Month: June 2013

Report from Bangalore, 2013

by  Tyler Cowen in

Okalipuram corporator Queen Elizabeth was granted anticipatory bail in a forgery case.

Allowing her bail plea, high court vacation judge AN Venugopala Gowda told her to surrender her passport before the trial court and execute a personal bond for Rs 50,000.

The corporator has to be available for interrogation as and when required on any day between 8am and 6pm and shouldn’t make attempts to induce or issue threat/promise to persons acquainted with the facts of the case, the judge said.

An FIR was registered against Queen Elizabeth under sections 198 and 420 of the IPC and section 3(1)(ix) of SC/ST(Prevention of Atrocities) Act, 1989, for allegedly forging documents and obtaining a false caste certificate.

The story is here, via James Crabtree, and yes the person’s name is Queen Elizabeth and she is on the city council.

Industry of Mediocrity

by  Alex Tabarrok in

AP: Washington: The nation’s teacher-training programs do not adequately prepare would-be educators for the classroom, even as they produce almost triple the number of graduates needed, according to a survey of more than 1,000 programs released Tuesday.

The National Council on Teacher Quality review is a scathing assessment of colleges’ education programs and their admission standards, training and value.

Not surprisingly the report is being criticized by the teacher’s unions who complain that evaluators “did not visit programs or interview students or schools that hired graduates.” Most of the teacher’s colleges, however, refused to cooperate with the evaluators with some even instructing their students not to cooperate. Do you think the non-cooperators were of better quality than the programs that did cooperate?

According to the report, “some 239,000 teachers are trained each year and 98,000 are hired” suggesting a poor return for the potential teachers. One wonders about the quality of the teachers not hired.

In any case, the report is consistent with a wide body of research that shows teacher quality is not high and has declined over time, see Launching the Innovation Renaissance for details.

Meanwhile, on the every cloud has a silver lining front, Neerav Kingsland, Chief Strategy Officer for the important non-profit New Schools for New Orleans argues that the great stagnation will increase the supply of high-quality teachers:

Unfortunately, international trade and technology will continue to eliminate middle-class jobs. Personally, I’m worried that our political system will not adequately ease the pain of this transition. However, this economic upheaval will increase the quality of human capital available to schools. The education sector will likely capture some of this talent surplus, so long as schools are well managed. Moreover, if tech progress reduces the amount of educators we need, we may be in a situation where we have both (a) higher quality applicant pools and (b) less education jobs. I do not view the hollowing out of middle-class jobs as a positive economic development, but it will positively affect education labor…

Do Presidents become more interventionist once they take office?

by  Tyler Cowen in

Andrew Sullivan is upset with President Obama over Syria.  I’d like to consider the background question of whether individuals, upon assuming the presidency, subsequently come to look more kindly on foreign intervention (and perhaps also surveillance?) than before holding office.  I can think of a few reasons why this might occur:

1. Presidents become used to holding power, and this makes them more statist, including more interventionist.  It’s not that they wake up one morning as evil, but rather they must make many small compromises along the way, and since they are committed to holding good images of themselves, their moral views shift subtly over time to accommodate this positive self-image.  Many libertarians favor this kind of explanation.

2. Presidents learn the actual truth about the international situation, and becoming more interventionist is a rational implication of Bayesian updating.  Many Presidents favor this kind of of explanation.

3. Presidents must live with a great sense of responsibility for their decisions, and this makes them more utilitarian and less deontological.  Arguably the same is true of CEOs of major companies, and of the major characters in the new Superman movie.  Superman seems willing to toss around infrastructure to increase his chance of taking out some bad guys, and none of the viewers in the Angelika Mosaic multiplex seemed to find this implausible or undesirable.

4. Presidents come to rely on the national security and defense establishment as an important part of their coalition, and this establishment is, for reasons of its own, often favorably predisposed to intervention, at least if done according to their self-imposed standards.  There is a bit of trade going on here and also a bit of cognitive capture, but in any case presidents move closer to the views of their national security establishments over time.

5. Presidents, upon assuming office, become increasingly aware of what it takes to maintain America’s network of global alliances.  For instance behind any Syria decision are a variety of pressures from the Gulf States, from Israel, from the Europeans, from ongoing push-and-shove with Russia, and so on.  The President has a stronger sense of how inaction can lead to an unraveling of America’s credibility and previous agreements, both explicit and implicit.  We are never playing from t = 0.

6. Presidents come to favor actions which correspond to them receiving a stronger place in history.  In their second terms this is especially likely to involve foreign affairs.

Perhaps there is something to all of these hypotheses.  Is there a way to describe them all under a common heading of what loses salience to an individual, once he or she becomes President of the United States? It doesn’t seem quite right to postulate “they forget about the little people.”  So what is it then?

The follow-up question whether these are on the whole destructive biases, or are they useful counters to other, less cosmopolitan biases which otherwise favor too little intervention?

I sometimes wonder how much Presidents trust their own judgments.

India fact of the day

by  Tyler Cowen in

One statistic above all explains the excitement India kindles: just 18 people in every 1,000 own a car. In China the figure is 58, according to the World Bank, while in most European countries it is more than 500. “India’s level of car ownership per capita is even lower than in Sudan, or Afghanistan,” says Tomas Ernberg, head of Volvo in India. “So in the long term there is bound to be growth, enormous growth.”

The market is also strikingly new. Barely 20 years ago India’s “Licence Raj” restricted aspirant motorists to two basic choices: the grand Hindustan Ambassador, an imitation of the venerable British Morris Oxford; and the boxy Maruti-Suzuki 800 hatchback, the country’s first (and then only) people’s car.

From the FT, here is more.

A small step toward cosmopolitan efficiency and away from nationalism (Mexican law about beach homes)

by  Tyler Cowen in

Morgan Warstler points me to this article:

Mexican congressmen voted on Tuesday to change a law that makes it difficult for foreigners to own beach homes in Mexico.

The law prevents any foreigner from directly owning a home that is located within 50 kilometers of Mexico’s coasts. Foreigners in Mexico are also banned from owning homes that are located within 100 kilometers of the country’s international borders.

Congressmen from Mexico’s house of representatives argued that the law was “outdated,” that it hampers investment in the country, creates unnecessary bureaucracy and no longer matches reality.

They pointed out that thousands of Americans and Canadians already own beach homes in Mexico anyways, and many more are interested in buying.

But currently, foreigners who want to have coastal properties in Mexico need to acquire these assets through Mexican companies or real estate trusts in which a local bank buys a property and then “leases” it to its foreign occupant for an annual fee. A report that was compiled by the Mexican congressmen who support this legal shift said that, between 2000 and 2012, about 49,000 foreigners bought homes in “restricted areas,” by going through these legal loopholes.

But do note:

The Mexican Senate, and the President of Mexico must now vote on this proposal for it to pass. Because this proposal would strike down a law that is part of Mexico’s constitution, it must also be approved by a majority of Mexico’s state legislatures.

Malcolm Gladwell on the new Albert Hirschman biography

by  Tyler Cowen in

It is an excellent overall review, here is one good excerpt of many:

“We may be dealing here with a general principle of action,” Hirschman wrote:

“Creativity always comes as a surprise to us; therefore we can never count on it and we dare not believe in it until it has happened. In other words, we would not consciously engage upon tasks whose success clearly requires that creativity be forthcoming. Hence, the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be.”

And from there Hirschman’s analysis took flight. People don’t seek out challenges, he went on. They are “apt to take on and plunge into new tasks because of the erroneously presumed absence of a challenge—because the task looks easier and more manageable than it will turn out to be.” This was the Hiding Hand principle—a play on Adam Smith’s Invisible Hand. The entrepreneur takes risks but does not see himself as a risk-taker, because he operates under the useful delusion that what he’s attempting is not risky. Then, trapped in mid-mountain, people discover the truth—and, because it is too late to turn back, they’re forced to finish the job.

You can buy the book here.

The Great Canadian Sperm Shortage

by  Alex Tabarrok in

As I was researching yesterday’s post on The Oocyte Cartel I came across an old MR post from 2003 on plans in Canada to restrict the import of American sperm:

The US is a world leader in sperm exports primarily because sperm banks in the U.S. are run on a for-profit basis. As a result, US sperm is reckoned to be of high quality particularly because the US version comes with a background on the vitals of the donor. Denmark also exports a lot of sperm because of high standards and demand for that blond, blue-eyed look.

Exports to Canada have increased in recent years because of a scandal involving poorly screened Canadian sperm. Canadians also import a lot of US eggs. The Canadian government, however, is apparently miffed as a new law is being readied that would forbid donations involving a paid donor. The law would not only make paid donation illegal in Canada it would make it illegal to use any paid-for sperm. Canadian couples seeking fertility options will suffer and who will benefit? I cannot think that this law is anything but spiteful and ridiculous. Is paying for sperm an original sin?

So what happened? In 2004, Canada made it a criminal offense to compensate sperm and egg donors. Loyal readers will not be surprised by the results (as of 2011)

…currently, in the entire country, there are only 35 active sperm donors. Over the last decade, our government has made its donation system so thoroughly unappealing that this ubiquitous fluid is almost impossible to obtain through official channels. There is a single operating sperm bank in all of Canada.

…If 35 national donors is an ugly statistic for the most removed observer, it’s especially devastating for the women and couples who have come to rely on our lone sperm bank in order to have a child.

Ironically, it’s been easier to prevent payments to Canadian donors than it has been to police sperm and egg imports because it is still technically legal to use paid-for sperm just not to buy sperm. As a result, the importation of US sperm has increased:

Patients here obtain more than 90% of semen from the United States, and the federal government appears to turn a blind eye to the fact they buy it from mostly for-profit sperm banks — a criminal offence in this country.

Addendum: Some readers may find all this talk of sex and sperm to be risque but do remember this is a family-friendly blog.

India to send the world’s last telegram on July 14th

by  Tyler Cowen in

At the Bharat Sanchar Nigam Limited (BSNL), India‘s state-owned telecom company, a message emerges from a dot matrix printer addressing a soldier’s Army unit in Delhi. “GRANDMOTHER SERIOUS. 15 DAYS LEAVE EXTENSION,” it reads. It’s one of about 5,000 such missives still being sent every day by telegram – a format favored for its “sense of urgency and authenticity,” explains a BSNL official.

But the days of such communication are numbered: The world’s last telegram message will be sent somewhere in India on July 14.

That missive will come 144 years after Samuel Morse sent the first telegram in Washington, and seven years after Western Union shuttered its services in the United States. In India, telegraph services were introduced by William O’Shaughnessy,  a British doctor and inventor who used a different code for the first time in 1850 to send a message.

The BSNL board, after dilly-dallying for two years, decided to shut down the service as it was no longer commercially viable.

“We were incurring losses of over $23 million a year because SMS and smartphones have rendered this service redundant,” Shamim Akhtar, general manager of BSNL’s telegraph services, told the Monitor.

And for a little bit of history:

At their peak in 1985, 60 million telegrams were being sent and received a year in India from 45,000 offices. Today, only 75 offices exist, though they are located in each of India’s 671 districts through franchises. And an industry that once employed 12,500 people, today has only 998 workers.

By the way:

Sixty-five percent of daily telegrams are sent by the government.

The full story is here, and the pointer is from Michael Clemens.

Detroit facts for today

by  Tyler Cowen in

…the city’s per capita income, averaged over its 684,799 residents, is just $15,261 per year. (That’s less than half the income of neighboring Livonia.) Auto insurance alone eats up a good $4,000 of that, for residents with a car.

And then comes the litany of municipal woes: Detroit has the highest violent crime rate of any major US city, at five times the national average; there were 344 murders in 2011, of which just 39 were solved. Right now, the average response time, if you put in an emergency call to the Detroit Police Department, is 58 minutes.

Detroit’s infrastructure is crumbling: 40% of its street lights are out of order, and it has 78,000 abandoned and blighted structures, of which 38,000 are considered dangerous buildings. Those buildings account for a large proportion of the 12,000 fires Detroit has every year. At the moment, firefighters are instructed not to use the hydraulic ladders on their firetrucks unless there is an immediate threat to life, because the ladders have not received safety inspections for years. Detroit also has just 36 ambulances, of which generally no more than 14 are in operation at any given time. And in terms of the city’s IT infrastructure — well, you can probably guess; suffice to say that a recent IRS audit characterized the city’s income tax system as “catastrophic”.

As far as Detroit’s balance sheet is concerned, there is $9 billion of debt, excluding pension liabilities, and also excluding healthcare and life insurance obligations which are calculated at roughly $6 billion. Debt service in 2013 is projected at more than $240 million, or about 22% of total revenues. Worryingly, under the section of the proposal headed “Realization of Value of Assets”, one finds the priceless collection owned by the Detroit Institute of Arts…

That is all from Felix Salmon.

The Oocyte Cartel

by  Alex Tabarrok in

The Society for Assisted Reproductive Technology (SART) represents more than 85 percent of the assisted reproduction industry. SART requires that its members work only with agencies that limit compensation to egg-donors to around $5000 or a maximum of $10,000 (figures decided upon by the ethics committee of an affiliated organization, The American Society for Reproductive Medicine (ASRM)). In other words, ASRM-SART acts as a buyer’s cartel.

In 2011, Lindsay Kamakahi launched a class action suit against ASRM-SART challenging  their horizontal price-fixing agreement as per se illegal under the Sherman Antitrust Act. ASRM-SART tried to have the case dismissed but a judge recently denied the dismissal in the process making it clear that the plaintiffs have a good case.

ASRM-SART argue that their maximum price is really about protecting women and that compensation “should not be so excessive as to constitute undue inducement.” Egg donation does involve extensive screening, time and some health risks. One would think, however, that the proper response for those interested in protecting women would be to ensure that the women are fully informed and that they are paid high wages not low wages.

The paternalistic policy of the ASRM-SART especially rankles because it applies only to women, sperm donations are not regulated. Of course, sperm donation isn’t risky but we also don’t see laws limiting the wages of miners to protect miners (mostly men) from “undue inducement.” The societal expectation seems to be that men are appropriately motivated by self-interest but women may be appropriately motivated only by altruism.

I am in agreement with Kimberly D. Krawiec who writes in her excellent paper Sunny Samaritans and Egomaniacs: Price-Fixing in the Gamete Market:

It is ASRM’s paternalistic and misguided attempts to control oocyte donor compensation through the same type of professional guidelines that courts have rejected when employed by engineers, lawyers, dentists, and doctors that should raise an ethical red flag.

pricecontrolsrentsASRM-SART surely believe that they are doing good but I think it no accident that they also do well from a policy that reduces the price of their inputs. A price controlled below the market price generates rents. In the traditional analysis, the rents are dissipated away by long-lines, a form of rent seeking (see Modern Principles–first edition now a bargain!). It’s also possible, however, for suppliers to grab up the rents, especially suppliers of complementary goods.

For example, it’s often been pointed out that in the organ donor market the hospitals, surgeons and executives all get paid and paid well; the only person not getting paid is the person who provides the transplant organ. But we can say more–one of the reasons the hospitals, surgeons and executives get paid well is precisely that the donor is not paid. The shortage created by the price control drives the demander’s willingness to pay upward and some of the difference between the willingness to pay and the maximum legal price is captured by the suppliers of complementary inputs. How do we know? In the 1990s, entry into the transplant business grew much faster than did the supply of transplant organs. In fact, transplants were so profitable there was a rush to transplant that increased the number of centers but drove down center volume thereby reducing patient survival rates.

Similarly, by limiting egg-supply the suppliers of assisted reproductive services may be able to increase their share of the total gains from trade.

Although ASRM-SART may profit from restricting donor compensation there is another issue at large, the repugnance constraint. The repugnance and disgust centers of the brain are old and deep and often revolve around issues of body integrity, body products, hygiene, sex and death. Birth treads uneasily in many of these waters already and egg donation adds to this volatile mix issues of gender, personhood, identity and genetics all of which prime for a repugnance storm. The plaintiff’s case is sound but if the antitrust laws prevent ASRM-SART from limiting prices–or saying that they limit prices–and if egg donation were to become even more of a market in everything might there not be a backlash and an outright ban on compensated donors, as is the case in many other countries and for transplant organs in this country? I hope not but it is a real possibility.

The ban on compensated transplant organ donation has led to hundreds of thousands of excess deaths. A ban on compensated sperm and egg donation would lead to a dearth of lives.