As measured by page views the most popular MR post this year was my post on how there is one law for the police and another for the rest of us, Get Out of Jail Free Cards.
Second was Tyler Cowen’s 12 Rules for Life. Number seven on Tyler’s list, “Learn how to learn from those who offend you,” caught my eye today but there’s much wisdom throughout.
The third most popular post was by neither Tyler, myself, nor a guest blogger but rather by a MR commentator, One smart guy’s frank take on working in some of the major tech companies.
One of my favorite posts was fourth, Lessons from “The Profit”. The new season of The Profit has started and continues to be of interest. All IO economists should watch.
Number five was another one of my favorites Why Sexism and Racism Never Diminish–Even When Everyone Becomes Less Sexist and Racist.
Tyler’s excellent analysis of the North Korean deal shows why he is an important thinker in foreign policy, able to see beyond the headlines, The North Korean summit and deal.
A second MR commentator had another top post, Will truckers be automated? (from the comments).
Tyler doesn’t like to write the kind of post that came in at number 8 but these posts are always popular which is one reason Tyler doesn’t like to write them. The five most influential public intellectuals?
Number 9 was a useful post, Why are antiques now so cheap?
Other notable posts from Tyler included:
- Should we Censor Porn?
- The high-return activity of raising others’ aspirations,
- Has there been progress in philosophy?
- Ten favorite Science Fiction Novels
- Underrated Libertarian Thinkers.
Other notable posts from me included:
- Direct Instruction: A Half Century of Research Shows Superior Results
- Do Boys Have a Comparative Advantage in Math and Science?
- The Uber Pay Gap
- Collective Action Kills Innovation
- Blockchains and the Opportunity of the Commons
Overall, I’d say it was a notable year for MR commentators! Congratulations! What were your favorite, or least favorite, MR posts of 2018?
The Supreme Court is considering whether the Constitution’s ban on excessive fines applies to the states as well as to the federal government. If the SC needs more motivation to curb the abusive process of civil asset forfeiture they need look no further than Philadelphia. In a field filled with outrageous stories of injustice, the situation in Philadelphia where houses have been forfeit stands out.
A forfeiture petition for one property lists one gram of marijuana, a half gram of cocaine and some over-the-counter pills as justification for taking. In one case recently settled in a $3 million class-action lawsuit, Norys Hernandez nearly lost the rowhouse she and her sister owned after police arrested her nephew on drug dealing charges and seized the house. Another family named in the suit fought to save their house from the grip of law enforcement after their son was arrested for selling $40 worth of drugs outside of it. Of the lawsuit’s four named plaintiffs, three had their houses targeted for seizure after police accused relatives dealing drugs on the property. None of the homeowners were themselves accused of committing a crime.
As families fought to keep homes targeted by the DA, the revenues from the forfeiture sales became a big moneymaker for local law enforcement – netting some $6 million annually in the best years. The proceeds turned into an unregulated budget split between the police and DA. The money made off of the seized homes went to buy wish list items ranging from new submachine guns to custom uniform embroidery.
As if that weren’t enough, sometimes police officers were the buyers of the foreclosed properties! How’s that for demand creates its own supply?
“I am genuinely distressed to learn that the DA’s office permitted police officers to acquire forfeited homes of Philadelphians at public auction,” said University of Pennsylvania Law School professor Lou Rulli. “This disturbing revelation underscores one of many serious flaws in civil forfeiture — law enforcement is able to directly benefit from the actions they take to seize private property, often from lawful homeowners who have done no wrong.”
This story takes the cake:
Biddle recalled an instance, in 2007, when he purchased a property on the 5700 block of Chester Avenue for $21,000. To his surprise, he found a buyer just a few days later who was willing to pay nearly double that amount. He inked the sale.
At the next forfeiture open house, an incensed DA staffer, who by now knew Biddle on sight from his repeat visits to forfeiture auctions, approached him.
“They said, ‘That guy we took the house from? You just sold that to the guy’s mom,’” Biddle recalled. “They were pissed, but they knew I couldn’t do anything about it.”
Records show that it took the District Attorney’s Office three years to seize the property back, through a second forfeiture action filed against the pair.
This is from an excellent investigative report by Ryan Briggs.
Addendum: See also my piece with Makowsky and Stratmann forthcoming in the JLS, To Serve and Collect: The Fiscal and Racial Determinants of Law Enforcement.
Over the past 60 years, the energy efficiency of ever-less expensive logic engines has improved by over one billion fold. No other machine of any kind has come remotely close to matching that throughout history.
Consider the implications even from 1980, the Apple II era. A single iPhone at 1980 energy-efficiency would require as much power as a Manhattan office building. Similarly, a single data center at circa 1980 efficiency would require as much power as the entire U.S. grid. But because of efficiency gains, the world today has billions of smartphones and thousands of datacenters.
From Mark Mills at Real Clear Energy.
A specter is haunting the modern world, the specter of crypto anarchy.
Computer technology is on the verge of providing the ability for individuals and groups to communicate and interact with each other in a totally anonymous manner. Two persons may exchange messages, conduct business, and negotiate electronic contracts without ever knowing the True Name, or legal identity, of the other. Interactions over networks will be untraceable, via extensive re- routing of encrypted packets and tamper-proof boxes which implement cryptographic protocols with nearly perfect assurance against any tampering. Reputations will be of central importance, far more important in dealings than even the credit ratings of today. These developments will alter completely the nature of government regulation, the ability to tax and control economic interactions, the ability to keep information secret, and will even alter the nature of trust and reputation.
The technology for this revolution–and it surely will be both a social and economic revolution–has existed in theory for the past decade. The methods are based upon public-key encryption, zero-knowledge interactive proof systems, and various software protocols for interaction, authentication, and verification. The focus has until now been on academic conferences in Europe and the U.S., conferences monitored closely by the National Security Agency. But only recently have computer networks and personal computers attained sufficient speed to make the ideas practically realizable. And the next ten years will bring enough additional speed to make the ideas economically feasible and essentially unstoppable. High-speed networks, ISDN, tamper-proof boxes, smart cards, satellites, Ku-band transmitters, multi-MIPS personal computers, and encryption chips now under development will be some of the enabling technologies.
The State will of course try to slow or halt the spread of this technology, citing national security concerns, use of the technology by drug dealers and tax evaders, and fears of societal disintegration. Many of these concerns will be valid; crypto anarchy will allow national secrets to be trade freely and will allow illicit and stolen materials to be traded. An anonymous computerized market will even make possible abhorrent markets for assassinations and extortion. Various criminal and foreign elements will be active users of CryptoNet. But this will not halt the spread of crypto anarchy.
Just as the technology of printing altered and reduced the power of medieval guilds and the social power structure, so too will cryptologic methods fundamentally alter the nature of corporations and of government interference in economic transactions. Combined with emerging information markets, crypto anarchy will create a liquid market for any and all material which can be put into words and pictures. And just as a seemingly minor invention like barbed wire made possible the fencing-off of vast ranches and farms, thus altering forever the concepts of land and property rights in the frontier West, so too will the seemingly minor discovery out of an arcane branch of mathematics come to be the wire clippers which dismantle the barbed wire around intellectual property.
Arise, you have nothing to lose but your barbed wire fences!
Addendum: Inspiring! But see my post The Demise of Crypto Anarchy from 15 years ago.
Why has wealth inequality increased in the United States? A lot of semi-plausible but vague theories have been offered–changes in the tax code, the diminished role of unions and so forth–but there are surprisingly few fully-specified models. In an important paper, Mohsen Mohaghegh (on the job market) has a new answer.
Wealth inequality has risen considerably in the US since 1975. For instance, the wealth share of households in the top 1 percent of the distribution rose from 25 percent in 1975 to more than 37 percent in 2007. This paper builds on theories of entrepreneurship and wealth inequality to address changes in inequality in the US between 1975 and 2007.
In the data, there are two trends in entrepreneurship since 1975: the average debt-to-asset ratio among entrepreneurs has increased, and the number of entrepreneurs (the entrepreneurship rate) has fallen. I study how the distribution of wealth changes over time, when these two trends are accounted for in a model.
…[two] channels accounts for both the fall in the entrepreneurship rate and the rise in the entrepreneurs’ leverage: an increase in banks’ willingness to fund risky entrepreneurial projects and a rise in the costs of starting a business. When changes in entrepreneurship are accounted for, my model explains more than 90 percent of the rise in the share of wealth held by the top 1 percent of households, and just under half of the rise in the share of the top 0.01 percent of households in the data.
A lower rate of entrepreneurship implies that a smaller number of households can take advantage of their productive ideas. Active entrepreneurs, however, have access to more capital which allows highly productive entrepreneurs to expand their businesses. Both of these changes contribute to a rise in inequality over time.
Below are two figures from the paper showing the declining entrepreneurship rate and increasing leverage. Mohaghegh doesn’t explain these facts but he connects three literatures, declining entrepreneurship, increasing financialization and rising inequality and he shows that the first two of these well-known features of the US economy can explain a large share of the third, the rise in inequality.
Ivey Business School at Western University (London Ontario, Canada) is looking for a Post doctoral Research Fellow to join our newly established CryptoEconomics Lab: http://cryptoeconomics-lab.com
The focus of the position is on conducting foundational research in the emerging discipline of cryptoeconomics, which examines the protocols and incentives that govern the production, distribution, and consumption of digital goods and services within decentralized online platforms.
The CryptoEconomics Lab at Ivey Business School is a cutting-edge initiative that is just getting started, and builds upon the school’s Scotiabank Digital Banking Lab and its interdisciplinary team of faculty members and graduate students.
The wild west era of blockchain is ending and the scams and flimflams are being revealed but the fundamental of the technology will be used to build socially useful mechanisms.
By the way, the CryptoEconomics Lab has a good bitcoin crash course ( I believe that should be read, bitcoin crash-course!).
Stephen Rose of the Urban Institute (not exactly a right-wing or libertarian think tank) compares recent studies measuring changes in inequality and finds that although inequality has increased the Piketty and Saez (2003) results, which generated a tremendous amount of discussion and research, are very likely over-stated.
The results from at least four studies were compared for three measures of income change: change in median incomes, share of growth captured by the top 10 percent, and the changing income share of the top 1 percent. In all cases, Piketty and Saez (2003) were the outlier, showing the most increased inequality. And in all three measures of income change , Piketty, Saez, and Zucman (2018) found much less growth in income inequality than Piketty and Saez (2003).
This brief does a meta-analysis of different findings to estimate a “consensus” level of change…I find that instead of stagnating, real median incomes grew by just over 40 percent (1 percent a year) from 1979 to 2014; the top 10 percent of the income ladder captured 45 percent of income growth from 1979 to 2014; and the share of the top 1 percent grew 3.5 percentage points.
All studies find that income inequality rose after 1979, but common perceptions that all income gain went to the top 10 percent and middle class incomes stagnated (or even declined) are wrong.
Russ Roberts also has several good videos showing how the numbers can be cut in various ways.
In an NBER paper, Blair and Chung find that occupational licensing reduces labor supply significantly. I had expected that occupational licensing would be worse for blacks than for whites because it imposes an additional locus of discrimination but that effect seems to be opposed by a certification effect (the license helps black workers to overcome statistical discrimination) so the net effect is not as bad for blacks as for whites:
We exploit state variation in licensing laws to study the effect of licensing on occupational choice using a boundary discontinuity design. We find that licensing reduces equilibrium labor supply by an average of 17%-27%. The negative labor supply effects of licensing appear to be strongest for white workers and comparatively weaker for black workers.
An Institute for Justice report by Morris M. Kleiner, the dean of occupational licensing studies, and Evgeny S. Vorotnikov attemps to calculate the net loss to the US economy from occupational licensing and concludes that when all costs are considered it is on the order of $200 billion annually.
In preventing people from working in the occupations for which they are best suited, licensing misallocates people’s human capital. In forcing people to fulfill burdensome licensing requirements that do not raise quality, licensing misallocates people’s human capital, money and time. And with its promise of economic returns over and above what can be had absent licensing, licensing encourages occupational practitioners and their occupational associations to invest resources in rent-seeking instead of more productive activity. Taking these misallocated resources into account, we find potential costs to the economy that far exceed those from deadweight losses and that likely provide a more complete picture of the extent to which licensing reduces economic activity.
…we find licensing costs the American economy $197.3 billion in misallocated resources.
Some good economics in Tariff Man, sung to the tune of Piano Man (with apologies to Billy Joel) by Art Carden:
Now Paul is a real estate contractor
He’d like to buy things for his wife
But he canceled a deal because structural steel’s
More expensive—it’s doubled in price!
And the firms are all practicing politics
As their businessmen fly to DC!
Yes, they’re spreading a problem called poverty,
And calling it prosperity!
Jack up that tax, you’re a Tariff Man!
Let’s make Americans pay
For the right to buy stuff from those foreigners–
We should make it here, anyway!
These policies concentrate benefits
And they spread costs to you and to me
These costs are concealed, but see, they are still real—
They are there, though they’re harder to see.
Some goods are expensive that shouldn’t be
Because tariffs have made them cost more!
And we’d have more for bars, and put bread in their jars
But we’re stopping goods at our shores!
La la la, di da da
La la, di da da da dum
Jack up that tax, you’re a Tariff Man!
The excellent Jason Brennan with a short introduction to his new book, When All Else Fails: The Ethics of Resistance to State Injustice:
Imagine a situation in which a civilian commits an injustice, the kind against which you believe it is permissible to use deception, subterfuge or violence to defend yourself or others. For instance, imagine your friend makes an improper stop at a red light, and his dad, in anger, yanks him out of the car, beats the hell out of him, and continues to strike the back of his skull even after your friend lies subdued and prostrate. May you use violence, if it’s necessary to stop the father? Now imagine the same scene, except this time the attacker is a police officer in Ohio, and the victim is Richard Hubbard III, who in 2017 experienced just such an attack as described. Does that change things? Must you let the police officer possibly kill Hubbard rather than intervene?
Most people answer yes, believing that we are forbidden from stopping government agents who violate our rights. I find this puzzling. On this view, my neighbours can eliminate our right of self-defence and our rights to defend others by granting someone an office or passing a bad law. On this view, our rights to life, liberty, due process and security of person can disappear by political fiat – or even when a cop has a bad day. In When All Else Fails: The Ethics of Resistance to State Injustice (2019), I argue instead that we may act defensively against government agents under the same conditions in which we may act defensively against civilians. In my view, civilian and government agents are on a par, and we have identical rights of self-defence (and defence of others) against both. We should presume, by default, that government agents have no special immunity against self-defence, unless we can discover good reason to think otherwise.
I think it helps in answering this question to think of other countries say South Africa under Apartheid or China today among the Uighur in Xinjiang province…then be consistent. Note that resistance to state injustice may be unwise even when it is ethical.
Bohemian Rhapsody—you already know the plot and it’s a tad long but the music is great and Rami Malek is fabulous as Freddie Mercury. The movie culminates with a virtually shot-by-shot recreation of the legendary Queen performance at Live Aid, considered by many to the greatest live performance in all of rock and roll. A little puzzling why they didn’t use the original. Worth seeing in the theater, if you don’t have a home theater.
Crazy Rich Asians – the all Asian cast made it notable and the shots of Singapore are great but it’s only average as a romantic comedy. The leads lack chemistry.
The Last Kingdom (Netflix)—I’ve watched all three Seasons and enjoyed them. Season 3, however, is beginning to lose its legs. The on-again, off-again love affair between King Alfred and Uhtred has worn its course and I swear I’ve seen the jump in the boats and row away under falling arrow scene more than once before. Still, it’s not boring.
Bodyguard (Netflix) —taut British thriller. I enjoyed it and at 6 episodes it’s less of an investment than some series.
Homecoming (Amazon Prime)—sold as a Julia Roberts endeavor. She’s fine but the real star is the mysterious atmospherics and unusual shots and edits. I didn’t realize till the end of the first episode that this was a Sam Esmail show. Ah, now it all makes sense. If you liked Mr. Robot, give it a shot. I haven’t finished the first season and I may not, so I can’t say for certain whether the investment is worthwhile.
Daredevil (Netflix) I have already mentioned. Now cancelled, despite a great third season.
The Man Who Would be King (Amazon Prime) – a John Huston classic featuring Sean Connery and Michael Caine. One of my favorites. Based on a story of Rudyard Kipling which was based on the true story of Josiah Harlan, Prince of Ghor.
At Eternity’s Gate: A stirring and powerful performance by Willem Dafoe as Van Gogh. Directed by Julian Schnabel, himself a noted artist. The camera work–meant to convey a “you are there” point of view and also the sometime madness of Van Gogh–was disconcertingly jumpy at times. Schnabel would have done better stepping back and placing more trust on Dafoe’s performance and also the cinematography of Benoît Delhomme. Oddly, Schnabel insists Van Gogh was murdered when suicide is the accepted account and one that rings true, even to the film itself.
Machines (Amazon Prime)–an excellent documentary illustrating a day in the life of a textile factory in Gujurat, India. The pictures do the work, very little commentary. Dickensian. Especially striking to an economist , how inefficiently the factory is being run. Quality control, inventory management and maintenance are clearly atrocious. I am reluctant to claim something is inefficient but we have strong experimental evidence that management quality in these firms is very low and that better management could more than pay for itself.
Former Cam Girl Aella offers a detailed, analytical, and interesting guide to the economics of the industry.
My credentials: I was a camgirl for five years. My highest earning month was $50,000, and my highest rank (on MFC) was #7, meaning I earned the 7th most money that month. I was, at one point, one of the most (if not the most) widely known working camgirls thanks to some viral content. My average income per hour was $200. Getting there was not easy and took a ton of mistakes and work, so I hope this helps you.
I was initially surprised that a cam girl can make more money than a prostitute. But the reason is simple, a cam girl is selling a non-rival good and can thus have more customers at a point in time than a prostitute. (In other words, the same economics as online education!) I suspect women would prefer to be cam girls than prostitutes so we should expect the supply of cam girls to increase and the supply of prostitutes to decrease thus raising the price of hiring a prostitute.
Male psychology plays an important role for the clever cam girl:
Men want a few things, and probably one of the biggest is winning a competition.
You see, you’re not just trying to get a guy to pay you – you’re trying to get a guy to pay you in front of a bunch of other guys. This is a super key. A man wants to feel attention from an attractive women on him, and this is made even more satisfying when it’s to the exclusion of those around him. He is showing off his power by buying your happiness.
So, when tipped, make sure you say his name (or username). A lot of girls use subtly masculine-competition language when referring to high tippers, such as “hero,” “champion,” or “winner”. I often would ask questions like “who is going to save my night?” or “who is going to be the one to make me feel x”?
The ‘control show’ I mentioned above plays into this. Give men a way to fight against each other, with tokens. A common tactic is to have guys buy into “teams”, and whichever team tips the most, wins (with the prize being a video or literally anything – you’d be surprised at how many competition prizes are just the guy’s name being listed on the girl’s profile). Have guys fight to put on or off your clothes, or force you/rescue you from doing something gross.
The most profitable thing I ever did was have a ‘war’ with another camgirl, and it became my tipping members vs. hers. Competition is bread and butter. Competition is love. Competition is life. Competition is your key to a life full of luxury handbags and butlers.
Just don’t be too obvious about it. All of this stuff I’m saying can be done with too heavy a hand, and then guys feel gross and leave.
Intrinsic and extrinsic incentives:
Divorce what you’re doing from money as much as you can. Never refer to tokens as money!! Refer to tokens as little as you can while still being clear. One of my camgirl friends would use the technique where she’d say, “This is like – I’m sitting at a bar, all alone over here. Is someone gonna be a gentleman and get me a drink?” And then someone would tip and she’d drink.
Classic marketing advice:
How do you get whales? A lot of it is high variance – a tiny fraction of the camwatching population is made out of very rich men, and so you might get one passing through your cam room once a week without you ever knowing, and you have no idea when or if you’ll be doing something interesting at that point.
But one technique to help is to give them something to do. If you have listed tip options as “40 tokens spank! 20 tokens kiss the mirror!” and your whale has 40,000 tokens he wants to drop today, then the best he’s going to get from you is some crying and screaming.
Thus, always have the absurd “nobody would ever buy that that would be insane” option.
Hat tip: Emil O W Kirkegaard.
Pay toilets are common in Europe but uncommon in the United States. Sophie House writing at City Lab explains why. Pay toilets were made illegal in much of the United States in the 1970s:
In 1969, California Assemblywoman March Fong Eu smashed a porcelain toilet with an axe in front of the California state capitol, protesting the misogyny of restrooms that charged entrance fees for stalls but not urinals. She was not alone in her frustration. The grassroots organization CEPTIA—the Committee to End Pay Toilets in America—mobilized against pay toilets, putting out a quarterly newsletter (the Free Toilet Paper) and exchanging warring pamphlets with Nik-O-Lok, the leading pay-toilet manufacturer. The group won a citywide ordinance banning pay toilets in Chicago in 1973, followed by bans in Alaska, California, Florida, Illinois, Iowa, Michigan, Ohio, New Jersey, New York, Tennessee, and Wyoming.
The logic seems to be if we cannot sit for free then you cannot stand for free. House calls the pay toilet ban a triumph over sexism. Is it so hard to understand why urinals are cheaper to operate and more difficult to lock than stalls?
In any case, CEPTIA was remarkably effective. In 1970 there were some 50,000 pay toilets in America and by 1980 there were almost none. The attentive reader, however, will not be surprised to learn that smashing the pay toilet conspiracy did not result in an abundance of free toilets.
In the decades since CEPTIA disbanded, however, pay-toilet bans have proven to be a Pyrrhic victory. The committee’s vision of free toilets for all never came to pass. Cities have persistently refused to construct public restrooms, and existing facilities have fallen into disrepair. Citing the difficulty of keeping bathrooms safe and clean, municipalities are often unwilling or unable to pay. Even assuming that funds are available for initial construction of public toilets, the maintenance and operating costs are a deterrent.
By contrast, in cities from Europe to India to Latin America, small entrance fees help to cover the costs of keeping facilities in good condition. Creating a similar revenue stream to defray operating costs would likely make pay toilets more attractive to U.S. municipalities. For example, fees could offset the costs of hiring restroom attendants—an excellent, but expensive, way to keep bathrooms safe. Pay toilets also redistribute the operating costs of restrooms. Free toilets are, of course, taxpayer-funded, while under pay-toilet schemes, tourists who use urban infrastructure also contribute to its functioning.
It’s a Tuesday morning, and I’m in the presence of one of the most mind-boggling accomplishments in human history. This thing is so astounding in its complexity and scope, it makes the Panama canal look like a third grader’s craft project.
This marvel I see before me is the result of thousands of human beings collaborating across dozens of countries.
It took the combined labor of artists, chemists, politicians, mechanics, biologists, miners, packagers, smugglers and goatherds.
It required airplanes, boats trucks, motorcycles, vans, pallets and shoulders.
It needed hundreds of materials–steel, wood, nitrogen, rubber, silicon, ultraviolet light, explosives, and bat guano.
It has caused great joy but also great poverty and oppression.
It relied upon ancient wisdom and space-age technology, freezing temperature and scorching heat, high mountains and deep water.
It is my morning coffee.
Jacobs then sets out to thank everyone–which he soon finds is impossible, so he limits to a thousand people–who contributed to getting him his morning miracle. From the obvious, the barista and the coffee growers to the less obvious, the manufacturers and designers of the coffee lid and the NY water department, Jacobs sets out to offer thanks, giving the reader some interesting background along the way (“New York water is tested 2.2 million times a year.” “According to one estimate, pallets account for more than 46 percent of US hardwood lumber production.”).
Jacobs is also good on the importance of gratitude. Being mindful of and thankful for the things we ordinarily take for granted can make for a better life. He asks philosopher Will MacAskill what he is grateful for. “Sometimes I’m just thankful I have arms.” Yes.
Jacobs sometimes forgets, however, that the value of gratitude is more in the giving than in the receiving. He thus confuses gratitude with charity. But gratitude is neither payment nor alms. It’s nice to be recognized and thanked but thanks don’t make the world go round.
I ask Andy whether it feels good that the coffee in his warehouse brings joy to millions of people. Andy looks at me, his eyebrows knit. It’s as if I just asked him if he enjoys being a Buddhist monk who mediates ten hours a day.
“Well let me ask you this,” I say, “What are you thankful for?”
“My paycheck,” he says, laughing.
I like Andy. Andy understands that working solely for the sake of others can be demeaning and degrading. Andy is working for himself and his loved ones and more power to him. Beyond a few special relationships, to make doing for others one’s primary motive is undignified and subservient. Humans are not worker ants eager to die for love of their Queen. Each person’s life is their own.
The true marvel is that despite the fact that most people are not living for others we can still all live together harmoniously. As I like to put it:
It is not from the benevolence of the butcher, the coffee brewer, or the baker that we expect our dinner, but from their regard to their own interest.