October 2004 Archives

Bad Surveys

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I'd like to state my views on survey error clearly, but I have to write quickly, so you should expect some oddities in what follows:

IMHO, we have no reason (i.e. statistical theory) to expect political polls to be consistent with one another. Most polls, although done cost effectively, are not scientific enterprises; the pollsters do not, and cannot, take the care necessary to be reliable. I do not accept as valid their "margins of error" at any given level of confidence. Those numbers--48% this or that with a +/-3% margin of error--simply do not mean what survey authors suggest.

In Stephen Landsburg's recent post, he excluded "all of the potential problems with surveys other than sampling error". Well, in my view, we can't exclude nonsampling error; nonsampling error actually dominates sampling error. Our focus on sampling variance is understandable, since that variance is what is seen. But it is the unseen that is of critical importance.

BLIS

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blis-volvo.jpgThe Washington Times notes that BLIS, Volvo's Blind Spot Information System, will be available in new mid-level models:

Instead, improvement has come as it always comes at Volvo � thoughtfully and carefully. There are design tweaks, mechanical updates and interior refinements. The most intriguing new feature will not be available until late winter or spring. It's the optional Blind Spot Information System.

A digital camera capable of taking 25 pictures per second will be mounted on each door mirror and will be able to warn the driver when a vehicle is entering the Volvo's blind spot. There is one limitation. Like all cameras, it will not function in times of poor visibility, such as fog or heavy snow.

0408_volvo_s60_blis_v.jpgA few more details at auto-innovations.com:
The technology employed: A digital camera is fitted on each door mirror and takes a large number of frames a second. By comparing the picture frames, the system can register when a vehicle is moving into the monitored zone, which is 9.5 metres long and 3 metres wide. The system is programmed to monitor cars as well as motorbikes, in both daylight and in the dark. It is also dimensioned not to react to parked cars, roadside fences, crash barriers, lampposts and so on.
Of those people who support the recent federal government requirement that new cars have child-proof window switches, how many would support a requirement of BLIS in all new cars? Note that the system will cost about US$600, and that adjusting your mirrors is free:
Though Volvo claims such a blind spot detection system is among the most asked-for features from drivers, we found a couple of BLIS�s characteristics questionable...

That a system like BLIS has come to fruition�and that reportedly people have demonstrated a desire for it�forces us to ask: Why aren�t drivers setting mirrors better? And what happened to the good ol� fashioned head-check?

Because ignorance, we surmise, is bliss. Or BLIS.

More Wal-Mart, More Poverty?

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You might want to read about a new WM study that claims to demonstrate: More WM, More Poverty. Full text (19 pages) of study here.

One for the reading list.

A friend of mine, with whom I have engaged in a number of debates on this very topic, pointed me to a new book on the electoral college: "Why the Electoral College is Bad for America," by George C. Edwards III.

Now on order from Amazon, rest assured I'll have some thoughts on it once it arrives.

From the review alone, I am skeptical on one point: the reliance on the anti-EC arguments from James Madison. While I have a great and enduring respect for the framer's of the Constitution, and in particular the brilliance of Madison, I think there is a tendency to look to these men as some form of oracles, from whom never ushered any poor judgements or miscalculations. These were men as given to political ambition and desire as anyone. In fact, it is precisely because they were flawed that I am even more in awe of their achievement.

In considering the justifications and decisions of the framers, I tend to give more weight to the early work of Madison, during the creation of the basic institutions of the US than to his arguments during and after Washington's first term as president. While the inciting incidents were surely the programs suggested by Hamilton, it was Madison the organizer that adroitly split the political sphere into warring factions and drove hard to oppose anything that seemed to displease Jefferson. The focus of his efforts shifted heavily, it appears to me, from the success of the foundling nation to the political career of his mentor. This just a few years after having written The Federalist letters in support of the very things Hamilton was pushing for. Jefferson's student in almost every respect, Madison quickly moved into the role of a political power-broker, working tirelessly for the support of Jefferson above all. That he came out in repudiation of the electoral college, after having given it such eloquent support strikes me as a sort of political maneuver designed chiefly to get and keep Jefferson into office. After all, the election of 1800 provided probably the first real test of the election system, with Adams and Jefferson having to rely on deals in the House of Representatives to decide the winner. Meanwhile, if Madison were truly honest about his push for a truly "democratic" election, why not attack the appointment of Senators by the House of Representatives? Obviously, I'm no historian, so there could be other sound reasons that Madison chose that time and that subject to attack; I just harbor suspicions about the reliance on Madison as clear evidence that even the "father of the Constitution" was against the electoral college.

That said, I'll suspend any judgement until after reading it. At which point I'll feel free to be as judgemental as I please.

Terrorism and Poverty

A great new paper by Alberto Abadie is up at NBER: Poverty, Political Freedom, and the Roots of Terrorism.

Political freedom is shown to explain terrorism, but it does so in a non-monotonic way: countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes. This result suggests that, as experienced recently in Iraq and previously in Spain and Russia, transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism. Finally, the results suggest that geographic factors are important to sustain terrorist activities.

Rauchen kann t�dlich sein

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swisssmoke.jpgThe Swiss have tightened regulations of cigarrette labels and other tobacco products. I'm not certain whether health officials in the Swiss and EU governments seriously think these hideous labels will be effective in deterring smoking:

The revision of the tobacco ordinance comes into force on November 1. But manufacturers have 18 months to comply for cigarettes and 30 months for other tobacco products. This is to give them time to sell existing stock.

Health warnings, such as �Smoking can affect sperm and reduces fertility�, �Smoking causes fatal lung cancer� and �Smoking during pregnancy harms the health of your child�, will be carried in the three official languages � German, French and Italian.

They will appear on the front of each packet in big, black letters and take up a third of the space. Another warning will occupy 50 per cent of the back of each packet...

The government is also considering whether packets should carry colour photos of diseased lungs, as is already the case in Canada.

Even if you support government intrusions into private health concerns, you know that these labels are ridiculous, and do little if anything to lower the cost any existing externalities.

See also this Google translated version of a Der Spiegel article, which notes that the EU is spending 72 million Euros on a new anti-smoking campaign, and has some pretty nasty pictures of what smoking can do to you.

Computers for Free & No Accountants!

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free4.gifLooking up a quote from Marx, I came across worldsocialism.org's proposals for economic reform. And not a moment too soon, because now I know the truth:

The time has come in the history of our species when it can get everything it wants for free. Yes, you heard me right, for free!

Technology has evolved to the point where there is no reason why food, clothes, housing, medical care, education, transportation, computers, books, CDs, digital connections, cannot be freely available to all human beings on the planet. It is time for such a change.

You say that, given their current human capital, billions and billions of people cannot possibly afford all these goodies? Why, didn't you know that capitalists maximize their profit by wasting resources coordinating private plans? Why, all we have to do is eliminate the coordinators!:
There are many other examples of employment which is necessary for the profit system but would be immediately redundant in a socialist society of common rather than private ownership and production for use instead of for market sale. The list is a long one - legal workers, chartered accountants, cost accountants, estimators, valuers, claims assessors, underwriters, brokers, taxation workers, marketing and sales personnel, advertisers, social security workers, cashiers and check-out assistants, police, prison workers, security guards, charities, armies, navies, air forces, armament workers, defence establishments etc.
Thankfully, I do not have to live in a world where these views are serious contenders for popular ideology.

Government Wi-Fi as Public Bad

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The economic theory of goods defines a bad as something that makes you worse off by having it, or better off by not having it (e.g. a disease, pollution, crime, and if you're anti-war, nuclear weapons).

As a dissertation writer, I need uninterrupted and distraction-free quiet to write, write, and write... I have to become a hermit--move into deep seclusion: no friends, no TV, no music, no internet, no blogging!. Woe to me then, when yesterday, I moved into what seemed like the quietest and most secluded position in the Alexandria Central Library, and my computer started downloading my email and Instapundit popped up in Firefox.

I didn't ask for the free Wifi, yet now I cannot avoid it. This is a bad--in fact, a disaster. As a result, I am now blogging this post instead of writing my dissertation. This whole situation reminds me of Sam Gordon in Russ Robert's The Invisible Heart who took control of his life by eliminating television--a private bad. Alas, I will now have to find a new place to write...

My coblogger Ian has already come down against government financed wi-fi networks. Alas, I too must oppose them, because to me they are a public bad. Imagine a world where I cannot anywhere avoid Wi-Fi, except in remote mountainous regions. I'd be writing my dissertation until I die...

Domino's Information Dominance

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I've argued with people who are concerned about corporations misusing private information, and I've insisted that it's government information dominance that we should be worried about. I still hold to that, although Domino's has given me pause.

My recent negative review of Domino's Doublemelt Pizza seems to have spurred the company to send me, via snail mail, a freebie offer of wings with my next pizza.

Now, they could only obtain my home address through a Whois query of T&B; I ask you, would they actually do this in response to a bad review? Or, rather, is it coincidence that a few days after my bad review, I get a "sorry for our poor performance" postcard? Did everyone who ordered a Doublemelt get this card?

Ebay futures market?

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Ok, so it's a little different. Cut me some slack for having to find catchy titles.

Anyway...here's something that might be of interest to our Iraqi Dinar visitors: 1,000,000 dinar up for bid on Ebay.

From what I can tell, however, the current bid of $870 is about $163 over the current value of the dinar itself. Which, I'm guessing, indicates that someone is expecting things to get better. Unless someone gets about that much ownership value out of having a pile of dinar to lug around.

Game Theory of Voting

In perusing web writing on issues about the Electoral College, I ran across two pieces at Slate, both by Jordan Ellenberg, I thoroughly enjoyed.

Part I: Vote!

Part II: Game Theory for Swingers

The first piece makes, in part, the point I was driving at below: that one of the effects of using the Electoral College is to make a voter, both in actuality and personal expectation, more likely to be decisive in determining the outcomes of an elective process.

Where to allocate campaign efforts as computed through game-theoretic strategies is the subject of the second piece. In a roundabout way, this continues to make my point. As the probability of winning in certain states approach 50-50, one would expect to see more campaign resources allocated to precisely those states. If we make the effect of campaigning dynamic (rather than fixing a certain percentage point gain or loss tochances of winning the state) as well, then it demands that a candidate further divide efforts among states. Concentration of electoral power into a few cities reduces the number of places that would be of interest to candidates. Additionally, assuming that current trends in voting patters for the major cities continue, the candidate that has a high probability of winning the largest cities need spend little time campaigning at all. All the time and money spent going to midsize cities could easily be drowned out by the relatively cheaper efforts made by a candidate in big cities.

Read 'em all, as they say.

Electoral College Questions

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As painful as it is to relive, it seems like people are preparing themselves for another round of "electoral v. popular" vote issues. This time, however, the positions are reversed: Zogby, among others, suggests that Bush may lose the electoral college but win the "popular vote."

Always Low Prices

After a not so brief hiatus, I have started posting again to my Wal-Mart blog, Always Low Prices.

In particular, note that WM is refusing to distribute Jon Stewart's new book in stores, although you can get it online.

Pyramid Scheme Warning

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pyramidwarning.jpgSome of our readers might have heard of the web based pyramid scheme involving a company called SkyBiz:

One SkyBiz presentation claimed, "This system was put together by a gentleman named Eric Rasmussen who basically joined SkyBiz and six months later was able to retire with an income of about 400,000 a month. Currently, [he] lives in the Gold Coast of Australia and he's making 76,000 a week and growing�They provided CD-Roms, computer disks, videos and books promoting the SkyBiz programs and they provide a PowerPoint presentation on their website that can be downloaded to aid in recruiting new members. The cost to join the SkyBiz Program is $125, ostensibly used to buy an "e-Commerce Web Pak," but in reality was to purchase the right to receive compensation for recruiting additional participants. Participants were urged to invest in more than one "Web Pak," to maximize their earning potential.

Now it seems the SkyBiz has been born-again in the Middle-East and Asia by the name of a company called BizNas. From Maldives, Sri Lanka to United Arab Emirates, people are being fooled to buy their package and are being promised commissions if they recruit additional participants. It sounds too good to be true.

The Securities and Exchange Commission of Pakistan has web notice declaring the winding up of the company BizNas.com Pakistan (Pvt). It was also involved in a similar multi-level web based marketing scheme, offering public to purchase its membership card at US $99, and in return giving different packages of learning and facility of web hosting. Here is more of �Biznas.com� rip off in the Indian Subcontinent. The problem in poor countries is that there are no consumer protection agencies and people can be ripped off easily.

Here is an excellent little book (Little black book of scams) issued by Office of Fair Trading Australia. Here is another creative pyramid scheme which tried targeting women.

Proper-Coaseans, the Internet, and Price Discrimination

chargingahead.gif
This week�s Economist has an interesting summary of a paper by Andrew Odlyzko in the Review of Network Economics. The following is the abstract of the paper:

A wide-ranging discussion of the evolution of pricing in early transportation industries, such as lighthouses, canals, and turnpikes, is presented. It shows that price discrimination was an important factor in the development of those industries, and tended to intensify with time. In order to make differential tariffs effective, service providers had the right of detailed inspection of the cargo. These historical precedents help explain the drive by large sectors of the telecommunications industry to gain greater control over what is transmitted over the Internet. The implications for the evolution of the Internet are briefly explored.

As the Economist notes, �On England's canals, prices by cargo varied widely by the 1790s, according to both content and ultimate use: for instance, transport was free for manure for adjacent fields and stone for road repairs. To some extent, regulation limited canal operators' ability to exploit their market power: until 1845, they were barred from offering transport service themselves, in a �structural separation� of the sort sometimes proposed in telecoms today.�

History of transport applied to telecommunications, very interesting. Here is another must read paper from the journal on regulatory impressionism (thanks to Knowledge Problem).


Iraqi Macro Update

The IMF has a new report on Iraq:


� Iraq suffered from severe economic mismanagement, and over a decade of international sanctions. GDP per capita is estimated to have dropped from over US$3,000 in the early 1980s to as low as US$200 in the early 1990s. Although GDP per capita recovered somewhat to an estimated US$800 in 2001, it fell again to about US$500 in 2003 as a result of the most recent conflict. Iraq�s human development indicators, which had exceeded the regional average in the early 1980s, are now considered among the lowest in the region. Unemployment is running close to 30 percent and underemployment is pervasive. Furthermore, about 60 percent of the population is thought to depend exclusively on the government�s food distribution system for subsistence.

Brad Setser thinks the report is a gold-mine. He notes two striking facts:

1. In 2004, the amount Iraq will spend importing (yes, importing) refined petroleum ($2.1 billion) will exceed the amount Iraq received in grant aid from the world (transfers are projected at $2.05 billion)

2. Iraq is a country where government spending is more than a 100% of gross domestic product (2004 budget is $22.6 billion, 04 GDP seems to more like $21.2 billion)

No wonder Iraq is such a mess.

Iraq: Subsidies and Deficits

While the US military continues to fight terrorist insurgents in Iraq, the Iraqi planning minister has been readying to fight subsidies:

BAGHDAD, Oct 23 (AFP) - The Iraqi government plans to phase out slowly subsidies on basic products, such as oil and electricity, which comprise 50 percent of public spending, equal to 15 billion dollars, the planning minister said on Saturday.

Unveiling a three year economic plan, compiled by in cooperation with the World Bank and the International Monetary Fund, Madhi al-Hafez pledged "a progressive programme to suppress subsidies... (which) constitute a significant burden on public finances."

Most Iraqis relied on subsidised fuel, electricity and food rations under a United Nations-sponsored oil-for-food programme during the regime of Saddam Hussein.

This could seriously hurt real incomes of many Iraqis if not done in conjunction with a plan to distribute some oil profits to Iraqis.

Also of note are the simple means of creating a budget deficit--i.e. an excuse for international aid--just use an incredibly conservative estimated price of oil:

Iraq itself is predicted to generate revenues (profit?--ed) of 19.4 billion dollars which, coupled with external aid, will bring total revenues to 23.7 billion dollars.

But the budget is seen at 30.4 billion dollars, meaning a deficit of some 6.7 billion dollars, including foreign help, and 11 million (sic) dollars without.

The 2005 budget is based on a price of oil of 26 dollars-per-barrel -- a hugely conservative estimate, considering the price of oil, which ended the week at a record 55.50 dollars a barrel.

"We have put very conservative figures on oil prices and if it continues to rise we might be able to cover the deficit," said Hafez.


More Women in Combat?

Via Drudge, we find that the U.S. Army has decided to put scarce resources to better uses:

The Army is negotiating with civilian leaders about eliminating a women-in-combat ban so it can place mixed-sex support companies within warfighting units, starting with a division going to Iraq in January.

Despite the legal prohibition, Army plans already have included such collocation of women-men units in blueprints for a lighter force of 10 active divisions, according to Defense Department sources.

An Army spokesman yesterday, in response to questions from The Washington Times, said the Army is now in discussions with Defense Secretary Donald H. Rumsfeld's staff to see whether the 10-year-old ban in this one area should be lifted. The ban prohibits the Army from putting women in units that "collocate" with ground combatants.
So we've finally come to the point where the aims of equality and lethality are beginning to merge; as the personnel readiness of ground combatants in Iraq continues to erode, the opportunity costs of gender separation are starting to look temptingly large.
The Army is not seeking to lift the ban on women in direct combat units, such as infantry or armor.

What is being examined is the part of the exclusion rule that says mixed-sex support companies may not be positioned with ground combat teams.

In the disputed instance, the transformation plan of Gen. Peter Schoomaker, the Army chief of staff, calls for creating Forward Support Companies, which are made up of men and women. These companies would collocate with reconnaissance squadrons, which are combat units and are part of larger brigade "units of action."

In my opinion, it's far easier to slowly change the roles of soldiers so that women can fill them all, than to keep the roles and insist that women be allowed to assume them... even though this amounts to the same thing.

Public Wi-Fi: Made up my mind.

So, I've finally come around to the idea that these attempts by cities to own broadband Wi-Fi networks in cities is just not a great idea. I like some of the ultimate effects, but not at the cost it would apparently take.

What was the deciding factor? This paper by the Heartland Institute (back in my ol' stomping grounds of Illinois).

A municipal broadband network may start service by charging �competitive� or even below-market fees, but once full-spectrum (DSL, cable, and wireless) competition arrives, prices for access will fall to the cities� operating costs or less, leaving them unable to pay off the bonds issued to cover the up-front investment in fiber. Businesses and residents cannot be treated as captive customers and charged more than what competitors would charge, first because of the existence of technological alternatives to the fiber-optic network and second because municipalities are barred from subsidizing their public telecommunications enterprises. Bankruptcy is a likely scenario.

I know, everyone was just dying to hear how I'd come down on this.

Anyway, it's an interesting read.

Small Guns, Big Money

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Many police officers in my area find that their self-interest requires them to be packing all the time. Here's the rather stark incentive:

"I run into people I put in prison at the oddest places," said Bunney, who likes buying his weapons and accessories at Potomac Arms Corp. in Old Town, where he worked after graduating from high school. "You run into them when you're shopping at a mall, when you go to the beach, when you go to dinner. I always want to have that edge if they decide to get even."
But they don't need the big guns off duty, and they opt for smaller models. This requires their own ammunition, holster, and other accessories. Apparently, this is where a gunshop finds its most consistent source of profit:
Jim Rowe, manager of Shooters Paradise, estimated that the store sold about 1,300 guns in 2003, not enough to cover the rent at the strip mall the store is in on Route 1. The real money, he said, is in the accessories.
Why are new, legal guns not so profitable? Well, one might think that since the US stock of (presumably working) firearms is 200-250 million, that the market is "flooded". But that's not so. Instead, this article suggests that manufacturing pricing policies yield a narrow retail price range for new guns, and the absence of such policies on used guns leads to a diversified pattern: some dealers use a fixed subjective markup over their purchase price, others price dynamically, by reacting to perceived demand conditions. The article addresses the problem of pricing (for maximum profit) a single firearm when originally purchased in a bulk lot; more importantly, the author reminds gun shop owners that inventory is costly:
Sooner or later you invariably will pay too much for a gun. For myself it usually occurs when I have been sloppy in my inspection of the piece and overlooked a detractor like a bent or bulged barrel, a stock crack, or such. It is also possible to misidentify a gun, overlook the fact that a barrel has been shortened, or just plain over estimate what it is actually worth. As Karl Malden would say: "What do you do? What do you do?"

Some dealers will simply refuse to sell a gun at a loss. It is a point of pride with them and they will literally let a gun sit in the rack for years rather than to take a loss. When the gun finally does sell, they think to themselves that they at least broke even. Well, they are wrong. Actually they lost far more money than if they had just bitten the bullet and sold the gun for a loss in the first place.

Anecdotes vs. Data: Real Estate Edition

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It seems that many real estate agents, like many baseball club recruiters and managers, rely on gut instincts and personal experience instead of the data:

In higher price ranges, though, agents report an uptick in the number of days properties are staying on the market. "I'm looking at the listings for Bethesda now," Jane Fairweather, an agent with Coldwell Banker Residential Brokerage in Bethesda, said last week. "Here's what I see priced between $800,000 and $900,000: 279 days on market, 83 days, 16 days, 118 days, 56 days, 17 days, 2 days, 55 days, 30, 45, 27, 67, 120."
Always remember that we have to pick and choose our anecdotes carefully; they're non-random, judgmental surveys, easily biased by not being representative of the whole. Anecdotes can provide valuable insight into areas for which no reliable data are available. But wait, that set of anecdotes above--covering a narrowly priced range of homes in a single area--didn't compare anything over time! And hard, reliable data are available on the average length of time homes have been on the market.

So what happens when the reporter looks it up?

Although many agents report anecdotally that homes are remaining on the market longer, statistics from the area's multiple listing service show days on market for all properties relatively flat for most local jurisdictions in September.
Now, I'm not one to ignore people whose livelihoods depend on being right about a specific market. And I understand the urge for the juicy soundbite for a reporter to nibble. But is it too much for the reporter to point out that real estate markets fluctuate all the time? That is, shouldn't we expect that--even in a sizzling market--a real estate agent would likely be able to find one neighborhood whose expensive houses are staying on the market longer than before?

My family is not poor.

According to the official U.S. Census definition of annual poverty (cue appropriately stuffy policy directive, and other links), I, my wife, and son stopped being poor some time in April--and we're not given the chance to be poor again until January 1.

That I quit my job in July and have had no income--except Google ads!--since then does not change the (correct) decision that the Census statisticians will make about my family in 2004.

(Of course, now I have the song going through my head.)

Realizing the potential hollowing out of the Canadian drug market if the US is allowed to start ordering prescription drugs en masse, some Canadian pharmacies are going to start rejecting bulk orders.

Why politicians think a country of 31 million people that has price controls on pharmaceuticals has enough excess drugs just sitting around that the US can start shopping like Paris Hilton on a bender is beyond me. I'd consider this a smart move on the part of these pharmacies. On the other hand, of course, this just means that those pharmacies that will sell to the US are going to be able to demand higher prices. If enough places adopt the no sales policy (to swing once again the other direction), the prices for those drugs that are available may rise to near-US levels, eroding the benefit. (Does anyone know if the price controls in Canada apply to international sales? I couldn't find anything in a quick search.)

For more on the reactions to the greater outcry for reimportation, see this excellent NYT piece.

I'm not the only one posting on the vaccine shortage. Russ Roberts has some great stuff in posts here and here. (While the good Professor obviously does a far better job than I, I would like to note that he too suggests the mess may have something to do with the way government buys vaccines).

This is all from the US perspective, however. What I also find interesting is looking at the issue from another side. What about Canada? They have a far more socialized health care system than we do, but it appears they have a small surplus they'd be willing to sell.

How can that be? To be honest, I'm not entirely sure. If I had the time, I'd look into their department of health and see how they go about purchasing to provide some comparison to the US method.

One thing I will note, however, is that the company that is poised to provide the extra vaccines is a domestic Canadian company. While I admit to drawing inference from a very thin source, might it be possible that the domestic company is financed largely by the Canadian government (cough --PEOPLE-- cough)? The US has no company that is producing flu vaccine, and looks to international producers for its supply. If this is, in fact, the case for Canada, then the cost of the vaccine is largely irrelevant for the production level, since the company may never have to worry about covering costs. Should that be true, it doesn't invalidate the claim that government purchasing is at the heart of the US vaccine shortage. Since the US is using its position as a near monopsonist to change prices, the private company is induced to produce less because of falling margins. A state-owned company doesn't have as much to worry about if funding from the government is available. (All else equal, of course, since there are plenty of cases where a state enterprise can fail even with the possibility of loan guarantee, bailout, whathaveyou.)

UPDATE: I stand corrected. Thanks to Tom North for pointing out that ID Biomedical is a public company in Canada. I tried looking for their ticker, but came up empty. Chalk it up to being too ignorant of Canada to make the search effective. I will admit, however, to being skeptical that this means that the company isn't otherwise guaranteed by the government, or that the cost structure for the company is radically different because of the more socialized system. I say that because in an environment where the end product is tightly controlled, and the product is (as almost everyone has mentioned elsewhere) tough to make and realizes thin returns, it's interesting that a publicly traded company can afford to exist where companies across the world failed. I'll have to look into it more. Hey, I'll be the first to admit it when I get it wrong...

Front vs. Rear Wheel Drive

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Over the lion's share of the automobile's history, most cars had an internal-combustion engine in front of the driver powering the wheels in back of him. But the fuel crises of the 1970s changed that. Manufacturers scrambled to save weight to save fuel, and they adopted assorted variations of the front-engine/front-drive layout...

Lately there has been a resurgence of rear-wheel-drive family cars. And, their makers claim better traction and handling than front-drive models, thanks to sophisticated electronics...

Popular mechanics performs a matched-pair experiment on a set of V-4, V-6, and V-8 powered cars:
One in each pair had front-wheel drive, the other rear. We ran them through our normal battery of performance tests. Then, we soaked the track and repeated all the tests to replicate the conditions you would face on a rain-slick road.

The reviewers conclude that computer control has eliminated the expected difference in power and handling between front and real drive:

Neither front-wheel drive nor rear-wheel drive is really better than the other. Today's sophisticated traction and stability control systems are so good they can mask or enhance the true driving dynamics of a vehicle. That said, through most of this test we found the effectiveness of these systems had more to do with a car's performance than which wheels were actually doing the driving.
One could quibble over the sample size of the test--in terms of cars and drivers--and insist that there must be some difference, but that would miss the point. Computers have made the difference between front and rear wheel drive so small that finding its exact level, or range of levels, is a waste of time...

Product Review: Domino's Doublemelt Pizza

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We usually order pizza from a local place; it's not New York's finest, but it serves as a fine proxy. But the idea of thin crust and multiple layers of cheese sounded interesting, so tonight my wife and I ordered a doublemelt pizza from Domino's:

Domino's Doublemelt starts with a thin crust, covered in a creamy blended cheese sauce full of herbs and a hint of garlic. A second thin crust is added and topped with the basics � tomato sauce, mozzarella cheese and choice of toppings. To top it off, another blend of six cheeses is added.

"This unique combination creates a texture unlike anything you've ever tasted in a pizza before, with layer upon layer of flavor," said Ken Calwell, executive vice president, for marketing & development at Domino's Pizza.

The inner layer was certainly unique--uniquely terrifying, that is. This was more than a "creamy blended cheese" concoction.
Inspired by the success of similar pizzas in international markets, Domino's Doublemelt offers a new option for those looking to double their pizza enjoyment.
This option did not double our enjoyment, it nullified it.

Avoid at all costs.

The movie rental market is going to get quite crowded:

Netflix already has new competition in the form of Blockbuster Inc., the nation's largest movie rental retailer. Earlier this year, Netflix increased its monthly fees to $22 despite Blockbuster's entry into the market with an offer of $19.99 a month.

Netflix reversed course on Thursday and said it would cut the fee to $18 a month in response to the possible arrival of Amazon. Blockbuster soon followed suit and said yesterday it would cut its monthly fee from $19.99 to $17.49....

But even as it defends against new competitors, Netflix is preparing to open a new front in the online movie rental business. Earlier this year, Netflix signed a deal that will allow it to deliver digital copies of movies over the Internet to TiVo Inc.'s 1.5 million subscribers.

Subscribers would be able to download the movie onto the TiVo digital recorder and replay it, just as they do with television programming that has been stored on the device's hard drive.

Cable and satellite companies are already delivering similar video-on-demand services.

Google Desktop

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You may now use Google to search your hard drive.

Yes!

All Vaccine, All the Time

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Well, let's hope not. It's just that I've had limited time, and -- to my great delight -- the vaccine post below has generated a bit of discussion that I feel the need to mention.

Many thanks to the folks that have hit the post with a Trackback, including those where the discussion is most pominent including The Knowledge Problem and Catallarchy.

Let's restate the argument I did make: government purchasing policies, codified into law, have helped, in large part, to create the vaccine shortage we're all hearing so much about. The argument I purposefully did not make is that the government is 1) buying all vaccines "below cost", 2) forcing companies to sell to other buyers at their discount or "below cost", or 3) the sole and entire cause of the shortage.

First, the "below cost" thing. This is actually a possibile reality. In the discussion presented by the IOM, the drastic die-off of vaccine producers occurs at around the same time as the US changing policies over purchasing. Now, correlation not implying causation of course, there might well be evidence that the price the US government dictated was, in fact, below what it cost some vaccine producers to generate their stock of the goods. Of course, some of these companies could have been in trouble to begin with, some might have been bought up, or any number of things. I have no evidence on this, and made no claims that it was so. However, the limited number of companies able to produce these vaccines (actually 2 for flu; I mention 5 below, but those are for the range of childhood vaccines mentioned in the IOM report and the news articles) means that there are at least two companies for whom costs do not exceed revenue.

My point was about a "shortage", not a total absence of the good. Companies can still produce some of the good at a certain price and make money; no one's saying they can't. If no company could make money with these vaccine products, we'd expect either complete exit from the market, or government subsidies to keep them afloat. But that there are companies producing the good also doesn't mean that there is enough to go around. A cap on the price that can be charged for the vaccine means a company will make only a certain amount. This all seems uncontroversial.

Forced discounts work largely like a cap on prices. When the US government is the majority buyer of the good, pulling down the price that they will pay will dramatically limit the amount of profit the company can pull in. Production will shift to reflect this. With over 50% of sales going to the USG, this, in effect, makes them a price-giving entity. The other 50% is made up of other governments, private institutions and individuals. With some goods, it would be possible to charge the other 50% a higher price and make back some of what was lost when the government decided that it didn't like the price it was getting. (Well, it's not that simple, but we'll keep it neat for now.)

What complicates this is that vaccines have characteristics that make one type of consumer a poor substitute for another. The usage of vaccines is effectively controlled through the regulation of their delivery; medical professionals are the ones that can purchase and use them, for the most part. (I've still not seen information on the legality of someone calling up Chiron and ordering themselves a truckload of childhood vaccines; I'll be happy to adjust my thoughts accordingly depending on the information.) So if the government buys them to sell to doctors and hospitals at lower costs, and then says other people aren't allowed to do the same, there is a big restriction on the rest of the market for such vaccines. And because many of the people who would buy them (doctors in the US, in this case) suddenly have a low-cost supplier (the USG), the company is again unable to capture new customers to help generate better returns. Why buy from the maker when the middleman is selling them for cheaper?

More confusing to me is the argument that vaccines aren't produced in larger quantities because there is a lower return on them, so having your majority buyer pay drastically less doesn't matter. Such a practice makes slim margins lower, and creates incentives to bring the amount supplied down even further, which isn't good policy regardless of the level of return prior to the discount. But why do we think that the low return would persist in a more open market? If the demand were growing year by year, I would tend to expect vaccine producers to raise prices to make it worth their time to produce. Clearly the demand for these things is strong (though, I admit, it is at least partially driven by the cheap price the government offers); the natural incentive would be, it seems to me, to find a price that does make a decent return and to find ways to produce more for lower costs. Companies don't just ditch products that make lower returns than their big sellers. Again, as I said below, the demand is there every year, and every year we talk about shortages once again.

Now, as people have rightly pointed out, vaccines are not just an assembly line product. The flu mutates, and every year the vaccine has to be a little different. However, I sincerely doubt that these researchers have no idea what the necessary vaccine might be until, say, Oct 12 every year, and cannot start production until sundown on that day. Investment in R&D might extend the timeline for production, which in turn could drive down costs (assuming that high-paced research costs more in manpower and hours worked overall). But it doesn't appear that we're seeing that. Also, the other childhood vaccines that are in short supply don't exhibit such a high rate of mutation, and so could be planned for on a longer horizon. The controlled delivery mechanism (having to sell to licensed distributors like doctors) would still restrict supply to some extent, but in the long run I believe the supply would better match the demand than the situation we have now.

(Sidenote: as to the nature of vaccines, they are far from being a public good. Clearly they are both rival and excludable. If they weren't this whole discussion would be moot since we could all have some at no cost to giving it to the next person. Now, a healthy populace might be more along the lines of a public good, but the vaccine itself strikes me as a way to make a public bad rival. But that's off-the-cuff and possibly a bit tangential, unless we want to discuss the reasons the government might be inclined to subsidize vaccine production.)

Compounding this is the traditionally horrendous job government does at estimating demand. The government could, of course, place a bigger order than it did last year. The reports from the post below, however, indicate that the federal government bases its estimate on the estimates from the states. So now you have to introduce the attempts to estimate demand from 50+ (does the US Virgin Islands participate? etc.) states with the constraints of a politically driven budgeting process. Will this year be worse than last year? Better? What happens when ordering becomes counter-cyclical? (That is, last year the USG had too much because it was a "down" year, and thus buys less this year, which just so happens to be a huge flu year.) If the government shouldn't be picking how many cars to make every year, why the hell should we trust it to decide how many flu shots are needed in your neighborhood?

Perhaps I take it too much as an article of faith that capping prices reduces supply, and government intervention introduces large inefficiencies. But I think in this case it's clear that by taking on the major purchasing role only to force a reduction in prices, and then regulating/affecting in other ways the potential pool of consumers for the vaccine producers, the government is drastically hurting the production and sales process of these companies, resulting in a shortage that is leaving people not only sick, but vulnerable to life-threatening disease should the unfortunate soul be old, young, or have a weakened immune system.

Bin Laden Studied Economics

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I was going through some of essays from the university days and came across the following which I thought was relevant today. I wrote it in the year 1999 long before 9/11.

�.it might be worthwhile to consider bin Laden's ideological roots, and how someone who studied economics and management in King Abdul Aziz University turned out to be America's most wanted terrorist.

Monthly Bill Fatigue

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Christopher Stern of the WaPo lets people complain about both unnecessary and necessary luxuries. Monthly bills take up too much discretionary income! They are separating the haves from the have nots! Many people are spending too much money on cable TV, cell phones, and other services billed monthly! The rest can't afford them!:

Economists and academics are beginning to grow concerned about Americans' willingness to cede a regular chunk of their monthly paychecks to new conveniences and services, saying it is taking a serious bite out of discretionary spending, a key driver of the nation's economy. They also worry that new services are contributing to a growing divide between consumers who have the means to secure special treatment, such as access to free-rolling highway lanes, while others are stuck in bumper-to-bumper standstills.
Excuse me, but consumers have discretion with their discretionary income; why should choosing "new" services be a worse choice for those dollars than any other? Should the "haves" choose goods and services that they think make them worse off? Should they be forced to save those dollars, or be required to spend them on Gucci handbags, or should they be redistributively taxed so that the poor, too, can get HBO? These are the fundamental questions, and no real answers are given to them.

Quote of the Day

cabinetminister.gifA new cabinet Minister was recently assigned as Minister of Gender, Family Development and Social Security in the Maldives (shown in the photo). In a recent interview she was quoted saying the following:

It is your (media�s) problem that you are promoting thin women and not looking at fat women (to find beauty in them)! Perhaps with the right medical attention those who need to thin needs to get thin�

I can�t see any sense why the media would conduct any program that promotes unhealthy dieting habits. Media should not air any programs that endangers health. We can still diet in a good way but I have to say that most of Maldivians� eating habits are not good. We eat too much hedhika (oily snacks)! We should eat more vegetables and fruits. We should also eat the right amount and not in excess. If this is so, then it�s not a very big issue. Everybody wants to look beautiful. If in this era people think thin people look beautiful, then people will try to stay thin�It�s not good to go hungry to become thin.�

Real Interest Rates in Iraq

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According to a frequent commenter on my Iraqi Dinar post, the private Baghdad based Al-Warka investment bank is offering 15% nominal interest on savings accounts (denominated in Iraqi Dinar). According to Central Bank data (pp. 28-30), the Iraqi government banks were offering 6.3% this June, down from 7% in January. If I'm reading this document right, Iraqi government debt is rediscounted at 6.35%.

The public banks are offering loans for 11%. If the private banks offer 15% on savings, how high are the interest rates on their loans? I'll try and find out.

Even if I can, it's tough to extract the real interest component from the nominal figures , because World Bank price inflation estimates in Iraq vary from 8.5% for consumer prices to 15% for the GDP Deflator. Meanwhile, the Central Bank bulletin (p. 29) shows price indices increasing one month and decreasing the next (however, food prices continually decreased and rent continually increased in 2004).

Overall, it seems that real interest rates vary widely in Iraq, so it's hard to come to any solid conclusions about the cost of capital made available in financial markets.

As an aside, I wonder how much capital is made available by the sometimes maligned Iraqi Dinar speculators who hold their currency in private Iraqi Banks...

Sad Maldivian Fact of the Day

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In a recent speech, the President of the Maldives (Mr. Gayoom), quoted some alarming statistics on the prevalence in the Maldives of a rare hereditary disease called thalassaemia:

�Another health issue of great concern to the Maldives is that of thalassaemia. Nationally, one in five persons is a thalassaemia carrier and one in every 120 newborns suffers from this blood disorder. If preventive steps to reduce the incidence of thalassaemia in the Maldives are not taken, informed projections show that in 50 years� time, the cost of treatment could consume over 40 percent of the per capita health expenditure. And what is worse, half the country might have to become blood donors for the other half, a nightmare situation that would be quite unsustainable��

Quick Addition on Vaccine Issue

Surprisingly, the SFGate has a clear and sensible take on the underlying causes of the vaccine shortage:

The fundamental problem is that government regulatory policies and what amounts to price controls discourage companies from investing aggressively to develop new vaccines. Producers have abandoned the field in droves, leaving only four major producers and a few dozen products. Only two companies make injectable flu vaccine, for example: Chiron, unable to supply any product this year because of allegations of contamination; and Aventis Pasteur, whose 54 million doses will be all that are available. (In addition, 2 million doses of FluMist, an inhalable nasal vaccine, will be ready.)

And make sure to read their suggested corrections. Not sure I agree with them completely, but in sum they might approximate the repealing of the bad policies that got us to this point in the first place.

Average Age of Automobiles in the US

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Inspired by Buzzcut's comment on Steve Verdon post on smog, I would like to look at the mean age of autos in the US, and the median age of autos in the US. Since the mean is persistently greater than the median (as expected), the distribution is persistently skewed towards older cars. Is this distribution becoming less skewed over time?

"We never had enough troops on the ground..."

Prior to the war, the Army chief of staff, Gen. Eric K. Shinseki, said publicly that he thought the invasion plan lacked sufficient manpower, and he was slapped down by the Pentagon's civilian leadership for saying so. During the war, concerns about troop strength expressed by retired generals also provoked angry denunciations by Defense Secretary Donald H. Rumsfeld and Gen. Richard B. Myers, the chairman of the Joint Chiefs of Staff.

Countless times, I've read this type of criticism of the Bush/Rumsfeld tactic of sending in fewer troops to Iraq than many generals wanted. Now, I don't want to get into who is "right" or "wrong" on this matter, or on the morality of invading Iraq in the first place; instead, I'm assuming Iraq had to be invaded, and that the long-term goal is to forcibly democratize and liberate Iraq and the rest of the Middle East.

We know that Bush/Rumsfeld paid a large price in Iraqi instability for having fewer troops. But I have not seen addressed the question of whether having sent in more troops initially would have actually cost less in the long run, or would have better met long-term objectives.

Note that I cannot answer this question, but I think it must be asked.

Fall is here, and that means winter can't be too far behind. As an anyone with a mother knows, that means it's the season for the flu. Fortunately, there's a pretty easy way to protect yourself -- get a flu shot! Sure, needles are no fun, but the vaccine is excellent at making sure you don't get sidelined by one or more really nasty bugs. One quick stick seems worth avoiding the pain and suffering of the flu. This is especially true for the young, the elderly, and those with poor immune systems, when the flu can actually become far more serious a problem. So, go today and sign up for your flu shot.

That is, if there are any left.

What this season once again means is it's time for the country to be inundated with stories about vaccine shortages, and almost no critical thought as to why this keeps happening.

If you have any faith at all in the notion of supply and demand, wouldn't it seem reasonable to think that that at least one of the companies that produces vaccines would see this cycle, and start gearing up production around summertime every year? The demand is certainly there; the government has moved into talk of rationing, fer cryin' out loud. Yet, here we are again.

Why does this happen? Well, here's the CDC's explanation:

In the United States there were recently shortages of many vaccines in the recommended childhood immunization schedule. Some of these shortages were widespread while others were localized. Reasons for these shortages were multi-factorial and included companies leaving the vaccine market, manufacturing or production problems, and insufficient stockpiles. Consequently, some shortages were only specific to one manufacturer.

Hmmm. "Multi-factorial" sounds pretty serious. Lots of things going on, tons of moving parts, too much to explain to the lay person. Well, let's see what non-scientist friendly familydoctor.org has to say:

A vaccine shortage can occur for many reasons. Some of the factors may be:
The company that makes the vaccine is not able to produce the vaccine fast enough.

The company decides to stop making the vaccine for business reasons.

The vaccine's supplier is not able to send out the vaccine quickly enough.

Often, a combination of these factors causes a vaccine shortage in one or more areas of the country.

Well, that seems reasonable. But...hold on. If people need and want it, and it happens every year...why can't you produce it fast enough? Wouldn't a company produce a little more in downtimes knowing that a surge is coming? But this time we get hints of "business reasons".

Unfortunately, that doesn't help me much. Business, to me, implies lots of things. Bad management, accounting irregularities, hostile takeovers, horrendous labor conditions. Maybe the corporation is just inept as well as corrupt, and our health is at the mercy of cold "business reasons."

Let's ask people who should know, like folks who study medicine!

The National Immunization Program of the Centers for Disease Control and Prevention (CDC) administers the vaccine purchase program for the federal government. Each state government has its own immunization program, which estimates the level of vaccines needed to assure access to immunization among underserved groups of children and adults. Vaccines purchased by CDC are shipped to public health clinics and private healthcare providers participating in programs for disadvantaged patients. At present, the U.S. government spends more than $1 billion annually to purchase childhood vaccines alone. Additional public funds are used to reimburse the costs of administering vaccines (through Medicaid and SCHIP payments, for example) and to reimburse physicians and other health professionals who buy vaccines for older adults through Medicare.

CDC negotiates a federal contract for each vaccine product, using large volume purchasesas leverage to obtain discounts on the manufacturer�s list price. The 50 states also rely upon the federal discount price for vaccines purchased with state revenues. In recent years the discount has declined significantly. The discount pricing process also has the effect of deflating payments to pharmaceutical companies, which tends to discourage future investments in vaccine development.

Hold the phone! You mean to say that government purchasing of vaccines at a forced discount has something to do with this? Could these be the mysterious "business reasons" that cause some companies to underproduce vaccines?

I'm shocked. Shocked, I say.

I suppose to anyone who was paying attention when this measure went into place and had a bit of economic sense about them, this is old news. And frankly, the point has been made before. I just think it's worth bringing up again. And again and again until people start to see the connection between government driven health care and undersupply of goods.

Imagine, now, that the government were to do the same thing for x-ray machines, painkillers, MRIs, nurses, obstetricians, and just about everything else. Government need not be the "provider" of health care to make lives worse. It need only be the majority purchaser, dictating prices to companies and potential doctors. Even with a second-tier in the system for those people who want to shell out money themselves for better care (though I have problems with people paying twice and getting one service), imagine the disparity in health care treatment between those who can pay and have access to the advanced care, and those who have to wait in lines hoping their heart murmer isn't something serious. How many doctors are going to choose to participate in the socialized system?

These shortages, that extend well beyond flu shots into treatments for preventable diseases in children are directly caused by government action.

Maybe regulation not only causes crime, it makes people sick, too. The Hechts from that last link put it best:

The flu vaccine shortage is just the tip of the vaccine-storage iceberg. Children (and adults) are endangered by the current situation.

For the Love of Property

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Chinese peasants fight corrupt, land-grabbing, police-wielding, Commies:

[R]esistance to land grabs in China's 34 provinces has sometimes veered into violence, raising the specter of popular rural unrest that has haunted China's rulers throughout history.

Brains out for Bucks

According to the Washington Post, brainy game shows are now dominated by former academic quiz bowlers. One question: what took them so long? Answer: They've always been there, but the big money is bringing them out in droves:

Tom Waters, a Savannah, Ga., golf shop owner widely considered the grand master of the game, changed his view of TV game shows, which he held in disdain despite his own $12,500 win on "Jeopardy!" nearly 20 years ago.

"There was a split in the community. Some of us thought 'Millionaire' was beneath ourselves. Some would swallow pride and prostrate ourselves."

At first, Waters took what he considered the higher ground.

"Then they came back with $10 million and I thought, 'I'm less a purist than I thought,' " said Waters.

He passed the tryouts but his fingers were too slow in the first round to get into the so-called hot seat and compete for the big money.

"The biggest hurdle is blind luck," he said. "The hardest part is getting drawn. I'm amazed at the number from the quiz bowl community that got on. One night's episode, there were two people I knew on it."

Thanks to Walter Williams, who always insisted that everything has a price.

Check out the CoTC at Drakeview, now nearly one year old! Note that T&B has not appeared often in the CoTC, since I try top submit only exceptional posts...

More Economics of Terrorism

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Despite having spent a good deal of time in graduate school looking at this very issue, I realized only recently that I hadn't been blogging much about it. Perhaps it's that I was worried that if I started, I'd just never stop, as I am wont to do with so many things.

But now, via Mahalanobis I see that Corner Solution has put up a couple of thoughts on the issue. Dochia has listed some interesting papers, and you should check out the trackbacks there as well. All interesting stuff.

The only problem is, I'm not buying it. Well, that's a bit much. How about I say, I'm incredibly skeptical of what's been mentioned so far. In specific, the supply and demand analysis of terrorism might be interesting, but it's not very helpful. I'm all for applying the lessons of economics to understanding terrorist groups, and do think there are some insights from institutional econ that would certainly be of use in understanding the functioning of such groups.

But here's my basic problem: terrorism is, by and large, becoming synonymous with suicide terrorism. (Caveat: the number of political kidnappings in Iraq will necessarily affect this, though it's been tracking in proportion with suicide bombings so I don't expect the ratio to be changed much.)

Here's the catch, then: suicide bombers die. Which, by definition, includes a cessation of all benefits from being a living person who is evetually going to be a martyr (Iannacone explains some of the gains from being seen by a religious group as someone that devoted to the cause; recognition, stature in the group, not to mention the physical benefits often awarded to families of suicide bombers like cash transfers, free housing, free education, etc.). To abstract these benefits for the moment, let's just call it utility. Why would someone choose to end the stream of utility gains by choosing to die? Perhaps the individal is other-regarding enough that the improvement of someone else's life is enough to believe that ending their own is worth it. Or maybe they're just crazy. None of these, however, are easily dealt with in the economic literature I've read. At least not directly.

Belonging to groups, as numerous people point out, confers significant utility to the member in a number of ways. Membership and the desire to fit in can drive a large number of behaviors. But why, then, would one choose to end that association through suicide? It's not that it doesn't happen regularly, so there must be some answer. However comparisons to other extremist groups that have resulted in group-suicide are problematic to me. The pressure from a group that is all doing the same thing at once (or in groups -- think Jonestown) exerts a very different pressure than getting an individual to perform an act where there are no others around. Seeing that your group is about to disappear, you may well be induced to drink the Kool-Aid. Walking alone into a crowded marketplace with dynamite strapped to your chest and no familiar faces around, it would seem, loses some of the direct peer-pressure effect.

Terror "firms" are interesting to consider, but of vital importance then is the idea of recruiting into the suicide bomber ranks. Supply and demand can potentially address why terrorist groups persist, why they use suicide bombers, why they're structured the way they are, and more. But I don't see that it addresses how you convince someone to stop being with a wife, children, friends and the religious community.

My answer? Two parts; the person is bored, and he or she likes killing people.

Taken in reverse order, some of this is semantic. By "likes", I mean that we should consider that utility is derived from the death of others. Think of yourself as a soldier in war, choosing killing over death. This utility isn't "pleasure", but rather the gains that come from having fewer people in the world looking to kill you. Even if the threat is only perceived, it's still a utility gain to see that those you think COULD be seeking your death are diminished in number. Some religious groups, or more accurately terrorist groups that use religious iconography and messages, teach to their members from the earliest age that their targets are enemies, and that the situation is tantamount to war. Killing the other side's soldiers in such a case is a useful activity and could, potentially, convey utility. So, when faced with asymmetric force structures, the person seeking to kill as many of the other side as possible will have to choose methods such as suicide bombing.

But still the question arises, why not just kill from afar, and live a long life gaining more and more utility along the way as the number of deaths increases? That's the boredom part.

Despite good evidence to the contrary, people still insist on claiming that poverty causes terrorism. What the authors of the linked study do find, instead, is that downward movement in economic position may well incite people to participate in terrorism. But they need not be moving from prosperity to poverty. Instead, I think, this is an indication that people's view of the future is a heavy indicator for potential participation. That is, the contributing inputs to discount factor of the individual as it pertains to their future stream of utility might be a big determinant in choosing suicide over living.

With stagnant or declining economic situations people may have little reason to believe that the future holds much worth or reward. Even those who would qualify as "middle class" (a highly relative measure, but let's go with it for now) could discount the future value of income/utility enough to believe that the future is bleak, at best. In a place where there are few jobs, and the jobs that are present are laborious and unchanging (the economy of Palestian territories has changed little over 30 years; or compare the incidences of terrorism in the economies of some former Soviet sattelite countries during the same time period) there may be little reason for hope.

With nothing to do and no reason to believe that things will get better (boredom) and a belief that killing the enemy could help (liking to kill), perhaps suicide bombers are rationally choosing suicide over living? Of course, the utility from killing needs to come in the moments before death, and there is a need to assume that the bomber believes his or her action will create change. So, it's not clean by any means, but so far it's the best that I've got.

(NOTE: This is done quickly during work hours, so I may update or refine later.)

Bill Gates' "Virtuous Cycle"

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I like Bill Gates language on international trade and development:

"China and India are the big change agents for the years ahead," Gates told students at the University of California Berkeley. "We have to go into the risky new areas. That's what's going to allow the United States to stay at the forefront..."

"It's a little scary to me that people are thinking of this as a zero sum game," Gates said, referring to criticism of outsourcing and growing overseas tech markets.

"We're at the start of a process where the whole world is getting into this virtuous cycle," Gates said.

Whoever wrote that Reuters summary picked out excellent quotes. This "virtuous cycle" language is not unique to Gates, of course; but it occurs again and again in Gates' speeches, regardless of topic.

In a White House speech on 4/5/2000, Gates said:

[If] you had to pick who's the big winner in all of this, you'd definitely have to pick consumers. Technology is putting them in the driver's seat. Think about what electronic commerce does if you're trying to buy a product. It lets you go out to the Internet and look at products and services of every kind. Whether you want to look by price, by reputation, you'll be able to find products that never would have been available through traditional distribution channels -- products that are unique to your particular interests. And so it's the consumers who are in charge as price transparency climbs.

Now, that makes businesses innovate in a way that really wasn't necessary before, whether that's innovation in quality, customer service, or simply the price of the product. And it's that virtuous cycle that's allowed capitalism to work better in this era than ever before.

Just a decade ago, people wondered: Would the PC revolution eliminate jobs? Would it make jobs in some ways worse? Today, we know that certainly, on balance, technological advancement has led to lower unemployment that they've gone hand in hand. And so this technology revolution has been one of the greatest job creation engines ever.

In November 2001, Gates uses it in supporting open-source software:
But back to this week's visions. Diplomatically, Bill says free software has a role: "We certainly accept free software as part of the software ecosystem. In fact, there's a very virtuous cycle where people do free things, some people find that adequate, sometimes companies will take that work and turn it into commercial products, those companies will hire people, pay taxes. And so you see the free software and the commercial software existing together."
It comes up when talking to Bill Moyers in May 2003 about international health and poverty issues :
Absolutely. And that is the most amazing fact that should be widely known. You know essentially Malthus was wrong. If you raised wealth and you improve health, particularly if you educate women, then this virtuous cycle kicks in and a society not only becomes self-sustaining, but it can move up to a fully developed status.
The virtuous cycle shows up when Microsoft reps discuss university-industry relations, and so on and so forth.

No snappy conclusion... I'm just noting how one man's mind works.

Moore for Free

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Michael Moore has been disinvited to speak at GMU. Sad.

Don Boudreaux notes Moore's dismissal smells politically motivated. I agree, even though Moore's invitation could equally well have been politically motivated.

However, I object to Moore speaking at GMU for a reason Don doesn't mention: Moore is not worth his $35,000 pricetag. I think that the university was overpaying for his services; until Conservatives objected, they were suckers at the bargaining table. And there is at least one person who agrees with me--Michael Moore:

Moore, in a telephone interview last night from his home in Flint, Mich., told The Washington Post he intends to speak at George Mason anyway. "I'm going to show up in support of free speech and free expression," he said.
You see, to get Michael Moore at a discount--in this case, a freebie--all you have to do is give him a day's worth of free advertising in the major papers.

A while back, Robert Fisk admitted to a packed GMU crowd that there was no massacre in Jenin; his potent exposure of the injustices of Israeli confiscation of land owned by Palestinians was worth the crowd's attention. If Moore were only half as intelligent as Fisk, it might well be worth it going to see him.

Baseball in DC

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I'm so happy that the Expos are moving to DC, not because I am a rabid baseball fanatic, but because the Expos are NOT moving into Northern Virginia!

Virginia Governor Warner and state Republicans get my praise for not being as fast and loose with the public purse as DC government representatives:

Washington, selected this week over Northern Virginia as the new home of the Montreal Expos, "put a lot more public money at risk than we did," Warner said.... "I am not going to put a lot of taxpayer money at risk."

He disputed claims by Bill Collins, a top booster for Virginia baseball, that the state was turned down because the governor would not support bond financing of a stadium in Loudoun County.

Warner said he wasn't the only high-level foe of bonds; that they were "strongly opposed" by House Speaker William J. Howell, R-Stafford, and Senate Finance Committee Chairman John H. Chichester, R-Stafford.

Warner said public dollars would have covered about one-third of the cost of a Virginia stadium.

In separate comments at an economic development conference in Richmond, Warner said Washington's bid for the Expos included about $100 million more in public funds than the Northern Virginia offer.

"We pursued it very aggressively," Warner said. "But I take very seriously my job as steward of the taxpayers' money."

Government bonds would have been "pledging the state's balance sheet" to the sports venture, Warner said on the radio show....

Warner said there was "no appetite" to impose additional taxes on Virginians to support professional baseball.

DC agreed to pay all the costs of a brand new stadium. Suckers.

UPDATE: Max Sawicky is all over this one.

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