|Truck and Barter
Where Sympathy and Hedonism Collide
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.
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!
What is Public Choice anyway?
7/28/2003 09:14:15 AM
The Boss Floods the Market
(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.
7/28/2003 08:38:10 AM
Financial Value is not Opportunity Cost
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):
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:
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.
7/28/2003 05:50:20 AM
The Worst Place to Live
Here's a primer:
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:
7/26/2003 08:38:53 AM
Taxes in Iraq
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:
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.
This again comes out to about 75% or so. However, according to this Fortune article:
I see why most economists love government-supplied official economic statistics: one-stop shopping makes our job so much easier--almost too easy...
7/23/2003 03:11:46 PM
A Business Principle
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:
And he closes with:
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.
7/23/2003 01:49:01 PM
College Costs to Students and Taxpayers
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:
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:
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".
7/22/2003 10:58:39 AM
More on Price Diversity
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:
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:
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.
7/21/2003 05:29:15 PM
Productivity, Cost, and the Limits of Humans
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:
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.
7/21/2003 10:44:00 AM
A Hayekian Moment vs. The Hayekian Mindset
Apparently drugged yesterday by the sweet taste of Australian clementines, Brad DeLong had what he calls a Hayekian moment:
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:
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.
7/17/2003 11:25:42 AM
On the Souls of Lost Readers
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.
Such are the ways of a life in blogging.
7/16/2003 11:14:25 AM
From The Admiral's Log
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.
7/16/2003 08:13:51 AM
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):
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.
7/15/2003 09:58:39 AM
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:
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!
7/15/2003 06:44:49 AM
Competition Good for Journalism
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"?
Doubtful, but fun to think about.
7/14/2003 05:02:01 PM
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.
7/14/2003 05:01:45 PM
On Data, Quality and Price
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.
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.
7/14/2003 02:44:00 PM
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!
Why are they opposed to capitalism?
Since Mr. Vadillo and I are flourishing, we must not be decent people.
Anyway, what is the gold Dinar?
It turns out that this is old hat for Mr. Vadillo whose works include:
NOTE: According to this web site:
NOTE 2:Hat tip to http://free-market.net/news
7/14/2003 12:42:39 PM
BlogSpot and Transactions Cost
This is what I would have posted to my blogspot blog, if I could still post there:
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
7/14/2003 11:52:37 AM
A Longer History of Aviation Safety
In today's Washington Post, in an article entitled "Major U.S. Airlines Complete Safest Year," Don Phillips writes:
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:
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.
7/13/2003 02:30:46 PM
An Efficient War?
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:
I will have something substantial to say about this framework later this weekend.
Also, T&B's readers might be interested in the "official" casualty figures on the U.S side for previous and current wars. The Washington Headquarters Services, Directorate for Information Operations and Reports is the statistical arm of the U.S. Department of Defense. On the WHS site, one can find a summary of casualties in previous wars, and use those to compare data on the current conflict.
7/11/2003 12:56:17 PM
Tax Reform in Virginia
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:
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.
7/10/2003 05:01:40 PM
RAND--off the Record
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:
7/10/2003 02:30:29 PM
Deflation's Effect on Consumption
James Picerno writes:
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).
7/10/2003 11:46:02 AM
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:
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:
7/3/2003 05:29:03 PM
Those Station Wagon Blues
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:
7/1/2003 12:34:26 PM