Beautiful Capitalism

By Scott Amron. $7 for a set of two.

Bad bets

TPS Clevelander Rob Holub sends along this link, asking conservative anti-global warming folk to put their money where their mouth is. The way I see it is as follows: Anti-global warming supports like to bring up sporadic examples of unexpectedly cool weather and then put forth the conclusion that all of this global warming nonsense is hogwash. The author of the blog post linked above says that those folks are remembering what they want to remember-- thus the bet. If you look at the whole picture, things may not support your position.

For what it's worth, I don't think the question is as much about whether the Earth's temperature is rising as much as whether it's humans that are causing that rise, or any further warming on top of the nature cycle of the Earth. As such, the bet shouldn't be a comparison of current temperatures to historical levels, but a comparison to a trendline estimate of where the Earth is naturally heading anyway. I guess it's not too surprising that no one has taken the bet.

It brings up the larger question: Should one be willing to put up money to lend credence to their positions? MR dealt with the issue a little while back, though I don't know how long ago and can't find the link. I could be convinced either way, though I suppose a staunch conviction in your theory could be offset by an even more staunch adherence to risk aversion.

Good News, Everybody! Poverty Edition

From the August 2009, NBER Digest: Poverty rates have been declining faster than suggested by income data.

Back in the blogging game!

Alright, I'm back home for a while, so I'll self-impose a more rigorous blogging output upon myself for the foreseeable future. A few thoughts I've had recently:

- I flew a couple of short Southwest flights over the past few days. For the uninitiated, Southwest does not assign specific seats on their flights. Instead, over the years, I've seen their boarding process evolve as follows:

1) My first recollection-- arrive at airport, check in, and receive a plastic, airline re-usable state-shaped card that allows you entrance onto the plane. These states are numbered, but only matter in groups of thirty. The first group of 30 boards the plane, irrespective of the individual numbers within the first group. The next 30 board, then the next 30, and so on, until the plane is full.

2) At some point, boarding passes fall in line with the rest of the airline industry-- disposable paper ones printed prior to the flight and worthless after you are on board. Also, groups expand to 45 and check-in can occur online up to 24 hours before scheduled departure.

Note that last change shifts competition from "who can show up earliest at the airport" to "who is most vigilant in remembering where they are exactly 24 hours before they leave."

3) Southwest now numbers every single boarding pass and you board strictly by your number; whereas before your 30 was equal to their 10, now you are getting on 20 spots later.

(As an aside, I noticed that handicapped/disabled/those that need extra time folks went first, then the first sixty passengers via the boarding pass number system, then those with babies, then the rest of the folks. Still not incentive compatible in my book, but my thoughts priority boarding privileges are here. And as an aside to the families-with-babies-board-in-the-middle realization, is Southwest inching towards becoming the first children-free airline? This bears watching.)

What is driving this change in boarding procedure-- that is, do you think it's more driven to suit customer demands or to reduce airline costs (i.e. board faster, turn the plane faster, etc.)?

While prices on plane flights vary over time, I am slightly surprised that prices for different seats within a plane at the same time do not vary (beyond first class, anyway). I'd pay more to sit in the front and away from the center seat. Has any airline ever done this? I've got to believe this has happened somewhere at some time.

- I had a dream recently where I was taking a class offered by Rachael Ray-- normal classroom offering and subject, only she was the instructor. I evidently attended the class very infrequently, and upon her confronting me, I then asked if she thought it was costly that I was missing class. She replied in extensive fashion that it was, to which I replied that her opportunity cost analysis was misguided. I'm really proud of myself for coming up with that! (I sleep with the TV on; I'm guessing that's where she came from.)

- Here's a bit on ESPN about pitch counts for starting pitchers in major league baseball, and here's a bit about a pair of studies that looked at the impact of youngsters throwing fastballs vs. curveballs. In short, I think certain pitchers can throw a lot and certain pitchers can't. In the past, at lower levels, if pitch counts were never an issue, then the low-volume throwers would get weeded from the game while the high volume pitchers would survive. You then make it to the professional level, and there aren't pitch count issues. However, with a range of theories and practices on the effects of throwing a high number of pitches, the weeding process is disturbed, and the uncertainty in drafting pitchers is a lot higher. Mix that with wanting to maximize the Type II error-- underutilize the pitcher when he could handle a heavier load rather than overusing someone who can't handle it-- and we've got dwindling pitch counts.

I can believe the curveball study in the sense that throwing any pitch is stressful on the elbow, and a curveball is generally thrown with less velocity than a fastball. It is also worth noting that if curveballs are so damaging, why do we never attibute arm injuries in professional pitchers to throwing curveballs? If the answer is that pros know how to throw them properly, then presumably amateurs are throwing pitches incorrectly, which leads up back to the first sentence-- throwing a fastball incorrectly will stress the arm more due to increased extertion.

I also vow to utilize the +/- feature-- I've timidly avoided it thus far.

Slandering the Supply Curve: Why Taxes on the Rich Matter

I know of no economist that believes we are on the downward sloping portion of the Laffer curve at the current rates, but Daniel Gross at Slate commits what can only be considered a willful disregard of careful thought on the subject:

Such logic makes sense to the Journal's op-ed page staffers, who inhabit an alternative universe in which people wake up in the morning and decide whether to go to work, innovate, or buy a bagel based on marginal tax rates. But if people were motivated to choose residences based solely on high state income taxes, then California and New York wouldn't have any wealthy entrepreneurs, venture capitalists, or investment bankers—and the several states that have no state income tax, which include South Dakota, Alaska, and Wyoming, would be really crowded with rich people.

The shortcomings, let me count them:

1. Gross discusses decisions in absolutes, rather than margins. Choices are not "never work again" or based "solely on taxes." On the margin, you consider the next additional project, and on the margin taxes matter. Did you ever turn something down you that you would have taken on if it just paid more? Me too.
   
   
2. For those nearing retirement (*cough*, baby boomers, *cough*), the decision actually can be whether or not to work or not.
   
   
3. The most important mistake is that he conflates taxable income with all forms of compensation. If you raise the rates on taxable income, one of the consequences is you incentivize firms and employees to change the form of your compensation so that you pay less taxes.
   
   
4. Gross acts as if there is no reason to think New York and California are different from other places. Perhaps if he read Paul Krugman's academic work, rather than just his op-eds, this would not have gotten lost on him. State income taxes are not terrible barometers of their monopoly power. Could South Dakota or Wyoming really impose high income taxes? California and New York have enough going for them that they can raise taxes and retain those residents, and even that has its limits.
   
   
5. The rich often have second homes, and they get to claim their permanent residence for tax purposes.* If a state wants to claim them as their own, the burden of proof is on them.
   

*Unless you are a professional athlete, and then you are required to claim your team's home city as your tax residence, regardless of where you live. And yes, MLB teams in higher tax states pay higher signing salaries to free agents.

The Business of Somali Piracy

A feature story in Wired.

File this under: You can bet on anything

I'll be back home next week, but quickly from CNN...

"Tennis superstar Roger Federer is the 'proud father' of twin girls after his wife Mirka gave birth overnight to Charlene Riva and Myla Rose.

[...]

Ladbrokes is offering 100 to one for either girl winning Wimbledon one day and 25-1 against a grand slam triumph in any of the four majors."

:-( Despair, Inc.

I just stumbled across this site. They have very funny tees and posters. Enjoy.

Inexpensive High Speed Hits Africa

A new undersea cable brings East Africa high speed internet. CNN reports:

"This is going to reduce the cost of doing business in Africa, within Africa and with international parties" said Suveer Ramdhani, SEACOM spokesman in South Africa.

"The cable is as thin as a hair strand and in one second it can download the same amount of data that 160 people use in a month."

SEACOM, privately funded and 75 percent African owned, will provide retail carriers with open source access to inexpensive bandwidth.

It has taken less than three years to complete the mammoth project, providing landing stations at South Africa, Kenya, Madagascar and other points along the east coast of Africa.

In other words, expect more spam in the inbox.

I stayed in South Africa for 4.5 months in 2007 and found the internet connection superior to my hometown.

RetroTech

I have always had an interest in RetroTech. I am always surprised when I step back and take a look at how quickly technology has progressed. Does anyone remember the original dancing baby? It was an internet phenomenon in 1996. Take a look.



A few years later, Pixar upgraded the clip.



Now, in 2009, Evian has upped the bar.

Just look how far we've come in a little over a decade.

Microcredit Woes

The Goldin Institue produced this report on microcredit in Bangladesh, and I found this paragraph particularly interesting (p. 4):

While many microcredit agencies express a desire to subvert the often exploitative traditional moneylending systems, evidence from our research shows that in many cases microcredit has achieved exactly the opposite. Numerous respondents reported being forced to take loans from traditional moneylenders in order to make their microcredit loan payments on time. Indeed, some respondents even suggest that these loans are preferable to microcredit loans because they are more flexible. As one observed, " I think taking loans from local money lenders is better than from NGOs because there is no obligation to pay a weekly installment. It is an easy system. They excuse us in times of crisis. They don't insult us. But NGOs never excuse us in any situation. We are tortured both physically and mentally. We remain bound to pay installments in time at any cost." In this way, the traditional moneylending systems have actually been bolstered by the development of microcredit in the village due to a growing dependence on credit from all sources. (emphasis from original author.)

This supports my concern that NGOs tend to have a strange collective group think against the competitive market process. The traditional private moneylenders are seen as inherently exploitive, and even after observing evidence to the contrary they remain disappointed that they exist. I suspose in their defense this may not be specific to NGOs, as payday lenders in the U.S. seem to suffer the same image problems.

Anti-Monopoly, The Book and Game

Over the weekend I was in a local game shop, and I came across "Anti-Monopoly", which of course is an idea we at TPS are very open to. On the box of the game itself, it was promising because it said something to the effect of "in the real world, prices are set by supply and demand." Here is the game's description:

Three different games have been produced over the years:

The First one was the original Anti-Monopoly I game, launched In 1974. It was a reverse-direction Monopoly game, that the players start where Monopoly ends. The board is monopolized in the beginning of the game and players compete with each other to return this virtual economy back to a competitive, free enterprise system. About a half a million units of this game were sold world-wide. Unfortunately, many players did not understand the game since the players were lawyers working for the Antitrust Department of the United States government, the same kind of lawyers who have worked to convict Microsoft of abusive monopoly power. But most players are not lawyers. To reach a wider audience, this game was phased out to be replaced by a new invention by Anspach,

Anti-Monoply II.

Second, was an upgrade of Monopoly, one which plays like Monopoly but which has an Anti-Monopoly theme in which some players act like monopolists and others like competitors. This game was also called Anti-Monopoly II.

Third, we are reviving the anti-monopolistic message of the real inventors of Monopoly in our new game: "the Original monopoly game" .

Its game equipment included two games:
(1) an Oil Cloth Atlantic City folk game which was stolen from its inventors and then commercialized with some new art work as Monopoly, and
(2) a Create-Your-Own-Monopoly game which revived the customization of an earlier monopoly folk game.

The website for the game also carries a book on the "true history of monopoly," and the legal battle with Parker Brothers over the marketing of their game.

I haven't played it, but if I get the chance I will report back with a review. In the mean time, I recommend Cities and Knights of Catan.

Save this Image For Your Lectures

For my fellow econ educators, by way of the CGD (Hat Tip: Art Carden), Zimbabwe (2000):

Blockquoting X

X = Milton Friedman:

There is wide agreement about the major goals of economic policy: high employment, stable prices, and rapid growth. There is less agreement that these goals are mutually compatible or, among those who regard them as incompatible, about the terms at which they can and should be substituted for one another. There is least agreement about the role that various instruments of policy can and should play in achieving the several goals.

These words were penned in 1968. Is there any more agreement among economists today?

What I've been reading

- Panicology is a statistician's (two, actually) take on the alarmist issues of today.  I like statistics, and I also dislike the alarmist take by the media, so I had high hopes, but the book seems weak in some areas and only stronger in others by relative comparison.  I did enjoy a few of the transportation sections, however-- one on the inherent safety of transportation, and another on cell phone usage while driving.  It is a decent jumping off point for a range off issues-- if I'm close by, borrow it from me when you need it or fire me an email about one of their topics, don't go buy your own.

- I'm just getting into Violence; if this is categorized as a sociology book, it's the best I've read in quite some time, if not ever.  It reads as a micro-foundations approach to all-things violent interaction, and the author explains it as such.  Making generalized statements about violence often mischaracterizes violent confrontations from the get go; as such, just about anything you've read making wide-ranging claims about violence (say, ethnic violence or racial violence) is probably wrong, and not by a little bit.  Here's the best one-liner I can give to sum it up (thus far, anyway):

"Most existing explanations of violence fall into the category of background explanations: factors outside the situation that lead up to and cause the observed violence...My objection across the board is that such explanations assume violence is easy once the motivation exists.  Micro-situational evidence, to the contrary, shows that violence is hard."

Frequency of violence tends to be a function not of the individuals but the overarching resolution framework to the situation; kids fight a lot because adults can provide resolution, prisoners fight frequently because guards can provide resolution, adults in society fight infrequently due to the lack of such a framework per the previous two examples.  That's a vast oversimplification (on my part); there's just a lot to go after in this book.  I highly recommend.

The Economics of Joab's Cancer

I'd like to point students and educators of economics alike to this paper by TPS friend Joab Corey, who will be at Florida State in the Fall:

The Economic Principles of my Cancer Treatment: How to Use Medical Experiences to Teach Economics

Abstract:
This paper uses specific examples from my cancer treatment to illuminate multiple concepts that are typically covered in economic principles classes. Economics is a method of thinking that reveals itself in all aspects of life and a good economics instructor should be able to recognize and adapt these economic concepts in even his or her most severe life experiences. The real events of my treatment serve to illustrate and further clarify basic economic concepts such as inelasticity, cost-benefit analysis, bundling, the concept of a second best world, and marginal decision making. This paper illustrates how an economics instructor can use personal medical examples to make the course material salient to students while bolstering their confidence in the economic way of thinking.

Joab tells these stories with the greatest elements of comedy, which hopefully will come across to you in the paper.

Here is Joab on Rational Ghost Game Theory.

Economists Doing it with Models: A Facebook Three-Way

If you have ever wondered how nerdy economists become when conversing over Facebook, I provide you with the following exchange with TPS friend Pavel Yakovlev, Jodi Beggs of EDIWM, and myself. The subject was from Jodi's post on a potential market for organs:



If you haven't added Jodi's blog/website to your regular reading list, do so now. As a PhD student, she may already be one of the best educators of economics in the country.

Reference Point Counterfactuals vs Observations

From SciAm:

The researchers show that people prompted to write about how a positive event may not have happened experience a greater uptick in mood than those prompted to describe the positive event. In their most persuasive study, individuals in committed relationships wrote for 15 to 20 minutes about how they might never have met and connected with their partners. Others wrote instead about the reverse – that is, how they did meet, start dating, and end up with their partners. Several control conditions, which involved writing about one’s typical day or about one’s friendships, were included as well. The biggest increase in satisfaction with the relationship occurred not in the group that pondered the sunny beginnings of their union but in the “mental subtraction” (or “How I might never have met Peter”) group.

I suspect this works in reverse as well ("...if only I hadn't bought that car..." or "...if only we had just stayed friends instead of dating...").

I am conjuring up ways to make this advice more useful than simply just substituting away from counting your blessings. I'll get back to you when I think I have something useful.

Why I Don't Read More Psychology

These were side-by-side teasers on this morning's Psychology Today homepage:

Here is the link for the first and second article, if you are so inclined.

Markets in Everything: Homeless Line-Holders Contracted by Lobbyists

From CNN, we learn what happens when quantity supplied is less than quantity demanded:

For big hearings with limited availability, line-standers may wait 20 to 30 hours. They're paid anywhere from $11 to $35 an hour.

Gomes was living in a shelter when he started line-standing. He said working in the halls of Congress gave him the motivation and money he needed to get off the streets. He now makes extra money by recruiting men for the line-standing services from the homeless shelters where he used to stay.

[...]

Many of the contracted line-standers are homeless or formerly homeless like Gomes.

Gasp! You mean there is no free lunch!?! Surely someone can stop this! Who will be our hero?

Critics see the practice as just another way lobbyists are buying influence on Capitol Hill. In 2007, Sen. Claire McCaskill of Missouri introduced legislation to ban the practice of line-standing.

"I have no problem with lobbyists being in hearings, but they shouldn't be able to buy a seat," McCaskill said. "It seems to me that if we are going to make sure lobbyists aren't buying meals for senators, and we are going to make sure lobbyists aren't buying elected officials gifts, then we ought to make sure they aren't buying seating at a public hearing."

They are going to ban standing in line? I'm not sure how people will get in the building. I would prefer we simply make it less valuable for lobbyists to get in the building in the first place.

This is where we must cue the sentiments from an activist who will reveal they care far less about outcomes, and instead demonstrate a bunch of self-serving moral indignation under the ruse of saving the homeless from being "used" or "exploited."

Maria Foscarinis, an advocate for the homeless, thinks it's ironic that some of the most powerful people in the country are using some of the most vulnerable to hold a place in line for them.

Hat Tip: TC @ MR for the Markets in Everything Theme

Juicing The Mitchell

Reason Magazine asks "Do we really need federal laws governing carry-on luggage, college football, and switchblades?"

Yes we do, now more than ever.

Indian Taco Inflation

TPS friend Jason Oberle has a funny post at the American Indian Policy Blog on the rising price of Indian Tacos, and gives TPS a shout out in the process.

I love price riddles (see here and here for others), and I hope JO gets to the bottom of Indian Tacos. Inflation? Coordination Game? Price Follower-Leader Model? Higher Costs? The world may never know.

Failed States Index

Foreign Policy and The Fund for Peace have put out the 2009 Failed States Index. Here's the top (bottom?) 10.

1. Somalia
2. Zimbabwe
3. Sudan
4. Chad
5. Democratic Republic of Congo
6. Iraq
7. Afghanistan
8. Central African Republic
9. Guinea
10. Pakistan

Here's the fancy map. Click a country to see how they rank.

Personally, I think Zimbabwe is worse than Somalia. Peter Leeson suggests Somalia isn't (or at least wasn't) as bad as people say. Ben Powell has a paper with Ryan Ford and Alex Nowrasteh titled “Somalia After State Collapse: Chaos or Improvement?” forthcoming in the Journal of Economic Behavior & Organization.

HT: Astrid Arca

San Pedro Prison

In Bolivia, the San Pedro Prison is governed completely by the inmates; guards simply ensure that no prisoners leave the facility. Despite this lack of government presence, the prison is safer than other Bolivian prisons and other self-governed prisons, like Andersonville prison camp. I argue in my paper on San Pedro, that the relative order is the result of inmates ability to operate businesses and own their own cells, which provide the resources necessary to invest in capital for protection and raise the cost of predatory behavior.

News reports indicate that Bolivian officials have begun cracking down on the prison. Inmate businesses are being shut down (including the inmate-run tours), ownership of cells is forbidden, and entrance to and exit from the prison is now tightly monitored (which will greatly reduce the extent of the market). The result will likely be greater violence and degradation.

Joke of the Day

Columbia Business School's Dean Glenn Hubbard sings about wanting Alan Greenspan's job.

Intentional tennis shirking?

Growing up, I found tennis a bit difficult to watch, and felt it was heading down the path of becoming more and more trying to watch as I got older. Racquets were becoming large and increasingly powerful-- great for the average weekend player, but for the elite it seemed to reduce the length of rallies. (Are there any statistics to confirm/refute this?) Further, those that had the most success seemed to be those that could utilize the technological characteristics of the racquet best. However, in recent years, it seems that technology has yielded to strategy and all-around performance, and those that play a fuller, more fan-friendly game seem to have the most success. The numbers could well bear my assertion out to be wrong; I don't have any statistical proof one way or the other.

Clearly, this comes on the heels of yesterday's epic men's final at Wimbledon. However, I was struck by something else over the weekend. During the women's final, Venus Williams squared off against her sister, Serena Williams, and lost in straight sets. But I noticed a curious thing happening during particularly crucial points on Venus' serves during the match-- she'd throw a poor toss in the air for her serve, and grab the ball on the way down. There's no penalty for this-- she simply throws the ball up again a moment later and serves it.

There are two questions here. First, was it actually happening? That's a numbers issue. Are there any incongruities in her poor tosses? Are they evenly distributed across matches and within matches? I don't have the data; the issue could be put to rest right there...or could be rather interesting...

...because, second, even if the numbers bore it out, was it intentional? Realize that tennis serves, even in the women's game, are in excess of 100 mph and require a significant degree of concentration and timing to return. This means that there's an advantage to be had in disrupting the returner. However, if a spike in faulty tosses increased during more pressure packed moments, it could also mean that the server simply got nervous and failed in the heat of the moment. So that's the pair of situations, if the numbers bear it out-- and given the repetitious nature of serving in tennis, I'd find it a more difficult argument to make that the pressure played an uninteded role on the server.

(A third question, of course, is if the failed tosses do actually have an adverse effect on the opponent.)

I have no idea who to even ask if mis-tosses on serves are tracked...but for a professional tennis player, there sure seemed to be a lot of poor tosses. And at pretty opportune times as well.

Things you hope your students don't mention to you...

Let's start off the week with some nonsense-- more happiness rankings! Here is the CNN rundown of the new rankings, which puts Costa Rica at the pole, followed by the Dominican Republic and Jamaica. And, pray tell, what are the criteria?

In a report released Saturday, the group ranks nations using the "Happy Planet Index," which seeks countries with the most content people.

In addition to happiness, the index by the New Economics Foundation considers the ecological footprint and life expectancy of countries.

Happy Planet Index?! Prison rodeo!?

The New Economics Foundation is here. The intro page for the Happy Planet Index is here, and the pdf report itself is here. The final rankings are on page 63 of the pdf. Components of the Happy Planet Index are: Life expectancy, life satisfaction, and ecological footprint. The goal with the final metric is to achieve "one-planet living." I'm guessing they're against colonizing Mars.

I liked this one: "The planet’s overall HPI score of 49 out of 100 reflects the fact that humanity as a whole has much to change..." Remember those nonsense days of yesteryear when a HPI of 49 used to be considered good? Now look how far we've come! Also of note-- by their index, China's doing nearly twice as much towards the end of a "happy planet" than North America. Just consider that sentence for a little bit.

Figure 6 in the report is a scatterplot of happy life years vs. GDP per capita, by country.

Yet Another Set Up, I Am Sure.

DC Council Member and poster child for detestable politicians Marion Barry was arrested. Again. The Washington Post reports:

At about 8:45 p.m., a woman traveling near the intersection Good Hope Road and Anacostia Drive flagged down a U.S. Park Police officer to report that a man in a vehicle nearby was stalking her, said Sgt. David Schlosser, a Park Police spokesman. That man, Schlosser said, was Barry.

Schlosser declined to repeat what Barry told the officer with respect to the incident. My guess: "B!^*# set me up."

Nash Equilibrium

From XKCD: