New economic policy blog from England

The Adam Smith Institute has recently started its own blog. The focus is on current events, in both Britain and around the world, the perspective is market-oriented.

Friedrich Hayek is well-know for writing an essay “Why I am Not a Conservative,” here is Madsen Pirie’s take, from ASI, entitled Why F A Hayek is a Conservative. Pirie is one of the main bloggers on the site.

Self-deception conference

Tomorrow I am attending a conference on self-deception, directed by Robin Hanson and me. We will have numerous luminaries, including Robert Trivers and Thomas Schelling, in attendance. By the way, blogging will continue.

Here are a few self-deception pointers for the day:

However much I examine my vanity, I can’t see in it the same disagreeable tone of the vanity of other people, all of which is just a further stage of vanity.

by the poet Carlos Drummond de Andrade.

Or, did you know that Stalin, when revising his official biography for publication, ordered that this sentence be inserted:

Stalin never let his work be affected by the least shadow of vanity, presumption or idolatry.

Thomas More once wrote:

Most men like their own writing best of all.

All of these bits are from Lies We Live By: The Art of Self-Deception, by a very underrated Brazilian economist named Eduardo Giannetti. Few economists are so well-read in the humanities, so ironic at the right moment, and so on the mark in their understanding of human psychology. If anyone out there knows Eduardo’s email address, please forward it to me, I would like to write him.

Economics and literature

I just received my copy of The Literary Book of Economics, compiled and edited by Michael Watts of Purdue University.

I love the book, it contains excerpts from literary works that present economic themes. On opportunity cost, you get to read Robert Frost on “The Road Not Taken”.

On equality, you get to read Kurt Vonnegut’s “Harrison Bergeron”, one of the most biting critiques of egalitarianism ever penned. The story is truly short, just a few pages, do click on the link and read it if you have the time.

Here is the opening to the story:

THE YEAR WAS 2081, and everybody was finally equal. They weren’t only equal before God and the law. They were equal every which way. Nobody was smarter than anybody else. Nobody was better looking than anybody else. Nobody was stronger or quicker than anybody else. All this equality was due to the 211th, 212th, and 213th Amendments to the Constitution, and to the unceasing vigilance of agents of the United States Handicapper General.

Or are you familiar with the economic proposition, sometimes associated with Aaron Wildavsky, that the demand for safety rises with wealth and income? British poet Alexander Pope first stated that idea in 1737, for his short poem “Imitations of Horace,” click here.

You don’t have to read this book in one fell swoop, it offers 348 pp. of wonderful browsing. In addition to the authors cited above you get John Milton, Ayn Rand, Thomas Mann, John Steinbeck, Victor Hugo, and George Orwell. Highly recommended.

Java-based ID cards in Taiwan

Everyone is getting one.

Each card contains a microprocessor with 32 kilobytes of memory that allows data such as allergy information, emergency contact numbers, medication, and personal insurance to be stored.

Let’s not forget Thailand:

In an even larger scheme in Thailand, the government plans to issue a Java-based national ID card to all 61 million citizens, according to a report in the Bangkok Post. The card will contain biometric identification, as well as insurance, tax and welfare benefit information. The scheme is expected to be launched later this year.

For more information read here.

My favorite book on privacy is David Brin’s thought-provoking The Transparent Society, for an interview with Brin, summarizing the book, click here. He says you’re not going to have your privacy anyway, get used to it, besides most people don’t even care about you, and this new world will prove liberating. I also am taken by Richard Posner’s point that few people truly want privacy, rather than want to selectively control how their images are presented to the outside world; they use talk of “privacy” as a rhetorical device to attempt to gain such control.

Will the current lawsuits against file-sharers work?

Lawrence Solum tells us no.

Here is an early part of his insightful, multi-tiered post:

On the one hand, the RIAA simply cannot bring enough lawsuits to create a real deterrent effect. First, the number of suits is so small that the actual risk of becoming a defendant times the cost of settlement equals a miniscule amount. Second, the perception among users of P2P programs is that one can avoid any risk of suit by keeping the number of files shared on any one service below a threshold (usually thought to be 1000 files). On the other hand, there is no evidence that the RIAA is changing copynorms.

His recommendation?

When the RIAA sends the message, “copying is theft,” they are fighting the norms. No one believes that copying is the moral equivalent of theft, because everyone thinks that private, noncommercial copying is just fine. Even the RIAA seems to have thought that when they agreed to the provisions of the Audio Home Recording Act that permit noncommercial analog copying. And the fact that copynorms diverge from norms about theft is rooted in the underlying economic reality–consumption of intellectual property is nonrivalrous, whereas consumption of tangible property is rivalrous.

So here is an alternative message that the RIAA could try:

Share with your friends, not with strangers!

In other words, the RIAA could try to get the public to see that P2P programs are the moral equivalent of giving away hundreds of videotapes or compilation tapes. Those activities are not socially acceptable. They may not be socially unacceptable either. Mass giveaways are rarely a social problem, because the cost is high enough to deter the behavior without either legal or social sanction. That is what the P2P technology changed. P2P enables the low cost mass gift.

It is worth reading Solum’s whole post, I might add he is one of the smartest bloggers out there.

The Politician and the Mechanic Conspire to Rip Me Off

Virginia requires yearly “safety” inspections of automobiles. Yesterday, it was my turn – it cost me $15 bucks and an hour of my time. What a pain. Merrell, Poitras and Sutter (MPS) (summary here, reference below) estimate that nationally inspection programs cost in excess of a billion dollars a year (I think this is a serious underestimate – see below). What do we get for our time and effort? Not much. MPS find that mandatory inspections do not reduce highway fatalities or injuries. Not surprising really since there are already good incentives to maintain one’s car and accidents are most often caused by factors, primarily driver behaviour, that are not inspected. (By the way, yes there is an externality but if self-interest alone causes you to replace a broken headlight then on the margin the externality is irrelevant – economists often forget this point.)

MPS arrive at the billion plus figure by summing inspection fees and travel time. But the major cost of the inspection system, in my opinion, is unnecessary repairs. Mechanics have an incentive to indicate a car needs repairs and it is difficult to know when they are speaking the truth. This problem is bad enough when you have brought your car to the mechanic voluntarily – at least then you know the car has a problem. But the potential for opportunistic behaviour is worse when you are required to take your car in for inspection and if you don’t follow the mechanic’s advice you fail. The mechanics know they have you over a barrel and act accordingly.

The citation for the MPS study is Merrell, D. Poitras, M and Daniel Sutter. 1999. The Effectiveness of Vehicle Safety Inspections: An Analysis Using Panel Data,” Southern Economic Journal, Volume 65, pp.571-583.

Is the academy biased against conservatives?

Daniel Drezner provides numerous links to this recent heated discussion in the blogosphere. Bruce Bartlett summarizes the data on bias in academia. My perspective is closest to that of Jacob Levy, who offers the following advice to budding academic conservatives and libertarians:

[I will tell you] The same thing I tell everyone else. If you love it, do it; and do it well, and honestly, and in good faith. Don’t do it to advance a partisan mission; you won’t get away with it. But if you want to do it for its own sake, you should– and enjoy it.

How much homework does a child do?

On average, daily time spent on homework in the United States increased from 16 minutes in 1981 to slightly more than 19 minutes in 1997, Brookings Institution researchers found, and little appears to have changed since then. Only 34 percent of 282,000 college freshmen surveyed nationwide last year by scholars at UCLA, for example, reported spending more than an hour each weekday on homework during their senior year of high school — the lowest percentage since the question was first asked in 1987.

A recent critique has suggested that homework disrupts families and overburdens children, to me this charge appears hard to sustain. Here is an interview with one of the authors of that charge.

Other bits: 64 percent of parents feel that the assigned amount of homework is “about right.” There was an increase in homework for high school students after the launching of Sputnik. For 9 to 12 year olds, television viewing fell by more than 20 percent from 1981 to 1997.

From today’s Washington Post.

Addendum: Comment from my (Russian) wife: “Kiska, you should have added to your entry on homework, that while 64% of American parents are satisfied with the amount of homework their children do, 100% of European parents living here think that it’s way too insufficient and ridiculous.”

Eating Apes

1. Bushmeat hunters in Africa typically earn in the range of $250 to $1050 a year.

2. In one sampled African market, ape meat cost about twice as much as beef or pork.

3. “In the big cities of Central Africa, it seems relatively easy to find a gorilla head or some hands, or perhaps a chimpanzee hand or two or four, for sale in the medicinal and fetish markets…In a Brazzaville fetish market, a dealer once offered me a gorilla head for the equivalent of $40 and a hand for about $10.”

4. Hunters of ape meat often rely on the trails cut by loggers

5. Ape meat supply has largely gone underground in recent years, although in a given market most people know whom to ask to get the meat.

6. Many village and hunter-gatherer societies have a special word for “meat-hunger.”

7. Central Africans eat at least as much meat per person as Americans or Europeans do.

8. Hunters claim that if a champanzee is wounded and cornered and about to meet his death, that he will beg for his life with the same expressions that a human being would use.

9. One hunter wrote: “It is this lurking reminiscence of humanity, indeed, which makes one of the chief ingredients of the hunter’s excitement in his attack of the gorilla.”

All of these bits are from Eating Apes, by Dale Peterson. This is a remarkably intelligent and disturbing book, the photos are unforgettable. The author is sympathetic to the plight of the great apes but he also understands how markets work, what the life of the poor is like, and why a naive ban on hunting is unlikely to succeed.

By the way, today’s reports that the Orangutan may be extinct within 10 to 20 years.

Neuroeconomics and trust

Today’s Financial Times runs a feature article on neuroeconomics, an offshoot of experimental economics.

Why do people cooperate in experimental games?

…during the games, Prof Smith’s team scanned players’ brains using functional magnetic resonance imaging. The FMRI scan showed that players who co-operated were using parts of their brain called Brodman’s areas 8 and 10. These areas had previously been associated with thinking about the mental activities and the motivations of others, and of delaying gratification to receive higher rewards later. Non-cooperative players did not use these parts of the brain, and neither did those who knew they were playing against computers instead of human opponents.

This, argues Prof Smith, is consistent with the reciprocity explanation: players are thinking about the likely responses of other players and deciding to trust them.

Brain scans are not the only tool of neuro-economists. Other approaches include measuring pulse rates, skin conductivity and hormone levels. And as a result of such experiments, neuroeconomics boasts an eclectic collection of findings – one of them being that ovulating women are less trustworthy than the rest of us…

Would you like to hear more about ovulating women?

Prof [Paul] Zak has also found that women who take part in the trust game while they are ovulating send back substantially less money to their fellow player than other women or than men – crudely, they are less trustworthy. He explains: “The physiological reason is that progesterone suppresses the effect of oxytocin. The evolutionary biological reason is that is that if you’re about to get pregnant, you should be very careful about overreacting to the social signals you receive. In addition, you don’t want to be giving away resources.” Prof Zak points out that since trust is fundamental to economic development, a better understanding of the oxytocin and the physiology of trust could be fundamental for promoting development. The Bangkok Post has already picked up on his work: the newspaper says that since the oxytocin stimulants massage, food and sex are much beloved of Thais, Thailand’s economic development is assured.

For those interested, GMU researcher Kevin McCabe has started a fledgling neuroeconomics blog.

Economic freedom indices

Niclas Berggren offers a very useful survey of the economic freedom indices, what they show, and their limitations. The piece just appeared in The Independent Review. The introductory blurb states:

Although not without limitations, the EFI [economic freedom index] supports Adam Smith’s contention that free-market processes, more than any alternatives, can advance wealth and welfare.

If you are interested in another point of view, here is a left-wing critique of the Fraser index, suggesting that economic freedom is not positively correlated with the real quality of life.

My take: Even economists, much less the general public, underestimate the long-run value of economic growth for human welfare. Today’s poor have a higher standard of living than the upper middle class of a century ago. While it makes good sense to discount the dollar returns on investments, there is less of a good normative argument for the positive temporal discounting of human welfare. So we should care greatly about the standard of living in the distant future, which suggests investing in economic growth today. For a lengthy presentation of the argument on discounting, click here.

A movie in your book

A piece of paper can now play video images:

A single sheet looks pretty much like ordinary paper. But the ink can be rearranged electronically fast enough to show video movies.

Its devisers, Robert Hayes and Johan Feenstra, have also figured out how to create full-colour displays. Their colour screens would be four times brighter than the flat devices currently made from liquid crystals, they reckon.

The invention is the latest version of ‘electronic ink’. Researchers hope to combine the convenience, robustness and readability of printed material with the vast and flexible information content of laptop computers.

In principle, a plastic sheet covered with electronic ink could display an entire library, page by page. The information would be stored in a portable chip, and the display would be powered by a slimline, lightweight battery. Harry Potter and the Order of the Phoenix would weigh no more than a feather.

Read more here from Nature magazine.

What is a dance worth?

As dance relies more on corporate support, the question has arisen who owns a dance. Is the choreographer the owner as an independent creator, or are the choreographers mere employees of a larger organization?

Martha Graham left her dance work in her will to an heir, but a federal district court ruled against the will; she had sold her dance school and its name to other parties, arguably selling the dances as well. The ruling is now under appeal. Joffrey Ballet faces similar issues. See this discussion of the “work for hire” doctrine in the context of music.

“This is definitely a success problem,” says one dance director, “These problems would never have existed 50 years ago, because the concept of a penny being made by a choreographer or from a dance was unheard of.”

The dilemma again shows how far copyright law is behind the times. An economic approach would suggest rewarding the rights to the parties whose contributions create the most value at the margin. If dance geniuses are especially scarce, and responsive to monetary incentives, this would argue for granting the rights to the dance creator.

From “Dance and Profit: Who Gets It?”, The New York Times, September 20, 2003, click here to buy the article.

How to spread the wealth

The [Marshall] Field chronicles tell us that it is not taxes or mismanagement that erode family fortunes, but multiple marriages. While it is often difficult for siblings to amicably take over the running of a huge enterprise, the situation becomes more challenging when divorce introduces half-brothers and stepsisters. Marshall Field’s 22,000-word will was an extraordinary document, the longest ever probated in Chicago. He left the bulk of his fortune to his two underage grandsons, but stipulated that most of the money be kept in trust until they turned fifty…

What Marshall Field did not foresee was his male offspring’s high turnover of wives. Of the six generations bearing the name Marshall Field, only Marshall II and, as of the present, Marshall VI (married in 1992) had one wife. Marshall Field III and IV each had three wives; Marshall Field V married twice and his half-brother Ted three times. The founding father’s will that for sixty-five years carried the fortune forward collapsed in 1982 when Ted demanded his share of the Field Enterprises.

From the recent book The Marshall Fields, by Axel Madsen.