Friday, January 31, 2014

Jon Stewart’s Minimum Wage Mistake

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The Daily Show with Jon Stewart screened a backwards supply and demand graph. Whatever, mistakes happen. They fixed it the day after. The irony though is that they screened it during a segment which criticized the view that supply curves slope downward – that minimum wage causes unemployment.

I can accept that at some margin the tradeoffs of minimum wages are utilitarian within the right margin. I can even accept that the right margin is higher than what it is now. What I’m very suspicious of is that with 99% of demand curves sloping downward, that we happened to pick the one that didn’t slope downward to fix the price of before we had any theoretical or empirical justification for it. I find it far more likely that liberals believe that minimum wage is different is as a rationalization for the policy they’ve always liked in the first place.

Thursday, January 30, 2014

The Economist on Macro, Micro, and Minimum wage

This is a very good article from Free Exchange (The Economist).

Microeconomics is the good economics, where economists by and large agree, conduct controlled experiments that confirm or modify established theory and lead to all sorts of welfare-enhancing outcomes.

To which I respond with two words: minimum wage.

One of the first things we learn in microeconomics is that demand curves slope down: raising the price of something reduces the quantity demanded. A minimum wage should reduce the demand for low-skilled workers as surely as a price floor on milk will reduce the amount bought.

Yet ask any two economists – macro, micro, whatever – whether raising the minimum wage will reduce employment for the low skilled, and odds are you will get two answers.

It is funny how the textbook understanding of minimum wage has fallen out of favor (make something more expensive and people buy less, amazing!). Greg Mankiw cites 79% of economists agree that minimum wage increases unemployment among young and unskilled workers. The data he is working with is a little older. A more recent poll of economists show that only 34% of economists agree and 32% disagree that a $9 minimum wage would make it noticeably harder for low skilled workers to find employment. 24% are uncertain. A part of the difference in the two polls is the inclusion of this word, “noticeably”, but I don’t think that’s enough to make up the difference. What used to be an economic consensus is much more of a split now.

What is true of all economics is that as soon as you wander into policy, you find the debate hijacked by policy advocates who write, report and promote research that reinforces their side of the debate while ignoring or disparaging the other.

I’m not sure if the author is referring to journalists or economists. Economists are certainly capable of confirmation bias of their right wing or left wing presuppositions. My impression is that the minimum wage debate divides up very well by ideology – leftish economists like minimum wage more than rightish economists.

It is fair to say that when it comes to the minimum wage, Barack Obama is a policy advocate, not an economist. Tonight in his State of the Union Address, he will repeat his call to raise the federal minimum wage. Today he has announced he will use his executive authority to entitle employees of federal contractors to a higher minimum wage. In its release the White House says:

‘A range of economic studies show that modestly raising the minimum wage increases earnings and reduces poverty without jeopardizing employment.’

Well, “range” is a pretty imprecise word. There’s also a range of studies that shows raising the minimum wage doesn’t reduce poverty and does jeopardize employment.

Politicians do what politicians do. I don’t blame the politicians as much as all the rooters and ranters who fail to exhibit calm rational skepticism of the evidence for what they’ve always believed in the first place.

The White House also says:

‘Low wages are also bad for business, as paying low wages lowers employee morale, encourages low productivity, and leads to frequent employee turnover—all of which impose costs’…

…is it plausible that Wal-Mart or McDonald’s know their own business so poorly that they are systematically hurting themselves by paying too little? Isn’t it more likely that they have weighed the tradeoff between low wages and poor morale and chosen the combination that maximizes profits?

The idea that the federal government needs to tell firms how to make profit is about as about as ideologically driven as an idea can get. Sometimes I hear about how Henry Ford paid his workers a significant premium so that they could turn around and buy Ford cars -- therefore government should force employers to help themselves by enacting the same model. This old wives tale is very far fetched logically, even if Henry Ford himself promoted it. A serious account of the magnitudes makes the story look ridiculous. With 14,000 workers selling 170,000 cars a year, the premium being paid to the workers couldn’t possibly pay for itself. Not even close.

And besides, wouldn’t you just pay the premium in the form of employee discount so that workers wouldn’t spend it on Toyota products or anything else that they can spend money on?

Why would Henry Ford pay his workers more than he had to? For the same reason almost every employer today pays above the minimum wage – to bid for better workers and reduce turnover. When only 2-4% of workers are paid the minimum wage, one is going to have to admit that on some level workers have bargaining power. In order to believe that they have none you’d have to also believe that all of these employers who pay more than they have to are very very charitable or very very confused about how to make money.

That’s my account of the Henry Ford myth. I hope it didn’t come across as too ranty. Back to The Economist on macro, micro, and the minimum wage.

The article ends with a thought on income inequality which strikes me as wrong,

They are doing the same in the debate over income inequality. Economists can offer explanations for why inequality has risen and what might reverse it, but they cannot advance positive reasons for what the right level of inequality is; this is function of social preferences outside the realm of empirical or even theoretical economics. (At least, they can’t make the case on microeconomic grounds. There are macroeconomic reasons to fret over higher inequality because shifting income from the high consuming poor to the high saving rich reduces aggregate demand.) Fundamentally, economists are troubled by inequality for the same reason non-economists are: it doesn’t seem right.

“It doesn’t seem right” is a great argument for the public, but the economists I’ve heard talk about an efficiency-equity tradeoff. There are a couple reasons why they say equity is valuable 1) because economic consumption has diminishing returns – that is an extra $1 to a millionaire is less valuable than an extra $1 to someone in poverty. This account is not in favor of equality per se, but only equality in so far as it improves the absolute living conditions of the poor (but not necessarily relative to others). 2) the second reason is in favor of equality in and of itself. Economists don’t favor efficiency, they favor utility for which efficiency is a means. If utility is a variable somewhat dependent on equality (I’m not as happy because my standard is what other people have), then equality is a good in itself.

Has the author ever heard Joseph Stiglitz (2001 Nobel Prize winner)? One argument he doesn’t make (to other economists) about the value of equality is “it doesn’t seem right”.

Wednesday, January 29, 2014

Bill Nye Defend Climate Change on Stossel

This is a video of Bill Nye the science guy defending the existence of the global warming disaster (if the embed doesn’t work, here is the site). He’s on the libertarian Fox Business show, Stossel.

I’ve been critical of Bill Nye before, but he performed the interview very well against a very tough crowd. The “debate” seems to have been sliced and diced by the editors too, and given Stossel’s audience, this probably wasn’t very favorable to Bill Nye. I commend how Bill Nye stood there and attempted to work through the logic of global warming with his opponents, rather than get bogged down on the statistics. Climate varies enough naturally that there’s no way to predict what would have happened otherwise, so most of these graphs don’t prove much one way or another. But working through the logic of carbon emissions to greenhouse gases to a warming effect is very difficult to dispute.

 

Thomas Sowell on Econtalk on Economic Facts and Fallacies

Here is Thomas Sowell on Econtalk. The discussion is on Sowell’s book, Economic Facts and fallacies. In it (and in the interview) Sowell covers and rejects the many economic fallacies that you hear particularly from leftists in popular discourse.

Sowell is pretty clearly right in most of the matters he covers. They’re sort of low hanging fruit though. Popular liberalism is filled with arguments that sound good, but fall apart after researching it from a more objective, non-liberal accounts. As far as I can tell, nothing that Sowell says would contradict the beliefs of more sound liberals like Matthew Yglesias or Jonathan Haidt. If this kind of liberalism weren’t so popular – if Thomas Sowell were building straw men – then I’d be much more receptive to leftish politics and even the political system as a whole.

But since popular liberalism is not very good, and popular conservatism is no better -- and even the politics of those who don’t fit in that spectrum is not very good, then we should be very suspicious of how well government will perform to whatever extent it performs ideally – that is, listens to voters. This should therefore result in making us all the more libertarian.

Saturday, January 18, 2014

Puzzle of Infinite Babies

Every parent I've ever known is glad that they had their last child. It doesn't matter how many children they've had, their last one was a good idea ex- post. One can turn that observation from anecdote to data by asking parents,

“taking everything into account, are you glad you had your last child?”

Presumably, the vast majority of them would say yes.

Ex-anti they oftentimes don't want to have one more, they will give all sorts of reasons for why having one more is not a good idea. But upon the actualization of such reasons, they almost never hold up, and they're glad they had their last one. One more baby is an investment that always yields a positive return.

Solutions?

1. Keep having one more baby

2. Taboo Bias. People fool themselves into thinking that their last child was a good idea because saying that Johnny
shouldn't have existed is not nice.

3. What you see is all there is bias. People have trouble evaluating circumstances relative to the counter-factual. "I can't imagine life without my Johnny", if you can't imagine it, how do you know it's worse?

4. People are just really really good at deciding when not to have one more child. Almost everyone stops having babies exactly when one more baby is a bad idea.

Hagee on Supersessionism and Rapture

John Hagee’s book, Four Blood Moons, finds connections between biblical eschatological prophesy and major events in world history. The problem is that he picks his particular interpretation of prophesy out of a large stock of possible interpretations for no other reason than because it fits his coincidences. The same with the events the prophesy is claimed to predict -- they’re picked from a large stock of possible choices, and the only reason to pick them over the other ones is because they fit his coincidences. That makes them not coincidences at all.

That is a problem. I don’t mind it when people make mistakes, but Hagee has a very crude understanding of alternative views. He makes poor arguments against them and does not accurately represent what they believe and why. He’s disrespectful and aggressive towards his opponents. 90% of his argumentation is geared toward painting them a bad color, and 10% is devoted to arguing with what he thinks they believe.

Particularly, this is the case when he represents Supersessionism…  and I don’t know what to call them – non-rapture people.

Supersessionism

Hagee uses the term, “replacement theology” to describe Supersessionism, which is pejorative. The first words which he uses to introduce the reader to it are,

Some Christians teach that God has broken covenant with the Jewish people. This teaching has come to be known as replacement theology; some refer to it as Supersessionism.

Do Supersessionists believe that God broke his promise? No. They do not. So do they therefore need to ask themselves, “If God has broken covenant with his own flesh and blood, what confidence do we, as Gentiles, have that he would not break covenant with us?” No they don’t.

Supersessionists, of which I am not one, believe God’s various promises to Israel were upon condition, fulfilled, or added to. I have never heard of any Supersessionist who believes that God broke his promise. And so arguing that God does not break his promises is arguing with a straw man.

Hagee gives Matthew 21:19 as what he thinks is a Supersessionist proof text. It is not. Hagee calls it a foundation for replacement theology. It is not. In the passage, Jesus curses a fig tree, saying, “let no fruit grow on you ever again”, and it withers. The idea that this is a foundational text for Supersessionism is silly. This too is a straw man.

Hagee presents Romans 11:1 as if his opponents disagreed,

I say then, has God cast away his people? Certainly not! For I also am an Israelite, of the seed of Abraham, and the tribe of Benjamin”

Supersessionists do not believe that God cast away his people. That is not the matter in dispute. All the views in question affirm that God keeps his promises. There is also middle ground between favoring and abandoning. If God treats Israel like any other ethnicity or nationality then he is neither abandoning nor favoring them.

Near the end of his foul treatment of Supersessionism, he calls it religious Anti-Semitism, as if believing that God no longer favors the Jewish people, that is anti-Jewish.

Non-rapture people

Unlike the last topic, where I actually tend to favor Hagee’s view but not his treatment, I actually disagree with him. I don’t think that scripture teaches in a rapture the way most evangelicals define it. Regardless, he treats the non-rapture people with the same lack of intellectual empathy that he treats Supersessionists.

He claims that non-rapture people think that the bible is allegorical or a myth. He then continues to explain that God literally created the heavens and the earth, and Jesus literally died on the cross, and therefore the rapture is literal. In fact, we don’t have to decide between the bible is completely literal or completely metaphorical, we can actually pick and choose depending on the context. Hagee claims that the bible is literal from cover to cover, so I guess he’s looking forward to a harlot clothed with the sun drinking the blood of the saints. He also thinks that he is literally the salt of the earth – you know, salt, those little white grainy things. He’s one of those.

He also argues against the claim that if the word “rapture” isn’t in the bible, then it is false. I have heard some people make that sort of argument, it is pretty bad, and Hagee properly argues against it. Lots of words were made up after the bible to describe things that are in the bible.

He points to 1 Corinthians 15:51-52 and 1 Thessalonians 14:16-17 in order to justify the rapture. Those are pretty common passages for rapture people.

Listen, I tell you a mystery: We will not all sleep, but we will all be change - in a flash, in the twinkling of an eye, at the last trumpet. For the trumpet will sound, the dead will be raised imperishable, and we will be changed.
1 Corinthians 15:51-52

That sounds like just the general resurrection to me. Do non-rapture people believe that there will be a general resurrection on the last day? Of course they do. If you want to call that the rapture, then be my guest. My understanding is that traditionally the general resurrection on the last day was referred to as the rapture. It is only recently that evangelicals have made it into the disappearance of the saved for an extended period of time.

For the Lord himself will come down from heaven, with a loud command, with the voice of the archangel and with the trumpet call of God, and the dead in Christ will rise first. After that, we who are still alive and are left will be caught up together with them in the clouds to meet the Lord in the air. And so we will be with the Lord forever.
1 Thessalonians 14:16-17

This sounds like the second coming to me. Being caught up in the clouds is imagery (whether literal or figurative) that depicts a greeting and escort as the Lord comes down. In the context of the previous versus, the passage is saying not to be sad for your lost loved ones, you’ll be reunited with them in the general resurrection when the Lord returns. That doesn’t sound like living Christians leaving planet earth for an extended period of time.

Hagee claims that the rapture occurs pre-tribulation. I have no idea how his eschatological timeline works in light of the passages he sites– so the dead will be raised imperishable, the Lord himself will come down from heaven… and then the anti-Christ will appear and the tribulation will take place?

If Hagee wants to argue that the coming Tetrad is an end times symbol, that’s fine. But the way he treats Christians who do not agree is insolent. These Christians typically hold pretty conventional Christian views, and Hagee paints them as radical bible revisionists and then argues with that depiction.

Four Blood Moons

I received a book for Christmas called, “Four Blood Moons”, by an evangelical named John Hagee. One doesn’t need to be a Christian in order to find biblical prophesy interesting. It can be very amusing for anyone to analyze the failures of many evangelicals to interpret biblical eschatological prophesy, and analyze exactly why it sounds to compelling, while at the same time almost never holds true.

The general problem is with misunderstanding the nature of coincidences. Some things that look like 1 in a million coincidence, are not, because the sample being drawn from is not random. It is chosen because it matches the other side of the “coincidence”.

They take apocalyptic literature filled with symbols that can mean a lot of different things, and apply them to a very large sample like major events in world history. The fact that they’re able to be matched up some way is not coincidental at all. The fact that they match up any particular way is very coincidental, but that’s why it is picked out of all the other interpretations. The very reason we’re hearing about those coincidental interpretations is because a mind looking for coincidences found it, and because those kinds of coincidences get popularized.

I haven’t read the whole book yet, but from what I’ve found Hagee has to actually stretch the truth in order for his coincidences to exist. So for him, a “blood moon” in eschatological prophesy means four full lunar eclipses which fall at the same time as Passover and the Feast of Tabernacles in a Shemittah year. Why this particular interpretation? Because this is the one he can make coincidences with.

He claims that the last three tetrads (which is four full lunar eclipses in a row) which coincide with the two Jewish feasts aligned with significant events for the Jewish people. Why these particular events in Jewish history rather than, say, the holocaust? Because these are the events he can make coincidences with.

It isn’t coincidental at all when aspect A and aspect B of a coincidence are being deliberately chosen out of a large stock of choices.

Even with his stretching of the interpretation of biblical prophesy to meet major events in world history, the years he cites leaves wiggle room. So the Jewish Expulsion from Spain occurred in 1492, while the Tetrad began in 1493 and lasted until 1494. In his talks, he actually talks about the Tetrad of 1492, he’s a little bit more honest in the book. True coincidences don’t get wiggle room where close enough counts. And either way, the blood moon doesn’t work as the “warning” he makes it out to be if it occurred after the event in question.

The same thing again with the next Tetrad. Israel became a nation in 1948, and the tetrad was in 1949-1950. Again, this doesn’t work as a warning. We’re also seeing wiggle room to how close the Tetrad is allowed to be in order to give this coincidence significance.

The third Tetrad begins the same year and two months after Jerusalem was reunited with Israel after the Six Day War, 1967-1968.

Here is a list of significant events in Jewish History which Hagee would have to choose from no matter where the tetrad fell. Some of them don’t sound as important as the one’s Hagee mentions, but it is easy to imagine Hagee saying something like,

“in 1867 the Jews, at long last, were finally emancipated from Hungary. And God lit up the heavens as a sign!”

And again, really? No Holocaust? And yet the Jewish expulsion from Spain? Significant is a word that means a lot of things to a lot of people. Certainly Hagee makes each and every event sound significant. “These three dates are the most important dates in all of Israel’s History!” Without exaggerating, it is hard to see why that’s the case.

 

This kind of thing is pretty usual in evangelical eschatology. The only problem I actually have with Hagee in particular is when he argues against the other side. His understanding of what non-rapture people and replacement theology says is severely crude and disrespectful. He argues against them in areas where there is common ground, as if they disagreed when they don’t.

Friday, January 17, 2014

Taboo Tradeoffs for the FDA

Me and my 18 week pregnant wife saw the midwife today. She asked us about getting checked for some kind of diabetes. She said that the risk is very low unless there are some kind of warning signs like that it runs in the family. We didn’t meet any of the warning signs so we declined, and she thought that made sense. No big deal.

We just put a price on the babies life. That’s a taboo tradeoff.

Daniel Kahneman puts it this way in Thinking Fast and Slow,

The survey of parents’ reactions to a potentially hazardous insecticide mentioned earlier also included a question about the willingness to accept increased risk. The respondents were told to imagine that they used an insecticide where the risk of inhalation and child poisoning was 15 per 10,000 bottles. A less expensive insecticide was available, for which the risk rose from 15 to 16 per 10,000 bottles. The parents were asked for the discount that would induce them to switch to the less expensive(and less safe) product. More than two-thirds of the parents in the survey responded that they would not purchase the new product at any price!

There is theory and there is practice. In theory people don’t trade a discount for an increased risk for their child’s safety – a cheaper car seat, a more potent insecticide, or not getting tested for diabetes. In practice, we do it all the time!

This is where we get articles like this. Apparently, FDA approved prescription drugs kill hundreds of thousands of people. Why? Big Pharma, and we should be scared. The problem is that over 210 million Americans take prescription drugs, do some back-of-the-envelope math and we have roughly 1 in 1,000 people taking pharmaceutical drugs and dying from them. Every last pill could be taken by an individual making perfectly rational informed tradeoffs and we would still get large numbers of deaths. That’s not a problem that needs to be fixed.

“Probably wonts” becomes “always wills” when we start talking about large numbers of people. 1 in 10,000 risk becomes 1 actual death when we talk about 10,000 people. That’s when people start whipping themselves up into moral outrage over nothing.

When people think this way, and I observe it a lot, what are the incentives of the FDA? Nobody thinks of the FDA as an agency with the mission statement of optimizing tradeoffs. They think of it as an agency with the mission statement of keeping us safe. If the system is truly democratic and people think this way, we’ll end up with drugs that are too expensive, too few, and too ineffective, because the FDA demands that drugs be too safe on behalf of consumers.

If the FDA is truly preventing a market failure, the relevant question is, which is further away from optimal -- the too safe FDA system or the not safe enough non-FDA system?

It is easy to pretend like hell will break loose without the FDA, but that is not as clear as many think. I think it is based on the ever popular ignore economic growth completely fallacy. It goes like this – if you want to know what the world would look like without policy A, just look at the world before we had policy A.

The problem with that is that as people get richer, they’re willing to pay a premium for less risk. Thanks to general economic growth, we’re a lot richer today then we were before the FDA, so people’s impressions of what the world would be like without the FDA are irrationally pessimistic.

 

I imagine the headline, “1,000 baby deaths a year because parents can’t afford extra tests.”

Saturday, January 11, 2014

Tyler Cowen on the Next Milton Friedman

Here is Tyler Cowen making the case for why Paul Krugman is the new Milton Friedman.

I doubt Paul Krugman’s hostility versus Milton Friedman’s civility has much much to do with their age.

They’re both top tier economists who have become popular political figures, for differing political views. I don’t actually see many similarities besides that. But maybe that’s all that “the next Milton Friedman” means. Though, I take it that many right-wingers are looking for the next Milton Friedman in a solely libertarian sense, which is why Tyler Cowen’s arguments are so contrarian within the group he’s speaking to.

The way that they look for “the next Milton Friedman” sort of reminds me of the NBA’s search for “the next Michael Jordan”. I’m sure the economists will put on a talent show one of these days, “the next top Milton Friedman”. But really, I don’t think that we should expect that kind of repeating of history. If somebody was the next Milton Friedman, that person wouldn’t be that great. Whatever similarities he actually has to Milton Friedman besides just the general quality of greatness, makes him not as relevant or as great because Milton Friedman already did it.

Wednesday, January 8, 2014

Wiki on the Balance of Nature

Nature is not balanced according to Wikipedia. Given that the sun will eventually die, and that life on the planet will not outlive the sun, this should not be surprising.