The Law of the Sea Treaty

Matt Yglesias is so, so right about Friday Night Lights, my new favorite TV series (you needn’t like football, high school, or Texas; I love only the third).  So I am surprised he is not more skeptical about the Law of the Sea Treaty.

For background, here is Wikipedia, here is a Heritage critique, and here is a Cato critique.  Here is an argument for the treaty.  Here is another summary of arguments, and more details here.  Note that many nations already have signed and ratified but the U.S. has not ratified.

In essence, the convention "guarantees" freedom of navigation (fine, noting that ocean navigation is currently free, but thanks mostly to the U.S. military, not the UN), defines territorial waters, and sets future guidelines for managing the sea’s mineral resources (not so fine).  The Convention "establishes an International Seabed Authority (ISA) to authorize seabed exploration and mining and collect and distribute the seabed mining royalty." 

Economic mining of the deep ocean is decades away.  But the ISA has veto rights over developing ocean resources and this hardly seems conducive to increasing the value of those resources.  Nor does the "some regulatory framework is better than none, if only to alleviate uncertainty" argument apply.  No entrepreneurs are sitting around waiting for the U.S. to ratify the convention so they can proceed with their deep sea mining platforms.  there is a potential commons problem but right now it is best to simply wait; no current "solution" will end up sticking or much reflect the actual problems that will arise.

When deep sea mining emerges as economically relevant, the Convention will have created a now-tiny but eventually clueless, bureaucratically crippled, and possibly even corrupt multilateral institution with veto rights over economic development.  Once the landscape of the issue becomes clear, we’ll have to rewrite plans and agreements anyway.  Why support this extra level of veto rights, namely the ISA?  ISA has dispute resolution powers and of course it is geared to levy taxes and redistribute the proceeds as it sees fit. 

I don’t hold the extreme view that the UN always fails.  It is possibly good when there is a general consensus for action (UNESCO World Heritage sites), or when a well-targeted military action has a defined purpose.  The UN is very bad at developing and enforcing open-ended commitments, and very bad at constructing well-run institutions. 

Ratifying the Convention might make us look more cooperative, but that is too vague a reason to justify it.  The Convention also would make it legally easier for the U.S. Navy to pass through foreign waters, although in a pinch this probably would not matter much. 

The real issue these days is stopping the Russians from claiming most of the Arctic, at least the sea lanes, and this is why the Bush administration now supports the treaty.  We’ll then have international support, or at least the pretext of such support, for telling the Russians they can’t colonize the Arctic.  That’s it, that’s the whole real reason for supporting the treaty and jumping into bed with the UN.  But hey, I can sympathize with stopping the Russians.

That reason may well outweigh the above-described costs of the treaty, which in any case lie in the future.  So maybe I end up agreeing with Matt.  But overall the Convention is not well thought out, and any support should be offered with the distinctly pinched nose occasioned by the most cynical (albeit sometimes justified) expressions of realpolitik.

Markets in everything

I call this one: "Price-discriminating monopolists appeal to the weak-willed" edition.  Let’s say you want to attract the religiously minded parts of the individual.  What might your prices look like?

When Larry Pinczower switches on his cellphone, the seal of a rabbinate
council appears. Unable to send text messages, take photographs or
connect to the Internet, his phone is a religiously approved adaptation
to modernity by the ultra-Orthodox sector of Israeli life.

More than 10,000 numbers for phone sex, dating services and the like
are blocked, and rabbinical overseers ensure that the lists are up to
date. Calls to other kosher phones are less than 2 cents a minute,
compared with 9.5 cents for normal phones. But on the Sabbath any call
costs $2.44 a minute, a steep religious penalty.

Or maybe there is no weakness of will, but rather the high prices signal the religious loyalty of the phone owner.  Here is the full and fascinating article, and thanks to Zev for the pointer.

Why is it not $10 a minute for a call on the Sabbath?  Might too high a price signal the person is excessively weak-willed?

Frightening abstracts

Many violent relationships are characterized by a high degree of
cyclicality: women who are the victims of domestic violence often leave
and return multiple times. To explain this we develop a model of time
inconsistent preferences in the context of domestic violence. This time
inconsistency generates a demand for commitment. We present supporting
evidence that women in violent relationships display time inconsistent
preferences by examining their demand for commitment devices. We find
that "no-drop" policies — which compel the prosecutor to continue with
prosecution even if the victim expresses a desire to drop the charges
— result in an increase in reporting. No-drop policies also result in
a decrease in the number of men murdered by intimates suggesting that
some women in violent relationships move away from an extreme type of
commitment device when a less costly one is offered.

Here is the paper.  Here are non-gated versions.  Or put it this way: when prosecutors cannnot drop the charges against the man, the women are more likely to report the man in the first place, and also less likely to kill the man.

Cheap Talk Incentive

Mayor Michael R. Bloomberg
said yesterday that he was considering a proposal to give some city
students free cellphones and to reward high performance with free
airtime, but emphasized that he had no intention of lifting the ban on
cellphones in the schools.

“It’s something we’ll take a look at,” the mayor said of the proposal
being pushed by Roland G. Fryer, a Harvard economist who joined the
Education Department this year as chief equality officer.

My favorite things Georgia

1. Favorite Ray Charles song: "What’d I Say"; it’s heresy to admit this, but overall his stuff leaves me cold.

2. Favorite Jasper Johns series: Lately I often call up the "Decoy" prints in my mind.  But the "Targets" series is my pick, followed by the American flag and "Numbers."

3. Big band arranger: Fletcher Henderson — does he deserve as much credit as Benny Goodman?

4. James Brown song: "Bewildered," and have you ever seen the videos of JB dancing on the T.A.M.I. show?

5. Favorite Otis Redding song: "Fa-Fa-Fa-Fa-Fa (Sad Song)."

6. Best Little Richard cover: "Long Tall Sally," Beatles. 

7. Favorite Gladys Knight song: Tough choice.

8. Fiction: Flannery O’Connor, Carson McCullers, Erskine Caldwell, and James Dickey are all candidates but none of them do it for me. 

9. Movie, set in: Duh.  Remember "Dueling Banjos"?

10. Favorite REM song: "Shaking Through," from Murmur, is a good pick.

11. Favorite Leo Kottke album: Six and Twelve String Guitar; this one changed my life.

12. Musician I’m not supposed to like: Tommy Roe; "Sweet Pea" and "Dizzy" still sound pretty good to me.

The bottom line: Awe.  It’s Jasper Johns plus music, music, and more music, and I didn’t even have to think hard about the music.  I’m sure I left plenty out.

Berry College

How would we plan our trips without Wikipedia?

The Berry campus, easily the largest land mass campus in the world,
consists of fields, forests, and Lavender Mountain, designated portions
of which are open to the public for hiking, cycling, horse back riding,
and other outdoor activities. Present throughout the campus is a large
population of deer, which are estimated to outnumber students seven to
one. Fishing on some of the campus’ lakes and streams is permitted with
proper permits. Berry also has a wealth of wild turkeys, seasonal ducks
and geese, skunks, and squirrels.

And:

Berry is a college rich in heritage and campus customs are deeply
rooted. The most universal custom is that of greeting everyone on
campus with a smile, a wave, and a cheery “hello.” Freshmen usually
become familiar with this custom on their first day and realize that
much of the beauty of Berry is in this spirit of friendship which one
meets everywhere.

After War

The subtitle is The Political Economy of Exporting Democracy, and the author is Chris Coyne, a former student of mine and now professor at West Virginia University, also blogger at The Austrian Economists.  Excerpt:

What do the data indicate regarding the effectiveness of reconstruction as a means of achieving liberal democracy?  In short, the historical record indicates that efforts to export liberal democracy at gunpoint are more likely to fail than succeed.  Of the twenty-five reconstruction efforts, where five years have passed since the end of occupation, seven have achieved the stated benchmark, resulting in a 28 percent success rate.  The rate of success stays the same for those cases where ten years have passed.  For those efforts where at least fifteen years have passed, nine out of twenty-three have achieved the benchmark for success, resulting in a 39 percent success rate.  Finally, of the twenty-two reconstruction efforts where twenty years have passed since the exit of occupiers eight have reached the benchmark, resulting in a 36 percent success rate.

You can buy Chris’s book here.  I view the key analytical point as focusing on the power of on-the-ground expectations to make the reconstruction "game" either a cooperative or combative one.  This is a difficult variable to control, but Chris offers a very good look at the best and worst attempts that the United States has made to manipulate these variables and thus export democracy.  If you want to know why the Solow model doesn’t seem to hold for Bosnia, or a deeper more analytic sense of why Iraq has been a mess, this is the place to go.

The best two sentences I read this morning

Charge 80% per year on a loan in the U.S. and you’re called a usurer.  Charge 80% on a loan in Latin America or Africa and you can be a poverty-alleviation charity.

That is Dean Karlan and Jonathan Zinman, in today’s WSJ, "In Defense of Usury," p.A18.  Karlan and Zinman discuss their study showing that micro-credit borrowers in South Africa are better off for receiving the money, even when they pay very high interest rates.

Are Soviet-style price controls returning?

As the New York Times noted last week,
food prices have been on a tear in Russia.  With elections approaching,
Vladimir Putin decided pricey potatoes and pierogies just wouldn’t do.
The solution: Soviet-style price controls.

I am a fan of Daniel Gross’s Slate writings, but I don’t think that claim is quite correct.  What made Soviet-style price controls Soviet-style was the absence of normal residual claimancy.  As David Levy has shown, the resulting incentive was to lower prices to deliberate shortage-inducing levels.  Managers would then sell access for favors, often access to goods and services elsewhere.  Therefore the incentive was to enforce the price control and limit access to the good.  Shortages were virtually everywhere and much of the economy reverted to barter.

Today most Russian firms are private or at least involve residual claimants, and both managers and owners wish to accumulate money not favors.  The incentive is to evade price controls, or to adjust the quality of the good to match the new specified price.  Most markets will still clear, albeit in inefficient ways.  These price controls are hardly a good idea, but their impact won’t be one tenth as bad as the price controls of the older regime.  Often the goal of such price controls is simply to lower the measured rate of inflation, or to allow the government to claim it is doing something rather than nothing.  I’d be surprised if shoppers at the major Moscow supermarkets notice a major difference.

Rorschach Economics

Gregor Smith of Queen’s University has discovered an amazing new relationship, Japan’s Phillips Curve Looks Like Japan.  John Palmer of EclectEcon believes that the result may be systematic as he has discovered that Canada’s Phillip’s Curve looks like Canada.
Jpcurve

Obviously these people are crazy.  Smith and Palmer clearly do not understand Marshallian
macroeconomics – everyone knows that the Phillip’s Curve looks like this country.

Why macroeconomics is not a science

The housing sector is down twenty percent and the price of oil is flirting with $90 a barrel, maybe $100 to come.  Yet the quarterly growth rate was just reported at 3.9%, led by surges in consumer spending and exports.  It is wrong to think we have turned the corner, but it is also wrong to think the doomsayers have been giving accurate predictions.

The economics of Halloween

A reform proposal from Kevin Hassett: "So let’s do something to reform Halloween. The first step would be for Halloween donors to give kids money instead of candy. Kids could then go to the supermarket the next day and binge on the candies they really like. That solution would get an A-plus in economics."

Linked here.  But alas, in-kind transfers are often more efficient than cash gifts, and that holds for public policy as well.  (Imagine giving "money to buy kidney dialysis," instead of "kidney dialysis," and see how many people fake kidney disease.)  The candy transfer insures that a) mostly young kids do the asking, and b) at some point everyone just stops and goes home.  I’ve long wanted to know how much movie attendance rises on Halloween evening, given that the real cost of going is suddenly and temporarily much lower.

Addendum: Here is a new paper on cash vs. in-kind transfers.

The economic value of teeth

Looks and height matter for economic outcomes, so why not teeth?

Healthy teeth are a vital and visible component of general well-being, but there is little systematic evidence to demonstrate any impact on the labor market.  In this paper, we examine the effect of oral health on labor market outcomes by exploiting variation in access to fluoridated water during childhood.  The politics surrounding the adoption of water fluoridation by local water districts suggests exposure to fluoride during childhood is exogenous to other factors affecting earnings. We find that children who grew up in communities with fluoridated water earn approximately 3% more as adults than children who did not.  The effect is larger for women than men, and is almost exclusively concentrated amongst those from families of low socioeconomic status.  Of the channels explored, we find that occupational sorting explains 14-23% of the effect, suggesting consumer and employer discrimination are the likely driving factors.

That is by Sherry Glied and Matthew Neidell; here is the paper on-line, note their findings are preliminary not final.  Teeth seem to matter less for rich people because they have later chances to cover up — using money of course — for bad childhood teeth.  The poor apparently remain stuck with their teeth problems.  You might think that childhood exposure to fluoride is just proxying for quality of county and thus county human capital in some way, but the fluoride/earnings correlation seems to hold up even when variables are used to adjust for county quality.  Can you dissent from a paper that writes:

…the anecdotes described above suggest that people who lack teeth may have trouble finding jobs.

I thank a loyal MR reader for the pointer.

Addendum: Here is Caplan (and Blinder) on the economics of teeth.