Month: November 2006

Moral Wiggle Room

If Bob and Alice prefer vanilla to chocolate ice cream then when given the choice we wouldn’t be surprised to see each of them choosing vanilla.  Now suppose that Bob and Alice are given the following choice, if either chooses vanilla they both get vanilla only if both choose chocolate do they receive chocolate.   If Bob and Alice prefer vanilla to chocolate it seems plausible that they will continue to choose vanilla.  But suppose that we observe Bob and Alice choosing chocolate in the second experiment.  How might we explain this?

Imagine that chocolate is considered sinful and vanilla is thought to be nice.  Bob and Alice might want to be sinful but they choose nice in the first experiment to avoid social condemnation.  In the second experiment, however, Bob and Alice are sinful only when both sin.  True preferences are revealed only when no individual can be singled out for condemnation.

That’s the setup of one of the clever experiments in an excellent new paper, Exploiting Moral Wiggle Room, except the experiment isn’t about chocolate and vanilla ice cream it’s about fairness in a division game.  In the first experiment Alice and Bob must each decide whether to choose $6 for themselves and $1 for a third party (Cindy) or $5 for themselves and $5 for Cindy.  In this experiment most Alice and Bobs choose to be nice, they divide "fairly" with Cindy.  Many researchers have concluded that Alice and Bob must have a preference for niceness.

But put Alice and Bob together in the second experiment and Alice and Bob are each much more likely to choose the sinful division, $6 and $1.  Alice and Bob may prefer chocolate after all.

Read the paper for several other experiments along these lines.  The implications for societal organization are profound.

Hat tip to Robin Hanson.

Books I love on topics I don’t care about

I have a new nomination:

[Alice] Sheldon (1915-87) was the most important sf writer ever to live in the
Washington area.  She also was, in her varied career, a psychologist, a
CIA officer and a chicken farmer.  Her biographer, Julie Phillips,
combines diligent archival work with more than 40 interviews to
successfully portray one of sf’s most brilliant — and tortured —

That is from a review of James Tiptree, Jr.: The Double Life of Alice Sheldon, by Julie Phillips.

Do, in the comments, give us your nominations for this category, but please make sure you don’t have any intrinsic interest in the topic of the book.

Ideas worth pondering

From Mark Kleiman, via Matt Yglesias:

Since the Veterans Administration, since its reform under Bill Clinton,
now has the best medical-records system going and produces high-quality
health care at a reasonable cost, could we move a baby step toward
national health insurance by allowing non-veterans to buy into the VA
system at a price equal to whatever the VA figures is its marginal

I find this idea appealing: this is a market test of whether the federal government could take better care of most of us.  (In case you are wondering, I wouldn’t buy in.)  In any case, a reform like this could deflect the pressure for trying a related idea on a non-experimental basis.  But if you think more government involvement in health care is desirable, well, this change should suffice to get us where we need to go.  And if you don’t think the VA could handle the extra demand, for whatever reasons, let’s set up a copycat institution.  If you are too worried about adverse selection, read Alex’s earlier post.

The productivity performance of universities

This paper presents new evidence on research and teaching productivity
in universities using a panel of 102 top U.S. schools during 1981-1999. 
Faculty employment grows at 0.6 percent per year, compared with growth
of 4.9 percent in industrial researchers.  Productivity growth per
researcher is 1.4-6.7 percent and is higher in private universities. 
Productivity growth per teacher is 0.8-1.1 percent and is higher in
public universities.  Growth in research productivity within
universities exceeds overall growth, because the research share grows
in universities where productivity growth is less.  This finding
suggests that allocative efficiency of U.S. higher education declined
during the late 20th century.  R&D stock, endowment, and post-docs
increase research productivity in universities, the effect of
nonfederal R&D is less, and the returns to research are
diminishing.  Since the nonfederal R&D share grows and is higher in
public schools, this may explain the rising inefficiency.  Decreasing
returns in research but not teaching suggest that most differences in
university size are due to teaching.

Here is the full paper.  Here is a non-gated version

I take "the returns to research are diminishing" to be the fundamental point.  The authors also find that private universities are about twice as research productive as public universities, and that private universities have a higher rate of research productivity growth.  Public universities have superior teaching productivity.

What is so great about social democracy anyway?

Andrew Smith, a loyal MR reader, writes:

You said in one of your
recent MR posts that although you did not find the European model
sustainable over the long run, frequent trips to Europe revealed much
in the model that delighted you. I believe you singled out Stockholm…as being a particularly vivid illustration of all that
social democracy could do right.

I, too, am a free-market enthusiast who is delighted by
European cities, but when I think carefully about what delights me I
find that it is less anything developed since World War II and more the
remnants of the Europe that existed before the First World War.

First, there is the dense urban development that created
incredible communities from the rise of Venice in the Middle Ages to
the Paris that Haussmann created in the mid-19th century.  I cannot
think of a single community built mostly after World War I that has
much charm and those built mostly after WWII — like the tower
communities that ring Paris — are downright depressing, worse than any
of the strip malls and sprawl American capitalism has produced since
the war.

The regional cuisines, the sidewalk cafes, the specialty merchants, the distinctive aspects of each area’s art and music — it all came about before WWI and now lingers as
a slowly fading twilight of Europe’s high noon.  (True, farm subsidies and merchant regulations do help maintain the beautiful countryside and the small shops, but I think Europeans have enough passion for local that both things would mostly survive in a free market.)

What part of the Europe that you enjoy so much owes its existence to social democracy?  Just curious.

Excellent points.  My answer is twofold.  First, social democracy has kept Europe, its high standard of living, and its historical wonders, more or less intact.  Through much of 1914-194? this outcome was by no means obvious.  I am willing, at times, to resort to crude historicism.

Second, European social democracy offers its citizens the most wonderful vacations elsewhere.  I just don’t see how most Americans tolerate only two weeks’ vacation. 

(Mind you, I am not lazy; my vacations, done my way, are more strenuous than any work day.  In fact I consider a work day my source of relaxatoin.  If I have to relax, at least I want to be getting lots done.)

As an aside, I do find contemporary Finland visually attractive, and I believe Lille would please me also, from the photos I have seen.

In any case, Smith’s points should cause us to downgrade that "aesthetic halo of achievement" which social democracy has around many of our heads.

Underground classical music

Spurred on by a growing number of offbeat performance venues and enterprising young classical musicians, New York is experiencing a boom in small, largely below-the-radar concert series.  There are opera nights at a Lower East Side dive bar, chamber music concerts at a boxing gym beneath the Brooklyn Bridge, contemporary music at a cabaret in Williamsburg, Brooklyn, and avant-garde fare in a silo on the banks of an industrial canal.

The rise of an alternative classical scene recalls the 1960s and 70s, when downtown lofts and art galleries helped give rise to minimalism and performance art.  The current crop of classical series resembles a similar trend happening in jazz and world-music circles, as the club epicenter has spread from Manhattan to Brooklyn.  Classical musicians often say they are drawn to simpler, less pretentious encounters with audiences.

“It’s just like going to see a band,” says Anne Ricci, a soprano in describing Opera on Tap, an opera recital series that she co-founded in June 2005 at Freddy’s Bar and Backroom, a former bowling alley and cop bar in Park Slope, Brooklyn, that now presents live music.

“Audiences are allowed to be loud, they’re allowed to talk, get up and re-fill their beers.  It helps the singers recover a sense of spontaneity that can easily be lost in the classical repertoire.”

Here is more.

Phone tax facts of the day

…the telephone tax is a very inefficient way to help poor people, says Thomas Hazlett, a professor at George Mason University, in a June white paper (  One Hawaiian phone company is getting an annual subsidy of $13,345 per line.  It would be cheaper to give these people free satellite service.

Alaskans are getting rich off oil royalties but still qualify for an average $175 a year each in phone handouts.  The citizens of Jackson Hole, Wyo. are winners, too, to the tune of $282 each.  Does Harrison Ford really need your help?

That is from Bill Baldwin at

What is the fuel cost of grapes from Chile?

Tim Harford writes to me:

Polluters in Europe currently have to pay about euros10 per tonne of carbon dioxide as part of Europe’s efforts to meet its obligations under the Kyoto agreement.  That is less than one penny per kg of carbon dioxide.  Perhaps that price, in a volatile market, is too low.  A Government Economic Service paper on the social cost of carbon emissions recommends a cost closer to euros25 a tonne of carbon dioxide.  Even that is less than 10p for a kilogram of mange-tout, or a penny for a 100g packet.  If consumers were forced to meet those costs – as in principle they should be – the sum would barely register.  There are good environmental reasons to tax airline fuel, but such taxes are not likely to make food imports substantially more expensive.

Here is the link, and Tim notes there are typos in the article, the text is correct as above.  When it comes to the social cost of food, one estimate is that congestion and accidents account for two-thirds of that sum.  So maybe you should walk or bike more, but eat what you want, from where you want.  Here is, again, my review of Michael Pollan’s The Omnivore’s Dilemma.

By the way, for a more skeptical view of a carbon tax, here is Robert Samuelson’s piece from today’s WP.

Addendum: The Economist (MMM?) refers me to a new "AntiPigou" and "Anti-Mankiw" blog, which I have yet to read.

How happy are French workers?

On the new (and anonymous) Economist blog, Maybe Megan McArdle writes:

A new working paper from the IMF
looks at the impact of the 35-hour working week in France, where it has
been imposed by law on large firms since 2000. The authors, Marcello
Estevao and Filipa Sa, find that the 35-hour week has:

(i) encouraged workers in large firms to take second jobs, or to move to small firms where the 35-hour week is not obligatory;

(ii) driven up hourly wage costs for large firms;

(iii) probably had "no significant impact" on aggregate employment;


(iv) brought no significant increase in worker satisfaction, as measured by the Eurobarometer opinion survey series.

I usually doubt the kind of questionnaire evidence that would go into the kind of judgment represented by iv), but nonetheless this is worth reporting.

The resurgence of the $2 bill

In 2005, depository institutions ordered $122 million in $2 notes,
according to Federal Reserve statistics.  That is more than double the
average amount ordered from 1991 to 2000.

…with banking and currency experts not certain what is fueling the
surge. A few possibilities are inflation, the introduction of the
Sacagawea $1 coin in 2000, and even, according to some, immigration.

of the reason, anecdotal evidence shows that at the local level,
vendors and customers are getting more comfortable with $2 bills.

group that has embraced the note is the exotic-dancing industry.  Strip
clubs hand out $2 bills when they give customers their change, and the
bills end up in dancers’ garters and bartenders’ tip jars.

entertainers love it because it doubles their tip money," said Angelina
Spencer, a former stripper and the current executive director of the
Association of Club Executives, an adult nightclub trade group.

addition to the inflation factor, Robert Hoge of the American
Numismatics Society thinks $2 bill demand may be getting help from
immigration flows, particularly from Canada and Europe, where currency
denominated in twos is common.

Peter Morici, professor at the Robert H. Smith School of Business at
the University of Maryland, thinks that with the introduction of the
Sacagawea, named for a famous Native American woman, people are
beginning to realize an inconvenience of $1 bills.  "In order to have a
successful $2 bill, you have to have a successful $1 coin," he said.

Here is the full story.  It is odd, is it not, that people would change their denominational holdings as the most efficient way around wage and price stickiness?

Purchasing Power Parity?

The value of a dollar in New York City is 76.2 cents.

Still a bargain, if you ask me, once you factor in live concerts at the Village Vanguard, which down here in Fairfax cost infinity.  (Of course Dickens you can read anywhere.)  Here is more, and thanks to Craig Newmark for the pointer.  By the way, I regularly enjoy New York magazine, the source of this article, even though I live all too far away.