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, August 27, 2005

How Long Does It Take for a Brand Name to Depreciate Fully?

Symantec seems to be trying to set a record. [link via BenS]

But I'll bet there are some old folks (like me) who still have a warm place in their hearts for Bucky Beaver and Ipana Toothpaste.

What is Considered Moderate?

Many readers have probably already seen this recent study from Australia [h/t to Jack]:

Moderate drinkers make better thinkers than those who tipple too much or not at all, a new Australian study says.

Verbal skills, memory and speed of thought were all faster and better in people who drank moderately compared to heavy drinkers and teetotallers, according to tests done on 7 000 Australians.
So, the production of mental output as a function of alcohol is quadratic with a negative second derivative, reaching a maximum at a "moderate" level of drinking. Okay, but what is considered moderate? At what quantity is the marginal physical product of alcohol equal to zero?

Men who consume 14-28 alcoholic drinks a week and women who imbibe 7-14 glasses a week were classed as moderate drinkers.
Two to four drinks per day is moderate?????

As Jack said, "Remember, the study was carried out in Australia."

I have quite a bit drinking to do, just to get up to that level! But I know it's good for me, so I'll make the sacrifice.

Housing Bubble to Deflate;
Recession to Follow

That's the prognostication of economist Ed Leamer:

In Leamer’s view, the housing market appears to have peaked “in California and elsewhere. It will take more than a year for this weakness to turn into job losses and to affect the economy in general.”

And, yes, he’s using the “R” word. As in “recession.”

Leamer lays the blame squarely on the Federal Reserve for leaving interest rates too low for too long. Now, he says, we’re not only heading for trouble in the housing sector, but in the auto industry — another market that got drunk on historically low rates.

Low borrowing costs accelerated future sales by enticing consumers to trade up to bigger homes and new vehicles sooner than they might have done otherwise. Instead of waiting to buy a new family car in a couple of years, folks said, “Oh, what the heck. Financing is so cheap we might as well get it today.” As a result, car dealers lose the sale they would have gotten two years from now.

As rates creep higher, consumers happily driving their new cars or living in their larger homes have no motivation to purchase additional ones. Since consumer spending drives two-thirds of our economy, when consumers close their wallets, the impact is far-reaching.
Thanks to MA for the pointers. Also see Calculated Risk.

Friday, August 26, 2005

New Motto for Ontario?

Earlier, I posted this at The Western Standard:
In light of Mark Steyn's disgust with the proposed motto change for New Hampshire ["You're Going to Love It Here" replaces "Live Free or Die"], Publius at The Gods of the Copybook suggests that perhaps Ontario needs a new motto.

Frankly, what kind of inspirational phrase or brief sentence could we use? Here are some ideas: "Giving the Maritimes the Shaft Since 1867." "Home of the United Empire Loyalists." "Now Bigger Than Pennsylvania." "Gateway to Detroit." "The Birthplace of Bob Rae." "The Birthplace of Margaret Atwood." "Ontario: Both Progressive and Conservative." "Toronto's Hinterland." "Yours To Be Smug About."

I have also suggested "The Great Northern Vacuum", but I suspect Western Standard readers would have many more appropriate suggestions.
But keep them short. They have to fit on a
license plate.
The suggestions there have been wonderful! Here are the ones posted within an hour or so after my original piece went up:

"Ontario: Yours to Despair".
"Ontario: Yours to be Disgusted".
"Ontario: Yours to be Left".
"Ontario: Live Left or Lack Canadian Values".
Post-national, post-modern Hampshire.
"The universe revolves around us 'cause we let it"
"Ontario...soon to be have nots"
"Ontario...where men are men and Liberals are nervous"
"Ontario: The Handguns are American; the Values are Canadian".

"Ontario: At least the Smog comes from American Coal-fired Electricity Plants, not Ontarian (though thank God we can buy the electricity from those American plants)".
Expand the size of the license plate.

"Ontario: Health Care Will Still Suck When You Can't". That one I like.
Ontario: Home of the Boondoggle & Damned Proud of It.
Ontario: It Ain't Texas

Update: be sure to check out the rest of the suggestions there. Also for some different suggestions, see here.

Oil Prices:
Experts vs. the Futures Market

From Reuters, [thanks to MA for this story]

A Reuters poll of industry analysts this week showed the mean average of oil price forecasts for 2006 rising above $50 for the first time.

The findings of the survey of 28 analysts forecast U.S. crude averaging $50.49 a barrel in 2006, with Goldman having the highest forecast of $68.

Compare that average and range with the futures market, where the equilibrium prices for 2006 range between $66 and $69. [h/t to Tyler Cowen for his posting and this link]

If those 28 analysts are so smart, why is the futures market so dumb? What do they know that people actually having to bet their own money on the future do not know?

And most importantly, if they're right, why haven't they taken enormous positions against the prevailing futures market prices and driven those prices down toward $50/barrel?

This is such a wide divergence, it will be a very good test of the abilities of Reuters' stable of analysts.

Comparisons between the USA and UAE

John Chilton, The Emirates Economist, has a list of comparisons between the United States and the United Arab Emirates.

Some parallels between the sources of success of the federal system in the UAE and the USA can be made. For example,

  • The USA was formed by the voluntary association of the 13 colonial states; the UAE was formed by the voluntary association of 7 independent emirates.
  • In both countries the individual states/emirates saw there was a political and economic gain to unifying and ceding control to a central government for joint protection from foreign intervention, and to reign in destructive barriers to trade between states/emirates.
  • The USA had George Washington; the UAE had Sheik Zayed. Both founding leaders were highly respected by large majorities of their citizens.
  • The USA and the UAE both experienced huge immigration -- the difference here being that in the UAE few of these immigrants have gained citizenship.
  • In the USA and the UAE the ethnic and sectarian diversity within each state/emirate was not dissimilar to the diversity between the states/emirates.
  • In the USA and the UAE states/emirates were delegated considerable discretion to handle local affairs locally.
  • The US left some questions of major conflict unresolved. Less than 100 years after its founding a very bloody civil war was fought over those issues. When that war ended the central government gained considerable power, including a greatly expanded ability to tax (and thereby redistribute). In the UAE the oil wealth centralized in Abu Dhabi has been used for the same redistributive purposes to as a carrot and stick to defuse conflict.
Re: EmEc's last point. In Canada, we have not resolved the major conflicts (Quebec; oil revenues in Nfld and Alberta; trade stances; etc.). So far a stronger central gubmnt has not done very well at helping to resolve them, either. And I really doubt that Alberta Premier, Ralph Klein, will want (himself or to allow the federal gubmnt) to use Alberta oil revenues "as a carrot and stick to defuse conflict". See this from the Globe and Mail (reg. req'd):

"We are doing more than our fair share, so keep your hands off," Mr. Klein said, later adding that other provinces could keep up to Alberta by becoming more economically competitive.

His warning was partly brought on by Ontario Premier Dalton McGuinty's recent musing that Alberta's wealth is becoming "the elephant in the room" and that the growing regional economic disparity needs to be addressed.

Shifting the Isocost Inward and addressing the Peak Load Problem

When an entity chooses an isocost line that is closer to the origin [econ-speak for spending less money, cutting the budget], the optimal reaction is ordinarily to use less capital and less labour (assuming neither input is "inferior"). That is what happened in a region in Norway (thanks to MA for the link):

Area police have had their fleet of vehicles trimmed from two to one due to budget cuts, and have repeatedly had to ring a taxi when needing another car to respond to a call, NRK (Norwegian Broadcasting) reports.

The mayor is so exasperated that he is considering donating a kick-sled to the force for the winter.

One question that remains unanswered in the article is why they decided to cut back on cruisers in the first place.

But regardless of why they made that decision, the use of taxis to meet the peak-load problem is ingenious.

The Effect of High Oil and Gasoline Prices on.........

Platinum prices.

If, just if, hydrogen cells ever become economically feasible for automobiles (and other energy-using devices), there will be a huge increase in the demand for platinum [h/t to Jack for the information, adapted from this source].

The auto industry is preparing for the day when oil wells run dry by investing billions of dollars to develop clean and efficient hydrogen-powered vehicles.

But the new fuel comes with its own built-in commodity crisis. Today’s experimental hydrogen fuel cells use so much platinum that there is not enough of the precious metal to replace all the world’s gasoline engines.

As Kazuo Okamoto, head of research and development at Toyota Motor Corp., Japan’s biggest automaker, says: “With the current type of technology we know already that [platinum supplies] will not be sufficient.” And the problem cannot be solved by just digging up more of the metal in South Africa, which has the bulk of the world’s reserves.

The possibility of a platinum shortage is already a critical issue for manufacturers spending vast sums on hydrogen research. More pressingly, it is also a major cost issue as 60g of platinum adds almost US$2,000 to the cost of a fuel cell. The only way to make the new technology competitive with traditional US$5,000 gasoline engines is to cut precious metal use.

[O]nce fuel cells take off, the price of platinum could lead to short-term price spikes before new mine investment increases output, according to the U.S. study.
Any shortage is likely to be eased by recycling. Already more platinum each year comes from exhaust catalysts in old cars and other industrial uses than from any single mine, and recycling rates remain low.
Technologies will change and develop over the next 45 years. But surely speculators are including the possibly immense demand for platinum in their calculations. If you don't think they are, just Google "platinum + hydrogen cells". If, after reading the material there, you still think there is discovery value that has not been capitalized by the market, there is always the futures market...

Anti-Semitism, Racism, and the Anglican Church

Both MA and BenS have sent me links to this site. I was awed by this statement about anti-Semitism:

THE CHIEF RABBI, Dr Jonathan Sacks, stated three years ago that: "Anti-Semitism exists . . . whenever two contradictory factors appear in combination: the belief that Jews are so powerful that they are responsible for the evils of the world, and the knowledge that they are so powerless that they can be attacked with impunity" (lecture to the Inter-Parliamentary Committee against Anti-Semitism, 28 February 2002).
That is how the posting begins. It is a very powerful, pithy statement about anti-Semitism in particular and about racism in general. The article points to recent events in the UK that indicate these conditions seem prevalent there. It continues with a quotation from Joanne Green:

"[A]s an active member of the Council of Christians and Jews, I feel betrayed by the Anglican Church. All those receptions at St James’s Palace and earnest tributes from church leaders regretting their millennia-long persecution of the Jews don’t mean anything any more. When Jews need real recognition of the danger they are in, where is the Church? Aligning themselves with those who want to wipe Israel from the face of the earth, after it was they who were responsible for the Holocaust. Forgive them, Lord, for they probably do know exactly what they do. How dare the Church lecture Jews on morality."

Many people mention the Church’s apparent silence in the face of the growing attacks on the British Jewish community. For one seasoned American journalist and Episcopalian cleric: "In Britain, there is a degree of open anti-Semitism that would be unthinkable in the USA. The C of E has been complicit in this, both by keeping silent, and by not cracking down on its members who cross the line in their advocacy of the Palestinian cause, and fall into Jew-baiting."

Thursday, August 25, 2005

Dishing Out Peanuts to Monkeys

Dear Economist, by Tim Harford, tells of a church pastor trying to replicate the parable of the talents by giving 10£ to each of the parishoners, with the hope they will be able to invest it wisely and double their money on behalf of the church. Harford is less than optimistic:

...remember that biblical Judea was severely capital-constrained. Anyone lucky enough to have investment capital had a great choice of projects and 100 per cent returns were not uncommon. A comparable present-day return on your money might be 10 per cent, or £1. Had Jesus wished to tell a parable about extraordinary investment savvy, he’d have said that the slaves quintupled the money.

Second, a “talent” was worth £550 or more in today’s money, the kind of sum that would fund participation in a significant venture. And third, household slaves were experienced money-managers. In contrast, your church is dishing out peanuts to monkeys.

Most serious of all, the parable of the talents has a master entrusting money to slaves who could not run away. You, on the other hand, are a free agent.

I usually hesitate to proffer investment advice but, since you ask, there is nothing to constrain you from investing your £10 in a round of drinks.

What Should Central Banks Do If
Oil Prices go to $100/barrel or more?

If oil prices were suddenly to skyrocket up to and over $100/barrel, what should the monetary authorities do about it?

On the one hand, if rising oil prices lead to an economic slow down, there would be pressure for the central bankers to inflate the money supply and hold down interest rates.

On the other hand, if real output were to shrink, inflating the money supply would cause serious inflation and have little impact on output, growth and unemployment.

I recall having talked with Tom Cooley many years ago about these questions. He recommended holding the line on money supply growth, possibly even reducing it, when the economy suffers negative output shocks.

That seems to be the long-run prescription from the Cleveland Fed:

Our experiments suggest that delaying further increases in the funds rate could help the economy through any potential “soft patch” caused by recent oil price hikes—without increasing the chance of inflation—but that the gains from such a change may be short-lived. Our anticipated-policy experiment demonstrates the downside of such a policy choice. The only reason that holding the funds rate constant substantially mitigated the output decline is that the public didn’t expect the Fed to do it. It might work once, but if the same response to oil price increases is given every time, it will eventually be anticipated by the public and do nothing to mitigate the output decline.
Nice how the effect of expectations is integrated into their analysis.

Thanks to Macroblog for the quote and link.

Is the Global Savings Glut Hurting Developing Countries?

Ben Carliner at Cynic's Delight says that too much of the savings being generated in the Asian economies is finding its way to the U.S., thus supporting the low interest rates in the U.S. In particular, they are being plowed into US Treasuries, with the attendant risk of future depreciation of the dollar.

While a single currency [Asian] is too ambitious a goal in the short term, exchange rate stability across East Asia is not hard too imagine. Given the depth of the reserves held by central banks across the region, as well as the general predilection over there for state-led development, why shouldn’t we expect future decisions regarding international monetary regimes to be made in smoky back rooms filled with Asian central bankers?

Moreover, there is a big prize to be had at the end of the day. Any solution to the so-called global savings glut is likely to include the creation of a mechanism for all those Asian savers to intermediate their savings and investments. In other words, a deep, liquid bond market in East Asia. All those savings would be much better spent on infrastructure projects and other investments in Asia itself, and not on buying US Treasuries that are likely to lose much of their value in the long term.
As much as I like Cynic's Delight, I'm not sure I agree with Ben Carliner on this one.
  • If US Treasuries are likely to lose much of their value in the long term, markets will adjust soon. People will not keep buying them for fear that others will soon begin to bail out. The feared loss in US Treasuries is something he can bet on if he's sure about it.
  • Who are we (or the central bankers) to say that these savings would be much better spent on infrastructure projects and other investments? If the types of investments that Carliner has in mind would be better investments, what is stopping the gubmnts of those countries from borrowing and making the investments, especially if they do have what he calls a "predilection for state-led development"? Do they have to pay an interest rate premium? If so, quite likely that is a risk premium that efficiently reflects the markets' perceptions of the risk differentials between those projects and US Treasuries.
  • I keep asking myself, "If I were in control in one of these economies, under what conditions would I rather hold US Treasuries than invest in infrastructure?" I would have to be skeptical about the efficacy of such projects, or I might be concerned about future uncertainties in the markets.

But I may have missed something, so read the whole piece.

The Opportunity Costs of Time;
choosing the optimal travel mode

If you were taking your Harley to a motorcycle rally, you would ride it there, right? Not if doing so would take you a day or two and you have a high value for your time. Phil Miller has this piece about a tax attorney in New York City who shipped his motorcycle to Sturgis, South Dakota, and flew there himself.

Time spent riding the 1726.88 miles from New York City to Sturgis (and back!) is time not spent doing something else. And while the enjoyment of travelling by bike is certainly there, sometimes that time spent doing something else is much more valuable. So the biker goes against tradition and has his/her hog shipped in separately. The average motorcyclist, according to one study presented by the New York Times, had a much higher income in 2003 than 1998:

Riding is becoming more of an investment than a hobby. According to The New York Times, the average motorcycle owner earned $44,000 a year in 1998; by 2003, the figure had risen by 28 percent to $56,000.

I imagine those figures are not adjusted for inflation. In any case, traditionalists scoff at the notion:
"Some of them make a big deal about, 'I rode my bike to Sturgis, and these wussies had their bikes shipped,' " he says. "I don't want to spend six days on the highways. That's boring."

Instead, he would rather spend his riding time travelling around the Rocky Mountains.

This is a terrific example of the opportunity costs of time and how people respond to incentives.

Gas Price Ceilings Again --
at least she knows about shortages

Hawaii has just set a price ceiling for the wholesale price of gasoline.

Gas prices in Hawaii are the highest in the country. The statewide average of the retail price of a gallon of regular unleaded Wednesday reached a record-high of $2.84. The AAA said that's 4 cents higher than in California.

... The law doesn't put a cap on retail prices.
I.e., go after the "big" distributors and producers but not the owners or managers of the gasoline stations, who are still free to charge a demand-determined price. What if the wholesale price ceiling actually leads to a reduction in supply? If retailers are free to charge whatever price they choose, won't this lead to even higher gasoline prices in Hawaii?

Apparently the Governor recognizes there might be problems:

Hawaii Gov. Linda Lingle said she's poised to repeal the gas cap if it somehow ends up costing motorists more. The governor said she would be checking gas price points to see if there are any gas shortages before she makes up her mind about repealing it.
Gasoline is expensive in Hawaii because transportation and refining costs are higher there. This setting of a price ceiling will cause nothing but confusion, anger, and inefficiencies.

Update: Kip Esquire has more.

Thanks to MA for the link.

Wednesday, August 24, 2005

Quebec and Butter-Coloured Margarine
Is the Controversy Finally Settled?

I posted earlier about a court decision upholding the ban on butter-coloured margarine in the province of Quebec. [see here for my first piece and, again, here for a followup]. Things have changed:

An interprovincial panel has determined that Quebec must open its borders to butter-coloured margarine by Sept. 1, a ruling that will apparently end one of Canada's most enduring ... internal trade disputes.

.... The June 23 ruling made public Monday, found Quebec's ban on butter-coloured margarine “impaired and caused injury to margarine producers and their upstream suppliers,” and is expected to end a trade dispute traceable to the 19th century, when margarine was banned entirely in Canada.
While I applaud the decision, I am not impressed with this basis given for it. I care far less about injury to Unilever and vegetable oil farmers and producers than I do about the true winners in the battles, the consumers. But of course the Glob and Mail does not even hint that consumers are the real winners. Instead, it says,

The margarine ruling, made by a dispute resolution panel of the provinces' Agreement on Internal Trade, is a win for canola producers in Alberta, Saskatchewan and Manitoba, and Ontario soybean farmers, whose crops are used in the vegetable-based butter substitute.
The only reason farmers and producers benefit from this decision is that consumers in Quebec wanted ready access to butter-coloured margarine. They are the winners in this decision.

and I would guess that not a single so-called consumer advocacy group was working for them on this case.

Islam and Women's Rights

You must read this, an attempt by Ghadi al-Hori to explain when a man may beat a disobedient wife.

It is quite obvious here that Islam adopts a gradual approach starting with verbal admonishment of the wife, then seeks a period of refraining from conjugal relations and, finally, if the husband finds the situation very serious, he may strike his disobedient wife....

A rebellious woman who is not moved by kind works, persuasion and admonition is a woman of no feeling and must therefore be punished by beating. Psychiatrists tell us of people, including women, for whom a cure lies in beating.

Hmmm. You're attempting to defend Islam here, aren't you?

Let Me Ask Again:
Why Do Maximizing Individuals Buy Lottery Tickets?

A couple who have been married for 63 years (both are nearly 90 years old) and who live together in a retirement home just won $7.5m (tax-free, Canadian) in a lottery. She says she's going to buy a new pair of nylons. He says he might buy a Lincoln, since he has never owned one. [Jack, who sent me this link, was not very enthusiastic about a 90-year-old driving around in a new Lincoln]. But aside from helping out their children, they have no idea what they will do with the money.

According to the Ontario Lottery and Gaming Commission, 74 per cent of millionaire winners share the jackpot with family members and 65 per cent buy a car.
So why buy the tickets? Why not just give your kids two or three bucks a week (or a hundred or two hundred dollars a year) instead of buying a lottery ticket each week? Is it the old Friedman-Savage hypothesis that small losses of income cause very little lost utility but big gains in income create huge gains in utility [i.e., the marginal utility of wealth is increasing]? Maybe.....

But then again maybe not for people who would expect to give away huge chunks of the winnings. For them, the thrill of winning must be worth something. Also, the utility from being able to give a large amount to one's offspring must worth quite a bit. Otherwise, why would they have bought the ticket? Does altruism mean less on an expected value basis when it comes (and is given) in small steady amounts instead of improbable but large amounts?

Only 74% of the big winners share the proceeds with family members??
That absolutely stuns me. What's with the other 26%?

More from Mark Steyn;
Gaza, Israel, and Egypt

Under the title, "Why Gaza? Why Now?" Mark Steyn sets forth a very compelling explanation for why it was good strategy for Israel to withdraw from Gaza. [Thanks to JJ for the link].

... [T]he Israelis could have held it without much difficulty for many years to come. Instead, in the short term, Gaza will decay even further into a terrorist squat fought over by Hamas and Islamic Jihad.

... A continuation of the status quo – whereby the Palestinians are preserved in perpetuity as “deserving” a state without ever having to earn one – would only see further remorseless deterioration for Israel in the world. In that sense, any change in the situation would be for the better – especially a change that makes Gaza not Israel’s problem but everybody’s problem.

Thus, the Egyptians have just deployed their own troops to the strip to replace the evacuated Israeli Defence Force. Why would they do this now the Zionist oppressor has fled and Arab lands are rightfully back in Arab hands? Well, for a very obvious reason: an Islamist squat in Gaza is a far greater threat to the Mubarak regime than it is to Israel.
But these are excerpts. Read the whole thing.

Tuesday, August 23, 2005

Time to Close the UN

I realize that most people who read The Eclectic Econoclast are likely, also, to read Mark Steyn, but I cannot resist posting a link to this piece about the corruption at the UN for those of you who do not read him regularly [h/t to BenS for the link]. Here are some choice excerpts:

Despite the current investigations into his brother, his son, his son's best friend, his predecessor's cousin, his former chief of staff, his procurement officer and the executive director of the UN's biggest ever program, the secretary-general insists he remains committed to staying on and tackling the important work of "reforming" the UN.

Unfortunately, his executive co-ordinator for United Nations reform has also had to resign.

... We only know [about the extent of the corruption] because the US invaded Iraq and the Ba'athists skedaddled out of town, leaving copious amounts of paperwork relating to the Baghdad end of Oil-for-Fraud, since when Claudia Rosett and a few other dogged journalists have been systematically unstitching the intricate web of family and business relationships around the UN's operations.

YOU'D THINK that by now respect for the UN would be plummeting faster than Benon Sevan's auntie down that elevator shaft. After all, these aren't peripheral figures or minor departments. They reach right into the heart of UN policy on two of the critical issues of the day – Iraq and North Korea...

Is This a Good Classroom Example for
Economics and "Sunk Costs"?

In nearly every introductory economics course, we teach that for profit-maximizing firms, sunk costs do not enter into a decision. We teach that profit maximizers are forward-looking and consider only the expected future costs and future benefits of their decisions, without regard to their sunk costs.

Then we quote a few nice cliches:

"Let bygones be bygones."

"Don't cry over spilled milk."

Or the New Testament admonition, "Leave the dead to bury the dead."

But you know what? Sunk costs play an important role in our decision-making.

Sometimes they are a short-hand way of saying something. For example when person A breaks up with person B, person B sometimes responds, "But think of all we have built up together. Do you really want to throw all that away?"

Person B could mistakenly be relying on sunk costs to make an argument. Alternatively, B could be arguing that both A and B will have to make large new investments in other relationships and it might be more efficient to work on the present one.

It is probably an irrational mental defect on my part, but I know I sometimes dwell for too long on past decisions about which I can do nothing now. I know I'm not the only one to do this. Past actions affect us now, even if they are of the form "sunk costs."

And now to the point of all this. From the New York Times quote of the day (August 23rd, reg. req.),
"We owe them something. We will finish the task that they gave their lives for."PRESIDENT BUSH, on the American soldiers killed in Iraq and Afghanistan.
Can dead soldiers be viewed as a sunk cost? Can a politician rationally say, "We have had many deaths, but looking forward, we believe the expected costs of this operation outweigh the expected benefits, so we're wrapping it up now."?

Let me make clear, I am not advocating that the U.S. withdraw from Iraq. I have had mixed but positive feelings about the U.S. actions there.

Rather, I take note of this quotation because I often use a similar example in the classroom, "We had to take the hill so that all the boys who died there will not have died in vain." which captured some of the inanity in Vietnam so many years ago.

So is President Bush being irrational in raising what are, from this perspective, sunk costs? Is he playing on the irrationalities of U.S. voters? And/or are humans hard-wired to consider sunk costs and dwell on regrets?

Parse This:
"As Soon As Possible"

What does it mean when someone says, "As soon as possible"? What constraint do they really have in mind that might limit "right now"? What is it that limits what is possible?

I seem to recall having once seen a documentary in which a large group of people were able, with careful planning and advance work, to construct a house on what had been a vacant lot in under 48 hours. They didn't care what the expense was, they just wanted to see how fast they could put up and finish the house.

The constraint in this case was a technical constraint: it was impossible to build the house any faster. That's what "... as fast as possible..." usually means to me. It usually does not mean as soon as we feel like it. It usually does not mean, "pretty soon, subject to a budget constraint." It usually does not mean, "Tomorrow, but the union won't let us."

And now the CBC is telling us, ad nauseum, they are currently experiencing a "labour disruption" and that they hope to

return to regularly scheduled programming as soon as possible.
Nonsense. If they wanted to return us to "regularly scheduled programming as soon as possible," they would agree to whatever the union wants. Clearly their idea of what is possible has additional constraints, involving a different feasible set than most of us imagine when we use that phrase.

Quite frankly, as Angry in T.O. says, I don't miss the CBC at all. And as one his commenters said,

They need to have their budget halved and let them concentrate on what they do best, which is.....uhh....umm.....

Incentive Effects, Parental Responsibility, and Tort Law

The parents of a 17-year-0ld young man in Ohio have been held 70% liable for his actions: he stabbed a 13-year-old girl.

Lance and Diane White share 70 percent of the blame for the 2003 attack on Casey Hilmer, the Hamilton County jury found Friday. Their son Benjamin, who was 17 at the time, bears the rest.

... Court records indicate that the Whites' son had a history of aggressive attacks on classmates and drug abuse, and that his parents knew he carried a knife. In Ohio, parents can be held liable if they negligently entrust a weapon to their child.

The jury foreman... said jurors held the parents responsible because they found no evidence that they had disciplined their son.
It should not take long for parents of such children in the future to
  • take such weapons away from their children, or
  • failing that, report the possession of the weapons to the local police force.

It won't stop the children from obtaining knives, but it will make it less likely they will have the knives with them as often. The only question is about the size of this incentive effect. I expect it will be larger in the long run than in the short run.

There Is Nothing Wrong with a Little Retributive Justice

Over 12 years ago, Karla Homolka was convicted of manslaughter for some gruesome sex-killings which she partnered with her husband, Paul Bernardo. But because she revealed the location of videotape evidence that led to the murder conviction of Bernardo, she was allowed to plead guilty to manslaughter.

She was recently released. A Montreal newspaper has located her home and workplace. Good. Given what she did, I hope she has no privacy. I hope she is watched and questioned and shunned and....and....

Monday, August 22, 2005

Frightening that He Was Elected

It is disappointing, even frightening, that this man was elected Mayor of London. [h/t to MA]

When asked,

Do you see a difference between suicide attacks by Palestinian fundamentalists against buses and civilian targets in Israel and the same kind of attacks in London?
He answered:

"I am against all attacks upon civilians everywhere. It is as much a crime for an Israeli soldier to use a rifle or a missile to kill or maim a child as it is for a suicide bomber to do so."
There was no reason for him to say this. And it is devious and false. The two are very different.

He also said,

"I welcome you as an honored guest."

-- Addressing Sheikh Yusuf al Qaradawi at a London conference, July 7, 2004. With Livingstone present, Qaradawi went on to explain that Palestinian suicide bombings are permitted "within the rules of Islam."
The intensity of this man's anti-semitism is appalling. You can read much more here.

Update: For even more on this topic, read this, which MA just sent to me.

More on the Housing Bubble

Here (from the NYTimes [reg. required] is more compelling evidence than anything else I have seen that there is a huge bubble in at least some housing markets:

Thanks to Alex Tabarrok at Marginal Revolution for this link.

What the index shows is that real house prices have remained stable over the past 100 years. The contrary impression is driven by inflation and as noted above, changes in what is being measured. Stability, however, is what we should expect. The United States remains a relatively unpopulated country. When house prices in current population centers increase, suburbs and smaller cities expand. People move to less populated areas and in so doing alleviate the press on house prices. In the long run, the supply of housing is very elastic.

The glaring exception to stability is the last 6 or 7 years when house prices have skyrocketed far beyond where they have ever been before. Can you hear the pop coming?

Remember, though, that the apparent bubble has been MUCH larger in some markets than in others. I would guess that the house-price index in that piece is very heavily weighted toward the large metro areas and doesn't consider other areas nearly as much. But if that's where most people want to live and are driving up prices, perhaps it is well-founded.

Mr. Housing Bubble t-shirts

After all the discussion on this blog (see above) and many others, MA sent me this CNN-Money link. [I've added the other links]

If you really want to buy one of these shirts for your friends who just took out zero-principal-variable-interest-rate mortgages, you can get one here. But you may have to go to their home page from this link. "Free Balloon Mortgage inside!"

They have some other t-shirts that are amusing, too.
. . . . . . .
I'm especially amused, for some reason, seeing Canada on this presidential hit list. Another reason, I guess, for Canada to plan its own nuclear weapons programme; also, see here.

Water Rationing.....AGAIN!
anal retentive fixations on power by petty bureaucrats

Water, water everywhere,
And all the boards did shrink.
Water, water everywhere,
Nor any drop to drink.
from The Rime of the Ancient Mariner
by Samuel Taylor Coleridge

We have had a comparatively dry summer in our area. Consequently, with great relish the local bureaucrats in many jurisdictions have once again imposed water rationing. As one example:

Those living at odd-numbered addresses may water our lawns and gardens between 8pm and 11pm on MWF and Sundays. Those living at even-numbered addresses may water between 8pm and 11pm TuThSa and Sundays.
This is an open challenge to these municipalities and towns:

If you think the reservoirs are likely to run dangerously low on water, please raise the price of water, a lot, during dry summer periods. People respond to price incentives, and will cut back on their use of water. And if you think they won't respond enough, raise the price some more. At higher prices, some people will choose to water their lawns and gardens less, wash their cars less, take shorter showers, etc.

And don't tell me you will not raise water prices because you are concerned about whether poor people who "need" water will be able to afford it. Of course they will have to make some choices, but so will everyone else. And it is mainly wealthier folks with bigger houses and bigger lawns who use more water. Raising the price of water will surely have a much bigger dollar effect on the rich.

John Chilton (the Emirates Economist) has similarly suggested that Jeddah use the price mechanism to ration water.

I can assure you, though, that using the market to allocate water is unlikely to happen in towns and jurisdictions where petty bureaucrats have an anal retentive fixation on such powers as water rationing.

This is especially true if they took courses in so-called "urban planning" which seem primarily to be intellectually arrogant justifications for bureaucratic meddling with the market mechanism.

More Difficult Issues in Family Law

This is for those of you who are married or who think you might some day be married. Have you considered whether you would like for your spouse to be able to have your children if you were to die suddenly? Presumably there are technologies available for harvesting an egg of a recently deceased female or the sperm of a recently deceased male, along with markets to hire someone to carry an in vitro fertilized egg, if necessary.

If you would like this option to be available, it might be advisable to spell it out. In Australia, a court decided that a partner could not assume permission would have been granted by a spouse who had just died:

A VICTORIAN widow has been refused the right to impregnate herself with her dead husband's sperm because she did not have his written consent to do so.

The landmark decision, handed down by Victorian Supreme Court judge Kim Hargrave, was the first time an Australian judge has had to make a finding on the issue of whether a woman can use her dead partner's sperm to have his child.

The 36-year-old woman had been married to her husband for more than eight years when he was killed in a car accident in July 1998.

Within 24 hours of his death, the woman, who can only be identified as AB, received permission from the Victorian Supreme Court - and the consent of the dead man's parents - to have his sperm taken and stored at a Melbourne hospital.

... Justice Hargrave said the law did not allow the taking of sperm or ova from the dead for the purpose of reproduction if the person had not consented in writing to the procedure before their death.
The moral of this story is that this court decided the risk of a partner's death is a foreseeable event, and if the partners want post-mortem progeny, they must consent to it in advance in writing. The decision penalizes those who do not anticipate their own deaths and do not plan accordingly.

Is this another form of natural selection?

Would you sue your lawyer for malpractice if s/he did not ask if you wanted to include a clause about this in your will?

[h/t to Brian Ferguson for this link, which he sent months ago, so it is probably dead by now]

Sunday, August 21, 2005

The Princely Frog
(emerges from the throne)

World Map Feature in Site Meter

To see the location of the most recent 10 or 100 visitors to The Eclectic Econoclast, click here [if necessary, click on "By World Map"; it's the fourth item under recent visitors on the menu along the left]. Drag your mouse arrow over each dot to see more details.

Do Your Ears Hang Low?

Remember the old camp song [sung to the tune of turkey in the straw?]?

Do your ears hang low?
Do they wobble to and fro?
Can you tie 'em in knot?
Can you tie 'em in a bow?
Can you throw 'em over your shoulder
Like a continental soldier?
Do your ears hang low?

Here's a potential topic for a modern version about other parts of the anatomy. [courtesy of Cameron Diaz and Phil Miller]

Recommendation for Ms. Diaz: do not go into a sauna or jacuzzi with your male partner(s).
Recommendation for Ms. Diaz's male partner(s): cold showers might help.
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