Month: July 2008

Markets which only look like an infinite regress

by  Tyler Cowen in

The risk that a claim won’t
be paid–a potential downside that every buyer of insurance faces–was an
uninsured exposure until recently, according to the developers of a new
policy to provide coverage so that risk managers can contest such
rejections…

The
new coverage, available to businesses of all sizes, will pay up to
$250,000 in legal expenses associated with contesting the denial of an
insurance claim under a commercial policy.

Here is the economic rationale:      

Mr.
Surdyk said that during the course of his work with insureds, he found
that while many clients had legitimate disputes with their insurers,
the underlying claims being denied were small-dollar amounts relative
to the legal costs of coverage disputes.  “It wasn‘t
worth it for a client to hire us to file a lawsuit against an insurance
company over $50,000–and insurance companies know that,“ he said.

Here is the full story, and thanks to Travis for the pointer.

Seth Roberts writes to me

by  Tyler Cowen in

That’s a good way to put it: quality of walking opportunities.  Reduced or enhanced because I don’t read the language?  I’m not sure.

I say enhanced.  More generally, I see Paris and Buenos Aires as the two cities with the highest quality of walking opportunities.  Not many cities in Asia do well on this score, mostly because of congestion and pollution.  Los Angeles is an underrated walking city and Sao Paulo used to be; maybe it is too dangerous now.

All Tyler, All the Time

by  Alex Tabarrok in

The tyler-city blog is a computer generated blog of gibberish meant solely to generate links (can readers explain the economics?).  It is drawn from all over, including quite a bit from Marginal Revolution.  It’s gibberish but as Tyler might say even a million monkeys occasionally generate some very good sentences.  Here are a few, I’ve provide links but please don’t encourage them too much.


I thought both were tyler cogent, for quite complex topics.

The Ton Ball That Keeps The Taipei tyler Tolerant Is Pretty

and it is good to know that "besides his many talents, Tyler was also a really nice kid."  But my favorite posting is this one:

Small steps toward a much better tyler.

The Liberal Hour

by  Tyler Cowen in

The authors are G. Calvin Mackenzie and Robert Weisbrot and the subtitle is Washington and the Politics of Change in the 1960s.  Everyone interested in social change, or for that matter American political history, should read this book.  It doesn’t unearth new material but it is a good summary of what is known.  The jacket flap sums it up:

For a brief period in the 1960s, more progressive legislation was passed in Congress than in almost any other era in American history.  Demands that had lingered for decades on the political agenda finally entered the realm of possibility.  Reform has seldom come with such speed, such sweep, and such consequence.  What drove this political sea change?…[the authors] argue that the primary force behind it was not the counterculture, but those in the traditional seats of power.

If you study the history portrayed in this book, you are more likely to believe that an Obama victory would not bring radical change to American economic policy.  It’s hard to find the comparable "shock troops" in Washington right now.

“Customer only” bathrooms

by  Tyler Cowen in

Ilan, a loyal MR reader, asks when a restaurant decides to make its bathrooms "customer only."  I see a few factors:

1. Fear of drug use or illegal drug dealings in the bathroom; the importance of this factor seems to have declined over time.

2. The belief that some people will buy a drink just for bathroom rights.  We did this in Brooklyn on Saturday and it was worth it.

3. The desire that only paying customers shape the ambience of a restaurant; this is important in areas with gangs.

On the other side of the equation is fear of Jack Henry Abbott, the realization that any restriction is not fully enforceable, the desire to cultivate good will among potential customers, and giving the visitors a chance to look at the food and atmosphere. 

Overall I’ve found that restaurant restrooms are more available to non-customers than ever before and I attribute this to the aging of America and the greater likelihood of a sharply declining marginal cost curve.  In other words, at least until this year raw materials expenses weren’t so important so the profit value of an extra customer was pretty high and restaurants would do a lot to cultivate good will.  In general rising commodity prices mean decreasing margins (retail prices don’t rise by full offset) and thus adjustment on other margins, such as portion size and service quality.  The bathroom isn’t as clean as it used to be either.

How can a stuffed shark be worth $12 million?

by  Tyler Cowen in

It was a bargain, I say.  Here is my review of Don Thompson’s excellent The $12 Million Stuffed Shark: The Curious Economics of Contemporary Art.  Here is one excerpt from my review:

Should we think such purchases are silly or noble? Many people recoil
from the contemporary art market as the home of pretension and human
foible, but as expensive pursuits go, the art market is a relatively
beneficial one. The dead shark cost $12 million to buy but, of course,
it didn’t cost nearly that much to make. So the production process
isn’t eating up too many societal resources or causing too much damage
to the environment. For the most part, it’s money passing back and
forth from one set of hands to another, like a game – and, yes, the
game is fun for those who have the money to play it. Don’t laugh, but
we do in fact need some means of determining which of the rich people
are the cool ones, and the art market surely serves that end.

Geo-engineering to cure global warming?

by  Tyler Cowen in

Robin Hanson summarizes one case for it.  I don’t know much about the technologies but my worries are mainly political.  Won’t the Russians benefit greatly from a warming world, both because they are a bit cold and because they will access a warmer Arctic?  Would the UN Security Council approve climate engineering?  Probably not.  If the United States did it on its own, could that be perceived as an act of war?  If geo-engineering is cheap (which is part of its very promise), and unilateral action is acceptable, don’t other countries also get to take their shot at influencing the environment and moving us toward an optimal climate?  What does the resulting equilibrium look like?  Who moves last?  How would we feel if someone changed the U.S. climate to make many parts of the country colder?

Should the driving rules favor cars or bikers?

by  Tyler Cowen in

Not everyone likes DC drivers and more here, both from Megan.  I am more sympathetic to the position of cars and their drivers (NB: I don’t ride a bike.)  I see two major arguments:

1. Riding a bike is dangerous no matter how considerate the drivers, at least in the car-intensive cities of the United States (maybe not in Amsterdam).  Furthermore accidents and potential accidents impose costs on both parties and more generally Coasian externalities are symmetric.  The first best equilibrium involves less mutual contact and the cheapest way to bring that about is probably to discourage biking.  (After all, they’re the ones who can be scared off with risk of death and dismemberment.)  That means road rules which discriminate against the interests of bikers.

2. If a bike has to stop and wait ten seconds for a car, that biker loses ten seconds of travel time.  If a car has to stop and wait ten seconds for a bike, the driver loses ten seconds of travel time.  The expected loss in distance traveled is much greater for the car, especially in areas where cars are going fast (i.e., the disputed areas when safety is a concern).  Furthermore the cars are more likely inhabited by people with a higher value for their time, at least on average if not for every biking blogger. 

The case for favoring the bikes is that taxing the privileges of cars will lead to truly safer behavior through greater driver caution.  Maybe.

Will chimes in, Arnold too.  Arnold is unhappy.

Vroom!!!