Month: December 2012

Some links for you

Good reads that haven’t been covered here on MR:

1. Institute for Justice on too much eminent domain discretion imparting bad incentives on redevelopment agencies.

2. The beginning of the end for corn ethanol?

3. My co-author Wayne Leighton on Bruce Yandle’s Bootleggers and Baptists: “it’s much more than a clever label for an interesting phenomenon; it’s serious political theory”.

4. Robert Sirico and Jeff Sandefur’s new book on how to be a hero.

5. Michael Makowsky and Stephen Miller on the effect of intelligence and education on the intensity of environmentalist beliefs.

Maxim Pinkovsky on managed care

This result is not a shocker, but I have never seen the actual work done on this point:

The Impact of Managed Care Backlash on Health Care Costs
During the late 1990s, there was a substantial cultural, media and legal backlash against the cost-containment practices of managed care organizations (particularly, HMOs). Most states passed a variety of laws in this period that restricted the cost-cutting measures that managed care firms could use. I exploit panel variation in the passage of these regulations across states and over time to investigate the effects of the managed care backlash, as proxied by this legislation, on health care cost growth. I find that the backlash had a strong effect on health care costs, and can statistically explain much of the rise in health spending as a share of U.S. GDP between 1993 and 2005 (amounting to 1% – 1.5% of GDP). I also investigate the effects of the managed care backlash on intensity of care, hospital salaries and technology adoption. I conclude that managed care was largely successful in keeping health care costs on a sustainable path relative to the size of the economy.

The paper is here, and it is Maxim’s job market paper from MIT.  A number of his other papers, at the link, look interesting as well.

Constraining Predation: Formal and Informal Institutions

If a monopoly on legitimate force (government) is set up to prevent private predation, then what constrains government predation? This new paper presents intriguing results (a snippet of the abstract):

Previous findings suggest that informal, cultural rules underlie constraints on government predation. Following this logic, this study asks how contract enforcement is achieved – through formal or informal mechanisms? After controlling for reverse causality, the empirical results suggest that informal cultural mechanisms protect against private predation and support contracting institutions while the formal institutions are insignificant.

The author is Claudia Williamson and it follows on her article in Public Choice and her Journal of Law & Economics piece with Carrie Kerekes. While limited by the quality of available measures of informal rules, this work is building a case that cultural norms do much heavy lifting when it comes to constraining both private and government predation.

Whither Fashion Copyright?

The Innovative Design Protection Act (S.3523) would extend copyright protection for three years to fashion designs, including “undergarments, outerwear, gloves, footwear, and headgear; handbags, purses, wallets, tote bags, and belts; and eyeglass frames.” (Bill text.) Despite being introduced in every Congress since 2006, the bill has barely eked out of committee and no version has been brought to a floor vote.

On the surface, it seems that Congress should have done more with this proposal. It would make U.S. law commensurate with designer protections in France, Canada, and other countries. Supporters argue this would save U.S. jobs and constrain foreign pirates from stealing American ingenuity. Congress has previously carved out copyright protections for other useful articles. And there is a popular industry lobby behind the proposal. What’s more, the courts have recently protected fashion designs. So why haven’t the authors of the bill celebrated yet?

Bad politics?

1. Because fashion design in the U.S. is centered in a relatively few locales, it doesn’t yield political gains to a sufficient number of congressional districts or states. But this explanation is a false start because legislation like this gets logrolled all the time.

2. It is simply a bad idea and doesn’t pass even Washington’s sniff test. This ascribes much credit to Congress in sifting good ideas from bad.

3. The lobby, while part of it is popular and noticeable, is not unified behind the idea. High-end designers have been backing the idea from the start, but clothing and shoe makers dug in their heels early and later came on board nominally (they prefer reducing import tariffs).

Bad timing?

4. A version of the fashion copyright bill was first introduced in the House in 2006, just as the housing bubble was going pop. With Washington focused on the financial crisis, terrorism, and unemployment, and with a growing public furor over economic inequality, the deck has been stacked against distributing rents to high-end designers.

5. Increased party polarization over the past decade has made it difficult to establish winning coalitions for bills like these. A few days ago I asked Chris Sprigman (co-author of “The Piracy Paradox”) about this. He said, “That’s generally true, but hasn’t been true of copyright. Copyright has mostly been bipartisan.” While he and Kal Raustiala predicted after the recent election that the GOP could potentially take a more reluctant stance on copyright: “then as if on cue, the whole Republican Study Committee fracas over the “anti-copyright” report erupted.” Chris elaborates here.

In sum: It’s conceivable the bill could just hang around long enough and a political opportunity will emerge. Yet having barely made it out of committee, and with no floor vote in either chamber, the proposal hasn’t been put to a serious political test. So it could just be too politically risky. Everyone buys clothes and shoes, and they presumably like that they’re spending less and less on apparel. Plus, through their regular shopping experiences, they can also see vividly that knockoffs are the reason they have inexpensive options. Do elected officials really want to test those waters? It’s difficult to see a winning coalition forming against the potential backlash that fashion copyright would generate.

More on these issues from MR:

Alex covered the rapid cameo of the Republican Study Committee’s “radical but sensible position paper on copyright.

Tyler covered “The Piracy Paradox” in his February 2006 entry, “How does the fashion industry work without copyright?” See also his: “Can we do without digital rights management?” and why the economics of food recipes resists copyright (“Food relies so much on execution…”); and why the French prioritize copyright.

Is there a great stagnation in action movies?

Chris MacDonald asks me:

Should we expect stagnation, or continued improvement, in the action film genre? The new Bond flick, Skyfall, is getting rave reviews, with some calling it the best Bond film ever. Hyperbole aside, it is indeed very good. Should we expect the next Bond film to be less good (regression to the mean) or is this one of the fields — like baseball management — where mechanisms exist to facilitate further improvement on a fairly reliable basis?

I was less crazy about Skyfall (“M, pull out your cell phone and call for aid!”) but that’s neither here nor there.

As for the stagnation issue, there are two main developments.  The first is a resurrection of sorts, namely 3-D, which is a very real gain, but in my view it is a significant plus for fewer than ten movies, most notably Avatar.

CGI is a gain for some movies (e.g, Troy, Life of Pi, Lord of the Rings), though it often makes action scenes less visceral and more distant.

The main drawback for Hollywood action movies has been globalization, which leads to too many explosions and not enough subtle dialogue and characterization.  The other main drawback has been high marketing costs, which encourages tent pole franchises with prior name recognition with a core audience.  That often means too much clunky plot exposition, too many comic book characters, too great a need to heed the wishes of the hard core audience base, and too few surprises about the characters.  There is one very good Spiderman movie but overall I call this trend a negative.

Still, there has been major progress in action movies, at least if we are willing to accept a particular semantic switch.  I much prefer Goldfinger to the newer Bond movies, but I also don’t think of it as an action movie.  It doesn’t have much action, although I don’t think people at the time felt that way.  By my possibly distorted standards, the Bond movies start being action movies only with Diamonds are Forever.

King Solomon’s Mines is a very good movie, under-watched these days, as is Thief of Baghdad.  Nonetheless prior to the 1970s I think of the action genre as virtually non-existent.  I was stunned when I first (1981) saw the opening scene of Raiders of the Lost Ark, though these days it isn’t especially impressive, just well-executed.

One possibility is that each generation thinks it is the first to have had action movies.

To sum up, for all of the contemporary excess, we have been living in a Golden Age of Action Movies. Even a scorned movie such as Lara Croft is pretty awesome on the big screen.  And Asian action movies have reached their peaks only in the last twenty years, including early John Woo.  Call that the plus side of the globalization equation.

That said, a few impressive 3-D movies aside, the last five years have brought more negatives than positives, a’la “Transformers” and various overinflated, noisy, character-stuffed, and self-important Hollywood monstrosities.  We’ll get over it, but in reality stagnation is something we might have wished for instead.

Here is one list of the greatest action movies of all time.  Not many pre-70s movies can stand up to these for action.

The next trend will be RCT-like audience studies to find out exactly which action tricks, with which timings, thrill us and which do not.  Great directors have an intuitive sense for this but it could be made much more scientific.

Markets in everything

Very, very sad:

Our ballistic backpack provides built-in ballistic protection in a backpack that weighs just ounces more than a non-armored backpack. RynoHide carbon nanotube armor is lined in the back panel of the backpack. Sewn into the rear of the pack, you can always be confident that the armor hasn’t been accidentally left at home and that you or your child are protected in case of the unthinkable. The backpack can be quickly brought to the front as a shield or can serve as center of mass protection while fleeing the scene of the shooting.

Maybe it is some kind of sorry joke but still a sign of an especially bad year for mass shootings.  For the pointer I thank FM.

Addendum: These seem to be real, and also fairly popular.

How minimal is our intelligence?

From a longer post by Douglas Reay, this is all worth a good ponder:

Q is polygenetic, meaning that many different genes are relevant to a person’s potential maximum IQ.  (Note: there are many non-genetic factors that may prevent an individual reaching their potential).   Algernon’s Law suggests that genes affecting IQ that have multiple alleles still common in the human population are likely to have a cost associated with the alleles tending to increase IQ, otherwise they’d have displaced the competing alleles.   In the same way that an animal species that develops the capability to grow a fur coat in response to cold weather is more advanced than one whose genes strictly determine that it will have a thick fur coat at all times, whether the weather is cold or hot; the polygenetic nature of human IQ gives human populations the ability to adapt and react on the time scale of just a few generations, increasing or decreasing the average IQ of the population as the environment changes to reduce or increase the penalties of particular trade-offs for particular alleles contributing to IQ.   In particular, if the trade-off for some of those alleles is increased energy consumption and we look at a population of humans moving from an environment where calories are the bottleneck on how many offspring can be produced and survive, to an environment where calories are more easily available, then we might expect to see something similar to the Flynn effect.

For the pointer I thank Michelle Dawson.  Here are some not totally unrelated remarks from James Flynn.

“Soviet Power Plus Electrification: what is the long-run legacy of communism?”

That is a newly published paper by Wendy Carlin, Mark Schaffer, and Paul Seabright, and here is the abstract:

Two decades after the end of central planning, we investigate the extent to which the advantages bequeathed by planning in terms of high investment in physical infrastructure and human capital compensated for the costs in allocative inefficiency and weak incentives for innovation.  We assemble and analyse three separate types of evidence.  First, we find that countries that were initially relatively poor prior to planning benefited more, as measured by long-run GDP per capita levels, from infrastructure and human capital than they suffered from weak market incentives. For initially relatively rich countries the opposite is true. Second, using various measures of physical stocks of infrastructure and human capital we show that at the end of planning, formerly planned countries had substantially different endowments from their contemporaneous market economy counterparts. However, these differences were much more important for poor than for rich countries. Finally, we use firm-level data to measure the cost of a wide range of constraints on firm performance, and we show that after more than a decade of transition in 2002-05, poor ex-planned economies differ much more from their market counterparts, in respect to both good and bad aspects of the planning legacy, than do relatively rich ones.  However, the persistent beneficial legacy effects disappeared under the pressure of strong growth in the formerly planned economies in the run-up to the global financial crisis.

This paper is a very good place to start for trying to seriously figure out what communism did and did not do.  It accounts for the relatively disastrous performance of East relative to West Germany, while helping to explain why Russia is in some regards a better place to live than Mexico.  It is also a very strong testament to the extreme importance of human capital and good formal education.

They also cite a recent Broadberry and Klein piece, “When and Why did Eastern European Economies Begin to Fail?, Lessons from a Czechoslovak/UK Productivity Comparison, 1921-1991,” available in an earlier form here (pdf); in this case I worry more about the quality of the statistics, plus legacy effects can sustain a formerly successful economy for some while.

Inexpensive Fashion: ¡Viva!

The Economist recently reported that

A GIANT photo of a model in tiny underwear is in danger of causing car-crashes on a busy intersection in Mexico City. The billboard announces the arrival of H&M, a Swedish fashion retailer, which opened its first Latin American store in Mexico City on November 1st. A fortnight earlier Forever 21, an American chain, celebrated its debut in the country. That followed the first opening of a Mexican store by Gap, another American clothing giant, in September. The new entrants promise high fashion at low prices: even more distracting than those skimpy H&M briefs is their miniature pricetag of 69 pesos ($5.30).

A catalyst to this beneficent development was Mexico’s recent reduction of apparel tariffs, but the driving force has been the steady march of fast fashion giants like H&M, Zara, and Forever 21, whose designs imitate the ever-changing trends established within fashion’s higher segments. Vilified by some of fashion’s upper crust, these copycats do more than merely copy. They adapt designs in ways that serve economic functions. As I’ve written elsewhere:

Copyists enable the industry to meet the range of consumer preferences by segmenting the market… When design copyists compete to imitate and adapt design originators, they also discover manufacturing and distribution shortcuts that help reduce unit costs. By removing a seam here or there, using less costly fabric, inventing an electronic inventory system, and so forth, fashion copyists reduce their own costs and can offer designs to consumers in even lower-priced market segments. It is only in recent decades that people of even modest purchasing power began to have access to fashionable, tasteful looks. “Queen Elizabeth owned silk stockings,” Joseph Schumpeter famously observed. “The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.” Similarly, Frédéric Bastiat expressed wonder at the market’s ability to feed Paris without a central plan. The same holds for the spontaneous order of the fashion world. Paris gets clothed as well, good sir.

¡Vivan las imitaciones! [corrected EJL]

The Returns to Being Nice

Santa Claus may know if you’ve been naughty or nice — but does the market? This from the June issue of Scientific American (gated):

“When Nice Guys Finish First” by Daisy Grewal

  1. People who are nice are those who score high on the agreeableness personality trait. They are generous, considerate of others and pleasant. Such people benefit from good personal and work relationships. They are more likely to get a job—and to keep it.
  2. Being exceedingly agreeable does have drawbacks, however. Nice people tend to earn less than their more demanding colleagues and to get passed over for promotions
  3. Nice people should pay attention to their posture when they find themselves in leadership positions or in situations in which they need to exert authority over other people.

Sounds nice, but there’s no way it’s domain general. I expect returns to niceness are high for service professionals like real estate agents (see all those smiling faces on billboard ads?) and primary care physicians, but rapidly diminishing for win-or-lose professions like litigating and coaching sports. I also wonder about politicians. For academics, niceness probably pays in teaching more than research (or blogging?). Certain icons of creativity were also known to treat the people close to them boorishly, like Steve Jobs or Jackson Pollock.

In this working paper on siblings and twins, scoring high on agreeableness doesn’t seem to affect labor market success; instead, the market rewards extraversion and punishes neuroticism. Twins and siblings get put through the empirical ringer in this paper—unlike Santa, the market rewards nice boys and nice girls differently. Oh, how naughty.