Month: October 2003

Naomi Klein argues that ads are a rip-off, a perversion of culture, and should be ignored or boycotted whenever possible. The well-known “Adbusters” group continues the campaign, calling for “Creative Resistance.”. Here is a useful article about the whole movement.

It is less commonly recognized that ads support free speech. No, I don’t mean that the ad itself is free speech, although this of course is true. Rather ads subsidize the free speech of others.

A simple example makes the point. A full issue of Forbes, without ads, would cost about $9.

The figure is taken from Why Not?, by Barry Nalebuff and Ian Ayres, click here for more information on the book and their web site.

An hour of network television, without commercials, would cost an additional 32 cents an hour to finance. This seems like less of a good deal to me, I would rather pay the 32 cents to eliminate the ads (that’s only 16 cents per Seinfeld episode!), but then again, I am not a typical viewer. I wouldn’t watch much TV, with or without the ads, and that is one reason why we have them, even in this age of cable TV. The people who are truly bothered by ads move to other forums, such as books, that stick few advertisements in your face.

On Nov. 24 cell phone users will, for the first time, be able to take their phone numbers with them when they switch carriers. The added convenience is a good thing but comes at a price. A locked-in customer is a valuable customer so when switching costs are important firms compete especially vigorously at the entry level. Today, you can get a cell phone for free if you sign up for a phone plan. After Nov. 24, I expect to see up-front giveaways become less generous. Overall, consumers will be better off as the competition for switchers lowers the price of service plans. Consumers who use their phones intensively will benefit the most, less intensive users will benefit less because the fall in service plan rates may not compensate for the rise in up-front fees. That at least, is my prediction. A good dissertation lies here.

Here is the take of Brad DeLong:

First, and most important, the unemployment rate is high because the Federal Reserve misjudged how much investment spending would fall in the aftermath of the collapse of the NASDAQ bubble, and because the Federal Reserve then misjudged how fast productivity would grow. If the Federal Reserve had had an accurate forecast of the investment-spending slowdown, it would have taken appropriate action and the labor market would be in good shape. And if labor productivity growth had exhibited its “normal” recession-and-stagnation slowdown rather than zooming ahead, the amount of demand growth we have had in the past two years would have been enough to put the labor market in good shape. However, don’t blame the Federal Reserve too much: it has a very hard task, it’s policies can’t be perfect, and all-in-all its performance over the past two decades has been amazing.

Plus the Bush tax cuts have not had much of a stimulatory effect on employment. Most of all, Brad tells us, we should not blame trade with China. I am less negative toward the Bush economists than is Brad, but I agree with the core of his analysis.

…after people attempt suicide and fail, their incomes increase by an average of 20.6 percent compared to peers who seriously contemplate suicide but never make an attempt. In fact, the more serious the attempt, the larger the boost–”hard-suicide” attempts, in which luck is the only reason the attempts fail, are associated with a 36.3 percent increase in income. (The presence of nonattempters as a control group suggests the suicide effort is the root cause of the boost.)

Here is a link to the original research.

Now, you may wonder, how can this be?

Why should suicide be an economic boon? Once you attempt suicide you suddenly have access to lots of resources–medical care, psychiatric attention, familial love and concern–that were previously expensive or unavailable. Doubters may ask why the depressed don’t seek out resources earlier. But studies have demonstrated that psychological and familial resources become “cheaper” after a suicide attempt: It is difficult to find free medical care when you are sad, but once you try to kill yourself, it’s forced on you.

So what should we do? The Slate.com article, the source of this post, suggests “well funded educational campaigns”. A cynical economist might suggest social stigma for suicide, rather than forgiveness. Personally, I suspect that few people attempt suicide for the resulting free medical care, but rather for the attention. We can’t precommit to ignoring them, so perhaps we are simply stuck. I invite Alex to offer some suggestions on how to limit the number of suicides; keep in mind it is a bigger killer in the United States than is homicide.

Addendum: Thanks to Fabio for the pointer. And Eric Crampton suggests the following: “I have a different take on the suicide post – mean reversion. Assume that people are hit with heterogeneous shocks, positive and negative. If people are most likely to commit suicide at the worst point (after the biggest negative shock), then future income increases are just mean reversion. People who just contemplate it have had negative shocks, but not as strongly negative.”