EclectEcon

What Is the Price Elasticity of Demand for the NFL Network?

Gregg Easterbrook of ESPN knows. It's greater than one (in absolute value):

The NFL's insistence on asking too much for its channel is yet another example of how often big business, with zillions of dollars in executive-suite and economic-consultant spending, nevertheless acts as if it's ignorant of basic economics. To increase revenues, cut prices; this raises demand. (A high price suppresses demand.)

No, Gregg. If you cut prices, that will lead to an increase in the quantity demanded, not demand; if you cut prices, you move downward along the demand curve, you don't shift it.



And whether that will lead to an increase in the revenues for the firm depends on the price elasticity of demand. And it is not at all clear that the price elasticity of demand for NFL Network is greater than one.

IQ Test?

Alex sent me this test. Someone claims it is used for job applicants in Japan.



My younger son, Adam Smith Palmer, got everyone across the river right away. Good thing, since he and his wife would like to work in Japan some day.



I looked at it and quit. I think that means my IQ is zero.

Vocabulary Test

Creating and enforcing property rights and removing impediments to the growth of a working market economy will do much more to help feed the hungry than sending ten or a thousand or a million grains of rice to starving people. So while I am not terribly keen on the underlying plan at this site, the vocabulary test is one heck of a challenge.



A few times I managed to run my score up to 47 with a series of lucky guesses, but I admit it was luck (with probably some residual influence from my high school Latin class 68 years ago plus what little I have managed to pick up from doing the crosswords with Ms. Eclectic over the past two decades). Here is the link [h/t to Alex]. My "natural" score, toward which I seem to tend, is about 43 or 44.

Securitize Your Wedding

Charlie Cooper at the Chicago Graduate School of Business suggests that it should be possible to package all the liabilities one incurs with a wedding and sell them to the guests:

My thought was this… we could add all our liabilities to together, split them up into shares and sell them to the guests. The end result being that all caterers, photographers, servers, florists etc. get paid and all guests feel as though they contributed to the wedding, as though they bought us a gift. The wedding could become self financing. It even would have returns to scale, the more people we invited, the bigger the wedding we could have. This is instead of traditional wedding financing which follows that the more people invited invariably incurs more cost. The guests are buyers and the service providers are sellers. All parties are left having purchased something that they find worth their money. The market is again clearing. And not at the NYSE, a technologically enhanced trading floor, but all this trading takes place over bourbon-on-the-rocks with poor Aretha Franklin cover music playing in the background. What could be better?



If we tranched it the right way, for her $150 wedding gift Aunt Betty would get a share of our nuptials worth 1/66th of the florist and 3/73rd of the photographer. For $75.00, Cousin Andy, who under traditional wedding market rules would have given to us our gravy boat, now gets to purchase 4% of the band, 2 steak dinners and 1/10th of the shrimp display. The tranching allows everyone to feel as though s/he gave us a gift and the gift givers get the added benefit of enjoying what they purchased. Ordinarily, cousin Andy would not get to eat out of the gravy boat he purchased whereas now, he gets utility from eating and listening to his own gift.



I present Collateralized Wedding Obligations: a type of asset-backed security and structured gift bearing product. CWOs gain exposure to a portfolio of wedding liabilities used to fund a glorious celebration of love and divide the burden among different tranches: senior tranches (immediate family and lifelong friends), mezzanine tranches (college friends), and equity tranches (the neighbor your mom said you had to invite).



The guests all get to buy gifts. The service providers all make a living. The bride and groom get married without debt. Families are not burdened. I don't end up with stuff I won't ever use. The payments of one party pay the liabilities of the other party. If I could only find a way to collect fees…

A Dated Item That Bears Repeating: Look at Nitrous Oxide

Ethanol made from Rapeseed (or Canola) or maize (aka corn in the US) creates more greenhouse gases than gasoline. From the UKTimes [h/t to Brian Ferguson],

Measurements of emissions from the burning of biofuels derived from rapeseed and maize have been found to produce more greenhouse gas emissions than they save. ...



Rapeseed and maize biodiesels were calculated to produce up to 70 per cent and 50 per cent more greenhouse gases respectively than fossil fuels. The concerns were raised over the levels of emissions of nitrous oxide, which is 296 times more powerful as a greenhouse gas than carbon dioxide. Scientists found that the use of biofuels released twice as much as nitrous oxide as previously realised. The research team found that 3 to 5 per cent of the nitrogen in fertiliser was converted and emitted. In contrast, the figure used by the International Panel on Climate Change, which assesses the extent and impact of man-made global warming, was 2 per cent. The findings illustrated the importance, the researchers said, of ensuring that measures designed to reduce greenhouse-gas emissions are assessed thoroughly before being hailed as a solution. ...



Maize for ethanol is the prime crop for biofuel in the US where production for the industry has recently overtaken the use of the plant as a food. In Europe the main crop is rapeseed, which accounts for 80 per cent of biofuel production.



Professor Smith told Chemistry World: “The significance of it is that the supposed benefits of biofuels are even more disputable than had been thought hitherto.”



It was accepted by the scientists that other factors, such as the use of fossil fuels to produce fertiliser, have yet to be fully analysed for their impact on overall figures. But they concluded that the biofuels “can contribute as much or more to global warming by N2 O emissions than cooling by fossil-fuel savings”.



The research is published in the journal Atmospheric Chemistry and Physics, where it has been placed for open review.

Property Rights: The Salvation of the Pilgrims

Every year, Carolyn Baum publishes a column (likely this year to appear here) that points out the real reason for US Thanksgiving: the institution of property rights by the Governor of the Pilgrim colony and the ensuing explosion in output. Here is an excerpt from her column as it appeared last year.

Their first winters after they landed at Plymouth Rock in 1620 and established the Plymouth Bay Colony were harsh. The weather and crop yields were poor.



Half the Pilgrims died or returned to England in the first year. Those who remained went hungry. Despite their deep religious convictions, the Pilgrims took to stealing from one another.



Finally, in the spring of 1623, Governor Bradford and the others ``begane to thinke how they might raise as much corne as they could, and obtaine a better crop than they had done, that they might not still thus languish in misery,'' according to Bradford's History.



Old-World Baggage



One of the traditions the Pilgrims had brought with them from England was a practice known as ``farming in common.'' Everything they produced was put into a common pool; the harvest was rationed among them according to need. [EE: sounds pretty Marxist to me]



They had thought ``that the taking away of property, and bringing in community into a common wealth, would make them happy and flourishing,'' Bradford recounts.



They were wrong. ``For this community (so far as it was) was found to breed much confusion and discontent, and retard much imployment that would have been to their benefite and comforte,'' Bradford writes.



Young, able-bodied men resented working for others without compensation. They thought it an ``injuestice'' to receive the same allotment of food and clothing as those who didn't pull their weight. What they lacked were proper incentives.



A New Way



After the Pilgrims had endured near-starvation for three winters, Bradford decided to experiment when it came time to plant in the spring of 1623. He set aside a plot of land for each family, that ``they should set corne every man for his owne perticuler, and in that regard trust to themselves.''



The results were nothing short of miraculous.



Bradford writes: ``This had very good success; for it made all hands very industrious, so as much more corne was planted than other waise would have bene by any means the Govr or any other could use, and saved him a great deall of trouble, and gave far better content.''



The women now went willingly into the field, carrying their young children on their backs. Those who previously claimed they were too old or ill to work embraced the idea of private property and enjoyed the fruits of their labor, eventually producing enough to trade their excess corn for furs and other desired commodities.

Wal-Mart: a Classy Store Where You Dress Up to Go Shopping

Jack sent me this. No reference is provided.

Pigou vs. Coase and Carbon EmissionsEclectEcon Considers Leaving the Pigou Club

A consistent theme running through the famous article, "The Problem of Social Cost" by Ronald Coase is that it is not always efficient to charge a tax on some activity that generates costs borne by others. As I reflect on the social costs that might be attributable to global warming, despite what I have written earlier, I wonder whether maybe Pigouvian taxes imposed on carbon-based fuels might not be the best way of dealing with the risk of global warming.



I used to think that if carbon emissions are a problem, then we should just "tax the snot out of 'em". I wrote about this earlier in a posting titled "To Pigou or Not To Pigou," but even then I had concerns about whether the implementation of Pigou taxes on carbon-based fuels would be practical or politically feasible.



As I ponder it more, I am even less certain that Pigou taxes are the most efficient route to take. Maybe it would be more efficient just to let global warming happen (especially given the uncertainty about whether humans can do anything about global warming, and given some questions about whether it is occurring, and if it is, whether it is attributable to human action: see this). Maybe, given the costs of trying to implement any other policy, and given the risk that "doing something" now might involve high costs with little or no benefits,... maybe we should just let it happen, and if it does, then deal with it.



Waiting; and then building dikes and moving people could well be a whole lot cheaper. That doesn't mean it would be efficient not to consider other options. That doesn't mean it would be efficient not to plan strategically for the building of dikes and levees. That doesn't mean it would be efficient not to plan for the future. It just means that the planning should include the possibility of not trying to prevent global warming but instead coping with it, should it occur.

Electric Sewage

Intriguing artwork by Alex Ivanov, a plumber from Russia now living in Goderich, Ontario.

This is my first album. It was inspired by reading Ontario Building Code Part 7, when I was preparing to take the plumbing exam for the provincial license. Besides other images it contains one nice picture and a couple of pretty gross ones.

I really like about half the pictures, and I don't mind the others.

She Doesn't Care about Drunken Elephants After All; and she still doesn't know anything about string theory

It turns out that Paris Hilton doesn't care about drunken elephants after all. From the Associated Press [via Brian Ferguson]:

GAUHATI, India (AP) — In a Nov. 13 story, The Associated Press incorrectly reported that Paris Hilton was praised by conservationists for highlighting the problem of binge-drinking elephants in northeastern India. Lori Berk, a publicist for Hilton, said she never made any comments about helping drunken elephants in India.

It seems this was quoting a source that was premature (or maybe just plain lying).

Hardly a Genius

I recently took this "intelligence" test. It is maybe a test of letter and number association; maybe a test of recognition of idioms and cliches; but it is hardly a test of intelligence. The test site says,

People who did well on this type of test are likely those who are gifted with verbal ability and linguistic pattern recognition.

This sort of assessment would discriminate against those with non-linguistic pattern recognition (like solving jigsaw puzzles)

and spatial intelligence (like the ability to use a map or see hidden figures in a drawing).

As Rondi Adamson (who got a very high score on the test) points out, the test has no time limit, so it is also a test of patience. You can keep trying wrong answers until you get them right, too. Once I reached the "genius" level, I figured I had satisficed, and I quit.



The site says it is Part I. Maybe the real intelligence test is to find a link to Part II.

Simultaneity and Identification: Creatine

In his latest weekly column (Nov 13, 2007, mostly about sports but also with a good dose of economics) at ESPN, Gregg Easterbrook writes,

Economics note: As the sense that creatine possesses forbidden powers has declined, so has its price. Five years ago, General Nutrition Centers sold a canister for $100 or more; now, canisters sell for $25 or so.

It looks as if Easterbrook is attributing the drop in the price of creatine to a decline in demand. But it is also quite likely that the high prices induced entry and increased competition among suppliers. Indeed, most websites devoted to body-building point out that there are now many brands and varieties of creatine to choose from.



If the demand curve shifted leftward, it also seems that the supply curve could have shifted to the right. Either shift (or both) would cause the price to drop, but it would be incorrect to attribute the price decline to either shift alone without more information.

Fakery, the French Media, and Mohammed al Durah

From Melanie Phillips,

[T]he iconic image of the child Mohammed al Durah, pictured crouching with his father behind a barrel next to a concrete wall in an apparently vain attempt to shelter from the gun-battle between Israel and the Palestinians that was raging around them before he was allegedly shot dead by the Israelis, served to incite terrorist violence and atrocities around the world after it was transmitted by France 2 at the beginning of the second intifada. Yet it is clear to anyone looking at this in detail that the whole thing was staged, not least from the devastating evidence here which shows the boy raising his arm and peeping through his fingers seconds after the France 2 correspondent Charles Enderlin said he had been shot dead.

Philippe Karsenty, who runs a French media watchdog, criticized the France 2 report and was successfully sued for libel. That case is now under appeal, and the additional evidence that is coming out strongly indicates that France 2, its journalist(s), and its managers all had/have a strong anti-Israel bias that smacks of anti-Semitism. As Phillips says,

There were many very strange things about this footage which just didn’t add up. When it came to the footage of the ‘killing’ of Mohammed al Durah, the following stood out:



* This sequence was not a continuous narrative but was repeatedly broken up and spliced onto footage of other scenes from the demonstration

* Although the France 2 cameraman had told a German film-maker, Esther Shapira, that he had filmed six minutes of the al Durah father and son under continuous Israeli fire, the footage of them lasted for less than one minute



* There was a camera tripod next to them

* There was no evidence of the boy actually being hit

* At one point, people in the crowd cried out that the boy was dead, while he was sitting up large as life clinging onto his father with his mouth wide open

* After he was said to be dead, he moved his arm (the sequence I have already reported which has been available on the web for years)....



The ‘killing’ of Mohammed al Durah was swallowed uncritically by the western media, despite the manifold unlikeliness and contradictions which were apparent from the start, because it accorded with the murderous prejudice against Israel which is the prism through which the Middle East conflict is habitually refracted. This scandal has the most profound implications not just for the media, not just for the Middle East conflict but for the western world’s relationship to reason, which seems to grow more tenuous by the day.

The Guardian = Support for Murder and Genocide

Bill Sjostrom writes,

[T]he Guardian has dedicated itself to supporting murder and genocide pretty much everywhere.

And many leftist academics still regard the Guardian as a legitimate source for news.



Also see his piece in which he says,

There is no getting around it: the Guardian is scum.

My Inner European

Your Inner European is Swedish!

Relaxed and peaceful. You like to kick back and enjoy life.

Who's Your Inner European?

The assessment is not particularly robust, however, as one might expect with just a six-question test. When I selected slightly different options:

Your Inner European is Dutch!

Open minded and tolerant. You're up for just about anything.

Who's Your Inner European?

The two assessments seem pretty closely related in my mind. I'll take both.

[h/t Gabriel, who is also somewhat Dutch

And She Still Quite Likely Knows Nothing about String Theory

Paris Hilton is concerned about binge-drinking, drunk elephants. Seriously:

Conservationists are praising socialite Paris Hilton, who has been convicted of driving under the influence of alcohol, for apparently trying to highlight the cause of binge-drinking elephants in northeastern India.



Activists say a celebrity endorsement was sure to raise awareness of the plight of the pachyderms that get drunk on farmers' homemade rice beer then go on a rampage.



Last month, six wild elephants that broke into a farm in the state of Meghalaya were electrocuted after discovering and drinking the potent brew then uprooting an electricity pole.



Last week in Tokyo, Hilton said there would have been more casualties if villagers hadn't chased them away.



She called the situation "sad" and said people need to make sure alcohol is not available to the elephants.



Hilton promised to improve her bad-girl image when she completed a three-week jail term in June for violating probation in an alcohol-related reckless driving case.

For earlier links between Paris Hilton and String Theory, see this, this, this, this, and this.



[h/t to Brian Ferguson]

More Evidence that Economists are Unsuccessful

I get the sense that everyone but economists thinks trade is bad. Oh, to be sure most people like the lower prices we pay for so many things as a result of trade. But despite the low unemployment rates in North America, it just seems to me that most North Americans think trade is bad because it steals jobs from their fellow citizens.



I know that sense is incorrect in some ways; otherwise, how would we have gotten such phenomenal trade liberalization over the past two decades? And yet my sense is not far off the mark. Ben Muse cites a recent poll in which 60% of the respondents agree with anti-free-trade statements.

U.S. voters rank trade issues relatively low on the list of things they're worried about, but they don't think foreign trade has been good for the U.S., suggests an early November poll of registered voters conducted by NBC News and the Wall Street Journal

Perhaps the next Nobel prize in economics should go to someone who comes up with a presentation of the gains from trade that is super-effective in countering the anti-trade rhetoric of special interests. So far economists have not succeeded with the general public.

Gresham's Law and Modern Exchange Rates

Gresham's Law is often stated colloquially as "Bad money drives good money out of circulation." More generally, it means that if there are two different currencies circulating at the same face value but with different intrinsic values, the one with the higher intrinsic value will be kept by people, and they will spend the one with the lower intrinsic value.



The latest example of Gresham's Law has become apparent with the circulation of coins in Canada. Back when the US price of a Canadian Loonie was only 67 cents or even 80 or 90 cents US, we rarely if ever received US coins mixed in with our change in Canada. But during the past couple of months as the Canuck buck has appreciated in value to be worth $1.03, $1.07, or more in US currency, I have begun to receive US coins in my change now and then. On average, I would guess I have received about 1% of my change as US coins during the past two months.



In bulk, US coins have a lower intrinsic value than Canadian coins right now. Nevertheless, for minor purchases Canadian and US coins are used interchangeably in Canada — the transaction costs of converting just a couple of US coins into Canadian coins are too high to make the conversion worthwhile.



The result is that rather than get stuck with US coins now, Canadians spend them. Given a choice, they would rather not hold onto the US coins, which (according to the exchange rate, at least) have a lower purchasing power than the Canadian coins. They spend the US coins and hold onto the Canadian coins. In direct confirmation of Gresham's Law, bad money (US coins) is driving good money (Canadian coins) out of circulation.

Quantity Discounts, Differential Pricing and Loyalty Plans at Brothels in Romania

Gabriel Mihalache recently posted photos of a quantity discount card issued by a brothel in the 1930s in Bucharest, Romania.

In Bucharest (Romania), in the ’30s, you could get brothel subscriptions, with volume discounts and hourly restrictions. (The card says that calls during weekends and holidays are restricted to mornings, because of “crowding”.)

Some questions:

• Are these quantity discounts or are they just a normal discount that one might expect (given the time value of money) for paying in advance for services. The advance payments would mean the purchaser would, in effect, be lending the madam some money. Also, payment in advance means the purchaser is bearing some risk that the business might not be there when it comes time use its services. To induce the customer to bear this risk, the business would typically have to offer a lower price for advance purchases.
• Is this an example of price discrimination? Increasingly, economists are arguing that if the costs of servicing clients are higher at certain times (due to congestion and due to the increased opportunity costs of serving one client when there are many others wanting service at the same time), then the different prices merely represent the different costs associated with providing service at different times on different days of the week. (For example, see the discussion in the comments here)

To my inexperienced eye, the card looks like one of those loyalty cards you get at coffee shops or florist shops — get ten stamps or holes punched and the next one is free. In a sense, I guess such cards provide quantity discounts, but they have quite different rationales. Loyalty cards are designed to encourage customers to provide repeat business rather than shopping around at different establishments. For more on loyalty cards and two-part pricing, see this.

Lonely Hearts Ads

Has anyone ever done a follow-up study to measure which singles ads work best? What does it mean in this context to say "work best"? Let's say, "get the most replies or responses from members of the appropriate sex and sexual inclination." But of course other criteria are equally plausible.



I was prompted to wonder about this after reading these excerpts at Newmark's Door. I thought, "These are fun to read. I wonder if they worked." I fear that as with too many strategies in life, people do not attempt a systematic evaluation of the results.



And yet, if the results of such a study were widely known, wouldn't that make the ensuing ads less informative as more singles used the strategies that had worked in the past?



That's okay. We would just have to apply for a grant to redo the study every five years, right?

European Left in Deep Crisis

In my student days of the tumultuous 60s and early 70s, I was pretty left of centre, as were most of my friends. One of the reasons I drifted toward the right was that I saw too many instances of people on the left trying to take away freedoms rather than create or enhance freedom.



I didn't realize that so many leftists are also racists. It seemed back then that leftists were the most active in the fight against racism. But not so any more in Europe, according to Flemming Rose. From an article in Reason, reflecting on the Danish cartoon controversy [h/t to BenS]:

I think many people betrayed their own ideals. The history of the left, for instance, is a history of confronting authority — be it religious or political authority — and always challenging religious symbols and figures. In this case, they failed miserably. I think the left is in a deep crisis in Europe because of their lack of willingness to confront the racist ideology of Islamism. They somehow view the Koran as a new version of Das Kapital and are willing to ignore everything else, as long of they continue to see the Muslims of Europe as a new proletariat.

IVF, Twins, and the Least-Cost Risk Bearer

A couple in Australia went for in vitro fertilization. The doctor implanted two embryos instead of one, purportedly against the express wishes of the couple.



His reasoning? Apparently for a birth mother of this age and for embryos in this condition, he wanted to guarantee that at least one would develop into a healthy child. Here is the story from the Melbourne Age [h/t to Brian Ferguson]:

They wanted to have a child together. Instead, they got two. Some might call it a blessing. But to this couple, the unexpected addition to their family was devastating. So devastating, that the unnamed ... couple are now suing Canberra obstetrician Dr Sydney Robert Armellin for more than $400,000. Most of it is to cover the cost of raising one of their twin three-year-old girls.



The couple allege they had made it clear that they wanted only one embryo transferred during the IVF process. Instead two were transferred, leading to the twin birth. The impact on their relationship and indeed their lives, according to evidence given in court this week, has been considerable.



"She always said that she had a big heart filled with love," ... said of her partner in the ACT Supreme Court yesterday. "I find (now) that she doesn't have the same ability to love that she used to and the same capacity to, I guess, embrace differences and issues as a couple or as a team."

Unfortunately the rest of the article discusses, in very vague terms, the social mores and the standard practices of the IVF labs of Melbourne. But it appears that the standard practice is NOT for the attending obstetrician to play god and make decisions for the couple. I.e., if they specify one embryo, that is what the doctor is to transfer.



I don't know whether the doctor committed a tort or a breach of contract in this case. But it does seem pretty clear that the doctor was the least-cost bearer of the risk that the couple would have twins when they wanted only one child. The only question is what is meant by "one": should it mean "no more than one" or should it mean "at least one" or should it mean "exactly one". Given the discussion in the original article,it seems that in this case "one" means "exactly one" embryo.



btw, for this case it should be irrelevant that the couple is lesbian.

The Wal-Mart Gimmick

As the Canadian dollar has appreciated in value relative to the US dollar (nearly 20% since June this year, largely due to the run-up in the price of oil), US goods have become considerably cheaper for Canadians to buy (see here and here for my earlier postings on this topic).



One area of concern for many consumers has been books and magazines, which have US prices and Canadian prices printed on them. The US prices have typically been much lower than the Canadian prices, reflecting exchange rates from perhaps a year ago and certainly not reflecting current exchange rates.



To address this concern, Wal-Mart in Canada has recently announced that it will now charge the US price, not the Canadian price that is printed on all books and magazines. When I heard this, I thought, "Leave it to Wal-Mart to address changing costs long before other retailers do." After all, Wal-Mart is my very favourite store.



Sure enough, when I was at Wal-Mart recently there were displays of books and magazines, all proudly announcing that because Wal-Mart cares about providing lower prices for its customers, they were charging the printed US prices, not the printed Canadian prices.



And then it hit me: Wal-Mart used to sell its books (I don't know about magazines) at anywhere from 25% to 40% off the suggested retail prices, and these discounts were no longer available. In effect, Wal-Mart hadn't lowered their prices much, if at all!



Digression #1: Here is further evidence that economists are failing in our attempts to educate people. While looking at the Wal-Mart book display I overheard one person say to another, "Look, Wal-Mart is selling their books at US instead of Canadian prices. That's nice," to which the other person responded, "I think Wal-Mart makes enough money they can afford to give us a price break".



Both statements strike me as typical perceptions about how economies work and both belie serious misapprehensions about economics.



There were two problems here. First, as I noted above, Wal-Mart probably wasn't really providing much, if any, of a price break to its customers. Second, Wal-Mart doesn't cut prices because they can afford to. They cut prices to induce us to buy things from them. They wouldn't do it unless they thought doing so would add to their overall profits.



Digression #2: I note that for every single book I have considered buying, the prices at Amazon.ca are still higher than the prices at Amazon.com. Of course one effect is overload at the post office as more Canadians buy things from US sources.

Waterboarding

Tom Hanna volunteers to be waterboarded for two and a half minutes. Click here.

Testing the Peltzman Effect

The Peltzman Effect says that if gubmnt officials impose restrictions, trying to make some activity safer, people will take more risks with it. The end result could easily end up with more injuries and greater social costs. I wrote about this effect earlier here and here.



Usually tests of the hypothesis have been one way, e.g. what happens to pedestrian deaths and injuries when drivers are required to wear seatbelts? [answer: they increase because drivers tend to take a bit less care in their driving.] But now many local councils in Scotland are planning to conduct a reverse test of the hypothesis [h/t to Brian Ferguson]:

WHITE dividing lines will be removed from roads in dozens of Scottish towns and villages, under plans to improve pedestrian safety.



Lines separating lanes of traffic have been a feature of the nation's roads for generations. But now experts believe they could be making drivers feel too safe, encouraging them to drive too fast and putting pedestrians at risk. ...



A key recommendation is the removal of centre lines to reduce the speed of traffic in towns and villages in the area.



Mr Gabriel states: "Although white centre lines can greatly assist drivers on major unlit rural roads, research in Wiltshire has shown that when white centre lines on lit roads within a 30mph speed limit were not replaced, traffic speeds and accidents were both reduced. It is, therefore, proposed that a similar experimental policy should be adopted in Aberdeenshire when roads with street lighting within 30mph speed limits are resurfaced or surface dressed.



"Short sections of line would still be reinstated for guidance at traffic islands or junctions.



Neil Greig, a spokesman for the Institute of Advanced Motorists Motoring Trust in Scotland said: "The concept is quite simple - that if you come round a corner and you are not sure exactly what the priorities are and where you should be on the road, then you will cut your speed."



But he stressed: "A number of factors will have to be taken into account. Novice drivers and older drivers, for example, quite like to know where they're supposed to be on the road and like to have a white line to tell them where to go.



"You don't know how they are going to react in these sorts of situation and, if you get too much uncertainty, you might get a lot of dithering and that could lead to road rage and all sorts of things. ..."



A spokeswoman for the Royal Society for the Prevention of Accidents also welcomed the proposals.



She said: "Schemes similar to this have been shown to have made a positive difference."

Calculating the net social benefits of removing the white lines will involve collecting a lot of data. How many more auto accidents will there be, if any, and at what cost? How many fewer pedestrians will be injured or killed, if any, and at what savings? I am not persuaded ex ante that there will be a cost savings or a net benefit to the removal of the white lines, but I applaud the experiment. And I hope the councils carrying it out will make detailed data available to various researchers.



To be really hard-nosed about it, what if the pedestrians saved are a bunch of dottering old fogies like me who have comparatively short expected remaining lifetimes and even shorter expected times during which they will be contributing to GDP; and at the same time, what if the white lines actually save more younger people with longer expected lifetimes and longer expected periods of contributing to GDP? Should these differences play a role in our cost-benefit analysis?



Addendum: When we were discussing this article, Brian reminded me of another option that might also have net social benefits: put spears (not airbags) on the steering wheels, pointed at the chests of the drivers, and don't allow drivers to wear seatbelts. Even if this policy did not have net social benefits, it would certainly induce most drivers to take more care.

The Crackdown on Freedom in Pakistan

If a state of emergency is necessary because of the threat from insurgents, taliban fundamentalists, and other Islamic extremists, why is it that so many lawyers and critics of General Musharraf are being arrested?

10000% Rate of Inflation?over what time period?

Multiply these prices by about 100 and you get a rough approximation of today's prices:

Pool, $1/game. Hot dogs, $2 each. Sandwiches, $3. etc.



[photo from the lower east side gallery at this site, date unknown. h/t to BenS and Clive]

The Social Loss if I Were Struck by a Car

In my Economic Analysis of Law class the other day, Ben said that of course there would be a social cost if I were struck by a car and killed. .... unless they didn't ruin my cuff links at the same time.

Is the Marginal Social Product of Oncologists Really Zero?

If the only thing that matters is whether someone has a strong support network, what's the use of physicians? From the Globe and Mail (via Ms. Eclectic):

Doctors routinely consider factors such as tumour size, stage of the disease and other measures to predict how long a patient with cancer will survive.



But factors that make up a patient's quality of life — overall health, mobility, emotional stability, social support and financial resources — may make the most difference, Dr. Nicolaou and colleagues found.



... Researchers at Fox Chase and Henry Ford Hospital in Detroit studied 239 patients with lung cancer enrolled in a treatment trial involving both radiation and chemotherapy.



The study was designed to evaluate the role of quality of life as a prediction for survival. Questions included things like: "Do you have trouble taking a long walk?" or, "In the past week, did you feel irritable? Did you feel depressed?"



The researchers also analyzed classic predictors of survival such as gender, race, age, marital status, state of disease and tumour location.



Some 91 per cent of patients completed a standardized quality of life survey before treatment. All patients were followed for at least 17 months.



What they found is quality of life emerged as the most significant predictor of overall patient survival.



"We conducted two different statistical analyses including all the usual prognostic factors and either way, quality of life remained the strongest predictor of overall survival," Dr. Benjamin Movsas of Henry Ford Hospital said in a statement.



"What's more, if a patient's quality of life increased over time, we saw a corresponding increase in survival," he said.

Holy mackanoli! "Quality of life" was more important than whether they received any treatments at all? I really doubt that. And I really doubt that the marginal product of physicians and cancer treatments is zero. Rather, I suspect, it was the case that among those patients who received similar treatment protocols, those who responded as having a better quality of life had higher survival rates.



It seems plausible to me that, ceteris paribus, quality of life as measured in this study would have some positive correlation with cancer survival at the margin. Whether that is causal or just correlational is another question; though the evidence that changes in quality of life are correlated with increased survival rates makes the variable seem to have causal impact on survival rates.



My take: people who have close friends and family members monitoring their behaviour (and caring about what happens to them) and making sure they show up for treatment are more likely to survive.



[with thanks to Jack, JB, Ms. Eclectic, and Brian Ferguson]

Revenue Sharing in Major League Baseball

Michael Lewis had an Op-Ed in the NYTimes yesterday morning, pointing out that the present revenue-sharing formula in major league baseball does little to affect the quality of the various teams on average and despite the fact that some small market teams do well now and then.



The reason? Revenue sharing has little impact on the expected marginal revenue and marginal costs of ticket sales, and it especially has little impact on the expected marginal revenue product and marginal factor costs of hiring more talent for the team. As a result, many teams like, say, Tampa Bay, respond to what is essentially a lump-sum transfer by pocketing the extra cash.



Lewis points to several other examples of teams that have received large revenue-sharing payments not by spending the increased revenue on more talent.

Since 1998, millions of dollars have been transferred from richer teams to poorer ones in an attempt to let all teams share in the economic advantages associated with playing in big markets — a large fan base, lots of press coverage and lucrative local cable television contracts. Last year, more than $300 million was transferred.



Yet since revenue sharing began, at least one team from each of the big four markets — New York, Los Angeles, Chicago and Boston — has appeared in every World Series except 2006. In the 10 years before 1998, in contrast, only two Series included one of those big-market teams.



The problem is that the teams receiving payments have come to use them as a primary source of income — rather than to build winning teams. The most extreme example has been the Tampa Bay Devil Rays. In 2006, this team had a payroll of about $35 million, $42 million less than the 2006 league average. Not surprisingly, it won only 38 percent of its games and filled less than 40 percent of its seats for home games. It also collected more than $30 million in revenue-sharing transfers. This past season, the team reduced its payroll to $24 million and had about the same level of success.



The Pittsburgh Pirates and the Kansas City Royals have also received significant revenue-sharing payments but kept payrolls low. These teams may well be slowly destroying their customer base. (The Rockies were not so parsimonious. With the team receiving $16 million in 2006, it increased its payroll for the next season by around $15 million.)



The problem is that transfers are based on local revenues. Teams that receive money are encouraged to invest it in their payrolls. But if a team actually attracts fans by fielding a winning team, its revenue-sharing receipts will be reduced.

So revenue-sharing also reduces the marginal revenue of an expected win, and not just for the big-market teams that are taxed to support the programme; it also reduces the incentive for small market teams, the recipients of revenue-sharing, to win too.



Of course there have been exceptions. But if this is the general case, perhaps it is time for a second look at the revenue-sharing formula.



Isn't basic economics fun?