Archive for March 2009
Via my buddy Matt Watson, here is a really well done infographic explaining the credit crisis. Merely entertaining for regular readers who’ve been following the crisis. But quite informative for any of your friends who haven’t felt the need to wade through all the commentary.
One of things I object to about mainstream environmentalists is that they act as if there are no tradeoffs. For example, they simultaneously promote organic farming, argue for biodiversity , and lobby for more open space. Personally, I think the second and third are very important. In my value system, they are are very close to terminal goals. Which is why I avoid organic foods.
Reason has a short interview with Norman Borlaug that nicely sums up the tradeoffs required by organic farming. There is literally nobody who understands modern agriculture better. The bottom line is that if the US tried to produce today’s agriculture output with 1960s era technology, we would need on the order of 1 million square miles of additional farmland (assuming that the marginal productivity of the land decreases somewhat as you bring less productive ares into play). That’s a swath 1000 miles by 1000 miles. That’s about 1/3 the land area of the contiguous 48 states.
Replicate this calculation all over the world and you’d have massive deforestation and habitat destruction. Remember the unintended slashing and burning rainforests to plant oil palms for subsidized biodiesel? Now multiply that by 10. No thanks.
Rafe posted this TED talk by Willie Smits without much commentary. I would like to add some. When I first started watching, I thought, “Wow, you can make a lot of hay out of simply applying Econ 101.” This was in response to the fact that they bought the former rainforest land in question, making it private property. This is one of the classic solutions to a Tragedy of the Commons problem. But then my appreciation made an exponential run upward.
Somehow, he managed to perfectly balance the economic and ecological package into a rapidly growing and self-sustaining system. You see, he had to figure out how much economic benefit the land could generate at each point in time and never have more than the corresponding number of people working the land. He had to figure out how to mesh psychological factors with incentive structures to get the locals to adopt the land both socially and economically. He also had to plot the path for an ecosystem in time and space.
Each of these three prongs represents an effort to control a dynamic system and he had to mesh all of them at once. He makes it sound obvious in retrospect, but make no mistake, this is a feat of sheer brilliance. I think there are some good general lessons to learn from this, but the real ongoing value is in the human capital he has built for managing this process. He should cycle through groups of apprentices that then go forth and attempt to replicate this miracle. I really hope this lasts and expands in the long term.
I had a thought today when I was reading Arnold Kling’s post on always trying to fight the last war with financial regulations. We seem to reliably have financial crises. They don’t follow a schedule, but they do happen somewhat frequently. What if the financial system is gripped by the same phenomenon of synchronized chaos that I described in this post? A brief survey of Google and Google Scholar doesn’t turn up much. Anybody know of work in this area? In other words, “Is there a mathematical economist in the house?”
As I mentioned in this post, one of the three primary planks of my worldview is that, “…the human brain is a woefully inadequate decision making substrate.” I started adopting this posture in graduate school and have refined it with constant input from the cognitive psychology and neurobiology literature over the years. Luckily, you don’t have to put in that kind of time. Simply go out and read Rational Choice in an Uncertain Worlds by Hastie and Dawes and The Accidental Mind by Linden.
Scott Sumner has a great post at his blog TheMoneyIllusion (highly recommended in general if you’re into monetary economics). In it, he explores the difference between values and worldview. In particular, he explains how academic economists tend to have liberal values but an economic, rather than liberal or conservative, worldview. This leads to interesting effects when you try to measure academic economists on the left-right spectrum.
What I loved was the list of seven differences between the “common sense” and “economic” worldviews. They are concrete examples of how economists differ in their causal reasoning from even very highly intelligent and educated non-economists. If you want to understand where I’m coming from, read the post. It’s pretty much one of the three primary planks of my own worldview. [In case your curious, the other two are that (2) the human brain is a woefully inadequate decision making substrate and (3) many of the outcomes we care about are produced by complex dynamic systems that are very difficult to characterize]
As you’ve probably figured out by now, I prefer to base decisions on statistically significant evidence. However, in order to gather such evidence, you must have hypotheses in the form of testable models. If the models you try to test are divorced from reality on the ground, your results will be useless no matter how statistically significant.
Therefore, if you’re interested in issues of poverty and race in the US, here are two ethnographies you should read. Gang Leader for a Day by Sudhir Venkatesh and Cop in the Hood by Peter Moskos. As sociology PhD candidates, both went out and actually became actors in poor black neighborhoods. Venkatesh hung out with a crack gang in a Chicago housing project and Moskos became a police officer in Baltimore’s roughest neighborhood.