Truck and Barter

Capitalism: You may say you hate it...

Via Jacqueline Passey's blog, I found this little gem of a movie:

Hypocrisy

A cute poke at those people who decry capitalism's "dehumanizing" aspects. Though the movie only hints at this, I think it's also worth pointing out (largely because, yes, I do get that pedantic at times) that really only a flourishing capitalistic system can make possible the easy access to a wide range of "alternative" products one might buy if one is disinclined to consume goods that have a certain corporate "taint" to them.

3rd Party Toothpaste

Much has been made of the 3rd party “spoiler effect” this election cycle. For example, many Democrats are angry that Ralph Nader is running again. They fear his being a possibility will draw votes away from Kerry and hand Bush his second term. “A vote for Nader is a vote for Bush,” is a common phrase used by Kerry supporters. Of course that is based on the assumption that Nader supporters prefer Kerry to Bush, which may or may not be true. Let’s think about it.

It seems to me that the market for toothpaste is essentially a two party system. Crest and Colgate look like they have substantial market shares. Suppose I were Aquafresh man. When I check out with my Aquafresh, no one says to me, “You know that buying Aquafresh is like buying Colgate because you’re taking that profit away from Crest.” Sounds ridiculous, doesn’t it? In fact, buying Aquafresh is not like buying Colgate at all. They are not perfect substitutes. Neither are Kerry and Nader or Bush and Badnarik (the Libertarian Party candidate). I don’t care that Crest is not getting money from me because I don’t prefer Crest. I prefer Aquafresh. A vote is like a purchasing decision. It is an expression of preferences.

Those of us who vote for 3rd party candidates are not doing so because we don’t understand the consequences of our actions. On the contrary, I think I am acting very rationally. I get more value out of supporting whichever candidate I prefer than I would voting for the Democrat or Republican I dislike least. I understand that allegiances to political parties are stronger than allegiances to toothpaste companies. Nonetheless, the comparison is interesting to ponder.

As it turns out, I’m a Colgate man but I still plan on voting for a 3rd party. And what about the half of the Americans who don’t vote at all? Well, they just don’t care about their teeth.

I know which I'd put my money on

Which is the better predictor of election outcomes: polls or futures markets? The NYT has an quick look at the current discrepancy between the two regarding the possibility of a second Bush term.

Should anyone give credence to such exchanges? "Our contracts have a much higher predictive value than any public opinion poll because people have to put their money where their mouth is," said Michael Knesevitch, director of communications and business strategy at Intrade, which was founded in 2001. "We predicted all the primaries. We also had Edwards as being the vice presidential nominee back in May."

The Iowa market, housed at the University of Iowa, has been around since 1988 and makes somewhat less exuberant claims. A comparison of 596 opinion polls with Iowa's presidential futures prices at the time the polls were conducted shows that the futures prices were closer to the actual result 76 percent of the time, according to Thomas A. Rietz, an associate professor of finance at the University of Iowa and a director of the market. As of Friday, Iowa traders thought that Mr. Bush had a 52 percent probability of winning.

Actually, I have reservations about both methods of predicting elections. Markets are just second worst of the two.

Revisiting Edmund Andrews

Last October, I noted with sadness that I could no longer trust The New York Times business section for Mr. Andrews' failure to substantiate claims regarding the "majority" of economists' and forecasters' views on the economy. I argued that factual assertions made in news articles require source statements; only when social facts are established within reason can we move forward in public debate.

Now, Russell Roberts is all over Mr. Andrews for a whole shopping cart full of intelectual crimes: drawing conclusions from inconclusive data , stating opinions as facts, using political sources without disinterested affirmation, and simply getting the numbers wrong. He concludes:

I suspect the New York Times reporter misread it to mean that the number of jobs in the high-paying industries is unchanged, ergo, zero job growth in the high-paying industries.

I have a call into Mr. Andrews. I'll re-post if anything changes.

But here's what's amazing and a little bit frightening. This claim that no new jobs are being created in the highest-paying industries will become what Joel Best calls a "mutant statistic." Whether it's true or not, because it was in the Times, it will get quoted and cited as fact. I don't think it is. If I'm wrong, I'll let you know.

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Iraqi Economy Update: 70% Unemployment Rate???

The macroeconomic condition of Iraq is impossible to cover thoroughly and objecively without reasonably accurate statistics, which exist for some government-controlled operations, and little else. Hence, data on the decentralized labor markets are nonexistent, except for nonscientific "expert" estimates, which I've already shown to be an inconsistent mish-mash.

One of the most recent estimates was made by unknown experts with unknown agendas at the college of economics at Baghdad University. On Aug. 1, Al-Jazeera reported:

A study by the college of economics at Baghdad University has found that the unemployment rate in Iraq is 70%.

The study says the problem of high unemployment is going from bad to worse, with the security situation deterioriating and the reconstruction process faltering.

No further detail is provided--like the authors' names, when this study was conducted, what methods were used (did they ask 10 men in Baghdad?), which geographical areas were included (probably excluding the Kurdish regions), and who funded the work. Are the sampling and nonsampling error 5% or 30%?

The article does note that scam artists are are rampant (absolutely credible), and the reporter is sticking to the story that most Iraqis believe that working for the US is treason.

The article spread like wildfire on alternative media outlets (Google 70% unemployment in Iraq), and I report it here only because I insist on finding out more. I have emailed the author of the Al-Jazeera article, Ahmed Janabi, asking him for either a copy of the report or its authors' contact information.I will not stop my inquiries until I get a copy of the report.

Note: Any reader who can connect me with the economists at Baghdad U. will be greatly admired and appreciated.

Quotes for Reflection

In Italy for thirty years under the Borgias, they had warfare, terror, murder, bloodshed. They produced Michelangelo, Leonardo da Vinci, and the Renaissance. In Switzerland, they had brotherly love, five hundred years of democracy and peace, and what did they produce? The cuckoo clock.

-Orson Welles (cited in Impossibility: The Limits of Science and the Science of Limits, by John Barrow, p.31)

It is probably no coincidence that the hotbed of medieval Europe’s inchoate capitalism was Italy, with its Mediterranean exposure to Islamic culture.

-Robert Wright, Non Zero, p.158

Prisoner of the Month

A prominent Maldivian artist Mr. Naushad Waheed is being profiled at Writers in Prison for this month:

A cyberdissident and prominent artist in the Maldives, Naushad Waheed has been an outspoken critic of the government for many years. His latest arrest took place on 9 December 2001 in Malé. He was held in Dhoonidhoo detention centre for about five months before being transferred to house arrest. On 14 October 2002 he was tried in the Criminal Court without access to a lawyer or the opportunity to defend himself and ten days later was sentenced to fifteen years. He was charged with treason, reportedly because of his involvement in public debates deemed critical of the government and correspondence with Amnesty International detailing human rights abuses…

The following Amnesty report comments on the dire states of the human rights situation in the country including the state of the criminal justice system:

Continue reading "Prisoner of the Month"

Tricky Transaction Cost Strategies

As some may or may not remember, I recently relocated to the Washington, DC area (Falls Church, so stress on the "area" for those who don't know the layout). Not having the time or capital to invest in buying, I was once again plunged into the ugly world of renting an apartment.

I found a place for a price I was willing to pay and just moved in. During the process of investigating the place, I was told repeatedly that the management company had a hassle-free, 30-day, don't-like-it-you-can-leave-for-free policy. At first I thought, well, ok, that's nice. But I didn't think much about it until later.

Later, of course, when I was considering taking them up on the offer and getting out of the place I now find myself. The apartment is passable, but has some features that, on the margin, would put it below other places I had seen. Of course, I didn't know of these until I moved in.

Which, conveniently or inconveniently depending on which side of the table you're sitting on, is when I thought more about the 30-day policy. While it's pitched as a way to guarantee that "you'll be happy" with your home, it really does something much different: it prevents the management from having to be responsive to situations that are brought up during move-in.

In both time and money (though mostly money), it's not worth it for me to leave, despite the numerous problems I've encountered. None of them make the place "unlivable" by any means. They are, however, enough that I sought out plenty of people to complain. In the midst of an argument, I realized what was going to happen should I suggest that I wanted to leave. "Fine," I heard the likely reply "we'll get you your security deposit right now."

The cost to the management company is very small should I decide to leave, especially when the housing market is as tight as it is here. I, on the other hand, have to face considerable costs should I wish to pack up again, find a truck or movers, locate a new apartment, and get out of the deal. And I'm on the low end of the spectrum of this situation. Recently, in the management office, I witnessed a similar problem being voiced by another tennant: a blind man with a seeing-eye dog that had been given a place without specific features he needed. His ire over this was met with cool patience: he is always free to leave if it's that bad. I didn't see how it worked out in person. Rather, when I went to voice my own complaints, each person in the leasing office mentioned to me that he had stayed (they knew I had seen it, and at least pretended to be upset that it had gotten to that point).

"That's no victory," I said. "In fact, it probably simply reinforces your poor performance." I spoke calmly, but could tell the manager was offended. I tried to explain the problem: the guarantee dramatically lowers the cost to them when someone is very unhappy because it is included in every contract that the lease can be nullified within 30 days. The fact that the residence company only has to hand over the small check (they don't require a full month's deposit) means they didn't lose out on much in principle or interest. And the time to end the contract is very different than a long argument between landlord and tennant about the condition in which the apartment ought to be when moving in takes place. In contrast, the blind man would have to begin his search again for a place that fit his needs, then go through the process of packing and moving all over again (which, I'm assuming, is quite a bit more of a hassle than it was for me). Knowing that, the company can let the problems with the current place be more significant than other apartment complexes, and still retain tennants. We're free to leave because it's so easy for them to end the contract, or to dawdle while answering service requests that they just don't face much cost in turning the apartments over.

To which the manager told me, "No, the guarantee is there only for your protection."

Russia's Putin-Duma: Welfare to be Paid in Cash

One of the major barriers to economic reform in Russia is the in-kind welfare benefits given to veterans, who are generally perceived as deserving. These in-kind benefits are housing, medical care, public transportation passes, etc.

The Russian system is geared not just to finance such welfare benefits but to directly allocate and provide them. One result is a two-tiered system: 1) a privately-run Western system of medicine ("American doctors"), new apartment buildings, and Mercedes for those young, adaptive, and perhaps unscrupulous, and 2) a publicly-run network of 1930's-1970's quality medical system, decrepit apartment houses, and creaky transportation options available to the State-dependent. In my opinion, almost everybody tacitly recognizes that the latter are horrendously inefficient and welfare-reducing (subject to bribery, graft, fraud, ineptitude, rudeness, dirtiness, etc.). But these systems are not wholly independent; you can't sustain a sea of prosperity within a ghetto, and the public systems are holding back the advance of the private system...

Hence, I applaud the Putin-Duma's initial attempt to create a schism between finance and production in welfare, in the hope that the public systems can eventually be absorbed into a quasi-private sector:

The new system will also increase transparency, and crack-down on those who use fake ID to abuse the system.

But many genuine claimants see losing their automatic benefits as an insult. Millions of Russians are entitled to state help in recognition of their role fighting or working for their country. They see that as a mark of respect.

Some pensioners say they will suffer serious financial implications...

''Our benefits have been paid for by the blood of our fathers - by our own hard labour," her letter read.

"Keep your paws off them, or face the curse of the nation. You still have time to change your mind - use it! Signed - Lidiya Malokeeva, Murmansk, a victim of your repressions."

Analyst Stanislav Belkovksy believes opposition to the reform is as much emotional as economic - a hangover from Soviet times.

''For this nation, the role of the state as a father and mother is of paramount importance," he explains.

"It's much more important than any money, and especially in the sort of amounts suggested by the new law."

I tend to perceive such moves as sacrificing Russia's poor at the altar of hope for its future generations. Russia's government is no longer letting them get in the way. Some--probably many--invalids, veterans, etc. will find their purchasing power severely eroded, as has happened with the disproportionate increases in the regulated prices of public transportation. As a result, how will the poor respond? Nobody is suggesting that they will starve to death, but only those with children and grandchildren they haven't alienated will probably see little difference in living standards.

Statsmerkwürdigkeiten: Master Plans of Disequilibrium

I hereby initiate a new series of posts on T&B; entitled "Statsmerkwürdigkeiten", which is German for "the remarkable things of the state". The word has an origin in Gottfried Achenwall's lectures in the 18th century, although we use it with an impish sarcasm. (I found it in a translation of Meitzen's History, Theory, and Technique of Statistics). See page 5 of this document for orginial German context.

Our first example of Statsmerkwürdigkeiten is this Washington Post piece, demonstrating that there is no invisible hand coordinating the master development plans set by local governments.

Ask youself what happens if the big players in a tight network of local governments use their zoning power to plan for ~2.6 jobs for every home in the community, but people prefer to live in densities of ~1.5 jobs per home:

Attracting workers -- but not the homes for all of them to live in -- is not just official policy in Clarksburg and Montgomery County; it has increasingly become the practice across the region. Local governments believe this makes financial sense because workplaces pay more taxes and use fewer government services than homeowners do. And governments maintain this imbalance through zoning and other development controls.

But by creating housing shortages, the policies push developers, home buyers and renters farther and farther away to find available land and more reasonably priced houses.

This migration, in turn, produces longer commutes to work, more road congestion and the destruction of remote natural habitats, planners say. The extra auto travel contributes to other troubles, including air pollution and the "dead zones" in the Chesapeake Bay. And, most of all, sprawl.

"Many local governments haven't controlled growth, unfortunately -- they've deflected it," said Gerrit Knaap, a planning professor and the director of the National Center for Smart Growth Research and Education at the University of Maryland.

Developers are often blamed for sprawl, and as self-interested businesspeople, they often lobby for road and home-building projects in outlying rural areas. But to a large extent, they are only catering to the housing demand in the Washington region within the constraints placed on them by local governments.

"Developers do what makes them money -- they build what they find to be profitable," Knaap said. "But what they find to be profitable is determined by consumer preferences and public policy."

Government officials find that they're punishing people who never live in their area, since they buy their homes elsewhere:

Several jurisdictions in the Washington area have pursued a strategy of attracting more workplaces than homes, but Montgomery County under County Executive Douglas M. Duncan (D) made it an explicit goal. Duncan proposed -- and the County Council approved in June -- a policy calling for faster job growth than housing growth.

New residents generally cost the county money. The average household in the county pays about $6,500 in property, income and other taxes to the county. But the county spends about $8,500 a year educating the average school student, not including state and federal aid.

"This policy is good for the tax base," Duncan said.

Or, as a Montgomery County booklet puts it: Creating workplaces faster than homes is "the economic development strategy yielding the greatest long-term net fiscal benefits."

County policy aims for employment growth of 2 percent and household growth of 1.4 percent annually. Though it won official approval only this summer, it appears to have been in practice for more than a decade.

Good for the tax base or good to get him re-elected?

Union Busting

I was going to post the recent happenings north of border dealing with Wal-Mart's union troubles, but Kevin beat me to it. I searched for more info on unions in Canada and came across a rather disturbing case of employer intimidation:

Toronto, Ontario: The Ontario Labour Relations Board will begin a hearing tomorrow into unfair labour practices filed by the Ontario Public Service Employees Union against the Governing Council of the Salvation Army in Canada and Salvation Army Community Living, London, Ontario.

The union has been on strike at Salvation Army Community Living since December 14, 1999.

The union is charging that the employer and a private security firm retained by the employer, have engaged in unlawful conduct by:
conducting surreptitious audio and video surveillance of the picketers;

intercepting private communications between persons on the picket line;

intimidating and harassing picketers through verbal abuse and sexual harassment;

and physically striking picketers by running into them with their vehicles

If you see one of those guys ringing the bell hop into a car after you just blew him off, run!

Congressman Moran: CUT SPENDING!

As a resident of the district represented by Democratic Congressman Jim Moran, I've just received an email from his office. The email includes a survey with the following multiple choice question:

1-Which statement best fits your views on our country's fiscal situation?

The President's tax cuts should be fully repealed in order to reduce the deficit and pay for the war on terrorism.

The portion of the President's tax cuts that benefit the wealthiest two percent of Americans should be repealed in order to reduce the deficit and pay for the war on terrorism.

We should keep the current tax cuts intact and continue deficit spending required by the war on terrorism.

We should cut taxes further and continue even more deficit spending required by the war on terrorism.

Notice the missing option: I would like for you to cut federal spending on everything but defense issues.

Woodchip Stamps

Celebrating the national timber industry, Switzerland's post office is selling stamps made from pine; every one will be as unique as a snowflake.

In addition to stamps that smelled like chocolate, last year they made a "high-sensory-impact" Braille stamp.

HP goes to the Penguins

Thought this was an interesting announcement from HP: first notebook with Linux installed.

Apart from issues about usability, I've found no one who doesn't seem to think that Linux is a better operating system in terms of flexibility and reliability. Which is why I've always been interested in why it wasn't a bigger seller. One of the usual answers would be path dependence, arguing along the lines of the story heard in most econ classes: the QWERTY keyboard versus, say, the Dvorak one. The Dvorak configuration has been shown to be more efficient, plus, it's not that hard to switch our current keyboards into that configuration. So why do we persist with inferior solutions? Are people just sort of lazy and/or dumb? (I tend not to think so, but this is often the tone I hear in economists voices when they talk about the fact that people don't regularly conform to models of rationality.)

In Microsoft, issues of (possible) path dependence have gotten big enough to warrant investigations about predatory practices and monoplist behavior. Everyone uses it because, well, everyone uses it. We've settled on an equilibrium that tends to reinforce itself, since the cost of getting out is view to be higher than the benefits gained from the move. And the more people settle into it, the harder it becomes to get out. But, is there really any good reason to stick with Microsoft, other than that fact that it's simply everywhere? If not, should we expect to see increasing migration away from Microsoft as its market share decreases since ubiquity, then, was the real strength?

Wireless net access as public good?

I've no desire to see the government get into business doing anything it doesn't already do. But every so often I see a small reminder that wireless networking just might be a huge boon to large parts of the population if it were uiquitous and cheap.

This weeked I flew to Chicago to attend the wedding of a longtime friend and now a current coworker. This, of course, meant I had to fly back to DC. Which, as luck would have it, was covered by thunderstorms. The delay set in motion a series of events that culminated in one of the flight attendants on my plane having to stop work, for she had hit the maximum hours-per-whatever that had been negotiated by her union. Of course, she lives in the DC area, and flew back on our plane with us. But we all had to wait in the plane for an hour and a half while they found another person who could staff the plane to meet FAA guidelines. The plane was one of those small things, with two seats on either side of the aisle and requires you to walk out onto what feels and sounds like the runway itself to board. Meanwhile, the reputation for baggage loss at Dulles had reached legendary proportions. (On one flight for the carrier I was on, 30 of the 49 people on the flight didn't get their baggage when they deplaned.)

Which is all nervous-making to say the least. Connections were being blown entirely. Everyone was asking if their connections in DC were delayed as well, since they understandably wanted to know if they would be able to get out again. The attendant didn't know. The pilot was trying to find an available crew member. And we were sufficiently far away from the terminal that no one could walk over to get an updated list of flights.

We were not, however, too far away for one guy and his bright idea. Airports like O'Hare have been gearing up WiFi like mad. So he powered up his laptop, turned on the wireless card, and got to the website for the air carrier. He patiently looked up everyone's connecting flight numbers to give them the new times of departure. Everyone was thoroughly grateful, and the mood of the plane eased considerably. Even the people who got bad news were resigned, and started making alternate plans calmly.

The airline couldn't do this on its own. But the ability to access the information was a major factor in keeping everyone pretty calm, and in preventing an already uncomfortable event into a shouting match (plenty of which I've seen over the years).

I taught in inner-city Chicago for a year or so, working with kids to develop technology skills. Access to the internet for research, entertainment, and basic communication skills was essential. But it was incredibly expensive for schools to get on their own. Had the issue been just the purchase of lots of wireless cards, it would have been simple. But wiring an old school isn't even a concern when the internet companies don't have local access terminals in the area. Being able to access information, to me, could be a massive shift in how schools perform, the motivation of students, and more. At this point, I have little but anecdotal evidence to support that, but buy me a beer, and I'll walk you through it all.

As the technology improves to expand distance and speed, a lot of money is going to be spent on protecting people from accessing a wireless network (since the wider the coverage, the more potential for free-riders). Sometimes I wonder if the money wouldn't be better spent on protecting individual computers, and making the wireless network something akin to the telephone in reach and ease of access.

But then, I'd never presume to tell the market how it ought to run.

Drafting a Criminal Code for the Maldives

Recently some controversy has been brewing with regard to a decision by the University of Pennsylvania’s Law School’s Professor Paul Robinson to cancel his “Criminal Law Theory Seminar” and replace it with the three-credit Maldive project:

“The seminar will revolve around a single project: drafting a new criminal code for the Maldives. The work has been requested by the Maldivian government and is sponsored by the United Nations Development Program. Because the Maldives is by constitutional mandate an Islamic nation and, as a matter of law, all citizens are Muslim, the code will be the world’s first criminal code of modern format that is based upon the principles of Shari‘a.

After studying the existing Maldivian criminal law statutes and the criminal law principles contained in Shari’a, student teams will propose criminal code provisions and critique the proposals of others”.

Daniel Pipes and the blogger at LittleGreenFootballs (both of them are noted for their hatred of Islam) have been critical of Professor Paul Robinson’s consulting work. He defends his work saying:

I do criminal code consulting for many countries. A few days ago, one client, China, beheaded a person for embezzlement. (Worse than anything the Maldivians have done.) Should I now refuse to advise them further on what I think a criminal code should look like? Your strategy of willful disengagement seems an odd way of bringing greater justice to the world.

The Maldivians are in the midst great social change. A special parliament called to draft a new constitution met for the first time two days ago; disagreements among the members spilled into demonstrations in the streets…

I do not know how the Maldivian criminal code project will turn out. Like many criminal code projects, it may go nowhere. I have no power other than the persuasiveness of my advice, which, experience tells, is often limited. But is it an enterprise worth undertaking? I would think it shameful to decline.

Here is a Maldivian opposition group alleging the UNDP’s support in assisting human rights abuses in the country and a recent case illustrating the state of the criminal justice system in the country:

Criminal court says case against parliament speaker cannot be looked into
…Referring to the Justice Ministry’s Circular 98/3, a criminal case has to be investigated, and has to be forwarded to the Criminal Court by the Attorney General’s Office, the court said in a press release. The court said that a criminal case filed by an individual cannot be looked into by the court…

For an overview of the current system see the article. It will be interesting to hear from other heavy weight lawyer bloggers on the web: I mean those at the Volokh Conspiracy, Crescat Sententia, Legal Theory Blog, and Punishment Theory amongst others.