The Economist's Apprentice

In which a little girl confronts the world and battles the anti-humans.

Wednesday, August 31, 2005

The Case Against Domestic Equality

Few intellectuals lecture single people on how many hours a week they should clean their house. Nor do pundits prescribe a set number of children that couples should have. Strangely enough, many commentators do consider it very important that couples split domestic chores and child duties equally.

Many couples do not split household duties equally and in many cases both partners benefit from the option of unequal sharing. This is because a couple must agree on how much work to do and not just who does the work. Imagine that one of Lucy's two moms is a slob and the other is a neat freak. They have bought into the belief that partners need to share chores equally. The slob argues that time spent vacuuming is a waste. The neat freak wants to spend the entire weekend cleaning. If they are constrained to share the housework evenly, the outcome will more likely be that which the slovenly mom prefers. She has the greater bargaining power, since if cooperation breaks down, the result will be a low level of housework - which is what she would prefer anyway. Both people would likely benefit, if they could negotiate an unequal sharing, where the slob does a reasonable amount of housework, even if it isn't as much as much as the neat freak does.

This principle is especially important when thinking of childcare duties. Many if not most couples would disagree as to the number of children to have, if they had to split family duties equally. What if Lucy's more maternal mom really wanted another child and the other mother had only a slight preference to stop at one? If childcare duties needed to be shared equally, Lucy would never get a sibling. In the real world, couples do not have their activities prescribed for them by outsiders ignorant of their preferences. In all likelihood, the more maternal mom would get the additional child by implicitly agreeing to shoulder more than half of the childcare duties.

Sunday, August 28, 2005

Why So Few Baby Bloggers

This will be so much easier when I have longer arms.

The Downside of Preventive Care

Conventional wisdom is that preventive care should reduce medical costs, as it will identify problems before they develop into expensive and deadly illnesses. Unfortunately, preventive care also leads to many wasteful medical interventions. Insured patients pay a small part of the cost of care. If preventive care identifies a minor medical problem with a costly solution, an insured patient is likely to undergo treatment, even if the real costs outweigh the benefits. It is likely that the nature of preventive care identifies far more minor problems than potential major problems. Friday's WSJ describes how cancer screening may not be as beneficial as is commonly believed.

...many tumors are so slow to progress - indolent, scientists call them - that they'll hang out in an organ for decades with no ill effects.... can be misled into attributing the decades of life you enjoy after "beating" cancer to early detection and treatment rather than to the properties of the tumor itself.

The article describes how overdiagnosis of cancer is the norm. Many people undergo invasive treatment for a cancer that would have developed so slowly that they would have died of something else first. Some of these patients suffer needlessly from side effects of their treatment. New research will lead to preventive care identifying more patients that can be treated at great expense with little expected benefit.

Researchers in Japan, for instance, find that CT scans detect almost as many lung lesions in nonsmokers as in smokers. But since nonsmokers have a mortality rate from lung cancer less than 10% that of smokers, the vast majority of what CT scans picked up would never have progressed to anything life-threatening. And a Mayo Clinic study found that although X-rays detect lung cancers at earlier stages, and lead to more five-year survivors, early detection does not lower death rates.

While consumers often resist increased cost sharing in their medical plans, financial incentives for patients to reduce wasteful treatment will be increasingly important.

Thursday, August 25, 2005

Doctor 'Education'

MSN Video has a Matt Lauer interview with Terry Bennett who evidently is being investigated for being rude to a patient. He told a morbidly obese woman that she was likely to outlive her husband and would be in a poor position to attract another mate.

A few observations:
1) Doctors who are rude are going to lose patients. There is no reason to believe that a free market will supply insufficient bedside manner.
2) This shows an obvious danger of many types of nationalized healthcare. If you were a 5'7", 250 lb woman, it would be cruel, if the government was selecting this doctor for you and you disliked hearing the obvious.
3) Many doctors have this crazy notion that they should educate obese people that obesity is bad for them. This isn't education. Dr. Bennett thinks he is earning his $75 fee by telling fat women that men aren't attracted to fat women? Why doesn't he just provide some type of electroshock therapy?

The Society of Actuaries often has doctors address professional sessions in which they educate actuaries about the costs created by poor lifestyle. These doctors are typically fantastic speakers who want to help other people, and they are invariably shocked that their fellow doctors don't spend enough time advocating weight loss. There is no need for highly trained medical professionals to provide this type of information, people can get it for free at MSNBC. In fact, the last time my daddy got a checkup, the doctor gave him an article printed from MSNBC.

Wednesday, August 24, 2005

Kaeru Goes To San Diego

Being new to blogging, I'm been spending some time at Technorati seeing if anyone is talking about me. On a site called The Daily BJ (my dad wouldn't explain the puzzling name), I found a link to the vacation photos of Kaeru, a frog even cuter than Kermit. I especially liked the photos of San Diego (no word if he was looking for fellow blogger James Hamilton).

I'm going to contact Kaeru's handlers. Maybe he would be interested in guest blogging at The Economist's Apprentice.

Grade Inflation Might Be Grade Redistribution

Bryan Caplan has a great post arguing that teachers who favor redistribution of income should also favor redistribution of grades, i.e., pity grading.

To me, this reveals a basic inconsistency in egalitarian philosophy. If you
assign grades based on merit, and merit depends on performance unadjusted for
opportunity, then why shouldn't the same principle hold for income and wealth?
Just because you feel sorry for someone, why does that entitle them to a share
of the riches of the more successful? And if you do not adjust for unequal
opportunities when you grade, why should you adjust for unequal opportunities
when you contemplate redistribution?

In a later post he states:

Complete equalization of grades and income destroys the value of both. But moderate redistribution destroys the value of neither. The U.S. income tax has not turned America into Haiti, and basing 5% of our grades on pity rather than merit would not wreck our educational system.

I think that grade inflation is partially explained by 5% of grades being based on pity. A professor who wanted to follow the 5% pity strategy would determine what the typical standards were and distort them slightly by increasing all grades below A. Unlike income redistribution, pity grading doesn't require anyone's nominal grade to be reduced.

Pity grading might also explain why grades in the humanities are higher than grades in engineering. On average, humanities professors favor more income redistribution, so as Bryan (I'm outing him as a flamboyant, one-name personality like Madonna) points out, it makes sense that they would favor more grade redistribution.

Tuesday, August 23, 2005

Drug Profits

I'm all for big pharma profits. Even though I'm healthy now, in fifty or sixty years there is no telling what ailments I might have. Drug firms won't innovate, if crazy liability claims soak up their profit stream. Econbrowser exposes the silliness of the Vioxx verdict. Is James Hamilton the best thing about San Diego?

Fat Cats

Paul Krugman thinks that the government should do something about obesity. He draws a comparison to how much good the government has done by reducing smoking. Given that a hunger for fat and sugar is part of people's physiological makeup, it is likely that any strong attempt to reduce excessive eating would amount to a human rights abuse. For people with particularly strong hunger, being overweight is completely rational. There is a tradeoff between quality of life and longevity.

However, people have self-control problems, which raises the question "how much would people weigh, if they could commit to a certain lifestyle in advance?" If tomorrow the typical American was being shipwrecked on an island, would he want the boat full of broccoli or potato chips? It is difficult to know if there is too much obesity in America, because introspection doesn't give much guidance for what would be best for other people.

I think the way people treat their cats shed light on this. People love their cats. They have almost complete control over what their cats eat. If they think that it is best for the cat to go hungry between meals to live longer lives, they can easily impose this regime. My guess is that people make the decisions for their cats that they would make for themselves if they didn't have any self-control problems. Given the number of fat cats I've seen, the government shouldn't leave it up to Paul Krugman to decide how much people should weigh.

Monday, August 22, 2005

My Aborted Modeling Career

I was so close to signing a contract to be the new model for Dove's Campaign For Real Beauty. Those boogers nixed the deal at the last second when they discovered that my baby fat was from, uh, my being a baby.

I'm trying to be philsophical about it. Given America's explosion of obesity, maybe we are actually too comfortable with our bodies.

Sunday, August 21, 2005

More South Korean Babies, Please

From a NYT times article about the falling South Korean birthrate.

South Korea began aggressively promoting family planning in the 1960's, fearing that overpopulation would impede its economic growth. Slogans at the time warned South Koreans, who averaged six children per family, that they would become "beggars without family planning." Even in the 1980's, slogans declared that "even two are a lot."

Successful family planning, coupled with changing mores, led the birthrate to drop below the ideal population replacement level of 2.1 in the 1980's and then more precipitously in the mid-1990's. Now on average a South Korean woman will have 1.19 child in her lifetime - a rate lower than Japan's birthrate of 1.28, comparable to Taiwan's 1.22, and higher than Hong Kong's 0.94.

Why Academics Favor Redistribution - One Reason

Many academics are inclined to favor redistribution of income. Some economists like Krugman argue forcefully that people care more about relative position than their absolute status. I have been reluctant to accept this position as being very important, perhaps because envy is so foreign to me. I do not resent Bill Gate's billions; I wish I had them. I would be happier if Bill Gates gave them to me, but I certainly wouldn't be happier if Bill Gates lost them. In fact, I think that resenting the wellbeing of others is a pretty strong character flaw. However, at some point, one must accept the fact that many people like Paul Krugman are deeply concerned with status.

Within the confines of the academic world, Paul Krugman stands near the top rung in terms of status. To the extent that status is defined by contributing to human knowledge, he has a lot to be proud about. Within the larger public, his intellectual achievements bring him status to the extent that it has brought him fame and money. He is very high up, perhaps at the same rung as Maureen Dowd, but certainly no where near as high as Bill Gates or thousands of people in business. I think academics are inclined to attack the privileges of wealth, because the existence of wealth lowers the relative status attributed to intellectual achievements. If the very pursuit of wealth can be reduced to a zero-sum struggle for status, then wealth loses some of its status. Academics gain status at the expense of businessmen and other high income professions.

Academics of all levels would see their relative status rise, if wealth is besmirched. A professor at a local community typically has a high level of educational attainment but only modest social status given their average level of income.

I think that it is no accident that many of those who are most fervent about redistributing income spend so much time bemoaning the chase for status. This chase is very real for them. As Jane Galt has observed, academics are probably more status obsessed than the typical person. The attack on wealth is one dimension of their chase for status.

Wednesday, August 17, 2005

The Fall of Hong Kong

The NYT describes how the WWII crimes perpetrated by the Japanese are little noted in today's Hong Kong. One reason why the crimes stir little attention is demographic. "The large majority of Hong Kong's 6.8 million people are not descendents of wartime survivors, but are part of families that left mainland China later, fleeing the rise of Communism."

The sad story of Hong Kong illustrates a flaw in colonialism as a form of government. Hong Kong was attacked within hours of Pearl Harbor and fell relatively rapidly to the Japanese, because the British were reluctant to arm the Chinese population. It is fairly obvious that the British put too much emphasis on remaining in power compared to protecting Hong Kong. A government ruled by ethnic Chinese would have put up a stronger resistance.

Monday, August 15, 2005

Great Leap Forward

The current JPE has a great article studying how the Chinese communist government was responsible for possibly the worst famine in human history. During 1958-61, an estimated 16 to 30 million people died due to food shortages. The Chinese government's official explanation emphasizes bad weather. Western social scientists have ascribed the bulk of the damage to government planning.

In 1958, China proclaimed that its Great Leap Forward policies would allow it to surpass the industrial capacity of countries like Great Britain and the United States within 15 to 20 years. The cornerstone of this fantasy, er project, would rely on transferring millions of workers out of the agricultural sector into the industrial sector. The problem is that China was barely self-sufficient in food. Thus the great leap in industrialization would require a leap in agricultural productivity. This was to be supplied by the marvels of collective farming.

Not surprisingly, the diversion of agricultural resources into industries like steel production reduced agricultural output. The central planners made matters worse by increasing the amount of grain farmers had to hand over to the government. (The government even increased food exports.) The farm workers now consumed so few calories that they couldn't effectively perform the physically demanding labor of farm work.

The paper statistically allocates the reduction in grain output to various factors. Weather gets assigned 12.9% of the fall in grain output. 33% of the fall in output was due to reduced inputs into agricultural production. 28.3% stemmed from workers being exhausted due to lack of food from increased procurement.

While quantifying the different causes of the famine is a worthy goal, the paper makes the mistake of portraying the tragedy as a purely economic one. "As decisions became centralized, any policy failure would have economywide repercussions, thereby exposing the economy to new systemic risks. In addition, the centrally planned system... lacked checks and balances." While these points are true, they are not sufficient to explain the tragedy. In a land of subsistence farming, reducing the agricultural labor supply in one year from 193 million to 155 million isn't just a poor policy, it shows a complete contempt for life. The paper mentions briefly that the local officials had incentives to conceal the downturn in food production, which led to the central government to overprocure grain and starve the agricultural workforce. These incentives aren't spelled out, but it is fairly obvious that they must have been morally bankrupt and not just economically flawed. Bryan Caplan makes an argument for the GLF deaths being considered murder.

Sunday, August 14, 2005

Housing Bubble?

I'm a believer after I sold this property for $250,000.

Voting Lotteries

The average voter spends little time accumulating knowledge that would be useful for selecting candidates. This is not surprising given that each individual's vote is next to worthless, given that the probability of affecting the outcome is close to zero.

One way to encourage policy education by voters is to limit the number of those eligible to vote. The smaller the electorate, the more important each vote becomes. In order to preserve the principle of equality, the right to vote can be allocated through a random draw. Right after a presidential election, a small number of people could be selected, perhaps one per congressional district, who would have the right to vote in the next presidential election. Given the advance notice, they would have the chance to educate themselves on the relevant issues. Non-profit groups would probably be created to facilitate the education of voters. Public interest groups might even finance sabbaticals so that voters could study policy without the distraction of work.

Voters would be able to accept money for listening to policy presentations from special interest groups in the same way politicians accept campaign contributions. Given a secret ballot, these contributions could not buy votes, they could only buy access to present the special interest's story.

Currently, impersonal polls dominate the coverage of elections. Under a franchise lottery, voter surveys would be replaced by human interest stories, as each elector would hold immense sway. Moderate voters would become celebrities, as America would watch every aspect of their decision process.

Saturday, August 13, 2005

Kyoto Emissions Credit Trading

The Dutch hope to earn half of their Kyoto emissions reduction credits through purchasing them from developing countries. For example, they are upgrading a landfill in Brazil to capture the methane emitted and convert it to carbon dioxide. Methane gets 21 times as many emissions credits as carbon dioxide, so the process generates a lot of credits.

Does the logic of emissions trading work when they are purchased from a country with no obligation to reduce emissions themselves? It doesn't seem reasonable to believe that Brazil's underlying desire to cut greenhouse emissions will actually be changed by these cash payments from developed countries. If they are paid to cleanup one landfill, might they be more likely to cut corners in another area? Especially, if being lax might generate new projects to generate emissions reduction payments in the future.

Friday, August 12, 2005

Subway Searches

Michael Bloomberg thinks I might be a terrorist. He is silly.

Do the Poor Even Exist?

I once read an interview with someone trying to save the tigers. This person lamented the fact that the increasing human population in India was encroaching on tiger habitats. Let's think, if the human population in India had been curbed, the increase in tiger lives would be measured in thousands, while the decrease in human lives would be measured in millions. This struck me as a bizarre tradeoff to wish for. Of course, amongst environmentalists it is a fairly common attitude. Many ordinary folks implicitly think like this, even though most would never admit to preferring one tiger to a thousand people.

I think the cause of this is that the thought of so many poor people living in India depresses many people. This is in sharp contrast to the joyful response people have of tigers prowling in the wilds. Based on any normal standards of wellbeing, the poor in India have it much better off than tigers. Tigers typically have shorter life expectancies, less stable food supplies, worse housing, a reduced ability to communicate with their family etc., etc. Perhaps, the U.N. should advocate family planning for the poor tiger instead of the human poor. The fact that human's feel bad when they see poor humans makes them advocate policies to reduce the number of poor humans. This is fine, if it leads to converting poor humans into non-poor humans. It is misguided, if it just reduces the number of humans.

I wanted to illustrate the disconnect between reason and people's emotional response by posting two photos:
1) a tiger in the wild,
2) an impoverished slum in India or Africa.
The caption would read, "who do you feel sorry for?" Then I would explain all the advantages the humans enjoyed versus the tiger.

I was going to get the photos at a stock photo website like Big Stock Photo. Typing 'tiger' in the search box of these sites yields many beautiful shots. Unfortunately, I didn't find the photo of poverty that I wanted. From these sites, you get the impression that India and Africa are mostly populated by animals. Of course, I should have expected this. After all, my point was that people irrationally prefer to look at tigers than the poor.

Thursday, August 11, 2005

Warning: Watching a Public Service Announcement Shortens Your Life by 30 Seconds

Wednesday, August 10, 2005

Garamendi vs Consumer Driven Health Plans?

The insurance commissioner of California released a damning report on the state of U.S. health care. With my nap schedule, I can only make a few observations today.

Consumer driven health plans and their funding vehicles (HSAs, HRAs) are condemned quite strongly. One hope of CDHPs is to reduce the amount of wasteful medical care by giving consumers a financial stake in their health spending. The commissioner's chapter on the ills of the prescription drug market provides several reasons why consumers should have a financial stake in their choices.

1) Pharmaceutical companies fuel demand for high priced drugs through direct-to-consumer marketing. Doctors have no incentive to refuse prescription requests spurred by this advertising. Cost-sharing reduces the number of prescriptions that offer minor benefits. Given consumer ignorance about medicine, direct-to-consumer advertising and financial incentives might be a combination that effectively balances cost and knowledge about care.

2) The report pillories drug companies for patent abuse but also criticizes the trend towards three-tier drug plans. These plans charge the consumer more for brand drugs than generics. Even with financial incentives many people are still reluctant to buy generics. Health insurers spend a lot of energy educating people that generics are therapeutically equivalent to brand name drugs. Without financial incentives, there would be almost no market for generics. The commissioner wants the state to influence doctors to prescribe more generics. Financial incentives can do the same thing without government coercion.

3) The report finds disturbing that PBMs serve as a middleman by negotiating discounts. Many drug categories have several competing drugs with comparable therapeutic value. Using their bargaining power on behalf of consumers, PBMs make drugs more affordable. The report is concerned that prescription patterns will be distorted by price incentives, but it also bemoans the fact that "there are virtually no studies conducted to evaluate the comparative efficacy of drugs in the same class." If science gives little guidance, why not go with the greatest discount? Formularies have been a target for years, but critics usually describe possibilities of abuse instead of specific cases. This is not surprising since in the U.S., healthcare consumers bridle at any restriction, no matter how reasonable. Mindless rebate chasing is unlikely to yield a competitive product.

Thanks to Ralston via Caplan.

Tuesday, August 09, 2005

Guess the Quote

A Measure of Media Bias argues that a media outlet's ideological slant can be determined by which policy groups they quote. My major complaint about citations of think tanks isn't the fact that they're used with bias, it's that they are almost never informative. Not only do these quotes not inform me about the subject matter in question, but I usually already know the think tank's opinion. For example, today's NYT quotes U.S. PIRG on the new energy bill. Can you guess which of three quotes is real?

"...we applaud the tax subsidies. The next step is to eliminate double taxation by getting rid of the corporate income tax."

"...the bill allows big oil companies to pollute water supplies, plunder the Treasury and attack our coastlines."

"'s about time the government encouraged nuclear power plants. France has shown nuclear power is safe and efficient. We don't want to fall behind Iran and North Korea."

You can check here.

Monday, August 08, 2005

Conspicuous Culture

Thorstein Veblen developed a theory of conspicuous consumption in chapter 4 of his book The Theory of the Leisure Class. This chapter is so poorly written it is astonshing that anyone has ever read it. Be that as it may, many people accept the principle that much consumption is for the purposes of display. People want nice things so that people see that they have nice things. To some extent, I believe that people consume high art for a similar purpose. How many people would read War and Peace, if they were not allowed to mention the fact. Attendence at art museums, symphony orchestras, and foreign films is no doubt increased by the desire to appear cultured.

Conspicuous consumption causes negative externalities to the extent that others feel they need to escalate their own consumption in the battle for status. In some circles, the same might occur with conspicuous culture. Material conspicuous consumption is difficult to identify, because things that are cool enough to inspire envy in your neighbors are probably cool enough that you would want them anyway. Reasonable people don't want the government discouraging people from having cool stuff.

The government can, however, improve society by reducing conspicuous culture. First, how do you identify conspicuous culture? Any culture that is provided by a non-profit or with government subsidies is a likely candidate. If culture can actually make a buck, it probably isn't 'conspicuous'. Without government subsidies and tax breaks, most opera houses and art museums would probably collapse.

Anyone that suggests the NEA be abolished opens themselves to being called a philistine. This posture no doubt feeds the attacker's sense of status in the same way that conspicuous culture does. How better to show a deep affinity for high culture than demand that others pay for it?

A Measure of Media Bias

The Quarterly Journal of Economics will be publishing Groseclose and Milyo's A Measure of Media Bias. While not freaky, the methodology is pretty cool. He starts with the ADA (Americans for Democratic Action) scores to measure the political ideology of members of Congress. Assuming members of Congress will cite think tanks with similar ideologies, it then becomes possible to assign think tanks ideologies. Then it becomes possible to determine the ideology of media outlets by what think tanks they cite.

Sunday, August 07, 2005

The Da Vinci Code; French Comics

Today's NYT describes how the movie version of The Da Vinci Code will temper the book's anti-Catholicism. The Da Vinci Code with its story of a sinister, centuries-long, religious conspiracy seemed fresh to American readers. In French popular fiction, religious conspiracy theories are almost their own genre. They are particularly common in French comic books. Le Scorpion and Le Triangle Secret are just two popular comic book series that mix religious conspiracy with high adventure.

Comic books are a great way to study French. Unlike their American cousins, they are not dominated by any one genre. (American westerns are common; superheroes are not.) While they are serial, they do not come out as frequently as their American counterparts. For devotees of a series, each hardcover release is a major event. Unfortunately, French students are usually introduced to just Asterix and Tintin, comics that are more likely to appeal to kids. Thanks to sites like that ship internationally, using comics as a basis for language study is simple.

Saturday, August 06, 2005

No Gray Hairs After My First Week Blogging

My Favorite Murder

In 1792, Gustav III was murdered at the opera house at Drottningholm, Sweden's royal palace situated a few miles outside of Stockholm. The opera house was a small wooden affair, which if it remained in use probably would have burned down several times over. The murder caused it to be shut down until the 1920s. At this time the ropes in the stage machinery were replaced and electricity was installed. It is now the oldest opera theater in the world and still has the original stage machinery. At a recent tour, my daddy turned the crank, which created the weather sound effects. For the rest of the trip, he bragged about being "the wind". I would have made a few choice remarks, if I had better control of my own bodily functions. Every summer the theater stages operas from the 18th century.

This muder also inspired the Verdi opera Un Ballo in Maschera. Check out this amazing DVD version with Pavarotti. For the sake of shameless bragging, while I was in the womb, I was lucky enough to hear Pavarotti's final opera performance (Tosca at the Met). The music was great but slightly muffled. My seat was in the fifth row, but the view was completely obstructed. Before I was born, I attended six operas in New York and Berlin. Since being born, nada, not one. Holy Dirty Diapers, what is going on!

French Survey on Hiroshima

60 years after the bombing of Hiroshima, Le Monde asks if Hiroshima...
a) has saved the world from World War III,
b) was a tragedy without real positive consequences,
c) no opinion.
Interestingly, the survey does not include the opinion held by many Americans:
d) the bombings saved lives by ending World War II quicker.

Academics are well aware that changing the way survey questions are expressed can impact the results. The story drawn is often that respondents are irrationally influenced by word choice. Often these seeming inconsistencies are created by the questions being incorrectly formulated. How would a respondent who believes (d) respond to the survey by Le Monde? They might think that the real purpose of the question was whether or not the Hiroshima bombing was beneficial and select (a). Later, if asked a simple yes/no question of whether or not the bomb saved the world from World War III, they might take the question at face value and answer 'no'. A similar inconsistency would appear, if the respondent chose (b) and then was later asked if the bombing saved lives by ending World War II quicker. Respondent's are doomed to inconsistency, if they are asked a series of related and incorrectly formulated questions.

Friday, August 05, 2005

Affirmative Action in Higher Education and Future Earnings

Peter Arcidiacono has a paper forthcoming in Econometrica with some intriguing results.
1) Preferential financial aid for blacks increases the rate at which blacks go to college but not their future earnings.
2) Preferential treatment in admissions increases the rate at which blacks attend quality universities but does not increase their future earnings.

The limited ability of affirmative action to increase black earnings probably reflects two facts that apply to all students regardless of race.
1) Students that aren't going to college because of finances probably wouldn't get much out of more education anyway.
2) Within the universe of competitive colleges, there are relatively little gains to going to a better school. (Dale and Krueger)

Response to Miss Anne Thrope

My post Limited Beachfront Property and Population Growth received the following post from Miss Anne Thrope.
What if those who would derive the most satisfaction from beach happen to be
poorer than average, and become unable to afford it?
Her point is interesting. As population grows, the price of unique tourist paradises rises, meaning that the tourists at them will probably become wealthier. Some poor 'beach bums' will be priced out of the market. It is even possible, though in my opinion unlikely, that this might dominate the effect that an increase in population increases the number of beach bums vying for the unique spots. The most likely outcome is that tourists will become wealthier and more predisposed to enjoy the beach.

Unique spots becoming pricier brings an additional social benefit - it increases the motivation of the wealthy to achieve wealth. The existence of luxury goods provides a motivation for people to create the goods and services that provide high incomes. If wealth did not bring its privileges, people wouldn't strive for it. Why become a heart surgeon, if a general practitioner can afford everything desirable? Why become a doctor, if a nurse can afford everything desirable? This is one reason why market price is often a good indicator of social value.

Of course, new construction of resort hotels is making these unique spots less unique everyday. Perhaps someday all developable beachfront property will be put to its best use.

Thursday, August 04, 2005

Limited Beachfront Property and Population Growth

There is only one Ocho Rios in Jamaica. Given that the amount of pristine beach front property is limited, it might happen that eventually it will all be occupied and that increases in population will decrease the percentage of people that can enjoy it. Surprisingly, the fact that natural paradise is limited, actually highlights an additional benefit of population growth.

As the wealth and the population of the U.S. grows, eventually Ocho Rios might hit its tourist capacity. In this case, increases in U.S. population would not increase the number of tourists in Jamaica, but it would increase the satisfaction experienced by the tourists. Why? Because the individuals who become Ocho Rios tourists would shift towards those that value the beach experience more highly. My daddy has been to Ocho Rios even though he is not a hardened beach bum. If the population of the U.S. had been twice as great, the number of devoted beach bums would have been doubled. Fanatics of planter's punch might have outbid my daddy for that hotel room. This shows how increased population helps make the most out of limited resources like beachfront property.

Of course, for now there are still new islands to commercialize. Real estate developers will probably see to it that there are plenty of beach front hotels for me to visit when I get older.

Wednesday, August 03, 2005

Witch Killing in Tanzania

The killing of witches is fairly common in rural Tanzania. The victims are typically elderly women and the killers are often relatives. Predictably enough, Edward Miquel finds that there are more witch killings when extreme weather conditions cause poverty. After all, witches are believed to cause bad weather. In Tanzania, witches are also suspected to cause disease, but an increase in disease does not seem to increase the number of witch killings. This raises the possibility that the women are not scapegoats. Instead, when times are tough, some women are being murdered to avoid the costs of supporting them.

Tuesday, August 02, 2005

The Monetary Policies of Father Coughlin and Michael Moore

A significant cause of the great depression's persistence was recurring decreases in the money supply. This increased the real value of wages and priced many people out of their jobs. Expanding the money supply would have gone a long way to easing the depression. This was essentially the opinion of Father Coughlin, a charismatic radio star whose speeches reached thirty million people. Only decades later did this become the consensus opinion of the economics profession.
1) In 1931, Father Coughlin advocated in front of the House Ways and Means Committee on the desirability of paying World War I veterans a bonus. One motivation of this was creating cheap money.
2) In 1933, he called on the government to double the value of the gold in its possession.
3) He also wished to cheapen money by instituting symmetalism, the use of gold and silver in one coin.

His possession of something resembling a coherent monetary policy seems almost accidental given his economic illiteracy. Although he struggled with the little economics that he had in school, he felt confident enough to espouse a laundry list of crazy economic views. For example, he supported the proposed Frazier-Lemke bill, which would have the federal government purchase outstanding farm mortgages by printing billions of dollars in paper money. This would seem consistent with his desire for cheap money, but he actually argued this would not be inflationary because the new money would be backed by the mortgages. Like many others during the time, he believed that the government propping up wages would ease the economy out of recession.

An amazing thing about Coughlin is that as media demagogue, he was able to convince many listeners that he was an expert in monetary policy. At least early in his career, he even convinced quite a few senators and congressman, who petitioned that Coughlin be appointed as a U.S. delegate to the London Economic Conference. Later, he lost his reputation for economic expertise, as his rhetoric degenerated to anti-semitic conspiracy theories involving Jewish communists, Jewish international bankers, and even the belief that Jewish international bankers were financing the Jewish communists.

Michael Moore is not known for his monetary policy, nor is Ann Coulter. Modern day rabble rousers rarely advise the monetary authorities. Unlike the 1930s, most people now believe that the monetary economists understand monetary economics better than the media pundits. And of course, they're right.