The cost of radio time

To be interviewed free, Mr. Holland said, “you have to be a senator. You have to be a president. You have to be a secretary of state. You’d have to be huge. Or you’d have to have influence with us. It’s a gift.”

Sky Radio, which also produces programming for United, Delta, Northwest airlines, charges guests to appear on its public affairs programs. Oracle, Dell, many major tech companies, most of the pharmaceutical companies, and all the big energy companies have paid these fees. One typical appearance went for $5,900.

Now a complaint has been filed with the Federal Trade Commission. Here is the full story, from The New York Times.

My take: Is this really such a big deal? I’m all for disclosure, but we should recognize that most listeners won’t hear, digest, or comprehend the announcement that the content is paid for. That being said, what is the worry? Anyone who pays to be on the radio is likely very boring. So what if listeners hear a steady stream of corporate drones, all claiming that their companies are wonderful? As it is, business scandals certainly get plenty of room on TV and in the newspapers, and I am not afraid of people being brainwashed into becoming followers of Ayn Rand.

By the way, I was once asked to pay to be on the radio. I declined to pay, if only because I thought I was doing them a favor, and in part because I saw no personal benefit from the appearance. I was told that many independent radio stations make their living this way.

Kidnapping facts

1. The number of reported kidnappings ranges between 12,500 and 25,500 a year, and it is estimated that only one-tenth of all kidnappings are reported. Nor do these numbers include the Chechen children sold back to their families by Russian soldiers.

2. London alone collects $130 million a year in premiums for kidnapping insurance, here is a link to one company, the visual introduction to this link is very effective.

3. About 90 percent of all kidnappings take place in the ten riskiest countries (the link also has tips on kidnapping etiquette), with Colombia a clear leader, reporting 10 kidnappings a day, more than half of the total. The police in Colombia admit that 1500 kidnapped hostages are held currently, the true number is likely much higher. Kidnapping is estimated to be a $200 million tax-free business in Colombia.

4. Kidnappers in the Philippines perhaps have read Thomas Schelling on credible precommitment. They now demand the names of two other likely victims and an estimate of their net worth, before releasing kidnapped children from wealthy families.

5. If you wish to buy one million dollars worth of kidnapping insurance for Colombia, it costs about $20,000 to $25,000 a year. Many people and companies buy much larger policies than this. Many kidnappers consider a ransom of less than a million to be a joke.

6. In Colombia a mere three percent of (reported) kidnappers are prosecuted; in the United States it is 95 percent.

7. The fatality rate on security-consultant-handled kidnappings is about 2 percent. You are most likely to die if they try to rescue you. You are most likely to win a safe release when kidnapping is done in conjunction with the police. Your time in captivity is likely longest when your kidnappers are Marxist revolutionaries.

From Robert Young Pelton’s The World’s Most Dangerous Places. I have been to only four of the place he lists (Bosnia, Russia, U.S., and Yemen), noting that it would be five, but he doesn’t even bother to put Haiti in the current edition, it might be too dangerous for inclusion, it certainly has not become safer. Given that Mexico is number two on the kidnapping list, it represents an odd omission as well.

Russia arrests its wealthiest man

Black-uniformed special forces swept onto the airplane of Russia’s wealthiest man Saturday and forced him back to Moscow, where he was ordered jailed on criminal charges – a dramatic escalation of the politically charged probe into Russia’s largest oil company.

Mikhail Khodorkovsky was charged Saturday with fraud, forgery and other crimes hours after the special forces troops, weapons drawn, surrounded his private plane at a Siberian airport.

This can’t be good news for a country. I can’t begin to understand the byzantine ins and outs of Russian politics. But either the wealthiest man doesn’t deserve to be arrested, in which case this is a tragic oppression or scapegoating. Or the wealthiest man does deserve to be arrested, which is tragic as well. What does it say about how wealth is earned in the country?

Somehow, this being Russia, one suspects that both case A and case B are true at the same time, which makes it even worse, and no, you need not lecture me on Aristotle’s Law of the Excluded Middle.

Click here for the full story.

The future of blogs, more

I had dinner with Glenn Reynolds tonight, and we discussed the future of blogs.

Glenn is so successful because he understands the idea of blogs as portals. (This is my view, not Glenn’s own self-description.) Blogs that offer too much of the author, and the author alone, are vulnerable to other blogs that cream-skim them, and other blogs, thereby offering the superior product. The question is not who can write the best stuff, but who can collect the best stuff, and comment on it most effectively. Really smart people are not always used to these terms of competition, I might add. The future of blogging lies in the hands of those who recognize the intellectual and literary division of labor.

The greater the number of blogs, the greater the importance of “portal blogs,” such as Glenn’s. In the old days you could read all or most of the good blogs yourself. That is becoming increasingly hard, and thus readers will look more and more to blogs that skim the cream.

Blogs make media more personal

Personality is a key reason why blogs will continue to gain readers. Consider this:

Media was institutional. Now it is personal.
By personalizing media, I don’t mean customizing it (My Yahoo, Your Yahoo, All God’s Children Got Yahoos).
I mean humanizing it, taking on the personalities of people, not of institutions. Consider:
: The success of FoxNews can be attributed to the rise of the personalities and opinions of its anchors…People magazine personalized all news, for now every story has a People angle. I was at the magazine at this tipping point. Once was, a big TV show on the cover yielded big sales. That ended with the remote control and its revolution of choice. The institution — the show — no longer mattered. Now what sold was the event in the star’s life. It was personal. And soon, it wasn’t just entertainment but news of any sort that got that treatment in People and everywhere. News was personal.

Reality TV is a similar phenomenon. For the full opinion, with links, read here.

Many people love the idea of getting their news from Glenn Reynolds as a filter, with his personal commentary, rather than looking to an institutional filter. We all want celebrities or authorities of one kind or another, and blogs help to fill this demand.

Reforming the corporate income tax

Not as sexy a topic as cads and dads, see immediately below. But here is the best short article I have seen on why we should reform the corporate income tax.

Levi Strauss was able to put about $100,000 into a sham Brazilian venture that netted it $180 million in tax deductions. And it was all perfectly legal.

The answer?:

Loopholes need to be closed, rules simplified and the 35 percent rate reduced. And serious thought has to be given to augmenting the corporate tax with an export-friendly value-added tax like the ones used by nearly every other industrial country.

I agree with the first sentence of that paragraph, but not the second. I worry about the transition costs to a VAT, I expect we would end up with both a VAT and an income tax and on that one I vote no.

Why do women like cads?

“About 60 percent of the women said they would prefer to have sex with a cad when considering a brief affair,” said Daniel Kruger, a social psychologist at the U-M Institute for Social Research (ISR), the world’s largest academic social science survey and research organization.

…the findings imply that the dad versus cad distinction is intuitive to women and remains a key element of contemporary mating strategies. Women’s preference for cads for short-term relationships supports what evolutionary psychologists call the “sexy son hypothesis,” Kruger said. Even though cads aren’t good bets to stick around and help raise children, the genes that make men successful cads will be passed along to their sons, who will increase their mothers’ eventual reproductive success by providing numerous grandchildren.

That being said, few women want their daughter to marry a cad:

…the distinction between dads and cads is intuitive enough that women showed a strong preference for dads [the contrasting male category, defined as caring, nurturing types] as potential sons-in-law. Only 13 percent of the women said they would prefer to see an imagined 25-year-old daughter engaged to a cad. “A cad would be less likely to provide paternal support for offspring,” Kruger said, “which means that a daughter might turn to the maternal family for help. That could adversely impact the grandmother’s overall reproductive success.”

Here is Kruger’s home page. Here is a link to the journal Human Nature, which lists the article as forthcoming. Here is the home page of co-author Maryanne Fisher.

My take: I can’t get my hands on the original paper. But the explanation, as offered, leaves a gap. It shows that a “cads equilibrium” is stable, once in place. But why are the sons of cads, themselves cads presumably, seen as sexy? One woman may want a cad, if she knows that other women will (later) want her son. But where does the female preference for cads, viewed more generally, come from?

Why don’t the French work more?

If France were to reduce its effective tax rate on labor income from 60 percent to the U.S. 40 percent rate, the welfare of the French people would increase by 19 percent in terms of lifetime consumption equivalents. This is a large number for a welfare gain. This estimate of the welfare gain takes into consideration the reduction in leisure associated with the change in the tax system and the cost of accumulating capital associated with the higher balanced growth path. The reduction in leisure is from 81.2 hours a week to 75.8 hours, which is a 6.6 percent decline in leisure. I was surprised to find that this large tax rate decrease did not lower tax revenues.

That’s the take of Ed Prescott, one of America’s smartest economists, here is the original research paper.

Consider just how radical the flip has been:

Americans now work 50 percent more than do the Germans, French, and Italians. This was not the case in the early 1970s when the Western Europeans worked more than Americans.

According to Prescott, changes in marginal tax rates are the main reason for this shift. The Prescott cite is from, a never-ending source of interesting material.

My take: Prescott’s critics like to squawk about his oversimplified models and his use of the representative agent construct. Having a background in Austrian economics, I have some sympathy for these criticisms. But on this matter, it is hard to deny that Prescott has nailed it.

The Effect of Police on Crime

Estimating the effect of police on crime is more difficult than it sounds because places with a lot of crime tend to have a lot of police and vice-versa. As a result, naive analyses tend to find that police cause crime! Jon Klick and I, following the amazing Steve Levitt, have what we think is a pretty clever solution. We look at what happens to crime in Washington DC when the terror alert level rises from elevated to high. During a high-alert period the police put on extra shifts, monitor closed circuit cameras on the National Mall and in general step-up policing. We find that crime falls a lot during these high-alert periods. Our new paper is, Using Terror Alert Levels To Estimate the Effect of Police on Crime. Comments welcome.

Here is the abstract:

We argue that changes in the terror alert level set by the Department of Homeland Security provide a shock to police presence in the Mall area of Washington, D.C. Using daily crime data during the period the terror alert system has been in place, we show that crime drops significantly, both statistically and economically, in the Mall area relative to the other areas of Washington DC. This provides strong evidence of the causal effect of police on crime and suggests a research strategy that can be used in other cities.


…if a panhandler asks for 17 cents or 37 cents, will he collect more donations than if he asks for 25 cents? Answer: He will receive about 60 percent more.

Here is another study…Students, acting as fundraisers, went door-to-door asking for donations. At half the houses they added one sentence to their spiel: “Even a penny would help.” Did this have any effect? Answer: It nearly doubled donations.

…Is it better to a) lecture students that they should be neat and tidy, or b) compliment them for being neat and tidy. Answer: In this study, the lecture method was useless, while method “b” led to a three-fold increase in the collection of litter.”

From a forthcoming review by J. Scott Armstrong, here is the whole review, it covers a book The Age of Propaganda, by Anthony Pratkanis and Elliot Aronson.

Here is another bit on persuasion, from Nalebuff and Ayres:

In 1990, H. Wesley Perkins, a professor at Hobart and William Smith College, discovered that most students think that they drink less than the average – and thus increase their consumption to be more like others. When the true drinking data is publicized, and students discover that few of their peers have more than five drinks at a party, peer pressure to binge is greatly reduced. The results were so successful in reducing heavy drinking that this approach has been employed throughout the California state university system and beyond. Rather than telling students to “Just say no,” it is more effective to say, “Just be like most everybody else.”

McCloskey and Klamer tell us that “One Quarter of GDP is Persuasion.”

Drinking errors

Both teenagers and adults misjudge how much they pour into glasses. They will pour more into short wide glasses than into tall slender glasses, but perceive the opposite to be true. The delusion of shape even influences experienced bartenders, though to a lesser degree, a researcher at the University of Illinois at Urbana-Champaign has found.

Click here for the full story.

What we buy from China

Our top categories of imports, by billions of dollars:

$8.6 Shoes
$6.1 Toys
$5.6 Input-output units
$5.1 Data processing machine parts
$3.2 VCRs
$2.6 Wood furniture
$2.0 Transmission equipment
$1.7 Data storage units

Get past the first two categories, and this is not just low-tech junk at your local Wal-Mart.

Now, consider our top imports from China, as a percentage of the overall imports in the stated category:

88% Radios
87% Christmas and festive items
83% Toys
70% Leather goods
67% Shoes
67% Handbags
65% Lamps and lights

From The Fruits of Free Trade, a publication by the Federal Reserve Bank of Dallas, the piece offers many nice illustrations of the benefits of trade.

In the average can of mixed nuts, you might find almonds from Italy, walnuts from china, Brazil nuts from Bolivia [sic], cashews from India, pistachios from Turkey, hazelnuts from Canada – a true international assortment.

Being a nut lover, that was my favorite bit from the brochure.

Milton Friedman tribute

I am pleased to report from a Milton Friedman tribute conference, held by the Federal Reserve Bank of Dallas. Milton, now 91 years old, remains incredibly sharp and quick on his feet. Gary Becker, in his talk this evening, challenged Milton as to why he does not believe in competitive supply of currency. Milton replied by saying he does not have a good answer to that question, but that he does not see how to get government out of the money business, given that dollars are already in place. He did suggest freezing the supply of high-powered money, and otherwise letting markets work and supply whatever forms of outside money might be demanded. Richard Ebeling discusses how Friedman’s thoughts on this issue have evolved.

My take: For a long time I favored Friedman’s position. In the meantime I have been more influenced by behavioral economics. I fear that some downward adjustments of prices and wages might be required, which people often find painful or resist, so I wonder if a very slight rate of price inflation might be superior. Of course a frozen supply of high-powered money does not necessitate deflation, but sometimes it will bring it. I also wonder how much short-run interest volatility would result. The supposed advantage of freezing high-powered money is to limit the potential for a repeat of the bad monetary policy of the 1970s, but has the Fed or government really engaged in effective precommitment? I doubt it. So right now I count myself as a monetary agnostic.

Addendum: Virginia Postrel, who is attending the conference, tells us about a forthcoming television biography of Friedman.

Second addendum: Here is a detailed conference report, written by a very smart and articulate attendee, his blog will be giving you updates as well.

On Whether To Rebuild Iraq and Whether to Pay for It

I am frankly puzzled about what justification there might be for “rebuilding” Iraq and why outsiders, the United States in particular, should pay for it. Is there some powerful theoretical argument or empirical evidence I am not aware of that suggests that Iraq is likely to become a significantly more friendly and civilized place if its electrical grid, highways, and water and sewage systems are substantially upgraded? And if so, is there some special virtue to outsiders paying for it? If there are strong arguments for either proposition I have not heard them. It would seem to me that helping the Iraqis establish the rule of law, a stable currency, secure property rights, will be far more valuable, considerably cheaper, and sad to say difficult enough. My sense is that a large infusion of cash from the outside will have a pernicious effect. It will encourage the (re)development of a rent-extraction industry.

Dalkon Shield, Silicone Breast Implants, Fen-Phen

A bill to move class action lawsuits out of the state courts and into federal courts narrowly failed in the Senate. Senator Tom Daaschle, explained his opposition to the bill this way, “It is the Dalkon shield, it is silicone breast implants, it is fen/phen.”

Good list. Wrong conclusion. The A.H. Robins Co. was driven into bankruptcy and forced to pay 3 billion dollars in damages but the Dalkon shield has been shown to be effective and safe. Silicone breast implants have been reviewed in studies by the AMA, the Institute of Medicine, the Canadians, the French, the British and others. All conclude that there are no unusual problems with the implants (any surgery has risks of course). The FDA will probably soon allow the implants back onto the market but in the meantime Dow-Corning has been driven into bankruptcy and tens of millions of dollars have been spent on lawsuits. Fen/Phen does looks like a serious health risk but tort law had nothing to do with removing the product from the marketplace. (Moreover, the issue is complicated. Only the Fen in Fen/Phen looks dangerous and that was approved in 1973).