Thinking on the Margin

Incredible Decrease in Child Mortality Worldwide in Last 50 Years

2013-02-22T13:36:00.002-05:00

Another fantastic video by Hans Rosling, showing the incredible decrease in child-mortality around the world in the last 50 years. Along this dimension, the world truly is becoming a better place.

(HT Freakonomics)

Principles of Macroeconomics: Every Graph You Need to Know

2013-02-19T08:02:00.000-05:00

The Top 10 Mistakes You Make When Trying to Change Your Behavior

2013-02-18T10:01:00.000-05:00

Related:

(HT Eric Barker)

The Economics of Why Children Inherit Their Last Names From Their Father, Not Their Mother

2013-02-18T08:47:00.000-05:00

It helps ensure the investment of fathers in the context of paternal uncertainty:

Fathers are therefore expected to invest more heavily in children who bear their last names than children who bear the mother’s last names, because they are more likely to be convinced of their paternity. As a result, ceteris paribus, children who inherit their last names from their fathers are expected to be more likely to survive and thrive than children who inherit their last names from their mothers. Like polyandry, the social institution of matrilineal inheritance of last names contains the seeds of its own extinction. Societies with such an institution are less likely to survive and thrive, because their children are less likely to survive and thrive, which explains why most known human cultures practice patrilineal inheritance of last names, not their matrilineal inheritance or even the system that vos Savant advocates. Worse yet, fathers in societies with the social institution that vos Savant advocates are expected to invest preferentially in sons over daughters, and thus girls are expected to be worse off than boys in such societies.

One of These Things Is Not Like the Other

2013-02-18T08:24:00.000-05:00

(via Noah Smith)

Is America Becoming More Diverse?

2013-02-17T15:14:00.000-05:00

Philip Cohen takes a fascinating look at how America's population has changed since 1972 -- broken down by religion, race, marital status, and age of first marriage. Lots of changes and increasing diversity on all fronts.

There are various ways of constructing a diversity index, but I use the one sometimes called the Blau index, which is easy to calculate and has a nice interpretation: the probability that two randomly selected individuals are from different groups...

I have complained before that using the 1950s or thereabouts as a benchmark is misleading because it was an unusual period, marked by high conformity, especially with regard to family matters. But it is still the case that since then diversity on a number of important measures has increased. Over the period of several generations, in important ways the people we randomly encounter are more likely to be different from ourselves (and each other).

Read the whole thing. Lots of interesting graphs.

What to Expect When No One's Expecting

2013-02-09T20:55:00.000-05:00

The title of a new book by Jonathan Last on the declining fertility rates in America and the negative impacts this will have on American society and economy. Here is Last writing in the Wall Street Journal:

The fertility rate is the number of children an average woman bears over the course of her life. The replacement rate is 2.1. If the average woman has more children than that, population grows. Fewer, and it contracts. Today, America's total fertility rate is 1.93, according to the latest figures from the Centers for Disease Control and Prevention; it hasn't been above the replacement rate in a sustained way since the early 1970s.

The nation's falling fertility rate underlies many of our most difficult problems. Once a country's fertility rate falls consistently below replacement, its age profile begins to shift. You get more old people than young people. And eventually, as the bloated cohort of old people dies off, population begins to contract. This dual problem—a population that is disproportionately old and shrinking overall—has enormous economic, political and cultural consequences...

Low-fertility societies don't innovate because their incentives for consumption tilt overwhelmingly toward health care. They don't invest aggressively because, with the average age skewing higher, capital shifts to preserving and extending life and then begins drawing down. They cannot sustain social-security programs because they don't have enough workers to pay for the retirees. They cannot project power because they lack the money to pay for defense and the military-age manpower to serve in their armed forces.

Read the whole thing.

(HT Tyler Cowen)

I Am Now Officially Dr. Hollar!

2012-11-28T23:51:00.000-05:00

I successfully defended my dissertation earlier today and am now officially Dr. Hollar! It has a been a long road getting here, but a journey I am very happy to have both started and finished.

The image above is the introductory slide for my defense presentation. I decided to have a little fun with it.

I am profoundly grateful to my dissertation committee, to GMU, and to all my family and friends who supported me these past few years. And a special word of thanks to Marymount University who not only provided me with a faculty position prior to graduation, but also gave me the time and support to successfully finish my PhD. I continue to feel like I landed a dream job in a dream location.

Next stop, tenure!

Tyler Cowen's Favorite Non-Ficton Books of 2012

2012-11-26T16:17:00.001-05:00

Tyler Cowen shares his picks:

Laurent Dubois, Haiti: The Aftershocks of History.
Charles Murray, Coming Apart: The State of White America, 1960-2010.
David Hackett Fischer, Fairness and Freedom: A History of Two Open Societies: New Zealand and the United States.
George Dyson, Turing’s Cathedral: The Origins of the Digital Universe.
Jon Gertner, The Idea Factory: Bell Labs and the Great Age of American Innovation.
Michael Dirda, On Conan Doyle: Or, The Whole Art of Storytelling.
James Fallows, China Airborne.
Greg Woolf, Rome: An Empire’s Story.
Odd Arne Westad, Restless Empire: China and the World Since 1750.
Robert D. Kaplan, The Revenge of Geography.
Barry Eichengreen, Dwight H. Perkins, and Khanho Shin, From Miracle to Maturity: The Growth of the Korean Economy.

Arnold Kling adds to the list.

My additions to the list would include James Manzi’s Uncontrolled, Enrico Moretti’s The New Geography of Jobs (in my opinion, one cannot put Murray on the list and leave out Moretti), Bruce Schneier’s Liars and Outliers (that one does not seem to have impressed anyone else I know), Paul Reid’s completion of William Manchester’s three-volume biography of Winston Churchill, and Jonathan Haidt’s The Righteous Mind (this is on an even higher plane, in my opinion–a candidate for book of the decade? See my review essay.)

I'm afraid I've been too busy working on my dissertation this past year to have much to add. Hope to remedy that next year. In the meantime, I just added Murray's Coming Apart and Haidt's The Righteous Mind to my reading list.

Everything You Need to Know About the Fiscal Cliff

2012-11-07T23:26:00.005-05:00

The Wall Street Journal:

Last August, President Obama and Congress put the U.S. economy on course to go over a "fiscal cliff." WSJ's David Wessel tells you everything you need to know about the "cliff" but were afraid to ask.

(HT Greg Mankiw)

How Did the Prediction Markets Do?

2012-11-07T11:23:00.001-05:00

Below is a map showing the results of yesterday's elections.

And here is the map of prediction market forecasts I posted on October 1st.

Florida has yet to be called, but if it goes to Obama, then the prediction markets will have accurately forecasted 50 out of 50 states five weeks before the election.

Here is how the prediction markets fared in 2004 and 2008. I'd say they nailed it yet again!

Read more of my posts on prediction markets here.

One Last Look At Prediction Markets Before Tomorrow's Election

2012-11-05T23:53:00.004-05:00

This is the latest prediction for tomorrow's election on Intrade. These predictions have been remarkably stable since October 1st, with only Florida changing from being likely to vote Democratic to now likely to vote Republican. Virginia and Colorado have shifted back and forth a bit over the past few weeks, but both are still predicted to go Democratic.

It will be interesting to see the final tally tomorrow night and compare it to Intrade's forecast over a month ago. If this map matches the final outcomes tomorrow, Intrade will have accurately predicted 49 out of the 50 states one month before the election.

Stay tuned!

How Powerful Is Your Vote?

2012-11-05T23:30:00.001-05:00

When it comes to voting, not all states are created equal.

Garett Jones explains why he loves the electoral college. (For the record, I do too.)

David Henderson explains why it will never go away.

A Campaign Map, Morphed by Money

2012-11-05T23:11:00.003-05:00

A very cool animated infographic by NPR on how the US would look if states were resized according to campaign spending. Follow the link for more info.

The Surprising Economics of Sex Ratios

2012-10-28T22:00:00.000-04:00

Even romance follows the laws of supply and demand:

Griskevicius and company then asked the test participants to indicate how much they would spend on three romantic gestures: a Valentine's Day gift, a dinner date, and the purchase of an engagement ring. When test participants believed men outnumbered women in the population, they expected men to spend more money on the items. This was true of both male and female participants — suggesting that when men have more competition for mates, women become choosier and men attempt to out-spend any rivals.

The research has its limitations. For starters, financial and mating decisions are complicated processes whose outcomes are hard to reduce to any single factor. Beyond that, it seems reasonable to wonder whether most people even know the sex ratio of their cities — and you'd have to know that ratio to act on it. Timing also seems important here: sex ratios might cause men to spend more during courtship, but what about once they start a family? There's a lot more to consider.

Still the theory is incredibly intriguing. In the latest issue of Current Biology, British researchers Aron Szekely of Oxford and Tamas Szekely of the University of Bath call the study "ground-breaking." The two Szekelys suggest that behavioral and population researchers develop models to assess how demographic shifts like sex ratio might influence consumer behavior. The theory might have a particularly ripe testing ground in China, which will soon have a male surplus of 40 million, for an overall sex ratio of 1.2 men to every woman. Break out your yuan, gentlemen.

Read the whole thing.

Who Really Benefits From Mortgage Interest Deductions?

2012-10-27T17:32:00.001-04:00

Lisa Prevost writing for The New York Times:

Real estate and building industry groups have loudly condemned proposals by both presidential campaigns to shrink the mortgage interest deduction. Central to their arguments is the long-hallowed deduction’s value to the middle class. But a closer look at who benefits suggests that this perception, though prevalent, is not accurate.

To begin with, most taxpayers do not benefit from the deduction at all. This is because they do not itemize deductions on their federal income tax returns. According to Joseph Rosenberg, a research associate at the Urban-Brookings Tax Policy Center, only about 30 percent of taxpayers itemize, rather than take the standard deduction. And the majority of these itemizers are upper-middle and upper-income households...

The other factor is that the value of the subsidy increases along with your tax bracket.

Read the whole thing.

The mortgage deduction is a policy that distorts the actual value of a home, making it look more valuable than it economically is. This leads to an over-consumption of housing an over-provision of single family homes in the economy. The poor are not only those who are least able to afford homes, but also are in the lowest tax bracket, receiving very little benefit from the mortgage deduction. As Prevost writes in her article, the tax benefits are mostly enjoyed by the wealthy.

Harvard's Ed Glaeser notes that the mortgage deduction contributes to suburban sprawl by incentivizing people to own when, but for price distortions due to tax policies, they might be better off renting a smaller home in or nearer to a city. This has huge ramifications on losses in productivity and well-being from time wasted commuting, environmental impact from lowered access to public transportation and additional miles driven, and lessened economies of scale on services in the suburbs relative to cities. The mortgage deduction also incentivizes people to purchase larger homes than they otherwise would, again leading to a waste of resources in building, heating, cooling, and maintaining overly-large houses. As Glaeser points out in his book, if other countries like China and India suburbanize the way the United States has, it could lead to large global increases in carbon emissions and the demand for oil.

I have recently been teaching my microeconomics class about positive externalities and negative externalities. If suburban living has as many negative externalities as Glaeser believes, maybe home ownership should be taxed rather than subsidized? At a minimum, the mortgage tax deduction is a policy that seems to have little justification from either the perspective of economics or equality.

(HT TaxProf Blog)

Latest Prediction Market Forecast

2012-10-26T08:43:00.001-04:00

See live updates on Intrade. Compared to the forecast on October 1st (before any of the presidential debates), Florida has switched from Democrat to Republican and Colorado and Virginia are now very close (both formerly predicted to vote for Obama). Obama's overall chance of winning is currently predicted to be 61.9%.

Read my previous posts on prediction markets.

What Would Life Be Like Without Capitalism?

2012-10-17T12:32:00.001-04:00

(HT Pete Boettke)

This Year's Nobel Prize for Economic Engineering

2012-10-15T14:33:00.001-04:00

Congratulations to Al Roth and Lloyd Shapley for winning the Nobel Prize in Economics this morning for their work in market design and matching theory (emphasis mine):

[Their work relates] to how people and companies find and select one another in everything from marriage to school choice to jobs to organ donations.

Their work primarily relates to markets that do not have prices, or at least have strict constraints on prices. In classical economics, prices are the main mechanism through which resources are allocated. The laureates’ breakthroughs involve figuring out how to properly assign people and things to stable matches when prices are not available to help buyers and sellers pair up.

Mr. Roth, 60, has put these theories to practical use, in his work on a program that matches new doctors to hospitals and more recently for a project matching up kidney donors. Public school systems in New York, Boston, Chicago and Denver, among other cities, use an algorithm based on his work to help assign students to schools. A professor at Harvard, he recently accepted a new position at Stanford...

Mr. Shapley, 89, a mathematician and economist long associated with game theory, is a professor emeritus at the University of California, Los Angeles. He made some of the earliest theoretical contributions to research on market design and matching, in the 1950s and 1960s. He looked at why, in a free market, it was sometimes difficult for individuals to come to an agreement about proper matches.

Read the whole thing.

I originally considered using the Gale-Shapley matching model for the foundation of my research on marriage markets. While I ended up eventually going with a more Beckerian approach, it was a great introduction to market design literature and of much help in my work on agent-based models.

Try out this animated demonstration of how the Gale-Shapley model works. Here is more analytical version. Wikipedia has a nice write up of the stable marriage problem. Read Gale-Shapley's original paper on matching markets, which is a highly accessible.

Be sure to check out Roth's webpage on game theory, experimental economics, and market design. And also see his blog, Market Design. As far as I know, Roth is the first academic blogger to win the Nobel Prize. (Paul Krugman is also a blogger, but to a more general audience.)

Alex Tabarrok has a some great commentary on the importance of Roth's and Shapley's work.

Forbes has a profile of Roth and Wikipedia of Shapley. (HT Tyler Cowen)

See is the official Nobel Prize webpage announcing the prize.

More thoughts on today's prize from Seven Levitt and Peter Klein.

So what exactly does it take to win a Nobel Prize? Some suspect it might have something to do with eating lots of chocolate...

The Importance of Being Urban

2012-10-14T17:12:00.002-04:00

The Economist:

In highly skilled societies, bigger cities are associated with higher levels of productivity and income, the column explains. This seems to be due to the ways in which cities facilitate innovation in an age of rapidly increasing economic and technological complexity. Prosperity now requires lots of skilled individuals in reasonably close proximity to each other, to learn from and occasionally partner with as part of the process of coming up with and spreading new ideas. America appears to be better able than Europe to accomplish this across a wide range of places.

Read more here.

Also check out Ed Glasser's Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. Highly recommended!

Prediction Markets: Obama Wins With 332 Electoral Votes

2012-10-01T12:27:00.000-04:00

Tomorrow, I will teach my class about prediction markets. With the presidential election just over a month away, below is my best estimate for how the election will go. This is based 100% off of today's trading on Intrade.

To be clear, I am not only forecasting that Obama will be the winner, but that he will receive 332 electoral votes vs. 206 for Romney.

Prediction markets did a phenomenal job forecasting the election in 2004 and 2008, and I have every confidence they will do well this year too.

To be honest, between teaching, keeping up with other responsibilities at Marymount, and trying to finish up my dissertation, I haven't been keeping up with the election news. But as I will teach my class tomorrow, prices do such a great job economizing on information that I don't have to.

For more on prediction markets:

See my previous posts on prediction markets.
Read A Market Approach to Politics -- a nice New York Times article by Hal Varian
Read The Wisdom of Crowds by James Surowiecki for a great, intuitive introduction to why prediction markets work.
Visit the Iowa Electronic Markets, a political prediction market run by the University of Iowa. More on them here.

Rising Tide of Restrictions on Religion

2012-10-01T11:11:00.004-04:00

(click on years above to see how restrictions have changed)

The Pew Forum on Religion and Public Life:

The share of countries with high or very high restrictions on religious beliefs and practices rose from 31% in the year ending in mid-2009 to 37% in the year ending in mid-2010. Because some of the most restrictive countries are very populous, three-quarters of the world’s approximately 7 billion people live in countries with high government restrictions on religion or high social hostilities involving religion, up from 70% a year earlier.

Restrictions on religion rose not only in countries that began the year with high or very high restrictions or hostilities, such as Indonesia and Nigeria, but also in many countries that began with low or moderate restrictions or hostilities, such as Switzerland and the United States. (See sidebar on the U.S..)

Read the whole thing.

Question: If you consider there to be a market for religion, what impact do you expect government restrictions to have on these market outcomes? As government restrictions become stronger in given regions, do you expect a 'black market' for religion to emerge? Does this match what we see in many countries?

A Historical View of US Unemployment

2012-09-14T13:39:00.001-04:00

An excellent infographic from The Wall Street Journal showing unemployment statistics in the US from 1948 to today.

(click image for larger view)

Why We're Really Winning the War on Poverty

2012-09-14T13:28:00.001-04:00

Darek Thompson writhing in The Atlantic (emphasis mine):

In the forty years between 1970 and 2010, real GDP per person doubled, the U.S. spent trillions of dollars on anti-poverty measures, but the poverty rate increased by two percentage points. Just yesterday the Census reported 46.2 million people living in poverty in 2011.

That's the official story. But a new paper from Bruce D. Meyer and James X. Sullivan says it's missing everything. "We may not have won the war on poverty, but we are certainly winning," they write.

When they looked at poorer families' consumption rather than income, accounted for changes in the tax code that benefit the poor, and included "noncash benefits" such as food stamps and government-provided medical care, they found poverty fell 12.5 percentage points between 1972 and 2010.

The graph [above] tells the story. The official poverty rate (shown in DARK BLUE) is higher today than it was in the early 1970s. But when you measure after-tax income (RED) or consumption (GREEN), the story changes: Poverty rates have declined steadily, and dramatically, since the 1960s.

Read the whole thing.

Josh Wright Nominated to be Next FTC Commissioner

2012-09-13T17:57:00.000-04:00

A huge congratulations to Josh Wright, who has been nominated to be the next commissioner of the Federal Trade Commission. Josh was a visiting scholar at the FTC when I interned there a few years ago and is currently a professor at GMU's law school. He blogs at Truth on the Market. Josh is a tremendous antitrust scholar and will be a wonderful asset to the FTC. I am particularly excited to know he will be the first JD/PhD to serve on the commission.

If confirmed, Josh will join Maureen Ohlhausen, my former manager, as two of the five commissioners of the FTC.