Auctions in everything

A California town just sold on ebay for $700,000:

A Southern California financial adviser is the proud new owner of what he called an “absolutely gorgeous” 32.8-hectare (82-acre) piece of land among the redwoods, about 435 kilometers (270 miles) northwest of San Francisco and 50 kilometers (30 miles) from the Pacific Ocean.

“There’s a mile and a half of river frontage. It’s very green and beautiful. Great weather,” said Krall, of Laguna Hills. “In San Francisco, $700,000 doesn’t buy you a one-car garage.”

But selling a whole town is not as easy as you might think:

In December 2002, Bridgeville became the first town “sold” on eBay. Almost 250 bids were cast during the town’s month on the electronic auction block. Bidding started at $5,000 and went well beyond the asking price of $775,000 to close at $1,777,877.

But no buyer ever appeared, no check arrived and the deal fell through.

A dozen more potential deals failed, prompting real estate agent Denise Stuart to post the property last year on more standard listings that brokers routinely share.

Would you want this place?

Bridgeville, which dates to the early 1900s, includes a post office, a cemetery and more than a dozen cabins and houses. It needs a new well and several buildings need to be renovated.

The town, which once had 100 residents, has been “severely neglected,” Krall said. His associates plan to move this summer to start cleaning it up, and will live there as caretakers.

Here is the full story. But that’s not my style. If I had the money, and the acquisitive instinct, I would buy a whole island.

Total information awareness everywhere

According to this article, a database firm sent the Feds a list of 120,000 “potential terrorists” based on a “terrorism quotient” developed by scoring over 4 billion records.

The scoring incorporated such factors as age, gender, ethnicity, credit history, “investigational data,” information about pilot and driver licenses, and connections to “dirty” addresses known to have been used by other suspects.

According to Seisint’s presentation, dated January 2003 and marked confidential, the 120,000 names with the highest scores were given to the Immigration and Naturalization Service, FBI, Secret Service and Florida state police….

Of the people with the 80 highest scores, five were among the Sept. 11 hijackers, Seisint’s presentation said. Forty-five were identified as being or possibly being under existing investigations, while 30 others “were unknown to FBI.”

“Investigations were triggered and arrests were made by INS and other agencies,” the presentation added. Two bullet points stated: “Several arrests within one week” and “Scores of other arrests.” It does not provide details of when and where the investigations and arrests took place.

I’m somewhat suspicious of these claims – my regressions are never that accurate! – but let’s pass on that question for now. What I find especially interesting is that the same firm is selling similar sorts of information to private buyers as well as to the government. SmartJury, a division of Seisint, provides:

…real-time access to public record information on potential jurors. Within seconds of entering potential jurors, you will receive reports including information such as: Criminal Records; Political Party Affiliations; Bankruptcies; Corporate Affiliations; Real Property Ownership (including value); Motor Vehicle Registrations; Web Site Domain Names; and 2000 Census Information (including median household income, average age, average years of education, and median home value).

Helpfully, SmartJury also provides demographic information from survey results to predict how each juror will vote! Part of the appeal of the jury system is the idea of drawing from a random/representative sample of the population – is that no longer possible? (And remember, the technology only needs to be good enough for the plaintiff to systematically identify just 1 juror who will push for acquital.)

And here is more meat for the conspiracy minded. The board chairman of Siesint is the former Director of the United States Secret Service and the board of SmartJury is littered with well-placed government types like Jack Kemp, William Bennett and Robert Kennedy Jr.

Thanks to Carl Close for the pointer.

Question about blogging software

Does anyone know of blogging software that allows blog posts and blog comments to be rated with the comments rising to the top the higher they are rated? I am thinking of something much like Amazon’s book pages where readers can rate both the books and the comments. The software would have to be flexible. Alternatively, can anyone out there write or modify existing software to perform these sorts of tasks? Email me with leads. Thanks!

The burdens facing French food

Consider the value-added taxes that were “harmonized” all over Europe during the 1990s. They benefit fast-food chains, since the tax on takeaway is only 5.5 percent, while they penalize sit-down restaurants, whether humble bistros or haute cuisine, which pay 19.6 percent. When President Jacques Chirac ran for re-election in 2002, he promised to reduce the tax, but such is the nature of the new Europe that all 25 countries will have to approve the measure for it to take effect–in 2006.

That’s just the beginning, here is the full story. Thanks to Michael at the ever-excellent for the link.

On the brighter side, here is a video of a French chef serving cicadas.

How much privacy did you expect?

Have you heard the latest?:, which will launch Monday, allows anyone to secretly track e-mails they send. You’ll see whether someone opens your e-mail, how long the recipient keeps it open – even where geographically the recipient is reading it.

And that’s for only $50 a year, check it out.

How are the pundits responding?

The reaction could be harsh. “It will freak people out,” says Internet expert Esther Dyson.

“It violates our electronic space in a way that’s as uncomfortable as someone violating our physical space,” says Mitchell Kertzman, a partner at technology investment firm Hummer Winblad.

But I am not very upset. So much of privacy has to do with expectations. No one expects that their behavior in a shopping mall is private, so no one complains when it is not. Have you ever noticed that Europeans, who are so worried about privacy rights, also are such big fans of the public downtown shopping experience? But just imagine the privacy critique:

“You walk around, the whole world can watch you. They see what you look like, which stores you frequent, what credit cards you use, and what you buy. And if you wear light-colored pants, some people can even see your underwear line.”

For better or worse, we need to get over this idea of the Internet as a private or confidential sphere. Gmail, of which I am a big fan, is just the beginning. In the longer run (it’s already on the way) I expect competing communications spheres. An easy-to-use sphere, which is essentially open and fair game, and a private sphere, which is slightly harder to use and less universal but fully confidential. I’ll predict that most people prefer the open sphere, but of course time will tell. Not everyone will get what they want, but hey, Taco Bell won’t sell me a Chillito anymore either.

Addendum: Here is a related anti-privacy idea: “A pair of sunglasses that can detect when someone is making eye contact with the wearer has been developed by Canadian researchers. Besides being useful in singles bars, its inventors say the system could play a key role in video blogging, a hi-tech form of diary keeping.” So if you don’t want to be detected, don’t look.

Also, check out this post on “Brad and Dad.”

The Laffer Curve, Italian style

The good news is that the Sicilian Mafia has slashed the rates it charges “clients.” The bad news is that it has vastly expanded its client base.

“Pagare tutti, pagare meno,” roughly translated as “everybody pays, everybody pays less,” is the new slogan Sicilian magistrates and mayors are using to describe what the Mafia is doing these days.

Here is the full story, courtesy of Craig Newmark.

Markets in self-constraint

A dental appliance designed to help dieters take smaller bites and eat more slowly hits the market Wednesday.

It’s the latest addition to the $40 billion weight-loss industry, which caters to millions of Americans who are trying to lose weight. Some experts say the device may be helpful in changing behaviors. Others say this shows how truly desperate Americans have become.

The small retainer-like device, called the DDS System, fits into the top of a person’s mouth, filling much of the upper cavity. The price: $400 to $500. It’s available only through dentists who have been trained in fitting the appliance.

“You can pop it in when you go out to lunch and pop it out when you’re finished,” says William Longley, founder of Scientific Intake in Atlanta, which is making and marketing the product. The effect on speech is minor [sic], and it doesn’t interfere with swallowing, he says. Longley cites a study in Japan that showed those who ate more slowly weighed less. But some aren’t convinced.

And how does it work?

The appliance was the brainchild of a woman who had torus palatinus, a bulge of bone that grows from the center of the palate. She said it helped her stay thin all her life because she had to take smaller bites and eat more slowly. She got a patent on the appliance and licensed it to Longley almost three years ago.

…Researchers found that those wearing the dental appliance on the second day ate about 25% less food (in weight) over the course of a day than those who weren’t wearing one…

It usually takes patients a couple of meals to get used to wearing it.

“It doesn’t work if you have it in your pocket,” Longley says. And patients can override the benefits of the system by drinking milkshakes or other high-calorie drinks, he says.

Just think, people used to make fun of this sort of idea.

What is driving Argentina’s economic recovery?

The modest soybean:

Two years after hitting rock bottom, Argentina’s economy is on the rebound. Although the 10-month-old government led by President Nestor Kirchner has taken credit, economists are praising the soybean – a small, round legume packed with protein that is at the margin of Argentina’s beef-heavy cuisine but at the heart of its economy.
Soybean prices have soared to their highest levels since 1988, bringing in billions of dollars in foreign currency and powering the economy’s 8.7 percent growth last year.
Taxes on soybean exports, meanwhile, have been a godsend for the cash-strapped government, providing a huge chunk of its budget surplus.
In recent years, soybeans have swept across Argentina’s vast plains, replacing other crops and cattle to become the nation’s top export.
The nation’s once formidable industry is still in ruins, and widespread unemployment in sprawling, urban slums remains, but the small towns that dot the sparsely populated pampas are bustling.
An emerging group of soybean-growing businessmen equipped with cell phones and sport utility vehicles is driving the boom. They have amassed huge tracts of land, building expansive agro-industrial operations that have begun displacing the region’s gauchos and small-scale farmers.

And who is buying all these soybeans?

Most of the soybeans are exported to China and other Asian countries, where they are crushed into a meal used as feed for livestock.

Here is the full story.

I have long wondered: why don’t individual investors diversify more? OK, it is bad for a country to be so heavily dependent on one crop. But surely individual investors — most of all soybean growers — should internalize these risks and hold a more diversified portfolio. Many of them don’t.

What is the upshot? Is the resulting high volatility simply the only way to get high growth? Perhaps you need non-diversified positions to generate the proper entrepreneurial incentives. On top of that, perhaps you need volatile upswings to cover your fixed costs as you move to the next stage of progress, a’ la Andrei Shleifer. Smoother growth patterns would lead to a lower average rate of growth. Or does raw hubris cause individual investors to diversify too little, thereby leading to a social inefficiency? Or how about the old days, when Kenneth Arrow argued that individual investors don’t take enough risk? I am inclined to agree with Shleifer, but these are some of the genuinely open questions in development economics.

Who’s a troll now?

Not that long ago David Bernstein wrote:

Huge increases in spending on education and other domestic programs that are not even within the federal government’s constitutional purview; a new prescription drug entitlement for the elderly; Wilsonian rhetoric and actions in foreign policy; Kennedyesque manned space mission boondoggles; clumsy protectionism; in its appointments to high-level positions, the most affirmative-action conscious administration in American history; a proposal to legalize the status of illegal aliens; and now, a huge proposed increase in funding for the National Endowment for the Arts. Remind me again of why liberals are so hostile to George Bush? Give him a phony Haavaad accent instead of phony Texas twang, a wonky college life, a less religious persona, and an attorney general other than John Ashcroft, and George Bush, in theory, would be a dream president for many liberals…

and Brad DeLong responded particularly intemperately saying Bernstein was a “either a out-and-out troll saying things he doesn’t believe or is remarkably uninformed.”

But when Ezra Klein says:

Republicans are getting elected by promising to protect the environment, strengthen entitlement programs, conduct humanitarian interventions, back Democratic security initiatives, and support public schools. They are getting elected by pretending to be Democrats, albeit Democrats who wear cowboy boots.

and liberal Matthew Yglesias writes:

the Republican Party has essentially abandoned the small-government agenda, a small army of disgruntled conservative think tankers notwithstanding

Brad has nothing but happy praise writing, “It’s twue! It’s twue!” and it’s a “a much better country for it.” (See also here).

Oil prices and time

Allow me to quote the ever-intelligent Arnold Kling:

In forecasting oil prices, I tend to defer to the efficient markets hypothesis. In some sense, oil in the ground has to compete with bonds and other interest-bearing assets. So, a reasonable approximation is that oil prices should be expected to go up at the interest rate. So, if the interest rate is 5 percent, then oil prices should go up at 5 percent, plus something for storage cost. If people thought oil prices were going to rise faster than that, they would keep the oil in the ground. If they thought that oil prices were going to rise more slowly than 5 percent (if that is the interest rate), then they would sell oil and buy bonds.

So my tendency is to assume that markets are efficient and predict that oil prices will rise at the interest rate.

This is called the Hotelling rule. But hey, didn’t Julian Simon tell me that most natural resource prices, in real terms, are falling over time? And surely the evidence is on his side. What gives?

Is oil exempt from Simon’s prediction? (How do VCRs fit into the picture?, the gentle reader might ask…)

Do markets systematically underestimate the rate of technical change, and thus the rate of price decline?

Or are falling prices an equilibrium because arbitrage-ready inventories are already essentially zero (no more selling is possible and the Saudis won’t pump more), and natural resource costs of production are falling rapidly as well? In other words, yes prices are falling but you can’t sell tomorrow’s oil today at a profit. Prices will be lower tomorrow but costs of production will be lower too. Good enough, but then the Hotelling rule doesn’t hold at the relevant margin.

I’ve never had good answers for these puzzles. Here is one useful survey of some models and the literature, scroll down a bit for the most relevant parts. Try this article as well. This literature suggests that most of the standards “outs,” such as changing costs of production, or new discoveries, don’t square the circle for anything other than the short-run. Holding oil still ought to yield (risk-adjusted) market rates of return, unless again investors are fooled into underestimating how much prices will fall.

My take: In my gut I don’t believe in the Hotelling rule. But I couldn’t tell you why not; I do understand that the arbitrage conditions of the model are fairly simple. If you wish to create some disagreement over lunch, raise this question with some economists you know. In the meantime, if you’re not confused, it means you don’t know what is going on.

Bigger than you think

The universe, that is. New estimates for its size, based on measured microwave radiation, are up to 78 billion light years. And that’s a minimum. The bad news? Given this size, it is less likely that light can “wrap around” an odd-shaped universe, allowing us to see what the earth looked like four billion years ago. And here’s more evidence that the universe is dominated by “dark energy,” causing it to expand, possibly forever.

Prof. Bainbridge answers 20 Questions

Prof. Bainbridge is the latest to undergo questioning at Crescat Sententia. When asked about law and economics the good professor had this insightful comment:

Traditional forms of legal scholarship were mostly backward-looking. One reasoned from old precedents to decide a present case, seemingly without much concern (at least explicitly) for the effect today’s decision would have on future behavior. Yet, law is necessarily forward looking. To be sure, a major function of our legal system is to resolve present disputes, but law’s principal function is to regulate future behavior [and]… law & economics gives judges a systematic mechanism for predicting how rules will affect behavior.

Health and Status

A number of studies have shown a startling connection between higher social status and better health, even after controlling for income, education and other factors. Some economists are skeptical, Angus Deaton, for example, suggests reverse causality may be a factor:

The major reason that people retire from the work force is that they’re sick. If you get sick in America, it does terrible things to your social status.

Two remarkable papers by Donald Redelmeier and Sheldon Singh cast some doubt on this explanation. In Survival in Academy Award-Winning Actors and Actresses Redelmeier and Singh compare the longevity of Oscar winners with nominees who did not win. The statistical hypothesis is that all that separates winners and nominees is the random fact of winning (random with respect to other factors influencing health). If winners and nominees are alike but for random factors then any differences in longevity can be causally ascribed to winning the Oscar. R and S find that winners live about 4 years longer than non-winners, a huge difference. The effect does not go away with additional controls.

Skeptics will posit other mechanisms but R and S have a lesser known but equally important paper on screenwriters who win the Academy Award. Surprisingly, they find that winning screenwriters die about 3 years earlier than non-winning nominees. At first, these two results appear to be quite contradictory suggesting some problem in the studies. But on second look there is a compelling logic to the findings. The difference between actors who win the Oscar and screenwriters is that even winning screenwriters get no respect. Who remembers a screenwriter’s name? I think it’s in the movie Bowfinger that Steve Martin says of the lovely ingenue something to the effect, “She’s so dumb she’s sleeping with the screenwriter to get to the top.” Winning screenwriters have longer and more successful careers (4 star movies) than non-winning writers so income and other material factors would suggest greater longevity but even a winning screenwriter is almost surely destined to have his lines mangled by a lousy but famous actor and perhaps this stress drives them to an early grave.