Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities

C'est la vie; c'est la guerre; c'est la pomme de terre . . . . . . . . . . . . . email: jpalmer at uwo dot ca

. . . . . . . . . . .Richard Posner should be awarded the next Nobel Prize in Economics . . . . . . . . . . . .

Saturday, July 30, 2005

Chicken Catching

My friend, Don, is a chicken farmer. He makes a lot of money chicken farming because in Ontario we have "supply management" meaning chicken farmers are strictly limited as to how many chickens they can produce, with the effect that consumers pay more for chicken, and the right to produce chickens is worth millions of dollars. See this for more details about chicken farming.

Don's 24,000 chickens [this is small-scale, compared with many operations in the area] had to be sent to the processor on Friday night. You catch the chickens late at night because that is when they are groggy and sleepy, making them much easier to catch. You feel for their legs to grab 'em and pick 'em up in the dark.

Last night, the chicken catchers picked up three birds in each hand because the cages on the trucks are designed to hold 9 birds each of the size that Don raises. I went out there last night to observe/help. There was no way, at my age and state of de-conditioning, that I would catch 3 birds per hand, and it was clear that I would just be in the way if I tried. I limited myself to catching the strays that got away from the trucks they were being loaded onto.

The chickens don't like being caught, and it is not a pleasant job. Good, experienced chicken catchers can make good money, but it is hard work. Maybe this girl is in training....

I'm an omnivore; some of my children and grandchildren are vegetarians. I have no problem eating meat. In addition, I think people shouldn't be squeamish about watching it get processed if they want to eat it; but I understand that many, many carnivores happily pay others to do the butchering so they won't have to think about it.

Before I went out to "help", I thought I'd read up on chicken catching on the internet. One of the first articles I came across was this screed about how chicken-catching is "specie-ist". These are some folks with serious problems with their priorities if they really believe this:

In “For the Birds,” Washington Post writer Tamara Jones declared at the outset: “Yes, Karen Davis is serious when she says the extermination of 7 billion broiler chickens is the moral equivalent of the Holocaust”
There are machines available to do chicken-catching [big-time capital-labour substitution!]. The problem with them is that they must be disinfected between catches, and if a machine breaks down, it is like having no catchers at all and the crop doesn't get harvested at the correct time and weight.

Civic Holiday

This is a holiday weekend for us. The first Monday of August is Civic Holiday in much of Canada.

When I first moved here 78 years ago, I had never heard of Civic Holiday. Colleague Robin Carter carefully explained to me that Canadians very intelligently decided they should have a holiday in August because they had official holidays in May, June, July, September, and October and they didn't want to go through August without having one then, too.

Civic Holiday commemorates nothing. It's just a good excuse to have a three-day weekend in August.

Calories and Calories from Fat;
a good listing for many fast foods

Not that I want to ruin your fun this weekend or anything like that, but here, courtesy of Jack, is a site that provides all the nutritional information you may not want to know about the foods available from these places:

Burger King
Papa John's
Pizza Hut
Taco Bell

Friday, July 29, 2005

What Do Basketball Players Learn in College?

from the sports law blog:

Update to NBA Player Arrest Study

In my study on NBA player arrest and age/education, I added an education-level comparison of arrested NBA players to all current NBA players. There are some rather striking results that appear to amplify the study's findings.Most notably, though 41.1 percent of all NBA players went to college for 4 years, 57.1 percent of arrested NBA players went to college for 4 years. In contrast, though 14.8 percent of all NBA players either did not go to college or went for one year, only 9.6 of arrested NBA players share the same educational background.

Why would college educated NBA players be more likely to be arrested? Why would those who attend for four years be more likely to be arrested than those who didn't?

One possible explanation is that after four years of suffering from monopsonistic exploitation by the NCAA, the players are less likely to have respect for the law. They see and experience cheating by athletic directors, and they are bombarded with bribes.

Another possible explanation: those who go straight to the NBA or who enter the draft early tend to be better players for whom the opportunity costs of being arrested are higher. They have more to lose and less to fall back on. They also have less time to become jaundiced by NCAA exploitation

A fun colour/word test

Jack sent me this link.

I got a perfect score...... the second time I took it.

Health Plans and the U.S. Auto Industry

Brian Ferguson has a very long posting at A Canadian Econoview about the current losses being suffered by General Motors. He correctly points out that their negotiated pensions and health plans for retirees are fixed costs even if the media report them as per-car costs. He also makes excellent use of the importance of expectations in decision-making:

GM and the union expected that GM would be able to make a great deal of money for many years. They were wrong. Now what can they do about it?

I know ---- get the taxpayers to pick up the slack. Here is Brian Ferguson's conclusion:
To the market oriented economist the situation is pretty straightforward. The American car manufacturers sat down and calculated the price they thought they could charge for their product and the revenue that they thought they'd bring in at that price. On the basis of those calculations they negotiated wage and benefit agreements with their unions. It turns out that consumers won't pay the price Detroit thought they'd pay for the cars Detroit was producing, so the revenue wasn't there. So they're asking the U.S. government to dip into the pockets of taxpayers, many of whom are earning a lot less than GM's workers are earning, to bring GM back to profitability without its unions having to make significant sacrifices. There is no justification for intervention, and the state of the auto industry certainly provides no basis for advocating national health insurance. The auto industry and its unions dug themselves into this hole, it should be left to them to get themselves out.
Why is GM or Ford stock not selling for just pennies? One reason might be that people expect the gubmnt to bail them out. Why else would someone pay anything for shares in firm with such huge fixed commitments?

What will happen if/when GM and Ford go belly-up? There will be a LOT of retirees whose pensions and health care coverage will be seriously reduced.

If you were retired (or retiring soon) from GM or Ford, wouldn't you be putting a little (or a lot!) extra aside for the future? I sure would.

Student Aid:
Income and Subsitution Effects

Rodney Hide, a member of Parliament in New Zealand, has a fascinating blog that I highly recommend. He is an outspoken critic of big gubmnt and feel-good policies that have unintended consequences.

In one of his recent entries, he addresses the topic of the huge debt load taken on by students for their post-secondary education. He notes that the NZ gubmnt, in an effort to reduce the amount of outstanding student debt, actually induced students to take on more debt:

The Labour Government promised free money while students studied back in 1999. Within a year, the proportion of eligible students who borrowed jumped ten percent and the amount that each student borrowed jumped on average 23 percent.

The result was more student debt, not less.

The effective interest rate on a student loan is now 2.8 per cent.

The problem is about to get much worse as National promises to make interest payments tax deductible.
The very politicians who are complaining about student debt are the very ones encouraging it. What student now won’t take on debt – and the maximum amount?
It gets worse:

National’s policy to buy votes by making interest on student loans tax deductible has now been outbid by big-spending Labour promising to wipe interest on graduates who stay in New Zealand.

We can’t outspend Labour. That’s why sticking to principle and sound policy is critical.

National started a bidding war and got outbid.

New Zealand has an election scheduled for this September. I hope Mr. Hide is re-elected and with strong support.

Thursday, July 28, 2005

In Defence of Payola

Payola is the payment by record producers to broadcasters to obtain more playing time for their recordings. Economists have defended since Ronald Coase wrote his seminal piece in 1979. This summary is from Sidak and Kronemyer:

The origin and economic function of payola were first analyzed in 1979 by Professor Ronald Coase. He argued three fundamental propositions.

First, every time a radio station plays a song, it in effect advertises a specific product (namely, a phonograph record) that a record company has for sale. Payola is a price mechanism for efficiently allocating this scarce but otherwise unpriced on-the-air advertising of popular music. There is no reason to believe that a record company that dispenses payola will spend its finite advertising resources promoting "bad" music rather than "good" music.

Second, long before the commercial development of radio, a similar pricing system was commonplace in the United States with respect to the inclusion of songs in live performances by popular singers and musicians. At that time, the implicit advertisement was for sheet music sold by music publishers.

Third, since at least the 1890s, movements to prohibit payola have been used as competitive weapons by record and music publishing firms. Those firms have acted, sometimes in concert, not only to reduce their own advertising costs, but also to restrict advertising alternatives by which new entrants could expose to the public their sound recordings and copyrighted compositions.
In a recent piece in Slate, Daniel Gross updates the defence of payola, noting that broadcasters have very little market power these days, what with ipods, itunes, podcasting, and other myriad opportunities to listen to music. He also points out that paying for promotional advantages is common and accepted in nearly every other retail business:

It's a truth universally acknowledged that manufacturers of everything from soap to computers pay the folks who control crucial distribution channels to display their wares prominently. It's legal, and no one minds. Viewers have accepted with equanimity the rise of (disclosureless) product placement in television shows and movies. In June, Randy Kennedy wrote an excellent brief dissertation in the New York Times on "co-op advertising," the process by which book publishers effectively pay Barnes & Noble for guaranteed placement at the front of stores. (No disclosure, no hint of illegality.) Why are Doritos bags stacked so nicely at the end of your supermarket aisle? Because Frito-Lay pays for them to be there. And the Web is one gigantic payola machine, from to the exploding realm of paid search.
He's right. For more read his entire piece; and for other articles on the topic, just Google Coase + payola.

CAFTA Passes.

From Ben Muse, my regular source on international trade policy,

At bedtime in Juneau (about 11 PM) the Washington Post is reporting that the House approved CAFTA 217 to 215: Trade Pact Approved By House .

Apparently it wasn't pretty:

To win, the White House and GOP congressional leaders had to overcome resistance from dozens of Republican members who were also concerned about the agreement because of issues ranging from the perceived threat to the U.S. sugar industry to more general worries about the impact of global trade on U.S. jobs...

It is apparently so difficult to win over the vested interests with comparative advantage arguments that voting-rule games must be played to win:
When time for the vote on the Central American Free Trade Agreement expired at 11:17 p.m., the nays outnumbered the yeas by 180 to 175. But, a few minutes past midnight, the GOP leadership, ignoring Democratic protests that the rules were being violated, had rounded up enough votes to win by 217 to 215...
Maybe, just maybe, the sugar lobby will continue to lose some of its power.

Jingoism, Nationalism, Unocal, and Danone;
Is Yogurt a "Strategic Industry"?

If you think people in the U.S. went a little crazy when it looked as if a Chinese firm might buy out Unocal in the oil business, you should see how the French are reacting to a possible takeover of Danone Yogurt by Pepsico:

The German government recently undertook considerable efforts to guarantee German control of German shipyards. The French Prime Minister has come to the defense of... yogurt.

... as Le Figaro points out, the acquisition of Danone by Nestlé would risk giving the latter a monopoly position in the markets in question. An acquisition by PepsiCo presents no such problems. One Danone employee interviewed on French television about the rumored takeover bid sighed: "Anything but the Americans...". Could French and EU authorities, in much the same spirit, prefer the creation of a "European" monopoly? Their recent sanctioning of the acquisition of Vivendi Universal Publishing (VUP) by Hachette-Lagardère suggests the answer is: "yes".

... EURSOC provides much useful background - recounting how Danone went from the bete noir of French industry to the current damsel in distress threatened by the "American ogre" - in "Yoghurt War".
Yoghurt War provides a superbly written summary of the situation. Highly recommended for those who like irony and/or sarcasm.

Update: Pepsico was apparently never interested in buying Danone. The rumour might, in fact, have been part of a stock price manipulation scheme. Makes the bruhaha even more haha.

On Monday, the French Financial Market Authority (AMF) announced that it had received assurances from the PepsiCo Corporation that, contrary to widespread rumors, the latter was not in fact preparing a takeover bid for Danone.

...In the meanwhile, following the request of Colette Neuville, President of the Association for the Defense of Minority Shareholders (ADAM), the Financial Market Authority has opened an inquiry into a possible manipulation of the Danone stock price.

[thanks to Alan Adamson for the pointers]

But Doesn't This Steal Jobs from "Real" Workers?

Blind workers at two different Lighthouse work centres in Texas are employed making uniform pants for U.S. soldiers.

The Army contract calls for about 60,000 pairs of trousers to be made by San Antonio Lighthouse this year and 120,000 pairs at El Paso Lighthouse for the Blind.

Similar work, along with production of the accompanying uniform jacket, is being done by sight-impaired workers in North Carolina, New York, New Jersey and Pennsylvania, according to the National Industries for the Blind of Alexandria, Va., which oversees the contract.

The three-year contract is worth about $15 million to the participating nonprofit agencies, said Jim Gibbons, NIB's president. Workers in San Antonio are paid $8 to $13 per hour plus benefits, Delgado said.
In the past, I have heard rumblings from unions that such projects steal jobs from "real workers". Maybe they do, although I find the term "real workers" quite objectionable.

If the contracts are not won via competitive bidding, but instead are awarded because of social policy to provide more jobs for people who are blind, then regardless of the merits of the programme on social or moral grounds, yes, the contracts do steal jobs from other workers, real or not.

[thanks to Rondi Adamson for the pointer]

Trends in Income Inequality

I was intrigued by a recent posting by Ben Muse, noting that income inequality in the U.S., by most measures, peaked sometime between 1910 and the late 1920s. Ben cites this paper by Rosenbloom and Stutes, who conclude:

Compared to estimates for the early twentieth century, the distribution of wealth at the national level... was relatively equal. In 1870 the top 1 percent of wealth holders owned 27.9 percent of all property, about one-third less than was the case in 1916.
One reason this piece intrigued me so much is that back in the late 1960s, before I went to Iowa State for grad skool in economics, when I inadvertently backed into an economic history course taught by Robert Fogel, I wrote a paper on changes in income distribution over time.

I posited that if potatoes are an inferior consumer good, then the more poor people there are, the greater should be the per capita expenditure on potatoes. Or something like that. I spent days, poring through historical volumes, collecting data, compiling a series. And sure as shootin', the series I compiled peaked about 1915 or so. Not a bad proxy, eh? Maybe I should dust it off, update it, and try to publish it.

Wednesday, July 27, 2005

Point Estimate: US Fed Funds Rates to be 4% by November

The current target rate is 3.25%. See here for more.
My own point estimate for November is 3.75%. Inflationary expectations are low; monetary growth is low; and fiscal deficits are less than expected.

Consumerism: A Set of Confessions and a Quiz

I know I am an unabashed consumer. I am grateful for the university pension plan, which pretty much induced me to save for my retirement; otherwise we'd be lucky to have a single-wide mobile home to live in when I retire.

One thing that limits how much stuff I buy (in addition to my paltry income) is the size of our house; after all, I could buy lots of stuff from Good Will if I really wanted to and had the space.

Here is the quiz [my answers are in brackets]:
  1. How many books have you bought but not read (yet)? [I have about 7 or 8 that I'm planning to read "really soon now"; plus there are another 20-30 that I realistically know I'll never get to.]
  2. How many unopened CDs do you have? [6]
  3. How many times have you bought a book or CD, only to discover you already own it? [or does this happen only with those of us approaching "senior" status? 5 or 6 or maybe more times.] This often happens to me when I peruse the clearance bins and just cannot pass up what appears to be a great bargain.
  4. How many unopened DVDs do you have? [We're down to only two now; we maintained an inventory "just in case", and my youngest granddaughter, Laura Bush Palmer, has been working her way through it.]
  5. How many tools or appliances have you bought in case you might "need" them and not used yet? [maybe 1, but I can't think of any]

Do you think this type of behaviour is a rational maximizing reaction to low interest rates? Quite possibly, David Altig would:

To put it short: I find it hard to reconcile the "conundrum" of low market interest rates with an explanation of large current account deficits and net borrowing from foreigners that hinges primarily on an exogenous increase in desired consumption spending by U.S. households (which is how I am, perhaps incorrectly, interpreting the phrase "consumption binge").

What I don't find hard to reconcile is a story that is fundamentally about low saving rates being driven in large part by low interest rates, which themselves are a result of some third (or fourth or fifth) source.

Talk about Tight Bayesian Priors!

The Freakonomics Blog has a letter from one of their readers that the NYTimes-Guardian wouldn't publish about the seat belt - child car seat debate. Here is an excerpt:

No matter how the data was sliced and diced we found that car seat belts were more effective for children and infants (highly statistically significant effects). NHTSA did not like this conclusion and obviously never went public with it (did not want to discourage child seat usage despite the relative ineffectiveness compared to existing seat belt systems). In fact they verbally indicated that they were not even going to take the results to the child seat manufacturers of the day to foster future improvement.
The on-going debate about the comparative safety effects of car seat belts versus child car seats is very stimulating and interesting. Read more at Freakonomics.

US-Born Economist, Teaching in Ireland, Takes Krugman to Task about Canada

When I started writing this item, the most frequently e-mailed piece from the NYTimes was Paul Krugman's column about why Toyota chose to locate its newest North American assembly plant in Canada rather than in the U.S. It may still be...

In a recent posting on The Atlantic Blog, Bill Sjostrom dissects Krugman's column very effectively.
He tries two lines of attack. One is to claim that American workers have lower productivity because of low government expenditure on schooling.

... Krugman's implicit claim is that more government spending improves schools. The difficulty here is that the evidence for this assertion is at best spotty, and there is a good deal of evidence that spending more makes little if any difference (see, for example, the work of Eric Hanushek of Stanford and Jeff Grogger of Chicago).
So why are Canadians/Ontarians reportedly more productive than, say, Alabamans or Texans? Is it our puritan work ethic? I honestly don't know, and I'm not convinced that it is due to our already-established manufacturing base because if it were, other places in the U.S. might be just as productive. Perhaps this is an instance in which a company's public statements should not be taken at face value but should be interpreted instead as a statement by Toyota to prospective employees: We expect you to work hard and produce a lot because you will be fired if you don't.
His other line of attack is to assert that Canada's national health insurance system gives Canada an advantage.

When Toyota sets up in Canada, it has to attract employees, either from other employers or by getting them into the labor market. Since everyone gets the health care the government provides, it follows that Toyota will still have to pay Canadian market wages. From the point of view of health care, the only advantage to moving to Canada is if the Canadian system can supply health care at a more advantageous combination of cost and quality, a doubtful proposition.

But Krugman is not trying to praise Canada, he is trying to get Americans to sign up for Canadian style national health care. Suppose the US created a Canadian style system. Then everyone would get the government health package regardless of whether they were working. To get employees to work for Toyota (and any other employer), the employers would have to compensate them for the wages lost to the extra taxes.
In other words, Krugman has raised the same issue that has been raised in the softwood lumber wars and has committed same error (or falsification, depending on your perception of the biases involved). It is inappropriate to talk about Canada's alleged subsidy to employers via gubmnt-funded health care without talking about tax levels and the costs from health care waiting times at the same time.

Let's also not ignore the massive subsidies offered to Toyota by every level of gubmnt. Maybe Texans and Alabamans are just smarter than Ontarians in their decisions not to subsidize major companies.

Tuesday, July 26, 2005

Interview with Gary Becker and Richard Posner

The most recent Radio Economics interview is now available. This one is with Gary Becker and Richard Posner, of the Becker-Posner blog. I was intrigued by two points made there:
  1. Posner talked as if he doesn't consider family blogs to be serious blogs. Okay, sometimes they aren't, but the comment also reveals Posner's intense academic bias. And the comment should not be surprising in light of his comment that he doesn't care for family get-togethers all that much. [see here for links about Posner]
  2. Becker said they don't have research assistants. Maybe not explicitly for their blog, but I would be surprised if there weren't some overlap. What he did say is that they rely heavily on Google for their research, a point made as well by Margaret Wente in her work.

I must say that all-in-all, even though James Reese does a great job putting together these interviews, listening to them is time-consuming.

Update: Craig Newmark sent me an e-mail about my own interview on Radio Economics, saying,

Hey, now you can require your students to get iPods for the educational purpose of listening to you. :-) Just like Duke. Duke purchases iPods for some of the undergraduates; they are enthusiastically received, but I rather doubt the educational value.

Italy and the Euro

Even if other countries are not playing by the rules of the European Monetary Authority, Stephen Poloz of Export Development Canada says the Euro benefits Italy, and Italy should not withdraw from the union:

First, the euro is not actually strong. It was worth about US$1.20 at its inception in 1999. During 2000-2001 the euro fell to around US$0.85 because of weak global growth and U.S. dollar strength. But the global recovery fostered a rebound in the euro, too, and after overshooting to $1.35 it is now closer to $1.20, where it all began. With the world economy functioning much more normally today, this is the sort of value for the euro that Europeans will need to get used to.

Second, Italy is one of the countries that benefited the most from the monetary union. In 1995, the interest rate on 10-year Italian government bonds was over 13%, while that on German bonds was below 8%. That risk premium of 5% was being paid by every Italian on their mortgages and credit cards. Today, thanks to monetary union, that risk premium is only 0.2%.

Third, Italy’s economic performance has not really changed. Average growth in the six years since monetary union has been 1.4%, and it was 1.5% during the six years prior to 1999. Italy’s economic problems are mostly structural in nature, and dropping the euro would not change that.

Dropping the euro would, however, lead financial markets to worry about a return to high deficits and inflation, and ordinary Italians would pay the price through higher interest rates. The fact is that the rules of euro membership make it easier for politicians to take tough economic decisions.
Steve's weekly newsletter is brief, interesting, and worth subscribing to. Also, since its from a quasi-gubmnt agency, it doesn't add to your spam. Click here to subscribe to it.

"Freedom of Speech"
vs. free use of resources for speech

In his classic text, Economic Analysis of Law, Richard Posner makes the important distinction between "freedom of speech" and the provision of scarce resources for people to use in order to exercise their right of free speech.

For example, under freedom of speech, I have the right to criticize a gubmnt official. I do not have the right to run ads on television publicizing my criticisms unless I pay for the ads. This distinction is crucial to understanding the economics of freedom of speech.

Where does pan-handling fit in? Is begging an exercise of my free speech? If I persistently walk up to people in crowded areas, asking for money, is that an exercise of my free speech? Kip Esquire thinks it is.
First, it is not clear that beggar-free streets, even in an important central business district, are a "compelling" interest — nice, perhaps, but not "compelling." Ugly, or smelly, or guilty-feeling-creating are not sufficient intrusions on our sensibilities to warrant wholesale removal from an entire area — even a tourist area.

And even if there were a sufficiently "compelling" interest, a law banning all panhandling, even merely sitting quietly in a corner with a cup in your hand, is still not "necessary" to achieving that goal, nor is it the least restrictive means available to achieve that interest. Enforcing existing laws relevant to aggressive panhandling, such as disturbing the peace, public nuisance, harassment, and even assault and battery if warranted, will "keep the beggars in their place," so to speak.

Or, if more is needed, laws proscribing aggressive panhandling can achieve the public interest with far less implication of First Amendment protections. A group called Center for the Community Interest has drafted a Model Aggressive Panhandling Law that would seem to address most of the concerns of those who support the ban (e.g., repeated requests, following or physically touching people, shouting) without a complete outlawing of all begging.

That's my opinion — any dissents?
I have a very high regard for Kip Esquire. His blog is one I try to visit on a regular basis, and he always seems several steps smarter and ahead of me. But in this case, he still has a ways to go before I'm convinced.

I don't see sitting on a street corner with cup as speech. And if someone thinks asking people for money on the streets is expressing a political view and requires protection, I do dissent. "Give me money or I'll harass you" sounds more like extortion than free speech to me. But most importantly, limiting where and how people use scarce resources that are not their own is not limiting freedom of speech; it is a limitation on using scarce resources.

I realize the distinction may sound picky, but it is really important.

Monday, July 25, 2005

Radio Economics Podcast Interview with
the Eclectic Econoclast

James Reese is putting together a set of interviews with various economists at This past weekend, he interviewed me. It is available in mp3 format, and you can listen to it by going here and then clicking on the title of his posting.

Or, to hear the actual interview, click here. He asked about several of my research topics, along with my background and the nature of this blog. Over the next few weeks, he has plans to add quite a few more.

I'm glad he didn't ask me about my most recent publication, co-authored with John Chilton and Phil Miller.

Posner Discusses Economics of Media Bias

In an article set for publication on July 31st, Richard Posner discusses the changing technologies and economic environment of the media, and how the Hotelling theory of product differentiation and central tendencies no longer applies. It is well worth reading. Here is a very small excerpt:

Being profit-driven, the media respond to the actual demands of their audience rather than to the idealized ''thirst for knowledge'' demand posited by public intellectuals and deans of journalism schools. They serve up what the consumer wants, and the more intense the competitive pressure, the better they do it. We see this in the media's coverage of political campaigns. Relatively little attention is paid to issues. Fundamental questions, like the actual difference in policies that might result if one candidate rather than the other won, get little play. The focus instead is on who's ahead, viewed as a function of campaign tactics, which are meticulously reported. Candidates' statements are evaluated not for their truth but for their adroitness; it is assumed, without a hint of embarrassment, that a political candidate who levels with voters disqualifies himself from being taken seriously, like a racehorse that tries to hug the outside of the track. News coverage of a political campaign is oriented to a public that enjoys competitive sports, not to one that is civic-minded.
Thanks to James Reese for the tip.

Applying Becker's Economic Analysis of Crime and Punishment

If criminals behave as if they are rational maximizers, then increasing the expected cost of committing a crime should lead to less crime. One way to do this is to increase the size of the punishment if the criminal is caught. A second way is to increase the probability that the criminal will be detected, caught, and punished.

It is this second method that underlies the NYC searches of backpacks. See this article by Heidi Singer and Leonard Greene [registration required]:

Even if cops never touched a backpack or briefcase, the mere possibility of searches is enough to improve security in the subways, experts said yesterday.

... "There are no silver bullets," said Daniel Prieto, a Harvard University professor who is a security consultant to the federal government. "So you have to increase the costs to terrorists."

Former Police Commissioner Howard Safir agreed.

"I think it's a great idea," Safir said. "No one is going to stop terrorism, but the more probabilities you put in place that somebody's going to get caught, the more effective you'll be."
These views are consistent with results that John Henderson and I derived several years ago.

Voting Reform:
Who Responds to What Incentives?

Programmes designed to increase voter participation among the poor, the less-well-educated, the un-carred, the young, etc., have the effect of increasing the participation among older, wealthier, white voters. From The New Virginia Churchman:

Unintended consequences wins, again.

Were Republicans merely playing Brer Rabbit's routine (from the Uncle Remus Tales) of please-don't-throw-me-in-that-briar-patch-Brer-Fox?

Quoting in full:
So have three decades of electoral reforms had any effect on the proportion of less advantaged Americans who vote on Election Day?

Yes -- but not in the way that the advocates of reform envisioned, says political scientist Adam J. Berinsky of the Massachusetts Institute of Technology, writing in the latest issue of American Politics Research.

Instead of luring the young, the poor and those with less interest in politics to the ballot box, new initiatives such as Oregon's vote-by-mail law have provoked greater participation from older, wealthier and white voters.

In a classic case of unintended consequences, Berinsky's review (pdf) of all major election-law changes of the past three decades found that "reforms designed to make it easier for registered voters to cast their ballots actually increase, rather than reduce, socioeconomic biases in the composition of the voting public."

Even Sex Offenders Respond to Incentives

This Slate article by Daniel Engber summarizes how psychologists assess the risks of recidivism by pedophiles.

How do psychologists assess the risk that a sex offender will strike again?

Through a combination of clinical judgment and statistics. A forensic psychologist interviews the convict, speaks with his family, and reviews police reports and prison records. The psychologist combines this research with actuarial assessments designed to predict whether an offender will commit another crime.
I know someone who has spent a great deal of time counseling pedophile sex offenders and assessing their risk of re-offending. My impression is that

  1. No matter what the treatment, the recidivisim risk is very high for nearly all pedophile sex offenders, though some offenders do not reoffend.
  2. Nearly all pedophile sex offenders deny that they've ever done it before when in fact they have a long list of past victims.
  3. Nearly all pedophile sex offenders, even if they have been convicted, say they did it only once and the victim enticed them, when in fact they repeatedly offended against the victim.
  4. Pedophile sex offenders are unlikely to re-offend while they are making regular weekly visits to group therapy.
  5. Chemical castration works reasonably well for many buy not all pedophile sex offenders.

Overall, the article is a superb summary. The one point in the article that is misleading at best is this:

An offender who admits he has a problem and swears he'll change might be less likely to fall into old patterns than someone who's unapologetic about his crimes.
While this may be correct, there are two problems with the statement:
  1. The change in the recidivism rate is small. People who swear they'll change still tend to have a high recidivism rate because
  2. It difficult to distinguish the liars from those who really mean it. Even sex offenders respond to incentives. When they figure out that swearing they will change will get them earlier parole or other benefits, they improve their pathological lying skills.

Sunday, July 24, 2005

Chief Justice Rehnquist:
the case for compulsory retirement?

Jack and I have been carrying on an e-mail discussion of Chief Justice Rehnquist's health, his competence, and the case for compulsory retirement. Jack began by sending me this [I apologize that I did not keep the specific source and link, but it ran in many papers and on-line news services]:
WASHINGTON - Chief Justice William Rehnquist, sick with cancer but determined to remain at the helm of the Supreme Court, returned to work Friday after defiantly squelching retirement speculation with a pledge to stay as long as his health allows. The 80-year-old chief justice, who is battling thyroid cancer, looked pale but confident as he left his house in a wheelchair for the trip to his office. He spent two nights in the hospital with a fever earlier in the week, and was discharged on Thursday.
Jack then added, after prodding from me:
It's clear that the man has much of his energy diverted to health issues. Only a supreme egotist would presume to carry on such an important job under such circumstance. Age per se is most often irrelevant.
BenS then weighed in with:
I agree with Jack. The guy is mostly disabled, qualified only to teach sociology at this point.
I agree that age per se should generally be irrelevant. But I have some questions about what the criteria for removal from the bench should be if not "life or good behavior."

If age is used, what is an appropriate age for retirement?

If length and number of terms are used, what are the appropriate length and number of terms?

If health is used, you can bet there will be highly politicized debates about whether someone is still healthy enough to serve on the bench.

Whether the criteria for removal/retirement should be changed may be debatable, but if they are changed, I hope the criteria are easily objectifiable, to reduce the otherwise inevitable political debates.

In the end, I really doubt the criteria will be changed. Doing so would require a constitutional amendment. Meanwhile, Congress still has the constitutional right to impeach a judge who is unable to perform his duties but who refuses to step down.

Customer Service of Questionable Quality

I have an Averatec 3250 laptop computer. It is convenient and very lightweight, which is why I bought it.

Recently, the AC adaptor has gone wonky, so I tried to order a new one. Neither Future Shop nor Tiger Direct in Canada carries them. So I tried to order one from the Averatec website, only to receive this message:

Dear AVERATEC Customer,

I humbly apologize for the temporary unavailability of our online store. The store is undergoing enhancements that are intended to improve your shopping experience.

Our online store will resume service before July 31, 2005.

Thank you for your understanding.

If we can be of further assistance, do not hesitate to contact us at or 714-429-8900.

Warmest Regards, Jessie Labayen

So I called their phone number to order the adaptor, only to get a message service. I left a message with my phone number, telling them exactly what I would like to order. They failed to return my call.

Fortunately, they did respond to an e-mail:

Our website store was being handled by a third party shipping company called ShipItForYou. ShipItForYou has closed their doors and so we are in the process of switching online fulfillment companies. We will have a new web store up on the 30th of this month. At that time you can reorder the product(s) you are interested in. Once again we're sorry that this has inconvenienced you.

In the mean time you can purchase many of our accessories from major online resellers such as and's link wouldn't ship to Canada, but did indeed provide a supplier who (for a hefty shipping fee) would do so.

Too bad Averatec didn't just provide these links on their own site. They'd have had a much happier customer on their hands.

Marital Advice for a Very Close Friend

I have a very close, long-time friend who is going through marital discord. It happens.

I just read these few paragraphs in Accidental Canadian [p. 65] by Margaret Wente, referring to a conversation she had with Linda Waite, co-author of The Case for Marriage:

[S]urely, I argued, being trapped in a lousy, rotten marriage is worse than getting a divorce.

"Not necessarily," [replied Waite]. Most couples who say they are quite unhappy with their marriage but stay married are much happier five years later. Good marriages can go bad. But bad marriages quite often go good."

I thought of all the married couples I know who were miserable when their kids were little and they were broke and tired. I thought of the best friend who used to come over and throw herself on my couch and vow to leave her husband and run away to France. She never did. Now the kids are grown, the mortgage is paid off and she and the husband she couldn't stand for one more second are devoted to each other. They had a good marriage that went bad and then went good. They just had to wait it out.
A longer-run perspective might be helpful.
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