DVDs and Movie Theaters
A lot of people have argued that DVDs, home theater, and the shrinking time from big screen to DVD sales are spelling doom for the movie theater business. Michael Campbell, CEO of Regal, the nation’s largest chain of theaters, has some smart things to say in response. I particularly like his first response which shows a keen appreciation of market inter-dependencies, "general equilibrium" in econ-speak.
I think DVD’s have been the savior of not only the studio model but
have been beneficial to theater owners, too, because it funnels more
money back into the studios, which in turn fuels higher production
budgets, greater numbers of films, and so on.We have seen the
window shrink from an average of about six months between theatrical to
video 10 years ago to about four and a half months today. Some
compression of that window over time is justified, or has been
justified at least in the past, because we generate our piece of the
pie at the box office much quicker today than we did a decade ago.People
who run the studios are smart people, and I think they realize the
tremendous value of having that theatrical launch pad. And I don’t
think that’s going to change. They make films to be released on the big
screen.
Does Mexican immigration reduce crime?
Robert Sampson writes in today’s NYT Op-Ed page:
…evidence points to increased immigration as a major factor associated with the lower crime rate of the 1990’s (and its recent leveling off).
Hispanic Americans do better on a range of various social indicators — including propensity to violence — than one would expect given their socioeconomic disadvantages. My colleagues and I have completed a study in which we examined 8,000 Chicago residents who were asked about the characteristics of their neighborhoods.
Surprisingly, we found a significantly lower rate of violence among Mexican-Americans than among blacks and whites…Indeed, the first-generation immigrants (those born outside the United States) in our study were 45 percent less likely to commit violence than were third-generation Americans, adjusting for family and neighborhood background. [TC: But don’t absolute probabilities play the key role here? And should we compare Mexicans to "blacks and whites" or to each group in isolation?] Second-generation immigrants were 22 percent less likely to commit violence than the third generation.
Our study further showed that living in a neighborhood of concentrated immigrants is directly associated with lower violence (again, after taking into account a host of factors…)
Alas, there is no permalink these days. Here is the relevant project which generated the data. No one of Sampson’s pieces on his web page seems to cover this result, though many are relevant more broadly. Also see this summary of his criticism of "broken window" and "tipping point" theories of crime.
Here is another piece which seems to support the basic result that Mexican immigration lowers crime. Here is a survey article on the topic. This piece (see p.113) suggests that crime is lower in border cities than comparable non-border cities, and that Mexican immigration cannot be identified as a cause of a higher U.S. crime rate.
Yes comments are open, but purely anecdotal accounts of how you were once mugged by a Mexican, or how your neighborhood just isn’t "the same anymore" are discouraged. I’m posting a version of this over at Volokh Conspiracy as well, look for the differing comments.
Addendum: Read Alex on this topic.
News you already knew
In this week’s Media Guy column for Advertising Age magazine, [Simon] Dumenco
contends that knowledge of the hippest, hottest blogs can increase
hook-up opportunities and boost sexual attractiveness….
Thanks to Eric Crampton for the pointer.
Pedicab crackdown
There are fewer taxicabs in New York City today than in 1937. Entry restrictions have meant too few taxis, too many private cars, and gridlock so bad that in downtown midtown Manhattan, pedicabs, basically tricycle-rickshaws, are faster than cars. Is it any wonder, therefore, that the city is considering a crackdown?
Thanks to Roger Congleton for the pointer.
Facts about the Mexican middle class
1. The ranks of the middle class — defined as $7,200 to $50,000 a year — have risen to about ten million families.
2. That is almost 40 percent of all Mexican households.
3. The country is in the middle of a housing boom. 560,000 new homes were built last year — a record — and 750,000 are expected for 2006.
4. Annual inflation is down to about three percent and over the last two years interest rates on 20-year mortgages have fallen from 18 to 8 percent.
5. Sales of home appliances have tripled in the last ten years.
Those facts are from Business Week, 13 March edition. Each time I visit Mexico, the more I am convinced that country has turned the corner. Here is an earlier post on undervalued nations. See here also.
The Road to Serfdom, in cartoon form
Seriously. Originally published in Look magazine. Thanks to Alina Stefanescu for the pointer.
Lunch with Tyrone
I have had lunch with Tyrone many times. He is never invited. Tyrone is devious, untrustworthy and worst of all, brilliant. It often take days to sort out the fallacies, sophistries, and half-truths that invade my mind after lunch with Tyrone. Sometimes it takes much longer. He makes my head hurt. Even when Tyrone is not at lunch, I worry. Tyrone does not always announce himself. Maybe he really was at lunch…I told you he was devious.
Please do not encourage Tyrone. He is a bad, bad, man.
Opposite Day: Tyrone on the minimum wage
"Minimum wage, bah humbug. It is easy to defend. Tyrone snorts at you.
First let us clear out some garbage. The minimum wage should not be $50 an hour, and simply citing this possibility does not serve as an effective reductio. And yes racist South African labor unions supported minimum wages, but wouldn’t you expect them, vile as they may have been, to support higher wages in any case?
We know the empirical evidence on minimum wages is mixed. I am familiar with the Card-Krueger smackdowns but at the end of the day you have to work hard to get a big effect on employment. Most importantly, all of these studies miss the longer-run effects that make a legally binding minimum wage such a good idea.
Don’t obsess over static neoclassical economics, where you start with a firm, a competitive market, and a set of marginal products already in place. Think dynamic and look at the longer-run. If you ban jobs beneath some hourly wage, you will end up with more jobs above that wage. Ex ante, companies can set up their production to mesh with high-wage rather than low-wage jobs. Surely we should prefer an economy with higher marginal products, higher wages, and higher median income. Yes this redistributes a bit of wealth from capital but what an efficient way to do so. And we all know that long-run dynamic gains tend to swamp one-time static losses.
Don’t expect to pick up these effects in any study with a short time horizon.
Furthermore there is more slack in the system than many economic models would indicate. As a young’un, I worked in a supermarket. When they raised the legal minimum wage, they raised my wage as well. I was happy. No one fired me.
Minimum wages probably lower the net amount of government intervention in an economy. Lower minimum wages would mean higher welfare payments to make up the difference. Ever heard of EITC? In reality, minimum wages and EITC work together to keep the poor at decent standards of living. More importantly, they keep poor workers in the private sector rather than letting them become wards of the state. Try living on the minimum wage (much less beneath it), and without the safety net of your parents, if you don’t get my point.
Perhaps you think the minimum wage is an excessively blunt policy instrument, given that many near-minimum jobs are held by upper middle class teenagers. Fair enough, but this also means that the minimum wage doesn’t put many of those people out of work. We can go back to focusing on the net effects on the poor.
Tyler, what is really your problem with the minimum wage? Free market economists love to bash it because they can posture as friends of the poor. They can pretend that basic economics has great relevance. They can claim to know something useful, rather than facing the fact that opposition to big government really means opposition to massive income transfers. Since the American public is not willing to go this route, free market economists have to focus their yapping on the minimum wage and the (actually quite small) benefits of free trade.
Tyler, don’t you agree? Tyrone signs off."
There he goes again. As a child, he would never even sit straight at the dinner table. Readers, if you now wish to refresh yourself, try this, or perhaps even this. And maybe someone over at CrookedTimber is up for Opposite Day, but on some other topic…?
GDP-Linked Securities
Referring to my post on drought insurance and the coming new financial order, Daniel Strauss Vasques alerts me to the fact that Argentina has recently issued some GDP-linked securities.
The payout to the Argentinian securities is complex it occurs only if Actual GDP exceeds "Base-Case GDP" and the growth rate of Actual GDP exceeds the growth rate of Base Case GDP. Base-Case GDP is just a particular projection of GDP which is fixed in advance. If these conditions are met then 5% of the difference between Actual and Base-Case GDP, called Excess GDP, is paid to the security holders in proportion to their holdings. Total payments are also subject to a cap. (Here is a very long PDF prospectus if you want further information).
The Argentinian securities are a good beginning but they are unnecessarily complex. It would be much better to establish a market in which anyone could buy or sell a simple security based on GDP, e.g. every unit of a US GDP Share would pay out 1 trillionth of US GDP.
Aside from allowing greater national and international risk-bearing, GDP Shares defined in this simple way would be very useful for decision markets. If GDP Shares started to decline as the prospects for a Democrat/Republican victory increased, for example, we would have ample grounds for rethinking our decision. Ultimately, we might use these markets to replace politics.
Comments are open.
Data Prizes
I suspect greater payoffs will come from more data than from more technique.
So said Alan Greenspan and I think he is right. Think of how much important work, for example, has been based on the Summers-Heston, Penn World Tables. Yet, most of the time the collectors of data toil in the fields unrecognized and unrewarded. When original data is collected it’s often hoarded – better to mine it for yourself than open up the commons. Now, that is a tragedy.
We ought to increase rewards to data collection. As a salutary example, which might be emulated by the AEA and others, Mike Kellerman points to the Dataset Award given by the APSA Comparative Politics section for "a publicly
available data set that has made an important contribution to the field of
comparative politics."
Department of !
Saturn moon spewing water vapor. Or so it seems…
Experimental economics vs. field economics
Uri Gneezy and John List write:
Recent discoveries in behavioral economics have led scholars to question the underpinnings of neoclassical economics. We use insights gained from one of the most influential lines of behavioral research — gift exchange — in an attempt to maximize worker effort in two quite distinct tasks: data entry for a university library and door-to-door fundraising for a research center. In support of the received literature, our field evidence suggests that worker effort in the first few hours on the job is considerably higher in the "gift" treatment than in the "non-gift treatment." After the initial few hours, however, no difference in outcomes is observed, and overall the gift treatment yielded inferior aggregate outcomes for the employer: with the same budget we would have logged more data for our library and raised more money for our research center by using the market-clearing wage rather than by trying to induce greater effort with a gift of higher wages.
In other words, people in the real world show behavior much like that of traditional economic agents. Here is the paper. Have I mentioned that John List is one of the most important young economists? He has jumped from a U. Wyoming Ph.d. to a U. Maryland job to the notoriously-stingy-to-tenure Department of Economics at the University of Chicago. If you want to see a tough skeptic about many commonly accepted research results, especially in the realm of economic experiments, read some of John’s other papers. John is developing more finely grained methods of discovering when we should believe laboratory experiments. Are you surprised he puts greater trust in market data?
Stay tuned for Opposite Day
JewishAtheist suggests Opposite Day:
I was thinking it might be fun to have an opposite day, where the atheists do their best to argue that theism is correct and the theists do their best to argue that atheism is correct. Perhaps some Jews can argue that Christianity is correct and vice versa. The point is to get you to put yourself in someone else’s shoes and see what the logic looks like from that side.
It’ll only work if you really try, though. You must resist mocking or parodying the position you’re supposed to be fighting for.
I’ll open up the comments, and let you suggest a topic where I should blog the opposite of my point of view. Three mentions wins it (the standard rule these days), and of course it has to be a topic where I might plausibly have a point of view. Nor can you force me into a repugnant or embarrassing position ("we should kill all members of group X,"), and so on.
I don’t want to have the wrong impression carved into Google forever, devoid of this context, so "my good friend Tyrone" will actually write the post. My father wanted to name me that, but my mom had the good sense to resist and so Tyler it was.
Interesting links
1. David Friedman has a novel coming out.
2. Here is another good reason to have sex.
3. Contracts for everything, a’ la Mary Blige.
4. Long compound German nouns.
5. Bird flu, standing on one foot, by EffectMeasure. Here is a good analysis of avian flu in cats.
6. How baseball statistics confuse the transient and the permanent, pointer from Robert Schwartz.
7. George Lucas: "I predict that by 2025 the average movie will cost only $15 million."
8. How to moderate a panel, pointer from Chris Masse.
1001 Books You Must Read Before You Die
If you are a completist, as am I, buying this new book — yes it really is called 1001 Books You Must Read Before You Die — is a dangerous move. It has already induced me to purchase George Bataille’s Story of the Eye (not what I thought!), Robert Musil’s Young Törless, Thomas Pynchon’s supposedly underrated Vineland, and Jules Verne’s The Mysterious Island, which I expect contains the key to the mysteries of Lost. The volume is excellent for browsing and seeing what came out in a particular year. Elsewhere on the book front, David Maruszek’s long-awaited Counting Heads has idea futures, frozen heads, and a compelling literary style. I can’t imagine how it could have a good ending, but I am not yet at the point where I care.