Students typically come to an economics class with many misconceptions, not just random errors but systematic biases.
Bill Goffe recently (2009) surveyed one of his macro principles classes and found, for example, that the median student believes that 35% of workers earn the minimum wage and a substantial fraction think that a majority of workers earn the minimum wage (Actual rate in 2007: 2.3% of hourly-paid workers and a smaller share of all workers earn the minimum wage, rates are probably somewhat higher today since the min. wage has risen and wages have not).
When asked about profits as a percentage of sales the median student guessed 30% (actual rate, closer to 4%).
When asked about the inflation rate over the last year (survey was in 2009) the median student guessed 11%. Actual rate: much closer to 0%. Note, how important such misconceptions could be to policy.
When asked by how much has income per person in the United States changed since 1950 (after adjusting for inflation) the median student said an increase of 25%. Actual rate an increase of about 248%, thus the median student was off by a factor of 10.
Alex Tabarrok, “Economic Misconceptions”, Marginal Revolution, 2010-10-11
October 13, 2010
QotD: Economic misconceptions
October 12, 2010
Monty on structural unemployment
Monty is still too busy with real life to do a daily Financial Briefing, but he’s dropping by a few times a week with his insightful-and-acidic thoughts at Ace of Spades HQ:
Welding jobs may be plentiful, but that’s no help to you if you’re not a welder. This is called “structural unemployment”, and it has no real short-term solution. It results from a disconnect between current worker skills and employer requirements. It’s really a form of malinvestment. Students train in subjects like Postmodernist Literary Theory and The Hermeneutics of Lesbian Cinema, but the job market is asking for engineers and plumbers. Workers in fading industries won’t or can’t retrain. The last time this problem cropped up was during the 1982 recession: the old manufacturing jobs were gone, and the hundreds of thousands of Rust Belt factory workers — many now middle-aged, with high union wages and benefits packages they didn’t want to lose — either could not or would not re-train into other fields. This led to a long cycle of stagnation in which the American upper midwest remains mired to this very day. Pull quote:
Victor Calix Cruz, 51, has been job hunting for two years after being laid off from construction work in Miami. He, his wife and their two teenage children are “surviving” on his wife’s disability and his unemployment payments, he said. While he heard of openings at hotels, he hasn’t applied because the pay and benefits aren’t as good as what he had before.
I don’t imagine that your unemployment check matches what you were making before either, Chief. It’s like the old Rolling Stones song: you can’t always get what you want.
The warplane older than the crew’s parents
It’s been an ongoing joke that the venerable B-52 bomber fleet are older than the crews that fly them. With a recent announcement, the US Air Force has ensured that the joke will change — by the time they retire, the planes will be older than the parents of their crews:
Without any fanfare, the U.S. Air Force recently announced that it would spend $11.9 billion to keep its remaining B-52 bombers in service until they are all retired by 2040. At that point, the last ones will have served over 70 years. The new “sustainment program” will cost over $150 million per aircraft, which is about twice what they cost to build (accounting for inflation).
The reason for this investment in half century old aircraft has a lot to do with the fact that the B-52 is very capable, reliable, and cheap to operate. This is especially true compared to the aircraft built to replace it (the B-1B). The U.S. Air Force has been having a hard time keeping its 67 B-1B bombers ready for action. Two years ago, the availability rate (aircraft you can send into action) was about 51 percent. Seven years ago it was 56 percent. Progress is being made, but the B-52 is still more reliable. The B-1Bs are used to drop smart bombs in Iraq and Afghanistan. They are particularly popular in Afghanistan, because you can put one in the air, and it can cover the entire country. While the B-1B is twice as expensive to operate (per hour in the air) than the B-52, the B-1B can more quickly move to a new target over Afghanistan.
B-52s are not only cheaper to maintain, they have a higher availability rate (65 percent.) As a result, the air force wants to keep 76 B-52s in service (despite a Congressional mandate to reduce that number to 56.) With the development of GPS guided bombs (JDAM), heavy bombers have become the most cost-effective way to deliver support to ground forces. The B-52 is the cheapest American heavy bomber to operate, and the oldest.
October 10, 2010
Electronic solution to the cost of rifle training
Strategypage reports on an indoor shooting simulator:
The U.S. Marine Corps has saved over half a billion dollars in the last four years, by using indoor electronic firing ranges. IMST (Indoor Simulated Marksmanship Trainer) has cost over $200 million, but the savings in ammo, wear on weapons, and running outdoor ranges were much larger. Nearly 200,000 marines have undergone marksmanship training using IMST. Unlike the similar U.S. Army EST system, IMST is wireless. A special magazine contains gas that provides a realistic recoil and a wireless radio device connects the weapon to the targets displayed on the screen and records how accurate the electronic rounds were fired.
Devices like IMST and EST have boosted the shooting skills of troops, while reducing costs. This gives American riflemen a big battlefield advantage. In most armies, the troops rarely fire their rifles. Ammo is too expensive (given the meager military budget). When there is combat, the troops are issued bullets, which they fire very inaccurately. Against a better trained foe, this leads to quick defeat. Happens all the time. But now cash strapped armies can train their troops to be effective marksmen without spending a lot of money, by using simulators.
Sure beats the “simulation technology” we used in my militia days: we ran around yelling “Bang!” to simulate firing the bullets the military budget couldn’t afford to provide us with. Ah, the joys of Trudeau-era military experience.
October 9, 2010
I always wondered about “Christian Rock”
If Insane Clown Posse has now outed themselves as Christian rockers, does that mean that Pat Boone was actually recruiting for Satan?
Milwaukee. A bad and quite eerie part of town. This happens to be the very block where the serial killer Jeffrey Dahmer murdered and ate 17 people in the 1980s. Now, from all around, thousands of young men and women, wearing scary clown face paint, are descending upon a disused indoor swimming pool that has been transformed into a music venue. They are juggalos, fans of Violent J and Shaggy 2 Dope, the rap duo known as Insane Clown Posse.
At first glance, it might not be obvious why I’m so excited about meeting them. You might dismiss them as just unbelievably misogynist and aggressive, and it is true that their lyrics are indeed incredibly offensive.
[. . .]
ICP have been going for 20 years, always wearing clown make-up, which looks slightly lumpy because it’s painted over their goatees. They’ve been banned from performing in various cities where juggalos have been implicated in murders and gang violence. ICP have a fearsome reputation, fostered by news reports showing teenagers in juggalo T-shirts arrested for stabbing strangers and lyrics like “Barrels in your mouth/bullets to your head/The back of your neck’s all over the shed/Boomshacka boom chop chop bang.”
All of which makes Violent J’s recent announcement really quite astonishing: Insane Clown Posse have this entire time secretly been evangelical Christians. They’ve only been pretending to be brutal and sadistic to trick their fans into believing in God.
Did anyone ever guess that the next Great Awakening would be heralded by ICP?
October 8, 2010
October 7, 2010
Isn’t this a barbaric practice for a free society?
I’m generally fine with our American neighbours, our societies are similar in so many respects, but this whole “Pledge of Allegiance” thing is something that I just don’t get. A country that theoretically prides itself on being the “home of the free” can still put you in jail for failing to recite it on command?
Danny Lampley (who clerked for me in law school), was jailed by Chancery Court Judge Littlejohn in Tupelo for failing to recite the pledge of allegiance in open court today. Danny was one of the local lawyers who represented the plaintiff in the Pontotoc school prayer case years ago, working with the ACLU and People for the American Way.
I’m informed that Danny rose and was respectful, but did not recite the pledge.
Is this just Judge Littlejohn being a prick, or does this sort of thing happen regularly? What penalty would he get for not singing the national anthem?
H/T to Radley Balko for the link.
October 6, 2010
Montessori school raided by New Mexico drug cops
You can rest easy, knowing that a potentially dangerous grow op has been investigated by New Mexico Schutzstaffel drug cops:
“We were all as a group eating outside as we usually do, and this unmarked drab-green helicopter kept flying over and dropping lower,” she said. “Of course, the kids got all excited. They were telling me that they could see gun barrels outside the helicopter. I was telling them they were exaggerating.”
After 15 minutes, Pantano said, the helicopter left, then five minutes later a state police officer parked a van in the school’s driveway. Pantano said she asked the officer what was happening, but he only would say he was there as a law-enforcement representative.
Then other vehicles arrived and four men wearing bullet-proof vests, but without any visible insignias or uniforms, got out and said they wanted to inspect the school’s greenhouses. Pantano said she then turned the men over to the farm director, Greg Nussbaum.
Ms. Pantano must have nerves of steel . . . most schools would have gone into emergency lock-down at the sight of all those paramilitary types deploying in the driveway.
The comments on BoingBoing were good, and this one was great:
The War on Organic Produce continues to go well. Each of those tomatoes cost the taxpayer $75.00 US! WE WILL NOT BE SATISFIED UNTIL THE DRUG CZAR IS RUMOURED TO CURE GOUT BY WASHING THE FEET OF THE AFFLICTED.
—
Seriously: What the fucking fuck fuck happened to Probable Cause in this day and age? “We’re spending $20,000 on this operation because we herd thai leik mudkips, so we kipped in thair mud so thai can mud whail thai kip.” In the immortal words of Plato, NON FUCKING SEQUITUR is NOT a RIVER in EGYPT!“What else floats the same as a Cannabis Sativa plant??? – er, WOOD! – Good, what else? – well, tiny rocks. – OH! A DUCK! – Right! So if the suspects are raising ducks — THEN THEY’RE RAISING POT! – WELL /DONE/!”
Law Enforcement by Superstition is horse-shit.
October 5, 2010
I thought this only happened in the bad old days
One of the arguments that used to appear regularly whenever anyone proposed privatizing public services is that “in the bad old days”, when fire departments were run by insurance firms, they’d only put out fires that endangered paying customers. Apparently that sort of thing still happens today:
Imagine your home catches fire but the local fire department won’t respond, then watches it burn. That’s exactly what happened to a local family tonight.
A local neighborhood is furious after firefighters watched as an Obion County, Tennessee, home burned to the ground.
The homeowner, Gene Cranick, said he offered to pay whatever it would take for firefighters to put out the flames, but was told it was too late. They wouldn’t do anything to stop his house from burning.
Terrible, isn’t it? A strong refutation to that whole crazy libertarian notion of privatizing essential services. So which greedy corporation runs the fire service?
Each year, Obion County residents must pay $75 if they want fire protection from the city of South Fulton. But the Cranicks did not pay.
The mayor said if homeowners don’t pay, they’re out of luck.
Interesting.
H/T to BoingBoing, where many of the comments seem to be from folks who didn’t read that it wasn’t a private fire service.
October 4, 2010
A cameo economic round-up by Monty
One of the most interesting features over at Ace of Spades HQ used to be the daily economic round-ups by Monty. Unfortunately, he had to take a breather, but we’re able to get an occasional update like this one:
[In which Monty, long away from the neighborhood, returns to save the local mom-n-pop bank from a hostile takeover through a stylish melange of breakdancing, infectious urban beats, and the rap music that all the youngsters seem to be so fond of. Thrill to the parachute pants, Jheri curls, and mirrored wraparound sunglasses! (The soundtrack, “Monty Raps! Funky Accordion and Theremin Music For These Troubled Modern Times”, now available in fine discout outlets nationwide!)]
[. . .]
I just wouldn’t be me if I didn’t point out that gold is now $1314/oz as I write this. I bought some gold five years back at about $500/oz; that’s a pretty damned good rate of return for something that’s just supposed to be an inflation hedge. The naysayers can continue mumbling that I can’t eat gold, that I will be crucified on a cross of gold, the gold is just metal and has no innate value — I will simply point to the fact that it has outperformed every other investment in my portfolio, and by quite a large margin. And as a long-term store of value, I trust it a hell of a lot more than Treasuries. (Silver has done even better in absolute terms.)
Ah, but what about those safe-haven darlings of investors, municipal bonds? The romance may be on the rocks. I’ve thought for a long time that municipal debt is the next big shoe to drop in this recession/depression/worker’s paradise that we’re living in. Harrisburg, PA made the news recently when they barely escaped having to declare bankruptcy, but Harrisburg is only one of tens or even hundreds of muncipalities in the nation in dire financial straits. There seems to be a belief that the feds will bail them out before things get too grim, but this ignores two facts: a) the appetite for another trillion-dollar bailout is at subzero levels, and b) it’s not clear that taxpayers of one state will be willing to bail out the profligate citizenry of another. Prudent residents of Lincoln, NE or Minot, ND may not wish to fund the rather more lavish lifestyles of a San Diego or Miami. However much we “feel” the federal and state debt, we’d feel a municipal crash a lot harder because it hits us right where we live (literally): trash collection, sewer, water, road repair, snow removal, all the rest. You pay more and more and get less and less from it. (Oh, and guess what the major financial burden on municipal governments is these days? If you said “public-employee pension and health benefits”, give yourself a gold star and then a smack upside the head for being an insufferable know-it-all.)
The war heckler’s latest book
P.J. O’Rourke has a new book coming out soon:
O’Rourke, the reformed ex-radical, editor of National Lampoon during the “Animal House” era, war correspondent and, lately, target of what he calls “ass cancer,” continues the anti-statist argument in his new book, “Don’t Vote: It Just Encourages the Bastards” (Atlantic Monthly Press). References to Milton Friedman, Friedrich Hayek and Adam Smith (to whose “Wealth of Nations” he once devoted an entire volume) prove O’Rourke can do the philosophical heavy lifting — yet make it all float on a fluffy cloud of wit. Among his best one-liners:
* “The free market is a bathroom scale. We may not like what we see when we step on the bathroom scale, but we can’t pass a law making ourselves weigh 165. Liberals and leftists think we can.”
* “We’re individuals — unique, disparate, and willful, as anyone raising a household of little individuals knows. And not one of those children has ever written a letter to Santa Claus saying, ‘Please bring me and a bunch of kids I don’t know a pony and we’ll share.’ “
* “The most sensible request of government we make is not, ‘Do something!’ But ‘Quit it!’ “
* “Conservatism is a flight from ideas. As in, ‘Don’t get any ideas,’ ‘What’s the big idea?’ and ‘Whose idea was that?’ “
O’Rourke, 62, is a cool Republican. It’s a lonely job. What can the rest of the party do to join him?
“I don’t think Republicans have ever been cool,” he says. “Abraham Lincoln tried growing a beard.”
Yes, and look what happened to him.
“It’s always going to be cooler to have wild visionary ideas for society and the future. All we can really do is see that we’ve got a society where as many people grow out of cool as fast as they possibly can.”
H/T to Paul Davis for the link.
October 3, 2010
Personal responsibility is key
A post at The Economist looks at the ongoing debate on liberal/libertarian joint concerns:
My colleague noted the other day the discussion Matthew Yglesias has been having with his readers over whether liberals and libertarians can agree on some regulations they both hate. So, here’s a regulation I hate: you’re not allowed to swim across the lake anymore in Massachusetts state parks. You have to stay inside the dinky little waist-deep swimming areas, with their bobbing lines of white buoys. There you are, under a deep blue New England summer sky, the lake laid out like a mirror in front of you and the rocks on the far shore gleaming under a bristling comb of red pine; you plunge in, strike out across the water, and tweet! A parks official blows his whistle and shouts after you. “Sir! Sir! Get back inside the swimming area!” What is this, summer camp? Henry David Thoreau never had to put up with this. It offends the dignity of man and nature. You want to shout, with Andy Samberg: “I’m an adult!“
I would gladly join any movement that promised to do away with this sort of nonsense. For example, Philip K. Howard’s organisation “Common Good” works on precisely this agenda. Common Good’s very bugaboo is useless, wasteful legal interference in schools, health care, recreation, and so on. But what you quickly note with many of these issues is that they’re driven by legal liability concerns. You have a snowblader in Colorado suing a resort because she crashed into someone. You have states declining to put up road-hazard signs because the signs prove they knew the hazard was there, which could render them liable for damages. You have the war on children’s playgrounds. The Massachusetts swimming ban, too, is driven by liability concerns. The park officials in Massachusetts aren’t really trying to minimise the risk that you might drown. They’re trying to minimise the risk that you might sue. The problem here, as Mr Howard says, isn’t simply over-regulation as such. It’s a culture of litigiousness and a refusal to accept personal responsibility. When some of the public behave like children, we all get a nanny state.
As Robert Heinlein put it, “The whole principle is wrong; it’s like demanding that grown men live on skimmed milk because the baby can’t eat steak.”
September 30, 2010
It’s Banned Books week
Patricia Wrede had some disturbing discoveries when she tried to look up book banning incidents for a panel discussion:
[. . .] I told them about the teacher who almost got fired when a parent objected to her reading Calling on Dragons in her classroom, because “it taught witchcraft!” I mentioned the fellow YA author who was disinvited from a school visit (these are day-long programs where an author talks to several classes worth of kids and usually has lunch with the teachers, and for some YA authors, they contribute a goodly chunk to their income) because a parent noticed a title on her extensive bibliography that “sounded occult” (it was a mystery, with not a whiff of the supernatural anywhere in the text). I pointed out the well-publicized attempts to suppress the Harry Potter books (the series is #1 on the ALA’s top ten most challenged books of the decade for 2000-2009), and a few less-well-publicized attempts to remove from school shelves things like The Wizard of Oz (because Dorothy is too independent and solves her own problems), The Lord of the Rings (because it is “Satanic”), and Grimm’s Fairy Tales (because the stories are “too violent”).
None of this was, I thought, stop-the-presses news — certainly not to anyone who writes fantasy. But the other writers at the table were shocked all over again. One of them happened to be on the program committee for the regional conference, and she went home and put the panel together.
When she asked me to be on the panel, I immediately said yes, and then I went off to the internet to do some research. I wanted some examples that would hit closer to home. I found quite a lot, but as I looked through the web sites, I noticed something interesting. I live in Minnesota. All of the descriptions of book-banning incidents in Minnesota were from the websites of organizations based in distant states: Florida, Texas, Washington D.C., Georgia.
So I poked a little more. There were quite a few local web sites publicizing Banned Books Week, and all of them did indeed have descriptions of surprising book-banning incidents. Incidents that took place in other states, like Texas, Georgia, and California.
September 28, 2010
Atheists and agnostics know more about religion than believers
A report in the Los Angeles Times has set some tongues wagging:
Atheists, agnostics most knowledgeable about religion, survey says
Report says nonbelievers know more, on average, about religion than most faithful. Jews and Mormons also score high on the U.S. Religious Knowledge Survey.
Apparently, this is some kind of surprise. I’m not sure how, unless a lot of people really don’t know any professed atheists or agnostics.
If you want to know about God, you might want to talk to an atheist.
Heresy? Perhaps. But a survey that measured Americans’ knowledge of religion found that atheists and agnostics knew more, on average, than followers of most major faiths. In fact, the gaps in knowledge among some of the faithful may give new meaning to the term “blind faith.”
A majority of Protestants, for instance, couldn’t identify Martin Luther as the driving force behind the Protestant Reformation
The cynic in me wonders how many of them thought the question was about Martin Luther King.
Stephen Prothero, a professor of religion at Boston University and author of “Religious Literacy: What Every American Needs to Know — And Doesn’t,” served as an advisor on the survey. “I think in general the survey confirms what I argued in the book, which is that we know almost nothing about our own religions and even less about the religions of other people,” he said.
He said he found it significant that Mormons, who are not considered Christians by many fundamentalists, showed greater knowledge of the Bible than evangelical Christians.
[Going for the cheap laughs] That’s because most Mormons can read.
The Rev. Adam Hamilton, a Methodist minister from Leawood, Kan., and the author of “When Christians Get it Wrong,” said the survey’s results may reflect a reluctance by many people to dig deeply into their own beliefs and especially into those of others.
“I think that what happens for many Christians is, they accept their particular faith, they accept it to be true and they stop examining it. Consequently, because it’s already accepted to be true, they don’t examine other people’s faiths. . . . That, I think, is not healthy for a person of any faith,” he said.
I think it’s rather that people who are brought up in a faith rarely examine it at all — your parents tell you it’s true, the religious leaders tell you it’s true, and there’s rarely any advantage to be had from opposing or questioning authority early in life. By the time you’re ready to start examining things for yourself, your religious faith is “part of you”, not something external to you. It’s such a deeply rooted part of your view of the world that most people never even consider the possibility of questioning it.
For comparison purposes, the survey also asked some questions about general knowledge, which yielded the scariest finding: 4% of Americans believe that Stephen King, not Herman Melville, wrote “Moby Dick.”
I have to assume that the writer of this article hasn’t seen very many surveys of this type: in any large number of people you can usually find 5-10% who believe in far more amazing things than mis-attributed works of popular fiction.
H/T to Cory Doctorow for the link.
