Liked the book and the movie but I've been trying to find the source of this passage:
Much of the forest destruction comes from burning. Almost 30% of the CO2 released into the atmosphere each year is a result of the burning of brushland for subsistence agriculture and wood fires used for cooking. (p. 227)
This seems like one area to target but the book does not discuss it.
Tuesday, November 6, 2007
Monday, November 5, 2007
Horseback riding
K1 has friends who are taking horseback riding. My knee jerk reaction and after thinking about it for a long time reaction are the same. I want to make something similar to that Pony remark in the Seinfeld episode. What do I have against horseback riding anyway?
Sunday, November 4, 2007
Data, statistics, facts - what are they?
I am confused because of this article by Prof. Mankiw - Beyond Those Health Care Numbers. Mark Thoma points out the following:
He should also know that life expectancy from birth, which he is using in his arguments about different death rates for infants and the young, is not the only or even the best way to make life expectancy comparisons (as opposed, to say, the life expectancy at age 30, age 40, etc., i.e. given that you've already made it through the infant and young adult years).
The data is not disputed, nor are the statistics (e.g. the average life expectancy), but the facts (i.e. the interpretation of the data/statistics) are disputed. What is the correct number to present? Unfortunately, this reminded me of a line I wrote for a review of Econospinning by Gene Epstein:
...this book is an indictment of economics and statistics and a reminder as to why the average person hates both.
The full review of Econospinning is below. (I didn't try to shop this around. It's a little pathetic.)
In this book, Gene Epstein, the Economics editor at Barron’s presents examples of how employment numbers such as the unemployment rate, labor force participation rates and wages can be interpreted or in this case, misinterpreted or manipulated. Indeed almost two thirds of this book is devoted solely to various employment numbers and how they can be misused. In an interesting aside he recounts how President Richard Nixon thought that Jews holding high positions in the Bureau of Labor Statistics were undermining him and proceeded to have them fired.
Almost half the book is spent criticizing numbers presented by Paul Krugman in his New York Times column. Along the way, Epstein also tries to straighten the record on former Federal Reserve Board Chairman Alan Greenspan. Greg Ip, the Wall Street Journal reporter had given a positive review of the chairman’s tenure and Epstein exposes what he calls the Greenspan myths. He also takes aim at the CNBC morning show Squawk Box, newscaster Lou Dobbs at CNN, author Barbara Ehrenreich’s bestselling book “Nickel and Dimed” and two chapters of the bestselling book “Freakanomics” by University of Chicago economist Steven Levitt and his co-author Stephen Dubner.
Given that Epstein’s theme is how to properly interpret numbers released by various government agencies, the book is scattered with various boxes on how ratios should be calculated. Sadly, this book is an indictment of economics and statistics and a reminder as to why the average person hates both.
He should also know that life expectancy from birth, which he is using in his arguments about different death rates for infants and the young, is not the only or even the best way to make life expectancy comparisons (as opposed, to say, the life expectancy at age 30, age 40, etc., i.e. given that you've already made it through the infant and young adult years).
The data is not disputed, nor are the statistics (e.g. the average life expectancy), but the facts (i.e. the interpretation of the data/statistics) are disputed. What is the correct number to present? Unfortunately, this reminded me of a line I wrote for a review of Econospinning by Gene Epstein:
...this book is an indictment of economics and statistics and a reminder as to why the average person hates both.
The full review of Econospinning is below. (I didn't try to shop this around. It's a little pathetic.)
In this book, Gene Epstein, the Economics editor at Barron’s presents examples of how employment numbers such as the unemployment rate, labor force participation rates and wages can be interpreted or in this case, misinterpreted or manipulated. Indeed almost two thirds of this book is devoted solely to various employment numbers and how they can be misused. In an interesting aside he recounts how President Richard Nixon thought that Jews holding high positions in the Bureau of Labor Statistics were undermining him and proceeded to have them fired.
Almost half the book is spent criticizing numbers presented by Paul Krugman in his New York Times column. Along the way, Epstein also tries to straighten the record on former Federal Reserve Board Chairman Alan Greenspan. Greg Ip, the Wall Street Journal reporter had given a positive review of the chairman’s tenure and Epstein exposes what he calls the Greenspan myths. He also takes aim at the CNBC morning show Squawk Box, newscaster Lou Dobbs at CNN, author Barbara Ehrenreich’s bestselling book “Nickel and Dimed” and two chapters of the bestselling book “Freakanomics” by University of Chicago economist Steven Levitt and his co-author Stephen Dubner.
Given that Epstein’s theme is how to properly interpret numbers released by various government agencies, the book is scattered with various boxes on how ratios should be calculated. Sadly, this book is an indictment of economics and statistics and a reminder as to why the average person hates both.
Saturday, November 3, 2007
Relative status and happiness: Show me the money
Relative Comparisons and Economics: Empirical Evidence is a nice and short review on relative status and comparisons from the FRBSF and the underlying data issues. This anecdote from Robert Rubin's In An Uncertain World is more convincing:
Bob Strauss once captured this dynamic when he said that a lawyer at his firm earning $90,000 a year -- this was some time ago -- and offered a $10,000 raise with the stipulation that a peer next door would get a $20,000 raise would prefer no raise at all to someone on his own level being paid even more. (p. 102)
There are a lot of anecdotes that convince me that people care about their ranking much more than analysis of happiness data or experimental data. I need to remind myself to look into models that assume relative consumption and explore the impacts (aside from those in asset pricing models such as Abel's Asset Prices under Habit Formation and Catching up with the Joneses)
It also sounds like the regression specifications in the literature are similar to those used in estimating peer effects, i.e. the average of some variable for the group in which the individual belongs to is included as a regressor. I recall Manski having a criticism of this approach but I cannot remeber the details.
Bob Strauss once captured this dynamic when he said that a lawyer at his firm earning $90,000 a year -- this was some time ago -- and offered a $10,000 raise with the stipulation that a peer next door would get a $20,000 raise would prefer no raise at all to someone on his own level being paid even more. (p. 102)
There are a lot of anecdotes that convince me that people care about their ranking much more than analysis of happiness data or experimental data. I need to remind myself to look into models that assume relative consumption and explore the impacts (aside from those in asset pricing models such as Abel's Asset Prices under Habit Formation and Catching up with the Joneses)
It also sounds like the regression specifications in the literature are similar to those used in estimating peer effects, i.e. the average of some variable for the group in which the individual belongs to is included as a regressor. I recall Manski having a criticism of this approach but I cannot remeber the details.
Friday, November 2, 2007
John Taylor wants to use economics to win the war in Iraq
John Taylor thinks that economics can work better than economics in securing the peace in Iraq.
My strong recommendation is: As soon as Gen. Petraeus and his coalition forces secure an area -- a neighborhood or a town -- we should immediately focus as best we can on the economic part of our mission. Help businesses reopen and hire people, especially young people who might otherwise join the enemy.
This is similar to Using Incentives to Solve the Israeli-Palestinian Conflict and in both cases it may be optimistic. As far as I know Prof. Taylor's approach has not been tried in Iraq. Given his track record, I say let him try.
The following is another rejected book review of John Taylor's Global Financial Warriors (I thought it was a gentler version of I,I,I:
“I was responsible for leading 350 finance experts and staff ... giving advice to finance ministers and central bank governors. I spent time on the ground in difficult areas like Afghanistan, Iraq, Liberia, and Haiti, and made a total of 120 visits to foreign countries, and attended over 400 meetings in the White House, experiences that afforded me a unique top to bottom perspective. I was responsible for coordinating U.S. financial policy internationally … I also had to coordinate policy internally with the State and Defense Departments…. I also gave over two hundred speeches and made another fifty trips to U.S. cities … I testified before committees of the Senate and House of Representatives twenty five times.”
Moreover, in reading the book we also find that Taylor, who once advocated the abolition of the International Monetary Fund, is an effective coordinator who was able to provide the leadership that was essential in a task oriented organizational structure to achieve the stated missions to which he was assigned.
The book covers the tumultuous years that Taylor was the Undersecretary of International Affairs at the U.S. Treasury from before 9/11 to 2005. Rather than tell the story chronologically, Taylor chose to divide the book into the missions that were undertaken. This has the advantage that each chapter is more or less self-contained. Unfortunately, it leaves the reader a little disoriented as events unfold such as the resignation of Paul O’Neill as Treasury Secretary. The book is almost structured like a résumé. He lists his achievements as follows:
1. Successfully coordinated internationally to freeze the assets of terrorists thereby effectively halting the flow of funds.
2. Planned, coordinated, supervised and implemented the financial reconstruction of Afghanistan, including acceleration of reconstruction funds and implementation of metrics to measure progress.
3. Prevented global financial contagion from the default by Argentina: Successfully utilized IMF’s augmentation of $8 billion to force debt renegotiation and to signal effectively to markets that no funds would be forthcoming thereby allowing the markets to anticipate and adjust to the news.
4. Successfully implemented “collective action clauses” in international bond issues thereby eliminating the need for the IMF to act as global bankruptcy court. The use of “collective action clauses” has prevented another international financial crisis.
5. Successfully negotiated for 100 percent cancellation of debt for developing countries. Shifted World Bank (IDA) loans to grants and implemented results measurement system.
6. Arranged and negotiated a financial package for Turkey in exchange for using Turkey to invade Iraq from the north.
7. Planned, coordinated, supervised and implemented the financial reconstruction of Iraq, including the reopening of the Central Bank, the delivery of tons of cash and the issue of new currency. Advised on monetary policy to that was used effectively to prevent inflation. Coordinated and negotiated for an 80 percent debt relief of Iraq loans.
8. Allowed massive Japanese intervention in the currency markets that resulted in a successful relation of the Japanese economy thereby ending Japan’s “Lost Decade”. Effectively signaled to the Japanese that once its economy was growing that it should stop its intervention in the currency markets and allow market forces to determine the exchange rate. This hands-off/hands-on approach achieved the desired result with Japan and subsequently, China which let the yuan float.
Taylor is an admirer of President Bush, often recounting how easily the President sets everyone at ease no matter how tense a situation is as well as how quickly the President can grasp economic issues that were presented. However, he does not say anything about the two Treasury Secretaries, Paul O’Neill and John Snow beyond describing his conversations. There are also interesting details about his interactions with Bono as well as with Anne Krueger, both while she was at the World Bank and at the IMF. He tells how the press, especially Paul Blustein at the Washington Post seemed to accentuate the differences he had with Ms. Krueger particularly in the debate as to whether the IMF should act as a global bankruptcy court. The story that he tells about how cash was flown into Iraq by military transport planes was also quite riveting.
The book is an interesting insight into how policy is formulated, sometimes by deliberately using press releases and speeches to gauge further reactions before making final recommendations. Sometimes the choice of where to have a meal and what to serve can be as important as the language in communiqué.
With everything that Taylor achieved while Undersecretary, it is hard to think how different things could be if he had been Defense Secretary.
My strong recommendation is: As soon as Gen. Petraeus and his coalition forces secure an area -- a neighborhood or a town -- we should immediately focus as best we can on the economic part of our mission. Help businesses reopen and hire people, especially young people who might otherwise join the enemy.
This is similar to Using Incentives to Solve the Israeli-Palestinian Conflict and in both cases it may be optimistic. As far as I know Prof. Taylor's approach has not been tried in Iraq. Given his track record, I say let him try.
The following is another rejected book review of John Taylor's Global Financial Warriors (I thought it was a gentler version of I,I,I:
“I was responsible for leading 350 finance experts and staff ... giving advice to finance ministers and central bank governors. I spent time on the ground in difficult areas like Afghanistan, Iraq, Liberia, and Haiti, and made a total of 120 visits to foreign countries, and attended over 400 meetings in the White House, experiences that afforded me a unique top to bottom perspective. I was responsible for coordinating U.S. financial policy internationally … I also had to coordinate policy internally with the State and Defense Departments…. I also gave over two hundred speeches and made another fifty trips to U.S. cities … I testified before committees of the Senate and House of Representatives twenty five times.”
Moreover, in reading the book we also find that Taylor, who once advocated the abolition of the International Monetary Fund, is an effective coordinator who was able to provide the leadership that was essential in a task oriented organizational structure to achieve the stated missions to which he was assigned.
The book covers the tumultuous years that Taylor was the Undersecretary of International Affairs at the U.S. Treasury from before 9/11 to 2005. Rather than tell the story chronologically, Taylor chose to divide the book into the missions that were undertaken. This has the advantage that each chapter is more or less self-contained. Unfortunately, it leaves the reader a little disoriented as events unfold such as the resignation of Paul O’Neill as Treasury Secretary. The book is almost structured like a résumé. He lists his achievements as follows:
1. Successfully coordinated internationally to freeze the assets of terrorists thereby effectively halting the flow of funds.
2. Planned, coordinated, supervised and implemented the financial reconstruction of Afghanistan, including acceleration of reconstruction funds and implementation of metrics to measure progress.
3. Prevented global financial contagion from the default by Argentina: Successfully utilized IMF’s augmentation of $8 billion to force debt renegotiation and to signal effectively to markets that no funds would be forthcoming thereby allowing the markets to anticipate and adjust to the news.
4. Successfully implemented “collective action clauses” in international bond issues thereby eliminating the need for the IMF to act as global bankruptcy court. The use of “collective action clauses” has prevented another international financial crisis.
5. Successfully negotiated for 100 percent cancellation of debt for developing countries. Shifted World Bank (IDA) loans to grants and implemented results measurement system.
6. Arranged and negotiated a financial package for Turkey in exchange for using Turkey to invade Iraq from the north.
7. Planned, coordinated, supervised and implemented the financial reconstruction of Iraq, including the reopening of the Central Bank, the delivery of tons of cash and the issue of new currency. Advised on monetary policy to that was used effectively to prevent inflation. Coordinated and negotiated for an 80 percent debt relief of Iraq loans.
8. Allowed massive Japanese intervention in the currency markets that resulted in a successful relation of the Japanese economy thereby ending Japan’s “Lost Decade”. Effectively signaled to the Japanese that once its economy was growing that it should stop its intervention in the currency markets and allow market forces to determine the exchange rate. This hands-off/hands-on approach achieved the desired result with Japan and subsequently, China which let the yuan float.
Taylor is an admirer of President Bush, often recounting how easily the President sets everyone at ease no matter how tense a situation is as well as how quickly the President can grasp economic issues that were presented. However, he does not say anything about the two Treasury Secretaries, Paul O’Neill and John Snow beyond describing his conversations. There are also interesting details about his interactions with Bono as well as with Anne Krueger, both while she was at the World Bank and at the IMF. He tells how the press, especially Paul Blustein at the Washington Post seemed to accentuate the differences he had with Ms. Krueger particularly in the debate as to whether the IMF should act as a global bankruptcy court. The story that he tells about how cash was flown into Iraq by military transport planes was also quite riveting.
The book is an interesting insight into how policy is formulated, sometimes by deliberately using press releases and speeches to gauge further reactions before making final recommendations. Sometimes the choice of where to have a meal and what to serve can be as important as the language in communiqué.
With everything that Taylor achieved while Undersecretary, it is hard to think how different things could be if he had been Defense Secretary.
Thursday, November 1, 2007
I just killed more trees
We had some miles expiring on Delta and we were told we could convert it to magazine subscriptions which we did. I felt a little guilty about all the paper that would be generated. I am one of those who does believe that a little can go a long way and this probably would have gone a long way in saving some trees. In any case, the self interest side won -- why would I want to give up all those miles for nothing? It actually would have been easier if the airline had said the miles are expiring -- period.
Then I thought, what if everyone started cancelling all their subscriptions and the publishing companies started to go bankrupt. What if we all stopped reading books and newspapers? Would I then be responsible for dstroying jobs and livelihoods? (This already seems to be happening to newspapers as everyone has gone online although more because its free I think, than to save some trees. Saving trees seems to be a good (?) side effect.) Should the government intervene and make unemployment benefits more generous?
Then I thought, what if everyone started cancelling all their subscriptions and the publishing companies started to go bankrupt. What if we all stopped reading books and newspapers? Would I then be responsible for dstroying jobs and livelihoods? (This already seems to be happening to newspapers as everyone has gone online although more because its free I think, than to save some trees. Saving trees seems to be a good (?) side effect.) Should the government intervene and make unemployment benefits more generous?
Data versus anecdotes
Andrew Gelman had an interesting post on data Skepticism About Empirical Studies:
Nick Firoozye writes,
I don't really have much to add here, except that the problem noted by Roberts (it's hard to know whether to believe a statistical study) is even more of a problem with non-statstical empirical studies (i.e., anecdotes). ... But there are a lot of areas where we have only weak opinions which can indeed be swayed by data (see here for some examples). These cases are important in their own right and also can serve as benchmarks for the success of statistical analysis, so that we can trust good analyses more when they're applied to tougher problems. This is one way that applied statistics proceeds, by exemplary analyses of problems that might not be hugely important on their own terms but serve as useful templates.
Personally, I don't find one empirical study all too convincing (whether it is an econometric study or a randomized trial). But over time as more and more studies on different data sets start to show the same result then I would be swayed. I also would place more emphasis on anecdotes than Prof. Gelman does. These stories can be extremely convincing even though they may not be representative of the situation being discussed. As pointed out by McCloskey, convincing others comes down to who can tell a better story. A study with a good anecdote beats everything, but I think good anecdotes can beat a statistical study any day. (Notice how hard economists have been trying to convince the public that free trade is good but the personal stories from those who have lost jobs over trade always trumps these arguments.)
Another well cited example is Ronald Reagan's characterization of those on welfare as Welfare queens. This label while not representative I think had a negative effect on everyone on welfare.
Nick Firoozye writes,
I [Firoozye] wanted to point your attention to the following podcast by Ian Ayres on Supercrunchers, where he shows himself an enthusiastic (if perhaps a bit naïve) proponent of the statistical method. Entertaining, definitely. One thing though that I thought you might be interested in is Russ Roberts’ (the interviewer's) own skepticism over the econometric method, which I think probably warrants a response. It may be that Roberts’ own view is due to his now-Austrian economics slant (i.e., somewhat anti-formallist approach) or perhaps to the fact that mainstream econometrics is a frequentist pursuit and one might question the honesty of the results as a consequence.
I don't really have much to add here, except that the problem noted by Roberts (it's hard to know whether to believe a statistical study) is even more of a problem with non-statstical empirical studies (i.e., anecdotes). ... But there are a lot of areas where we have only weak opinions which can indeed be swayed by data (see here for some examples). These cases are important in their own right and also can serve as benchmarks for the success of statistical analysis, so that we can trust good analyses more when they're applied to tougher problems. This is one way that applied statistics proceeds, by exemplary analyses of problems that might not be hugely important on their own terms but serve as useful templates.
Personally, I don't find one empirical study all too convincing (whether it is an econometric study or a randomized trial). But over time as more and more studies on different data sets start to show the same result then I would be swayed. I also would place more emphasis on anecdotes than Prof. Gelman does. These stories can be extremely convincing even though they may not be representative of the situation being discussed. As pointed out by McCloskey, convincing others comes down to who can tell a better story. A study with a good anecdote beats everything, but I think good anecdotes can beat a statistical study any day. (Notice how hard economists have been trying to convince the public that free trade is good but the personal stories from those who have lost jobs over trade always trumps these arguments.)
Another well cited example is Ronald Reagan's characterization of those on welfare as Welfare queens. This label while not representative I think had a negative effect on everyone on welfare.
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