Month: September 2004

Markets in everything, the saddest installment you will likely see

A thousand rubles, or about $34, was enough to bribe an airline agent to put a Chechen woman on board a flight just before takeoff, according to Russian investigators. The agent took the cash, and on a ticket the Chechen held for another flight simply scrawled, “Admit on board Flight 1047.”

And this was not the first time:

Authorities have acknowledged that a similar group of gunmen paid off police in 2002 as they transported a virtual armory of assault rifles, hand grenades and explosives all the way from the south to Moscow, where they seized a theater filled with patrons. The subsequent standoff left 129 hostages dead. “They admitted it,” Satarov said. “But it was two years ago, and nothing has been done.”

And it has been nine years since Shamil Basayev, the Chechen guerrilla leader, led an assault force that took over a hospital with more than 1,000 people in the southern city of Budennovsk. That attack ended with more than 100 civilian deaths. Basayev later told an interviewer that he had gotten past police road stops with $10,000 in bribes and had intended to go all the way to Moscow but stopped in Budennovsk because he ran out of money.

Here is the full story.

Blog coverage

The ever-excellent Daniel Drezner offers some useful words about how he chooses blog topics.  I speak only for myself, and not for Alex, but here are a few guiding principles behind my blogging choices:

1. Institutions and ideas matter more than particular leaders or candidates.

2. The blogosphere already covers Iraq, gay marriage, and the election — or whatever else is the topic of the day — to an extreme.

3. The intersection of academic learning and public policy is ripe territory.

4. The long-run impact of science on our lives is commonly underrated.

5. Personal attacks, whether on public figures or other bloggers, usually are not very interesting.

6. Some (small) percentage of the posts should be utterly idiosyncratic.

7. Most of all, I should be interested in the topic.

In reality, number seven reigns supreme.

Why did Sony pay $5 billion for MGM?

Press coverage cites two reasons:

1. The MGM film library is extensive. It includes the James Bond franchise, the Pink Panther movies, and about 8,000 other titles. The new Sony/MGM group would own a substantial fraction of the color movies ever made in Hollywood; one source says half.

2. Sony will try to use its larger film library to become format king for the next generation of high resolution DVDs. But note that new movie issues, rather than the back catalog, may have greater influence on the new standard.

Note that Comcast is part of the deal as well:

Comcast is fresh from a defeat in its audacious bid to acquire Disney (and its Buena Vista studio) earlier this year. In addition to its distribution deal with Sony, it is also understood to have an option to acquire 20% of MGM for $300m. Both agreements underline the belief that drove the Disney bid: that owning content is essential to Comcast’s target of reaching 40m customers by 2006. Indeed, Comcast’s involvement is symptomatic of a broader trend in America’s media business: consolidation between those who make music, movies and television programmes, and those who distribute them, whether via broadcast networks or, increasingly, via cable, satellite and the internet.

I see two possible scenarios. Under the first, the current DVD gold mine will continue until it is displaced by some version of video on demand. Film owners will continue to reap the profits, but buying into film libraries late in the game should not bring extra-normal returns. Under the second scenario, DVD buying will dry up, just as CD buying for classical music has dried up. Once people build up the basic library they want, they buy at a much slower rate. Both DVDs and video on demand will become less profitable over time.

I’ll weight these two options at about 50-50 in terms of proportional relevance. But regardless of which view you hold, I would not want to be bidding for old film titles in a competitive environment.

New currencies around the world

With paper bills so rancid even beggars hate to touch them, French-speaking West African gets down to serious money-laundering today. An eight-country campaign aims to retire more than $1 billion in decaying currency seen as much as vectors of disease as units of exchange…

The old ones, they are just disgusting,” merchant Mohamed Hussein said at his wood-shelf storefront in Dakar. “NInety-five percent of people who fall sick are because of filthy money,” he said, pulling out a bottle of liquid soap he keeps under the counter for every post-purchase scrub-down.

That is from the 15 September USA Today, p.14A, not currently on-line. Here is a related story, here is another.

Closer to home, the new look to the U.S. nickel makes Jefferson look like a cadaver; click on “Gallery,” through the link, for a clear view.

The Sledgehammer of Wow

By this point in life I’ve stuffed so much material down my gullet I feel I am hard to impress. When it comes to new books and music in particular, I can go many moons without feeling The Sledgehammer of Wow. But yesterday I felt it twice:

Blueberry Boat by The Fiery Furnaces dispays a level on ongoing invention that one expected from Brian Wilson circa 1968.

Susannah Clarke’s Jonathan Strange and Mr. Norrell: A Novel has been called a “Harry Potter for grown-ups”; it starts by asking whether magic has disappeared in England. Only rarely have I been captivated so quickly and so deeply by a novel of our time. Read the ever-insightful Henry Farrell ( on this wonderful book. Here is another good review, also courtesy of Henry; here is a review.

On a sadder note, Johnny Ramone has passed away. “Twenty-twenty-twenty-four hours to go, I wanna be sedated…!”

Health savings accounts on the rise

The HSA idea gives you a tax-free account for medical expenses but requires purchase of a high-deductible health care plan (above $1000 for individuals and $2000 for families, in most cases). And when age 65 comes, you can use the money for Medicare premiums or simply pull it out and pay standard rates of taxation. Bush packaged this innovation with the Medicare drug prescription bill. The accounts are now rising in popularity:

1. About twenty major financial institutions are now marketing HSAs. About fifty insurers have introduced corresponding high-deductible health care policies.

2. 81 percent of large (>20,000) employers expect to offer the accounts by 2006.

3. The Treasury has recently clarified what kind of expenses the plans can be used for.

4. One Congressional spokesman expects one million HSA accounts by 2004 and three million by 2013.

My take: The number of accounts will not be large enough to affect health care costs in the foreseeable future. So we can forget about macro changes and evaluate the micro incentives on their own merits.

In general I favor incentives to save, although I would remove current disincentives before adding on a new tax benefit.

Should the government subsidize high-deductible insurance policies? Probably not in the abstract. Of course this subsidy may offset the tax advantages of low-deductible plans, but again a simpler solution is available, namely to eliminate the original distortion.

Finally let us say that HSAs were soon to be much more common. What would the macro effects be on health care costs? I predict the “encourage health care expenditures” effect would swamp the “encourage high deductibles” effect. A $1000 or $2000 deductible is still not very high, especially since most people using the plan will be middle class or above. So aggregate medical costs would rise rather than fall.

More politically and more cynically, the plan has the plus of (possibly) deflecting pressures for national health insurance.

The best case for HSAs involves strategy. The plan might, in the longer run, wean us away from more governmental mechanisms. And people will identify with their health savings accounts, which will cause voters to internalize some of the effects of their decisions in the voting booth.

That being said, the strategic issues cut two ways. The core idea, whether admitted or not, is that we cannot muster the political coalitions to eliminate the original distortions on savings and health care decisions. Rather than keeping up this good fight, we should cave and add in some new distortions, hoping the net effects are to some extent a wash. In other words, the Bush people must believe it is easier to sell people on a new “benefit” than to undo previous mistakes. But the more distortions we add on, the harder it becomes to get rid of any of them. I wonder how wise this will prove in the longer run.

I am all for the idea of the ownership society. But let’s start with letting people own things. This means cutting government spending and the real tax burden over time. It is less useful to direct individual behavior by using a crazy quilt set of conflicting incentives to induce them to lock up their funds for purposes specified by the government.

Some of the facts above are from The Wall Street Journal, September 9, 2004, p.D2.

The Cultural Exception

The Louvre Museum yesterday swallowed its pride as it welcomed potential American benefactors for an inaugural official tour of paintings featured in Dan Brown’s best-selling thriller, The Da Vinci Code.

It is a telling concession to popular culture that reflects the intense financial pressure facing l’exception culturelle, the idea that France and the French language can hold their own against Anglo-Saxon cultural imperialism. Until now, the Louvre’s official position on The Da Vinci Code had been disdainful. “None of our curators will talk about the book. It’s a work of fiction and we don’t see it as our job to discuss it,” a press officer said last week.

Like many French museums, the Louvre, which only started seeking sponsorship last year, is running to catch up with its global rivals as it weans itself off state subsidies. Private sponsorship funds just 10-15 per cent of the Louvre’s €150m ($184m, £102m) annual budget.

As last year’s crisis in the system that funds France’s subsidised performing artists showed, the days of lavish state funding of the arts are over. The Louvre, on any given day, has to close up to 15 per cent of its display space for lack of staff…

Hosting yesterday’s Da Vinci Code tour for the American Friends of the Louvre, a new fund-raising body, Henri Loyrette, the museum’s director, said he wanted to dispel a reputation for “arrogance” and offer a warmer welcome to US tourists.

And get this:

“The big US museums have been able to build up huge endowments over the years, which allow them to fund virtually all their operating costs from the interest,” says Christophe Monin, head of fund-raising at the Louvre. “We are not so lucky [sic].”

New uses for flies

British scientists are developing a robot that will generate its own power by eating flies.

The idea is to produce electricity by catching flies and digesting them in special fuel cells that will break down sugar in the insects’ skeletons and release electrons that will drive an electric current.

“Called EcoBot II, the robot is part of a drive to make “release and forget” robots that can be sent into dangerous or inhospitable areas to carry our remote industrial or military monitoring of, say, temperature or toxic gas concentrations,” New Scientist magazine said on Wednesday.

Chris Melhuish and his team, who are developing the robot, have to manually feed the flies to EcoBot II because they are still designing some type of pump to suck the insects into it.

And here is an advantage to flies which perhaps you never thought of before:

“One of the great things about flies is that you can get them to come to you,” he said.

Hence the downside of the fully autonomous robot: it will have to use sewage or excrement to attract the flies and is bound to smell appalling.

Here is the link, and thanks to Yana for the pointer.

News roundup

Test of Missile Defense System Delayed Again is the headline in the Washington Post but don’t worry, “The Air Force general in charge of the program said the setback will not affect plans to begin operating the system in the next month or two.”

$3 Trillion Price Tag Left Out As Bush Details His Agenda but don’t worry, Bush-Cheney spokesman Steve Schmidt says “the president remains committed to cutting the budget deficit in half over the next five years.”

How can politicians get away with crazy policies like this? Explanation here.

The politics of Nobel Prizes

Jorge Luis Borges was one of the greatest writers never to win a Nobel Prize (try the early short fiction if you don’t already know his work). Now I know why:

The visit to [Pinochet’s] Chile finished off Borges’s chances of ever winning the Nobel Prize. That year, and for the remaining years of his life, his candidacy was opposed by a veteran member of the Nobel Prize committee, the socialist writer Arthur Lundkvist, a long-standing friend of the Chilean Communist poet Pablo Neruda, who had received the Nobel Prize in 1971. Lundkvist would subsequently explain to Volodia Teitelboim, one of Borges’s biographers and a onetime chairman of the Chilean Communist Party, that he would never forgive Borges his public endorsement of General Pinochet’s regime.

Borges, it should be noted, did believe in democracy but thought Pinochet the best of the available options at the time. For purposes of contrast, consider the following (slightly overstated) description of Laureate Pablo Neruda:

On the eve of his [Neruda’s] death, in 1973, he could still describe Stalin as “that wise, tranquil Georgian”. His feelings were similarly soft for Mao’s China, where he loved to see everyone in those vast landscapes and streetscapes dressed in regulation blue.

The former quotation is from p.426 of Edwin Williamson’s excellent Borges: A Life.

Credible Discretion

Brad DeLong writes:

I think, the most interesting thing about the late-Greenspan Fed. He has so much credibility as an inflation hawk that he simply doesn’t have to worry about what monetary policy moves over a one or two-year span do to alter people’s perceptions of the Fed’s tolerance for inflation. As a result, he can be much more aggressive in trying to keep unemployment near its natural rate (whatever that is) than a central banker who would wish to and is known to wish that he could focus on stabilizing employment rather than controlling inflation. Such a central banker has to be constantly reassuring everyone that he is committed to controlling inflation, and so has very little room to respond to shocks–like shocks to oil prices–that might affect both.

Quite right. In short, it’s not rules versus discretion it’s rules and discretion.

Economic growth and diet

…at that time [eighteenth and early nineteenth centuries] food constituted between 50 and 75 percent of the expenditures of laboring families…however…the energy value of the typical diet in France at the start of the eighteenth century was as low as that of Rwanda in 1965, the most malnourished nation for that year in the tables of the World Bank. England’s supply of food per capita exceeded that of France by several hundred calories but was still exceedingly low by current standards. Indeed, as late as 1850, the English availability of calories hardly matched the current Indian level.

Not surprisingly, meat was not a major source of calories in earlier times.

One implication of these low-level diets needs to be stressed: Even prime-age males had only a meager amount of energy available for work.

And get this:

…the average efficiency of the human engine in Britain increased by about 53 percent between 1790 and 1980. The combined effect of the increase in dietary energy available for work, and of the increased human efficiency in transforming dietary energy into work output, appears to account for about 50 percent of the British economic growth since 1790.

Keep all that in mind next time you despair about the modern world. The data and quotation are from Robert Fogel’s The Escape from Hunger and Premature Death.