Month: March 2014

Those new service sector jobs, once again — stunt nudity experts

Taub and Smith, stunt nudity experts, wore clothing that could be taken off quickly. “The photographer said, ‘Once people start getting on the bus, get naked and jump in line and pretend like you’re getting on the bus,’” Taub said.

The photo at the link does show nudity from behind, though not obscenity.  Maybe it is not safe for work.  The article has some other interesting angles:

But it was the Google-bound commuters who surprised Taub the most.

“They were quite uptight. Your average San Francisco bus — we would have gotten more of a reaction. People would clap or take pictures,” she said. “These buses, it was more like very uncomfortable.”

Jessica Powell, vice president of product and corporate communications at Google, said that this is not something Google condones.

“No, no nudes on the bus. It might interfere with the Wi-Fi.”

For the pointer I thank Samir Varma.

Jeff Bezos, The Washington Post, and his plan to take over the media world (speculative)

Remember Sherlock Holmes and the dog which did not bark?  WaPo remains very much in the running to be the up-and-coming mega-web site which succeeds.  Perhaps the model is a Coasean one:

Much of the media world has been waiting with bated breath since Jeff Bezos bought the Washington Post for $250 million last year, eager to see some sign of the Amazon founder and CEO’s hand at work. The first tangible evidence appeared on Tuesday, when the newspaper announced a major national subscription partnership that will offer free digital access to readers of other newspapers in major U.S. cities.

While this may not be as dramatic as shutting down the printing presses to go web-only, or offering everyone a free Kindle with their subscription, it’s still a fairly dramatic departure from the approach taken not just by the Washington Post but by most newspapers with traditional management.

The partnership — which will see the Post provide free digital access to subscribers of newspapers like The Dallas Morning News, the Minneapolis Star Tribune and the Pittsburgh Post-Gazette — allows the Post to (theoretically at least) build a broader online readership outside of its core subscription area. As the Nieman Journalism Lab notes, the Post effectively ceded the national newspaper market to the New York Times by not launching a national edition, but the partnership could give it a way of achieving the same thing at much lower cost.

One possible model at work here is simply to buy the best content from everyone else, at cut-rate prices, relying on the willingness of outside sources to price discriminate and shed some marginal IP rights for some marginal revenue.  Before the rest of the world is fully aware of what is going on, suddenly you have one of the best news web sites.

But wait, doesn’t this article say the Post is giving free access to its content to other newspapers?  Here is where Coasean contracting, and symmetry of externalities, enters the picture.  WaPo giving free access to the Minneapolis Star-Tribune, or vice versa, end up being pretty much the same thing (over time, with renegotiations) in a world of Coasean contracting.  WaPo will end up becoming the hub and the others will be feeder spokes, with Wapo paying a fraction of the cost for the content it receives from each one.  (And I suspect there will be no easy “cross-access” of say the Minneapolis paper to the Pittsburgh paper, and so on, to limit the evolution of a rival hub.)  Furthermore, at least in the short run, the marketing work is being done by other newspapers, not by WaPo.

Over time the WaPo web site can buy bits of content from Le Monde and FAZ (translated by software programs, of course), The Guardian, The (London) Times, various local U.S. papers, London Review of Books, Boston Review, and who knows where else?  Probably only a few outlets, such as WSJ and NYT, will refuse to sell content to them at cut-rate prices.  If there is low marginal cost there will be price discrimination, so why not be the one buying on the low part of the demand curve and avoiding most of the costs?

Plus hire a few blogs while you are at it, see how that goes, and maybe over time reel in a few hundred of them.  Why not?  We’ve already seen some moves in this direction, with The Monkey Cage and Volokh Conspiracy.

How about some music streaming while we are at it?

How about calling it…”Amazon for News”?  And for other stuff too.  By the way, this hypothesis helps explain why Bezos doesn’t feel any great need to shake up the current WaPo newsroom.

In this model there is a cannibalization effect and the price and value of content end up falling.  Does that sound familiar?

Never underestimate how smart really smart people are.

For a further explication of what I take to be the Bezos business model, see my old MR post, “Luring Alex to Lunch,” still one of my favorites and a meditation on whether or not you should produce and write all of your own content.  (We don’t, and our model is sustainable.)  And thus, sometimes, I manage to lure Alex to lunch.  Here is how Alex feels about lunch.  That hasn’t changed.

Mark Toma’s *Monetary Policy and the Onset of the Great Depression*

The subtitle is The Myth of Benjamin Strong as Decisive Leader.  Here is a summary from the book’s back cover:

Monetary Policy and the Onset of the Great Depression challenges Milton Friedman and Anna Schwartz’s now-consensus view that the high tide of the Federal Reserve System in the 1920s was due to the leadership skills of Benjamin Strong, head of the Federal Reserve Bank of New York. In this new work, Toma develops a self-regulated model of the Federal Reserve, which stands in contrast to a conventional discretionary model. Given the easy redemption of dollars for gold and the competition among Reserve banks, the self-regulated model implies that the early Fed could control neither the money supply nor the price level. Exploiting an untapped data set, later chapters test the thesis of self-regulation by focusing on the monetary decisions of individual Reserve banks.

The micro-based evidence indicates that “Reserve banks really did compete” – and that Benjamin Strong as decisive leader during the 1920s is a myth. This finding, with its emphasis on monetary policy in the years leading up to the Great Depression, will be of interest to scholars, students, and sophisticated lay readers with an interest in macroeconomic and monetary economic policy issues, specifically to those with an interest in economic history.

I have not read it yet, but it is sure to be controversial.

Claims about Goethe

In 1979, director Francis Ford Coppola, in the grip of clinical manic depression and anxiety over his incomplete opus Apocalypse Now, and while purportedly under the influence of his girlfriend, screenwriter Melissa Mathison, proposed making a “ten-hour film version of Goethe’s Elective Affinities, in 3D“.

There is more here.  And here is the famed Walter Benjamin essay on Elective Affinities.

The new and excellent Howard Eiland and Michael W. Jennings biography of Benjamin has a good discussion of that essay.

How to improve referee performance

Via Michael Makowsky, there is a new and extremely useful paper by Chetty, Saez, and Sandor in “slides” form (pdf).  Their conclusions include these:

1. Short deadlines for referees are extremely effective at increasing speed.

2. Cash incentives can generate significant improvements with salient reminders right before a deadline.

3. Even light social incentives, such as direct prods from an editor, can bring significant benefits.

More broadly, at least in this context cash incentives work, they do not displace social incentives, and attention really matters as do “nudges.”

Modeling Vladimir Putin

Here are some options:

1. Putin is a crazy hothead who is not even procedurally rational.  Merkel received that impression from one of her phone calls with him.

2. Putin is rational, in the Mises-Robbins sense of instrumental means-ends rationality, namely that he has some reason for what he does.  He simply wills evil ends, namely the extension of Russian state power and his own power as well.

3. Putin is fully rational in the procedural sense, namely that he calculates very well and pursues his evil ends effectively.  In #2 he is Austrian but in #3 he is neoclassical and Lucasian too.  He knows the true structure of the underlying model of global geopolitics.

Putin-2

4. Putin lives in a world where power is so much the calculus — instrumentally, emotionally and otherwise — that traditional means-ends relationships are not easy to define.  Power very often is the exercise of means for their own sake and means and ends thus meld and merge.  Our rational choice constructs may mislead us and cause us to see pointless irrationality when in fact power is being consumed as both means and end.  It is hard for we peons to grasp the emotional resonance that power has for Putin and for some of his Russian cronies.  They grew up in the KGB, watched their world collapse, tyrannized to rise to top power, while we sit on pillows and watch ESPN.

Here is a former CIA chief arguing Putin has a zero-sum mentality, though I would not make that my primary framing.  Here is Alexander J. Motyl considering whether Putin is rational (Foreign Affairs, possibly gated for you).  Here is an interesting and useful discussion of differing White House views of PutinThis account of a several-hour dinner with Putin says he is prideful, resentful of domination, and hardly ever laughs.  Here is Eric Posner on Putin’s legal astuteness.

My views are a mix of #2 and #4.  He is rational, far from perfect in his decision-making, and has a calculus which we find hard to emotionally internalize.  His resentments make him powerful, and give him precommitment technologies, but also blind him to the true Lucasian model of global geopolitics, which suggests among other things that a Eurasian empire for Russia is still a pathetic idea.

Putin is also paranoid, and rationally so.  We have surrounded him with NATO.  China gets stronger every year.  Many other Russians seek to kill him, overthrow him, or put him in prison.

Assumptions about Putin’s rationality will shape prediction.  Under #1 you should worry about major wars.  With my mix of #2 and #4, I do not expect a massive conflagration, but neither do I think he will stop.  I expect he keep the West distracted and seek to turn resource-rich neighbors into vassal states, for the purpose of constructing a power-intensive, emotionally resonant new Russian/Soviet empire, to counter the growing weight of China and to (partially) reverse the fall of the Soviet Union.  Even if he does not grok the true model of the global world order, he does know that Europe is weak and the United States has few good cards it is willing to play.

Developing…

Addendum: Whatever your theory of Russians in general may be, watch this one-minute video of a Russian baby conducting and give it a rethink.

The economics of South Ossetia

They are not good, despite high expectations from some of the initial Russian sympathizers:

These days South Ossetia’s economy is entirely dependent on budgetary funds from Russia. Unemployment is high, and so are prices, since goods must now be shuttled in through the tunnel, long and thin like a drinking straw, that cuts through the Caucasus ridge from Russia.

Its political system is controlled by elites loyal to Moscow, suddenly wealthy enough to drive glossy black cars, though the roads are pitted or unpaved. Dozens of homes damaged in the 2008 war with Georgia have never been repaired. Dina Alborova, who heads a nonprofit organization in the South Ossetian capital, Tskhinvali, said her early hopes “all got corrected, step by step.”

The full story is here.

Tesla versus the Rent Seekers

The NYTimes has a very bad article on Tesla and auto dealer franchise laws. The worst bit is this mind blowing contradiction:

…most states have some limits on direct sales by auto manufacturers…These rules are generally meant to ensure competition, so that buyers can shop around for discounts from independent dealers, and to protect car dealers and franchises from being undercut by the automakers.

teslacarSo there you have it, limits on direct sales ensure competition and protect car dealers from being undercut by the automakers. Sorry, but you can’t have it both ways. Which view is correct? Let’s begin with some background (drawing on a great article by LaFontaine and Morton).

Franchising arose early on in the history of the auto industry because, as in other industries, franchising can take advantage of local knowledge and at the same time control agency costs. Franchising rules evolved in Coasean fashion so that manufacturers could not expropriate dealers and dealers could not expropriate manufacturers. To encourage dealers to invest in a knowledgeable sales and repair staff, for example, manufactures promised dealers exclusive franchise (i.e. they would not license a competitor next door). But with exclusive franchises dealers would have an incentive to take advantage of their monopoly power and increase profits by selling fewer units at higher profits. Selling fewer units, however, works to the detriment of the manufacturer and the public (ala the double marginalization problem (video)). Thus the manufactures required dealers buy and sell a minimum quantity of cars, so-called quantity forcing. Selling more units is exactly what we want a monopoly to do, so these restrictions benefited manufactures and consumers.

Politics, however, began to intrude into this Coasean world in the 1940s and 1950s. Auto sales accounts for some 20% of sales taxes and auto dealers employ a lot of people so when it came to a battle in the state legislatures the auto dealers trumped the manufacturers. The result was franchise laws that were increasingly biased towards dealers. In essence, exclusive franchises became locked into place, manufactures lost the right to add dealers even with population expansion, quantity forcing became illegal and dealer termination became all but impossible.

The result of dealer rent seeking has been higher auto prices for consumers, about 6% higher according to one (older) study by the FTC. Consumers have been stiffed in other ways as well. In some states, for example, manufacturers were required to reimburse dealers for a repair under warranty whatever amount the dealers would have charged consumers for the same repair not under warranty. As a result, dealers had an incentive to increase their price to consumers because that increased what they would be reimbursed for repairs under warranty. The franchise laws have also resulted in a highly inefficient distribution of dealers as populations have moved but dealers have been frozen into place. The inability to close, move or consolidate dealers has impacted the big-3 American firms especially because they have older networks. As a result, a typical GM dealer sells 377 cars a year while a typical Honda dealer sells 1,062 and a Toyota dealer 1,488.

Tesla wants to sell directly to the public but more generally what we need is to restore the Coasean balance, put dealers and manufacturers back on a equal footing and let the market decide the most efficient means of retailing and distributing automobiles.

Addendum: Dan Crane and Lynne Kiesling have further posts on this topic.

Assorted links

The Girl Next Door (are sex and studying substitutes?)

That is a new piece (pdf) by Andrew J. Hill, at the University of South Carolina.  It seems your child should beware the girl next door:

Parents are concerned about the influence of friends during adolescence. Using the gender composition of schoolmates in an individual’s close neighborhood as an instrument for the gender composition of an individual’s self-reported friendship network, this paper finds that the share of opposite gender friends has a sizable negative eff ect on high school GPA. The eff ect is found across all subjects for students over the age of sixteen, but is limited to mathematics and science for younger students. Self-reported difficulties getting along with the teacher and paying attention in class are important mechanisms through which the e ffect operates.

For the pointer I thank the ever-excellent Kevin Lewis.

*Water 4.0*

That is the new book by David Sedlak and the subtitle is The Past, Present, and Future of the World’s Most Vital Resource.  I found this consistently interesting, going well beyond the usual anecdotes one finds in the other general “history of water” books.  Here is one bit about Japanese water relations being Coasean in earlier times:

In Japan, human wastes were separated prior to recycling.  Fecal matter was the more valuable commodity, because solids were easier to transport.  In the first stage of the recycling process, landlords sold the feces in their tenants’ cesspools to merchants who were members of a guild that had secured the right to collect the wastes from that part of the city.  The wastes were so valuable that the rent of an apartment would increase if the number of people living in the house, and hence the amount of solid waste produced, decreased.  When it came time to renegotiate the price for the wastes, the guilds sometimes fought with each other for the rights to buy the increasingly valuable fertilizer.

Urine — the less prized waste — was still a marketable commodity.  Because of its lower value, tenants, who owned the rights to their urine, sold it to a group of merchants who were not part of the fecal waste guild.

That discussion, by the way, is drawing upon this S.B. Hanley piece.

Recommended.

Ski holiday markets in everything

The ski holiday company that is offering to pay parents’ fines for taking children out of school to go skiing has received tremendous support from parents since the promotion went viral.

Lee Quince, the owner of Bedford-based MountainBase, which sells holidays to Morzine in the French Alps, said: “90 per cent of the people who have got in touch have been supportive of what we’re doing.”

It was a fortnight ago an advert called ‘Are Schools in the UK taking the PISTE?’ ran, claiming that the company would pay any local authority fines parents received for taking their children out of school if they booked a holiday in March or April. But it wasn’t until last week the advert was picked up by the national press, reigniting a long running debate about the cost of holidays out of term time.

Mr Quince has admitted his company’s deal encourages parents to break the law, but said he has received a lot of support for the advert.

The company claims it has no choice but to put its prices up by almost 50 per cent during the peak season, which it claims is unfair on customers.

There is more here.