Explaining the plummeting gas prices

My latest Rappler article (after a 9-month hiatus) seems to be a hit!

Post by Rappler.

Harsh conditions in Apple's supply chain

A perfect illustration of the difficulties of transitioning from agriculture to industry/manufacturing.

Link fiesta (12.15.14)

1. OECD: inequality curbs growth. (here, here, here, here)
2. "Debate" among top econ journals seems to have peaked in the 1960s and have been falling ever since. (link)
3. Behavioral economics among development economists. (link)
4. Decomposing TFP into consumption TFP and investment TFP. (link)
5. It seems many economists don't clean up their code. (link)
6. A history of the error term in TS econometrics. (link)
7. Compilation of latest research on the minimum wage. (link)
8. Uber updates. (link)
9. On the limits of cross-country regressions. (link)
10. Oil prices as an indicator of global economic conditions. (link)
1. "...of the observed 45% decline in the price of oil, 19 percentage points– more than 2/5– might be reflecting new indications of weakness in the global economy."
2. The latest on US oil production. (link, link)

2014 Nobel lecture of Jean Tirole

Link fiesta (12.8.14)

1. Some claim that by end of 2014 China will be the largest economy in the world (i.e., in PPP terms). Time to rewrite the textbooks, yet again? (link)
2. Quick tips on making research presentations. (link)
3. "Christmas economics: a sleigh ride". (link)
4. New book on the economics of causality (brought to you by the authors of Mostly Harmless Econometrics). (link)
5. Amy Finkelstein's new book on moral hazard in the insurance industry. (link)
6. Ronald Coase's impact on economics. (link)
7. Creative destruction at work: how video stores survive in the age of Netflix. (link)
8. How technology can reduce income inequality in the future. (link)
9. The median household income in the US is declining, due to demographics changes and the decline in work hours per household. (link)
10. The US has surpassed Saudi's oil production in the past 22 months. (link)
11. The US divorce rate has also been declining. (link)
12. PhD comics: How profs spend their time.
13. Secular stagnation in the US. (link, link)
14. Because of competition from Uber, medallion prices in NYC are declining. (link)

I drafted this speech!

Sec. Balisacan's keynote message at the Angara Centre-Metrobank Fdn. Roundtable Discussion on the ASEAN Integration http://t.co/6MvYzlm2qi
— NEDA Central Office (@NEDAhq) December 5, 2014

Link fiesta (12.4.14)

1. World Bank on the economic impact of Ebola. (link)
1. Hans Rosling takes on Ebola in Liberia. (link)
2. Is blogging/tweeting about research papers worth it? (link)
3. Capuchin monkeys are not fooled by Veblen goods. (link)
4. How the West is winning the war against teen pregnancies: 
1. "...the declines are not due to teenagers having less sex. As in the US, the improvement appears to be related to more widespread use of contraceptives, which Ingham says is due to better sex education in schools". (link)
5. Sociologists vs. economists, redux: 
1. "Sociologists are fighting what they perceive to be an intellectual battle against economists over whose description of social phenomena - discrimination, family life, etc. etc. - is going to be accepted by society. And it is asymmetric warfare. Sociologists, by (sometimes) continuing to use the tools of literary "critical theory", have brought a nerf gun to a tank fight. We live in a quantitative, data-driven age..." (link)
6. Troubling graph of the day: a flattening of TFP or mismeasurement problems? (link)

Link fiesta (12.3.14)

1. Sexual divide in technological unemployment: "So, while men were increasing their leisure, women were increasing their market work. Combining men and women, you would not see a decline in market work." (link)
2. Behavioral political economy. (link)
3. Political economy of Bitcoin. (link)
4. The superiority of economists: "Taken together, these traits constitute what we call the superiority of economists, where economists’ objective supremacy is intimately linked with their subjective sense of authority and entitlement." (link)
1. Even more: "According to the authors, economists see themselves at the top of the social science disciplinary hierarchy given their view of other social science disciplines as having less powerful analytical tools, their role in public policy debate and discourse and the fact that they command some of the highest levels of compensation particularly in American arts and science faculties. Economics emphasizes quantitative reasoning (interpreted as a sign of higher intellectual capabilities), is male dominated and rather insular in its relationship with the other social sciences. Indeed, according to the authors, it is the rise of the field of finance and business school connections that are the main purveyors of ‘interdisciplinary’ references for economics." (link)
5. Economics of Seinfeld. (link)
6. Dr. Albert: The costs and benefits of Pantawid Pamilya. (Rappler)

UPSE 50th Anniversary Promo

One word: OMG.

Who pays for the US gov't?

Apparently the richest quintile. (Link.)

Link fiesta (12.1.14)

1. The economics of rape. (Here and here.) Excerpt from abstract: "By disrupting income or reducing earning power, all of these employment consequences have implications for survivors' economic well-being in the months or years following the assault. In addition, I argue that for many survivors, these employment consequences compound one another and ultimately shift survivors' long-term economic trajectories."
2. Reversal of the latitude and per-capita income relationship over time. (Here and here.)
3. Lazy grad students. (Link.)
4. A critique of academic tenure. (Link.)
5. "I'm with stupid (voters)." (Link.)
6. "Big ideas are destroying international development." (Link.)
7. Does crime increase on NFL game days? (Link.) 
8. Citations in economic fields. (Link.)
9. More on #GruberGate. (Link.)

Highest-paying jobs in the Philippines (as of July 2012)

Top 20 occupations shown below. Based on the July 2012 Occupational Wage Survey of the DOLE. Be mindful of the methodology used.

Discontinuity in the unemployment rate series

By virtue of NSCB Resolution No. 15, series of 2004, a new definition of unemployment was adopted by the Philippine statistical system. Prior to this change, a person was considered unemployed if he basically satisfied 2 criteria:

1. Without work; and
2. Seeking work.

But starting the April 2005 LFS round, a third criterion was included so that the unemployed were those:

1. Without work;
2. Seeking work; and
3. Currently available for work (within the basic reference period or 2 weeks after the LFS interview date).

The inclusion of this availability criterion is in view of the desire to align the Philippine definition to international standards. As a result, this new definition removes the unemployment tag on those who are encountering temporary setbacks to availability due to, say, temporary illness, family responsibilities, or waiting for the school term to finish. They do not remain unavailable for too long, and soon enough they are back in the labor force. 

One problem arising from this is a discontinuity in the time series of unemployment starting April 2005. Specifically, there has been a reduction of the unemployment rate by as much as 2 percentage points, attributed to the definition change (Fig. 1). Some say that this time series disruption has prevented meaningful comparison of past and present unemployment.

Fig. 1. Source: PIDS database. Annual figures are the average of quarterly LFS rounds. Starting 2007, 2000-based population projections were used.

Albert [2014], however, shows a close correlation between the old and new time series (Fig. 2). 

Fig. 2. Source: Albert [2014].

End of the population pyramid

The population pyramid may soon be a thing of the past.

#GruberGate

MIT econ prof Jonathan Gruber in hot water!

Too meta

Xkcd:

Average, illustrated

(Global) negative externalities, illustrated

US income inequality, pre- and post-taxes

See here and here. Apparently the top (richest) quintile pays for most of federal taxes net of transfers.

Insightful graph of the day

Data shows that average growth in the last 4 years (2010-2013) has been the highest since 1979 or more than 3 decade ago! (Done while rushing Sec Arsi's keynote presentation.)

Source: PSA

Efficiency, illustrated

Dr Gruber, lies, and the policy process

A thought-provoking piece about the necessity of lying in policymaking:

http://keithhennessey.com/2014/11/10/honesty-about-lying/

Quotes:

When you strip away all the complexity, economic policy is ultimately an expression of elected officials making difficult value choices. If over time these officials make value choices that do not reflect the values of the people whom they represent, they can, should, and will be replaced. 

When these same elected officials, and those who advise them, deliberately construct policies to hide value choices that would be unpopular were they transparent and explicit, we end up with two terrible outcomes. We get policies that do not reflect our values, and we re-elect representatives who are lying to us.

Coase theorem, illustrated

Bayes' rule, illustrated

The animated GIF is quite fun to watch.
http://simplystatistics.org/2014/10/17/bayes-rule-in-a-gif/

Merle Hazard - "Dual Mandate"

One of mankind's greatest achievements

80% reduction in extreme poverty in the past 36 years.

New book by my bosses: Sustainable Econ Dev't

Shameless plug: the latest volume by 2 of my bosses, Sec. Arsi Balisacan and Prof. Majah Ravago, which also serves as a Festschrift to their mentor Prof. James Roumasset (Univ. of Hawaii). This book also contains in Chapter 24 the study on multidimensional poverty in the Phils. written by Sec. Arsi and research assisted by...me! 

http://www.econ.upd.edu.ph/wp-content/uploads/2014/10/Flyer-Sus-Dev-Oct14-edited.pdf

Exchange rate overshooting (4-panel diagram)

So Prof. Carlos of UPSE has published as a working paper her favorite 4-panel diagram of exchange rate overshooting, following the model by Dornbusch [1976]. This model holds a lot of undergrad memories for me back in 2008, since my drawing of it spread like wildfire in the class and beyond (as some alumni will attest to).

http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1468

Creative destruction, illustrated

Cheaper internet vs. net cafés. Cafés are still very popular (and important) in rural areas, as I witnessed in Tuguegarao City last Jan. 2014.

The economics of parenting styles

Source.

The latest on "Pikettymania"

Apparently, many other big-time economists aren't convinced.

Accuracy vs. precision, illustrated

Log vs. linear time series, illustrated

Also, incidentally, the significance of Bitcoin:
http://conversableeconomist.blogspot.com/2014/09/how-does-bitcoin-work.html

Necessities vs. luxuries, illustrated

http://conversableeconomist.blogspot.com/2014/10/spending-on-necessities-and-luxuries.html

#EconomicsInThreeWords

https://twitter.com/hashtag/economicsinthreewords?src=hash

Some of my faves include:

1. Employment for economists.
2. Ideology with charts.
3. Hard sciences envy.
4. Model trumps reality. 
5. MaxU(x) st whatevah.
6. Separating hyperplane theorem.
7. Twice sociologists' salaries.
8. Fourth rate mathematicians.
9. Often misses the target.
10. Works in theory.

Correlation vs. causation, illustrated

One doesn't necessarily lead to the other:
http://www.tylervigen.com/

C-grade traveler (so far)

Apparently my travel habits in the Ph leaves much to be desired... XD


My Lakbayan grade is C!

How much of the Philippines have you visited? Find out at Lakbayan!
Created by Eugene Villar.

10 most fatal jobs in the US

From Carpe Diem:

Link fiesta (on the econ profession; 8.6.14)

1. Economists dissing economics (quotes).
2. Top 10 funniest papers in economics. 
3. When do economists matter? Here and here. 
If economists are to succeed in influencing, and perhaps even improving, public policy then convincing the public along is crucial. How then can economists offer better advice? Confining themselves to technocratic advice is neither helpful nor likely. There are too many inherently political issues on which economists have valuable advice to give. But perhaps by framing their advice in a more technical manner, for example measuring the benefits of immigration, rather merely than advocating it, economists can ensure that their advice is more effective in the public arena.

Coase Theorem, illustrated

Don’t Want Me to Recline My Airline Seat? You Can Pay Me
By Josh Barro

I fly a lot. When I fly, I recline. I don’t feel guilty about it. And I’m going to keep doing it, unless you pay me to stop. 

I bring this up because of a dispute you may have heard about: On Sunday, a United Airlines flight from Newark to Denver made an unscheduled stop in Chicago to discharge two passengers who had a dispute over seat reclining. According to The Associated Press, a man in a middle seat installed the Knee Defender, a $21.95 device that keeps a seat upright, on the seatback in front of him. 

A flight attendant asked him to remove the device. He refused. The woman seated in front of him turned around and threw water at him. The pilot landed the plane and
booted both passengers off the flight.

Obviously, it’s improper to throw water at another passenger on a flight, even if he deserves it. But I’ve seen a distressing amount of sympathy for Mr. Knee Defender, who wasn’t just instigating a fight but usurping his fellow passenger’s property rights. When you buy an airline ticket, one of the things you’re buying is the right to use your seat’s reclining function. If this passenger so badly wanted the passenger in front of him not to recline, he should have paid her to give up that right.

If Magic Mirror knew statistics...

Poverty, illustrated

A distressing and humbling case study at Interaksyon.com:

PAANO BA MAGING SOBRANG POOR? | Toothpaste ay sabong panlaba, tela ang gamit kapag may regla

http://www.interaksyon.com/article/92339/paano-ba-maging-sobrang-poor--toothpaste-ay-sabong-panlaba-tela-ang-gamit-kapag-may-regla

Income inequality, illustrated

A rather powerful graph from Rappler.com. Though I prefer a more accurate histogram.

Economic modeling, illustrated

What makes a good economist?

Mankiw on the value of inherited wealth

Source:

Because of intergenerational altruism, they make their consumption and saving decisions based not only on their own needs but also on those of their descendants. Because of regression toward the mean, they expect their descendants to be less financially successful than they are. Hence, to smooth consumption across generations, they need to save some of their income so future generations can consume out of inherited wealth.

Anatomy of academic regalia

Mentorship and teaching

On Jim Buchanan:

While Jim Buchanan is known throughout the world for his scholarship, I hold him in particular esteem for showing me that the classroom could be a place of mutual learning where your position as instructor is one of primus inter pares and not one of an expert passing on knowledge to novices. Sure, Buchanan passed on knowledge, much of it, but he did so always in the context of searching for alternative ideas to articulate. If something has been written, a student can read it. Starting from that point of departure, the classroom is an arena for searching for new ideas to articulate.

Efficient markets, illustrated

Source: SMBC.

Why we should rethink intro to probability classes

Source: xkcd.

Mr. Poo's music video

Apparently part of a public campaign in India against public defecation. Will it work? (HT: Freakonomics.com)

Must-read: Think Like a Freak!

It has a different tone to Freakonomics and SuperFreakonomics, but I enjoyed it immensely (after one sitting tonight). The piece of advice on how to rise up to criticisms is particularly enjoyable, and I related a lot with the section on the upside of quitting (being a proud serial quitter myself).

Efficiency, illustrated

How a one-man team beat an entire bureaucracy in digitizing old newspapers in the US.

Gospels and the economics of networks

An illuminating documentary on the origins of the New Testament. Interestingly, this got me thinking about the economics of ideas, and how early Christian leaders chose which scripts/texts/books would make for an optimum "bundle" of gospels which would spread the message of Christianity most effectively. It was as if the Christian leaders were aiming to maximize the spread of the Christian message but had to choose carefully about which gospels to include and censor.

How could the framing of the Bible have affected the spread of the Christian message through social networks? This seems to me a potent candidate for economic research in the area of signalling and the economics of networks.

Gary Becker has died

Gary Becker, who was in my opinion the original Freakonomist, has died last Saturday (May 3, 2013). He was 83. 

His lectures at UChicago on Human Capital Theory are all uploaded on YouTube (link; kudos to the brilliant people who initiated this endeavor of immortalizing him for the appreciation of future generations). 

His blog with Richard Posner, however, is expected to be discontinued soon (both authors recently took a sabbatical, perhaps due to Becker's ill health). Nevertheless, his invaluable contributions to human capital theory (and economics in general) will surely live on. 

P.S. Becker's student and colleague Steven Levitt (modern day Freakonomist) wrote about his reminiscences about Becker, including this touching anecdote:

At various points in [Levitt's] career, I have been the target of intense criticism, often carried out in very prominent and public forums. During one of these periods, Gary summoned me to his office and asked me how I was doing. I told him I was doing fine, but the criticism was exhausting. He got a conspiratorial look on his face and he leaned in close to me and made a confession: “I never minded when people attacked me; I actually kind of liked it. You know what drove me crazy? When people ignored me. So as long as people are willing to spend the energy to attack you, you know you are doing something right.”

Sometimes I'm the subject of criticism myself. Thanks to some of my Rappler articles especially my most recent one on the proposed soda ban law. Sometimes the criticism can get intense, but this little anecdote about Becker raises my spirit and gives me courage to continue writing soon.

Wage differentials, illustrated

NBER working paper (link): Do labor market changes help explain the decline in interstate migration in the US?

Interstate migration has decreased steadily since the 1980s. We show that this trend is not primarily related to demographic and socioeconomic factors, but instead appears to be connected to a concurrent secular decline in labor market transitions. We explore a number of reasons for the declines in geographic and labor market transitions, and find the strongest support for explanations related to a decrease in the net benefit to changing employers. Our preferred interpretation is that the distribution of relevant outside offers has shifted in a way that has made labor market transitions, and thus geographic transitions, less desirable to workers.

Competition and prices, illustrated

NBER working paper (link): What does a randomized setup say about the link between competition and prices? (Apparently it's a first!)

This paper provides the first experimental evidence on the effect of increased competition on the prices and quality of goods. We rely on an intervention that randomized the entry of 61 retail firms (grocery stores) into 72 local markets in the context of a conditional cash transfer program that serves the poor in the Dominican Republic. Six months after the intervention, product prices in the treated districts had decreased by about 6%, while product quality and service quality had not changed. Using a theoretical model, we arrive at the conclusion that the poor segments of the population in these markets care the most about prices and much less about quality. Our results are also informative to the design of social policies. They suggest that policymakers should pay attention to supply conditions even when the policies in question will only affect the demand side of the market.

Incentive compatibility, illustrated

Matthew Gentzkow: 2014 John Bates Clark Medalist

Economist Matthew Gentzkow has just won the 2014 John Bates Clark Medal, awarded annually by the American Economic Association to the best American economist under age 40. (Citation here.)

Graduation speech, econ style

In 2007 Nobel laureate Thomas Sargent delivered a graduation speech at UC Berkeley all in under 2 minutes (full text below). Rather erudite, but talk about economy of words!

I remember how happy I felt when I graduated from Berkeley many years ago. But I thought the graduation speeches were long. I will economize on words. 

Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches. 

1. Many things that are desirable are not feasible. 

2. Individuals and communities face trade-offs. 

3. Other people have more information about their abilities, their efforts, and their preferences than you do. 

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended. 

5. There are tradeoffs between equality and efficiency. 

6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse. 

7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation. 

8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made. 

9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore). 

10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation. 

11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves). 

12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates.

P.S. (4/21/14) Chris Dillows alternative 12 principles of economics.

I particularly liked principle #4: "Luck matters. The R-squareds in Mincer equations are generally low." He elaborates: "Where you were born. I'm rich because I was born in England, not Ethiopia. Herbert Simon estimated that at least 90% (pdf) of the incomes of western individuals are due to this fortune of birth." So true, yet I feel this is understudied.

4Ps and Yolanda

Prepared by colleagues at the Bank:

The importance of survey comparability

The US Census Bureau is reportedly overhauling the questionnaire and methodology of its annual survey on health insurance, possibly making old and new data incomparable. Moreover, the changes might make it virtually impossible to assess the impact of the Obama administration's new Affordable Care Act (link):

With the new questions, “it is likely that the Census Bureau will decide that there is a break in series for the health insurance estimates,” says another agency document describing the changes. This “break in trend” will complicate efforts to trace the impact of the Affordable Care Act, it said.

Survey comparability is incidentally an issue that beleaguers our own statistical system, especially where poverty and unemployment data are concerned. While survey updates are usually justified as an effort to adhere to international standards and best practices, there is a case for conducting the same survey using old methods if only to retain the comparability of data over time, especially for purposes of policy analysis and reforms.

Economics for high school: are we missing the mark?

Prof. Noel de Dios makes a case for revamping economics education at the high school level (link):

In lieu of computing elasticities and slopes of curves, an age-appropriate program for economic and financial literacy ought to deal with more existential questions such as: what young people can expect to earn from careers based on their life-goals, skills, and achievements; why prudent budgeting and prioritization of expenses matters and what it entails; the crucial importance of planning a financial future and the role of saving; the responsible use of borrowing and credit; rules for wise financial investment (including how to avoid getting ripped off); and the various uses and options for insurance (medical, life and accident, retirement).