Irony

From the Wikipedia page on Agricultural Policy:

Some argue that nations have an interest in assuring there is sufficient domestic production capability to meet domestic needs in the event of a global supply disruption. Significant dependence on foreign food producers makes a country strategically vulnerable in the event of war, blockade or embargo. Maintaining adequate domestic capability allows for food self-sufficiency that lessens the risk of supply shocks due to geopolitical events. Agricultural policies[...] may be an ongoing subsidy designed to allow a product to compete with or undercut foreign competition.

Could this possibly backfire? Hmmm, let me think... This week in Scandinavia:

Danish dairies say no to Norway

Dairy producers in Denmark have said they won’t export butter to neighbouring Norway, despite moves by Oslo to cut tariffs as the country battles to get the product back on supermarket shelves.

Norway, like Sweden and Finland, has been hit by a major butter shortage in recent months. The Nordic trio have seen less raw milk available annually amid soaring demand for high-fat dairy products such as creams, butters and milk. 

[snip] 

But while the Danes are happy to help out the Swedes and the Finns, Norwegian shoppers look set to be left in the lurch with Christmas looming. 

Oslo has slashed import tariffs on butter for the month of December in an attempt to attract foreign producers, but leading Danish dairies remain unimpressed. 

“We’ve been bashing our head against an excise wall in Norway for more than ten years, so we don’t have enough faith in a little hole in the wall to start sending butter via that route,” said Mogens Poulsen from dairy Thise Andelsmejeri to news website foodculture.dk. 

Danish news reports said the country’s other main dairy producers were similarly disinclined to make a beeline for the Norwegian market. 

“We can’t start building something up only to dismantle it again three weeks from now,” said Arla spokesperson Theis Brøgger to foodculture.dk.

It may only be butter, but still a telling example. On a general level, I don't know which I find more impressive: The fact that so many people are in agreement about the need to drastically scale down agricultural subsidies... Or that these subsidies somehow remain as entrenched throughout the world as they do.

UPDATES: (1) Norway is a great place to live in many ways, but their protectionist trade policies suck. Most of the Norwegians that I speak to are pretty happy to echo these sentiments, although that might not be a representative sample. (2) Damn. Butter futures would have been a good investment. Black market bids currently going around $500 per half kilo!

Economics > Doing the right thing

Drowning in university work here, so no time for any blog posts. In the meantime, read this article by Gernot Wagner, who has a new book out explaining why economic forces and policies -- not individual acts of environmental goodwill or heroism -- are the only way to ensure meaningful action against climate change... and to resolve environmental problems generally.[*]

Cold, Hard Economics

Global warming is happening faster and with more intensity than anyone expected, yet the fossil-fueled right has succeeded in removing the issue almost entirely from the agenda through a false pretense of defending "free markets." In response, environmentalists have tended to retreat further into their own organically padded corners, when what's needed is to get back to economic basics: Markets cannot be free when benefits are privatized and enormous costs are being socialized. The only way out of this environmental crisis is to align citizens' economic self-interest with the planet's health.[...]

You can also watch a video of Gernot here.

[*] Lest it be unclear, economic policies also include "let prices and the market mechanism run their course". Environmental economics is not simply about knee-jerk, top-down regulation. Although, you already knew that. Right?

Facts vs Beliefs (George Monbiot edition)

When the facts, I change my mind. What do you do, sir? 

- Apocryphally attributed to John Maynard Keynes

A criticism often leveled at environmentalists is that they are far too wedded to their own ideological agendas to ever partake in rational debate.

Ignore, for the moment, that such criticisms are usually dripping in hypocrisy. (My experience is that extremists on both side of the aisle not only deserve each other, but have a remarkable gift for pointing out their own flaws in their opponents.) The unfortunate truth is that such characterisations of blinkered "green" thinking does hit the mark in many cases. While it's hard to fault someone's sincerity in arguing passionately for the environment, too often reason is thrust aside at the alter of Gaia.

All this points towards why I enjoy reading George Monbiot. His essays often provoke, but they always make you think. Alongside his ability to construct compelling arguments using detailed lines of evidence, his honesty makes him a rare commodity in the world of "opinion" columnists. He is not scared to challenge power or orthodoxy, but is also prepared to admit when gets something wrong.

Now, I've praised Monbiot along these lines before (e.g. here). However, he provides some deeper insight into this admirable trait in today's column. [Background: New data made available by a UK researchers show that resource use (at least in the UK) is diminishing with, and may even be caused by, GDP growth.]

Is the 'peak consumption' hypothesis correct?

I won't deny it: my first reaction on seeing the results of Chris Goodall's research into our use of resources was: "I don't want this to be true." Obviously, I'd like to see our environmental impacts reduced, as swiftly and painlessly as possible. But if his hypothesis is right – that economic growth has been accompanied by a reduction in our consumption of stuff and might even have driven it – this would put me in the wrong. I'm among those who have argued that a decline in our use of resources requires less economic activity, or at least a transition to a steady-state economy. 

[snip]

That was what the available research suggested at the time. But if Goodall's findings are correct, they put a coach and horses through something I strongly believed to be true. 

So, for a few minutes, I engaged in what psychologists call protective cognition. I started scouring his findings for reasons to reject them. It took an effort of will to shake myself out of it and remember that the intellectually honest response to new information is to adjust our beliefs to the evidence, rather than adjust the evidence to our beliefs. We must question and test new findings of course, but we must do so as dispassionately as possible. Otherwise we are in danger of doing more harm than good, and of wasting our lives promoting the wrong causes. Anti-vaccine campaigners please take note. 

Starting again, this time reading it as objectively as I could, I saw that Goodall's report appears to be rigorous and unbiased. It answered many of the questions and objections I raised as I read it. People like me have to step back and consider the possibility that Chris Goodall could be right when he states:

"Absolute decoupling of resource use from economic growth may possibly have occurred … GDP growth, because it brings technological progress which is correlated with more efficient use of resources, may help reduce environmental damage."

[...] 

Monbiot does go on to ask some legitimate questions that might challenge the extent to which we can generalise Goodhall's findings. (For instance, by pointing out that declining resource use in the UK is a relatively new phenomenon with much uncertainty over the longer term.) However, the principle is worth repeating: "The intellectually honest response to new information is to adjust our beliefs to the evidence, rather than adjust the evidence to our beliefs."

Homeopathic A&E

Following Monday's post, which touched on the murky world of alternative medicine... South African comedian, Warren Robertson links to a brilliant Mitchell and Webb skit, "Homeopathic A&E":

Quote of the day - Consensus

Reading through the comments on a YouTube video is normally enough to make you despair for humanity. Every now and again, however, you come across some gold. Like this:

"It's a personal opinion, which I feel should become popular consensus."

[Note to self: Claim as own.]

Rhino horn! Homeopathy! Psychics!

A few weeks ago, the South African government announced that it was appointing a team to reconsider the ban on the trade in rhino horn. In short, the idea is that SA could kill two birds with one stone by capitalising on what is effectively an extremely lucrative market. Since a single rhino horn is estimated to fetch $500,000 on the Asian black market, government stock piles of the stuff (from culling and thwarted poaching operations) could actually bring in substantial revenue towards conservation efforts.

Take things a bit further and you could easily argue that the ability to legally farm and "harvest" these animals generally would bring the same positive effects that hunting does for wildlife conservation. That is, it establishes a profit motive that incentivises the preservation of valuable animal species.

Save a horny friend?

The libertarian journalist, Ivo Vegter, penned a provocative column shortly thereafter in support of the government announcement. Unsurprisingly, the essay captures some of the essence of free-market environmentalist thinking. Contrasting the fortunes of sheep with dwindling rhino numbers, he writes that the ban on rhino horn has undermined market incentives for managing these animals:

If they want rhino horn, let's sell them some 

Sheep aren't endangered, because farmers farm them. They have a vested interest in making sure that they breed and stay healthy. The profit motive ensures that sheep are either kept alive (in the case of the woolly kind) or get killed less frequently than they get born (in the case of the eating kind).

Most economists would fully appreciate the logic of utilizing these types of incentives and market signals. I readily agree with the notion that ending the ban on rhino horn could be a boon for the rhino population. However, I do have problems with a subsequent paragraph:

Many environmentalists and armchair liberals are of the view that “we” merely need to educate the backward Orientals about the lack of medicinal qualities of rhino horn. This is rich coming from a group that routinely advocates the use of unproven herbal remedies. It is also supremely condescending. Imagine the Chinese coming to Africa and telling us to stop using muti, or better yet, instructing wealthy elites about the superstition that homeopathy works. We'd tell them to mind their own business and sod off back to China, and rightly so. Even if the Vietnamese and Chinese are wrong about rhino horn, re-educating half a billion people is as tyrannical as it sounds. And even the communists failed at that.

Apart from being wonderfully ironic in highlighting his own condescension -- something, it must be said, that Ivo does not lack for when discussing "greens" or "liberals" -- this paragraph merely serves to sidestep some very important ethical issues. The morality of selling unproven (say nothing of cruelly obtained) substances for human well-being cannot be simply disentangled from its economic outcomes. Indeed, a commentator draws attention to the matter by asking: "How can it be it ethically conscionable to sell, at huge profit, a remedy that has been proven to have absolutely no efficacy? SA should peddle rhino horn to cancer patients . . . shall we also farm and sell African potatoes to people who believe they will cure AIDS? How about exporting a few of our local evangelists to exploit the gullible in exchange for miracle cures while we are about it?" (posted on Wed, 5 Oct 2011 at 12:12)

Ivo responds, but I rather think he draws a line on the wrong side of this issue. To quote the truism: Two wrongs don't make a right... And just because some new-age salesmen are able to peddle their snakeoil wares to Western consumers -- under false pretences and without accurate labeling -- does not provide satisfactory justification for encouraging (or even allowing) others to do the same. Moreover, suggesting that it does, is simply to argue your case by association.

In another sense though, Ivo is quite right because inconsistency can be a maddening thing. The difference between us, is that I would like to see consistency achieved via some form of standard regulation -- at the very least in terms of evaluating product claims and policing false advertising -- rather than a free-for-all. Given the vast asymmetries of information involved, these are the type of situations where Government (and, yes, civil society at large) can play a crucial role in improving market outcomes; by providing accurate information on product effectiveness and regulating products that might otherwise thrive on fraudulent claims. More to the point, this why precisely we expect our doctors and drugs to be licensed in modern democracies, and why we have empowered state authorities to do so on our behalf.

===

I was reminded of all this today when I saw this morning's xkcd strip, which might accurately be described as what happens when homeopathy gets into the book publishing business:

Sad, but true.

Also worth reading is the "tooltip text" that you can see if you hover over the image on the actual xkcd site. It explains the inspiration for this particular strip thusly: "I just noticed that CVS has started stocking homeopathic pills on the same shelves with -- and labelled similarly to -- their actual medicine. Telling someone who trusts you that you are giving them medicine, when you know you're not, because you want their money, isn't just lying -- it's like an example that you'd make up if you had to illustrate for a child why lying is wrong". [UPDATE: See this post.]

===

Let me leave you with one more story that has been making the rounds in the run-up to Halloween, which highlights that fine line between deception and self-delusion. A group of skeptics (not the climate change kind!) has been offering a million dollar prize to anyone that can prove, under scientifically acceptable standards, that they posses paranormal abilities. Not content to see their money go unspent, the skeptics have publicly courted a number of high-profile TV psychics (e.g. Britain's Sally Morgan) and invited them to take up the challenge.

And, would you believe it, none of these self-proclaimed psychics have responded to this wonderful opportunity to earn international fame and scientific respect... say nothing of the cool seven-figure cheque. I know, I know... Unbelievable. The brilliant Derren Brown sums up the situation thusly:

You’d think psychics would be very eager to prove they can really do it. There’s a million dollar prize fund to be won by any psychic who can show under reasonable and controlled conditions (which they can decide upon in conjunction with the scientists) that what they do is real. This is money that could be kept or given to charity of course, not to mention the likelihood of also receiving a Nobel prize and the ability to give the world vital new knowledge that would change us forever. Imagine that! If I woke up to find that I could really do it, I’d be a selfish and odd creature to offer it only to TV viewers and theatre audiences. I’d be out there, doing every test I could until the scientific establishment sat up and listened. You’d be forgiven for doubting my sincerity if I said I had better things to do. 

"I  see  hear dead people. LOL!"

As far as "forcing" he likes of Sally Morgan to take the test, this seems to be most unsatisfactory solution and one that would impinge on any number of individual rights. However, there is the lingering sense that it is simply very wrong to charge grieving people for a service that amounts to little more than selling them outright lies at particularly vulnerable times in their lives. (Although, perhaps comfort is more important than truth in some circumstances?) In that sense, I'm glad she's being called out... Though I don't hold any hopes of either side being convinced.

THOUGHT FOR THE DAY: You often hear it said that economics is not a morality play. Perhaps there's some cold comfort in learning that, apparently, neither is the psychic business.
___
[*] I do wonder about the practicals implications of actually farming these animals, and whether doing so would actually lead to a collapse in poaching. After all, poachers would still be able to capture substantial "rents" through their illegal actions, so long as breeding and raising a fully grown rhino remains an expensive exercise. That, however, is a subject for another day.

Cover Thursdays - Ni' Zilund edition

In search for a unifying theme for this week's Cover Thursdays post, I suppose that I can do no better than tip my hat to the Rugby World Cup in New Zealand. Options for Kiwi bands are fairly limited -- let alone covers decent thereof -- but I think that I've got two songs here that you will enjoy...

First up, a very nice find by The Primate (keep up the good work, meneer). Boy & Bear get kinda bluegrassy on Crowded House's "Fall at Your Feet":



Next, The Naked & Famous see their synth-drenched "Punching In A Dream" given the ol' acoustic guitar and xylophone treatment by Antipodean fellows The Mission In Motion:



PS - If you are confused by the subject line of this post, then I suggest heading here for a little exercise in the Kiwi vernacular.

Support NZ for the World Cup... It's the right thing to do

So, South Africa bow out of the Rugby World Cup in a most frustrating and even inexplicable way. Yes, there is is justified cause for anger at the incompetence of Bryce Lawrence (which, let's be honest, was already something of a celebrated topic). However, the Springboks's failure to land the killer blow, despite complete dominance across nearly all facets of play, says as much about their own limitations as an attacking side, as it does about the sheer bloody-mindedness of Australia's fantastic defence or the curious ineptitude of Mr Lawrence.

Joining South Africa on their own flights home are the likes of England, Ireland, Scotland and Argentina. Post-mortems are already underway, but still to be decided is the little matter of who will actually win this damn thing. For neutral supporters, the next question that arises is: To which nation should we pledge our support for the remaining semi-final and the final encounters?

The first semi is a Henman if ever there was one. (In its original, literal form that is... 10 weeks ago I don't think anyone would have predicted these two contestants.) Thus, a vastly improved Welsh side, brimming with self-belief will take on the ever-mercurial French... who appear to have taken a leaf out of their national football counterparts' book by staging a player revolt mid-World Cup campaign. The only difference is that the French rugby side have managed to salvage at least one famous victory and now somehow find themselves in the last four, while Raymond Domenech's (former?) men imploded in rather spectacular fashion and were out by the group stages. Viva la Revolution, liberté, égalité, fraternité and all that, but I'm backing the Welsh for this one. I'll be happy to reward professionalism and structure over maddening inconsistency any day.

Did they even have colour photos back then?

In the second play-off, hosts New Zealand seek to finally recapture the title that has eluded them since they won the inaugural tournament in 1987.  They've been dealt a potentially devastating blow through the loss of key playmaker, Dan Carter, while captain Richie McCaw appears to be playing on one leg. However, fate may have handed them some strange recompense through the injury of back-up flyhalf, Colin Slade. Odd as this may sound, the latter's replacement, young Aaron Cruden, would seem a much safer bet than the woefully out-of-his-depth Slade. Harsh, but fair I'm afraid. Facing New Zealand, of course, is the same Australian side that bundled South Africa out during this weekend's quarter-final. Aus have some outstanding young talent of their own, not least the players that featured most prominently in the victory against SA: David Pocock, James O'Connor and skipper James Horwill. However, they are thin on depth if injury does strike and there remain big doubts about their set-piece, and the BMT of flyhalf Quade Cooper among other things. It's a big call, but I'm still backing New Zealand for the win that will see them through to play Wales in the grand finale.

And the final itself? Well, you'd have to pick New Zealand again wouldn't you?

Okay, I hear you asking, but do you want them to win? So, with a very clear conscience, allow me to answer: "Yes".

As much as anything, I've grown tired of the ongoing tragi-comedy that sees that the planet's consistently best team dumped out of the World Cup. Bloomsboy put it rather poignantly: "Watching the spectacle of another France-NZ upset in the final would be a bit like succumbing to the morbid fascination of the World Trade Centers falling." A rugby fan first and foremost, I feel no shame in saying that the Kiwis have played most of the very top stuff I have ever watched. If there was such a thing as cosmic rugby justice, New Zealand should win this thing.

But forget speculative pleas to the rugby gods. Anyone who can tell me that Mrs. Karma cares for the game of rugby when the likes of Ben Cohen and Justin Harrison have World Cup winner medals, but Christian Cullen doesn't, is an idiot or a liar. Quite possibly both.

No, much more than balancing the scales of sporting justice, I hope that New Zealand winning the World Cup would finally put an end to the inane excuses that other rugby nations -- and South Africa in particular -- have become comfortable with in shrugging off mediocre results. Another year without a Tri-Nations trophy? ("Ja, but at least we can win a World Cup, hey!") Thirty-three percent average against our arch-rivals since 1995? ("Two World Cup trophies, boet!")

Suitably lame explanations for lame results.

It may provide comfort to opposition supporters, but New Zealand's failure to win a World Cup has actually become an albatross around the neck of other rugby nations. For, as long as the ABs can't get their hands on the Web Ellis trophy, we can dupe ourselves into thinking that we're actually doing pretty well... when we actually aren't.

With some important exceptions, New Zealand have clearly set the standard in modern rugby terms. I certainly believe that South Africa (and maybe even a few other nations) could overtake them, but not while the four-year mindset persists. Until the Kiwis bury their World Cup hatchet, a misplaced superiority complex will simply be doing us more harm in the long-run than good. Let order be restored and the slates be wiped clean. Because only then can we focus on consistently being the best rugby nation in world... full stop. Not just having a go every four years.

So... unless you happen to be Australian, Welsh or French... get behind the All Blacks for the Rugby World Cup 2011. Forget that they deserve it, we need it as much as they do.

Bryce Lawrence Reffing Flowchart

A very interesting paper...

From the latest American Economic Review:

Environmental Accounting for Pollution in the United States Economy

By Nicholas Z. Muller, Robert Mendelsohn, and William Nordhaus

ABSTRACT

This study presents a framework to include environmental externalities into a system of national accounts. The paper estimates the air pollution damages for each industry in the United States. An integrated-assessment model quantifies the marginal damages of air pollution emissions for the US which are multiplied times the quantity of emissions by industry to compute gross damages. Solid waste combustion, sewage treatment, stone quarrying, marinas, and oil and coal-fired power plants have air pollution damages larger than their value added. The largest industrial contributor to external costs is coal-fired electric generation, whose damages range from 0.8 to 5.6 times value added.

Unless you're on a university server, you'll probably find that the article is gated. [Update - The working paper version is accessible here.] Fortunately, there are a number of good summaries available on the net. Bottom line: We severely underpay for the goods and services provided by major industries, given the measurable effect that air pollution from these industries has on human health and productivity.

Crucially, the environmental damages that drive these results have nothing to do with any kind of long-term climate change effects. They are simply the local damages that result from compromised air quality and are happening right now.

Lest it be unclear, this most certainly isn't about turning our back on coal (or even agriculture, another industry with a surprisingly high un-costed air pollution damages figure). Or markets in general. It is simply about trying to account for full costs and thinking about the best ways in which we can do that. That's all that good economics is about.

A little bit of Friday awesome

That is all.

Have a good weekend everyone.

Easter Island - History revisi(onis)ted?

I've just handed in a fat micro assignment and thus finally seen the back of a hellish two weeks. Twelve-hour days (plus) have become the new norm... and then working on weekends as well. Who said university life was lark? Still, I'm acutely aware that I need to keep the odd post going so that I don't lose my readership entirely. In that spirit, I recently came across a fascinating debate concerning Easter Island.

"What's so important about Easter Island?", you may find yourself asking. Well, in short, people have long used it as cautionary tale of the human risks associated with environmental degradation. A once-stable and relatively prosperous civilization suddenly imploded as the supporting systems of their natural environment began to fail. Worse still, these wounds were self-inflicted; it was the islanders that caused the very environmental damage that brought about their demise. This idea was perhaps most memorably outlined by Jared Diamond, in his 2005 book Collapse.

Earlier this month, however, the British environmentalist Mark Lynas (whom I've mentioned favourably before) wrote a blog post that sought to overturn this standard, "ecocide" account of Easter Island's downfall. Drawing on some new archaeological research, Lynas shaped to explain why many of the traditional ideas on the subject are completely wrong. Most importantly, he claimed that the Easter Islanders were actually good stewards of their environment and were thus largely blameless for the fate that befell them. Instead, the tipping point for environmental collapse came with the arrival of European settlers, who brought the disease and invasive species (most notably rats) that ultimately decimated the indigenous plant and animal life. As Lynas's post was one aimed at refuting the orthodoxy, it probably won't surprise to learn that Jared Diamond was the primary focus of much the criticism.

So what happened next?

Well, Diamond responded to this stinging critique by penning an excellent rebuttal, which describes in some depth why the revisionist view is highly implausible (to put it kindly), and why the traditional account continues to provide the most compelling thesis. Ever the scholar, Diamond's tone is never less than respectful and thoughtful, although the evidence he cites is rather damning. I was particularly struck by his concluding paragraph:

The islanders did inadvertently destroy the environmental underpinnings of their society. They did so, not because they were especially evil or deprived of foresight, but because they were ordinary people, living in a fragile environment, and subject to the usual human problems of clashes between group interests, clashes between individual and group interests, selfishness, and limited ability to predict the future. Does that remind you of any problems that we ourselves face today? That’s why we find Easter’s story so gripping, and why it may offer us lessons.

Sage words indeed.

PS - Kudos must also go to Lynas for publishing Diamond's reply. (I believe he is currently seeking a response from some of the researchers that he initially quoted. ) This is what scientific and, I daresay, moral progress looks like. No room for sacred cows... but no indulgence of second-rate science either.

First journal submission

In other news...

I finally submitted my (co-authored) paper to a journal yesterday.

Title: 

Electricity Prices, River Temperatures and Cooling Water Scarcity

Abstract: 

Thermal-based power stations rely on water for cooling purposes. These water sources may be subject to incidents of scarcity, environmental regulations and competing economic concerns. This paper analyses the impacts of water scarcity and increased river temperatures on German electricity prices from 2002 to 2009. Having controlled for demand effects, the results indicate that the electricity price is significantly impacted by both a change in river temperatures and the relative abundance of river water. An implication is that future climate change will affect electricity prices not only through changes in demand, but also via increased water temperatures and scarcity.

All told, I'm pretty happy with it. We'll see what the reviewers think, though... As I understand it, these things take their time and I'm only expecting hear back at the start of next year. Still, a big relief to get it out the door.

Happy birthday to Stickman's Corral!

Well, a day late... but that can probably only be described as fitting.

Of course, recent postings have taken a severe backseat, as you might have observed. To be completely honest, I'm not sure whether I'll ever be able to get back into (semi) regular blogging activity if my workload continues to be this heavy. Hopefully that isn't the case, though... I've been told by almost everyone that the first semester of PhD is the worst.

But, enough blagging. You didn't stop by to hear excuses for current blogging inactivity. You came to see a review of the year passed! (If you didn't; unlucky just go with it.) So, without further ado...

The top five posts over the last twelve months, in terms of unique page views, have been:
1) Why we need maths in economics (317 page views)
2) Movember* (266)
3) Meat and Veg(etarianism) (129)
4) Facts vs Beliefs (114)
5) Should pregnant women be banned from smoking? (110)
* Somewhat depressingly, (2) has virtually all been traffic directed from "movember" image web searches... And, almost certainly for the logo itself rather than my steamy latino pose.

The five most commented on posts are fairly similar:
1) Facts vs Beliefs (24 comments)
2) Should pregnant women be banned from smoking? (21 comments)
3) Meat and Veg(etarianism) (11 comments)
4) Mises's action "axiom" or false dichotomy? (8 comments)

5) And then a bunch with six comments...

If these staggering </sarcasm> numbers weren't enough for you, in terms of readership by country we have:
1) United States (1,871 page views)
2) South Africa (728)
3*) Norway (519... although we should really exclude this as they're mostly mine)
3) United Kingdom (470)
4) Canada (173)
5) Australia (145)

Thanks to everyone that has ever stopped by The Corral for a visit! 

My own favourite posts are bit harder to nail down, especially in the little time I have available here. Still, alongside some of those already mentioned, here are a couple that I probably did enjoy writing more than others:

• Basically, all those that I have listed in "The Zen of Stickman's Corral" box in the upper right-hand corner.
• Putting a Price on Nature and the Defining Sustainability posts
• South Africa and water pricing
• Leonard Cohen covers (more the sentiments expressed in the body of the test than the cover versions themselves)
• Free will in a world of Mad Men
• Hippie Baptists and Libertarian Bootleggers
• More on Norway, Liberty and Labels

The lessons that I have learned from blogging very closely parallel my general experiences in the blogosphere. And, on the whole, they are certainly positive. 

• It really is a great resource for testing and expanding upon ideas; both in the sense of how others respond, and making sure that you understand an idea well enough to write it down in plain language for all to see. (Not that I always managed this...)
• Blogging takes up a lot of time. For me anyway. That may simply be due to the fact that I am something of a stickler for facts and have an uncanny knack for stretching a story out. Being on the long side of winded is not my favourite personal trait, but at the same time I don't wish to let go of it completely! I'm hoping that keeping this blog has actually moved me towards some kind of middle ground.
• It's hard to attract a big, regular audience unless you focus on specific, narrow themes. Jumping between completely unrelated topics kills your readership. My feeling is that people mostly visit blogs because they expect certain themes to be consistently addressed (even though the applications can vary widely); not to hear someone's everyday ramblings on whatever interests them. Unfortunately, I tend towards the latter... but so be it! (Although, I certainly have written posts simply because I thought that it would interest one particular person who might have been reading.)

Something I also want to mention specifically is music. I was hoping to put together a downloadable playlist of all the songs that I've linked to over the course of the year... but who has the time? I hope that you'll settle for YouTube links:

• Arcade Fire - "Suburban War"
• Smokey Robinson - "The Tracks Of My Tears" (live 1965)
• Pavement - "Gold Soundz"
• Neil Young - "Cortez The Killer", followed by the Dave Matthews Band version live in Central Park (with Warren Hayes)
• Sam Cooke - "Bring It On Home To Me" and "You Send Me"
• Goldfish - "Get Busy Living"
• Kings of Leon - "Fans" (BBC Radio 1 Live Lounge)
• Madrugada - "Majesty" (Live at the Tralfamadore)
• Elliott Smith - "Junk Bond Trader"
• Muse - "Map of the Problematique" (live at Glastonbury)
• The National - "Terrible Love" (live on Pitchfork TV)
• The Gossip - "Careless Whisper" (Wham! cover)
• Gnarls Barkley - "Reckoner" (live Radiohead cover)
• Eddie Vedder - "My City of Ruins" (live Bruce Springsteen cover)
• Tegan and Sara - "Dancing in the Dark" (live studio Bruce Springsteen cover)
• Gaslight Anthem - "9 Crimes" (live Damien Rice cover)
• Gaslight Anthem - "I Do Not Hook Up" (Kelly Clarkson cover on BBC Radio 1 Live Lounge)
• The Subways - "Staring at the Sun" (TV on the Radio cover)
• TV on the Radio - "Mr Grieves" (a cappella Pixies cover)
• Frightened Rabbit - various tracks including "Keep Yourself Warm", "Poke", "Heads Roll Off", "Swim Until You Can't See Land", "Fast Blood", "The Wrestle, The Loneliness & The Scream", etc...
• The Lemonheads (feat. Liv Tyler) - "Hey, That's No Way To Say Goodbye" (Leonard Cohen cover)
• Judy Collins - "Suzanne" (Leonard Cohen cover... some controversy surrounding this one, as apparently it should have been Nina Simone's version)
• GAYNGS - "By Your Side" (Sade cover)
• Bon Iver - "I Can't Make You Love Me" (live on The Late Show with Jimmy Fallon)
• Angus Stone - "River" (Joni Mitchell cover)
• Eddie Vedder - "Trouble" (live Cat Stevens cover)
• We are Scientists - "Hoppipolla" (Sigur Rós cover)
• Birdy - "Shelter" (The xx cover)
• Red House Painters - "Have You Forgotten"
• Yeah Yeah Yeahs - "Diamond Sea" (Sonic Youth cover)
• Crash Test Dummies - "Androgynous" (The Replacements cover)
• Steve Earle - "My Back Pages" (Bob Dylan cover)

Not a bad collection, if I say so myself! (With a little help from the odd Poncey guest post and suggestions by others.)

And with that, I have some GMM estimation techniques that need looking at.

See you soon,

o-[-<

Like a kid on Christmas eve...

The Rugby World Cup 2011 starts tomorrow... BOOM!

Good times... GOOD times.

Will South Africa become the first team in the tournament's history to successfully defend the title? Is 2011 a few years too early for Australia's team of gifted youngsters? Can this New Zealand side finally put a 24-year hoodoo to rest on home soil? Most importantly, will Stickman's cable subscription hold out and provide the coverage he deserves needs to stay in touch with all the key games... despite his residing in a far-off land where the primitive locals are ignorant of the intricacies of the scrum, the savage beauty of the crash tackle, the deft touches required to put the inside man into space... and where combining the words "hooker" and "prop" in a sentence is likely to only invite accusations of sexual depravity? (Uncivilised boors!)

My tentative answers to the above questions are: 1) "I fear not"; 2) "probably"; 3) "well, they won't be staying on home soil otherwise";... and 4) "by God, I hope so!".[*]

Really, all other sports are just for laughs. This is what I'm talking about:

Krugman, Hotelling and gold

... and negative (short-run) supply curves.

Paul Krugman's recent column, which links the high price of gold to a disinflationary environment, has generated a lot of discussion in the blogosphere. In essence, he references the Hotelling Rule to show that a high gold price is perfectly consistent with the rock-bottom treasury yields... despite the fact that these two extremes seem to simultaneously imply contradictory expectations of 1) hyperinflation and 2) deflation/very low inflation.

What effect should a lower real interest rate have on the Hotelling path? The answer is that it should get flatter: investors need less price appreciation to have an incentive to hold gold. But if the price path is going to be flatter while still leading to consumption of the existing stock — and no more — by the time it hits the choke price, it’s going to have to start from a higher initial level. So the change in the path should look like this: 

 

And this says that the price of gold should jump in the short run. 

The logic, if you think about it, is pretty intuitive: with lower interest rates, it makes more sense to hoard gold now and push its actual use further into the future, which means higher prices in the short run and the near future. 

[...]For this is essentially a “real” story about gold, in which the price has risen because expected returns on other investments have fallen; it is not, repeat not, a story about inflation expectations. [...]So people who bought gold because they believed that inflation was around the corner were right for the wrong reasons.

Krugman's invocation of the Hotelling Rule here is pretty neat. I certainly count myself as someone in the non-inflationista camp and have been using the "right for the wrong reasons" line on gold bugs for a while. At least those claiming the high gold prices reflects an impending surge in (hyper)inflation, while the actual numbers themselves -- CPIX, BPP and bond rates -- show anything but. It's like an overweight person looking into a fairground mirror and congratulating themselves on their successful diet... all the while losing weight for unrelated reasons. Perhaps they've become enamoured with their reflection and forgotten to eat?

Tortured metaphors aside, I do, however, have two problems with Krugman's analysis:

1. Bond rates certainly aren't low everywhere (Greece, Portugal, etc), and US consumers certainly aren't the only ones buying gold.
2. The Hotelling Rule has, historically, been a poor guide to the price path of gold (and, indeed, other metals). There's nothing wrong with the reasoning behind the H-R in of itself; indeed, it conveys an elegant truth that is almost impossible to refute, ceteris paribus. However, abstracting to a pure interest rate effect hasn't proven empirically successful. In short, it has been overwhelmed by technological shocks on the supply side, as well as other demand-related factors.

That's not to say that there isn't merit in Krugman's argument, because it certainly serves a purpose in trying to reconcile high gold prices and low interest rates. At least, in the US. My own opinion differs, to be sure, but is not entirely incompatible. I see the high gold price is primarily a function of fears of insolvent governments being unable to repay their debts, and the simple dearth of alternative investment opportunities out there. As long as equities are yielding negative returns and bonds yields are low and/or risky, even modest rises in gold prices suddenly become very attractive. <Insert jokes about beauty contests here.>

===

There is a quasi-related factor to all this is that I want to finish today's post with:

The supply elasticity of gold production in certain countries -- most notably South Africa -- is negative. That is, gold miners actually cut back on production following an appreciation in the price of gold rise. Just as high gold prices and low interest rates seem incompatible (at least at first blush), the idea that producers should reduce production in the face of rising prices appears to contradict common sense. Until you understand a bit more about the circumstances under which gold miners operate.

Gold mines in South Africa are incredibly deep, making them complex and expensive operations to run. When the price of gold suddenly rises, producers are afforded the opportunity to prolong the life expectancy of a mine. They do this by mining the poorer quality veins of gold first, since it is now profitable to do so. When the price falls again, whether that be in absolute terms or relative to costs, they switch back to mining the richer deposits and thereby maintain projected cash flows. Gold producers are thus trading off short-term profitability against the expected lifetime value of their mines.

Rather presciently, John Maynard Keynes hypothesised the backward-bending supply curve for South African gold production for these reasons back in 1936.

THOUGHT FOR THE DAY: There are many factors pushing up the price of gold to extreme highs. Personally, I don't think that inflationary fears can justifiably be cited as the key driver. At the same time, there are reasons to be sceptical that high gold prices necessarily follow low interest rates (as per the Hotelling Rule). Nevertheless, there are certainly strange forces at play in determining the gold price right now. Some of the most important ones would, at first glance, even appear to contradict common sense. It may be convenient to be right for the wrong reasons for a while, but you wouldn't want to stake your career (or your house) on it any longer than is necessary.

Privileging theory over evidence

It's late and my brain is in desperate need of sleep, but I've just read something very interesting on the Mises.org blog (via Twitter). In particular, Bob Murphy shapes to provide a takedown of a new book by economic anthropologist, David Graeber, on the true origins of money: Debt: The First 5,000 Years. Bob's motivation appears to stem, in large part, from the awkwardness that Graeber's thesis would imply for adherents of Austrian economics. As he writes in the introduction to his article:

Last week the popular blog "naked capitalism" ran an interview with David Graeber, an "economic anthropologist" whose new book allegedly destroys the standard account of the origin of money. If correct, Graeber's views would prove embarrassing to the Austrian School, because it was none other than Carl Menger who developed the first systematic explanation for how people went from barter to a full-blown monetary economy.

Bob then goes on to summarise Menger's position, before refuting Graeber's challenge in the body of his post... Which is all good and well, except that Graeber has provided an outstanding reply in the comments section, which rather eviscerates the original critique.

Graeber's comment is very long (broken up into six parts), but well worth reading through the whole thing to get a full sense of his arguments. In the interest of being fair to any Austrian readers, at this point I should probably say that -- as suggested by the quoted text above -- this is more a matter of pride than a fundamental attack on, say, ABCT. While awkward for Austrian sympathisers, I'm not trying to claim that the possibly of Menger being wrong in this instance serves to invalidate the edifice of Austrian Theory...[*]

That being said, it remains a very interesting topic, especially in these fractious times where the proponents of "hard money" and fiat currency are clawing at each other's throats. More fundamentally, the debate serves to highlight something closer to my own heart: The dangers of privileging theory above evidence.

As Graeber's writes:

As for the supposed refutation of my example of the village where people loan things to one another, no, [Murphy] does not get my argument right at all. First of all, we are not dealing with a situation where people borrow things from one another and expect an equivalent of exactly the same value. I suppose the certain Austrian school theories of human nature assume that's what neighbors in a moneyless economy would do with one another, but again, this just shows a flaw in those theories of human nature, because when tested against the empirical evidence, this is not what one finds.[...]  

[snip] 

I think the participants in this forum should reflect on what they consider the status of economics to be. Is it a science that generates hypotheses about empirical reality that can then be tested against the evidence, and changed or abandoned if they don’t prove to predict what’s empirically there? Or is it a kind of faith, a revealed Truth embodied in the words of great prophets (such as Van[sic] Mises) who must, by definition be correct, and whose theories must be defended whatever empirical reality throws at them – even to the extent of generating imaginary unknown periods of history where something like what was originally described “must have” taken place? 

Well said. I've expressed my scepticism about the extreme a priori approach adopted by certain Austrians before (e.g. here and here). Yes, it's true that we can deduce much about human behaviour and economic systems based on a few key assumptions -- indeed, all theory aims to do something along those lines. However, I find the notion that these simple axioms provide the foundation for understanding the full complexity of economic activity, without the need for supporting empirical evidence to be... well, nothing short of the pretence of knowledge.

[*] Indeed, from my reading of things, Graeber appears to be refuting Adam Smith's account of the barter economy as much as anyone. Let me also state for the record that I actually look forward to Bob's response. I've seen him stage a comeback before after appearing completely cornered on an issue before, so you never know...

Cover Thursdays - Poncey Dylan edition

Guest post.

My mate, Poncey notes my calls for help RE this whole blogging thing and a lack of sufficient posting time. I would also let the record state that the man has started up his own blog, which you'll no-doubt be wanting visit straight after reading this! Who can resist a "A Smörgåsbord of weighty opinions[...] An exotic blend of rants, sport, music and observations of the absurd in everyday life -- as well as some other kak."? Not I. Anyway, here the Ponceman making a fairly ballsy call - Ed.

Right, so you get really excited when you hear that one of your favourite bands is singing a cover of one of your favourite artists.  In this case it's the Decemberists* doing Leonard Cohen's 'Hey that's no way to say goodbye'.  You patiently wait for it to be released and for it to reach YouTube and when -- and I'm just finishing my first listen here as I type -- you hear it and you're thoroughly disappointed.

I was going to say something along the lines of you've got to have a huge set of stones to cover Leonard Cohen, but then I realised that an oke named Rufus Wainwright and Liv Tyler have done decent efforts -- so maybe he lends himself to the cover a bit better than Bobby D.

If you're reading Stickman's blog or know the man personally you're probably not averse to the odd thesis-length post or conversation (he remains the only person I've ever heard use annotations during a conversation), but I'm going to keep this relatively short.

Covering Dylan is an insane risk in my opinion.  Yes, Guns 'n Roses, Jimi Hendrix and no doubt some quite enjoy the wailing of Joan Baez or the unbearable naff-ness that is the Byrds.  Yes yes.  Making something that is already brilliant more popular ain't really the point.

HOWEVER, I do believe I have found the greatest Dylan cover ever.  Up until two months ago it wasn't on YouTube, but here it is now for your enjoyment.

Aim your stones at the body.  Go.

Poncey. 

Finally...

The academic paper that you've been waiting for! Zombie guru, George A. Romero, teams up with Columbia statistician, Andrew Gelman, as they seek to answer the question that plagues us all:

How many zombies do you know?

Using indirect survey methods to measure alien attacks and outbreaks of the undead.

Abstract:

The zombie menace has so far been studied only qualitatively or through the use of mathematical models without empirical content. We propose to use a new tool in survey research to allow zombies to be studied indirectly without risk to the interviewers.

The text is actually funnier than the abstract, including some great lines. ("But mathematical models [of zombie outbreaks] are not enough. We need data.")

The first zombie film that really hooked me wasn't actually a Romero original, but Zack Snyder's "remake" of Dawn of the Dead. Perhaps the best opening 15 minutes of a film you're likely to see. And if we're talking zombie humour (though I suppose all of Romero's films are tinged with dark laughs throughout), then I'm scoring Shaun of the Dead way above Zombieland.

The Winchester

Service, interrupted

You may have noticed that blogging's been a bit slow around these parts, lately. Please accept my apologies, but it's a hard thing to rectify given my current circumstances.

Last week I began what was ambitiously labelled a "refresher" pre-course in Maths and Statistics. I feel a more accurate meme would have been "SHOCK AND AWE".

Of course, there's some stuff that I can recall through the hazy fog of undergraduate memories -- how could I forget an inequality named after Chevy Chase?? -- but much of it is entirely new.

You can call me Al?

I don't know whether it's a cause for optimism, but I take cold comfort in the fact that my new classmates all claim to be pretty much in the same boat. [Side note: I once heard a piece of musical folk wisdom to the effect of "Playing the Blues isn't about making yourself feel better... It's about making everyone else feel as bad as you."]

This coming week, I'll have to juggle the second half of this intensive Maths/Stats malarkey alongside the start of my core modules from the first semester: Microeconomics and Econometrics. In addition, I'll starting my TA duties for the Master's econometrics course. My only hope is that the Big Lebowski kills me before the Germans can cut my dick off. At the current rate then, I'm really just aiming to successfully make it through these first few weeks and pass the compulsory exam early next month.

Some more cheery academic news from the past couple days is the "completion" of paper that I have been working on with my supervisor. We've tweaked the theoretical model quite a bit and got the key findings down into a workable, 20-page format. At the moment, the paper is sitting with an external colleague of my supervisor for comments, but hopefully we get to submit it (with whatever changes are recommended) for journal publication early this week. Then, I suppose, the process of response and revision will begin in earnest! Still, nice to get it out the door in it's current form.

In sum: Busy times.

Hopefully I get round to some semi-regular blogging activity in a couple weeks. In the meantime, you folks stay classy.

Quote of the day - Burning Bridges

May the bridges I burn light the way.

- Anon.

Cover Thursdays - Instrumetalist edition

And, yes, I did mean to spell it that way.

Just got some time to squeeze this in before a self-imposed deadline... I feel it's high time we had something a little different here at the Corral. "How different?", you ask.

Well, how do some head-banging -- though possibly epileptic -- cellists grab you?



Okay, perhaps you're not impressed. If so, then I'm afraid to say that this next clip, featuring the (multi-talented!) comedian Bill Bailey, may not sway you either:



Well, I chuckled.

Four-Year Plans...

So, my PhD programme began today. We're starting with a preparatory maths and statistics course, before getting into the core modules -- micro, macro, 'metrics and (scientific) methods -- during the year. Well, those plus a couple of electives that I'm interested in taking, but won't mention here because they don't begin with the letter "m". Alliteration uber alles!

All told, it's a four-year programme (yikes!), but with a one-year exchange and 25% work obligation thrown in. So that should hopefully mix things up a bit. (In case you're wondering: Yes, I do feel like this.)

Anyway, after umming and ahhing for a while about the whole PhD palaver, I'm pretty happy with my decision to go this route. At this (very) early stage, I'm not particularly set on a career in academia afterwards -- though I certainly like having the option -- but rather feel the additional qualifications will stand me in good stead for my general career ambitions. Plus, I've been lucky enough with my research scholarship that my earnings won't really suffer in the interim :)

On that note, I only just checked my final Master's results yesterday, including that of my thesis. (I'd previously just assumed that everything was more-or-less okay unless my supervisor contacted me with a "we need to talk" email.) As such, I'm happy to report that everything went smoothly. I've also just about finalised a shortened, adapted version of my thesis that I'm hoping to publish as a co-written journal article. I'll keep you informed...

As a general comment, I believe that time away from studies and working in the professional sector certainly helped sharpen my focus coming into postgraduate studies -- as did my travelling stint. I know that some people happily go all the way through from a Bachelor's to a Doctorate, but I'm very pleased to have had those experiences outside of academics in retrospect. FWIW, I'd recommend a similar approach if anyone is seeking advice towards that end. Your perspectives are broader at the same time as your true interests are clearer. And, although the charge is often made unfairly, you're also far less likely to suffer from ivory-tower syndrome, which is the Achilles Heel of many university residents.

Ideas, not people

Beyond the specific subject matter of my previous post, I think that the Paul Samuelson article inadvertently highlights something else of value... especially in the current, polarised economic climate.

Samuelson, of course, was arguably the seminal economist to emerge after the Second World War. A (neo) Keynesian first-and-foremost, he revolutionised the field through the application of a common mathematical language to economic problems (co-opting the approaches found in the physical sciences) and is also held as figurehead of the neoclassical synthesis that came to dominate economic thinking in the latter half of the 20th century.

And, yet, he happily acknowledges a seminal contribution of Friedrich Hayek -- whom many would regard to personify something like the antithesis of Samuelsonian economics -- in an important economic issue; namely the role of decentralised prices in allowing viable economic calculation.

I keep seeing people pitting the likes of Hayek versus Samuelson/Keynes as if it's some stark choice: All of one and none of the other. Similarly, there's a tendency for people to slavishly (deride) defend their (non-) favoured thinker no matter what cost or subject. Now, of course, it certainly is true that there are some very different prescriptions on things like fiscal policy that are not going to be reconcilable... However, it's beyond counter-productive to overlook the fact that there are also some tremendously important areas of commonality.

While I can't speak for every economics programme out there, I've certainly been exposed to (and influenced by) Hayekian insights in my classes and syllabus. And, let's not forget, that's coming from someone studying in the socialist nightmare that is Scandinavia! Dum dum daaaa....

The Daily Show - The Stockholm Syndrome Pt. 1
Get More: Daily Show Full Episodes,Political Humor & Satire Blog,The Daily Show on Facebook

Part 2 here.

Humour aside, I have to smile wryly at suggestions that someone like Hayek has been unduly ignored and marginalised by mainstream economics. That type of explanation just smacks of laziness and a lack of intellectual integrity. The man won a Nobel Prize for goodness sake! Beyond the narrow field of professional economists, he acted as an inspiration for Margaret Thatcher among numerous others, influencing many of the most powerful political  and business leaders of the last two generations.

Just as Samuelson expresses his admiration of Hayek for pinpointing the value of decentralized prices in unlocking the socialist calculation debate, he can comfortably dismiss some of the latter's other prognostications and positions.[*] Finding some redeeming feature in your intellectual opponents isn't a pre-requisite for being a serious thinker, but at least it means you aren't an empty ideologue. By the same token, Hayek, Keynes, Samuelson, or anyone else for that matter, didn't need to be right about everything to contribute many profound insights to economic thought.

It is ideas that matter, not the people behind them.

[*] In case you missed it, the money passage was: Hayek has been persuasive -- not in Whig ideology or in declaring that moderate reform of laissez-faire leads inevitably down the road to totalitarian socialism but -- in arguing that experience suggests that only with heavy dependence on market pricing mechanisms can there be realized quasi-efficient and quasi-progressive organization of societies involving humans as Darwinian history has bequeathed them[...]

Hayek contra Coase... on property rights?

Say it ain't so!

Well... I guess it ain't technically "so"... but hear me out on this one.

Noah Smith, citing his personal experiences in Japan, writes that irreducible transaction costs place a not insignificant constraint on the gains to be had through privatisation:

[T]he existence of a government-owned "commons" often makes people feel more free, not less. Sure, the commons is financed through taxation, and sure, that means that people generally don't receive benefits exactly equal to what they pay. But the difference can be small, and is often canceled out by the fact that you only pay once rather than a million billion times. [...]Past a certain point, the gains to privatization are outweighed by the sheer weight of transaction cost externalities. (Note that transaction costs also kill the Coase Theorem, another libertarian standby; this is no coincidence.)

Of course, these aren't new points... Even yours truly has been known to say similar such things. From time to time. Ahem.

All that being said, the above is really just an elaborate segue to something else that I read earlier this week: A 1995 paper by the late Paul Samuelson, Some uneasiness with the Coase Theorem.

In typically pithy fashion, Samuelson hits on several issues surrounding the Coase Theorem that have come up in the blogosphere. Such as:
- What exactly qualifies this as an original "theorem"?: Many disciples cheerfully agree: There is no Coase Theorem. (Cf. Env-Econ.)
- The problem of distorted incentives in establishing an efficient allocation of resources: "If I go the road of buying off those who would burglarize me, I soon evoke a new supply of threatening burglars." (Cf. Matt Rognlie.)

His biggest concerns, however, are reserved for the Coaseian tendency to collapse -- and then conveniently file away -- important strategic considerations under the umbrella of (zero) transaction costs. Of course, information asymmetries between bargaining parties are an intrinsic characteristic of unequal property rights distribution, thus severely inhibiting the possibly of achieving Pareto optimal outcomes.[*] More fundamentally, though, Samuelson argues that bilateral bargaining agreements such as Coase envisaged between, say, a land owner and free-roaming ranchers, suffer from the same inherent inefficiencies as standard duopolies / bilateral monopolies. That is, they are beset by various (game-theoretic) strategic considerations that undermine the negotiating process:

What really interested me amidst all of this was Samuelson's invocation of Hayek to highlight the crux of his argument. Here's some of the meat:

The Coase-Samuelson generation were brought up witnessing the great debate between von Mises and Lerner-Lange concerning the feasibility of socialist rational pricing to produce Utopia. (That was a reprise of earlier Pareto-Barone-Wieser-Taylor debates.) Many contemporaries believed Lerner-Lange triumphed in the debate. I came to believe that Friedrich Hayek was the true victor.

Under static conditions where all is known or knowable (to whom?), whatever optimal states laissez-faire might occasion, so could some computer solution or some algorithms of play the game of competition also achieve. But in the real world all is changing, even in the time it takes me to write this sentence. Hayek has been persuasive -- not in Whig ideology or in declaring that moderate reform of laissez-faire leads inevitably down the road to totalitarian socialism but -- in arguing that experience suggests that only with heavy dependence on  market pricing mechanisms can there be realized quasi-efficient and quasi-progressive organization of societies involving humans as Darwinian history has bequeathed them[...]

My point is that the same thing applies to legal assignment of property rights. [...]We can contrive [in public utility economics] a variety of alternative property rights that would make for Pareto-Optimality. [...]But in the time it takes me to write this paragraph, exogenous change and dynamic endogenous change will cause the data of the problem to change in such a way as to entail a different set of property rights. If the Social Contract makes all earlier property rights capable of being abrogated to adjust to new Pareto-Optimal needs, we are in the old quagmire of moral hazard, inverse externalities, and so forth. No doubt wise Twenty-First-Century Hayeks or Lerners will come forward to give persuasive counsel on how a Mixed Economy will want to compromise among divergent instrumentalities so as to optimize various definitions of social and individual welfares.

 [snip]

To try to capture all that which contributes to deadweight loss under the verbal rubric of "transactions costs" weakens a useful concept without gaining understanding of incompleteness of markets, asymmetries of information, and insusceptibilities of various technologies to decentralized pricing algorithms.

Anyway, read the article to get a better understanding of the context. It's only six pages long and cuts to the core of some of the persistent scepticism surrounding the Coase Theorem. (Not that Ronald Coase himself wasn't aware of the practical limitations of his approach, as I have tried to explain previously.) And, when you're done with that, you can read a comment on Samuelson's article -- in partial defence of Coase -- by another esteemed economist, Oliver Willamson, here.

UPDATE: Continuing with my famous economist links fest, Deirdre McCloskey weighs in loquaciously on the matter here.
___

[*] Recall that the original formulation of Coase's argument held that zero transaction costs effectively meant perfect information among all parties.

Ikea

Two things that I learnt about Ikea (and public transport) yesterday:

1) Flat packed furniture may be much easier to move about than the ready-built stuff, but it is still rather cumbersome to transport your new apartment furnishings on the bus. Also, other passengers tend to frown upon such behaviour... especially when your new lounge unit is taking up all available seats. If disapproving looks from (standing) elderly women don't get you down, then the walk uphill to your apartment -- with said furniture on your back -- just might.

2) Ikea's greatest achievement is not that it provides affordable furniture and home luxuries to the masses. Rather, it is helping a generation of emasculated, desk-bound males feel something like the practical men that their grandfathers were. I haven't felt this "handy" since I was champion Lego builder of my neighbourhood circa 1988.

Can the trolley come too?

Cover Thursdays - 90s throwback edition

Super quick post as I'm off to catch a plane shortly, but here's a little something to take you back a decade or so:

1) The awesome Karen O leads her Yeah Yeah Yeahs bandmates in a heartfelt rendition of Sonic Youth's "Diamond Sea".



2) GR reminds me of this suitably quirky Crash Test Dummies version of "Androgynous", originally by (tragically under-appreciated) The Replacements.



Stay classy folks and I'll see you all a couple days once my internet is successfully set up.

Red House Painters - Have You Forgotten

Talking about the Vanilla Sky soundtrack, here's a great example of a "nearly perfect" song. I'm not sure where the problem lies exactly, but it's just missing that extra something that would make it one for the ages. (My instincts tell me it's the chorus and some sloppy lyrics in the middle...) Still, well worth a listen:



NOTE: Yes, I realise that these clips are not from Vanilla Sky. They're from À la folie... pas du tout (He loves me... he loves me not). However, it was about the only video that I could find on YouTube that had the correct version of the song, which didn't involve tortured little emo sayings flashing across the screen.

Changing Faces

I've just come back from London, where I was staying with one of my best friends from school. He is a professional rugby player and currently plies his trade with Saracens, the 2010/2011 English Premiership champions.

Saracens have earned plaudits -- as well as attracted a degree of professional acrimony and jealousy -- for giving the two-fingered salute to the old boys running the English RFU shaking things up in English rugby circles. There's much to be said about the extremely professional, yet largely alternative route that they've taken to summit the world's richest rugby league. Such issues are largely beyond the scope of anything that I want to mention here, however, save for the fact that the club really emphasizes personal development outside of simply playing sport. They do this by strongly encouraging players to take on tertiary education, organizing special events for them to attend, and inviting guest speakers to deliver interesting and inspiring stories at the club.

I went along as a guest to one such session this weekend, which was led by James Partridge, founder of Changing Faces. As the name implies, Changing Faces is a charity that "supports and represents people who have disfigurements to the face, hand or body from any cause".

James' own life was forever altered after being involved in a severe care accident in his late teens:

On the Ides of March 1971 (15.3.71), I looked in a mirror for the first time after my accident 3 months previously – and from knowing myself as a good-looking 18-year-old guy with prospects, I came face-to-face with a disaster area which, it was very hard not to think, could only hold a very tarnished and unhappy self. 

The photo tells only a part of the story because (a) it is black-and-white, and (b) it was taken two months after my day of reckoning when my face was still bloody scabs, vivid redness, and ghastly distortion. 

 

Look carefully and you may see the tell-tale signs of doubt, grief and pessimism – I felt all of these as I scanned across that face and I just could not imagine how I could ever get my life back – any kind of life, frankly… 

Five years of brilliant 1970s surgery created the face I now wear with pride but it was what went on outside hospital as I struggled to become a fully-included citizen and not an outsider, a horror-movie villain nor a just a lifelong patient, that really counted for me.

Interacting with everyone at the club, James was never less than charming and confident. Alongside a genuine interest in other people, it's amazing what a difference those qualities make towards disarming any knee-jerk reactions to his "strange face" (as he put it). There was no need for avoidance of eye contact, unnatural sympathy, and so forth, simply because he appeared so comfortable with himself and effectively managed the expectations of others.

James as he is today

Listening to his story, I was also reminded of Vanilla Sky. In addition to a great soundtrack, I admired the film for seriously tackling the issue of how our physical appearance is intrinsically linked to our happiness; a subject that is too often passed off as frivolous and vainglorious, when of course it isn't. I'm used to interacting with the world in a certain way and much of that is contingent on the way that I look. In fact, I'd venture that we all trade on our looks to some extent and, as Oscar Wilde observed, beauty is its own form of genius.

Unfortunately, in Vanilla Sky Hollywood sensitivities ultimately won the battle: A disfigured Tom Cruise sees all his problems solved via cryogenic freezing and a visit to an advanced plastic surgeon's office at some unspecified point in the future. (Talk about realistic expectations!) In contrast, the people at Changing Faces offer some real insight into how those with disfigurements can overcome the challenges of integrating into a society obsessed with looks.