Market in Everything
I think most of these are “art” but this market in everything makes for entertaining reading. Here are some of my favorites. For legal reasons, if you want the product, you will have to go to the website for the seller’s email.
Guilty? Innocent? It’s all the same to me. For a fee of 500 pounds a time I will lie to the police about your whereabouts, and for 2000, I will perjure myself in court, and swear a testimony to a fictitious scenario of your choice. Easiest to contact me in advance of crime, and establish the deal. Emergency alibis also available.
For a price, I will think of you and only you every time I commit acts of self-love during a time period. I will picture you in my mind, and pretend that all pleasurable touches come from your hands…I will breathe your name heavily. I will lust after you. I will dream of you. I will long for you. …During each time period, I vow to commit acts of self-love to orgasm, at the very least, once per day, no matter what.
Worried that the day to mark your passing is going to be an Eleanor Rigby type affair? Fear not, for 20% of your estate (or £1000, whichever the greater) plus travel and overnight accomodation expenses, I will pretend to have known you, deliver a stirring eulogy, and then get drunk at your wake.
I will sell you immortality for only £12 plus £2 booking fee. There is a full refund for dissatisfied customers.
Thanks the MetaFilter for the link.
Abortion Politics
The Wall Street Journal and the American Spectator have sunk to an embarassing low with the publication of an Levine, Trainor and Zimmerman (1996), find just this. LTZ estimate that restrictions on Medicaid funding of abortions reduced the number of abortions but the number of pregnancies fell even further so the number of births actually went down not up.
Putting things the other way, compensating behavior means that abortion liberalization will reduce the number of births by less than the number of abortions. Five states legalized abortion in 1970, prior to Roe v. Wade (Alaska, California, Hawaii, New York, and Washington). Levine, Staiger, Kane and Zimmerman (1999) estimate that births in these states fell by 5% more than in states that had not legalized abortion. Applying this number to today’s rates they estimate “a complete recriminalization of abortion would result in 320,000 additional births per year.” Since there are about 1.3 million abortions a year, only about a quarter of all abortions represent a net reduction in births.
The reduction in births, even though considerably smaller than than the number of abortions, is not distributed randomly across the population so abortion policy can have an impact on things like crime and teenage pregnancy but the number of Democrats and Republicans has got to be one of the least interesting consequences.
Hat tip to MemeFirst for alerting me to the article.
I will return
No, not another post on the return puzzle (and follow-up here) but a note to indicate that I will be on vacation so expect light blogging from me. The ever-productive Tyler will continue to stream great content to the world.
Returns again
Many thanks for all the good suggestions regarding the return puzzle. Here are just a few of the many ideas that I received. My apologies to those not mentioned by name.
Mark Garbowski stated one thesis very nicely:
Demand forced the Sears catalogue to offer easy returns because people were buying things they could not see or touch. Back in 1895, I suspect this was a pretty unusual experience. If you go to a small local shop and know the owner, you probably have a good opportunity to inspect the merchandise before purchase, but this was not possible with mail order. Generalizing, I would opine that the combination of a significant rural population spread over a vast geographic landmass, together with improved communication and transportation, allowed those rural people the ability to purchase (at least occasionally) high quality, exotic (meaning from far away) goods to a degree that was never before possible, and never duplicated in Europe. Before a consumer would send a check or hard cash in advance of receiving an item he or she had never seen or touched, it became necessary to develop a good return policy as insurance.
I suspect that the economies of scale you discuss allow the insurance to be economical, but did not drive its creation. I believe it is a demand side creation, but based on historical circumstances, and not current class or income circumstances. Once the demand side forced mail order retailers to offer it, consumers discovered how much they liked it and forced other retailers to follow suit, even though it was not as necessary.
Ian MacCleod and others mentioned that retail trade in Europe is organized more often on the boutique model than on mass retailing. Salespeople don’t turnover as often as in the U.S., they spend more time with the customer and they personally represent the product to a greater extent. As a result, returning a product can be seen as an affront.
Adam Shostack writes that the credit card companies often reward firms that offer easy return policies because it is less costly than handling a billing dispute. Credit card usage is much lower in Europe thus supporting the theory.
Tim Worstall points out that there are legal restrictions in much of Europe on things like “as is” sales. Similarly, there is a large wholesale market for “as is” items in the US but not in Europe. Both of these factors make offering easy returns more costly. Of course, these differences may be as much “caused by” as “causes of” differences in the return policy but its useful to remember that there is a whole web of practices involved with easy returns.
Does Dr. Pangloss recant?
In his post on Medicaid (just below) Tyler writes “The fiscal burdens of Medicare are, by far, the biggest economic problem in today’s America.” Hmmm… might one even say that they are a big enough problem to make one rationally gloomy?
Why so many happy returns?
It’s much easier to return a purchase in the United States than in Europe. An old joke has it that Germans are very nice people until you try to buy something from them. Imagine then how difficult it is to return something in Germany. The no questions asked, easy return is not common in most of Europe.
It’s puzzling why this should be so. One explanation offered at lunch yesterday when I raised this question focused on the demand side. Incomes are lower in Europe, perhaps people of lower income don’t demand easy return policies. The theory here is a little odd – an easy return policy is a form of insurance and the poor should demand more insurance not less – but we do observe the poor buying less insurance in other areas so it’s not ruled out completely. The differences in return policy, however, are striking while the differences in income are modest. It’s not like we observe large differences in return policy across the U.S. states, for example, and Germany is among the richer countries in Europe. Return policy has also been relatively good in the United States for a very long time – going back at least to the 1895 Sears Roebuck catalog.
From the supply side the question becomes why is it cheaper for U.S. firms to offer easy returns than it is for European firms? I think part of the answer is suggested by that Sears-Roebuck guarantee. Retailers in the United States tend to be larger than in Europe and because of this they can take advantages of economies of scale both in insurance and in establishing a reputation for quality. European retailers are smaller and have greater monopoly power (even though there are more of them they have local monopoly power that the big boxes in the United States do not.)
If the supply theory is correct then multi-national firms that offer easy return policies in the United States ought to offer similar policies in Europe – the demand theory, in contrast, says that return policy should differ by country according to income. I bet, however, that Ikea offers easy returns in Sweden just as in the United States.
Email me if you have other ideas, experiences or evidence on this question. The return puzzle may seem minor but it has widespread implications. Return policy is not chosen alone but in conjunction with product quality. Easy return policy increases the incentive to produce high-quality products that consumers will not want to return and high-quality products reduces the cost of offering an easy return policy.
In the Pipeline
In the Pipeline is a consistently good blog about the science and industry of pharmaceuticals. The organic chemistry is over my head but the author, Derek Lowe, is also good on the economics as this response to an annoying Slate article indicates.
Mellencamp on Payola
Following my earlier post on payola, Les Jones points me to an interview with John Cougar Mellencamp. Key quote:
Look, in the ’80s when people were paying openly to get songs on the radio, here’s the way it worked. “We want you to play this record and we’re going to give you a spiff [kickback] of $100 to get it on the radio.” OK, the guy plays it for a week and says, “I’ve been playing the song for a week and nobody likes it.” “Well, here’s $200 to play it next week.” They’ve been playing the song for two weeks and nobody likes it. Guess what, they’re done paying. It’s over at that point. You cannot pay your way into having a hit. It won’t happen. The only thing you can pay your way into is having the opportunity to have a hit. If you don’t pay, you don’t even have the opportunity. That’s the way it should be done.
What will they think of next?
I kid you not, this lightbulb freshens the air. The outside of the bulb is coated with titanium dioxide which is activated by fluorescent light producing oxidizers that break down odors. Buy from Amazon here. Thanks to Kevin Kelly’s Cool Tools for the link.
Kidney swaps II
The Wall Street Journal reports (subs. required) that the kidney swap idea I wrote about earlier is beginning to be implemented. Here are they key points:
Last year, 43% of kidneys transplanted in the U.S. came from living donors, up from 28% a decade ago.
But a biological barrier often blocks a transplant from a relative. In about a third of all would-be pairs, blood types are incompatible. In others, the sick person has antibodies that can initiate a rejection of the donated organ. It’s heartbreaking “to have the treasure of the live donor and then have that not go forward because of a biological obstacle,” says Massachusetts General Hospital transplant surgeon Francis DelMonico.
Occasionally, transplant centers spot a way out: One New England father with blood type A couldn’t donate a kidney to his daughter with blood type B. So he gave a kidney to a teenager with blood type A, and the teenager’s sister gave a kidney for the man’s daughter.
Such swaps, however, typically occur only when happenstance alerts surgeons to the possibility. Economist Alvin Roth and co-authors have devised an algorithm, however, that computes all the possible swaps and which is incentive-compatible.
…when Dr. Saidman gave the economists details on 45 pairs in which the would-be donor was unable to give a kidney to the intended recipient. Even though each of the 45 had a donor willing to spare a kidney, all were stuck waiting for the right person to die. With swaps involving two kidneys, the economists found, eight transplants were possible. If swaps involving three kidneys were possible, then 11 transplants were possible.
Addendum: Alert readers will note that kidney swaps are quite similar to organ clubs an idea for saving lives that has been implemented by Lifesharers.
Think again!
Interested in “seductive math problems for the modern mind”? Every day Jan Nordgreen, a Norwegian living in Bolivia, posts a new puzzle on his elegant and fun blog, Think Again!
Here is a recent challenge:
A party consists of three couples. At the end of the party one of the husbands asks the others how many new acquaintances they made during the evening. Everybody gives a different answer. What did his wife answer?
Shorter patent lives mean shorter lives
People talk about the high price of pharmaceuticals as if high prices lasted forever. In fact, within a year of the expiration of a pharmaceutical’s patents, prices will typically fall by more than 50 percent as generic producers enter the market. Patents nominally last for 20 years but the effective patent life is much lower because patents are typically granted years before a product has cleared FDA review. The effective patent life of the average new pharmaceutical in the 1990s averaged just 12 years (see here for some references). Competition from competing but non-infringing pharmaceuticals makes the de facto patent life even shorter.
Thus, my response to the seniors and others clamoring for lower pharmaceutical prices is to be more patient. Does this sound harsh? Consider this, the people who are demanding price controls are not simply asking for lower drug prices they are asking for lower prices on the newest drugs. Lower prices for drugs introduced 15 years ago are already here. Remember, those drugs were recently considered the very best modern medicine has to offer, so it’s not like I am expecting those who can’t afford the newer medicines to go back to using leeches.
Price controls or other such plans such as reimportation may bring cheaper pharmaceuticals for a short period but we will then have a much smaller supply of new drugs forever. Only the shortsighted would buy that prescription.
Payola II
Following my earlier post, an astute reader pointed me to an excellent analysis of payola:
[Payola] helped new musicians gain airplay. Payola combatted conformism and racism in the music business… Chuck Berry’s “Maybellene,” his first hit and still one of his most popular songs, was given initial airplay because of payola. Leonard Chess of Chess Records went to well-known disk jockey Alan Freed with a large catalog of material. Chess offered Freed partial songwriting credits on any song of his choice, provided that he would play and promote the song. Freed now had a stronger incentive to pick the best song and to promote it. After listening to hundreds of recordings, Freed picked “Maybellene.” Berry became a star, and the Freed estate continues to receive royalties…
The discussion, of course, is from Tyler’s book In Praise of Commercial Culture. (Yup, he’s the astute reader also!). See the book for more, including how racism factored into the payola “scandals.”
No comment necessary
The Central Intelligence Agency has ruled that large portions of a report by the Senate Intelligence Committee that is highly critical of the agency includes material too sensitive to be released to the public…
Full story here.
Why is Payola Illegal?
Actually, payola isn’t illegal if it goes to the station, rather than to the DJ, and if it is disclosed. But if radio stations don’t want their DJs profiting from payola they can easily write this into their contracts. Since contract law can handle the DJ issue it seems doubtful that the real intent of the Federal Communications Act was simply to help radio stations from being abused by their employees. Apparently, the requirement of disclosure was a big enough deterrent to prevent the real issue, payola to the stations, although some stations occasionally do play songs “as presented by Arista Records.”
The issue is further complicated by the role of Billboard magazine and other radio charts. Getting on the chart may generate momentum thus
Canadian pop rocker Avril Lavigne’s new song “Don’t Tell Me” aired no fewer than 109 times on Nashville radio station WQZQ-FM.
The heaviest rotation came between midnight and 6 a.m., an on-air no man’s land visited largely by insomniacs, truckers and graveyard shift workers. One Sunday morning, the 3-minute, 24-second song aired 18 times, sometimes as little as 11 minutes apart.
But what many chart watchers may not know is that the predawn saturation in Nashville — and elsewhere — occurred largely because Arista Records paid the station to play the song as an advertisement….The practice is legal as long as the station makes an on-air disclosure of the label’s sponsorship — typically with an introduction such as “And now, Avril Lavigne’s ‘Don’t Tell Me,’ presented by Arista Records.”
Using advertising to bias the charts in this way seems like a relatively new phenomena so I don’t think it explains the animus towards payola. Correcting this problem, say by counting only top-hour plays, doesn’t seem so difficult either.