Thursday, September 24, 2009

The Marshmellow Test

A lesson on hyperbolic preferences.

New Yorker had an article about it here!

So, if you're computer has no sound, don't worry. Basically, a woman tells these children that they can eat the 1st marshmellow right away, OR they can wait until she comes back and receive a 2nd marshmellow. She then leaves for a very long time...

The boy in grey shirt (the one who does NOT display hyperbolic preferences) is SOOO CUTE from 2:46-2:53. OMGAHHH. SO FUNNY. I DIE.

Saturday, September 19, 2009


I finally have some time to blog! These past two weeks have been crazy. By the end of this week, I will have been on a bus/car for a total of 27 hours...
I picked out my apartment in Pentagon City and it's going to be awesome! It's pretty much across the street from the Pentagon City mall, Pentagon City metro station, Costco and a Mr. Smoothie. What more could a girl who does not drive ask for? Maybe a puppy...

Anyway, I linked you guys to Jenn's blog earlier. She wrote an awesome post about Chavez's impact on Venezuela. As promised, here is my post on expropriation and social institutions. (I promised Jenn it would be meaty...)

In ECON 333, we studied a paper called, "Why do some countries produce so much more output per worker than others?" by Robert E. Hall and Charles I. Jones. In this paper, Hall and Jones hypothesize that output per worker is affected by differences in social infrastructure across countries. They assume that social infrastructure is determined historically by location and other factors captured in part by language.

So, what exactly is "social infrastructure?" Unfortunately, social infrastructure is not easily quantifiable. However, Hall and Jones think that "the ideal measure of social infrastructure would quantify the wedge between the private return to productive activities and the social return to such activities. A good social infrastructure ensures that these returns are kept closely in line across the range of activities in an economy." Good social infrastructure protects people against "diversion." Diversion includes things like expropriation, corruption, etc.

Not surprisingly, Hall and Jones find that:
1) Differences in social infrastructure across countries cause large differences in capital accumulation, educational attainment, and productivity, and therefore large differences in income across countries.

One might argue that there is a feedback effect from output per worker to social infrastructure (i.e. high output per worker may lead to the creation of better social infrastructure). However, Hall and Jones control for this feedback by using instrumental variables.* This is explained in their last finding:
"The extent to which different countries have adopted different social infrastructures is partially related to the extent to which they have been influenced by Western Europe. Using distance from the equator and language data, we conclude that our finding that differences in social infrastructure cause large differences in income is robust to measurement error and endogeneity concerns."

Basically, Hall and Jones are saying that countries that have been influenced by Western Europe tend to have better social infrastructure and higher output per capita. They study a sample of 127 countries and give a nice table of different countries' productivity levels as ratios to U.S. values.

Here are some figures:
Canada: 0.941
India: 0.086
The average for 127 countries was 0.296 w/a standard deviation of 0.268.

Why is the quality of social infrastructure so different across countries? (UGH, my mom just pulled a white hair out of my head as I was typing...WTF. THAT HURT.)

Anyway, there are several theories that address the above question, but I think I'm going to need another blog post to write about Acemoglu, Johnson & Robinson, and Engerman & Sokoloff...

* Instrumental Variable:
Let's say we want to find the effect of "x" on "y." However, "x" is not quantifiable. So, we create an instrumental variable, "z," which is quantifiable. "z" affects "y" ONLY through "x." A bad instrumental variable affects "y" through other pathways.
For example,
x = total number of hours of TV watched
y = prevalence of autism in a city
z = amount of rainfall in that city

If we had no way of measuring the number of hours of TV watched in a city, but wanted to study its effect on the prevalence of autism, we could create instrumental variable "z," which is the amount of rainfall in that city.

More rain --> More kids stay indoors and watch TV --> higher prevalence of autism(?)

However, "z" is not a very good instrumental variable because you can make a pathway like this:

More rain --> More kids wear raincoats --> higher prevalence of autism(?)

Does all of that make sense?

OMGSHHH. I'm going to die laughing. I'm watching FRIENDS DVDs and my dad says, "Why do these people never look older? They're still so young!" I told him I was watching DVDs, and he said, "Oh okay. So they're old now, right?" Haha. LOVES IT.

Wednesday, September 9, 2009

Succexy (Like the song by Metric!)

I am no longer frictionally unemployed! YAYAYAYAY!

Thanks so so so much to friends who have helped me along the way! Could NOT have done it without you. I <3 you!!!

I'll be working at Georgetown Law/thinking about going to law school because it will be FREE.

Here is the awesome Professor with whom I will be working: John H. Jackon
I'll have a chance to go to his International Economic Law seminars/classes. YAY! I'm SUPER EXCITED.


Please visit me in D.C. PLEASE?!


Tuesday, September 8, 2009

The Middle Finger of the South.

Hi! So I started writing this over the summer, but got distracted. Enjoy!

The Economist (a while ago): "Morton Marcus, a prominent local economist, calls [Indiana] 'the middle finger of the South thrust into the North.'"

Indiana is a rather dichotomous state. On July 21 and 22, the Indiana Office of Energy Development hosted an event called WIndiana. The conference focused on wind farming in Indiana, and according to the American Wind and Energy Association, "Indiana leads the nation in the growth of wind energy." On May 29th, Indiana celebrated the construction of Fowler Ridge Wind Farm, which will eventually produce 750 MW of wind energy (enough to power ~200,000 homes). However, only 2 out of 5 Dems in Indiana voted in favor of the climate change bill. The climate change bill is pretty flawed, but these Dems didn't oppose the climate change bill because of the $600 billion in forgone revenue (free permits vs. auctioned permits). They opposed the bill because they believed that stricter energy standards in Indiana would translate into a loss of jobs.

Indiana ranks 3rd in per capita consumption of coal (10.45 tons per year in 2007-2008) and approximately 94% of its electricity comes from coal. U.S. Rep. Joe Donnelly opposed the clean energy bill because he believed that Indiana's manufacturing sector would no longer be able to compete with those of China and India if stricter clean energy standards were imposed. In the face of such difficult times, the American Coalition for Clean Coal Electricity created this fabulous ad. I remember first hearing about this on Wait Wait...Don't Tell Me! Oh, such wonderful things I learn from Peter Sagal and Carl Kassel!

Anyway, I think America needs to quit whining/blaming foreign competition and up its game. Also, I think it's ironic that poorer countries are most adamantly opposed to clean energy standards even though they will be hit the hardest by climate change. Although, their opposition is more understandable. If you have to choose between food in your stomach and clean air in your lungs, you're going to choose food. Lunch time! Peace out!

Also, I'm going to post about expropriation/nationalization next. And I think you should all read Jenn's post about Chavez to prepare yourselves!

Wednesday, September 2, 2009


Hi everyone! These past two weeks have been absolutely crazy, so I haven't had a chance to blog much...

However, a few tidbits from the news:
Taxpayers are realizing profits as big banks repay their loans. This article reminded me of the Resolution Trust Corporation from the S&L crisis.

The WTO ruled that the U.S. would face ~$300 million in annual sanctions as a result of illegal subsidies to U.S. cotton growers. WP article here. Hrm...does this remind anyone else of corn subsidies?! Corn subsidies and sugar tariffs also make it impossible for Brazil to export sugar cane based ethanol, which is more environmentally friendly than corn based ethanol. Boo. I imagine Professor Johnson shaking his fists angrily as he tells his students this...

Paul Krugman's reaction to Greg Mankiw's post on SAT scores here. I guess even grown ups have frienemies...haha.

Pieces on health care from Free Exchange and WP.

Going to meet Chanda for bubble tea now! She is leaving for Peking University tomorrow. I am 80% excited, and 20% sad. Chanda, NY will miss you! That's right. ALL OF NEW YORK WILL MISS YOU, ESPECIALLY ME!