Be Wary Those Bearing PHd’s

August 29th, 2004

There was some talk of two economists before the Olympics and their model of predicting medals. Below is the follow up:
Economists’ Forecast
Misses Olympic Gold

August 30, 2004

Finishing out of contention in the 2004 Olympics: Economists.

Before the Olympics, Andrew Bernard, a professor at Dartmouth College’s Tuck School of Business in New Hampshire, and Meghan Busse, a visiting professor at the University of California at Berkeley, used economic models to predict the medal standings of what were expected to be the top 34 countries in the Games.

The model had its shining moments, but it also produced a few notable misses. The computer projected that the U.S. would win 93 medals; the U.S. took home 103. “We think the U.S. exceeded expectations,” Mr. Bernard says.

The economists say their model can predict country performances by weighing a nation’s population size, gross domestic product per person and past performance. Despite the model’s misfires, Mr. Bernard says he was happy with how he did. He came within three medals of a perfect prediction for 23 of the 34 countries tracked and the computer model did a pretty good job predicting gold medals. It called for the U.S. to win 37 gold, and American athletes won 35. It called for Russia to win 29 gold medals, and Russia ended up with 27. Germany was seen winning 13 gold, and it won 14. “The model performed well,” the economist says.

Tounge and cheek, the model did perform well, however it was better on analyzing past data rather than prediction. Illustrating how difficult the Fed’s job can be, and the trickiness of projecting out of sample.
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That Free Trade thing

August 25th, 2004

While the administrations stance is both a turn around and welcomed, I still have a bad taste in my mouth. Missing from Zoellicks’ argument is the longer we play the trade game, which is extensive, the greater the probablility and incentive of one player to screw the other(s). The trick of the administration is setting the aggrements up so this is as difficult as possible – the Doha talks certainly don’t lead by example.

WSJ 8-25-04

Push for Free Trade
In These Times?
Bush Answers Yes
August 25, 2004; Page A4

These are the times that try a free-trader’s soul.

It is an election year, and the trade deficit is way up. The U.S. imported $55.8 billion more in goods and services than it exported in June. Loss of jobs has become the economic issue, and the outsourcing of jobs abroad the metaphor for it.

Amidst all of that, Robert Zoellick is doing something intriguing, almost shocking: He is pushing free trade as hard as ever. More interesting, his boss, President Bush, who is busy running for re-election, is backing him all the way.

Mr. Zoellick is the Bush administration’s trade representative, and his continued pursuit of free trade amid all the political pressure to move in the opposite direction is one of the more surprising and little-noticed stories of the election year. Mr. Zoellick says the administration is “confounding conventional wisdom,” and he is right.

In recent weeks, the administration has signed a deal to add the Dominican Republic to five Central American nations already part of a free-trade agreement, signed a separate free-trade deal with Australia, pushed a trade agreement with Morocco through Congress and revived moribund talks on a new global deal to lower trade barriers. In fact, the administration has finished free-trade agreements with nine countries in the last eight months.

Far from buckling to populist protectionist impulses in the campaign season, the administration actually seems to be getting more committed to free trade as the re-election test approaches. This is a matter of core beliefs — but it also may be the result of the administration’s own somewhat painful experiences.

The Bush team dallied with protectionism early on, when it imposed temporary tariffs on imported steel. That was a fairly obvious attempt to please the steel industry and the politically important swing states of Pennsylvania and West Virginia, as well as a bid to buy political support for trade-liberalization in other areas. While the tariffs did win some time for the domestic steel industry to regroup and reorganize, manufacturers in other politically sensitive swing states saw the cost of their steel go up, and they weren’t happy.

Now Mr. Bush seems to have moved past that experience, and he delivers a hearty defense of free trade. On one trip to Ohio — the ultimate swing state — he lauded the way open trade has brought more than 900 foreign facilities to the state, and more than 16,000 jobs building Hondas alone.

“When politicians in Washington attack trade for political reasons, they don’t mention these workers, or the 6.4 million other Americans who draw their paychecks from foreign companies,” he declared. “Across America, from Marysville, Ohio, to Seattle, Washington, workers are better off — better off — because this country is an optimistic, successful trading nation.”

For his part, Mr. Zoellick also sounds like a man itching to make the case for free trade as a political winner, even in a climate of trembling over jobs lost abroad. He rattles off statistics to back his case: More than 12 million Americans with jobs supported by exports, with pay that runs perhaps 18% above average. One in five manufacturing jobs dependent on exports. One in three acres of crops planted for exports. A quarter of economic growth in the 1990s from exports.

Offsetting those numbers, of course, is the uncomfortable reality that, despite the free-trade leanings of this administration and the Clinton one before it, the country has lost 1.1 million jobs since 2001. If trade creates jobs, why are the job numbers going down?

Mr. Zoellick has a ready answer for that as well. The big reason the U.S. is running a manufacturing trade deficit, he argues, isn’t that it is buying more from abroad, but that it isn’t exporting enough goods overseas. That problem is rooted in the fact that barriers to trade abroad tend to be much higher than U.S. barriers.

So free-trade agreements, by definition, should benefit the U.S. more than the other guys: The other side eliminates barriers that are higher to start with, while the U.S. eliminates barriers that are lower. The bigger bang should go to American exports. “The benefit of a free-trade negotiation is that we’re leveling the playing field — to zero,” says Mr. Zoellick.

So in theory, at least, free trade is a win-win for the U.S. — provided, the other side lives up to its deal. Which the administration, of course, pledges it will ensure. That is at least a coherent economic message at a time when the Bush team is straining for one, and has the added benefit of being one the president firmly believes. Expect to hear more of it next week at the Republican national convention, and beyond.

Write to Gerald F. Seib at

Social Welfare Question

August 23rd, 2004

One of the things I’m intersted in thinking about this coming year is the problem of Social Welfare and the Entitlement Fallacy. Im uncertain as to the size and mesh the net should have – though I usually sit in the camp of ‘in a welthy nation a bigger net is better’. Reading suggestions along this line would be appreciated.

We have problems, not all bad.

August 7th, 2004

On a recent trip into SF to visit a friend, I found myself inching down Market to the Metreon. An inexplicable and original scene: A homeless youth, complete with dog and shoping cart full of his only posesions was camped outside a BART station, with a laptop plugged into the municipal grid – checking his email.

*sigh*, another reason for a camera phone.

Hunger and Mental Development

August 7th, 2004

An excellent article on why Food Aid programs are in all our best interests.

Food for thought
Jul 29th 2004 | DEDZA, MALAWI
From The Economist print edition

Global hunger is on the wane but it is still hampering the growth of people, and of economies

THERE are not enough classrooms at the Msekeni primary school, so half the lessons take place in the shade of yellow-blossomed acacia trees. Given this shortage, it might seem odd that one of the school’s purpose-built classrooms has been emptied of pupils and turned into a storeroom for sacks of grain. But it makes sense. Food matters more than shelter.
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The bigger you are – the harder you fall

July 18th, 2004

I’m posting this out of general interest, essentially The Economist thinks the dollar is ripening for another drop akin to the one in the fourth quarter of 2003.

One of the main factors is inorder for foreign currencies to remain weak comparatively, they buy up all our bonds. This keeps exports cheap and more competative in our markets, but has the nasty side of inflation in their home countries. China has been mounting an assult of sorts inorder to tame their continued growth at 11%, but without any real bankning infastructure – it is a difficult task to say the least. Japan on the other hand is a little jublient that the inflation is carrying them out of a decade of deflation, and certainly keen on not returning any time soon. Both countries have experienced a nice spurt of growth in the past 6 months but if inflationary pressures get too high at home, they stop buying our $, and down we go.

Keep an eye on it
Jul 8th 2004
From The Economist print edition

After a buoyant start to the year, the dollar seems headed for a tumble

THERE was a time, not long ago, when economists and those who dabble in the foreign-exchange market could find scarcely a good thing to say about the dollar. Last year, John Snow, America’s treasury secretary, even managed to transform his country’s long-standing strong-dollar policy into a weak-dollar one. All this greatly irritated Europeans, especially; as the euro rose, international meetings of the great and the good were dominated by cross discussions about the beleaguered buck. Newspapers, including this one, were full of gloomy headlines suggesting that the greenback would, indeed should, fall farther.
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Berkeley Farmers Market

July 17th, 2004

The morning was the first time this summer for me – I just finished a dinner or sweet corn and peaches, admittedly not the most well rounded of course, but absolutely delicious!
(The economics of this is I paid $22 for a bag of vegtables that even at Whole Foods would’ve cost 1/2 that – i place the blame on an exceptionally sunny Saturday which baked my brain into Consumerous Maximous mode)

Breaking up, and breaking it all down

July 13th, 2004

When you think about it
what is a relationship worth?
The tender moments – the happy moments – the bitter moments – the quiet ones. Sometimes we’re full, sometimes we feel sucked dry. Inevitably we a drawn to them, whomever we are. Is it worth it? – for those who’ve been hurt, Whats to loose? – For those who haven’t.

If you sit down with paper and a pen, are things like this quantifiable?

There is an interesting paper just published looking at relationships, sex, money and how they equate. A slew of psychological data has come out on this in the past few years. If you don’t feel like braving the paper – a NYT article sums it up nicely.

On the side – there is a great program from This American Life talking about this – and other things number related. (You’ll need Real Player)

Duking it out

July 4th, 2004

David Wessel aptly (subscription) points to the difference b/n politics and economics.


Bush, Kerry Are Both
Right on the Economy
July 1, 2004; Page A2

President George W. Bush says the economy is “strong and getting stronger.” Challenger John Kerry says, “We can do better.” The Bush campaign says cruise lines are carrying 74% more passengers than in 1996, half of them folks earning less than $60,000 a year. The Kerry campaign says health-insurance premiums rose 40% between 2000 and 2003. The Bush campaign says that Americans’ after-tax incomes are rising faster than inflation. The Kerry campaign says hourly wages aren’t.

Tweet! Time out for perspective from the sidelines. Each campaign’s assertion is factually defensible. Here are four more meaningful ones.

The economy is doing better. But it’s not yet good.
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Ah, the summer classes

June 23rd, 2004

So the summer is now in full swing – yet officially over. Analysis, once again. I like this class so far – lots of questions from the students – and a newly minted doctorate.