Business Regulation

Andrei Shleifer and colleagues have engaged in a massive collection of data on legal regimes around the world. The World Bank has now released a major report written by the same group called Doing Business 2004 (summary here). In addition, the data from their project is available on the World Bank website Doing Business. This is a major resource for economists.

Here’s a nice graph from the report (click to expand).

regulation.JPG

Siberian facts

1. Oil and gas account for about a quarter of Russian gdp, about half of the export earnings, and about a third of government revenues.

2. Much of the Russian energy supply goes toward heating very cold places.

3. Almost 40 million Russians work and live in cities where the average January temperatures range from minus 15 Centigrade to minus 45 Centigrade.

4. Costs of living in Siberia are about four times higher than in the rest of Russia.

5. The average wage in Siberia is about 1/12 that of Moscow, and most Siberians cannot pay their energy bills.

6. There are restrictions on settlement in Moscow, and a general difficulty of finding jobs.

7. Many of the Siberian cities would never have been developed, had it not been for communist planning.

From today’s Financial Times.

Apparently this is why Russia cannot so easily deregulate its energy market and allow prices to rise to world market levels. Siberia would move further into bankruptcy.

The doctor drain from Canada

Unlike most libertarian-oriented economists, I find persuasive the left-wing arguments that individuals have a positive right to medical care. The problem is, most governmental systems are proving unsustainable in the long run. They are affordable only by rationing, which frustrates doctors and patients alike. The Canadian system is (barely) tolerable, only because so many Canadians come to this country for their care.

Read this article from The New York Times.

Here is one money quote:

Forced to compete for operating room time with other surgeons, he said that he and his colleague could complete only one or two operations on some days, meaning that patients whose cases were not emergencies could go months or even years before completing necessary treatment.

“Scarce resources are simply not being spent properly,” Dr. Sriharan concluded, citing a shortage of nurses and anesthesiologists in the hospital where the single microscope available is old and breaking down.

The two surgeons are sharply critical of Canada’s health care system, which is driven by government-financed insurance for all but increasingly rations service because of various technological and personnel shortages. Both doctors said they were fed up with a two-tier medical system in which those with connections go to the head of the line for surgery.

Here is another:

There was a net migration of 49 neurosurgeons from Canada from 1996 to 2002, according to the Canadian Institute for Health Information, a large loss given that there are only 241 neurosurgeons in the country.

My take: It is only going to get worse.

Tightening the border?

Barriers to entering Mexicans simply encourage them to stay in this country longer, and make them less likely to return home for long visits. On net, the number of illegal immigrants appears to go up. For more, read the always stimulating Virginia Postrel.

My take: I know some of these people (the Mexican immigrants), and I can tell you, this is absolutely true. Given border crackdowns, they make a conscious calculation to stay longer in the United States, rather than migrating seasonally.

What is in a voter’s self-interest?

Alan Krueger reports on survey research that shows that people do not vote according to their self-interest. In particular, he bemoans the fact that a majority of the poor want to get rid of the estate tax. This and other odd results are due to “ignorance and uncertainty” says Larry Bartels, a Princeton political scientist. If only the poor were better informed they would vote against tax cuts for the rich. Moreover, a better informed electorate would be a good thing. I take issue with both of these positions.

Take the normative position first. Assuming that voters voted self-interestedly, would a more informed electorate be a good thing? Doubtful. If everyone voted their “interest,” as Krueger and Bartels conceive it, every bureaucrat, welfare recipient and old person living on social security would vote for more government. Naturally, I think this would be a disaster but even those who think this would be a good thing ought to give pause when they consider how much more polarized our society would become were it not for the fact that ideology cuts across class lines.

Moreover, isn’t it interesting that when the poor vote against their “self-interest” they are labeled “uninformed” – Bartels compares them to Homer Simpson. But when Hollywood liberals like Barbara Streisand or rich philanthropists like Bill Gates Sr. vote against their “self-interest” they are called enlightened. What Krueger and Bartels refer to as self-interest is actually masking an ideology.

Is it true that informed voters would vote differently? (Krueger cites some evidence suggesting that in fact this is not the case – at least not as much as one would expect – but he doesn’t offer an explanation.) To understand this one should first realize that voters are uninformed because it doesn’t pay to be informed. The probability that one vote sways the election is infinitesimal so voters are rationally ignorant. Does this imply that voting is random? Not at all. Voters who care about ideas even a little are free to vote their ideology at low cost. Thus, in my view, the fact that votes don’t matter gives us hope. It’s only because votes don’t matter that libertarianism has a chance of success. Of course, I recognize that the same facts gives socialism a chance at the polls but I hope good ideas will win out.

Addendum: I’ve been influenced on these issues by our colleague, Bryan Caplan – although I give the ideas a more positive spin than he does. I recommend his paper Libertarianism Against Economism: How Economists Misunderstand Voters, and Why Libertarians Should Care from The Independent Review and his other papers on rational irrationality which you can find on his web page.

Bickering with Alex over vouchers

Oh, yes, it is time for that again.

Alex thought that Brad DeLong and I should be cheerier over the prospects for vouchers. My previous post had cited a study of vouchers in Chile, showing no real educational improvement over twenty years.

Like Alex, I am willing to give vouchers a try, but I think he is overselling the idea. Why I am not convinced by Alex’s pep talk?

First, Alex cites a study of Colombian vouchers, which showed improvement from a voucher program. Point granted, but I think that correct conclusion is simply that sometimes vouchers improve schooling, sometimes they don’t. The most convincing Chilean evidence, not cited by Alex, is simply that overall educational performance, on the international scale, did not improve after twenty years of vouchers.

Second, Alex argues that Chile did not have a pure vouchers scheme. Again, point granted, but no implementable vouchers scheme will be pure, let us take this for granted. Have you read about the Washington D.C. voucher proposals, which would force private schools to admit a certain percentage of “voucher students” by lot? Not surprisingly, the good private schools don’t want to participate in the program, if it passes.

Alex overestimates how far the Chilean system deviates from a pure voucher model. True, the Chilean system makes the payment to the private school, rather than to the family. But according to most theories of tax incidence, this should not matter. The private school will lower tuition accordingly, hoping to capture more students, and thus a greater payment from the government.

Overall, what is going on? Education is not just another commodity. Some of it is signaling, in which case subsidizing it doesn’t bring great gains. Another big part of education is selecting peers for our child. A school filled with bad kids is a bad school, whether it is private or public. It is not obvious how much a private school can make bad kids good. As experience in Eastern Europe and around the world shows, certain kinds of education may be a prerequisite for well-functioning markets, the right values don’t follow from markets automatically.

Most generally, educational performance varies with many factors, not all of them depending on the scope of the market. There are, in fact, very many good public schools, whether in the U.S. or abroad. Now Chile is a relatively homogeneous and urbanized country, with 13 million plus inhabitants. The country also has a reputation for discipline, order, and strong family structure. Is it plausible to think that such a region can have reasonably good public schools, so good that vouchers won’t elevate their youth to another level? Yes.

Vouchers would give U.S. urban youths another educational chance, but let us not expect too much from this reform.

Don’t forget to say please

The Italian Bishops Conference has recently agonised about how to address the devil during exorcisms following a Vatican decision to translate into Italian the venerable Latin formula, Vade retro Satanas.

Bishops were unsure which form of “you” to use – the familiar “tu” or formal “lei”.

The full story is about Cardinal Dionigi Tettamanzi, 66, the archbishop of Genoa, and a leading candidate to be the next Pope. Here are his controversial Ten Rules on Resisting Satan.

The betting market has Tettamanzi as a 5 to 4 favorite to win the Papal election.

Addendum: One reader wrote and asked why I found the rules for resisting the devil so controversial. As I understand the controversy, it has provoked controversy among Catholics, many of whom feel that the devil should not be so prominent in theology.

Facts about books

From 1450 to 1500, between 10,00 to 15,000 titles were published, with an average print run of 500 copies.

By 1962, 250,000 titles were being published each year; this implies a growth rate five times more rapid than that of population.

Since the development of television (defined as 1950), world population has grown 1.6 percent a year. The number of book titles has grown by an average of 2.8 percent a year.

The human race publishes a book every thirty seconds.

From Gabriel Zaid’s fun, new So Many Books: Reading and Publishing in an Age of Abundance.

By the way, the first book to sell a million copies was Margaret Mitchell’s Gone With the Wind.

More on sales

I sell bonsai by the roadside. The best sign I have discovered so far is “One day only”

Some good signs I display before the motorist gets to my truck include:”50% off”, “$15-500”, “bonsai for Mom”, “bonsai” (written in chinese). “See the 300 year old bonsai”
What other signs would your [Industrial Organizaton] class suggest?

How quickly can IO students come up with the three main reasons why “for Mom” works better than “for Dad”, even though any bonsai club is predominantly male?

From BonsaiDave, an avid reader, responding to my earlier post on Persian carpet sales.

More on student evaluations

Yes, the beautiful do get better student evaluations, the research of Daniel Hamermesh confirms this, the link is through Instapundit.

And get this bit, taken from the link within the link:

According to their data, the effect of beauty (or lack thereof) on teaching evaluations for men was three times as great as it was for women.

How about this?:

A glance at Web sites such as ProfessorPerformance.com and RateMyProfessors.com — where students rate their instructors on criteria such as coolness, clarity, easiness, helpfulness, and hotness (on RateMyProfessors.com, hot professors get chili peppers beside their names) — leaves little doubt about the viciousness of some students. Petty comments abound: “Someone fire this fat bastard” and “Looks like a hobbit, is not a nice person!”

Harold Glasser has been a victim of such comments. One of his students posted the following remarks on ProfessorPerformance.com: “Glasser where’s (sic) the same blue fleece sweatercoat thing, and this awful matching blue fleece hat that looks like the one Elmer Fudd wore. If this wasn’t enough, he has some of the same mannerisms as Dr. Evil,” from the Austin Powers movies.

There is no chili pepper next to my name, but given all this, my opinion of my looks has gone up.

Addendum: Here is link to the paper, thanks to John Charles for the pointer.

Hypotheses about envy

1. We envy those close to us, who get paid just a bit more, not Bill Gates.

2. Men find it hardest to forgive other men for their success with women.

3. Men do not much envy women because they view women as “one of life’s prizes”.

4. The philosophers who wrote most insightfully about envy were all bachelors (Kant, Kierkegaard, Schopenhauer, Nietzsche).

I found these claims in Joseph Epstein’s recent, and entertaining, book Envy. Here is an interview with Epstein. Here is an essay by Epstein on envy. Here is a whole host of Epstein-related links.

My take: I envy how well he writes, but was comforted to read that tenured academics typically earn more than he does.