Remember when Google (partially) bypassed the investment banks and held its own auction of its shares?  Many people thought this was the trend of the future.  Why let investment banks underprice the issue and take such a big cut?  Well it turns out that when IPO auctions are available they usually end up abandoned:

We document a somewhat surprising regularity: of the many countries
that have used IPO auctions, virtually all have abandoned them. The
common explanations given for the lack of popularity of the auction
method in the U.S., viz., issuer reluctance to try a new experimental
method, and underwriter pressure towards methods that lead to higher
fees, do not fit the evidence. We examine why auctions have failed and
verify, to the extent possible, that they are consistent with what
academic theory predicts. Both uniform price and discriminatory
auctions are plagued by unexpectedly large fluctuations in the number
of participants. The free rider problem and the winner’s curse hamper
price discovery and discourage investors from participating in
auctions. That may explain the inaccurate pricing and poor aftermarket
performance of IPOs using auctions.

Here is the link and paper, by Ravi Jagannathan and Ann Sherman.  Here are free copies of the paper.  The explanation is not complete, because the auctions often provide a superior price.  Nonetheless the risk is greater plus buyers are more likely to abandon the market in subsequent periods.  This article is long and not always fun to read, but it definitely falls into the "I learned something today" category.

Human Events offers a list based on a poll of conservatives.  Social Security comes in first, number five is "contraceptive funding."  Foreign policy aside, what should such a list look like?

At the top I will put our aggregate of health care policies, including Medicare, but without pretending that removing any one of them would solve the major problems.  Many smaller decisions, taken together, have painted us into a box where the incentives are for cost-escalation and burden-shifting at the same time. 

It is hard for me to see social security as such a huge villain.  I’m not going to push Ricardian neutrality, but a lot of it is just dollars slushing back and forth.  It would be better as a welfare program but as is I just don’t see how it has wrecked us.

Farm subsidies are terrible but quantitatively they don’t amount to much in the broader scheme of things.  Therefore my second pick is the aggregate burden of many small regulations.  As with health care, we have no single identifiable villain.  Again many small policies, taken together, make entrepreneurship less dynamic and lower long-run economic growth.  "Small steps toward a much worse world," as they say.

My third pick is the public quasi-monopoly on education.

Your ideas?

Sitting in the dentist’s chair yesterday, and knowing I will return tomorrow (don’t worry, it is only root canal work), I realized I had nothing to read.  So I started thinking about the immediate incentives of the dentist, or lack thereof.

I have a very good dentist, but surely there is variation in the willingness of a dentist, across patients, to try harder and do a better job. 

When there is no incentive at all, perhaps the dentist does not try hard enough to alleviate your pain.  Yes there is long-run reputation, but Daniel Kahneman and others find that the duration of a pain has little bearing on your memory of that pain.  So patient reports, as they are filtered into the marketplace, are an imperfect signal.  Furthermore for any given average reputation your dentist seeks, you still want to receive relatively favorable treatment within the distribution of patients.

You might pay a bonus at the end of the visit, if you thought the performance of the dentist was especially good.  But then the dentist might put you though too little pain.  "Fragmented tooth?  Don’t worry, you can ignore it."

Last year I stopped going to a dentist who put me through too much unnecessary pain while cleaning my teeth.

Perhaps you should pretend you are a dentist yourself?  (Toward that end, here is a dental dictionary.)  Or a lawyer?  Should you talk about the breadth of your social circle?

With my new dentist, I pretend to have no fear.  And at the end of the visit I said what a great job she did.  I expect better performance by supporting her self-image as a good dentist and I find high-powered incentives difficult to apply.

But might I improve on this approach?  Comments are open…