Heidegger on the screen

[The movie] is more than three hours long and explores the theories of a German philosopher while wending its way up a European river.

A challenging package, you might think, even by the relatively adventurous standards of a film festival audience.

Yet this film, called The Ister, has been playing to packed houses everywhere from Rotterdam to Sydney and Melbourne. Few people have seen anything like it before.

Made by a pair of Melburnians armed with little more than a digital camera and a sense of inquiry, The Ister is loosely based on a wartime lecture delivered by ex-Nazi Martin Heidegger on one of Germany’s most celebrated poets, Friedrich Holderlin, whose poem The Ister (an old Roman name for the Danube river) is another source of inspiration for the documentary.

It is a movie made with great care:

Ross [the filmmaker] was concerned that it be intellectually coherent.

“In the back of his mind was, ‘What if Jacques Derrida sees this?”‘ Barison says.

Here is the full story.

Happy Birthday to Marginal Revolution!

We are one year old today! Here is our first post. Since that time we have written 1,685 posts (388 from myself and an incredible 1,208 from Tyler, the remainder from some great guest bloggers) and have had over 870,000 visitors. When imported into Word, MRs first year is 1,842 pages long. Technorati watches 3.5 million blogs and ranks Marginal Revolution at number 463 and rising! Pretty good for a 1 year old. Sorry to crow but heh, I have to be paid somehow.

Facts about the Mexican judiciary

1. In Mexico the federal judiciary employs 29,800 employees; in the much larger and richer United States the same number is 34,000.

2. Mexico employs about 900 federal judges; in the United States it is 1700.

3. The Mexican Supreme Court employs 3400 individuals; in the United States the corresponding number is 430.

4. The Mexican federal judiciary employs more chaffeurs than judges.

I can think of at least two explanations. First, Mexico, which has lower wage rates, chooses a higher labor-to-capital ratio. Second, the Mexican system is full of corrupt perks.

My blog source writes:

En México, el tercer poder es totalmente disfuncional en todos sus niveles y funciones. [In Mexico the third branch of government is totally dysfunctional in all of its levels and functions.]

Number of judges do not the rule of law make.

The data are from La Boveda, an excellent Spanish-language blog, from Mexico, for economics and politics.

The Economics of Declining Architecture, Once Again

Last week I asked why contemporary urban architecture has declined in some regards; trace back the link for the full context. My final suggestion concerns the issue of resale value.

I, like many others, have occasionally been tempted to buy a house that looked interesting. I’ve also been tempted to have huge and beautiful murals painted on the walls of my house. I did neither. Why? I feared for resale value.

The quest for resale value encourages standardized packaging. Just look at the mortgage market or the New York Stock Exchange.

In (many) older settings, people bought homes and buildings and stayed in them for long periods of time. Often they were passed down through the generations. If you do not have to worry about resale, simply buy what you want. But the buyers of modern America often will be moving on to another house within three or maybe five years. They think about selling again at the best price possible, as quickly as possible. So they are led to appeal to mainstream taste.

Andy Warhol understood these dynamics better than many other artists. The most saleable Warhols are those from definite “series.” He did flowers, soup cans, Chairman Mao, and so on. These works are easiest to price, market, and brag about in casual conversation. No doubt Warhol, whether you like him or not, was an innovator. But within his ouevre he sought a fair degree of homogenization.

In the music market, in contrast, few people buy CDs for resale value (those that do will focus on the hits). The scope for heterogeneity and innovation is correspondingly greater.

The economics are of course tricky. A world with easy resale is a world with many buyers, which can encourage innovation. But holding the number of buyers constant, a higher demand for resale may well lower innovation.

Why the growth rate is important

The importance of the growth rate increases, the further into the future we look. If a country grows at two percent, as opposed to growing at one percent, the difference in welfare in a single year is relatively small. But over time the difference becomes very large. For instance, had America grown one percentage point less per year, between 1870 and 1990, the America of 1990 would be no richer than the Mexico of 1990. At a growth rate of five percent per annum, it takes just over eighty years for a country to move from a per capita income of $500 to a per capita income of $25,000, defining both in terms of constant real dollars. At a growth rate of one percent, such an improvement takes 393 years.

That’s me quoting me, from a book I am just starting to write. The tentative title is “The Welfare Economics of Human Tragedy: A New Approach to the Theory of Economic Policy.”

If I had to explain, in one sentence, the reason I am not on the political left, I would cite the enormous long-run benefits of economic growth. Of course it still can be argued that various left-wing policies, properly understood, will contribute to long-term growth. But in my view, if you are not supporting growth-maximizing economic policies, you better had a pretty good reason in your pocket.

From hot water to cold air

My post on hot water (and followup here) is drawing more hot air than I expected. Daniel Davies over at Crooked Timber is often very good so I am frankly surprised that he gets this one very wrong. Davies thinks the argument falters if you assume the landlord has monopoly power.

Even if there is a slight oversupply of rental units for sale, time is almost always on the landlord’s side, because waiting is typically much more inconvenient for the party that has to wait without a house to do wait in [sic]. In general, when tenants and landlords are negotiating over the potential Pareto gain that could be made from renting the house, the landlord ends up capturing most or all of the surplus. The hot water and habitability laws are simply aimed at skewing things a bit in favour of the tenant and putting a floor on how bad a deal the tenant can end up accepting.

Wrong. Assume that a rapacious landlord owns the only apartment in the entire universe and you want it. The landlord is therefore going to extract all of your consumer surplus. Without the hot water the apartment is worth $500 a month to you – so that’s the rent. With the hot water it’s worth $550 – so that’s the rent. There is no skewing in favor of the tenant because the law doesn’t change the landlord’s bargaining power one iota. All it does is raise the landlord’s costs so that he may, in fact, quit the business making you worse off.

Daniel has not absorbed the lesson of my post, the rent will go up. He would have an argument if we added rent controls thereby squeezing the landlord from both ends. [Addendum: Glen Whitman gets the analysis exactly right.]

On a different note, many people have focused undue attention on hot water, something that most of us (in this country) really do want in an apartment. The principles involved, however, don’t change much with the good. If you like, think air conditioning instead. Eric Kilby kindly sends me an editorial from a few years ago in the Philadelphia Inquirer (registration required). Here’s what it says:

The zoning board under Thomas Kelly, president of Sheet Metal Workers Local 19, has required some developers of subsidized housing to install central air conditioning – a pricey, discouraging requirement for what are supposed to be low-cost projects. AC, in case you haven’t guessed, is installed by sheet-metal workers.

Is Globalization Changing How We Eat?

Here is my recent keynote address to the International Association of Culinary Professionals. Since it is a transcribed talk, this is about as chatty as I come. I present a simple approach to thinking about excellent food, based on the ideas of competition, experimentation, and pride.

You will also “hear” me on the decline of diners, my idea of food paradise, and how to find a good dive in rural Louisiana. Here is one excerpt:

If you look at Mexican food in this country, a lot of it, of course, is not eaten by Mexicans at all. It is eaten by Americans. But consider the Mexican food eaten by Mexicans. Well, who are the Mexicans, for the most part, who are currently coming to America? They tend to be fairly young, and they tend to be male. So take a group of young men, say ages eighteen to twenty-five, put them together in large numbers and let them eat. What do you get? Well, some of it is quite excellent, some of it is not so great, but you get something very different than the native cuisine. Let’s say you performed this thought experiment with France. Take a million Frenchmen, male, ages eighteen to twenty five, bring them to the United States, let them loose, have them eat. You are not going to get classic French cuisine.

Can you implore “read the whole thing” when it is your own talk?

The Gringos Will be Weeping

That is the subtitle of the film I saw last night in Mexico City. The title is “Un Dia sin Mexicanos” [A Day Without Mexicans]. The premise of this comedy is that all of the Hispanic residents of California suddenly disappear one day without any warning. Beds are empty, cars are left running, and so on. Not surprisingly, California falls apart.

There are few movies that accurately illustrate market economics and fewer yet that show a good understanding of the theory of comparative advantage. This is one of them, and it can be viewed as a truly libertarian film. I won’t offer any spoilers but the final message is cosmopolitan and explores the question of what it really means to be a Latino. Plus it offers rich insight into how the Mexicans feel they are viewed by Americans. The film does hit a few false notes and has some slow patches but much of it is quite hilarious. And most of the film is in English, if you ever (unlikely) have a chance to see it.

The movie is currently showing on more screens in Mexico City than any other, including “Yo, Robot”, starring Will Smith.

By the way, if you are wondering, the film was partially subsidized by the Mexican government.

Hot water (again)

I think my law students understood my first-class example about contracts, incentives and hot water. But Kevin Drum, Matt Yglesias and others are having some difficulties. No problem. I will make it simpler. Suppose we have a law that says that at the end of every year landlords must rebate their tenants $50 for every month of rent paid. Good for tenants, right? Perhaps in the very short run but in the near future we can expect to see rents rise by $50 per month and the old equilibrium will be restored in all essentials. Now suppose that instead of being required to rebate the $50 the landlords are required to spend the money on shoes for the tenants. Now both tenants and landlords are almost certainly worse off since the tenants would almost certainly have used the rebate to buy something other than shoes. The hot water example hardly differs.

Of course, we could add in some other features that might make the law a good idea. Suppose, for example, that hot water encourages bathing which reduces the transmission of disease. Tenants won’t take the external benefit of hot water into account and thus hot water will be underprovided – a hot water requirement or better yet a subsidy might be justified in this situation.

An alternative explanation for laws like this is that they are supported by people who want to keep the poor out of their neighborhood – this is an externality argument also but one quite different from that above. Whatever the explanation, note that these arguments are quite different than the naive one which assumes that the requirement transfers wealth from the landlord to the tenant. Contracts are multi-dimensional, force one part to change and the others will adjust. More bonus points: What implications does this have for the study of price controls?

As I told my students, understanding the basic analysis is the first-step on the path to wisdom, it is not the end of the path. But you have to understand the first step if you are going to reach the final destination.

Toll Roads and Externalities

A recent paper by Aaron Edlin and Pinar Karaca-Mandic has focused my attention on the potential of toll roads. The basic question is whether,

…driving entail[s] substantial accident externalities that tort law does not internalize? …If so, this implies that a one percent increase in aggregate driving increases aggregate accident costs by more than one percent.

This may seem obvious. Any error in tort judgments would reduce deterrence enough to make it suboptimal. But, argue Edlin and Karaca-Mandic, its not so simple;

The reverse, however, could hold. The riskiness of driving could decrease as aggregate driving increases, because such increases could worsen congestion and if people are forced to drive at lower speeds, accidents could become less severe or less frequent. As a consequence, a one percent increase in driving could increase aggregate accident costs by less than one percent, and could even decrease those costs.

Edlin and Karaca-Mandic find that

…traffic density increases accident costs substantially whether measured by insurance rates or insurer costs. …a typical extra driver raises others’ insurance rates (by increasing traffic density) by the most in high traffic density states. In California, a very high-traffic state, we estimate that a typical additional driver increases the total insurance premiums that others pay by roughly $2231 ±$549 each year.

What is the best way to internalize the externality? Gas taxes are, as Edlin and Karaca-Mandic point out, politically untenable. They propose

…requir[ing] insurance companies to quote premiums by the mile instead of per car per year? This simple change could reduce driving substantially by moving a fixed cost to the margin without raising the overall cost of driving.

To some extent insurance companies already do this. Nonetheless I’m not sure that this solves the problem. A friend of mine lives in Riverside, CA and commutes to LA at 3 am. He would get hit by the Edlin premium but is in fact reducing the externality. Even in LA he is really only a risk to himself at 3 am. Another option is toll roads. The problem is that currently most toll roads do not congestion price or differentiate by vehicle size (beyond trucks); a factor White [2002], for example, finds significantly affects accident costs. The transaction costs of internalizing this externality via toll roads may be too high. But technology, according to the Economist, is changing. Toll roads can now congestion price and change higher fees to SUV. The Economist notes that a Swiss toll system which charges for the distance driven

“.. seems to be an unmitigated success. To general surprise, it was up and running on time. And it achieved its main objective: reducing truck traffic across Switzerland, which increased by 7% during the late 1990s. In the year after the system’s debut in 2001, the number of trucks on Swiss roads fell by 5%. What is more, transport companies now try much harder to ensure that their trucks do not cross the Alps empty. Financially, things appear to work, too. Operating costs amount to only 6% of revenues, estimated at €575m last year.

Addendum: Tyler and Alex debated this issue you can follow the debate here.

Islamic economics

The Islamic Bank of Britain, the first sharia-compliant bank in that country will soon open its doors. Ironically, Islamic banks may do better in the West than in the present Muslim world. The natural alternative to interest-bearing loans is a profit-sharing contract but that only works if accounting standards are clear and the courts can enforce the contract. Consider, if Taghi lends Amir money based on interest it’s clear what Amir owes, but if Taghi gives Amir money for a share of a profit-making enterprise then he is at the mercy of Amir’s bookkeeper. Writing in the NYTimes, Virginia Postrel writes:

…Islamic banks learned the hard way that risk sharing does not work in countries where businesses keep false accounting records. “Many people came to borrow money with wonderful ideas, and they just walked away with the money,” Professor Kuran said. The banks could not reliably audit the books, and if they took a client to court, the business would just claim a loss.

Consequently, the banks all started charging what amounted to interest for loans…A minuscule portion – generally well under 5 percent – of the assets of Islamic banks consist of loans based on genuine profit and loss sharing,” writes Professor Kuran..

Substitutes for interest-bearing loans are not hard to find, however.

The most common way around the interest ban is known as murabaha. The bank buys a capital good, a computer, say, for a client, who agrees to buy it back, with a markup, at a particular time in the future. In effect, the markup represents interest.

Islamic banks also invest in debt securities and pay depositors returns that fluctuate with prevailing interest rates. They act like money market funds.

Postrel’s article is based on Timur Kuran’s book, Islam and Mammon. I haven’t read the book yet but I know Timur’s work and feel safe in recommending it to anyone interested in these important issues. Here is chapter one.

My favorite things Mexican

I am in Mexico, and you will be hearing more about this. Here are a few of my favorite things.

1. Favorite Mexican novel: Pedro Paramo, by Juan Rolfo. A hilarious and moving tale of visiting rural Mexico and encountering the dead. The true heir to Dante. I remain surprised by how many people do not know this marvelous work, though the English translation does not capture the humor well. Will you be turned off if I tell you this is a favorite of Susan Sontag’s?

2. Favorite Mexican music: Mexican rap is extraordinarily eclectic and creative. I would be hard pressed to pick a favorite group, but Control Machete is one place to start.

3. Favorite Mexican artist: Marcial Camilo Ayala, whom I am currently visiting in Cuernavaca. Here is one of my favorite pieces of his; here is one in black and white. If you pay in advance (less than you think), I am happy to help you get one.

4. Favorite Mexican food: Chicken with mole sauce, a’ la Puebla or Oaxaca. For real authenticity, make sure you crumble in the stale tortilla.

5. Favorite Mexican movie: You probably already know Y Tu Mama Tambien, Amores Perros, and El Mariachi. So I’ll recommend Luis Bunuel’s old version of Wuthering Heights, a truly strange adaptation that captures the spirit of the original novel remarkably well. You do not have to buy into Bunuel’s later, more pretentious work to like this one.

Addendum: My favorite Mexican dish might be Chiles Nogada.

The Olympics and Greek History

Here are two free 30 minute lectures from the Teaching Company.

The Olympics: From Ancient Greece to Athens, Parts 1 and 2.

From 776 BC onwards, the greatest champions among the Greeks began assembling every four years at Olympia in western Greece to assert their strength and physical prowess. Who were the most charismatic of the ancient Greek Olympic heroes? To truly understand the origins of the Olympics, why do we really need to begin with Homer? In these specially commissioned lectures, Professor McInerney takes you on a journey back to the Olympics of the ancient Greek world.