Freakwenter takes a break

The entire staff of the Freakwenter will be on blogging vacation for the next few weeks.

Change is Bad

Back in the old days, before the mass production of corn ethanol drove up the price of corn (an 80% increase in 2006 alone), advocates for economic development in third world countries loudly complained that US agricultural subsidies were hurting small farmers by pushing down global grain prices, depriving small farmers of their main source of income. Now that global grain prices are rising, those same advocates are shrieking that food prices are too high for consumers in poor countries.

As the price of housing was rising, the media highlighted the groaning of new home buyers as it became more and more difficult to become a home owner. Now that the price of housing is falling, we mainly hear about all those homeowners who wish they had never bought while the price was high, or about all those homeowners who have to scale back their retirement plans because they no longer are "feeling flush."

We just can't get it right, no matter if we raise the prices or lower them. Conclusion: Change is Bad.

How to spend $50 million

A man plans to give away $50 million of his inheritance, according to the freakonomics blog. Here are his wishes:

1) I want to give it all away in ten years.
2) I want to give it away only in the U.S. — I can’t stand these people who give money overseas when we need it at home.
3) I won’t give a penny to schools. I think its unconscionable that Gates is paying for schools; that’s the government’s job.
4) I don’t want to give anything less than $1 million at a time. Meaning, no small grants.

Assuming that Mr. Wealthy also has the unstated goal of trying to help regular people in the US and he's willing to work on goals with a long-term payoff, here is the plan he needs:

Plan: Use all the money to buy large pieces of unpopulated land, to be owned and maintained by a foundation. The foundation's mission is to ensure that the land is never used by humans except, possibly, for light camping or other low-impact recreation.

Why spend the money this way?

• We must slow the spread of suburbia. Suburbia keeps people away from the cities, where it is possible to walk to work instead of burning gas to get there. Suburbia keeps people apart, preventing the formation of communities. Suburbia destroys wildlife, and messes up the countryside.
• Although the US is not densely populated compared to most other industrialized nations, our collective carbon footprint far exceeds a sustainable level. Taking land out of circulation will make people feel more crowded, and speed along the environmentalist movement by pushing people to make sacrifices sooner rather than later.
  
• Taking land out of circulation gives modern industrialization a much-needed margin of error. It is too early for us to understand the long-term consequences of our modern use of land and resources (it has only been in the last 20 years that global warming has come into our everyday language). If we wake up one day to realize that our farms can no longer produce thanks to our abuse, $50 million of extra land for a second try would sure come in handy.
  

McCain on global warming, oil addiction, and sustainability

Farmers replace soybeans with corn.
Rising food prices make people feel worn.
While cars burn ethanol,
and business runs at a crawl,
The leaders say, "Distribute more porn!"

Is the government screwing up our statistics?

In the May '08 Harper's Magazine, Kevin Phillips says that the US government uses deceptive statistics to convince Americans that "the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunity than it actually is."

Phillips' conspiratorial tone invites distrust, and much of his discussion revolves around irrelevant facts or rumor. For example, Phillips states,

Lyndon Johnson, for his part, was widely rumored to have personally scrutinized [irrelevant] and sometimes tweaked [only a rumor] Gross National Product numbers before their release.

Nevertheless, Phillips occasionally says something relevant in his report. Here is a compilation of his most interesting claims:

• "A few years" after 1961, unemployment calculations began to exclude "discouraged workers," people who say they want a job but are not actively looking for one. The effect was to lower the reported unemployment rate.
• In 1983, the Bureau of Labor Statistics stopped including housing prices in its calculations of the consumer price index, and instead started using an Owner's Equivalent Rent measure, which is an estimation of how much a house could be rented out for. (Freakwenter: The effect would be to lower the inflation rate during housing booms, but it is unclear if this would change the long-term inflation numbers.)
• The Reagan administration reclassified members of the military as "employed" instead of outside the labor force, thus lowering the reported unemployment rate.
• According to Phillips, "... the Clinton administration thinned [the unemployment survey sample] ... from 60,000 to 50,000, and a disproportionate number of the dropped households were in the inner cities." (Freakwenter: If true, the effect was to lower the reported unemployment rate.)
  
• The GDP numbers published by the Bureau of Economic Analysis include "imputed income," which Phillips claims accounted for 15% of the 2007 GDP. Imputed income includes things such as the value of employer-paid insurance premiums and the value you derive from living in a house you own (see page 5). (Freakwenter: The implications for the reliability of GDP growth figures is unclear, but imputed income highlights the complexity of the computation, and the potential for distortions as the economy changes.)

Dear Freakwenter

I've had some strange dreams. The other night two guys broke into my apartment and started cutting my hair. When I realized that they were trying to do a good job, I stopped struggling and let them cut it. It felt nice. In the next scene I was taking communion, and someone switched out one of the trays for another one. I took some of the non-switched-out communion grape juice, and immediately all the colors turned psychedelic. What's more, all the people took on alien-esque appearances, with big trumpety knobs coming out from their foreheads. The guys that had taken their communion from the switched-out tray turned into lanky white demons who were trying to take over the world. As my dream ended, all of us alien figures were serving ourselves food at a potluck, and the lanky white demons had not yet triumphed.

The next night, a bunch of giraffes were chasing me with their nibbly lips, so I took refuge in a little house I found. There I found a 2-year old girl. The house was shaky, so I was worried it would collapse and the giraffes would hurt the little girl. I asked her, "Are you alone?" and she said no, and showed me the baby that she was caring for upstairs. I took the baby and fed it. Soon the 2-year-old's mother came home, dressed like a conservative Mennonite. She seemed completely incurious about why I was there. Then the baby's mother arrived, and promptly criticized me for holding the baby with its head tilted, so I handed the baby over to its mother.

The following night I was being born. Someone was helping to push my head down to the birth canal, and about that time I turned into an observer of my own birth. As I was coming out of my mother, she encouraged me to catch myself, because it was a rare opportunity: to catch one-self on the way out of the womb. I did, but then I dropped myself. As I was picking myself up off the floor, the baby me became my brother, who is 10 years older than me.

Why did I dream these things?

-The Loved One

Dear Loved One,

First, I want to thank you for writing to me, because I have received mail only three times before. As stated by the old Chinese proverb, "People who get a lot of mail have better luck." And now on to your dreams.

The one thing that stands out to me about your three dreams is how clearly interlinked they are. In fact, they form a loop. The first dream is about the adult life, it's complexity, how bad guys can also be good guys, and how viewing life through the lens of religious dogma can make us all look like aliens at a potluck trying to save the world from lanky demons. The second dream backtracks to childhood and adolescence, learning to live despite constant fears, how to escape from giraffe-like strangers whose nibbling personalities eat away at you, and learning to cope with increasing responsibility - all while getting criticized for your incompetence. The final dream backtracks all the way to your birth - or hints at the time when you will give birth to someone like yourself, completing this moronic circle of life and death.

So to answer your question. The reason that you dreamed these dreams is that you were sleeping. Sleeping is what causes dreams.

Good night!
-The Freakwenter

Our 12 cents worth

Since adding Google Adsense on March 2, 2008, The Freakwenter's revenue has totaled $15.99, the result of 34 clicks. The Freakwenter has good reason to believe that this activity did not, on average, reflect substantial interest by the readers in the products advertised in the ads. But from the perspective of clicks per reader-hour, is the Freakwenter readership really that far out of line?

As mentioned in the last post, there are an estimated 1.3 billion internet users in the world. Suppose that these users, on average, spend about one hour per day browsing pages with Google ads. That's 1.3 billion hours per day. March 2 was about 40 days ago. In this time, perhaps 40*1.3 billion = about 52 billion hours worth of reader time occurred worldwide. Now 40 days is about 11% of a year, and last year Google revenue was about $16.5 billion, so in those 40 days, Google may have earned about $1.8 billion. A look at Google's financial statements suggests that about 30% of these funds get paid to the owners of pages displaying the ads. That makes $0.54 billion paid to page owners for every 52 billion hours of reader time, or about a penny an hour. According to The Freakwenter's sitemeter, there are an average of 7 visitors per day, each staying on the page for an average of 2 min and 37 seconds. That's about 17.5 minutes of reading per day. In 40 days, that's about 12 hours of reading. Going by the global average, The Freakwenter should have earned about 12 cents by now, enough to give the writers all of about 0.1 cents per hour of labor.

Jeesh guys, stop clicking, or we'll get disqualified.

Is Google Being Evil?

Google's motto, "Don't be evil," raises the suspicion that Google is trying to hide something. Everybody knows that you shouldn't be evil, and nobody was accusing Google of being evil, so Google has no good excuse for stating the obvious.

What is Google trying to hide? Here's one guess: the real source of its revenue. According to its investor relations page, Google grossed about 16.6 billion in revenue in 2007, and Google claims that about 16.4 billion of that came from ad revenue. Google's "Advertising Programs" page lists only one way to post advertisements through Google: the Adwords (or Adsense) program. Does it makes sense for Google to be earning this much from Adwords alone?

As of December 2007, an estimated 1.3 billion people worldwide had access to the internet. If advertisers paid Google 16.4 billion to post those dinky little Adsense ads, that means the advertisers were expecting to profit at least an additional 16.4/1.3 = $12.61 per internet user resulting from increased sales.

Now, I don't know about normal people, but I have never clicked on an ad without first thoroughly bracing myself to resist the temptation to buy whatever is for sale, so I'm pretty sure that no internet ad has ever influenced me to buy something. Then who are the crazies out there who are doing what Google claims normal people do: click on ads and then go buy something? Have you ever done that? Have you heard of anyone who has?

Surprisingly, Google's 16.4 billion in ad revenue is nothing next to global spending on advertisement, which is projected to be nearly $500 billion in 2009. But this doesn't answer any questions. It just goes to show that Google probably isn't at the root of this conspiracy. Someone is behind this at the global level. Maybe some terrorists. Or else advertisers worldwide are just that stupid, thinking that just one more ad will help them sell more stuff.

Update: A reader points out that Google's ad revenue comes not only from text ads but also video ads. Recall that Google bought youtube, which now displays some advertisement videos. See the deal with the video ads here.

Another black and white issue. At last!

Most intellectuals agree that the initial decision to invade Iraq was a huge disaster. But that was five years ago. You would expect it's about time again for American politicians to be goofing up, and indeed, they are. It's not every day that the American government adopts a policy that is so obviously stupid - and significant enough to matter - that basically the entire media reacts negatively.

The US political support for the production of corn ethanol (such as the Energy Policy Act of 2005) is being shot down by every study, news story, and respectable pundit. The problems with substituting corn ethanol for gasoline are many. First, Paul Krugman says that the conversion of corn to ethanol is causing rising food prices, which hurts the poor especially hard. Second, George Will cites one source claiming that even if the entire US corn crop were converted to ethanol, this would be enough to replace only about 3.5% of US gasoline use. Third, recent studies say that growing corn to produce ethanol is contributing to global warming, for reasons associated with the destruction of Brazilian rain forests to grow more corn. Lord have mercy!

Dear Freakwenter

I need to find an apartment because I'm about to start grad school. I can't decide whether to pay more, and live within walking distance of school or pay less and drive or bus to work everyday. Could you provide a heuristic to help me sort out this jabberwocky?

-Prelocated in ... ?



Dear Prelocated:

First, I want to thank you for writing to me because I've gotten mail only twice before. As it has been said, "I get mail - therefore I am." Here is the solution to your predicament. First, you need to break out of your outdated mode of black-and-white thinking, pretending that you must choose "either-or." To do this, you may need to rely heavily on the monster-weight leading intellectual on creative thinking, Dr. Edward de Bono, pictured here. Dr. de Bono specialized in teaching people to think. Can't you tell this just by looking at his picture? It could be well-worth your time to take a look at his webpage, where you will find all kinds of profundity relating to Dr. de Bono's "understanding of the mind as a self-organizing information system." In summary, the solution to your problem is to ignore the problem and to allow yourself to perceive only opportunities. Maybe you have the opportunity to live in your office and not worry about getting an apartment. Or you could do a self-study on homelessness for some part of your graduate thesis. Whatever you decide to do, make sure you start out by learning how to think.

Sincerely,
The Freakwenter

The Value of a Mankiw Referral

Greg Mankiw's blog averages nearly 10,000 visits daily. On March 29, he posted an amusing excerpt from dream recounted on another blog, Webloggistics:

I wake up, groggy, bed-headed, pajamaed. Lying next to me, fully dressed on top of the bed is Gregory Mankiw, the economist. "You're Greg Mankiw," I intelligently remark.

A quick look at Webloggistics shows that this is obviously not a big-time blog. On a typical post, readers comment about 3 times. But what happens to your readership when Greg Mankiw makes a referral to you on his blog? In the case of Webloggistics, not much. The post that Mankiw referred to has all of 7 comments, including this kind one:

You do realize that Mankiw read all this and posted it on his blog, right?

and this cruel one:

hey, also here from mankiw's blog... i think its pretty amazing that he actually linked to it but u still only have 6 comments :)

Oh well, Greg, you might be the world's greatest economics blogger, but your referrals still don't mean that much.

Big Boys

Last night I dreamed that I was in a meeting with several government Big Boys (and Girls, in this case). One of them went by the name "Chertoff," and it wasn't until I awoke that I realized who I had been dealing with: Michael Chertoff, head of the Department of Homeland Security. Anyway, nothing much happened in the meeting, except that right afterwards one of the Big Girls handed me a couple $100 bills in payment for being there, and I thought that was too much, so I tried to find some change to give her, but couldn't find any.

This morning I hopped on a bus headed for downtown DC, and was surprised when a high-ranking Princeton Ph.D. economist employed by a prominent federal banking institution took the seat beside me. I asked him to compare the relative merits of the economic policies of Obama versus McCain. He said that Obama's opposition to the US wasting a trillion dollars in Iraq - and McCain's willingness to do it all over again if necessary - pretty much settles the issue for him.

Who knows what I'll dream tonight, or who I'll meet tomorrow!

Dear Freakwenter

My parents died last year and left me $80,000. I would like to create a foundation in their memory. Do you have any recommendations for what the mission of such a foundation could be? My parents didn't seem to have an especially notable mission in life beyond raising the kids and doing well at whatever they were working on. Any ideas?

-Aimless in Africa

Dear Aimless,

First, I want to thank you for writing to me, since this is only the second time I have received mail. Consider the following facts. There are too many foundations already, something like 50,000 in the US alone. I refuse to consider the possibility that there exist 50,000 distinct and legitimate causes in the whole world. Therefore, please do waste your parent's money on a foundation. As for their memory, it is sooo almost over. They will be forgotten. Their memory is no longer theirs -- it's yours for you to digest and maybe share with some friends. Good grief, child. Here is something better to do with the money: buy some land and let it sit forever.

Sincerely,
The Freakwenter

Crapple

Jack drew a fruit from his satchel.
And said, "Boy this tastes just like scrapple."
And when he looked down,
his face turned a frown,
For he saw half a worm in his apple.

Update contributed by anonymous:

Jack grew a plant in his garden
His neighbor said "I beg your pardon--
I'm getting some calls
About hairy balls--
Is this something that I could take part in?"

Unidentified Reader Alert!

I request self disclosure, preferably in riddle form, of whoever is reading me from Wilmington, DE.

Gomphocarpus physocarpus

Photo stolen from this sweet botany blog.

Also known as the "swan plant," the "balloon plant," or "hairy balls," this lightly sweet-smelling 2-inch bloom is now known to me and my loved one as "April fool's flowers." I decided to buy her a small cluster to make up for my joke of earlier in the day, which she took somewhat more seriously than I had intended. She received the gift with admirable grace, and plans to take her hairy balls with her to show off at work tomorrow.

The biggest financial reform since the Greapression

Treasury Secretary secretary Henry Paulson proposes increasing the role of the Federal Reserve to prevent future subprime-style crises. In the new plan, Paulson says,

"The Fed would have the authority to go wherever in the [financial] system it thinks it needs to go for a deeper look to preserve stability."

Slate protests:

The Federal Reserve Bank, whose job already includes regulating a large component of the financial system, has failed pretty badly at its tasks. The proposed solution—to give it more responsibility—seems ridiculous and hazardous.

Ouch!

This morning on my way to work I wrecked my bike. It was raining and I tried going around a corner too fast and wiped out, slid into a bus, and half my left hand got mashed up by the wheel. I was already almost at work so I walked over to the nurse's office and got a temporary bandage. I'll look into going to the hospital this afternoon and see if they can't amputate my pinkie. It's really starting to stink.