Month: February 2006

Parking fact of the day

On average [in the U.S.] a new parking space has cost 17 percent more than a new car.  Drivers may not realize it, but many parking spaces cost more than the cars parked in them, especially because cars depreciate in value much faster than parking spaces do…the parking supply is worth more than the vehicle stock.

That is from Donald Shoup’s The High Cost of Free Parking, a detailed, economically insightful, data-rich, and lengthy, impassioned plea for charging people for parking spaces.  Here is Dan Klein’s excellent review of the book.

Jonathan Amith

Word by word, Mr. Amith is creating an extensive archive of Nahuatl, the language spoken by the Aztecs at the time of the 16th century Spanish conquest and now the first language of 1.5 million Mexican Indians. He records fables and personal histories, collects plants and insects, and keeps up a nonstop patter with locals, searching for information to add to a Web site he is building that is part dictionary, part encyclopedia and part storybook.
His goal is both daring and quixotic: to preserve Nahuatl so that native speakers don’t discard their language as they turn to Spanish, which they need to compete in contemporary Mexico…

"[Jonathan Amith] harkens back to the 19th century tradition of the
adventurer-scholar who says, "I’ll go out and do something and the
world be damned," says Tyler Cowen, a George Mason University economist
who studies Nahuatl-speakng villages.

For more, see the front page of today’s Wall Street Journal,
center column.  By the way, tomato, coyote, avocado, and chocolate are all English words which came from NahuatlNahuatl is the most beautiful language I have heard.  Here is Jonathan’s web page.  I think of Jonathan as an obsessive collector of words, in the best sense of that term.  He is one of the most remarkable men I have met and his knowledge of the social sciences is phenomenal.  Here are some MP3 files
of Jonathan’s linguistic work
.  Here is my book on the village, which also
profiles Jonathan.  Comments are open, especially if you have a link to the article ("Scholar’s Dictionary of Aztec Language May Take a Lifetime," by Bob Davis); it should appear on-line at some point.

The economics of polygamy

The new HBO series Big Love presents a polygamous family, raising the obvious questions.  Here is Ted Bergstrom on the economics of polygamy.  Here is Tim Harford on polygamy.  Excerpt:

It’s hardly surprising that in most polygynous societies, the bride’s
family gets large payments in exchange for her hand in marriage. If
polygyny combined with women’s rights, I bet we’d see more promises to
wash the dishes. Not everybody would have to share a husband, but I can
think of some who might prefer half of Orlando Bloom to all of Tim
Harford–including my wife.

In my bones I am a square who believes this arrangement cannot be best.  Economists might question how polygamy makes women worse off, since they can always decline the arrangement.  You might try a story about how the family, not the woman, captures the dowry payment and uses it to help their sons buy more wives (see Bergstrom, noting also that the very presence of polygamy shifts the outcome of the bargaining game with the family).  Or you might try a story about sexually frustrated males who are led to revolt, thus destroying social order.

How about the trade-off between quality and quantity of children?  A genetically talented father with many wives will likely maximize the quantity of children rather than their quality.  This has a long-run negative externality, especially if you believe in the Lucas-Uzawa models of economic growth, or some approximation thereof.  You would rather be in a society with fewer but more talented people.  Switzerland rather than India.  The loser is not the wives but rather the next generation of children.  A piece in the February JPE also notes that the children may substitute for savings and thus polygamy can stunt capital formation; I take this as another version of the same argument.

The bottom line?  We should encourage family structures that spur human capital formation.  Polygamy does not do the trick.  Comments are open…

A Whitman Sampler

Glen Whitman has got Coase in the brain.  In Against the New
Paternalism: Internalities and the Economics of Self-Control
he puts Coasian insights to good use arguing against the new paternalism of internalities.

Writing the paper must have been hard, hard work because Glen has now got the Coasian Blues.  (More at the link!).

You can hire an agent to work in your basement
But you know there’s a
possible cost:
That dude could be shirkin’ yet oughta be workin’
If you
don’t hire monitors, boss!

You can bring on a man to run your food
But your firm could be courtin’ a loss.
‘Cause that helpful young
man might come up with a plan
To abscond with your so-special sauce!

Yeah you pick and you choose… the markets you use;
And if you
pick wrong… you’ll be singing the blues.

I know that one day if my
tears go away
Then my cheeks’ll be rosy in hue
But until that day comes to
pass I must say,
I’ll be singin’ the Coasean Blues.

Make Money on eBay

Would you rather pay $10 and have free shipping or pay $5 and pay $6 for shipping?  Answer: you prefer the latter.  Well, at least if you are like most bidders on eBay. 

Morgan and co-author Tanjim Hossain, an assistant professor at Hong
Kong University of Science and Technology, held 80 auctions of new
music CDs and Xbox video games to test how consumers respond to
different price schemes. In the eBay study, they varied the opening bid
price and shipping charges on identical CDs, ranging from Britney
Spears to Nirvana, and video games, including Halo and NBA 2K2.

perfectly informed and fully rational consumer will merely add together
the two parts of a price to obtain the total out-of-pocket price for an
item and then decide whether to buy and how much to bid based on this
total price.

But that’s not what happened
in their eBay auctions. Instead, they found that lowering the opening
bid price while raising shipping charges attracts earlier and more
bidders and ultimately leads to higher revenues compared with doing the
reverse. Those findings suggest consumers pay less attention or even
completely overlook shipping costs when making bids…

The quote is from a writeup, the full paper is
…Plus Shipping and Handling: Revenue (Non) Equivalence in Field Experiments on eBay (subs required).

Also check out the interesting data on online pricing at

Thanks to Carl Close for the pointer.

Yet more economics of curling

Curling is the funniest sport I have seen.  Best is how the duo scrubs the ice with brushes in front of the moving stone, while Anette Norberg barks out pagan Swedish curses, in an attempt to steer the thing after it has left her hand.  The economics of curling?  I needed only to watch it.  If the sport falls on hard times, it could sell itself as a Monty Python skit, albeit in an obscure Swiss German dialect.  Is it the only Olympic sport where you can wear earrings while playing?  Here is a curling video — be baffled, be very baffled.  The division of labor is limited by the extent of the market, as they say.

Will our universe be mangled?

"It could be there’s a moment of pain before the end," [Robin] Hanson says. "But you could be comforted by the fact that versions of you will go on, even if you don’t."

Yes that is our Robin Hanson, on quantum mechanics and multiple universes, picked up by New Scientist.  Here is Robin guest-blogging quantum mechanics for us; see also here.  The bottom line?  Finish that novel you are working on.

Poetry from the Spanish Civil War

You must look to Pablo Neruda and his suspiciously titled Hymn to the Glories of the People at War.  Here is one brief bit (in Spanish).  Here is a broader index of related poems.  The visual presentation of the material is beautiful.  Here is English-language background on Neruda in the war.  Here is Neruda as Chilean diplomat to Spain.  Here is a dual English-Spanish presentation of one part of the poem.

In my eyes, once you get past Rilke, Yeats, Eliot, and the 1920s, Paul Celan and Wallace Stevens are the only twentieth century poets who compare to Neruda.

Interesting links

1. Creativity in the fashion industry might be a more general model for the entertainment industry.  But let us not forget differing levels of fixed and capital costs.

2. People in small, tribal societies have the most violence in their dreams.

3. Richard Epstein’s new book.

4. Markets in Everything, this time Hasidic reggae.

5. "Brincos" are special sneakers, equipped with secret storage compartments, for illegal aliens to cross the border.  Now they are hip.

6. Matt Yglesias on the bureaucratic infighting behind the resignation of Larry Summers.  Here is more.

7. Quantum computers that work even without running.

Can more bonuses improve the NBA?

Rick Barry has an idea:

If every player had money on the line in every game based upon a victory, you’d see some unbelievable competition. Sports and team concept would change dramatically.

Of course "per-victory" contracts are possible now, but most incentive clauses are based on individual performance or a victory or playoff threshold.  Why? 

1. Star players might injure themselves too frequently if they try hard every game.  Their value to the league involves an external benefit which they do not internalize when deciding how much injury to risk.  Plus an owner wants them to conserve their energy for the playoffs or for critical opponents.

2. Most fans don’t know the difference between a good game and a bad one.  They want only to see the stars, and maybe a few slam dunks.  So why impose more pecuniary risk on the players?

3. Players already try hard on offense.  Making them play tough defense would deaden the game.  This doesn’t explain why a single team doesn’t use per-victory bonuses, but it does suggest there will be no league pressure to do so.

4. Per-victory compensation will lead the players to blame each other too much for particular losses.  Team morale and thus team productivity will decline.

5. Incentives of fame and approbation already impose this incentive structure, and in a more powerful way than money could do.

6. When bargaining over a contract, a player would reveal negative information about his self-estimated talent level by accepting high-powered incentives.  If you cut a deal with big bonuses, the team must think your low-effort state of output is pretty crummy.

I put weight on all of these, but on #6 least.  Of course this relates to the general question of why firms don’t use more high-powered incentives.  Could the lesson be that fewer business variables matter than you might think?  (A related question is why don’t more firms use idea futures.) 

Would Rick Barry’s idea improve the NBA?  Comments are open…

Resale Bans in Japan

According to this post the Japanese have a very strict system of auto inspection:   

The first ones to talk to the government about this were the car manufacturers,
and they convinced the government to enforce a rule that used cars have to go to
the technical inspection after 3 years, and this is a costly matter since a
check costs between 1500 and 3500 EUR. Once you’re in the system, you have to
get your car checked every 2 years, and once your car is 10 years old, you need
to go there every year. This is a reson why the Japanese change cars quite fast,
usually before the car is 3 years old. Important aspect is that you have no
control whatsoever on the cost of possible repairs, because after the technical
check, the car is driven to the garage and they do the repairs that the
technical check asked them to do, you just get the bill with your car. A very
nice rip-off… and this system is being envied by a lot of other domains, like
the electronics domain at this moment. So from April 1st 2006, ALL electronic
products sold in Japan before 2001 will be prohibited from the 2nd hand market!

Comments are open if you have more information on these interesting policies.  I guarantee there is a dissertation or two here.  Here is my previous post on state car "safety" programs.

Thanks to Boing Boing Blog for the link.

Addendum: An informed reader noted that the post is incorrect about electronic products being banned, major appliances will have to be inspected something like autos but the inspection doesn’t apply to computers. 

Innovative Solutions for Iraq

At the event on Iraq I blogged about earlier, Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty, discussed partitioning Iraq.  Ivan is looking more and more prescient.  (My colleague Roger Congleton has also been an early and vocal proponent of partition.) You can see Innovative Solutions for Iraq on CSPAN at the following times:

Saturday, February 25, 9:00 p.m. ET (6:00 p.m. PT) and
Monday, February 27, 6:20 a.m. ET (3:20 a.m. PT).