Oil Prices

CNN notes that gas prices have dropped over 50 cents in the last two weeks, and here's an interactive map from CNN showing the evolution of gas prices over the last six months. Maybe I can argue with myself now.

My favorite line from the story:

"She attributed the price reductions to crude prices and demand."

That killed me for some reason. The real story is the drop in global demand...but attributing lower gas prices to lower crude oil prices? Isn't that like saying lower GDP figures are the reason for slower growth?

I just noticed that the story was from over a month ago-- and note the impact (or lack thereof) that OPEC's reduction in oil production has had on prices since then. It highlights the fact that many people either don't want to admit or honestly don't know-- OPEC doesn't produce that much oil. Not enough to significantly alter world prices, anyway.

Spillovers from deep sea drilling?

Oil drilling is bad, right? But what if we can observe new species while doing so? Do the environmentalists then fight themselves, a la Ed Norton in Fight Club? What's the elasticity between the dislike of drilling and the sanctity of videotaping the un-videotapable?

Free Range or Free Markets?

I received the following excellent question from a student:

I like to shop at the farm's market because I buy meat and eggs from local farmers who I've researched and know that they are treating their animals humanely (I really have researched them, I'm not just being sucker or trying to act like I'm a good person because I buy cage free eggs :-). It only costs a little bit more and as a consumer its something that I highly value.

However I find myself conflicted because I do support having a free market (As someone who studies the USSR I'm especially nauseated by the slightest hint of socialism. Also I don't hate corporations, complain about big oil or think that Haliburton is a dirty word), but if I go along with the free market then it is more efficient to stack 10 chickens in a small wire cage where they can't even turn around then treat them humanely. Is there any way to reconcile the free market with factory farming?

To which I respond:

Actually, there is no conflict between wanting a free market and your desire for humane animal treatment. Demand for goods and services is inherently subjective to us all, and your desire for food or products with humane animal treatment is no different from any other consumer's desire for more cupholders in a car, different flavors of ice cream, etc. Suppliers strive to satisfy their consumers preferences, and stacking chickens in tens is only "efficient" because the cost savings outweighs consumer resentment (in the form of reduced sales or lower willingness to pay). If you and others change your preferences enough, then the market "efficient" move will be to add the cost of humane treatment because of the higher willingness to pay for it.

The animal rights issue is an interesting one to think about. I consider it a glorious achievement of capitalism that 1) obesity, not starvation, is correlated with low incomes, a complete about-face from all other times in history; and 2) our wealth and prosperity is so high we would be willing to sacrifice a little bit of it for a improvement in the standard of living for animals.

Anyway, enjoy your free range food without fear that you are interfering with free markets. Free markets allow suppliers to cater to your wants, not to force you to accept society's norms.

Fortunately for me, she asked the easy question with animal rights. There is a lot of interesting positive analysis under different assumptions in this issue. Should animals be counted in the social welfare function? Even those that say yes often disagree on the weights animals should receive relative to humans. Much of the world that is not so well off benefits from the cost-efficient factory farming, and greater preferences for "humane" treatment of animals may translate into very real human suffering if there are significant economies of scale in production. However, that argument is rendered invalid if animals and humans receive equal weight in the social welfare function.

Notes from the SEA's

Random assortment of thoughts 1 week after the SEA's:

• Robert Lawson has a very interesting empirical analysis in the works on the Hayek-Friedman hypothesis (which states economic freedom is a necessary but not sufficient condition for political freedom).
• If the conference was a random sampling of sports economists interested in discovering biases in sports betting markets, then I'd say the field tends to suffer the bifurcated man fallacy in their policy recommendations for possible prediction markets.
• Dave Skarbek is taller than I thought he would be.
  
• TPS blew an opportunity to get a "team photo." When will the stars ever align so that all 5 are at the same conference? Probably APEE, but nonetheless...
• Russ Sobel is a Rock Band star.
• If you are on the job market, you are probably doing ok if you are coming out of WVU. PhD candidates are getting more looks from better places with each passing year, even in a tough market like the current one. This is a joint product of the quality of work from previous graduates and the economics department's focus on cultivating PhD students.
  
• If you are just starting your PhD in economics and haven't chosen a dissertation subject, consider environmental economics if you have an interest there. There is an enormous market demand, and the supply is not as impressive in quality relative to other fields. Learn economics first, then approach the climate change research, and I think you could do especially well.
• The TSA searched my luggage and apparently kept a pair of my boxers. Offputting.
• After listening to other new assistant professors' start-up stories, I am more confident than ever that SPEA is a great place to work.

File this under....Black Friday Economics

TPS Clevelander Rob Holub sends over his efficient market link of the day. Check out the post at 8:03am:

"He was vying for a Toshiba laptop on sale for $497, and an E-Machines desktop for $397. The total savings on the items would be almost $600, Vargo said. Like Target, Best Buy passed out tickets for the first shoppers in line.

But even though he was toward the front of the line, Best Buy had already run out of tickets for the laptop before getting to Vargo. He ended up buying a ticket from someone else for $20. Some people were asking as much as $50 for the tickets, he said."

And now for the revealed opportunity cost...

"After getting the tickets, Vargo had to wait in another line to actually purchase the two items. He tried to use his debit card, but the total exceeded his withdraw limit for the day and he could buy only one. Best Buy put his item aside while he tried to call his bank.

When I talked to him at around 7:30 a.m., he was in the line for a second time after succeeding in getting his withdraw limit increased. 'It's just been an ordeal,' he said. 'But the savings is worth it.'"

In reference to the top quote-- are there people that wait in line all night to get the coupons, then either sell the coupons or immediately re-sell the items (on eBay, for instance)? I'd never heard of this, but it would make sense. When you introduce competition on non-price margins, you get some perverse outcomes.

Japanese stuff!

Do you like the cutting edge feel of Japanese design? Do you think it's ridiculous? Either way, or anywhere in between, you'll get a kick out of Gizmine.

My favorites are the Bubble Palette, the pet owl, and the conservative Hello Kitty Jellybean watch.

A Request for Information

Despite intense Googling, I cannot discover where these generic blue "Buy Local" bumper stickers are manufactured. I have seen them in at least 4 cities (D.C., Bloomington, Indianapolis, and Cincinnati) and the lack of city or state identification makes me beleive they are mass produced.

The question is...where? If anyone has any information on who manufactures these and where, I would greatly appreciate the info.

Addendum: Here is a link to the buy local bumper stickers, none of which give indication as to where they are manufactured, but seem to fit the spirit of my inquiry. Irony is only $5 away:

Credit Default Swap Tuesday

Credit default swaps can be confusing, so our good friends at the Heartland Institute have provided some nice links on the topic. Here is an overview of CDS. Here is why CDS is good for you. Here are misconceptions of the CDS market. Here is why the CDS market didn't fail. Here is talk of an exchange for CDS, and here is more on the same topic.

Addendum: Tom and Rob, I'm curious on your take on the CDS scenario-- you guys probably know about this stuff better than the rest of us. Everyone seems to be suggesting an exchange for CDS in the future, and it takes an act of government to set that up. (Foolish, but the legacy of FDR lives on.) The big advantage of an exchange seems to be the clarity in price, and I agree, that is a big plus of an exchange, but my question is: Were the "true" prices of CDS really that tough to figure out before? I have a hard time believing these firms would be engaging in such a large volume of CDS activity without a good grasp on the price. That just doesn't make sense. Say what you will about the incentive to become too big to fail, but blindly running a bank down a path is not something these people were bred to do. Now, if there was a systematic bias in how these were priced, that could explain the mis-pricing-- but what is the source? I similarly have a tough time believing that everyone believed that this just wouldn't happen; remember, the CDS evolved as a hedge in case the "just wouldn't happen" did just that.

The Illusion of Economic Freedom

It is a curious paradox that thus ensues the market, which is the acme of individual economic freedom, is the strictest taskmaster of all. One may appeal the ruling of a planning board or win the dispensation of a minister; but there is no appeal, no dispensation, from the anonymous pressures of the market mechanism. Economic freedom is thus more illusory than at first appears. One can do as one pleases in the market. But if one pleases to do what the market disapproves, the price of individual freedom is economic ruination.

That is Robert Heilbroner, p. 57-58 in The Worldly Philosophers, which I am reading again for the first time since undergrad.

Signs I Might Be Evil II

Venezuela election edition:

Pro-Chavez candidates won the gubernatorial races in 17 of 22 states. The opposition win included the populous states of Miranda and Zulia.

"There is a categorical success," Chavez told reporters after the results were announced. "Today, it is Venezuela's victory, and it is ratified the democratic party that people have chosen."

Personally, I am happy Chavez is pulling a W here. No more of this "socialism didn't work because we didn't have enough of it" nonsense. Had Chavez had his power reduced, he would have been able to blame the coming collapse of his creation on the remaining freedoms. That opportunity is slipping away from him.

In the middle ages when poisonous blood was believed to be the cause of illness, the prescription was leeches. Leech after leech was applied and the patient would only get sicker. "Why?" the families would ask their medicine man, whom would respond "The problem is...there is still blood, we need more leeches!" Here are your leeches Chavez, go ahead and prove to the world that the illness of your country is the poisonous blood of capitalism.

I feel evil because of the people who will suffer from this, but I remind myself that the majority of them apparently voted for this medicine man. Here are your leeches.

MC = 0

Someone might misinterpret this drunk driving advertisement....

Moore on the Possible Auto Bailout

I didn't think of it until I saw the link-- but considering Roger and Me is almost 20 years old, Michael Moore should have something to say about the possible auto industry bailout, right? Especially considering if you'd have asked him twenty years ago, he'd probably have been in favor of exactly what could potentially happen here in the near future.

Read it for yourself, it's not too hard to find the flaws, but note especially the tension between free-market capitalism doing its job and the deep-rooted desire to eliminate any negative outcome associated with it.

Most of our principles classes are strewn with examples of good economics and good economic reasoning, and that's fine. But there's also value in showing bad economics and bad economic reasoning; as such, Michael Moore should always have a place in the classroom.

TPS Bloggers at the SEAs

If you are attending the Southern Economic Association's annual meeting in Washington D.C. this weekend, you will find TPS at 60% of full strength. Despite being a stone's throw away, David and Emily are not on the program. [Please explain yourselves in the comments ;)]

Here is where you can find us and when:

Claudia Williamson, Saturday @ 8a.m. will present "Culture Eroded or Enriched: The Impact of Trade Openness on Culture" (with Chris Coyne).

Matt Ryan, Saturday @ 10a.m. will present "Heavy Underdog Betting in Major League Baseball, 2000-2007."

Justin Ross, Friday@ 10 a.m. will present "Are Community Arrangements with NIMBYs Undermined by School Finance Reform?"; Saturday @ 10 a.m. will present "A Brief History of State-Level Rent Seeking" (with Josh Hall); and Sunday @ 5 p.m. will present "Is National Defense a Public Good?" (with Pavel Yakovlev).

The Brain of TPS

Like Mankiw, our psychological profile is "The Scientists":
Obviously, this website functions perfectly.

Somalian development

We here at TPS know some anarchists; some of us may even subscribe to the theory themselves. Nonetheless, when you know anarchists, anything concerning Somalia becomes interesting. Here's is CNN's offering for the day.

The piracy we keep hearing about is undoubtedly bad; the losses grow beyond tankers, as companies are hesitant to invest in uncertainty. But given the influx of money into Somalia-- substitute wealthy foreigners looking to get away, if it's easier to imagine-- look at the markets that have arisen absent a central government.

"Businessmen started gathering cigarettes, food and cold glass bottles of orange soda, setting up small kiosks for the pirates who come to shore to re-supply almost daily."

"Meanwhile, towns that once were eroded by years of poverty and chaos are now bustling with restaurants, Land Cruisers and Internet cafes. Residents also use their gains to buy generators -- allowing full days of electricity, once an unimaginable luxury in Somalia."

"The attackers generally treat their hostages well in anticipation of a big payday, hiring caterers on shore to cook spaghetti, grilled fish and roasted meat that will appeal to a Western palate. They also keep a steady supply of cigarettes and drinks from the shops on shore."

"'Getting this equipment is easy for us, we have business connections with people in Dubai, Nairobi, Djibouti and other areas,' Yusuf said. 'So we send them money and they send us what we want.'"

Credit markets are even well-functioning:

"Dahir said she is so confident in the pirates, she instituted a layaway plan just for them. 'They always take things without paying and we put them into the book of debts,' she told The Associated Press in a telephone interview. 'Later, when they get the ransom money, they pay us a lot.'"

There's no government like no government!

Private vs. Commons Property

SPEA microwave edition. It would be fair to say that in general, the faculty and staff of SPEA are very in favor of more public goods. Therefore, commons property would stand a better chance of being well maintained in SPEA than a random sampling of the population.

Here is a picture of the microwave in my lounge area, which probably gets traffic of about 5 or 6 people per day:

Here is a picture of the microwave in the main lobby area, which is maintained by a private food vendor selling microwavable pizzas, hamburgers, etc. This vendor is also generous enough to let non-customers use his microwave. I would estimate that in its hours of operation (8-3, M-F), the microwave gets daily traffic of 20-30:



And that is the difference between private and commons property.

Secondary effects: Extra-marital edition

Longtime TPSer Thomas Johnson sends along this effect of the economic slowdown. The piece mentions that any study concerning extra-marital affairs should be taken with "a large grain of salt," but by studying only those who engage in the activity, the researchers avoid a lot of potential problems.

I recently brought up the issue of positive outcomes being overlooked in the midst of our economic downturn. Is there a silver lining to this one? If you view affairs on a continuous span, less cheating is certainly good (the study mentions less gifts and lavish treatment-- I don't think it's a stretch to say there's "less cheating" occurring, however you want to quantify that). If you see it as discrete, the change should mean nothing-- "less cheating" is still cheating, and that's what matters.

By the way, if you can read the comments by the gender studies professor in the article without breaking into uncontrollable laughter, you're a stronger person than I am.

Anecdotal Evidence That at Least One of My Theories is Right

Health care correlations I wish to explain:

1. There is a positive relationship between health care (access & outcomes) and income in the U.S., Canada, and Britain.
   
2. In Canada, income appears to be more important than in the U.S., and the best evidence suggests it is an absolute (not relative) effect. In Britain, income effects in children are statistically insignificant from 0-4, but become significant afterward and increase with age.
   
3. Health care expenditures do not seem to have much of a relationship with outcomes.
   

#3 seems to contradict #1 & #2, so what could be going on? It makes sense, for the most part to have a income effect in the U.S., but why does it exist in England and appear larger in Canada?

I have hinted on this blog before, that I suspect that the reason the Canadian and English Health Care Systems have an income effect is due to capitalization in the housing market. Everything I could tell about these two health care systems seems to ration their services geographically, just like the U.S. does with its public school system. Therefore, people who care about access to the better hospitals will bid up the price of housing in those areas. This creates the appearance of an income effect without the expenditure effect. Now, this story appears in the U.K. Telegraph:

New figures seen by the Daily Telegraph illustrate for the first time how Government changes in the way the NHS is run have fundamentally altered the way care is provided.

Data from Dr Foster, an independent health care information company, published today (MON) reveals that more than a third of the NHS hospital trusts in England suffered a fall in the number of routine operations they performed last year.

Many hospitals have witnessed a sharp fall in income as a result of health care reforms, including the introduction of a Payment by Results system.

Patients are now able to choose where they are treated, with many snubbing the traditional visit to their local hospital and opting for units with the best treatment records, facilities and, crucially, cleanliness and infection control.

GPs can also choose where to send their patients. Crucially, hospitals no longer receive a guaranteed block grant and are paid according to the number of patients they treat.

Bold emphasis added by me.

On Russia's Abandoning the "Crisis"

Mark Perry at Carpe Diem has an interesting post about Russian state involvement in the press to manage the financial panic:

Instead, just as in Soviet times, Russians are told how bad everything is in the West. The US, Russians are told, is in irreversible decline, while desperate Britons are throwing themselves into the Thames. The Queen, facing imminent penury, has been forced to pawn her diamonds and, according to one tabloid front page, Brits can no longer afford to bury their dead.

I asked TPS friend, Dr. Pavel Yakovlev, a Soviet native now economist if he would like to comment on the story:

I think it is a fairly accurate post. When I talk with people who currently do business and live in Russia they say the crisis has really hit them hard. It is mostly a psychological or panic driven crisis for them despite the best attempts by the government to play it down as nothing serious and calm people down. The Russians remember the 1998 crisis, which has wiped out many businesses and are afraid that it could happen again even though the fundamentals are good. So, I think there is an unhealthy level of negative expectations and the government's desperate attempts to calm people down may surprisingly backfire.

NFL thoughts

So the Pittsburgh Steelers defeated the San Diego Chargers yesterday in NFL action, and a number of interesting scenarios developed as a result:

- After 12,000+ NFL games, this was the first one to end in a final score of 11-10. Surprising? Perhaps. But given any number of parameters, you can find a scenario in any game that was a first in NFL history. (QB that threw for 350, ran for 6 first downs and had 3 rushers of at least 34 years? It's a first!) The interesting part is the simplicity of the condition. Everyone else seems to be much more excited about this than I am-- and I get excited really easily about statistical oddities too.

- As the clock was winding down, San Diego was playing defense with a 10-8 lead. They had used their time outs; if they so chose, they could have stacked the line, stopped every subsequent run up the middle, and be at the mercy of a very short field goal. That gives them a low probability of success. Conversely, the Chargers-- once they couldn't stop the clock-- could let Pittsburgh score a touchdown, then turn around themselves and march down the field in the remaining time. (An action taken by the Packers at the end of Super Bowl XXXII.) If I remember correctly, this would have left them about a minute and a half to execute the task. Not an easy task, for certain, but neither scenario is favorable-- you need to put yourself in the best situation to win. The decision by the Chargers was the common one-- play defense and try to block the field goal-- but I'm not certain that's your best chance of winning. Then again, Pittsburgh has a solid defense, the weather wasn't great and I still can't understand why people feel Phil Rivers is an NFL level quarterback. Six of one, half dozen of the other I guess.

- San Diego did get the ball back with time for one more play after the Pittsburgh field goal, and elected to go for the Cal/Stanford lateral type play for their last ditch effort. The band stayed off the field, and these types of plays usually result in fumbles. And that's what happened-- and as it turned out, one of the Steelers picked up the fumble and ran it in. So what's the difference between an 11-10 win and a (likely) 18-10 win? When the line is PIT -4.5, quite a bit, actually.

Any idea on the amount of money wagered on this game? It's clearly in the millions; NFL games see a lot of action, and both of these teams are popular on top of that. TPS gambling guru Rob Holub is invited to provide links or general commentary.

Now is the Winter of their Discontent

From WSJ:

Bush administration officials have resisted Democrats' calls to use funds from the $700 billion financial rescue plan on the auto makers, and have said public dollars should be used to ensure a company's long-term viability.

Executives of GM, Ford Motor Co. and Chrysler LLC, along with leaders of the United Auto Workers union, are expected to testify at a hearing of the House Financial Services Committee next Wednesday.

Personally, I look forward to the upcoming cognitive dissonance facing the ideologists who often both love the privileges and protections afforded to labor unions while loathing corporate welfare. There will be mounds of such dissonance in the upcoming months as we watch congressional hearings that feature UAW leaders pleading for such welfare, it is a monster of their own making.

The Upside of Downturns

My column in the State Journal this week deals with a topic that we got to discussing over beers a little while back. The media loves to cry wolf-- anything that can be spun badly, will. And with the way things have played out in the recent past, there are no shortage of opportunities.

But what about the good things that come from economic downturns-- in particular, what things happen during downturns that are the exact opposite of what people complain about during upswings? I cited gas prices, housing prices and (though, in general, not strictly cyclical with the economy like the other two) the strength of the dollar, but there are plenty more. I'd like to hear what other examples are out there.

Optimists, the day is yours!

Ron Paul at Freakonomics

Ron Paul is answering questions over at Freakonomics; the first half is here, and the second half should be coming shortly. Take a gander if you've got a few minutes to spare.

Personally, I have found it very satisfying at a base level that the Austian Business Cycle Theory has begun to creep its way into national discussions with higher frequency. Paul sprinkles it throughout his answers, and with great effectiveness.

A Trio of Wine

Is the wine industry changing right under our noses? Three points to consider. First, Amazon is getting into the wine business (again). For a number of reasons, including the myriad of interstate shipping laws, the wine industry has encountered problems transitioning to the web. Amazon invested $30 million in an attempt in 2000 to get into the online retail side of wine, but to no avail. Now they are at it again, this time giving producers the ability to set the sale price. Retailers will receive 47% of the retail price -- slightly less than what they receive in the traditional three tiered pricing system.

Second, wine is making its way out of the countryside and going urban chic. Vintners are increasingly moving into old factories and warehouses in cities, many of which are traditionally unassociated with wine and wine production.

Finally, Intrade has just announced an agreement with Live-ex: The Fine Wine Exchange to create the first publicly traded wine futures contracts written on the fine wine market.

These will be interesting developments to watch, maybe shedding light on questions like whether the rents that middlemen in this industry earn are more a function of the services they perform (in terms of providing information to both sides of the transaction and lowering transactions costs of exchange) or more artificially attributable to laws and regulations. It may seem that if consumers can detect quality themselves and obtain information from producers and reputable sources, online retailing will be successful to the extent that companies like Amazon can navigate the tangle of regulation.

But I think that information availability is not really the problem (costly search may increase with online retail). There is plenty of information out there on the various vineyards and producers, but that information is costly to condense and make accessible. I have not settled on one explanation, but I tend to think that middlemen provide a useful and necessary role in the market for wine. There is a personal component of wine that I have yet to put my finger on, but I think its the reason that user-based content or social networking wine sites like Snooth have not really taken off (who are also now selling wine). Wine has all of the interesting components of ex ante unobservable quality, repeated play and reputation, and ultimate subjective enjoyment that make it interesting to discuss, but there is more to the experience of wine than its components. While I am a big fan of wine becoming more accessible, I think there are components of the wine experience that will continue to lend itself to a market heavily structured with middlemen and intermediaries. Any thoughts?

ThinkMarkets

Mario Rizzo is now blogging along with other Austrians at ThinkMarkets. I had the fortune of taking a course from Mario on ethics and the role of the state, as well as enjoy a lecture & discussion this past summer at FEE. Mario always brings an unique and insightful understanding to any particular problem he tackles. I was at a conference last month where his co-author, Glen Whitman (who blogs here) presented a new paper on internalities and new paternalisim. I think these are crucial questions for libertarians and economists to address, and am glad that Mario and Glen are working in these areas. I am excited to keep up with this new blog, as I expect I will learn something new from Mario and his co-bloggers from NYU Colloquium on Market Institutions and Economic Processes.

Hat Tip to the Austrian Economists.

Short-sighted alcohol tax effects

CNN reports on a new study [pdf] in the American Journal of Public Health that notes that higher alcohol prices via taxes leads to the saving of lives. That spin of the results makes all of the difference-- the researchers correctly note that the increase in alcohol taxes leads to "immediate and sustained reductions alcohol-related disease mortality." [emphasis added] The real issue here is that taxation causes substitution away from the taxed good (beer, wine and spirits) and for the answer that everyone cares about-- what's the overall effect on mortality-- to become apparent, we'd need to look at the spillover effects of this tax into related activities. Are all of the high-value drinkers substituting into lower quality alcohol? Maybe they're drinking less and eating more potato chips on the couch watching football. The direct effect is clear, but the truth comes in looking at the secondary outcomes. The authors don't extend their research beyond alcohol, nor beyond drect alcohol related deaths by disease (i.e. drunk driving), so they aren't trying to overstep their bounds. CNN gave it a bit too much range, however.

For what it's worth, Figure 2 doesn't provide a compelling story. Personally, if I don't see it in the simplest of terms, I'm not going to buy any level of statistical fudgery. And at first glance, under the right circumstances, an increased propensity for alcohol-related death over the second span could generate the downward dichotomy at 1983 that the authors attribute to the tax shock. Also, the variance of the error terms doesn't seem to be constant across the span either. And are they drawing the last line in the thrid section with 8 data points over 2 years?

Again, I believe the paper doesn't try to say too much, but the policy implications of papers like this can't be underestimated if they get into the wrong, MADD-inspired hands.

Fact of the Day, animal edition

Earth-wide, the combined weight of humans and ants are roughly equal.

Addendum: Which brings up the following question: Which animal would yield the greatest sum total? Obviously, the structure of the question matters. Insects as a whole would probably take the cake, but from the above statement, we've parsed ants away from that group. I don't think if you chose "mosquitos" or "ladybugs" you'd end up with a vastly greater number. So, what animal would take this? Or would humans/ants top the list? Zoologists of the world, comment.

Source: The Discovery Channel

On the Bailout Flip Flop...Remember Those Who Warned Us

Remember the anti-bailout petition signed by 200 economists? Here was point 2 of their 3 points of opposition:

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

Now, maybe this flip flop is for the better (though it is not clear to me), but you can't say that this was unforeseeable or that Congress was duped. In all likelihood, they wanted the ambiguity so that they could lack any accountability on the matter, much like the Iraq War vote.

Financial Panic: How We Got Here in 5 Words

With no lessons learned. Here is the headline title from this CNN Money article:

From Marx's Playbook

Via Doug French:

The TV pragmatists probably forget that Karl Marx and Friedrich Engels wrote in The Communist Manifesto that creating "a centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly" should be near the top of any communist's agenda.

Is it any wonder that Treasury Secretary Henry Paulson's plan has morphed into the federal government taking equity stakes in banks, mortgage companies, and at least one insurance company? As Oscar B. Johannsen wrote, "A socialized banking system is the precursor of socialism in all business." (By the time you read this, airlines and car manufacturers may be partially owned by the government.)

U.K. Government-Approved Occupation Shortage List

The U.K.'s Ministry of Borders and Immigration has decided what market shortages exist in thier domain, and what they will need more of in the future from immigrants. Find the complete report here. Philippe Legrain provides the highlights (I resist the temptation to Americanize the spelling):

• sheep shearers (but only if they hold the British Wool Marketing Board bronze medal or equivalent);
• frozen fish filleters (but only in Scotland);
• theatre nurses (but not midwives);
• veterinary surgeons (but not other veterinarians);
• chefs (but only those paid at least £8.10 an hour);
• ballet dancers (but not choreographers, or other dancers).

Google tracks the flu

Read about it here, check it out here, and here's how it works. Watch the video on the last link-- Google's Flu Trend leads the CDC's information by about two weeks.

Google is a trove of information; I'm thrilled that they put it to interesting use. The whole Google Trend outfit is here.

Data by the truckload gets the TPS Seal of Approval.

The Incredible Government Abuse of Michael Shergold

I'm just deferring readers here to KipEsquire's blog, which has an excellent synopsis of the story ongoing in the U.K. and is the first I had heard of it. Here is a teaser:

The one observation I can come up with is that this abomination illustrates the evil of pure utilitarianism. Apparently, a supposedly civilized nation has now become perfectly willing to have its citizens literally start carving each other up based on some low-level bureaucrat’s determination of “the greatest good for the greatest number.”
...
If the government presented me with the dilemma it has so pointlessly and cruelly foisted upon Michael Shergold, I would probably have a nervous breakdown. (Keep in mind that Shergold has two other minor children. The surgery would pose a serious risk to him and, vicariously, to them and their welfare.) How do you chose whose interests to prioritize from among your children — especially when, thanks to the coercive power of the government, you have bonded with your children in very different ways? What thought processes could possibly have led to this nightmare?

It is an incredible story, do read the whole post, it even illustrates the importance of having a Free Press...by demonstrating that the UK does not have one.

Economics of Swingers

Yes, those kinds of swingers.

Here is what I recently learned from a sociologist friend of mine who happened to be invited to join a group of swingers. Her curiosity as a social scientist led her to ask a bunch of questions, which she was able to pass on to me.

• Swingers tend to have at least one person per couple with a college degree.
• The couples involved tend to have stronger marriages, but it is believed that those who do not have strong foundations quickly divorce after starting the swinging.
  
• The typical rule is that it must be couples, no singles allowed.
• To join a group, you must first present a negative STD test, and agree to be routinely tested.
• Many have restrictions on outside sex, so in a sense, you are not permitted to "cheat on the group."
• Usually people find groups these days over the internet, but you need to participate in messaging on the internet for a long period of time before anyone will approach you or respond to you for meeting.
  
• Even after they agree to meet with you, there are several "dates" where they meet the new potential couple and get to know them.
• Groups intentionally try to match up with each other with the purpose of having low variance and similar mean in appearance.
• Groups also sort themselves according to their preferences for activity types.
  
• Since swinging in "public" places (like bars) is illegal in many states, there is a large underground establishment of bars that are popular and "normal" but have secret swing rooms. Oftentimes, the bar owners of these establishments are swingers themselves.
• It is easier to be exiled from the swinging culture than it is to be accepted into it.
  

Obviously, there is an enormous amount of diversity in these groups, so nothing above is a law. Some groups are more accepting of new members, including singles, and are less or more concerned with safety. It is also not a scientific study, but what my friend who has a doctorate in social sciences is able to ascertain from the groups that have invited her.

It is interesting to see the provision of club goods play out in this underground world. Trust and reputation play an enormous role, not so much out of legal concerns but because of health concerns. The high entry barriers are used to dissuade those who would only be somewhat interested in maintaining a lasting relationship with the group, and while the monitoring is not particularly frequent it is clear (negative STD tests).

I am curious about the punishment for cheating on the group. If you have a spouse that has difficulty resisting temptation, it seems that swinging would be a good option for you. 1) You could satisfy their temptation in a controlled environment; 2) You would have access to a network of reliable monitors.

Che T-Shirts

For those of you who wanted to know what to get your free-market economist friend for a gift this holiday season, check out this:


Hat Tip: An unnamed free-market economist who spent this Halloween dressed as Che.

Wise Words from Ed Glaeser

In a post about smoking bans coupled with marijuana legalization occurring simultaneously:

Some people think that the libertarian viewpoint is undone by an increasing acceptance that people are not all that rational. I disagree. Accepting the limits on human rationality makes me more uncomfortable with allowing our elected or appointed officials to make decisions for us, because the effects of individual irrationality can be significantly increased when we delegate authority to elected officials. In Boston, government officials want to “de-normalize” smoking. In other places and other times, governments have wanted to “de-normalize” homosexuality. Perhaps we are better off without trusting the state to de-normalize anything.

You can't keep a good market down...

The response to this situation should be interesting-- but would it be Obama's call or W's? Or the local authorities of Washington DC? I'd guess the last of them all, with advice from Obama.

But wouldn't it be ironic if, during an inauguration address by Obama highlighting the importance of strengthening the economy, he took the stance of squashing the most rudimentary of markets by preventing resale of inauguration tickets?

As I've said many times before: Ticket "scalping" is not bad.

As I've also said many times before: If you wanted to put an end to ticket resale markets, auctioning off tickets to begin with would severely reduce in size that market.

Onorato Tax

So being close to Pittsburgh, and having Pittsburgh local channels beamed in on Dish Network, I end up hearing a decent amount of Pittsburgh news. Over the last year or so, there has been quite a hubbub over a new drink tax. People don't like paying more taxes, obviously, but evidently people really don't like paying extra for their drinks. And at 10%, that's a steep levy.

What reminded me of this situation was my bill from a recent trip to a Pittsburgh restaurant-- clear as can be, below my total bill, were the taxes were split into "sales tax" and "drink tax." Only the drink tax didn't say "drink tax"-- instead, it was labeled as the "Onorato Tax," after Allegheny County Cheif Executive Dan Onorato. That killed me.

How things have progressed: In late July, the Allegheny City Council determined that this measure should be decided on the November ballot-- in the format of "should we repeal the drink tax for an increase in property taxes?" In early September, the board of elections of Allegheny County determined that the issue was not fit to be determined through an election. A week after that ruling, the Friends Against Counterproductive Taxation appealed the decision. Just last Thursday, the state Supreme Court decided that it will hear the two appeals. Dana-- I know in California they vote on tax issues all of the time, so what's the grounds for saying this shouldn't be put to a vote if the city council deems it so?

Designing Cartels within the States' Interior

As a bonus point project I recently had my MPA students look for examples of Antitrust cases that at least appear to have increased competition. Not surprisingly, the cases that have emerged actually seem to be cases where Antitrust law was used to contradict firms using other laws or regulation to reduce competition. For example, the use of dummy corporations to extend patent laws beyond their intended lifetime. By coincidence, Slate has a story this morning that follows the theme:

In 22 states, including Arkansas, it is illegal to call yourself an interior designer without going through an arduous and expensive certification process. In Nevada, it's illegal to do interior design without a license. That's right, advising someone about drapes could land you in the hoosegow.

Bargaining Over A Dollar

In graduate microeconomics, I remember having to study the various demonstrations of the "bargaining over a dollar" game. Two players would take turn making offers on how to divide a dollar among each other and the outcome depended on the number of rounds, bargaining costs, impatience factors, and who got to make the initial offer. There are probably hundreds if not thousands of variations of this game. The news provides us with a real life demonstration on Yahoo News!

CLEVELAND – A contractor who found $182,000 in Depression-era currency hidden in a bathroom wall has ended up with only a few thousand dollars, but he feels some vindication.

The windfall discovery amounted to little more than grief for contractor Bob Kitts, who couldn't agree on how to split the money with homeowner Amanda Reece.

....

And 21 descendants of Patrick Dunne — the wealthy businessman who stashed the money that was minted in a time of bank collapses and joblessness — will each get a mere fraction of the find.

"If these two individuals had sat down and resolved their disputes and divided the money, the heirs would have had no knowledge of it," said attorney Gid Marcinkevicius, who represents the Dunne estate. "Because they were not able to sit down and divide it in a rational way, they both lost."

Ah, the prisoner's dilemma be a harsh mistress, but I'm surprised the property rights extended to the descendants of the original wall depositor. I guess we'll have to consult Dana, the TPS legal expert, in the comments!

Hat Tip: Jason Oberle for the pointer.

Creationist Economics

If you are looking to feel sick to your stomach, read the comments on Marignal Revolution's reference to Mankiw's open letter to Obama.

The liberal left treats their economics the way the religious right treats their biology - with Creationism.

Signs I Might Be Evil

Today, the telephone rings, it's a telemarketer (TM):

TM: Hi, this is X and I'm calling you on behalf of MADD, Mother's Against Drunk Driving, how are you today?

Me: Fine, but...

TM: Don't worry, I'm not calling to ask you for donations, but instead...

Me: Actually what I was going to say was that I do not support MADD because of their policy positions.

TM: This has never happened before, I have no rebuttal, or even an idea as to what to say. Have a good evening I guess.

Me: You too, have a good one.

I'll never forget that final volley from him. In my defense, I was thinking of their opposition to lowering the drinking age from 21 to 18. I do suspect that ceteris paribus it would increase drunk driving (what with demand curves being downward sloping and all), but I would be in favor of increasing the penalties significantly to help offset that.

Economics of Gangs

Although it won't be out in print until fall 2010, my paper "Putting the 'Con' into Constitutions: The Economics of Prison Gangs" is now available for free on the Journal of Law, Economics, & Organization website. Here's the abstract:

This paper investigates the internal governance institutions of criminal enterprise by examining the law, economics, and organization of the La Nuestra Familia prison gang. To organize effectively within the confines of penitentiaries, the gang needs to provide a credible commitment for member safety to potential entrants and a means of preventing predation and misconduct within the gang. I analyze the governance structure outlined in the gang’s written constitution and show how it solves the collective action problems associated with multilevel criminal enterprises. (JEL D23, K42, L23, P16)

Two sentences from Obama's website

Check it out for yourself; these are from the Economy page.

Sentence 1: Obama and Biden believe that trade with foreign nations should strengthen the American economy and create more American jobs.

So far, so good. We could replace "should" with "does," but for a politician, it's nice to hear that trade is good.

Sentence 2: Fight for Fair Trade.

Oh dear.

(Justin keeps urging me to write about politics.)

Ah...Questions We Might Get Answered

In one of my first TPS posts, I asked:

What if we cloned a small number of an extinct species Jurassic Park style, like the Dodo bird, would the Endangered Species Act require us to put them on the list?

It appears, we may soon find out:

Japanese scientists have produced clones of mice that have been dead and frozen for 16 years -- a feat that could lead researchers to one day resurrect long-extinct species, such as the mammoth.

Huzzah's all around! I recommend that the new political regimes devote 100% of their time, attention, and focus to developing a complete answer to this question.

Amity Shlaes on The Daily Show

Notes on the NFL Network

Last night, I watched a live game on the NFL Network for the first time. My understanding of the NFL Network is that the NFL is engaging in some vertical integration to retain some of the revenues of broadcasting a game. Rather than outsourcing the cinemagraphic version of their product to CBS, ESPN, or Fox and paying a fee, they create their own network and keep it in house. Now having observed it, some notes:

• The pre-game and hype building is significantly better than any other station. The lack of significant opportunity costs and greater internalization of the benefits for this network allows them to really dive into the story of the teams.
  
  
• Sounds of the game are terrible: When you watch the game you want to get a feeling of the emotion of the crowd. When something exciting happens in Cleveland Browns Stadium, your ears bleed. Cleveland is a city that overreacts to every smidgen of success because they know how short lived it will be. During the game, the apparent absence of any crowd mic's really stripped the game of that feeling of crowd intensity.
  
  
• Video of the game: Worse than others, but not terrible. They choose bizarre shots that are just upsetting. They brought the camera angle just behind the running back for a play, and I had no good sense of how many yards were gained on the run (I could tell it was between zero and ten, but it turned out to be eight.)
  
  
• Instant replay: They are slighlty too judicious with it for my taste, but more annoying is that they seem to lack a smooth transition from the live feed to the replay. The screen pauses, appears to start to slowly rewind, you look down at your DirectTV remote to see if you accidentally hit "back," but then the replay starts. Irritating.
  

Just Say No to ED!

Eminent Domain, that is. Fishers, a northeast suburb of Indianapolis is apparently not totalitarian enough for the taste of developers. From the Indy Star:

A developer has pulled the plug on a $100 million downtown redevelopment project and town leaders now plan to restart the process, starting with a poll of residents.

...

The Fishers Chamber of Commerce and town government leaders about a year ago selected Cleveland-based Fairmount Properties to begin buying 125 homes that would be torn down to make way for the development, but Fairmount had not purchased a single property by July. The lack of progress had frustrated town leaders.

“The decision to mutually terminate the development agreement was the right decision for both Fairmount and the town due to Fairmount’s concerns with acquiring the proposed properties without the town’s assistance with eminent domain,” Scott Faultless, Town Council president, said in a news release issued today. “The Town of Fishers agrees and supports Fairmount’s position to withdraw from the project.”

I have yet to see any indication from Fishers that the town leaders plan to use eminent domain. I can only guess that Ed Lopez must be nearby whispering in their ears! ;)

Greyhound racing ban

Marshall Gramm sends along this election result, in which the voters of Massachusetts approved a dog racing ban on Tuesday. Dog racing will be phased out by 2010, not immediately, so as to allow the nearly 1,000 employees to find alternative employment. (That reminds me of Justin's hypocrisy arguments concerning economic sanctions-- countries will impose free trade restricting tariffs in the name of protecting domestic industries while also imposing economic sanctions on countries in which it does not politically agree (i.e. Cuba, North Korea, etc.) in order to harm their economy.) Of course, it's another example of legislating morality-- but if legislating morality can be viewed by the larger public as more acceptable as long as there's an amount of time to allow things to shake out for the worse, that's the damage of this bill.

The Humane Society has a short bit on the status of greyhound racing bans in other states, scroll down to #7. Seven states (prior to Massachusetts) have live greyhound racing bans: Idaho, Maine, North Carolina, Nevada, Vermont, Virginia, and Washington. All of these passed in the 1990s.

Unintended consequence: What to do now with all of the greyhounds? Is this a case akin of sweatshop laborers in other countries-- perhaps the workers are not doing as well compared to American workers, but that's not the proper comparison to make. Amongst low income countries, sweatshop workers actually do pretty well for themselves. The dogs don't have acres to themselves and filet mignon nightly, but they weren't put down by the local pound either.

More Research on the Canadian Health Care Income Gradient

American pundits and activists behave like it doesn't even exist, but income is not only important it is possibly more important in Canada than it is in the U.S. Anyway, in Empirical Economics I found this paper to be interesting by Sun and Stengos:

The absolute health income hypothesis revisited: a semiparametric quantile regression approach

This paper uses the 1998–1999 Canadian National Population Health Survey data to examine the health–income relationship that underlies the absolute income hypothesis. To allow for nonlinearity and data heterogeneity, we use a partially linear semiparametric quantile regression model. The “absolute income hypothesis” is partially true; the negative aging effects appear more pronounced for the ill-healthy population than for the healthy population and when annual income is below 40,000 Canadian dollars.

I wonder if there is a comparable study in the US? The absolute income hypothesis (AIH) suggests that increasing a persons income will improve their health, but at a diminishing rate (aka "concavity"). The alternative theory is the relative income hypothesis, which says it is your income relative to your peer group that determines your health outcomes. Support for the AIH theory suggests that we want to address health care outcomes by focusing on income growth.

This paper shows that the AIH holds but is not "globally concave," in that it does not hold for the entire spectrum of the population, but instead applies differently across age groups. The paper is very good so, if you are familiar with quantile regressions, I recommend those with an interest to have a read.

Update: $2.99 Gas Deal

Back in May, Steve Levitt took a beating from commenters and bloggers for a Freakonomics post on Chrysler's $2.99 gas deal, which is nicely summarized here:

If you buy a Chrysler vehicle this month, you’re eligible for a gasoline card that caps your fuel costs at $2.99 a gallon for three years. Freakonomics author Steven Levitt calls this a ”brilliant idea,” because he thinks consumers “systematically exaggerate the importance of gas prices to their budgets.” He also thinks the program might not cost Chrysler very much, because there’s a good chance that gasoline prices might fall.

Many people were upset by 1) his suggestion that people exaggerate the importance of gas prices; and 2) that he suggested prices might fall and Chrysler would not have to pay anything out.

Well, you could still debate #1, but #2 looks like it is going to go to Levitt, so there should be a world wide web of people preparing an apology to him.

Why So Negative On These Unintended Consequences?

From Slate:

Nebraska is the last state to pass a so-called "safe haven" law designating places such as hospitals or police departments where a parent can give up one or more children without risking jail time.

Unlike the laws passed in the other 49 states, where typically the child must be one month old or less, Nebraska's measure imposes no age limit; infant and strapping teenager alike may be forfeited. As a result, Nebraska is turning into a national dumping ground for unwanted kids. Mothers and fathers eager to cull their herds have shown up from distant Michigan, Arizona, Georgia, and Iowa. In one busy 24-hour period in September, 11 children were deposited at local hospitals, including nine siblings left by a single father. One 16-year-old girl didn't even know she was being abandoned. Concluding, sensibly, that the Nebraska law as written is disastrously broad, Gov. Dave Heineman has called for a special legislative session this month to cap at three days the age of lawfully abandoned children.

I don't understand the controversy here, maybe someone can offer help. Nebraska, like many others, are trying to avoid the unintended consequences of having laws that jail parents for abandoning their children (that I prefer not to imagine). As a result, they create a safe haven to overcome these, but they are upset over the scale? The author says the conclusion the law is "disastrously broad" as being "sensible," but it is not at all clear to me.

I have to imagine that most good parents are not near the margin of dump or keep, but instead face a large discrete jump. Children whose parents are near the margin I would guess have a fairly unhappy home life, regardless if it is 1 month or 16 years. Alternatively, the parent may be extremely loving but has so much concern over their own ability to raise a child it overwhelms their instinct to keep them.

In either of these two cases, how does restricting the safe haven laws make anyone better off by forcing them to remain in the situation? It is not obvious to me, the comments are open as always.

Free stuff for voting

Turns out that a lot of places want people to vote-- so much so that they're willing to give out free products. Starbucks, Krispy Kreme and Ben & Jerry's are highlighted in the article. Does anyone know of anywhere else?

Control for factors across all fifty states, then find the marginal impact of free goods on voting rates? Presumably the country is not blanketed evenly by all three companies. Even Starbucks. Though they have closed some stores recently. [pdf list here]

Waiting in line poll

I put up a poll about an hour ago asking:

"How long would you be willing to wait in line to vote?"

The results are as follows:

21 - Less than 30 minutes
11 - 30 minutes to 1 hour
10 - 1 hour to 2 hours
4 - 2 hours to 3 hours
19 - More than 3 hours

I understand those that aren't willing to wait long at all; I also understand why people would chose to wait a very long time (the reasoning, not the reason). But is the one to two hour time frame significant? Is that the level of opportunity cost that hits a wide swath of the public? Apart from those that take a strict rational voting stance (assumed to be the low end), and those that take a strict civic duty stance (the high end), do the middle provide a decent estimate of the value of voting?

Edited: I'll adjust the number accordingly throughout the day...

Election Day History at TPS

Since it's Election Day, and I'm still in West Virginia, I thought I'd point to a post we had here at TPS a few years back. Everyone here in the Mountain State gets the day off school-- even at the University level. I teach on MWF so, again, Election Day misses my class schedule.

I'm watching SportsCenter at the moment, and Chris Berman has told me that it's my "duty and privilege" to vote today. I'll agree with the latter.

Research Whose Results I Believe

From the NYT:

A study of nearly 7,000 students at 38 institutions published in the current PS: Political Science and Politics, the journal of the American Political Science Association, as well as a second study that has been accepted by the journal to run in April 2009, both reach similar conclusions.

“There is no evidence that an instructor’s views instigate political change among students,” Matthew Woessner and April Kelly-Woessner, a husband-and-wife team of political scientists who have frequently conducted research on politics in higher education, write in that second study.

Why do I believe this? Because other research has had a lot of trouble finding an effect of school characteristics and teachers on measurable outcomes of educational attainment, why should ideology be any different?

I Didn't Realized the SSA Shared My Point of View

That social security is NOT a part of the "social safety net." People don't consider a life annuity voluntarily purchased from a bank or insurance company part of the social safety net, why would we consider the involuntary life annuity with poor contract terms part of the social safety net? Surprisingly, I discovered that the SSA agrees:

The main source of Social Security income is the taxes that employees, employers, and the self-employed pay. This method of financing Social Security—a payroll tax on workers and their employers—remains the primary method of financing the program. The Social Security program has won widespread public acceptance and support largely because it is directly supported by the people who receive benefits from it. Both benefit amounts and Social Security taxes are based on the worker’s earnings under the program. This aspect of Social Security helps to avoid any implication that the benefits are a form of government assistance or public charity.

Endure your costly civic duty

I'm constantly amazed by stories like this.

Waiting six hours in line to vote? I mean...really? Anthony Downs would be perplexed. The only explanation I can give is that people have ingrained within them a strong sense of civic duty, and they're convinced that they can't sleep at night unless they cast their ballot. And I guess that's the amazing result-- that preferences so violently inconsistent with individual well-being can persist, trial after trial. Altruism may be individually irrational but not terribly so; psychic benefit could conceivably explain the decision time after time. Yet voting is consistently a very costly activity-- sometimes really costly, as outlined in the article-- and people continue to do so. Can you attribute the activity solely to psychic benefit? Why aren't people updating their preferences election after election in terms of their vote being the swaying vote? Is civic duty, ingrained from elementary school day #1, that strong?

Bizarre.

Why It Is Ok for Libertarians to Vote Obama

Brad Smith at DOL writes down the arguments for why Libertarians should, if not go for McCain, at least stay away from Obama. Mostly, he is responding to this Reason article and demonstrates (accurately, in my view) why many of the Libertarian Obamanauts are using faulty logic, such as "retaliation" to the Republicans.

To be sure, if I was registered to vote, I would not vote for Obama. However, I think Libertarians can justify a vote for Obama on other grounds:

1. Libertarian philosophy is not just limited to economic realms, and to the extent social and political freedoms can be (if at all) seperated from economic freedoms, Democrats are often closet Libertarians. Legalization of drugs, looser immigration, and a zero propensity to return military conscription.
   
2. I suspect, as do many others, that Obama is much more likely to get us out of Iraq, and sooner rather than later.
3. Affirmative Action will continue to lose its appeal as a majority of Americans who are under no coercion to hire a black president decide to do so of their own free will.
4. I suspect Tyler Cowen is right in his theory that big swings in the ideological spectrum are more likely to occur when the president is of the opposing ideology. Of course, this may require a Republican congress, but maybe we will squeeze some economic freedom out of him yet.
   
5. From what I can tell, the free trade move to make is to shoot down the Columbia Free Trade Agreement, which would be a publicity loss but would be the better of the two outcomes.
6. Obama will be more likely to keep Congress from involving the government more in marriage and religion. As an aside, Libertarians have not capitalized enough on the government's attempts to render homosexuals to the status of second class citizens as a means of gathering additonal party support.
   

I could give easily give Libertarians a solid 10 reasons not to vote Obama, but it would all depend on how you way these different items. Anyway, if you are voting, may I suggest you cast a write-in ballot of "Palin/Binden." Now that would be good comedy! ;)

Communist Party wants Bond Girl to Capture Daniel Craig

Just read it for yourself, hat tip to Pavel Yakovlev, and here is a snippet:

Ukrainian Olga Kurylenko, 28, plays a Russian-Bolivian agent who falls for Bond in Quantum of Solace, which opens in cinemas across Britain on Friday night.

But the Communist Party of St Petersburg is taking the action movie very seriously indeed, having accused her of helping "a man who worked for decades under the orders of Thatcher and Reagan to destroy the USSR."

In a message on the party's website, it said: "The Soviet Union educated you, cared for you and brought you up for free but no one suspected that you would commit this act of intellectual and moral betrayal."

The party went on to appeal to Kurylenko to use her feminine wiles to get Bond - or Daniel Craig - to "tell what other plans are being written in the Pentagon and Hollywood to discredit Russia and drive a wedge between the Russian and Ukrainian people."

The party's leader, Sergei Malinkovich, said: "Everyone knows that the CIA and MI6 finance James Bond films as a special operation of psychological warfare against us. This Ukranian girl sleeps with Bond and that means that Ukraine is sleeping with the West."

He added: "Now she has the right to choose - to become a collaborator or capture Craig and hand him over to the Russian security services for interrogation.”

What's your favorite part of this story? That the leader of a political party has a conspiracy theory involving MI6 financed Hollywood movies, which apparently have links to plans with the Pentagon? That they see themselves as gracious educators of the Ukranian people? That they see her as having the right to "choose" to capture her costar and turn him over to the authorities, where I'm sure he'll receive the humane treatment that communists are so well known for?

Those Signaling Sneetches

What is signaling? Why is the costly-to-fake principle so important to successful signaling? How can signaling be used to provide public goods and overcome free-rider problems?

Meet the Sneetches.

The Sneetches were broken into two camps, those with green stars on their bellies (Star-Belly Sneetches), and those with "none upon thars" (Plain-Belly Sneetches). The purpose of a signal is to convey some meaningful information. In the case of the Sneetches, the Star-Belly Sneetches believed themselves to be superior than the other sand used these stars to identify other members of their groups in distributing public goods like frankfurter roasts, picnics, parties, and marshmallow toasts.

Cults often operate in a similar manner, according to Larry Iannaccone, where elaborate visual and easily monitored signals are used to seperate the group from potential free-riders who would otherwise consume valuable resources without contributing.

The point of the signal is to be costly, often intentionally meaningless and without use.* It must cost enough that it becomes pointless for non-members or others with "fake" intentions to adopt the signal. In other words, the cost of the signal cannot be quickly recovered by those who would only join the group for a short-period of time.

This point is clearly illustrated in the book by Sylvester McMonkey McBean, who invents a machine capable of printing stars onto the bellies of the Plain-Belly Sneetches for the modest sum of $3. The original Star-Belly Sneetches lament this:

"We're still the best Sneetches and they are the worst. But, now, how in the world will we know," they all frowned, "If which kind is what, or the other way round?"

McBean quickly invents a second machine that removes them for $10, allowing the original group a new means to seperate themselves.

* Like a degree from the University of Dayton...just kidding Flyers ;)