Highly Linkable

Visit these 18 fabulous libraries.
Go there (someday) in a "windowless" airplane.
Ask if you can fly a drone around inside to potentially produce videos as cool as these.
If they'll let you, film it for a week so it can get on prime-time Norwegian TV. Those guys plus the drones are getting close to my ideas.

Barry Ritholtz shares his basic simple truths of investing. These are highly recommended. Make sure you read the whole (short) list as the last two are as important as any.

Once you've got your investing house in order, better get to work on correcting these misconceptions about exercise--many of these are no surprise to loyal readers of MM.

Before leaving the body, don't fall for any detox nonsense in your New Year's Resolutionating.

John Cochrane goes all Principal Max Anderson in reviewing Ken Rogoff's proposal to eliminate physical currency. I fully am with Cochrane but I did want to quibble with his confusion about how this would actually affect monetary policy. You or I can immunize our own exposure to the negative interest rate, but we cannot all jointly eliminate it--the burden can only be transferred. I believe Scott Sumner has this criticism nailed.

We are repeatedly reminded that the overwhelming majority of NCAA athletes will go pro in something other than sports. For those the depressing fact is their degree wasn't worth that much. That doesn't surprise David Berri who also notes how the NBA age-limit rule (friendly for the NCAA) harms players while helping colleges and coaches.

Lot of count-ups and downs in this link fest. Here are 20 reasons the wind industry's case is (motionless) hot air.

Tim Harford reminds us in this post that most ventures are failures and we can learn from the losers.

If you were looking for a succinct list of arguments against price controls (ceilings specifically) in the face of disasters, you can relax--Don Boudreaux has provided it.

David Henderson reflects on one of his more memorable times questioning the powerful. If only more of us were so courageous as to continually question the military leadership.

2014's Resolution Fulfillment

It is time again to check on how I did in fulfilling my annual resolution. One word: success. Let me explain exactly how I mean.

Ever since the first skybox suites were installed in Oklahoma Memorial Stadium, I've held steadfastly that they were not for me. My time as a student (7 years) solidified this belief as I wanted to feel and breathe the atmosphere. And even as a graduate, I continued for a season to sit among the students before migrating back to the upper-west side stands 14 years ago (the area in which I sat before college going back to the age of about 7).

While the upper-west seats were a bit sterile after my days in the student section, they were still in the elements of both weather and populace. Upgrades in recent years to include new, more glamorous suites did not sway my belief. It wasn't about a rejection of luxury per se; it was somewhat about staying true to the experience (I might as well be at home for being in a suite) and a lot about NOT being like or around those in the suites. On this latter point, there are three facets.

The first problem is these people tend to be snobs. This is perhaps the biggest single issue I have with the suites. The second problem is my perception that those in the suites don't actually watch the game much. It is easy to become distracted by the booze and the food and the conversation. The people in the suites might as well be at some pool party.

The first two problems relate to the third problem. Being in them is like playing some kind of game, but the rules don't make any sense to me. They're being made up by all the wrong people. I mean no one makes them up. They seem to make themselves up. You cannot have alcohol in the stadium at OU. In fact there are strict rules about alcohol throughout the publicly-owned, state university. But you can have it in the suites. So the guy sitting in the blazing heat or blistering cold can't have a beer, but the guy asking the attendant to adjust the thermostat can sip a bourbon.

Getting back to the resolution--what has changed? As surprising as it was for me, at some point this football season I reversed my position on where I would prefer to sit. This change of heart was gradual at first and then sudden in completion. To be sure I was not seduced by the lure of even better improvements to come. In fact there are perhaps as many amenities for the regular seats as their are for suite people in the latest plans. And it is not just that I can see the advantages of suites; I would actually prefer to be in one under certain conditions. Namely, those conditions include I don't have to endure the problems I still have with suite people.

But just as I don't want to associate with my stereotypical view of who frequents a suite, I have grown quite tired of being around the typical fan. So basically I want to watch a game in person with people of my choosing. What has soured me on those in the stands? One word: ignorance. I am tired of the following (to be sure, I have been guilty of each of these myself at one time or another):

• People who think the other team and their fans are evil, dumb, undeserving, rude, or any other negative quality rather than basically equivalent to themselves as a whole and on average. 
• People who indignantly and vocally question every thing short of perfect success.
• People who don't know the rules of the game--to a ridiculous fault. You do not have to be an expert, but appreciate what you don't know.
• People who always think they are getting screwed by the refs.
• People who think good coaching consists of yelling, getting mad, "giving them a good butt chewing" at halftime, etc.
• People who think that good player play includes never fumbling (the ol' try harder approach to solving a random phenomenon), never being out-manned or out-talented, and perfection in all its many other forms. 
• People who support concussions for players. Oh, they never say it that way. The way they express it is to become visibly irate when one of their players is flagged for an illegal hit. Apparently, dangerously injurious behavior is "part of football"--at least it is when one's own player is applying the hit.
• People who cheer this. It is theft in the least, and it is potentially criminal negligence that could lead to severe injury or death. For the unfortunate person on the ground the impact would be about the equivalent of having a football thrown at his head at 70 miles per hour from a few feet away.

I could go on and on, but it would get even more petty and unfair. Perhaps it is not them; it is me. But regardless it seems that after 176 home games attended in a row, I have changed my mind on where I would prefer to sit. Now to just come up with spare $100,000 a year or so to pay for my preference ...

Highly Linkable

A pre-New Year's Resolution I am setting is to blog A LOT more (and not just more links, but in all honesty how else would you know what to read).

I dubbed this "blog post of the year". Enjoy.

This TED talk was insightful. I really like the points she makes. And this TED talk is a great example of why we should be optimistic about the potential of medicine and technology . . . if we could only let the market do its thing . . . but I digress.

Watching this last night, I thought immediately what my heckle would be, "He's more King than you'll ever be, William!" I had read this by David Boaz the day before to give me strength.

I like Landsburg's three short essays on the Eric Garner tragedy. He brings up great points as well as giving a great economics lesson. I would like to know what happened in the missing 1:18 minutes of that video, but I doubt it would change my opinion that it was excessive, unreasonable force. Sadly, Eric Garner is but a statistic in a long line.

While I continue to be very critical of the Ferguson police and militarized police in general, this piece by Paul Cassell along with his other analysis convinced me that declining to bring charges was most likely judicially correct.

I've been waiting for this knowing it would be an epic takedown the likes of which we haven't seen since the Tri-Lams fought down the tyranny of Alpha Beta. Apparently, old grumpy was too.

I appreciate how Jerry Palm is thinking beyond the seen as he actually does some analysis regarding the Big 12's apparent "need" for a championship game in light of being passed over for a slot in the College Football Playoff. My own view is the 10-team Big 12 is much too unstable to look for quick fixes like adding a playoff game or two new (anyone will do) teams. I predict that more will change in college football than has changed already even though we have seen a lot of change. For universities strategic thinking is highly critical right now as is protecting what really matters--beware what loyalties you sacrifice for.

Lastly, glad to say I'm already doing quite a few of these backup strategies.

Highly Linkable - economics, et al. edition

The eagle has landed--at Jardins du Trocadéro?

We want to believe, Charles Murray included, that we can raise our children's IQ, but the case against it keeps growing.

BI has 9 more math facts people have a hard time accepting.

Speaking of mathematics, Steven Landsburg has two wonderful passages on the recent passing of math colossus Alexander Grothendieck (read here then here).

Speaking of passings, economics giant Gordon Tullock died earlier this month. Tyler Cowen had a nice, short tribute. Perhaps more than anyone, Tullock taught us that the correct comparison to market failure is government failure.

Leaving the somber topics, here is some good news. Be sure to check out the "Browse Data" tab at the top.

In more good news, the health/wealth benefits of self-driving cars have enormous promise. Not to be a Debbie Downer, but here is a predicted summary headline of the near future (the second sentence is the scary one) :

Family of four dies in fiery crash as self driving car refused to recognize and decelerate as it quickly approached a crowded intersection. Regulators question technology that saves over 30,000 lives per year. 

Continuing on a theme of counter-intuitive thinking (from one of my favorite counter-intuitive thinkers), the workers of Amazon (commendably) want foremen who push them hard.

I agree with Noah Smith that we need to rethink how economics is taught to MBAs (and so many others).

We could start with this simple, true, and so often misunderstood economic lesson from Scott Sumner.

This one on antidepressants is long, but interesting and thought provoking. (HT: Bryan Caplan)

Highly Linkable - the sports edition

Three different takes on exploitation related to sports.

The new school is exploiting the weaknesses of the old school in football. Love the quote: "We always get the chalk last."

David Berri shows how conventional wisdom exploits many basketball fans' better judgment when it comes to measuring player greatness.

DaBerri also shows us what true exploitation looks like. To those who would condone the coordinated limitation (cartelization) of workers' incomes, you're despicable!

Highly Linkable - the voting edition

I am happy to report that in the recent midterm election the results were very good. No, I don't mean who won and who lost. I am moderately favorable to that, and it was very pleasant to watch all the squirming on MSNBC. The success I refer to is the wonderfully-low voter turnout!

Perhaps we are getting wiser as a society, and more people realize there is no duty to vote.

After all, there are many good reasons not to vote.

Besides, voting is in many cases a moral wrong.

As I put it on Twitter:

Got some free time today. Guess how I won't be using it. Mathematical literacy & political realism > naïve wishing & democratic romance.
— Steve Winkler (@swinkler78) November 4, 2014

Can You Buy Economic Growth?

When you pose the question in that form, the answer should be obvious. Yet time and again we see well intended but mistaken people attempting to get something for nothing. Let’s take a hypothetical example that we see in real life quite often: a city offering a business economic incentives to invest in that city.

In this example we’ll assume the following:

1. That Company XYZ is looking to create a new research facility.
2. That the facility will be staffed with 20 new employees (not being relocated from elsewhere in Company XYZ's organization) who will earn on average $100,000 per year in total salary and benefits after taxes. $2,000,000 in NEW JOBS!
3. That Company XYZ will build a brand new facility on what is currently raw land well within the heart of the city in which it ultimately chooses to locate.
4. That the facility will be built by a local construction firm resulting in a $1,000,000 net profit to the construction firm.

It has narrowed the search down to Oklahoma City and Wichita, Kansas. From Company XYZ’s point of view and analysis the cities are essentially identical, but rather than flip a coin to determine the winning city, it will conduct a game where both cities compete to attract the investment.

The game involves both city governments coming up with incentives to entice Company XYZ, which essentially means each government taking resources from its citizens to give to Company XYZ’s shareholders. The first important point to make is that economically this is at best a zero-sum game and at worst a negative-sum game—at best the economic result is a breakeven; at worst (and likely) the game destroys resources. What is gained by Company XYZ’s shareholders is lost by citizens of the “winning” city. And IF there are economic gains to being the winning city, those gains are foregone by the losing city; hence, playing the game does not change the economic pie of the total economy. It is likely a negative-sum game because playing the game is not free. It takes resources to at the very least organize an incentive plan, tax the citizens to pay for it (or seize their land), and distribute the lucre incentive package to Company XYZ.

However, being the self-centered people advocates for the game playing must believe them to be, both cities* care only about its own economic gains. Thus, each will evaluate the game outcome only on the basis of how it affects its own city’s economy. Since I live in Oklahoma City, I will present it from the perspective of “us” being OKC.

So are there economic gains to be had? Well, let’s start with the construction of the facility. There is a $1,000,000 profit to be had there. Being the winning city is worth at least $1,000,000. In terms of aggregate economic gains for each city, we don’t care that the gain will go to a single construction firm (a concentrated benefit) at the expense of taxpayers in general paying for whatever incentive package is created (a diffused cost). We might care about the distributional effects (are we taking from poorer taxpayers to give to the richer construction firm?) and we should care that the construction firm might encourage an incentive package worth more than $1,000,000 (an effect of the concentrated benefit/diffused cost**). But the economic gains imply we should spend up to $1,000,000 to get the facility.

Of course, Wichita has the same incentive. How will this play out? It is likely the incentive package will be bid up until all the gain (or more) goes back to Company XYZ—the winning incentive package will be $1,000,000 (or higher). I hear your protest, "But wait, aren't there other economic gains? What about the 20 $100,000 jobs? Giving up the $1,000,000 related to the construction seems a small price for $2,000,000 in NEW jobs." Okay, let’s look at jobs.

Remember that jobs are a means, not an end in themselves. The economic gains from a new job is illusory. If we assume the 20 employees come out of the local economy, we have to consider that they came from somewhere. The personal gain to each is the difference between what they had before and what they have now in the new job (i.e., what total wages and benefits they were expecting to make before compared to the new job’s $100,000). Even if they were unemployed, it is bad economic reasoning to assume their gain is $100,000 annually. We need to compare their next-best alternative, which surely was not zero income for life. It may have been government assistance and family support, but it was more likely the prospects of another job very similar to the $100,000 one at Company XYZ. Why is this so?

Effectively workers compete for the new jobs by offering to work for less than competing workers.*** This competitive process tends to eliminate candidates starting with those who have the most to gain from the new job. In a moderately large economy the eventual candidate pool will be those who would only slightly benefit from taking the new job. Therefore, regardless of what they were doing previously, it is highly likely that the new jobs are only marginally better for the workers who get them.

To be generous, let’s assume the new workers all come from another city—might as well assume Wichita while we’re picking on them. Don’t these new entrants into the local OKC economy represent economic gains in the form of growth? Yes, they do.**** And we can roughly approximate the gross gains to OKC's economy as being $2,000,000 per year. The net gain will be somewhat smaller as these new entrants use city resources, etc. Let’s ignore those costs, though, and just stick with the $2,000,000 figure. Again we are back to the courtship competition between the two cities where each will pay Company XYZ the equivalent of $2,000,000 per year to be the winner.

Let’s tally winners and losers:

WINNERS	LOSERS
Company XYZ (it captured all the gains to be had from the winning city)	Both cities (they each used resources campaigning; the winning city gave up all the economic gains to Company XYZ)
People in the winning city who now have new neighbors	People in the cities from which the relocating employees left
Construction firm
Employees (but only marginally)

This analysis used precise assumptions about profits and jobs that are unrealistic. In reality these facts would not be known with certainty and would almost certainly be very out of analytical reach for the city governments. They are ill-equipped and ill-incentivized to discover and estimate these facts well. Notice we didn't talk about cronyism or corruption. We ignored any fanciful, magic multipliers that would imply a $2,000,000 new job infusion would create more than $2,000,000 in economic gains. The burden of proof is on those who would refute this analysis. Wanting it to be different is not the same as it being different. Quit basing economic and political decisions on hopes, good intentions, and "great" leaders performing miracles behind the curtain.

*Here is the first flaw in this line of argument advocates make. Cities don’t have cares or opinions. Only people within cities have cares, and those cares are not uniform or identical.

**See the late Gordon Tullock and public choice economics.

*** The transition mechanism for this is indirect; so don’t get caught up in the fact that you have never witnessed it directly. It is a market-driven process largely unseen to market participants just as the price of my iPhone accounts for the use of expensive elements like praseodymium, gadolinium, and terbium even though I didn't know those even existed until reading an article about rare elements in iPhones—and I still don’t know and don’t need to know what they do.

****I am assuming the cities want (there I go again) economic growth. It is not at all clear that all members of each city desire this. In fact a lot of behavior, from zoning laws to grumpy complaining to moving just outside of the city, demonstrates that people are not that keen on economic growth.