mailbag

A brief grumbling about the NSA.

Anonymous asks: “Off topic: What do you think of the ruling of the court case over the NSA data-collection-whatever?”

I haven’t studied the case or ruling beyond what was in the headlines and a few articles. However, I think it’s safe to say that capturing virtually all internet traffic is unreasonable and unwarranted (and I have a pretty broad definition of “reasonable”), thus violating the Fourth Amendment.

I think I could tolerate the NSA capturing all internet traffic if it were reasonable. But is there any evidence to show that it’s reasonable? Has there been any effort made to demonstrate that it’s reasonable?

I’d like to be able to defend the NSA here. After all, the world is a scary place, national security is an increasingly complex matter, and the bad guys use the internet, so why not monitor and use the internet to catch them?

More specifically, I’d like to be able to defend the NSA by saying something along these lines: “Because the world is a scary place, national security is an increasingly complex matter, and the bad guys use the internet, the NSA needs to be able to do A, B, and C. But doing D, or anything beyond that, would clearly be going too far, so it can’t and doesn’t do D.”

But over the last few years, we’ve learned that the NSA does do D. And E. And F. Come to think of it, when’s the last time you saw a story confirming that the NSA does not have a particular ability or capacity? That there’s some limit to its data collection or intelligence gathering or spying? Hasn’t literally every NSA story been about how it has more power than we knew?

I’m sure that the Obama folks would simply say, just like the Bush folks did, “At some point, you have to trust us.” But if the left didn’t trust Bush with this sort of power, and the right doesn’t trust Obama with this power, and the middle doesn’t trust anybody with this power, then… we have a problem. Go after the bad guys, sure, but… Jeez.

I already assume the President won’t do anything to reign in the NSA; it’s not in the nature of the office or the office-holder, regardless of party. We’ve seen a federal court show that it’s willing to do something; hopefully other courts and the Congress will follow suit.

Another point, that might’ve been worth considering, say, 14 or 15 months ago: Will anyone ever again believe that a President doesn’t spy on his campaign opponents? Or can we safely assume that every President from here on out is a Lyndon Edgar Nixon?

On the possibility of default.

An anonymous reader asked in an earlier comment thread, “Could you explain what would happen if the Oct. 17 deadline isn’t met?”

October 17th is the day that the federal government expects to hit its debt ceiling. In other words, on that day, the federal government will max out its credit card and it won’t be allowed to borrow any more money until it pays off some of its old debts.

That doesn’t mean the federal government will cease all operations, or stop collecting taxes, or stop spending money. It can keep operating, collecting taxes, and spending money. It just won’t be allowed to borrow any additional money until (A) the debt ceiling is increased, or (B) enough old debt is retired to make some room underneath the debt ceiling.

The big fear now is that if the debt limit is not increased by Thursday, the federal government will default— that is, if the government owes you money on Friday, it won’t be able to pay you. That would be bad because an IOU from the federal government is supposed to be one of the most (or the most) safe and secure financial investments on Earth. And suddenly a lot of people, businesses, and other governments who’ve lent money to the federal government in good faith will realize that they may not get their money back in full. And that causes worldwide economic turmoil unless and until the federal government gets its act back together, but even then investors may no longer view it as trustworthy. And then people/businesses/governments are less willing to lend money to the federal government, which suddenly has great difficulty funding its daily operations, and has to either cut spending, increase tax revenues, or inflate the currency.

Default is the big fear. But default doesn’t have to happen, even if the debt ceiling doesn’t get raised by October 17th. The federal government can cut spending or it can raise taxes. Neither’s a pleasant option, but default would be far worse. And perhaps because default would be far worse, default is legally and constitutionally the last resort. The feds have to pay off their IOUs before they spend a dime on any other function of the government. That’s not just my opinion, that’s not just how I read the Constitution, that’s the last few centuries of financial and legal precedent. Bondholders– the “U” in “IOU”– get paid first. Not our military. Not Social Security or Medicare recipients. Not Congresscritters or other federal employees. Bondholders. And every day, the feds bring in several times the amount of cash necessary to pay off the bonds that come due every day.

So if October 17th comes and the debt limit hasn’t been raised, expect more parts of the government to shut down because of spending cuts. It won’t be pretty, but default will still be a long ways off– unless the President unilaterally decides to shaft the bondholders, which I’m sure would never ever happen in a million years.

On groceries.

An anonymous reader emails:

I have an economics-related question that stemmed from a pretty interesting article I just read on the cost of living in NYC.

My question is this: On page one of the article, the author quotes some research stating, “…for households earning above $100,000, grocery costs are 20 percent lower in cities with a high per-capita income (like New York) than in cities with a low per-capita income (like New Orleans).”

But then on page two of the same article, the author quotes different data from the same study, “…a household earning $15,000 a year faces approximately 20 percent higher grocery costs in cities with relatively high per-capita income.”

I don’t understand how grocery costs can be higher or lower for one socioeconomic group than another. If Person A making $100,000 a year and Person B making $15,000 a year both shop at the same store, would the prices not be the same for each person? I know obviously Person A is more likely to shop at an upscale/ more expensive store than Person B, especially in a city like New York, but there are only so many grocery chains to choose from, and I’ve found from working in grocery stores that I daily come across an equal number of people from both ends of the spectrum that shop at the same chain with the same prices. I’m sure I’m missing something obvious, but I don’t see how these two statistics can coexist simultaneously. Thoughts? [Emphasis added by VDV.]

Let’s address the first statistic first. Remember that this statistic compares rich people in rich cities (such as NYC) to rich people in poor cities (such as New Orleans). Because NYC is such a rich city, a lot of fancy grocery stores open and compete for rich customers. The competition is intense enough that it puts significant downward pressure on the price of expensive groceries. On the other hand, New Orleans is a comparatively poor city, so you’ll see proportionately fewer fancy grocery stores open. They don’t have to compete as hard for rich customers, so that downward pressure on prices isn’t as great as it would be in NYC. Thus, rich New Yorkers have a lower grocery bill than rich New Orleanians. This is the explanation offered by the author and researcher on page one of the article.

Now on to the second statistic: “a household earning $15,000 a year faces approximately 20 percent higher grocery costs in cities with relatively high per-capita income.” I assume that this is in comparison to poor households in relatively poor cities (the author doesn’t go into as much detail with this statistic, which is a bit disappointing). There are several possible explanations for this, but let me give you the simplest one I can think of– which is essentially the same as the explanation for the first statistic. Watch this:

Because New Orleans is such a poor city, a lot of inexpensive grocery stores open and compete for poor customers. The competition is intense enough that it puts significant downward pressure on the price of inexpensive groceries. On the other hand, NYC is a comparatively rich city, so you’ll see proportionately fewer inexpensive grocery stores open. They don’t have to compete as hard for poor customers, so that downward pressure on prices isn’t as great as it would be in New Orleans. Thus, poor New Orleanians have a lower grocery bill than poor New Yorkers.

Now go back to the boldfaced part of your email. You didn’t miss the “something obvious” that helps explain it– rather, you typed the “something obvious” and then ignored it. On average, the rich and the poor buy different groceries (you acknowledged this at first) and on average, they go to different stores. That plus understanding competition plus understanding that different income groups are different sizes in different cities equals a plausible explanation for the simultaneous coexistence of these statistics.

You said “there are only so many grocery chains to choose from”. [Note my use of logical quotation.] This is true, but remember, “only so many” is relative. In NYC, there are relatively many rich groceries to choose from. That’s good for the rich consumer. In New Orleans, there are relatively few rich groceries to choose from. That’s bad for the rich consumer. That explains the cost disparity facing rich folks.

On the flip side, in NYC, there are relatively few inexpensive groceries to choose from. That’s bad for the poor consumer. In New Orleans, there are relatively many inexpensive groceries to choose from. That’s good for the poor consumer. That explains the cost disparity facing poor folks.

I hope this helps.

Catsup.

Here are some brief responses to recent questions from anonymous readers. I may expand my responses one day.

1. “Personal Question! What meaning does your religion (or philosophy) hold for you and how does it impact how you live day to day?”

It generally keeps me from having other gods, making graven images, taking the Lord’s name in vain, forgetting the Sabbath, dishonoring my parents, committing murder, committing adultery, stealing, bearing false witness, and coveting my neighbor’s stuff. Generally.

I abide by the Golden Rule as much as possible. I figure since, in some form or other, it shows up in virtually every religion and philosophy and in game theory (read The Evolution of Cooperation), it’s pretty solid.

As an aside, the book of The Good Book that has most influenced me is Job. Here’s the short version: God can do whatever He wants, whenever He wants, to whomever He wants, and doesn’t have to answer to anyone… because He’s God. You don’t get to argue about things like goodness, justice, mercy, or fairness with the guy who invented them. Don’t like it? Tough noogie. If God exists, then this is incontrovertible.

For similar reasons, I also like the parable of the laborers in the vineyard (Matthew 20), but probably more for its commentary on property and exchange than its commentary on getting into Heaven.

We are owed nothing by God, by God. You can substitute “the universe” or “fate” for God if you’d like, but it still holds. If you happen to get good stuff thrown at you, just be grateful.

2. “…[I] was wondering what your opinion is on the legalization/decriminalization of Marijuana; the Constitution and the Amendments to the Constitution, as well as the founding father’s views on Cannabis, seem to point to the states being allowed to legalize/ decriminalize marijuana, but the presidents over the last few decades have been heavily against marijuana (The War on Drugs).”

I think that the federal prohibition of marijuana should end, and that the states should legalize, criminalize, and/or regulate it as they see fit. If a constitutional amendment was necessary to prohibit the manufacture, sale, and transportation of alcohol throughout the entire country, then it seems to follow that a constitutional amendment would be necessary to similarly restrict any other ingestible substance throughout the entire country.

That said, I have little patience for stoners. They deserve to be eaten.

3. “Would you rather fight 100 duck sized horses, or one horse sized duck and why? This question should be on one of your questionnaires.”

This is a stupid question.

4. “You should write a blog post about gay marriage. The issue has been slowly shifting in favor of gay marriage. How long do you think it will be before it is legal in all states?”

Eight hundred years, tops.

5. “On January 15th, in a post named ‘On Austrian Economics’ you said, ‘A more interesting question (not that Austria vs. Keynes is uninteresting) would have been whether I favor the Austrian/Vienna school or the Chicago school. I’d need time to ponder that one, preferably whilst eating a Chicago-style Vienna Beef hot dog. I just discovered Let’s Nosh down on San Jose this weekend, so my mind’s wandering thataway right now.’ I was curious as to whether your pondering has led you to a preference yet.”

It has. The Chicago-style dogs and Italian roast beef sandwiches at Let’s Nosh are far superior to those at Carmine’s. The key is that Nosh has the right ingredients: the right brands of beef (Vienna), the right toppings, the right type of bread, and so on. Carmine’s (in Riverside) definitely has the best Chicago-style pizza in the city, but their beef sandwiches are mediocre. Not enough beef, the bread’s wrong, they can’t pronounce giardiniera, the gravy isn’t right… I don’t want to think about it anymore.

Answers about majoring in econ.

I contacted four of my former students regarding the questions in the previous post. Here’s what I sent them:

“A few of my students have asked about majoring in economics (what sort of careers are open to them, what sort of coursework does it entail, what sort of master’s work can it lead to, what would be an ideal minor, what if I’m not so good at math, blah blah blah). I gave them some answers, and offered to put them in touch with former students of mine who’ve majored in econ. That’s you. May I give them your email/facebook address? Or would you mind answering some of the above questions so I can pass the info along?”

And here are their responses so far:

From Former Student 1:

yeah id be happy to help them out! feel free to have them email me […] as for those questions, ill try to give general answers: Careers – Usually it depends on degree level and program. Most of the econ majors I know have gone into a variety of business positions (management, marketing, etc). The finance industry is very receptive of bachelors in econ grads. A masters and PhD degree open you up to a variety of economist positions and research analyst positions. Econ course work is becoming more mathematical, especially with new models being developed after the recession. Course work is broken down my macro, micro and mathematical econ (econometrics, math econ etc). I was terrible at math, but now I really enjoy it so im sure if a student isnt good at math, they can learn the skills (especially since its put in the econ setting which is exciting). as for the ideal minor, that usually depends on the individual’s preference. Some do political science, some statistics, some finance. It all depends on where you want to be after the program. And tell them theyre making an awesome decision if they major in economics, yet as a grad student preparing for a final tomorrow, it requires some sleepless nights, being considered the nerd on campus, and studying on Friday nights.

From Former Student 2:

Definitely! […] I’ve written some answers to some of those questions before, I’ll forward that along when I find it. Honestly, after all of my classes so far, if they want to become an economist, majoring in math and computer science is much more useful than a major in econ. A minor in econ would suffice as long as you read stuff on the side. But the most useful classes to what I’m working on currently are probability, linear algebra, and micro theory.

Forwarded answer from Former Student 2:

The following responses are more geared towards the students interested in an econ Ph.D. program and careers that result from that.

A little bit about me (so you can see my biases): Currently a Junior at [some lame university that isn’t Clemson] majoring in Mathematics and Economics with a minor in History. I started as a History and Business Econ major, after working as a research assistant (RA) and taking more math, I decided to try and become an academic and my goal is to get an economics professorship at a research university. I work as a research assistant and an undergrad TA.

Careers : What can’t be a career? You can do anything with economics. I think it’s an excellent door opener. I know people who currently work as: actuaries, investment bankers, working on econ Ph.D., and a transfer agent. Research economist, you get to become a complete expert in your niche, you’re always learning higher level stuff, the downsides include long hours, working in isolation (even when you’re part of a research group), and you need a high tolerance for setbacks and rejection.

Coursework (personally, I believe that the following list of courses will open the most doors. The following should allow you to pursue graduate level econ, grad work in any other social science, make you a very attractive job applicant, and teach you to “think like an economist.”):

  • Principles, Intermediate, and Advanced Microeconomic Theory (some schools call it Price Theory)
  • Principles and Intermediate Macroeconomic Theory. Feel free to take more macro courses if you wish, but since macro varies so much from school to school, what you learn in undergrad may very well be the polar opposite of what you end up using.
  • Econometrics
  • Game Theory
  • Math: Bare minimum: Calc I-III (don’t take business calc, I can tell you more about this if you wish since I’m a business calc TA.), linear algebra, intro to proofs, probability, statistics
  • If you want econ grad school, take the above and these: real analysis (this is the big one, if you had to take a class that wasn’t already listed above, take real analysis!!!), topology , differential equations (this stuff is trivial, it’s not necessary per se, but important enough to get mentioned) http://www.urch.com/forums/phd-economics/
  • Try not to take “Mathematical Economics,” I hear these courses tend to be watered down mathematics. See http://gregmankiw.blogspot.com/2006/05/which-math-courses.html
  • If you want law school, take the “Law and Econ” elective and ask some professors or your academic advisor about a pre-law track for econ.
  • Any class you find interesting! I believe that you should take a class with professors who are experts in their fields, ones that know what they’re doing. You can pick up a lot of stuff on your own, you can do that whenever. But you won’t have another chance to take a class with Professor XYZ if you pass up the opportunity. Plus it could lead to extremely valuable career advice and mentoring.
  • If you’re considering applied economics or economics, take some computer science courses. I don’t really have any advice on that since I haven’t taken any and everyone I know learned it on their own (they, like me, figured out that comp sci is needed for econ too late). But something on data mining, programming, and software would be helpful.

Master’s work: I personally know/have heard of students who have gone into: econ, math, computer science, physics, history, political science, public policy, law, Russian, accounting, international business, and finance.
Econ is extremely versatile.

Ideal minor: Math, Computer Science, or Econ.

What if I’m not good at math? Allow me to refer you to what I’ve been referred to several times:

Now some advice and a personal story. At Paxon I hated math and science; I was convinced I couldn’t differentiate even the most basic equations. I can pin-point the exact moment at Paxon that made me despise math (it was in Algebra II). But now, I love it! I took business calc my first semester at [some lame university that isn’t Clemson], when I was told I needed real math to become an economist I was scared. But there was no other route. Luckily my Calc 1 professor hated teaching undergrad so she made the class extremely difficult (no other Calc 1 prof wanted students to write proofs on exams!) and I saw what higher level math was like and I love it.

What I’m trying to say is that you’re probably not “not good at math,” you’re just approaching it with the wrong attitude and inefficient study habits. It’s not entirely how many hours you put into studying; it’s about how you spend those hours. Don’t be afraid to fail!

Let me close with a quote from John Maynard Keynes:

“… the master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher–in some degree.  He must understand symbols and speak in words.  He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought.  He must study the present in the light of the past for the purposes of the future.  No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.”

From Former Student 3:

I’d be happy to answer those questions! […] There are a lot of careers open to Econ majors, depending on what you want to do. Yo can use it as a foundation for international relations, politics, law school – which is what I’m doing – and go in with an understanding of why and how the country runs the way it does and how the economy is so integrated with legislation. You can go on to graduate school in economics and end up doing research; I know someone who is getting a PhD in Economics, and is just doing studies with his professors, some of his recent work relates to the effects of incarceration crime rates on the economy, and the wealth gap. You can also teach, at whatever level. And economics is just knowledge that is useful always, regardless of the field you end up in. The coursework at [some other lame university that isn’t Clemson] is all I can talk about with any confidence in what I’m saying. You need to take Principles of Micro and Macro (which can be covered with AP Micro and AP Macro), Intermediate Micro and Macro – neither of which are that difficult, but that could be because I enjoy what I’m learning. And then you need to take upper division electives to complete the major requirements. There are a lot of opportunities for research or volunteering to help professors here with their research, which doesn’t necessarily have to be in Economics. A minor with Economics could be Business, or you can double major with Economics pretty easily. And it’s not that math intensive, though you will basic calculus. […] I hope what I’ve written has answered the questions, somehow at least. I hope I’ve helped at least a little!

This is why I teach: so others will write my blog posts for me.