Sunday, October 31, 2010

Americans Hate Elitists, but Do We or Should We Really Hate Elites?

The New York Times has a story today (here) claiming that President Obama has been unable to shake the charge of being an elitist. The story strikes me as generally accurate. But I wonder whether the article is more an indictment of the president or the electorate (I appreciate that the answer to my question does not alter the president's political predicament). defines "elitism" as "a practice of or belief in rule by an elite." On that definition, I am an unapologetic elitist. I don't want our elected officials to be people of ordinary (or lesser) ability. I want them to be - like the founders - men and women of extraordinary education, intellect, judgment, and ability. If I have one complaint about the political process is that it generally tends to weed out such people, leaving voters with a meager choice between mediocrities (or worse). offers a second definition of "elitism," which is also significant for the political process: "consciousness of or pride in belonging to a select or favored group." On this definition, there is no way of avoiding elitism in politics because successful candidates inevitably become proud members of a select or favored group of elected officials.

Great Signs from the "Rally to Restore Sanity"


October Cycling Totals

Nothing much to see here. I finally managed to get in a 100-mile week, as of today. The month as a whole, however, was pretty meager in terms of mileage: 278.4.

Year-to-date: 4283.3 miles.

Sunday Recovery Ride

We had a bit bigger group on today's ride, which was sunnier, colder, and somewhat less windy than yesterday's ride. With the wind out of the NE, we rode up to Whitestown today, then over to Lebanon and back. Nothing much to report other than one flat tire (not mine), a nasty pickup truck driver, and a few squirrely moves within the group.

Arsenal 1 - West Ham 0

Sorry for the delay in posting comments on yesterday's London Derby, which Arsenal pulled out late on an excellent headed goal by Alex Song. The Gunners dominated the match, but West Ham defended doggedly. Twice the Hammers were saved by the goal post, once on a blistering free kick from nearly 40 yards out by Samir Nasri. But in the 89th minute, Gael Clichy clipped a beautiful cross inside the six-yard box, which the diving Song headed into the back of the net.

I wouldn't say the Gunners were lucky to get the 3 points yesterday. They earned the victory, but the difficulty of the match was another indication that the Gunners have not yet found the same form in the Premiership that they have shown in their Champion's League and Carling Cup matches, admittedly against lesser opponents (so far). After piling up goals in those matches, they waltz back into Premier League ties with what seems to be a false sense of confidence, only to find that they have to work much harder to gain the points.

On the plus side, the Gunners are definitely getting healthier and deeper with the return from injuries of Nicklas Bendtner and Theo Walcott, both of whom have come back in fine form. Still to come are Robin van Persie, Jack Wilshire, and Thomas Vermaelen. The key to the entire season, however, is that Cesc Fabregas must stay healthy. They look a completely different, and lesser, side, when he is out of the line-up.

Tim Harford Identifies the Real Issues in the Current Debate Between Keynesians and Deficit Hawks


Master of the Obvious Award

And the award goes to ... the genius editor at the New York Times, who came up with this headline: "Democrats Fight to Keep Senate from G.O.P. Gains" (here).

Happy 52d Birthday Jeannie Longo

One of the most remarkable athletes of our time (or any time), Longo has four Olympic medals, including a gold in the Olympic road race of 1996. She has been the World Champion women's road cyclist 5 times; the World Champion women's time trialist 4 times; and a World Champion track cyclist 4 times (once in the points race, thrice in the 3k pursuit). She has won 57 (yes, that's right, 57) French national championship races. Her most recent win was in 2010, at the age of 51, in the national time-trial championship. Longo is also an accomplished academic, with a BS in Mathematics, an MBA, and a doctorate in sports management.

Saturday, October 30, 2010

Saturday Group Ride

It would be churlish of me to complain about a little wind on a late October ride, with skies mostly clear and the temperature hitting 60 degrees. But the SSW wind was fierce, especially when it was a crosswind, gusting up to 25 mph. The group was not large today - just six of us to share the work (Brian Robinson, Brian Murphy, Dr. Raynor, Dr. Wilkes, Dr. Stevens, and myself). Everyone worked plenty hard, although some worked harder than others (I'm looking at you Karl, Brian R., and Larry). Dr. Wilkes was on his beautiful new steed - the Neil Pryde Diablo, which looks fast even when it's standing still. Once he got his seat post secured, he was flying. I certainly wasn't flying, but I did manage to keep the bike moving forward into the headwind. When we turned north on Pittsboro Road with the wind mostly at our backs, I just hoisted the spinnaker and had a nice conversation with Karl going 30 mph, which ordinarily is not a conversational pace. Even at that speed, we lost minutes to the guys who were riding hard off the front. As always, we all regrouped when we turned back towards home.

Happy Birthday Clifford Brown (1930-1956)

He wasn't the most famous jazz trumpeter of the twentieth century, but no one was better, ever. Just ask any other jazz trumpeter. Brown died tragically at the age of only 26 in an automobile accident (along with pianist Richie Powell and Powell's wife). However, his influence on subsequent generations of jazz musicians could hardly have been greater had he lived to 100. Here he is, along with Powell, and the rest of the Clifford Brown/Max Roach Quintet (Max Roach, drums; Harold Land, tenor sax; and George Morrow, bass) playing "Sandu."

Friday, October 29, 2010

Conference Announcement: Society for Environmental Law and Economics

The third annual meeting of the Society for Environmental Law and Economics (SELE) will be held on June 24-25 at the University of Amsterdam. The conference website is here. I'm looking forward to it immensely.

Hat tip: Josephine van Zeben

A Rally to Restore Sanity in Indianapolis

A Rally to Restore Sanity get-together will take place in Indianapolis tomorrow to coincide with the event sponsored by Jon Stewart's Daily Show in Washington, D.C. The gathering will be at Dave and Buster's in Castleton from 12 pm - 3 pm, and will feature a live television link-up to the rally in Washington. The Indy gathering has its own Facebook page (here). Because of a charge for the room, the organizers will be collecting $10 at the door. All those who like to discuss politics without yelling and name-calling are invited to attend.

Hat tip: Matt Stucky

A Sensible View of the Midterm Elections as a Referendum on President Obama

Here in The Economist.

UK Economy Not in a Weak Recovery, but a Double-Dip Recession

I recently posted (here) on the UK's "natural experiment" to test the fundamental tenets of Keynesianism by instituting an austerity budget during a very weak recovery from a very deep recession. Turns out my premise was slightly off. Britain will not be instituting an austerity budget during a weak recovery from a deep recession, but in the midst of a "double-dip" recession. Today, the Daily Telegraph (here) reports that the UK's property market is officially in a "double-dip." Net lending fell from 1.62 billion pounds in August to only 112 million pounds in September. During the same period, the price of the average home fell by 0.7 percent. Housing sales are at their lowest since last February, before the May elections that swept a Conservative/Liberal coalition government into power. How long it will stay there must now be in some doubt, given economists' predictions that the property market will continue to struggle because "'the state of the wider economy - particularly the labour market - is likely to remain unsupportive in the months ahead.'"

Justice Scalia Shoots with (Not at) Justice Kagan

The ABA Journal is reporting (here) that, last week, Justice Scalia took the Supreme Court's newest Justice, Elena Kagan, to his skeet-shooting club in Virginia last week, "where he gave her a lesson." Apparently, she survived unscathed.

Academic Earth: A Great Web Resource

Academic Earth provides videotapes of lectures by leading academics. I haven't yet had a chance to view many of them, but those I have viewed are excellent. The one below is a good example. It is a shortened version of a lecture by Yale Management Professor Barry Nalebuff, who is best known as a game theorist. Indeed, his introductory game theory book with Avinash Dixit, Thinking Strategically (1991), is superb and highly recommended. This lecture, however, is not about game theory. Rather, it is based on Nalebuff's more recent book with Ian Ayres, Why Not? How to Use Everyday Ingenuity to Solve Problems Big and Small (2003).

Watch it on Academic Earth

First Lactate Threshold Test of Winter Training

I did better than expected, especially considering how little riding I've been doing the last two months and the broken bone in the foot. For the 20 minute time trial, I averaged 288 watts, 20.9 mph, and 167 bpm (heart rate). That's within 20 watts of my best ever LT test last February. Hopefully, I'll regain those 20 watts (and perhaps a few more) as winter training proceeds. In the meantime, the weather's looking good for a couple of long outdoor rides this weekend. Here's the graph from my iBike.

Happy Birthday A.J. Ayer (1910-1989)

A leading 20th century analytical philosopher and humanist, Ayer remained devoted to the project of Logical Positivism, even after it fell out of favor. He was, perhaps, best known for his own verificationist theory of meaning, which was more or less blown out of the water by Karl Popper's philosophy of science based on falsification. Nevertheless, Ayer's works, including Logical Positivism (1959) and Language, Truth and Logic (1936) are still widely read today.

Thursday, October 28, 2010

Start Getting Your Affairs in Order

Some physicists are predicting the end of the universe. When? I won't ruin the surprise for you. Anyway, not to worry: we humans likely will be gone from the scene long before the denouement. The story is here in National Geographic.

Happy Birthday Dr. Jonas Salk (1914-1995)

Inventor of the polio vaccine, which in short order eradicated the most feared public health threat. Tellingly about the man, Salk did not seek to patent his vaccine.

Wednesday, October 27, 2010

Hayek Favored Top-down Environmental Regulation

Last week, in my review of Matt Ridley's excellent book, The Rational Optimist (see here), I suggested that Matt was a little too Hayekian for my taste in arguing that virtually all good institutions come from the bottom-up. Today, Matt Yglesias serves up a reminder (here) that even Hayek did not believe in the "spontaneous organization" (or bottom-up development) of environmental protection. Ygelsias quotes from Hayek's The Road to Serfdom (Routledge 1944), which recently became a best-seller thanks in large part to plugs from Glenn Beck on FoxNews. However, Beck probably did not have this paragraph in mind:
Nor can certain harmful effects of deforestation, or of some methods of farming, or of the smoke and noise of factories, be confined to the owner of the property in question or to those who are willing to submit to the damage for an agreed compensation. In such instances we must find some substitute for the regulation by the price mechanism. But the fact that we have toresort to the substitution of direct regulation by authority where the conditions for the proper working of competition cannot be created, does not prove that we should suppress competition where it can be made to function.
This passage (among others throughout Hayek's works) just goes to show that Hayek was much less conservative - "reactionary" would probably be a better word - than many of those who are claiming his mantle today.

Hat tip: Tyler Cowen at Marginal Revolution.

The Beginning of the End for Mountaintop Removal Mining

Nature has the story here. The EPA report on which the story is based is here.

Does "The Daily Beast" Represent the Future of Journalism?

The Daily Beast is a website combining news, serious commentary (from various political perspectives), and the kind of salacious crap traditionally reserved for People magazine or the tabloids located in grocery store check-out lines. Serious-minded readers can find some good stuff at The Daily Beast but must be willing to suffer headlines like, "Michelle's High Heel Revolution."

Veteran reporter Howard Kurtz recently moved to The Daily Beast after decades at The Washington Post. He's betting with his career that it represents the future of journalism. Unfortunately, that future appears to involve much pandering to the public's obsession with the culture of celebrity.

Danny MacAskill Goes Home to Skye

Cycling genius Danny MacAskill has a new film coming out in November. Here is a short video about the making of  "Way Back Home."

Happy Birthday Teddy Roosevelt (1858-1919)

The 26th President of the United States and a most brilliant, energetic, and individual character. He was the conservationist President. There is no doubt that he had a greater impact on land use and management in the United States than any other single American history, with the possible exception of Thomas Jefferson (1803 Louisiana Purchase). As Douglass Brinkley explains in his magisterial (but too long) biography of Roosevelt, The Wilderness Warrrior: Theodore Roosevelt and the Crusade for America (2009), p. 19: Roosevelt instituted the first national monuments and conservation commissions, quadrupled the number of national forest reserves, and established five national parks, among them the Grand Canyon. All told, he set aside for preservation more than 234 millions acres - approximately one in ten acres of the entire United States, Alaska included.

For a more general biography of Roosevelt, I would recommend Edmund Morris's two volumes, The Rise of Theodore Roosevelt (1979), which won the Pulitzer Prize, and Theodore Rex (2001).

Tuesday, October 26, 2010

Henry Drummond on the Religious Right

Inherit the Wind (1960), one of my all-time favorite films, is playing right now on Turner Classic Movies. The film, a fictionalized account of the 1925 Scopes Monkey Trial,  was directed by Stanley Kramer and co-written by Nedrick Young, Harold Jacob Smith, and the original playwrights Jerome Lawrence and Robert E. Lee. One of those fine writers gave Spencer Tracey, portraying defense attorney Henry Drummond (a fictionalized version of Clarence Darrow), several great lines to recite, including the following:
"All I want is to prevent the clock-stoppers from dumping a load of medieval nonsense into the U.S. Constitution."

"[F]anaticism and ignorance is forever busy, and needs feeding. And soon, your Honor, with banners flying and with drums beating we'll be marching backward, BACKWARD, through the glorious ages of that Sixteenth Century when bigots burned the man who dared bring enlightenment and intelligence to the human mind!

"An idea is a greater monument than a cathedral. And the advance of man's knowledge is a greater miracle than all the sticks turned to snakes or the parting of the waters."
They also gave some great lines to Gene Kelly, portraying a cynical reporter called E.K. Hornbeck, including this one:
"Darwin was wrong. Man is still an ape."

UPDATE: I may have given the film's writers too much credit. Some of the "Henry Drummond" quotes above are barely altered statements by Clarence Darrow himself from the transcript of the Scopes trial (see here).

Winter Training Begins

This evening at the Indy Cycling Academy. Time to start getting back into shape for next season. I'll be training with a bunch of my regular riding buddies, so trash-talking will no doubt be part of the training program. As I'm still a bit hobbled, I'll be starting slowly. Anyway, what's the hurry? Winter training lasts for 16 weeks!

DeLong on Chinese Trade Policy

In the process of slamming a column by University of Chicago Economist John Cochrane in today's Wall Street Journal (here), Brad DeLong (here) offers a concise and powerful policy argument that not only explains why China continues to invest in the US, but also why no one should expect China to cave into pressure to stop devaluing its currency:
China has 900 million rural dwellers who are still living at a standard of living not that far above subsistence. The pressure to migrate from the countryside to the coastal cities is enormous. China needs to grow at more than 8% per year in order to avoid mass unemployment in the coastal cities. And mass unemployment in the coastal cities is likely to be followed by political collapse and turmoil on a gigantic scale.

Part of growing at 8% per year is to continue to rapidly expand exports to the North Atlantic core of the world economy. But in order to expand exports Chinese-produced goods must look like good values. And if demand for dollar-denominated assets falls and the value of the dollar falls, Chinese-produced goods will no longer look like good values. We know very well that when we unwind these purchases of dollar-denominated assets a generation from now the financial rate of return on our investments will be lousy. But in the meantime we get something much more important to us--export growth, full employment in Shanghai, and societal stability.
China's trade policy, like most of its domestic policies, is geared towards avoiding civil war this century between the fast-developing eastern parts of the country and the still undeveloped and impoverished western regions. When will the US and Europe realize that China is driven by that domestic political imperative?

Happy Birthday Charlie Barnet (1913-1991)

An underrated sax players and band leader.

Monday, October 25, 2010

Is the SO2 Trading Program Dying or Only Napping?

Recent posts on this blog (here) and at the Environmental Economics blogs (e.g., here), reported on a conference presentation by Richard Woodward on "The End of the SO2 Trading Program." Since then, I have been trying to unravel, historically and analytically, the apparent collapse of the SO2 market, as illustrated in Woodward's graph below:

Thanks to information provided by Professor Woodward and two EPA economists, Al McGartland (Director of the National Center for Environmental Economics at EPA) and David Evans, at least some pieces of the puzzle are beginning to fall into place.

First, the 2005 Clean Air Interstate Rule (CAIR) affected the preexisting acid rain program in two ways: it reduced overall SO2 caps and it differentiated between sources in upwind and downwind states, imposing more stringent requirements on SO2 emissions from upwind states in order to prevent them from contributing to nonattainment of national ambient air quality standards (NAAQSs) in downwind states. The relevant air quality standards here are not those for SO2 itself, but for PM and O3 (ozone), to which SO2 emissions contribute.

Both of CAIR's effects on the acid rain program, according to Karen Palmer and David Evans (here) should have improved the acid rain trading program, increasing net social benefits. Moreover, CAIR should have increased allowance scarcity and thereby raised prices, assuming no offsetting shift in demand and no new restraints on trading.

However, in July 2008 the DC Circuit Court of Appeals vacated CAIR in large part because it did not control trading of SO2 emissions to ensure that emissions from upwind states could not contribute significantly to nonattainment (of PM and Ozone standards) in downwind states. In effect, the court called into question the continued existence of the SO2 trading program. This ruling may have had a chilling effect on trading, depressing SO2 allowance prices. However, the court allowed CAIR to remain in effect while EPA worked on a replacement policy that would satisfy the court's concerns.

In July of this year, the EPA proposed a new "transport rule" (see fact sheet here, overview presentation here,  and the full proposed rule here) to replace the vacated CAIR rule. This proposed rule would not terminate the SO2 trading program completely, but would limit it substantially and in complicated ways to prevent emissions from upwind states from contributing to nonattainment in downwind states. By limiting and increasing the complexity of trading, the rule would limit demand for SO2 allowances and, therefore, depress prices (all else remaining equal). The apparent market reaction - reduced demand, leading to lower prices and reduced volume of trading - could reflect uncertainty over whether the SO2 trading market remains viable given the new and complex geographical trading restrictions the transport rule would impose. At the very least, the proposed rule would significantly raise the transaction costs of participating in the SO2 market. On the other hand, the new transport rule could reinvigorate the SO2 market if caps are set so as to ensure sufficient scarcity of allowances, even after adjusting for geographical limitations on transferability.

Another potentially important piece of the puzzle, though one that remains pretty obscure, is the possible impact (perhaps already factored into the market) of the not-yet-completed "Utility MACT" (Maximum Achievable Control Technology) rule. It is possible, but not certain, that the Utility MACT will use SO2, a non-hazardous air pollutant, as a surrogate for various acids that are hazardous air pollutants (under sec. 112 of the Clean Air Act). If that happens, then we really could be back in a situation where all (or virtually all) SO2 emissions are scrubbed, and the acid rain trading regime is rendered obsolete.

Also, as I observed in my earlier posting on this issue (here) the graph from Richard Woodward's presentation (above) indicates that trading volume and the price of SO2 allowances were both declining well before the DC Circuit vacated the CAIR rule. This does not necessarily mean that the trading market was dying. But even if it was, we need to bear in mind that the trading market itself is not an end in itself, but simply a means of minimizing the costs of complying with an exogenously set environmental protection goal. It could be that the SO2 trading program has served its purpose and is now ready to be superseded by new programs with somewhat different aims, which (for reasons relating to NAAQS compliance in downwind states) are not amenable to widespread emissions trading.

If, and it remains a big if, SO2 emissions trading is winding down, what are the implications for the theory of emissions trading generally, and for trading programs relating to other pollutants, such as carbon dioxide? One obvious lesson seems to be that, in the context of the Clean Air Act, large-scale emissions trading may not easily co-exist with statutory air quality goals.  These and other policy issues raised by Professor Woodward's graph are immensely interesting. I just wish I had time to deal with them right now.

UPDATE: In response to the first question of my final paragraph, Tim Haab writes (here):
My opinion? The theory is sound.  The real question is whether the theory is so sound that the practical implementation resulted in suicide for Cap'n Trade, or whether Cap'n Trade is a theoretical construct, similar to Hotelling's rule, which, while nice on paper, is confounded when put into practice by the annoying nuisances of the political, legal and economic systems.
 By raising the implications for theory, I did not mean to suggest that emissions trading does not work as John Dales and others said it would: It certainly does reduce the compliance costs of achieving exogenously set environmental protection goals. What I wonder about is, as a matter of instrument-choice, whether emissions trading regimes have only short-term instrumental value, and whether they are compatible with other regulatory regimes. In this case, for example, a clear conflict has arisen between the SO2 allowance market and the preeminent goal of the Clean Air Act. This might well count as an "annoying nuisance[] of the political, legal and economic systems."

Happy Birthday Pablo Picasso (1881-1973)

One of the most important and influential artists of the 20th century. Below his portrait is a painting called "The Dream."

Sunday, October 24, 2010

Chelsea's Dominance

After nine games, Chelsea sits atop the Premier League, with Arsenal, Man City, and Man United (in that order on goal differential) all 5 points behind. Two numbers explain Chelsea's advantage, and why they will win the title this season (much to this Gooner's chagrin): 25 goals scored; 2 goals against. One wonders how they managed to lose one game and draw another with that goal disparity.No team has scored more (Arsenal are second with 21 goals) and no team has given up fewer goals (seventh-place Sunderland are closest, having conceded just seven goals in nine games).

Extrapolating over a full, 38-game season, we would anticipate that Chelsea will score more than 100 goals this season and concede fewer than 10. Of course, early season trends do not necessarily continue. Injuries to key offensive or defensive personnel - especially striker Didier Drogba and/or goalie Peter Cech - could dramatically  change the scenario. Absent that, the Blues' combination of scoring prowess and stinginess on defense should prove insurmountable.

Rare Sunday Group Ride

Between injuries and business trips, group rides have been few and far between for me over the last month or so. I did, however, manage to get out for a nice 43-mile jaunt today with the Wilkes/Raynor group, supplemented with some riders from the T3 Multisport Team. It was a warmish day for late October, but blustery and just a tad wet. I'm clearly lacking fitness, but I was pleased to get some solid miles in.

Winter training starts tomorrow (Tuesday for me) at the Indianapolis Cycling Academy.  

Manchester City 0 - Arsenal 3

Arsenal passed a tough test on the road at Manchester City today with flying colors. They were assisted by an early sending-off, after Man City defender Dedryck Boyata, who was the last defender, took down Arsenal striker Marouane Chamakh in the fourth minute. After Samir Nasri scored a nicely-finished goal from a pretty one-two with Andrei Arshavin, 10-man Man City were always chasing the game. The home side's spirits were lifted by a brilliant penalty save by Joe Hart on Cesc Fabregas, who had been taken down in the box by a clumsy challenge. After the half, City started brightly, but Arsenal eventually retook control of the match and dominated possession throughout. The Gunners' second goal was scored by Alex Song's precise toe poke, after the ball fortuitously fell at his feet in the box after a nice build up by Arsenal. The final goal was scored by second-half substitute striker Nicklas Bendtner, who is just coming off injury. Samir Nasri gathered the ball at the far touchline near midfield, and played Bendtner free of the defens. Bendtner opened his body at the last moment and slotted the ball above a sprawling Hart.

All in all, it was a very good victory for the Gunners, who leapfrogged City in the League Table on goal differential.

Happy 37th Birthday Levi Leipheimer

One of the best American's in the pro peloton, Levi has won all over the world, including (among others) the Tour of Deutschland, the Dauphine Libere, and the Tour of California (3 times). He was also a bronze medalist in the time trial at the Beijing Olympics (2008), was second in the general classification at the 2008 Vuelta a Espana, and 3d overall at the Tour de France in 2007.

Saturday, October 23, 2010

Happy Birthday Leszek Kolakowski (1927-2009)

One of the most important political theorists and historians of ideas of the 20th century, Kolakowski started his career as a doctrinaire Marxist but quickly grew disenchanted. He is best known for his magisterial three-volume work, Main Currents of Marxism (1976), in which he argue that Stalinist totalitarianism was not only consistent with Marxism but was it's logical end. In 2003, the Library of Congress awarded Kolakowski the first John W. Kluge Prize for lifetime achievement in the humanities.

Friday, October 22, 2010

The Vagaries of Academic Hiring

Something I learned today while reading Nicholas Phillipson's long-awaited biography, Adam Smith: An Enlightened Life (Yale 2010):

In the mid-18th century, Archibald Campbell, Earl of Islay (later third Duke of Argyll) was virtually an "uncrowned king of Scotland." As such, he controlled appointments to professorial chairs at the major universities, including in Glasgow, at the height of the Scottish Enlightenment. Islay might have gone down in history as the greatest ever judge of academic talent, but for one profound mistake.

After appointing the brilliant Francis Hutcheson to the Chair in Moral Philosophy in Glasgow in 1929, and the even more brilliant Adam Smith to the Chair in Logic and Metaphysics in 1751, Islay opposed the supremely brilliant David Hume's application to fill Smith's chair, after Smith took over Hutcheson's chair in 1752. Instead, Smith's chair went to the eminently forgettable and forgotten James Clow. (It is worth noting that Smith's own recommendation of Hume for the Chair was only lukewarm because he foresaw a hostile public reaction against Hume's appointment.)

Instead of going down in history as the ablest academic administrator ever, the Earl of Islay is now infamous (if he is remembered at all) for believing that David Hume was not qualified (probably for religious reasons) for a professorship in Logic and Metaphysics.

Happy 61st Birthday Arsene Wenger

Arsenal's best ever manager, and one of the great footballing minds in the world, who has taken the idea of "the beautiful game" and put it into practice.

Thursday, October 21, 2010

Is the Acid Rain (SO2 Trading) Program Dead?

Over at Environmental Economics (here), Tim Haab (Ohio State) reports on a conference presentation by Texas A&M economist Richard Woodward on "The End of the SO2 Trading Program." The slide (see below) from his presentation on trading volume and spot market prices certainly seems to indicate that SO2 trading is dead. (To enlarge the slide, click on it.)

But it's not clear to me just why the market has collapsed. For one thing, the Clean Air Interstate Rule (CAIR) was not legally related to the acid rain program, so why should the outcome of litigation over CAIR dramatically affect the SO2 market. Moreover, the slide indicates that SO2 allowance prices (the top graph) and trading volumes (the bottom graph) were increasing before CAIR took effect, and started to decline well before CAIR was judicially invalidated. So, there must be more to the story. Specifically, I wonder whether EPA failed to alter the caps enough to maintain sufficient scarcity of SO2 allowances for the market to function.

I am trying to track down more information on what seems to me a very important story.

Hat tip: Tim Haab at Environmental Economics.

Your Vote Will Neither Save Nor Destroy America

One of my neighbors has posted a yard sign - really more on the scale of a small billboard - that reads in big, bold type: "Save America, Vote Republican." This kind of message bothers me because it is hyperbolic and implies that patriotism lies in just one party. To counter my neighbor's sign, I would like to find one that says the following: "Vote However You Like. It Won't Save or Destroy America."

Happy Birthday Dizzy Gillespie (1917-1993)

Just listen to him in his prime.

Wednesday, October 20, 2010

A Natural Experiment to Test Fundamental Tenets of Keynsianism

Britain's coalition government has announced sweeping cuts to public sector budget, amounting to 80 billion pounds or 19 percent over the next four years (see here). If the government holds its nerve and carries through with the program, it will constitute the largest-scale test of Keynesian theory conducted since Keynes first outlined those theories in his 1936 book The General Theory of Employment, Interest, and Money

Business leaders in the UK staunchly support the government's budget cuts as necessary to reduce the UK's ballooning budget deficits (see here). Keynesian economists, by contrast, fear that the budget cuts will cut short the fragile economic recovery and possibly cause a double-dip recession (see here and here). No matter what happens, both sides will probably declare, "We were right." But careful economic analyses should be able to untangle, to a substantial extent, whether Keynes was at least more right than wrong about the priority of stimulus over deficit-cutting during and in the immediate wake of a recession.

UPDATE: Brad DeLong argues (here) that the UK's budget cuts not only disregard Keynesian theory, but defy Milton Friedman's advice as well. That's some feat - instituting a macroeconomic policy that disses both Keynes and Friedman.

A Great Column by Timothy Garton Ash About the Not-at-Ground-Zero Mosque

Here in today's The Guardian. My only comment is, Bravo!

A Brief Stop-Over in Indy

Today is my one day at home this week, trying to catch up on work before teaching class this evening. I just returned last night from the always excellent Society for Benefit-Cost Analysis Conference in Washington, D.C.

Tomorrow morning, I'm off again before the sun comes up for Denver, where I'll be presenting my new paper on "Property Creation by Regulation: Rights to Clean Air and Rights to Pollute" (available for downloading here) at the University of Denver Sturm College of Law. Happily, this will be my last trip this month. Next month, I have just one trip scheduled, to St. Louis for a conference celebrating Doug North's 90th birthday.

Tyler Cowen on the Theory of the Firm

Over at Marginal Revolution (here), Tyler Cowen has a post about some new theories of the firm, developed by young economists including Eric van den Steen. As Tyler describes them, the new theories seem quite promising, but then he takes a more or less gratuitous slap at Coase, whose theory of the firm has dominated the literature for the past several decades (but only gained serious attention many years after he first published "The Nature of the Firm" in 1937). Tyler suggests that the Coasean theory of the firm is a "a dead end" because "[i]nternally, firms aren't usually more efficient than markets...."

I think Tyler dismissal of Coase's theory of the firm is premature and far too casual. Without doubt, markets are usually more efficient than firms, which is why most exchanges are via markets. (As an aside, the fact that markets are widely used does not mean that using the price mechanism is costless - that observation of Coase's retains vital importance, even if Coase's theory of the firm is displaced). But imagine the costs of living in a world where all goods, however complex, are produced entirely by independent contractors. Consider, for example, what it would cost to purchase a car (or any other complex good) built entirely through market transactions, i.e., where all the parts of every car were designed, manufactured to specification, assembled, and marketed by independent contractors. Next, imagine the headaches (i.e, costs)  involved if a car, comprised of thousands of discrete parts had a technical problem after purchase. To whom would the owner go for repair or replacement? The search costs alone would be enormous.

Coasian theory may not be the end of industrial organization theory, but neither is it a dead end.

Happy Birthday Sir Christopher Wren (1632-1723)

The great English architect. Below are photos of two of his commissions, St. Paul's Cathedral in London and the library at Trinity College, Cambridge.

Tuesday, October 19, 2010

It's Only "Mostly Dead"

Stanford Law Professor Pamela Karlan has an article in Sept/Oct issue of the Boston Review (here) noting how constitutional originalists, including Justice Scalia, are really instrumental consequentialists, who remain true to original understandings of constitutional provisions only so long as those understandings support their normative views of what the constitution should mean. Justice Scalia famously insists that the US Constitution is "dead" (see, e.g., here), by which he means that it's meaning cannot change over time (absent amendment). As Professor Karlan points out, however, Scalia's opinions suggest that the constitution is - to borrow a phrase from the film The Princess Bride - only "mostly dead." It seems to take a breath every so often, when Justice Scalia needs it to support an outcome that deviates from original understandings.

I believe that any balanced assessment of Scalia's judicial opinions would support Professor Karlan's view. I have made a similar argument, in the specific context of regulatory takings doctrine, in the final chapter of my 2002 book Pollution and Property.

Happy 64th Birthday Phillip Pullman

The provocative and entertaining English author of the trilogy His Dark Materials (Northern Lights, The Subtle Knife, and The Amber Spyglass. My children and I thoroughly enjoyed them. His newest book, which I have not yet had a chance to read, is The Good Man Jesus and the Scoundrel Christ.

Monday, October 18, 2010

Book Review: Matt Ridley's "The Rational Optimist"

In his excellent new book, The Rational Optimist: How Prosperity Evolves (Harper 2010),  Matt Ridley takes up the mantles of  both Julian Simon and Friedrich von Hayek to argue that the world (and with it the human race) is not going to hell, but is actually getting better at least for most people in most places, thanks to increasing specialization and trade, which are the prerequisites for development, innovation, and long-run growth. The book is a tour de force, and a breath of fresh air in a literary landscape dominated by pessimists and doomsayers.

Julian Simon (see, e.g., here) is, perhaps, most famous for countering assertions by Paul Ehrlich (see, e.g., here) and other mid-twentieth-century doomsayers  that humans were destroying the natural environment and facing imminent Malthusian catastrophes. Simon was almost entirely right then, and Ridley is almost entirely right today. He wears Simon's mantle well, and even improves on the original because Ridley possesses a broader scope of knowledge, including of biology, which he uses to particularly good effect in the book's opening chapters. Ridley also has the advantage of access to recently published economic histories, including works by Robert Fogel (see, e.g., here), Joel Mokyr (see, e.g., here), and Gregory Clark (see, e.g., here), which generally support his arguments.

Unlike Simon, Ridley pays at least some attention (not always enough, in my estimation) to the very real problems that humans have created for themselves and for other species. His treatment of environmental problems, including climate change, seems a bit rosy-eyed for reasons I will explain below. As an added plus, Ridley also happens to be a better, more entertaining writer than Julian Simon. Here is an example that serves also to highlight a major theme of the book:
Ideas are having sex with other ideas from all over the planet with ever-increasing promiscuity. The telephone had sex with the computer and spawned the internet. The first motor cars looked as though they were 'sired by the bicycle out of the horse carriage.' The idea for plastics came from photographic chemistry. The camera pill is an idea that came from a conversation between a gastroenterologist and a guided-missile designer. Almost every technology is a hybrid.
Unfortunately, Hayek's mantle - the catallaxy - does not suit Ridley nearly as well as Simon's, despite Ridley's best efforts to argue, on the evidence, that the history of improvements in the human condition and the natural environment have been predominantly bottom-up - made by individuals guided, as it were, by "an invisible hand" - rather than imposed from the top down by governmental elites. Despite his proper focus on good institutions as a prerequisite for development and growth, and his lip-service to the New Institutional Economics, Ridley sometimes overstates the importance of individual exchange and understates the extent to which the world is better because of good governance (by elites). On page 165, he writes that "trade emerged from the interactions of individuals. it evolved. Nobody was in charge." This is true, but really only for small-scale markets. As Douglass North has observed (e.g., here and here), long-term deferred exchange, which is a very important feature of long-run economic growth, depends significantly on the development of good governmental, as well as market, institutions

More specifically, on page 106 Ridley notes that conventional pollution problems have been getting better, particularly in the advanced industrial democracies; and he cites the Environmental Kuznets Curve (EKC), according to which environmental stress per unit of production has an inverted U-shape, increasing until per capita income reaches a certain level, at which point the amount of environmental stress per unit of production first levels out and then begins to fall. He refers to this as a "well-established rule of thumb," but fails to note that it is only well established for some pollutants and not for others (if there is an EKC for carbon dioxide, the turning point must be at a very high level of per capita income). More importantly for present purposes, he conveniently fails to note the critical role top-down governance has played in improving environmental protection in the US, Europe, and elsewhere. The graph below shows sulfur dioxide emissions in the US from 1940 to the middle of the last decade. Note the major downward shift that began after 1970 when the Clean Air Act was signed into law by President Nixon. Since then, federal regulatory standards have gotten more stringent, which explains the continuing downward trend. Graphs for other conventional pollutants would show similar trends.

The pollution reductions experience in the US since 1970 are not primarily a function of bottom-up actions by millions of individuals, but top-down regulatory impositions from government, which do of course reflect rising political demand for environmental protection as per capita income increases in accordance with the EKC. We can debate the relative efficiency of top-down environmental protection measures (some environmental regulations clearly have been more efficient than others). But the primarily top-down nature of pollution reductions in the US and other advanced, industrialized democracies over the past half-century is too well-established to deny. Ridley does not deny it but, perhaps because it does not fit his Hayekian narrative, he elides it. Likewise, workers who in the nineteenth century would have worked "inhuman hours from an early age in conditions of terrible danger, noise and dirt" (p. 219)  today are spared those travails today mainly due to government action rather than the beneficent outcomes of unfettered labor markets. These examples contradict Ridley's assertion on page 321 that good institutions must come from the bottom up.

But are they just the exceptions that prove the rule? Ridley may be right that bottom-up solutions are usually preferable. But special cases exist - environmental protection may be one - where bottom-up solutions are likely to be insufficient or nonexistent. In many cases, however, Ridley is quite right that government intrusion can be quite harmful, both economically and environmentally. Many of the energy policies he discusses, such as those pushing the production and marketing of inefficient and environmentally harmful biofuels, are a case in point (even recognizing that some biofuels might have a legitimate future in the energy mix). Government failure is, after all, as important a category as market failure. In Ridley's analysis, however, it is far more important - government failures feature far much in his story than market failures, which are every bit as prevalent. Ridley does have an ideological bias, then, just like all other social scientists (myself included).

Finally, Ridley tackles what he takes to be the two greatest sources of pessimism in the world today: poverty (especially in Africa) and climate change. He notes that economic growth has recently been strong in Africa. Indeed, global poverty has been greatly reduced in the last century. As Paul Collier has noted, the "bottom billion" - the billion people living on $1 per day or less - not so long ago were the "bottom two billion." Obviously, we still have a long way to go to eradicate poverty - and we may never do so completely - but Ridley is quite right that life has generally been getting better for everyone, from rich to poor.

On the climate change issue, Ridley is almost certainly right that climate change will not spell the end of human civilization on earth, as some doomsayers, including Al Gore, suggest. And he is right that we can probably save more lives in developing countries by helping them to increase per capita income and eradicating malaria than by mitigating our greenhouse gas emissions. But he downplays too much Marty Weitzman's analyses of low probability climate catastrophes. Ridley treats the probabilities as trivial, when they are not. Weitzman's analysis of climate sensitivity models finds a 5% aggregate chance of global mean temperature increases of 7 degrees (C) or higher during the next 150 years. Such temperature changes over such brief periods of time are outside of anything human civilizations have ever experienced. The socio-economic consequences could be truly catastrophic. Just as individuals are observed to take precautions or purchase insurance against 5% risks of death or economic calamity, Weitzman argues reasonably that societies should take out insurance against catastrophic climate change by investing a small amount of GDP to reduce the risk of high global mean temperature changes toward zero.

To some extent, Ridley's optimism about climate change is colored by the presupposition that future generations will inevitably be wealthier than current generations. I certainly hope that this supposition is correct, but at least two reasons exist for treating it with greater uncertainty than Ridley exhibits: (1) as Doug North's works (see, e.g., here) in economic history demonstrate, economic growth is not the rule but the exception in human history - our expectation of ever continuing growth may be partly the consequence of an availability heuristic - which depends greatly on the adaptive efficiency of governance institutions; and (2) catastrophic climate change itself could belie the presumption of continuing growth in per capita income (as Partha Dasgupta, Karl-Goren Maler, and Scott Barrett have noted, here). Again, the probabilities of climate catastrophes and negative growth are remote, but not so trivially small as Ridley suggests.

In the final analysis, although I am not quite as optimistic as Matt Ridley about the future of humanity and the world, I cannot conclude that his optimism is irrational. As I explained earlier, Ridley's book, following in Julian Simon's footsteps, is a very useful antidote to much of the overly negative literature on human societies and their effects on the natural environment. Generally speaking, material welfare has been improving for an ever-increasing majority of humans, and the environmental effects are at least being treated seriously, and sometimes quite successfully, by local resource users and governments. Problems exist, of course, but there is reason for optimism that than can be successfully resolved, one way or another, by collective action on various (polycentric) scales.

Happy 71st Birthday "Iron Mike"

Mike Ditka for many years personified the Chicago Bears, first as a player - as the prototype of the modern tight end - and later as a Head Coach. The Bears last two championships were in 1985 and 1963, and Ditka was on the team for both.


Sunday, October 17, 2010

My Election Predictions

Normally, I don't pay attention to minor events like midterm elections, but this year I've been captivated by the rise of the Tea Party, which defies any singular description but, as Sean Wilentz argues in The New Yorker (see here), has definite roots in the old John Birch Society, with a large dollop of the present-day religious right. The Tea Party, by itself, does not elevate the current midterm elections from minor event to major event, however. To put it bluntly, these midterm elections will not change very much in Washington (for better or for worse).

Having taken a quick look at the most recent polling data - a sure recipe for erroneous predictions - here's how I see the election shaking out. The Republican/Tea Party has a better than even chance of taking back the US House of Representatives and a less than even chance of taking back the Senate. The wackiest of the Tea Party wackos, including Christine O'Donnell (Senate candidate in Delaware) and Carl Paladino (gubernatorial candidate in New York) will lose handily. But don't fret too much about that. Even if the craziest of the crazies don't make it, there is still plenty of crazy to go around. For instance, borderline psycho Sharon Angle should prevail over the man who personifies the word insipid, Harry Reid, in Nevada.

The changing cast of Congress may be a dream come true for the likes of John Stewart and Steven Colbert. The silly (Sharon Angle) is always a better target for ridicule than the boring (Harry Reid). President Obama will obviously not be so pleased. He will have to try - probably an exercise in futility - to work with the nuts on both sides of the aisle. Even from the president's perspective, however, it's difficult to see how much will change as a matter of policy. It certainly won't make any practical difference on issues such as climate policy, which are going nowhere even with the Democrats in control of both houses. Should the Republicans take the House of Representatives, the president will lose the surprisingly able and effective leadership of Nancy Pelosi; but given the lack of effective Democratic leadership in the Senate, Obama's policy agenda for the next two years probably would not have been enacted anyway.

Meanwhile, the Republicans/Tea Partiers will not have the votes to do the kinds of things they have promised to do, such as repealing "Obamacare" (a.k.a., "Romneycare") and the new financial regulations. President Obama will wield his veto pen without fear of legislative overrides. This will no doubt annoy Tea Partiers, who will probably respond by pushing for a constitutional amendment to revoke the president's veto power (but only for Democratic presidents). Absent that, the next Congress will witness no significant, let alone dramatic, reduction in the size and scope of the federal government (for better and for worse).

Despite all of the talk about this midterm election as a game-changer, the stakes are probably a lot lower than most pundits are willing to admit. We will not see the scale of change that occurred in 1994, when Republicans retook control of both houses of Congress (if only fleetingly) for the first time in 40 years. If the Republicans take only the House on this occasion, this should at least minimize the risk that they will seek to impeach President Obama for being a socialist or a Kenyan or a closet Muslim. That might save us taxpayers a few bucks each. More importantly for relative moderates like me, the chief value of this midterm election might be to divide power between the parties so as to make it less likely that anyone - Democrats, Republicans, or Tea Partiers - can accomplish anything truly radical. Successful legislative proposals will have to be compromise measures. For those who prefer gridlock, I might add that I see little appetite for compromise among the various factions in the coming Congress. The next Congress is likely, therefore, to be a do-nothing Congress, which is not after all the worst thing in the world.

Finally, I suspect that a moderate Republic/Tea Party victory in the midterm election might be a good thing for President Obama's reelection bid two years from now. If Mr. Obama can stay above the fray as Congress squabbles, his approval rating could well rebound between now and 2012. He would be helped even more if the Tea Partiers are able to assert greater authority over the Republican agenda. I suspect the President would like nothing more than to run for reelection against candidates campaigning on issues such as a return to the gold standard, taking health care insurance away from millions of newly insured Americans, nuking Iran, privatizing social security, and re-deregulating financial markets.

Bottom line: the importance of these midterm elections has been greatly exaggerated.

There's Always an Explanation

Sitting at the Indy airport, waiting for my flight to DC. The gate agent announced that the flight is oversold; he's looking for volunteers to take a later flight. This struck me as odd for a Sunday morning flight to DC, until I realized that the Colts are playing in Washington this evening.

2010 Society for Benefit-Cost Analysis Conference

I'm off to Washington, D.C. later this morning for twin conferences, running Monday through Wednesday, of the Society for Benefit-Cost Analysis (SBCA). The first part, all day Monday and Tuesday morning, is sponsored by the MacArthur Foundation and is focused on developing standards for benefit-cost analysis. I have organized and will chair the legal scholars panel for that part of the conference, which will focus on distributional aspects of  benefit-cost analysis. The speakers include Ricky Revesz (Dean, NYU Law School), Matt Adler (Penn. Law School), Jonathan Nash (Emory Law School), and Shi-Ling Hsu (University of British Columbia Law School).

The second part of the conference, from Tuesday afternoon through Wednesday afternoon, is the annual meeting of the SBCA, which includes numerous excellent panels. Unfortunately, I will miss much of it because I have to return Tuesday for meetings and class on Wednesday, before heading off to Denver to make a presentation on Thursday.

You can view the programs for the respective parts of the SBCA conferences here and here.

Happy 64th Birthday Adam Michnik

A dissident under communism in Poland, who spent several years in prison, and became a leading intellectual within the Solidarity movement of the 1980s. As a writer, Michnik is best know for his book Letters from Prison (1987).After the Roundtable negotiations of 1989 that led to the downfall of communism in Poland, Michnik began publishing a Solidarity-based daily newspaper called Gazeta Wyborcza, which quickly became the largest circulation daily paper in Poland. He is still its publisher today, and he remains among Poland's most prominent intellectuals.

Saturday, October 16, 2010

Waiting for the Phone to Ring

Last week, when the Nobel Prizes were announced, I wondered what it is like for the prominent economists, scientists, and literary figures, whose names are mentioned each year as leading candidates. Does the anxiety build up as the announcement date draws near? Knowing precisely when the phone call will come, if it comes, do they toss and turn all night before?

In today's Telegraph (here)Howard Jacobson, the winner of this year's Man Booker Prize for fiction, for his book The Finkler Question (Bloomsbury 2010), provides an insightful and entertaining answer to that question. One question he does not answer, however, is whether ambitious scientists, economists, and writers choose their projects or adjust their work in order to maximize their chances of achieving their prize ambitions. My guess is that many, if not all, do so.

Arsenal 2 - Birmingham 1

The Gunners won for the first time in the last three games. Having dominating large segments of the game, Arsenal really should have shot and scored more. At least, they showed more offensive rhythm and a cutting edge that had been missing in recent matches.

With lowly West Brom tying Man U, the Gunners have moved up to second place in the League table, pending the outcome of Man City's match against Blackpool tomorrow. Chelsea will retain top position this week, regardless of how they fair at Aston Villa this afternoon.

Susan Haack on Popper, the Demarcation Problem, and Scientific Evidence in Litigation

University of Miami Law Professor Susan Haack, has an interesting and very readable article in the New York University Journal of Law and Liberty on the misguided reliance of the US Supreme Court on Karl Popper's philosophy of science in its famous ruling in Daubert v. Merrell Dow Parmaceuticals, Inc., 509 US 579 (1993). Here is the abstract:
When they feel the need to distinguish genuine science from pretenders, or to understand what is distinctive about the scientific method, U.S. courts have sometimes called on Karl Popper's philosophy of science. Focusing on the cases involving the admissibility of expert testimony, this paper (i) presents Popper's philosophy of science in enough detail to show that it can't possibly provide a criterion of the reliability of scientific testimony; (ii) spells out how Justice Blackmun misconstructed Popper's ideas, and identifies some sources of this misunderstanding in the amicus briefs in Daubert and in the then-recent literature, as well as in Popper himself; (iii) looks at what federal courts have made of Justice Blackmun's allusions to Popper as Daubert has played out in subsequent rulings, revealing that courts, and legal scholars, have continued to misunderstand how radical Popper's ideas really are, and most importantly, how unsuitable for their purposes; and concludes with an argument that the justice system's concern with reliability is both legally essential and philosophically legitimate, and that - ironically enough - the misinterpretation many courts have given the first, quasi-Popperian Daubert factor is closer to the truth than the Popperian philosophy of science from which it ostensibly derives.
It's clear from the outset that, in contrast to me, Professor Haack is not a fan of Popper's philosophy. She even takes a few digs at his famously curmudgeonly character, and his alleged unwillingness to learn from others (which is belied by his numerous positive references to works by other philosophers, including for example Alfred Tarski and Gilbert Ryle). Nevertheless, Professor Haack is quite right that Popper's philosophy of science is: (a) more radical than  readers commonly accept; (b) not as clearly specified (across the body of Popper's work) as some readers, including the Supreme Court, would have us believe; and (c) not a very useful basis for determining the admissibility of scientific evidence in court.

I am an unapologetic Popperian, but I thoroughly enjoyed reading Professor Haack's article. My only complaints are that (1) she too lightly dismisses or devalues the demarcation problem, (2) overstates the extent to which Popper's philosophy of science is inconsistent with "competitor" theories, such as Kuhn's, and (3) clings to the most radical version of falsificationism that Popper himself did not follow in his everyday life (recognizing the difference between high theory and everyday life).

First, Professor Haack asserts that we need to "get over the Popperian preoccupation with demarcation." The specific reasons Professor Haack provides in support of this assertion are reasonable enough, but they do not get rid of the demarcation problem; they merely broaden the "legitimate kinds of inquiry" to be placed on one side of the demarcation. Moreover, I believe she fails to adequately address the big issue - the one that initially  motivated the Logical Positivists and remains primary today - the problem of religious superstition. If no basis exists for discriminating between science and religion, then no basis exists for allowing the teaching of natural selection but not creationism (or the story of Genesis, itself) in a biology course. Popper's demarcation rule was, of course, falsification. (Hillary Putnam has argued that Darwinian natural selection is not capable of falsification, and therefore Popper's demarcation rule fails to resolve the issue evolution v. creationism, but I think Putnam's premise is incorrect. Natural selection is capable of falsification, if not within the lifetime of any individual investigator.)

Second, Professor Haack (in common with many others, including perhaps Kuhn himself) is too quick to conclude that Thomas Kuhn's theory of scientific revolutions is inconsistent with Popperian falsificationism. Popper and Kuhn both believed that scientific theories are based on certain axioms, which could prove false, and always contingent. Moreover, despite Kuhn's criticisms of Popper and falsification, his own theory of anomalies (discrepancies between theories and observed facts) seems to depend on falsification for the erosion of the existing paradigm prior to its replacement by a new paradigm. Kuhn was not nearly the scientific relativist that he is often made out to be. In Chapter XIII of the Structure of Scientific Revolutions (1962), he made clear that he did not believe progress in knowledge or scientific problem-solving was either impossible or a mirage.

Third, it is important to bear in mind that Popper developed and applied his theory of falsification in the realm of high scientific theory. Is it really true, as Professor Haack suggests, that he would not have conceded the practical need to accept as contingently "true" scientific theories that have not been falsified but are capable of falsification? I just don't think so. Popper did, after all, fly on airplanes and made use of other technologies that depended on existing scientific theories. And in his work, he did eventually incorporate the implications of probability and corroboration into his notion of falsification. The following segment from his autobiography, The Unended Quest (1978), p. 99, is, I think, instructive on this point:
Probability created problems for me, as well as much exciting and enjoyable work. The fundamental problem tackled in Logik der Forschung was the testability of probability statements in physics. I regarded this problem as offering an important challenge to my general epistemology, and I solved it with the help of an idea which was an integral part of this epistemology and not, I think, an ad hoc assumption. It was the idea that no test of any theoretical statement is final or conclusive, and that the empirical, or the critical, attitude involves the adherence to some "methodological rules" which tell us not to evade criticism but to accept refutations (though not too easily). These rules are essentially somewhat flexible. As a consequence the acceptance of a refutation is nearly as risky as the tentative adoption of a hypothesis: it is the acceptance of a conjecture.
Finally, it is crucial to remember that Popper's entire approach to metaphysics and epistemology was motivated by his belief that the human endeavor is to solve problems, both theoretical and practical. To that end, he put great stock in real science (over what he and the Logical Positivists called "psuedo-science"). Viewed in this light, Popper's falsification criterion is perhaps less radical than Professor Haack supposes (even if it is more radical than many others presume). For anyone who agrees with Popper about the basic human endeavor, the demarcation problem remains of great importance, even if it is problematic and not completely resolved by Popper's falsification criterion.

Hat tip: Lawrence Solum at Legal Theory Blog.

Slow News Day in Indy

The "top news" story at this morning is "Monograms can add class and whimsy to your home." Can't remember the last time I saw the words "monograms" or "whimsy" in a top news story. Since when did Martha Stewart take over as publisher of The Star?

Happy Birthday Oscar Wilde (1854-1900)

A hugely talented writer and a principled man, most famous for his play The Importance of Being Earnest (1894-5) and his novel The Picture of Dorian Gray (1890). He is also well known for his numerous witty epigrams. Two of my favorites are: "Ambition is the last refuge of the failure" and "One should always be a little improbable." Had lived in a later era, Wilde would not encountered less social opprobrium and no imprisonment; to the contrary, he probably would have been awarded a Nobel Prize in Literature, and quite possibly his own talk show on the BBC. 

Friday, October 15, 2010

The Law School PR Game

It's that time of year - just before US News sends out voting ballots for annual law schools rankings - when my mailbox fills up with all kinds of postal detritus from other schools touting their new hires, programs, etc., all in the quest to convince me that they are a school on the rise (as compared to all the other schools from which I also receive mailings). I don't know anyone who actually looks at, lead alone reads, the dozens of annual reports, newsletters, alumni magazines and postcards (aside, perhaps, those from an alma mater). In my own case, there is no delay between their removal from my mailbox and their insertion in the trash. Assuming most professors treat this stuff like I do, the question becomes, why do law schools continue to pay to send them, especially in difficult economic times?

I have yet to see any reliable data on the total cost of the mailings or on their effects on the US News Rankings (if any). In that absence of any data, I begin with the following two suppositions: (1) the cost of mailings is not huge, but neither is it insignificant to law schools, most of which are currently operating under tight budget constraints; and (2) the mailings have virtually no effect on the US News Rankings. These are testable hypothesis, but I know of no actual tests that either confirm or falsify them. Assuming (in the absence of evidence) that the two suppositions are correct, we have a puzzle: law schools are expending scarce resources on mailings that bring them virtually no benefits. Why would any rational dean continue to countenance such wasteful spending?

My best guess it that law schools have become caught in a game in which they are less concerned with any positive reputational benefits of mass mailings than with the potential costs of not playing along with everyone else.  Law schools could be concerned that if they suddenly declined to participate in this collective waste of money, they would suffer reputational damage that could negatively effect their US News rankings. Thus, the chief benefit for law schools of the mass mailings may be as a signaling device to show that they have the resources to play the same stupid game as other law schools.

Another part of the signaling function of law school mass mailings game may be to deal with a type of cognitive bias affecting US News "voters," known as an "availability heuristic."  How easily a given law school comes to mind could well effect how an individual "voter" ranks it. In that respect, the mailing serves as simple reminder to voters, in the hope that they will more easily recall something positive they recently read about a particular school. This presumes, of course, that voters who receive the mailings actually look at them long enough to process the information they contain.

As it happens, I'm not a US News voter this year, but even if I were the mailings would not likely affect my cognitive biases, at least not consciously, because I simply don't pay enough attention to them to affect my thinking. This week, I  received approximately two dozen mailings from as many law schools. I am unable to report which schools they came from, or what they were touting. Given that, how might they affect my voting?

Of course, my sample is n=1. No doubt some law professors really do pay attention to this stuff. But I doubt they comprise a significant enough plurality to affect any outcomes. That, of course, is another empirically testable hypothesis for which I have no data.

Happy 30th Birthday Tom Boonen

A great Belgian cyclist, who is always a favorite in the Spring Classics and in the Tour de France's points (Green Jersey) competition, Boonen won the World Championship road race in 2005.  His long palmares also includes three wins at Paris-Roubaix, two at the Tour of Flanders, and a win at Gent-Wevelgem.

Thursday, October 14, 2010

More on the Crisis of the Humanities in Higher Education

Dan Edelstein, a Professor of French at Stanford, has an interesting column at that provides a different (though not necessarily inconsistent) perspective from Stanley Fish's column in Tuesday's New York Times (about which I posted here). Edelstein accepts that humanities departments are struggling because of a decline in student enrollment, which itself is due to the rising price of higher education, particularly at elite institutions. He defends tuition increases as largely the result of providing students with better education and more services. He makes a pretty strong case that college students in the US actually get good value for money compared with students in Europe, but they certainly do pay more for their education.

According to Edelstein, one direct consequence of the rising price of a college education is an increasing desire or need on the part of students and their families to recoup college expenses more quickly and completely by taking subjects that offer greater and/or more immediate financial rewards. Those subjects do not, generally speaking, include the humanities. If Edelstein is right (and I think he is), then even if a broad liberal arts education constitutes a great long-term investment in human capital development, it might now be  cost-prohibitive for many students.

Hat tip: Tyler Cowen at Marginal Revolution

Happy Birthday Hannah Arendt (1906-1975)

An important 20th-century political theorist, who wrote provocative but influential books, including The Origins of Totalitarianism (1951) and The Human Condition (1958). They are still widely read today.

Wednesday, October 13, 2010

A Reminder from Chile about Collective Problem Solving

As the trapped Chilean miners are being pulled, one by one, from their months' long captivity 2000 feet below the earth's surface, it is worth appreciating the great international, multi-institutional effort required to achieve this favorable outcome to what might have been a great tragedy. What initially started as a combined market and government failure ended well because of the combined efforts of market actors, government agecies, and private organizations.

Mining is an inherently dangerous activity, perhaps more so in Chile than in many other places. Indeed, the miners who worked in the very Chilean mine that collapsed were paid what economists call a "risk premium" of 30% over the prevailing wage and were referred to locally as "kamikazes" (see here). Debates continue as to whether the company that owned the mine took adequate precautions to protect its workers, and whether the Chilean government regulated the mine sufficiently  to compensate for the lack of market incentives to protect miners.

What is undeniable and most impressive, however, is the massive, well-coordinated, and (so far) well-executed rescue attempt,  involving various agencies of Chile's government, Chile's domestic mining industry, information from mine safety and rescue experts the world over, and even NASA, which was able to offer useful advise on keeping the miners alive and well in an small, enclosed space with no natural light over a lengthy period of time.

The happy ending of this ordeal for the 33 trapped miners is down to the ability and coordinated actions of a large number of individuals (including, not least,  the brave miners themselves) and organizations - including both market and governmental organizations - working toward a common goal. This should temper, if only modestly and temporarily, our usual skepticism about the ability of humans - and especially the governments they create - to solve real problems.

Is the Indianapolis Star Biased Toward Republicans?

In a televised debate the other day between the two candidates to fill the Senate seat being vacated by Evan Bayh, Republican candidate and former Indiana Senator Dan Coats told a bald-faced lie. During the debate, Coats's opponent, Democrat Brad Ellsworth, accused Coats of negotiating a lobbying job while he was still serving in the Senate. In response, Coats claimed that he was offered a position, but did not accept it until a month after he had left the Senate.

After the debate, Dan Parker, Chairman of the Indiana Democratic Party, cited a news release from Coats' own Senate office, dated December 3, 1998, announcing that Coats expected to join the lobbying firm of Verner, Liipfert. Coats' Senate term ended exactly one month later. Coats' campaign now maintains that the candidate simply misspoke during the debate.

During an election year when voters are fed up about the way business is done in Washington, this story is, or should be, a big deal. Why, then, is the Indianapolis Star downplaying it? Instead of leading with the real crux of the matter - Coats LIED during the debate, and approves (by his actions) the revolving door between Congress and lobbying - the Star misleads with this headline: "Coats' camp rebuts charge". That's like saying President Clinton "rebutted" claims that he lied under oath, when he said "It depends on what the meaning of the word 'is' is" (see here). 

A feeble explanation does not rebut a bald-faced lie; nor does it help to resolve the bigger issue of whether Indiana voters should return to the Senate a veteran politician/lobbyist who seems happy enough with the way Washington works.

We Can't Just Spend Our Way to a Green Energy Future

David Leonhardt has an article in today's New York Times about the push for a national climate policy based on financing clean energy research, rather than cap-and-trade regulation of greenhouse gas emissions. Put simply, climate policy would be based on spending, rather than taxing. The proposal is to raise the current level of spending on clean energy technologies from around $4 billion per year to $25 billion per year.

This new approach has some formidable supporters, including Michael Greenstone, former Chief Economist of President Obama's Council of Economic Advisors, Al Gore, and even Steven Hayward of the American Enterprise Institute. A basic presumption of these supporters is that cap-and-trade is politically dead in the water; and even if some form of cap-and-trade legislation made it through Congress, it would be weak and not affect greenhouse gas emissions very much.

However, spending on clean energy technology is no panacea either. The history of energy policy is littered with huge federal spending programs for technologies ranging from oil shale to nuclear fusion that have led nowhere. Moreover, spending priorities are often determined politically, as in the case of corn-based ethanol, which is horrible from an energy-policy perspective (corn ethanol requires more energy to make than it produces), but very sensible for politicians trying to appeal to the farm lobby. Friend of Cyclingprof Peter Grossman is currently writing a book about the history of energy policy in the United States (for Cambridge University Press), and the story he tells (see, e.g., here and here) should give caution to those now pushing Congress to spend our way to a greener future. The bottom line is that new technologies do not achieve market success just because Congress decides to throw money at them.

This is not to argue that federal spending cannot possibly make a difference in the development of green energy. Perhaps the current level of financial support to basic energy R&D is too low. But if we're really going to move beyond fossil fuels, it's going to take the kinds of market incentives for innovation that Congress cannot reproduce  by spending alone. To properly structure market incentives, the price of fossil fuels will have to rise and stay high. That would happen naturally as stocks of fossil fuels become increasingly scarce relative to demand, but that would take a very long time. Congress can help speed up the process by (a) reducing or eliminating existing subsidies for fossil fuel production that artificially lower prices and (b) increase taxes on energy production and/or consumption either directly or indirectly (i.e., through quantity-based regulations, such as cap-and-trade) to artificially raise prices.

Any real push for clean energy will require both taxing and spending. Of these, the taxes may be the more important because they would directly affect the price of fossil fuels and send market signals to private investors. To make the taxes politically palatable, Congress would have to credibly commit to offsetting the consequences for taxpayers and energy-users by providing offsetting tax reductions (e.g., to payroll or income taxes).

But how likely is any of this in the next Congress? The probability of new fossil-fuel taxes is approximately zero. The probability of significant increases in spending on green technologies is insignificantly higher than that. From a political point of view, it's not clear that increasing current federal spending on clean energy by a factor of five or six would be an easier sell in the next Congress than cap-and-trade. Given the (unfortunate) failure of the pro-stimulus faction (Krugman et al.) to prevail over the deficit hawks in the court of public opinion, it seems more likely that spending on green energy will be cut rather than increased.