Results for “prizes”
215 found

How to boost voting turnout and improve the quality of local government

I did not know this idea was under consideration:

Los Angeles city leaders are considering a lottery system to reward citizens for casting a ballot in local elections, in a measure to combat low voter turnout that officials and outside observers say could be a first for any U.S. municipality.

The Los Angeles Ethics Commission voted 3-0 on Thursday to recommend that members of the City Council move forward with the lottery idea, either by putting it before voters as a local initiative or by adopting it on their own, said commission president Nathan Hochman.

The commission discussed a number of possible ways for the lottery to work, including the use of $100,000 to be split into four prizes of $25,000, or 100 pots of $1,000 for lucky voters who win the drawing, Hochman said.

The story is here, hat tip goes to long-time MR correspondent Daniel Lippman, who now is working for Politico.

File under The Polity that is California.

Do the advantages of undergraduate prestige persist?

Joni Hersch of Vanderbilt has a new paper on this topic.  Given the multiple dimensions of unobserved quality, I wonder if there is any method which can convince me on such questions.  Still, I am glad to see someone putting the effort in.  Here is what the author came up with:

Income disparities arise not only from differences in the level of education but also from differences in status associated with an individual’s degree-granting college or university. While higher ability among those who graduate from elite undergraduate institutions may account for much of the earnings premium associated with elite education, ability should be largely equalized among those who graduate from similarly selective graduate programs. Few graduates of nonselective institutions earn post-baccalaureate degrees from elite institutions, and even when they do, undergraduate institutional prestige continues to influence earnings overall and among those with law, medical, graduate business and doctoral degrees.

For the pointer I thank the excellent Kevin Lewis.  Kevin also refers us to this unorthodox paper on the Finns, namely why are they so smart yet win so few Nobel Prizes.

Ebola and the FDA

The Telegraph reports:

The two American doctors who have caught Ebola have been treated with a new “secret serum” which could potentially save their lives.

…A source close to the Atlanta hospital, where Dr Brantly is being treated, told CNN: “Within an hour of receiving the medication, Brantly’s condition was nearly reversed. His breathing improved; the rash over his trunk faded away.”

One of his doctors reportedly described the events as “miraculous.”

…Dr Writebol was also administrated with the drug, which was transported to Liberia in a special sub-zero container. She showed a less remarkable recovery, but is hoped to travel to the US on Tuesday to continue her treatment.

According to CNN, the drug was developed by the biotech firm Mapp Biopharmaceutical, based in California. The patients were told that this treatment had never been tried before in a human being but had shown promise in small experiments with monkeys.

…health workers said drugs that could fight Ebola are not particularly complicated but pharmaceutical firms see no economic reason to invest in making them because the virus’ few victims are poor Africans.

Of course, pharmaceutical firms are not going to invest millions in getting a drug through FDA trials for a disease that has only killed a few thousand people since being discovered in 1976. Nevertheless, some people find this simple logic difficult to accept.

 Prof John Ashton, Britain’s leading public health doctor, termed the “moral bankruptcy” of profit-driven drugs developers.

The logic of profit-driven drug developers is no different than the logic of profit driving automobile manufactures. It isn’t profitable to make cars for people who can’t afford them but the auto firms are rarely called morally bankrupt for not giving cars away to the poor. Moreover, it’s not at all obvious why the burden of producing unprofitable drugs should fall on the drug manufacturers. To the extent that there is an ethical case for developing drugs for the poor it’s a burden that falls on all of us.

As Eric Crampton notes there are at least two possible solutions. Either ensure at taxpayer expense a return on investment by subsidizing, offering prizes (as I suggested in Launching) or publicly investing in orphan drugs or

ease up the FDA trials for drugs in this kind of category. Does it really make sense to mandate placebo trials for drugs hitting diseases with 60% fatality rates? We are condemning people to a very high risk of death for the sake of ensuring that there aren’t drug side effects and that the drugs are more effective than placebos (pretty easy to tell quickly where the fatality rate is otherwise 60%!).

Insurance markets in everything

But there is one type of insurance that people buy to protect them from the consequences of unusually good luck: In Japan, the U.K., and, to a lesser extent, around the world, golfers buy insurance to protect themselves from the potentially bankrupting consequences of sinking a hole in one.

The concept of hole in one insurance may baffle the uninitiated, but to many it is a wise precaution as golf tradition holds that anyone who scores a hole in one should buy drinks back at the clubhouse for his playing group — if not everyone present. In Japan, many give extravagant gifts to friends and family after scoring a lucky ace.

And indeed there is such an institution:

A number of firms offer hole in one insurance, frequently bundled with other services that golfers commonly buy like insurance for golfing equipment or personal liability. (Apparently yelling “Fore!” can’t ward off lawsuits if you hit a ball right at someone.) Golfplan, a U.K. insurer, covers $340 to $510 worth of drinks for hole in one celebrations. (Clubs’ set of rules for validating a hole in one makes it easier to process claims.) When it is sold unbundled, hole in one insurance can be cheap; Tokio Marine & Nichido Fire Insurance Co. Ltd offers Japanese golfers hole in one insurance for as little as a $3 premium. Outside of individual policies, golf tournaments also get hole in one insurance so that they can offer huge cash prizes for a hole in one as a marketing promotion — it’s the same type of “prize indemnity” insurance that covers teams when a fan sinks a half court shot or makes a field goal.

In the United States, where the custom is less firmly established, golf forums are filled with debate about what tradition demands. Some clubs have written the tradition into their rules. The New York Times notes that the membership dues at one San Francisco club include covering $250 worth of drinks to celebrate any hole in one, while a similar system at a club in Bremerton, Washington, gives pro shop and food and beverage credit to the lucky golfer — it’s up to him or her to share.

The full story is here, hat tip goes to Michael Rosenwald.  I wonder how many people buy this insurance simply to convince themselves (falsely) that they have some chance of making a hole in one.

Assorted links

1. Claims about the brains of great traders.  Not what I would have said.

2. Data on long-term trends, visually presented.

3. Can Google hackers put a restaurant out of business?  And a simple critique of smart people (not really about Google, no slight intended).

4. Predictions for 2025, including flying cars.  And the public choice angles on smart guns, by Joseph Nocera.

5. David Warsh with various speculations on various Nobel Prizes.

6. Ryan Avent: we still don’t know what is up with productivity.

How Winning the Fields Medal Affects Scientific Output

That is the subtitle of a new paper (pdf) by and George J. Borjas and Kirk B. Doran, the abstract is this:

Knowledge generation is key to economic growth, and scientific prizes are designed to encourage it. But how does winning a prestigious prize affect future output? We compare the productivity of Fields medalists (winners of the top mathematics prize) to that of similarly brilliant contenders. The two groups have similar publication rates until the award year, after which the winners’ productivity declines. The medalists begin to “play the field,” studying unfamiliar topics at the expense of writing papers. It appears that tournaments can have large post-prize effects on the effort allocation of knowledge producers.

For the pointer I thank Sarah Brodsky.

Summers, Lomborg, Tabarrok, and Cowen on climate change

There was a brief symposium, here are the results:

Larry Summers

President Emeritus of Harvard University, Former Chief Economist of the World Bank

My sense is that cap and trade is not the route to the future. It did not make it politically in the US at a moment of great opportunity in 2009. And European carbon markets have been plagued by constant problems. And globally it’s even harder. My sense is that the right strategy has three major elements. First, as the G20 vowed in 2009, there needs to be a concerted phase out of fossil fuel subsidies. This would help government budgets, drive increases in economic efficiency and substantially reduce global emissions. Second, there needs to be assurance of adequate funding for all areas of basic energy research. As a practical matter my guess is the world will produce non fossil fuel power in the next 25 years at today s fossil fuel prices or it will fail with respect to global climate change. Third, there is a strong case for concerted carbon taxes to further discourage greenhouse gas emissions. But this is a follow-on step for after the elimination of fossil fuel subsidies.

Bjorn Lomborg

Director of the Copenhagen Consensus Center and adjunct professor at Copenhagen Business School

The only way to move towards a long-term reduction in emissions is if green energy becomes much cheaper. If it cost less than fossil fuels, everyone would switch, including the Chinese. This, of course, requires breakthroughs in green technologies and much more innovation.

At the Copenhagen Consensus on Climate (fixtheclimate.com), a panel of economists, including three Nobel laureates, found that the best long-term strategy to tackle global warming was to increase dramatically investment in green research and development. They suggested doing so 10-fold to $100bn a year globally. This would equal 0.2% of global GDP. Compare this to the EU’s climate policies, which cost $280 billion a year but reduce temperatures by a trivial 0.1 degrees Fahrenheit by the end of the century.

Alex Tabarrok

Bartley J. Madden Chair in Economics at the Mercatus Center, George Mason University

Neither the developed nor the developing world will accept large reductions in their standard of living. As a result, the only solution to global climate change is innovations in green technology. A carbon tax will induce innovation as people demand a way to avoid the tax. A carbon tax, however, will be more politically acceptable if technologies to avoid the tax are in existence before the tax is put into place. Prizes for green innovations can blaze a path down a road that must be traveled, making the trip easier. The L-prize successfully induced innovation in LED technologies, the X-Prize put a spacecraft into near space twice within two weeks and Google’s Lunar X prize for putting a robot on the moon is close to being awarded. Prizes have proven their worth. To speed both the creation and diffusion of green technology, green prizes should be awarded at the rate of $100-$200 million annually.

Tyler Cowen

Professor of Economics, George Mason University

This is a problem we are failing to solve. Keep in mind it is not just about getting the wealthy countries to switch to greener technologies, but we also desire that emerging economies will find green technology more profitable than dirty coal. A carbon tax is one way forward but the odds are that will not be enough and besides many countries are unlikely to adopt one anytime soon. Subsidies for technology could occur at a very basic level and we could make a gamble that nuclear fusion will finally pay off. We also need a version of green technology that will fit into existing energy infrastructures and into countries which do not have the most reliable institutions. The most likely scenario is that we will find out just how bad the climate change problem is slated to be.

There are further responses at the link.

Addendum: Ashok Rao adds comments.

High prices for broadband, contestability, and Google Fiber

Here is a potential new development:

Verizon is adding more antennas to its network, forming smaller wireless cells with stronger coverage and rolling out service on new segments of the wireless spectrum, the digital equivalent of opening new lanes for traffic. Sprint is introducing a service called Sprint Spark that increases access speeds if customers have devices that can use multiple wireless frequencies at once.

If pCell works as promised, Mr. Perlman’s technology could result in much bigger gains in wireless speeds. In traditional cellular networks, antennas placed around a city transmit wireless signals to all of the mobile devices within their area. As more people enter an area, they share the wireless network with everyone else there, resulting in slower speeds. Wireless carriers cannot simply solve the problem by putting antennas everywhere because their signals can be disrupted if they are too close together.

With a network of pCell antennas, someone with a mobile device will get access to the full wireless data speed in the area, regardless of how many other people are sharing that network, Mr. Perlman said.

There is also this:

The plan is to bring Google Fiber to 34 cities and see how that goes.

Here are various satellite video streaming services.

I do not feel I can judge the prospects for these developments.  The point, however, is this.  Improving connectivity is an extremely dynamic market sector.  A high mark-up on cable internet connectivity, as might be applied by say a Comcast monopolist, is also creating a “prize” for further innovation in the sector.  Admittedly one does not prefer to have this prize funded by deadweight loss (less broadband consumption) but virtually all prizes are funded by deadweight loss in some manner rather than by lump sum taxation.

When people claim “the current mark-up is too high,” that is an entirely reasonable stance.  But when you rewrite it as “the current innovation prize, funded out of deadweight loss” is too high, that reframing brings some clarity, some moderation, and I think also induces some more agnosticism about the costs of the current semi-monopoly.  For similar reasons I don’t worry about monopoly in the eBook market and the like and there the case for simply ignoring the problem is much stronger because the options and cheapness have exploded so radically and so quickly.

So I don’t see the current cable semi-monopoly as lasting that long.  And its current cost cannot be that much higher than the cost of sending a disc in the mail, otherwise the disc would be sent.  Alternatively, most communities have public libraries which offer pretty good and pretty free internet connections, including video streaming of course.  If the argument is simply “this prize, for future connectivity innovation, cannot be funded from deadweight loss because it means that in the meantime some poorer people will have to wait to get their discs in the mail and make too many trips to the public library”…well, I guess I’m not that impressed this is a major public policy problem.

The longer and more you regulate cable prices, the longer it will take this sector to reach a more competitive equilibrium.

By the way, dear reader, I am not clever enough to use Netflix streaming, as I find the TV menu confusing.  So I still get the discs in the mail.

The Return of Command and Control

I spoke earlier this week at a conference on markets and the environment at the R Street Institute (I spoke about prizes). Many of the speakers were Reagan era politicians and appointees who are proud of Reagan and Bush’s successful approach to the environment and decry the inability to make progress today.

Back then, Republican’s were willing to accept environmental goals so long as they were achieved efficiently using market means and Democrats were willing to accept markets means to achieve environmental goals. Today, the Republicans are no longer willing to accept the environmental goals regardless of the means. The result, however, hasn’t been the ending of the goals it’s been that Democrats no longer accept market means.

Jeffrey Frankel argues that the net effect has been a disastrous return to command and control.

In the United States, the highly successful cap-and-trade system for sulfur-dioxide emissions has effectively vanished. In Europe, the Emissions Trading System (ETS), the world’s largest market for carbon allowances, has become increasingly irrelevant as well. On both sides of the Atlantic, market-oriented environmental regulation has in effect been superseded over the last five years by older “command-and-control” approaches, by which the government dictates who should use which technologies, in what amounts, to reduce which emissions.

As recently as 2008, the Republican candidate for US president, Senator John McCain, had sponsored legislative proposals to use cap and trade to address emissions of carbon dioxide and other greenhouse gases.

But Republican politicians now seem to have forgotten that this approach was once their policy. In 2009, they worked to defeat climate-change legislation by relying on anti-regulation rhetoric that demonized their own creation. This left only less market-friendly alternatives – especially after court cases upheld the validity of the 1970 Clean Air Act. Though such alternatives are less efficient, they are again the operative regime.

…government attempts to address market failures can themselves fail. In the case of the environment, command-and-control regulation is inefficient, discourages innovation, and can have unintended consequences (like Europe’s growing reliance on coal).

Savings lotteries

The idea of rewarding savings with prizes dates from at least 1694, when Britain, desperate to pay off war debt, lured savers with a jackpot. Prize-linked savings exist in some form in at least 18 countries today. Perhaps the experience most relevant for the United States is Britain’s Premium Bonds, established in 1956. The interest on the bonds isn’t repaid to the holders. Instead, it goes into a prize fund. Every pound savers put in (to a maximum of £30,000) gives them a chance to win a monthly £1 million jackpot plus a million different smaller prizes — all tax free. The program was begun as “Savings With a Thrill,” and the winning numbers were announced each month by celebrities.

At the program’s 50th anniversary, there was £32 billion in bonds — providing the government with capital at a cheaper rate than borrowing. Nearly 40 percent of Britain’s population — 23 million people — hold Premium Bonds. They are sometimes, but not always, the best savings deal — there is often a product whose return is better than the odds of what you’d win with Premium Bonds with average luck. But that’s the point: even though they might not be the left-brain choice, they get people to save.

In America, banks can’t run raffles or lotteries. They can run sweepstakes. The difference is a sweepstakes can’t require entrants to put in money — people must be able to enter by simply sending in their names. That effectively kills the idea for banks.

D2D, which is short for Doorways to Dreams, works to change federal and state laws to allow banks to offer prize-linked savings. But it is also collaborating with institutions that can do this right now: credit unions. In some states, credit unions can hold raffles. Michigan has long been one of them, and in 2008 D2D approached the Michigan Credit Union League about trying it out. Eight credit unions joined a pilot.

…For each deposit of $25, savers got normal interest, plus one entry to the annual grand prize and monthly smaller prizes of between $25 and $100. More deposits meant more chances to win, up to $250 – 10 chances — a month.

From Tina Rosenberg, there is more here.  The perceptive reader will note that insofar as you get to keep your money, no lottery payment is possible.  The seller of the lottery therefore must skim some off the top, one way or another.  So think of this as a savings component bundled with a lottery component but of course the buyers can spend more from their other sources of funds.  Perhaps if this “savings program” ends up looking virtuous enough, it could bring new, otherwise responsible customers to the idea of playing the lottery.

For the pointer I thank sellmejunk, a loyal MR reader.

Observations on South Korea

South Korea’s success has been deep but not wide. Almost half of its population lives, works and competes in Seoul. Its occupational structure is also narrow. The number of professions in South Korea is only two-thirds of the number in Japan and only 38% of that in America. This striking statistic is not lost on the South Korean government (few are). It has appointed a task force to foster 500 promising occupations, such as veterinary nurse, chiropractor and private detective.

Tyler Cowen, an economist at George Mason University, once pointed out that America has more than 3,000 halls of fame, honouring everyone from sportsmen to accountants. If people cannot reach the top of one ladder, they climb a different one. In South Korea, by contrast, people share a common definition of success. Everyone is clambering up the same set of rungs, aspiring to the same prizes and fearing similar failures. Those who say they are trying for something else are not quite believed. “People would rather be the tail of a dragon than the head of a snake,” as one journalist put it.

The entire article is interesting, from The Economist.

Do parents seek to maximize the social value of their children?

Let’s say a genetic test indicated a 90% chance that a child-to-come would be troubled with obsessions and unhappy and unsuccessful, and a ten percent chance that the child would grow up to be one of America’s leading entrepreneurs.  Or more modestly, in the positive scenario the child would be comparable to a worker or a scientist who creates $5 million in social value a year.  I believe most parents would feel uneasy about this genetic lottery, even though its expected social value is unambiguously high.  Telling the parents that the expected value of the child for society would be high would not distract them very much from the costs of the risk.

As I see it, many upper middle class parents desire their child to be slightly more successful than they are, and in related but not identical fields and ways.  They certainly would be happy if their child turned out to be the next Bill Gates (and more secure in their retirement), but not that much happier from a parental point of view.  Parents qua parents can get only so happy, and if your kid turns out well by your standards you are already pretty close to that maximum.

Notice how children differ from money.  Big dollar prizes induce risk-taking, at least from some entrepreneurs who have a strong desire for more and more money.  But big “parental prizes,” such a siring a true genius, might not induce much risk-taking with the identities or natures of children.

This is one possible institutional failure if there were “market-based” eugenics, namely that parents would be too risk-averse a social point of view.  We would end up with too much sameness, both across children and across the generations, and not enough monomaniacal creators.

Lars Peter Hansen, Nobel Laureate

This is a prize given to time series econometrics and how to deal with imperfect data and changing variances for variables being estimated.  Can you say “Generalized Method of Moments” (GMM)?  Hansen teaches at the economics department of the University of Chicago.

For years now journalists have asked me if Hansen might win, and if so, how they might explain his work to the general reading public.  Good luck with that one.

Here is Hansen on scholar.google.com.  Here is Hansen’s home page.  Here is Hansen on Wikipedia.  Hansen developed GMM in 1982, and here are some lecture notes on GMM:

Unlike maximum likelihood estimation (MLE), GMM does not require complete knowledge of the distribution of the data. Only specified moments derived from an underlying model are needed for GMM estimation. In some cases in which the distribution of the data is known, MLE can be computationally very burdensome whereas GMM can be computationally very easy. The log-normal stochastic volatility model is one example. In models for which there are more moment conditions than model parameters, GMM estimation provides a straightforward way to test the specification of the proposed model. This is an important feature that is unique to GMM estimation.

Here is a highly technical piece on how GMM is useful for testing macroeconomic propositions.  This is a slightly more intuitive treatment than most sources.

If you read this piece with Hodrick, you will see that Hansen’s work is instrumental for testing the advanced versions of the propositions of Fama and Shiller. In this critical sense, the three prizes are quite tightly unified.  And see this paper too with Singleton.  Here’s the most concrete sentence you are going to squeeze out of me on this one: if you want to do serious analysis of whether changing risk premia can help rationalize observed asset price movements, Hansen’s contributions will prove essential.