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What would the House of Commons look like under a Liberal-NDP merger? June 20, 2010

Posted by tomflesher in Academia, Canada.
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It’s been a while since I did any Canadian politics ranting.

Coalition government and/or a left-wing merger in Canada is all the rage at the Globe and Mail, with a Globe and Mail editorial discussing the ramifications of a shift left, Jeffrey Simpson arguing that the whole thing is a stupid idea, and Neil Reynolds talking about the Whigs for no good reason. The arguments on all sides contemplate a merger or coalition of the Liberals and the New Democratic Party, which is the most logical assumption considering that the Greens are nonviable nationally (although I did enjoy discussing the “hypothetical Mango Coalition” that could result from the 2008 election if the red, orange, and green parties joined up).

I’m interested in the effect of a merger, so I’m going to make some assumptions, not all of which are warranted:

  • The Bloc Québecois is not party to any coalition. BQ voters will always vote for the BQ. (This is probably the weakest assumption, since the BQ actively campaigns for votes and almost certainly won marginal candidates.)
  • The Green Party is not party to any coalition. Green voters will always vote for the Greens. (Again, this is a fairly weak assumption and I might examine the hypothetical Mango Coalition in a later post, but they’re not considered relevant by the editorialists so I’ll ignore them. However, they would have made quite a difference in the model below.)
  • Ridings won with a majority by any party remain with that party.
  • A riding won with a plurality by a Liberal or NDP candidate would remain with the merged party regardless of the current vote split.
  • A riding won with a plurality by a Conservative or BQ candidate needs to be reconsidered. I’ll do so by assuming that 66% of the NDP vote goes to the merged party and the other 34% evaporates (to model voters being displeased by a perceived shift to the middle and staying home). Based on those numbers, the party with a plurality takes the seat.

There were some surprising results. The Liberal-NDP merged party ended up poaching 24 seats in total, including 17 from the Conservatives and 7 from the Bloc Québecois. In total, that puts the parties at:Pie chart of the House of Commons under a hypothetical merger

  • Liberal Democrats: 137 seats
  • Conservatives: 127 seats
  • Bloc Québecois: 41 seats
  • Independent: 3 seats

This puts a different spin on the current House. However, we must take into account the Bloc’s behavior. After the 2008 election, there was discussion of a Liberal-NDP-Bloc coalition government. However, it is not in the Bloc’s interest to form a coalition, since the Grits’ position on Québec sovereignty is not compatible with the Bloc’s. As a result, we must consider this a non-coalition government – a majority run by the Grits.

It’s difficult to imagine this situation as being much better for the Grits. Dion would have run a minority government, but as a weak leader he likely would have been forced into an election some time between October 2008 and now. Ignatieff would still have been waiting in the wings to take over the leadership of the party in the ensuing chaos.

A merger is not a panacea.

Review: Soccernomics April 2, 2010

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Soccernomics (Simon Kuper and Stefan Szymanski) – $9.99 (Kindle edition)
Overall: **** (out of five)
Recommendation: Buy

One of the first books I read with the intent of understanding the quantitative basis for it was Moneyball by Michael Lewis. Regardless of what I write on my résumé, my research interests in mechanism design, industrial organization, and price theory take a back seat to sports economics (as this blog’s faithful readers, if any, know).

For that reason, while I don’t know much about soccer, I had to read Soccernomics. The book is arranged much like Freakonomics, right down to the cover design, and takes on the format of devoting individual chapters to interesting research questions. It differs, however, in that it also devotes chapters to telling stories about game changers as opposed to analyzing data. There are numerous subchapters that follow Moneyball‘s familiar narrative format focusing on a charismatic individual as a lens through which the economics can be viewed. For example, the discussion on Guus Hiddink is a fascinating palate-cleanser that puts the authors’ theory into action rather than relying solely on the data to tell the story.

The data are, however, the backbone of Soccernomics. The authors include descriptions of their statistical techniques at a level appropriate for the non-technical reader without being frustratingly simplistic. One chapter analyzes the data on world power too deeply (yes, there is such a thing!) but comes to interesting conclusions that justify the deep discussion of world-level finishes in multiple sports.

The book tells interesting stories and is clear enough that even I could understand it despite knowing nothing about soccer (although the repeated references to ‘bottle’ still don’t make any sense to me). I would have like a technical appendix of some sort to show some of their regression results more clearly, but as it stands this is an excellent book for the technical or nontechnical reader.

Immigration and US Science PhDs March 25, 2010

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On March 21, Thomas L. Friedman published an editorial in the New York Times in which he discussed the effect of legal immigration on the supply of knowledge in the United States. Friedman demonstrated that effect by citing the proportion of recent immigrant families in this year’s Intel Talent Search.

Today, the Times published several letters in response, including one from Stuart Taylor of Los Angeles. Dr. Taylor’s letter, the second on this page, argues that the oversupply of scientists created by open immigration policy has negative effects on the United States because it leads to American scientists facing too-stiff competition for employment. Specifically,

Without stricter immigration policies, the oversupply of Ph.D.’s just gets worse and worse, with the result that in some fields immigrants are being given a large fraction of the jobs. These are science jobs that Americans want, are applying for and are being turned away from.

Wisely, Dr. Taylor does not argue that the large proportion of immigrant scientists has a negative effect on productivity in science. Rather, he argues that “It is harmful to trumpet the rest of the world’s students who are being given our jobs as “America’s Real Dream Team.”” His argument contains the assumption that given the choice between an American scientist and an immigrant scientist, there is some inherent good in favoring the American. He does not explicitly consider the possibility that the large fraction of jobs given to immigrant scientists are given to them because they are better prepared for those jobs than Americans are. Dr. Taylor would do well to consider the effects of his suggested policy of stricter immigration standards on productivity in fields employing PhD scientists. It seems evident to me that since employers are self-interested, they are employing the scientists they expect to be most productive, and as a result, the open supply of scientists from abroad leads to a net positive effect on the science produced in the United States.

Dr. Taylor does, however, mention an item of concern: the oversupply of PhDs in the current job market. This oversupply is generally attributed to one of two causes:

  1. Standards for granting a PhD are too lax, and the degree is losing its signaling value;
  2. Non-economic concerns lead students to pursue PhDs which are not necessary for their careers, leading to a glut of qualified applicants.

There is essentially no economic solution to situation (2). The solution to (1) would of course have to involve aligning incentives such that fewer PhDs are granted, but such a solution would be unpalatable and would likely have the effect of tightening admissions as well as graduation. As a result, fewer candidates who are not predicted to be highly successful would be given the chance to work toward a doctorate, and since predicting academic success is an imperfect process, it stands to reason that fewer brilliant scientists would be produced.

Instead, the solution to the oversupply of science PhDs is probably one that allows profit to be derived from them. Dr. Taylor should instead be arguing for incentives to run independent research and development labs, in order to put additional resources (i.e., unemployed scientists) to use. These incentives might take the form of tax credits or even more robust outsourcing on the part of major corporations similar to the X Prize model. After all, even a marginal PhD still has rigorous training in research methods and would present a benefit to a development lab.

Review: The Invisible Hook March 19, 2010

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The Invisible Hook (Peter Leeson) – $14.82 (Kindle edition)
Overall: *** (out of five)
Recommendation: Buy, with caveat

The Invisible Hook is a fine little pop economics book by University of Chicago Visiting Assistant Professor of Economics Peter Leeson. It follows the format of many other pop econ books, such as The Economic Naturalist, Naked Economics, and More Sex Is Safer Sex in that it asks questions about topics superficially unrelated to economics but analyzes the answers using economics as a lens. Each chapter tackles a different idea, with a title and subtitle of the format “Pirate Pun: The Economics of ______.” Chapter 6, for example, is entitled, “Pressing Pegleg: The Economics of Pirate Conscription.”

From an economic standpoint, Dr. Leeson is quite adept at explaining why seemingly counterintuitive behavior is in fact justified by economic logic. For example, Chapter 7, “Equal Pay For Equal Prey: The Economics of Pirate Tolerance” deals intelligently with the reasons why pirates often treated black shipmates as full equals rather than slaves, as for-profit ships generally would have. Using the standard rational choice framework, Dr. Leeson ably analyzes the possible actions of pirates and determines the differing results. Through the usual assumptions (mostly that people are self-interested utility maximizers), Dr. Leeson paints a picture of pirates as self-interested men who, in the interest of protecting their own ability to earn, stumbled on one of the most efficient systems of political economy available to them.

The book does have its warts, however. One minor irritation is that the chapters all take a keyhole-essay format – they begin with an introduction, then expose and analyze that material, finally concluding with a summary. As a result, Dr. Leeson’s book appears to repeat the same information at least three times in short order; this format is unusual in the pop economics literature and can seem simplistic at times.

Another quibble is not really a quibble at all but a note about intended audience. Dr. Leeson’s book seems intended for the Freakonomics crowd – those who are not trained in economics but who may or may not have taken a Principles course years ago. Though invariably correct, Dr. Leeson’s analysis is at times simplistic and left me wanting him to discuss the underlying material more deeply. A student with a stronger background in economics might do well to investigate the articles in Dr. Leeson’s CV on which the book was based.

The Invisible Hook was fun, and I recommend it, but it will be enjoyed most by people who are not formally trained in economics.

Research January 17, 2010

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This semester’s research note involved data collection and analysis regarding housing prices in Amherst, New York. The paper, which I’ve posted in PDF format here, contains a detailed description of my methodology and results. Data and SAS code are available by request.

With the usual caveats about sample size (as discussed in the paper), it seems that officials were systematically under-assessed and so carried a lower-than-expected property tax burden.

Manny bidding Manny July 16, 2009

Posted by tomflesher in Academia, Baseball.
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There’s been some debate as to whether Manny Ramirez should have been allowed to make his rehab starts in AAA Albuquerque before returning to his Major League club, the Los Angeles Dodgers, after a 50-game suspension for drug use. Behind the cut, I’d like to think about some of the reasons behind the punishment and propose a solution.

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The Misery Index April 2, 2009

Posted by tomflesher in Academia, Economics, US Politics.
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The Misery Index is a measure of national economic health derived by adding the unemployment rate to the rate of inflation. It was famously used by Jimmy Carter to declare that Gerald Ford, under whom the rate had risen to 12.5%, had no right to run the country, and then by Ronald Reagan to declare that Carter was unfit for the presidency after it rose to over 20%. (It’s available in real time at MiseryIndex.us.) (more…)

Quickie: Seal hunts and the Coase Theorem March 26, 2009

Posted by tomflesher in Academia, Canada.
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Andrew over at the Stackelberg Follower discusses the economics of the seal hunt and briefly touches on the world’s response:

[I]t is clear that a large part of the world either derives disutility from the seal hunt, derives utility from decrying the seal hunt, or some convex combination thereof. If it the former, there is a possibility for a Coasian bargain, i.e. the rest of the world pays off Atlantic Canada to stop the hunt/transport the seals somewhere else. If the latter dominates, then it is optimal for the hunt to continue.

A Coasian bargain is an application of the Coase Theorem, which in this case basically says that if the seal hunt imposes externalities on the rest of the world, then the rest of the world can pay Atlantic Canada some amount a) greater than or equal to the economic benefit derived from the seal hunt, and b) less than or equal to the economic cost generated by the seal hunt.

The Coase Theorem is applied commonly in tort law, where the cost of the tort is allocated to the party most able to bear it, and the parties are expected to negotiate out a more efficient allocation themselves (with failed negotiations penalizing the more-able party). The idea is that if the court’s allocation is inefficient, the parties are in the best position to make it optimal.

That said, neither of us is aware of any situation in which a Coase bargain has been attempted in a similar situation.

Barry Bonds (with bonus Collusion discussion) March 25, 2009

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Sorry about the infrequent updates. It’s a busy time in the semester.

Barry Bonds is, without a doubt, one of the most controversial figures in baseball. He’s currently trying, again, what he tried last year – shopping himself around for the league’s minimum salary. (Thanks to the Sports Law Blog for the link.) Inside, I’d like to briefly discuss collusion and look at the incentives involved with this situation.

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Shovel-Ready Twins December 22, 2008

Posted by tomflesher in Academia.
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My Macroeconomic Theory final had an extra credit question asking us to apply one of the models from the class to the Obama stimulus proposal. I’m something of an econeophyte, but I do remember this coming up in, inter alia, Alan Harvey’s Demand Side Economics podcast (which I listened to mainly to balance EconTalk, which I listen to mainly because Russ Roberts is brilliant).

In addition, I am a twin. Why this is relevant will become clear behind the cut.

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