Month: October 2006

Why do people in New York City smoke so much?

I was up in NYC for only a few hours, but it struck me once again.  Manhattanites smoke much more than the people in northern Virginia.  I can imagine a few hypotheses:

1. Social networkers head to Manhattan, and social networkers smoke.

2. In Manhattan it is more important to signal you are cool. 

3. Air pollution is higher, so the marginal health cost of smoking is less.

4. New York is colder, and that makes cigarettes more enjoyable.

5. The "artsy" variable is doing most of the work; of course this is related to #1 and #2.

6. NYC life is more stressful, and smoking calms some of these people down.

7. Many of them are poseurs, and these smokers don’t have such valuable human capital.

I’d bet first on #2, and also on #7, but I don’t have a good theory that will explain the rest of the cross-sectional evidence.

Gerald Dworkin writes to me

How about best shortest sentences?   My favorite is Ring Lardner’s: Shut up, he explained.  For five words Woody Allen:  I am two with nature.

Please give us other candidates, either from others or your own.  Here is my previous post on six-word novels.

From Wired, here are more six-word stories.  I like:

He read his obituary with confusion.

And, from Orson Scott Card:

Please, this is everything, I swear.

Katrina remedies?

What are the options?  I don’t buy the Leeson-Sobel notion that cutting FEMA aid will improve long-term performance in disaster-stricken areas.  The real question is what we should do ex ante.

Howard Kunreuther and Mark Pauly promote a traditional idea:

This paper explores options for programs to be put in place prior to a
disaster to avoid large and often poorly-managed expenditures following
a catastrophe and to provide appropriate protection against the risk of
those large losses which do occur.  The lack of interest in insurance
protection and mitigation by property owners and by public sector
agencies prior to a disaster often creates major problems following a
catastrophic event for victims and the government.  Property owners who
suffer severe damage may not have the financial resources easily at
hand to rebuild their property and hence will demand relief.  The
government is then likely to respond with costly but poorly targeted
disaster assistance.  To avoid these large and often uneven ex post
expenditures, we consider the option of mandatory comprehensive private
disaster insurance with risk based rates.  It may be more efficient to
have an ex ante public program to ensure coverage of catastrophic
losses and to subsidize low income residents who cannot afford coverage
rather than the current largely ex post public disaster relief program.

The goal is to make people internalize the social costs of placing their assets in a vulnerable position.  If you own a home by a questionable levee, you have to buy insurance.  Maybe the price of that insurance will tell you not to keep the home.  I have two problems with this idea.  First, in distributional terms we will essentially end up confiscating the homes of many poor people.  Second, insurers can be notoriously reluctant to write policies for high-risk areas, or they will write policies with exorbitant non-expected-utility-based rates.  (Is any of this regulatory?  Why don’t the markets pool out the risk?  Is there a principal-agent issue within the insurance company?)  It might lead to far more confiscation or abandonment than is efficient.

The correct ex ante policies toward disasters remain an underexplored are of microeconomics.  And why private insurance doesn’t do a better job of insuring against long-run risks..well…that is perhaps the leading question of applied microeconomics today.

Here is my previous post on libertarian policy recommendations and Katrina.

Paintings to see before you die

Here is a Guardian list, via CrookedTimber.  It is not bad, but surely Giotto’s Padua murals (this panel is clearer) should be added, Rembrandt’s Anatomy Lesson of Dr. Tuyp is far better than his Aristotle Contemplating the Bust of Homer, and how about Thomas Eakins’s The Gross Clinic?  I am not anti-Picasso but Guernica is in my view overrated.  How about this one?  El Greco’s Toledo picture is another contender

Try this list too.  Your thoughts?

How to Use a Condom Optimally

The NYTimes has an excellent article on how foreign aid is often more about aiding local companies than aiding foreigners.  It’s a familiar story but told with a wry look at condom production in Alabama where for decades billions of condoms have been manufactured for USAID and other programs despite the fact that costs are much lower on the world market.

A central theme in the article is the contrast between the waste of foreign aid dollars and the plight of the poor, low-skilled workers who make the US condoms.  Here, however, is a way to square the circle.  The US plant typically produces about 450 million condoms a year at a cost of 5 cents each.  Condoms could be bought on the world market at 2 cents each so if the plant shuts down USAID can save $13.5 million dollars a year.   The US plant employs 260 people so every one of those employees could be paid a one-time quitting bonus of $51,923, equivalent to several years of salary of the lowest paid workers.  USAID would be indifferent in year one and would have more to spend on foreign aid in every subsequent year.  My bet is that the workers would jump at the chance to be bought out.  So there you have it, that’s how you use a condom optimally.

Die Vereinigte Dienstleistungsgewerkschaft, or stronger unions for America?

Ezra Klein writes:

So what makes us [the United States]

different.  In a word, power.  Or the distribution of it. Europe has strong unions
and active governments; countervailing powers that wrest a portion of
the pie for their constituencies.  We don’t.

Many intelligent Democrat bloggers are converging upon this meme.

A few years ago five separate German trade unions, drawing heavily from service industries, merged to form the very large Vereinigte Dienstleistungsgewerkschaft.

Here is a propagandistic article about Die Vereinigte Dienstleistungsgewerkschaft.

It is hard for me to believe that the American hi-tech sector would create more prosperity — and I mean for the middle class, never mind the rich — if it had a Vereinigte Dienstleistungsgewerkschaft.

Here is an article about the current and forthcoming death of German trade unions.  Germany is now moving toward a two-tier labor market; guess which tier the new jobs are being created in?  I have never known a Vereinigte Dienstleistungsgewerkschaft to support the "creative destruction" which is the lifeblood of capitalist innovation.  Unions are better suited for a relatively static set of manufacturing tasks, precisely the jobs which are disappearing from Germany and also from the United States.  Read this too; German unionization is down to about one out of every five jobs.  Unions are declining more generally throughout the OECD.

Here is how German unions have responded to the Airbus crisis; it is not pretty.  Here is a German complaining about German unions.

German unions were an instrumental part of postwar recovery and democratization.  And I do not doubt the standard evidence that, in partial equilibrium terms, there is a union wage premium of about ten to fifteen percent (though, interestingly, such a premium cannot be found for Sweden, France, or Germany; union defenders claim that the collective bargaining benefits spill over into all sectors.  Maybe.). 

But today?  I do not see the appeal of a Vereinigte Dienstleistungsgewerkschaft, most of all for the relatively dynamic United States.  It would bring a one-time boost in some wages and a long run decline in growth and job creation.  That is not a good deal.  And if I imagine the counterfactual world in which I am a Democrat, I would not feel any differently about this question.

A question from my macro mid-term

"Imagine that we live in the world of Malthus, where real wages hover at subsistence and boosts in living standards occasion population growth which then push wages back toward subsistence.  Furthermore if some of this population growth comes through improved sanitation and fewer deaths, it can happen in the short run, not just the long run.  How might this change real business cycle models?  What are the implication of a Malthusian model for interest rates."

MR readers are, of course, free to leave their answers in the comments.

Which British authors were most popular in late nineteenth century India?

A sample of fourteen library catalogs, from across India, revealed that only two authors were in all fourteen: Edward Bulwer-Lytton and Sir Walter Scott.  Apparently the embellished novel was popular.

In thirteen of the catalogs were Dickens, Disraeli, and Thackeray.

In twelve of the catalogs were Marie Corelli, F. Marion Crawford, Dumas, George Eliot, Charles Kingsley, Captain Frederick Marryat, G.W.M. Reynolds, and Philip Meadows Taylor.

Sir Arthur Conan Doyle was in eleven.

The figures are from the new and noteworthy, The Novel: Volume 1, History, Geography, and Culture, edited by Franco Moretti; this volume is a treasure trove of information about the history and early economics of the novel.

Why we talk

How much is communication of information the main purpose of speech?  I can think of other reasons to speak:

1. We talk to signal loyalty, or disloyalty.

2. We talk to bond with others.

3. We talk because we are not very self-aware and we need an audience if we are to learn our own thoughts or make up our minds.  Clark Durant points to Hamlet.

4. We talk so people may judge us, leading to efficient sorting.

5. We talk to see who will leave the room.

6. We talk because we are restless, nervous, or bored.  Speech may relieve anxiety, or give the pretense of doing so.

Of course it depends on context, but I’ll put information communication at no more than fifteen percent of our chatter.

Grab bag of books

1. Vicki Howard, Brides, Inc.: American Weddings and the Business of Tradition.  Weddings have become big business; this book tells you how and why.

2. Matthew D. Adler and Eric A. Posner, New Foundations of Cost-Benefit Analysis.  There is not exactly a new thesis here, but it is the most intelligent discussion to date of the strengths and limits of cost-benefit analysis.

3. Nation-States and the Multinational Corporation, by Nathan M. Jensen.  Rule of law and credibility, not low corporate taxes, are the key features in luring foreign investment.  You pro-tax people might think this is good news, but it probably just means that the burden of those taxes falls on labor, or on consumers.

4. The Marketplace of Christianity, by Robert B. Ekelund, Robert Hebert, and Robert D. Tollison.  This book is full of stimulating hypotheses, especially if you don’t flinch at chapters with titles like "The Counter-Reformation: Incumbent-Firm Reaction to Market Entry."  The economics of religion remains one of the most exciting fields.

5. Democratic Constitutional Design and Public Policy: Analysis and Evidence, edited by Roger Congleton and Birgitta Swedenborg.  This book offers the best minds in European public choice, Barry Weingast, and Roger.

Towards a Better Press Corps

The Washington Post has another story today on Wal-Mart’s plan to offer lower pharmaceutical prices.  Today’s piece is far superior to the one I criticized earlier but the following sentence did catch my eye:

But the additions have not quelled skepticism of the program. In a
statement early this month, the National Community Pharmacists
Association, a trade group representing independent pharmacists, called
the rollout an "attempt to gain maximum public relations value while
providing minimum value to patients."

Ok, you don’t need a PhD in Public Choice to see the issue.  Nevertheless the "skepticism" expressed would have been better put into context had the sentence been written:

In a
statement early this month, the National Community Pharmacists
Association, a trade group representing many pharmacists in competition with Wal-Mart, called
the rollout an "attempt to gain maximum public relations value while
providing minimum value to patients."

The limits of philanthropy?

Unless the world is in for a nasty spill, the richest people likely will become even richer over the generations.  Other than buying out or bribing African dictators, what else might the truly rich do with their money?

1. Build artificial islands, create jobs there, take in immigrants, and experiment.

2. Change their names to "Nemo," and hire mercenaries to intervene when Darfur-like situations get out of control.

3. Finance excellent movies just for the heck of it.

4. Send out self-replicating, solar powered von Neumann probes to explore the galaxy and look for life, or perhaps seed life (did anyone get a tax deduction for doing Earth?).

5. Create galactic spectacles which are obviously the work of intelligent beings, to advertise our presence to other civilizations, or future civilizations, throughout the galaxy.

What else?

Why I love Sweden

I won’t dwell on the beauty of Stockholm, the quality of the seafood, or the intelligence and good judgment of the people.  Swedish women seem OK too, and Swedish Impressionist painting is underrated.  I even liked the place in December.  But what I enjoy most about Sweden is the sense of freedom.

Let’s be blunt: much of this freedom stems from government, and what you get is freedom from other people.  People are not less free of the tax man, but in Sweden you don’t need other people very much to insure your economic well-being.  You can do your own thing, without much fear (relatively speaking, of course) of personal oppression from others.  You really can choose which personal relationships you wish to have.  Autonomy reigns.  The Swedish family is, of course, fractured.  For all of its collectivist reputation, Sweden is the land of the true individualist, sometimes verging on atomism.  At will you can go off into the woods and eat your lingonberries, weather of course permitting.

I would not want to live there, if only because my restless self needs a large country and lots of space for travel in multiple directions.  Uppsala bored me in less than a day, Malmo was OK, but what next?  The yikes factor kicks in.  Latin America looks so far away.

Nor do I think that living in Sweden necessarily would be good for me.  But when I look at it, I like it.  I like seeing it.  I think it is an important social experiment.  And it is hard to argue that it has been bad for the Swedes.  I also think the whole arrangement, tax payments and all, is no less voluntary (and probably more voluntary) than what we do in the United States.  Some of that is the small country/homogeneity thing, some is simply that Swedes recognize their high quality way of life.

I’ve heard it said that "socialism is the religion of the Swedes."  This is not quite correct, though it hints at an important truth.  I think of "being Swedish" as the religion of the Swedes.  And the more cosmopolitan they behave, the more they are partaking in this religion; don’t be fooled!

This "being Swedish" business is a wonderful religion for Sweden.  It is not a good or possible religion for most of the rest of the world.  And it is not a religion to which I have been or could be invited. 

But Sweden (or should I say Stockholm?) remains one of the best places in the history of the world to date, and we are fooling ourselves if we don’t recognize that.