Some beautiful links

I am not around.  Over the next three weeks, there are a series of really rubbish auto-posts are coming up about “factor shares” – I normally write posts in advance, but it is unlikely I am going to add anything or move posts around to include new ones.  During that time I’ll be reading and reviewing Capital and writing a summary document on income inequality measurement (both things I promise to share) – these are both sizable tasks I want to do, hence why I won’t be around too much.

However, this also means I can’t post on things I find cool.  So I’ll just give you some links ;)

  1. Greg Mankiw mentions the harm principle and economics.  “First do no harm” is a good principle for us to hold when considering policy, I agree.
  2. Details do matter though, via Mark Thoma and also a piece by John Aziz. My view of this in general would be that the “harm” comes from a “change” in policy from an “initial position” – how do we define this initial position such that something counts as change?  If we define it solely as “now” then we are simply conservative, if we define it as some “ideal type” that we believe is “natural for the social system”, we are trading in ideologies.  Applying the harm principle starts to get tricky! [Note:  In the comments to the recent Hand posts (here, here) there has been further discussion of this]
  3. Tim Harford, Chris Dillow, and Noah Smith all discuss behavioural economics – plenty of interesting points in there if people want to think about choice, its relation to trade-offs, and its relation to policy.
  4. From Mark Thoma again, the misuse of theoretical models.  Given my interest in methodology I’m certainly interested in reading this (what they establish as the ‘should’ how they find what ‘is’ in modeling) – I’m sure you all feel the same way :)
  5. And because I have to put up something about inequality here is Lane Kenworthy.  The US example is an interesting one, but I would almost think that lower growth in the low and middle parts of the income distribution is itself defined as higher inequality – it is almost tautological to say one caused the other.  The magnitude of the gap over there tells us that it is an issue worth looking into though!

Taxing: Choice and policy consistency

Offsetting recently posted about a tweet by Gareth Morgan on eating and control, including a reply I popped up.  Essentially, Gareth’s tweet implied that the way individuals make choices indicates we have no choice over how much they eat.  I disagreed talking about precommitment – he stated I assumed perfect information, which is both a touch untrue and (surprisingly to many) irrelevant.

It did get me thinking though.  The two of us actually have almost exactly the same model of choice in our heads for this issue, and as a result any differences of view of on the appropriateness of policy that we might have are not due to differences in the underlying model. Read more

Thinking more carefully about gifts

Mieke Welvaert recently discussed gift giving, pointing out that it was significantly more complicated than the “just give cash” statement Matt Nolan made a few years back.  For example a gift is an inherently different good to the same self-purchased product – I good is not just the set of physical properties that constitute it:

There are some things people like to receive but probably wouldn’t buy if you gave them the cash to do so. Flowers and chocolate come to mind for this category.  I personally, much prefer to receive flowers than to buy them for myself.  I understand that many people enjoy a box of chocolates free of guilt if they were given the chocolates rather than if they bought them for themselves.

Furthermore let us not forget the importance of signalling – gift giving can be a signal, which may have value, or may in itself be waste.  When it comes to gifts the key point that comes out is that “efficiency is a really hard idea”.

Folk addiction = time inconsistency?

As you may or may not know, I am a vegetarian.  As a result, occasionally I talk myself into needing more protein.  To do this I eat cashews, which I think are actually just mainly fat, but are very yummy.

Anyways, I went along to the supermarket and purchased a small number of cashews.  The checkout operator warned me “be careful, those are addictive”.  I responded by saying “hey that is why I buy them is such small quantities”.  We’ve talked about this idea in the past here and here.

Now what we really described there was a situation where the consumption of cashews is time inconsistent, and where I use a precommitment strategy of “buying less of them”.

This broad definition of addiction, which merely means that you are unable to commit to an optimal time path of consumption, is fine.  But the cost of it is limited by the cost of precommiting.

Read more

A cash payment is not a ‘nudge’

There’s controversy in the UK over trials of a £200 payment to mothers for breastfeeding their children. Bizarrely, the payment is being described as a ‘nudge’ when it is nothing of the sort. A nudge is a change in the framing of a choice that doesn’t change the choice itself. Interventions that make one option far cheaper than the other through a cash payment are not nudges. The breastfeeding payment is a pure incentive scheme and has nothing to do with behavioural research. Read more

In defence of economists

I see that the Listener (ht Agnitio) has picked up on this piece on psychology today (ht Andrew F), which claims that an education in economics inherently changes our behaviour making economists worse citizens.

At first brush I would like to note that we have a psychology lecturer suggesting that this implies more people should study psychology – it might be the economist in me talking but this sounds a bit like these recommendations are a touch self-interested themselves ;)

But this would be a digression.  While I don’t disagree that economists do need to be humble about the conditional nature of their knowledge (a point that holds equally for other social, and physical, sciences mind you!) I stick by my general conclusion that:

Saying “we shouldn’t look at trade-offs because then we lose our sense of community” sounds strangely like “we shouldn’t study the natural world or we will lose our sense of faith” don’t you think

Read more