This makes me think of the brain, the really complicated system that I know something about. And then I think: if the state of knowledge about economics is so shitty, then how can we know so much about how the brain works, since that’s even more complicated? [1] The answer is that at least with the brain we can do experiments. And people have done experiments for a hundred years, of increasing sophistication, on animals and people. (What does early visual cortex do? Let’s stick some probes into a cat and find out!)

The point of an experiment is that you have a hypothesis, you make an experimental manipulation, you see what happens, and you accept or revise your hypothesis. There is almost none of that in macro econ. Almost all data is post-facto, correlational data. And what ‘experimental’ data there is (how does the US economy react to the stimulus package?) has a sample size of 1.

I can’t decide if this makes it really good or really bad to be a macro economist. On the one hand, you really can’t ever know anything, or resoundingly win an argument. On the other hand, you can pretty much not be proven wrong on any opinion that isn’t completely retarded.

[1] Arguable depending on how you choose to define complexity. But you can make a defensible case that brain complexity > world economy complexity.

This [The Race Between Education and Technology] is a really wonderful book. It gives a masterful outline of the standard economic model, where earnings are proportional to contribution, or to productivity. It highlights in a very clear manner what determines the productivities of different individuals and different groups. It takes its cue from a phrase that the famous Dutch economist, Jan Tinbergen coined. The key idea is that technological changes often increase the demand for more skilled workers, so in order to keep inequality in check you need to have a steady increase in the supply of skilled workers in the economy. He called this “the race between education and technology”. If the race is won by technology, inequality tends to increase, if the race is won by education, inequality tends to decrease.

You can read the whole thing here. My feeling is that the crazy gaps — and the change in the rate of gap growth — is cancerous to a democracy; and will, in effect, transform the democracy into some quasi-democracy, which is essentially what’s already happened.

But my other gut feeling is that there might not be any other way: for the same reason that preferential link attachment in networks leads to vastly unequal linkage properties (where the most popular nodes are millions of times more influential than the average nodes), income calls out to income. You might try to dampen what happens at the upper part of the distribution, but in a world with free movement of capital and industry, the issue would just pop up somewhere else. The Republicans always talk about people and businesses chasing the lowest tax rates; mostly that’s bullshit (okay dude, enjoy the Libertarian wonderland of Somalia) but there’s a grain of truth to it.

Anyway, worth a read.

There are three main mechanisms through which high-speed rail can help expand the economy, according to the MPI study. First, HSR expands the labor pool available to firms, bringing talented workers from nearby centers within commuting distance and thus expanding the quantity and quality of available employees. Second, HSR makes more jobs available to workers without making them have to relocate and move to a new home. Third, HSR extends the benefits of other expensive, productivity-enhancing infrastructure such as airports across broad regions. International airports, major research universities, and reference libraries are all more financially viable and internationally competitive when they serve a larger population. High-speed rail allows them to build the scale they need to achieve world-class excellence and also spreads their high costs across a wider population.

These are some of the reasons why ridership shouldn’t be the sole metric for evaluating the need for, or the success of, viable public transportation options.

From Richard Florida, who knows something about economics and cities.

So this latter group goes around yelling “Choice!” and “Freedom!” and lambasting whatever seems to restrict either of those two holy artifacts. Sometimes they make good points. Often they don’t, and when they don’t it’s because they fail to consider that ‘choice’ and ‘freedom’ are extraordinarily weedy concepts, no matter how carefully you try to phrase things. The example from this strangely named financial blog caught my fancy today:

Point 1: I’m assuming that if I was a degenerate crackhead who snuck into your neighborhood and mugged you for $50, the Wall Street Journal Opinion Page would want me thrown in jail. Now imagine that I’m a degenerate crackhead who took out a subprime loan to move next door to you, in an arrangement that I’m likely not going to pay off. I might not even make one payment. If I default you’ll lose 10% of the value of your home from the externality effect. Assuming your home is worth $300,000, there’s a 20% chance I default in 2 years (realistic numbers), and you lose 10%; 300,000*.2*.1 = I’ve just robbed you for $6,000 while the Wall Street Journal Opinion Page cheered me on. And that’s one house – I’ll have a dozen neighbors. Now mind you, the product was great for me – I got to smoke crack indoors, in a house I could never realistically afford, which was a big plus. The subprime lender sold my loan to a pension fund in Denmark for a nice fee. It goes in the win column for us.

I don’t know why I post these things. It makes me feel good inside to hurt others I suppose. Or to pretend to hurt them.

…the persistence of these educational achievement gaps imposes on the United States the economic equivalent of a permanent national recession.

A quote of a quote. See it here.

The point, less subtly: a hell of a lot of people don’t get that when liberals are whining about educating the poor and giving health care to the unwashed masses, it’s not just about touchy-feely human decency. PEOPLE WHO ARE EDUCATED AND HEALTHY ARE THE BIGGEST RESOURCE IN ANY COUNTRY. ESPECIALLY NOW. PAYING CASH UP FRONT TO INCREASE THE NUMBER OF HEALTHY EDUCATED PEOPLE IS LIKE BUYING DOLLARS FOR NICKELS.

Whew. Sorry.

A second part of the human capital dividend comes from our productivity as Web consumers. Billions of people are rapidly becoming more knowledgeable and better connected to one another. Self-education has never been more fun, and that is because we are in control of that process like never before.

The theme of ideological capital obsesses me. From time to time it becomes apparent, even through the assorted fogs that obscure most of the world, how revolutionary are the times in which we live. DDB moved out of the Hot Tamale Club into a place without internet, and he spends shitloads of time pecking into his crappy Blackberry trying to get his fix. The flow of information, the weaving together of a thousand strands of information and insight and tiny amusements is the chief leisure occupation of a hell of a lot of people. But unlike TV-watching, which this new web activity is unseating, your online explorations creates value for other people.

Someday we’ll gain the tools to measure these new benefits. Twitter’s value will lie not in its eventual market cap but in the human connections it creates. My Twitter feed is a virtual meeting room with economists, aid workers, entrepreneurs, housewives, celebrities, and plain old friends. The Web unites millions of diverse individuals, who interact and sometimes even meet up or marry. The world has a lot more of these connections, even if we’ve yet to see all of their implications — including the traditional financial ones of new businesses, employment, and revenue. And it may sound counterintuitive, but the more time you spend staring at your screen, the bigger that human capital dividend will be.

I’m thinking of how affected I am by your tweets, Facebook updates, shared items on Google Reader, Flickr photos, everything FriendFeed aggregates, even what few comments get made on this blog. The web has a lot of rah-rah folks who can do a better job of cheerleading than I can, so I’ll just paint the image I see one more time: a billion people pecking away like a billion tiny factories, creating “durable” goods both more and less durable than anything we’ve known before.

But even subtle growth can have a dramatic impact. The environmental activist group Friends of the Earth estimates that just 10 miles of a new four-lane highway create the equivalent lifetime emissions of nearly 47,000 Hummers, and the public health implications are equally alarming. By overfeeding development, highways are fattening up America and Americans at the same time. A Georgia Tech study shows that every hour spent in a car each day increases the likelihood of obesity by 6 percent, while walkable, mixed-use neighborhoods decrease it by 7 percent, lowering the overall relative risk of obesity by 35 percent. The National Institutes of Health links obesity to decreased life expectancy, so more highways mean more sprawl, more fat, and shorter lives. Our roads are literally killing us.

Freeway expansion is intended to relieve congestion, but in fact it encourages more commuting and longer distances, so cities are trapped in a vicious cycle, enabling overdevelopment. The insidious sprawl of my hometown, Houston, was one of the reasons I left; it seemed impossible to do anything without a car, and “pedestrian” was a pejorative term. So imagine my shock when the city began reclaiming its inner-city neighborhoods and installed a light-rail transit system. If Houston can do it, any place can.

Wait – an infrastructure and political climate that encourages people to spread all over hell and spend 15% of their waking hours driving back and forth in a car has _consequences_? Consequences that extend beyond the personal preferences of a single person? What?

From here.

Be very afraid! Frickin commies!

(Got this from Conor Clarke‘s blog post for The Atlantic.)

Example A: (The pressing basketball team as David)
Thesis: (David can’t fight Goliath by his own rules)
Example B: (Lawrence of Arabia as David)
Thesis elaboration
Example A cont: (History of basketball team)
Example C: (Doug Lenat and wargaming)
Thesis elaboration
Example B cont
Example C cont
Example A cont
Thesis conclusion

You can learn a lot by studying Gladwell – he’s full of interesting ideas, and is a phenomenal popularizer of science, which means that scientists who’ve made careers on one particular topic always bitch that he’s simplifying the area, but hey: duh! That’s what science popularization is: synthesis and summary.

This article interests me for two reasons: first, it’s partly about basketball. But second, it brings out an obvious and contemporary issue – when people can’t win using the rules they’re given, they change the rules. If you’re a small group of rich religious lunatics who hates the United States, do you quietly stew in your rage, since your couple of thousand members can never challenge the US’s military strength? Obviously not. You blow up civilians and then hide amongst civilians. You don’t present a target for the superior forces to destroy. Which complicates the hell out of the situation, but most people are willing to complicate the situation rather than be annihilated.

This rule-changing strategy has been true throughout history. It’s why the United States exists in the first place: during the American Revolution the British were always complaining about how the Americans didn’t line up their inferior forces to be slaughtered in standard infantry battles like they were supposed to. When you were in Elementary school you’d hear about how the small, plucky Americans beat back the immoral English power. Well, how do you think that happened?

This is something to keep in mind in other domains, too. I keep getting into arguments with Republicans and Libertarians about social services. Yes, it’s annoying that you hard-working and successful folks are paying for shitbags to be shitbags. But guess what? If people are desperate and hungry and poor they are often not content to huddle in their hovels trying not to bother their social betters. No, they change the rules, one way or another. They pervert the system to seize what can be seized. They adapt. So you can be a hardass if you want, and stand on principle, but nobody else feels much obligation to your principles. That’s something we’d all do well to keep in mind.

Job

I have a job. Or two jobs, sort of, from two labs in the Psychology Department at the University of Minnesota. The good news is that the work is interesting and cool and important. The bad news is that it pays about a third of what a gentleman and scholar of my caliber could expect to earn. But still, that’s enough to live on, and is a whole lot better than the zero I was getting before.

A million sources are reporting a million different indices of the country’s economic health; and my tiny myopic peephole doesn’t mean much compared to all that. But from my experience, things are pretty fucking bad: in the final analysis I got a shitload of calls from a shitload of recruiters fighting like dogs over the handful of table scraps the different companies would throw them. I started out looking only in Mpls, then both widened the search and narrowed my salary requirements, but to no avail. The one exception is if you have an active security clearance and are willing to travel. I had one job yanked out from under me because my last employer stopped processing my clearance when I left.

House

We bought a house. You wonder how this could possibly have happened, considering the financial situation we were in. Here’s how: we used a combination of the money I made in New Hampshire, some cash from my parents, loans and grants from the city of Minneapolis, and the real estate expertise of my friend Dave Wilson. Result: we bought a foreclosure in the ghetto for $22.5k in cash.

The thinking was this: we weren’t likely to have the opportunity to buy a house again, not for at least five years. Cancer is expensive; and then, in the fall, Monica is going to nursing school. Then, in the fall, I am going to the U (see below.) The housing market is already starting to rebound, meaning that the number of insane lunatic deals are shrinking. If we were gonna do it we had to strike while the iron was hot, so we did.

Hopefully buying the house will turn out to be a good idea. Right now it’s too early to tell. Wilson has been an unbelievable friend throughout the process. According to the estimates we got from various contractors, so far Wilson’s done about ten thousand dollars of labor on our place, for free, with more to come; and that’s not taking into account that he found the candidate houses in appropriate areas, took us to see them, and gave us a builder’s critique of their problems and potential. In return he wants me to make him a web site. I think that’s a deal I can live with.

Heifer has been particularly wonderful during this period – two days of vicious dirty grunt work tearing off our ancient shingles and cedar shakes, two days of moving including hauling away some of our garbage and letting us use his enclosed trailer. DDB came out for one day as well, and then there are all the folks who’ve been bringing us meals in support of Monica’s chemo: Peaches (twice), Alix, and some of Monica’s friends including Rachelle, who sometimes reads LSH.

In all I’m astounded by the efforts my friends have been willing to make on our behalf. I hope that the things I’ve done for them over the years warrants what they’re doing for me, and promise to do my damndest to make sure my efforts going forward are worthy of their efforts now.

The U

I got a Fellowship to take another crack at the PhD thing, this time in the psych department at the U. Economically speaking this is probably an astoundingly stupid decision. But as I was reminded in New Hampshire, you get one life, and you’ve got to make every day mean something. Flushing your time down the toilet chasing dollars is a fool’s game. The question is, after the clusterfuck at USC, is academia another fool’s game? I have reason to think it isn’t, but this has gone on too long already and you’ll have to wait to hear why.