Re: Levitt article

2003-08-04 Thread Alex Tabarrok
Here it is.  Fabio, we expect better work from you next time!  :-)

Alex

http://www.nytimes.com/2003/08/03/magazine/03LEVITT.html?pagewanted=printposition=

--
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Wage-Price Controls Under Nixon

2003-06-13 Thread Alex Tabarrok
Michael Kinsley has an interesting piece in Slate today.

http://slate.msn.com/id/2084315/

It's about the Patriot Act and other so-called security measures and 
whether they infringe on our liberties. He concludes that so-far the 
infringement has not been so bad but there is potential danger in large 
part because Americans don't really love freedom. Indeed, when motivated 
with good stories they are willing to give freedom away quite easily 
(shades of Bryan's notion of rationality irrationality here). He then 
gives this stunning example:



This does not mean there's nothing to worry about. Incipience is 
legitimately scary. To return to the original question, Americans are 
not so innately freedom-loving that we would never let it dribble away 
without noticing. I can prove this because it actually happened, within 
the adult lifetimes of anyone over about 50. On August 15, 1971, more or 
less out of the blue, President Nixon declared a freeze on wages and 
prices. Legislation authorizing this had passed Congress the year 
before, with little controversy. The freeze evolved into a system of 
formulas about who could get paid what, requirements about filing forms 
with the government and keeping records and posting notices, all 
enforced by a growing bureaucracy of wage and price cops. The controls 
lasted a couple of years at full strength and then faded away over the 
next couple.

The notion that the government could tell everyone from General Motors 
to a baby-sitting teenager what they could chargeand did soseems 
shocking in retrospect, at least to me. There was no real national 
emergency. It was part of a cynical re-election strategy to gun the 
economy while holding inflation temporarily in check. But at the time, 
controls were not just accepted but popular. When they disappeared, even 
those (like me) who had opposed them found it strange and, at first, 
unnatural. You mean, anyone can just charge whatever they want? How does 
that work? The analogy isn't perfect. The right to set your own price 
isn't as profound as the right to express your own political opinion. 
But it is, if anything, even more a part of every citizen's daily life. 
And yet when they took it away, we freedom-loving Americans didn't even 
miss it.

--
Alexander Tabarrok 
Department of Economics, MSN 1D3 
George Mason University 
Fairfax, VA, 22030 
Tel. 703-993-2314

Web Page: http://mason.gmu.edu/~atabarro/ 

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Re: Wage-Price Controls Under Nixon

2003-06-13 Thread Alex Tabarrok
Well, the average American is not so pro-freedom as, say, Walter Williams,
but considerably more so than the average Frenchman or German.
Really?  How do you measure this?

  The remarkable fact is that it is apparently perfectly legal for the government in the United States to control the price of just about everything - i.e. fascism - I mean this as literally and not in a loose derogatory sense - is constitutional in the U.S.  This really illustrates that a) the constitution counts for pretty much nothing if the public wants something to happen and b) the public is not so freedom loving as to not want wage and price controls on everything.  Hence Kinsley's conclusion that there is a danger of big losses in freedom should the public buy some story that reductions in freedom are necessary for security the way they apparently bought that government control of price and wages was necessary to control inflation.

Alex

--
Alexander Tabarrok 
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Re: Charity

2003-06-06 Thread Alex Tabarrok
The public good story is also inconsistent with public opinion polls 
which show that the public always think the foreign aid budget is too 
*large*.  If the public good story were true people would be clamoring 
for collective action.

Alex

--
Alexander Tabarrok 
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George Mason University 
Fairfax, VA, 22030 
Tel. 703-993-2314

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Re: charity and time preference

2003-06-06 Thread Alex Tabarrok
Sure, the flaw is that this argument would imply that you hold the money 
forever.

Alex

--
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Re: Charity

2003-06-05 Thread Alex Tabarrok
Eric has me as being nicer than I actually am.  I would give up a leg to 
cure AIDS.  For SARS I would take a kick in the leg.

Alex

--
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George Mason University 
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Tel. 703-993-2314

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New Journal - Econ Journal Watch

2003-06-03 Thread Alex Tabarrok
 There is a new online journal that will start publishing in Jan. of 
2004 that some of you may be interested in. The journal is called Econ 
Journal Watch and will essentially be a journal of comments on papers 
published elsewhere. It will also include discussion about the economics 
profession and the role of the economist in society. More information 
can found here:

http://www.econjournalwatch.org/pdf/announcing_EJW.pdf

Alex

--
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Economics and Beauty

2003-05-31 Thread Alex Tabarrok
Regarding the economic return to beauty this newspaper cite suggests a 
link through health.

http://news.bbc.co.uk/2/hi/health/2943464.stm

...

Researchers in Spain have found that men who are regarded as attractive 
by women are also more fertile.

Their sperm move faster and are generally healthier.

The study is the latest to suggest that good looks can be a pointer to 
good health.

In April, researchers in Australia found that men with chiselled jaws 
and classic masculine features are in better physical health than their 
less manly peers.

These and similar findings have led scientists to conclude that women 
who seek attractive male partners are, in fact, searching for the 
healthiest men, most able to father and provide for their children

Alex

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Re: [Forum] Quoth who?

2003-05-30 Thread Alex Tabarrok


The idea, called regulatory capture is associated with George
Stigler.  Posner's paper Theories of Economic Regulation, Richard
Posner, Bell Journal of Economics and management science, Vol. 5, No. 2,
pp.
335-358, 1974. brought the idea ought very clearly as I recall but I am
not aware of that quote in either.
Alex

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Re: Questions about the stagflation episode...

2003-02-02 Thread Alex Tabarrok
I think that today there is a unified macro (Bill recognized that saying 
there wasn't was going out on a limb).  Macro is now in a period of 
normal science.  The profession has decided that the corect way to do 
macro is using a stochastic dynamic general equilibrium model.  Some 
people include sticky prices in such models and others do not but either 
approach is well within the mainstream.  Also, almost all the profession 
will now also agree that sticky prices or not a large fraction of what 
we call business cycles are the natural responses of an economy to real 
shocks.  

Although stagflation opened the door to new ideas what has driven 
the process more than anything is the internal dynamic to make macro 
models more micro-based.

Alex

--
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Advise to Journalists

2003-02-02 Thread Alex Tabarrok
I will be giving a 15-20 minute talk to a bunch of journalists and 
proto-journalists ( most of them are editors of student university 
newspapers) about what economics has to offer journalism.  I am 
interested in the suggestions of list members as to what the most 
important lessons economics has to teach.  I have a number of thoughts 
myself, of course, including

comparative advantage (veneer of competition hides much cooperation)
public choice (qui bono? look for the organized exploiting the unorganized)
tradeoffs/all good are economic goods (e.g. safety)
amazing economic/business stories that are not told (I have in mind here 
I Pencil/How Paris is Fed stories about the great complexities of 
modern markets that people take for granted.

Other ideas?  Thoughts?  Specific examples?

Alex

--
Alexander Tabarrok 
Department of Economics, MSN 1D3 
George Mason University 
Fairfax, VA, 22030 
Tel. 703-993-2314

Web Page: http://mason.gmu.edu/~atabarro/ 

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Re: Employment Index Derivatives

2003-01-07 Thread Alex Tabarrok
It's a good idea.  Not much exists yet but Robert Shiller has been 
actively promoting similar ideas for some time.  A good introduction is 
his paper with co-authors in the volume I edited called Entrepreneurial 
Economics: Bright Ideas from the Dismal Science, see

www.EntrepreneurialEconomics.org

Alex

--
Alexander Tabarrok 
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George Mason University 
Fairfax, VA, 22030 
Tel. 703-993-2314 

and 

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Re: [Fwd: a non-profit oddity]

2003-01-07 Thread Alex Tabarrok
This is a multi-part message in MIME format.





Re: Environmental and economic effects of Speed Limits

2002-08-10 Thread Alex Tabarrok

Charles Lave of UC Irvine has done a lot of work on the economics of
speed limits - he had an AER paper a few years ago.  I doubt that there
is much of an environmental effect - the main environmental effect is
due to congestion not speed limits.

Alex Tabarrok




taxi transitional gains trap

2002-08-04 Thread Alex Tabarrok

Here is an interesting plan to get out of NYCs transitional gain trap
regarding taxi medallions.  Basically the author suggests buying out the
current medallion holders and selling taxi-cab licenses on an open
basis.  I think his numbers don't add up but this might make an
interesting microeconomics exercise for students perhpas in conjunction
with Tullock's paper on the transitional gains trap.

http://www.city-journal.org/html/12_2_how_to_fix.html

Alex
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Re: taxi transitional gains trap

2002-08-04 Thread Alex Tabarrok

Bryan Caplan wrote:

 If a majority of NYers
 seriously wanted free entry in cabs, wouldn't it happen regardless of
 the opinions of cab companies?

   Bryan is gently pointing out that my assumptions may be inconsistent
with my earlier posts on democracy.  Nevermind, I contain multitudes.  
It does seem, however, that this is a good case of concentrated
benefits, diffuse costs.  In addition, there are serious constitutional
issues involved in opening the market to free-entry because this would
probably constitute a taking.  Thus the cab companies have the motive
and means to prevent entry.  Of course, there's no denying a majority if
it really wants something - even the constitution can be overriden (does
anyone remember that little thing about Congress having the power to
declare war?) - but in this case the public doesn't care enough about
the issue to overcome the cab companies at their most powerful but it
might care enough to overcome the companies if their opposition was
diminished by a buyout.

Alex   


  

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Re: free-vs-competitive please reply!!

2002-07-29 Thread Alex Tabarrok

 A free market can be defined as a market without direct government
intervention.  A competitive market is more difficult to define but
economists usually have in mind some definition based upon outcomes -
something like price tending towards marginal costs and zero profits on
average.  I think most economists would agree that a free market is a
necessary condition for markets to be competitive but there are big
differences over the degree of sufficiency.

Some economists in the Austrian tradition, particularly Rothbard,
either ignore competition or define it so that free markets are always
competitive.

Neo-classicals partial to laissez-faire, such as Milton Friedman,
recognize the distinction but argue in practice that free markets are
almost always tolerably competitive when they appear not to be
competitive it is usually due to government intervention (such as
tariffs) and that government intervention even if sound in theory will
usually make things worse in practice.

Good economists with a liberal leaning (e.g. Paul Krugman, Bradford
DeLong) think that most free markets are competitive (if the rules of
the game are clearly defined by governments) but that important
exceptions exist for which we need antitrust law and other occasional
government interventions.

Alex   
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Re: Textbook Econometrics

2002-07-23 Thread Alex Tabarrok

The best text is Jeffrey Wooldridge's Introductory Econometrics: A
Modern Approach.  Supplement with Peter Kennedy's A Guide to
Econometrics (a must have.)

Alex
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Re: Republican Reversal -- from whence, belief?

2002-07-18 Thread Alex Tabarrok

Tom Grey wrote

 Further, I derive support for this from limited thought experiments:
 Society A: more Atheist,
 Society B: more Bible Believing.
 
 In which society do I expect more fraud? more cheating spouses 
 promiscuity? more theft? more murder?
 Well, even without empirical support, I believe B will be better for me to
 live in, whether I, personally, am a weak Episcopalian/ agnostic/ atheist/
 or devout believer.

The data do not seem to support the hypothesis  England and France, for
example, are much less bible believing than the U.S. but overall have
lower crime rates (and despite their reputation the French are
apparently not especially promiscious).  The U.S. South is much more
bible believing than the North but crime rates are higher.  Atheism
increases with education and income (even more clearly bible beleving
falls with education and income) but crime falls with education and
income.  

The hypothesis is not well framed but if we were to say simply that
societies with more bible believing should have lower crime rates etc.
than that is even more decisively refuted because most of the world is
not bible believing and the Asian societies, in particular, appear to
have lower crime rates etc.  

It's tricky, but by some measures Confucian's, for example, can be
considered atheists (Confucious was a person not a god) albeit not
secular atheists.  I have little doubt that you will find that
Confucian's in the United States say have lower rates of crime etc. than
bible believers.

None of this controls for other factors, of course, so I do not
claim causality and of course counter-examples can be found (no need to
mention them) but the limited-evidence ought to be enough to cast doubt
on the limited thought experiments.

Alex


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Re: Republican Reversal

2002-07-17 Thread Alex Tabarrok

 Yes, I believe that the majority of the American public supports
farm subsidies.  The rational ignorance assumption fails to explain this
- it's not like the information that governments spends billions on the
farmers is hard to find.

Some combination of Bryan's rational irrationality and just plain
irrationality explains the results much better.

Forty four percent of the American public thinks that  “God created
human beings pretty much in their present form at one time within the
last 10,000 years or so.” (November 1997, Gallup Poll) so why should we
be surprised that many Americans also support farm subsidies?

Alex
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The Independent Institute
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Re: Republican Reversal

2002-07-17 Thread Alex Tabarrok

Actually, if you read closely, you will see that I implied that
Americans who believe that God created human beings pretty much the way
they are now about 10,000 years ago are *not* ignorant.

The remarks were appropriate because they address the issue under
discussion.  As economists, we are often surprised that government
policy differs so dramatically from what we think is efficient (and also
equitable).  Sometimes we like to think, as Fred put it, that the reason
for this is that the public is ignorant and fooled by the
government/special interests etc.  We like to think that if only the
public were informed they would denounce farm subsidies as many of us
do.  But why should we think this when information about, for example,
the farm subsidy program is widely available?

The evidence is even stronger in other fields that information
per-se often does not change people's minds.  The scientific consensus
in favor of evolution is far stronger than the economic consensus
against farm subsidies and the scientists have the advantage of support
from the public school system and the media and yet, in America, they
have not managed to convince a large segment of the population about the
most important and fundamental fact of biology.

If information doesn't change people's minds - what does?  Or, at
least, what causes people to have the beliefs that they have?  This is
where Bryan's important work comes in.  Understanding these sorts of
questions will give us a much better understanding of social change.

Alex 



Gray, Lynn wrote:
 
 The implication that those who believe in the historical accuracy of the
 Bible are ignorant was inappropriate, Alex.
 
 Lynn
 
 -Original Message-
 From: Alex Tabarrok [mailto:[EMAIL PROTECTED]]
 Sent: Wednesday, July 17, 2002 11:30 AM
 To: [EMAIL PROTECTED]
 Subject: Re: Republican Reversal
 
  Yes, I believe that the majority of the American public supports
 farm subsidies.  The rational ignorance assumption fails to explain this
 - it's not like the information that governments spends billions on the
 farmers is hard to find.
 
 Some combination of Bryan's rational irrationality and just plain
 irrationality explains the results much better.
 
 Forty four percent of the American public thinks that  God created
 human beings pretty much in their present form at one time within the
 last 10,000 years or so. (November 1997, Gallup Poll) so why should we
 be surprised that many Americans also support farm subsidies?
 
 Alex
 --
 Dr. Alexander Tabarrok
 Vice President and Director of Research
 The Independent Institute
 100 Swan Way
 Oakland, CA, 94621-1428
 Tel. 510-632-1366, FAX: 510-568-6040
 Email: [EMAIL PROTECTED]

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Dr. Alexander Tabarrok
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The Independent Institute
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Re: Republican Reversal

2002-07-17 Thread Alex Tabarrok

Fred Foldvary wrote:

...if the typical American favors subsidies to sugar farmers and
 does not mind if the domestic price is over twice the world price, and does
 not care much if candy-making jobs are moving to Canada, why do sugar farmers
 contribute funds to candidates if the representatives would vote for the
 subsidy anyway?

The public supports farm subsidies in general.  The politicians and
special interests joust over the details.  This is a long way from
saying that government policies can be explained by rational ignorance
and/or rent seeking.  I will certainly grant that these ideas explain
some things such as details of the tax code but if you look at the
budget the vast majority of it goes to programs that the public supports
in large numbers.

Alex

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Re: Why are the simple folk so wrong WAS Republican Reversal

2002-07-17 Thread Alex Tabarrok

Yes, this is precisely my point.

Alex

Michael Etchison wrote:

 Alex Tabarrok:
 The evidence is even stronger in other fields that information per-se
 often does not change people's minds. . . .

 If information doesn't change people's minds - what does?

 You do notice, I trust, that just as there are those, including some who
 appear to be well-educated and otherwise civilized, but who doubt that
 Darwin had the whole story, there are those -- no doubt all uncouth
 shoeless gap-toothed mouthbreathers -- who do not think that the
 prevailing economic theories are information.

 Michael

 Michael E. Etchison
 Texas Wholesale Power Report
 MLE Consulting
 www.mleconsulting.com
 1423 Jackson Road
 Kerrville, TX 78028
 (830) 895-4005





Stiglitz v. Rogoff

2002-07-09 Thread Alex Tabarrok

Ken Rogoff has written a stinging and very funny rebuke of Joe Stiglitz
and his new book.  It's not the sort of thing you see very often.

http://www.imf.org/external/np/vc/2002/070202.htm

Brad DeLong's comments on the book are also devastating.

http://www.j-bradford-delong.net/movable_type/archives/000322.html

Alex
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Firing Line

2002-07-08 Thread Alex Tabarrok

Italy's restrictions on firing employee's are so bad that a bank was
prevented from firing a money launderer and it are so entrenched that
recent attempts to reform the system have led to the assasination of the
reformers.  See Alan Krueger's piece

http://www.nytimes.com/2002/06/27/business/27SCEN.html

which I was alerted to by Kausfiles who has some other links, see entry
for Friday July 5 here

http://slate.msn.com/?id=2067592

Alex
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Re: Quantity/Bulk discounts

2002-07-07 Thread Alex Tabarrok

The industrial organization textbook by Carlton and Perloff is good on
issues of price discrimination, quantity discounts etc.

Alex
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Amusement Park Lines and Concert Tickets

2002-07-03 Thread Alex Tabarrok

  Economist's have long puzzled over why tickets for almost sure to
sell-out concerts aren't sold for more and similarly why amusement parks
don't congestion price their attractions.  

   Yet, at long last, concert promoters have started to do exactly
this.  Prime tickets for the recent Rolling Stone's concerts were sold
for $500 and more, for example, (by the promoters not scalpers).

   Also this item

http://slate.msn.com/?id=2067672

notes that amusement parks are now offering go to the front of the line
tickets (complete with bodyguard to prevent other irate consumers from
yelling at you or worse !).

I suppose one could come up with explanations for why this used to
be non-optimal but now is optimal (I await eagerly) but it seems to me
that what these and other incidents teach (such as the auctioning of
radio spectrum, for example) is that sometimes the best explanation for
why something isn't done when economics suggests that it should be done
is simply that people don't understand economics.

  Economists, in other words, have much to offer the world in new and
better ideas.  A certain amount of humility is certainly in order - so
if something doesn't fit with economic theory we should look for
explanations for why our theory could be wrong but we should also not
denigrate our knowledge by assuming that what is, is optimal.

(This theme is a prominent aspect of the book I edited, Entrepreneurial
Economics: Bright Ideas from the Dismal science 

www.EntrepreneurialEconomics.org

Of course you know that since I am sure you have all bought and read the
book by now.)


Alex




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Re: Fwd: Cheap parking spaces drive up fuel prices

2002-07-02 Thread Alex Tabarrok

The news article was based on the work of Don Shoup of UCLA who is the
leading author on the free parking issue.  You can find one of his
papers, The Trouble With Minimum Parking Requirements, here

http://www.vtpi.org/shoup.pdf

this is the abstract

Urban planners typically set the minimum parking requirements for every
land use to satisfy the peak demand for free parking. As a result,
parking is free for 99 percent of automobile trips in the United States.
Minimum parking requirements increase the supply and reduce the
price–but not the cost–of parking. They bundle the cost of parking
spaces into the cost of development, and thereby increase the prices of
all the goods and services sold at the sites that offer free parking.
Cars have many external costs, but the external cost of parking in
cities may be greater than all the
other external costs combined. To prevent spillover, cities could price
on-street parking rather than require off-street parking. Compared with
minimum parking requirements, market prices can allocate parking spaces
fairly and efficiently.

Alex
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Re: double vs. single entry

2002-06-27 Thread Alex Tabarrok

Double entry accounting makes it very difficult to hide losses and
massively inflate your profits...wait, that can't be right, scratch
that.  I don't know.

Alex
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Brouwer's Puzzle Answer

2002-06-26 Thread Alex Tabarrok

Answer:  Here is an elegant solution.  Let the ascent and descent be
divided between two persons on the same day.  They must meet.


Alex
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Dr. Alexander Tabarrok
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The Independent Institute
100 Swan Way
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Brouwer's Fixed Point Theorem - Puzzle

2002-06-26 Thread Alex Tabarrok

Here is a nice application/proof of Brouwer's Theorem in one
dimension from Mark Rubinstein's page 

http://www.in-the-money.com/

which has some other nice material as well.

--
One morning, exactly at sunrise, a Buddhist monk began to climb a tall
mountain.  The narrow path, no more than a foot or two wide, spiraled
around the mountain to a glittering temple at the summit.  The monk
ascended the path at varying rates of speed, stopping many times along
the way to rest and to eat the dried fruit he carried with him.  He
reached the temple shortly before sunset.  After several days of fasting
and meditation he began his journey back along the same path, starting
at sunrise and again walking at variable speeds with many pauses along
the way.  His average speed descending was, of course, greater than his
average climbing speed.

Prove that there is a spot along the path that the monk will occupy on
both trips at precisely the same time of day.
--

   One can prove this by showing that the puzzle satisfies the
assumptions of Brouwer's Fixed Point Theorem but there is an intuitive
and satisfying answer also.  The answer can be found in Rubinstein's
page but I'll also post it in a follow up-message - but no cheating!

Alex

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Re: fantastically entertaining paper

2002-06-21 Thread Alex Tabarrok

Robin probably regrets using the word cheap in regard to entry as
this has clearly confused some people.  As Robin later pointed out he
meant cheap to mean the journal industry approximates the economic
concept of free entry (more than many other industries we all think of
as competitive).

Now, I hope that none of us would say that the market for
restaurants is not competitive because it costs about $250,000 to start
a new restaurant and therefore entry is expensive.  Yet some comments
regarding entry into the journal market make exactly this mistake.

  By the way, the journal market has exploded in recent decades with
many entrants.

 Thus, if one is going to complain about the output of the journal
market one should look at the preferences of its customers.  A parallel
I have noted in other context is that sometimes people trained in the
Buchanan style of constitutional economics think that all that is
required to get better policy is that we change the rules of the game
when in truth sometimes there is no choice but to change the preferences
of the players.

Thus when Pete says Change the nature of the way resarch is published
and presented and the research game will change within the academy. 
Well of course!  Who would deny that? :)  But the nature of the way
research is published and presented is a dependent not an independent
variable!

Alex
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Not such a fantastically entertaining paper

2002-06-20 Thread Alex Tabarrok

In addition to Robin's comments I found the motivating factor of Frey's
paper to be weak.  I take it that his main complaint is that referee's
force authors to prostitute themselves by making changes the authors
think are wrong.

 I personally have never experienced this problem and I would be
surprised if many people have, although I am willing to be enlightened. 
To be sure, I have had papers rejected for bad reasons and sometimes I
have made changes to satisfy referees that I thought were not necessary
but I have never been asked to change a conclusion or to write something
I thought was false.  In a few cases, referees have actually helped me
to improve the paper!  (Yes, this does sometimes happen!).

Now perhaps Frey is saying that the problem is that authors must
write their papers in a certain way even in order to have any hope of
getting published.  Now certainly this is true - the profession demands
a particulary style of paper especially in the top journals.  I happen
to think that much of what the profession demands is unnecessary,
boring, absurd, and counter-productive but what has this to do with the
way journals are refereed?  Almost nothing.

Alex 



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Re: Not such a fantastically entertaining paper

2002-06-20 Thread Alex Tabarrok

I said I happen to think that much of what the profession demands is
unnecessary,
boring, absurd, and counter-productive but what has this to do with the
way journals are refereed?

Pete responded Well, that is the question isn't it?

Yes, it is the question that Frey doesn't answer.

Pete writes How about lack of accountability in double-blind systems? 
How about intellectual fadism within a profession? We have a problem of
conspicous production in academics.

But where is the argument that connects lack of accountability in
double-blind systems to any of the substantive complaints we (or Frey)
have about the industry?  Do you really think that single or no-blind
would lead to more relevant economics?  If anything, double-blind does
something to break the cartel although I don't think that it changes
content much at all (i.e. it gives lesser-known people a better shot at
the big journals but they still have to do the sort of work the
profession likes).

Furthering Robin's comments recall that economists do not have an
unusual method of editing journals - practically all journals in all
countries use a similar system so its hard to argue that the system is
dominated.  About the only profession that is different is law - would
anyone care to make an argument that student edited journals are the way
to go???!


Alex


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Re: Consumer Reports on Deregulation

2002-06-13 Thread Alex Tabarrok

Bill notes that prior to deregulation In flight meals were more
substantial and more frequent. Ticket lines were shorter for coach
passengers. Major airline employees were more polite. There were lots of
give always (decks of cards, airline pins, etc.) Flight attendants with
time on their hands would strike up conversations with passengers. I
don't know that anyone has tried to quantify this...

I bet there is something in the literature but if not quantifying
quality changes would be a nice project for a bright student.  First
place that I would look is passengers per airplane, i.e. seat room.

Alex
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Re: 3 questions on Buridan's Ass

2002-05-20 Thread Alex Tabarrok

In the Austrian economics tradition the point of the argument has always
been that indifference is impossible to observe in action.  Choice
always implies ranking - thus indifference curves are verbotten.

See Bryan's SEJ article for a critique.  Note that the Austrians,
i.e. those who take this sort of position on indifference curves, have
never been able to show that the indifference curve argument leads to
false conclusions.  See again Bryan's article and, should you be
interested, my note on the preferred tax type in the Review of Austrian
Economics (v.5, #2).

The argument may be used differently in other traditions.

Alex 
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Dr. Alexander Tabarrok
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real free market environmentalism

2002-05-07 Thread Alex Tabarrok

This came across my desk today, thought others might be interested.

Alex


FREE-MARKET ECONOMY ON CORAL REEFS
 
Market forces appear to be at work on coral reefs, where fish 
that perform a cleaning service risk losing customers if they get 
sloppy. Scientists studying these fish conclude that healthy 
competition is sometimes important in ecology, helping to 
stabilize co-operation between species.

Researchers have seen a free-market economy at work in the 
interactions between cleaner wrasse and their client fish on the 
reefs of Ras Muhammad, on the Red Sea coast of Egypt. 

The cleaners can cheat in this transaction, feeding on mucus or 
even the tissues of the client instead.
 
   o   Client fish regularly visit cleaning stations where the 
   wrasse nibble parasites from their bodies.

   o   Fish were less likely to visit stations where they had 
   previously been cheated or had to wait in a queue.
 
   o   By exercising what amounts to consumer choice, the client 
   fish promote healthy competition between all the cleaning 
   stations, and this ensures good quality service.
 
Although predatory client species can attack the cleaners if they 
feel cheated, non-predatory clients are powerless to threaten 
revenge. So their arrangement would seem doomed -- cheating 
should become widespread, so long as the cleaners remove just 
enough parasites to keep clients coming back for further sessions 
when they get desperate.  But market forces keep the cleaning 
standards high.

Source: Jon Copley, Coral Reefs Operate Free-Market Economy, 
New Scientist, April 28, 2002, and Animal Behavior (vol. 63, p 
547).
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
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misc

2002-04-24 Thread Alex Tabarrok

Hi Bryan,
 Thanks for your hospitality.  I regret that we did not have the opportunity to 
speak more but time had to be allotted to the big wigs.  Most important
benefit of being at GMU I did not know before the trip?  All economist DD game - 
excellent!

Cheers

Alex




Re: misc - ignore!

2002-04-24 Thread Alex Tabarrok

I am a dunce and I have inadvertently given Bryan's secret away.  I promise, however, 
not to reveal the names of the other participants (especially if they
send me large wads of cash - you know who you are.)  My apologies to all.

Alex

Alex Tabarrok wrote:

 Hi Bryan,
  Thanks for your hospitality.  I regret that we did not have the opportunity to 
speak more but time had to be allotted to the big wigs.  Most important
 benefit of being at GMU I did not know before the trip?  All economist DD game - 
excellent!

 Cheers

 Alex




Unselfish Capitalism

2002-04-19 Thread Alex Tabarrok

This came across my desk - I thought others might be also interested.

Alex

UNSELFISH CAPITALISM

Capitalism has been criticized for centuries for its single-
minded pursuit of self-interest.  It is often claimed that 
pastoral and agrarian societies foster social cooperation and 
sharing, while industrial societies promote materialism and 
greed.

But scientists who actually tested these assertions found that 
people raised in market economies are more trusting and willing 
to share than those raised in most preindustrial cultures.

Over two years, 11 anthropologists and an economist conducted 
experiments in diverse cultures, including three hunting-and-
foraging societies, six slash-and-burn agricultural communities, 
four nomadic-herding groups and two farm villages.

People from these groups played the same economic games that had 
been extensively tested on college students in developed 
countries.  In an ultimatum game, a player divided a sum of 
money (or cigarettes or other valuable goods) between himself an 
anonymous partner, who could accept the division -- in which case 
both received that amount -- or reject it, in which case neither 
got anything.  The results reveal concepts of fairness and the 
degree of trust.

   o   Peruvian forest dwellers, for example, usually offered 15 
   percent to 25 percent of the pot -- and responders agreed 
   to nearly all offers, even below 15 percent.

   o   Hazda hunter-gatherers made similarly low offers, but 
   responders usually rejected them.

   o   In contrast, American undergraduates usually tender 30 
   percent to 40 percent of the total, and most responders 
   reject anything below 20 percent.

   o   And in another trust game, people in a rural Missouri 
   town usually ended up with equal shares.

Industrialized nations promote a stronger ethic of fairness than 
do many of the traditional societies, says anthropologist Joseph 
Henrich.   And, suggests economist Colin Camerer, The 
opportunity to trade in economic markets may create social 
expectations about sharing and trust that exist over and above 
individual decisions and motivations

Source: Bruce Bower, A Fair Share of the Pie, Science News, 
February 16, 2002.

-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
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Re: Grade Inflation

2002-04-15 Thread Alex Tabarrok

   The real problem with grade inflation is not the reduction in
information that might be used by employers.  As with regular inflation,
the real problem is that grade inflation is not uniform - some
departments and some professors are more subject to inflation than
others.  In particular, grade inflation tends to be much worse the
softer the science: grades are almost always significantly higher in
art, cultural anthropology, and english than in math, physics and
economics, for example.  And within departments it is well known that
some professors grade easier than others.

 The effect of this is to draw students away from math, science and
economics and towards the softer social sciences.  Similarly, within
departments students are drawn away from harder graders and towards
softer graders.  Budgets go where students go!  Thus grade inflation
causes a *misallocation of resources* (measured in student time or in
budgets.)

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
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Re: Grade Inflation

2002-04-15 Thread Alex Tabarrok

   In response to Fabio's comments:  If you just start by saying what's
the optimal number of math or english PhDs then obviously you are going
to get nowhere.  A better procedure, however, is to say that the current
situation is non-optimal if it is based upon arbitrary factors.

   In particular, the distribution of students and budgets can't be
optimal if it is based on the fact that some professors and disciplines
arbitrarily grade easier than other professors and disciplines.  Thus,
rather than say I think there should be more math and science degrees
I say I think the choice of what degree to puruse should not be based
on an arbitrary grade inflation factor. 

Alex

P.S.  I very much doubt that such a system is second-best optimal.  Here
is a test for all such arguments (in this and in other contexts).  If
all disciplines and professors graded on a common scale would anyone
argue in *favor* of grade inflation in English?  I seriously doubt it -
thus such ex-post rationalizations should be given little weight (even -
perhaps especially! - if they come from exceedingly clever people like
Fabio). 

P.P.S.  I was not reading the NYTimes this morning but I did find what
Fabio was referring to, an article by Valen Johnson.  Available here:

http://www.nytimes.com/2002/04/14/edlife/14ED-VIEW.html

Several years ago in Statistical Science, Johnson proposed a grading
scheme that would overcome the grade inflation problem.  You can find
the paper on his home page, but to make a long story short the essential
idea is to downweight an A from a professor/discipline that gives all As
(and thus provides little discriminating information) and to upweigh an
A from a professor/discipline where there are As and Cs.
   
I was enthusiastic about Johnson's proposal when I brought it up on
this list some time ago.  There was some discussion then, I think Robin
had some critiques - check the archives.

Alex
  


-- 
Dr. Alexander Tabarrok
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The Independent Institute
100 Swan Way
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Tel. 510-632-1366, FAX: 510-568-6040
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Re: Grade Inflation

2002-04-11 Thread Alex Tabarrok

Jason wrote This could (and in my observation does) mean that
non-academics jobs are looking for other characteristics that are hard
to test for- good people skills  and leadership ability.

   Yes, as I tell my children, Son, don't worry about those grades -
even a C student can become President one day.

Alex 
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Dr. Alexander Tabarrok
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The Independent Institute
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Re: economic history question

2002-04-10 Thread Alex Tabarrok

Most observers have always been very surprised that there never was a
big demand for socialism in the United States - even at the height of
the depression.  The New Deal was very much driven by the Executive
branch not by Congress - thus I think things could have been quite
different had we not had FDR.

Alex

P.S.  Note also that many of the programs of the New Deal had the effect
of increasing and lengthening unemployment thus the safety net of
unemployment insurance could be seen as more of a safety net for the New
Deal than for capitalism.
-- 
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The Independent Institute
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Re: Securities analysis

2002-04-04 Thread Alex Tabarrok

   There are actually two issues 1) Is the market efficient? and 2) Can
someone, using public information, systematically earn higher returns
than those on a suitably risk-adjusted market basket?  

 These issues are related but they are not the same.  If the market
is efficient the answer to the second question is certainly no.  If the
market is inefficient, however, it does not follow that the answer (in
practice) to the second question is yes.  Some types of inefficiencies
such as two different prices for the same good can and will be
eliminated through profitable arbitrage but when arbitrage is not
possible eliminating market inefficiencies is risky.  Even if you knew
that X was a bubble, for example, you can short the stock but you then
run the risk of the bubble flying much higher before it bursts. 
Essentially, the failure of Long Term Capital Management was precisely
this problem - right theory but they ran out of capital before they
could profit from the elimination of the inefficiency.

In addition, we must also face the fact that if the market is
inefficient due to investor irrationality it is very likely that we
(yes, you and I) and our agents are also irrational in some respects.  

Thus if we care about issue 2 then pointing to bubbles of the past
or arguing that people are irrational or greedy etc. misses the point. 
The real test of issue 2 is,  Do portfolio managers/stock picking
newsletters or other active strategies outperform a passive index
strategy?  And the answer to this question is a resounding NO.  Taken as
a group and taking into account transaction costs the active strategies
actually *underperform* the indexing strategy.  I don't know anyone who
disputes this finding - note that whether this is because the market is
efficient or portfolio managers are just as irrational as everyone else
is open to question but not relevant to question 2.

 At any given time, of course, some portfolio managers beat the
market but, again as a group, no more than you would expect by chance. 
Of course there are a few outliers, Warren Buffet and Templeton, for
example.  It's quite reasonable to mark these down as a chance but my
own view is that there are a few geniuses out there and that Buffet is
to stock picking what Michael Jordan was to basketball.  I no more think
that I could duplicate what Buffet does than I could duplicate what
Michael Jordan does even if Jordan wrote a book explaining how he plays
the game.  (Indeed, careful observers of Buffet find that how his
investing decisions cannot be explained soley by reference to his rules
of investing.)  

Alex   




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Dr. Alexander Tabarrok
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The Independent Institute
100 Swan Way
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Tel. 510-632-1366, FAX: 510-568-6040
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Re: Securities exchanges shutdowns

2002-04-02 Thread Alex Tabarrok

Robin Hanson wrote:
 
 Alex Tabarrok wrote:
 
  Yes, in 1968 the exchange closed on Wednesday's in order to deal with
  backlog.  French and Roll (1986) find that variance of stock returns on
  days when the market is closed is much lower than on days when the
  market is open which suggests that trading itself, rather than say
  information transmission, generates variance.
 
 Couldn't we interpret this as trading *creating* information, which is then
 transmitted?

   What's the value of this created information?  In other words, what
sort of information could be created solely by trading that we would
still want incorporated into market prices?  i.e. does this trading
information help the market to achieve efficiency?  It's difficult to
come up with a story where this is true.  Markets are supposed to reveal
information that is already out there.


Alex
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Dr. Alexander Tabarrok
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The Independent Institute
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Margarine - silly business regulations

2002-04-01 Thread Alex Tabarrok

Almost from the time it was invented margarine came under attack from
butter manufacturers and farmers.  In the late 1880s there were even
laws requiring margarine to be colored pink - but these were overturned
by the Supreme Court.  Bans on yellow margarine, however, were upheld. 
There were also Federal and state taxes that varied by the color of the
margarine!  This is what accounted for the packets to allow
home-coloring.  The Federal government didn't get out of regulating
margine extensively until sometime around 1950.  The last state to
repeal restrictions on margin (in 1967) was .. you guessed
it!Wisconsin.

Alex
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Dr. Alexander Tabarrok
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The Independent Institute
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Re: Margarine - silly business regulations

2002-04-01 Thread Alex Tabarrok

Art Woolf is having trouble posting to the list but sent me an email
noting that there was a recent article in the JEH on the regulation of
margarine.  I found the reference with a quick search it's

Dupre, Ruth. 1999. 'If It's Yellow, It Must Be Butter:'  Margarine
Regulation in North America Since 1886, Journal of Economic History
59(2): 353-71. 

Alex

 

-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
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Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Securities exchanges shutdowns

2002-04-01 Thread Alex Tabarrok

Yes, in 1968 the exchange closed on Wednesday's in order to deal with
backlog.  French and Roll (1986) find that variance of stock returns on
days when the market is closed is much lower than on days when the
market is open which suggests that trading itself, rather than say
information transmission, generates variance.

See


French, Kenneth and Richard Roll. 1986. Stock Price Variances: The
Arrival of
Information and the Reaction of Traders, Journal of Financial Economics,
17,
September, pp. 5-26.

Alex
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Dr. Alexander Tabarrok
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The Independent Institute
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Re: long-lasting cars

2002-03-28 Thread Alex Tabarrok

Gustavo wrote Let's assume for a minute that: (A1) It costs the
manufacturer the same $8 000 to produce 1 long-lived car as it costs
them to produce 1 short-lived car.
(A2)...Since the manufacturers' profit per unit is more or less
proportional to the
cost of production (call this assumption A3), (P1) when production
becomes very cheap, the manufacturers' profits can get smaller, even if
the number of sales is increasedDoes this make sense?
---

   No, it doesn't.  Consider first the easier case of competition.  In a
competitive situation, as the auto market surely is, an auto maker with
access to such technology would certainly use it to get a jump on the
competition and grab market share.  The fact that the long run
implications of this would be to reduce total auto maker revenues is
irrelevant in a competitive situation (and a common occurence).

Now consider the monopoly situation.  At first this seems like a
better candidate but it isn't for the reasons given by Landsburg in John
Hull's post.  Think about it this way.  Suppose that all sales are
up-front so you can either buy 1 long lived car today which will last 20
years or you can buy 2 short lived cars today each of which will last 10
years (the second car will be in storage for the first 10 years).  Even
assume that consumers are indifferent between these two purchases - say
they are willing to pay $20,000 either way.  It's still the case that
profits are much higher selling the long lived car = 20,000-8,000=12,000
rather than the two short lived cars =20,000-16,000=4,000.


Alex 



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Dr. Alexander Tabarrok
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The Independent Institute
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Airlines Again

2002-03-05 Thread Alex Tabarrok

   Fabio mentioned the long string of unprofitable airlines in an
earlier post.  The Feb. 17, 2002 NYTimes Magazine had a good piece by
Rich Lowenstein this.  Among others, the following points caught my eye:

One reason the major airlines find themselves in this predicament is
that they use huge amounts of *fixed* capital - wide-body jets go for
$100 million each and can't be readily liquidated.  They also depend on
a skilled labor force.  The two problems can exacerbate each other. 
Since airlines cannot afford to let planes sit idle, they can ill suffer
strikes.  That makes their unions unusually powerful. ... [Comparison
with other industries with high fixed costs like steel but replaceable
workers or skilled works but little fixed capital as with
Microsoft]...Airline pilots (and mechanics too) are not so replaceable. 
Stringent safety codes strengthen unions further by introducing
stickiness into the rules that govern hiring and firing...

An interested related point made later is that Pilots make good money
but lack the free agency of other professionals.  If a United pilot
moves to Delta or American, he loses his seniority and most of his pay. 
This makes him utterly dependent on the union - and makes the union a
potent force.

Alex

P.S. A recent piece in Wired (Mar 2002 issue) on the much lower costs of
deregulated and de-unionized airlines in Europe is a good companion
piece (not online yet but later this month will be available at
http://www.wired.com/wired/archive/10.03/).

Alex
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Dr. Alexander Tabarrok
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The Independent Institute
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Re: Campaign finance changes

2002-03-04 Thread Alex Tabarrok

(In response to Gustavo)

The real problem is not how to get money out of politics but how to get
politics out of money.

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
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Re: Campaign finance changes

2002-03-03 Thread Alex Tabarrok

Campaign financing regulations inevitably protect incumbents -
incumbents already have huge advantages so challengers need relatively
more money to compete, thus campaign finance laws raise rival's costs.

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
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Tel. 510-632-1366, FAX: 510-568-6040
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Re: Economics of rank vs. Economics of the most money

2002-02-20 Thread Alex Tabarrok

Concerning Robin's point about the details of the relative coonsumption
models, Steven Landsburg made the same point in a review of one of
Frank's books in The Independent Review

http://www.independent.org/tii/content/pubs/review/TIR42Landsberg.html

Here are a few excerpts

But it’s hard to refute Frank’s story decisively, because his story
keeps changing.  First he says we want to consume more than our
neighbors; then before long he says we want to earn more income than our
neighbors. Those are different things, but
Frank flits from one to the other as if they were the same.
As for why we care about relative consumption (or relative income) in
the first place, Frank is equally slippery. Are we psychologically
hard-wired to care about relative position for its own sake? Or do we
care about relative position because it helps us compete for goods—such
as mates—that are distributed outside the economic marketplace? Either
hypothesis could be the germ of a respectable theory, and each of
them probably contains an element of truth, but they are surely distinct
hypotheses,
with distinct implications; and it’s not always clear which one Frank
has in mind.
Frank is at his most incoherent when he asks the question of “Why
now?”...



(I actually think this is a little hard on Frank who is working on new
territory.  Perhaps a kinder response would be that models need to be
carefuly distinguished and appropriately tested.)

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Organ shortage - a tragedy of the commons

2002-02-18 Thread Alex Tabarrok

Two notes on organ donation the second more economic than the first.

Organ donation is not prohibited by Hinduism.  There are in fact a
number of Hindu stories that lend support to organ donation.

Economists typically see the organ donation issue as a problem of price
controls (price fixed at zero creating a shortage) but this is not the
only economic perspective.  In a paper in my book Entrepreneurial
Economics: Bright Ideas from the Dismal Science
(www.EntrepreneurialEconomics.org) I suggest that the problem can also
be seen as a tragedy of the commons.  Today, by law, everyone has equal
access to an organ should they need one - i.e. the supply of organs is
treated as a commons and the commons is therefore ill-maintained and
stocked.  Now what is the solution to a commons problem? - privatize
it.  I suggest that the only people who should be entitled to an organ
are those who sign their organ donor cards - the supply of organs thus
becomes the property of the organ donor card signatories.  Alternatively
conceived, signing your organ donor card is the premium one pays for a
policy that offers insurance in case one of your organs goes bad.  Some
advantages of this no give - no take rule is that most people think it
is moral and fair - unlike the reaction of most people to buying and
selling organs.  In addition, the policy will increase the supply of
organs because there is now an incentive to sign your organ donor card. 
Indeed the policy is essentially as efficient as pricing organs.
 Some quick responses to obvious objections - children wouldn't be
restricted until they had a choice to sign their cards at say age 16.  A
1 year moratorium would cover last minute signers.  Medical criteria
would continue to play a role and rather than literally forbidding
non-signers to get an organ you could give points to those who had
previously signed their organ donor cards that moved them up the list.

Some other elements are covered in my paper.  Entrepreneurial
Economics also includes a paper by Barnett, Blair and Kaserman that is
one of the best pieces on pricing organs.


Alex Tabarrok
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Organ shortage - a tragedy of the commons

2002-02-18 Thread Alex Tabarrok

The organ shortage issue can be broken down and analyzed from a
number of different perspectives.  My view is that the key issue is
*not* the supply of organs per-se but rather the *supply of people who
sign their organ donor cards*.  Take care of this and the other problems
are of second-order.  Most people express strong support for organ
donation but nevertheless do not sign their organ donor cards.  I
believe that a small incentive at the organ donor signing stage could
alleviate the organ-shortage problem.  The no-give, no-take system
provides such an incentive and at the same time changes how people think
of the supply of organs.  In the no-give no-take system those who sign
their organ donor cards would belong to a special club the club of
people that get special preference in receiving organs.  Signing your
organ donor card is the ticket into the club.  

   Now if we think of the total value of organs to recipients and the
total costs of signing the organ donor card the no-give, no-take rule is
essentially efficient in maximizing net revenues.

I qualify by saying essentially for the following reason.  The
plan is about increasing the incentive to sign the organ donor card and
not about allocating organs.  Thus, suppose a rich person is willing to
pay someone higher up on the list to trade places with them or is
willing to pay someone near death to get their organs.  In a technical
sense, allowing this would be an increase in efficiency that would be
allowed for by a pure market in organs.  Most people, however, find this
distasteful and the arguments for efficiency as a normative guide are,
in this context, quite weak.  Thus, I am not that bothered by the
failure of the no-give, no-take rule to be efficient in this context. 
The same thing goes for inducing people with especially good organs to
sign - I think this is a second (or less) order problem.

An analogy is to the tragedy of the commons.  You can get efficient
results by parceling out a commons in individually owned freehold plots
but this is not necessary.  Ostrom and others have shown that property
held in-common areas can be well maintained if there are
incentive/exclusion systems so that only people who do not abuse and/or
contribute to the commons get access to the commons.  Villages, for
example, can maintain highly functioning commons without resort to
individual ownership if incentive/exclusion systems exist.  The point
here is that even if you don't get 100% efficiency collective ownership
with incentive/exclusion systems need not be a tragedy. 

Alex


-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Organ donation

2002-02-17 Thread Alex Tabarrok

Every major religion supports organ donation.

Alex




Restaurants Again

2002-02-10 Thread Alex Tabarrok

Several weeks ago Fabio pointed out a novel reason why restaurants might choose
long lines intead of higher prices - the longer lines induce people in the
restaurant to eat faster.  This is an interesting suggestion but it misses
quite a bit of the phenomena because it applies (presumably) only to physical,
on-premises waiting.  Many fine restaurants, however, have long waiting times
to get a reservation.  The French Laundry, for example, is perhaps the best
restaurant in America and the wait to get in is 2 months or more! (2 months for
a normal day - much longer if you want to book for Valentines or something like
that.)  This sort of waiting seems much more amenable to a Becker type
explanation involving non-linearities and prestige factors.

Alex Tabarrok





Re: Life Expectancy and Immigration

2002-01-28 Thread Alex Tabarrok

You can find lots of data on life-expectancy and health broken down by
age, race, hispanic origin and much else at tbe National Center for
Health Statistics

http://www.cdc.gov/nchs/about.htm

after a quick search, however, I couldn't find anything on country of
birth, let alone age of immigration per se.

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Spam: Legal, economic or technical problem?

2002-01-26 Thread Alex Tabarrok

There are some good potential economic mechanisms using micro-payments.  If it
costs even a nickel to send an email that would greatly reduce spam.  Money is
not even necessary - suppose that when an email was sent a response was sent
back saying in order to accept this email you must factor this number and send
me back the factors - if the factorization took even a few micro-seconds that
would not be an issue for non-spammers but would shut spammers down.

Alex Tabarrok




Re: Photographers

2002-01-23 Thread Alex Tabarrok

Sure, if you take your own pictures you get the negatives.  But if you
hire a profesional photographer for say a wedding or if you have a
portrait done they are insistent on keeping the negatives.

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Photographers

2002-01-23 Thread Alex Tabarrok

Tbe adverse selection story, really a price discrimination story,
assumes monopoly power in the photography market.  But there is free
entry into photography and hundreds of photographers easily available in
the phone book thus price should fall to MC which implies that
photographers should be willing to give up the negatives for a penny.

John-Charles's answer (keeping the negative is a form of quality
control necessary for the photographer to keep and maintain a good
reputation) is more promising.   It could be the case that the cost of
the potential loss in reputation to the photographer is worth more than
the negatives to the buyer and thus no trade is made.  The main question
I would have is whether quality of print versus quality of photograph is
that difficult to ascertain - but I'm willing to go with this for now.

JC's answer, by the way, is consistent with price being at marginal
cost.  Thus an important test suggests itself - when the photographer
has your negative is price above marginal cost for developing a print -
i.e. is the price higher than if you had the negative and went
elsewhere?  I had always assumed that it was but JCs answer suggests I
should investigate further.

Alex   



-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Only Economists Tell the Truth?

2002-01-11 Thread Alex Tabarrok

   I think Robin exaggerates the extent to which social science would be
easier if we could just ask people why they do things.  To be sure,
there is a tradition in economics that survey results about intentions
and ideas (as opposed to age and income!) are not to be trusted. I agree
this tradition is overdone and am happy to see work such as Bewley's on
why firms hold wages fixed etc.  Much of economics, however, concerns
effects which are no part of anyone's intention - hence Adam Smith's
metaphor of the *invisible* hand.  For macro effects of micro behavior
there is no point asking people what they intend.  No firm intends to
push price to marginal cost, no firm intends to use inputs in just such
a way that social value of those resources in alternative uses is
minimized, no investor intends to impart his knowledge into prices - but
this is what happens. 

Alex 
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Survivor - game theory

2002-01-11 Thread Alex Tabarrok

Anyone see survivor last night?  When asked to pick a number between 1
and 1000 (presumably the closest number to the one in the questioner's
head would win her vote) the first contestant chose 3 and the second
chose 886!  Incredibly poor strategy on both contestants part especially
when a million dollars was at stake.  

 (For students and others on the list wondering what the correct
strategy is note that this game is the same as the median voter theorem
or Hotelling's two firm location problem.  If the first person chose 3
the second person should have chosen 4 thereby winning if the number was
4 or more.  Thus, what should the first person have chosen?)

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Only Economists Tell the Truth?

2002-01-11 Thread Alex Tabarrok

 Here is another reason, that just occured to me, why survey
questions may not help us as much as we would like even on those
questions where they are relevant.  In economics we are typically
interested in what matters at the margin and this may be difficult to
discover in a survey question.
Take Robin's question about why people go to school.  The answer
could truthfully be because my friends are going/because my father said
I should etc. while at the same time it could be also be true that an
increase in the wage rate reduces the number of people going to school. 
It seems to me that this may be difficult to pick up in survey questions
though I suppose we could ask questions like - What factors would raise
the probability that you would attend/not attend school?  - this sort of
counter-factual, however, is a more difficult question to answer than
the factual about why you did what you did but the answer to the latter
question is an average while we are interested in the marginal.

Alex


P.S.  Yes, economists are inconsistent.


-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



odds and terrorism

2001-11-28 Thread Alex Tabarrok

Here is a nice article on the odds of various events and terrorist
related odds.  It's familiar material to this audience but might make a
good discussion item in a class.

Best

Alex


http://www.washingtonpost.com/wp-dyn/articles/A7812-2001Nov23.html
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Austrians and markets

2001-11-26 Thread Alex Tabarrok

Hello?  If the history of the twentieth century is not an undeniable
argument against the hypothesis that the market for social science is
not efficient then what is?

Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Austrians and markets

2001-11-26 Thread Alex Tabarrok

Sorry, double negatives confuse me.  I mean of course that the history of
the twentieth century (Marxist-Leinism, communism, fascism etc.) is an
argument against the efficiency of the market in social science.

alex

Alex Tabarrok wrote:

 Hello?  If the history of the twentieth century is not an undeniable
 argument against the hypothesis that the market for social science is
 not efficient then what is?

 Alex
 --
 Dr. Alexander Tabarrok
 Vice President and Director of Research
 The Independent Institute
 100 Swan Way
 Oakland, CA, 94621-1428
 Tel. 510-632-1366, FAX: 510-568-6040
 Email: [EMAIL PROTECTED]




Chronicle on Levy

2001-11-15 Thread Alex Tabarrok

There is a nice article here from the Chronicle of Education on David
Levy's important work on the classical economists, the poets and
slavery.  The link may not last forever so get it while its hot.

Alex

http://chronicle.com/free/v48/i12/12a01601.htm
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Taliban Tipping Game

2001-11-15 Thread Alex Tabarrok

Here is a chunk of William Saletan's analysis from Slate,  It is very
supportive of Fabio's tipping interpretation.

http://slate.msn.com/?id=2058705

Alex

In the north, the Taliban's enemies failed to advance. In the south,
they failed to speak up. The American press suggested that the war had
bogged down, that the United States had underestimated the Taliban,
and that the U.S.-led coalition was falling apart. Complaints of
futility and pointless bloodshed grew into an outcry to halt the
bombing. 

Then, last Friday, Mazar-i-Sharif fell. The Taliban's aura was
punctured. In accelerating succession, other cities fell. War can't move
that fast. It takes days to move your own tanks and troops, much less to
push back the enemy's. But even in Afghanistan, the information age has
arrived. What traveled from city to city in minutes wasn't the armies of
the Northern Alliance, but the news of the Taliban's defeat. Civilians
and Taliban soldiers who had resented the regime lost their fear of it.
Those who had supported the regime lost their confidence in it. Taliban
armies didn't lose their cities in battle; they defected or fled. Each
flight or defection, in turn, provoked others. Sell, sell, sell. 

Now the rout has turned south. Pashtun warlords who refused to stand up
to the Taliban a week ago are rushing to claim pieces of its carcass.
Some Taliban troops fleeing cities are being wiped out by U.S. bombers.
Others are regrouping in the mountains, forgetting that they lack the
supply lines and popular support to win the kind of guerrilla war they
waged against the Soviets. The rest, according to today's New York Times
and Washington Post, are fading away, disappearing, vanishing,
dissipating, becoming phantoms, and returning to their home
villages. 

Morale matters. The army that loses self-confidence and the confidence
of its people loses the war. 

-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: subsidies for renewable energies and the environment

2001-11-12 Thread Alex Tabarrok


I've often made the point that the main benefit of subsidies for
renewable energy sources is to increase price competition on OPEC
thereby resulting in lower oil prices and greater oil consumption.  I
like the irony.

More generally, the economics of subsidizing a substitute for a
monopolized product that you want *less of* is an excellent topic for
research.  The model I had in mind above is one where OPEC limit prices
at the profit point of its substitutes.  There are other ways of
modeling how OPEC behaves, however, and its not obvious that prices fall
under all of these. 

Taking for granted the wisdom of trying to increase renewable energy
sources (I'm skeptical), I suspect that for a variety of reasons taxing
the monopolized product is a much superior strategy to subsidizing the
substitute.  

Alex


-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Re: Studying Economics

2001-11-02 Thread Alex Tabarrok


Gray, Lynn wrote:
 
 But in terms of getting into a high ranking grad school isn't going to the
 right undergraduate institution important?
 
 Lynn


You can get into a top graduate school from any decent undergraduate
program in the country so long as your grades are superb and you have
prepared yourself well for the intense math of the first several years. 
Undergraduate education is very similar everywhere - especially in the
standard math classes that you will want to take to prepare for grad
school (see earlier posts). 

I taught at Ball State University for a number of years which is far
from the best school in Indiana let alone anywhere else.  Yet, we were
able to send students to Chicago when those students had prepared
appropriately.  Of course, if you go to an undergraduate institution
like Ball State and you want to go to Chicago then you had better excel.


Alex  
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



FAQ: Where Should I Go to Graduate School?

2001-10-31 Thread Alex Tabarrok

The question, Where should I go to Graduate School? is a common one on
the armchair list.  In May of 2000, before the list was archived, there
was an extensive discussion of this question under the subject heading
Graduate Studies.  There were some very thoughtful responses that
deserve to be archived and remembered for use by others.  I have
collected in this email what I thought were the best responses.  My own
response was one of the earliest and begins next.

Alex

-


The most important things to know about graduate school in economics
are a) you are better off getting an undergraduate degree in math than
in economics and b) holding all else equal, it is much easier getting a
job coming out of a top-ten graduate program than it is coming out of a
non top-ten program.

Thus, if you want to go to graduate school take at a minimum the
following courses: multivariate calculus, linear algebra, statistics,
and if it is offered econometrics and math econ.  Other courses to think
about are real analysis and mathematical statistics.  If you cannot get
very high grades in these courses sit in on them and do all the
homework.

There are a few departments, such as George Mason, where I attended,
where it is possible to get a degree without knowing as much math as at
other schools.  But this is not such a comfort when you realize that to
participate in the economics conversation you must be able to at least
*read* math intensive journal articles (if you are very smart you do not
necessarily have to be able to write a lot of math but you must be able
to read it.)  Thus you still have to learn math if you go to Mason but
there are fewer people there to teach it to you than elsewhere.  (I got
most of my math econ training by taking courses at the University of
Virginia.)  Mason is also becoming more math intensive than it has in
the past (a good thing in my view.)

 Note that Mason once had an edge in public choice analysis but
public choice has now become mainstream and there are other departments
such as Harvard and Chicago where a lot of public choice type work is
being done.  It would not be unusual to do such work in any major econ
department.

If your math is pretty good and your grades are good enough to
get into a top twenty five program then that is where you should go. 
Failing
that Mason is a reasonable choice especially if you are interested in
teaching economics at the undergraduate level, going into policy work,
or working for government.

Alex Tabarrok   
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]

--

Listen to Alex, he speaks wisely.  My own two cents:

If you are able to go to either Mason or a Top-20 program, your choice
depends critically on time preference.  You will have more fun at Mason
while in graduate school, but your life after graduate school will be
harder, especially if you want an academic job.  Life is a tradeoff, sad
but true.

On the other hand, if the unpleasantness of a Top-20 program means you
would never finish anyway, coming to Mason is a free lunch of sorts. 
Better to finish at a place you like than be a career student at a place
you hate.
-- 
Prof. Bryan Caplan 
Department of Economics  George Mason University
http://www.bcaplan.com  [EMAIL PROTECTED] 


-

I'm not an economist, but I've taken graduate courses in economics
at Berkeley and Chicago and many of my personal friends are economists
and graduate students in the field. Here is my advice:

1) If you want an academic career, the higher ranked the school the
better. Unorthodox schools like GMU may have interesting curricula, but
little social capital. Academic careers are very often prestige driven.
Jobs at top schools are often acquired through social networks 
*in addition* to a publication record.

2) Higher ranked schools tend to be places with big research projects.
It is easier to get skills while working in research groups. This leads
to publications and the accumulation of skills - empirical analysis,
writing for publication, etc.

3) If you want a career outside of academia, the school rank matters
less. They won't care if you know what a fixed point theorem is. They
will
care that you have some basic skills which can be acquired at most
places.

4) The more math you learn, the better you will feel. I'd recommend
knowing some real analysis, linear algebra, multivariable calculus
and if you school teaches it, some measure theory. In statistics,
you should understand classical hypothesis testing, OLS and
some of its variants. It might help to learn assorted applied
math like linear programming or some basic differential equations.
In short, at the top programs you should have the background of
a strong math major at a solid undergraduate school.

5) Only go to a less prestigious

Re: Tax with positive growth effect

2001-10-31 Thread Alex Tabarrok

   Holding spending constant, it is certainly true that some taxes are
better for growth than other taxes.  To summarize a large literature
taxes on capital tend to be very bad for growth because of positive
externalities associated with capital, taxes on income are better and
something like a consumption tax is best for growth.

One of the best paper written in recent years (IMHO) is on the
subject of taxes and growth:

Ohanian, Lee and Thomas Cooley. 1997. “Postwar British Economic Growth
and the Legacy of Keynes”, Journal of Political Economy” ,
vol. 3, (105), 1997, pp. 439 – 472.


Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
Tel. 510-632-1366, FAX: 510-568-6040
Email: [EMAIL PROTECTED]



Urban Planning

2001-10-26 Thread Alex Tabarrok

Brian,

 The first idea that Since they won't be living in the places more
than 5 or 10 years they don't care if the place is ugly to most people
or shoddily constructed.  This leaves the rest of the population with
only ugly and shoddy houses to choose from when they eventually need to
move. is complete and utter nonsense and, if an accurate representation
of what your professor said, shamefuly ignorant.

As has already been pointed out people certainly care about the resale
value of their housing and that means they implicitly care about the
value of their house even into the far future when they will not be
living in it.

This doesn't mean that no ugly or cheap (not shoddily) housing will
be built.  Sometimes it is better to build cheap and ugly than expensive
and beautiful and the market will supply appropriately.

The prisoner's dilemma idea regarding neighborhood improvement is a
real, if not overwhelmingly important problem.  The most difficult
example is where improving the neighborhood requires a concerted effort
- this is usually not in things like painting but in controlling crime,
pushing drug dealers out of houses, taking control of the neighborhood
etc. - lots of things could be said here about the slow extension of the
boundaries of good neighborhoods (gentrification), privatizing streets
(as in St. Louis), organizing neighborhood watches and crime patrols
etc.  There is no easy solution.  Perhaps the best answer is not to get
into this situation in the first place (on which see below).  But it is
certainly false to think that this is a situation in which government is
obviously superior to voluntary processes.  The fact that what kills a
neighborhood is usually lack of crime control should indicate that
clearly eneough.

On building new developments to overcome these problems see the
following recent article from The Economist. 

The Independent Institute and the University of Michigan Press will
also have a book out on these sorts of issues, both historical and
contemporary, in the new year callled The Voluntary City edited by
myself, David Beito and Peter Gordon (who is at USC).

Best

Alex

--
 
AMERICA'S NEW UTOPIAS 


Private housing associations increasingly lay down the laws that
middle-class
Americans live by. What are they doing to the country?

HEAD north out of Phoenix, Arizona, up the I-17. Drive past the signs
for Happy
Valley Road, Carefree Highway and, less auspiciously, one advising you
not to
pick up hitchhikers because you are passing a federal prison. Eventually
you
come to one for Anthem by Del Webb.

Anthem feels more like a luxury holiday resort than a town. It includes
a water
park, with Disneyesque water slides, a children's railway, hiking
trails,
tennis courts, a rock-climbing wall, two golf courses, several spotless
parks,
a supermarket mall, two churches, a school and, for those who want a
little
more security, the Anthem Country Club, a gated (and guarded) community.

Anthem, which is planned to have 12,500 homes, opened in 1999. Its
houses and
roads look spotless. One reason for this is that everybody who buys a
house in
Anthem has to follow certain covenants, conditions and restrictions
(CCGBPRs),
governing everything from the colour of your house to whether you can
put your
car on blocks outside it (you can't). Everybody in Anthem, except the
construction workers, seems to be white. 

Anthem sounds like an exclusive enclave for the rich. Far from it: homes
start
at a distinctly modest $155,000. Even the residents of the Anthem
Country Club
hardly seem posh. They tend to laugh at the rules, regarding them, like
the
long commute to Phoenix, as part of the price. Why did one young mother
come
here? Because it's safe, because there are activities, because it's,
well,
like us.

Indeed, Anthem is not bucking a trend, but joining it. In many of the
fastest-growing parts of America, development is being driven by
master-planned communities of one sort or another. In big cities half
the new
home sales are in association-managed communities, according to the
Community
Associations Institute. Altogether, some 47m people--one in six
Americans--live
in 18m homes in 230,000 communities and pay around $35 billion in fees
every
year. Around 1.25m people serve on community-association boards. 

Nowadays, whoever you are, there is probably a community planned with
you in
mind. In Nevada, a 55-acre community called Front Sight, featuring
streets with
names like Second Amendment Drive and Sense of Duty Way, is being built
for gun
enthusiasts (people who buy an acre plot get lifetime use of the 22
planned
ranges, an Uzi machinegun and a safari in Africa). In Baton Rouge,
Louisiana,
one gated community seems to have been taken over by black rap stars. In
poor
areas of Chicago, residents have set up gated communities to ward off
crime.
Though most of these places are in the west and the south, they crop up
all
over the country.

Legally 

Re: Signaling

2001-10-15 Thread Alex Tabarrok

*Warning* the following message contains shameless promotion.

Milton Friedman, Armien Alchian and William Baumol recently blurbed
a book that I edited that is forthcoming on Oxford University Press
called Entrepreneurial Economics: Bright Ideas from the Dismal Science. 
I would like to say that Friedman, Alchian, and Baumol are my friends -
I certainly like the idea that people might think they are my friends -
but in point of fact none of them would recognize me on the street, they
are just distinguished economists who know a good book when they read
one (and who were kind enough to give me some of their time and
reputation.)

I agree 100% with Bryan by the way who writes The better your names,
the the better you can
expect the book to be.! :)  

Quite seriously, there is real information in blurbs especially when
they come from people with good reputations. 

Don't worry I'll be sure to tell you more about my book when it
appears sometime early next year.  :)

Alex 

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Re: 2001 Economic Nobelists

2001-10-10 Thread Alex Tabarrok

Stiglitz would have liked to get the prize for the Modigliani-Miller
theorem but that one was already taken.

Alex
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Friedman Prize

2001-10-10 Thread Alex Tabarrok

 Speaking of prizes, Cato has just announced a biennial Milton
Friedman Prize for the Advancement of Liberty.  The award will be a cash
prize of $500,000 to one individual for significant achievement in the
advancement of liberty.  The first prize will be presented May 9, 2002.

Any predictions/wishes/thoughts?

Note by the way how far things have come since the early days of say
Mont Pelerin when there were some 8 democracies left in the world,
socialism was advancing everywhere, and people like Friedman and Hayek
were universally thought of as cranks.  Makes me optimistic.

Alex
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Re: Disaster Raises Happiness, Trust

2001-10-09 Thread Alex Tabarrok

Why not deny the empirical fact - given all we have for data is a
second-hand report about a newspaper column!  Indeed, the ease with
which the clever people on this list are able to generate explanations
that go either way seems to me to be a bad sign for evolutionary
psychology.

Alex 
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Re: Disaster Raises Happiness, Trust

2001-10-01 Thread Alex Tabarrok


Bryan Caplan wrote:
 
 A lot of Soviet citizens, similarly, (retrospectively) claimed they were
 happiest during World War II, when something like 1-out-of-8 perished!

Selection bias!

Alex
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Airlines

2001-09-26 Thread Alex Tabarrok

The President has authorized some 15 billion dollars to bail out the
airlines and now travel agents and a host of others are asking for help
also.  Question: Is there any economic defense for this sort of action? 
After all, if the demand for air travel has fallen then isn't the
optimal response to reallocate resources from the airline and related
travel industries into other industries?

Alex
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Self-financing Terrorism?

2001-09-18 Thread Alex Tabarrok

The San Francisco Chronicle reports today that there was an
unusually large number of puts placed on United and American airline
stock in the day before the terrorist attacks.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2001/09/18/MN63703.DTL


Apparently, strong-form efficient market theory sometimes holds.

Alex  

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Re: Excessive drinking

2001-09-12 Thread Alex Tabarrok

When a good is made illegal consumers react by squeezing more consumption into a 
shorter period of time in order to minimize the chances of getting caught per unit of 
pleasure.  Thus, it is a common observation that adults drink more often than 
teenagers but
in less quantity (Thus, I have a glass of wine two to three times a week.  Even binge 
teenager drinkers probably binge only once a week.)  This idea is the consumer side 
equivalent to the observation that prohibition increases the incentives of seller's to 
push
harder drugs (more dollar per oz thus reducing the chances of being caught).

Alex

Edward Lopez wrote:

 In a Forbes article last year, a professor of health at Indiana University notes 
that since the increase in the legal drinking age to 21 (1987), total amount of 
alcohol consumed dropped but the incidence of EXCESSIVE drinking increased among 
18-20 year olds.

 1. any takers on why?
 2. is a forbidden fruit argument consistent with economic rationality?

 Ed.

 Edward J. López
 Assistant Professor
 Department of Economics
 University of North Texas
 P.O. Box 311457
 Denton, TX 76203-1457
 Tel: 940.369.7005
 Fax: 940.565.4426
 NEW EMAIL: [EMAIL PROTECTED]
 Web: www.econ.unt.edu/elopez




Re: help, please

2001-09-05 Thread Alex Tabarrok

Marc,
 Look at Kelvin Lancaster's old book Consumer demand; a new
approach also do a search on econlit looking for product
characteristics and demand, you should come up with quite a bit of
recent material.  I have also seen the Dixit-Stiglitz utility function
adapted for this purpose, although it may be too restricitive for what
you want.  The literature on hedonic prices looks at how to estimate
such demands empirically.

Alex

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Argentian Monetary Economics

2001-08-27 Thread Alex Tabarrok

   A recent article in the NYTimes raises some interesting issues in
monetary economics.  (Might be fun for class discussion.)  The article
has been emailed to this list under separate title.

--

   Provincial governments in Argentina are short of pesos so they are
paying their workers in patacones which are bonds that pay-off in
dollars in one year at a 7% interest rate.  (It's somewhat unclear
whether there is a general shortage of cash, because of the withdrawal
of U.S. investment funds and sticky prices (?), or whether the issue is
that due to a recession the local governments simply have less revenues
than expenditures.)  The governments tried to borrow in pesos
internationally but failed.  Presumably they can't borrow nationally
either.  

 Can the bond scheme possibly work in this situation?  It seems
highly unlikely because someone who accepts patacones is really lending
the government money but we already noted that international and
national financial markets are not willing to lend the government
money.  At best, it seems that the patacones are really a way of
approaching a particular set of lenders, those who most need the
government but who may not be liquid.  That is, the workers who can't
find other jobs may accept the new currency and the stores that rely on
the worker's businesses may accept it because they too have few other
choices in the short run. But if the financial markets are correct it
seems that sooner or later the bonds will be repudiated (paid off at
less than par).  Thus the scheme is really a way of taxing those who
have the fewest alternatives to government employment/expenditure.

Comments?

Alex

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Re: lobbying as a public goods problem

2001-02-05 Thread Alex Tabarrok

Wei wrote "Reading Jonathan Rauch's _Government's End: Why Washington
Stopped
Working_ (http://www.amazon.com/exec/obidos/ASIN/1891620495) made me
wonder how special-interest lobbies solved the public goods problem."


See Mancur Olson's The Logic of Collective Action and The Rise and Fall
of Nations, both of which are about precisely this question and the
implications of the answer.

Alex 
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Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
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Re: Voluntary Pollution Control

2001-02-02 Thread Alex Tabarrok

Bryan,
 You don't need altruism to get a crowding-out effect if people are
initially contributing towards the public good as part of a Nash
equilibrium.  In the Nash Equilibrium people contribute to the public
good but less than the optimum amount (the case where people contribute
nothing is the limit of this model as the number of people get large. 
As this may describe pollution, the NE model may not be relevant - but
it is something to think about).  Now imagine some people have a change
in preferences that increases their demand for the public good - thus
they contribute more (they pollute less).  *What happens depends on the
preferences of everyone else for the public good.*  Since more of the
public good is being provided everyone else has an effective increase in
income.  How is this income spent?  If everyone else is satiated in the
public good then there is one-to-one crowding out.  If the public good
is normal then some of the effective increase in income will not be
converted into the private good and public good provision will increase
but less than the increase contributed by those whose preferences
changed.  If the public good is superior then there can even be an
increase in public good provision above that provided by those whose
preferences changed.

Alex

 
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
Oakland, CA, 94621-1428
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The Dismal Science

2001-01-22 Thread Alex Tabarrok

All economists ought to be aware of the true story of why economics
was named the dismal science.  It's not because of Malthus and the
population issue but rather because the classical liberal economists
thought that everyone, including blacks, were equal a proposition that
that bastard Carlyle thought was truly "dismal."

See 

http://www.econlib.org/library/Columns/LevyPeartdismal.html

for the true story.

Cheers

Alex
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Re: California Power Crisis/Mises Cycle

2001-01-18 Thread Alex Tabarrok

Fabio,
The situation in CA is, as I understand it, as follows.

Wholesale electricity was sort of deregulated (more on the sort of
later) but price caps remain at the retail level.  Currently, wholesale
electricity prices have soared and the two largest utilities PGE and
So.Cal Edison are within days of bankruptcy having lost billions of
dollars in the past couple of months.  Fearing that they won't get paid
generators don't want to sell to the two utilities which of course
excerbates the problem.  Short term problem number one, therefore, is
what to do about the bankrupt utilities.

Now why have wholesale prices soared?  A couple of reasons, CA has
built no major new generating facilities in something like a decade but
demand has increased dramatically becuase of immigration and computer
technology (producer and consumer side).  The regulations and NIMBY
problems in CA are huge.  It takes about a year to get a power plant up
and running in TX and about four years and counting to get the same
plant up and running in CA.  Second, the neanderthal governor Gray Davis
has talked about taking over the generators "statizing them?" and/or
regulating them to death so now there is a huge regulatory risk and even
fewer people are willing to build generators in CA.  Electricity can be
transported, of course, but the transmission lines are currently at
capacity so that doesn't help.

 Add to this an increase in natural gas prices (which is used to
generate electricity) and we have a crisis.  (Note that some people say
that the generators are gaming the system.  I doubt that this is a
serious aspect of the problem but even if it were it's more a
consequence of the lack of generating capacity than a cause.)

A couple of other things.  Recall that retail prices are capped so
we have the absurd situation of a shortage but little economizing at the
consumer level!

Also, and very importantly, the wholesale market "deregulation" came
with a host of conditions.  Most important of which seems to be that for
"transparency" type reasons the regulators wanted to get all the buyers
and sellers together in the "power exchange" which is a one-day-ahead
spot market.  The regulators, in other words, strongly discouraged long
term contracts and they encouraged the utilities to divest themselves of
generation capacity (the utilities went along with this willing,
however, as I understand it and they still have considerable generation
capacity left).  The main discouragement was that utilities were allowed
to buy futures but if the future price turned out to be higher than the
spot price then the regulators could retroactively charge the utilities
with being "imprudent" and fine them!  With these incentives the
utilities shied away from buying long, even though they could have
bought 8 months ago at prices ten times lower than the marginal price
today.  The result has been that the average price of a kilowatt has
risen to the marginal price, i.e. since most electricity is bought in
the spot market and the spot market price has been pushed up due to the
failure of supply to meet demand at the margin all units of electricity
have been pushed up in price.


Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
100 Swan Way
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Re: California Power Crisis/Mises Cycle

2001-01-18 Thread Alex Tabarrok

Fabio,
It's difficult to build a power plant in CA for the same that gas
prices are higher here than anywhere else (special processing and
additives are required in CA fuel) and you can't bring in a car from
another state without it passing special CA tests, i.e. CA has long been
hostile to power plants because of its strong environmental movement.

The idea of forcing the private utilities into the day-ahead power
exchange had something to do with "transparency."  I think the idea was
that if you let utilities and generators bargain themselves then they
could cut deals which would rip the consumers off either purposively or
because the regulators figured the utilities would make mistakes!  In
essence the idea of the PX was the combine a competitive exchange with
central control and oversight of all transactions, the perfect Walrasian
market.  

Don't forget also that the CA restructuring was a result of a complex
political bargain between utilities, generators, environmentalists,
consumer groups and others none of whom had creating a free market in
energy as their goal.

Alex
-- 
Dr. Alexander Tabarrok
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The Independent Institute
100 Swan Way
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USPS hires FED EX

2001-01-11 Thread Alex Tabarrok

   RE our discussion on the mails the post office has hired Fed Ex.

http://www.washingtonpost.com/wp-dyn/articles/A43459-2001Jan10.html
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Re:

2001-01-10 Thread Alex Tabarrok

  What do you mean by "gauge for" international trade?  (By the way, if
you have read Krugman, Obstfeld, Appleyard etc. you are unlikely to get
a better answer here but it will help if you make the question clearer.)

Alex
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Re: The Medieval Postal Service

2001-01-09 Thread Alex Tabarrok

  You don't have to go back that far.  The Pony Express had speeds
comparable to today's US Post Office on routes like New York to Boston
etc.  Fed. Ex. UPS etc. are also superior for packages so why wouldn't
they be superior for letters?  

Alex
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The Independent Institute
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Re: Canada

2001-01-04 Thread Alex Tabarrok

The Fraser Institute has done quite a bit of work on this subject.  See

http://www.fraserinstitute.ca/

A good place to start for leads is NCPA which collects short newspaper
articles of itnerest (not scholary papers) see www.ncpa.org.

Alex
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The Independent Institute
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Re: Pocket Change

2000-12-15 Thread Alex Tabarrok

What does this have to do with economics?  Answer: Not much.
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Re: Why not refinance when interest rates rise?

2000-12-14 Thread Alex Tabarrok

Robin,
 Note that you can't be better off "refinancing" since your payments
continue to be $7000 a year - thus consumption never rises and your
puzzle must involve an illusion!  So where is it?  Run your example in
reverse.  You borrow $70,000 at 10% paying $7000 per year forever.  The
interest rate then falls to 7%.  You thus borrow $100,000 at 7% and,
*following your logic*, you now take $70,000 of the new $100,000 and pay
off your loan giving you a savings of $30,000.  Great, but wrong!  You
owe the bank $7000 per year which at a 7% interest rate now has a NPV of
$100,000 - you therefore must give the bank $100,000 not $70,000.  No
gain.   

The key is that the NPV of the $7000 per year is $100,000 at a 7%
interest rate but only $70,000 at a 10% interest rate so *regardless* of
whether you "refinance" or not the real value of your mortgage changes
with the interest rate.  Essentially, what refinancing does in your
example is to reflect the real changes in nominal terms which otherwise
would not occur.

 What you should do when the interest rate goes up is save more -
that is the only source of gain.

Alex   



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Re: Landsburg Column

2000-11-27 Thread Alex Tabarrok

Bill,
  As I read Landsburg the Klenow-Bils idea is that if at time 1 the
rich own 100% more microwaves than the poor at a 25% higher price then
at time 2 when the poor own 100% more microwaves than at time 1 the
quality-adjusted price (unobserved) has fallen 25%.  What they need to
assume is that the quantity/quality price that poor and rich consumers
face at time 1 continues to hold between time 1 and 2.  My guess is that
the assumption requires some sort of uniform technological improvement
across the span of microwaves from low to high quality.  (Probably also
some homotheticity type assumptions about preferences).

The examples you mention show that technological improvement is not
uniform across quality types but does the tradeoff change so fast that
the cross-sectional results are uniformative?  Suppose, for example,
that you reestimate the cross sectional quantity/quality price every
five years - this is easy as there is plenty of data - then all you need
is more or less uniform technological improvement over any five year
span, which seems reasonable enough to me.


Alex


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Re: Software Patents

2000-11-17 Thread Alex Tabarrok

  I do not want to get into a debate on the morality of patents - there
is plenty of that in the Armchair archive.  On the economics here are
some notes and references written for another purpose which may be of
interest.


   Patents can *reduce* investment in RD in *theory* as well as in
practice.  There are several ways in which this can occur.  First,
consider a single firm in an industry with many firms and suppose that
the firms are competitive in the sense that patents compete with
patents, i.e. the latest technology replaces the previous technology. 
Now consider a policy which makes patents harder to get.  On the one
hand this reduces the return to RD since fewer discoveries will be
patentable but on the other any patented discover is likely to dominate
the market for a longer period of time.  That is, making a patent harder
to get reduces the probability of getting a patent but it increases the
economic life of the patent.  Recall, the idea relies on a structure in
which your patent competes with future patents.  Thus, making patents
more difficult to get reduces the probability that you will get a patent
but also reduces the probability of competition from a competitor's
future patent, conditional on you getting a patent.  It can be shown
that the second effect can dominate the first so that making patents
more difficult to get actually increases RD.

See Hunt, Robert. 1999. Patent Reform: A Mixed Blessing for the U.S.
Economy? Federal Reserve Bank of Philadelphia, Business Review. Nov/Dec.

and the same author's FRB of Phil. Working Paper.  Both available on the
net.  For the first see the link below, for the second search under
working papers at the FRB of Phil. site.

http://www.phil.frb.org/files/br/brnd99rh.pdf

Patents can also reduce innovation when one patent builds upon
another.  This is especially possible with business method patents. 
(Note the author refers to "Internet patents" while actually internet
patents are merely the most obvious example of the larger class of
"business method" patents.)  Consider why ideas such as Newton's law of
gravity are not patentable, one reason is that such ideas generate a
host of other secondary implications, ideas and inventions which would
certainly be reduced in number should the primary idea be patentable. 
Business method patents may be more like ideas than specific
inventions.  More could be said on this.

See Bessen and Maskin "Sequential Innovation, Patents and Imitation"
Working Paper available at

http://www.researchoninnovation.org/patent.pdf

and the short version at

http://ksgwww.harvard.edu/iip/econ/bessen.html

For evidence on the strategic use of patents, see the paper "The
Patent Paradox Revised: Determinants of Patenting in the US
Semiconductor industry," by Bronwyn Hall and Rosemarie Ziedonis
available on Hall's web page at

http://elsa.berkeley.edu/~bhhall/index.html

More generally, it would be interesting to think of what sort of
industries benefit from patents and what sort of industries are harmed
and why?  It's hard to see a large pharmaceutical industry existing
without some patent protection.  On the other hand there seems no reason
why semi-conductors could not exist without patent protection as they
did up until the mid 1980's (see the Hunt article).  What accounts for
these differences?  Are there any principles involved which could help
to improve the awarding of patents?  Is it really a case of all or
nothing?  What improvements to the current system might the author
recommend?  One modest suggestion comes from Robert Merges see his paper
"As Many as Six Impossible Patents before Breakfast" available at:

http://www.law.berkeley.edu:80/institutes/bclt/pubs/merges/

In addition to public policy changes the author might want to
think about market mechanisms.  A few thoughts can be found in:

"The Contractual Alternative to Patents" (with Roger E. Meiners),
International Review of Law and Economics 1 (1981), pp. 227-231.

On the issue of reform the author may also want to examine the excellent
paper by Michael Kremer

Kremer, Michael. 1998. Patent Buyouts. QJE. (Nov): 1137-1167.


Another benefit of patents is the diffusion of information.
Trade secrecy is an alternative to patents.  Thus the gains from getting
rid of patents may be less than believed if firms then invest
more in keeping their ideas secret - thus, there will still be
monopolies although not government granted monopolies.  Second, it could
even be the case that the public nature of the patent increases
information diffusion enough to make patents superior to no-patents. 
Certainly, on the margin, this idea suggests that we should patent ideas
which can be kept secret if not patented but not other processes, eg. we
should not allow a patent on one-click buying since this idea could not
be kept secret if there was no patent.


Alex
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent 

Re: More Election Statistics

2000-11-16 Thread Alex Tabarrok

Bill,
 I thought the recount that had been done so far was a machine
recount in all of the counties - thus only yesterday was the last of the
67 counties reported.  My understanding is that the hand recount in the
four counties you mention has yet to be done and may not ever be done if
Harris has her way.

Alex
-- 
Dr. Alexander Tabarrok
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The Independent Institute
100 Swan Way
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More Election Statistics

2000-11-15 Thread Alex Tabarrok

http://www.lasvegassun.com/sunbin/stories/archives/2000/nov/10/511018638.html
-- 
Dr. Alexander Tabarrok
Vice President and Director of Research
The Independent Institute
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