Month: June 2005

Insurance, medical and otherwise

I’ve three times tried to get insurance reimbursement from Allstate, and three times they have — in unambiguous cases — tried to screw me over or otherwise held up the claim for months. 

That is why so many intelligent people promote the nonetheless-still-quite-insane idea of a single-payer health care system for the United States.  Let’s keep in mind the words of Arnold Kling on Medicare:

There is no actual evidence that the elderly receive better care, or more cost-effective care, or more egalitarian care than people under 65. Particularly interesting is the data that the U.S. spends about 40 percent more per capita on health care for the elderly, just as we spend about 40 percent more per capita on health care for those under 65. Where in the data is the much-vaunted efficiency of Medicare?

Let’s also not forget that the best European systems reject the single-payer idea.  Furthermore, while I am frustrated at Allstate, government either does the same or costs and abuse go crazy.  Read Jane Galt as well.

Markets in everything — musical equity

A London-based pop singer is raising funds to kick-start his career by selling shares in himself on internet auction site eBay. In just three days, Shayan has raised £9,000 from buyers in London, New York and Toronto.

Shayan – who doesn’t trade under his surname, Italia – insists the scheme is a way of avoiding the traditional route of sending demos to major labels. "The most difficult thing is to get people’s attention," he says.

Speculative buyers are offered the chance to invest £3,000 in return for a 0.25% equity share in anything the 27-year-old singer-songwriter earns over his entire career. The shares remain valid for 70 years after the artist’s death, and can be transferred to the buyer’s children.

Read more here.


I am in Michigan today speaking to a large group of judges on criminal
deterrence.  It should be a fun talk, judges are good listeners (or at
least they are good at pretending to listen) but I did have a dream
last night in which hundreds of judges were banging their gavels
shouting at me "guilty, guilty, guilty."  Damn conscience.

Coinidentally, some of my work on crime was featured in the latest Economic Scene
column in the NYTimes (thanks Virginia!).  Here is my powerpoint presentation for the judges which surveys some of the new literature on
crime and deterrence (the notes page in the powerpoint provides some
references and calculations).

Are market-clearing prices so bad?

The state House of Representatives gave preliminary approval yesterday to a bill intended to crack down on private parking lot operators around Fenway Park who illegally charge exorbitant fees on big game days.

Mayor Thomas M. Menino sought the legislation, which would raise the fine for price-gouging from $300 to $1,000, after hearing that some lot operators were charging fans as much as $100 to park on opening day.

”The prices are so high, it’s hard for the average person to afford them," said Thomas J. Tinlin, the city’s acting transportation commissioner. ”If these open-air lot parking providers don’t want to do right by the people visiting the city and violate the terms of their license, we need to make them pay for that, and obviously $300 wasn’t getting it done."

Here is the story, courtesy of Michael Costello.  And here is a bit from the rock star who runs our development policy:

Scores of free tickets for the 2 July concert in London – won through a text contest – had been put up for sale [on ebay].

Live 8 organiser Bob Geldof branded the attempted sale of the tickets as "sick profiteering" and welcomed the move.

He said people had realised that "the weakest people on our planet" were being exploited and they were "sickened by that".

The minister for music, James Purnell, said he "wholeheartedly shared" Geldof’s annoyance and had asked the site to halt the sales.

Thanks to David Nishimura for that story; see also Lynne Kiesling.

India has a long, long, way to go

…most of the country is still denied access to free markets and all the advantages they bring. India opened its markets in 1991 not because there was a political will to open the economy, but because of a balance-of-payments crisis that left it with few options. The liberalization was half-hearted and limited to a few sectors, and nowhere near as broad as it needed to be.

One would have expected India’s growth to be driven by labor-intensive manufacturing but, almost by default, it instead came in the poorly licensed area of services exports. The manufacturing sector, ideally placed in terms of labor and raw material to compete with China, never took off. India’s restrictive labor laws, a remnant of the socialist infrastructure that India’s first prime minister, Jawaharlal Nehru, put in place in the 1950s and 1960s, were politically impossible to reform. It remains excruciatingly difficult for most Indians to start a business or set up shop in India’s cities.

This is painstakingly illustrated in “Law, Liberty and Livelihood”, a new book edited by Parth Shah and Naveen Mandava of the Center for Civil Society in New Delhi, which documents the obstacles in the way of any Indian who wishes to start a business in one of India’s big cities. Messrs. Shah and Mandava write: “Entrepreneurs can expect to go through 11 steps to launch a business over 89 days on average, at a cost equal to 49.5% of gross national income per capita.” Contrast the figure of 89 days with two days for Australia, eight for Singapore and 24 for neighboring Pakistan.

That is from The Asian Wall Street Journal, read more here.  Do not forget that "outsourcing jobs" are about one percent of the Indian labor force.  Most of the country is agriculture, and while the Green Revolution fed millions, agricultural productivity has made few other strides into the modern age.

What are the gains to illegal immigration?

Not the gains the U.S., I wish to know how much the migrants are better off.

Typically a rural Mexican goes from earning two dollars a day to ten dollars an hour.  Over a year’s time this could amount to a difference of about $25,000.  Multiplied by many millions of immigrants, this is a considerable sum.

But other economic arguments point to lower numbers.  First, it costs about $1500 to cross the border illegally. (N.B.: That’s not $1500 a year, that is $1500 for the entire crossing, which may keep you in the U.S. for years.)  After all, life in Mexico is more fun and keeps you closer to your family.  The illegal migrants I have known have mixed feelings about life in the U.S. and many have returned to Mexico. 

So is that the value of a marginal crossing?

The $1500 figure does not measure the option value of crossing.  You might not pay $1500 to cross now, but the ability to cross in general is worth more.  But even an option value of 10x use value only gets us up to $15,000.

Consider another argument.  Transactions costs aside, in equilibrium the average returns to being a rural Mexican in Mexico should equal the average returns to being a rural Mexican illegally in Texas.  If not, migration will bring about equalization.  Those average returns cannot differ by more than $1500 per person, no? 

A further question is where — rural Mexico or El Paso — you find greater economic congestion.  To me the answer is not obvious, but this could lower the social value of illegal Mexicans in Texas.  If another Mexican crosses, the greatest costs are imposed on the Mexicans already present in the U.S..

Could it be that the greatest gains are reaped by those back home who get the remittances?   

How about infra-marginal values?  Some pay $1500 to cross but value the experience at much more.  Still, if we are considering marginal shifts in border policy, the $1500 figure still seems relevant.

Might credit constraints matter?  The difference between willingness to pay and willingness to be paid?

How about the next generation?  Perhaps we should use a very low social discount rate to evaluate these future benefits.  If you will be born in El Paso in 2019, you are not, in the meantime, sitting around feeling costs of impatience.  And since you will not have grown accustomed to life in Mexico, you are much better off in the United States.

I conclude that we do not have a very good handle on this question.

Yes Virginia, I do believe in the Commerce Clause

Fafnir does constitutional law.

"Insolent pot!" says Giblets. "Be more vendible!"
"Giblets why are you yellin at that pot plant?" says me.
is trying to turn it into commerce," says Giblets. "But buying and
selling it is too much work. He wants it to be commerce NOOOOOWWW!"

Giblets, everything is commerce!" says me. "Let’s step into this
maaaagical schoolbus and we will learn all about Our World Of Commerce!"…

This snowman is not commerce. But we can make him commerce with this ol top hat we found… and if we just believe!
Now all the children of the world clap your hands an say together now:
"I do believe in an expanded Commerce Clause, I do believe in an
expanded Commerce Clause!"

Hooray, now our snowman is
commercial an alive an singin an dancin around! "Happy birthday!" says
the snowman. He is quickly arrested and detained. Commercial snowmen
are strictly controlled by the Department of Snowman Security.

Should only the blind vote?

Psychologist Alexander Todorov of Princeton University
had volunteers look at black-and-white photographs of House and Senate
winners and losers from elections in 2000 and 2002, and the competing
candidates prior to the 2004 contests. The faces had to be unknown to
the participants; images of Sens. Hillary Rodham Clinton, D-N.Y., John
McCain, R-Ariz., and John Kerry, D-Mass., for example, were immediately

“It was just on facial appearance, it could not be influenced by any other information,” Todorov said in an interview.

The study (reported here) found that the candidate perceived as more competent was
the winner in 72 percent of the Senate races and 67 percent of the
House races.

The primary distinguishing factor appears to be that voters do not like babyfaced men (a round face, large eyes, small nose, high forehead and small chin).
Competency appears to be associated with facial maturity.  But are the voters correct in their biases?  It would appear not:

In fact, studies by Zebrowitz and others have shown that
babyfaced men are actually more intelligent, better educated, more
assertive and apt to win more military medals than their mature-looking

Research in the area of facial impressions has implications for
political marketing, social decision-making and even the democratic
process, Zebrowitz believes. "The data we have suggest that we’re not
necessarily electing better leaders – people who are actually more
competent, though we are electing people who look the part."

Randall Parker at FuturePundit opines:

Democracy is flawed because humans are shallow and superficial.
Maybe blind voters make better decisions. Anyone up for restricting the
voting franchise to the blind only? Ugly talented candidates would fare
much better. Think about it.

China has a long, long way to go

The Chinese government is considering creating a $15 billion fund to help bail out the nation’s ailing stock market, according to a senior government official and people told of the proposal.

The creation of a huge fund to invest in mainland stocks would be the government’s most striking effort yet to prop up share prices and try to restore confidence in a market that has fallen to its lowest level in about eight years…

Government bailouts have a weak track record, however, and the proposed support is unlikely to nurse the growth of the capital markets here. When authorities in Hong Kong and Tokyo stepped in to aid their local stock markets, the moves only provided a short psychological lift and failed to produce a sustained turnaround…

At the heart of the problem is that private companies, which have a much better track record, are not allowed to list on the Chinese stock exchanges.

Here is the NYT story.

After me, the farm subsidy

…the Guardian published what had until then been a government secret: which Brits rake in the biggest subsidies from the profligate European Union.  Near the top of the list was the queen herself, whose farm in Norfolk received 769,000 pounds (approximately $1.3 million) in 2003-4.

That is from the July issue of Reason magazine.  Here is the original story:

A spokesman for the Queen yesterday rejected any suggestion that she received too much money from the taxpayer. "The Queen is a landowner and a farmer. She receives subsidy, just as any other farmer would do."

The total would be higher if subsidies to Scotland — still a secret — were also included.