Nativism as Immigration Policy

Of all the issues in which public policy finds least guidance from the general public, the matter of immigration is right up there. There are lots of myths about the harm that immigrants cause when they move across borders throughout the world. While one may understand the natural apprehension that comes with the influx of foreigners into a country, the leading arguments against immigrants in all countries include the claims that they are opportunists who try to take advantage of welfare state provisions,drive crime rates, are tax evaders and lead to a decline of wages for the poor in the nation to which they emigrate.

Most of these claims are supported by qualified studies here and there but a good number of these claims do not stand to objective scrutiny. Sebastian Mallaby, an Op-Ed columnist with the Washington Post revisits these major claims and cites studies that debunk a good number of them. The conclusion is that these claims are mere nativist rants by demagogues. Most disappointing are the politicians in the US who know better but would rather duck the issue. In this respect, most countries, irrespective of the levels of income tend to be universally uninformed.

More Dubious Data on Gun Policy

While commenting earlier on this blog on the loss of life due to mass shooting at Virginia Tech Campus, I mentioned that one of the more annoying things about the mater was that the talking heads were having a good time pushing forward their predictable prescriptions for the policy on hand guns. I also stated that either side is trying its best to selectively pick details that confirm that a tighter gun control policy or looser control that allows freer gun ownership are silver bullets for this problem with gun violence perpetrated by male.

Making reference to one case of pontification, I referred to the the shortcomings and serious data errors in the book More Guns, Less Crime. Well, the numbers guy at the Wall Street Journal makes a more detailed point about the thoughtless deployment of numbers in the ongoing policy debate. As he states, most of the numbers used in support of either side of the intractable problem are altogether inexact. However, the ability to deploy numbers in policy discussions arrest attention and this will happen in this and other policy contexts as well. Watch the numbers.

Stock Market for Star Athletes is Here

Most professional sports are already organized as corporations in which stocks are held in private or by a wider public. An interesting article on Yahoo Finance brings forth the argument that a market for creating a market for trading in professional athletes in the same way as stocks are traded may be established soon. Essentially therefore, this market would involve trading stocks in professional athletes by taking positions on the anticipated performance during their careers. Since trading in stocks now is already about making judgment about the performance of certain corporations in competition with others.

As the article states, an athlete would trade up to say 20% of future performance earnings to a trust, which would in turn sell stock based on their value to the public. As one would expect, the value of that stock would fluctuate with the performance of the athlete.

I have no doubt that the athletes whose stocks would be most traded would be those playing in the NBA, NFL, and soccer leagues in Europe. However, having just watched the London Marathon yesterday, I am convinced that buying into the future of the less well known Kenyan athlete would represent very good returns. While that is pretty obvious, I am interested in finding out how data will be readily utilized to disaggregate the contributions of athletes in team sports such as soccer.

Adding Nonsense to Virginia Tech Tragedy

I am unfamiliar with the ideological orientation of Mr. Ben Wattenberg and initially was impressed that he seems to propose that there ought to be no vituperation and overreaction to the tragic events that occurred at the Virginia Tech campus on the 16th April 2007. On the whole, all people in the US and outside (as I) agree about is that the perpetrator was not too well and that these events ought not to have happened. Thereafter, it all descends to sometimes puerile arguments based on absolute positions.

Having watched lots of TV debates and pompous punditry on the causes of the tragedy and listened to the simplistic answers being offered such as absolute gun control on one side against the equally tired arguments that guns do not commit homicide, I read the first paragraphs of Mr. Wattenberg's blog entry on the Washington Post in earnest. Appropriately named Think Tank Town, I was disappointed to see that while proposing the avoidance of self-condemnation, the author then thoughtlessly quotes another whose main publication was has not only been discredited but one who also sues Prof. Steven Levitt for disagreeing with his methods and conclusions. Perhaps Washington is not as much Think Tank Town as it is the incorrigible partisan’s hovel.

As an aside, I read the book, More Guns, Less Crime that Mr. Wattenberg appears so impressed with and had to revise my conclusions from it after some very serious errors were discovered in it. Nice theory but not empirically supported and the data is suspicious. Mr. Wattenberg should avoid the trap of proselytizing for now.

Testing for Tastes in Music Lab

About three years ago, I enthusiastically acquired a copy of Duncan Watts' book, Six Degrees: The Science of a Connected Age. I commenced its reading with enthusiasm and admittedly learned a lot about the science of networks and network theory in general. Fascinating as the discovery of fat tailed curves and clusters, together with the illustrations of the Bacon numbers game, I failed to see the immediate policy applications of this very carefully presented and indubitably innovative work.

Duncan Watts, an accomplished physicist and now professor of Sociology at the University of Columbia has used the internet to conduct informative experiments such as the Small world experiment whose results were presented in his first two publications. Writing in this New York Times Magazine article, he describes the results of the other experiment in which he and professional colleagues try to untangle how tastes in music are formed. It is now apparent that contrary to my initial thinking, network theory and the science of small worlds has a potentially large number of applications in commerce and perhaps in policy too.

However the most critical insight is that commercially successful cultural products could result from a confluence of forces and could not have been predicted. All commentary about why a certain product is successful is more likely a reflection of being clever after the fact. He still proves that good quality music certainly stands out but gains momentum because of the fact that it has been acquired by others.

This article leads me to regret the fact that I was not too keen while reading Six Degrees and that I did not take the early opportunity to participate in the Music Lab project. To my mind, its most profound implications are for professionals who market products. They ought to go figure!

Bernanke: Lay off Hedge Funds

The Chairman of the Federal Reserve Bank of the United States of America considers that further regulation of hedge funds is not in the interest of the public or beneficial to financial markets. Indeed, Ben Bernanke states that these financial institutions bestow benefits such as increased liquidity and improvements of risk sharing. His very correct and defensible proposal for the systemic risks that they face is that of prudence on the part of investors, their managers and counterparties.

Simply put, why fix it if it ain't broke?

Getting the Economics of Hedge Funds Right

Some of the loudest commentaries over this year have concentrated on the large bonuses that Wall Street firms distributed among their associates and partners as rewards for successful trading performance in the previous year. Granted that these rewards represented enormous sums of money,this blogger remains unconvinced that there is particular reason for concern about such high incomes.

However, anyone who bears a genuine interest about professionals who earn huge sums of money ought to review the reported incomes of hedge fund managers. This extremely informative feature in the New York Magazine takes readers through the distinguishing features for hedge funds, the psychological make up of the more recognized hedge fund managers and the genesis and reasons for the momentous growth of the industry.

It turns out that most hedge fund managers not only have peculiar views about investment, but that the industry seems to be built on the assumption of perpetually high returns.The typical fees structure is based on the 2 & 20 principle wherein the fund shaves off 2% for annual management fees and 20% of the absolute profits. The rise in the number of hedge funds leads to the question about the degree to which grand lessons from LTCM's collapse are relevant at all. With the proliferation of hedge funds and the superstar founders, the likelihood of a perfect storm are ever higher. As John Kay reckons, the extreme confidence in the ability of models employed by this category of investors are such that such returns cannot be guaranteed. Any model is as weak as the assumptions built into it in addition to the failure of the model itself.

Developing Markets Without IP Enforcement

It is clear that stringent enforcement of most intellectual property rights have the effect of granting monopoly rights for the exploitation of ideas or designs to firms or individuals. However, an enduring question among lawyers, economists and physical scientists is whether intellectual property enforcement of copyrights, patents and trademarks are altogether a precondition for innovation and development of products.

I am glad to link to Hal Varian's article in the New York Times today arguing for a more considered interrogation of the conventional wisdom that stringent protection is the only way to defend certain markets. This piece does not resolve the issue but argues cogently and links to other papers which attempt to demonstrate that not all industries benefit from IP rights enforcement. This certainly will not end the debate but points to the need for more incisive market analysis to develop principles that would allow for better public policy.

McDonald's in India

While visiting India to attend a formal meeting a couple of weeks ago, I was quite surprised that the McDonald's near the market situated on Janpath Road in New Delhi served no beef burgers. This is in spite the fact that I am aware that the adherents of the Hindu religion completely eschew the consumption of beef. One may hastily conclude therefore that beef burgers would have no meaningful market for McDonald's restaurants at all.

In trying to reconcile this curious fact with the cosmopolitan nature of the main India cities in a discussion with friends resident in New Delhi, we noted that India is home to nearly 200 million citizens whose religious persuasion may not have injunctions against the consumption of beef. Why then is the McDonald's India menu largely vegetarian?

Another puzzle concerning geography and markets is that the McDonald's India's restaurant locator facility shows that most of the McDonald's restaurants are situated in the middle of the country and hardly in the southern and eastern parts of the country. I wonder what informs this pattern of investment and consumption of veggie burgers?