Marginal Revolution

Unemployment in South Africa

Alex Tabarrok

More than 40 percent of the South African workforce is without a job and nearly 60 percent of those who are jobless have never worked. The NYTimes is correct that South Africa faces many problems including poorly educated workers, AIDS, and crime. But it is not true that South Africa is doing poorly "despite [it's] sound economic policies." In particular, if you read to the 22nd paragraph you find this buried lede:

In other developing countries, legions of unskilled workers have kept down labor costs. But South Africa's leaders, vowing not to let their nation become the West's sweatshop, heeded the demands of politically powerful labor unions for new protections and benefits. According to a study conducted in 2000 for the government's finance department, South Africa's wages are five times higher than Indonesia's, even though its workers are only twice as productive.

To the great detriment of its people, South Africa's leaders have been successful. South Africa is not the West's sweatshop.

When is it rational to honor sunk costs?

Tyler Cowen

Alex offers up some biography and describes his encounter with sunk costs. He asks the classic question: why honor a cost once it is sunk? Why not just go ahead and do what is best?

Brian at CrookedTimber writes the following, citing a paper by philosopher Thomas Kelly:

The main idea (roughly stated) is that since the value of an action is partially determined by what happens in the future...our current actions can be sometimes justified by the redemptive value they confer on past actions.

What does this mean concretely? Here is one example from Kelly:

One might prefer that, if others have made significant sacrifices in attempting to realize some valuable state of affairs S, then their sacrifices not be in vain. That is, one might prefer that these sacrifices causally contribute to the realization of some valuable state of affairs...Interestingly, one sometimes is in a position to determine, by one’s own actions, whether the past efforts of others will have been in vain. This is true, for example, when it is within one’s power to finish some valuable project in whose service others have labored, but which they are now not in a position to complete. Let us say that when one acts so as to prevent the past efforts of others from having been in vain one redeems those efforts.

In other words, you don't want to admit that you shouldn't have started your blog. And how about this?

Gilbert Harman...observes that, so strong is our desire to see our own past efforts play a role in bringing about valuable ends, we will often adopt new ends, carefully tailored, so that our past efforts can be seen as instrumentally valuable means to the achievement of these ends.

Let's not forget the game-theoretic rationale for honoring sunk costs: You might honor sunk costs so that others do not perceive you as wasteful, or so that others perceive you as constant and reliable. Robert Nozick argued that we follow through on sunk costs as a kind of self-discipline, to prevent ourselves from initiating too many stupid undertakings in the future. If you self-signal that you will follow through on your commitments, you will be more careful in accepting commitments in the first place.

By the way, I have found that women honor sunk costs to a greater degree than do men. Furthermore women often do not like it when men announce that something is "only" a sunk cost.

The bottom line: Once your model of choice is at all complex, no one knows what a sunk cost means any more. So a theoretical scolding of those who honor "sunk costs" is not completely well-defined. That being said, there is still the empirical question of whether most people attach too much weight to previous plans and have a status quo bias. The experimental evidence suggests that we are more rigid than we need to be. The propensity to honor previous commitments may have efficiency properties, but we cannot discard this proclivity when we ought to.

Is overconfidence good for traders?

Tyler Cowen

A little confidence is a good thing. But a lot of confidence may be even better -- particularly if you're a high-powered currency trader playing the international money markets.

Finance professor Carol Osler found that at least some of the wild and unexplained fluctuations in currency markets may simply be due to overconfident money traders. "Overconfidence can help you get ahead, but it can have serious ramifications, too," says Osler, who teaches at the International Business School at Brandeis University.

Osler and her research colleague, psychologist Thomas Oberlechner of the University of Vienna, interviewed 416 currency market traders. They asked these wheeler-dealers to rate how successful they were as traders on a seven-point scale ranging from "much less successful" than other traders to "much more successful." They also asked the traders' bosses to rate the employees' value to the firm, and then asked the traders to estimate what the exchange rate of five currencies would be in six months and in a year.

The first thing they learned is that -- surprise! -- most currency traders have outsize egos: Nearly three in four rated themselves as "better than average." Even most traders working at less prestigious institutions thought they were better than most, Osler and Oberlechner reported in a paper they have presented at two European universities and at Harvard.

The distinct whiff of hubris was confirmed when they compared the traders' self-evaluations with the supervisors' ratings. More than half of the traders gave themselves a higher rating than their supervisors did, while few underestimated their value.

The researchers found that this self-confidence had no impact on a company's bottom line. But it had a dramatic and positive impact on the careers of traders, increasing their chances of becoming a senior trader or chief dealer, when other factors such as age and trading success held constant.

Here is the link. Here is Carol Osler's home page.

My take: I have mixed feelings about the core result. On one hand, competition is thick and you have to take chances to win special positions in life. This requires a certain amount of hubris. That being said, I worry about selection bias in the results. You only observe the ones who made it. Try asking the bankrupt currency traders, lying in the proverbial gutter, if cockiness was good for them. And let's not forget about those in jail, or headed there.

Krugman vs the CEA

Alex Tabarrok

Paul Krugman goes beyond the bounds of decency and evidence when he accuses the Council of Economic Advisors of corruption. His evidence? The following graph (click to expand):

Krugman writes:

...wishful thinking on this scale is unprecedented. What you see in this chart is the signature of a corrupted policy process, in which political propaganda takes the place of professional analysis.

Now, the CEA has certainly made mistakes and can justifiably be accused of optimism (see Brad DeLong and passim) but Krugman's chart is highly misleading. Here is the same data but over a slightly longer time-frame.

With this graph it becomes clear that the CEA has in essence been predicting a return to trend. Obviously, the CEA has been wrong, employment has not returned to trend, but that surely tells us more about the peculiar nature of this recession than it does about corruption at the CEA.

Has political progaganda taken the place of professional analysis? Indeed.

China fact of the day

Tyler Cowen

China's electricity consumption grew by 15 percent last year and 10.4 percent in 2002 - a spike in demand he said was equal to total power consumption in Brazil. "They are adding a middle-sized country every two years in terms of energy consumption," he said.

Here is the full story. Here is an earlier installment of facts about China.

Mexican democratization

Tyler Cowen

1. "The making of Mexico's democracy was distinctive in many ways. There was no Nelson Mandela, no single leader to personify and guide the struggle. Nor was there a single democratic movement, but rather a multitude of initiatives from individuals and groups across the society and the country, which gradually converged as more and more Mexicans became convinced of the need to end the PRI's despotic rule."

2. "We contend that Mexico's opening to democracy is one of the few major developments in the country's modern history that was not shaped by invasion or intervention by the United States."

3. The Salinas cabinet had an amazing preponderance of economics Ph.ds. His Finance Secretary had a Ph.d. in economics from MIT. The Trade Secretary and Budget Secretaries had Ph.ds. in economics from Yale. Salinas's Chief of Staff studied Political Economy at Stanford. The head of the PRI at the time had a masters in economics from University of Pennsylvania. His government favored economic liberalization but did much less for democracy.

4. "It can be argued that Raul Salinas de Gortari [brother of the president, Carlos] did more than any other living Mexican to contribute to his country's transition to democracy. His, however, was not a hero's role; his impact stemmed from the compelling force of his negative example. He did more to discredit the PRI system in the eyes of the Mexican people than anyone else in seven decades, and in so doing, he significantly hastened the demise of authoritarian rule." Follow this link to the famous photo of Raul with his mistress.

5. Since democratization, progress against crime, corruption, and drug trafficking has been slow at best. The Mexican public agrees.

6. Some communities in southern Mexico still reckon time with the Mayan calendar.

7. By 2002, "some were saying that [Vincente] Fox's only truly major achievement had been to get himself elected."

The facts and quotations are from Opening Mexico: The Making of a Democracy, by Julia Preston and Samuel Dillon, an excellent book on how an autocratic society can find its way to democracy.

The jobless recovery

Tyler Cowen

This week's Business Week had a useful though non-revelatory feature article on the jobless recovery (note that the paper edition has much more than the link).

The bottom line? Two root causes -- productivity gains and fear -- appear to be causing our economy's weak employment performance.

Rapid productivity gains mean that a business can produce the same output with fewer workers. So unless demand is truly booming, why hire more people?

At the same time uncertainties have kept business cautious. Terrorism, corporate scandals, and the bursting of the high-tech bubble all provide extra reasons to wait. Counterintuitively, largely positive changes, such as productivity boosts and their accompanying sectoral shifts, can spur caution as well. Why make your irreversible investment today when you will know more two years' down the road?

Some research sources suggest that outsourcing has cost the U.S. only 300,000 jobs in three years, though all such figures should be taken with a grain of salt (for instance, when calculating the number, what is the relevant counterfactual?). A Wall Street Journal survey (12 March 2004) found that only sixteen percent of responding economists blamed outsourcing as a significant source of job losses. More importantly, outsourcing creates more jobs than it destroys; let us not forget the positive role of insourcing as well, the U.S. receives massive capital flows from outside.

And who is to blame for the jobless recovery? Paul Krugman finds a not unsurprising culprit:

...should we blame the Bush administration? Yes — because it refuses to learn from experience. Franklin Roosevelt, in his efforts to combat economic woes, was famously willing to try anything until he found something that worked. George Bush, by contrast, seems determined to try the same thing, over and over again.

I hope Krugman does not really mean the Roosevelt point. Recall that the Great Depression was by many measures worse in 1937-8 than in 1932. A willingness to "try anything" is hardly a recipe for economic success.

And while I buy the Krugman line on Bush's fiscal irresponsibility, we don't find it priced in the bond market. So why should we think those bad policies are driving the labor market?

Brad DeLong suggests that the tax cut was ill-targeted for the purposes of stimulating aggregate demand. Point granted. That being said, government is better at stimulating nominal rather than real aggregate demand. In times of structural uncertainty, often the latter is more badly needed. So I don't blame Bush fiscal policy, whatever its flaws, for the jobless nature of recovery.

The Democrats have little to offer in the way of short-run cures. Perhaps assisting the jobless can be defended on distributional grounds, but it can delay reemployment as much as boost it. A new President, whether or not you favor the idea, would increase rather than lower uncertainty, at least at first. Greater fiscal responsibility will pay off in the future (I am all for it), but I don't see how it will boost employment over the course of, say, two years. Most of the relevant uncertainties are real and structural in nature.

Read this post on why many people are no longer looking for jobs. Reeducation is a significant reason why many people have stopped looking for work. This might someday kick in with higher productivity. But note also that workers fear being locked into jobs that will later brand them as losers. So in times of uncertainty they, like businesses, often will simply prefer to wait.

The bottom line: There is a potential silver lining in the cloud that we call the jobless recovery. Once those people get to work, output could be especially high, provided we don't mess up in the meantime. That being said, responsible economists all along the political spectrum remain puzzled by the jobless recovery. We can cite and roughly agree on its causes. But at the end of the day, relative to other recoveries, we all remain surprised by the slowness of employment to adjust.

Addendum: Here is Alex on productivity and employment.

Alison Krauss + Union Station

Alex Tabarrok

Alison Krauss has the voice of an angel. You probably heard her on the Academy Awards singing a track from Cold Mountain or on the wonderful soundtrack for O Brother, Where Art Thou? where she sings the heart-breakingly beautiful Down to the River to Pray. She plays with the versatile Union Station whose I am a Man of Constant Sorrow was also featured in O Brother. For more, Alison Kraus + Union Station Live is an excellent place to begin.

Cultural imperialism watch

Tyler Cowen

Did the idea of the enclosed shopping mall come to the United States from Vienna? And was the ideology of communal European planning the original inspiration?

Austrian architect Victor Gruen brought the mall concept to this country and designed the first enclosed American mall, drawing on ideas from socialist theory. He saw malls as the new source of American community, though later in his life he became more skeptical.

By the way, what do we do when socialists bring us ideas that transform our country? In this case we named a shopping theory after the guy:

"The Gruen Effect" is what happens when a clever layout causes task-oriented shoppers to forget the purpose of their quick trip to the store and begin shopping aimlessly. It's also the very threshold that the designers of the Mall of America want visitors to cross. "We want people to get lost in the mall," explains Tim Magill of Jerde Partnerships, the group that designed the Bloomington complex. "We want to tweak your perceptions so you'll be exposed to areas you would regularly pass by."

Red books/blue books. Old media/new media.

Alex Tabarrok

Remember the graph of red books and blue books? I presented it here on Feb. 4. More than a month later the NYTimes prints the same graph. Not exactly on par with a Drudge scoop but I'm quite pleased.

Rich nations can conserve water

Tyler Cowen

Efforts to conserve water - from low-flush toilets to more efficient power plants and crop irrigation - are working so well that Americans use less of it than they did 30 years ago, a report issued Thursday by the federal government says.

The flat trend in consumption came even as the USA's population grew and electricity production, the largest user of water, increased.

The study from the U.S. Geological Survey says consumption is largely unchanged since 1985 and is 25% less than the 1970s, when it peaked.

Here is some more evidence:

The biggest savings have been by industry. And that is a result of water-saving technology driven by energy-saving and environmental protection laws passed in the 1970s. Utilities that once needed huge amounts of water to cool electrical generating plants in "once-through" fashion now conserve water by recirculating it in a closed loop.

The report says the USA consumes 408 billion gallons a day. Homes and most businesses use 11% of that. Nearly half, 48%, goes to power plants. Watering crops takes 34%. The remaining 7% includes mining, livestock and individual domestic wells.

Here is the full story, which also ranks states by water use. Here is the original report. On a global scale, agriculture accounts for 70 percent of water use, which indicates further room for conservation. It is indeed a problem that rich nations use ten time more water per capita than poor ones. But in a time when people are talking seriously of nanotechnology, can cheap desalinization be so far on the horizon? Read here on a recent Israeli effort.

What do we know about the children of gay parents?

Tyler Cowen

Not much, according to this incisive article on Slate.com: "The existing science is methodologically flawed and ideologically skewed."

Here is another major point:

...the defensive goal of proving sameness is almost a guarantee of weak science. (The hypothesis that both groups of kids are alike is hard to rule out, but that doesn't mean you've established that there are no differences.) That "heterosexist" bias, Stacey argues, has also encouraged researchers to fudge results, anxiously claiming homogeneity where there's actually some variety. Why, she asks, buy into the view that "differences indicate deficits"?

And consider the following:

Digging around in the existing data on kids of gay parents leads the authors and others to similarly rosy speculations that these children are unusually open-minded. Some studies, for example, show boys playing less aggressively and behaving more "chastely" as youths, while girls' early interests are more androgynous and their adolescence evidently somewhat more sexually adventurous. On the hot topic of sexual orientation, the only long-term study of lesbian-headed families reports 64 percent of the young adult children saying they've considered same-sex relationships (compared to 17 percent with heterosexual parents)—although the percentage of those who identify themselves as gay, lesbian, or bisexual is the same in both groups.

Here is a survey of some reader reactions.

The bottom line: We need some good labor economists, or demographers, to tackle this problem. That being said, the policy-relevant comparison is not "gay parents" vs. "straight parents." Rather it is gay parents vs. an orphanage, or gay parents vs. not having been born in the first place. I'll put my money on the gay parents.

Are bubbles good for economic development?

Tyler Cowen

Fools rush in, but should we mind?

...when it comes to transformative technologies, overoptimistic investors are actually working for the common good—even if they don’t know it. We can be glad that investors financed the construction of thousands of miles of track in the middle of the nineteenth century, despite the fact that most of them dropped a bundle doing it. The same goes for overoptimistic investors who poured money into semiconductors thirty years ago, financed undersea fibre-optic cables in the late nineties, and now are poised to lose their shirts in the coming nanobubble. In the dreams of avarice lie the hopes of progress.

The full story concerns the nanotechnology bubble, by the ever-intelligent James Surowiecki, writing for The New Yorker.

My take: The real story of the invisible hand is that many of the rewards offered by the capitalist system are illusory in value. Ayn Rand had a point that the world rests on the shoulders of the talented few. She forgot that those people often aren't very rational.

Securitizing human education

Tyler Cowen

MyRichUncle is not a lender. MyRichUncle is a network of investors, "Rich Uncles" if you will, interested in financing the next generation of undergraduate and graduate students.

MyRichUncle provides students with Education Investments--funds for school. Upon graduation, students pay a fixed percentage of their future income for a fixed period of time. At the end of the period, their obligation is over regardless of what they have paid.

Education Investments are not loans. That means there is no principal or interest, and there is no obligation to payback the amount initially received. At the end of the payment period, your obligation is over, regardless of what you’ve paid.

Education is the greatest investment one can make toward his or her future. It is the key to opportunity. MyRichUncle is here to make sure everyone can afford it.

In other words, investors give students money and hold equity in their future income performance. Payments range from one to three percent, over a ten to fifteen year period. This is an onerous burden over time but the marginal tax rate is not so large to make the person stop working. Plus there is a 2.5 percent service fee on what you borrow.

Here is their web site. Here is an article on the involvement of Michael Robertson, the MP3.com guy. Here is a Cato policy analysis on the idea.

My take: Why not try this? It will help some people go to a better school. True, the offer will take in some high time preference suckers, who don't really need the money, but those people already have enough paths to ruin.

Keep in mind this is an insurance scheme, not just a loan market or a way to go through school. If it turns out that you are less smart or less hard-working than you thought you were, you pay less back. The self-confident may refuse to buy it, which leaves the fearful dominating the market. Think of this as stupidity insurance, or laziness insurance, packaged under a more marketable and flattering guise ("You too can go to school..."). Of course it is a central question in economics why markets provide so little insurance protection for long-term risks. Let's hope this instrument is the start of a new trend.

Thanks to Paul Edwards for the pointer.

How bestsellers have changed

Tyler Cowen

Here are some basic facts:

The popularity of religious titles has soared. Books such as Left Behind by Tim LaHaye and Jerry Jenkins, the first in a popular series and No. 61 for the decade, used to be sold primarily in Christian bookstores. Now they're stacked thigh-high at discount stores such as Wal-Mart.

Self-help, always a fixture of best-seller lists, is shifting the focus from improving people's lives to improving their health as many baby boomers pass 50. [Diet books, most of all Atkins-related, have become especially popular.]

Brand-name series grabbed a growing share of the list. Chicken Soup for the Soul begat Chicken Soup for the Woman's Soul, which begat Chicken Soup for the Teenage Soul. All were among the decade's 100 most popular titles.

With 12 novels on the list of 100, John Grisham staked out a nearly permanent spot on the weekly best-seller list. Only the titles changed. But if the familiar was popular, there were a few surprises. Previously unknown novelists such as Dan Brown (The Da Vinci Code) and Alice Sebold (The Lovely Bones) ended up among the decade's best sellers.

Fiction, led by thrillers, staged a comeback, accounting for 72% of last year's weekly best sellers, compared with 59% in 1998.

Here are other facts of import:

1. Never have so many books been published: in the U.S. more than 1,000 new titles a week, nearly double the rate in 1993.

2. Aggregate book sales are flat.

3. "last year the average American spent more time on the Internet (about three hours a week) than reading books (about two hours a week). And...the average American adult spent more money last year on movies, videos and DVDs ($166) than on books ($90)."

4. Bestsellers (top ten in the major categories) account for only 4% of book sales.

5. Amazon, Barnes&Noble.com; and BookSense.com account for 8% of U.S. book sales.

6. Discount stores and price clubs account for 11% of U.S. book sales.

7. Humor books have fallen from 5.3% of the bestsellers market in 1995 to 0.6% today.

8. The Cliff Notes version of The Scarlet Letter outsells the real thing by 3 to 1.

9. In August dictionaries are 77% of all reference book sales. Otherwise they run less than five percent of the total.

Here is the the full story, noting that some of the facts are found in the paper edition only.

The bottom line? The book market works wonderfully. If you have any complaint, it should be with the quality of public taste.

USA Today (from Thursday) offers a list of the 100 best-selling books of the last ten years (not on-line). Once you get past Tolkien and Harry Potter, there is little to interest me. That being said, I find it easy to walk into my public libraries and every week find numerous good new books to read.

Who is the best-selling artist of all time?

Tyler Cowen

Charles Schulz would be a better guess than Picasso, but both are wrong. Click here to read one plausible answer and see some images.

They should have blogged

Alex Tabarrok

In Dry Holes in Economic Research (Kyklos subscription required) David Laband and Robert Tollison find that a large fraction of economics papers (26%) are never cited and despite large increases in resources devoted to publication this percentage has not changed in decades.

Between 1974 and 1996, there was a substantial increase in the emphasis on academic research in universities located in the United States and elsewhere throughout the world. This increased emphasis was, and continues to be, reflected in a variety of increased incentives for faculty to produce research, including higher salaries, reduced teaching loads, increased money for travel, on so on. Yet, as we report in this paper, during this time period the rate of uncitedness of economics papers remained constant (at 26 percent). Clearly, universities and taxpayers/supporters of universities are obtaining no enhancement of research output (in terms of citations) from the increased subsidy to faculty research. We discuss the implications of this result for the publication and organization of economic research. In particular, we discuss the fact that resources devoted to up-front screening of papers by authors and journals have risen substantially over this period, but to no avail with respect to reducing the incidence of dry holes.

Copyright protection for folklore?

Tyler Cowen

Two days ago I asked whether we should extend copyright protection to folklore. Thank you all for your interesting and informative replies.

Here are some possible answers which I don't find sufficiently forcing:

1. Folklore has already been produced. TC: Of course you could say the same for a good deal of music. Why treat folklore differently?

2. Most folklore is very old and copyright protection would have expired by now anyway. TC: Folklore is not so old and musty; rather it evolves frequently and changes rapidly. Here is one source on contemporary folklore, here is another. Here is a brief account of contemporary Haitian folklore.

3. Folklore could never have evolved in the first place, had much earlier folklore received copyright protection. TC: This point is true, but you still could have copyright protection against for-profit uses of folklore. Author Edwidge Danticat can publish and copyright a processed version of folklore. Since those books bring in money, the law could stipulate that some royalties go back to the folklore creators.

4. Copyright is an incentive for future production, and we're not going to have much future folklore anyway. TC: Hard to disprove a claim of this kind, but I don't believe it. Arguably folklore has never been more vital than in today's world.

So we are left with the following:

5. With folklore it is harder to define a clear line between copying and independent discovery. Similarly it is hard to draw a clear line between general inspiration and outright borrowing. Borrowing in general is harder to trace, a given derived story could have come from numerous sources. TC: This argument carries real force with me, although how different is music, consider George Harrison.

6. A culture is better off if other cultures can borrow its tales and "memes" without restriction. TC: Copyright holders could always waive their rights if that were beneficial, though admittedly there is an externalities problem for a culture as a whole. And again, you could apply the same argument to music.

7. Folklore is collectively produced, ownership is hard to assign, and there are no relevant corporate entities in most cases. Entrusting copyright ownership to "tribes" will encourage politicization and rent-seeking behavior. TC: Hard to argue here.

8. Folklore rarely offers a final, set, canonical, or well-defined final product. TC: I wonder if digital technologies will move other art forms in this same direction.

All interesting hypotheses. Many of them might be true, I still can't get past "I don't trust the courts in these other countries to enforce copyright in folklore, it will just lead to rent-seeking." See my earlier post, at the first link, for further clarification.

I hope to soon consider other angles on related problems, such as whether there is a right to cultural privacy.

Markets in everything, in the subjunctive...

Tyler Cowen

Here is a new way of organizing peer groups and your Friday evening out:

The ability to track the locations of people has a lot of other applications of course. As the tracking devices become smaller and cheaper expect to see parents putting them in their children both to protect their children from kidnapping and also simply to find out what trouble the kids are getting themselves into.

Another possible interesting application would be to manage affinity groups. Imagine a traveller who is cruising down a road trying to decide which night club to try out. If people registered with an affinity tracking service then a traveller could choose a club or restaurant whose currently present patrons fit some desired demographic profile. One obvious problem with such a service is that just because one person likes a particular type of person doesn't mean that most who fit a desired profile will like that person in return. Look at celebrities for example. They are loved by all sorts of people who the celebrities would very much like to avoid. So a service would need to develop eligibility criteria that require matching of preferences in both directions before that person driving down the street would get a flashing light on their car LCD pointing them to a particular bar or night club.

That's from Randall Parker, read his longer discussion, which focuses on GPS monitoring of criminals.

The costs of corruption

Tyler Cowen

More corrupt states have lower credit ratings, even after adjusting for other determinants of creditworthiness. What is the economic impact of a one standard deviation increase in the public corruption index above the national mean? Over half (0.58) of a Moody's credit rating.

Here is the original research. Here is an earlier MR discussion on which is the most corrupt state.

Hot potatoes

Alex Tabarrok

I am delighted that I can now buy irradiated beef at my local supermarket. It's safer than regular beef but I would buy it just to spite the anti-science hysterics who kept this technology off-the-shelf for decades. Irradiation has recently been approved for Hawaiian sweet potatoes - the expense of the previous technology, methyl bromide fumigation kept these purple spuds out of mainland markets.

Of course, the mainland-based U.S. Sweet Potato Council is worried about competition. Mainland growers produce 1.3 billion pounds annually and Hawaiian output is only 1.8 million pounds leading the Potato Council to a unique argument for protectionism, "Hawaiian production is a mere pittance . . . and therefore, Hawaii should be able to consume every sweet potato they produce and then some."

Road to Serfdom, 60th anniversay

Tyler Cowen

BBC informs us that this is the 60th anniversary of the publication of Hayek's Road to Serfdom. In memoriam, here is a fact sheet about the book.

I have always seen huge pluses and minuses in the work. On the down side, mixed economies did not lead to fascism, communism, or totalitarianism, as Hayek had feared. On the plus side, Hayek offers his strongest and clearest case for liberty. Only rarely is political decision-making about trying to do the right thing. His analysis of the dynamics of political power remains a "public choice" classic to this day.

Thanks to Ray Squitieri for the pointer.

A rant against Gateway service

Alex Tabarrok

I'm off to the North Carolina beach so expect reduced blogging from me. Ordinarily, I would holiday-blog when my wife wasn't looking but my portable refused to boot more than two weeks ago. It was obviously a hardware problem so I knew the otherwise capable techs at GMU couldn't fix it but before taking it to Gateway I needed their authorization. That took a few days. After a week of sitting on the bench, the Gateway store in Fairfax ran a diagnostic and realized that they couldn't fix it either. They promised to expedite it to the main service center. A week later I found out they were still waiting for, get this, a box to be sent to them so they could send the portable to the service center. A box#$*! (Worse yet, I gave it to them in the original box it came in - foam included.) So finally the computer makes it to the main service center and now I am told it is waiting for a part!##!@! Now, wouldn't you put your service center and parts warehouse close together like say in the same phrelling place?

How to control federal spending

Tyler Cowen

Read this piece for the nuts and bolts. I would quibble with some of the details, but this is a good start.

Markets in everything, yet again...

Tyler Cowen

Now you can get paid to hear ads and take telemarketing calls:

Adnoodle has signed up 15,000 consumers who have agreed to listen to recorded telemarketing pitches, speak with telemarketers and respond to e-mail solicitations -- for a price. He says 500 to 1,000 people are enrolling daily, and he is planning a promotion campaign on college campuses this month before he "hard-launches" the program this spring.

"It's all about getting value for the consumer -- because consumers have value, right?" says Shifrin, 35, whose other company, AutoWraps, pays consumers to put advertising on their cars.

To enroll, consumers go to adnoodle.com and decide the minimum per-minute payment they would accept -- generally, the lower the payment, the more companies will contact the consumer. The recommended range is 10 cents to $1.20, but registrants are advised that "bids" of 10 to 50 cents are likely to draw more ad calls. Participants also have the option of being paid in entries to a $5,000 Adnoodle sweepstakes.

Registrants also choose the ad vehicles -- telemarketing, e-mails, or both -- and they can choose the window times they'll receive the ads. They complete a survey that asks gender, age, number of children, interests and consumer behavior, so companies can target products and services.

The typical Adnoodle sales call is a recording and states upfront its cash offer for listening. Not enough coin? Too busy right now? You can accept or decline -- no obligation. Each ad runs a minute or more. The consumer must correctly answer a multiple-choice question at the end to get paid. "Knowing that the person who heard that message understands the content is really a leap in advertising," says Shifrin [emphasis added].

At the end of the call, consumers can opt to receive a coupon for the advertised product or talk to a live representative -- or hang up. Payment is via PayPal, the online payment company.

"For 2 1/2 minutes a day, if your average price is $1 a minute, you make $80 to $100 a month," says Shifrin. "Not bad, right?" Actually, it's more like $75.

In other words, it pays better than blogging. Here is the full story. Here is the website, if you want to sign up.

My take: If you think the idea can work, you have a very cynical view of human nature. You must think that people, listening to ads only to earn some money, nonetheless cannot resist buying the product. On second thought, does that sound so wrong? On the plus side, pricing ads and customer time has long been a theoretical dream of economists. That being said, I'll bet against this project lasting, especially once word gets round and the pool of applicants changes. A sufficiently hardened idiot or curmudgeon can't be convinced by anything. Or how about outsourcing the receipt of the phone call? And you will recall that pay-to-surf web sites bombed in the 1990s.

Haitian fact of the day

Tyler Cowen

Mr. Charles must also rebuild a force corrupted by Colombian drug traffickers, who pay millions of dollars a year to Haitian officials to ship cocaine through Haiti to the United States, the State Department says.

The United States government estimates that the value of bribes paid in Haiti by cocaine kingpins is nearly three times the government's spending on police, courts and justice, and that nearly a quarter of the Colombian cocaine reaching the United States flows through Haiti — almost 80 tons a year [emphasis added].

Here is the full story.

And by the way:

Haiti has seen 15 governments and army juntas in the past 18 years. Throughout those years, even under Mr. Aristide, who was democratically elected, "a small economic elite has supported a predatory state" shored up by "pervasive repression through army, police and paramilitary groups," the World Bank said in a 2002 study.

Here is my earlier public choice account of Haiti.