Monday, November 19, 2012

Southern Economic Meetings Rundown

Just got back from the Southern Economic Association Meetings. New Orleans was fun and the presentations were informative but I'm happy to be home. When I was growing up I remember Dad had an affinity for top-5 or top-10 lists, I guess he passed it on to me. Below are my top-5 papers from the conference along with their abstract and a couple sentence comment.

Title: "Educations Gambling Problem: Earmarked Lottery Revenues, Government Spending, and Charitable Donations"

Abstract: I examine the impact that lotteries introduced to support education have on overall funding for education, accounting for both government expenditures and private charitable donations. State government education expenditures do not significantly increase when an education lottery is introduced. However, the fact that states claim to use lottery revenues for education may have a negative impact on charitable contributions to education related causes. This in turn would imply that total support for education  decreases with the introduction of a lottery. Empirically, I examine the impact of the introduction of education lotteries introduced between 1989 to 2008. Using both donor-level survey data and nonprofit tax returns, I demonstrate that donations to education-related organizations fall with the introduction of a lottery. This result seems to be driven by donors’ response to the new (often highly publicized) government revenue source rather than by a decrease in nonprofit fundraising efforts.

Comment: Donors lower contributions in response to *perceived* increases in government spending on education and this perception hinges critically on the kind of advertising. This is an interesting result. At this point the data is too aggregated (I think) but it would be interesting to know who is decreasing their private donations and whether this would be true under a different distribution mechanism for lottery money. Since most lottery participants are lower income the lottery money could primarily be used to finance programs for low income schools.

Also I should mention, the whole session this paper was on was fantastic with interesting research presented by Sarah Helms and Jeremy Thornton.

Title: Birth, Death, and Public Good Provision

Abstract: None

Comment: This takes a standard voluntary contributions mechanism and asks what happens when some members of the group "die" and new members are "born". Don't worry, nobody was harmed in this experiment! But, it is an interesting twist on a standard game because the "young" inject their optimism into a situation that is fraught with bitterness.

Panel on "Biblical Foundations of Economic Freedom and Market Exchange". So it was not a paper; however, the panel provided a lot of questions to sort through. Chief among those questions was how to talk to people who are process rather than results oriented. In economics we talk about outcomes usually not processes so we have a difficult time even having a conversation with theologians and others because something that has a good process does not often obtain good outcomes. There are no concrete papers associated with the session (at least I couldn't find links) but I'm sure we will be talking about it soon.

Title: The 17th Amendment, Senator Ideology, and the Growth of Government"

Abstract: None

Comments: There are some big questions in economics. For example, what can explain the growth in the size of government. One rule that might explain some of that growth is the 17th amendment. The popular election of Senators rather than the appointment by the state legislature. Popular election meant that Senators were not instructed by their state legislatures about how to properly represent the state but acted like free agents accountable mainly to the voters who were less informed about their actions. The paper was still in preliminary stages.

Panel on "How Should We Discuss Markets vis a vis Morality . . . " had a really long title but was an absolutely crucial discussion to have. The authors discussed different variations on how people act in moral capacities whether they are in voluntary or government settings. There was some discussion that reflected the "Biblical Foundations . . ." panel where good intentions sometimes seem to mean more to people than good outcomes. The trouble is in the communication with other people to help them understand economics. All good arguments rest on three points: logic, credibility, and emotional appeal. We have a difficult time with emotional appeal ---I think part of this is that voluntary associations are not the primary provider of many charitable services so people have a growing feeling we need the market to support charitable activities.

The final thought I will close with was a thought from Dwight Lee on the panel just mentioned (paraphrase): Market failure is treated as endemic of the market system. On the other hand, government failure is treated not as an endemic failure of the system but a failure of not doing a good enough job.

Tuesday, November 13, 2012

Quote of the Day

This quote comes from Francis Chan's book Crazy Love (p. 80),

"When I was in high school, I seriously considered joining the Marines; this was when they first came out with the commercials for "the few, the proud, the Marines." What turned me off was that in those advertisements, everyone was always running. Always. And I hate running.

But you know what? I didn't bother to ask if they would modify the rules for me so I could run less, and maybe also do fewer push-ups . . . Somehow this realization does not cross over into our thinking about the Christian life. Jesus didn't say that if you wanted to follow him you could do it in a lukewarm manner. He said, 'Take up your cross and follow me.'"

Thursday, November 8, 2012

Some Thoughts on the Election

I am stuck in Atlanta. Shockingly this is not the fault of Delta but Greyhound. Since I'll be sitting here a while (until 4am) it seemed like a good time to write. The last few days have been despairing and there has been an albatross question hanging on the conservative community, "How did this happen?" I thought it would be like chicken soup for the soul to chronicle the recent happenings from my perspective.

In the primaries Romney did not energize me, but, neither did the other candidates. Then a couple months passed and he selected Paul Ryan as his running mate. That started to get me excited. Having seen Paul Ryan speak a couple times he struck me as articulate and principled. The Ryan selection gave me a reason to believe this could be a supportable ticket.

But, the conventions did not really provide much boost in the polls and Mitt did not seem comfortable giving stump speeches and marshaling campaign rallies. Then the awkwardness was replaced with a dynamite performance in the first debate where he caught President Obama flat-footed. After the first debate, liberal commentator Chris Matthews was asked for his thoughts, "I don't know what [Obama] was doing out there. . .What was Romney doing tonight? He was winning! If he does five more of these nights, forget it! That's my thought". In that hour-and-a-half I started thinking of him as a real candidate with a shot at winning. He brought up his business acumen. He seemed committed to casting off regulatory burdens for businesses and working towards a solution for the mounting debt. These were good signs. A bunch of other people must have seen things in a similar light. The buzz vaulted him passed Obama in the Real Clear Politics average. That was the first time in the election cycle the Republican candidate outperformed President Obama in the poll averages

From the graph you can see the average reflects, more-or-less, a momentum in favor of Romney throughout the debates; however, towards the end of October this momentum waned. What happened? I'm sure you are aware of the banter:

  1. Romney seemed to coast and there was no final burst to the finish line.
  2. Obama had a great "ground game" to help Democratic voter turnout
  3. Obama appeared bipartisan when photographed with Chris Christie
  4. Romney did not hammer home on the Benghazi incident
  5. ETC. 

All of those things probably had some impact. Large numbers of Democrats are citing negative spillovers on the Republican Party from their Tea Party segment. In a similar vein some pundits are telling the Republican party there are branding problems and the country wants their message to be more moderate. While I do not agree with every plank in the traditional Republican platform (most notable immigration and death penalty) I do not believe this is the real problem.

Romney ran on the economy and did not touch other issues. Hammering home the poor economic performance was the best strategy available. See the graph below. But, notice, this does not account for the 3rd quarter growth of 2%. Not that 2% is something special but it represented an improvement over 1.3% in the 2nd quarter:

The recent economic conditions, however dismal, were showing an improving trend. While unemployment numbers were not fantastic ---increasing from 7.8% in September to 7.9% in October it was not an egregious increase. I am arguing that these numbers sowed thoughts of, "Give it time," in the electorate. The folks over at Monkey Cage were writing that the incumbent advantage combined with improved growth numbers did enough to push Obama over-the-top.  

In fact, it is possible that we are starting into recovery. Macroeconomists think that business cycles last about 7.5 years. Given that the United States started into the bust part of the cycle in late 2007 we should see recovery with some good policies. Will this be a U-shaped recovery or a W-shaped recovery? Not sure. I'm hoping that Tyler Cowen provides some insight on the topic at the Southern Economic Meetings. Of course, there is also the prospect that things will get worse. We do not know how negotiations with the fiscal cliff will work out. That will be a game-changer with big consequences for well-being in the United States.

So the conversation does not end here but keeps going . . .

One thing is clear: Life is still wonderful. God is still constant, unchanging, and good. I am thankful for the grace offered through Jesus Christ. I am excited about the spirit working in me, pushing me in the process of sanctification. I am thankful for my wife, family, and friends. I'm certain that God can use us to advance His kingdom. So there is still purpose, meaning, and loving relationships. These things will never depend on what political party wins the election.        

Monday, November 5, 2012

Monday School: Character Part III

A couple of the recent posts have been on character transformation which was the subject of Andy Stanley's series "Character Under Construction". I recommend Andy Stanley's podcast, they are both clear and challenging. The last post was about "taking off the old". This post is about "putting on the new". Stanley remarks, "To put on the new is to learn to counter the specific lies that you are most tempted to believe with the specific truth of God's word." We must saturate ourselves in God's word so we can combat the lies.

In a beautiful comparison Stanley uses a story many of us have heard from Matthew chapter 4, Jesus' temptation. As an aside, I love the way Stanley often tells his congregation that he knows they will be tempted to gloss over the story saying, "Yeah, yeah, I've heard this before." But, he reminds them to listen

Matthew 4:1-4

Then Jesus was led by the Spirit into the wilderness to be tempted by the devil. After fasting forty days and forty nights, he was hungry. The tempter came to him and said, “If you are the Son of God, tell these stones to become bread. Jesus answered, “It is written: ‘Man shall not live on bread alone, but on every word that comes from the mouth of God.’”

We need to be prepared to counter the lies we that face us with truth. Jesus had not eaten in a *long* time and he certainly had the power to turn the stone to bread. But, Jesus knew that he was "led by the Spirit" for a different purpose. The lie was that his needs were legitimate and he had a right to fulfill those needs even if those actions conflicted with God's purpose.

Matthew 4:5-7
Then the devil took him to the holy city and had him stand on the highest point of the temple. “If you are the Son of God,” he said, “throw yourself down. For it is written:
“‘He will command his angels concerning you,
    and they will lift you up in their hands,
    so that you will not strike your foot against a stone.’”

Jesus answered him, “It is also written: ‘Do not put the Lord your God to the test.’”

Once again, we must counter truth with lies. The lie here is that we need to prove ourselves. But, do we really need to prove ourselves to others? Moreover, what if that action in a desire to prove ourselves or conform compromises our integrity? 

Matthew 4:8-11
Again, the devil took him to a very high mountain and showed him all the kingdoms of the world and their splendor. “All this I will give you,” he said, “if you will bow down and worship me.” Jesus said to him, “Away from me, Satan! For it is written: ‘Worship the Lord your God, and serve him only.’” Then the devil left him, and angels came and attended him.

Jesus will ultimately come to rule as King. The devil is offering Jesus a shortcut. No cross, no suffering, no pain and you still get what you want. But, taking short cuts and compromises are like bowing down to Satan. Stanley says that he has written under this verse, (paraphrase) Nothing we gain from broken fellowship with the Father is worth it.

We need to shift our thoughts away from, "I know I shouldn't . . ." to "It has been written . . .". This method was good enough for Jesus and should be good enough for us.

But memorizing verses can be difficult, right? When I was teaching the Economics of Compassion course we covered a large amount of material. Some of my students asked me, "How can we remember all of this?" I told them, "We tend to remember the things that we think about." This wasn't meant to be rude, but, rather a statement of how we learn.

After hearing five sermons in the series (1 more to go) much of our transformation depends on awareness and abiding. We need to be aware of the lies that we believe. But, what is a lie? A deviation from the truth. What truth? The truth about God, ourselves, and others. How do we learn to spot a lie? By abiding in Christ and God's word. The two things that make for excellent character are abiding and awareness. What is more they have a reciprocal relationship! There is no substitute for abiding in Christ and paying attention.

Friday, November 2, 2012

Friday Links

No matter who is elected our fiscal affairs must be fixed. This is a nice lesson on the basic problems from the Wall Street Journal.

There is a large literature in economics on rent-seeking (think privilege seeking). This blog post points out the shameless lengths special interests go to keep the privileges coming. On a related note, when we increase the size of the government we see more of this kind of behavior because the prizes to special interests are larger than before. I have never understood how this lesson is not understood by more people.

While we are talking about rent-seeking I read a nice quote from the intellectual father of that term Gordon Tullock. He argues that economists should be actively engaged in public discussion on economic topics.

Also, just listened last night to this excellent podcast by Bryan Caplan on his book the Myth of the Rational Voter. It is 80 minutes but worth every minute of it! You are in for a treat that will give you some serious things to think about.

Thursday, November 1, 2012

Who's in your top 5?

I just ran across an article that was helping to prepare PhD candidates for the job market. Here. In perusing the article I came across a list of common questions. One question stood out:

Which senior economists do you wish to emulate? Why?

Watching football at a friend's house over a year ago I remember he asked me this question. At the time I didn't have a very good answer, it wasn't a question I had given much thought to. But tonight I spent some time thinking about who is in my top 5 and the qualities they have. Without further ado, 

Ronald Coase - His willingness to ask what appear to be obvious questions like "What is the nature of the firm?". Even when others condemned those questions as silly he pressed on. Also, his exhortations to go out into the field and study how the world actually works are important.

Charles Plott - His intellectual curiosity spans multiple fields and he demonstrated that experiments could be relevant for both policy and firm-level decision-making.

Daniel Hungerman - His econometric work really opened my eyes to interesting public economic questions when the only research experience I had was in doing experiments. Also, his research in the field of Economics and Religion has been really interesting because he has been a forerunner in attempting to identify causal relationships between religion and economically/politically relevant action (which is really hard to do).       

Elinor Ostrom - Her work on polycentrism (multiple centers of authority) demonstrated institutional nuance in what can become a heated and dichotomous debate of government versus non-government. Also, she had a fantastic and kind personality in addition to being a top-notch scholar.

Mark Isaac - He has done a lot of significant experimental research on public goods provision and topics in industrial organization.  Anyone would like to make such contributions to their field; however, that is not the main reason Mark is in my top 5. Anything I accomplish in economics will be because of his mentorship. His patience in listening and his friendship have benefited me more than economics but also in showing how to be a virtuous man. If I am half the teacher to my students Mark has been to me I will be doing a great job.