Category: Law
Stayaway from Layaway
Layaway plans are immensely popular, a fact I find deeply puzzling much like the popularity of Justin Bieber, Snooki, and homeopathy makes me question the rationality of my fellow human beings.
The typical layaway plan requires a deposit of 10-15% of the price of the good, say a new TV. If the consumer pays the balance over the following 10-12 weeks (i.e. by Christmas) they can pickup the good. If the consumer doesn’t pay the balance they get a refund of payments made less a service fee.
Walmart and Kmart advertise their layaway plans heavily. I am shocked, however, that so-called consumer advocates also have good things to say about poor people lending big corporations money:
Consumer advocates say layaway is a great way to manage a major purchase and stick to a budget, allowing consumers to spread the cost of an item over a number of payments without running up a lot of costly debt.
…”The fees, if any, are generally nominal and probably much lower than the interest you’d pay if you purchased those things with a credit card and didn’t pay off the bill for several months,” said Tod Marks, senior editor and shopping expert at Consumer Reports.
Stop the insanity! The relevant comparison is not to buying on credit but to saving. Instead of lending Walmart money, get yourself an old-fashioned piggy bank and avoid the cancellation fee and the hassle of going to the store to make the periodic payments.
Tod Marks, from Consumer Reports (!), also makes this astounding argument:
With layaway, you don’t have to worry that the store will run out of an item you want,” he said.
Are we living in the Soviet Union? Who worries about Walmart and Kmart running out of goods? Occasionally an item will be discontinued but then the replacement is usually better and/or cheaper. Similarly, layaway plans advertise that you can “lock-in” the current price. Right, and if the price goes down or you find a lower price elsewhere you are similarly locked in.
Still not convinced? In the spirit of Tabarrok’s Wager I offer Tabarrok’s Layaway Plan.
Send me $10 right away along with a message telling me what you want, when you want it and the current price. Save your money. If you save enough to buy the good at the requisite time send me a note and I will heartily congratulate you with a $10 reward. If you don’t save enough, thanks for the $10 and better luck next time. Unlike Walmart I will not guarantee the current price but Tabarrok’s Layaway Plan offers significant advantages that Walmart’s plan does not. On the day that you have saved up enough, Tabarrok’s Layaway Plan lets you buy at any store and at the lowest price that you can find! And that’s not all! Tabarrok’s Layaway Plan offers another great advantage, The Tabarrok Switch™. If you find a good that you like more than the good that you had originally planned to buy the Tabarrok Layaway Plan lets you switch to the new good!
Congratulations on choosing the Tabarrok Layaway Plan, the plan with the most options and flexibility of all layaway plans.
The economics of declining Somali piracy
The number of successful pirate hijackings has dropped since November 2011 when over 40 successful attacks were recorded for that month alone. In comparison, in 2012 there were only 15 successful attacks off the East African coast, according to UN figures. The drop has been attributed to increased private armed security on the part of commercial vessels and anti-piracy task forces from foreign governments, which have been supported by enforced prosecution of hijackers. Maritime law before 2011 did not allow armed security on commercial vessels, but the International Maritime Organization has since added it to itsguidance on best management practices for piracy for high risk areas. Although the situation has seen improvement, some pirate groups have turned to inland hostage taking and hijacking attempts still continue.
There is much more here. By the way, I enjoyed Captain Phillips, which I took to be quite critical of the U.S. military and which is best understood as seeing the two stories as running parallel commentary on each other.
The markets in everything angle is this:
Not all of the crew cooperated with the movie, and those who did were paid as little as $5,000 for their life rights by Sony and made to sign nondisclosure agreements — meaning they can never speak publicly about what really happened on that ship.
It’s the film’s version of events — and Hanks’ version of Phillips — that will be immortalized.
There is more here.
Texas fact of the day
…two-thirds of the 109 state prisons lack air conditioning in housing areas…
…corrections officers have complained to Texas prison officials that the heat index inside facilities is often as high as 130 degrees Fahrenheit, but haven’t been able to persuade them to make changes. They said they were driven to speak out after learning that the state spent $750,000 in June to buy six new barns with exhaust fans and misters to cool pigs raised for inmate consumption.
There is more here.
New Zealand vending machine markets in everything
Oxford farmers Geoff and Sandra Rountree will start selling the controversial beverage through a refrigerated vending machine at their farm gate this week. The Rountrees are franchisees of raw milk company Village Milk, which has developed a network of six vending machines around New Zealand in just over a year. Managing director Richard Houston said his franchisees were the only certified raw milk suppliers in the country.
Natural experiments from Washington State?
Washington already has the highest state minimum wage in the country, at $9.19 an hour. Soon, voters in this tiny city south of Seattle will decide whether to push the local minimum even higher.
If a majority of the voters here say yes to a referendum known as Proposition 1 when their mail-in ballots start arriving this week, a minimum wage of $15 an hour would be required for many businesses in SeaTac, more than twice the federal minimum of $7.25.
There is more here. Of course doing this in a single locality is the least advantageous setting for such a policy experiment. That said, the Sea-Tac airport (and associated concerns) is by far the biggest employer in the city and that entity may well face inelastic consumer demand in response to higher prices, provided those price hikes can be collectively enforced across all the sellers in the airport, which is indeed what a minimum wage hike would bring.
Bob Laszlewski on the ACA exchanges
Based upon my survey of a large number of health plans accounting for substantial market share in the 36 states the federal insurance exchange is operating in, not more than about 5,000 individuals and families signed-up for health insurance in the 36 states run by the Obama administration through Monday.
It is not uncommon for a major health insurer with a large market share to report less than 100 enrollments in the first week.
Reports today say the enrollments continue to trickle in at about the same rate.
Worse, the backroom connection between the insurance companies and the federal government is a disaster. Things are worse behind the curtain than in front of it.
Here is one example from a carrier–and I have received numerous reports from many other carriers with exactly the same problem. One carrier exec told me that yesterday they got 7 transactions for 1 person – 4 enrollments and 3 cancellations.
For some reason the system is enrolling, unenrolling, enrolling again, and so forth the same person. This has been going on for a few days for many of the enrollments being sent to the health plans. It has got on to the point that the health plans worry some of these very few enrollments really don’t exist.
The reconciliation system, that reconciles enrollment between the feds and the health plans, is not working and hasn’t even been tested yet.
When health plans call the special health plan “help desk” they are lucky to get through. When they finally get through, the feds are creating a “help desk ticket” to be researched.
Now, if we are enrolling 20 to 50 people per day per health plan per state through the federal exchange, that might be sort of manageable. But if this thing ever ramps up to thousands of enrollments a day…
In summary, big market share health plans are getting maybe 50 enrollments per day per state from the feds and that little bit of new business is a mess.
The link is here, hat tip goes to virtually everyone in my Twitter feed.
Will the health care exchanges lower prices over time?
Here are some interesting arguments from David Goldhill, here is one of them:
The designers of the health-care exchanges have also assumed that consumers, by shopping for the best deal, will drive down premiums. However, a major flaw in the design of insurance subsidies will insulate almost all of the initial customers — the estimated 20 million subsidized households — from concern about how much their policies cost.
Now, it’s not supposed to work this way. Only those Americans who don’t get insurance at work and who have income that puts them between 100 percent (138 percent in Medicaid expansion states) and 400 percent of the federal poverty level are eligible for exchange subsidies. As income rises within this bracket, the subsidy shrinks. But in practical terms, everyone who is subsidized has an infinite subsidy that will make them insensitive to premium levels.
How can that be? Let’s take an example. A family of four at 138 percent of the poverty level ($32,499) has its premium capped at 3.29 percent of income or $1,071. The rest is subsidy. So, if the cost of a silver plan is $10,000, the subsidy for this family is $8,929. A family at 400 percent of the poverty level ($94,200) has to pay up to 9.5 percent of its income for a plan, or $8,949. So the same $10,000 premium carries a subsidy of only $1,051.
…But now look at those two families from the insurer’s perspective. A $10,000 plan already costs more than the maximum amount either family would pay. If the insurer raises the premium to $10,001, both families get $1 in additional subsidy. If it raises premiums to $11,000, both families get $1,000 in additional subsidy. In other words, no matter how much an insurer raises rates, a subsidized household pays zero more.
The full piece is here. Reihan adds useful comments. This evidence does indicate that more sellers does lead to lower premiums, relative to fewer sellers.
The labor market effects of immigration and emigration from OECD countries
Here is a new paper by Frédéric Docquier, Çaglar Ozden & Giovanni Peri, forthcoming in Economic Journal:
In this paper, we quantify the labor market effects of migration flows in OECD countries during the 1990’s based on a new global database on the bilateral stock of migrants, by education level. We simulate various outcomes using an aggregate model of labor markets, parameterized by a range of estimates from the literature. We find that immigration had a positive effect on the wages of less educated natives and it increased or left unchanged the average native wages. Emigration, instead, had a negative effect on the wages of less educated native workers and increased inequality within countries.
A gated version of the paper is here, ungated versions are here.
Yes, I am familiar with how these models and estimates work, and yes you can argue back to a “we really can’t tell” point of view, if you are so inclined. But you cannot by any stretch of the imagination argue to some of the negative economic claims about immigration that you will find in the comments section of this blog and elsewhere.
And no I do not favor open borders even though I do favor a big increase in immigration into the United States, both high- and low-skilled. The simplest argument against open borders is the political one. Try to apply the idea to Cyprus, Taiwan, Israel, Switzerland, and Iceland and see how far you get. Big countries will manage the flow better than the small ones but suddenly the burden of proof is shifted to a new question: can we find any countries big enough (or undesirable enough) where truly open immigration might actually work?
In my view the open borders advocates are doing the pro-immigration cause a disservice. The notion of fully open borders scares people, it should scare people, and it rubs against their risk-averse tendencies the wrong way. I am glad the United States had open borders when it did, but today there is too much global mobility and the institutions and infrastructure and social welfare policies of the United States are, unlike in 1910, already too geared toward higher per capita incomes than what truly free immigration would bring. Plunking 500 million or a billion poor individuals in the United States most likely would destroy the goose laying the golden eggs. (The clever will note that this problem is smaller if all wealthy countries move to free immigration at the same time, but of course that is unlikely.)
For the initial pointer I thank Kevin Lewis.
The back end glitches in Obamacare
Very few of the individuals trying to buy health insurance are getting through to all the steps of the federal ACA website and using it successfully. But once they register, they still may not have actual coverage plans, with successes running at what is (possibly) a one in one hundred rate:
As few as 1 in 100 applications on the federal exchange contains enough information to enroll the applicant in a plan, several insurance industry sources told CNBC on Friday. Some of the problems involve how the exchange’s software collects and verifies an applicant’s data.
“It is extraordinary that these systems weren’t ready,” said Sumit Nijhawan, CEO of Infogix, which handles data integrity issues for major insurers including WellPoint and Cigna, as well as multiple Blue Cross Blue Shield affiliates.
Experts said that if Healthcare.gov‘s success rate doesn’t improve within the next month or so, federal officials could face a situation in January in which relatively large numbers of people believe they have coverage starting that month, but whose enrollment applications are have not been processed.
There is more here, via Megan McArdle, who for years has been predicting major problems with the web sites. By the way, these are not fundamentally problems of high usage or high demand.
Using eminent domain to halt foreclosure
Richmond, California has developed a new trick, achieving an effect similar to principal reduction:
Richmond condemns mortgages on homes that are now worth far less than what the borrower owes. The note holders — investors such as pension funds and mutual funds – are forced to settle for the current fair market value. The city pays for this with cash from a new set of investors, who now own the mortgage. The new price is set by the current market, and the homeowner settles into a more manageable loan.
From Lydia DePillis at Wonkbook, the full story is here. This part is interesting too:
Richmond couldn’t get insurance to shield it from a crushing judgment — if it lost its bid to spare struggling homeowners, the city could find itself underwater.
In the backlash to the plan, the market boycotted the city’s most recent bond issuance, forcing it to withdraw the $34 million offer, which was supposed to refinance earlier debt.
Richmond’s leaders stared hard at the threats. In the end, it seemed to only harden their resolve.
The seizures have not yet happened, but are pending, and it is expected that Richmond will need to defend itself in court.
Will the Swiss vote in a guaranteed annual income?
Switzerland will hold a vote on whether to introduce a basic income for all adults, in a further sign of growing public activism over pay inequality since the financial crisis.
A grassroots committee is calling for all adults in Switzerland to receive an unconditional income of 2,500 Swiss francs ($2,800) per month from the state, with the aim of providing a financial safety net for the population.
Organizers submitted more than the 100,000 signatures needed to call a referendum on Friday and tipped a truckload of 8 million five-rappen coins outside the parliament building in Berne, one for each person living in Switzerland.
With that, a married couple could piece together more than 67k and simply not work, so this sum appears infeasible. There is more information here, hat tip goes to Evan Soltas.
Does increasing inequality weaken the case for additional low-skilled immigration?
In general, no. Let’s assume that the increase in inequality is driven by new technologies, such as automation, or by foreign trade. Imagine that Chinese competition lowers American middle class wages but gives Apple another export market and thus simultaneously boosts the returns to capital. For our analytical purposes, the new foreign trade is a “new technology” of some kind or another, so doing trade or technology as the cause of the higher inequality should not make a big difference.
Assume also, as many models do, that capital is more mobile than labor.
In many settings it is then the mobility of capital that determines the domestic wage, not immigration. If you keep out more immigrants, that just means capital leaves your country for India or China. Alternatively, letting in more low-wage immigrants limits outsourcing (or automation, as you wish) and keeps more capital in the United States. It may even boost the number of jobs for native-born Americans, who perhaps drive trucks to and from the factories where the immigrants work. Here is some evidence on that point, hardly conclusive but certainly not running against immigration.
It is instructive to look at the polar case. Let’s say American wages were completely determined in global markets. Letting in more immigrants wouldn’t affect those wages at all.
Immigrants also keep their beneficial economic effects in increasing returns to scale models, with or without high inequality in the domestic wage structure.
There are many different ways you can slice this cake, and I am not suggesting the mechanisms outlined above are always the dominant ones. Still, they should disabuse you of leveling the immediate knee-jerk charge that higher domestic inequality weakens the economic case for additional low-skilled immigration.
There are two further points of import. First, if permitted immigration is so high that labor is more mobile than capital, the argument for limiting low-skilled immigration to help domestic workers may become stronger. Second, the “political and cultural externalities” arguments against low-skilled immigration are still on the table.
Accrediting individual courses (hi future)
A growing clamor is calling for an accreditor to oversee the quality of college-level learning that occurs outside of college.
The challenge could be taken on by an existing accrediting agency — or a new one — that develops a specialty in non-institutional providers like StraighterLine and Udacity. Or, with more of a trailblazing approach, an accreditor could approve individual courses rather than degrees.
If either idea becomes a reality it would add a seal of approval for a constellation of online course providers and, perhaps, open the door for them to federal financial aid.
Here is further information. On the down side, note that the fixed cost of monitoring and enforcing ongoing standards on a stand-alone individual course may be fairly high, at least relative to the value of that course.
Arresting the bad guys in Greece
Probably most of you know by now that the Greek government has moved to arrest leading members of Golden Dawn, their neo-Nazi Party, including parliamentary members and leaders of the party. These members seem to be bad people, even by the low standards of neo-Nazi parties worldwide.
Still, it is odd to arrest the leadership the leadership of an elected political party — even a bad one — all at the same time. At least the typical foreign sources are not completely clear on the exact nature of the “criminal gang” charges (there is a slightly more detailed summary here, and here, see also @Yiannisbab, and one reads that the charges themselves have been leaked only in part to the press). I understand full well that this is an attempt to preserve democracy for Greece, not an attempt to eliminate it, but still the resulting situation is rather awkward. And what if some of the key players cannot be convicted? What kind of new elections are required? And until conviction, what kinds of political powers, and claims to political funds, do the defendants have? As Gideon Rachman wrote: “Mass arrests of legitimately elected politicians should always spark unease.”
From this distance, it is difficult to judge whether the right thing has been done. In any case, when you feel you have to arrest your neo-Nazi party to limit their influence, things have gone far indeed in a very bad direction. Some sources indicate that fifty percent of the police voted for Golden Dawn.
Addendum: Interestingly, for all of their anti-immigrant stances, the Golden Dawn party seems to have used migrants to sell products illegally on black markets as a revenue raiser.
*The Tragedy of Liberation*
That is the new book by Frank Dikötter, the subtitle is A History of the Chinese Revolution 1945-1957, and it is a prequel to his earlier Mao’s Great Famine. His books are superb documents of the tyrannical age he studies. Here is one excerpt:
In an orgy of false accusations and arbitrary denunciations, few escaped with their reputations intact. By February no more than 10,000 of a total 50,000 ‘capitalists’ in Beijing were considered honest. Similar figures came from other parts of the country. To punish all would wreck the economy. Mao had a solution to this conundrum. He came up with a quota, ordering that a few should be killed to set the tone, while exemplary punishment should focus on 5 per cent of the most ‘reactionary’ suspects. Across most cities, by a rough rule of thumb, about 1 per cent of the accused were shot, a further 1 per cent sent to labour camps for life, and 2 to 3 per cent imprisoned for terms of ten years or more.
This is not easy material to read about, but Dikötter’s books are landmark achievements of their time.
And as I am wont to say, China’s prospects and fundamentals look pretty good if you scrutinize the country’s history over the last 30 or also the last 3000 years. It’s the time frame of the last 300 years that doesn’t look so good.