Asymmetrical Information

From the desk of Jane Galt:

One of my readers has a question

Will someone please explain to me how all of the following can possibly be true about the same market?

(a) all demand is still being met, i.e. no rationing is occurring (via the price system or otherwise, as far as anyone can tell, there's no evidence of inability to meet all the demand that would exist at the lower price);

(b) prices are increasing faster than the marginal cost of additional supply to the oil companies (profits are increasing); and

(c) no oil company is competing on price by reducing its profits back to the equilibrium level (i.e. by only increasing prices in an amount sufficient to meet its additional marginal cost).

I thought I'd let my readers take a swing at this before I do. Please step into the comments and explain to Paul how this can happen.

From the desk of Jane Galt:

Stupidist tax cut ever

Someone in the Senate wants to give every American a $100 rebate to offset the pain of high oil prices. As the inimitable Professor Bainbridge asks, why not just call it The Official Republican Vote-Buying Act of 2006 and be done with it?

From the desk of Jane Galt:

Hypochondriac question of the week

Have I ever mentioned that I'm a hypochondriac? No, I see I haven't. Well, I have certain hypochondriacal tendencies. Not the kind who goes to the doctor all the time to drive him nuts with my nattering about the transient stabbing pain in my left shinbone; that would be too simple, not to mention require far too much effort. I am just the kind of person who notices weird things and then searches them on Web MD and then contacts my lawyer to draw up a will before the non-Hodgkin's lymphoma gets me. I can be watching a 60 minutes segment about some disease that only afflicts Turkish Jewish men over the age of 60, and I'll have every symptom.

Anyway, y'all seem to like puzzles, donut shops, and other non-economics fun, so I thought I'd share with you my symptom of the week.

As anyone who's ever met me personally knows, I loooooooove diet soda. Last year I painfully weaned myself off of diet coke and my caffeine jitters, only to replace my 2-liter-a-day habit with a nearly equally impressive diet gingerale intake.

Now suddenly I can't stand the taste of anything with aspartame in it, including my new lemon-flavoured toothpaste. A couple of ounces of diet gingerale leave me with a nasty bitter aftertaste that lasts for hours.

I presume that that taste was always there; indeed, I believe I've heard people complain about it. So why am I suddenly able to taste it so strongly? Brain tumour? Tastebud wasting disease? The only things I came up with on Google were things like acid reflux (which I have, but which these particular symptoms don't match) and ALS (aka Lou Gehrig's disease), but that also seems to be associated with a lot of symptoms I don't have, like "episodes of pathological crying, generalised spasticity, muscle atrophy, weakness, and fasciculations". At least, I don't think I have fasciculations. They sound awful.

Does this sort of thing happen often? Should I be worried? Do I need to update my will to take cognizance of my fantastic new kitchen shelves and pasta maker?

Lollipop for the first reader who provides a diagnosis . . . preferably one that lets me resume my dreadful habit post haste.

From the desk of Jane Galt:

What's so special about gasoline?

Today I'm writing about oil and gasoline (er . . . petrol) prices. Just in time, Daniel Drezner asks a great question:

So, here's my question to readers... why is a spike in gas prices considered such a political crisis?

[You're the political scientist... why don't you have an explanation?--ed.] I have one, but it's a bit loopy: gasoline is a unique commodity in three ways. First, it's tied into the politics of the Middle East, which allows media coverage to always give it that extra political twist... though during the Cold War, the only sources for platinum were the Soviet Union and South Africa, but no one fretted about the political implications.

Second, oil is one of the few commodities that's subjected to a supplier cartel... though I don't hear anyone besides myself complain about, say, the diamond cartel.

Third (and by far the loopiest), gasoline is the one commodity in which Americans of both genders possess close to full information. It's therefore the one commodity that might mobilize the mass public into seeking a political solution.

I place very little confidence in my explanation, however: readers are welcomed to chime in.

My thoughts:

1) Most Americans buy gas at least once a week

2) They buy a lot of it

3) They buy it by itself--if the price of milk or orange juice rises, it gets lost in the overall grocery bill, which is still falling in real terms.

4) The price is visible and because demand is almost completely inelastic, little effort is made at price discrimination--there are no coupons for cut price gas.

5) There is relatively little variation in gas prices compared to, say, generic food/drugs vs. name brands.

6) Gas is heavily implicated in other consumption. When the price of milk rises, you stop drinking milk and start drinking calcium-fortified OJ (or vice versa). When the price of gas rises, you stop going to the movies and start watching the science channel.

7) There are very few good substitutes for gasoline consumption.

8) It is relatively difficult to cut back on gasoline consumption, because commutes and things like grocery shopping make up so much of the total, and people only purchase new cars once every few years, if that.

In short, people have to buy it; they have to buy large amounts of it frequently; it's very difficult and painful to economize on; and the cost is highly visible. That's what makes it different from groceries or furniture. Or anyway, that's my guess.

From the desk of Jane Galt:

Learn something new every day

From Slate's ad report card:

Dunkin' Donuts is spreading its wings. The chain is expanding nationwide and plans to triple in size within the next 10 years. According to a Dunkin' press release, this new ad campaign "marks the most significant repositioning effort in the company's 55-year history." A big part of the goal here is to introduce the brand to Americans not yet familiar with it.

Hey, put in wireless, and I'll happily eschew the chi-chi chains. I like Dunkin Donuts' coffee immeasurably better than Starbucks', anyway.

But the real surprise to lil ol' parochial me is -- who knew Dunkin Donuts wasn't already nationwide?

From the desk of Jane Galt:

The importance of failure

Or at least, being willing to fail--in innovative industries, safe=dead:

I enjoyed one of the recent comments to the "Why All the Gloom" post, where an IP lawyer mentions what people at the small startups told him: namely, that managers had figured out that by saying "No" they were right all the time, while saying "Yes" had a much lower chance of success.

I know just what he's talking about. You can have an entire career in the drug industry, just sitting around telling people that their ideas aren't going to work. And more than nine times out of ten, you'll be right. Fortunetellers and stockpickers should have such a record! So what's the problem?

Well, the problem is, the whole industry depends on those times when someone's idea actually works. For that to happen, chances have to be taken, risks run. Being in charge of reluctantly-killing-off-once-promising-projects has a lot more job security, but someone has to go and make something happen once in a while.

One problem is, I think, that some companies kill things off for a long period until the situation gets more and more desperate. Then they try to run with whatever's in the clinic at the time. Some of those projects will, no doubt, be worse bets than some of the things that were killed off through excess caution a few years before. But if you didn't let a few of those loose, you eventually get stuck with what you have.

From the desk of Winterspeak:

Mearsheimer in Boston

I went to a speech given by U Chicago professor John Mearsheimer on the rise of China. Mearsheimer is famous for 1) being a proponent of structural realism, which argues that states follow their own interests within the constrains of the international system and 2) a recent paper arguing that US foreign policy towards Israel has been captured by the Jewish Lobby, to the detriment of both the US and Israel.

The paper is, frankly, anti-semitic (not that I care much, there is plenty of anti-semitic material in the world, as well as real scholarship around semitism -- on the margin what difference does one more make one way or the other?) but listening to Mearsheimer talk about China reveals the limits of his academic posture, and why his thoughts on America's support for democracy in general and Israel in particular, are weak.

Mearsheimer delineates the assumptions behind structural realism as follows:
1) States are the major actors in the world -- their internal composition does not matter.
2) States operate in a world of anarchy -- there is no higher authority they can call on to impose order, or protect themselves from other states.
3) All states can project some offensive power.
4) States are primarily interested in their own survival. Yes, they care about other things too, like prosperity, but you have to be around before getting to enjoy anything else, so survival is job 1, everything else is job 2.
5) States cannot be sure of the intention of other states. This is certainly true about states in the future -- even if you know what today's rulers will do, there is no way you can know what the rulers 20 or 30 years in the future will do, never mind who they will be.

The upshot of these assumptions is that each state, for its own security, will attempt to gain regional hegemony simply because there is no better way to ensure your own survival than "being the biggest, baddest dude on the block". It is better to be Godzilla, than Bambi. Secondly, regional hegemons will not allow other "peer rivals" (hegemons in other regions) to appear. They will form "balancing coalitions" with other regional players to prevent a single power from gaining hegemony. Being a regional hegemon is nice because you get to meddle in everyone elses back yard and do not need to tolerate others meddling in yours.

In the context of China, this means that when (if) it rises, it will neccessary come into conflict with the United States. The US will form a balancing coalition with Japan, Taiwan, Singapore, Vietnam, India, and Russia to keep China from dominating the region. You can read his argument here: Better to Be Godzilla than Bambi.

There were two major weaknesses in his thinking: first, he does not understand economics, especially related to things like oil markets, which means he says things that are plain ol' wrong. That said, I have no doubt that most government bureaucrats have a similarly incorrect understanding of this topic, so while Mearsheimer may be wrong, his predictions may also accurately describe what governments actually do as his folly is echoed is various halls of power.

Secondly, his perception of the "state" and what survival of said state means is limited. He sees states as "billiard balls", complete opaque entities to themselves, and honestly sees no difference between democratic states and dictatorships. In his view, a state's interests does not depend on the structure of its government, and its range of options are constrained by the same international protocols no matter how it is governed internally. And this is false.

Let's take the oil discussion first. Mearsheimer spent a lot of time talking about how "controlling Middle Eastern oil" was a key strategic interest of all major powers, and how other nations will not tolerate the US meddling in Iran since it already has influence over the other 3 major sources of Middle Eastern oil -- Iraq, Saudi, and Kuwait. Arnold Kling has written an excellent piece on this (oil econ 101) which I recommend, pointing out that oil is a global market. It does not matter who "controls" the oil since it must be sold on the market. Gasoline has not become cheaper in the US because it happens to be occupying Iraq. Oil costs whatever it trades at, no matter who the seller is. If oil gets more scarce the price will rise, and invading oil producing countries will not change this fact.

Now let's talk about Mearsheimer's limited concept of the "state". In the lecture, he said that he did not care how a state was governed, and did not think democracy was a panacea to anything the way Bush II does. But it's a trivial observation that "survival" means very different things to dictatorships than to democracies, and therefore their incentives, and actions, will be appropriately different. To Saddam Hussein, and the various other dictators scattered across the Arab, Muslim, and African world, the "state" is themselves and their clan. Saddam was going to be succeeded by Uday or Qusay. Kim Il Sung was succeeded by his son, Kim Jong Il. Louis XIV (1638-1715) said "L'etat, c'est moi" which I think sums up this point very neatly. Saddam, Kim, and Louis would gamble their entire nation on retaining power, because to them, survival of the state is synonymous with their personal survival. If they go, the state is no more, so they will be willing to sacrifice it to hold onto power. By contrast, democracies change leaders regularly, and routinely kick out the bum who is in charge for some new bum. The state does not even need to be in any existential danger for them to do this.

Mearsheimer does not see this as a factor in the decisions a state makes, which is dumb to me. Together with his ignorance towards commodity markets, though, it becomes clear why he feels the US support of Israel is irrational, and therefore must have a conspiratorial reason. Since democratic administrations frequently change, the bar on them using force is set much higher and they will be less aggressive than their dictatorial neighbors. Israel is the only democracy in the Middle East, and is therefore valuable to America as an ally. Democracies are less likely to impoverish themselves as a country to enrich their ruling class than dictatorships, so it is better to have oil in democratic hands as this will make them more rational about selling it. An autocratic Saudi is much more likely to unilaterally stop oil exports (at great cost to the country, at small cost to the already loaded and unaccountable rulers) than a democratic Saudi. An autocratic Iran is more willing to go down in a hail of nuclear bullets than a democratic Iran. Given the geo-political realities in the region, this should be obvious to a hard nosed "realist" like Mearsheimer.

The agency problems are bigger in dictatorships than democracies, both in domestic and foreign policy decisions. Refusing to think through the consequences of these different incentive structures will limit your ability to predict what an administration will do.

(Yes I know, the US -- and other democracies -- have a long history of supporting dictatorships when it suited them. The points I outlined above are not hard and fast rules, they merely point out that the consequences of democracy have some value, not that those values are so large they do, or should, outweigh all other factors. It is rational to ally with a far enemy to defeat a near enemy, just as Syria has allied with the United States, a far enemy, to defeat Al Quaeda, a near enemy. One point that Mearsheimer was slow to get, but did get eventually, was that states do not like non state actors because it puts their own existence in jeopardy. Saddam was kicked out because of Al Quaeda. Other Arab dictatorships do not like international terrorism because it puts them in the cross-hairs of the US and other countries. They are not willing, however, to entertain competitive political systems even if [big if] that solves the terrorism problem, because dictator=state. My point is that dictatorships have different incentives around “survival” than democracies, and this makes a material difference to their decisions and policies – both towards their own populations and towards other countries. Ignoring these differences will reduce your ability to predict what states will do and you will end up making anti-Semitic conspiracy theories and then be surprised when people laugh at you, denounce you, and David Duke becomes your new best friend.)

I would also add that I am no international relations expert, and while I've given some thought to how dictators have different domestic incentives, I have not thought much on how dictators have different foreign incentives, and what all the impacts on policy would be. If an administration really beleived that the state started and stopped with them, and therefore had their own *personal* survival as the number one goal for the nation, how would that influence their interactions with other states? I'll be interested to read the comments.

From the desk of Jane Galt:

Bush boosting

It may not have suffered from the brutal Afghan winter, but the Bush administration certainly seems to be caught in a political quagmire these days. As pundits debate whether the Bush administration is evil or merely egregiously incompetent, it's easy to forget that the administration has done some big things right.

The first is trade. The Bush administration's committment to free trade has been downright inspiring. Sadly, the intransigence of Europe and the G20 block of developing nations over agricultural subsidies loks like it is going to derail any substantial progress in the Doha round of WTO negotiations. But the Bush administration has pushed the ag subsidies issue farther and faster than any previous president has dared. Even the abominable steel tariffs seem, in retrospect, to have been a way to gain street cred with protectionist factions at almost no expense--since the steel tariffs were designed in a way that was certain to be overturned at the WTO, "forcing" the administration to repeal them. The administration could have crafted some protectionist sop that wasn't so easily negated; it is to their credit that they did so.

The second is education. Yes, NCLB is no panacea; yes, it lets states choose their own tests. But for the first time we are forcing educators to ask basic questions like "Can all our children read?" and we have stopped letting them segregate minorities into special education tracks that don't count for evaluation purposes--one of the many appalling ways in which the American educational system fails its most vulnerable constituents. The main complaints about the act--that it is an unfunded mandate, that it is rigid, that we have to cancel field trips to drill for the test--are strengths, not weaknesses. The first job of American schools is to teach children to read, write, and do basic math--three skills without which a child is doomed to fail in modern American society. If schools have to cut music classes, gym, or field trips to make financial, physical, or schedule room for arithmetic drill, that's because they were failing to adequately teach arithmetic, and cutting out those classes is a very good thing. Drill and kill may be boring for affluent middle class kids, but frankly, I just don't care. If they're bored, and they already know how to read, then let them read while you drill the other kids. Getting poor kids the basic skills they need to make a decent lives for themselves is more important than keeping rich snots like the child I was stimulated. NCLB certainly doesn't solve all our educational problems--but it makes us look hard at them, which is a necessary prelude to addressing them.

The third is foreign aid. Y'all know I'm a bleeding heart where it comes to developing countries. The problem is, aid to developing countries doesn't do much to make them develop, or even alleviate the dreadful poverty most of their citizens live in. (There are exceptions, like medical aid, but most aid is thoroughly wasted, and even counterproductive.) If I thought more aid would do good, I'd be all for it; as it is, I'm glad that the US didn't sign onto the Live8 bandwagon. The Bush administration's efforts have been small--but they've taken the right approach. For on thing, they've put conditions on the aid. But that approach has been tried before; it generally fails, because the target companies fail to follow through on their big promises. The difference is that the Bush administration made countries comply with the conditions before they got any cash. Marginal Revolution offers evidence that it's working. It's very early days yet . . . countries are improving on the goal areas, but it's too soon to know whether that will translate into those countries becoming stable, prosperous nations. But it's a very impressive start.

Those areas may not be enough to rescue his presidency. But 100 years from now, it's possible that the Millenium Challenge will rank higher in historical memory than a minor war in the Middle East.

From the desk of Jane Galt:

In which I bow to greatness

Jim Henley is the zen master of blogging. I am selling my possessions, moving to Washington, and shaving my head in the hopes that after several years of squatting on his doorstep, he will take me on as his disciple.

From the desk of Winterspeak:

How poor is poor?

This New Yorker article looks at how poverty levels are defined in the US, and asks "how poor is poor?" Unsurprisingly, this question is deeply political, as the Left wants "poor" to be defined in such a way that maximizes its size, and so will bolster the case for government transfers, while the Right wants to define "poor" such that its size is minimized, and thus undermines the case for transfers.

The article itself has no ambivalence about how to define poverty, it states:

More recently, three economists at the University of Warwick published the results of a survey of sixteen thousand workers in a range of industries, in which they found that the workers’ reported levels of job satisfaction had less to do with their salaries than with how their salaries compared with those of co-workers. Human beings are also competitive with their neighbors. Erzo Luttmer, an economist at the John F. Kennedy School of Government, recently found that people with rich neighbors tend to be less happy than people whose neighbors earn about as much money as they do. It appears that, while money matters to people, their relative ranking matters more.
...
The conservative case against a relative-poverty line asserts that since some people will always earn less than others the relative-poverty rate will never go down. Fortunately, this isn’t necessarily true. If incomes were distributed more equally, fewer families would earn less than half the median income. Therefore, the way to reduce relative poverty is to reduce income inequality—perhaps by increasing the minimum wage and raising taxes on the rich. Between 1979 and 2000, the inflation-adjusted earnings of the poorest fifth of Americans increased just nine per cent; the earnings of the middle fifth rose fifteen per cent; and the earnings of the top fifth climbed sixty-eight per cent.

The article fixates on the notion that it is relative wealth that matters, and thus the solution to all ills is to reduce income disparity (I think he may mean consumption disparity, a distinction he makes earlier in the article and subsequently ignores). We will all be happy once we are all above average.

But there are other ways to reduce relative wealth disparities that article does not mention. Rich people and poor people could be sharply segregated so that the rich (or even the middle class) never enter the consideration set of the poor. While a great deal of this segregation happens today through zoning laws and housing costs, the distinctions could surely be sharpened by physically separating poor neighborhoods even further from rich neighborhoods, and re-instituting land covenants based on wealth.

Moreover, TV is a powerful channel of conveying the lives of the rich to the poor. The average TV character is much better looking, richer, and more educated than the average person, which creates horrible stress according to the New Yorker, so it would be better to restrict who folks can watch on TV based on their income.

Moreover, role models, many of whom are wealthier than the people who are supposed to emulate them, would have to end. Role models are harmful by throwing income disparity into sharper contrast than it would be otherwise.

Half of the one recommendation that the article makes, raising the minimum wage and taxes, would actually make the situation worse by forcing poor people out of jobs they way high minimum wages have in France. While poor people may be less happy than rich people, unemployed people are *much* less happy than employed people.

From the desk of Jane Galt:

Boy, it's fun to be on the web

Like anyone who goes out on the wbe and posts their personal opinions for the delectation of strangers, I have suffered some personal attacks in my time. I've been called stupid, compared to an unneutered female dog, had the validity of my parent's marriage questioned, seen it speculated that grievous bodily harm should be done to my person, even suffered through a number of suggestions that were not only grossly immoral, but biologically most improbable.

But the commenter who responded to my weight loss post in the thread on my speech last Thursday (went fine, thanks for asking) takes the cake:

was at your debate. where do you weight 145 - 152, on the moon? Posted by: james on April 11, 2006 01:55 AM

Whoa. I mean . . . whoa. I haven't been confronted with such deliberate personal rudeness since . . . well, it's hard to remember, but I'd guess middle school. Well, FYI, as of this morning I weighed 151 and change, and I'm 6'2, and a size 8-10, and dammit that is NOT fat! So there! And James, wherever you are: I'm rubber, you're glue . . .

Now if you'll excuse me, I have a date with a treadmill and a bottle of ipecac.

From the desk of Jane Galt:

Media alert

If you're in New York, I'll be speaking on the topic of failure tonight at the New York Junto. The meeting will be held at the General Society Library, at 20 West 44th St.

From the desk of Jane Galt:

Immigration and unskilled labour

Mickey Kaus makes the most serious argument I've seen in favour of restricting immigration to boost low-skilled wages:

Clinton's Achievement vs. DeLong's Pie in the Sky: Mark Kleiman blogs:

Brad DeLong is right: the biggest beneficiaries of immigration are immigrants, and those benefits ought to count. If we want to help low-income Americans, there are better ways to do it than restricting immigration. [Emph. added]

Oh yeah? Name one. ... Actually, DeLong names five:

... more progressive tax brackets, more public provision of services, a more generous Earned Income Tax Credit, a higher minimum wage, a greater focus on education.

I would suggest that if DeLong actually thinks changes in these policies will dramatically improve the situation of low-income Americans, especially unskilled African American men--not to mention help reestablish the black family, which is the real goal--he is dreaming. 1) A "focus on education" hasn't helped those hanging out on the streetcorners and selling drugs in the past. They are not big successes at school! 2) Progressive tax brackets only help if you actually earn money, which these people aren't doing. 3) The Earned Income Tax Credit does send cash to low income earners, but again you need to earn at least some money to get it. And it's already pretty big. We probably can't increase it much higher without running into cost and disincentive problems when the credit is phased out in the mid-income ranges (i.e. workers will end up losing--in phases-out EITC payments--a good chunk of any extra dollars they earn). 4) A higher minimum wage will help, but if you raise it too much it becomes a job-killer. 5) As for "public provision of services," it's not clear what DeLong means. Suppose we had national health care. Would that change the lives of the estimated 72 percent of black male high school dropouts in their 20's who are "unable to find work, not seeking it or incarcerated"? Will they stop being scrubs hanging out on the corner--or will they be scrubs hanging out on the corner who get free medical care?

The one thing that seems to have been a huge boon for unskilled African Americans is the tight low-wage labor market of the Clinton years--especially during Clinton's second term. It's hard to give a high school dropout a college education. But if you give him an unskilled job paying $10 an hour he's got a shot at forming a family (with another worker). And in the process he's integrated into the mainstream, working culture. It's even better than "provision of services"!

A tight labor market is especially important for young black men because they tend to be at the end of the employment queue. You have to let employers run through all the groups they prefer--and illegal immigrants are one of them--before they will reach out to ghetto kids. That's the sociological reality. If we let in lots of unskilled immigrants, however deserving, they will jump ahead in the queue.

I'd always thought the tight 90s labor market, and the opportunity it provided for those at the bottom, was one of the glories of the Clinton years that Democratic economists like DeLong celebrate and wish to replicate. Maybe Democrats could run an economy so hot it would provide employment for millions of decent, hard-working immigrants from Latin America and Korea and for any left-behind unskilled Americans. That would be nice! But until we achieve that miracle, we will have to think about restricting the influx of competing low-wage workers from abroad.

The question then becomes: should we want to help these low-skilled workers at the expense of immigrants? Especially when the immigrants are hard-working people born into a rotten economic environment, while the American low-skilled workers get that way by virtue of personal decisions like dropping out of high school?

Well, maybe. Environment matters, as I've argued before; most of my nice middle class readers, dropped into a dysfunctional slum at birth, would drop out of school, sell drugs, and get pregnant out of wedlock, just like the current occupants do. It is cripplingly difficult to get out of such an environment once you're in it . . . most of our ancestors with the Horatio Alger success stories came out of cultures with perfectly functional economic mores, but where larger economic conditions made advancement difficult. Today's poor Americans, on the other hand, lack basic things like stable families and educations, or even the cultural support to seek such things.

Many people argue that family formation is the first step to solving the problem of the underclass (problems, rather, since America has at least two distinct forms of poverty: urban and rural). Higher wages for low-skilled jobs would theoretically make men who have them more attractive candidates for marriage, allowing them to form families at a higher rate. In time, that might undo the devastation that was wrought by the 1960's-era welfare policies that pushed men out of poor households.

But colour me sceptical. A wage increase of 8% would mean, for someone earning Wal-Mart salary, about $1200 a year . . . not chicken feed, but not exactly enough to raise a kid in most places, either. Is $2400 a year (the difference for a two-income family) enough to overcome the demand-side problems created by young men who want to have children without responsibility, and young women who seem to be willing to offer this service? Seems unlikely. Meanwhile, poor would-be immigrants are suffering somethign a lot worse than hanging out aimlessly on street corners.

But on the other hand, a chance to alter the poverty cultures in our society is not to be tossed away lightly. Poor areas are not happy places to grow up, whether they be housing projects or trailer parks, and even less happy places to spend your whole life . . .

From the desk of Jane Galt:

Does weight loss work?

Ampersand says no.

Well, at least for me it did. After I stopped growing, I blew up like a balloon. By the time I was a freshman in high school, I weighed 180 pounds. And yes, it was because I ate too much.

During high school, I went too far in the other direction, joining the rest of the girls in my school on a quasi-anorexic diet. By the time I graduated, I weighed 125. My family has very, very dense bones. That was not good.

But since then my weight has been pretty damn stable, at between 145 and 152. (I gain about seven pounds every winter, and lose it every summer . . . from changes in appetite, not dieting). I eat normally, for an upper middle class New Yorker . . . salads and grilled chicken, to be sure, but also chinese takeout and pizza. My parents think I am too thin. By New York City standards, I could stand to lose ten pounds.

The fact that more and more people, especially children, are becoming obese, indicates that there is obviously some caloric/excercise factor in obesity . . . or some as-yet-unknown infectious agent is playing havoc with everyone's biology. Said infectious agent is obviously transmitted through money, since it infects countries pretty much in line with their per-capita GDP . . . but not big denominations, because the obesity ends up concentrated among the poor.

I jest, of course. We're getting fat because we eat too much and excercise too little. Even in Ampersand's post, there's evidence for that, although it's buried:

[In a study of children], Rolland-Cachera and Bellisle found that food intake was about 500 calories greater and obesity about four times more common in the lowest versus the highest socioeconomic groups studied; however, within each socioeconomic group, there were comparable levels of caloric intake among lean, average weight, and obese children. […]

Ampersand's post seems to imply that there is therefore no difference between what fat people and thin people eat.

No!

What it implies is that in any given group, there are a minority of skinny people who will be skinny no matter what. There is another minority of people who have fast metabolisms, and find it harder to gain weight at a given calorie intake. And then there are the majority of us, who, if we are fed 500 more calories a day, will gain weight. The amount of calorie intake is generally socially conditioned . . . the higher the SES, the lower the calorie intake. And altering the calorie intake in the social environment dramatically alters the distribution of weights: the more calories consumed by your peer group, the more obese people in that group, and the higher the likelihood that you're one of them.

Now, once you've gained the weight, it may be damn near impossible to lose it. (Not totally impossible, as I demonstrate. But very difficult.) Dieting may be a bad individual strategy.

But it may not be a bad strategy for the group. If being more than a few pounds overweight is bad for you (as I believe the evidence does show, particularly with nasty chronic diseases like diabetes), then the social pressure that produces dieting is the same social pressure that keeps people from getting fat in the first place . . . assuming that rich people aren't genetically thinner, but merely responding to their environment. Fat acceptance, on the other hand, may be good for fat people, but bad for the future people who will become fat if the cultural stigma on high-calorie eating is removed.

Update In the comments, Roborant says:

Funny how dieting aways works perfectly in animals. If your dog or cat is overweight, the vet tells you to cut down their food. If you do, then — like magic — they lose weight.

It works every time it's tried. Apparently, there are extremely few dogs or cats with genetic predispositions to being extra fat. You just modulate their food intake and their weight just follows.

This works for me too. Cut down the calories and up the exercise and I lose weight every single time. If you really want to lose weight, try training for a marathon (everyone should try it at least once). Running 20-40 miles per week will force you to lose weight unless you are REALLY dedicated to eating piles and piles of food.

Isn't it just barely possible that humans are just like the other animals and the vast majority of those people who claim "I can't lose weight no matter how little I eat" are just fooling themselves one way or another?

Indeed, the biggest problem with any long-term weight loss study is that they rely on self-reporting. And self-reporting, we know, is in general unreliable, and is especially so when the activity that is being tracked has a heavy social stigma attached, as overeating does. Even getting people into the lab and strictly monitoring their calories is unreliable, because the act of being observed almost certainly changes people's eating behaviour. I had a college roommate whom I would have sworn ate like a bird . . . until I came home unexpectedly early from a weekend trip and found her digging into her second half-gallon of ice cream. I'm not saying that all fat people eat that way, but said roommate strenuously maintained, to me and everyone else, that she didn't eat that much. Even many thin women are secretive about their eating habits; fat people have that much more reason to be so.

As far as I am aware, only a few studies have attempted to correlate what people say they eat with what they actually eat, and those studies have all found that people were consuming 500 calories or more in excess of their reported consumption. The implication is not only that some people lie about what they eat, but also that many more people are simply unaware of the extra calories they consume . . . the handful of M&Ms or the canapes at cocktail hour get stuck into some different mental basket and don't get added to the daily total.

That said, I also assume that people who struggle with their weight have some different, stronger signals in their brain telling them to eat than I have. Aside from the occasional holiday gorge, I find overeating unpleasant, and actively seek to avoid it by cooking small portions, or pushing my plate away when I've had enough, so that I can't pick at it. And too many heavy meals in a row kill my appetite. Social conditioning or biology? No idea. But I don't assume that what is easy for me is easy for everyone--after all, most of my friends can smoke socially, while every time I've broken down and had a cigarette, I've ended up right back on a pack-and-a-half habit within a week. Unfortunately, my friends who struggle with their weight can't just go cold turkey, the way I did.

From the desk of Winterspeak:

Libertarian paternalism

Arnold Kling comments on Daniel McFadden's thoughts regarding behavioral economics and Medicare Part D.

In the March, 2006 American Economic Review, which has an unusually large number of articles that interested me, Daniel McFadden writes concerning Medicare Part D and behavioral economics,

"leaving the large block of uninformed consumers to "sink or swim", and relying on their self-interest to achieve satisfactory outcomes is clearly unrealistic. I endorse Thaler and Sunstein’s (2003) libertarian paternalism."

(note--the version I quoted differs slightly from the printed version)

What McFadden means by libertarian paternalism is that markets can satisfy wants, but people need to be taught what to want.

I am not sure if McFadden is getting it wrong, or Arnold is getting it wrong, but Thaler and Sunstein's "libertarian paternalism" does not mean that markets can satisfy wants but people need to be taught what to want.

"Libertarian paternalism" recognizes that centralized decision making is often wrong, and that individuals don't always make the best possible choices, so defaults matter and it's worth putting some thoughts into them.

Medicare Part D offers seniors a baffling array of prescription drug plans they can opt into. Uptake has been weak. Libertarian paternalism would automatically enroll seniors into a particlar plan, while allowing them to opt out, or switch plan if they wanted.

From a libertarian perspective, both of these options should result in the same outcome -- after all, people are still free to do what they want and their opportunity set is identicle in both cases. From a real world perspective, the automatic enrollment with opt-out being an option will result in much higher uptake than optional enrollment. Given that most people are just going to take the default option, it makes sense to put some thought into it. Given that committees thinking things in DC often get things wrong, it's critical that their decision is not binding in any way.

From the desk of Jane Galt:

Time to stage an intervention?

Michael O'Hare contemplates Europe's demographic decline:

It's difficult, or perhaps it's too easy, to find a metaphor for three nightmares of which I have been watching (two from up close) over the last two weeks, and it's almost as hard to characterize watching while the participants have coffee and pay no attention. Seeing a good friend descend slowly into a debilitating, probably fatal addiction to drugs or suicidal behavior? Watching a town go about its business as the dam up the valley develops cracks and leaks? Wile E. Coyote heading off the cliff with grim determination?

The last one is no good, at least for my first scenario, because the coyote doesn't know about the cliff until his feet are flailing in the air. In contrast, the demographic suicide of western Europe is not only amply documented but obvious on the street: it's a world of grownups and most of them will soon be old. I live in a college town and my perception may be distorted by my own day-to-day experience being out and about, but outside student districts, Berkeley has children on the scene, on my street half a dozen in a stretch of a half-dozen houses. Milan, however, is a city of twenties and thirties, almost all single and childless, and their parents. In any case, all the few people who could have children in the next fifteen-plus years are already born and accounted for; demography is a science of long horizons and very early warning. The only thing I've ever seen to compare with this baby and child vacuum is the city of San Francisco, rapidly becoming a child-free zone with closing schools and empty playgrounds.

. . .

The phenomenon is creepy, but what's like a science fiction movie about zombies is the pervasive lack of concern. Good studies are commissioned and filed away, governments have started some tentative child-subsidy tax programs, especially generous in France, but there's no conversation about it, nothing in the newspapers, an election in a week in Italy and I can't find a word about this impending catastrophe from a candidate in the newspapers or on TV. The current administration seems to have spent its entire term in office keeping the prime minister out of jail, not attending to this (or anything else, as far as I can tell).

What could possibly be more important to Italy than the looming extinction of Italians? And even if the society had decided it's time to roll up the enterprise and pass the peninsula to someone else, or just turn out the lights and close the door, what do the twenties and thirties of today expect to have for dinner when they're old, having paid taxes to support their (more numerous) parents most of their working lives? Why is everyone acting as if this isn't happening??!!

As an italophile on many dimensions, sitting in a comfortable train [this is shorthand for a competent system of public services that provide a high quality of life] between Rome and Milan where life is very good in so many ways, in the land of Giotto, da Vinci, Fermi [supply your own pages of really smart Italians who think outside the box], I find myself suppressing a tendency to grab people at random by the collar and yell at them, "forse queste cose non mi riguardono, ma siete pazzi, voi? ciecchi?" (si, amici miei, questo è per voi) [maybe this is none of my business, but are you people nuts? blind?]

Excellent question. But his proffered explanation--economic insecurity and husbands who don't do housework--isn't very convincing. American men don't do much more housework than European ones (depending on the country, of course), and the birthrate is lower than the decidedly insecure period that followed WWII. A more convincing explanation, to me, is economic:

1. A shift to women working after marriage increases the opportunity cost of each child.

2. Increasing incomes also raise the opportunity cost, by increasing the amount of income that must be forgone in order to put energy into childraising.

3. Generous social security systems, including social workers to replace some of the social functions of children, mean that individuals have no financial need for children in their old age. There is actually evidence on this: several papers suggest that the more generous your social security system is, the fewer children your society will have.

Of course, we still need to come up with an explanation of why America, which is still getting richer and putting women into the workforce, isn't below replacement rate. But much of our fertility comes from poor women and immigrants, who have a much lower opportunity cost for childrearing than overeducated professionals like me. Our welfare policy may be inadvertently pro-natalist--since, unlike Europe, the only way for a healthy woman to collect benefit is to have children.