Relationship Possibility Frontier

Hat Tip: Astrid Arca

File this under....things that matter, incentives

Wow.

"Officials from the North Central Regional Airport along with coordination from Clarksburg Travel Service arranged an afternoon of free flights. A Boeing 757 from Newark, New Jersey landed in Bridgeport to take passengers for a 30-minute flight around North Central West Virginia. The airport is trying reach a goal of 10,000 passengers for the year so it can be eligible for an airport improvement program grant."

Thanks to Bob Lawson, via Russell Sobel, for the pointer.

Swine flu thoughts

Yes, we've been inundated with news about it recently, and in case you've somehow missed it, here is a story about Mexico's fear of swine flu, here is how companies are dealing with possible swine flu labor force effects, here is a video about a flu ward being too risky for a reporter to enter, here is how to make music out of the swine flu gene, here is a question and answer session about swine flu, here is Spain worrying about the swine flu, here is Joe Biden giving his take on the swine flu and how to protect yourself, here is a first-hand account of fears in Mexico, here is where the swine flu is, and here is a bit concerning swine flu and flying. And that's all visible from the CNN.com front page without scrolling down. Seriously.

My thoughts:

- All we've been fed is statistics about the number of cases and the number of deaths. These mean nothing by themselves. The important figures that need to go along with these are comparable diseases and their potency. According to Wikipedia, with good ol' normal influenza, "the worldwide death toll exceeds a few hundred thousand people a year." I'm also fairly certain that within the U.S., the toll is in the tens of thousands every year, though I can't find anything to back that up. But these numbers need to be kept in mind when considering the scope of swine flu.

Of more importance, though, is the potency of swine flu. No matter how widespread swine flu becomes-- if the death rate of swine flu victims is less than traditional influenza, is it something that should ever be dealt with over and above traditional influenza? Absolutely not, and that's the beauty of economics in dealing with health issues-- we can get at appropriate paths of action without placing a value on human life. Nonetheless, I haven't see percentage numbers. Perhaps N is still too small at this point. But I'd like to see exactly how much worse this swine flu is compared to other sicknesses.

- I'm not going to get worried until a healthy adult in America dies from this illness. Children, the elderly and anyone else with less-than-full-strength immune systems are more at risk for every sickness; swine flu is no different. Could a healthy adult die? Sure. But do past instances of supposedly deadly, human-race threatening diseases being overestimated lead us to believe that this might fall under the same category? You betcha.

- I wonder if the WHO is more likely to declare a disease more risky around budget determining time? I don't know who supports them, but that would be an excellent paper.

How Times Change in Graduate Economics

In this interview with econometrician Phoebus Dhrymes in Econometric Theory, he says this of his class with Bob Solow on business cycles [p.7 of pdf]:

It may have been called economic fluctuations, but I would characterize it as a course about who said what, when, and where; for example, Kondratieff said this about cycles, Hawtrey said this, some Austrian said that, Hicks said that, i.e., it was a tour of the literature and models on the "business cycle."

Did MIT teach Austrian Business Cycle Theory? The times have certainly changed.
And on having Paul Samuelson as a professor before economics was mathemetized [also p.7], he states:

It also appeared to me, perhaps wrongly, that he displayed mild contempt for his students, and he would ask, for instance, "Do you know what a derivative is?" and some students would raise their voices and say, "No, I don't know what a derivative is." And Samuelson would say, well, you know, "It's where you make an itsy bitsy change in this and get an eeny-weeny change in that."

I infer from the article that this was late 1950's, probably 1957 or 58. One year removed from a doctoral education in economics in the early 21st century, it is difficult to imagine a professor even thinking to ask this question, let alone a student not knowing that answer.

Hat Tip: Matthew Kahn

More on Specter

I blogged briefly yesterday about Spcter switching parties; CNN offers a bit more on the reasons for Specter's change.

This decision, to me, comes down to the ability to secure rents in the public arena. You can split these rents into current (i.e. this Congress) and future (i.e. future Congresses) flows. Initially, before thinking about any of this, I'd presume that changing parties would help you secure rents in the present, but maybe with a tradeoff. This may come at the expense of angering your constituency, but the more I think about it, that may not be a large issue at all. Do constituents elect Republicans and Democrats, or individuals? If it's the former, they might be upset-- but if it's the latter, and a change in party generates more political power and more pork, all the better in the eyes of the voter.

Of course, there's a future rent flow to consider as well-- and that seems to be the underlying issue for Specter.

The senator, who has represented Pennsylvania in the upper chamber since 1980, said he was "anxious" to stay in the Senate -- and he did not want to face a Republican primary in order to keep his seat next year.

"I was unwilling to subject my 29-year record in the U.S. Senate to the Pennsylvania Republican primary electorate," he said. "But I am pleased to run in the primary on the Democratic ticket and am ready, willing and anxious to take on all comers in the general election."

Polls suggested Specter would face a stiff primary challenge from Rep. Pat Toomey, who falls to his right on the political spectrum. Toomey nearly defeated Specter in the Pennsylvania GOP Senate primary in 2004.

These are big moments in Congressional history; the Jeffords effect has received a fair amount of attention in the journal world.

Econ 101: An Increase in the Future Price of a Good

Will cause demand to shift to the right in the present period, causing the price to increase and, at least partially, arbitraging away the difference in price across the two periods. From the USPS:

On May 11 the price for a 1-ounce First-Class Mail stamp will increase from 42¢ to 44¢. Prices for other mailing services — Standard Mail, Periodicals, Package Services (including Parcel Post), and Extra Services — will also change. The average increase by class of mail is at or below the rate of inflation as measured by the Consumer Price Index.

Here is e-Bay on 4/29/2009 at 9:52 a.m.:
That is the first result of the search, where we observe that the the current highest bidder is offering $8.53/20=$0.4265 per stamp, which is higher than if you were to talk into the post office today but lower than if you are to walk into the post office on May 11.

People (Do Not?) Respond to Incentives

So Mullen, Frank, and Rosenthal find a new NBER working paper. Some highlights from this very interesting paper:

In 1999, the Institute of Medicine (IOM) issued a startling report estimating that, every year, between 44,000 and 98,000 people admitted to U.S. hospitals die as a result of preventable medical errors (IOM 1999). On average, U.S. patients receive only 55% of recommended care, including regular screenings, follow-ups, and appropriate management of chronic diseases such as asthma and diabetes (McGlynn et al. 2003). In response to widespread concerns over high rates of medical errors and inconsistent health care quality that have persisted in the face of public reporting of quality, health policy makers and private insurers are turning to pay-for-performance (P4P) as a more direct line of attack. [p. 1]
...
A typical P4P program rewards health care providers (e.g., physician medical groups) with bonuses for high marks on one or more quality measures, such as rates of preventative screenings or adherence to guidelines for chronic disease management (e.g., regular blood sugar testing for diabetics). These measures are based on clinical studies showing that better outcomes result when these processes are followed for patients meeting certain criteria. The rationale for pay-for-performance is simple. If quality of care becomes a direct component of their financial success, providers will shift more resources towards quality improvement. Economic theory, however, suggests the story may not be this simple. In particular, providers may shift resources toward rewarded dimensions of quality at the expense of unrewarded dimensions, which may result in a decline in the overall quality of patient care. [p. 2]
...
We address two main questions. First, were either of these P4P programs effective at inducing changes in quality of care? Second, if so, did the programs encourage health care providers to divert effort away from unrewarded towards rewarded dimensions of quality? We find that pay-for performance did have a positive impact on some of the clinical measures rewarded by the programs, and the impact increased with the size of the average expected reward. However, we fail to find evidence that the programs either resulted in major improvement or notable disruption in care. [p.3]

In addition, the authors are concerned that their results indicate that providers substituted among the different measured dimensions according to the reward being offered. I wonder how errors in these dimensions are treated in the legal system. If certain tests can result in very big lawsuits, the P4P programs might not be large enough to compensate or are areas in which health care providers are already "doing their best" even as bad as that might be. In fact, if I were a private insurance company, tests with very large lawsuits would be the areas I would most likely target these bonuses.

Blockquoting X

X = Pete Boettke

I have often told the young athletes I work with that there are two pains they must choose between -- the pain of hard work, or the pain of regret. I argue that the pain of regret will sting for much longer.

The Specter Switch

Arlen Specter (Was-R-Now-D, Penn.) switched over to the Democratic party today, CNN has the story here. CNN reports that he's the 13th Senator to do so since the direct election of Senators in 1913.

Is there any pattern to these decisions? The Senate reports here on the 20 members who have switched parties since 1890. What's striking from a quick look at that list is the durability that these Senators had after switching parties. More often than not, they won another election after the switch. It speaks against the strict bipartisan model, assuming the underlying constituency doesn't change (perhaps that's incorrect to assume?), though it could also speak towards everyone moving towards the center as well.

There's a dissertation's worth of ideas to take from looking at this phenomenon...on to the idea list they go!

Large Hadron Update: April 28, 2009

CNN gives an update on the Large Hadron Collider. I initially posted about the machine here and offered previous updates here and here. The article notes that the LHC "will start receiving current again in July, and will circulate this year's first proton beam by the end of September..." Which means, given the dates on my previous posts...yes, it was years, not months. And September 2009 is an optimistic estimate-- I'd say odds are even on tests running before the end of the year.

I also doubt that the magnets are cooled to "a couple degrees below absolute zero."

Because They Wore Heavy Boots

Great story from a physics professor (Hat Tip to Ryan Graf for the pointer).

I'm tempted to start labeling certain folks as preaching "Heavy Boot Economics," but I will resist.

For now.

Investor Uncertainty

From the WSJ:

Private-equity investors need to know how free companies that received government help will be before they start betting their billions of dollars on troubled companies, said Kohlberg Kravis Roberts & Co. founding partner Henry Kravis.

“We do not know enough about the terms” of government bailouts, he told reporters in Mumbai today. Investors are worried that if they invest in companies that have received help, “Are you now ensnared in government action and going to be called into Congress because you are making money?”

Don't Blame the Beer Goggles

A study summarized in TIME, but given that it is TIME, it should not be surprising that they do not provide a link to the actual study:

The study's authors, Egan and Cordan, asked their 120 drinking and 120 sober participants to rate the attractiveness of 15-year-old girls versus 19-year-old girls shown in photographs. The study participants were evenly divided between men and women. For ethical and legal reasons, the photos were actually altered images of 17-year-old students from McMaster University in Ontario; they had given permission for their likenesses to be used. Researchers digitally manipulated the pictures to make the students' craniofacial features look like those of typical 15-year-olds or those of 19-year-olds. The doctored pictures were then shown in random order to participants recruited in bars, airport lounges, cafes and other natural settings.
...
Surprisingly, drinking had little impact on the results. Both drinkers and nondrinkers tended to favor the 15-year-old girls over the older ones, and when asked to estimate the younger girls' age, both groups of participants overestimated them to be just over 18 — or, just over the legal age for sex in the U.S. (The one condition under which drinkers preferred the 19-year-old faces was when they were wearing makeup, which has the effect of smoothing out wrinkles and granting a younger appearance — a finding won't come as a great surprise to any woman who has ever worn rouge.)

The study suggests that guys who claim they were too drunk to notice that a girl was underage are probably lying, since drunkenness doesn't have much to do with one's ability to estimate age or attractiveness.

The last claim doesn't seem to logically follow as "lying" since both groups systematically overestimate the age of those in the photographs. It merely follows, that when informed of the error, the drinking group would likely attribute this error to their drinking. It also seems to divide people into drinking and non-drinking groups, and there is no mention about how much the drinking group had.

Sex, Lies, and Data

While sorting through the NLSY79, I realized women often answer one particular question inconsistently from year to year.

How old were you when you first had sexual intercourse?

A subset of the 79 cohort was asked this question in 1983, 84, and 85. More often than not, they answered inconsistently. 1 year differences could probably be chalked up to natural error. "Was I 16 or 17 that Summer?" What do you say for a 16/20 split though? Clearly, someone is not telling the truth. But why lie to an interviewer?

After skimming the NLSY79 manual, it appears as the interviewee was not always surveyed alone (spouses, children, etc. were present). That's unfortunate, from a scientific perspective. I plan to use the lowest year offered by the interviewee. What do you think?

(The question was not repeated for males once they had offered a year, so comparisons are not possible.)

File This Under... Incentives Matter

Cover your ears, kids. It's Penn and Teller.

Happy Birthday Justin!

A hearty Happy Birthday to TPS stalwart, Justin Ross. I believe the magic number is 28 years.

Enjoy the day!

A Summer Snooze

Here is Lawrence Summers at a meeting with credit card officials:


In the mean time, congress is pushing this with the support of the president. Perhaps Larry should wake up before congress reduces access to credit? Several of the proposed provisions would do just that.

Setting the Null on God

One of the less productive things you can do with your time is argue about the existence of God. One of the more annoying things people do in these debates is try to cite evidence. Atheists ask rhetorically "where is the evidence of God?" Theists respond "all around you!"

Here is how to properly frame this pointless debate:

The Atheist's Null Hypothesis: There is no God. They do not have enough evidence to reject the null.
The Theist's Null Hypothesis: There is a God. They do not have enough evidence to reject the null.
The Agnostic's Null Hypothesis: Undecided between the Atheist and Theist null hypothesis.

And now here's one minute of Family Guy:

Luther: Is Inflation Theft?

Justin, Claudia and Matt have offered solid arguments. I would like to suggest, however, that we are asking the wrong question. Inflation is not theft. But is inflation fraud?

In a free society with private currencies, contracts between currency providers and customers would establish whether inflation amounts to fraudulent behavior. Of course, private currencies are effectively banned in the US--the government is the sole provider of legal tender. So in order to claim that government sponsored inflation is fraud, we would first need to show that the government has an obligation to provide a stable currency. Does such an obligation exist? I will leave this for you to decide.

Ryan: Is Inflation Theft?

Justin and Claudia both offered fantastic viewpoints on the question of whether inflation amounted to theft.

While I don't see it written as such in the article that Justin linked to, I believe the idea that taxation is theft comes from the following logical train of thought: Inflation is a tax, tax is theft, ergo, inflation is theft. Justin's point that we don't have property rights over the pecuniary value of an object is spot-on; going with that mindset, those in favor of categorizing inflation as theft also have to consider some other possibilities. The idea is that one's buying power is less; would changes in aggregate demand be theft as well? Let's say that cargo pants become a massive fad, and their price correspondingly rises. Since your buying power in terms of cargo pants has decreased, is this theft? By the previous logic, I'm not sure how it isn't. Further, when I think of theft, I think of a clear victim and a clear antagonist. Who's responsible for the cargo pants theft?

I'm also reminded of an argument that comes up in policy circles-- it comes up most often when a big box retailers move into towns. Existing businesses complain that these stores will take "their customers," as if they have a right to future business. No such right exists, and no right exists to the pecuniary value of an asset either.

Williamson: Is Inflation Theft?

I want to comment on Justin's Post. I just covered how inflation can be a tax in my principles course. Students found this very interesting as another way that government can ‘trick us.’ I followed this with how anticipated vs. unanticipated inflation really drives how quickly we return to our long run equilibrium. The next topic I am covering is specifically how inflation can be costly it terms of relative price distortions and misallocation of resources. Nowhere in this discussion will ‘inflation is theft’ be covered.



My reason is that I try to teach my students that economics is about means/ends analysis. When students bring up moral issues such as any taxation is theft, I try to stay away from a moral/natural rights debate. Instead, I push my students to understand the costs/benefits of any scenario presented in class, such as the deadweight loss from taxation, not how taxation is morally wrong. Following this logic, I do not see why inflation is theft because we understand the consequences of the government printing more money, i.e. inflation. Since we know this, we can alter our behavior today to try and offset the negative costs. Just like we alter our labor supply in response to the income tax, we can alter our response to an increase in the money supply. There are significant costs to inflation, but I do not see how invoking the argument that inflation is theft helps to illuminate these costs.

Ross: Is Inflation Theft?

In the middle of the night someone breaks in your house, finds and steals some of your cash, leaving you able to buy less stuff. In the middle of the night the government prints a bunch of new money and cause prices to rise, and as a result you are not able to buy as much stuff with your money. The former scenario is theft, and some argue passionately that the inflationary scenario is also theft.

For someone to steal from you, you must have property rights over that object that entitles you the right to exclusive use. The problem with the “inflation is theft” argument is that it requires a claim of property rights to a pecuniary value of an object. However, greenbacks only represent a claim on U.S. goods, services, and assets. They do not represent a claim for you to be able to receive two candy bars or an hour of parking for every dollar you posses.

Free marketer’s do not usually make this error in other domains. If someone were to claim a right to be paid as much or more for their house as what they paid for it, they would be correctly reminded that their purchase only granted them rights to the house and property, not to any pecuniary value of the home. In my view, the "inflation is theft" crowd make this error.

Claudia, Matt, and Will weigh in on the subject.

ALEC-Laffer State Economic Competitive Index

Here's the second version of the ALEC-Laffer State Economic Competitive Index, I posted about the first version in the fall. West Virginia has some bad areas but some good areas as well; one of the bad ones is "State Liability System Survey," they rank last. It seems that anyone who takes even a rudimentary look at state judicial systems concludes that West Virginia is last, and clearly so. Russ Sobel's new book, The Rule of Law, addresses this issue.

Now that the dissertation is done, the compile-all-of-these-indexes paper is on the list of things to do.

Congrats to Dr. Matt E. Ryan!!!

As he successfully defended his dissertation yesterday!

File This Under...Soon To Be Fired Marketing Consultants

Live Blogging: Brown Bag Lunch with Gordon Tullock

Today, I had the pleasure of listening to Gordon Tullock during the lunch hour. I have recorded some of the memorable quotes from the session.

When asked about being a founder of public choice, Tullock responded by saying, "I didn't know the implications of what I was doing. I thought I was just writing an interesting book."

What was the worst application of your work?
"All genuine applications of my work are good."
So what was the worst?
"I can't think of any."

"It is not clear that politicians gain anything from reading my work. I have a theory of politics; it's not a theory of how to get ahead in politics."

What do you consider your biggest contribution?
"Teaching economists that they don't have to stick to economics."

Are we likely to slow or reverse the growth of government?
"I am afraid not. It is certainly unlikely. I would like to shrink it. But it is important to remember that our government, by world standards, is quite small."

"I would like, myself, to have a government that focuses primarily on preventing crime."

"It is not evident to me that government needs to subsidize science."

Senile Have A Duty To Die

From the ever human universal British health care system (Hat Tip: KipEsquire):

PENSIONERS with dementia should consider ending their lives to stop “wasting” NHS resources, it was suggested yesterday.

Medical ethics expert Baroness Warnock, 84, said senility sufferers were a burden to their families and doctors.

And she said there was nothing wrong with them feeling they had a “duty” to opt for euthanasia for the sake of others. She said: “If you are demented you are wasting people’s lives, your family’s lives and you are wasting the resources of the NHS.

You know what? This is exactly consistent with the utilitarian principles necessary to run a universal health care system. How you explain this to someone with dementia is a different matter.

Stephen Moore on Atlas Shrugged Realized

I thought this would be mostly rhetoric, but is actually very good. At the WSJ:

In the book, these relentless wealth redistributionists and their programs are disparaged as "the looters and their laws." Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the "Anti-Greed Act" to redistribute income (sounds like Charlie Rangel's promises soak-the-rich tax bill) and the "Equalization of Opportunity Act" to prevent people from starting more than one business (to give other people a chance). My personal favorite, the "Anti Dog-Eat-Dog Act," aims to restrict cut-throat competition between firms and thus slow the wave of business bankruptcies. Why didn't Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We already have been served up the $700 billion "Emergency Economic Stabilization Act" and the "Auto Industry Financing and Restructuring Act." Now that Barack Obama is in town, he will soon sign into law with great urgency the "American Recovery and Reinvestment Plan." This latest Hail Mary pass will increase the federal budget (which has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion -- in roughly his first 100 days in office.

Hat Tip: Matt Wolf

More on Earth Day and Recycling...Paper Edition

D1 is demand for forests when everyone recycles paper. D2 is demand for forests when you do not recycle paper. Don't recycle your paper, get more forest area.
The Armchair Economist

Happy Earth Day!

Enjoy this episode of Penn & Teller's BullSh*t! on recycling.

Part 2 available here.
Part 3 available here.

Surname Incidence

From Freakonomics, here is a list of the most common surnames in the United States. (The linked page gives the first thousand, though is looks like they link all the way through 49,000.) How common are we here at TPS?

Luther - #2,438
Ross - #89
Ryan - #177
Schaeffer - #2,156
Skarbek - #53,047
Williamson - #245

Is Price Gouging Ethical?

There is an excellent exchange in the April 2009 issue of the Business Ethics Quarterly on the ethics of price gouging between Matt Zwolinski and Jeremy Snyder. (Gated table of contents available here.) It containes plenty of food for thought for both sides of the debate.

Zwolinski has also done interesting work on another research intersest of mine, sweatshops.

Secession with Ron Paul

Here's a short bit with Ron Paul talking about secession. Three cheers for Paul-- it's an important constraint on the federal government that needs to be in the minds of federal officials when making decisions.

Of all the op-eds I have written, the only piece a paper refused run was one discussing how state secession could limit the redistribution of federal funds, about three years ago.

Stephen Hawking hospitalized

CNN reports that Stephen Hawking has been hospitalized and is "very ill." The world's most well-known physicist suffers from ALS, so no trip to the hospital can be taken lightly.

A quick trip to the Nobel site reveals that he is yet to win a Nobel Prize for his work. From what I have read, he has made more than enough of a contribution to deserve the Prize. (Have I been misled?) In which case, the Nobel committee would suffer an embarrassment for not recognizing his work should he pass.

My Wife the Political Economist

A few weeks ago we had a meeting with our insurance agent, where my wife demonstrated the logic of a political economist:

Agent: How do you feel about earthquake coverage?
Me: Have we had earthquakes in Bloomington before?
Agent: We have had earthquakes in Bloomington in the past, but they have all been very minor and haven't caused much, if any, damage.
Me: What do most Bloomington residents do?
Agent: I am rarely able to sell this coverage.
My Wife: Then if a earthquake is so big that it actually damages our house, then it will damage so many uninsured houses that the government will bail us out.

Superb, just superb. I almost never discuss any economics or political economy with her. Here I was hoping to get at some crowd wisdom while thinking about availability heuristics. My wife, as usual, provided the more relevant analysis.

My wife is also a excellent behavioral economist (see here and here).

Cleanest Countries

Forbes is a great place for rankings, and since I love rankings, I enjoy popping over to the site on occasion and finding a new list. The Forbes article is here, and the underlying information for the rankings comes from the Environmental Performance Index. (That's a groovy map, by the way.)

Generally, you'd expect richer countries to do better-- they can better afford the economic hit that environmental regulation (like welfare systems) imposes on the economy. To that end, there are some interesting results-- most notably Colombia at #9. Most of Africa does poorly; the danger of a study like this would be to come to the conclusion that Africa is in dire need of further environmental restrictions.

A Sunday Thank You

Here's a short piece on CNN this morning about a fellow who converts engines using diesel fuel to ones that can use vegetable oil. Not that I have a particular interest in this process, nor can I believe it involves only snipping and reattaching a few hoses here and there, but I loved the quote at the end:

"If you're emitting half the carbon dioxide that our neighbor is, that means one of two things: Either your neighbor can drive twice as much, or you're having a significant positive impact on the environment."

And it is for this reason that I thank the alternative fuel movement, since any modicum of guilt I could possibly feel for driving is mitigated knowing that others are taking the effort to compensate for my transportation pollution. Thanks, environmentalists!

Blockquoting X

X = Richard Thaler

Game theory as it currently exists is a normative theory. It characterizes optimal behavior when selfishness and rationality are common knowledge (p. 32).

Waking Up Canadian

Changes in Canadian citizenship laws apparently resulted in many individuals "waking up Canadian" today, though with less bells and whistles than this YouTube clip suggests.

Questions to Ask:
1. Why did this change occur?
2. How does it affect the number of citizens on net? (Is there an offsetting clause which reduces the number of Canadian citizens?)
3. What are the implications for welfare programs?

Prison Economics

Prisons provides a unique environment to study economics, especially the economics of the underground economy.

1. The black market economy in prison is substantial, and it is a testament to the ability of entrepreneurial individuals to provide people's needs in a marketplace, even ones as restricted as this. For example, despite this funny, off-color video from the Onion, a recent indictment against the Black Guerrilla Family prison gangs reveals that inmates have access to fine cigars, salmon, shrimps, Grey Goose Vodka, and other items not provided legally within the prison. This isn't uncommon either. Even within the notorious Confederate Andersonville prison camp, a market for goods and housing sprang up. From San Quentin to Baltimore County, prisons and jails are stocked full of contraband goods for convicts.

2. As predicted by theories of the underground economy, corruption often follows. Prison guards receive substantial cash payments for taking both an active and passive role in facilitating the importation of goods into prison. Some guards even exchange sexual services for money, and one female officer (now fired) sent provocative photos to inmates. She's caught on a police wire tap explaining the allure of profits to an inmate: "That job was cool while it lasted. But that s--- like having a McDonald's job, I got to break the law to get money." One of the challenges of prison operations is outlawing goods that are dangerous to guards and inmates while at the same time ensuring that guards are not tempted by offers of thousands of dollars for smuggling in, for example, small packages of heroin.

3. As correctional facilities provide no enforcement of illicit contracts (or even people's personal property rights to a substantial extent), it is not surprising to see organized crime arise. Historically, organized crime provides protection and enforces contracts (see Gambetta, Bandiera, Milhaupt and West, Skaperdas, and others). The Black Guerrilla Family provides protection to people who pay for it, and they are a major player in the prison economy. After grouping together, this enterprise has low costs of enacting violence on others, and a result, the likelihood that a trading partner engages in some sort of fraud or post-contractual opportunism is diminished. When legitimiate institutions are prevented from aiding trade, alternative mechanisms will be discovered.

4. Finally, though incarcerated inmates are capable of both extorting and controlling criminal activity on the streets. The small size of cell phones makes it easy to smuggle them into prison, and this allows incarcerated gang leaders to stay in control of criminal enterprises. Also, I've argued before, criminals who are not active in prison gangs are also forced to make extortion payments to them. Analogous in many ways to governments (argued by Baumol, Skaperdas and others), gangs act similar to governments by providing public goods, demanding tax payments, and enforcing contracts for a price.

50 Most Brilliant Atheists

Here's the list.

Markets in Everything: Employing College Students

Jobaphiles (Hat Tip: Jason Oberle)

Jobaphiles is a free job-auction website. You can post a job and local college students and recent grads will then bid for it by indicating how much they're willing to work for and why they should be hired.

Scary

From CNN:

Where is the state of Lincoln? Why should this guy care about how much the state receives in the stimulus package (while Bastiat spins in his grave)? What do child credits have to do with a philosophical objection to taxes?

Hat Tip: Matt Wolf

The Economics of Volcano Climbing

So I recently hiked up a portion of the Volcan Pacaya and I noticed something interesting. The hike begins at a small town (if you can even describe it as that), a goodly portion up the hill, about two miles and 500m from the outlook near the top of the volcano. At this base are assorted locals selling water, snacks, food, etc., as well as children renting walking sticks and slightly older folk offering mule rides to the top of the hike. The price at the bottom for the mule was 50 quetzales; since we were there to hike, we opted for 2 walking sticks at 1/10th the price.

When we began up the hill, I was surprised to look back and see that two of individuals offering mule guides were leading their mules up the mountain behind us, without riders. The idea is that since the walk was pretty directly uphill, people would get tired and want a mule to complete the journey. This must happen with a frequency signficantly greater than 0%, or else this practice would prove fruitless--and tiring to boot.

Since we stopped a few times on the way up, and the mule guide stopped with us, the economist in me got to thinking-- I wonder how the price changes on the way up the hill. So every time we stopped, I asked him what the price was at that point in time. As it turned out, the price never changed from 50 quetzales.

Now, it could well be that the individual never wanted to change the price. Or, perhaps there was a different range of negotiation to be had at different points, but he never strayed from starting at 50. Fair enough. But there are a lot of factors that could go into the price of the mule on the way up the hill; perhaps they all balanced out over the course of the walk. Consider:

- Does his willingness to supply the mule change on the way up the hill? This is interesting. He's already committed the mule to going up the hill; if there's an exhaustion factor, perhaps he'd be willing to accept a lesser amount (as anything above 0 rewards the trip up to some degree). It's tough to think of a scenario where he'd only be willing to accept more-- maybe if the mule goes faster than a hiker, and since he committed the mule to the slower hiking group, he'd want more money to offset the longer time committment of the mule to a half-hike/half-mule trip up the volcano?

- Does our willingness to pay for a mule change on the way up the hill? Perhaps, but it's tough to tell which way that could affect the price. Would I want to pay less since the ride wouldn't be as long? Would I want to pay more since I have committed to the hike and wouldn't want to turn back if I could only go halfway?

- He is offering us a service by following us up the hill; after all, if I slipped and broke my leg, I'd want to be taken down the hill as quickly as possible. His decision to follow us up the hill is an insurance policy, of sorts, provided for us free of change.

Anything else? Again, I won't disagree that he decided to keep the price at 50 for ease. But then again, it's nearly costless to change the price and bargaining is in play here. Besides, it's more fun to consider the possibilities anyway.

10 Hot Economists

Here.

Economists have not done well on these ratings.

WTF?

In this interview, I find a set of nonsensical, and oftentimes downright bizarre answers from Richard Posner. How can anyone possibly consider the financial system in 2000 to be deregulated? Health care and education, both of which have numerous price controls and legal monopolies, are the only rivals to banking in terms of most regulation.

I do agree, however, that irrationality is not to blame.

Cloudy Speeches

I cannot help but wonder how word clouds will affect political speeches in the future. Rhetorical devices can be persuasive when spoken, but seeing a speech in word cloud form makes it clear that the speaker spent more time delivering nonsensical phrases than addressing important topics. Maybe politicians will start using silly phrases like "American people" and "Wall Street"/"Main Street" less frequently. Or maybe they will try to game the system, using words like "health care" a lot but without actually saying much. Or maybe nothing will change at all.

Below is a screenshot of President Obama's Speech to Congress, February 24, 2009.

As for gaming the system, Many Eyes makes that difficult. When you scroll across a word, a drop down box displays the sentences in the speech where the word appears.

You know it's a good day when...

...your copy of The Invisible Hook was waiting for you when you got home. Just puts a nice kick in your step for the rest of the day. I'm getting through Slash (very good thus far-- will comment on when done) and will start Flights of the Mind here shortly, but I can't resist cracking Leeson's effort. The Penguins start the Stanley Cup playoffs tonight and I'll start it then.

New addition to TPS: Will Luther

It is our pleasure to welcome Will Luther into the fold as the sixth blogger here at TPS. Will is in his first year of the PhD program in Economics at George Mason University. His current blog is here. There's some more info about him here.

I look forward to Will's contributions. Just think, after 2 posts, he won't be at the bottom of the total posts ranking anymore! (Hi Claudia!)

While we have undoubtedly improved with Will's addition, we have also necessarily decreased the probability that the ever-elusive team photo will ever happen...

Guatemala: The rundown

I'm just back from Guatemala, here are a few thoughts:

- On the business end of things, I am extremely pleased with our session at the APEE Conference. I say "our" as it was designed, at least in part, to be a TPS session. Claudia presented a nascent paper pushing the development envelope forward, finally finding a proper connection for geography, culture, institutions and growth. David presented his very enjoyable work on the economic of organized crime, with a particular emphasis on the Mexican Mafia in California. I spoke on the distribution of legislative tenure in the United States Congress and its impact on legislative productivity. I won't comment on my work, but I found the other two presentations terrifically engaging and, simply put, interesting. The three of us were discussants for each other's papers, which gave a nice, friendly groundwork for the audience to chime in after the presentations and discussant comments. I also feel that we were fortunate enough to hit the optimal number of audience members-- about 15. Any less than that, and a good enough discussion can be difficult to achieve, or comments exhaust too quickly. Any more than 15, and sometimes comments that would emerge in smaller groups remain unsaid.

I was so pleased with the session that I think we should aim for a TPS session every year-- we can even keep the Jeopardy!-inspired title of "Economics Potpourri" if we see fit. The primary goal is that the work has to be interesting; I also liked the fact that we discussed each other's papers, I think it was a nice touch that set a nice tone for the ensuing comments.

Justin was originally on the agenda as well, though he got a bit busy this semester and couldn't make the trip. I have no doubt his presentation would only have made the session a greater enjoyment for all attending.

- Also on the business end of things, we may have a new blogger joining us here at TPS...news (hopefully) to come soon.

- I had the good fortune of seeing a few places in Guatemala over the last week or so. The Mayan ruins at Tikal are stunning; it is a bit out of the way (1 hour flight from Guatemala City to Flores, then a 1 hour cab ride to the ruins) but well worth the trek. Staying the night at the park is best so an early morning entrance can happen. I had previously been to the ruins at Tulum-- those are a nice collection in and of themselves, but simply can't compare if for no other reason for the sheer size of the ruins at Tikal. Further, you are allowed (if not encouraged) to climb most of the structures at Tikal-- it's like an adult junglegym, though some of the larger temples are not for the faint of heart, especially Templo V. (Note the ladder to the top here.) Independent of convenience, if you see one thing in Guatemala, it has to be Tikal.

We also visited Antigua, which I felt was slightly overrated given the hype though nonetheless enjoyable, Monterrico, a terrific town directly on the Pacific Ocean, and climbed the Volcan Pacaya, a nice mid-level hike on an active volcano that made noise the entire trip up and back.

All in all, the country is very affordable, the food was superb, the people were very friendly, it helps to have some Spanish language knowledge but English can generally get you what you need, travel between cities can be mildly inconveient but ultimately doable, and safe as long as you aren't foolish about your whereabouts. Given its price and close proximity to the United States, it's a great warm weather destination.

Adam Smith's TMS Reading Group

In case you haven't heard, Russ Roberts and Daniel Klein over at Econtalk are doing a bookclub series of podcasts covering Adam Smith's Theory of Moral Sentiments. For anyone who has yet to have the pleasure of reading this text, this is an excellent opportunity to do so. You can find an overview podcast here, where Klein and Roberts discuss general themes in the book such as Smith's conception of man, the nature of man's sympathies, and thoughts on justice. They will do podcasts covering sections of text beginning tomorrow with Part I. A free online copy of the text is available here or you can purchase your own through Liberty Fund here.

I find this book the most facinating insight into causal forces driving man's actions. This text directly influences some of the research projects I am personally pursuing, and I am looking forward to reading along with Russ and Dan.

Local Government User Fees

Blogging will be light this week, as I am in the process of moving, but via e-mail I've received a interesting question from a student that I think others would enjoy pondering in their own right.

Q1: What is my position on user fees? For example [note also that WVU-grad Gary Wagner is quoted in the article]:

Washington’s mayor, Adrian M. Fenty, has proposed a “streetlight user fee” of $4.25 a month, to be added to electric bills, that would cover the cost of operating and maintaining the city’s streetlights. New York City recently expanded its anti-idling law to include anyone parked near a school who leaves the engine running for more than a minute. Doing that will cost you $100.

Another example is being charged for the police services when you cause an accident. I am actually in favor of user fees. I know the concern is that they are used in-addition to property taxes, but that is simply replacing future increases in property taxes. User fees get me two things I like:

1. A closer link to the cost-benefit principle of those who get the benefits bear the costs. What geographies within the locality should bear the cost of the street light? That's the kind of question that is more likely to get asked with user fees.
   
2. Overcome tax/fiscal illusion, for which I think the behavioral economics is quite convincing exists. The more visible the cost of streetlights, the more closely my neighbors and I will scrutinize them. It is hard to see what share of my property taxes fund schools and what share goes to streetlights.

I think many would see this as just another tax to get huffed up about...but that is the point! If you are getting huffed up about it because it feels like you are paying SO many taxes, as opposed to just your property and sales taxes, then others will as well. They are getting a better feel of the costs. If you take away user fees, you will probably just end up with higher property and sales taxes, so governments seizing more tax revenue is really a sunk cost.

No Free Prayer

Religious rent-seeking for Obama's Sunday mornings. You will most likely enjoy the entire article:

Mr. Obama’s search for a church home has touched off a frenzied competition among ministers of various colors and creeds who are wooing the first family. The president, in turn, has sent emissaries to observe worship services, interview congregants and scrutinize pastors. (His aides even searched YouTube to vet one local minister.)

Feng-shui of emergency shelter?

In my research on the political economy of natural disaster reconstruction, temporary housing plays a significant role in much of the political discourse and policy implementation in the aftermath of the destruction. Pictured above is designer Ming Tang's prototype for post-earthquake shelters. He describes the project as contrasted against the 1.5 million shelter homes the Chinese government plans to construct in response to an earthquake that killed 69,000 people last year. As Tang describes it,

"The central feature of our project is the development of temporary shelter to house homeless people, a kinetic structure that exhibits features of umbrella and folded fans, the potential of arranging themselves into variety of contexts and living requirements....a self reconstructive structure for instant installations, which, according to the changing internal requirements and site topography, can produce potentially infinite scenarios. The Folded House is transported to site and modified by the social, economic and cultural requirements of the user."

The Chinese equivalent of FEMA trailers. The design remains in the mind of its creator, and part and parcel with all urban designers, there are Utopian depictions of the model in use (see below). So far however, these structures have yet to be implemented by either by government or purchased for production by a private company.


Aesthetically, these emergency shelters please me in a "crouching spider" sort of way. Aside from the vast amount of waste that would result from government subsidization of this scheme, there are two potential upshots here. First, the technology of these housing units has a built-in expectation of the temporary nature of emergency housing. Second, the Folding House is subversively individualistic in design and suggested implementation. Plus, its as easy as origami.

(Hat tip to Kyle at apartmenttherapy.com)

My Blogging Birthday

Today is April 11th, exactly 1 year from my first introductory blog post here at TPS. Since that time, we have also had the excellent additions of Claudia and Emily. In case you are relatively new to the blog, here are my favorite 5 TPS posts of the last 365 Days, in no particular order:

1. Claudia's regressions on Big Foot and UFO sightings.
2. Matt's defense of non-capital punishment for child sex offenders. It is the perfect blog post.
   
3. David's post on what becomes of labor when you regulate it.
4. Emily's post on creative art history revisionism.
   
5. A tie between my posts on tipping prostitutes and the Tragedy of the SPEA Microwaves.
   

I am also partial to the on-going series of children's books for economists ;)

Markets In Everything: Obama's ASU Commencement

From the CHE:

Some of the university’s seniors are offering their tickets to his May 13 commencement speech on Craigslist for $60 to $100 apiece, and others are auctioning their tickets on eBay, according to CNN. Seniors can pick up as many as six free tickets to the event, scheduled for the university’s Sun Devil Stadium, which has a game-day capacity of 71,706. But not all seniors plan to attend — in part because of the inconvenience caused by the president’s presence. “You have to get through security, then you have to hear him speak, and then you have to get out,” said a student who told CNN he’s not going.
...
The university announced on a graduation Web page that no student could take “any action to sell, trade, or barter the ticket, or to assign or transfer the ticket for any consideration whatsoever.”

True to CHE form, the comments start to turn batshit crazy by #3.

Get Used to It

Reason on the rush to ban e-cigarettes:

Meanwhile, supporters of the bill, which the Senate will consider later this year, are demanding that the FDA ban e-cigarettes, a potentially life-saving alternative for smokers, as unauthorized drug delivery devices. Last month Sen. Frank Lautenberg (D-N.J.), who brags that he is "one of the Senate's leaders in protecting Americans from the dangers of smoking," urged the FDA to take e-cigarettes off the market "until they are proven safe." The next day, the American Cancer Society, the American Heart Association, the American Lung Association, and the Campaign for Tobacco-Free Kids applauded Lautenberg's position.

Michael Siegel, a professor at the Boston University School of Public Health, did not. "This is about as idiotic and irrational an approach as I have ever seen in my 22 years in tobacco control and public health," he wrote on his blog. "A public policy maker who touts himself as being a champion of the public's health as well as some of the leading national health advocacy organizations are demanding that we ban what is clearly a much safer cigarette than those on the market, but that we allow, protect, approve, and institutionalize the really toxic ones."

That is what it is like almost every day for those of us that study economics. Almost daily we watch policy makers claim they want to bring the poor out of poverty or increase the standard of living, only to have them then turn around and propose policy that does precisely the opposite. Why? Because some crazy activist with irrational, knee-jerk, and oftentimes elitist, positions on market policy want them.

Is the Public Smarter Than I Thought?

Maybe they are under this possible interpretation of a discrepancy in polling, from Rasmussen Reports:

Only 53% of American adults believe capitalism is better than socialism.
...

It is interesting to compare the new results to an earlier survey in which 70% of Americans prefer a free-market economy. The fact that a “free-market economy” attracts substantially more support than “capitalism” may suggest some skepticism about whether capitalism in the United States today relies on free markets.

Other survey data supports that notion. Rather than seeing large corporations as committed to free markets, two-out-of-three Americans believe that big government and big business often work together in ways that hurt consumers and investors.

Fifteen percent (15%) of Americans say they prefer a government-managed economy, similar to the 20% support for socialism. Just 14% believe the federal government would do a better job running auto companies, and even fewer believe government would do a better job running financial firms.

Perhaps I give the public too little credit, but I also think they don't recognize socialism when it smacks them in the face. If you were to ask "would Obama do a better job running auto companies" then I suspect that number would jump quite considerably, demonstrating (among other things) a considerable lack of foresight.

Cuba's Hospitals

Proceed, if you have the stomach. Pictures from here and here

I Heart Capitalism

I recently purchased a several products from Best Buy for my new house. The entire process of shopping there illustrated the many wonders and benefits of competition.

• Best Buy offered 0% financing for 18 months, allowing me to consume my future earnings today. Had they not offered this, I would have gone across the street to Sears for a similar offer.
  
• The home theater systems and blue ray players, major items, were sold at very competitive prices. I know this without having to visit multiple competing retailers, because I did my homework online. Since most people do their homework on large major purchases, everyone gets this low price.
  
• Like most retailers, Best Buy makes its profit on the cross selling of high margin items (warranties, cables, etc). This works because folks like me do their homework on the major items and forget about these supplementary items.
  
• I use my cell phone that has Internet Explorer, a recent innovation for cell phones, and check what Amazon retails these supplementary items. I find that Amazon will ship to me the wall mount at a price 54% below Best Buy's, and HDMI cables at 20% of Best Buy's price.
  
• I inform the Best Buy rep of this discrepancy, he informs his manager, who then matches the Amazon price. Total savings is about $154 on both the wall mount and HDMI cables.
• The $154 was my cell phone's marginal product, roughly equivalent to 5 months of payments I make on the phone.
  

The Roosters' Dilemma

I enjoyed reading this about John Napier, inventor of logarithms:

Napier used this rooster to find out which of his servants had been stealing from his home. He would shut the suspects one at a time in a room with the bird, telling them to stroke it. The rooster would then tell Napier which of them was guilty. Actually, what would happen is that he would secretly coat the rooster with soot. Servants who were innocent would have no qualms about stroking it but the guilty one would only pretend he had, and when Napier examined their hands, the one with the clean hands was guilty.^[5]

At Least We're Not Russia

I'm glad I don't find myself thinking that more often than I do. From the NYT:

Known as Avtovaz for short, it is one of the least efficient automobile factories anywhere in the world — each worker produces, on average, eight cars a year, compared with 36 cars a year at General Motors’ assembly line in Bowling Green, Ky., for example.
...
The factory, a monument to Soviet gigantism in industrial design, is a panoramic sprawl of pipes and smokestacks on a bank of the Volga River, 460 miles southeast of Moscow. It employs 104,000 assembly line workers, many of whom still toil with hand-held wrenches.

This factory persists because of subsidization and bailouts from the Russian government. The details of the bailout are less invasive (no executive firings or requests for a new business plans), but I see that as political hubris that unintentionally serving the role of deterring more firms from finding government bailouts attractive.

Hat Tip: Dave Esposito for the link.

Harvard Student v. Barney Frank

Student to Frank: "How much responsibility, if any, do you have for the financial crisis?"

What follows is a must see. About 5 minutes long, sorry, no embed option.

The student is the far better statesman. Frank is understandably defensive, as people are coming around to recognize his level of involvement.

Hat Tip: Jason Oberle

I Love This Question

From the NBER:

Can a rational choice modeling framework help broaden our understanding of anorexia nervosa? This question is interesting because anorexia nervosa is a serious health concern, and because of the following issue: could a rational choice approach shed useful light on a condition which appears to involve "choosing" to be ill? We present a model of weight choice and dieting applicable to anorexia nervosa, and the sometimes-associated purging behavior. We also present empirical evidence about factors possibly contributing to anorexia nervosa. We offer this analysis as a consciousness-raising way of thinking about the condition.

Local Currency

Almost every time there is a recession, we hear more about the issuance of local currency. This was probably most prevalent during the Great Depression, when the federal currency was in contraction (see Williamson et al.). Suzie Witmer at 4 am frames the concept correctly and then asks all the right questions:

This would be like saying Walmart created its own currency when it started creating gift cards. An interesting part about this system though is while you can purchase almost everything at Walmart, people would be protesting if this company started paying their employees with gift cards....what happens though when participating members want to go on vacation in an area beyond Ithaca's borders?...What if they wanted to purchase a car that is not created in Ithaca and therefore does not accept Ithaca Hours as trading power? What if a neighboring community has higher quality products or lower prices on equal goods?

Indeed,Claudia has pointed out that coal mines in West Virginia often provided their own "company stores" as part of a package of benefits to their employees, and that company store "price gouging" was a myth. There is no functional difference between company stores, gift cards, and local currency.

On the surface Ithica Hours do seem to be voluntary, employers don't have to pay them and employees don't have to accept them. Given all the constraints Witmer points out, why does anyone adopt them? This isn't the Great Depression, where the federal money supply was choked off.

The motivation of the organization behind Ithica Hours seem to be your run-of-the-mill buy local fallacy, and amusingly they clearly recognize the advantages of expanding membership to as many people as possible. The organization appears to attract members by creating networking and advertising opportunities, as well as offering business loans in Ithica Hours at a interest rate of zero percent.

This subsidization appears to rely on donations, so fortunately the unseen consequences of the underlying fallacy are largely voluntary in their distribution. Since it is voluntary buy local bias, the people who prefer them are probably only substituting the color of their money, so the marginal cost of this program is probably pretty small.

Disappearing Car Door

Hat Tip: Jeff Heyde

Tax Freedom Day, 2009

Here's the rundown on Tax Freedom Day 2009. The concept is simple: If, when you started working on January 1, you first paid all of your taxes before you kept any money for yourself, when would you begin earning money for yourself? It's a nice way to get a sense for the magnitude of taxes.

Their calculations-- and they admit this in certain places-- are skewed a bit by income levels. You'll notice that the states they project to have the earliest Tax Freedom Days next year are Louisiana, Mississippi, South Dakota, and West Virginia-- not exactly the top of the income charts. Of course, higher income states pay more in taxes due to the progressive income tax system at the federal level (and in a number of states, too). So that needs to be kept in mind when looking at these listings-- it's tempting to look at the earliest date and say that its citizens are subject to the kindest tax system, in relative terms. Well, they are the least burdened-- but that's not entirely a function of their state's tax system compared to everyone else's. In fact, you could have an elasticity issue here-- the increase in taxes paid due to a poor system balanced by the decrease in taxes paid due to the poor system harming economic growth. (Though there are a number of margins here-- corporate, income, property, etc.-- this is just a generalization.) The Tax Freedom Day figures would suggest that the latter is winning. Which could also suggest we're all on the upper portion of the Laffer curve.

I'm trying to imagine how one could adjust for this; though maybe you wouldn't want to?

Congrats to Claudia and Emily!

Many congratulations to go around, as of late:

Emily successfully defended her dissertation and has taken a job at San Jose State.

Claudia joins Bill Easterly's Research Development Institute at NYU.

Everyone is very happy for you both!

Spolitical

TPS All-Things-Sports Consultant Rob Holub sends along Spolitical, "a blog devoted to the innumerable ways in which politics informs, influences, and (occasionally) infects the sports world."

I like this post-- capping salaries is plainly absurd-- though ticket prices would change. Prices are determined by the interaction of supply and demand, and capping salaries affects the offer (supply) curve for ticket prices. If nothing else, capping salaries affects the fixed cost, and that monkeys with the average total cost curve. The effects on the prices of everything else could be argued a lot of ways. Ceteris paribus isn't terribly easy here.

Give the blog a read-- I'll add it to the Rolodex. Thankfully, we have categories for blogs, politics and sports. Wasn't a tough choice there.

Cigarette Tax

Typical nonsense here concerning the increased cigarette tax. Let's go over the Principles-level basics...

1) Not liking something is not a reason to tax it, not in the economic sense anyway. Though it just struck me that it might be a good example of the divide between political costs and economic costs. Perhaps we should tax the "hot, juicy steak" smoke since I don't like the feeling of hunger it encourages?

2) Some people say that taxing cigarettes is good since people "have to have them," i.e., the demand for them is inelastic. Fair enough; low deadweight loss in taxation is a reasonable goal, and Ramsey would be proud. Then people come around and say it's good to tax them because it will significantly reduce their consumption, and that's a good thing since cigarettes are little white evil sticks. I want these people to argue with each other. Sometimes it's the same people saying both things.

3) Saying that taxing smokers makes fiscal sense since "it hits us in our pocketbooks eventually" (via public health care) is a misplaced argument; that's a problem with the public provision of health, not the smoking of cigarettes.

Let it also be said that I've never smoked a cigarette in my life, don't anticipate doing so and hope that I don't, yet cigarette taxation, and its increasing excess, is an embarassment.

I'm also curious if a study has been done to compare, in a cost/benefit framework, the costs of increased public medical burden due to smoking, but in light of the increased benefits of early death to the Social Security system.

Cyber Czar

What is so attractive about the label "czar" that we have to have one in every regulatory office?

The proposals, in Senate legislation that could be introduced as early as today, would broaden the focus of the government's cybersecurity efforts to include not only military networks but also private systems that control essentials such as electricity and water distribution. At the same time, the bill would add regulatory teeth to ensure industry compliance with the rules, congressional officials familiar with the plan said yesterday.

Addressing what intelligence officials describe as a gaping vulnerability, the legislation also calls for the appointment of a White House cybersecurity "czar" with unprecedented authority to shut down computer networks, including private ones, if a cyberattack is underway, the officials said.

Predictably, I'm not impressed with this idea. It reminds me of the "we can't wait for a mushroom cloud to act" argument the Bush Administration used to throw around to scare people into their corner.

Private institutions have enormous incentives to keep their information secure, and the take multiple approaches to do it. My suspicion is that popularity is a detriment to private networks, not a benefit. Macintosh computers were considerably safer from virus attacks for a sizable period because Crackers preferred the more popular Microsoft PC's. Therefore, my concern can be summarized as:

1. If the regulate a specific technology, cracks will increase rather than decrease, as many minds converge on a single, popular, and stationary target.
2. If they simply regulate certification, what's the point? Private industry firms are already terrified of these exact same concerns, and regulatory compliance will be very expensive. If you have ever paid a technician to fix your computer, you know this is true.
3. It will likely turn into an attempt to introduce limitations on the available labor supply in an industry where there is a lot of self-taught talent. The article even hints at this:
   

   It also would require licensing and certification of cybersecurity professionals.
   

   Yes, because firms are so quick to just put any joe-schmoe in charge of one of their largest capital expenditures.
   

Hat Tip: Jason Oberle