There is a natural experiment from the recent switch away from DST in Indiana.  Matthew Kotchen and Laura Grant report:

Our main finding is that–contrary to the policy’s intent–DST increases residential electricity demand. Estimates of the overall increase range from 1 to 4 percent, but we find that the effect is not constant throughout the DST period. There is some evidence of electricity savings during the spring, but the effect lessens, changes sign, and appears to cause the greatest increase in consumption near the end of the DST period in the fall. These findings are consistent with simulation results that point to a tradeoff between reducing demand for lighting and increasing demand for heating and cooling. Based on the dates of DST practice before the 2007 extensions, we estimate a cost of increased electricity bills to Indiana households of $8.6 million per year. We also estimate social costs of increased pollution emissions that range from $1.6 to $5.3 million per year.

In other words, with DST less is spent on light but more is spent on air conditioning.  Here is a summary article on the work, from today’s WSJ.  Do note this:

There may also be social benefits to daylight-saving time that weren’t covered in the research. When the extension of daylight-saving time was proposed by Mr. Markey, he cited studies that noted "less crime, fewer traffic fatalities, more recreation time and increased economic activity" with the extra sunlight in the evening.

Mike Moffatt has signed up with Stickk.com to try to lose some weight and he wrote to Tyler and myself.

I need to find people to give the money to if I fail, so I
thought I’d ask the Economics blogging community for help.
If you agree then if I fail at my goal, I will pay Marginal Revolution, or the charity
of your choice, $100. 

Here is my response to Mike:

Hmmmm….I am not sure whether to be pleased at the prospect of a free
$100 or upset that you consider $100 in our hands to be such good
motivation!  Speaking personally, however, I understand the difficulty
of losing weight thus I want you to know that if we receive the $100 we will not send it to India, we will not give the money to cancer research, we will not give the money to any cute
animals instead we will use your money to squash the poor, to fight
against universal health care, and to gas up our Hummer.  Moreover, we
will do this while drinking fine wine, smoking cigars, eating foie gras
and laughing uproariously.

There that ought to help.

If there are other left-wingers out there who would like more motivation to accomplish their life goals then do know that Tyler and I are here to help.

The focus of the article is on Robin, Alex, Bryan, myself, Peter Leeson, and also Ilia Rainer, who plays straight man very very well.  I’ve put the part about myself in the first comment below.  But read the whole story!  It is very insightful.

The question is why anyone might think Cuba is doing OK, relative to northern Mexico.  Megan McArdle offers (more than) two points:

3) Deep poverty is much more picturesque than moderate poverty. Poor
countries have their old colonial buildings still standing, because no
one had the money (or the reason) to tear them down and put up
something bigger. The countryside is dotted with adorable houses made
out of natural materials and natives wearing colorful traditional garb.
Animals graze in verdant fields, besides teams of sowers and reapers.
Middle income countries are smoggy, and almost everything looks like a
cheaper, shabbier version of what you get in the US. Scenic landscapes
are despoiled by cinderblock buildings with hideous tin roofs, or
trailers; cities are choked with boxy modern buildings that look
something like our housing projects. The genteel decay that looks
gothic and intriguing on an old Victorian mansion just looks seedy when
it’s eating away at badly poured concrete. Affluent Americans
underestimate the utility value of things like having personal space,
or an automobile.

4) Cuba was relatively wealthy in 1959; it therefore has more
of the markers, like old majestic buildings, that we associate with
wealth.

I found the most evident signs of Cuban poverty to be the unceasing supply of articulate and sometimes weakly sobbing mendicants, none of whom sounded like con men, all of whom needed money to buy food and clothes for their families.  The most shocking part is what small sums of money they would ask for or be made happy by.  Or the numerous women — and I mean ordinary women in the streets — who would offer their bodies to a stranger (handsome though I am) for a mere pittance.  Yes in Cuba there is good access to doctors but anesthesia is in short supply and the health care system stopped improving long ago.

If you want to understand northern Mexico, get out of the Tijuana tourist strip and visit Hermosillo.  Count the number of new housing developments, and then count how many of them are inhabited by fairly dark-skinned, previously dirt poor, Mexican mestizos.  Put that number over the number of buildings in Havana that do not have serious maintenance problems and see if you can divide by zero.

It’s quite possible that a lower middle class Mexican eats better food than you do, but there is no chance of that for anyone in Cuba except the top elite.  Powdered milk is a luxury there. 

I’ve long thought that Prague looks much richer than it is, and that the ugly northern Virginia or Houston looks poorer than it is.  Where else looks deceivingly rich or poor?

This is Fred Krupp president of the Environmental Defense Fund interviewed in Wired who after noting the success of markets in acid rain avoidance says this about approaches to carbon avoidance and global warming:

…I know that capitalism works, that American entrepreneurialism works,
and we can damn well expect that private capital – not government money
– will actually solve this problem.

Oakland’s recent gun buyback was especially ridiculous.  The police offered up to $250 for a gun "no questions asked, no ID required."  The first people in line?  Two gun dealers from Reno with 60 cheap handguns.  Fortunately the buyback did manage to get some guns off the street, too bad they were turned in by a bunch of senior citizens from an assisted living facility.   Whew, the streets are safe at last.

Even putting aside the obvious nonsense, gun buybacks simply don’t work.  In technical terms the supply of guns to Oakland is perfectly elastic so buybacks won’t reduce the number of guns in Oakland.  Here is an analogy from my op-ed in the Oakland Tribune.

Imagine that instead of guns, the Oakland police decided, for
whatever strange reason, to buy back sneakers. The idea of a gun
buyback is to reduce the supply of guns in Oakland. Do you think that a
sneaker buyback program would reduce the number of people wearing
sneakers in Oakland? Of course not.

All that would happen is that people would reach into the
back of their closet and sell the police a bunch of old, tired, stinky
sneakers.

Gun buybacks won’t reduce the number of guns in Oakland. In fact, buybacks may increase the number of guns in Oakland.

Imagine that gun dealers offered a guarantee with every gun:
Whenever this gun gets old and wears down, the dealer will buy back the
gun for $250.

The dealer’s guarantee makes guns more valuable, so people will buy more guns.

But the story is exactly the same when it’s the police offering
the guarantee. If buyers know that they can sell their old guns in a
buyback, they are more likely to buy new guns. Thus the more common
that gun buybacks become, the more likely they are to misfire….

The guns bought in this buyback are destined to be melted down to create a monument.  It’s a shame that this monument will be the only lasting effect of the buyback.

I saw you had a post up about some work I did with Bob Gordon, and I
found your comments very interesting.  I have a couple questions that I
hope might help clarify your thoughts on the subject.

First, you
seem to argue that we would expect a CEO to be paid her marginal
product.  As you point out, there is ample evidence that a CEO adds far
more to the value of a company than she is generally paid.  I’m
curious, though, what you mean when you say we would expect the CEO to be paid her marginal
product.  Models in this literature often assume that
each firm must hire one CEO.  The concept of a marginal product breaks
down at this point.  The firm can’t hire a second CEO.  There is no
marginal value.  It’s possible that we can look at marginal products in
terms of the skill a CEO brings to the firm, but in that case, we would
be mixing up marginal and average products if we were to simply look at
the total contribution a CEO makes to firm output.

I think you’re correct to point out the institutional factors
holding down CEO pay pre-1970.  That said though, why didn’t we see CEO
pay rising much faster than market cap during the 80’s in order for it
to catch up to where it should be?  There is a period where the
pay-market cap elasticity may have been higher than 1, but it’s only for a few
years in the 90’s.  Looking at the full 1976-2005 sample, the
relationship is nearly unitary (.935, according to Frydman and Saks).  So I guess I’m surprised there is no
catch up in pay.

I think you’re right to be skeptical of the Bebchuk-Grinstein
results.  To me, the most interesting result
from Gabaix and Landier, no matter what one thinks about their model as a
whole, is that the cross-section and time series may show very
different patterns.
So one wouldn’t necessarily expect the cross-sectional results from Bebchuk and Grinstein to predict the time-series.

One
of my biggest concerns with Gabaix and Landier’s model is that it does
not display decreasing returns to scale.  An analogous
example is Berk and Green’s model of mutual funds.  They assume that if
a manager all of a sudden
sees the size of his fund double, he will see lower average returns.  I
think this is reasonable.  When there are not diminishing returns, it
is difficult to make models function.  Gabaix and Landier are forced to
do it by assuming firms never merge.  That concerns me in this
setting.  Dixit-Stiglitz competition is often a reasonable
assumption because the models using it do not actually care about firm
size
or mergers.  In the case of CEO pay, however, firm size is clearly
critical.

The question about the marginal product of a CEO is a tricky one.  I can imagine the following definitions which either express marginal product or some modified version thereof:

1. How much better the highly-paid guy is than a less-well-paid substitute would be.

2. How much better the highly-paid guy is than the next best person (in stochastic terms, that is) the firm would get for that same sum.

3. How much a bit of extra pay causes the CEO to improve effort and thus performance.

4. The complex econometric definition offered by Jensen and Murphy, read pp.33-38 here.

5. Some number between the CEO’s value of leisure and how well the firm would do with no CEO at all.

None of these quite make sense in pure theory, and it is even harder to say which is the most important variable for practice.

There is now some data for the price discrimination hypothesis:

Looking at detailed revenue data for a chain of movie theaters in Spain,
Wesley Hartmann … and Ricard Gil … compared concession purchases in weeks
with low and high movie attendance.

The fact that concession sales were proportionately higher during
low-attendance periods suggested the presence of "die-hard" moviegoers willing
to see any kind of film, good or bad–and willing to purchase high-priced
popcorn to boot. "The logic is that if they’re willing to pay, say, $10 for a
bad movie, they would be willing to pay even more for a good movie," said
Hartmann. "This is underscored by the fact that they do pay more, even for a
bad movie, as is seen in their concession buying. So for the times they’re in
the theater seeing good or popular movies, they’re actually getting more
quality than they would have needed to show up. That means that, essentially,
you could have charged them a higher price for the ticket."

Should theaters flirt with raising their ticket prices then? No, says
Hartmann. The die-hard group does not represent the average movie viewer. While
the film-o-philes might be willing to pay, say, $15 for a movie ticket, a
theater that tried such a pricing tactic would soon find itself closing its
doors.

"The fact that the people who show up only for good or popular movies
consume a lot less popcorn means that the total they pay is substantially less
than that of people who will come to see anything. If you want to bring more
consumers into the market, you need to keep ticket prices lower to attract
them." Theaters wisely make up the margin, he says, by transferring it to the
person willing to buy the $5 popcorn bucket.

Here is more.  The data are the data, but this doesn’t strike me as a very general explanation.  Specifically it requires that the high-value movie demanders are also the high-value popcorn demanders.  If anything I would expect the casual movie fans to be the ones who want to buy the concessions; the seasoned moviegoer will have some other, better plan worked out in advance.  For other explanations for high popcorn prices, you might look at the research on "shrouding," or consider that ticket revenue is shared with the studio but concession revenue usually is not.