The Ambrosini Critique

The book reviews, the “real” book reviews, are rolling in:

• Robert A. Margo says,
  

  So, in the end, should you read A Farewell to Alms? If you are into Big Think as a consumer or producer, the answer is a definite “yes” — especially if you are a producer (trust me, you will need to prepare a response to Clark, if you haven’t already). Even if, in the end, you are like me — you don’t care for Big Think but you have graduate students to worry about — the answer is still “yes”. Just make sure that your students realize that the scholarly behaviors they should be emulating are the virtues — patience, hard work and discipline — that produced the articles underlying this book in the first place.

  The review contains a good summary of the book for those of you who have yet to read it. BTW, one of his big complaints is he doesn’t like the “tone” of the book. Booooring.

• Arnold Kling is generally more receptive to Clark’s culture story, but wants institutions to play a bigger role in the story of development. Booooring.

For, in the abstract, we may envision an Olympian perfection of perfect beings in Washington doing the business of their employers, the people, but any of us who has ever been at a zoning meeting with our property at stake is aware of the urge to cut through all the pernicious bullshit and go straight to firearms.

— David Mamet

I see no interesting intrinsic moral distinction between brick- and other forms of laying.

— Will Wilkensen Wilkinsen Wilkinson

Borjas strikes back!

[T]he finding of immigrant-native complementarity evaporates simply by removing high school students from the data (under the Ottaviano and Peri classification, currently enrolled high school juniors and seniors are included among high school dropouts, which substantially increases the counts of young low-skilled workers ). More generally, we cannot reject the hypothesis that comparably skilled immigrant and native workers are perfect substitutes once the empirical exercise uses standard methods to carefully construct the variables representing factor prices and factor supplies.

The Economist weighs in here.

Its not clear to me, and a subsequent discussion with Prof. Peri has validated my hunch, that High School students should be given zero weight as Borjas et al suggest. Perhaps they should be given a lower weight than Ottaviano and Peri gave them, but a zero weight? Also, while Peri’s result may be counter-intuitive, on closer inspection doesn’t it seem obvious that low-skill immigrants (who have sub-par English skills, aren’t expert at negotiating our culture, etc) aren’t perfect substitutes for natives? It seems the proper null hypothesis (the one that should be harder to reject) would be complementarity.

The real news here, actually, is the extreme transparency with which this debate has been played out. Both authors have their papers (and data) available on their websites and this has been so BEFORE the results were published. Anyone can download the data and reproduce either author’s result. The authors have corresponded heavily; everyone has shown each other their cards.

Even from the inside, this looks like a fairy tale academic debate! (I just hope it pays off for everyone… and I’m not thinking of the Harvard tenured professor.)

…

In other news, Economic Principles talks about economics in the University of California

One of my favorite authors on the visual display of information is Edward Tufte. Besides despensing great advice on presenting data, he’s produced a series of beautiful books. They’re really picture books for the data nerd set.

I think he’d like this diagram:

The only thing better would be to figure out how to plot the whole density for each year. The black lines give preference for the selected percentiles, but there’s no a priori reason to think the 99 percentile is some how more important than the 96 percentile. Because this bias is built in, the diagram is a little misleading.

But I like it, nonetheless.

If you read through the comments at Prof. Kenworthy’s post, you’ll see many people committing the fallacy of assuming the same individual is represented by a single percentile line on the chart. As I’ve pointed out before, people do not stay within the same percentile (or decile or quintile, etc) over their lives. The churn of poverty is very high. Before age 75, for example, 50% of Americans will have spent some time below the poverty line and 50% spent some time at level of income ten times the poverty line. Only about 20% of Americans won’t experience one of these extremes.

UPDATE: Yes, Nancy, that means 30% of Americans will have been rich and poor in their lifetimes.

UPDATE 2: I swear to all that is holy that I titled this post before reading the post over at CT.

UPDATE 3: These Sala-i-martin (2002) charts are an improvement, except for the log scale, on the Kenworthy ones:

Here’s a good discussion of the link between abortion and poverty. The number of abortions (and pregnancies) skyrocketed after Roe v. Wade, but in the last couple of decades both numbers have declined. Poverty has fluctuated between 11-15%, but at much higher frequencies. So while there’s only been one “abortion cycle”, there’s been 3-4 “poverty cycles” since the Supreme Courts landmark decision.

DarwinCatholic concludes there isn’t much of a relationship between poverty and the level of abortion:

The trend is actually very interesting. As the poverty rate was rising sharply from 1979 through 1982, the abortion rate dropped. The same thing happened during the poverty rate rises of 1990-1993 and 2001-2004. Even more interesting, however, is that during these first two downturns, although the abortion rate levelled in the first case and continued dropping in the second, the abortion ratio increased during both of those periods. What that means is that although women were not getting abortions at a higher rate during these periods, they were conceiving at a higher rate. People avoided pregnancy at a higher rate (thus decreasing the number of planned pregnancies) but did not abort at a higher rate.

If people were aborting more because of the rise in poverty, one would expect to see the actual abortion rate go up during these periods. Instead, we see that people avoided pregnancy (thus decreasing the percentage of total pregnancies which were “planned pregnancies”) but actually reduced the rate at which they aborted.

I’ve done some back of the spreadsheet (xls here) analysis to more or less confirm this conclusion. The regression of abortions on lagged abortions and 10th percentile income level suggest increasing the poor’s income by one standard deviation (about $700) reduces the number of abortions by about 34 thousand (or about 3% of the total, less than a third of the standard deviation in the number of abortions).

To explain the dynamics of abortion, he has some interesting things to say:

Why has abortion really been falling? I think it’s significant that the abortion rate is falling in such a tight correlation to the number of years since the peak. This indicates, it seems, some sort of self-correcting mechanism going on. Perhaps it’s partly a re-introduction of restrictions on abortion, both cultural and legal. Perhaps it’s partly a build-up of painful experience, which has overcome the initial impression that the costs of getting pregnant (and getting out of getting pregnant) are not as high as they were before 1973. Either way, it seems that some force that is building with time is continuing to drive the abortion rate down without any current signs of slowing.

Update: minor typos

This is neat. Contrast the location of libraries (blue) against the location of bookstores (green).

Tim Spalding, Librarything head honcho, suggests:

Bookstores cluster together in the high-traffic center; public library branches spread out into the outlying areas and are separated from each other evenly like identically-polarized magnets.

I don’t think this basic fact will come as a surprise to many, but it’s striking even so. It’s worth thinking about why these two institutions—so different but also sharing much—are positioned so differently in space.

I think the easiest explanation is the difference between economics and politics. Economics favors businesses that can create the most amount of happiness—which is to say revenue— whether or not this makes access difficult for some people. Representative politics favors solutions that give all citizens good or equal access to the resource, even if the resultant distribution is inefficient in economic terms.

I agree with his comments about the economic incentives. You can look at those maps and tell where people like to buy books by looking at the location of the green dots. Those bookstores have an incentive to be located exactly where people will buy the most books.

His comment about political incentives, I’m not so sure about. To maximize access, you’d think the libraries would be concentrated with the population. There would be more libraries were there’s more people. I suspect, by looking at various other cities, this isn’t what’s happening. Doesn’t it seem like the libraries are too uniformly spread over the geography given the population probably aren’t?

Of course, maybe I should be looking at books per person (normalized by some distance) rather than library buildings per person. It could be that it maximizes access by having buildings evenly spaced, but bigger buildings (with more books) where there’s more people.

In any case, I don’t think you can look at those maps and conclude access is being optimized.

First, on general principles it’s not clear what one learns from very short-term movements in relative wages… Second, more specifically, the period since 1995 includes a major boom-bust cycle in high-technology industries. The technology bubble of the late 1990s probably elevated the education premium, while the subsequent bust caused that premium to deflate. As a result, inferences from the movement in inequality during the first few years after the tech bust should be taken with a grain of salt.

— Paul Krugman 2008 working paper (pdf)

Gabriel tagged me. I have to:

1. Pick up the nearest book (of at least 123 pages).
2. Open the book to page 123.
3. Find the fifth sentence.
4. Post the next three sentences.
5. Tag five people.

Let’s see. Right on top of Landes’ Wealth and Poverty of Nations, on my desk we’ve got UC San Diego’s copy of Peter Turchin’s Historical Dynamics:

The typical dynamics of the demographic-fiscal model are shown in Figure 7.1a. Starting with the initial value of S = 0 and population numbers N = k_0/2, the model predicts that intially both N and S will grow. As S increases, so does the carrying capacity k(S), which quickly approaches the upper limit k_max.

I’m going to throw this one to the non-econ-blogosphere: Gavin, Scott, Fumiko, Kevin and Yoko, you’re it!

YouNotSneaky’s at it again. Why might prices be more stable under monopolies (and why might we care)?

Here’s my favorite line:

Probably less explicitly but more importantly, when prices keep changing on you it means you’ve gotta recalculate your optimal allocations of expenditure again. You gotta set up a new Lagrangian, take the damn first order conditions and figure out if making out the adjustments in your optimal consumption basket – given your income – are worth it. What? You don’t think that way? You don’t set up constrained Lagrangians every time there’s a change in prices and compute your Kuhn-Tucker conditions?