Month: July 2009

Kidney Donor Chains

Virginia Postrel has an excellent piece in the online Atlantic on the shortage of transplant organs, it includes a very good discussion of both the promise and limitations of kidney swaps and donor chains.  Imagine that Mrs. Smith and Mr. Jones each need a kidney transplant.  Mr. Smith is willing but due to an incompatible blood type unable to donate a kidney to his wife.  Similarly, Mrs Jones is willing but unable to donate a kidney to her husband.  In a kidney swap, Mr. Smith donates to Mr. Jones and Mrs. Jones donates to Mrs. Smith.  Everyone is happy.

Donor chains extend this idea.  We start with an altruistic donor willing to give to anyone – by careful arrangement it's then possible to produce many transplants.  Recently, a single donor led to a chain of ten transplants!

Despite the promise of these techniques they are being underutilized.  Amazingly, the National Kidney Registry, which coordinates swaps and chains, has donors who are waiting to give.  A clear reminder that $500 bills aren't always picked up as quickly as we would like. 

Even the maximal use of swaps and chains won't solve the crisis, however. For that we are going to need better incentives to encourage more donors.

“Markets” in everything

The deal with doctors could come at a steep price: a $250 billion
fix to a 12-year-old provision in federal law intended to limit the
growth of Medicare reimbursements. The American Medical Association
and other doctors’ groups have sought to change or repeal the
provision, and they are likely to try to extract that as their price
for boarding the Obama train, people tracking the negotiations said.

Wal-Mart, the nation’s largest private-sector employer, agreed recently
to support requiring all big companies to insure their workers. In
exchange, Wal-Mart said it wanted a guarantee that the bill would not
“create barriers to hiring entry-level employees” – in effect, code
words to insist that lawmakers abandon the idea of requiring employers
to pay part of the cost for workers covered by Medicaid, the government
insurance plan for the poor.

“It’s kind of a give-and-take, quid pro quo kind of environment,” said Tom Daschle, President Obama‘s
first choice for health secretary, who remains in touch with the White
House on health care issues. “I think that the stakeholders wouldn’t do
this if they didn’t think there was something in it for them.”

…Over the past year, Mr. Baucus, Democrat of Montana, has
strong-armed industry groups, warning them not to publicly criticize
the process if they want to stay in negotiations.

Mr. Baucus, in
turn, has said little about his talks with industry players. On
Tuesday, he said only that he was “heartened” by how many groups were
supporting the health care overhaul.

That's the NYT reporting, not The Weekly Standard.  Here is much more

How should I feel if Obama, or maybe Congress, threatened to re-zone my neighborhood — unfavorably — unless I support an active Afghanistan plan on my blog?  (Should it matter if I've incorporated the blog as a business?  As an association?  Even if there is no corporate right to freedom of speech, should there be "forced speech"?)  Should it help much if the intimidation against freedom of speech is for a benevolent end?  If Republican Presidents had done something similar?

Might it be correct to call this "evil"?  I have seen "evil" defined as "morally bad or wrong." 

Of course these deals are not unrelated to why health care reform — if we get it — won't in fact solve most of the major problems the sector faces.

Oil price speculation

There's lot of talk about curbing speculation in energy markets.  Simon Johnson has an excellent post on this topic:  He writes:

1) They are trying hard to talk up the market, with regard to global growth.  At the same time, the hard data continue to disappoint.  Naturally, this causes volatility in oil prices.

2) They claim to see no link between their failure to converge on
climate change/environmental policies and what happens to energy
prices.  The extent to which industrialized countries’ effectively
control carbon emissions will have a big impact on the longer-run
demand for oil.  Flip-flopping on this issue discourages investment in
the energy sector (regular and alternative), and thus directly and
indirectly contributes to oil price volatility.

3) The very cheap money policies of leading central banks, including
the Fed, the Bank of England and arguably also the European Central
Bank, lower the funding costs for big players who want to take large
positions in commodities markets.  Essentially, we are providing the
credit that makes big speculative positions possible.  Add to this mix
a “too big to fail” attitude and a “yes we can, recapitalize through
trading profits” deal with policymakers, and you see why major
financial firms are likely to place huge commodity bets in the months

…The true speculators here are your elected representatives.

Thanks for bearing with me

I have many, many hundreds of emails to go through.  I will get you the freedom chapter and my apologies for the delay, it will still take me some days.  I prefer to respond personally to each email rather than farming this out to an assistant.  Your patience is appreciated.  I am pleased that they will be doing a third printing of the book this Monday.


That's the clever title they gave my piece at the WSJ.  It is a look at the recent papal encyclical, which is full of claims about economics.  There is plenty there to object to, but I didn't think it nearly as "left-wing" as did many other market-oriented commentators.  In fact I was surprised how positive or at least neutral it was about markets, once you cut through some of the rhetoric.  It was pro-micro-credit, it repeatedly noted that globalization can have a positive side, and it stressed the idea that businesses are, in the right setting, capable of doing a lot of social good.

One excerpt:

We should probably not expect too much to come from the encyclical's call for more state power.

Most of the encyclical, appropriately, expresses a desire for
ethical conduct. The importance of ethics for civilization is obvious,
but of course good ethics, consistently applied, are hard to come by.
People are very good at ethical and psychological compartmentalization,
and so it is possible for them to offer the church nominal authority
over the ethical realm while continuing their dubious economic behavior.


Although it was just issued, the encyclical already feels dated.
Globalization is one of the main concerns in the document. Yet because
of the financial crisis, international trade has been falling apart.
The real worry is not how to manage the economic globalization we have
but how to stop the world's rapid deglobalization, which is at a pace
that matches the collapse of trade in the 1930s. For better or worse,
economic rather than ethical factors will determine the outcome here.

The end of my piece covers what the Encyclical should have discussed, namely the importance of the non-Christian nature of China and India and what that means for the future of the world.

The English-language text of the encyclical is here.

My favorite things Nevada

I am flying there tonight, to speak at  But yikes people, this is a tough one.  I never finished Walter van Tillburg Clark's The Ox-Bow Incident and what else can I think of?  Wikipedia tells me that Curtis Hanson, who directed L.A. Confidential, is from Reno.  Does Wayne Newton somehow enter this equation?  The Killers are OK.

How about this?

1. Movie, set in: Viva Las Vegas, with a number of strong runner-ups, including Ocean's Eleven, Leaving Las Vegas, the still under-rated Casino, Diamonds are Forever, Showgirls, Austin Powers (partly, I recall), and you might even squeeze Godfather II into the category.  Catch this erotically supercharged clip of Elvis singing to Ann Margaret.  Wasn't Them set in Nevada?

2. Song, set in: Viva Las Vegas, with Las Vegas, by Gram Parsons and Emmylou Harris, as runner-up.

3. Architecture book, set in: Robert Venturi, Learning from Las Vegas.

The state has excellent food, but overall I come no further.

The bottom line: You tell me.  If you're wondering, I've never gambled, although I have visited the city four times.  I genuinely cannot understand why so many other people find gambling to be an appealing pastime.  It's negative expected value!  There are so many positive expected value things to do.

The Political Psychology of Stimulus

David Hirschleifer writes:

Regardless of who's right on the economics, clearly the ‘stimulus'
language captures the pro side perfectly, and the con side not at all.
Indeed, the term immunizes the mind to opposing evidence. After a cup
of stimulus from Starbucks, if I'm still drowsy, by definition I need
another jolt.

….Opponents have lots of metaphors they could choose from. Instead of
the image of rousing activity, there could be the economic ‘suppression
plan,' ‘deadweight package,' or ‘growth-retardant system.' For
alliteration, there's ‘prosperity Propofol.' To honor the frugality of
government, how about ‘resource-flush scheme,' ‘wealth dump,' or
‘porkapalooza'? As for mechanical metaphors, there's ‘recovery off
switch,' ‘opportunity crusher,' and ‘investment choke button.' For the
computer savvy, how about ‘stagnation drag and-drop-down device,' or
‘system freezer'.

In recognition of our gleaming new
infrastructure, there's the ‘road-to-Hell-paving project'. And to
celebrate the new Star Trek film, how about economic ‘stasis-field
mechanism', ‘enterprise eliminator,' 'job vaporizer,' or just plain
‘black hole'?

So, here's a political psychology question. Why did opponents gullibly
swallow the stimulus terminology, and thereby defeat? Any ideas?

Thanks for your interest

It's been great (#1 Business book on Amazon yesterday) and I'm working to "fill the orders" as fast as I can.  If I'm not sending you your chapter *now*, it is because a) I am blogging, b) I am sending someone else the chapter, or c) I am getting on a flight.  I will get to it, it's also very good to hear from you all, and keep the orders coming.

If you're having trouble clicking through to other book outlets, the link for Barnes& is here, the link for is here.

John Calvin as behavioral economist

Tomorrow marks the 500th birthday of John Calvin.  If you read John Calvin you will find a great deal of what we now call behavioral economics.

He wrote about non-convexity:

For there is no medium between the two things: the earth must either be worthless in our estimation, or keep us enslaved by an intemperate love of it.

Here is one reason why there is "evil" in the world:

Whatever be the kind of tribulation with which we are afflicted, we should always consider the end of it to be, that we may be trained to despise the present, and thereby stimulated to aspire to the future life. For since God well knows how strongly we are inclined by nature to a slavish love of this world, in order to prevent us from clinging too strongly to it, he employs the fittest reason for calling us back, and shaking off our lethargy.

Adam Smith and David Hume were influenced by Calvin:

If we see a funeral, or walk among graves, as the image of death is then present to the eye, I admit we philosophise admirably on the vanity of life. We do not indeed always do so, for those things often have no effect upon us at all. But, at the best, our philosophy is momentary. It vanishes as soon as we turn our back, and leaves not the vestige of remembrance behind; in short, it passes away, just like the applause of a theatre at some pleasant spectacle. Forgetful not only of death, but also of mortality itself, as if no rumour of it had ever reached us, we indulge in supine security as expecting a terrestrial immortality.

It is odd to call someone so famous an "underrated thinker" but indeed Calvin is.  You'll find the whole text of the Institutes of Christian Religion here; it makes for good browsing.

This chapter is John Calvin imitating Robin Hanson.

Buy the book here on Kindle for 99 cents.

Markets in Everything: Dead and Live Souls

Wikipedia describes the history behind the plot of Gogol's Dead Souls:

The [Russian] government would tax the landowners on a regular basis, with the assessment based on how many serfs (or "souls") the landowner had on their records at the time of the collection. These records were determined by census, but censuses in this period were infrequent, far less so than the tax collection, so landowners would often find themselves in the position of paying taxes on serfs that were no longer living, yet were registered on the census to them, thus they were paying on "dead souls."

It is these dead souls, manifested as property, that Chichikov seeks to purchase from people in the villages he visits; he merely tells the prospective sellers that he has a use for them, and that the sellers would be better off anyway, since selling them would relieve the present owners of a needless tax burden…

Chichikov's macabre mission to acquire "dead souls" is actually just another complicated scheme to inflate his social standing (essentially a 19th century Russian version of the ever popular "get rich quick" scheme). He hopes to collect the legal ownership rights to dead serfs as a way of inflating his apparent wealth and power. Once he acquires enough dead souls, he will retire to a large farm and take out an enormous loan against them, finally acquiring the great wealth he desires.

All this leads Marina Gorbis guestblogging at Boing Boing to note

So every time I see another article or an ad about how to acquire more followers on twitter, friends on Facebook, or otherwise collect more "souls" for money, fame, or reputation, I start thinking about Chichikov. He did come to an ignominous end, finally fleeing town. Makes me wonder.

*Create Your Own Economy*, special offer

As an economist I believe in the power of incentives.

If you order or buy my book before midnight tomorrow (it comes out tomorrow in stores), I will send you a free, special bonus chapter.  If you've already bought or ordered the book, don't worry, you still qualify.

Just email me and tell me you bought the book, I will take your word for it.  You can send me a copy of your on-line order if you wish.

No, it's not a bonus chapter from Create Your Own Economy.

Did you know that for years I have been, on and off, drafting a book on the philosophic foundations of a free society?  The book is still years from completion.  It won't even be my next book to come.  But I do finally have an introductory chapter for that book which I will send you.  This book is my no-holds-barred attempt to answer all of the tough questions about the philosophic foundations of our belief in freedom.  It also gives a shorthand version of why I have significant reservations about the standard neoclassical approach to economic policy.  No, it is not the book's full treatment of these issues but the chapter outlines the scope of the argument and the six major problems that any philosophy of freedom must solve. 

In return I ask only that you give me your word you will not post the chapter on-line. (Comments, however, are welcome.)

This offer will not be repeated and I do not expect other people to see this chapter (much less the manuscript-in-progress) for some time to come.  So now is the best, highest return time to order or buy Create Your Own Economy.

If you're having trouble clicking through to other book outlets, the link for Barnes& is here, the link for is here.

What defines the Swedish soul?

This article, from Prospect, is interesting throughout.  Excerpt:

Inevitably, the subject turns to sex and marriage. I'll never forget
asking one group what they thought of marriage in a country where most
educated young people (and half go to university) don't get married or
bear children until they are well over 30. A young woman gave me a
thoughtful answer and so I asked her, "What are you looking for in a
husband?" Without batting an eye or pausing for thought, she answered:
"Three things. One, he must be good in bed. Two, he must be a good
father. Three, when we divorce, he mustn't be bitter."

Robin Hanson comments on the USA.  Here is my earlier post on what I think of Sweden, one of my favorite MR posts.