Thanks Fabio!
Our thanks go out to Fabio Rojas for doing a great job as Marginal Revolution’s first guest blogger. Stay tuned to this spot for future guests!
Kissing Cousins (More)
A John Tierney article in today’s NYTimes argues that the Iraqi tradition of cousin marriage and consequent clan loyalties make it difficult to establish democracy. (See Tyler’s earlier post for a map and some other links.) Most interesting claim is that the Western taboo against cousin marriage was promoted by the church explicitly in order to reduce loyalty to the clan and promote universal love. Key quote:
Cousin marriage was once the norm throughout the world, but it became taboo in Europe after a long campaign by the Roman Catholic Church. Theologians like St. Augustine and St. Thomas argued that the practice promoted family loyalties at the expense of universal love and social harmony. Eliminating it was seen as a way to reduce clan warfare and promote loyalty to larger social institutions – like the church.
By the way, recent genetic research indicates that cousin marriage does not lead to dramatically higher abnormalities in children.
Capitalism comes to Iraq
Most of the talk about the reconstruction of Iraq has been about US aid, a so-called “Marshall plan for Iraq.” But as Tyler pointed out the Marshall plan never did that much for Europe – what made the difference was economic liberalization (and recall that the key reform in Germany, Ludwig Erhard’s lifting of price controls, was done without the permission and against the wishes of the US administrators). It is heartening therefore that liberalization appears to be coming to Iraq. Here is the key information from The Economist (subscription required).
A shock programme of economic reforms signals a radical departure for Iraq. The changes, announced by the country’s provisional rulers at the annual World Bank/IMF jamboree in Dubai, could see its battered economy transformed abruptly into a virtual free-trade zone.
If carried through, the measures will represent the kind of wish-list that foreign investors and donor agencies dream of for developing markets. Investors in any field, except for all-important oil production and refining, would be allowed 100% ownership of Iraqi assets, full repatriation of profits, and equal legal standing with local firms. Foreign banks would be welcome to set up shop immediately, or buy into Iraqi ventures. Income and corporate taxes would be capped at 15%. Tariffs would be slashed to a universal 5% rate, with none imposed on food, drugs, books and other “humanitarian” imports.
Small, Medium, Large
Ever wonder why product quality often comes in threes? (Basic, Regular, Premium. Bronze, Silver, Gold. Third, Second, and First Class etc.) When there are only two product qualities consumers are torn between two “extremes,” either of which makes them uneasy. Add a third quality and you create a happy medium. Simonson and Tversky (the cite is in the link below) report that when offered a low-end and a midrange microwave oven consumers chose the midrange 45% of the time. But when offered the same two ovens plus a high-end oven they significantly increased their purchases of the midrange. Even when few consumers buy the premium product the mere fact that it is offered can increase sales of the midrange product. Hal Varian calls this Goldilocks pricing (see discussion beginning at p.10).
OPEC, Iraq and Taxes
OPEC unexpectedly announced a cutback in production today. I wonder if the administration tacitly encouraged the cutback? At the very least, I suspect that they are secretly pleased. The increase in oil prices will mean greater funds for rebuilding Iraq – funds that the administration is having difficulty getting Congress to approve. Unlike a tax, the increase in oil prices does not require Congressional approval.
An even shorter introduction to intelligence
I recommend Ian Deary’s Intelligence: A Very Short Introduction. I am going to buy more books in this Oxford series. We at Marginal Revolution aim to provide value for attention, however, so here is an even shorter introduction.
1) Almost all measures of intelligence correlate with one another and quite a few measures of different aspects of intelligence are highly correlated. It is thus meaningful to talk about general intelligence, g. Howard Gardner’s work on “multiple intelligences” is on the fringes of scientific psychology.
2) Intelligence rankings are stable with age but fluid intelligence, meaning something like pure reasoning power, as opposed to crystalized intelligence peaks in the 20-30s and then declines with age.
3) Connecting IQ scores to brain morphology and activity is still in its infancy but there are modest, but well established, correlations between brain size and IQ (psychometric intelligence) and measures of reaction time (which plausibly measure brain speed) and IQ.
4) Intelligence is in large part genetic and that which is due to environment is primarily not due to the obvious possibilities such as family upbringing.
5) Intelligence matters for work performance and education. IQ is a better forecaster of work performance than just about any other test short of a trial run on the actual work to be performed.
6) IQ has been rising, the Flynn effect. No one knows why.
7) None of the above points are controversial among intelligence researchers.
Aside from Dreary’s book another useful introduction to intelligence research is the authoritative consensus report from the American Psychological Assocation, Intelligence: Knowns and Unknowns, summary here.
Why executives should be paid more than they deserve
If workers are paid their marginal product its difficult to understand why some CEOs are paid such high wages. But think of the CEO’s wage as a prize. Valuable prizes make everyone else work hard in order to become the CEO. With this model, the tournament model (JSTOR) of Lazear and Rosen, it may even make sense that CEO wages go up as profits go down. After all, shouldn’t prizes be set highest when motivation is most required? No doubt, some will see this argument as more proof that economists are just shills for the capitalist class.
Never miss a day of the revolution!
You can now see all the posts from a specific day by clicking on that day in the calendar. Also, did you know that an easy way to see all the posts in a category is to click on the category link at the bottom of each post? The opening page of Marginal Revolution contains the last 7 days of posts. Google search and links to monthly and weekly archives are available in the left hand column.
Google the Revolution!
By popular demand we have added a search box to the left sidebar. Should, for example, you want to find all posts by your favorite Revolutionary, just search for Tabarrok! Now that we are getting lots of hits and a fair number of links, Google has a pretty good archive of MR. But you can help by putting a link to www.MarginalRevolution.com on your homepage – this will further draw the attention of the great Google spider! Thanks. You can, of course, also find content by category and date in the Archives.
NY Times Wrong on Iraqi Gun Ownership
In March, Neil MacFarquhar of the New York Times asserted that guns were easy and legal to obtain in Saddam Hussein’s Iraq. The NRA has long argued that guns are a bulwark against the police state so Slate’s Timothy Noah challenged the NRA to explain “how Iraq got to be, and remains, one of the world’s most repressive police states when just about everyone is packing heat.” Noah later rejected reader explanations of this apparent paradox, including the possibility that MacFarquhar was wrong, and “reluctantly” concluded that private gun ownership is not a bulwark against a police state.
Today, however, John Tierney of the New York Times reports that “Mr. Hussein, never one to tolerate competition, forbade private citizens to carry weapons, effectively outlawing the security industry.”
Clearly, the New York Times is wrong. But where does the truth lie?
Tortured Justice
I am angry. The lawyers will get $19 million, the plaintiffs have no damages and I have been involved in an abuse of justice. I received notice yesterday that I was a plaintiff in a class action lawsuit against Bridgestone/Firestone that is about to be settled. I was never injured by Firestone but that’s ok because injured people have their own lawsuit the one I am involved in is for people who were not injured. The lawsuit reads “Plaintiff Does Not Seek To Represent And This Litigation Does Not Involve Any Person Who Alleges That He or She Suffered Any Personal Injury or Property Damage Because Of A Failure Of One Of The Tires” (capitalization in original.) Bear in mind that Firestone has already replaced all four of my tires with a competitor’s brand for free and similarly for many of the other plaintiffs.
The settlement is simple, Firestone agrees to sell and advertise tires (as part of a safety awareness program). The plaintiffs get nothing except for the named plaintiff who gets $2500. The lawyers? “Plaintiff intends to seek, and Firestone will not object to, an award of $19 million for all fees, costs and and expenses…” Plantiff’s attorney Zona Jones says “The outcome is one that we believe is extremely positive.” Yeah, right.
Cases like this should be thrown out by judges. But that is not going to happen because the case was brought in Texas where judges are selected by partisan elections. My research (summary here) shows that awards against out-of-state defendants are much higher in states that select their judges using partisan elections compared to other states. I have little doubt that the plaintiff’s lawyers (or their firm) are big contributors to Judge Donald Floyd’s reelection campaign (this is neither illegal nor uncommon in Texas).
I do not blame Firestone for settling, they comment that they have done so only “to avoid further expense, burden, distraction, and inconvenience of litigation.” But I am outraged that against my will I have been made a party to extortion and am saddened that Firestone believes, probably correctly, that they risk more than 19 million dollars by letting this trashy lawsuit go to court.
Cannabis Emptor
When goods are prohibited, quality tends to fall because of lack of competition and legal recourse. Quality in illegal markets, however, may still beat that available from government production. Health Canada spends millions of dollars growing marijuana for distribution to patients with medical need. The government grown pot is so awful, however, that patients are returning their 30 gram bags and asking for refunds! The government certifies and advertises that their product contains 10.2% THC but independent labs report only 3% THC. Furthermore, the government pot is contaminated with lead and arsenic. “This particular product wouldn’t hold a candle to street-level cannabis,” said Philippe Lucas of Canadians for Safe Access, the group that sponsored the tests. Thanks to Eric Crampton for alerting us to this story.
The beast isn’t starving
I caught a lot of flak from conservatives when I wrote in an op-ed that the so-called Bush tax-cuts were a fraud. If spending isn’t cut then in the long run taxes can’t be cut either. Since spending has gone up under Bush, all he has done, I argued, is to raise our future taxes (at precisely the wrong time too given the coming fiscal problems created by demography) . Conservatives complained that I missed the strategic beauty of the Bush plan. A tax cut, they said, will keep spending down, it will “starve the beast.” Well Bush is now asking for another $87 billion to fight the war in Iraq, employment is down everywhere but in the federal government where it is higher than under Clinton, and Bush is already touting how his administration is responsible for the largest increase in Medicare in its 38 year history. Apparently, on the Bush diet you can eat all you want and still lose weight.
The Demise of Crypto Anarchy
Crypto anarchists and cyber-libertarians promised a new world of privacy and liberty built on the foundations of the internet and public key cryptography. As David Friedman memorably put it public key cryptograpy allows “anonymity with reputation” thus it becomes possible in theory to evade the taxman while still maintaining a public presence.
All of this now looks somewhat naive. Consider, for example, how internet gambling has been quashed. First, the credit card companies caved into government pressure and refused to process gambling related transactions. Initially, gamblers shrugged this off and routed their transactions through PayPal but a U.S District Attorney accused PayPal of violating the USA Patriot Act and to avoid charges PayPal was forced to pony up 10 million dollars. (Why am I not surprised that a law intended to go after terrorists has been used to most affect against peaceful gamblers?). Entrepreneurs have taken their online gambling sites to places where it is legal like Antigua and Costa Rica but don’t try coming home again. When Jay Cohen, founder of the World Sport Exchange, did that he was tried, convicted and jailed in a Federal prison.
The cyber-anarchists and libertarians were correct about the technology – public key cryptography can do what they say it can do – so where did the argument go wrong? In part, the cyber anarchists forgot that most of the value of cyberspace comes from its overlap with real space. I don’t blog anonymously because I want to be rewarded for my blogging with something that I can use to buy a car (ok, maybe a toaster is more realistic). Even if privacy is perfect in cyberspace the many margins of overlap with real space leave plenty of room for authority to insert its hooks especially when authority itself is technologically adept. Moreover, as Richard Posner has noted, the demand for privacy is more often than not a demand for control over the public presentation of self and cryptography does nothing to help and may even impede that demand.
The cyber-anarchist world works in a thought-experiment when everyone demands privacy and as a result the technology for getting privacy is built into all of our communications structures and used as a matter of routine. But that’s a description of an equilibrium and not a description of how to get there from here. At present, most people are not that bothered with privacy and so do not, for example, encrypt their email. As a result, privacy is not convenient even for those who want it. Indeed, someone who encrypts their email or phone conversations is probably calling more attention to themselves than they otherwise would.
The cyber anarchists may yet be proven right but today David Brin’s forecast of a Transparent Society in which no one has privacy, including authority, is looking far more realistic. Need I mention this as proof of Brin’s thesis?
Fabio joins the Marginal Revolution!
We are pleased to announce that Fabio Rojas, newly-minted sociologist (Chicago) and intellectual bon vivant now teaching at Indiana University at Bloomington, will be doing a stint of guest blogging with us at the Marginal Revolution. We look forward to his insights!