Truck and Barter Where Sympathy and Hedonism Collide
Monday, July 28, 2003
BY
Kevin
Truck & Barter becomes a War Room
Attention Readers: The next 3 weeks will be heaven, hell and in-between for me, so expect light posting.
First, I'm due to become a first-time father later next week (heaven)
Second, I will be taking the Ph.D. Economics field exams in Public Choice and Law & Economics on August 16th and 20th respectively (hell)
Third, I have to complete several projects from work still on my plate (purgatory)
In order to continue posting regularly for the next few weeks, I will be writing primarily about Public Choice and Law & Economics. This should provide a rather different perspective than Henry Farrell's "all markets, all the time" view of Public Choice. (He previously stated that Public Choice "is an ideology - and not all that much more than that."). The pursuit of Truth blindsided! Say it ain't so!
Public choice takes the same principles that economists use to analyze people's actions in the marketplace and applies them to people's actions in collective decision making...
[A]lthough people acting in the political marketplace have some concern for others, their main motive, whether they are voters, politicians, lobbyists, or bureaucrats, is self-interest...
[P]ublic choice economists point out that there also is such a thing as "government failure." That is, there are reasons why government intervention does not achieve the desired effect.
Bruce Springsteen seems to have beaten the scalpers this time--by flooding the NYC market with 10 shows at Giant's Stadium in July and August, instead of the originally planned 2.
But soon, they were slashing their price like used-mattress salesmen. No one would buy the ticket for face value, $57, nor for $20. Twenty minutes before showtime, Mr. White couldn't even give it away.
It was like trying to sell sand on a public beach. Scalpers and ticket-buyers quickly learned the basics of supply and demand
(See show dates here). I'm very curious how and why the decision was made to increase the number of shows, and whether the effect on the value of resale (i.e. scalped) tickets was brought into the calculation.
I don't think this glut is prevalent throughout the country, though. The Boss market in NYC and nationwide is thick enough to support a thriving ticket resale and exchange board.
I was watching weekend MSNBC when the commentator had on a guest who presumed to tell the audience whether performing specific household chores oneself is "worth it" in a strictly financial sense.
This analysis made me cringe, not just because one cannot really separate the financial from any other aspect of value, but because the methodology used by the talking head assumed that each hour of human life has equivalent potential financial value--which is untrue for most of us.
How can any economist know enough about the specific lifestyles and work habits of people to tell them whether mowing their lawn--instead of hiring the neighborhood kid--makes financial sense? Anybody who makes any decision must take the particulars of his circumstance into account. It is the particulars that will decide each and every case. No formula or methodology can remove the need for specific data.
Although this source is independent, the TV commentator sounded like a portion of this article (which is a fun read in itself, for its wild predictions of the dot com boom):
Here's the big picture: Your life is like an enterprise. And you're the chief executive... To save time, save money, or tap into someone else's expertise, you may be "outsourcing" a multitude of pesky life details, from laundry, housecleaning, groceries, gardening, taxes, and educating your children to repairing your car, planning vacations, and determining your investments. Some of these chores are admittedly more tactical than strategic, but that's a key point. You may just want the execution and strategy in the hands of specialists, regardless of the task¹s importance. Even if you sometimes have nothing better to do.
If you do a cost-benefit analysis, most of the time outsourcing chores makes sense, just as it often does in your job. True, there are more than a few exceptions...
It seems almost every economist--good and bad--make the simplification that we can value an hour's time based on some average wage, even though nobody is the average person, and even an average person cannot work more or less hours at whim. In reality every hour--hell, every minute--is different in subtle and not-so-subtle ways, depending on how we plan our days, weeks, years, and entire lives.
In a strictly financial sense, each of these hours should be valued differently (by the person who lives them). For some of them, I would require a hefty premium to work or perform household chores:
Any given hour of my time
An hour during a blizzard
An hour before my wedding
An hour while my wife is in labor
An hour on Sunday
10 PM on Sunday
3 AM on Monday
9 AM on Monday
I know that I shouldn't be too picky. The idea of such household cost-benefit analyses is to get rough estimates--or so we say. But I think that these estimates are both 1) wrong, and 2) give a poor impression of economic thinking. Choice theory, as developed by economists and others, should reflect more of the inherent difficulties in making choices, instead of whitewashing them with simplistic estimates of value.
Moral: Don't let economists tell you who should mow your lawn, or when to mow it--your wife should tell you that. If your wife is an economist, I empathize.
G.W. Bush just ordered U.S. troops
into Liberia to make sure the country doesn't implode. Last year The Economistpredicted that Liberia would be "the
world's worst place to live in 2003".
A civil war in 1989-96 destroyed much of Liberia's economy, especially the infrastructure in and
around Monrovia. Many businessmen fled the country, taking capital and expertise with them. Some
returned; many will not return. Richly endowed with water, mineral resources, forests, and a
climate favorable to agriculture, Liberia had been a producer and exporter of basic products, while
local manufacturing, mainly foreign owned, had been small in scope.
The following are key facts I've extracted from the CIA
World Factbook. About 500,000 of Liberia's 3.3 million people are supposed to live in urban Monrovia, which is the only area still controlled by the recognized government. But I don't know how many people have been dislocated during the current conflict.
The Liberian economy is still primarily agrarian (60% of GDP), and 80% of Liberians live below "the poverty line" (which is a much lower bar than the poverty line in the US). Exports consist of raw materials and cocao and coffee, sent primarily to Belgium and Germany. Imports are primarily from France, South Korea, Japan, and Singapore. They import everything.
Military expenditure was $7.8 million in FY01, which is 1.3% of GDP. I see now why the Liberian defense minister was leading his convoy of troops in SUVs instead of personnel carriers. With such a small budget to counter, outside funding of the rebels could be done entirely by private means.
Fox News showed the defense minister using a cell phone to talk to his subordinates. (Cell phones recently became available in Monrovia and Buchanan only--not in the rest of the country.)
The literacy rate in Liberia is 53.9% for men, 22.4% for women. Women have about 6 children each. About 10% of adults are HIV positive. Religion is mixed: 40% inidgenous, 40% Christian, 20% Muslim.
While most blogs bring you more or less insightful criticism, at T&B we bring you the data you could live without. Other sites with facts, figures, and opinions:
After researching the tax structure of Iraq, and finding nothing, I realized that the walk-in that informed the US of the whereabouts of Uday and Qusay will soon be a full $30 million richer--not $30 million less 33%--we're talking $30 million tax-free. If this person lived in the United States, he would have to give back about $11 million to the federal government in income taxes.
ATTENTION READERS: Does anybody out there know where I can find information on the former and planned tax structures in Iraq? All I could find was SANCTIONS AGAINST IRAQ:
COSTS OF FAILURE by researchers at the Center for Economic and Social Rights, who stated:
One reason for such openness with income data in Iraq compared to many other developing (and indeed developed) countries is that direct taxation is practically unheard of. In many other countries people are worried about disclosing their earnings lest the information gets passed on to tax authorities...
There are few taxes in Iraq, so the main part of revenues apparently came from oil and profit transfers from non-oil state enterprises...[Emphasis added]
Apparently, there was an implicit tax on farmers some time ago, who were forced to sell their product to the government at below market prices, resulting an implicit tax rate of 25%-35%.
It will be interesting to see how Iraqis respond to an entrenched bureaucracy that will tax them directly.
UPDATE: I forgot to mention Saddam's loving use of "the cruelest tax"--inflation. The inflation rate was estimated at 70% in 2002. See also this Feb ruary 19th ABC News article:
"The official figure on inflation is 900 percent since 1991," said Denis Halliday, the former assistant secretary general at the United Nations.
This again comes out to about 75% or so. However, according to this Fortune article:
During the embargo years, Iraq's inflation rate sometimes hit 1,000% annually, as Hussein simply printed more money to meet expenses.
I see why most economists love government-supplied official economic statistics: one-stop shopping makes our job so much easier--almost too easy...
My previous feature on Herbert Spencer met with some success, so I've decided to undertake a monthly examination of Spencer's short essays on business, ethics, and politics.
If you recall, H. Spencer was a strong critic of government regulation; in fact there was little about late 19th century British government policy that Spencer found hopeful. He believed in laissez-faire, but he did not believe people were angels or that markets were to be idolized; in fact, he knew people to be scoundrels and pikers and bunglers and fools.
His perception of the business world was not rose-colored. In the 5 page essay A Business Principle Spencer finds a curious inconsistency in business behavior that continues to this day:
Not unfrequently I have been astonished at the confidence with which men deliver their securities
and the control of important transactions to their legal agents. "Everybody does it," each thinks to
himself, "and I suppose I may safely do it." This unlimited trust seems the more remarkable after considering the utter absence of trust shown by the various deeds and documents left in a lawyer's hands. Each of these amounts to an elaborate profession of distrust in those with whom business-transactions have been, or are, or will be, carried on. Clauses are inserted to shut out all possibilities of evasion or perversion, and the whole is so witnessed as to insure that the specified claims and liabilities can be legally proved. Yet all these precautions having been taken, the security supposed to be gained is abandoned. Everything is placed in the legal agent's hands, trusting that he will act honestly; and this notwithstanding the fact that the repute alike of law and of lawyers is not of the highest! Surely a surprising inconsistency!
Many years ago, when on the managing committee of a club, I disgusted the secretary by remarking that in matters of administration, as in matters of business at large, the maxim should be:--Do not suppose things are going right till it is proved they are going wrong, but rather suppose they are going wrong till it is proved they are going right.
And he closes with:
While taught, and professing to believe, that the human heart is deceitful above all things and desperately
wicked, men in cases like these tacitly assume that the human heart is not at all wicked and is quite trustworthy. The rational belief lies between these extremes. It should ever be borne in mind that with
a type of human nature such as now exists, going wrong is certain to occur in course of time if there
are left any openings for going wrong, and that the only prudent course is to be ever seeking out the
openings and stopping them up.
Of course, we still trust in ways what Spencer admonished not to--with both lawyers and accountants. It's hard to see any means around this.
It seems taxpayers have been mighty successful in shifting the financing of college onto students and their parents. All this is bemoaned in the press as an "increasing cost" of attending college. The press is really concerned with who's paying the bills, instead of the real causes of the skyrocketing budgets deemed necessary to run an American-class university:
David W. Breneman, dean of the Curry School of Education at the University of Virginia, said the shift represents a largely unacknowledged national policy decision, as states react one by one to the most serious fiscal crises in decades. The effect, he and others said, is to shift the cost of higher education away from states, onto in-state students and their families.
States and the Feds cannot make costs disappear; for a long time they have been loading the burden of these costs onto taxpayers. Now that burden is getting much heavier, and politicans face the prospect of raising taxes or cutting aid to universities. Since no student actually receives a check from the government--such tuition subsidies go directly to the University--it seems easier for politicans to cut the aid and blame "rising costs" for tuition increases, rather than to raise sales or income taxes, which will fiercely bite every taxpayer, and result in them biting back.
However, there are even more sinister ways of looking at this--ways that most academics and administrators would scoff at:
University officials voiced concern that many lower- and moderate-income students now will be pushed into community colleges or out of higher education because federal financial aid and most state aid programs are not keeping pace with rising tuition. Meanwhile, the job market for young adults is dismal, and more students need to work to afford college.
The shift towards less expensive schools is completely expected by students of Econ 101. However, I had never before heard such loud concern from Universities over the inferior quality of education at community colleges--that is, until it appeared to Universities that potential students will shop around based on price, and might actually purchase educational services at a discount.
As far as more (or a larger percentage of) students needing to work to afford college, the data is hard to find and compile, and I don't yet have a time series.
But I have read that "Work is the chosen financing method for the majority of students. Four-fifths of all undergraduates nationwide worked while enrolled in school during the 1999-2000 Academic Year (AY), and nearly 40 percent worked full-time." [See this].
However, according to Table 5.2 of the Profile of Undergraduates in U.S. Postsecondary Institutions: 1999-2000, published by the National Center for Education Statistics, 66.6% of all undergraduates who worked full time in 1999-2000 think of themselves as "Employees Enrolled in School" instead of "Students Working to Meet Expenses".
In a post below I wrote that I would like to see movie theatres charge varying amounts for viewing different films, depending on quality and demand, as is done for live performances.
In yesterday's New York Times Arts section, David Leonhardt investigates the growing phenomenon of price diversity in theatres:
But tucked in their pockets or folded in their hands, their tickets tell a different story, one that many producers would like to keep somewhat quiet. Sitting just feet from one another, sometimes in the same row, are theatergoers who have paid dizzyingly varied prices for their seats.
...
This revolution in variable pricing has changed the business of Broadway. Outside of a few well-known discount sources, people long paid the same price for the same seats. But now the purchase of a theater ticket has come to resemble the purchase of an airline ticket. For complete control -- the ability to choose your seat and the date you sit there -- you will probably pay top dollar. In most other cases, you can make a deal.
As they say, read the whole thing (before the Times yanks it into pay-per-view territory). The article also notes the appearance of discount and premium baseball games, which I must remember when I write all this up in a formal paper. However, I disagree with the following assessment of airlines:
But as anybody who has ever bought an airline stock knows, businesses that discount widely can also create big problems for themselves. After driving up their list prices during the late 1990's boom, much as Broadway did, the airlines have been losing money for the last two years.
The real discount airlines, like Southwest (49 straight profitable quarters) and JetBlue (9 of 12 quarters profitable) know how to price their tickets and reign in costs. Theatres must learn their techniques from successful airlines--not the failures.
Marathonguide.com has a cool interactive graph of world-record times for running the 26.2 mile marathon (reproduced without interaction here).
The continual decrease in time needed to finish the marathon, in my mind, is one disconfirming data point to the well-noted dismal conclusion that labor productivity enhancements cannot be had in certain industries--like classical music performances.
This is known as "Baumol's cost disease", and can best be defined using Baumol's own words:
The "cost disease" is named after its symptom. Any economic activity affected by it will tend to rise in cost persistently and at a rate faster than the economy’s rate of inflation... Orchestral music is a prime example. The reason the problem arises is that orchestras experience little or no labor-saving innovation--no growth in productivity. A Haydn symphony written to be performed by 30 musicians and lasting one-half an hour will require 15 person hours of human labor for an "authentic" performance, no less than it did a the end of the 18th century. But elsewhere in the economy it takes less and less labor every year to produce a product. The amount of labor needed to produce an automobile declines more than three percent each year, on the average. This means that if wages rise at more or less the same rate in car production and in orchestras, then clearly, the cost per performance must rise faster than the cost per car, because in car production rising wages are offset by the reduced use of labor per car, while in orchestras there are few such offsets. Thus, orchestra costs are condemned to rise every year, cumulatively, at a rate faster than the average of the economy’s prices; in other words, faster than the rate of inflation.
Baumol does not here mention the change in quality of the performances, which are presumed constant. Yet we see in other labor intensive industries, like athletics, a continually increasing quality of performance. So is the quality-adjusted cost of performance increasing or decreasing in athletics? How about in concerts? I'll leave those estimations to the Hedonic Regression folks at the Bureau of Labor Statistics (Hedonic regression is a statistical means of finding the "real" price change when quality also changes).
What we see in marathon running is a clear incentive to continually get faster. The goal is to finish first. This simple, single, objective benchmark of success is not matched in other service industries, like concerts, in which performance measurement is highly subjective.
This single performance metric has its pros and cons. The major benefit is that it is easy for athletes to see the direction they must pursue to be successful. The cost is that while humans have not yet approached the limits of speed, endurance, or physical fitness, they will reach these physical limits sooner than they will the aesthetic limits of finesse, creativity and brillance.
There is less justification in assuming that a set limit exists for playing the violin than for running a mile.
Apparently drugged yesterday by the sweet taste of Australian clementines, Brad DeLong had what he calls a Hayekian moment:
Nobody human knows... the knowledge that an extra clementine tree should be planted in Australia in order to provide J. Bradford DeLong... with big, sweet, juicy clementines... But the world market... knows this. How wise it is!
However, there are those who appreciate markets without the citrus-induced euphoria. One such person is my Ph.D. microeconomics professor Walter Williams, who wrote yesterday, in one of his more somber and relaxed columns:
What's referred to as "the market" is simply a collection of millions, perhaps billions, of independent decision-makers. No economist believes that markets are perfect, like heaven or a utopia. But the relevant comparisons are to the alternatives that we have on Earth. When there's market allocation, mistakes and shenanigans are detected and ruthlessly punished. After all, it wasn't the Securities and Exchange Commission, whose charter is to protect investors, who discovered Enron's and WorldCom's misdeeds, punished them by making their stock worthless and made heads roll. It was the market.
Dr. Williams has the Hayekian mindset--understand what people can do with markets and the legal structure that they otherwise find difficult or impossible, and explain why this is so.
Important: William Sjostrom notes that the policy emphasis of Dr. William's column is to defend insider trading on economic grounds.
Recent SiteMeter data tell me that since BlogSpot refuses to let me post a link and message on the old site pointing people here, more readers go to the BlogSpot site than the new one. I fear I may soon be stricken from several regular reading lists.
It is generally conceded that an individual is most productive when he has a maximum of freedom from restraint, whether his energies find an outlet in religion, in writing or in thought--or whether he is engaged in the production and exchange of goods and services. And, as a matter of fundamental principle, there is no more warrant for attempting to clamp political controls on a man's energies in his shop than there is to put his energies under political control in his church, his classroom, his editorial office or his study. If freedom is good in any one of these places, which I believe, it is good in every one of these places,--which I also believe.
Admiral Ben Moreel in The Admiral's Log [pp. 128-9]. These remarks, which I'm sympathetic towards, were made on Dec. 7, 1955. But they are of emotional, not intellectual import. Just as eloquent pleas have been made for the government to attack businesses and churches and newspapers and bedrooms, but these are grounded not in individual productivity, but individual helplessness.
During the move to truckandbarter.com, I changed the subtitle of this blog from "Compact Analysis of Economic Data" to "Where Sympathy and Hedonism Collide" because, to me, how human beings think about and act on these two fundamental moral categories is still the core disagreement in the discussion of political economy. This disagreement has taken on many names, sometimes using a more scientific jargon (like the one in welfare economics), othertimes contained in crass political sneering.
Besides, I found out early on that writing about economic data was both perpetually inconclusive and really boring.
The Cost of In Vitro Fertilization--Here and There
I was struck by some economics tucked into Mary Duenwald's New York Times article on the advancements of in vitro fertilization (IVF):
In Europe, many doctors transfer only one embryo per fertilization cycle. This strategy has been shown to be as effective as transferring more than one, as long as the couple goes through at least two cycles. American doctors say that practice is unrealistic in this country, where most insurance companies do not pay for in vitro fertilization.
I was thinking (foolishly and rashly) that this implies European doctors and patients prefer costlier means of producing the same outcome. However that only makes so much sense. Because many Europeans use the government to force other people pay their medical bills, patients try to minimize the risks of having a multiple pregnancy, regardless of cost. In contrast the U.S. pay-as-you-go system of IVF tends to result in the most cost effective practices, which entail having a higher risk of multiple pregnancy.
To highly generalize this result, U.S. medicine utilizes fewer resources than European medicine--leaving more income for the consumption of other goods and services.
T&B often hears wishes and hopes that future humans (mostly future Americans) learn that they have enough stuff, and do not need to produce and consume much more per person. However, I didn't realize that this effort has also tried to combat the production and consumption of people!
On page 591 of What to Expect the First Year, a child rearing book by Arlene Eisenberg, Heidi E. Murkoff, and Sandee E. Hathaway, there is this curious bit of advice to fathers:
Until he's grown and has moved out of your home, your child will likely be what you (and the rest of the family) eat.
While I firmly believe that voluntary action and cooperation, not the edict of government bureaucrats, should determine the amount of goods and services one will produce and consume, I do think the government rightly intervenes to prevent the consumption of children as food. :)
Note: As I write, Amazon.com has 567(!) used copies of this book for sale!
Instapundit points to a Kathleen Parker article in which she writes:
In some areas, bloggers are beating the knickers off mainstream reporters and commentators...
The view from my bunker suggests that blogs can't be anything but good for journalism. Just as a new restaurant is good for established ones, competition is good. And fun! As another famous cowboy recently put it, "Bring 'em on!"
However, as zero price goods, this blog competition is not reported in GDP, except perhaps in expenditure on hosting. Still, the growth of blogs can mean that the "Newspapers" series recorded by the Bureau of Economic Analysis is underestimating Americans' consumption of news.
Should the BEA change its "Newspapers" category to "Newspapers & Blogs"? This is a perfect example of the subjective nature of "information-economy" goods and services discussed below. Whether done in the near or distant future, the incorporation of blogs could change both the historical data and the interpretation of data. It all depends on how much value-added blogs are estimated to contribute to newspapers. Will 2002 actually be remembered as a banner year for "Newspapers & Blogs" instead of a terrible performance for "Newspapers"?
I've been posting at an increased rate today because 1) I've been running SAS and VBA programs that take a few minutes each to execute, and 2) I've lost track of the number of cups of coffee I've consumed. Much of the time in-between debugging and editing programs has been dedicated to T&B. Unfortunately this effort level is not sustainable, and I will be reverting to light posting mode whether I want to or not.
Trader Mike points to a July 11th article by Daniel Altman in The New York Times lamenting the conflicting conclusions economists derive from government-produced economic data.
"In a knowledge-based, information-based economy, one could argue that we don't have good metrics for measuring output"
I think it is hubris to say we measure output. We estimate it, with uncertain accuracy. But this is not limited to services. Just how good are the metrics for the industrial economy? We economists have no simple, intuitive answer to that question. We're not even taught to answer it, are we? Going one step further, I could assert that we must have even worse metrics for valuing output than for just getting the quantity of it.
Adjusting prices of services for changes in quality can be especially challenging, said John S. Greenlees, acting associate commissioner for prices and living conditions at the Bureau of Labor Statistics, because services are less likely than goods to have observable characteristics. Comparing the features on television sets with different prices is easy, he said, but not so for movie tickets.
"You don't have different movies with different admissions prices based on their acting," he said.
I think it would be fantastic to charge more for better movies.
After all, quality can be and is frequently judged by price. Opera houses and other live theatres have been doing this a very long time. Not only do better opera houses charge 1) more for a performance of the same opera by superior performers on more luxurious sets, 2) the same opera house charges different prices for the same opera performed at a different date and time, and 3) the same opera house can charge a a different price for different operas performed on the same time and day of the week.
The Metropolitan Opera in effect engages in all of these "price discriminating" techniques--and more--through its pricing of single-show tickets and in its discount "subscription" packages.
Muslim Group Calls for End of Capitalism Through Gold Standard
In a bizarre BBC news article Mark McCallum writes that Murabitun, a Muslim group, calls for 1) an end to American dominated capitalism, and 2) that this revolution be initiated by the a return to a gold Dinar standard!
The keynote speaker at the conference was Umar Ibrahim Vadillo, leader of the worldwide Muslim group known as Murabitun.
The group is strongly opposed to capitalism.
Mr Vadillo said America's economic interests had become the religion of the world and that people slavishly adjusted their lifestyles to suit the capitalist model.
But he said capitalism cannot sustain itself and is bound to collapse.
[W]hat the usurious capitalist system has done is to forbid trade and permit usury. In these circumstances, capitalism will flourish but it guarantees the ruin of the decent people of this world.
Since Mr. Vadillo and I are flourishing, we must not be decent people.
The gold dinar, which is 4.25 grams of 24-carat gold, would unite Muslim nations who blame "greedy" currency traders for Asia's downfall in the economic crisis of 1997-98. There is also a silver Islamic Dirham coin of 3.0 grams silver. The dinar is being privately used in 22 countries and is minted in 4 countries.
It turns out that this is old hat for Mr. Vadillo whose works include:
This is what I would have posted to my blogspot blog, if I could still post there:
Dear BlogSpot,
I find myself in a sad predicament, and it's all your fault. The pecuniary costs of BlogSpot are too low, and the transactions cost too high. I would demand that you increase your charges--and your service--but you don't respond to my service requests. Hence, I shall Truck and Barter elsewhere.
Listen BlogSpot, you provide an excellent cheap service--but it's still cheap: it looks like it, smells like it, uploads, crashes, and burns like it. That's OK, but I need a host that will serve my blog with dignity and respect. I need a host that let's me post when I want--not when the host grants me permission.
This is not a bad joke. You should take note: I was unable to post to T&B for a week, your servers are too slow, your bandwidth too small, your attention to my needs too shortsighted. In short, your price is too low and I will not pay almost nothing any longer.
Herewith, I offer a forwarding address: http://www.truckandbarter.com
In today's Washington Post, in an article entitled "Major U.S. Airlines
Complete Safest Year," Don Phillips writes:
Last year was the worst ever for the nation's major airlines financially,
with losses of $11.3 billion.
It was also their safest year ever.
There were no fatalities, either among passengers or people on the
ground. Only nine passengers were seriously injured, most in turbulence
or on evacuation slides after what turned out to be otherwise minor
incidents.
...
While 2002 was an unusually good year, accident rates in recent years
have generally been declining to the point that they are stubbornly
defying efforts to reduce them even further.
Pilots today fly with safety equipment that was only dreamed of a decade
ago...
The article then goes into details regarding the major programs and
technologies--by airlines and regulators--that have caused such a
decrease in accidents and deaths. One important point is that not all
the gains are 9/11 related.
But obviously some are. How do we separate the trend from the influence
of 9/11? Let's look at the time-series safety data in the following
graph, which was generated from data available from the National Aviation Safety Data Analysis Center:
The number of commercial aircraft accidents with fatalities had been
decreasing before 9/11. Both in the early nineties, and in the late
nineties, it seems one metric of safety reached new lower plateaus.
However, another aspect of the article insists that outsourced repair and
maintenance facilities (that just happen to be non-union) are the
potential cause of decreased safety:
Instead, United's decision to contract out maintenance work now being
performed by United employees is the potential safety threat...
"As long as airlines contract out, that will make it inherently more
dangerous," Peat [director of flight safety for IAM District 141] said.
"Not that United will cut corners, but the third-party contractors often
cut corners."
This makes no sense. If United wants its contractors not to "cut
corners" then it could easily write clear specific performance clauses into its
contracts with them. It third-parties are not contracted to perform all
the maintenance that unionized personnel used to, United itself--not
the third-party--has decided that such maintenance is not worth the
cost. Nice try, but the union has no real way around blaming United.
A recent RAND publication develops a framework to analyze the economic and noneconomic costs of the War on Terror. I have not worked on, supported, or reviewed the project that produced A Preliminary Cost/Benefit Framework for Counterterrorism Public Expenditures, but I think it is both important and short enough (47 pages) that some people will choose to skim it on their own without further commentary from me. The blurb:
The author develops a range of rough estimates of the benefits and costs of a U.S. counterterrorism effort in the context of moderate (based on Northern Ireland in 1999), severe (recent Israeli experience), and nuclear terrorist attacks against the United States. The analysis suggests that short-run marginal benefit may exceed marginal cost, and thus that spending may in fact be too little. Another important facet of the problem is the financing source for the counterterrorism efforts the federal government or state or local agencies.
I will have something substantial to say about this framework later this weekend.
In a bold move redistribute corporate revenue to his own higher-tax state of Virginia, Mr. Warner wants to redesign the "patchwork quilt of antiquated revenue sources" that is the current tax code. Sounds like the usual rhetoric--until he gets to specifics:
On personal and corporate income taxes, Warner said the current system "places unfair burdens" on many low-income Virginians, adding that too many corporations are legally shielding their sales and profits by moving them out of state.
"The result is that individual taxpayers carry too much of the tax burden and other businesses are put at a competitive disadvantage," Warner said.
Lying bastard That's not the entire picture, of course. For instance, Mr. Warner fails to mention how this will affect the budgets of the lower-tax states from which revenue will be stolen.
Also, in the name of "fairness" to brick-and-mortar businesses, Mr. Warner also wants to impose taxes on (out of state) Internet retail sales, and to extend sales taxes to services. Apparently, he doesn't notice that those taxes will be borne by those same lower-income Virginians he's allegedly trying to help.
when, if ever, is something off the record for a blogger? I think for some bloggers the answer would be "never." For those of us who are blogging in the context of our businesses, there has to be some more pragmatic line drawing.
David works for a venture capital firm, and cannot write about the details of the businesses presented to him. I'm in a similar situation, which severely hampers my ability to write about the data, opinions, and egos I encounter on a daily basis.
As a Cost Analyst at the RAND Corporation, I find it imprudent to write about current research projects, which are a substantial portion of my intellectual life.
RAND's clients demand and receive objective hard-hitting independent views. That's one reason why the Department of Defense comes to RAND, instead of a profit-hungry Beltway Bandit. Still, our clients pay for the research, and want to make sure it is revealed to the right people at an appropriate time. We have an explicit contractural agreement, in addition to official RAND policies, and a tradition of keeping things secret. (With one notable exception!)
RAND analysts update clients frequently during a project's existence (from several months to several years), and during that time, need their client's explicit permission before discussing work with people outside of the project team.
However, at the end of each project, RAND analysts document their work--in papers, briefings, and books made available to the public for free on the web, or in cheap soft-cover editions. I then feel free to discuss such work on this blog.
NOTE:Paul Dueweke has a fine definition of Beltway Bandit:
For those not conversant in Government Speak, a Beltway Bandit is one of the companies clustered around the Washington, DC Beltway which sell the Government "professional services" which is stuff the Government could do itself if they had any idea what they wanted done or if they weren't fighting among themselves about who should do it.
deflation will arise on the wings of perception, namely, consumers who expect, reasonably or not, that tomorrow's autos, computers and DVD players will be cheaper than today's.
[See Thursday, July 10]
This seemingly potent argument made by economists has the ring of common sense. However, I question whether a slow deflation--one in which the consumer price index lowers up to, say, 5% a year--will really affect consumption the way that is usually predicted. I belive that deflation presents consumers with a tougher choice than is presented above, and I don't think the empirical evidence on slow overall deflations or large product-specific deflations supports this claim. After all, the year over-year-prices of computers and DVD players have for a while been plummeting at a far greater clip than everything else.
How many people will defer the purchase of an automobile because their monthly payments will be 5% lower if they buy next year? I might defer a purchase of a good if I expect its price to be 20% lower next year, but I'd have to balance this savings against the cost of not having the item for one year of my life. I know of nobody who refused to purchase a DVD player becuase it would be $10 or $40 cheaper a year from now (although such people do exist).
To support the macroeconomic "deflation effect" on consumption, economic theory requires that at the margin, a lot of consumers would rather do without a (new?) automobile or cell phone or frying pan. They would rather keep the money in the bank (or under the mattress), and buy the same item the next year for less. Deflation would have to cause many people to buy nothing instead of something else whose price may be expected to increase.
No doubt some people will act this way. But how many? Only those whose marginal benefit of consuming a specific item is less than the deflation rate (which causes a loss in asset value, and can be considered a proxy for marginal cost).
The New York Times Mishandles Driving Fatality Statistics
Danny Hakim of The New York Times reports that the Federal Government has decided to spend $11 million of your tax dollars on advertising targeted to "young men who use heavy drinking for social bonding". Activists are outraged that young men ignore the risks of hot rodding under the influence. I agree that such loss of life is a terrible tragedy for all involved, and share their desire for fewer deaths. But I must take a stand against their polemics:
In case you thought the book on drunken driving was closed in the Nancy Reagan era, some of the progress made in the 1980's has been undone of late. Last year, just under 18,000 people died in alcohol-related accidents.
It was the greatest number since 1992 and a sharp spike from the 16,572 who died in 1999. The highest number of fatalities related to drunken driving over the last several decades was in 1982, when about 25,000 people were killed.
According to the highway safety agency, in 2001, the most recent year for which detailed figures are available, 14,933 of 17,448 alcohol-related deaths involved someone with a blood-alcohol content over 0.08. Fifty-six percent of those killed were drunken drivers, 22 percent were passengers and 12 percent — nearly 1,800 people — were drunken pedestrians or bicyclists. Another 4 percent were pedestrians or bicyclists who were not drunk. Seven percent of the dead — more than 1,000 people — were sober drivers of other vehicles.
Well, this is the age of the internet. Government data are available to practically everyone. You can look at the data for yourself, right here (1982-2001 data) and here for the 2002 data. I've taken the liberty of graphing some of the long-term trends.
...
And to me, despite the frightening rhetoric used in the article, the historical record reveals only a slight uptick in the number of fatalities and alcohol-related fatalities, but no long-term trend reversal. Are the year-to-year differences in fatalities even significant?:
Well, they are--but they're not the whole story. A statistic such as an increase of more than 500 alcohol-related fatalities from 2001 to 2002 must be seen in a broader context. Although in 2002 the estimated number of persons killed in all fatal accidents increased to the highest level since 1990, it should also be noted that in 2002:
Injuries in motor vehicle crashes declined
The fatality rate per 100M vehicle miles traveled was unchanged
Injury rates declined
Occupant fatalities accounted for all of the increase in total fatalities
Non-Occupant fatalities declined
[This list was taken from a more extensive one on page 5 of this document]
Sorry about the light posting, but I've been spending all of my free time researching the purchase of a new station wagon. (For fun, check out this 5 part history of the station wagon.) I had set out with a pretty grim attitude--everything I had read and heard before made me believe that the demise of the station wagon was imminent due to the scourge of evil SUVs and minivans.
Well, folks, it just ain't so. I've found an enormous selection of mid-priced wagons--from Subaru, Saturn, Mazda, Ford/Mercury, Volkswagen. Autobytel lists a substantial array of compact, midsize, and luxury wagons for sale. This selection is less diverse than the pre-SUV craze, but not substantially so. In fact, the station wagon is making a comeback:
Wagon sales peaked in the early '80s at just over 600,000 annual sales. And, after an onslaught of minivans in the '80s and SUVs in the '90s, they nearly died.
...
[Experts predict] an increase from about 250,000 wagon sales in 2000 to about 375,000 a year by 2005. Consider that about 1.3 million minivans and between 3.5 million and 4 million sport-utilities are sold every year, and wagons still represent a small share of the U.S. auto market.
By 1997, the number of station-wagon models available in the United States had fallen to 29 - down from 54 in 1994, according to Automotive News. But that number started to grow again in 1998 and has risen since then.
However, as zero price goods, this blog competition is not reported in GDP, except perhaps in expenditure on hosting. Still, the growth of blogs can mean that the "Newspapers" series recorded by the Bureau of Economic Analysis is underestimating Americans' consumption of news.
The number of commercial aircraft accidents with fatalities had been
decreasing before 9/11. Both in the early nineties, and in the late
nineties, it seems one metric of safety reached new lower plateaus.
