Monday, April 30, 2007
Summers on Climate Change
Larry Summers says we should take global climate change seriously, while rejecting Kyoto. He promises to give his own preferred solution in his next column, but I bet it's a carbon tax.
Preppy Wedding Details Continued
I'm back. With even more preppy wedding details! 
You certainly could create something like this in word and print from home. Especially if you have a customized monogram to brand your wedding.
He also took our monogram and ran off signs for each station. You know to keep up with the wedding branding !!
Another cute detail is the monogrammed hankie my mom had made for me. I also made hankies for my mom and mother-in-law based on a recommendation by monogram momma. If you're interested, use The Silken Thread. Their work was beautiful and such a cute detail.
One of the things I didn't want to spend a lot of money on was the programs. Now you all know about my love for stationary, but I couldn't justify spending so much on something sure to be thrown away immediately following the ceremony.
So, I had my best friend (also a graphic designer) do a play on our monogram brand. The reason I didn't use our exact monogram? It gets so expensive to print in multiple colors. And because I used a printing service (and not my home computer), I kept costs down by only going with brown. My best bud also designed our reserved signs, so that elderly guests could have a table and a guaranteed place to sit.
You certainly could create something like this in word and print from home. Especially if you have a customized monogram to brand your wedding.
Another big thing to talk about is the food. Our caterer was fabulous and young and he really executed the wedding perfectly. I blogged about our menu here. But this will give you an idea of how beautiful his displays were. And want to know the veggie dip du jour - pimento cheese. YUM.
He also helped us with selecting our signature drink and suggested we do a fun spin on the mason jars used for the flower arrangements. I love the idea and execution of our drinks and with HOT weather the day of the wedding, these were a HUGE hit.
He also took our monogram and ran off signs for each station. You know to keep up with the wedding branding !!
Last, but not least, perfectly preppy wedding attire. You all know about the ebay dress, so I won't bore you to tears talking about it - only to recommend it as an option. If you're looking to save money, your dress is a great place to start.
The ring bearers suit was from the GAP via ebay and the flower girl wore a Strausburg Kids dress in a silk that matched what I was wearing!
Another cute detail is the monogrammed hankie my mom had made for me. I also made hankies for my mom and mother-in-law based on a recommendation by monogram momma. If you're interested, use The Silken Thread. Their work was beautiful and such a cute detail.
So, that's it for pictures. Thanks for looking!
I also wanted to let all you girls out there know, Jcrew is running a 20 dollars off 100 dollars deal until 5/5/07. Just enter IAP-389 at checkout. There are lots of cute new summer things in stock!
Sunday, April 29, 2007
Bill Bradley on Social Security
This is from a review of Bill Bradley's new book:
To get the budget deficit under control, Bradley proposes gradually raising the minimum eligibility age for Social Security until the year 2099, when it would be 70 (he recommends a �narrowly liberalized� disability benefit for people in their late 60s whose jobs cause health problems that won�t permit them to keep working). This is more than justified, he notes correctly, by the rise in average life expectancy (from 61 years to 78) in the seven decades since Social Security was introduced. Bradley has advocated this reform since his Senate days, but backed away from it during his presidential run when Gore used it to attack him.Another member for Arnold Kling's Reality-Based Retirement Club.
Determinants of Social Spending
In today's NY Times, the work of my colleagues Alberto Alesina and Ed Glaeser gets some attention:
�Racial divisions and ethnic divisions reduce incentives for people to be generous to others through social welfare,� said Alberto Alesina, a professor of economics at Harvard. �This is very unfortunate. But as social scientists, we can�t close our eyes to something we don�t like.�
Saturday, April 28, 2007
LONDON CALLING
After almost 3 years, I've decided to leave Paris. Of course the City of Lights is charming, but, let's face it, not a hotspot for fashion fodder. I've been roaming streets and crashing parties all around the world, scanning faces, forgetting the meaning of the working week. I've learnt a lot over the past year and I couldn't fail to notice this: the image of Paris you get from the fashion industry is a million miles away from the "real people" who mostly don't get off on dressing up. Old people still have a snappy sense of style, but the young have lost their heritage and aren't experimental enough to replace it. I might as well just say it, Paris has lost its sense of style. London, New York, Stockholm, Copenhagen and Reykjavik are the most inspiring places I've been - places where you can find people inventing new cultures, new ways of dressing, or at least enjoying elegance. I've chosen London because it offers more diversity, plain craziness and cultural invention per square metre than pretty much anywhere else around. Needless to say being based in Europe allows me to get around easily too. New York will doubtless be the next step. So I'm changing my address, but not my life. I'll keep travelling as much as possible, always on the hunt for personalities rather than simple trends. For the Paris lovers, don't worry, the Eurostar won't lose my custom. Here's my line-up for the coming weeks:
April 29th - May 14th: London
May 15th - 21th: Belgrade
May 22th - 27th: Madrid
May 28th - 30th: London
June 1st-3rd: Switzerland
June: Venice, Helsinki and Paris to be confirmed
Lastly, I want to thank you all for your support. Face Hunter is a really crazy adventure that brings me new projects all the time. Half the fun is sharing them with you.
April 29th - May 14th: London
May 15th - 21th: Belgrade
May 22th - 27th: Madrid
May 28th - 30th: London
June 1st-3rd: Switzerland
June: Venice, Helsinki and Paris to be confirmed
Lastly, I want to thank you all for your support. Face Hunter is a really crazy adventure that brings me new projects all the time. Half the fun is sharing them with you.
What I've been reading
A fascinating new paper by Richard Rogerson and Johanna Wallenius examines how work effort responds to tax rates.
The paper emphasizes the distinction between the intensive margin and the extensive margin. The intensive margin refers to how many hours an employed person chooses to work. The extensive margin refers to a person's decision whether to work at all. (I personally dislike these terms, because I can never remember which is which.)
Here is the paper's conclusion:
The paper emphasizes the distinction between the intensive margin and the extensive margin. The intensive margin refers to how many hours an employed person chooses to work. The extensive margin refers to a person's decision whether to work at all. (I personally dislike these terms, because I can never remember which is which.)
Here is the paper's conclusion:
In this paper we develop a general equilibrium life cycle model of labor supply that incorporates both intensive and extensive margins of labor supply....Our analysis produces four main findings. First, macro elasticities and micro elasticities are virtually unrelated: a factor 25 difference in micro elasticities is associated with only a thirty percent change in the associated macro elasticities. Second, macro elasticities are large�in the range of 2.3 - 3.0. Third, in our model with variation in either productivity or disutility of work over the life cycle, tax and transfer programs necessarily imply that higher taxes lead to less work on both the extensive and intensive margin. Fourth, the employment differences generated by differences in tax and transfer programs are necessarily concentrated among young and old workers.This paper deserves to be studied carefully by economists at Treasury and CBO. The bottom line: For simulating the effects of alternative tax regimes, one should use much larger compensated labor supply elasticities than are conventionally adopted. This conclusion, if accepted, would profoundly affect tax policy analysis, such as dynamic scoring.
Ricardo vs Heckscher-Ohlin
Here is an academic, but also policy-relevant, question. Which model is more useful in thinking through issues in trade policy: the Ricardian model or the Heckscher-Ohlin model?
In a post earlier today, I discussed the effects of trade policy using the Ricardian model, the model we teach in first week of ec 10. In a response to my post, Dani Rodrik questioned my conclusion about real wages based on the Stolper-Samuelson theorem, which in turn works within the Heckscher-Ohlin model. So I started wondering, which of these two models is the better workhorse for practical issues in trade policy? (Don't say we need to understand and appreciate all of the models. Of course we do, but that's a cop-out. We need to form judgments as well about the utility of alternative models.)
My first thought was, the Ricardian model is simpler, but it assumes only one factor of production--labor. The Heckscher-Olin model assumes two factors of production--capital and labor--which is surely more realistic.
But more notable in the Heckscher-Olin model may be the assumption that capital cannot move from country to country. That assumption is key to many results. Yet, in today's global economy, capital is highly mobile across national borders. In light of this fact, I wonder whether it may be better to work with a model that includes labor as the only immobile factor of production.
To explain a bit more technically, assume that an industry has production function:
Y = F(K,L).
And assume that the marginal product of capital is determined by the world rental price of capital R:
FK(K,L) = R.
Then with these two equations, we can eliminate K and solve for output as a function of L (and also R, which a nation takes as given). If F is homogeneous of degree one in K and L (that is, constant returns to scale), then the resulting reduced-form production function will be linear in labor, exactly as assumed in the Ricardian model.
As a tentative conclusion, therefore, I am inclined to think that in a world with significant capital mobility, the Ricardian theory of trade is more useful than Heckscher-Olin.
Update: Astute commenter mvpy points out the importance of human capital, which is left out of these conventional trade models. Human capital such as education is undoubtedly central to understanding cross-country differences, but it unclear to me what the best way to incorporate it for the issues at hand.
One might assume that physical capital moves internationally to equalize the marginal product around the world but that human capital cannot move. After all, as an American, I can easily invest in Toyota stock but not in a college degree of a Japanese worker. In this case, one might come to the conclusion that the right distinction for Heckscher-Olin is not capital and labor but instead skilled and unskilled workers.
But there's another way to think about the issue. Suppose every family decides how long to keep their children in school. Each faces a tradeoff between marginal investments in human capital and marginal investments in financial instruments, such as a savings account at a local bank. If financial returns are equalized around world through capital flows, and families make their human capital decisions based on opportunity cost, then rates of return on all forms of capital would move toward equality. Human capital could become, in effect, an internationally mobile factor of production.
Time horizon clearly matters here. Human capital is quasi-fixed. In the short run, we should take it as given. In the the long run, it adjusts in response to incentives. The same might true of physical capital because of adjustment costs, but for human capital, it takes longer to reach the long run.
In a post earlier today, I discussed the effects of trade policy using the Ricardian model, the model we teach in first week of ec 10. In a response to my post, Dani Rodrik questioned my conclusion about real wages based on the Stolper-Samuelson theorem, which in turn works within the Heckscher-Ohlin model. So I started wondering, which of these two models is the better workhorse for practical issues in trade policy? (Don't say we need to understand and appreciate all of the models. Of course we do, but that's a cop-out. We need to form judgments as well about the utility of alternative models.)
My first thought was, the Ricardian model is simpler, but it assumes only one factor of production--labor. The Heckscher-Olin model assumes two factors of production--capital and labor--which is surely more realistic.
But more notable in the Heckscher-Olin model may be the assumption that capital cannot move from country to country. That assumption is key to many results. Yet, in today's global economy, capital is highly mobile across national borders. In light of this fact, I wonder whether it may be better to work with a model that includes labor as the only immobile factor of production.
To explain a bit more technically, assume that an industry has production function:
Y = F(K,L).
And assume that the marginal product of capital is determined by the world rental price of capital R:
FK(K,L) = R.
Then with these two equations, we can eliminate K and solve for output as a function of L (and also R, which a nation takes as given). If F is homogeneous of degree one in K and L (that is, constant returns to scale), then the resulting reduced-form production function will be linear in labor, exactly as assumed in the Ricardian model.
As a tentative conclusion, therefore, I am inclined to think that in a world with significant capital mobility, the Ricardian theory of trade is more useful than Heckscher-Olin.
Update: Astute commenter mvpy points out the importance of human capital, which is left out of these conventional trade models. Human capital such as education is undoubtedly central to understanding cross-country differences, but it unclear to me what the best way to incorporate it for the issues at hand.
One might assume that physical capital moves internationally to equalize the marginal product around the world but that human capital cannot move. After all, as an American, I can easily invest in Toyota stock but not in a college degree of a Japanese worker. In this case, one might come to the conclusion that the right distinction for Heckscher-Olin is not capital and labor but instead skilled and unskilled workers.
But there's another way to think about the issue. Suppose every family decides how long to keep their children in school. Each faces a tradeoff between marginal investments in human capital and marginal investments in financial instruments, such as a savings account at a local bank. If financial returns are equalized around world through capital flows, and families make their human capital decisions based on opportunity cost, then rates of return on all forms of capital would move toward equality. Human capital could become, in effect, an internationally mobile factor of production.
Time horizon clearly matters here. Human capital is quasi-fixed. In the short run, we should take it as given. In the the long run, it adjusts in response to incentives. The same might true of physical capital because of adjustment costs, but for human capital, it takes longer to reach the long run.
Taxes around the World
TaxProf and the Citizens for Tax Justice note that "in all but two OECD countries, taxes make up a larger percentage of gross domestic product (GDP) than in the United States." That may be one reason Americans work harder.Note: Click on the graph to see it enlarged.
An Anthropological Digression
A student reminds me of the classic article Life Among the Econ by Axel Leijonhufvud. Read it, if you haven't already.
Does free trade lower prices?
Dani Rodrik debunks what he considers a myth:
1. Defenders of free trade rarely are in a position of having to defend exports, because people think that exports create jobs. When people complain about trade, it usually about the alleged job-destroying effect of imports. This partial-equilibrium complaint naturally encourages a partial-equilibrium retort: imports lower prices for consumers. The losses to producers in these markets are more than offset by gains to consumers from lower prices. True, the full story can only be told in general equilibrium, where it is relative prices that matter for the allocation of resources. But the distinction between the absolute price level (determined by monetary forces) and relative prices (determined by numerous market supply and demand curves) looms larger in the minds of economists than laymen. The reason is related to my second point.
2. People sometimes instinctively treat the nominal wage as the numeraire. That may be because it is one of the stickier prices around. So maybe when we hear people say that trade lowers prices, we should interpret the statement as meaning that trade lowers the price of a basket of consumer goods for a given price of labor. That is, trade raises real wages. This is one simple way of translating the basic Ricardian model (in which trade expands both trading partners' consumption opportunities) into a language that is a bit more familiar to the general public.
Update: Dani responds. I disagree with Dani when he says:
Advocates of globalization love to argue that free trade lowers prices, and the argument seems sensible enough. Think of all the cheap goods from China that we can buy at Wal-Mart. But anyone who understands comparative advantage knows that free trade affects relative prices, not the price level (the latter being the province of macro and monetary factors). When a country opens up to trade (or liberalizes its trade), it is the relative price of imports that comes down; by necessity, the relative prices of its exports must go up!Dani is right about the theory, of course. But I am more sympathetic to the "lower prices" summary of it than he is, for two reasons.
1. Defenders of free trade rarely are in a position of having to defend exports, because people think that exports create jobs. When people complain about trade, it usually about the alleged job-destroying effect of imports. This partial-equilibrium complaint naturally encourages a partial-equilibrium retort: imports lower prices for consumers. The losses to producers in these markets are more than offset by gains to consumers from lower prices. True, the full story can only be told in general equilibrium, where it is relative prices that matter for the allocation of resources. But the distinction between the absolute price level (determined by monetary forces) and relative prices (determined by numerous market supply and demand curves) looms larger in the minds of economists than laymen. The reason is related to my second point.
2. People sometimes instinctively treat the nominal wage as the numeraire. That may be because it is one of the stickier prices around. So maybe when we hear people say that trade lowers prices, we should interpret the statement as meaning that trade lowers the price of a basket of consumer goods for a given price of labor. That is, trade raises real wages. This is one simple way of translating the basic Ricardian model (in which trade expands both trading partners' consumption opportunities) into a language that is a bit more familiar to the general public.
Update: Dani responds. I disagree with Dani when he says:
Back in his example, he says that "these are export products for Argentina," whereas in point 1 above I was describing a country that is a net importer of the good. For net exporters, prices do rise when a country moves from autarky to free trade. In this case, the gains to producers more than offset the losses to consumers. For readers who want to see a diagrammatic explanation of these two cases, see chapter 9 of my favorite textbook.there is no theorem that guarantees that the partial-equilibrium losses to import-competing producers �are more than offset by gains to consumers from lower prices.� My wheat-and-beef example in Argentina is exactly an instance where this supposition fails.
The more interesting and difficult issue that Dani raises is how many caveats economists should include in their analysis when they present their ideas as part of the public debate. All economic analysis involves simplifying in order to clarify. This is, in a sense, the very essence of building a model. The art in economics is drawing the line between simplification which clarifies and oversimplification which misleads. Without doubt, that judgment call is always tough. One has to be careful not to make the best the enemy of the good.
Friday, April 27, 2007
Good Advice
Here is some advice on giving an academic talk. Thanks to Newmark's Door for the pointer.
Bundorf
Here is a nice profile of Stanford health economist Kate Bundorf. An excerpt that will surely be controversial in some circles:
Bundorf and Mark Pauly, the health economist at Wharton who was her thesis adviser, found that as much as three-quarters of the uninsured population may be able to afford its own insurance.
Thursday, April 26, 2007
Preppy Wedding Details
I'm going to share some detail pictures of the things we did for our perfectly preppy wedding. Next week, I'll talk in more detail about some of our ideas for all you DIY girls out there.
Here goes ...
Keep in mind the overall theme tying this wedding together was SOUTHERN CHIC.
Some of you asked about our flowers. The wedding really was a hydrangea fest. I carried 6 bunches of blue hydrangeas while the maids carried 4 bunches of ivory. This saved us money, as hydrangeas are imported this time of year. (Also - the imported hydrangeas are supposed to be more hearty) As you can see, I also had a picture of my mom's mom and dad's dad (who are both deceased) dancing. I love this picture, so I went to Ritz camera, shrunk it to locket size and had my florest tie it onto my bouquet. That way, I had a constant reminder of their prescence.
Here goes ...
Keep in mind the overall theme tying this wedding together was SOUTHERN CHIC.
Some of you asked about our flowers. The wedding really was a hydrangea fest. I carried 6 bunches of blue hydrangeas while the maids carried 4 bunches of ivory. This saved us money, as hydrangeas are imported this time of year. (Also - the imported hydrangeas are supposed to be more hearty) As you can see, I also had a picture of my mom's mom and dad's dad (who are both deceased) dancing. I love this picture, so I went to Ritz camera, shrunk it to locket size and had my florest tie it onto my bouquet. That way, I had a constant reminder of their prescence.
We also used hydrangeas at the church to mark the reserved isles. Miss Magnolia blogged about this last week, so here is our version.
The one flower item we did splurge on was the hydrangea topiary at the reception. Our location had beautiful side rooms with mantles, so this went in the "food room." It's not an original idea, we stole it from Martha of course. And a calligrapher did the parchment that runs between for $25.00. That's right, we were robbed. But, it was the week before the wedding and as my mom put it, the week before the wedding, you pretty much hemorage money.
Now onto the favors. Not a ton of explination on this one. We set up a table in the landing of the stairs leading to the reception. We included our Richmond-themed guest book, pictures of our parents getting married (and one of our engagement shots), the beautiful CDs and the ever popular flip flops. These were the guests favorite detail and a perfect idea for you summer brides.
Now, onto some fun reception details. First, the cake. We loved ours. It was red velvet and made by a city baker who charged us less than 2.00 a slice. And pretty much everyone went for seconds. She even recreated our monogram, which I think moved the whole branding of the wedding to a new level.
One of the other things we did (that our caterer suggested) was to actually wheel the cake table out onto the dance floor to cut the cake. It worked out fabulously, because everyone was on the dance floor and they actually watched us do it! I've been to lots of weddings where no one paid attention and loved the fact that everyone was actually watching the two of us.
Ok guys, I'll be back on Monday with some other super cute details from the perfectly preppy wedding!
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