The economics of on-line dating

Yesterday’s New York Times Magazine offers a lengthy look at on-line dating. This article is longer than most links I offer, it is not full of economic reasoning though the interesting and salacious content may keep you reading.

The bottom line, however, is simple. On-line dating seems to serve (at least) two major constituencies. First, many people use it to marry or otherwise find a monogamous relationship. Match.com claims to have lost 140,000 members, by enabling those people to find partners. Second, many people use internet dating to find casual sex or serial partners. The article quotes a “Greg,” who enjoys a first date with quickie sex at the end, and then offers the following remark: “I liked her, but not enough to merit fireworks. Given the seemingly endless selectoin, I get to be a little less forgiving.”

Since I suspect that on-line dating is more effective than not, people will increasingly choose one category or the other. Those people who are willing and able to marry, will find their partners and marry. After some period of time, the stock of marriageable people will be smaller. (Note: I believe that some decent chunk of the unmarried are simply emotionally incapable of marrying, for whatever reason.) The remaining unmarried will then find relatively higher returns from the serial dating and casual sex routes. So the distribution of the number of sexual partners will become more bimodal over time.

Furthermore, the last two years have been an especially good time to marry through on-line dating. The new technology is being applied to a large stock of unmarried people who could marry and be happy, but who otherwise could not find the right partner. Yes, an ongoing flow will replenish the stock but arguably the stock has been at a peak in recent times, given that on-line dating has just taken off. So if you want to marry, hurry up and get on-line. If you are just looking for casual sex, well, you have a greater luxury of waiting and in fact your options will likely improve with time.

Which party is better for the stock market?

Democrats, it turns out, read Hal Varian on this question. Here is a summary of the data:

Professors Santa-Clara and Valkanov look at the excess market return – the difference between a broad index of stock prices (similar to the Standard & Poor’s 500-stock index) and the three-month Treasury bill rate – between 1927 and 1998. The excess return measures how attractive stock investments are compared with completely safe investments like short-term T-bills.

Using this measure, they find that during those 72 years the stock market returned about 11 percent more a year under Democratic presidents and 2 percent more under Republicans – a striking difference.

This nine-percentage-point excess can be broken down further into an average 5.3 percent higher real return for the stock market and a 3.7 percent lower return for Treasury bills under Democratic administrations.

This regularity is harder to explain than you think, and simply defending Democrats or attacking Republicans will not do the trick. Remember, high stock market returns mean, not that things are good per se, but rather that things are better than people had expected.

I might have thought that people simply overestimate how bad Democratic Presidents will be. But no, the market does not appear to decline as the election of a Democrat approaches. Nor do changes in the risk premium seem to account for the patterns. Take a look at the original research.

Small companies, by the way, do especially well under Democrats:

One interesting finding is that although both large and small companies do better under Democratic administrations, small companies do especially well, while larger ones do only a little better. The return on the smallest 10 percent of traded companies is 21 percent higher during Democratic administrations, while the return on the largest 10 percent is only 7.7 percent greater.

Email if you have any good ideas. Maybe being unduly pessimistic also causes us to vote for Democrats, that is the best I can come up with. It is in fact the case that conservatives are happier, and more likely to believe that they are in control of their lives, than are liberals. Maybe we see similar patterns, not just in the cross-section, but also across time. When people feel bad, and out of control, stock prices fall too low, and those people act more like Democrats in the voting booth.

The new medicare bill

This is one debate I simply have not had time to follow. Brad DeLong, however, offers two posts, the first notes that the prescription drug benefit has no funding source. The second, drawing on Henry Aaron, notes that the insurance component of the bill is far from ideal, here is one excerpt, Brad quoting Henry Aaron:

The design of the bill’s drug insurance makes little sense. Any plan that covers the three-hundredth dollar a person spends on drugs in a year, but provides no coverage for that person’s three thousandth dollar of spending has to be regarded as a bit wacky. Yet that is what this bill would do. It would end federal support for Medicaid drug benefits if patients are also eligible for Medicare, even where the new Medicare coverage would be narrower than existing Medicaid coverage. At the same time, it does nothing to remedy Medicare’s other major failings. It does not cap out-of-pocket costs, even though almost all policies covering the nonelderly provide this essential “stop-loss” protection. It provides no additional help to pay crippling nursing home costs, which are poorly covered under the current program. And it does nothing to help the half of the poor elderly and disabled who now receive no help with premiums and cost sharing they can ill afford.

Even worse, the conference committee bill could single out Medicare for unfair benefit cuts or payroll tax increases in the future. Currently, Medicare hospital benefits (part A) are covered by a dedicated payroll tax. Revenues from this tax now exceed costs and, together with the excess collections from past years (which are deposited in the Hospital Insurance trust fund), are sufficient to cover benefits through 2026. Under current law, three-fourths of the cost of Medicare’s Supplemental Medical Insurance (SMI or part B), which covers doctors bills, durable medical equipment, and certain other expenses, are paid from general revenues and the balance by beneficiary premiums.

I’m still a bit baffled by the whole issue, but it appears we have to write down yet another case (e.g., profligate domestic spending increases, various protectionist measures, the stalled energy bill, etc.) of bad economic policy from the people downtown.

Why are we fascinated by celebrities?

Michael Jackson and Kobe Bryant make the front pages for their possible misdeeds. The tabloids are full of news about Reese Witherspoon’s baby boy. Why do we care? Here is one account:

On the surface, the celebrity rags seem to be about sex. But their real subject is reproduction and the future of the human tribe. On the savannah, we needed to monitor how our clan was faring, and given our small populations we could do the job by ourselves, gossiping about how Gronk had left Zumba and that last night she slipped into Uggah’s cave to make a baby, and what our chance might be to steal one of them as a mate. But in a country of 290 million people, where even our next-door neighbors are strangers, we still need to flex those savannah needs for gossip and information in order to measure our species’ prospect. What better proxy than the young, wealthy, handsome, and visible alpha-male and -female breeding stock that Hollywood employs?

So writes Jack Shafer on Slate.com, see his full analysis. I agree, though I would be reluctant to write with such a reductionist tone myself. Furthermore I think we use celebrities for more prosaic reasons as well. We are fascinated by what produces relative status, something we all seek. We also use celebrities as a topic of social conversation, a means of showing that we are in touch, a way of signaling our views on various issues, and as a vicarious outlet for our hopes and fears. For more, see my What Price Fame?, also shown on the right bar on this blog.

How to outfox terrorists and other pursuers

You might try bsr-inc.com, they offer a two-day anti-terrorist driving school, which includes surveillance and 180-degree spins. You can even give your loved ones a gift certificate for the camp.

Why stop at driving? A three-day anti-terrorist camp in Arizona also teaches espionage and combat pistol techniques, for only $3800, try incredible-adventures.com. They offer a special course on Russian martial arts, promising “If you do spend time in a hotel, it won’t be a five-star.” You learn the “Systema” method of self-defense, enabling you to strike from virtually any position, dating from the Russian cossacks. Oddly, the course promises only two hours a day, I suppose you spend the rest of the time sunning yourself at the hotel pool. Their driving adventures include a course in Southern truck racing.

Many Hollywood movies, by the way, suggest that you overtake a car in pursuit by bumping it in the rear. Anti-terrorist driving instructors assure us this is the wrong way to go. Bump them from the back side, cause their car to spin around, and then pin them against a wall. Warning: do not try this on your own.

From this month’s issue of Popular Science. Oh, yes, if any of those anti-terrorist courses are beyond your means, consider a simple computer game for $50 or less, or perhaps the new John Woo movie, due out Christmas day, for $8.50 or so. That will be my pick of the lot.

Cadaveric vs Live Organ Donation

The basic point is simple – financial incentives for cadaveric donation of organs would save lives and would also reduce the demand for live donation, a costly and difficult procedure. (See my previous posts on this issue here and here). Tyler’s post obscures the basic point by introducing a debate about “a truly free market in organs” by which he means allowing payment for live donors. I won’t be drawn into that debate today, not because it isn’t an interesting issue, but because it is not germane to the issue of financial incentives for cadaveric donation. We should have the latter regardless of our position on the former. Note also that for obvious reasons live donation primarily affects kidneys only and doesn’t reach the issue of how to save the lives of transplant patients who needs hearts, lungs and other organs.

Is Alex an organ protectionist? Should he be?

In a recent post, Alex suggests that we should use market incentives to encourage organ donations from cadavers. I am all for this. But I also read Alex as suggesting that cadaver organs will form the bulk of the organ sales market, if such a market is allowed to develop. He is trying to present a relatively attractive picture of a market in organs, no fear of the desperate poor selling their organs for a pittance, and then squandering the windfall.

What about outsourcing, so to speak? If we had a truly free market in organs, I suspect that most organs would come from the living, and mostly from poor countries. The going rate for a kidney, for instance, runs between $1000 and $2000, which is probably cheaper than the incentives needed to garner many more kidneys from the dead in America. So if we wish to defend a trade in organs, we still need to face up to its less savory aspects, gains from trade or not, most people blanch at the idea of cutting live people open to pull out their kidneys. We can avoid this scenario if Alex is an organ protectionist, though I doubt that he is.

One more palatable option would involve harvesting kidneys from the poor dead, in poor countries. This is the best case scenario, as it would combine both free trade and harvesting from the dead rather than from the living. Needy patients get the kidneys, many lives are saved, but without cutting open desperate kidney sellers. But how easy is it to evaluate the quality of a kidney from abroad, much less ship the kidney from somewhere like India? Most likely, the cheapest way to ship kidneys is to put a living body, the kidney owner, on a plane. I could be wrong, indeed I hope I am wrong. But if I am right, perhaps there is at least some argument for organ protectionism. (Imagine the political rhetoric, “no more cheap kidneys from abroad!”. etc., Gephardt could mention this to kidney-selling states in the debates and get all the heads nodding.) If you, like I, believe that most poor organ sellers benefit little from their trades, it could be better to harvest organs from the American dead, than buying them from the living poor abroad.

The best new ideas in applied science

Read this feature article from Popular Science magazine, or just buy the December issue. My two favorite new products are the following:

1. Binoculars that repeat the last 30 seconds. Instant replay, right there in your hands, and only $600 from bushnell.com.

2. Speakers that know how to listen. The speakers can measure what kind of sound they are producing in a particular room, and adjust their output accordingly to sound even better, they are called Beolab 5. This item costs a steeper $16,000, I will buy them when they start paying bloggers, from Bang-Olufsen.

Alex will be interested to hear about the new “Lifeport Kidney Transporter,” see organ-recovery.com, now FDA-approved, which makes it easier to move kidneys around the world, the device makes a soon-to-be transplanted kidney last for 17 more hours than previous technologies.

Hollywood Heavies

While Hollywood lobbies Congress for protection in the more gentile manner (see Tyler’s post today) the Teamsters have taken direct action. Axium International planned to hold a symposium in LA on the Canadian Tax Credit Incentive for film production. The Teamsters threatened to bring hundreds of supporters and 30-50 trucks to shut the hotel down where the symposium was to be held. Axium backed down, cancelled the lectures and wrote a craven letter to Arnie in Daily Variety – “please exert your utmost through the California legislature, the Governor’s office or the federal government to enact legislation ensuring that the entertainment production business remains, for now and ever, in California.”

Note that I have a bias on this issue – see the post below.

Movie IPOs

An investment firm is raising money to finance movie projects by letting film buffs buy a piece of Ethan Hawke, or at least a share in a project he’s involved with, and trade that as a stock.

This isn’t a pretend Internet stock exchange based on the rise and fall of Hollywood stars. Chicago-based brokerage Civilian Capital is letting investors buy actual shares in a film.

(More here.) Why not? You can own stock in the Green Bay Packers and bonds backed by the music of David Bowie. This is a method of generating buzz, a natural audience, and capital. Thanks for the link go to my brother Nic Tabarrok, a movie producer in Toronto. I once invested in one of his films. I lost money but a lot less than in Webvan – I’d do it again.

What Arnie wants for Hollywood

Privileges and protection, it would seem. Newsmax tells us the following:

Included in the Hollywood wish list is a bill now in a congressional conference committee that could provide about $250 million over five years in incentives for keeping small- and medium-budget productions in the United States.

Under an amendment, films would qualify for a tax deduction if half of the wages paid to actors, producers, directors and others are kept inside the United States.

According to a recent report, the U.S. economy has lost about $4 billion in economic benefits – about 25,000 jobs per year – since Canada began offering tax subsidies in 1998 to film production companies.

It is believed that Arnie can use his bully pulpit to help push the measure into law.

My take: If Canada wishes to subsidize Hollywood cultural exports, and then cry about the supposed decline of cultural diversity, let the production companies take the money and laugh all the way to the bank.

What is the hot Christmas toy this year?

Just click here to see it. It is called “Lunar Stunt Car.” I can’t for the life of me imagine what is special about it, though of course I am not the typical buyer in this market. It is already hard to get in stores, but of course they are not raising the price, creating yet another puzzle in price theory, in fact they are advertising that it is on sale.

My best guess: They keep the prices low to generate publicity, to drive a fad, and the artificial scarcity makes it an especially sought-after item. Furthermore it may generate trips to the toy store, leading parents to buy other toys, although whether these gains rebound to the Lunar Stunt Car manufacturer is unclear. That all being said, once the toy takes off, I still don’t see why they don’t raise the price to capture higher profits.

Joe Lieberman vs. Howard Dean

Score one for Lieberman, read Jacob Levy’s comparison of the two on economic policy. Dean recently called for the “re-regulation of business”, Lieberman countered with the following:

“Howard Dean doesn’t understand how Bill Clinton created 22 million jobs in 8 years. By responsibly deregulating markets, Bill Clinton allowed exporters to sell more American products to foreign markets and brought competition to existing monopolies.

“Howard Dean would usher in a new era of big government with his re-regulation proposal. He would give us a treacherous trifecta of policies that turn back the economic clock: new trade barriers, a larger tax burden on our middle class, and now bigger bureaucracy. Either he doesn’t know how to turn the economy around, or this is another reckless mistake.

“We need to toughen the integrity of our marketplace, put real enforcers in regulatory posts, and put wrongdoers in jail. We don’t need to cripple the economy with a whole new set of broad re-regulation as Howard Dean proposes.”

It is a shame that Lieberman has no chance within the Democratic party.