Not as bad as it sounds

The U.N. convention on cultural diversity, championed by Canada and
France, would take cultural goods such as films, plays and music out of
the realm of trade negotiations. It would exempt them from free-trade
rules, allow governments to protect and support their cultural industries,
and enshrine the “cultural exception” that European nations have defended
in international law.

It amazes me how many “free speech advocates” have no qualms about restricting consumer choice in the cultural marketplace, which of course is another forum for speech and ideas.

That being said, this news is probably not as bad as it sounds. First, American cultural presence is losing ground when it comes to both television and movies, the two most sensitive cases. Most people want to see locally produced TV programs, which reflect their language and culture. American shows dominate the television market only in parts of the English-speaking world, such as Canada. In cinema, France has shown some ability to capture more than half of its home market, thanks to films such as Amelie. Even Quebec, a very small region, has produced some box-office winners (“The Barbarian Invasions”) as of late.

Quite simply, most of the rest of the world is becoming more entrepreneurial in its cultural production. New technologies, such as digital moviemaking and editing, will only accelerate this trend. So putting in quotas is addressing a dilemma that the marketplace is already solving.

Second, the importance of the quotas is often more symbolic than anything else. France, for instance, does not strictly enforce its quotas against foreign films in French theaters. Anyone who has visited Paris knows it is a wonderful place to see foreign movies of all kinds. The French, for all their noises about the cultural exception, are remarkably open to outside cultures; the musics of Algeria and Zaire have been centered in Paris for some time now. In part, granting the French a symbolic victory on trade policy makes it easier for them to be more open in the long run, and this is what I predict from the U.N. convention. What the French, and many others want, is the ability to win a symbolic victory, and then the ability to choose what they want in the marketplace.

Here is full link, and thanks to Eric Crampton and Michael Giesbrecht for the pointer.

Our stalled energy bill

Remember all that hubbub about the new energy bill, following the Great Blackout? What ever happened? Lynne Kiesling offers a useful update on where things are at.

Here is part of her overview:

There’s a lot of stuff in those measures that is economically unsound and may even increase net energy use, such as increased ethanol use. But my political science friends tell me that as long as Denny Hastert is speaker of the House and the Iowa caucuses have the power they do in the Presidential election, corn farmers will be able to sock it to us, good and hard…ethanol’s nose gets in the tent through a renewable fuels mandate, not through the federal fuel oxygenate requirement. Ethanol a renewable fuel? Stop for a second to think about how ethanol is made: till soil, fertilize, plant corn, harvest, process it using lots of fossil fuel energy and creating air, water and soil emissions in the process, transport it in trucks, trains and barges to its consumption location. So there are a few parts in the production process that require fossil fuel use, and consequently result in emissions.

In other words, special interests and political rent-seeking are preventing us from adopting a sounder energy policy. Will things ever change? Stay tuned to Lynne’s blog for periodic updates.

More on Canadian medicine

Median waiting time for radiation treatment for breast cancer in province of Ontario: 8 weeks

Median waiting time for angioplasty in the province of British Columbia: 12 weeks

Median waiting time for radiation treatment for prostate cancer in province of Quebec: 12 weeks

Median waiting time for cataract removal in the province of Ontario: 20 weeks.

Median waiting time for cataract removal in the province of Saskatchewan: 52 weeks.

Median waiting time for a tonsillectomy in the province of Saskatchewan: 80 weeks.

For the full story, replete with additional statistics, and also some graphs, click here.

Parapundit now offers an update on the sorry state of Canadian medicine.

A Taxonomy of Methods for Discriminating

Not all procedures for engaging in racial discrimination are equal. They differ in their legal standing, their social meaning, and their “economic” efficiency. The Supreme Court in distinguishing Grutter and Graatz, and the admissions regimes of the various state universities suggest a useful taxonomy.

There are three generic forms of racial discrimination not merely in admissions decisions but in other practices and policies as well: (1) express and objective (i.e., points and quotas); (2) facially neutral and objective (e.g., the top 10% of graduates from each high school); and (3) implied and subjective (“we look at the whole person”). From an efficiency perspective the first form of discrimination is the least harmful. It does not corrupt the measure of merit, it only sets a different standard for “minorities.” Its shortcomings are twofold. First, as the Supreme Court decisions in Grutter and Grattz makes abundantly clear it is the one method most likely to be found illegal. This is implicitly related to its second shortcoming, it is so barefaced. It makes clear to both those favored and those harmed that the favored are otherwise inferior in their qualifications.

The second method, using a facially neutral operational measure to achieve a suspect theoretical goal, now favored by the state universities of California, Texas and Florida, in granting admission to those who finish in the top X% of their high school class and by the United Network for Organ Sharing in granting more “points” in the organ allocation scheme for time on the waiting list, has the virtue of being an objective measure, and the virtue (?) of a disguise that reduces shame. Its shortcoming is that its effectiveness in bringing about the preferred ethnic distribution is tied to its inefficiency. It employs an objective measure of merit that substantially distorts. Thus, the rankings of both the favored and the unfavored groups are mis-aligned.

The third measure, a subjective, ad-hoc eclectic judgment, can in practice be a mimic of the first, the second, or anything else. The process becomes a beclouded mystery. This is both its virtue and its vice. There is no clear trail, evidence or standards that mark the favored as inferior–feelings are spared. On the other hand the absence of an objective measure means that the decisionmakers are effectively unanswerable and may indulge in any form of corruption.

Method (1) is clearly falling by the wayside. Is there likely to be a clear political winner between (2) and (3)?

Wining about Taxes

Jennifer Rosen totals up the taxes on a bottle of wine. This summary is direct from Walter in Denver.

1. Federal import license, $500, 3 to 5 month wait.

2. Register an office for each state in which the wine is sold, $100 to $350 per state.

3. Find a distributor for each state or even each county. These distributors will add their own markup to the price of your wine. State governments will not allow you to act as your own distributor.

4. Create and print a new English language label for the wine. The label will have to meet the federal requirements for warning labels and such.

5. After shipping, wait ten days for the wine to clear customs.

In Rosen’s hypothetical case the bottle of wine that sells in its home country for $4.50 winds in U.S. stores at $15.50 per bottle.

Tax protestors often note that half of the average American’s paycheck goes to taxes. When you count the cost of regulation, government’s cost is actually much higher.

Cream Skimming

Glen Whitman at Agoraphilia has some comments on my debate with Tyler on vouchers. He notes that the public school system separates students according to ability with honors classes, AP classes, magnet schools and so forth. Yet, few people call this “cream skimming.” I think Glen’s point blows the peer-effects argument against school choice out of the water.

More generally, the argument in the peer-effects literature is that we shouldn’t let smart kids escape the public school system because their presence gives dumb kids a positive externality. I detest this argument. Children are not pawns to be moved about to satisfy the desires of some grand master. A decent school system treats children as ends in themselves. (In preparation, one might add, for life in a society that treats every individual as an end in themself.)

Is health care good for you?

Robin Hanson frequently tries to convince me that more health care, at the margin, doesn’t make us any healthier. A well-known Rand study found that 30 percent increases in health care consumption did not make people healthier. Nor does the international cross-sectional evidence drive the point home. Once you adjust for income, greater health care spending does not appear to make people healthier.

Robin now sends me this study, which shows that greater Medicare spending doesn’t make people any healthier. Areas with high Medicare spending don’t produce extra health, and yes, this result does adjust for the relevant variables. This, of course, would make Medicare reform a good deal easier, you cut cut spending without fearing catastrophe.

Why, then, do we spend so much on health care? Robin claims we do it to “show that we care” for our relatives. I’ve suggested we
do it simply to avoid the feeling of regret, should one of our loved ones die, and we then feel we “didn’t do enough.”

By the way, here is one of Robin’s essays, “Buy Health, Not Health Care,” he suggests that your doctor should lose a lot of money when you die.

My take: I never manage to win this debate with Robin. I don’t have much evidence to cite in favor of health care spending (email me if you know some). But I am suspicious when I hear the claim that health care does not matter at the margin. Which margin? The last unit you bought? The next unit you might buy? And how big a unit? No one wants to give up penicillin. And exactly which margin are these studies measuring?

On one hand, the economist in me would be happier if I had some evidence that all the extra American health care spending was bringing a concrete return. On the other hand, I hate going to the doctor, in fact I never go. If I could tell my wife that this was rational, well, that would be better than making the economist in me happy.

Climate Change Change

I took my kids to see the dinosaurs in the Smithsonian yesterday. As I was wandering around, I came across a surprising exhibit on the ice age that noted the following:

Initiation of glacial conditions may be triggered by surprisingly rapid climate changes. Therefore, the minor global cooling trend of recent decades…is being carefully watched and studied. Already the effects on food production are severe in many parts of the world….We are now in a relatively warm period (“interglacial”) following one of several major glacial periods. It is not certain when the present interglacial period will end but…imagine the impact of another full scale glacial advance like that just a few thousand years ago!

Clearly, the Smithsonian needs to update some of its exhibits but when they do so I hope they note that the “scientific consensus” on global climate change has been much more variable than the climate.

I’m moving to Switzerland!

Not only are taxes low in Switzerland, but according to Alvin Rabushka beginning in 2004 (not 1994 – earlier version had a typo) the Schaffhausen Canton will introduce an income tax with declining marginal tax rates. Beginning at 8% the marginal tax rate will peak at 11.5% and then decline so that the very highest income earners will face a marginal income tax (from the Canton) of just 6%. I like this not only because my income is relatively high but also because declining marginal tax rates are a property of optimal tax systems (see here for an introduction to optimal tax theory).

Is Austrian Business Cycle Theory Back?

Two new papers on ABC have been written recently by mainstream economists. The Great Depression as a credit boom gone wrong is by Barry Eichengreen and Kris Mitchener under the auspices of the Bank for International Settlements and The Austrian Theory of Business Cycles: Old Lessons for Modern Economic Policy? is by Stefan E. Oppers under the auspices of the IMF. Both links are courtesy of Bruce Bartlett’s Talking Points.

Behavioral economics

Michael, at offers a useful post on behavioral economics, replete with useful links. For instance, this interview with Gary Becker offers Becker’s criticisms of this movement, scroll toward the end, if you don’t read the whole thing. You also can read about how Becker came upon the economics of crime and punishment while looking for a parking spot: “I started thinking about my chances of getting caught…”

More Bickering

Two quick notes on Tyler’s comment on my recent post on vouchers.

First, whether the school or the parent is sent the check is irrelevant (this is a basic theorem in economics). My point, however, was that parents cannot add-on to the voucher amount – i.e. the Chilean system has extensive price controls. Another way of saying this is that in the Chilean system parents never spend any of their own money on the private (subsidized) schools. I think a good voucher system requires that on at least some margins parents spend their own hard-earned dollars on their children’s education.

Second, Tyler thinks that the most convincing evidence is that Chileans did not improve on an international scale. Actually this is the least convincing evidence and it illustrates my point about the power of HU’s tests. The private schools in Chile increased by about 20 percentage points over the relevant time frame. Suppose that private schools were better than public schools by 10 percent then the aggregate gain at the national level would only be 2 percent. Small exogenous decreases in the quality of the public schools could easily swamp this gain.