Why do people put their houses in the path of so many fires? Matt Welch at Reason.com suggests an answer:

“The frequency and the intensity of the forest fires in the Southern California chaparral are the greatest in the United States, with the possible exception of the wildfires of the New Jersey Pine Barrens,” wrote environmental essayist John McPhee, in his marvelous “Los Angeles Against the Mountains” section of The Control of Nature. “It burns as if it were soaked with gasoline… The canyons serve as chimneys, and in minutes whole mountains are aflame, resembling volcanoes, emitting high columns of fire and smoke.”

Of course, those canyons–at least the ones not owned by the state or federal government–also serve as glorious, high-end residential real estate, eligible for the state-mandated, below-market FAIR insurance. According to Kiplinger’s, the average FAIR policy here costs $350. Part of the reason for the low price is that FAIR plans don’t generally cover theft or personal liability. But another is that there is a two-fisted downward pressure on prices–political desire to keep rates affordable, and the massive disincentive for any private insurers to compete against the heavily backed, low-priced plans.

The bottom line: These people are not paying the full social costs of their real estate decisions. In response we are offering welfare for the wealthy.

Thanks to Instapundit for the pointer, see also his commentary.

Six percent. Much better than expected. Here is a brief Fox News Bulletin.

Tom Bell suggests the following on today’s Techcentralstation.com:

…we need to spur white-hat security hackers with the prospect of profit and to guide their efforts into safe and useful channels. We need, in other words, to set up a bounty program that will reward both pretend terrorism and real security. Program participants who successfully hack the U.S. air security system would win money for their efforts. Unsuccessful hackers would have to pay the guards who catch them.

Here are my worries:

1. It will, in the long run, lead to the discovery of knowledge that is used by terrorists (Bell does discuss this, see the link).

2. Public anxiety, one of the biggest costs of terrorism, would rise appreciably. We would be constantly aware of our own vulnerability and we would become increasingly insecure. Isn’t that what the terrorists want? Terrorism as a phenomenon would receive more attention, perhaps to the benefit of terrorists. The 20-year-old who cracked security with box-cutters made the front pages.

3. Let’s say it worked. Would net terrorism decline? I’ve always wondered why terrorists have this obsession with planes, rather than stadiums, which would appear more vulnerable. Of course we could use the idea with stadiums as well, but overall substitutability may be high. And yes, this argument could be used against any safety measure (why not allow box-cutters again?), but still I think we are using up a good deal of society’s “ability to tolerate anxiety” on a single and not our only vulnerable spot.

4. Something else I can’t quite put my finger on. It relates to why it is so hard to use incentives successfully within a bureaucracy. And yes, the white-hat hackers would need to be embedded in a highly regulated and ordered bureaucracy, whether we like it or not. But can you imagine the FBI or CIA pulling this off successfully?

Still, ideas like this are worth thinking about. I certainly don’t have better proposals, and it is hard to believe that pecuniary incentives should have as low a role, in fighting terrorism, as they do today.

Leszek Kolakowski just won a new prize, the Kluge Prize, which is worth $1 million.

This is the nature of the prize:

The prize…is meant to highlight fields of study as varied as anthropology, history, philosophy, sociology and religion for which there is no major international award. It was conceived by the librarian of Congress, James H. Billington, and financed by the philanthropist John W. Kluge, who had no say in selecting the winner, library officials said.

In other words, it is intended to supplement the Nobel Prize. Kolakowski, a brilliant author, polymath, and critic of Marxism, is more than deserving. See also Jacob Levy’s excellent post on the matter, rebutting the charge that the award was politically motivated by “right-wing” considerations. After all, Kolakowski teaches at Oxford, hardly a hotbed of radical right sentiment.

In general we would expect that new prizes are awarded to the relatively old; Kolakowski is 76. Remember Cato’s Milton Friedman Prize of last year? It was awarded to the 85-year-old Lord Bauer, who died right before the award ceremony.

Presumably a new prize is seeking to build up its reputation, so its first few awards should be sterling in quality, not very controversial, and designed to generate maximum publicity. Once a prize is more established, the prize givers can take more chances, or use the prize to certify the quality of younger achievers, or use the prize to spur greater achievement.

Robin Hanson wonders why we don’t use more prizes today, in lieu of grants, to encourage science. In the eighteenth century, prizes not grants were the dominant means of encouraging science. One drawback of prizes is that they tend to be awarded in the interests of the prizegiver, and not necessarily to stimulate maximum scientific output. Arguably prizes should be awarded when people are younger, not older, if only for incentive reasons. Still, prizes make the most sense when you cannot predict where new innovation is coming from, and thus you do not know who should get the grants. As our world becomes more complex, less hierarchical, and more decentralized, I predict a greater reliance on prizes to stimulate science.

Sony and BMG might merge, bringing together the world’s second and fifth largest music companies. That would pair Tori Amos and Michael Jackson (Sony) with Outkast (BMG). The resulting firm, supposedly designed to cut common administrative costs, would be almost as large as the industry leader, Universal. Here is the full story.

My take: Regulatory approval is not certain, arguably unlikely, but regulators should not worry about market power issues. This is a desperation merger in a fading industry. The real “industry sector” includes file sharing, once you count that, and the accompanying zero price, the concentration issues do not look so bad. On the other hand, shareholders should not worry if they don’t get regulatory approval. I would expect a mess more than any significant cost savings, as the merger does not address the underlying problems faced by either company.