|Truck and Barter
Where Sympathy and Hedonism Collide
Broadband Prices "Plunge"
Last week, a report by Point-Topic indicated that prices for broadband have gone down signicantly over the past year--especially in the US.
These numbers are not inflation adjusted, so real prices have decreased a little more than that.
10/31/2003 09:13:31 AM
10/31/2003 08:11:01 AM
Virgin Mobile's Unclear Pricing Policy
Lately, I've been considering purchasing a wireless phone--even though I have a landline in my office, and another at home.
I don't want a wireless phone on steriods (although I think multi-use products are cool). I don't want to take photos, play games, surf the web, or to write text messages with this phone. What I want is a mobile phone that can reach my wife, emergency numbers, 800 numbers, and the towing company. It must have excellent coverage of the NYC, Wash-DC, and LA metro regions. I want it to work all the time, but I hope I never have to use it. And as a tough-minded consumer, I want it all at minimum cost.
So I looked around, and found out that there are several prepaid phones that are good options for me. However, I did find that determining total cost a pretty tricky affair with the some telecom companies.
In particular I fault Virgin Mobile USA for what I consider intentionally misleading pricing information on their otherwise fantastic website. Why is this relevant? Because their hypocrisy stinks. They hide the details of their innovative and unique pricing structure, while insisting on their clarity, honesty and openness. Their What it Costs page gives the customer what he wants to read, not what he needs to know:
Reasonably straight forward. I like the mix of humor, salesmanship, and information. And over on the phone sales page, Virgin tells you that "Everything's included with your phone - Even Free Shipping: Buy a phone, activate it, use it... No contracts to sign and no hidden fees..."
All this is crystal clear, so I became very suspicious that specifics were missing. In fact, it's what they don't tell you up-front that enervated me. Because up to this point, no mention is made of what it costs to keep your phone active. What if I activate it and don't use it? To me, it sounds like all you have to do is pay for the phone, activate it, and you can keep it active without even making a single call.
Of course, that's not how it works. What their service really costs is only listed under "Payment/Top-Up" on the FAQ page:
Note to Virgin: This REALLY should be on the "What it Costs" page, not on some difficult to access FAQ page. Some customers may not fully understand that by "top-up", you actually mean "pre-pay"; you shouldn't hide the $20 minimum every 90 days. In fact, you should openly state whether or not that $20 is lost if you don't use the minutes, or if your balance carries over. (Other sites indicate that the "minutes expire".)
By hiding the way Virgin actually charges its customers, the company makes itself and the wireless industry overall look suspect. I should note that in contrast, Verizon's prepaid Freeup clearly posts actual rates, and expiration dates of purchased minutes.
10/31/2003 07:42:15 AM
More on "Most Forecasters"
Steve Verdon picked up and ran with my post immediately below. Discussions have emerged in his comments thread about trusting the Times and why it's either important or irrelevant to have source statements in newspaper articles.
I've learned that at least one person doesn't care to have some statements verifiable.
10/30/2003 12:54:44 PM
And today, Mr. Andrews writes:
Note to The New York Times--I demand empirical sources for such statements. This is not a costly or time consuming addition; just rewrite the sentence to include the source. Why do this? Because it is too easy to make false statements sound authoritative. Why not do this? If editors and fact-checkers are combing through each article, they should already have the source at hand.
In my comments, I was asked why I expect better of the NYT. My answer was curt, and I should explain myself. Because of the errors of Mr. Krugman and other improprieties, I no longer trust the reporting of the NYT, and this includes the business/economics section. I was under the impression that the Times wants its readers' trust. The only way for them to regain my trust is to enable me to verify that statements in articles are accurate.
I'm not saying that other newspapers don't make such statements--they do. But other newspapers follow the NYT. Holding the sophisticated Times to the highest standard is the most effective way to maintain high national and international standards. The easiest way to keep the mass of middle and low-ranking reporters in check is for readers to have ample comparisons to the best reporters, who are also kept in check.
10/29/2003 10:12:16 AM
Illegal Immigrants Paid More than Minimum Wage
Some professional writers can turn the day's headlines into a gripping story of hope, desperation, endurance, fear, and triumph. Unforunately Steven Greenhouse of the New York Times prefers to use the misfortune of recently caught illegal immigrants (the Wal-Mart cleaners) to rail against those who employed them.
Mr. Greenhouse decries the lack of health insurance, the low wages, few days off, and most ridiculously "about whether the contractor was making the required contributions for Social Security and unemployment insurance." I forgive Mr. Greenhouse for not considering that illegals don't have valid social security numbers, but I cannot forgive him for not noticing that these illegal immigrants were paid above the national $5.15 minimum wage.
My point is that their evil profit-hungry employers could not have paid them less, because in most markets low-skilled demand intersects low-skilled supply at prices above minimum wage.
What Mr. Greenhouse does notice is the diversity of nationalities of illegals:
well, it's nice to know we don't need affirmative action to redistribute opportunities for illegal immigration! Ladies and gentlemen, we have now arrested hundreds of people from across the globe who want live and work in the United States. Except for staying in this country without government permission, these people have played by the rules of civil society. Hell, these people worked in jobs even American teenagers don't want to take. How much did they actually make?
It may be a federal law to pay time and a half for overtime, but that obviously doesn't apply to illegals. The strict per hour pay comes to $7.14 an hour. Also, Mr. Greenhouse doesn't calculate total annual earnings; by working 8 hour days 7 days a week, both Mr. Zavala and his wife earned $400*52=$20,800, for a total family income of $41,600. In New Jersey, this doesn't go very far, but it's a far cry from what Mr. and Mrs. Zavala could have earned as a janitor in Mexico, and far exceeds the official poverty line in the United States.
10/25/2003 11:06:28 AM
Playing by Rummy's Rules
Llewellyn H. Rockwell, Jr. writes about the most recent leaked snowflake. I ususally don't write about DoD politics, but in this case, I'll make an exception:
I don't love or hate Rummy. I don't feel a damn thing about him, and I needed to find out some more about him before judging his memo.
Before 9-11 Tim Noah of Slate had Rumsfeld on Death-Watch (again, and again). Why? Rumsfeld had planned a massive reconfiguration of the military in mission, equipment, and personnel, and was being actively resisted from within the ranks and from those who controlled the purchasing decisions and purse strings in Congress.
After 9/11, he wasn't going anywhere.
While I'd agree with Lew about the near-impossibility of taming and reforming bureaucracy, Rumsfeld does not ask "Do we need a new organization?" obliquely--i.e. evasively or dishonestly. He actually wants to know if anybody under him has any good ideas, because if corporate experience is any guide, some of them actually will have good ideas. Good managers know to let their employees contribute to the big think.
Also, if the CIA, DoD, and the rest cannot protect the U.S. from terrorists, and terrorism is our primary long-run threat, it seems almost too polite of Rumsfeld to inquire whether the US requires a "new organization". Successful and cost effective managment of a public organization is difficult, to say the least. Turning one on its head is nearly impossible.
Also, Rumsfeld is very confusing when we writes. "The cost-benefit ratio is against us. Our costs is billions against the terrorist's cost of millions." This is a cost/cost ratio, not a cost/benefit ratio. Does Rumsfeld want us to spend less, or them to spend more? Both--he wants the U.S. government to use cost-effective, long-term solutions to attack the core of Islamic fundamentalism, and to make sure that victories in this war make it more expensive for the radicals to recruit their armies. I think Rumsfeld knows we cannot stop all terrorists, and that we do not want to spend the money to try and fail at that goal.
Rumsfeld demands that people use valid research to back up their points of view. He insists on "metrics" like any other modern profit-making organization would--only DoD's product is not tracked by Wal-Mart's legendary inventory system. Frankly without good data, we don't know a damn thing about the real world outside of ourselves, and as an Austrian economist, Lew knows this better than most.
I believe that Rumsfeld perceives himself to be a reformer; he wants the military to operate more on market terms--especially in personnel matters. Overall these efforts have not been implemented; the leaked memo might actually help them along...
10/24/2003 12:15:07 PM
The Mrs., the boy, and I went to the dentist today. On the wall, the good dentist's assistant had crookedly push-pinned a rather amusing "History of Dentistry" prepared by Crest. (an earlier version is reproduced here).
Some of the more interesting entries:
Dentistry is a 20th century capitalist phenomenon; it's one of those many services that the wealthiest "gods", kings and priests could not buy, and one that most poor today find commonplace.
10/23/2003 02:54:24 PM
Mama ain't no Feminist
Yesterday, Glenn Reynolds pointed to Katie Granju in Salon:
Speak for yourself lady, but first talk to my Italian-American mother--who, in 1969, chose freely to get married and have a family instead of working on Wall Street. BTW, if she would have stayed at the same company for a few years, she would have quickly been in the top 1% of income earners nationally. Instead, she adopted and raised two kids.
Thanks, ma! Bear hugs and big kisses! She would make Camille Paglia proud.
Also, despite being Catholic, my mother believes in legal abortion, birth control, pre-marital sex, and of course in working women--all this without the militant excess of feminism. My mother didn't need an ideology, and didn't need to be a feminist; by 1965 she was already free to live the life she wanted. (Many of my readers may not like my mother's values, but rest assured, she doesn't give a damn.)
I think gen-X-ers need to ask their parents more detailed questions about the 1950s and 1960s; the past is never as innocent as we like to think it.
10/22/2003 10:50:09 AM
Nothing New to Write, No Time Anyway
Equation of the day:
Baby + Wife + Work + Dissertation > Blog
10/21/2003 10:20:32 AM
I found Treasury Secretary Snow's prediction bold:
Edmund L. Andrews of The New York Times agrees with me:
I have a standard that lets me verify or falsify what "most economists" believe--50% + 1 of economists must agree on something. And I want to hear this from economists themselves.
Although doubt about net job increases may be widespread among economists, Mr. Andrews must prove this objectively--most effectively with the results of a survey.
It is improper to present as news the assertion that "most economists" believe something, and then cite only anecdotal evidence--in this case, a research note by Jan Hatzius, a senior economist at Goldman Sachs.
I expect better from The New York Times.
10/21/2003 09:37:02 AM
Assisted Living--Need or Preference?
This NY Times article on the increasing prevalence of assisted living among immigrants made me question whether putting the elderly in assisted living is more based on healthcare needs or on family preferences. I came across some surprising statistics on elderweb.com:
That's a hell of a lot of elderly who're not in group homes or institutions. One hopes that most have taken to heart what Mr. King has two characters say in the The Shawshank Redemption, "get busy living, or get busy dying." Anyway, it's still more evidence that we need a more refined picture of what healthcare means to the elderly in the United States.
10/20/2003 01:06:02 PM
Where did Becker Park?
REGION: I understand that you found the initial inspiration for your work on the economics of crime while searching for a parking spot.
He tells a similar tale in his 1992 Nobel prize lecture. Having lived at Columbia U. for four years, I know the area, but I don't understand why it took him 10 minutes to get to his building, since the urban campus is cris-crossed by streets with ample illegal parking. (See map).
There are several decades-old parking garages just a few blocks away from campus. If it took Becker 10 minutes to walk from an illegal parking space, he didn't park near campus. If he didn't park near campus, he didn't save much time by parking illegally, but he did save the price of parking at the lot, which is substantial in NYC. But wasn't saving time Becker's reason for parking illegally?
Assuming an average walking speed of 5 feet per second, in 10 minutes Becker walked 10*60*5 of 3000 feet or 3000/5280= .57 mile. Let's say he walked a little over half a mile or 10 city blocks. That's pretty damn far to walk if he parked illegally--and it seems too far, really.
Just where did Becker park so that it took him 10 minutes?
10/19/2003 04:00:32 PM
America's Oldest Worker
I missed this story a few weeks back. One Russell B. Clark was crowned America's oldest worker. At 102 years old, he actively manages his properties. Apparently, he's been working for 93 years--since 1910, at a time when working as a child was not only appropriate, but required for survival.
What's his philosophy?
He also believes something I cannot verify:
10/19/2003 12:17:16 PM
Superior Child Care
In this month's (November 2003) Parents magazine, in an article entitled, "THE CHILD CARE CRISIS,"Diane Debrovner demands that the government subsidize (or supply outright) high-quality child care for every child in the United States--and that this system be modeled after the military Child Development System. She writes:
The article is not available online, and perhaps that's for the best. Because the article is misleading, in its perception of the military child care system, the civilian child care market, and in its use of economics.
I hadn't really thought about the Military Child Development System before, so I looked it up:
Why is it provided for military servicemembers?
So, clearly, this is considered a wise business decision. When you're in the business of conducting war, personnel readiness and excellence are key quality control issues. But all Ms. Debrovner sees is the government helping out some people at the expense of everyone--and she wants her cut of the action.
It's not surprising to me that military members are paid in kind--they have been given housing and food rations as a form of compensation for a very long time--so why not child-care? For the military to subsidize and control childcare centers on military barracks is not surprising either; except for purely commercial ventures--like gasoline stations and fast food joints--the military system performs almost everything that the civilian private sector and government authorities do. I am not surprised that the government orders and structures military society; I am surprised that Ms. Debrovner wants to order and structure civil society on the same pattern.
When our author gets to the private child care market, she has little good to say about parents:
Maybe I misread this, but Ms. Debrovner seems to think that parents themselves and their relatives are not "quality care". If so, she can go to hell. But she believes there's a crisis of cost and quality--regardless of the data.
This is not a great record, but this is certainly not a "crisis" of quality. But no matter, Ms. Debrovner is off proving the government can make all this better--if only it would tightly control and regulate child care:
I guess she's never heard of federalism. But we finally get to her real grief in child care--the workers are paid too little, and the care costs too much!
Excuse me! There is no economic justification for the assertion that childcare costs are subsidized by "grossly underpaid" worker--even if $7.80 an hour is below her personally preferred "living wage." If these wages are determined in markets, she should tell us why the resulting wages do not reveal consumer preferences about child-care. There's even more:
Get this--the government already pays for 40% of childcare costs, but it's not enough! In other words, many people think that the "unregulated, lower quality care" is better overall for them and their kids, but they're wrong. Economists would say that the opportunity costs of switching from low to high quality care are larger than the benefits of switching from low to high quality care. But, Dr. McCartney insists that people must be forced to consume high-quality care.
What can I say to that?
10/19/2003 08:41:54 AM
Absolute Mobility vs. Relative Mobility
No new posts today.
See UPDATE 3 in the Percentiles post below--and the excellent comments by readers.
UPDATE! I can't help but point to the Concise Encyclopedia's entry Poverty in the United States by Isabel V. Sawhill:
See also the comments--reprinted in full below--by the editor of the Concise Encyclopedia, David R. Henderson:
10/17/2003 02:54:38 PM
Taking the Day Off
I doubt there will be any posts of substance today on T&B, as I am doing doctoral research.
In the meantime, note that cost of living adjustments will increase Social Security Benefits by 2.1% next year. Also, the taxable income ceiling will be raised from $87,000 to $87,900. The 9.2 million households who earn at least this much will pay an average of $900*6.2% = $56 more in payroll tax, and their employers will pay an equivalent amount. Let me clarify--this is not small increase in savings for future retirees, but a marginal increase in current income transfer from high-income earners to the elderly and the disabled, and others.
10/16/2003 11:29:15 AM
Percentiles are not People
Ben at Economist-to-Be gets serious in his reply to my comments about who's getting fatter. His reply is in three parts, and this post is a response to the first part only, in which he says:
I do not dispute the accuracy of the data, but I do dispute Ben's interpretation. "Widening income inequality" has occured, but this doesn't demonstrate that "the rich" in the US (in this case, people with high incomes) have gotten richer (earning even higher incomes than before). The people in the top 5% of the income distribution in 1970 are not the same people in it today. More importantly, the overwhelming majority of those in the bottom bracket 30 years ago have moved up one or more income brackets in 30 years.
Percentiles are not people. The only way to prove the assertion, "the rich are getting richer" is to look at the specific high income earners 30 years ago and follow their incomes into the future, and the only way to prove that "the poor are getting poorer" is to look at the specific people in the bottom 5% or bottom 20% of income earners 30 years ago, and follow thier incomes into the future.
Only a longitudinal survey--like the Panel Study of Income Dynamics, conducted by the University of Michigan--can really answer whether the rich are getting richer. In fact, researchers have used the PSID to thoroughly document income dynamism--and have shown that overall, the rich got richer, but so did the poor.
Who did this analysis? The same people who run the PSID, the Institute for Social Research at the University of Michigan. Their results are reported in By Our Own Bootstraps: Economic Opportunity & the Dynamics of Income Distribution by W. Michael Cox and Richard Alm--authors of Myths of Rich and Poor.
Instead of reinventing the wheel, let me quote Cox and Alm's explanation of figure 4:
And then their explanation of figure 5:
These data are not conclusive, but they give a hell of a different picture than annual snapshots of the income distribution. Only 5.1% of those in the bottom 20% in 1975 were still there by 1991. Only 62.5% of the top 20% of income earners were there 17 years later. Most income gains accrued to those who were formerly in the bottom 40%. Read the rest of the report, if you haven't--including a second report by the US treasury that found that only 14.2% of those in the lowest income bracket in 1979 were still there in 1988--10 years later!
UPDATE: Vinod links (thanks!) and points out:
UPDATE2: I want people to respond to this post.
Looking at how people change over time makes far more sense to me than looking at how percentiles change over time. Looking at people reveals that most poor will lift themselves out of poverty. There's no point in ignoring this dynamic, and each of us should use this information to focus our analysis and resources where they are most needed--specifically the type of poor who will never rise above the lowest quintile.
There are sizable problems with entrenched poverty in the US--nobody I know disagrees about this. But differing views of how people move between income percentiles can influence beliefs about effective remedies.
Those who hold to solely a static "distribution view" want to the government to help equalize income for everyone at every point in time, with the humane benefits of such intervention outweighing the costs in economic civil liberties and reduced output. They see economic classes as stagnant, with little movement. The poor remain poor, while the rich get richer. I do not believe the evidence supports this view--in the United States today.
But those who insist on a "dynamic view" want people to move up the distribution as quickly as possible. Depending on how easy the poor realize the American Dream, dynamists may or may not support government programs designed to facilite movement up the distribution. Those with strong views will insist that levelling the income distribution would retard the very strong upward movement. Those who see the dream as harder to achieve today might see room for government assistance in training/education, or might even demand outright subsidies. But within this view, it is possible to assess the data, revise one's view about the state of the nation, and adjust policy preferences...
I hope my readers sense and share my frustration at the standard measure of income inequality...
UPDATE 3: Absolute Mobility vs. Relative Mobility
Very smart commenters have pointed out difficulties in the data that I presented. This is a VERY unsettled and complex issue, and I have to read up more before making an intelligent judgement, but I wanted to give some indication of my trouble.
The Urban Institute's Daniel P. McNurrer and Isabel Sawhill review the literature on income mobility--including the Treasury and Cox and Alm studies referenced above-- and make a short assessment of their own. They write:
They're highly critical of the "absolute mobility" methodology of Cox & Alm--preferring a relative mobility method. They refer to Krugman's heated article linked to by Leaderlog in my comments, and to an unpublished paper by Peter Gottschalk entitled "Notes on 'By Our Own Bootstraps: Economic Opportunity and the Dynamics of Income Distribution' by Cox and Alm," Boston College, April 22, 1996. (I've emailed Dr. Gottschalk for a copy of this paper).
I want to know if there ways to determine which measure is better for which application. The McNurrer and Sawhill contrast of relative mobility to absolute mobility--both measuring movement of people between percentiles through time--does not help much:
Relative mobility looks at how people within a sample rate against each other at the beginning, and then again at then end. Absolute mobility looks at how people in the sample compare to the entire population at the beginning, and again how they compare to the entire population at the end.
Relative mobility is a great measure if the composition of your society doesn't change at all. RM uncouples and isolates itself from all population changes. Absolute mobility permits the entire sample to rise relative to the population. While this may seem like the sample is no longer representative of the population at the end of the survey, that's the entire point. The population has changed--and so has the sample.
Relative mobility findings have shown that some of the the formerly poor have moved up within their samples. Absolute mobility studies have shown that a lot of the formerly poor have moved up compared to the entire population. One problem with Cox and Alm, like that of the treasury, is that their sample ages but their population stays the same average age.
How the hell are we supposed to adjust for the tendency of wages to increase with age when it is precisely working hard consistently for long periods that the poor use to rise in income? The absolute mobility argument is that people start poor and then become less so. (Yes, so do college students, but we can separate these out later). Both move up the income distribution and make real gains.... Anyway, I'm tired.
Here's a list of income mobility references. Enjoy!
10/15/2003 03:42:44 PM
Persian Carpets and Mens Suits
Tyler Cowen asked my fellow GMU students about pricing policies for Persian carpets. Their answers are plausible:
The first argument says that most consumers can't tell a Persian carpet from a Persian cat. The second says that consumers are picky but want the carpet immediately. They have to deal with "sales" in order to have the most inventory to choose from.
Both these assume that store owners have experimented and found the profit-maximizing business process, but this would only be convincing to me if we had a history of the development of Persian carpet sales. When did such business practices become standard? Did stores that fail to adopt these practices have a higher rate of failure? Or are businessmen just doing any damn thing they can to get people into the store, in the knowledge that walk-ins=sales?
But Tyler, why focus on carpets?
Look at the low-end to low-mid-range retail clothing industry, say in Manhattan. Every single store is having a sale, or calls their operations a warehouse liquidation, or insists that it is going out of business. I particularly like stores that have signs that read, "Going out FOR business," which clearly indicate their customers' inattention to detail.
This discount model is a standard retail business practice. I'd say, without data to back me up, that most owners are imitative of success--and operate their business on the same models as other successful businessmen. There are only a small, distinct set of retail business models to pursue.
Once there was a fire next to my father's mens retail clothing store. He thought his inventory was worthless, and decided to sell it off in a "fire sale." The response was enormous. After the first day, he actually had an employee buy a briefcase to transfer all the cash to the bank. After seeing this enormous response to his fire-sale of smokey inventory, he made the decision to go from "boutique" to "discount". He remodeled the store and his future inventory to meet the needs of a lower-income clientele that he hadn't realized the neighborhood was actually sustaining.
After my father passed, we closed down this store, and hired a company that specializes in helping small business run "Going out of business" sales. You would not believe the change in clientele that occurred. It was like the "fire-sale" all over again. Suddenly, all these people who had never before stopped in the store (it had been there a quarter of a century), wandered in to find the "$1 shirts". Others were more suspicious, asking how many times we had "gone out of business".
Also, never, ever--ever pay sticker price on a carpet. These deals are meant to be negotiable, and the owners will not hesitate dicker with you. And, believe it or not, (or just ask Victor Niederhoffer), you can dicker on price for almost every item in small, owner operated, retail stores.
What are the alternatives to not having a continual sale? How can they spice up their stores to get people to come in?
UPDATE: Lynne Kiesling reminds me about the Hotelling model:
Clustering is contrary to my experience. So I used superpages.com to map the oriental rug stores closest to my home in Alexandria, VA. The results reveal minimal clustering. How well should the Hotelling model represent such stores?
10/15/2003 12:24:03 PM
Competing Data Sources
The Financial Times reports that two competing lists of the 100 richest Chinese are being created by Asiamoney and Forbes:
I wholly support the idea of competing data sources, and wish more were done to find alternative estimates of national macroeconomic aggregates like GDP, the unemployment rate, and the consumer and producer price levels.
Of course the most important statistic is the one not stated. 2/3 of the richest entrepreneurs in China are NOT members of the top political gangs! Still, I wish they had a measure of connectivity of the private sector with the public sector.
Note:Hat tip to Drudge.
10/14/2003 05:43:53 PM
Even more Obese
Ben at Economist-to-be points to two articles referencing RAND Health research, trying to make it look like the poor are getting fatter. Some people are getting fatter, but Ben has no basis to assert that the rich are getting richer, while the poor are getting fatter. The research he points to does not indicate who is getting fatter over time.
But we know that, in the last 20 years, severe obesity increased in the US population overall, faster than the rate of increase for being just overweight. This research was conducted by Roland Sturm at RAND), and published by the Archives of Internal Medicine in the article Increases in Clinically Severe Obesity in the United States, 1986-2000. The skinny:
The tails of the fat distribution are spreading wider as the entire distribution shifts to the right. Even though there are problems with the data-- undercounting obesity because of self-reporting and overcounting obesity because the obese are more likely to be stuck at home and answer the survey, Mr. Sturn does the best he can with the data. He also writes something I didn't expect:
However, I have libertarian concerns with Sturn's assessment of policy options:
The last time I checked, even though the right to eat was not specifically mentioned n the constitution, neither was crafting and enforcing a mandatory "food policy." Also, renaming fatty-food regulation "environmental intervention" serves only to obscure its ferocious attack on American civil liberties; it is like calling China's one-child policy a friendly and necessary "family intervention."
Choice of diet is no less important than the choice of family size. If somebody wants to eat grease all day, fine by me. If somebody wants to have 10 children, fine by me. Just don't expect me to feel bad if you die at 50, or cannot afford the best in medical care for all your children. I'd love to have a cheesburger and fries tonight, but I'll grill chicken instead. And personally I and my wife don't want a large family, but we do want 2 children. These are our choices to make--wisely or foolishly--nobody else's.
However, there are real fiscal concerns with the morbidly obese. On May 1, 2002, before this blog was started, Rhonda L Rundle published an article entitled "Obesity's hidden costs" in the Wall Street Journal (reproduced here). It notes that rapidly increasing numbers of obese people will force hospitals to purchase capital equipment--bariatric wheelchairs, beds, mattresses, surgery tables, scales--to accomodate them. What the article doesn't say is that some of these charges will accrue to all hospital facility users--meaning the non-obese will pay for the obese.
All these expenditures are, somewhat incorrectly, termed "social costs". In previous research Sturm conlcuded:
It seems pretty clear that at any given point, obese people cost more to treat than non-obese people. What is still unclear however, is whether the life-cycle healthcare cost of being obese is greater than the life-cycle cost of healthy. An obese person may cost more every year to treat, but he may die much earlier, leaving a lower total healthcare cost over his lifetime (i.e. lower net present vallue). Eliminating obesity--or smoking or drinking--could actually increase the total expenditure on health maintenance.
Something to think about....
10/14/2003 04:45:44 PM
Carnival of the Capitalists
Sorry for the post-free weekend. I've been playing Mr. Mom, but I'll have some time to devote to blogging soon.
In the meantime, check out the first ever edition of the Carnival of the Capitalists--a weekly summary of the best posts from economics, business, and finance blogs. Your's truly is only one among dozens of bloggers--most of which are not linked at right--who have come together in this effort.
10/13/2003 02:10:45 PM
Not One--but Two Exit Polls!
I'm not upset, and I haven't been given a good economic reason why I should be. As I understand the story, a group of media organizations contracted with and paid a professional polling organization to take the exit poll. Given a specific contract between the polling organization and its clients, and the lack of an official contract between the polling organization and those being polled, I believe that ownership of the information accumulated by the polling organization is its clients' property--which they can do with as they damn well please. Neither the public, the blogosphere, nor the government should have any say in how the data are used.
I know the arguments are against me--the press has a higher ethical obligation to report accurately and promptly about elections, etc. However, why should we believe the press will fulfill those obligations? Why should I count on "the press" to tell us how elections are going? Why don't we have NGOs and non-profits conducting their own analysis, and making it available directly to the public via the internet?
We've had disappointments before; in 2002 the Voter News Service, owned and operated by the major networks, was disbanded after the networks misused exit polling data, presuming it had scientific accuracy. It was a shameful performance--not by the VNS, but by the networks.
For the California recall, many news agencies--AP, ABC, NBC, CNN, Fox, New York Times, Washington Post, USA Today, Sacramento Bee, KABC-TV, KCBS-TV, KNBC-TV, KNSD-TV, KTVU-TV and KNTV-TV--chipped in to pay Edison Media Research and Mitofsky International to conduct an exit poll and telephone survey. Some details of the interviews with 3814 voters leaving polling stations and 400 absentee voters:
The now widely reported results are here.
I say unto you, if you want exit poll information available to all, CONDUCT YOUR OWN DAMN EXIT POLL. Give the results to the people freely!!! Do not wait for the press to leak the information--they think too little of your intelligence, and too highly of their own social position.
In fact, up to now, I've been under the impression that there was only one exit poll. But I just noticed, as you might have, that the LA Times in NOT included in organizations listed above. That's because they paid for their own exit poll!, conducted by Davis Research of Calabasas. They sampled 5205 voters in 74 polling places:
If the LA Times and the other media organizations do not want to share their polling data, interested citizens will be left no choice but to come together and finance their own polls. Frankly, I personally don't think it's worth it, and would not support such efforts--unless the press start intentionally misreporting theirs.
Also, such polls are clearly club goods--not public goods. Why?
10/10/2003 01:56:40 PM
Big Government, Bigger Wal-Mart
Last Sunday, Matthew Yglesias noted that the Federal Government, not Wal-Mart, is the largest employer in the US. True, but lumping together all federal employees in all departments really ignores how these bureaucracies are managed. For example, it's been my experience that the military services think of themselves as separate, distinct entities for the purposes of personnel management.
Also, the postal service employs about 800,000 workers--or thereabouts.
UPDATE: Our military really is bigger than that--just more efficiently designed. The data above reflect active duty military only. Each reserve component is managed separately from the active component--and from each other. Still, active-reserve integration has been acclerating for some time.
Table 5-2 of Selected Manpower Statistics FY2002 show data about the reserve components--which together yielded 1.2 million persons in 2002. Remember, most of these guys and gals are not full-time soldiers--or at least weren't until the recent military campaigns. Wal-Mart is still bigger than each component, but not all of them put together. An interesting question I'll try to answer is "how many reservists actually work at Wal-Mart?".
10/9/2003 04:01:57 PM
On the Benefits of a Market Economy in Iraq
I've criticized other economists for focusing blindly on the marginal financial costs of war. It's easy to focus solely on the costs, because they can be extrapolated by simple methods from current U.S. budget allocations. As I write this costofwar.com says the toppling of Hussein and the occupation of Iraq--i.e. setting up democratic political institutions, the reconstruction of schools, the
However, time has come for somebody to provide an estimate of the economic benefits of the Iraq war. I am not an expert in these matters--and I don't know who is. But the world needs to know that there will be substantial economic benefits--not immediately, and not primarily to U.S. residents. The benefits will accrue in the future, and primarily to Iraqi residents and their trading partners. These benefits will far exceed the consumer-based market rush experienced after the downfall of Saddam.
There is no doubt that this war--like all wars--brought immediate death and impoverishment--not prosperity. The techniques of cost-benefit analysis cannot easily account for the loss of human life. In addition to the budgeted costs, the economic loss incurred from the two hundred American military and journalistic casualties, as well as the 2200 Iraqi military personnel and the hotly debated number of Iraqi civilians, can be roughly estimated. In addition, the destruction of buildings and equipment in Iraq, and the loss of production from calling up reservists can be estimated.
But the economic benefits are even harder to calculate and summarize--and I won't even try. We cannot count on supposed beneficial effects on the stock prices for Americans or on oil prices for Iraqis. These are not real tangible improvements. We cannot count on the broken window fallacy--that explosion of American bombs and the destruction of Iraqi wealth are, through their impacts on rebuilding efforts, positive economic shocks.
What we must count on is the superior demonstrated performance of open decentralized market economies over stagnant centrally-strangled economies.
Formerly, Iraq was tied with North Korea for last (155th) on the 2002 Index of Economic Freedom. (It was not ranked in 2003). On each and every component--from government regulation to monetary policy to property rights, it earn the worst possible score. We must count on Iraqis using economic freedom to create economic prosperity. If history is our guide, the economic future of the Iraqi people has never shined brighter.
On page 51 of the 2003 index the authors insist that economic benefits will accrue after the transition to a market economy:
The future performance of the Iraqi economy, if U.S. sets up the rules of the game intelligently, should be unparalled in the Middle East. How will this happen? If the future Iraqi government maintains an economically free nation, that will be for Iraqi businessmen--bankers, manufacturers, industrialists, and retailers--to decide. We cannot provide a guarantee or a blueprint, but that's the entire point...
And if all goes well, some day we will be sending our manufacturing jobs to Iraq, as well as China and Mexico.
10/9/2003 11:54:36 AM
Supply meets Demand--with a Lag
I wanted to post pictures of my son sooner, to meet customer demand and supplier ego, but I had to wait until my mother-in-law saw Misha's pictures and videos first. Anyway, Misha thanks you for patronizing T&B.
He's the one on the right.
My mother-in-law, who lives in Russia, has been repeatedly denied a visitors visa to the US. Despite the popular belief of most Americans born in the U.S., it's not easy to get into this country legally--even just to visit or travel--if you're not from a select set of elite countries. Someday I'll discuss the... well... uneven... treatment she has received at the hands of some of the Consular Officers in St. Petersburg.
10/8/2003 04:40:31 PM
Granger and Engle win Econ Nobel
Kikuchiyo says he didn't go to school with either Granger or Engle, although it seems everyone else has.
10/8/2003 10:53:57 AM
State Auto Emissions Tests
I don't mean to routinely pick on Tyler Cowen. He's goliath; I'm the bug under David's
Tyler also writes:
The first factoid is summarized in the report. But on page 5, the report notes that focusing on the dirtiest 10% will actually mean making the poor worse off:
But whether it's easy to fake auto emissions test I can't figure out...
Emissions tests are run and enforced by State governments, each with its own set of required procedures and equipment. At any given time, you should have an easier time of faking it in some states than than others. However, over time, most states have begun "advanced automotive emissions programs", effectively designed to made it harder for auto shops to fake emissions tests. The new equipment required can tell if the mechanic is tinkering with the process.
I know this happened in New York in the late 1990's, as my relatives who run auto shops were complaining bitterly.
In Virginia, "antique" cars--i.e. cars more than 25 years old--do not have to pass emissions inspection! Could this exception be the cause of much of the pollution?
Does anybody out there know?
10/8/2003 09:28:29 AM
Interracial Marriages Help Center the Income Distribution
A couple of weeks ago, Walter Williams wrote:
10/7/2003 03:23:06 PM
Campaign Blogs on the Economy
Looking through the single Bush 2004 blog entry about Economics makes me think it might be fruitful to examine all campaign blogs for the stories and commentary on economic matters. Clearly, the Dems will focus on the negative numbers and team Bush will focus on the positive numbers. I don't expect to find out how the candidates want to intervene in the economy, and why they think their plans are the best. In fact, I find all this campaigning boring, tiresome, and much of the time childish.
Instead of offering a button or a blog or a 30-second ad, I think it would be really nice if all the candidates were to tell us--in writing:
I know, there's not a chance in hell any candidate would do this.
See also the Economists for Dean blog. Sure it's partisan, but it's good!
10/7/2003 10:55:44 AM
Uh, Oh--Court Enforced Cable "Deregulation"
A Federal Appeals court maintains that Cable internet services must be treated as telecommunications services for regulatory purposes. This means that cable companies must let competitors use their lines (at what prices???). I'll leave the experts to disentangle this mess, but wanted to point out one paragraph that was particularly misleading:
Excuse me, but from most consumers' point of view, "cable broadband" is not a separate industry from broadband in general. Competition for broadband services exists even in almost all 14 million cable broadband homes-- from 1) telephone provider's DSL service, or 2) satellite providers like Dish Network (with Earthlink) and Direct TV (Direcway). As far as price goes, I have no aggregate data, just personal anecdote. DSL and cable internet service cost about the same, while the dish stuff is more expensive.
Note that cable and the dish folks act like fiery competitors. Comcast, my cable service provider, runs folksy commercials making fun of "The Dish", and Direct TV uses Danny Devito and other celebrities to read consumers' letters about how the dish's quality is excellent, and service is unbeatable.
UPDATE: Here's the text of the ruling.
10/7/2003 07:51:10 AM
On Symphony Orchestras
Tyler Cowen makes a common mistake when discussing symphony orchestras:
I would have agreed with Tyler--until last July, when I emailed Jan Wilson of the American Symphony Orchestra League. I requested data about the number of symphony orchestras in the United States. Jan's reply, if you find it credible, makes the industry sound better off than I previously thought. According to the data she sent, less than 1% of symphony orchestras have gone bankrupt recently:
The number of orchestras in the US has actually increased over the past ten years. Recent news reports of the demise of symphony orchestras are a little premature and inaccurate. There have been only 8 orchestras that have filed for bankruptcy or reorganization. Currently, the League has over 900 member orchestras and we no of approximately 1200 orchestras total for the US. Most of the remaining 300 or so orchestras are smaller budget orchestras.
10/6/2003 01:06:24 PM
Those Manufacturing Jobs
Many commentators have noted the continual loss of manufacturing jobs overseas (or lost forever to productivity gains). But as anybody who looks at the size composition of GDP knows, as the number employed in manufacturing has decreased, manufacturing output has steadily increases.
This is a general, long-run trend, demonstrated by the exception in 2001, when manufacturing was hard-hit by the recession. These are rough numbers, and perhaps the BLS and BEA work with different definitions of manufacturing, so I reserve the right to correct later, but I think this trend is accepted by most economists.
True, increasing output and productivity is little consolation to those who lose their jobs. Even though we're sympathetic, we economists do not often specify which jobs are lost in much detail, and cannot explain the history of those lost jobs.
To begin to make up for that lack, I would like to link to two great articles about Elkhart, Indiana--the self proclaimed "Band Instrument Capital of the World." The first is entitled American dream, economics clash and the second Foreign competitors siphon market share: Cuts, shift overseas may help locally . Both are written by Andrew Souukup of the South Bend Tribune. The articles reveal modern worries about globalization, but a century-long history of participating in the global marketplace. The articles are best read in reverse. The second article begins:
Companies consider outsourcing the solution to tough competition:
But the first article notes this has been a long-term battle-- fierce competition first by local producers and then by international producers.
So being the "Band Instrument Capital of the World" and luring employees from abroad is NOT globalization, but sending production abroad is?
10/6/2003 12:31:11 PM
Microsoft and Moran
The always interesting Angry Economist writes:
The purer the majority rule, the greater the centralization of power and legislators' control and direction of economic wealth. Everybody knows that the wealthy and the powerful will use any means necessary to secure the highest rate of return on their investments. We must admit to ourselves that politicans in the U.S. today control massive amounts of wealth--because they have the regulatory power to expropriate property rights.
Here's a theoretically refutable hypothesis, "It is impossible for a politician to maximize his own welfare and the welfare of those he represents." If true, I do not see the point of insisting that subsidies and the like be repealed (which is clearly the right thing to do for us and the third world), since many U.S. politicians would make themselves worse off by doing so.
My House Representative, Jim Moran, is no more accountable to me or to the people than the bully quasi-monopolist Microsoft. Neither Moran nor Microsoft do what I want them to. And frankly I don't expect them to.
But Microsoft will deal with me on specific terms, by selling me products for specified prices. Moran, because he's a national legislator, instead of a consumer goods producer, doesn't have to worry so much about a bunch of disorganized little guys being dissatisfied. If I don't like Windows XP, I can still move to Mac OS with my next computer, thereby punishing Microsoft (and myself a little). If I don't like Moran's policy objectives, I can move to another district and hope for more influence, but this punishes myself, and leaves Moran untouched! If I stay in his district, a single vote against him would probably not hurt him at all. The only way to get noticed is to form a sustainable special-interest group, like AARP.
Jim Moran's office has dealt with me before, by sending me a form letter when I wrote a note arguing against his stance on post 9/11 relief ("It’s an open grab bag, so let’s grab."), and another when I wanted clarification on this statement, "If it were not for the strong support of the Jewish community for this war with Iraq, we would not be doing this..."
If I were an important person--with wealth or a voice that could hurt Moran, he'd respond to me personally. But the same is true of Microsoft. For some reason, politicians are supposed to respond to the people. Maybe they do, but they don't respond to this person.
Wow... I didn't realize how much I disliked Moran.
10/3/2003 05:00:31 PM
New Jobs, Finally!
This headline for employment data is just ridiculous. Simply put, it is not at all true that For First Time in 8 Months, U.S. Businesses Add New Jobs . Obviously, they mean that on net, more jobs were created in September than were destroyed. But this does not mean that U.S. businesses created zero jobs in the previous 8 months, until suddenly, for no apparent reason, they began hiring in September.
UPDATE: James Picerno (no permalinks!) provides an excellent comparison of the current job picture with recent history.
10/3/2003 09:11:39 AM
The Quality and Quantity of Homework
Most American parents think their kids the right amount of homework . They could be right, but a broad question like How Much is Too Much? might not be specific enough. Neither parents, students, nor teachers are homogenous groups--not across the country, and not within the classroom. Given such diversity, it seems inappropriate to assume that the correct level of homework is the same for each student in a class, regardless of his level of ability or interest in the subject matter.
I would like to suggest that students of different abilities should be given varying types and amounts of homework.
Certainly, it is pragmatic for a teacher to assign a uniform level of homework to all students in a class. In fact, some students might think it unfair that other students get less homework than they do (although it is doubtful that any student would complain if other students were getting more homework). But it's clear to me (from hands-on experience in an after-school program), that some kids need to read the same paragraph several times to get the basic meaning out of something, while others barely need to skim to retain the details.
If the objective is to keep kids busy learning, then smarter students need more homework--longer and more complex reading and writing assignments, harder math problems, more free-thinking after rote memorization, etc. Slower students need to master skills and acquire basic information before moving on--shorter, more repititious assignments.
The Washington Post notes that "Teachers tend to demand more from the children of college-educated parents." I doubt this happens very often within the classroom...
10/2/2003 11:55:30 AM
Is GMU taking over the EconoBlogosphere?
As a good friend of mine puts it--"neat shit."
In addition to Neuroeconomics, GMU Economics has Tyler Cowen and Alex Tabarrok at Marginal Revolution. We also have Chairman Donald Boudreaux, whose unorthodox blog entries are his pointed letters to the editors of major newspapers.
I will encourage more GMU econ professors to join us, but most are too damn busy teaching, doing research and writing papers and books.
10/1/2003 02:33:13 PM