Month: June 2007

Gas Shortages in Iran

Iran, one of the largest producers of oil in the world, has shortages of gasoline and has just introduced a rationing scheme causing riots in the streets.

Need I explain why the shortage exists?

Under the rationing plan, owners of private cars can buy 26 gallons of
fuel per month at the subsidized price of 38 cents per gallon.

and this tidbit is interesting.

Conservatives in Iran’s parliament, especially those aligned with
the country’s national oil company, have long pushed for higher
gasoline prices to curtail demand and free up government funds for
investment in more oil and gas production.

Ahmadinejad had resisted allowing increases because of his campaign promises to share Iran’s oil wealth with the nation’s poor.

What it is like to be a baby

I found these claims intriguing, but memory did not provide a test:

Gopnik argues that babies are not only conscious, they are more conscious
than adults.  Her argument for this view begins with the idea that
people in general — adults, that is — have more conscious experience
of what they attend to than of what they disregard…

Baby brains, Gopnik says, exhibit a much broader plasticity than adults’ and have a general neurochemistry
similar to the neurochemistry involved in adult attention.  Babies learn
more quickly than we do, and about more things, and pick up more
incidental knowledge outside a narrow band of attention.  Gopnik
suggests that we think of attention, in adults, as something like a
mechanism that turns part of our mature and slow-changing
brains, for a brief period, flexible, quick learning, and plastic —
baby-like — while suppressing change in the rest of the brain.

what is it like to be a baby?  According to Gopnik, it’s something like
attending to everything at once:  There’s much less of the reflexive and
ignored, the non-conscious, the automatic and expert.  She suggests that
the closest approximation adults typically get to baby-like experience
is when they are in completely novel environments, such as very
different cultures, where everything is new.

In my view, some people have a better sense (a much better sense) of what it is like to be a baby than others…

Why doesn’t America have electronic medical records?

Ezra Klein poses the question:

I’ve never read a compelling explanation of why the nation’s doctors and hospitals haven’t broadly adopted electronic medical records.  It’s not as if they’re allergic to technology.  At this point, cardiovascular care employs every strategy but astral projection to keep our in rhythm.  It’s not as if it wouldn’t be cheaper and easier for them.  The man hours and costs from keeping track of files, printing out labels, finding lost manila folders, and getting sued because the nurse misread the doctor’s handwriting are enormous.  Theoretically, insurers should be pushing on this, but they seem behind the curve, too.  And it’s not as if there aren’t tested programs in use — not only does Europe do electronic records well, but the VA does them beautifully, and they’ve released their primary program, ViSTA, as open source, for free use by anybody.

I can think of four reasons. 

1. Most of the benefits are reaped by the patient, and in the long run.  Today’s suppliers don’t realize these benefits in the form of profits.

2. The United States has relatively weak data protection laws.  Many people don’t want outsiders to know their medical history, and information compilers fear lawsuits if the information leaks out or is hacked.

3. No single provider has an incentive to move first in this game.  Why computerize if no one else has?

4. I haven’t computerized my office (is Alex laughing?), I worry more about surviving until the next day.

The comments over at Ezra’s are excellent.  And if you think that electronic records are the source of vast productivity gains, just have Medicare mandate such a change.  Readers?

Addendum: Here is Arnold Kling.

The Spirit of Radio

The Lott-Levitt dispute is a distraction but John Lott’s Freedomnomics has plenty of interesting economics.  I liked this bit regarding free-riding and the early history of radio:

…free-riding problems initially seemed almost insurmountable in providing radio service….some peope doubted there was any way to make listeners pay.  In 1922, Herbert Hoover, then Secretary of Commerce, declared: "Nor do I believe there is any practical method of payment from the listeners."  Others assumed that radio transmissions would eventually be funded by paying subscribers, but no one could devise a method for limiting broadcasts to subscribers’ receivers.  Consequently, some believed that government would have to provide the service…

So what happened?  Did private businessmen throw up their hands and invite the government to run the industry?  Was society denied the benefits of radio because no one could solve the free-riding problem?  Of course not.  The problem was eventually resolved in 1922 when AT&T discovered that it could make money by selling radio advertising airtime….With enough at stake, companies find amazingly creative ways to solve free-riding problems.

What’s the social value of Microsoft?

Here is Mark Thoma and Robert Barro, here is Brad DeLong.  You may recall that Barro had claimed that the social value of the company was roughly equal to its revenue; of course many critics objected.

Imprecise questions are being thrown around.  It is fine to question Microsoft’s net contribution by asking what other companies would have done in its stead.  But then, to be consistent, we should ask what revenue those alternate-universe companies would have earned.  The correct comparison is one set of social values minus revenue (that of Microsoft) to another (hypothetical) social value minus revenue (what would have happened without Bill Gates).  Would the alternative have been more or less monopolistic, more or less stifling of innovation, more or less able to enforce copyright?  And so on.  We can speculate but of course we’ll never solve those counterfactuals. 

We can, however, assert the nonetheless profound truism that gross social benefits of Microsoft, over time, exceed the gross revenue of the company by quite some amount.  The company is a highly imperfect price discriminator and many people rip off its software.

I’ll call the comparisons in the counterfactual (different revenues, propensities to monopolize, social values, etc.) a wash and thus I believe that the correct measure of the social value of the company is much greater than its revenue. It would make more sense to compare the company to a first best if we thought there was a feasible antitrust policy to get us there, but I find that hard to believe.

In other words, Barro probably is underestimating the value of Bill Gates and Microsoft.

Tyrone’s immigration plan

Tyrone just sent me the following, I added in the link:

Tyler, you had a good point that the demand for immigrant labor is often the demand for illegal immigrant labor, but you didn’t take it far enough.  We too frequently conflate illegal labor with unskilled labor, when instead this dichotomy should be challenged.  We need to make illegal labor more highly skilled and thereby restore its good name.

Toward that end I have a modest proposal.  The federal government should allow, by default, any northern European to work in the United States illegally.  The labor would be legal in the sense that the employer would face no criminal penalties.  But the worker would collect no social security or Medicare benefits, receive no OSHA protections, and the worker would never be sure how long this grace period would last.

Hi-tech employees, especially for short projects, would receive many offers very quickly.  So would many medical professionals.

Who would come?  It is obvious — those from high marginal tax rate countries.  That means France and Sweden, etc.  In essence our government would be engaging in tax arbitrage by not paying these people benefits.  Those are the optimal illegals.

Transient communities of Swedes would congregate on the shores of the Minnesota Lakes, sharing lutefisk, waiting for rides (a lot of them come from Stockholm and thus can’t drive), and exchanging rumors about where hi-tech work is available.

These people would never fully integrate with the capital stock of the United States.  But the program would attract people who already had high levels of human capital from their native Sweden.

Don’t charge them admission for a visa, that would give the gains to our rapacious and spendthrift government, rather than to the people of this fine land.

Do let them own pets.

But don’t make them legal, that just means higher wages for them and lower net gains for all right-thinking, baseball-loving Americans.

All the legal spots should be reserved for Mexicans.

Poor, poor Tyrone.  His mind never recovered from that military ambush he faced in the Congo.  That is why he talks of giving free entry to all Venezuelans, or at least the women.  He wants to set up an artificial American island just off the shores of Cuba, with lighted beacons along the way.  He wants to give "the Puerto Rico deal" to Trinidad, or indeed to any individual citizen of Trinidad who wishes to take it.  He thinks that free citizenship should be offered to any person who can score in the 80th percentile on GREs. 

Poor Tyrone has no idea of the cultural foundations of democracy.

Will you give me your secret blog address?

A loyal MR reader (and prominent game theorist) writes:

…your [no] response makes sense because you know that, averaging over the population of all people who would write to you as i did, the elasticity [of purchase] is finite, despite our claims.  However, you also realize that now, in response, the second-best solution for me to make a binding commitment never to buy the book.  (Such a commitment is no less credible than the unverifiable claims you are soliciting.)  Then you will behave as a perfect price-discriminator and give me the address.  (your marginal costs are negative.) 

But we realize that this is inefficient because it may happen that I may need to buy the book in the future and we will lose out on those gains from trade.  So in the interest of Pareto efficiency, you should tell me the address.

Oh, Pareto optimality is a such an overrated idea.  In any case the offer still stands.  You can pre-order the book (as so many others have done…thanks everyone!), write me at [email protected], and get access to the new secret blog.

Addendum: Here is Bryan Caplan, discussing the book, on whether economists (and gays) should come out of the closet.

Female tennis players and wages — politically incorrect paper of the day

Female tennis players play more conservatively and commit more
unforced errors when playing critical points.  Does this explain the
upper-echelons wage gap?

Here is the fact in more detail:

Women are significantly more likely to hit unforced errors at the most
crucial stages of the match, while men exhibit no significant variation
in performance.  Specifically, about 30% of men’s points end in unforced
errors, regardless of their placement in the distribution of the
importance variable.  For women, about 36% of points in the bottom
quartile of the importance distribution end in unforced errors, but
unforced errors rise to nearly 40% for points in the top quartile of
the importance distribution.  What is remarkable is not the difference
in the levels (men are more powerful and therefore more likely to hit
winners at any stage).  The interest lies in the differences in the way
men and women respond to increases in competitive pressure.

Here is the full article.

Betting markets in everything figures the odds are 20-1 that someone will get trampled
while scrambling to snag one June 29.  The site has also put odds on how
long the batteries will last and whether the devices will be recalled.

Here is the source, and thanks to John De Palma for the pointer.  There are many other odds at the link, spontaneous combustion of the phone is listed at 150-1.

Immigration enforcement ideas

My preferred immigration plan would be to massively increase the number of visas, set a very minimal bar to meet–not a terrorist, not a criminal, not carrying a hideous contagious disease–and then auction off various tranches of visas, classed not by type but by length of stay.  Let the visas be transferrable.  Then let immigrant communities do enforcement for you, as illegal immigrants suddenly threaten to erode the price of their valuable asset: the right to stay in-country.

That is from Jane Galt

The implicit model is that once people have spent money for an asset they value that asset more than they would value their prospective income stream from living in the United States.  Jane postulates a kind of endowment effect for immigrants.  Moving away from family-based immigration also limits potential trustable allies for law-breaking. 

I suspect that auction-based proposals will result in too few legal unskilled immigrants, and also more illegal immigration of the unskilled, but I would not rule out this idea just yet.  I’m still waiting for someone to write down an impossibility theorem for a good immigration policy, noting that much of the domestic demand is for immigrant traits (e.g., cheapness and immediate readiness to work) which are strongly correlated with illegality.  That is some employers want (explicitly or implicitly) to deny some of their workers the benefits of integrating with the U.S. capital stock.  Has anyone analyzed immigration policy in terms of finding optimal price discrimination on the side of a country-sized monopsonistic buyer…?