Sunday Times: “The world’s investment banks are to reveal a $30 billion (£14.9 billion) hit from bad debts as they unveil results that give the first real insight into the impact of the debt crisis….Attention in the markets will switch this week to the Federal Reserve and its decision on interest rates on Tuesday. While the Fed is widely expected to announce a cut in the key Fed funds rate, and possibly an accompanying reduction in the discount rate, analysts are split on whether it will be a quarter or half-point reduction.”
Category / Economics
Indie Bookstores: Not Unlike a Bedside Manner
Bookdwarf, who is apparently more quick on the draw with my hometown newspaper than I am, points to this interesting claim by A Clean Well-Lighted Place President Neal Sofman. Sofman discovered a study of Chicago merchants illustrating that local retailers recirculate more of their sales dollars into the local economy than do chains. The study in question can be found here. If this is indeed the case, then why are the big publishers spending a substantial chunk of their promotion money placing authors into large corporate venues like Borders (and, for that matter, withholding their authors from smaller and more independent media outlets)? Would not a more targeted and devoted audience of readers more inclined to buy books and shift cash into the local economy be a more effective marketing strategy?
Lies, Damned Lies and Freakanomics
Freakanomics. Like every sophisticated American looking for a conversational entry point at a cocktail party, you’ve read it and been astounded by the conclusions. Yes indeed, Virginia, economics can be applied to everything! As per the free associative argumentative style that seems to run rampant and unchecked in today’s popular nonfiction titles. (Thank you, Malcolm Gladwell, for opening that Pandora’s box.)
Well, as it turns out, the two Steves got the economics wrong. Two economists (both of them, strangely enough, named Chris, proving an economic equation I’ve always found true: Two Steves + Two Chrises = Mayhem) from the Federal Reserve Bank have come forward, finding the research and statistics to be of questionable value.
Economist Christopher Foote notes that he spotted a missing formula in Steven Levitt’s initial research and that this programming oversight makes Levitt’s conclusion that the legalization of abortion reduced crime rates invalid. Apparently, Levitt failed to account for the crack wave of the 1980s and 1990s and, Foote says, Levitt’s failure to count arrests on a per-capita basis renders the abortion effect null and void.
This isn’t the first time that Levitt’s conclusions have come under attack, but this is the first time a high-profile economist has taken on Levitt at length. Levitt says that he hasn’t changed his stance and that the abortion effect holds true in Canada and Australia. Levitt himself has responded to these charges on his blog, noting that he will post a lengthy response once he has fully parsed Foote and Goetz’s paper. For the moment, Levitt confesses that he’s embarassed that he forgot the pivotal data, but insists that the data still matches up “when you run the specifications we meant to run.”
I’m quite curious about the viability of the abortion effect myself, but I’m quite surprised to see one of the world’s top economists insist that his hypothesis is right without actually running any results. I’m no scientist, but I know that my high school chemistry teacher would never give me a pass until I had proven a hypothesis. (The exploding test tubes that resulted from these experiments are another story.)
So, Dr. Levitt, when will you run these specifications? This correspondent, for one, will be watching.