Month: April 2008

Sentences of interest

The libertarian point is that the illegality and attendant marginalization of polygamy pushes it into isolated, authoritarian, quasi-state cult compounds where these kinds of crimes are most likely to take place.

That’s Will Wilkinson and the point reminds me of recent party debates on drug legalization.  I don’t mind legalizing polygamy (though I disapprove of the practice), but would such legalization prevent an FLDS type of episode?  Maybe the goals of the perpetrators are rape, abuse, and power-mad intimidation, rather than polygamy per se ("polygamy: merely a means to an end.")  In that case polygamy legalization won’t limit their ability to set up isolated, authoritarian, quasi-state cult compounds for their nefarious purposes. 

Alternatively, if illicit polygamy is a marketing point that draws people to the compound in the first place, legalization may well help.  Oddly legalization helps most when the religious belief (in polygamy) is relatively sincere and the abuse accumulates through evolutionary processes of increasingly bestial behavior; legalization helps least when the religious belief in polygamy is for cynical reasons of control and could easily be replaced by some other marketing point.

Limited Liability

“The limited liability corporation is the greatest single discovery of modern times. Even steam and electricity are less important than the limited liability company”.

Professor Butler President of Columbia University, 1911.

"This limited liability corporation is the bedrock of the market economy…And what do we, the citizenry, get in return for this generous public grant of limited liability? Originally, we told the corporation what to do. You are to deliver the goods and then go out of business. And then let humans live our lives. But corporations gained power, broke through democratic controls, and now roam around the world inflicting unspeakable damage on the earth."

Russell Mokhiber and Robert Weissman, Mother Jones 1999

What’s a New York Times ad worth for a book?

Dani Rodrik tries an experiment:

Princeton University Press ran a small ad for my book last Sunday in the New York Times book review. I was curious if it would have any effect on sales, so I ran a little experiment.  I checked the book’s sales ranking in at periodic intervals starting on Saturday afternoon.

But the ad didn’t matter so much (see also the comments on the post).  I would note a few points of speculation:

1. Below the top tier, a book can rise rapidly through the Amazon rankings without selling so many extra copies.

2. Amazon buyers are better educated and not representative of the market as a whole.

3. It is an open question whether the Amazon rankings are "honest," or strategically designed to sell what is hot at the moment, by making it look especially hot.

4. The best question to ask is: Is your book in Wal-Mart and Costco?

5. The next best metric is to check its location in Barnes and Noble.

6. Success of a book in Borders is less representative of overall success than it used to be; Borders (which is on the verge of going under, I might add) is now closer to an "indie" book store in many ways than it is to B&N.

Addendum: Chug writes in the comments: "display ads for books are not to sell books. they are for good relations between the publisher and the author…."

The McCain health care plan

Mr. McCain’s health plan centers on eliminating the tax breaks for
employers who provide health insurance for their workers – a marked
departure from the current system – and giving $5,000 tax credits to
families to buy their own insurance. His goal in shifting from
employer-based coverage to having people buy their own policies is to
encourage competition and choice, and to drive down the costs of health

Here is more.  Portability is good but so many of the uninsured families do not pay $5000 in taxes.  Will this boil down to a subsidy to those who don’t need it or to health insurance vouchers?  InTrade says there is a 39.6 percent chance we will find out.  And here is some vagueness:

Mr. McCain proposed that the federal government work with the states to
cover those who cannot find insurance on the open market. With federal
financial assistance, states would be encouraged to create high-risk
pools that would contract with insurers to cover consumers who have
been rejected on the open market.

Here is more detail; in part it sounds like revived HillaryCare (part I), but only for the high-risk cases rather than for the entire population.  The "notches" problem is obvious as people at the relevant margin hold out for the subsidized pool, thereby making the pool size larger and larger.

McCain also emphasizes lifestyle as a factor behind health; that’s empirically important — more so than health care — but after cutting various stupid subsidies the government should not be the main driver there.  Megan McArdle comments overall.

Trade aside, so far I’ve yet to see many actual policy proposals from the McCain camp.  Mostly I’ve seen attempts to signal that they won’t do anything too offensive to the party’s right wing.  Very few of these trial balloons seem to be ideas that McCain had expressed much previous loyalty to.  I don’t even think we should be analyzing these statements as policy proposals.  We should be wondering why the Republican Party has given up on the idea of policy proposals.

Back of the envelope

Is Wikipedia just the beginning?  Clay Shirky has turned off his TV and gotten down to work:

So if you take Wikipedia as a kind of unit, all of Wikipedia, the whole project–every page, every edit, every talk page, every line of code, in every language that Wikipedia exists in–that represents something like the cumulation of 100 million hours of human thought.  I worked this out with Martin Wattenberg at IBM; it’s a back-of-the-envelope calculation, but it’s the right order of magnitude, about 100 million hours of thought.

And television watching?  Two hundred billion hours, in the U.S. alone, every year. Put another way, now that we have a unit, that’s 2,000 Wikipedia projects a year spent watching television.  Or put still another way, in the U.S., we spend 100 million hours every weekend, just watching the ads. This is a pretty big surplus. People asking, "Where do they find the time?" when they’re looking at things like Wikipedia don’t understand how tiny that entire project is, as a carve-out of this asset that’s finally being dragged into what Tim calls an architecture of participation.

I thank Jules Sigall for the pointer.

Peter Thiel on the Great Bubble

One would not have thought it
possible for the internet bubble of the late
1990s, the greatest boom in the history of the world, to be replaced within five
years by a real estate bubble of even greater magnitude and worse stupidity.
Under more normal circumstances, one would not have thought that the same
mistake could happen twice in the lifetimes of the people involved…

The most straightforward explanation begins with the view that all of these
bubbles are not truly separate, but instead represent different facets of a
single Great Boom of unprecedented size and duration. As with the earlier
bubbles of the modern age, the Great Boom has been based on a similar story of
globalization, told and retold in different ways
– and so we have seen a rotating series of local booms and bubbles as investors
price a globally unified world through the prism of different markets.

Nevertheless, this Great Boom is also very different from all previous bubbles.
This time around, globalization either will succeed and humanity will achieve a
degree of freedom and prosperity that can scarcely be imagined, or
globalization will fail and capitalism or even humanity itself may come to an
end. The real alternative to good globalization is world war. And because of
the nature of today
‘s technology, such a war would be apocalyptic in the twenty-first century. Because there is not much time left, the Great Boom, taken as a whole, either is
not a bubble at all, or it is the final and greatest bubble in history

This also means that catastrophic risk has never been higher and the peso problem — changing small probabilities of total collapse — is screwing around with asset prices to an unprecedented degree.  Here is the full essay, which also has much of value on China, among other topics.  If nothing else, remember this:

there is no good scenario for the world in which China fails.

And this:

…a long
“China” position is not a forecast that financial globalization will succeed, but
rather a bet that its internal contradictions will persist.

The hat tip is from wunderkind Ben Casnocha.

Markets in everything: reverse prostitution edition

Thousands of people in Africa will be paid to avoid unsafe sex, under a groundbreaking World Bank-backed experiment aimed at halting the spread of Aids.

The $1.8m trial – to be launched this year – will counsel 3,000 men and women aged 15-30 in southern rural Tanzania over three years, paying them on condition that periodic laboratory test results prove they have not contracted sexually transmitted infections.

The proposed payments of $45 equate to a quarter of annual income for some participants.

Here is the full story.  It is a joint private sector, public sector initiative, in case you were wondering.  I thank Johannes for the pointer.

How good would the abolition of zoning in New York City be?

Yes, I am opposed to many forms of zoning.  Without zoning our cities would be denser, more eco-friendly, cheaper to live in, more able to produce economies of agglomeration, and more immigrants would benefit from American prosperity.  Matt Yglesias periodically has good posts on this topic. 

More specifically, Manhattan would look more like Sao Paulo, with a true forest of skyscrapers instead of the current puny and indeed embarrassing line-up.  Many of these towers would be residential, as they are in Sao Paulo.  Many problems of cities, including congestion, would of course become worse.  Overall I see the gain as real but a small one, at least relative to gdp.

A key question is what zoning means.  Let’s say you wanted to set up a shack on the sidewalk and live in it; should that be allowed?  How about a modest apartment building but without a water connection?  Should Manhattan really become like Sao Paulo?  Only in extreme cases would I wish to waive such infrastructure requirements for the housing stock.  And if you agree with me on that one, then you don’t want to get rid of most zoning either.

Fried Rice

The main point of my piece is that inter- and intra-national
restrictions on trade in rice are bad, not that free trade reduces
the price of rice for everyone.  Consider a simple analogy: if the quality of
Interstate 95 declined, the price of barbecue in North Carolina might
fall, namely because people like me wouldn’t drive to go eat there.  Yet few
people would argue that a nation can do better feeding itself by
lowering the quality of its roads or for that matter littering its
harbor with dangerous rocks or for that matter imposing export restrictions.  It doesn’t knock down the trade argument, as an empirical claim, to cite the existence of pecuniary externalities.

Maybe Rodrik has in mind the commonly-heard argument that eliminating the agricultural subsidies of rich countries would produce vast benefits for poor countries.  I’ve criticized that claim myself; my column is careful to argue that the poor countries are the worst protectionists, often internally as well as externally.

Here is a related part of Rodrik’s critique:

Freer trade would reduce prices of food (relative to other prices) only
in countries that are food importers.  Food exporters would experience
a rise in the relative price of food, and there is simply no way of
escaping that reality.

The great strength of Rodrik’s work is how much he stresses the
context-dependent nature of economic arguments and how "one size fits
all" is often an oversimplification.  So beware when anyone writes "there is simply no way of
escaping that reality."  Increasing returns are one way of escaping that reality.  Would the price of cars be lower in Japan today, if the Japanese had placed heavy export restrictions on Toyota autos?  Probably not.  (Constant returns, by the way, are another means of escaping from that reality.)  Now rice production may or may not be subject to increasing returns, but surely rice trade is a positive-sum game and also has broadly pro-egalitarian effects.

Trade really is an issue where a) economists have something to say and b) human lives are on the line.  If Rodrik wishes to argue, "Indonesia should ban the export of rice," then by all means he should just come right out and say so.  Let’s have that debate.  But if not, I wonder if he could see his way toward using his considerable influence and writing eight simple words:

"The world should have free trade in rice."