Month: July 2005

Risky business

More evidence for the existence of a rational – if unpleasant – universe. Paul Gertler, Manisha Shah and Stef Bertozzi show in the Journal of Political Economy that Mexican prostitutes sometimes accept a premium (about 25 percent) not to use condoms. This paper uses panel data and is probably a better estimate than some previous ones.

The real punchline, though, is that they’ve worked out the implied value to these women of a year of healthy life: $15,000 – $50,000, which is (relative to income) extremely close to previous estimates from other dangerous jobs. If you want to increase condom use, education for prostitutes seems to have reached diminishing returns – instead, we need to reach the tougher goals of improving job opportunities for Mexican women, or persuading men that risky sex is not worth paying for.

Incidentally, I’ve been looking into this story for my next book. It is surprising (perhaps I should not be surprised) to discover how much you can learn from sex-tourism websites. Between the inevitable ponography, some of the advice to tourists is thoughtful and erudite, like a good restaurant review. Just a shame about the subject matter.

This is the last post of my stint on Marginal Revolution. Thanks very much to Tyler and Alex for the opportunity. It’s not as easy as they make it look.

Pizarro slept here

Last night I stayed in the Hotel Libertador whose main claim to fame is that it is built on Incan foundations and parts of the building date to the 16th century when it was occupied for a time by Pizarro.  The claim is plausible as he certainly pillaged the temple next door.

The other contender for Cusco´s finest hotel is the more expensive Hotel Monasterio where you can get what I call a "Michael Jackson" room, a sealed room which is flooded with oxygen to help combat altitude sickness.

The Hotel Los Andes where I stayed most of the time was excellent.

How to improve taxi markets

Singapore has solved this problem, with a little assistance from satellite technology.  Imagine Walrasian taxi markets.  The taxi driver receives a satellite message on his little thingie, specifying where the customer wishes to be picked up and where he wishes to go.  The cabbie, if interested, then enters a bid for how much he will charge.  The customer is matched with the cabbie who enters the lowest bid.  Amazing, no?  And if it is raining, you have the ability to pay more to actually get a taxi.

This is for real (i.e., I saw it twice), but alas I cannot find anything through Google.  It is called CanBid, at least on the little machine thingies in the cabs.  I’ve opened up comments in case you know more than I do.

They also price the roads, I might add, using electronic sensors.  Privacy is no issue, since you don’t have any privacy here anyway.

You should consider this place for your next vacation.  I came for work, but I have been consistently charmed and delighted.

Is the new NBA age limit a good idea?

Here are the data.  The conclusions?

…college education does not appear to diminish the probability of a player getting in trouble with the law. In fact, some of the most notorious NBA players are those with college degrees, while many others have three years of a college education…actually, the data suggests that premiere high school seniors might be better off skipping college altogether, perhaps in order to avoid the disturbing external influences that afflict many college basketball programs…

No matter the interpretation, it doesn’t appear that the recent decision by the NBA and NBPA to raise the age of NBA draft eligibility from 18 to 19 (or one year out of high school) will improve the overall law-abidingness of NBA players. If anything, actually, this data suggests that it might have the opposite effect.

Second, players appear more likely to get in trouble with the law towards the middle and end of their careers than at the start. This could be interpreted in a number of ways. For instance, it might suggest that the “pressures of being an NBA player” are more manageable at the start of one’s career, perhaps because the player is less autonomous and more reliant on the team. This interpretation is bolstered by the financial stake of NBA teams in facilitating the transition of their players from life as an amateur to life as a pro. Second, and related to the preceding interpretation, new NBA players are often surrounded by veterans in their late 20s and 30s who can monitor them and serve as de facto “big brothers.” The presence of these veteran players is obviously something distinct from the college experience, where the “veterans” are often just 20 or 21-years old, and are thus not likely to be as well-equipped in steering their 18 and 19-year teammates away from nefarious influences. Alternatively, the data may suggest that as the player accumulates wealth and notoriety, he is more likely to succumb to these “pressures.”

Thanks to Todd Zywicki for the pointer.  Here is my earlier post on age limits in sports.

Red tape and house prices

Steven Landsburg’s latest Slate column is based on work by Ed Glaeser and Joe Gyourko.

Instead of the traditional formula "housing price equals land price + construction costs + reasonable profit," we seem to be seeing something more like "housing price equals land price + constructions costs plus reasonable profit + mystery component." And, most interestingly, the mystery component varies a lot from city to city.

The mystery component turns out to be zoning rules, and proxied quite well by the length of time it takes to get a permit. In September, the World Bank’s Doing Business project will be publishing data on the cost of building inspections in 150 countries; it already has data on the cost of firing workers, starting a business, going through the courts, and more.

A critic on Critical Mass

I recently finished Philip Ball’s Critical Mass.
The bad news: it’s twice as long as it needs to be and his criticisms
of economics are rather odd (no, ability to forecast share prices is not the
test of the subject’s validity). The good news: it’s packed full of fun
stuff about the relevance of various physical and agent-based modelling
techniques to the social sciences. Even better, you can read Ball’s own
summary and find out whether you like it.

Thomas Schelling was there first again with
his chessboard model of racial segregation. The bottom line: racial
preferences which would seem to accommodate mixed neighbourhoods turn
out to lead to extreme segregation, as shown in (b) below.


Robert Axtell, one of the founders of the Sugarscape agent-based modelling system, predicts that within a few years we will be able to run models with billions of agents, rather than Schelling’s 50 or so. Artificial worlds beckon.

We shall see how many funerals…

Let us take out of the Hospitals, out of the Camps, or from elsewhere, 200, or 500 poor People, that have Fevers, Pleurisies, etc. Let us divide them in Halfes, let us cast lots, that one half of them may fall to my share and the other to yours; I will cure them without bloodletting and sensible evacuation; but do you do as ye know (for neither do I tye you up to the boasting, or of Phlebotomy, or the abstinence from a solutive Medicine) we shall see how many Funerals both of us shall have: But let the reward of the contention or wager, be 300 Florens, deposited on both sides: Here your business is decided.

That was Jean Baptiste van Helmont in the 17th century. It took three hundred years for randomized trials to become widespread in the medical profession. Now the MIT Poverty Action Lab, among others, is advocating their use in evaluating the effectiveness of development projects (and other policy interventions). Since many projects are rolled out gradually, rolling them out with some randomization generates very good data without much extra effort required.

Peru Facts of the Day

It’s easy to rent a motorcycle in Peru, unlike in the United States where liability fears have made this almost impossible.  On the other hand, I would not want to drive a car let alone a motorcycle in Peru. These two facts may well be related – I will let you work out the model.

It would have suited my biases to report that the only Che Guevara T-shirts I have seen were on tourists.  But while this may be true in the cities it is not true in the countryside where it is easy to spot El Comandante.  Guevara spoke to the people and they are still listening.

My tour guide, an Andean, had nothing good to say about the Spanish.  Combine this with the last fact and we see that Peru continues to be deeply divided along racial lines, regardless of how much one hears about mestizo.

More on yuan revaluation

Joseph Stiglitz writes:

…we do not know accurately the size of China’s surplus because, in an attempt to circumvent exchange controls, there is over-invoicing of exports and under-invoicing of imports – part of speculative flows. The large import content of China’s exports, particularly to America, mean that China’s competitiveness will be little affected. Economists disagree about whether the import content for exports to America is 70 per cent or 80 per cent but, whatever the number, it means that the effective appreciation was almost certainly under 1 per cent. In the case of a larger revaluation, Chinese companies would probably respond to the loss of competitiveness by cutting margins, reducing further the effect of the revaluation. This revaluation – even if followed by further moderate ones – is likely only to slow the rising tide of China’s exports slightly.

But whether this, or a succession of revaluations, eliminates China’s trade surplus will have little effect on the more important problem of global trade imbalances, and particularly on the US trade deficit. Much of China’s recent gains in textile sales, for instance, after the end of quotas last December, came at the expense of other developing countries. America will once again be buying from them, and so total imports will be little changed.

Wise words, although I disagree with Stiglitz’s pessimism about U.S. living standards (see the link) and the apparent claim that China does not much need the U.S..