Month: November 2013
“Nobody dislikes currency inflation more than strippers”
The link to the associated cartoon with that caption is here, from Tim Harford’s Twitter feed.
But is that claim true? It depends on the margin. Let’s say the standard tip is a dollar, and price inflation lowers the real value of that dollar. A lot of customers won’t substitute into stuffing $1.43 into the stripper’s garments. They might do two or three singles, but strippers will be shortchanged at various points going up the price pole. There is something about handing out a single bill that is easier and more transparent, or so it seems.
Say inflation gets high, or runs on for a long time for a large cumulative effect. At some point the customers switch to giving $5 bills.
Does it help strippers if the Fed issues lots of $2 bills? Well, the leap up to the larger tip comes more quickly, but the customers also stay at the $2 tip level a long time before moving up to $5.
At some margins inflation is bad for current strippers, but good for some set of future strippers. If the economy is close to the margin where individuals upgrade from a $1 tip to a $5 tip, then inflation is good for current strippers but bad for future strippers (for a while).
The answer also may depend on whether the Fed adjusts the ratio of $5 to $1 bills to keep in proper synch with the stripper customers. If the Fed doesn’t increase the supply of fivers rapidly enough, future strippers may not get their deserved payoffs for a long time.
Let’s explore this assumption that handing out a single bill of a given kind is easier (admittedly there may be other ways to specify the assumptions). And let’s assume that overpaying some strippers and underpaying others is less efficient for some reason, whether Benthamite or having to do with the unevenness of medium-run supply elasticities.
In that case tips may be more efficient, with ongoing inflation, at the $5 level than the $1 level. Given that two dollar notes are rare, the step up from a one to a five involves a fivefold increase. But the step up from a five to a ten is only a twofold increase, as is the step up from a ten to a twenty. Even the switch from twenties to fifties involves a smaller multiple than from a one to a five. So there are fewer problems with the non-convexities within the 5-10-20-50 range than within the 1-5 range.
Perhaps the sooner we get the strippers away from “the ones” the better — who needs those non-convexities? Strippers sure don’t.
On the whole, therefore, strippers may prefer price inflation. Of course once the $100 bill is the standard tip, the next notch upwards is again hard to come by, outside of the eurozone that is.
Markets in everything: paid friends
This account may to some degree be speculative, but here goes:
According to one avid PF [paid friend] employer, ‘Once you’ve had paid friends who don’t argue with you, it’s actually quite hard to go back to real friends.’
The ex-wife of a PF hoarder said ‘many really successful men don’t actually have time for real friends,’ because normal friends ‘are either resentful or bitter or ask for money,’ and that some ‘are often competitive.’
She said that as a result, ‘very rich men have paid friends as an expensive filter, because they can control them.’
If her ex-husband were not wealthy, ‘he’d be sitting all alone in his apartment with a container of Haagan-Dazs and a bottle of vodka,’ she said.
I say why opt for “paid friends” when you can have a $6,000 Vertu smart phone?
The full story is here, hat tip goes to @ArikSharon.
What is the nature of France’s fiscal problem?
Here is a report today from William Horobin:
Until now, many of the deficits have been transferred to a little-known vehicle set up to pay down the social-security system’s overdrafts with a special tax. But the vehicle—called Cades—is quickly approaching the legal ceiling of €270 billion ($360.4 billion) of debt it is permitted to handle over its lifetime.
To breach the Cades threshold and plow in more debt, the government is bound by law to increase the special tax. But faced with at-times violent street protests over taxation, Mr. Hollande has pledged to stop raising taxes, saying the government instead must help companies regain competitiveness and preserve household spending power. As a result, Mr. Hollande’s government is considering leaving the debt load where it is, in the social-security system, instead of moving it to Cades.
The national audit office and many lawmakers are crying foul, saying the stockpile of deficits sits on the books of a social-security system designed to manage cash flow, not long-term debt, and is leaving the system vulnerable to an increase in interest rates.
“It’s creating a time bomb,” said Philippe Marini, a center-right senator who heads the finance commission of the French Parliament’s upper house.
The debate over where to store the debts underscores the shrinking room France has to maneuver in grappling with deficits tied to its generous, and underfinanced, welfare programs.
If you read the whole article, you will see this concern is held by many individuals in the French establishment, not just by Olli Rehn. More generally, I would say that the most fundamental problem seems to be willful denial amongst the citizenry and a strong unwillingness to reform, for instance:
“You cannot take away guns from Americans, and in the same way you cannot take away social benefits from French people,” said Louis Paris, who lives on the Rue Louis Braille, a typical neighborhood in St Etienne, which has deep working-class roots and historically has leaned Socialist. “They won’t stand for it,” said Paris.
Sweden had a period where its government spent too much money, yet they snapped out of it and cut spending and marginal tax rates, like good, pragmatic Swedes. We’ve yet to see serious signs that the French are going to do the same. They certainly don’t have much if any room to raise taxes any further.
The point here is not to argue that the French economy is on the verge of collapse. It isn’t. But they do have serious fiscal problems which go beyond a static look at the usual metrics.
Assorted links
1. Video defense of Bitcoin, start at about 2:30. Interesting up through the end.
2. MIE: Santas for hire, with real beards only. These guys really look like Santa, unlike the phonies I visited with as a kid. For an hour it is $218, plus travel costs. The march of progress continues.
3. CoreEcon, a new project from the Institute for New Economic Thinking. The mission is to provide open access materials for how an undergraduate economics curriculum should look.
4. Where in the world is household debt going up? Going down?
Who is Juan Galt?
USA Today: Thousands of Venezuelans lined up outside the country’s equivalent of Best Buy, a chain of electronics stores known as Daka, hoping for a bargain after the socialist government forced the company to charge customers “fair” prices.
…Members of Venezuela’s National Guard, some of whom carried assault rifles, kept order at the stores as bargain hunters rushed to get inside.
“I want a Sony plasma television for the house,” said Amanda Lisboa, 34, a business administrator, who had waited seven hours already outside one Caracas store. “It’s going to be so cheap!”
…The president, who took over from Hugo Chávez in April 2013, appeared on state television Friday calling for the “occupation” of the chain, which employs some 500 staff.
“This is for the good of the nation,” Maduro said. “Leave nothing on the shelves, nothing in the warehouses … Let nothing remain in stock!”
…Daka’s store managers, according to Maduro, have been arrested and are being held by the country’s security services. Neither Daka nor the government responded to requests for comment.
In Atlas Shrugged‘s money speech Rand, drawing on Hayek, provides an implicit warning to Maduro and Venezuela:
…when a society establishes criminals-by-right and looters-by-law–men who use force to seize the wealth of disarmed victims–then money becomes its creators’ avenger. Such looters believe it safe to rob defenseless men, once they’ve passed a law to disarm them. But their loot becomes the magnet for other looters, who get it from them as they got it. Then the race goes, not to the ablest at production, but to those most ruthless at brutality. When force is the standard, the murderer wins over the pickpocket.
Competitive hospitals as a virtue of the Singapore health care system
I won’t recap my earlier discussion, but rather here I will point out another feature of the system which makes it work and which keeps costs down: competition among hospitals.
Singapore has nine general hospitals, eight community hospitals, and twelve specialist hospitals, many of which are owned by the government. (The public hospitals are usually bigger than the private hospitals, so the public hospitals serve about 80% of the market.) To put that in proper perspective, Singapore is about the size of a U.S. county. That’s 274.1 square miles, noting that most people do not live on the fringes of the territory.
The publicness of the public hospitals is not their most important feature. Their most important feature is that they compete. They do not merge, for instance.
Not every Singaporean public hospital is a contender to treat every kind of ailment. And not every hospital is within convenient reach in a country where many people do not have cars. Still, that’s a lot of competition by American standards.
To put matters in perspective, Fairfax plus Arlington counties have two hospital chains of significance, Virginia Hospital Center and Inova FFX hospital, and that is in a reasonably densely populated (by American standards) elite region. Yes DC and Maryland may beckon (Sibley, Suburban, Children’s Hospital — what else is good?), but still ask yourself how many Americans can choose from a comparable number of hospitals as one can in Singapore?
One lesson is that urbanization is good for your health care system. That is another reason to deregulate urban density.
A second lesson is that congestion prices for your roads make it easier for hospitals to compete. Driving north on the Beltway to a Maryland hospital, from Fairfax, isn’t so great, especially if you are really sick.
A third lesson concerns the Hayek-Lange debate on managed competition as a potential solution to the socialist calculation debate. The government-owned hospitals in Singapore would appear to be implementing one version of Lange’s proposal, namely that they are told to compete and they do. Very successfully, so successfully that they are often cited as an example by market-oriented economists. No, this could not work for an entire economy, and yes, in most other places public choice considerations would be a bigger problem than they are in Singapore. Still, Lange’s proposal, viewed in light of the Singapore hospital system, looks a bit better than it used to.
Addendum: Here is Reihan on the monopoly power of U.S. hospitals.
Amazon markets in everything
The cash-short United States Postal Service, which has failed to win congressional approval to stop delivering mail on Saturdays to save money, has struck a deal with the online retailer Amazon.com to deliver the company’s packages on Sundays — a first for both, with obvious advantages for each.
There is more here. And here is an example of the trouble Amazon can get you into.
How large is the control premium?
Cass Sunstein on Twitter directs us to this paper (AEA gate), by David Owens, Zachary Grossman, and Ryan Fackler, entitled “The Control Premium: A Preference for Payoff Autonomy.” The abstract is here:
We document individuals’ willingness to pay to control their own payoff . Experiment participants choose whether to bet on themselves or on a partner answering a quiz question correctly. Given participants’ beliefs, which we elicit separately, expected-money maximizers would bet on themselves in 56.4 percent of the decisions. However, participants actually bet on themselves in 64.9 percent of their opportunities, reflecting an aggregate control premium. The average participant is willing to sacrifice 8 percent to 15 percent of expected asset-earnings to retain control. Thus, agents may incur costs to avoid delegating and studies inferring beliefs from choices may overestimate their results on overconfidence.
There are ungated versions here.
Mt. Kisco, New York dining bleg
That’s Westchester County, right? I will have time for one meal there, before a trip to IBM Watson. Where should I eat?
Assorted links
1. Did the 2009 Card Act work?
2. Has the Great Recession had a “productivity cleansing” effect?
3. The automated burger is coming to DC. I’ll actually bet against that one.
4. Claims about Chinese cities (unconfirmed, I would say, but interesting).
6. The culture that is Russia (I am not convinced, by the way, that all of those will be ineffective as personal ads, quite the contrary).
What do we know about the easing of malaria burdens?
There are some new and interesting results from Lena Huldén, Ross McKitrick and Larry Huldén. Here is the abstract:
Malaria has disappeared in some countries but not others, and an explanation for the eradication pattern has been elusive. We show that the probability of malaria eradication jumps sharply when average household size in a country drops below four persons. Part of the effect commonly attributed to income growth is likely due to declining household size. The effect of DDT usage is difficult to isolate but we only identify a weak role for it. Warmer temperatures are not associated with increased malaria prevalence. We propose that household size matters because malaria is transmitted indoors at night, so the fewer people are sleeping in the same room, the lower the probability of transmission of the parasite to a new victim. We test this hypothesis by contrasting malaria incidence with dengue fever, another mosquito-borne illness spread mainly by daytime outdoor contact.
The gated published version is here. A six-page author summary is here.
For pointers I thank Aaron C. Chmielewski and Gregory Rehmke.
Does reading books change your mind?
All you authors out there, read this carefully and recall the words of Samuel Johnson:
Reading a book can change your mind, but only some changes last for a year: food attitude changes in readers of The Omnivore’s Dilemma.
Source
Department of Psychology, University at Albany, State University of New York Albany, NY, USA.
Abstract
Attitude change is a critical component of health behavior change, but has rarely been studied longitudinally following extensive exposures to persuasive materials such as full-length movies, books, or plays. We examined changes in attitudes related to food production and consumption in college students who had read Michael Pollan’s book The Omnivore’s Dilemma as part of a University-wide reading project. Composite attitudes toward organic foods, local produce, meat, and the quality of the American food supply, as well as opposition to government subsidies, distrust in corporations, and commitment to the environmental movement were significantly and substantially impacted, in comparison to students who had not read the book. Much of the attitude change disappeared after 1 year; however, over the course of 12 months self-reported opposition to government subsidies and belief that the quality of the food supply is declining remained elevated in readers of the book, compared to non-readers. Findings have implications for our understanding of the nature of changes in attitudes to food and eating in response to extensive exposure to coherent and engaging messages targeting health behaviors.
Hat tip goes to Neuroskeptic.
Assorted links
1. More on old vs. new Keynesianism.
2. An old style socialist analysis of racism in Madison, Wisconsin. And what are the whitest job categories in America? #1 is veterenarian.
3. Can we unwind wealth illusions without pain?
4. Polygamy over space and time.
5. How Twitter marries man and machine. And Ten Questions Consumers Should Ask When Choosing a Robo-Adviser.
6. A caustic piece on the fundamental political flaw behind Obamacare.
Google patents a throat tattoo with a built-in lie-detecting mobe microphone
Maybe your boss (or spouse?) will want you to wear it:
And then there’s the lie-detector feature. “Optionally,” the filing muses, “the electronic skin tattoo can further include a galvanic skin response detector to detect skin resistance of a user. It is contemplated that a user that may be nervous or engaging in speaking falsehoods may exhibit different galvanic skin response than a more confident, truth telling individual.”
There is more information here. The pointer is from Charles C. Mann.
When will pitch-tracking technology displace baseball umpires?
This is a fascinating article by Ben Lindbergh, and it does not require interest in baseball, here is one bit:
“The goal, of course, is no error, or as close to that ideal as we can possibly come. And so the best solution might be a hybrid approach that combines tradition with technology. Not robot umps, but regular umps with input from robot brains.”
Here is another good bit of many:
Over time, players have internalized some of the idiosyncrasies of the strike zone as it’s currently called. The zone called against left-handed hitters is shifted a couple inches away relative to righties. The size of the zone fluctuates depending on the count — expanding dramatically on 3-0 and shrinking severely on 0-2 — and according to the base-out state, velocity of the pitch, and many other factors. Yes, these are all arguments in support of standardizing the strike zone, assuming you like to see pitches called according to code. They’re also reasons to exercise caution. “Because it’s always worked this way” isn’t a good reason not to do something different, but it is a reason to think through the possible ramifications before making a major change that could upset the delicate batter-pitcher balance. Players will adjust to whatever the zone looks like, but it’s in baseball’s best interests to make those adjustments smooth.
McKean cautions that instituting an automatic zone “would ruin the game,” which makes him the latest in a long line of thus-far-incorrect critics who’ve warned that something would be the end of baseball. “If you told the pitchers to try and throw that ball with an automatic strike zone, which means it has to hit some part of that plate or be in some part of that strike zone, heck, the games would go on for five, six hours,” he says. My guess is that he has the direction of the effect right, but the magnitude wrong. Automating the strike zone would probably make it slightly smaller, on the whole, and more predictable for the hitter. That could increase scoring and perhaps lead to longer games, but not to such an extent that the sport would be broken.
However, standardizing the zone would remove a level of interplay between batter, pitcher, catcher, and umpire that many fans find compelling.
Interesting throughout, and for the pointer I thank Hamp Nettles.