[a] woman thinks she has found a niche by turning canine fur into
fashion, spinning hairballs into accessories that can cost $200.

Read more here, noting that the most "sumptuous hair" is from the underbelly. And did you know that other yarns are made of wire, paper, and possum hair?  For the pointer I thank Ennis of the Indian-flavored www.sepiamutiny.com, one of my favorite blogs.

Readers of this blog will be familiar with Tyler’s insistent question, what’s your P?  As in what probability do you put on this event or belief?  (Examples here, here and my favorite here).

Unfortunately this type of thinking is all Greek (I am tempted to say all Arabic, but that would be cruel) to our intelligence services.  Writing in the Washington Post Michael Schrage argues:

It’s time to require national security analysts to assign numerical
probabilities to their professional estimates and assessments as both a
matter of rigor and of record. Policymakers can’t weigh the risks
associated with their decisions if they can’t see how confident
analysts are in the evidence and conclusions used to justify those
decisions….

[T]he CIA, Defense Intelligence
Agency, FBI and the federal government’s other analytic agencies have
shied away from simple mathematical tools that would let them better
weigh conflicting evidence and data. That bureaucratic shortsightedness
undermines our ability to even see the dots, let alone connect them.

Consider the National Intelligence Estimates, the
Presidential Daily Briefings or many of the critical classified and
unclassified analyses flowing through Washington’s national security
establishment. Key estimates and analytic insights rarely come with
explicit probabilities attached. The nation’s most knowledgeable
experts on the Middle East, counterterrorism, nuclear proliferation,
etc., are seldom asked to quantify, in writing, precisely how much
confidence they have in their evidence or their conclusions.

Your
personal financial planner does a better job, on average, of
quantitative risk assessment for your investments than the typical
intelligence analyst does for our national security.

All true.  I would add only that one virtue of information markets, like the short-lived Policy Analysis Market, is precisely that they produce such probabilities as a matter of course.

Students at a high school in Austin, Texas gave their teachers a lesson in the economics of prohibition.

When Austin High School administrators removed candy from campus vending
machines last year, the move was hailed as a step toward fighting
obesity. What happened next shows how hard it can be for schools to
control what students eat on campus.

The candy removal plan, according to students at Austin High, was
thwarted by classmates who created an underground candy market, turning
the hallways of the high school into Willy-Wonka-meets-Casablanca….

"It’s all about supply and demand," said Austin junior Scott Roudebush.
"We’ve got some entrepreneurs around here."

Thanks to Sean Brown, a student at another Austin high school, for the pointer.

Robert Shiller writes:

According to a study by the Insurance Information Institute, expenditures on non-life insurance in 2003 amounted to only 0.83% of GDP in Indonesia, 1.19% of GDP in Thailand, and 0.62% of GDP in India, compared with 5.23% of GDP in the United States.

And his bottom line?

Foreign aid is no substitute for insurance. Charity inspires, reassuring us of our humanity, but it is often capricious. You wouldn’t want to rely on it. Indeed, when deciding how much disaster aid to offer, countries often seem to be influenced mainly by their leaders’ concerns about how others will view them. Charity responds to attention-grabbing events, often neglecting less sensational disasters.  Insurance, on the other hand, is a reliable and venerable institution, its modern form dating back to the seventeenth century.

Could the micro-credit revolution be followed by a micro-insurance revolution?  Shiller argues valiantly but I am not convinced.  Economists miss one of the biggest problems with insurance.  We are blinkered by adverse selection models, which imply that the dangerous prospects most want to buy insurance.  The opposite is more often true.  If you are an irresponsible driver, you are likely to be irresponsible in other spheres as well and not buy auto insurance.  On the whole many insurance markets show positive rather than adverse selection.  In a development context, this means that the people who most need insurance will be the least likely to buy it.

Rachel Soloveichik writes:

I completely agree [with my earlier post] that parents aren’t perfectly altruistic toward their children, and parents are happier when their children are better behaved rather than happy.  But if society shifts toward giving more power to children parents are much less likely to have children.  The small effect on children’s utility from more toys may be hugely outweighed by fewer children being born.  That’s probably part of the reason religious parents have more children, because they have a set of norms that justifying pushing their children to good behavior rather than being happy.

My question is where the limits lie, once we make this a moral question.  Say you could cut a deal with a fetus or would-be fetus.  You agree to raise a child, under the condition that it remain your slave for life. You also make sure that the life of that slave remains better than no life at all, although just barely.  Should we, as believers in the Pareto principle, approve of such deals?  I’ll say no, which is one reason why I don’t put much stock in Nozickian libertarian rights.  But I find this view difficult to defend.  After all, everyone is better off (forget about secondary consequences, if you wish to make the hypothetical example airtight).  Should we allow parents, or corporations, for that matter, to make such deals?  And would we need actual consent from the child-to-be, or is it enough to recognize that in expected value terms the child-to-be would likely prefer to be born, despite the onerous terms of the deal?

I suspect that yes, it is better for the deal to be made.  More happy people is a good thing, all other things equal.  But it is also better for the deal to be broken, ex post.  Some ways of treating people are just wrong, even if they were agreed to ex ante.

Oddly, perhaps libertarians should welcome this conclusion.  Arguably their ancestors consented to rule by the U.S. government when they moved to this country.  Or perhaps you offer a kind of implicit consent from your consumption of public goods or from your dealings with broader society, nearly all of which favors the idea of government power.  But libertarians still can object to their current treatment, no matter what explicit or implicit agreements were made in the past.

What if parents agreed to have kids, but only on the grounds that those kids would not freeze their social security benefits?