Seeking safety in Latin America

In Mexico City I am relieved to step out of the taxicab and into the street. Cabs are a major venue for robbery and kidnapping. In Rio de Janeiro I am relieved to step out of the street and into the taxicab. Cabs are relatively safe, but a twelve-year old street urchin might knife you in the gut for a dollar.

I’ve yet to find a good explanation for this difference in criminal method. Could it be that Mexican crime is more closely linked to the drug trade and especially the export of drugs to the U.S.? This increases the optimal size for a criminal gang and might cause robbery and mayhem to be better organized and more capital-intensive. Brazil also appears to have an especially bad educational system, which lowers the average criminal age but also diminishes the relevance of taxis.

Monetary economics on Gilligan’s Island

Did the Castaways use paper money? Yes.

In early episodes, we see Mr. Howell hiring various services from other castaways. We eventually learn he’s been writing checks on a mainland (and therefore inaccessible) bank. This works while the group consider their condition temporary, but the checks are quickly devalued and eliminated when the castaways begin to prepare for the possibility of an indefinite stay on the island.

In Episode 9, “The Big Gold Strike,” Gilligan and Mr. Howell find a gold mine on the island, which Howell convinces Gilligan to keep secret from the others. By the time everyone learns about the mine, Howell has already taken the lion’s share of the most easily accessible gold. He’d like to hoard it for himself, but the other castaways begin charging him for their goods and services. Soon everyone has a small fortune in gold, which they all try to smuggle aboard a tiny escape raft. Their collected wealth, of course, ends up at the bottom of the lagoon.

In later episodes, monetary exchange takes place in US paper currency.

Might such fiat dollar exchange occur in the real world?

The market can reclaim money from government…This is why the castaways value Thurston Howell’s paper dollars: because whatever absurd amount he may have brought with him for “a three-hour tour,” that amount is now fixed. Dollars are the most stable currency available on Gilligan’s Island, and the government has nothing to do with it. Or rather: the absence of government has everything to do with it. If people are allowed to pick their own preferred money, they will pick whatever holds its value most reliably.

Here is the full analysis, courtesy of the Mises Institute.

My take: Fiat money would not survive on Gilligan’s Island, at least assuming that no rescue is expected. Skipper and Gilligan will return to barter, based on some useful island commodity, probably a storable foodstuff. Perhaps they will continue to use dollars as a medium of reckoning, for mutual convenience. But why accept dollars as a medium of payment? Given that only seven people live on the island, there is market power and room for dollar prices to slide over time. (To see one potential problem, imagine the polar case of only two traders — would you mind losing all your dollars? — surely prices would then fall in response.) Dollars would offer little stability of real value, if only because you might start to doubt whether other people would continue to accept them.

Don’t take your salad bag for granted

Today’s [salad] bags are a triumph of practical ingenuity. Their plastic is made of up to five to ten layers, each with a different function. Some are designed to make the package shiny or crinkly, others to carry print well. Together, they have to be just permeable enough to keep the bag’s artificial atmosphere in balance – the wrong ink alone can suffocate a salad. As the lettuce sits on the shelf, the gases in the bag are constantly consumed, released, and replaced. Oxygen, nitrogen, and carbon-dioxide molecules bond with the polymers on one side of the plastic and are released on the other, diffusing from high concentrations to low. Every type of salad requires a different type of bag, tailored to its respiration rate by gas chromatography and computer analysis. Every bag is a miniature biosphere.

That’s from the recent double-issue of The New Yorker, Sept. 6, p.140; it is devoted to food and may be the finest issue yet under Remnick’s tenure. And here is a brief defense of eating from salad bags.

De Gustibus…

A Malaysian woman is trying to reclaim the world record for the longest stay in a room full of scorpions, news reports said Sunday.

Nur Malena Hassan, 27, moved Saturday into a locked glass box where she plans to live for 36 consecutive days with more than 6,000 of the poisonous arachnids in a shopping mall, the Malay-language Mingguan Malaysia newspaper reported.

Scores of people watched as Nur Malena stood fearlessly in a red sweater and jeans with scorpions crawling up her head, chest and legs in Kuantan, a city about 350 kilometres (160 miles) east of Kuala Lumpur, a photograph published by the newspaper showed.

Nur Malena set a world record in 2001 by living for 30 days with 2,700 scorpions. She was stung seven times, fell unconscious and almost gave up the attempt.

Her record was shattered a year later by Kanchana Ketkeaw, a woman in neighbouring Thailand who lived in a similar glass room for 32 days with 3,400 scorpions.

Under self-imposed rules, Nur Malena is expected to leave the glass room just once a day for 15 minutes at a time. She will sleep, eat and perform Muslim prayers in the room.

The woman gives herself a 50-50 chance of making the record. She claims that the nighttime is worst, since scorpions are especially active then. On the brighter side, scorpions rarely sting unless disturbed, so a quiet posture yields dividends. Furthermore she has built up immunity over the last six years by allowing herself to be stung repeatedly.

No doubt her fear will be more impressive than that of the previous recordholder: “Having 6,000 scorpions is different from 3,000 [TC: hey wasn’t it 3,444?]. It’s just worse.”

When bored during her ordeal, she watches DVDs; her current favorite is Spiderman.

Here is one account, I have drawn further information from the Mexican edition of the Miami Herald.

And why is she doing it? In her own words, “I want to show that Malaysians are capable of world-class efforts.”

Mexican economic growth – a revision

My good friend, the ever-reliable, ever-intelligent Kevin Grier, writes to me the following about Mexican economic growth:

I believe the primary two problems with mexico are both political (1) very little real competition in the domestic economy (2) no true rule of law. Fundamentally its still a society where personal connections or bribes get lots of things done. The “ideal” of everyday anonymous transactions working out well even when there are time intervals between beginning and end (payment and reward) just is not there.

Also the Mexican civil war at the beginning of the 20th century probably had something to do with the low growth in the first half of the century. That was no joke, that war. The “golden years” could easily be high transitional growth getting back on the BGP after the devastation of the civil war, kind of Mexico’s mini version of the Japanese and German growth miracles after WWII.

imho Mexico is middle income due to “location location location” and is still chained to an almost feudal social and political system.

More specifically, Kevin points out that the available data show Mexican convergence to the U.S. from 1950-75, and from 1870-1900, but not for the twentieth century more generally, I offer apologies for my previous error.

Addendum: Don’t forget to check out Kevin’s Haitian art page, or his music tastes.

Non Economic Damages

According to Tillinghast, twenty four cents of every dollar spent in the tort system covers a non-economic loss, such as pain and suffering. Non-economic damages have been a target for reformers for years but concern with capping them has always been that it’s easy to avoid the caps by reclassifying the non-economic damage portion of the award as compensatory. A recent report by RAND indicates that California’s $250,000 cap is effective at reducing awards. It finds that “Defendants’ liabilities were reduced by 30 percent.”

This does not, however, mean a 30% reduction in payouts to plaintiffs. Because of limitations on attorney fees, which result in a reduction of payments to plaintiff’s attorneys of 60 percent, plaintiff’s recoveries fell by only 15%.

My take: California has made a good start but did not go far enough. Since consumers ultimately pay for any damage payments in higher prices for goods and services, damages in the tort system’s coverage should mirror private insurance markets. Private insurance markets reveal the preferences of consumers for insurance and hence certain types of compensation. Consumers find it worthwhile to purchase insurance against economic loses. However, as Paul Rubin explains

No direct insurance policy covers this class of loss, but tort damages commonly do pay them. But the ability to receive payments for nonpecuniary losses is not a benefit to consumers; it is a cost. The reason insurance does not commonly cover them is that consumers are not willing to pay the cost of the coverage, even given the small loads commonly associated with direct insurance. (The theory of rational insurance can explain that reluctance.)

But if consumers are not willing to pay voluntarily for direct insurance against pain and suffering, why should they benefit if they are forced to buy the same insurance as part of their medical payments? The answer is that they would not benefit. By forcing payments for nonpecuniary losses on consumers as part of medical insurance, we would not be creating a net benefit for them.

For Rubin’s theory see John Calfee and Paul H. Rubin. “Some Implications of Damage Payments for Nonpecuniary Losses.” Journal of Legal Studies 21 (1992).

MR and the Google Wars!

Fabio Rojas, a frequent guest blogger for MR, writes me the following:

There is a young man in Northridge, California whose name is “Fabio Rojas.” He’s a computer programmer from the Dominican Republic. Since about 1996, his personal web page was the one to come up first in Yahoo, Altavista and Google when you entered the words “Fabio Rojas.”

As you can imagine, I was enraged. That’s when I began a silent war waged on the information superhighway. Despite my furor and razor sharp analytical mind, there was nothing I could do to fight his influence. I was losing the war to be the #1 Fabio Rojas on the internet.

Althought I set up my own web page and participated in numerous on line forums, year after year, “Northridge” Rojas’ web page would be the #1 Fabio Rojas web page in the world. I was stymied… as an experienced computer programmer, “Northridge” Rojas” knew how to jack up his google rating to an unsurmountable level. There were even times this past fall when my Indiana University professor profile would momentarily get #1 status, only to be knocked down by his poorly constructed and infrequently updated personal profile. He was obviously messin’ with me.

Today, I looked upon the battle field and found that the tides had turned in a most remarkable fashion. I am now the undisputed #1 Fabio Rojas on the internet. “Northridge” Rojas’ has been routed, and barely shows in the top 10 google hits.

And who can I thank for this reversal in fortune? That’s right, the guys at Marginal Revolution. My post on Football and economics seems to still get some hits, months after it was posted, which encourages people to read my profile and thus vanquish the pretender Rojas.

What can I say?

!Viva la Revolucion Marginalista!


Bryan Caplan, our colleague and recent guest blogger, has also been aided by MR in his own Google War. Bryan is the author of an extensive website, The Museum of Communism. It’s an excellent website that he continues to update. Assuming that I outlive him, Bryan has made me promise that in lieu of flowers I will take up a collection to preserve the site in perpetuity! (Logically, he should have asked Robin Hanson to do this but that’s another story).

For a long time Bryan was the number one Google hit on the word Communism but the Marxists later pulled ahead. Bryan’s recent stint as a guest blogger put him in the lead for a while but now I see he is once more number two. So click on the Google link, check out the Museum and do your part to help overthrow the Marxists!

Cutting the fat

Dieting is difficult because it’s so much easier to give in to temptation and consume what you should not. It’s a constant struggle to cut the fat. The same is true in business. Economists may write down a “cost curve” on the blackboard but these curves, which represent the minimum cost of producing a particular quantity, are not given to the firm they are products of the firm. It takes effort and attention and willpower to keep costs low. Letting costs go by raising salaries, increasing benefits and paying little attention to the bottom line is easy and, for a time, pleasant which is why firms need strong incentives, including the carrot of profit and the stick of loss, to get and stay trim.

Government agencies face few such incentives. As a result, fat is rampant. Case in point, California prison guards. To encourage fitness the California Department of Corrections created a fitness bonus some years ago. The bonus was quite substantial, $100 per month but to get it guards had to pass a fitness test involving sit-ups, running and jumping. Five years ago the state paid out about $5 million for the fitness incentive. But who wants to be the bad guy who denies a prison guard a bonus? No one – if they aren’t paying the bills.

As a result, the fitness test started to get easier as the bonus got larger. Last year, California shelled out $33.2 million for fitness bonuses and some 80 percent of prison employees, not just guards but wardens and mangers also, now get the fitness bonus. Of course, a test is no longer required – all the employee need do to get the bonus is visit a doctor once per year.

With the California budget crunch even the politically poweful prison guards are having to cut some fat but in the long run recognize the incentive structure and don’t expect government to go on a diet.

Can we judge thinkers by their followers?

Having written recently on what is valid in Karl Marx, I am reminded of an ongoing debate I have with my colleague Bryan Caplan. I like to tell Bryan, only half in jest, that thinkers are responsible for the quality of their followers. Surely if a thinker is bright and rich and multi-faceted, that thinker would attract followers of a similar quality. And a rotten thinker ought not to attract many students of a higher quality. This test is not failproof but it is one way of approaching the question of intellectual quality.

On the negative side, Marx attracted Lenin, Stalin, and Trotsky. I’ll go out on a limb and claim that Gramsci, Lukacs, Althusser, and Luxembourg are all vastly overrated, even by many non-Marxists. Who then would I cite as illustrating Marx’s positive intellectual heritage? Here are a few options:

1. Walter Benjamin. His work on mechanical reproduction and aura continues to shape debates over contemporary culture. Plus you can mine his notebooks for incisive nuggets of insight; some of them are no more than a sentence.

2. Michel Foucault. Yes the specialists have poked holes in the histories. And his mechanisms are often murky and insufficiently grounded in methodological individualism. Still his accounts of the dark side of the Enlightenment — as found in prisons and hospitals – remain justly influential. And The Order of Things is an interesting albeit flawed look at the comovement of ideas in many disciplines in early modern times. By the way, he developed a strong interest in Mises and Hayek in the latter years of his life.

3. Juergen Habermas. I find much of his work unreadable; he is the strongest argument extant for the use of mathematical economics (why doesn’t he write down a simple model?). Still the early work on the growth of the public sphere in the eighteenth century is impressive. As a work of intellectual history, it offers enviable clarity, range and depth.

4. Ferdinand Braudel. OK, he didn’t have to be a Marxist to write those wonderful books on the Mediterranean and the rise of modern Europe. Still, the emphases on material forces and the long sweep of history are derived unmistakeably from Marx’s writings.

The summary picture is exactly what you would expect. On the whole Marx had a seriously pernicious influence on both the humanities and social sciences. Still, he inspired some significant thinkers and generated important nuggets of insight.

OK, now here is a challenge for real men. Can you tell me, standing on one foot, what exactly is both important and valid in the writings of Martin Heidegger? I’ll assume I can use your name unless you tell me otherwise; a blogged answer is best of all.

What makes New York City so wonderful

So used to the one measure of status in Washington — political power — the Republicans may find New York to be a disconcerting place.

No New Yorker wins every contest. In fact, every New Yorker is going to see someone in the next 15 minutes who will bring them down a notch. This gaze economy has so many scales of value that no one gets to triumph. Indeed, the higher we score on one scale, the lower we score on another. Interestingly, there is no exit scenario. Unless we spend all our time at home and the club, we must expose ourselves to diminishment. Or to put this in the form of a trade off, we cannot present ourselves for approval, without exposing ourselves to the reminder that we are, in someone’s world, a dolt.

In other words, life in a (relative) meritocracy is tough. But it is also good for you in the longer run. That’s from a longer post by Grant McCracken, my favorite anthropologist-blogger. Read the whole discussion, and thanks to Virginia Postrel for the pointer. Also scroll down on his blog to read a series of posts on the “gaze economy.”

Jeffersonians vs Hamiltonians

Entering Monticello,Thomas Jefferson’s home, you are flanked by two busts, Jefferson on one side and Alexander Hamilton on the other. Since the two were political foes it’s a surprising choice. But the busts were placed there by Jefferson himself who said, “we were ever-opposed in life and now we shall be ever-opposed in death.” The Jefferson-Hamilton battle continues to this day (read the link for more and don’t miss the many interesting comments.)


Addendum: Brad was perhaps fooled by the name of this blog but then there are two of us.

What rap stars crave

1. Looking at the Billboard Top 20 for rap music, 59 brands have been mentioned 645 times in songs so far this year.

2. Very high end and very low end brands are the most popular mentions.

3. The top brand so far this year in rap songs is Hennessey, a kind of cognac. Cadillac comes in second.

4. Mercedes, a previous favorite, now has fallen behind Cadillac, Rolls-Royce, and Jaguar.

5. Autos, fashion, and beverages provide the brands most likely to be mentioned in rap songs.

6. Cristal, an extremely expensive champaigne, may be losing appeal because it is now so closely identified with hip-hop.

7. Polariod, in contrast, has benefited greatly from rap music. The product has been hurt by digital photography, but Outkast sang “Shake it like a Polaroid picture” in its hit “Hey Ya.”

That is all from the Mexican edition of the Miami Herald, August 26, sorry no link available from here. Agenda Inc., a San Francisco marketing firm, compiled the data.