Bodies refunds!

I saw this piece on CNN and enjoyed it for the most part-- it's on plastination and the increasing numbers of people signing up for the treatment for their remains after they pass. It's the process behind what you see at the Bodies shows, which I recommend if you get the chance-- I usually get a bit squirmy around stuff like this, but experienced nothing of the sort when I saw it a few months back.

However, about halfway through the article, I ran across this little ditty:

"In a settlement with the New York State Attorney General's Office, Premier Exhibitions admitted that the specimens used in "Bodies ... The Exhibit" might be victims of torture or execution from Chinese prisons. The settlement requires that Premier Exhibitions obtain proof of donor consent for specimens used in its shows. The company has also set up a fund to compensate...

...(wait for it)...

...visitors to its New York show."

Really? I mean...really? Those are the people that get compensated? And on what grounds? Dana, I'm going to need some law help on this one. Mind you, people voluntarily went to this exhibit, all that changed in their perspective is how the bodies were obtained. What does that change in terms of the experience each visitor expected and received? I'm not justifying how they obtained the bodies but...really? The visitors get compensated?

Should you get a refund to a magic show if you learn about how the tricks were performed after the fact? What about if a circus coerced any of its performers?

This one gets me.

One Standard Will Do Just Fine

Why do economists think of competition as being beneficial to society? For now, think only of the producer side. Firms, locked competition with each other, continuously discover ways to meet consumer needs, only to experience temporary profits and losses before their competitors match them in some dimension. The social benefits:

• Production
• Innovation (technological, product quality, etc)
  
• Greater purchasing power of consumer incomes
• Maximum efficiency gains (consumer and producer surplus is maximized

However, the term "firm" is just a linguistic shortcut used by economists. In reality, a firm is a collective of households, who may or may not know each other but interact through this collective entity that may have a purpose entirely different from their own. You cannot tax a firm. There is no entity like a Microsoft wandering around who can be taxed or punished. You can only do these things to households who are represented collectively as "Microsoft." For this reason, economists place equal weights on consumer or producer surplus and treat them as what they both really are...households.

Those who suggest a role for government in "solving" positional externalities miss this last point. They never seem to suggest that competition among producers is bad, but when some household buys a nicer car than his/her neighbor, thereby inducing their neighbor to try and buy a nicer car it is seen as some kind of social treadmill (as Robert Frank describes it). The households are locked into ever increasing workload without any real gain in relative social status. Therefore, they say, we should regulate the work week hoping to avoid this outcome.

This is a double standard. They will either have to wage a campaign against the concept of a competitive equilibrium maximizing social benefits or abandon the correcting of positional externalities altogether. What is the point of buying some cost saving technology when the competitors will just adopt it also, eliminating those gains? A grocery store that tries to compete customers away from its rival by increasing the number of hours it is open is no different from the neighbor who puts in overtime so that they can put nicer siding on their home. Even if competition eliminates their temporary gains, their production to the rest of the world leaves it a better place.

Ah, tree sitters...

I've read about the Berkeley tree protesters before; here is a particularly absurd article about them. Just to clarify--they are protecting a 1920s landscaping project, and preventing a replacement project from being assembled in another area. It could be construed that the current protesters are preventing the construction of a landscaping project that Berkeley protesters will be protesting to save 80 years from now.

Anyway, it was the lines in the article that got me chuckling, so on to it...

"They're very well-trained tree climbers."

"Protesters howled, flung excrement and shook tree branches as campus-hired arborists cut supply lines and removed gear. But by late this week, campus police were conducting delicate negotiations with tree-sitters, offering to provide food and water if protesters would lower their waste on a daily basis in the interest of hygiene. Campus officials ended up giving up the water without concessions; protesters declined to yield their urine."

Good times.

Obama and taxes, part 2

Justin brought up the issue of Obama and taxes a little while back; CNN clarifies the issue a little bit more this morning. It seems $200k single/$250k joint is now the magic dividing line, and top tier tax rates increase as well.

I'm guessing Obama lands in the "ability-to-pay" camp, as opposed to the "benefits received" camp.

Better word to describe Al Gore: Green or Red?

The good folks at the Tennessee Center for Policy Research have been keeping an eye on uber-environmentalist Al Gore. Remember when it was reported last year that Gore's Tennessee home used far more energy than the average home? The TCPR dropped that story. Anyway, they've kept an eye on the "green" improvements to his house over the last year, and guess what? He uses even more energy than he did before!

The Tennessee Center for Policy Research gets the TPS Seal of Approval.

Capital Punishment for Rapists

There is a growing debate regarding capital punishment for child rapists. This is one of those issues where anyone that takes the "no" position gets painted as sympathetic towards the most heinous of crimes. This isn't a statement for or against capital punishment, but given that it exists, people need to realize why rapists are not subject to capital punishment-- because this makes the marginal punishment for murder after rape zero. Would there be more rapes if the punishment were higher? No, that number could only fall (assuming criminals value life in prison over death), but the percentage of rapes that would become murders would rise. Rape is horrible, no doubt-- but the secondary effects of such legislation need to be realized.

What is the Profit Maximizing Level of Aisle Clarity for Big Box Stores?

I received the following question in an e-mail from a student today:

Is it the intention of "big box" stores to make it difficult for people to find there way around the store? I have noticed that only major sections are marked in these types of stores. For example the signs will just say "Bath", "Outdoor", "Electronics". Is this because they want you to spend more time in the store looking around for what you want because then you might purchase more?

Hanging signs is costly so I agree that it seems unlikely this is an accident, but I don't know the answer. It is impractical to list everything in an isle, but not particularly helpful when it is so vague, so what is the profit maximizing level of clarity for isle labels of the big box stores?

Comments are open.

Paramedics, continued

So it turns out that a student that came into the office this morning has a significant other who is a paramedic. Jackpot! I've always wondered why paramedics make so little; here's what I gleaned:

- Salary information was, on the whole, accurate. She mentioned paramedics in larger cities make more, but I'd doubt it's much more than a rough cost-of-living adjustment.

- It turns out that you don't need that much training to be a paramedic, or at least not as much as I was imagining. In order to be an EMT (the one who drives the ambulance), it takes one year of night classes, and depending on the outfit you are with, it could take more classes/tests/experience to graduate to paramedic status (the one in the back working on the patient). I don't know what I was imagining, but I think it was more than that. The supply of paramedics/EMTs is not as inelastic as I believed.

- Said significant other, at least partially, became a paramedic as a stepping stone to another job. She verified that it would be a plus on the resume for the job he was going for to have had experience working as an EMT. I (still) think this is the biggest reason to explain the seemingly low wages.

- She mentioned turnover in the paramedic industry was high; that doesn't surprise me. But it does lead to some interesting questions. Is experience not valued? Evidently not; higher wages would retain more EMTs. (On a side note, is it scary that you are likely to have an inexperienced EMT coming to get you when you're in bad shape?) Do new paramedics persistently lack information about the job they are getting into? Evidently, a lot of paramedics get out of that line of work after dealing with not-too-pleasant things day after day (I know I could never do that). Why the constant information shortcoming, i.e., why do people consistently not know what the job entails? Perhaps it's something that existing paramedics don't want to talk about. The fact that a lot of people find out that EMTing isn't for them could explain why wages were low to start with, but not why they would continue to be low.

I'm still a bit perplexed.

Dataset of the day: Required vacation days

Like any empirical economist, I love data. While trolling around today, I happened across this dataset, of legally required vacation days by country.

Required vacation days, along with minimum wages, maternity leave and workplace safety laws, are often mistakenly identified as the causes of wealth. After all, it is rich countries that have these labor laws, so the path to prosperity must be through workplace regulation, right? (Policy recommendations have actually been framed in this manner; sub-Saharan Africa has been advised to offer more maternity leave along similar lines.) But don't confuse wealth producing policies with the wealth reducing policies that already wealthy economies can withstand. The same could be same for increasing the welfare state; all of these policies do not enhance the well being of an economy, but can be withstood by an already vibrant economy.

Revealed Preferences for Relative Status

Naked Self-Promotion:
As promised, here is a new working paper by Susane Daniels and myself. Titled "Revealed Preference for Relative Status: Evidence from the U.S. Housing Market."

This paper investigates the value individuals place on their relative status in consumption, as opposed to absolute status. Using housing data from five Ohio MSAs, we employ a spatial Durbin hedonic price model to estimate willingness to pay for both relative and absolute status. Using this revealed-preference approach, we find individuals, on average, are willing to pay $7,332 per 100 square feet for an increase in absolute house size, compared with $2,257 for an equivalent increase in relative house size. This strongly suggests that while individuals do desire relative status, they value absolute status significantly more.

Susane Daniels is entering her 4th year of the Econ Ph.D. program here at WVU, and is extremely promising. This is the lead essay of her excellent dissertation on Revealed Preferences for Relative Status. In the other essays, she examines the "relative to who" question, as well as breaking the results down by quintile to tease out the "who cares?"

What if burden equaled incidence?

In writing this week's column, I want to offer the following question:

Would there be any value in assigning the incidence of the tax to match the burden of the tax?

Obviously, tax burden will be different for each individual and for each good at every point in time, so you can't ever get it exactly right but it could be estimated closer-- let's say the sales tax become 50% you pay it at the register/50% the company pays after the fact. Would there be any effects from this? Clearly, theory dictates that incidence is independent of burden...but it is in actuality? Could we see some "irrational" response to this? My mind is spinning all over this possibility; I'm curious to see what anyone else has to say.

Favorite Things West Virginia: State Slogans

Millions of dollars, heavy debate, reminds me of this Simpson's episode. From what I can tell, the previous state slogans have been:

Wild, Wonderful West Virginia (1975-1991)
Almost Heaven (1991 - 2005)
Wild and Wonderful (2005 - 2006)
Open for Business (2006-2007)
Wild and Wonderful (2008-present)

Favorite Things West Virginia: Bonker Politics

Governor: Let's start with Phillip Frye, 2003 West Virginia Gubernatorial Candidate. Why did Fry run? Because incumbent Bob Wise had slept with his wife, and he wanted to be a nuisance to him.

Most surprising special interest group: West Virginia University Rifle Team
I did not know schools had rifle teams before I came to WVU, or that it is actually an NCAA sport. However, when the school tried to 86 around the time of my arrival, the state legislature stepped in with line-item appropriations. Since then they have been a political force and even though they don't make explicit endorsements, they have an audience around the state that takes a great deal of pride in them and want to know if they are unhappy.

Favorite Conspiracy Theory: My favorite conspiracy theory from the townies is the belief that Manchin (governor), Rockefeller (senator), and David Hardesty (former WVU President) have a standing agreement to ensure that they get to take turns as leaders of the most prestigious public positions in the state (governor, senator, WVU president). The names of the conspirators change depending on who you talk to, but I love the fact that a university president is near the same plane of power as the governor in the minds of the locals.

Favorite Act of Legislature: "The Friends of Coal Bowl." What do they get if they win? The Governor's Cup.

Favorite Things West Virginia: Country Roads

"Take Me Home, Country Roads" is of course a great song, but I bother mentioning it because of the debate among West Virginians over its worthiness. Take the following from WikiAnswers:

1. The song refers to the Shenandoah River, of which only a small fraction flows thru (sic) WV, the rest of it is in Virginia

2. Also referenced is the Blue Ridge Mountains, virtually none of which are in West Virginia

3. Rumor has it the song was originally entitled "Old Virginia"

#3 explains the confusion created by #1 and #2. I first learned of this from Joab Corey, who learned this from his High School Civics Teacher. Like many songs, the inspiration has a lot of folklore to it, so it is unclear, but very amusing.

Favorite Things West Virginia: Homeland Security

This is my last week in West Virginia, and as a result I keep going over the interesting things I experienced here that have made a long lasting impression. My previous post inspired my leading dissertation essay on Tax Assessor Incentives.

The above picture is the Ruby Memorial Hospital in Morgantown, where both of my sons were born. One thing I will never forget about Ruby though, is the day I learned that it was the #1 target for a terrorist attack within West Virginia.

How did I learn this? As my wife (Lisa) and I were being discharged from Ruby after my first son's birth (8/5/2006), my Mother-in-Law filmed Lisa and I load him into the car for the first time, directly in front of the hospital under the awning. A security guard approached the new grandmother and told her to shut off the video camera and that filming in front of the hospital was banned because Ruby was listed as the #1 possible terrorist attack sight in West Virginia.

I would love to know if this guard was just overzealous about his responsibilities, or if a list was actually generated and Ruby was #1. Another hospital of equal size was just across the street, why not them? Was this the result of successful rent-seeking for homeland security funds?

Capture Theory and Morgantown Tax Assessment

Capture Theory suggests that when a government regulatory commission exists, the parties with the most vested interest in the outcomes of those regulations will devote the most resources to seize control of it, using it for its own anti-competitive purposes. Consider this story:

MORGANTOWN, W.Va. (AP) -- The Monongalia County Commission says they've found nothing wrong with a property owner's 1,531 percent tax increase.

Morgantown property owner Jim Jones filed a complaint with the commission because his property taxes increased from $285.90 to $4,663.44 after he refused to sell his property to Chief Deputy Assessor Bill Perry.

County Assessor Rodney Pyles says the property was reclassified as part of a routine audit, resulting in a tax hike. But Jones says it was retaliation.

Bill Perry is one of the largest property owners and landlords in the county. For your convenience, here is an Excel spreadsheet of his property in the county, which is publicly available through the county assessor website.

WWJD? Burn A Cross into an 8th Grader's Arm!

Story from CNN. Yeah, I'm sure Jesus would approve of this.

Ode to a Rent Seeker

From Public Choice 48:271-272, by Charles K. Rowley:

I aim to seek out every rent
be it honest or be it bent
I seek out rent on every margin
let fools engage in wealth enlarging
Some may shirk whilst others toil
I spend my time on fertile soil
Government transfers I endorse
as a highly fruitful income source
Receipts in excess of gains foregone
mean others lose what I have won
With outlays less than Tullock cost
no-one can argue that I have lost
Stigler and Peltzman tell the truth
I make more than Babe(y) Ruth
Rectangles win, trapezoids lose
No wonder Harberger sings the blues
I spend upfront with great delight
To seize a durable monopoly right
Give me monarchs, divine right kings
for then the monopoly market sings
Congress I accept, even Tip O'Neill
though there rent margins tend to reel
Wealth is still transferred for all to see
but at a much greater cost to G.N.P.
God protect me from the final blow
when all the margins of rent are low
Let the margins be many and always high
so that I shall thrive 'till the day I die.

The State Against Blacks

An oldie but goodie from my professor Walter E. Williams:

Race to the moon, Google style

Since the Anasari X Prize went over well, I'm thrilled to see Google jump into the mix and offer $20 million to whomever can get a rover to the moon, have it move around, and send back some info by the end of 2012. Even better:

"One of the main requirements is to have as little government involvement in the project as possible."

Someone pinch me.

There are 13 teams currently going after the prize, but they expect the number to grow to 25. Would you rather have 25 companies trying to get there or one government?

Great news. In the coming years, expect outrageous statistics about how much more cheaply, efficiently, and just downright better the private sector can put a vehicle on the moon compared to the public sector.

Friday Facts

I may have blogged about this a while back, but it's worth a bump anyway. The Georgia Public Policy Foundation, Georgia's representative in the state-based free market think tank network, sends out a weekly email called Friday Facts, the archive is here, and you can sign up for it here. They're great facts to have in your back pocket; this week, for example, they've got a bit about New Mexico lowering their income tax rate (dramatically, actually) and showing an increase in tax revenue, so you can toss that in for your Laffer curve discussions. There's also a link to a study looking at overinsured Americans in terms of health care.

I recommend. Friday Facts gets the TPS Seal of Approval.

File this under: Rational Ignorance, Embarrassment of

Line of the day, from a 1988 law review article:

"A 1980 study reported that only one voter in ten claimed to know how her Representative had voted on a piece of legislation during the preceding two years, but more than two-thirds of those voters claimed to have agreed with the legislator's votes."

Denmark wins the happiness race

I know how much Justin loves happiness surveys; here's the transcript of a story that ran on 60 minutes last Sunday trying to figure out exactly why Denmark continually is the happiest country. I won't argue on the margin of why we're even declaring places "happiest"-- let's just assume there is some value. The article hints at one of the crucial shortcomings of the happiness research: Expectations. Happiness is at least partially a function of how close you are to what you were expecting. At the extreme, if you're expecting horrible things and get just really bad, you could conceivably rank higher in happiness than someone who expects the world and gets just better than average. Expectations could come from culture or history or any of a number of sources, but it certainly plays a role. Comparing surveys across countries assumes either that they don't matter or everyone has the same foundation form which they judge their happiness.

Bob Lawson had a terrific blog post on happiness over at Division of Labour a little while back. In his eyes, and I agree completely, happiness is a flow variable, not a stock variable. I eat a sandwich now, I'm happy. I'm hungry in a few hours, I'm not happy. I can't build up on happiness from the previous two days to make me feel less unhappy about my hunger. Asking how much happiness a country has is like asking how much energy a country has. Well, you can say how much energy a country uses, or its rate of electric generation, but you can't really describe electricity as a stock variable.

Happiness surveys, though treat happiness as a stock variable. They count how much happiness units everyone has, stack them up (Arrow be damned) and see who has the most. It doesn't really work like that.

Take care when arming your loins with a thong

Dana, as a lawyer and a female, please comment on this Victoria's Secret lawsuit business.

Actually, as foolish lawsuits go, this seems to have some legal merit. Then again, I didn't go to law school.

File this under...what the blogs are saying about your dissertation committee members

There's really nothing more to say than: This is fantastic on a number of margins.

Soccer thoughts

As I'm watching the conclusion of round robin play in Euro 2008, I got to thinking: Is there less trash talking in sports where the native languages differ? You could construct a fractionalization index for each sport if you really wanted; don't you think this might have to do with the level of jawing between the players? Wouldn't you say trash talking in NBA basketball has gone down over the last 5 years? Haven't more international players entered into the mix? Yes, I know they can speak English, but if I were in Spain I wouldn't feel comfortable yakking in my broken Spanish.

Also-- my soccer knowledge is slowly increasing, but what's with this "2-0 is the worst lead you want to have; most people would prefer 1-0." Huh? The idea is that your team plays a bit more relaxed; in any case, it's ludicrous. It's along the lines of "a damp sponge holds more water than a dry one." That always frustrates me. Whatever amount of water makes the dry sponge a damp sponge, so long as its nonzero, necessitates a dry sponge hold more than a damp sponge. What usually isn't said is that they are probably referring to the ability of a damp sponge to take in a fixed amount of water quicker than a dry sponge. At least I hope so; that could be argued. Saying it simply holds more is just ignorant. Similarly, whatever marginal advantage you gain from having a 2 goal lead-- even if nothing more than it takes a minute off of the clock-- gets added to the 1-0 lead advantage and you're strictly better off. Don't buy momentum arguments; if that holds any value, you could slippery slope yourself to a 10-0 lead bring inferior to a 1-0 lead.

For what it's worth, Spain and the Netherlands have looked strongest, and Switzerland and Austria both failed to capitalize on the usually-substantial home country advantage and will be watching the knockout phase from home. (Well, they'd be at home anyway, but they won't be playing.)

Sexual Preference and Brain Makeup

There's an interesting piece from Time about physical differences between the heterosexual and homosexual brain. It seems that those after women-- heterosexual males and homosexual women-- had brains that were mildly asymmetrical. Those after men-- homosexual males and heterosexual females-- had brains that were more symmetrical. The impact here, though the biology types here may have something more of substance to say, is that it's not just regions of the brain devoted to reproduction and sexuality that seem to play a role.

Taken at face value, this study strikes me as something that could then be a predictor of sexual preference, possibly before birth. Again, I'm not a biology expert, but I'd suspect brain asymmetries would exist from a very young age. Insofar that people have preferences about these things-- and I think it's a fair assumption to say that some people do-- then this could well lead further down the path of gene selection and choosing for yourself a child with characteristics you prefer. Without starting a holy war, I'm tentatively for gene selection, though could well be swayed with a convincing argument. I think you'd make the same arguments for gene selection of children that you'd make for coercing them to eat their vegetables, though part of your gene selection decision helps form the preference set by which you are supposed to be acting on their behalf. Yikes. Would you then have to play by some overarching set of preferences above both you and your child? This gets messy very quickly.

Interesting, too, was the part at the end concerning tendencies of men for younger partners, regardless of sexual orientation, and the opposite in women, again regardless of sexual preference. Once more, taken at face value, doesn't this lend towards a stable (unstable) equilibrium for heterosexual (homosexual) relationships?

Worst Blog Posts

A few days ago, Marginal Revolution's Alex Tabarrok was deemed by EconLog's Bryan Caplan to have written the "perfect" blog post on Senate cafeteria privatization. I agree, it is excellent, but what are the worst blog posts you have read? What sticks out in your mind as being so bad, that they stay with you for years.

I have four that come to mind, which are all from Steven Dubner at the Freakonomics blog, and demonstrates why it went from my "always read" blog 2 years ago to my "almost never read" list:

1. This embarrassing rant on behalf of the New York Times, in which he claims the NYT's new policy of allowing college students to have free net access to be "a huge move, and one that will reverberate throughout every discussion of the new business model/s for journalism." Giving free stuff to college students was not even a new idea for newspapers at the time, or anywhere else.
   
2. Dubner asks why Thomas the Train Toys were so expensive ($10-$20) if they were made in China. Their being made in China instead of Wisconsin (his previous thought), of course, explains why they were not $25-$40.
3. Dubner complains about econospeak (fair enough, plenty to agree on there), but he cites the title of an econometrics working paper as an example. There is no simpler way to describe treating heteroskedasticity in a title than using the word "heteroskedasticity." Especially when the target audience or any undergraduate econ major will know what it means.
   
4. Dubner points to media bias in the Wall Street Journal when comparing headlines for the same story to the NYT, comically without realizing his own subjective bias in deciding which one is biased.
   

FWIW: Cafe Hayek is my favorite blog these days, particularly the posts of Don Boudreaux. While I have had a great deal of volatility in which blogs I read, the only one that I have read consistently almost every day over the last 3 years is the always excellent Division of Labour.

Don't tell me what I value!

I always get a kick out of commercials trying to sell you something; in fact, television commercial superstar Billy Mays supposedly went to the same undergraduate institution that I did, though I can't confirm it. Though only now did I notice the language that they use in the commercials is economically very misleading.

The usual plug: "Buy this product, get this other product-- a $X value-- free!" As an economist, of course, I'm thinking that value is subjective. Which leads the following deductions:

- If we've got a distribution of people that value the product at different amounts, only a small fraction will be placing that exact dollar value on the free goods. So at best, I'd say the commercial accurately speaks to a fraction of a percent of the population. It would also be speaking favorably to those who value the free goods more, in my opinion, since undercutting the value of it might elicit a stronger response from those who really value the goods a whole lot. ($40 value for the free jimmy legs?! No way! I'd pay $200 for those puppies!) Then again, by convincing the viewer they are getting something more valuable for free, it might induce them to buy if they don't have an opinion in the first place. So I guess it's an elasticity issue between those who know their preferences and those who don't and want to be told them.

Also, I'm not certain if you can ever unbundle the paid-for goods from the free goods (I don't think I've ever bought anything off of the TV), so marginal analysis is fruitless here. It would be interesting to have time when the free goods were available or not...that might give some better info the average societal value of these goods. Then again, the people calling are presumably looking to buy in the first place...you'd have a pretty severe selection bias. It'd work better in a store; how many would buy just the original goods for a price, how many more would buy the goods with the freebies added on. Again, the point is not that the goods have an actual value $X-- take that, labor theory of value!-- but what the average person might value it at. Which may or may not have any redeeming quality in and of itself, outside of being a bit more accurate.

- If accuracy is the goal in advertising-- and that's a stretch-- then a more accurate way of phrasing the free goods might be stating the cost of them. After all, they would have a computable dollar cost per good. I'm not sure that would attract many sellers, however. (We'll throw in 20 free wipers-- they cost us four cents each!)

- Even more accurate than using "value" would be to say what the goods usually sell for in stores. I think these commercials are actually trying to get at this aspect when they say "$X value." In fact, some of them even phrase it as such. (You'll see these inflatable laptops in stores for $2500!) But today's lesson: Do not make the mistake of confusing "sells for" and "value"-- there's a big difference between the two.

US v. UK

I don't know anything about the law, but these two new stories strike me as an interesting pair to show up within a few days:

1. UK votes to increase to the time that terrorist suspects can be detained without charge to 42 days.

2. Boumediene v. Bush supreme court decision that seems to give more rights to terrorist detainees.

What is the Best Way for an Average Citizen to Affect Policy?

I have been asked this questions a couple times now since I have macro students who were my micro students last semester. I made sure to put the best case forward for them to save the time they would have spent voting doing something else. However, not voting doesn't satisfy that desire you've been schooled in to affect policy. So how can an "average" person affect policy without wasting his/her time at the voting booth?

Lie.

More specifically, lie to pollsters. When they call asking if you are a registered voter and what policies you favor, lie and say you are 100% certain you'll vote in the upcoming election. The most prominent national polls will be based on a telephone survey of about 1,000 people. Politicians and their aides read them and extrapolate. You will never be more likely to be the median voter than in that poll.

What Would You Do If You the Free Market Revolution Happens?

By You I mean other free-market economists. I wonder about this from time-to-time, economists are probably overs-supplied thanks to the bureaucratic budget maximizers of higher education. In fact, everyone involved in academic institutions probably receive a great deal of perks as a result of the system being so devoid of market competition (I realize the supply side of the labor market is very competitive, but the demand side is not).

So, what happens if we get the free market revolution we advocate? We are oversupplied and many of us will probably have to exit, so where do you go?

I think my competitive juices for the business environment are pretty dull, but eventually I would work my way back into banking, probably by starting at the teller window.

Who Gentrifies Low-Income Neighborhoods? A Problem for Relative Happiness Literature

New NBER working paper by McKinnish, Walsh, and White. Abstract:

This paper uses confidential Census data, specifically the 1990 and 2000 Census Long Form data, to study the demographic processes underlying the gentrification of low-income urban neighborhoods during the 1990's. In contrast to previous studies, the analysis is conducted at the more refined census-tract level with a narrower definition of gentrification and more closely matched comparison neighborhoods. The analysis is also richly disaggregated by demographic characteristic, uncovering differential patterns by race, education, age and family structure that would not have emerged in the more aggregate analysis in previous studies. The results provide no evidence of displacement of low-income non-white households in gentrifying neighborhoods. The bulk of the increase in average family income in gentrifying neighborhoods is attributed to black high school graduates and white college graduates. The disproportionate retention and income gains of the former and the disproportionate in-migration of the latter are distinguishing characteristics of gentrifying U.S. urban neighborhoods in the 1990's.

This paper will prove problematic for the relative happiness literature (aka positional externalities), where the agents are constantly trying to outperform their neighbors by being in the richest neighborhoods and being the richest of the neighbors (often, it is supposedly signaled with house size, which I will weigh in soon on). If households care so much about relative status, then: 1) Why does gentrification occur? Why would the well-off move to poor neighborhoods? and 2) once the gentrification process begins, why are those who are being gentrified out of their neighborhood so slow to leave?

In short, these problems with that line of literature arise because they usually aren't able to answer "relative to who?" If your answer to #1 is "because they'll be the richest person there", then you must concede that the behavior in #2 contradicts #1. The original residents who were "relatively rich" are not leaving after becoming "relatively poor" to their new neighbors.

If absolute status dominates, there is a simple explanation here: People move to poor neighborhoods because they find great bargains there for housing, and those being gentrified out aren't eager to leave because they are reaping the gains of increased property values because of their new neighbors.

Wager's I'm Willing to Make

From the Chicago Tribune:

A fatal construction crane collapse at the site of a luxury high-rise condominium Friday, the second such disaster in Manhattan in less than three months....
The city's buildings commissioner resigned a month later, and a building inspector was arrested and charged with reporting false inspections of the site.

If we discover that the managers of the construction firms paid bribes to the building commissioner for false inspection reports, then I'd be willing to make the following wagers:

1. The construction firms that employed the bribing managers will be out-of-business within the year, never to build again.
2. The city government agency that employed the bribed building commissioner will still be conduct inspections of construction sites.
   

CNN Headline Shirts?

I have found the new "shirt" option at CNN.com to be one of the most unusual innovations I have seen recently. For a given news link from the homepage, there may be an icon of a t-shirt, which if you click on looks something like this. They look like little more than an advertisement for CNN, and if you continue to the shopping cart, they cost about $15. This feature begs the following questions from me:

1. How do they determine which headlines get the shirt option? I suspect an algorithm is behind it, but I want to know the parameters.
2. Who buys these shirts and why? A while ago I saw a headline that read something like "Repeated sex offender accidentally released from prison" which carried the t-shirt option. I wondered who they thought would want to wear that around town.
3. The marginal cost of the link to buying the shirt is probably near zero, so why not provide it for every article?

I place a prior probability of 0.80 that I will one day buy one of these shirts. The prior is just 0.50 that it will be before the end of the calender year.

The Division of the Drive-Through Is Limited by the Extent of the Market

A neat example for all you teachers of economics explaining Smithian division of labor...the Fast Food drive through! I was at the drive through at a Dairy Queen, looking across the street at the McDonalds with two windows...one to collect the money the other to deliver the food. Dairy Queen had only one I presume because they seem to have considerably less business than McD's does, and even McD's will close its money collecting window during their slow hours.

If I may recommend, the EconTalk with Mike Munger on the Division of Labour.

Zakaria Fails Econ 101 on Demand v. Quantity Demanded

Fareed Zakaria from CNN:

More important, high prices are finally making Americans use less gas.
...
If we use less, the price will come down.

Consumers reduce their quantity demanded because of the price increase, but the subsequent reduction in quantity demanded will not lead to a decrease in price by itself. This is a mandatory question on all first econ 101 exams. The logic itself is circular: prices rise --> consumers reduce quantity demanded --> if this causes prices fall wouldn't the next step then be increased quantity demanded and higher prices?

Econ principles teachers of the world, weep.

Which cities are better prepared for high gas prices?

Here's an interesting piece on CNN; it concerns the spread nature of Oklahoma City and how it costs a lot more to drive to work. The first interesting thing I found was that, as a result, people starting organizing carpools. Hey, markets work! Who'd have thought? That would make a great country-wide story-- how carpools spontaneously have emerged with the lower search costs of the internet and the higher costs of driving yourself.

It also mentioned a study by Common Current, which ranks the 50 most populous U.S. cities on the metric of being most prepared for high gas prices. (The pdf of that study is here.) The stats used are city public transit use, national metro transit use, metro sprawl data, heating oil use, and carpooling data. Endogeneity abounds in those measures, of course, but it's still interesting to see the final result. San Francisco, New York and Chicago lead the group; Louisville, Tulsa and Oklahoma city bring up the rear. I'd say a general trend, at least from eyeballing the list, is that richer cities are nearer the top. Of course, richer cities can better afford the burden of a complex transit system; if building a complex subway system were the panacea for sluggish city growth, I'd be taking the underground here in Morgantown from my office to the student center for a sandwich. Let's hope policy makers don't draw such conclusions.

A Series of Quips: Refuting Marglin

Stimulated by this post, this podcast, and this review of "The Dismal Science: How Thinking Like an Economist Undermines the Community" by Steve Marglin. Let the quipping begin:

- Economics was coined the dismal science because of the field's widespread stance against slavery. How does that fit your theme?

- What is "community?" This is undefinable, and I'll bet it is ever-changing.

- Economists have been constructing the modern economy? If only we were so powerful! This is like saying biologists create animals. Markets are of human action, not of human design.

- Academic Economists, at best, are to Markets as College English teachers are to the English language.

- Economists have ignored the role of community? I didn't realize this because of the following lines of research: Social Capital, community peer effects models (See Hoff and Sen; AER 2006), Gravity Models, Chain Migration, spatial autocorrelation (unobserved heterogeneity that takes a spatial pattern), and the Homevoter Hypothesis.

- Markets discourage helping others? Here I thought the best way to succeed in Market Economies over the long run was to build mutually beneficial relationships.

- Economists define self-interest in terms of maximizing consumption of "goods and services"? That's news to me. I always took "goods" to serve as a metaphor which were things that made us happy. I thought this could be anything as there is no accounting for preferences. I guess it actually meant anything except community involvement.

- "Applications of markets should be scrutinized." Do you really think there is a deficiency here? I thought you were at Harvard.

- The conspiracy angle to this book....some entity is walking around out there "the market" and economists are the ones who have ensured that it runs the world. Actually, the institutions of the world that did not use markets died.

- The normative angle to this book...if someone's barn blows down, the whole community should be coming together to fix it. I cannot help but think of when this happened to Ned Flanders on The Simpsons. Join a commune if you want, but don't make me. I want to spend my evenings with my wife and children, not necessarily at the bar making friends with the local architect so I can repair my house.

Freedom of speech, South Carolina graduation edition

Dear Illinois,

You think you're tough on graduation cheering? Think again.

Love,

South Carolina

Dana, tell me this won't amount to anything. 30 days in jail?! Sweet crispy Christ.

There's more to life than just maximizing days on Earth...

New life expectancy figures are out, the actual pdf of the report is here. Expect the fact that the United States' life expectancy is a couple of years behind a few socialized health care countries (Sweden, Canada, United Kingdom) to be combined with our higher medical expenditures as a percentage of GDP to be construed as an argument to go Marxist with our health care in the upcoming election; don't take the bait. Missing from the analysis, of course, is the fact that Americans choose to partake in many avenues of health care that do not increase life expectancy yet increase quality of life, i.e., cosmetic surgery and hip replacements. These options are not at your ready disposal with the government decides how you should be treated.

Choking on the Diesel Fumes of the Recycling Truck

Enjoy the irony.

These two trucks were blocking the front entrance of WVU's college of B&E this morning. The blue truck appears to be diesel. Both of them were running idle. I saw nobody around, the drivers were likely inside the various buildings collecting the recycling bins (we hope). Remember that it is a myth that it uses less gas to run idle for a few minutes than to turn-off and restart your engine. They were also covering a handicap parking space.

For more on the economics of recycling, I refer you to this EconTalk podcast with Mike Munger.

When Obama Says Tax Cuts for the Poor, Think of Me

When Obama says "tax the rich, give it to the poor" I thought I would be on the former end. "I'm a professor (or will be soon), surely I'm one of the rich" I thought to myself. But based on the Tax Policy Center, I'm one of the poor Joes that get a tax cut:

	MCCAIN	OBAMA
Income	Avg. tax bill	Avg. tax bill
Over $2.9M	-$269,364	+$701,885
$603K and up	-$45,361	+$115,974
$227K-$603K	-$7,871	+$12
$161K-$227K	-$4,380	-$2,789
$112K-$161K	-$2,614	-$2,204
$66K-$112K	-$1,009	-$1,290
$38K-$66K	-$319	-$1,042
$19K-$38K	-$113	-$892
Under $19K	-$19	-$567

Of course under both plans, it is actually a tax hike, as the article tries to say. Also, I do not endorse the ridiculous class warfare this Obama plan seems to want to engage in. Class warfare will just put us all in lower brackets via lower economic growth. I just found it interesting that I'm one of the poor. I thought a PhD would fix that.

Wal-Mart and Leisure

When you get a chance, check out this working paper "Wal-Mart, Leisure, and Culture" by Charles Courtemanche and Art Carden (of DoL fame). In reading the abstract, I couldn't help but recall this:

Singles can head to the Roanoke Wal-Mart tonight for the third of the store's weekly singles nights, held every Friday evening. Billed as a way singles can meet their match while filling their cart, participating customers select shopping carts adorned with red bows identifying them as singles looking to mingle. The rest is up to them.

The paper cited above essentially taps into Wal-Mart's influence on the "Bowling Alone" phenomenon, which is the idea of diminishing community spirit and interaction. Capitalism takes the blame by many of those involved in this literature, I would suggest, because they are looking for capitalism to blame for something. It's good to see the more empirical/positive approach being applied by Courtemanche and Carden to this literature. I think if community (whatever that is) involvement is declining, it has to do with a few other things that I have not yet been able to prove (data suggestions welcome):

1. Wealth effect: Markets and wealth allow us to economize our love, spending on it where we value it most. I no longer need the mechanic to like me to get a good price for fixing my car. I don't need to go to the bar, or offer him help moving. Instead, I can spend that time and love on my family.
2. Cultural improvements for families: There is less social pressure to marry or marry early, and less stigma from divorce if the marriage goes bad. Hence, those who marry prefer to spend time at home with spouses and family, rather than go bowling with their work buddies.
   
3. Supreme Court: Many state supreme court have been undermining the link between the community and their local public schools, which are a source of great community interaction.
   
4. More information available helps people sort into the kind of communities they want to live in, so there are less sources of tension within communities. Communities that are voting a lot on divisive issues have a lot of community involvement. Communities with low turnout are content.
   

40% of Americans Don't Remember the 1970's

From CNN:

A CNN/Opinion Research poll released Tuesday shows that 55% of those surveyed are more worried about long lines at gas stations and rationing than about the high prices that drivers have paid in recent months. The poll shows 40% of the respondents are more concerned about the high prices.

And hooray for the 55% who do remember it.

Assorted thoughts

- It came up again yesterday; why do people believe that insurance for household appliances is uniformly a bad idea? People don't seem to argue much if you end up having an item replaced or fixed, thus saving you money on net, but it could be economically rational ex post even if you never claim one cent on it. It's economics, not accounting-- peace of mind has value, yes? If you avoid sleepless nights (should you be wired as such) worrying about your appliance possibly breaking, this is a good thing. I'm shocked at how much resistance to this I get.

- I just finished The Birth of a Transfer Society, it's a historical look at the evolution of the United States public sector into a transfer machine through the eyes of Supreme Court rulings. It's short-- about 90 pages of non-Atlas Shrugged font-- and paints an interesting picture. I recommend.

- I haven't seen either of the NBA Finals games (though am surprised at the 2-0 lead for Boston), but heard last night that a partially blocked 3-pointer helped seal one of the victories. This, of course, led to a discussion of the best blocked 3-pointers that we could remember. My friend went with Olajuwon's block in the 1994 playoffs; I, with my severely limited mental database on basketball, went with Hakim Warrick's block against Kansas near the end of the 2003 NCAA title game. Feel free to leave your favorite.

Paper's I'd Like to See Written: Celebrity Endorsements

Does it help a political candidate to have celebrity endorsements? Do people really base their vote or use the endorsement of celebrities in deciding their vote? Does Obama gain votes with Oprah's endorsement? Did Wesley Clark (2004 election) lose votes because of Michael Moore's?

I'm not against people doing this, it is as good of reason as any to choose your vote. There seems to be much research done on celebrity product endorsement, but I see that as a signaling game because of the cost involved in hiring the celebrity. Celebrities seem to endorse candidates for free, demeaning the value of the signal. It seems to me that candidates are more likely to be hurt by a celebrity endorsement than aided by it, and since neither Obama nor Hilary as far as I could tell devoted resources to courting Richard Gere, they do not value it particularly high. They do seem to enjoy the ones they get, like when Huckabee got Chuck Norris.

I guess it would depend on what makes the "celebrity" a celebrity. I have been thinking entertainers, but Jon Stewart or Stephen Cobert are probably influential because their status is a function of watching politicians so closely.

Profit Maximizing Level of Air Conditioning in Grocery Stores

I've been meaning to blog about this since I saw Tyler Cowen's post at MR on the subject, but a recent trip to the store reminded me to do so. His explanation:

I believe the goal of high-powered AC is to give customers the feeling of luxury, the feeling that anything can be afforded, and the feeling that the store will spare no expense toward the end of comfort. I do not believe that either the average or the marginal buyer actually -- marketing effects aside -- prefers that temperatures be so low.

I'm not buying the feeling of luxury story in the literal sense, though I won't rule it out. I have other complementary explanations I suspect play a larger role:

1. As a bagger at a major grocery store in my teen years, I have no memory of thinking the store was chronically cold. Probably because I was working and was hot, or at least hotter than the customers. The person who was in charge of the thermostat was also working, and probably didn't think it was too cold. Customer satisfaction is important, but so are employees when it comes to profitability.
2. Produce sections have higher refrigeration costs as the difference between the cool sections and the rest of the store increases.
   
3. Customer visits on average are probably not that long, and coming in from the heat it may be not long enough to get so acclimated that they may become cold. Setting it so low that they cool off but leave before they get cold may be the optimal strategy.
4. It is easier to lose a customer for being too warm rather than too cold. You are not trying to get the "average" customers preferences, you want to accommodate the person with the lowest temperature preference.
   

On Tournament Pay Seating

From CNN, a "sad" story about how expensive it is to sit court side (around $35,000) for the NBA finals these days. However, notice the following about the other seats:

"Right now, we're getting $450 to $475 for the worst row in the balcony,'' said John Higgins of Higs Cityside Tickets, a ticket broker in Boston. "My partner was in the business in the '80s and he says it cost close to $500 to get in anywhere in the building back then. Of course, that was the old Garden, so you might have been paying $500 to sit behind a pole or some AC vent.''

Interesting, seat price inequality has been on the rise throughout the NBA's recent history, as the front row seats explode in price. However, for the rest of the seats, nominal prices seem to be the same, certainly (assuming source is accurate) a decrease in the real price. Additionally, the quality of the seat has been improved. Not to mention the quality of those who are watching from home, on a digital HD big screen TV that costs in the hundreds or low thousands.

Let's string together the explanation. The rise of good quality substitutes with ever falling prices (TV's) have driven demand down for the mediocre-poor seats like television have competed down prices there. At the same time, this viable close substitute to stay at home has increased the value of the court side seats for those who wish to actually go to the game. Not to mention, the greater coverage of the sport has increased the possibility of being seen on TV. The result: a small difference in viewing ability produces dramatic differences in seat prices.

No Such Thing As A Free Coffee

I usually buy my non-fair trade coffee from Starbucks, where I get a cup of coffee with the purchase of a bag of coffee grinds. This week, I paid $9.55 for Breakfast Blend + a cup of coffee. Today at Wal-Mart, I saw the same bag of coffee for $8.83, this time no coffee. Thus my free cup of coffee cost $0.72.

"The Rainbow is Black!" ~ The Pot

From CNN:

Russian President Dmitry Medvedev on Saturday criticized the United States for "economic egotism," saying it has fueled global troubles, and portrayed Russia's growing economic might as a force for worldwide stabilization.

Is it me, or is every idea in this sentence either highly questionable or wrong, not to mention glowing with irony? Russia a model of economic stability? With a straight face? That he could portray the hundreds of millions of people in the U.S. as some sort of collective unit with an ego problem demonstrates that many of the leaders have not moved beyond their soviet planning days, and thus do not yet fully understand how the world works. As for somehow passing us economically, they do not seem to understand that rankings do not matter, how far behind they are from us, and that they still have a long way to go in becoming "more like us" before they are able to become as wealthy as us.

Francisco Marroquin University

Here's a piece in the Los Angeles Times about Francisco Marroquin University in Guatemala.

UFM sends along that the other three Nobel Laureates that have lectured there, in addition to Friedman, were Hayek, Buchanan and Smith.

We will be in Guatemala next Spring, as UFM will be hosting the APEE Annual Meetings. I'm certainly looking forward to it!

UFM is the first Latin American recipient of the TPS Seal of Approval.

The beat goes on...

TPS commenter extraordinaire Bryce Ryan sends along this bit, another stop on the never-ending road to unraveling the ultimatum game.

The last few lines were interesting, commenting on the paper's ability to discern rationality from urge impulses. The ultimatum game, of course, is itself an exercise in irrationality by strict economic definitions. The largest lesson you can take from the exercise, in my opinion, is the people's personal welfare functions have social equity versus personal efficiency tradeoffs. I always find this interesting-- you can't have personal equity issues, of course, but you're willing to make yourself worse off at the cost of witnessing no bad acts. This isn't quite the same as the typical public economics social welfare function equity/efficiency tradeoff.

Ultimatum games typically play to about 40% efficiency; with the stats presented in the article, it sounds like they were about in this range.

I can't speak to the science of what's going on here, but neuroeconomics is a fast growing field...

Variable rate...contract enforcement

TPS regular Thomas Johnson sends along this article from WSJ; a rogue sheriff is starting to take the law into his own hands by neglecting his duty to hold court-ordered foreclosure auctions.

This is a very bad precedent to set; the only reason there isn't an uproar is that his decision to stall default auctions favors those with a face in the matter and harms the impersonal lending companies. But property rights are property rights, and contracts are contracts-- if the struggling airline companies decided to stall paychecks for a month, how would

What does this do to the incentive to buy a house in Philadelphia that you might not be able to afford? What does this do to the incentive of lending companies to operate within Philadelphia?

Employment Laws in France

Q: What do you get from strict employment laws?
A: A substitute from labor to capital.

In France, nearly every restaurant and bar I went to used these hand held point of sale systems. They allow waiters to serve more customers, so reduce the need to hire more people. Employment laws, ostensibly designed to improve working conditions for employees, often reduce certain types of jobs on the margin.

Rent Seek the Whales

From CNN, a tale of of rent-seeking:

By the early 20th century, their numbers were so depleted that in 1935, hunting was banned. Yet 73 years later, the species has not bounced back.

What a shocker, the regulation didn't fix the tragedy of the commons. The article reveals there are an estimated 300 remaining whales, and then

That measure is a proposal from U.S. government scientists to require commercial ships to slow to 10 knots inside a 30-mile "bubble" near ports where and when these whales are migrating. Right now, experts say, commercial ships kill about two North Atlantic right whales every year.
"We think that more animals are being killed than are being born, and there are a couple of main sources of human-caused mortality that we are trying to reduce," said Jim Lecky, director of the Office of Protected Resources at the National Marine Fisheries Service.

What? 300 whales can't produce more than 2 children in a year?

Many in the shipping industry oppose the speed limit, saying it would be too costly. A federal study concluded that slowing the ships near the whales will cost shipping companies about $112 million, or less than 1 percent of the $340 billion East Coast shipping industry income.

One percent, is a big deal, people change their behavior all the time to save one percent.

Not all shipping companies oppose the rule. A smaller industry group, Chamber Shipping of America, filed a document with the federal government saying, "Our members believe the economic impacts associated with the proposed rule ... are well worth the benefits to preserving this most endangered species."

What a surprise! The group composed of what I'm guessing is the smaller shipping companies that are less likely to have giant fast vessels, are ok with their larger faster competitors having to slow down. Is the possibility of saving two whales a year worth $112 million? Would it not be cheaper to allow these firms to continue their speed and instead start an insemination program or breed at least two in captivity? Couldn't these scientists work on a device that emits a noise that scares these whales away upon their approach?

Perhaps Bryce will explain in the comments why these alternative solutions are or are not reasonable. At least an explanation of why these apparently lazy creatures are hell bent on suicide. By the way, one of the best episodes of Futurama ever made was "300 Big Boys," which features a disgruntled whale biologist, fiscal stimulus plans, rapid inflation, and actual "voodoo" economists.

While parsing through the Historical Abstract of the United States...

...I came across a fantastic table: Speed of Motor Vehicles on Highways, 1945 to 1970.

At first glance, I thought it was something to do with speed limits; turns out they recorded a sample of several hundred cars on "tangent sections of main rural highways during off-peak hours." They also break it down by passenger vehicles, trucks and buses, and also have a breakdown of percentage of cars exceeding 40 mph, 45mph, 50 mph, etc., all the way to 70 mph.

Clearly, there's increases in everything across the board, but the difference is pretty staggering. Passenger vehicles averaged 45 mph in 1945; they were at an over 60mph clip by 1970. 64% of cars went faster than 40mph on these roads in 1945; in 1970, 97%. 5% of cars went faster than 60 in 1945; in 1970, 47%.

When you think about the gains in an economy, you don't tend to think about vehicle speed-- but driving places faster is absolutely a gain felt across the economy, compounded by rising wages.

(We've addressed vehicle speed before. Twice. Do we need a driving category? I don't even know what to file this under otherwise.)

Equinometrics and you

With the Belmont Stakes running this weekend, I thought I'd give a quick bump to equinometrics.com, run by horse racing/gambling aficionado Marshall Gramm. Anyone that's ever presumed that I know one iota about horse racing can take that credit and draw it right back to where it came from-- Marshall.

Everyone's been trumpeting Big Brown; in his Preakness post, Gramm doesn't like him this weekend. (Belmont is a longer race; from what I understand, I believe the Derby and the Preakness are basically the same length.) He'll have a post concerning the Belmont in the near future, so keep your eyes peeled. It's very good stuff.

Let's race some horses and gamble on 'em!

Equinometrics.com gets the TPS Seal of Approval.

File this under...redistribution happens

Some of the impact from the stimulus checks is starting to trickle in; you wouldn't believe it, but when you redistribute money from higher incomes to lower incomes, places that serve the lower income folk do better and places that serve the higher income folk do worse.

Wal-Mart? Up. Costco? Up.

Victoria's Secret? Down. Bath and Body Works? Down.

Your federal government: Picking winners and losers since 1789!

Help Wanted: Blogger

Help wanted for blogging here at the Degrees of Freedom blog. I love the n-k-1 web address of this cite, which is very satisfying for us nerds. Here is the job description:

I'd like to expand Degrees of Freedom beyond a one person operation.

What I Get:

The ideal co-blogger would be exactly like me, and think exactly like me and write exactly like me. Well, not really. I'm looking for someone who shares the general outlook expressed here (libertarian, at least sympathetic to Austrian economics and absolute property rights, etc.) and who is willing to post at least on a weekly basis.

What You Get:

A soapbox. And (in case the thought occurred to you) a share of ad revenue, if any should ever trickle in. Don't count on this too much.

Interested?

The link is still prominent on the homepage, even though it is dated for 2006 and now appears to have 2 contributors. Just trying to help the matching game in the new economy.

Potential Gas Price Solutions

Here's a piece on CNN with 6 fixes to high gas prices, let's take a look:

- Tax oil companies more, give the money to motorists. Bad. High prices beget more production; we want to reduce the incentive for companies to produce more?

- Limit oil speculation. Bad. If speculation drove high prices, couldn't we just cram the stock market full of speculators and we all could retire tomorrow? Speculators assume risk, don't prevent the market from functioning.

- Ease refining restrictions. Good. There are environmental issues, of course, but if the goal here is to attack high prices, let companies serve the public by increasing supply of the high priced types of gas.

- Lift the ethanol tariff. Good. The effect may be small, but it would be undoubtedly downward.

- Open the Strategic Petroleum Reserve. Good. Why we even have this is beyond me; crank that mother open and let people use it.

- Suspend the gas tax. Good. Hear, hear! As price the price of gas has increased, the percentage paid in taxes has obviously gone down, but dropping the game tax will cut the price by a nontrivial amount depending on what state you're in, or what particular gas taxes were to be dropped.

Oranges, and nothing but

Curious line of the day, from a bit on British orange consumption:

"Seven out of ten times oranges are consumed for health reasons."

Really? What are the other three? Eating contests? Throwing them at your neighbors? If you're hungry and you eat an orange, that's a health reason to me. If it's not, then you're telling me people eat oranges one 3 out of 10 times because they're hungry? Either way, this just seems bizarre.

Also-- tangerines can't be that much quicker to peel than an orange, can they? I'm amazingly inept at peeling oranges; most young children have me in a race, and I mangle the orange in the process. I attribute this to a path dependence of starting out slowly in my peeling ability and always having someone better than me around. You'll never see anyone die an OK orange peeler-- bimodal, I'd gather.

The Great Cash Free Challenge concludes

So as of yesterday at noon, I have resigned from the Great Cash Free Challenge. I will be attending a beer event tonight that will take $10 cash to participate. Instead of insisting on paying with a check (perhaps a strain on the organizers), having someone cover me (against the spirit of the competition), or just omitting the detail (how could I face myself in the morning?), I've decided to end it here. That put it at exactly two weeks. We've learned a few things:

1) A cash-free life is entirely feasible and, if you are content in a routine, you could manage for yourself a routine that involves never using cash.

2) Parking in Morgantown without heeding meters was not as costly as I anticipated it; perhaps when students are out for the summer the heat pays less attention? I only received one parking ticket over the two weeks, and even that was a ticket I would have received had I been using cash (wasn't a meter issue, was a restricted lot issue).

3) I still nonetheless found myself carrying cash; perhaps that is as big a statement as any.

Many thanks to the adjudication of Rob Holub in interpreting and enforcing the rules; a model justice, indeed, one worthy of the omnipotent, even-handed and non-self-motivated assumptions of the 1960s.

So what's the next challenge? In the words of the Simpsons' Lord Daftwager, "Don't worry, we'll find other wagers!"

Graduation Advice

I finally have gotten around to reading P.J. O'Rourke's wonderful advice for graduates, only a solid 1 month after it was published. FWIW, here is what my advice for graduates would be:

1. Don't change the world.
2. Don't recycle unless it makes financial sense, like if someone pays you to do it.
3. Consider smoking, but also consider that it is very difficult to quit.

I think the graduate who considers why these things can be argued for will have a good understanding of the world. The hidden messages are:

1. The world is a pretty good place if you are able to read/listen to this, drastic changes are not necessary.
2. If recycling actually uses fewer resources than it consumes, it will be an opportunity for profit that entrepreneurs will not pass up. Remember that when you are choking on the fumes of the recycling truck that goes around picking up small blue bins.
   
3. There is more to living than maximizing life expectancy, but be careful with decisions that are hard to reverse.
   

What If....2003 Prediction Markets for Iraq

Join me for a moment of pure speculation. Robin Hanson not only gets his way with using betting markets for national security purposes, he gets it several months or even a year earlier than when the program was terminated (in July of 2003) by political non-sense. If you believe the disgruntled employees of the CIA, Pentagon, and White House you get the distinct idea that everyone knew that Iraq was not the threat the President was making them out to be. You get the impression that everyone knew but those doing the cheerleading for the media, but were pressured into shutting up.

Suppose they took this information with them to the betting market, which I understand the proposal was going to be small bets around $10 made by those in the CIA and Pentagon. They can't speak up to their superior's for whatever reason, but they are able to anonymously (to their superiors) buy and sell shares on the following stocks:

1. Weapons of Mass Destruction will be found In Iraq by (dd/mm/yyyy).
2. U.S. military will be able to exit Iraq within X years of occupation.
   
3. Total cost of U.S. military expenditures on Iraq will be under $100 million in 3 years.
4. Iraq will hold a formal national democratic election by (dd/mm/yyyy).

Now, imagine the public, media, and political opponents see these shares trading close to zero. Does it change the course of events? Does the political pendulum swing the other way and we stay out of Iraq? Suppose Bush invades anyway (as I suspect he would have, regardless of betting markets), does the accuracy of betting markets become glorified for having provided warning that our actions were misguided?

Pure speculation, I know. I like how this speculation has a "Robin Hanson saves the world" ring to it. Ironically, it was an idea killed by those same people who berate Bush & Company for ignoring evidence from their intelligence agencies, or at least not passing that info along.

Ohio payday lending update

TPS stalwart Rob Holub keeps us up to date on the payday lending situation in Ohio; it's gotten worse. (We touched on this issue before.)

I'm constantly surprised by the interest group power held by the exact two groups mentioned here-- religious and consumer protection groups. It's surprising to me because they stand to gain nothing fiscally from defending these issues; in this particular instance, it's not like those who would otherwise be paying 35% would transfer the 7% difference to the supporting group. Do people give to these groups on moral grounds, or on the ground that they want to impose their morals on the rest of society? It means that much to them? Now that's a scary thought.

My column in the State Journal this week will deal a bit with consumer protection groups; seems to be the issue of the week.

The group of lenders, by the way, have acquired a former Solicitor General in their fight against the law in hopes of mounting a constitutional challenge to the bill. Well, if the contract clause in the constitution held any weight, this would get thrown out in a second, but that's long since gone the way of the typewriter and Boston sports fans' modesty.

This is a five labeler!

Addendum: Here's a funny clip on banks vs. check cashing places, it's 9 minutes long but pretty good. (Mild profanity.)

Not Evil Just Wrong

The good people at Heartland, TPS Seal of Approval holders, have sent along word that they are trying to create some buzz for a new film, Not Evil Just Wrong. It's the anti-An-Inconvenient-Truth, a movie that purports to show the true cost of global warming hysteria. (Would "The Convenient Truth" have worked as a title? Maybe not.) I watched the trailer, it looks enjoyable in that let's-look-at-the-secondary-effects kind of way. You guys know where my sympathies lie on this issue-- no need to say any more.

(What I am still looking for, however: In the 1970s, there was actually the opposite public outcry-- the world is getting too cold. I'd give a fine piece of red meat to find some Al Gore quotes about how the Earth is getting too chilly and what we need to do about it. That's right up there with my desire to verify the Abraham Lincoln why-foreign-trade-is-bad quote.)

Don't rob my lottery!

My mom sent along this article about Schwarzenegger's unforeseen difficulties in borrowing against future lottery revenues, don't underestimate the impact of public choice vis a vis the tribes like the article did. I loved the mention of Independent Lottery Research; division of labor, indeed. ILR states the only other topic people have more of a propensity to speak about, ahead of the lottery, is sex. The article also says that people would rather have their taxes raised instead of seeing Arnold's plan go through, though that's a generous reading of the statistics presented a few lines later.

California politics tend to be more enjoyable than most; thanks to direct democracy, voters have hamstrung the ability of the state to generate revenue from property taxes (easily the #1 source of revenue for most states), so the hoops California politicians have to jump through can be humorous.

The Curious Merchantilist

I sent the following letter to TIME today attacking this column by "The Curious Capitalist" Justin Fox:

What’s curious about “capitalist” Justin Fox in “A Port that Exports” (June 9, 2008) is the mercantilist message that exports and imports should balance. He does this by confusing a good business model in the shipping industry, that it is more profitable to ship in both directions rather than just one, with what is a good model for the economy. America runs a trade deficit because foreigners use the money they earn selling their goods to invest in American assets. These makes it cheaper for Americans to borrow to pay for college, purchase a home, build offices, and a host of other activities that make our country richer. In short, the trade deficit represents foreigners trying to get rich by making Americans even richer.

Economists have written billions of pages for over 230 years attacking merchantilist theory. I tried to do it in a few words, but obviously much more could have been written. By the way, Fox's last article "How the Next President Can Fix the Economy" was a tour de force in manipulating statistics, bad economics, and normative dribble.

Will West Virginia Be The First Democratic Primary Next Election?

Maybe not West Virginia, but some other state with relatively few delegates at stake. Why? Non-credible threats and cost-benefit analysis following from the Michigan-Florida decision. The outcome seems to be that Michigan and Florida will essentially get to count for half of what they previously were worth. If the Democrats do not change their rules for how delegates are counted when the state violates their approved election date before their next primary, consider the cost-benefit analysis for states that consider going early:

1. Benefit: Economic/Political benefit of being early or even first, which states seem to value regardless of whether or not it actually exists. Why else do states try and go first if there is no benefit? The first states do seem to filter the field pretty quickly.
   
2. Cost: Lose half your delegates, hence some of your influence in who the democratic candidate will be.

The MI-FL agreement has established that #2 is not lose ALL your delegates, but they each get a half-vote. My initial intuition is that small states that are not particularly large to begin with, it is likely that #1>#2. However, I could see larger states sending a stronger signal even if their votes are not counted, so maybe they will be even more likely to find #1>#2.

Jumping Libertarian Jesus

Michael Gerson writes:

The Jewish tradition in which Jesus lived and taught demanded that just rulers make a minimal provision for the poor, including no-interest loans and the distribution of agricultural commodities. (Look it up: Exodus 22:25-27 and Deuteronomy 24:19-21.) The apostle Paul held a high view of government's role in promoting justice and urged the willing payment of taxes -- a biblical demand more severe, for some of us, than all those sexual prohibitions.

Notice the careful use of language by Gerson, it does not say that Jesus demanded these things, but that the Jewish tradition demanded it. The first time I read it, I had the impression that he directly demanded it as well (which he might have, but that is not what Gerson is writing, but seems to be implying).

Can I now use a violation of the separation between church and state as a means of protesting taxation and public goods? Probably not, because that no longer seems to matter these days.

Hat Tip: Mike Munger