Month: November 2007

Laissez-Faire Marriage

by  Alex Tabarrok in

Should the state be involved in marriage?  Writing in the NYTimes professor of history Stephanie Coontz notes:

The American colonies officially required marriages to be
registered, but until the mid-19th century, state supreme courts
routinely ruled that public cohabitation was sufficient evidence of a
valid marriage. By the later part of that century, however, the United
States began to nullify common-law marriages and exert more control
over who was allowed to marry.

By the 1920s, 38 states
prohibited whites from marrying blacks, “mulattos,” Japanese, Chinese,
Indians, “Mongolians,” “Malays” or Filipinos. Twelve states would not
issue a marriage license if one partner was a drunk, an addict or a
“mental defect.” Eighteen states set barriers to remarriage after
divorce.

It’s no accident that the state began restricting and intervening in the marriage contract at the same time as it was restricting and intervening in economic contracts.  It was of course the evil Oliver Wendell Holmes Jr. who dissented in Lochner v. New York and who also upheld forced sterilization laws in Buck v. Bell (writing that "three generations of imbeciles in enough.")  Economists don’t like to talk about social externalities but the connection between economic and social regulation is very clear in the progressives.

I think it’s time to restore
freedom of contract to marriage.  Why should two men, for example, be denied the same rights to contract as are allowed to a man and a woman?  Far from ending civilization the extension of the bourgeoisie concept of contract ever further is the epitome of civilization.  Our modern concept of marriage, for example, is simply one instantiation of the idea of contract.

People will claim that this means a chaos of contracts for every form of marriage.  This is wrong factually and also conceptually misguided.  Factually, we already allow men and women to adjust the marriage contract as they see fit with pre-nuptials.  Moreover, different states offer different marriage contracts with some offering more than one type.  Partnerships of other kinds have access to all manner of contractual arrangements without insufferable problems. 

More importantly, the chaos of contracts argument is fundamentally misguided.  The purpose of contract law is to give individual’s greater control over their lives.  To make contract law a restraint on how people may govern themselves is a perversion of the social contract.  To restrict people from accessing the tools of civilization on the basis of their sexual preference is baseless discrimination. 

It is time to restore
freedom of contract to marriage,  Laissez-faire for all capitalist acts between consenting adults!

Thanks to Daniel Akst for the pointer.

My favorite things Honduran

by  Tyler Cowen in

1. The best known Honduran painter is Jose Antonio Velásquez, here is a typical image.

2. America Ferrara, who plays Betty in Ugly Betty, is of Honduran parents.  I like that show, I don’t love it.

3. This guy did lots of scientific work, including the laying of some foundations for Viagra, and he married a Belgian princess.  I’ve yet to benefit from his existence.

Plus I would cite a few personal acquaintances, past and present, of whom I am very fond.  That’s what I can think of folks, and I wouldn’t have found #3 without Google.  This website assures us "There are famous people from Honduras," although the link to the list of them is broken.

I have also read one short story from Honduras, from an anthology of Latin American short stories; it is entitled "Malaria."

I might add I am very fond of airfares to Honduras; right now the roundtrip is cheaper than the one way shuttle to New York City.  And maybe the flight is quicker too, no holding patterns over LaGuardia!

Most of all I like places where no one else goes, and I expect this short weekend trip to be very worth its while.

Medicare for everyone?

by  Tyler Cowen in

Medicare spends billions of dollars each year on products and
services that are available at far lower prices from retail pharmacies
and online stores, according to an analysis of federal data by The New
York Times. A comparison of Medicare figures with retail catalogs
reveals dozens of instances of the program’s paying above-market costs.

For example, last year Medicare spent more than $21 million on
pumps to help older and disabled men attain erections, paying about
$450 for the same device that is available online for as little as
$108. Even for something as simple as a walking cane, which can be
purchased online for about $11, the government pays $20, according to
government data.

These widespread price discrepancies, including those for oxygen services, have been noted in dozens of regulatory reports.

But
when officials and politicians have tried to cut these costs, they have
often encountered a powerful foe: the companies that sell these
devices, who ask their elderly customers to serve, in effect, as unpaid
lobbyists, calling and writing to their representatives in Congress,
protesting at rallies, and even participating in political attacks
against individual lawmakers who take on the issue.

Here is the full story.  You are correct to think that not all versions of a single-payer system need discourage innovation.  You are also correct to think this is what they look like.

A plea for more anthropology of ideology

by  Tyler Cowen in

What strikes me is that these writers, and also their counterparts on the Right, see so little need to adduce anthropological evidence to characterize other people’s views.  When it concerns the Laffer Curve, or global warming, or the correct measure of civilian deaths in Iraq, the concern is for the highest standards of evidence.  Yet the question of what other people "really believe" also can be treated in more or less sophisticated form, most of all with the tools of anthropology.  Web quotations are relevant, but there is no substitute for getting out there and speaking to those people, for a start.

I’d like to propose a new research convention.  Anytime a writer or blogger talks about what The Right or The Left (or some subset thereof) really wants or means, I’d like them to list their personal anthropological experience with the subjects under consideration.  Davies presents Friedman as a shill for the Republican Party; I’d like to know how many (public or non-public) conversations he has had with Friedman about the topic of the Republican Party.  I’ve been present for a few, and while I’m open to feedback from Davies, my guess reading his post is that he hasn’t been there for any.  Yet he writes with a tone of certitude: "it’s clearly not intellectual honesty that makes American liberals act pretend that Milton Friedman wasn’t a party line Republican hack." 

Is it really true that "The ideological core of Chicago-style libertarianism has two planks. 1. Vote Republican.  2. That’s it."?  And Davies’s own quotation of Milton Friedman does not support his core claims; he simply asks us to believe that Friedman is lying.  I would ask Davies to apply the same standards of argumentation and evidence that he does to the Lancet study of Iraq or the many other topics he has written excellent blog posts about.

How many supply-siders has Chait talked to?  It might be a lot, but again I’d like to know.  Has he met with the people who write The Wall Street Journal Op-Ed page?  How many of them?  How many leading Republican donors and strategists does he know?  Did they really chat with him, or were they in controlled "interview mode"?  How motivated are they by supply-side doctrine?  What did those say who weren’t so motivated?

How many intelligent pro-life Republicans do you know?  How many southern racist Republicans do you know?  Have they confided in you?  Do they trust you?  Do you really think you know what they believe?

I don’t mean to suggest that such anthropological research will always yield sanitizing answers.  Nor do I believe that the Left is worse in ignoring the anthropology of ideology than is the Right. 

It is sad that anthropological research has such a low status among so many smart people.  It is fashionable to open up data sets for replication.  So let’s do the same for research into ideology or even just proclamations about the ideology of others, especially those you disagree with.  Tell us how much field work you did, who you did it with, how much they trusted you, and what you wish you could have done but didn’t.  That is easy enough in the on-line world. 

The demand for authenticity

by  Tyler Cowen in

Eric Jorgensen, a programmer at Microsoft,
has invented PixelWhimsy, a computer program that allows toddlers to
sit at a regular computer and bang away on the keys to create sounds
and colors and shapes, but without damaging the computer.

Asmin
Jalis, who also works at Microsoft and whose 2-year-old boy, Ibrahim,
has been using PixelWhimsy, said his son liked it better than his toy
computer. “We have a toy laptop for him, and he knows it’s a fake,” he
said.

Or more generally:

Cellphones, laptops, digital cameras and MP3 music players are among the hottest gift items this year. For preschoolers.  Toy makers and retailers are filling shelves with new tech devices for
children ages 3 and up, and sometimes even down. They say they are
catering to junior consumers who want to emulate their parents and are
not satisfied with fake gadgets.

Constructive suggestions about foreclosures

by  Tyler Cowen in

Francisco Torralba writes:

First of all, settle on a bankruptcy text and stick to it. The latest
overhaul of the Bankruptcy Code took place as recently as 2005.
Regulatory uncertainty inhibits lenders.

Second, lawmakers
should give the two parties in a contract more leeway to renegotiate
their loans. I applaud the congressmen’s proposals to allow
modifications of the terms of the original loans, but they could go
further. For example, they should allow converting 30-year adjustable
rate mortgages (ARM) into 50-year fixed-rate mortgages.

The
modifications could be proposed by the court, but then they should
require consent from both mortgagee and lender. Two of the bills under consideration — the ones by Senator Durbin
(D-IL) and Representative Miller (D-NC) — allow the bankruptcy court
to modify the terms of the loan without restrictions, not even
agreement in writing between the parties. Giving such power to the
court has at least two effects. First, it tilts the balance towards the
consumer — in a free negotiation between mortgagee and bank, the
latter would have the upper hand. Second, it increases the uncertainty
of the bank’s payoffs. Both effects reduce the supply of debt.

Congress
should also modify the Code so that the least creditworthy borrowers
have more incentives to file for Chapter 7 instead of Chapter 13.

Going beyond the current problems, better ex ante disclosure would be welcome. Most borrowers don’t understand 95 percent of the legal mumbo jumbo on their contracts. Mortgage applicants should be given worst-case scenario simulations of their monthly payments.

We could also set a floor on “teaser” introductory mortgage payments. Hybrid ARM’s,
for example, start out carrying a low, fixed rate. Two to five years
later the interest rate resets to a higher, floating level. Option ARM’s
let the borrower initially make interest-only payments, minimum
payments (often below the interest accrued), or fixed, low-rate
payments, also until the first reset date. Any of those schemes make
mortgages affordable, but only for the first few years. Legislation
could provide, for example, that initial monthly payments never be
below 80 percent of the expected payment after the first reset date.

Here is Francisco’s blog, if you don’t already know it.

Why does John Nye violate the law of one price?

by  Tyler Cowen in

John’s new book War, Wine, and Taxes sells new for $29.95 on Amazon [TC: this is correcting a previous mistake in listing the price], with free shipping in the U.S.  Many of the used copies of John’s book are selling for over $30, others in the $25-30 range, and the shipping charges are higher than Amazon’s.  Last I looked, none of the forty used copies were selling for less than $25 and one was selling for $50.

It is not hard to get a new copy of John’s book, John assures me.  What’s up?

Should we regulate banks more?

by  Tyler Cowen in

In the wake of subprime losses we are hearing claims that the United States should have regulated its banks more.  It is worth pointing out that the U.S. has some of the most heavily regulated banks in the world:

1. The Bank Holding Company Act of 1940, still in force, prevents bank from owning non-financial corporations.

2. The previous Glass-Steagall Act (repealed in 1999) discouraged banks from diversifying out of home mortgages.

3. The Office of the Comptroller of the Currency charters, regulates, and oversees banks, including with respect to risk.

4. Several rounds of the Basel accords, including subsequent fine-tunings, have regulated bank capital holdings and reporting requirements.  These are international regulations and not the sole design of a possibly defective U.S. regulatory system.

5. Banks are chartered by individual states and subject to varying regulations, disclosure, and reporting requirements, including with respect to risk.

6. Banks are regulated and supervised by the Fed, especially with regard to their risk-taking.

7. Banks are regulated and supervised by the FDIC, especially with regard to their risk.

8. Banks face additional regulations, both at the state and federal level, to the extent they are involved in commodities and insurance markets.

9. The Federal Housing Finance Board regulates Federal Home Loan Banks, which are involved in mortgage markets.

10. The Sarbanes-Oxley Act applies to publicly traded banks.

11. The Gramm-Leach-Bliley Act, the revision of the Glass-Steagall Act, regulates bank assets, albeit less than in times past. 

12. The Home Mortgage Disclosure Act "…requires financial institutions to maintain and annually
disclose data about home purchases, home purchase pre-approvals, home
improvement, and refinance applications involving 1 to 4 unit and
multifamily dwellings."  These regulations are intended to limit the ability of banks to discriminate against borrowers; in practice this encourages subprime loans.

13. The Community Reinvestment Act encourages banks "to reinvest in the communities they serve," which again in practice encourages subprime loans.

14. I believe this list is not complete.

I guess we didn’t have enough bank regulation!

It is also worth noting that many European banks have suffered heavy losses as well, despite operating under different regulatory regimes.

It is plausible to argue that the United States should have fewer bank regulators (I’ll nominate the Fed for the main role), but that consolidation should be accompanied by greater efficacy of regulation.  In the meantime there are too many regulatory authorities, and too many regulations.  We have completely blurred lines of accountability, legal, political, economic, and otherwise.

Markets in everything

by  Tyler Cowen in

Tumbleweeds:

Linda started her online business, the Prairie Tumbleweed Farm, as a joke. It was 1994 and she wanted to teach herself how to design a website. Since she lived on the prairie in southwest Kansas, where rolling tumbleweeds are sometimes the only dynamic feature of an endless flat horizon, she invented a farm that sold tumbleweeds, listing prices at $15 for a small one, $20 for a medium and $25 for large.

Hollywood has also come calling. Katz’s tumbleweeds have appeared in films like Johnny Depp’s “Neverland.” And she has supplied tumbleweeds to the big purple dinosaur kid’s show, “Barney.”

Katz says people usually use her tumbleweeds to recreate the look and feel of the old west for theme parties. But some customers tell her they buy tumbleweeds to remind them of the home on the prairie they left long ago.

She is now making about $40,000 a year.

The pointer is from David Welton.  Here are David’s writings on Padua.