Voting Fraud in Florida?

Just in case you hear about the study done by a prof at Berkeley, and aren't sure what to make of it: the study referred to by some folks in the media has been effectively countered by Craig Newmark, who includes a few demographic variables that have changed over the past four years.

Let's hear it for good theoretical modeling and the clear use of statistical estimation.

Why are people so quick to assume fraud in electronic balloting but not in all our billions of day-to-day electronic business transactions? Bill Sjostrom has a good explanation of the differences in trust, to which I linked earlier

Hint to Craig Newmark's results: the demographic changes did not involve a movement of evangelical Christians to Florida.

Some Light Reading: The Cat Who...

Last spring, I bought one of The Cat Who books, not knowing much about them. Since then I think I have read them all. Nice stories.

What is "Champagne"?

Orginally, a sparkling white wine was called "champagne" only if it came from the Champagne region of France. But in many countries the name has taken on a generic meaning: bubbly white wine that somewhat resembles the sparkling white wine produced in the Champagne region of France. Understandably, winemakers in Champagne (like the makers of Coke, Kleenex, and Aspirin) have fought the drift from specificity to generic use of their name. That's right, you folks outside Canada: Bayer has successfully defended its brand name "Aspirin" in Canada; here, we buy generic A.S.A., not generic aspirin.

According to The Washington Post (free registration may be required), it now looks as if the World Trade Organization is going to permit winemakers elsewhere to continue calling their bubbly, "champagne". This interim ruling is different, though, from a similar one that prohibits Italian ham producers from importing parma ham to Canada because a firm has the Canadian trademark for "Parma Ham".

The WTO has its hands full with these issues:

According to the E.U., this is "a short list of 41 products whose names are being abused and parroted" by non-E.U. producers. The European bloc also has plans to seek protection at a later stage for 600 more "regional quality products."

The E.U. is not alone. India is keen to protect Darjeeling tea, Sri Lanka its Ceylon tea, Guatemala its Antigua coffee and Switzerland its Etivaz cheese.

For the most part, I don't much care if producers in another country convert a regional term into a generic term; usually the increased competition benefits consumers. Nevertheless, from a longer-term perspective, if converting a regional appellation into a generic term means that consumers receive less information about a product's characteristics, then this drift is not unqualifiedly a good thing for consumers.

The Economics of Bicycle Helmets

I have worn a helmet while bicycling for over 30 years; my major investments and wealth have been in the form of human capital, and it has made sense to protect this capital. Also, I always insisted that my children wear bicycle helmets, and I encourage others to do so, too.

But now we have laws requiring people to wear bicycle helmets.

The economic effects of such laws are far from clear, as pointed out in Andrew Coyne's blog here and here. I'm especially intrigued by the argument that requiring bicycle helmets means more people will drive, leading to more pollution, congestion, etc. It should not surprise us that people respond to incentives by changing their behaviour.

From a libertarian perspective, I'm not sure why the gubmnt should have an interest in whether people wear bicycle helmets. Why not just let people choose which risks they want to take and then let them accept responsibility for the outcome? Before you urge I be fired for asking such questions, please read on...

I can think of two closely related reasons that we don't adopt such a laissez-faire attitude toward such things as bicycle helmets (or seat belts, for that matter). Both justifications involve the concept of externalities.

1. Even when people knowingly choose to take the risk of riding their bicycles without helmets, if they later become injured, we would look after them to some extent. We wouldn't (at least in Canada we wouldn't) deny them some basic health care; and we wouldn't require their families to suffer enormous financial losses just because a bicyclist in their family chose to take the risk of not wearing a helmet.
   And if people know that others will look after them (and their dependents) in the event of serious injury, then at the margin some will choose to eschew wearing helmets, for reasons of cost and/or comfort. They will choose instead to let others in society bear at least some of the downside risk of their decision. It is impossible to internalize this externality through the market. And this market failure leaves open the possibility (it's not a certainty!) that regulation might help deal with it.
   
   
2. In a world of socialized medicine, people who take risks quite clearly impose costs (in a probablistic sense) on all the taxpayers in the economy. If people injured in auto and bicycle accidents had to bear the full costs (directly or through their risk pool with private insurance), they would be much more likely to consider the downside costs of their risky actions. But because the taxpayers pick up the tab for their health care, that gives the taxpayers a fiduciary interest in the risks taken by everyone. And this interest is often used to justify interventions, such as requirements that people wear bicycle helmets or seat belts.

Isn't it interesting how the advent of medicare/socialized medicine leads to other justifications for gubmnt interventions in the marketplace?

Tyler Cowen on Tax Reform and Growth

Tyler Cowen is one of the smartest and nicest men I know. He has more compassion and sensitivity than most libertarian/conservative type folks, and yet he sees freedom and markets as the best way to pursue those compassionate goals. For example, see this debate in the Wall Street Journal. [update: The original links have disappeared behind the WSJ subscriber-only wall; the current link is to Tyler's blog (see below), which then links to the WSJ debates]

The heart of his argument in that debate, and elsewhere, is that economic growth does much more to help the poor than any redistributive tax programme.

To follow Tyler's thoughts on a wide variety of topics, I make it a daily habit to read The Marginal Revolution.

The NHL lockout, again

Nearly everyone in Canada knows someone who knows a real live National Hockey League player. In a country like this, with a sport that has been such a large part of our culture, I guess all we need are two degrees of separation, not six!

The friends I have who know current members of the NHLPA tell me that not many of them have found lucrative alternative employment in hockey. A very few are working for pro-rated salaries of $3oo,ooo or so in Russia (displacing players who were making the equivalent of at most $20,000). Others have found jobs paying far less with other European teams. Another 20 - 30 are playing with AHL teams for roughly five hundred dollars per game plus three hundred dollars per practice. Others are selling cars, working at Future Shop, or working construction jobs. But many of them are "staying home, drinking" as one put it, playing video games, or working out in gyms and doubling as fitness instructors.

In other words, aside from a few of them, most hockey players of NHL calibre earn enormous rents compared with their next best alternatives outside the NHL. Nevertheless, my friends tell me these same players pretty much expect not to play at all with the NHL during the 2004-5 season.

If this casual empiricism about the players' opportunity costs is even close to correct, then maybe my earlier speculation about the possibility that cracks might develop in union solidarity is correct. If well over 80% of the players are facing massive foregone earnings to fight a hard salary cap (that would primarily reduce the earnings of the most highly paid players), I wouldn't be too quick to write off the possibility of some sort of agreement before January 1st.

If, however, the league doesn't resume play by then, it is very interesting to speculate about the future of hockey in North America.

Wouldn't it be fun to see a revamped set of leagues along the lines of premier soccer, whereby teams that finish last would drop back to the AHL, with 2nd tier status, while the best AHL teams would be promoted to the NHL? Skip Sauer at The Sports Economist has some thoughts on applying this to MLS as well. One thing for sure: if losing NHL 1st tier status were the result of finishing last, the cost of bagging a few games just to get the first draft pick would be a lot higher than it has been!

Under this scheme, games between celler dwellers near the end of the season would become very meaningful.

K-Mart and Sears Merge?

Kmart and Sears are merging. That's like one non-swimmer trying to rescue another non-swimmer. My advice? Short 'em.

What Degrees Are Employers Looking For?

Check out this list from CNN.Money:

"...the greatest number of employers said they were interested in hiring grads who majored in accounting, electrical engineering, mechanical engineering, business administration and economics/finance."

Of course the results are based on U.S. employers and degrees, but I doubt if things are much different in the Canadian market for new university graduates.

Gratuitous comment: I didn't notice Sociology or Social Work on the list.

Link courtesy of King Banaian at SCSU Scholars -- a very good blog! He and I have known each other for well over a decade, having begun our correspondence about the economics of sports (baseball in particular). We renewed our friendship when I came across his blog and his interest in academic freedom. Throughout his blog, he posts really interestintg items about sports, economics, and academic integrity.

Oddly, even though I've never visited St. Cloud State Unversity in Minnesota, and even though I think he is the only person I know there, I find his posts about SCSU quite interesting - a tribute to what a good writer and analyst he is.

Trust, Reputation, and Poll Watching

Bill Sjostrom at the Atlantic Blog has a nice piece on why people are more likely to trust paperless transactions with businesses than they are with bureaucrats.

If a business screws up, there are usually fairly close substitutes available from competitors, and so most businesses try not to screw up. But if a bureaucrat screws up, finding a substitute bureaucracy in a different jurisdiction can be pretty costly: selling your house, buying a new one, quitting your old job, and finding a new one (or commuting to your old one) are very costly ways of searching out the next best substitute.

So it is quite reasonable that we are willing to trust businesses with many paperless transactions; but for elections we want paper trails and/or poll watchers.

How Safe is Canada?

From Roger Ebert (in his discussion of his review of the Michael Wilson film, "Michael Moore Hates America" [which, btw, received two thumbs up]):

For the year 2003, per 100,000 population,

Canada had 8,530 crimes, and the U.S. 4,267.
For crimes of violence, 958 vs. 523.
For property crimes, 4,275 vs. 3,744.

Why do you suppose Canada has a higher crime rate than the U.S.?

• Canada's law enforcement agencies keep better records?
• The proliferation of hand guns in the U.S. actually deters crime? John Lott would probably agree with this explanation

UPDATE: Another possible explanation, presented in Moore's Lies, is that the categories of crimes include different crimes in the two countries, with the Canadian categories being broader and more inclusive.

Commodity prices and Long Run Inflation

Rachel Layne, of Bloomberg News, has written a number of pieces recently on the squeeze that manufacturers are facing because of rising commodities prices. In the National Post (Nov 12, p. 53 of the Financial Post section, subscription required), she notes that in the U.S., from September 2003 to September 2004, crude materials prices rose by 14%, prices for intermediate materials rose by 8.4%, the finished goods price index rose 3.3%, but the consumer price index rose by only 2.5%.

I'm sure caution is called for in any forecasts. And I'm sure my younger colleagues will have many nits to pick with what I'm about to say. But.....

Even in a highly service oriented economy, and even with tremendous growth and technological change, it's difficult to see how such rapidly rising producer prices won't eventually lead to higher rates of inflation in the U.S. All those federal gubmnt deficits have surely pumped up aggregate demand and put pressure on commodities prices.

With these numbers, what surprises me is that it took so long for the U.S. dollar to lose value.

Shopping for a Date at Wal-Mart??

Whatever happened to singles' bars?
Whatever happened to shopping for a date in the produce section of the grocery store?

Now, in Germany, Walmart runs a singles night:
The Wal-mart employees greeted a man who was looking for a date, "...with a glass of sparkling wine and freshly shucked oysters. They took his picture and tacked it on a singles bulletin board, along with his age, interests and the qualities he seeks in a prospective partner. Semprich grabbed a shopping cart outfitted with a bright-red bow denoting his unmarried status and hit the aisles." link courtesy of AlwaysLowPrices.

Going to Wal-mart to buy a few things, even if you end up throwing them in the garbage, might be cheaper than going to a dimly lit bar. Also, shopping for a date this way might involve some interesting signaling strategies as people send signals by the items they place in their carts, such as:

• Look at me. I buy lots of neat things and can provide for you.
• I'm a very clean person, and I know how to do housework.
• I like to look good for my partner, and I save money doing so by shopping at Wal-mart.
• I don't mind watching chick/guy flicks.

At least the signaling would be different from that observed in bars; and the ambient noise level would be lower, too!

NL MVP - Barry Bonds wins his 7th

Barry Bonds has won his fourth straight Most Valuable Player award for the National League. He was clearly the best player in both leagues, with ungodly high OBA (.609) and SLB (.812) for a massive OPS of 1.421. Most players are considered very good if they have an OPS over .900, and anything over 1.1 is fantastic. Based on his career record, I am willing to argue that Bonds is the best player ever in major league baseball.

That having been said.... (you knew this was coming)....

As I have written before, I wonder whether the criteria for the MVP award should pay more attention to most revenue added to a team. The value of a player might very well be closely related to his playing ability and contribution to team wins (i.e. marginal physical product), but when the team doesn't make the playoffs, those wins didn't add as much to team revenue as did those contributed by the performances of, say, Beltre or Pujols. In the end, since the Giants didn't make the playoffs, did Bonds really add more to his team's revenue than was added by the other contenders?

The Social Safety Net for the Elderly

I've been following the discussions about social security and social insurance in the economics literature and in the blogosphere for quite some time. Tyler Cowen has recently written an excellent summary and analysis of the issues at The Marginal Revolution.

To summarize one of his important points:
Many of us think people ought to be free to allocate their wealth and spending as they choose, and many of us think people ought to assume, accept, and live with the responsibility and results of their own decisions.
Nevertheless, as a wealthy society in the 21st century, we will no longer force the elderly poor to starve or become dependent on their progeny or charitable organizations. And if that is the case, completely privatizing social security (or the CPP/OAS system in Canada) will not work -- most people will still want (and vote to have) a social safety net.

If this assessment of old-age insurance is correct, then there are some important questions to be asked:

1. How high do we want the social safety net to be?
2. How should we fund the annual expenditures for the social safety net?

And of course our answers to these questions will depend crucially on our guesses about how elastic we think people's responses will be to changes in taxes and benefits.

But the crucial part of his analysis that we must accept is that the important question is not whether to have gubmnt provision of old-age security; rather, it is how much to provide and how to provide it.

Alice Munro Wins the Giller Prize

I wouldn't ordinarily post something about the Giller Prize, but Alice Munro lives in Clinton, Ontario. Last Thursday, she was awarded Canada's prestigious Giller Prize for her book Runaway , a collection of short stories.

There's a good chance, too, that next week she'll win the Governess General's Award.

What Good Is High School Economics?

A friend who teaches high school wrote me last week to ask, among other things, "Do you find that students who have taken Economics at high school do better in your first year courses?"

We did a fairly tightly controlled study of this question many years ago, and in general (based on my casual ad hoc empiricism) I think the results from that study are still relevant. On the first day of classes, we gave the students a pretest that was based on the micro portion of TUCE [the Test of Understanding College Economics]. Students who had taken economics in high school outperformed those who hadn't, by about 30%.

Then we gave them the same test as part of the term's final exam. There was no significant difference between the final exam scores of students who had taken high school economics and those who hadn't.

A strong implication of these results is that if students are not going to take any more economics courses, then a high school course probably teaches them something; but if they are going to go on to take an economics course in college or university, they would probably be better off taking more math, history, language, etc. in high school.

Quite a bit of time has passed since we did that study, and the situation may be different nowadays, but the incoming students in my classes seem about the same, so I expect the results would hold today. However, the results might just be the result of self-selection: the brighter high school students take math, science, history, language, etc., while the less bright and/or less motivated students take economics (traditionally a "bird" course at the high school level), sociology, religious studies, etc. The students may end up with similar grades but different abilities and motivations (and all we could correct for in the study was h.s. grades, not aptitude test scores).

Wouldn't it be nice if high schools could, and especially would concentrate on the concept of opportunity costs? and maybe the fact that demand curves are downward-sloping?

Fixing Hockey

There are lots of reasons for the comparative lack of interest in NHL hockey. For my own part, until recently, I just assumed that as I got old(er) I didn't care nearly so much about watching sports with a lot of fighting and heavy body contact. Way back in time, when I was in high school, we used to enjoy going to minor league hockey games and cheering wildly for the fights, yet I'm downright repulsed by them now. So the fights are one reason I don't much like NHL hockey these days, but I figure that's just me, not the market as a whole.

At the same time, it isn't much fun to watch games that are really low-scoring. I know that some commentators refer to such events as great defensive battles, but I don't like them for two reasons. (1) when it's really hard to score, the goals that are scored are too often the result of random factors, not skill differentials, and (2) low-scoring games are boring.

Clearly I'm not the only one who feels this way. There is serious discussion underway to change the rules to make the game more attractive. [digression: curling has been quite successful with it's rule changes over the past decade - watch for it to grow]. One possibility receiving consideration is to reduce the allowable size of goalies' pads and thus permit more scoring.

When I first heard this proposed rule change, I thought it was a good idea. Actually, I still do, but I think doing something to open up play might be even better. Opening up the play would have the effect of both generating more scoring and deterring fighting. If the play is more wide open, then better passing, skating and shooting will become comparatively more valuable, at the margin, relative to fighting and "enforcing", with the result that there will be incentive changes and the tone of the game will change, too.

If I'm right, then the question is, "How can/should the NHL make play more wide open?" One possibility is to require that arenas rip out a row or two of seats if necessary and make the ice surfaces bigger. Another possibility is to require that players actually serve off-setting minors, so there would be more four-on-four hockey, which leads to more scoring. Yet another possibility is to go to straight four-on-four hockey all the time.

I'm not sure I like the idea of going to four-on-four hockey, but it would have some salutory effects. In addition to leading to more scoring and less fighting, it would also help the owners (if they need help) financially by reducing their labour costs. If all the NHL teams went to four-on-four hockey, they probably would carry fewer players, thus reducing the demand for labour, and these effects would lower their labour costs.

I doubt if the NHL will move to four-on-four hockey, but they might do well to consider having players serve all their penalties.

They might also do well to consider requiring ice-size changes over time.

Walmart's next victims: auto dealers?

There is no evidence that Wal-mart will start selling autos soon, but why not? Here is Forbes' prediction of Wal-mart's next victims. Be sure to click on the gun sight to watch the video -- it's good.

link courtesy of AlwaysLowPrices.