Month: September 2007

Student Blog Contest

America’s Future Foundation is pleased to announce a nationwide
for the best conservative or libertarian college blogger. The
purpose of the contest is to encourage original liberty-minded blogger
journalism on college campuses and to identify young conservative and
libertarian talent who wish to pursue careers as journalists and

The contest is open to all graduate and undergraduate bloggers age
25 and younger. The winning blog will be awarded a cash prize of $10,000,
and be invited to be a panelist at an AFF Roundtable on higher
education in Washington, D.C. Awards will be announced on April 7, 2008.

The Tyranny of the Market

This new book is by sometimes columnist and U. Penn economist Joel Waldfogel, of "Deadweight Loss of Christmas" fame.  The subtitle is "Why You Can’t Always Get What You Want."

This well-written monograph is the best extant non-technical treatment of fixed costs and how they limit product diversity.  On a given night, you can’t see a live performance of Samuel Beckett in Topeka, Kansas but maybe you can in the larger New York City; fixed costs are why they won’t set up the stage and hire the cast for only five viewers.

But Waldfogel is more pessimistic about the market than I am.  The book’s opening example is about how hard it is to find radio stations in underpopulated areas; satellite radio is mentioned on p.120 but I would have started with its reach and also its limitations (and here).  There is internet radio as well.  The first example in the empirical chapter is that it takes $900 million on average to develop a new drug, but regulations and the FDA are not mentioned.

I can recommend this book but I do not agree with its central conclusion: "Markets do not avoid the tyranny of the majority."  There are very few areas of my life, if any, where markets force me to follow the wishes of the majority.

Oddly the biggest problem is not mentioned and that is style and marketing.  Retail outlets do not carry many items, not because they couldn’t hang some of the stuff from the ceiling, but rather because they wish to project a focused image.  In other words, the real problem, when there is one, is the very limited attention spans of the consumers and the ad watchers and the product line gossipers.

In favor of boring meetings

Here is my Forbes piece (free registration required), in the October 1 issue.  Excerpt:

Meetings also confer a sense of control. Attendees feel like
insiders who have a real voice in decisions. This boosts their
motivation to implement ideas discussed as a group. For this reason it
is especially important to listen to the blowhards and the
obstructionists, who otherwise would pursue their own agendas rather
than support a common plan.

Frequent meetings help a business
apply bonuses and yearly evaluations with greater precision.
Evaluations are inherently problematic. The natural human tendency is
to feel slighted or get upset at anything less than a perfect
evaluation. By contrast, meetings reaffirm the value of the individual
to the company. When the time comes for the boss to offer criticism or
dock a bonus, a worker who has been to many meetings is more likely to
take the feedback in a constructive spirit and respond with improvement
rather than resentment.

In other words, meetings are fundamentally a form of "social theater" and should be analyzed as such.  Now if only speakers had to pay by the minute…   

A Law and Economics Exam Question

In Virginia the common law has long held that if a neighbor’s tree encroaches on your yard you may cut the branches as they fall over the property line but any damage the tree does to your property is your problem.  Your neighbor can even sue if your pruning kills the tree.  Last week the Virginia Supreme Court overruled this 70 year-old precedent so that now it’s your neighbor’s duty to prune or cut down the tree if it is a "nuisance."

Discuss.  Which rule is better the new rule or the old?  What does this ruling imply about Posner’s hypothesis about the efficiency of the common law?  What would Coase say? 

My Favorite Things Vermont

1. Calypso song about a Vermont native: "Guests of Rudy Vallee", and of course Vallee was a central figure behind the popularization of calypso in the United States.

2. Philosopher: John Dewey.  I can’t actually stand to read him, but if you recast everything he said, you can come up with some profound positions.

3. Undeserving Nobel Laureate: Pearl Buck.

4. Man with an iron rail through his brain: Phineas Gage.

5. Composer: Carl Ruggles – his 16-minute Sun Treader is one of the most underappreciated pieces of great American music.

That’s all I can think of right now.  I’m headed up to Middlebury for a day and a bit, as guest of David Colander.

Sentences of provocation

Our results suggest that if all states had primary enforcement seatbelt laws then regular youth seatbelt use would be nearly universal and youth fatalities would fall by about 120 per year.

Here is the paper.  My question: how many expected saved lives are required for this law to be a good idea?  Any comment on this post should suggest a specific numerical answer to that question.

Job interview questions for Google

How many piano tuners are there in the entire world?

Or how about?:

You are shrunk to the height of a nickel and your mass is proportionally reduced so as to maintain your original density. You are then thrown into an empty glass blender. The blades will start moving in 60 seconds. What do you do?

Here are many more, via Craig Newmark.  I gave a talk at Google on Friday (soon coming on YouTube), and yes they really do have toy stations and Lego blocks for everyone.  They also have the tastiest workplace cafeteria I’ve sampled.  Everyone is smart and beautiful, and I didn’t want to leave.

Facts about rich people

In the first Forbes 400 [1982], oil was the source of 22.8 percent of the fortunes, manufacturing 15.3 percent, finance 9 percent, and technology 3 percent.  By 2006 oil had fallen to 8.5 percent and manufacturing to 8.5 percent.  Technology, however, had risen to 11.75 percent and finance to an extraordinary 24.5 percent.

And get this:

The average net worth in 2006 of Forbes 400 members without a college degree was $5.96 billion; those with a degree averaged $3.14 billion.  Four of the five richest Americans — Bill Gates, casino owner Sheldon Adelson, Oracle’s Larry Ellison, and Microsoft cofounder Paul Allen…– are college dropouts.

Both are from the quite engaging All the Money in the World — How the Forbes 400 Make — And Spend — Their Fortunes, by Peter W. Bernstein and Annalyn Swan.

In inflation-adjusted terms, here are the richest Americans of all time; Bill Gates is #13.  Here are graphs on California vs. New York.

The Ku Klux Klan

Here is the abstract from the new Roland Fryer and Steve Levitt paper:

The Ku Klux Klan reached its heyday in the mid-1920s, claiming millions
of members.  In this paper, we analyze the 1920s Klan, those who joined
it, and the social and political impact that it had.  We utilize a wide
range of newly discovered data sources including information from Klan
membership roles, applications, robe-order forms, an internal audit of
the Klan by Ernst and Ernst, and a census that the Klan conducted after
an internal scandal.  Combining these sources with data from the 1920
and 1930 U.S. Censuses, we find that individuals who joined the Klan
were better educated and more likely to hold professional jobs than the
typical American.  Surprisingly, we find few tangible social or
political impacts of the Klan.  There is little evidence that the Klan
had an effect on black or foreign born residential mobility, or on
lynching patterns.  Historians have argued that the Klan was successful
in getting candidates they favored elected.  Statistical analysis,
however, suggests that any direct impact of the Klan was likely to be
small.  Furthermore, those who were elected had little discernible
effect on legislation passed.  Rather than a terrorist organization, the
1920s Klan is best described as a social organization built through a
wildly successful pyramid scheme fueled by an army of
highly-incentivized sales agents selling hatred, religious intolerance,
and fraternity in a time and place where there was tremendous demand.

I find this interpretation plausible; for many (evil) people, evil is downright fun, especially if you are bored in the first place.  Both Donnie Brasco and The Sopranos capture aspects of this equation.

Google does not generate a non-gated version, let us know in the comments if I missed one.


Eventually, Medicare should completely transform the way it pays physicians and hospitals.  Instead of paying doctors and hospitals separately and reimbursing them for how much care they deliver, it will want to begin paying them as a group on a per-capita basis, depending upon the number of patients they care for.  (Because outcomes of their patients will be monitored and eventually made public, these integrated systems will not want to attract more patients than they can handle simply to boost their incomes.)

That is from Shannon Brownlee’s new Overtreated: Why Too Much Medicine is Making Us Sicker and Poorer, which should be read by anyone interested in health care economics.  I have a few points:

1. The early chapters are too anecdotal for my tastes, but later the book becomes more analytical.

2. The author writes as if doctors can be steamrollered into submission and forced to adopt better compensation schemes; in this sense the public choice analysis is naive.  Yes maybe that is what "should happen" but I predict that greater government involvement will be geared toward protecting the rents of American doctors, not making them passive servants of the public interest.

3. The (favorable) discussion of VHA is more insightful and more subtle than the usual treatments.  For instance we learn that the much-heralded computerization of VA records was created in direct violation of government law.

4. The chapter on the rise and fall of managed care was excellent.  Yet the core problems with managed care also would plague the author’s proposal for compensating doctors and hospitals, quoted above.

5. The policy prescriptions focus on changing the bundle of health care, rather than just cutting back on health care, so the title is not strictly accurate.  The author is not a radical Hansonian but rather favors more "integrated care" and more primary physicians.

Robin Hanson, now there’s a guy who favors gross cutbacks in health care, he argues they won’t cost us actual health.  See the recent forum over at CatoUnbound.

Addendum: See also this NYT magazine article, "Do We Really Know What Makes Us Healthy?"

What is going on with the UC Regents?!!!!

First this:

In a showdown over academic freedom, a prominent
legal scholar said Wednesday that the University of California,
Irvine’s chancellor had succumbed to conservative political pressure
in rescinding his contract to head the university’s new law school, a
charge the chancellor vehemently denied.

Erwin Chemerinsky, a well-known liberal expert on constitutional
law, said he had signed a contract Sept. 4, only to be told Tuesday by
Chancellor Michael V. Drake that he was voiding their deal because
Chemerinsky was too liberal and the university had underestimated
"conservatives out to get me."

Now this:

After a group of UC Davis women faculty began circulating a petition,
UC regents rescinded an invitation to Larry Summers, the controversial
former president of Harvard University, to speak at a board dinner
Wednesday night in Sacramento.

Both of these decisions are shameful.

Don’t get so worked up about the Fed

We have seen here that the big movements in stock prices and real
estate prices in the last decade or so do not line up with movements in
long-term interest rates over the same time period.  This appears to
confirm the 1988 results of Campbell and Shiller that stock prices
relative to dividends or earnings are not well explainable in terms of
present value models with time-varying interest rates.

That is Robert Schiller, in a new paper, via New Economist.  And while I do think the Fed can influence real interest rates — especially short rates — this ability should not be taken for granted either.  So if you want to blame the subprime crisis on loose monetary policy from the years of the bubble burst, you have some explaining to do.