately summoned to Asunción and was handed a confession to sign. General Stroessner then promoted him to foreign minister. “He could never have an independent thought or deed after that,” Mr. White explained.

This is close to a suggestion of Thomas Schelling, in Strategy of Conflict, I think. To match it perfectly, Stroessner would have offered him the Foreign Secretaryship *before* the man had gambled away the money, but on condition that he do so.

I used to think computing was one thing Indiana University managed well, but about 5 years ago I started to notice a change. I think I’ll start to keep track of problems here. This morning I found that I couldn’t ask Onestart to tell me when my class met. Onestart is a web location separate from our teaching software location (Oncourse)– which, to begin with, is bad, since they aren’t even linked. Rather than just scan in the Schedule of Classes, they attempted to use a fancy search system (rather than just buy one from Google, I guess) and forgot to allow someone to search by, say, G601 rather than the 10 or so other search categories they allow.

Michael Fumento’s “Ketamine and Depression” at the American Spectator sounds like big news, and an interesting medical study. One injection of ketamine caused immediate (within hours) improvement in two thirds of severely depressed patients, and a third of them were better even after a week. The sample was tiny (17), but they first did a double-blind, with zero improvement in the placebo patients, and then reversed the roles, and found that thos same patients improved with the ketamine in the second round. Ketamine is a dangerous drug (euphoric and hallucogenic), but the results are remarkable. If true, why aren’t asylums rushing to use this? Or are they?

Dubner and Levitt’s Freakonomics was on my Dozen Best list for 2005, but I also enjoy the caustic rough translation of Ariel Rubinstein’s review of it, a review similar in style to Ed Leamer’s review of Thomas Friedman’s The World Is Flat. Both reviews make fun of the books, while also noting their good points, and both reviews have penetrating main ideas that I was embarassed not to have thought of myself. (That, by the way, is a good test for a brilliant idea. George Stigler was a master at that— at the short, simple, seminar question which totally derailed the paper being presented.) Leamer’s idea is “Friedman’s metaphor of the flat world is not wrong, but simply meaningless,” and Rubinstein’s idea is “Most of Levitt’s Freakonomics isn’t economics at all, just smart thinking.” (more…)

I stopped at the Mall of America for a snack break with my kids on my way past Minneapolis. Hell must be a lot like the Mall of America: constant yelling, machinery noise, and people everywhere.